Russia: Dalavia e Sakhalin fuse in Aeroflot


Aeroflot CEO aims for increases in domestic share, long-haul fleet
Wednesday November 22, 2006

Aeroflot Chairman and CEO Valery Okulov told ATWOnline during an interview in Vienna that the carrier will post a 2006 profit of more than $200 million (it earned $220 million in 2005) and that there are no plans for an IPO despite the Russian government's August hint that it was prepared to part with its interest in the flag carrier (ATWOnline, Aug. 17).

Instead, Aeroflot will focus on enhancing its domestic presence. "This year we will grow 9% on international routes and 16% on the domestic network," Okulov said. "So we see our biggest growth within Russia, where we currently serve 25 destinations and where we want to increase our transport activity by 25%."

That aim is behind the launch of a new regional carrier called Aeroflot East, which will be based in Khabarovsk and combine smaller carriers Dalavia Far East Airways and SAT Airlines (ATWOnline, Nov. 21). "We realized that foreign carriers have increased their activities in Russia by 14% and in the Far East by 18%. As a result, airlines from Russia have lost market share," he explained.

Aeroflot East will operate both short- and long-haul routes. "First we have to bring the new carrier to Aeroflot standards. The program should be fully working within two years," Okulov said. SU already operates subsidiaries Aeroflot Don in Rostov and Aeroflot Nord in Arkhangelsk. It also has opened branches in Saint Petersburg and Magadan. It has a total market share in Russia of 60% on international routes but just 12% of the domestic market. "By 2010 we want to have a 30% share within Russia," he noted.

The next step is to expand European services and connect them more effectively via Moscow Sheremetyevo to the Far East. "We want to build a bridge between Europe and Asia. Our investment in the new Sheremetyevo 3 terminal is $150 million," he said. Russian banks have chipped in another $300-$400 million. By Nov. 30, 2007, all flights operated by SU and its partners will transfer to the new facility.

Regarding the fleet, Okulov said that until 2010 the carrier will operate 30 Russian Regional Jets (ATWOnline, June 1) and 65 A320 family aircraft. "We want to increase our long-haul fleet dramatically, up to 45 aircraft," he said, adding that the carrier will talk with Airbus and Boeing about the A350 and 787 respectively. "But I don't know when we can make a decision. Aeroflot had $180 million in aircraft leasing costs in 2006."

He hopes that if and when Russia joins the WTO, taxes on Western-built aircraft will be reduced for Russian airlines, which he said "gives us a better chance to compete with Western carriers."

by Kurt Hofmann
ATWonline