Aeroflot Launches Takeover of Ukraine International Airlines, Eyes Air Moldova

Big news out of Russia this week as Aeroflot has decided to take over Ukrainian flag carrier Ukraine International Airlines (UIA). Rumor has it that the airline is also eyeing Air Moldova and possibly other airlines in a bid to grow dramatically. As you can imagine, this is extremely controversial.

So why the heck would Aeroflot do something this crazy? Well, the airline argues that air service in Ukraine was always provided by Aeroflot until the break-up of the Soviet Union. So the people there want Aeroflot to come back in so it can be like it used to be (without, uh, the unreliable Soviet aircraft I guess). Travelers are split on this so far with those in Ukraine’s west extremely angry and those in the east more welcoming of the news. But it’s not the travelers who decide if this will happen.

Originally, the airline’s management was in favor of deepening cooperation with Aeroflot. It got so serious that UIA began to rethink its interline and codeshare arrangements with carriers in the European Union (Air France, Alitalia, Austrian, Brussels Airlines, Iberia, KLM, Swiss, and TAP Portugal) in favor of a tighter alliance with carriers in former Soviet countries. But protests from employees reached a fever pitch and the President of the airline was forced to step down. A new President cleaned house and once again warmed up to western airlines, but that just set Aeroflot on a rampage. Aeroflot was afraid that the partnership it was forging was going to fall apart so it stepped in with a hostile takeover bid.

Why does Aeroflot care? UIA’s hubs provide strategic access into Southern Europe and the Middle East. This will help strengthen Aeroflot in the area dramatically. But with UIA’s new management against the bid, will Aeroflot succeed? It is certainly looking that way, thanks to UIA shareholders.

UIA was privatized in 2011, and the current shareholders expressed support for the merger. After emerging from a dark room after 3 hours of “negotiations,” the shareholders stood together, smiling and crowing about how great it would be for the two airlines to be united. Aeroflot’s representatives stood behind then in a show of unity, stone-faced and carrying Kalashnikovs.

Several shareholders were asked why they supported the deal, which wasn’t exactly rich, but most were unwilling to talk. (Aeroflot offered 2 rubles and a promise not to put the airline out of business.)

One minor shareholder did speak under the condition of anonymity. His voice was shaking as he detailed how he had always loved Russia and knew that the two airlines should become one. That’s all I was able to get before he was whisked away in an unmarked car.

A final vote is apparently scheduled for tomorrow, but this isn’t the end of Aeroflot’s ambitious expansion plans.

Aeroflot is said to be interested in acquiring Air Moldova as well. No deal has been announced, but Aeroflot representatives have already begun moving west toward the airline’s headquarters. Were I betting man, I’d say this was a done deal unless another airline decides to get involved.

Major US and European airlines are unhappy about both of these moves and have dispatched their own representatives to try to work out an alternative deal. Discussions have been ongoing with both Aeroflot and the smaller takeover targets, but there has been no progress.

Unless these airlines are able to strike a deal, it seems highly likely that Aeroflot will continue to expand at will.

And a happy April Fools’ Day to all. (Unless you live in Ukraine, then it’s not exactly happy.)