S7 to absorb Transaero?

S7 to the rescue...!

When it looked like the Transaero saga was heading to its inevitable conclusion, the story took another unexpected twist: S7 Airlines owner and CEO, Vladislav Filev just bought 51% of Transaero's shares (a move which accounted for a sudden 187% rise in the price of shares earlier this week).

Uncertainty as to the future of Transaero remains though, as it seems that regulators will withdraw its air operator certificate already on the 26th of this month.

What motivates this move by S7 (previously known as "Sibir"), one of the success stories of private commercial aviation in Russia?

Well, Mr.Filev himself explains himself in this interview, published today on Kommersant.

It could be that, as he puts it "lived once in a country where there was only Aeroflot and I did not like it"...or might well be that it did so at the behest of some of the creditor banks that expect, this way, to recover part of the proceeds...

In any case, if Transaero, or part of it, finally swallowed by S7, this opens up an interesting possibility for the competitiveness of the Russian airline market. 

Whereas the market leader Aeroflot would become a semi-monopolist in case Transaero was absorbed by it or simply disappeared, a combination of Transaero's 13M passengers and S7's 10M would create an airline of almost as large as Russia's flag carrier.

For reference, Aeroflot carried 24M passengers in 2014 (although the 34.7M passengers of the whole Aeroflot Group, that includes low cost airline Pobeda, St.Petersburg-based Rossiya and a handful of soon-to-be-merged regional carriers, would still leave it clearly ahead of any competitor).

Moreover, Transaero's long-haul fleet and international network would complement nicely S7's narrow-body and mostly domestic network, even if only the most modern aircraft are retained.

Also, whereas Transaero was a non-aligned carrier, S7 is a member of Oneworld. Aeroflot's Skyteam membership would, thus, place them also on rival fields when it comes to In terms of international alliances.

Now, this might just be simple speculation, particularly in such a politicized industry where state companies are in play, but, nevertheless makes for quite an interesting scenario.