Russia to merge, sell two Moscow airports

Russia's Prime Minister Vladimir Putin (C) and Transport Minister Igor Levitin (2nd R) listen to Mikhail Vasilenko (L), General Director of Sheremetyevo Airport, as they inspect the model of the airport in Moscow March 28, 2011.

MOSCOW (Reuters) - Two major airports in Moscow will be combined into a single state-owned entity, renovated and later privatised to boost their performance, Prime Minister Vladimir Putin said at government meeting on Monday.

"We agreed with the mayor of Moscow, the transport minister and a representative of the Finance Ministry to combine into a single complex Sheremetyevo, 100-percent owned by the government, and Vnukovo airports, where the government holds a 75-percent stake," Putin said.

Sheremetyevo, home to Russia's flagship airline Aeroflot (AFLT.MM), has fallen behind privately-owned Domodedovo in terms of passenger numbers and is seen as trailing its rival in terms of customer service standards.

Domodedovo is also favoured by many international airlines including British Airways BAY.L, although it was also the scene of a suicide bombing that killed 37 people in January.

The state will pay between 45-50 billion roubles for the 25 percent in Moscow's oldest and third biggest airport Vnukovo that it does not already own, paying the cash to Moscow's city authorities.

Putin said he hoped Moscow, which under new mayor Sergei Sobyanin has been selling various assets to raise funds, would use the cash to invest in metro construction.

He said the government planned to renovate the combined airport -- making the building of a third runway at Sheremetyevo a priority -- and eventually sell it to private investors.

"The state does not plan on keeping this asset forever," Putin said. "This step is meant to create a single complex, equip it with the latest technology, and then put it on the market for privatisation at an appropriate price."

He added that Moscow's airports plan to double their capacity to 100 million passengers by 2020. (Reporting by Gleb Stolyarov, Writing by Nastassia Astrasheuskaya, Editing by John Bowker and Louise Heavens)