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European Bank buys 20% stake in Russia's first budget airline

The European Bank for Reconstruction and Development bought 20% of Sky Express, Russia's first budget airline, to help boost competition as the economy enters a ninth year of growth.

The EBRD will pay $10 million for the holding, a sum that will double „in several stages,” the bank said in an e-mailed statement today. Billionaires Alexander Lebedev and Mikhail Fridman are among Russian businessmen who have said they planned to or are considering establishing a low-cost carrier. Russian airlines flew 14.8 million passengers in the first half of the year, 9.2% more than in the same period last year.

„The launch of this low-cost airline, whose prices will compete with those for train journeys in a country which is the world's largest landmass, is vital for stimulating competition in the Russian air-transport sector,” said Riccardo Puliti, head of transportation investment at EBRD. Sky Express was founded by Boris Abramovich, general director and co-owner of KrasAir, Russia's third-biggest carrier, the bank said.

Sky Express plans to start operating a fleet of six aircraft by April and will be based at Moscow's Vnukovo Airport. Lebedev's National Reserve Corp., the largest shareholder in former Soviet monopoly carrier OAO Aeroflot after the government, plans to roll out its new carrier, National Wings, next year. National Reserve's Alpstream subsidiary, a Zurich-based investment company, this year acquired 48% of Blue Wings AG, a German low-cost carrier. (Bloomberg)