Aeroflot Limits Shares to Employees

Only company employees will be able to buy shares in Aeroflot when the government sells off a 49-percent share in the airline in coming weeks, officials said Monday.Outside investors from Russia and abroad will only be allowed to purchase stock in Soviet Aeroflot's international successor next year at the earliest and 1997 at the latest, officials say. Aeroflot employees will initially be barred from reselling their shares, and the government does not plan to auction off its remaining 51 percent stake for three years."During this stage of privatization, it is not possible for outsiders to invest," said Igor Desyatnichenko, Aeroflot's deputy executive director for finance. "In the next stage, I think conditions for foreign capital to invest will be created."Despite its reputation for lackluster service and bad publicity surrounding the March crash of its Airbus A-310 in Siberia, Aeroflot could become one of Russia's most popular future investments. The company, which inherited many of the most experienced aviators, 200 of the best planes and all the international routes of the Soviet airline monopoly, has shown a knack for making money even during difficult economic times, with 1992 profits of $1.2 billion and $800 million in 1991.Aeroflot enjoyed a 30 percent profit margin in 1993, but exact numbers are not available as final accounting is still underway, Desyatnichenko said. "We are still a fairly profitable enterprise despite many difficulties." Although workers and retired employees of Aeroflot will have to buy their shares, the government is offering them at bargain basement prices. Each worker can buy up to 42 shares at 1,700 rubles (85 cents) each. Since only 1,071,333 shares will be offered, such prices would mean that 49 percent of the company is worth just $926,000, or the cost of one Western jet engine for a smaller plane.An added twist is a requirement that workers pay for at least half their investment with privatization vouchers, which means they must state their intention to invest before July 1, when the nationwide voucher program ends. Those who have already used their privatization checks will be able to purchase new vouchers from Aeroflot. All money invested will go into government coffers, Desyatnichenko said.The plan to offer a 49 percent stake to workers was developed last fall, but Aeroflot gave the final green light to implement it only last Friday.Russia's nearly 300 domestic airlines, which have been split from Aeroflot over the past two years, will privatize in separate plans on their own. These "Baby Flots" no longer have a direct relationship with Aeroflot and have new names even though their planes on the most part have not been repainted.Along with its privatization plan, Aeroflot announced a change in management last week. Vladimir Tikhonov, 60, the former head of financial operations, has become the new general director, replacing Vladimir Potapov. Considered a tough, authoritative boss, Tikhonov previously worked in Aeroflot's Iraqi, Swedish and Canadian branches and, unlike his predecessor, speaks English fluently."I don't consider Tikhonov a new man with a new style of management," said one Russian aviation official who works outside Aeroflot. "This recent change is a little bit discouraging."Tikhonov has not spoken out publicly on his plans for Aeroflot, though he is expected to address a press conference in the coming days, a company spokesman said Monday. He was previously appointed general director a year ago, but the decision was reversed after the staff at Sheremetyevo Airport threatened to strike as a result.Aeroflot is also in the process of shedding its control of Sheremetyevo airport, which will remain in government hands for the time being.Since the formal creation of Aeroflot Russian International Airlines in 1992, the company has made efforts to improve service and standards, but with mixed results. It has leased Western aircraft and several Boeing 747s, and added new destinations such as Los Angeles to its international flight map.Yet after the March crash of the European-made Airbus A-310 in which 75 were killed, many of these gains were quickly wiped out after officials confirmed that the pilot was giving flight lessons to his children minutes before the fatal crash. Families of several deceased passengers have threatened to sue Aeroflot after an official report on the accident is published.Aeroflot officials say that privatization should be an important step in bringing Aeroflot more in line with international aviation service standards."Even without any privatization, we ourselves have realized the need for a higher level of service," Desyatnichenko said. "But now workers will also have a stake in this reorganization."c