The sale of the state-owned stake in S7, formerly Sibir, is envisaged in the government's 2006 privatization plan. Aeroflot's management has suggested the shares be included in the company's equity capital to increase the government's 51.17% interest in Aeroflot.
"We have sent a letter to the Transportation Ministry saying we consider the transfer of the stake to Aeroflot's equity capital unreasonable," said Igor Konkov, an aide to the minister.
He said the transaction would involve a conflict of interest, as Aeroflot would then be able to block S7's decisions to expand its routes, for example, to international flights.
The Federal Agency for the Management of Federal Property said in July that Aeroflot was asked to consider forming an alliance to increase the efficiency of its aircraft fleet and optimize flight routes. "If the alliance is not formed, the stake will be put up for auction," a spokesperson said.
S7, Russia's second largest carrier after Aeroflot, has encountered difficulties this year, the most severe being the tragedy in the Siberian city of Irkutsk, where an Airbus 310 crashed on landing July 9, killing at least 124 and injuring 70 of 203 people on board.
