Aeroflot Wants to Buy Georgian Flag Carrier
By Lyuba Pronina, Staff Writer

Moscow Times
Monday, May 31, 2004. Page 5.

Flagship carrier Aeroflot is in talks to buy Georgia's national
carrier, Air Zena, in an effort to expand into the CIS market,
a company official said Sunday.

"We confirm that we are in talks, but this is a very preliminary
stage and it is too early to talk about results," Lev Koshlyakov,
deputy general director of Aeroflot, said by telephone Sunday.

"We have an interest in the CIS market and we are building up contacts
and relations as this could be our trump card in the SkyTeam alliance,"
Koshlyakov said.

Aeroflot last week signed a preliminary agreement to join the Air
France-led SkyTeam airline alliance, a deal that could take a year to
be finalized. Koshlyakov added that there have been no negotiations
with other CIS airlines on possible purchases.

Air Zena was not available for comment over the weekend, but company
spokesman Tea Kakabadze confirmed to RIA Novosti that talks with
Aeroflot were under way.

Air Zena became Georgia's national carrier after gobbling up bankrupt
Georgian Airlines in 1999.

The company itself started off in 1994 as a charter carrier and is
completely private. It operates three Boeing 737-500 and two Antonov
2 aircraft on routes connecting Tbilisi with Moscow, Prague, Paris,
Athens, Tel Aviv, Frankfurt, Amsterdam, Vienna and Kiev.

Details of the airline's financial situation were not immediately
available, and it was not clear how much Aeroflot was prepared to pay
for the airline. A source in Aeroflot said Sunday that "the market
volume of the company is not very big. From the point of view of
consolidation, Air Zena is not the most interesting asset, but at
the same time not the most harmful."

If Aeroflot buys up Air Zena, it will follow in the footsteps of
No. 2 carrier Sibir, which in 2002 acquired Armenia's Armavia airline.

Sibir has used Armavia not only to expand its network, but also to
import Airbus 320 planes duty-free and to gain experience operating
them on the CIS market.

Sibir has already imported four such craft and is only required to
pay a small registration fee in Armenia. However, the aircraft cannot
be used on the routes of Sibir proper.

"Sibir's experience with importing jets through Armavia could be
interesting to Aeroflot," the source said.

He lamented government restrictions on using imported craft --
Aeroflot is allowed to operate only 27 foreign jets in its fleet
of 78 -- but added that flying planes under another flag "is still
better than nothing."

News of the talks broke Friday during a visit to Tbilisi by Economic
Development and Trade Minister German Gref.

He was attending a two-day bilateral business forum accompanied by
some 100 Russian businessmen, including executives like Aeroflot's
Valery Okulov, Access Industries-Renova's Viktor Vekselberg, AFK
Sistema's Vladimir Yevtushenkov, Itera's Valery Otchertsov and United
Heavy Machinery's Kakha Bendukidze. Gref told the gathering, which
was also attended by Georgian President Mikheil Saakashvili, that
"Russia considers Georgia a close political partner and a priority
country for developing cooperation."