AeroSvit, Ukraine's largest airline, will seek protection from its creditors in court this week after grounding most of its flights and leaving hundreds of people stranded across the globe due to financial problems.
AeroSvit, which operates 28 planes and serviced 2.8 million passengers in 2011, had debt of UAH4.27 billion hryvnias (USD$534 million) as of the end of last year, which was almost three times its assets.
The Kiev-based company said the court procedure was part of a reorganization plan aimed "to restore its operating efficiency and increase revenue inflows". The hearings are due to start on January 23.
"We expect a (court) ruling that will launch the process of recovery in the company," an AeroSvit spokesman said on Tuesday, declining to elaborate.
The company filed for bankruptcy late last December, just before the New Year holidays, prompting a number of its partners such as travel firms and airports to suspend services.
As a result, more than a thousand passengers in cities from Bangkok to Stockholm were unable to get on return flights to Ukraine in time, forcing the Ukrainian government to intervene and arrange their return.
Trade unions, which include AeroSvit workers, say the company had issued warnings to all its 2,500 staff that they would be laid off soon.
AeroSvit, in turn, has blamed unions for driving up staff wages so much that they became one of the key factors leading to its downfall.
In 2011, AeroSvit's financial loss tripled year-on-year to UAH1.456 billion hryvnias. It has not reported 2012 results.
AeroSvit, controlled by Ukrainian businessman Ihor Kolomoisky, is one of Ukraine's two biggest carriers along with Ukraine International Airlines (UIA), its main competitor.
It operates a fleet of 28 Boeing aircraft including eight long-haul Boeing 767 and 20 medium-haul Boeing 737. Last July, AeroSvit said it had received two Next Generation Boeing 737-800 planes and planned to get nine more by 2016.
Before reducing the number of its flights to just six this month, AeroSvit operated 80 international routes to 34 countries.
Some Ukrainian media have reported that Kolomoisky - who also has interests in metals, oil refining, media and banking - had taken over UIA, although the company has denied this.