Daily analyst comments

On August 25, following Vladimir Putin's criticism of flight delays, the Russian Ministry of Transport held a meeting, where it was decided to finance the operating activities of the AirUnion alliance, whose core asset is the KrasAir airline company, until at least early September. The exact mechanism of financing has not been defined yet; however, the ministry probably plans to grant a commodity loan to the alliance on a deferred basis, reports Interfax.

Currently, the companies of the alliance are making an operating loss, and they are unlikely to be able to attract financing on their own. On Monday, an official spokesperson of state corporation Rostekhnologii, which had been expected to help the alliance get financial assistance, said that the air union's managers and shareholders should solve the problems themselves. He also noted that the uncertainty over Rostekhnologii's legal status (de jure, the corporation is not related to AirUnion) prevents the alliance from conducting successful negotiations to attract additional financing.

At Monday's meeting, the Transport Ministry took a decision to finance the alliance's operations at least until early autumn. However, given the upturn in operating expenses, the air alliance's future looks vague. In view of the complex industry conditions and AirUnion's serious debt load and inability to attract financing on its own, we recommend that investors sell KrasAir shares.