Russia's Federal Air Transport Agency (Rosaviatsia) has announced that it will revoke Transaero Airlines' Air Operators Certificate (AOC) with effect from October 26 citing numerous violations of the country's Federal Air Regulations (FAR).

The regulatory body said an audit of Transaero's books and operations earlier this month showed the struggling carrier lacks the financial resources "to service, repay debt and fund ongoing operations in full."

Among the agency's gravest concerns are a lack of funding to ensure adequate crew simulator training, airworthiness inspections for its varied fleet of aircraft, and the timely repair and maintenance of aircraft. All of these, the agency said, "could generate additional risks and threats to the security of air travel". In light of these shortcomings, Rosaviatsia says Transaero no longer complies with local FARs thus warranting the revocation - not suspension - of its AOC.

Passengers affected by the grounding will be assisted by various other Russian carriers while 6,000 out of the 10,000 affected Transaero personnel will be absorbed into Aeroflot (SU, Moscow Sheremetyevo). Others will be able to take advantage of a newly established aviation job centre.

It is uncertain how the development will affect S7 Group's bid to take control of Transaero's shareholding which was announced on Tuesday, October 20 by S7 Group's chief executive and shareholder Vladislav Filev and Transaero's founder and majority shareholder, Alexander Pleshakov. Under the proposed deal, Filev said S7 had a plan to normalize relations with Transaero creditors who are collectively owed over RUB250 billion (USD3.8 billion).