Government officials said Friday that the country would create a state-controlled airline holding company as big as Aeroflot to rescue the cash-strapped AiRUnion airline alliance.

The new holding will be controlled by state-owned industrial group Russian Technologies, which has agreed to help the alliance pay off its debt.

AiRUnion last month fell behind on payments for jet fuel, grounding aircraft and stranding thousands of people at airports across the country.

"The crisis at AiRUnion is over," Deputy Finance Minister Andrei Nedosekov was quoted as saying by Russian news agencies.

"The state understands that the crisis of one company could lead to the collapse of the whole sector. The state is ready to support the company and has the resources to do this."

The news came as AiRUnion member KrasAir was charged Friday with large-scale fraud and could face charges over illegal actions during bankruptcy proceedings, said Oksana Gorbunova, spokeswoman for the west Siberian transportation prosecutor, Interfax reported.

AiRUnion is run by two Russian brothers — Boris and Alexander Abramovich — and the alliance's members are mostly state-controlled. The brothers also have stakes in some of the alliance's members.

Government officials on Thursday created a deal whereby AiRUnion's assets will be folded into a new holding, together with Atlant-Soyuz, controlled by the Moscow city government, and several regional airlines.

Russian Technologies said it would take at least nine months to create the holding, which will include KrasAir, GTK Russia, Kavminvodyavia, Orenburg Airlines, Saratov Airlines, Domodedovo Airlines, Samara Airlines and Vladivostok Airlines.

The state corporation will repay $100 million of AiRUnion's estimated $800 million debt and plans to renegotiate the rest, Alexei Alyoshin, deputy chief executive of the holding, said Friday on state television.

The Moscow city government said it would not seek to bankrupt the companies in the alliance. "We are not yet rich enough to use bankruptcy procedures to get an improvement," Deputy Mayor Yury Roslyak told reporters.

Sources close to the alliance said part of the debt was secured by stakes owned by the Abramovich brothers. They could not be reached for comment.

The Federal Reserves Agency has supplied the AiRUnion with state-owned fuel to help it fly passengers home, and the Transportation Ministry has said supplies will continue, after Prime Minister Vladimir Putin directed Russian Technologies to start working to resolve the problem.

The country's airline officials say jet-fuel suppliers have been hiking prices and refuse to allow long-term pricing contracts. Aeroflot CEO Valery Okulov said Thursday that its profit would almost halve in 2008 because of soaring fuel prices.

No one answered phones at AiRUnion on Friday. But in a statement Aug. 20, the firm apologized to passengers, saying revenues did not cover fuel costs.

Starting Sunday, all of the alliance's Moscow flights will move from Domodedovo Airport to Vnukovo Airport, said Vitaly Vantsev, deputy head of Vnukovo, Interfax reported Saturday. The flights will follow AiRUnion's previous schedule, Vantsev said.

(Reuters, Bloomberg, MT)