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Putin signs order to form Russia's second-biggest airline

Russian President Vladimir Putin on Wednesday signed an order establishing a new airline that is to be the country's second-biggest after Aeroflot, the Kremlin said.

The president's order will see Russian regional airlines KrasAir, Domodedovo, Samara, Omskavia and Sibaviatrans merged into AirUnion within six months, the Kremlin said in a statement. The government will own a share of „at least” 45% of the new company, it added. AirUnion will also be designated as a strategic enterprise, which entails strict limits on foreign involvement and a minimum amount of government control. The move comes as Russia tries to modernize both its many regional airlines as well as the country's once-prolific aircraft production industry.

A separate government-owned company, headed by First Deputy Prime Minister Sergei Ivanov, is being formed to consolidate military and civil aircraft producers, and the Kremlin would like to see similar consolidation of the regional airlines. Last year saw three major airplane crashes either on Russian territory or involving Russian airlines. With an accident rate 13 times the global average, Russia and other former Soviet republics were among the most dangerous places to fly in 2006, the International Air Transport Association said last month. As Russia tries to improve its safety record and update old Soviet-era planes, Aeroflot, AirUnion and S7 have emerged as the country's largest airlines. These airlines have tried to increase their access to international routes, and Aeroflot is one of three bidders looking to buy Italy's Alitalia.

AirUnion, which has existed as a loose alliance of the five airlines since 2005, last month clinched a deal to buy Hungary's national carrier Malév. AirUnion chief Boris Abramovich called Malév „an invaluable asset allowing us to benefit from linking with the global air transport system.” The five airlines of AirUnion control 70 planes and are expected to carry 5.5 million passengers in the near future, making it the country's No. 2 airline, Kommersant reported. (