The Kremlin has pushed Aeroflot, Russia's largest airline, to take over beleaguered Transaero, Russia's second largest, for the symbolic price of RUB1, consolidating its dominance of the Russian market but landing it with heavy debts.

State-controlled Aeroflot had a 37% share of the Russian air travel market in 2013, according to its website. Together with privately-owned Transaero's 14.8%, it would now have more than a 50% market share. 

At a meeting with First Deputy Prime Minister Igor Shuvalov on September 1, Aeroflot's board agreed to support the purchase of 75% plus one share of Transaero, according to Vedomosti business daily, citing a source close to the meeting participants. Shuvalov demanded that all obligations to Transaero’s passengers and staff be carried out in full, the source said.

Transaero’s stocks jumped 40% on the news to RUB116 per share, while Aeroflot stock went down by 4.3%.

Transaero has two options: its shareholders either agree to external control by Aeroflot, or the carrier faces bankruptcy, Vedomosti cited a federal official as saying. 

Transaero has been on the verge of bankruptcy for more than a year. The airline won RUB9bn ($135mn at the current rate) of state guarantees in December 2014, and was promised further support. Despite the subsidies, its total debt to banks and leasing companies still stands at RUB67.5bn. During Transaero’s negotiations with banks on debt restructuring, it was revealed that it plans to ask for another RUB70bn of state subsidies. 

Transaero’s CEO and co-owner Olga Pleshakova was not able to pull the carrier through the crisis, but instead is trying to blackmail the government with the amount of outstanding tickets sold, one of Vedomosti’s sources said. 

"It is easier to provide Aeroflot with subsidies and let it fly Transaero’s passengers than to try to save the airline, which is constantly billing the state and blackmailing it with passengers,” one of the officials told Vedomosti.

Transaero's net loss under RAS amounted to RUB8.577bn in H1. The company’s troubles started in the end of 2014, when the ruble's decline raised the costs of its dollar-denominated plane leases and cut passenger numbers. 

Aeroflot and S7, whose financials were more stable, attempted to squeeze Transaero and Utair out of the market. The companies opposed the government’s plans to support struggling carriers, saying they were ready to fly Utair’s and Transaero’s passengers if the companies exited the market.