Troubled Russian carrier UTair warned its creditors that it will not be able to fully repay the interest on loans worth RUB109.2bn ($1.7bn), Vedomosti daily reported on June 18.
As reported by bne IntelliNews, Russian airlines posted a record-loss in the first quarter of 2019, following a cumulative loss in 2018, risking a series of bankruptcies in the sector and/or increasing ticket prices.
"The company will channel all the operational profit in the high summer season to create a liquidity buffer, and postpones the interest payments scheduled for June," the carrier said in the press release.
Previously in April unconfirmed reports claimed that UTair is seeking to postpone its bond repayment by 35 years, in addition to previous attempts to restructure RUB31.4bn ($488mn) worth of banking loans.
Separate reports also claimed that Russian state-owned banks VTB and Sberbank could use the heavily indebted UTair as the basis for creating a new regional airline. However, VTB Bank CEO Andrei Kostin said in May that plans to set up the regional carrier had been postponed. The two banks were tasked by the government to set up another domestic airline in October 2018, to improve transport links within the country that stretches across eight time zones.
However, the state drive to support the air carriers and the industry is wobbling, as the Finance Ministry recently resisted calls to support the carriers in the face of rising fuel prices.
The total debt of UTair amounts to RUB75.8bn, out of which RUB39.1bn account for two syndicated loans issues by 11 banks, on which UTair has already technically defaulted. Previously in March UTair requested permission to write off RUB31.4bn of banking debt.
UTair is Russia's fifth largest airline with 7.7mn passenger turnover in 2018. The company posted a loss of RUB22bn in 2018.