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Russia's flagship airline set to buy rival company, Transaero

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
File photo shows an Airbus A330-243 operated by Russia’s Aeroflot Airlines.

Russia's flagship airline, Aeroflot, is reportedly planning to buy its rival airline, Transaero, a source close to the government says.

The unnamed source was quoted as saying by AFP on Tuesday that Aeroflot has decided to make an offer to acquire 75 percent of Transaero’s stocks.

The decision, according to the source, was made at a meeting led by Russia’s First Deputy Prime Minister Igor Shuvalov, which must be then finalized by the Aeroflot’s board of directors.

Meanwhile, Russian news agency, Interfax, citing one of the participants in the meeting with Shuvalov as its source, reported that Aeroflot’s plan was to acquire Transaero for the symbolic price of one ruble (one US or euro cent).

Transaero started operating in 1991 and while being the second-largest Russian airline, is also the country's largest privately-owned carrier. The airline carried 5.7 million passengers during the first half of 2015, compared to 10.9 million who flew on Aeroflot.

Transaero’s debts have grown remarkably in recent years taking the company to the brink of bankruptcy as the airline made an effort to modernize its fleet.

According to the Vedomosti business daily, the airline has no choice now but to accept Aeroflot's offer in order to survive.

Transaero operates a fleet of 106 planes, serving domestic destinations, most of European capitals, and long-haul destinations popular with Russian holidaymakers such as Thailand.

The falling spending power of Russian people during recent months has dealt a drastic blow to the country’s international airlines, forcing them to sell cut-price tickets to fill planes.

On the other hand, the plunge in the value of Russia’s national currency, ruble, has increased costs linked to US dollar, such as renting and maintenance of aircraft as well as repayment of dollar-denominated loans.

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