Blacklisted Aeroflot Unit Plans $1.5 Billion Boeing Jet Deal

Aug 06, 2014 3:21 pm ET

(Adds sanctions background in seventh paragraph.)

Aug. 6 (Bloomberg) -- Dobrolet, the low-cost unit of Russia’s OAO Aeroflot grounded by European Union sanctions, plans to buy $1.5 billion of single-aisle jets from Boeing Co.

Deliveries of the 16 Boeing 737-800s would occur in 2017 or 2018, and Dobrolet has paid a deposit, Maxim Fetisov, a spokesman, said today. Marc Birtel, a Boeing spokesman, said Dobrolet intends to take the planes while declining to say when the deal would be booked as a firm order.

Announcing plane purchases amid Dobrolet’s flight suspension signals Aeroflot’s determination to return the discount carrier to the skies in the face of EU penalties over the Ukraine crisis. State-run Aeroflot halted Dobrolet’s operations on Aug. 4, a day after European companies annulled leasing, servicing and insurance contracts with the unit.

Dobrolet had two Boeing 737-800s in service and 10 more on order, Aeroflot Chief Executive Officer Vitaly Savelyev said last month in an interview with Bloomberg News. He said at the time that the carrier didn’t plan additional jet purchases until Russia further liberalized its air-carriage rules.

Boeing’s 737-800 retails for $93.3 million, according to the website of the Chicago-based company. Buyers typically pay less than list prices. The 737, the world’s most widely flown jetliner, competes with planes from Airbus Group NV’s A320 aircraft family.

Dobrolet’s Deposit

Dobrolet placed the deposit for the jets on Aug. 4, Fetisov said, the same day that the carrier parked its existing aircraft. The airline flew between Moscow and the Crimea, the region whose defection from Ukraine to rule from Moscow escalated political tensions.

Sanctions by the U.S., Europe and other countries have targeted different aspects of Russia’s economy over the Ukraine conflict. The EU’s actions affected Dobrolet, for example, while earlier U.S. measures included travel bans on associates of Russian President Vladimir Putin. The Russian leader struck back today with restrictions on food imports from countries imposing sanctions because of his support for Ukrainian rebels.

For Boeing, an agreement with a Russian carrier keeps open a sales channel that was closed during the Cold War. Aeroflot’s first Boeing order came in 1997, the planemaker’s website shows, and the Russian company’s total was 48 jets through June.

In May, Boeing Chief Operating Officer Dennis Muilenburg skipped the St. Petersburg International Economic Forum, following pressure from the White House.

--With assistance from Christopher Jasper in London and Olga Tanas in Moscow.