Daily analyst comments

State corporation, Rostekhnologii, has started the process of economic recovery for the companies incorporated into the AirUnion alliance, structured around its core asset, KrasAir airline company, Vedomosti newspaper reported. The stabilization of company cash flows will be entrusted to investment banker Mikhail Moshiashvili, who, however, will have only consulting authority, while the operating activities will be co-ordinated by Vim-Avia's VP, Roman Pakhomov. Among its primary objectives, AirUnion names the fundamental analysis of the air carriers' business activities and the subsequent shift of the companies towards financial self-sufficiency.

We are upbeat on Rostekhnologii's urge to boost the business efficiency of AirUnion's member companies, since the state corporation is to become the air alliance's shareholder. However, a considerable increase in jet fuel prices coupled with a strong monopolization of filling stations at airports will reduce the companies' abilities to exercise efficient control over expenses. Even the largest airline companies, such as KrasAir, experience problems with fuel supplies from time to time. The existence of such problems is an important characteristic of the company's financial health and the stability of its cash flows. In our opinion, the process of economic recovery and normalization at KrasAir may take longer than expected. Therefore, we recommend that investors Sell KrasAir shares.