Cash crunch grounds Russia's first budget carrier Avianova

4th October 2011, Comments 0 comments

Russia's first budget carrier Avianova Tuesday said it would suspend operations from next week due to a cash crunch fuelled by a spat between its two main shareholders.

"Avianova announces that after October 9 it will halt all flights following the decision of US fund Indigo Partners to halt all existing and future investment," a statement said.

The main stakeholders in the airline launched in 2007 are A1 -- the investment arm of Russia's Alfa Group -- and Indigo, holding 51 percent and 49 percent, respectively.

Avianova put its last tickets on sale on the Internet on Sunday and said passengers would be "reimbursed in line with Russian laws."

Alexander Neradko, the head of the federal air transport agency, told Russian media that the airline had sold about 67,000 tickets for the period between October 3 and 29.

Avianova professed to be Russia's fourth-largest airline in terms of passengers. When it started out, it undertook an advertising blitz promoting its base fare of about 250 rubles ($9).

However, A1 and Indigo became entangled in a bitter dispute earlier this year over the running of the airline with A1 accusing the US fund of appointing expatriate managers without its consent and running the carrier singlehandedly.

The acrimony culminated in June when several foreign and Russian employees, including manager Andrew Pyne and former chief commercial officer Mike Hayden were forcibly evicted from the airline's Moscow headquarters by security guards.

Avianova has also accused the US shareholders of sabotaging expansion plans that would have led it to compete with Central Europe based low-cost carrier Wizz Air but without specifying Indigo's link with the latter.

© 2011 AFP

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