Moscow charter airlines hit back at the regional airlines incursions into their market

Published: 2/19/2000

Vnukovo Airlines, East Line, Continentalnye (Continental) Airlines, Transevropeiskie (Trans European) Airlines, AJT and Atlant-Soyuz, the airlines that dominate the Moscow charter market, have formed an alliance of charter carriers, called rather cumbersomely The Association of Airlines of Moscow Transport Centre. The formation of the alliance has been expected for sometime given the intense pressure that operators have been under since the financial crisis of late 1998. The collapse of demand left the market with a great deal of capacity and little demand, which led travel agents, who supply most of the charter airlines passengers, to slash prices. In an effort to gather what business was available, compelling the charter airlines to take commensurate cuts in their prices, which in many cases have resulted in heavy operating losses. AJT Air International, which operates a mixed fleet of Il-86s and Tu-154s proposed an anti dumping agreement at the end of the summer of 1999, but received a luke warm response for fellow operators, it appears however continuing losses and increasing competition have galvanised them into action. Competition in the sector has emerged from the regional airlines, such as Sibir and Krasnoyarsk Airlines, eager to better utilise their fleets operating in the soft domestic scheduled market. The result of the move into the charter market by the regional carriers has been a market share of 30% of the charter carriers traditional market. The attack of the regional carriers has forced the Moscow based airlines to combine, with Aeroflot standing outside the association, but having observer status, although what this exactly means in reality has been left very vague. The airlines are reported to have agreed to a number of cartel like decisions, which may bring them into confrontation with the Federal Government"s anticartel authorities if the initial reports prove to be correct and the agreements can be implemented: · Flights from the popular Sheremetyevo terminal 2,should not be sold at higher prices than the other Moscow airports of Domodedovo and Vnukovo · To agree to a quota of international flights from from Sheremetyevo 2, and defend traffic from the other two airports · No price dumping on routes between association members · Try and restrict the use of Sheremetyevo 2 by regional airlines The travel agents believe not surprisingly, that the impact on the successful implementation of these agreements will be to drive prices up by 30% and will make foreign charter carrier options attractive. In addition, the increase in prices could lead to a decline in traffic for the airports in the Moscow area. We should be able to see the impact of these moves at the MITT-2000 exhibition in March, where the travel agents will outline their summer offerings and pricing, which will show if the airline"s actions have had any effect. Associated article: www.concise.org. 27th September 1999

Article ID: 1440