IFC GRANTS $29.9 MILLION LOAN TO VOLGA-DNEPR AIRLINES

Moscow, Russia (July 5, 2002) - Volga-Dnepr Airlines today signed an agreement with the International Finance Corporation (IFC) to secure a US$29.9 million loan. IFC, the private-sector arm of the World Bank granted the ten-year loan to Volga-Dnepr to finance the construction of an Antonov An-124-100 Ruslan freighter at the Ulyanovsk-based Aviastar aircraft factory. The new aircraft will be the tenth An-124 in the Volga-Dnepr fleet.

Alexey Isaikin, Volga-Dnepr's Chairman said: "This agreement with the IFC is an important step in Volga-Dnepr's policy, aimed at attracting the global financial resources necessary for the Group's development. We are very grateful to IFC for their continuous support, which led to signing of this agreement. Today's agreement is proof of the stable growth of the Russian economy and of the positive changes in Russia's aviation industry".

IFC's investment in Volga-Dnepr Airlines consists of a loan of $16.9 million on its own account and a syndicated loan of $13 million to be provided by FMO (Financierings-Maatschappij voor Ontwikkelingslanden NV), which demonstrates the level of confidence of international financial institutions place in the Volga-Dnepr Group performance and future strategy.

Sergey Shklyanik, Volga-Dnepr's Deputy General Director for Strategic Management said: "IFC financing a Russian airline to expand its fleet is a first for Russia's civil aviation history. This loan reflects positive political changes, which now provide favourable conditions for attracting Western investments to Russian industry".

Declan Duff, Director of IFC's Infrastructure Department, said: "Volga-Dnepr is building an international business on the foundation of Russia's unique airframe building industry. We expect that the investment will help demonstrate the strengths and potential of the private sector transport industry in Russia. We believe that it will encourage other financiers to invest in the transport sector."

The signing was preceded by a full-scale financial audit of Volga-Dnepr, both by specialists from IFC and experts from foreign consulting agencies. After making a financial forecast for Volga-Dnepr and its economic prospects on the international outsize air cargo market, the IFC concluded that Volga-Dnepr is a reliable company. Volga-Dnepr's ten-year history of international independent financial audits, which is otherwise unprecedented in Russian aviation, played an important role in IFC's positive decision. IFC also evaluated the flight safety standards and technical condition of Volga-Dnepr's fleet, which proved the company's high operational standards are in full compliance with international civil aviation regulatory requirements.

During the signing ceremony Alexey Isaikin expressed his satisfaction that Volga-Dnepr's level of organisation and corporate culture was acceptable to the IFC. "This investment is a result of persistent efforts of Volga-Dnepr Airlines' management team to create a cargo airline which operates competitive Russian aircraft, and which is both predictable and transparent to investors. I am glad that IFC was satisfied with the information it received from Volga-Dnepr, and made a decision to invest, despite the business risks in the air transport sector after the tragic events of September 11 in the USA. I am looking forward to continuing our cooperation with IFC", emphasised Alexey Isaikin.

IFC finances private sector investments in the developing world, mobilises capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndication for 2,636 companies in 140 developing countries.

Volga-Dnepr will invest the loan in the completion of an An-124-100 freighter on the Aviastar aircraft production line, thus providing work for Aviastar and creating additional jobs in one of the largest aircraft manufacturing facilities in Russia.