Economy Minister Alexei Ulyukayev had warned earlier this month the airline faced bankruptcy after Aeroflot failed to reach agreement with Transaero's creditors on a restructure of its estimated 250 billion rubles ($3.78 billion) debt pile.
Aeroflot's board of directors had in September approved the acquisition of a controlling 75-percent-plus-one-share stake in Transaero for the symbolic sum of 1 ruble in a government-backed deal
But the deal foundered on the debt issue and the carrier, hit by three straight years of heavy losses, filed for bankruptcy on October 1 after the civil aviation authority ordered it to stop selling tickets.
Privately-owned Transaero, which employs some 10,000 staff, started out by leasing Aeroflot aircraft and serving destinations across the former Soviet Union as well as parts of Asia and the Caribbean.
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The firm's woes add to a growing exodus of foreign carriers with the likes of EasyJet and Air Berlin as well as Lufthansa announcing pullouts in recent months, citing weak demand as Russia labours under international sanctions imposed over its actions in Ukraine.
Last evening saw a flicker of hope with a reported bid for a majority stake in Transaero by Vladislav Filev, CEO of S7, Russia's number-three carrier.
However, the Russian authorities said the distressed airline had been grounded definitively, with Rosaviatsia director Alexander Neradko telling reporters its operating license had been revoked.
Deputy prime minister Igor Shuvalov said the airline "will leave the market" but assured that "passengers will not suffer" as other carriers, led by Aeroflot, would take on its 156 routes.