The main fuel provider of the Krasair airline may suspend refueling the carrier's aircraft until the company settles its debts, now put at USD 10 million. We believe that the problem with jet fuel supplies to the Karsnoyarsk airport may soon be resolved. However, the appearance of such problems is indicative of the carrier's precarious financial state. Taking into account the complex conditions in the industry and the company's serious debt burden, we recommend selling KrasAir shares.
It was reported on August 12 that Siberia Avia Service, the main fuel supplier for the KrasAir airline in Krasnoyarsk's Yemelyanovo airport, may stop refueling the company's airplanes until the company settles its debts, now put at USD 10 million.
Taking into account the scale of the airline's business, its current debt may be regarded as not very large. Moreover, Russian Technologies, which is to take over a state share package in KrasAir, has promised to help the airline with aviation fuel supplies, according to the Vedomosti daily. However, given spikes in jet fuel prices, the company may end this year with operating losses. The airline's insufficient cash flows may have an adverse impact on its financial stability.
We believe that the problem with jet fuel supplies to the Krasnoyarsk airport will soon be settled. However, the appearance of such problems is indicative of the carrier's precarious financial state and its weak cash flows. Taking into account complex industry conditions and the company's heavy debt burden, we recommend selling KrasAir shares.
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