Baikal awaits the end of its administration period to see if it survives

Published: 2/22/2000

It seems that the problems of Baikal Airlines continue although there has been a stabilisation of the company"s finances over the last few months according to recent reports of statements by the airline"s temporary manager Vladimir Sisov. The airline, which received a six-month extension of its administration status from creditors in November 1999, is also trying to convince its 1500 employees for more time to resolve its problems. At a conference for the election of the employee representatives on the 8th February, Sisov said that the steep rises in fuel prices during the last year had hit the carrier, but that the airline had reduced the two years" backlog on salaries, with only one delay in current payments in November 1999 since the airline went into administration in November 1998. However, with fuel at 7000 rubles a tonne, the airline is operating unprofitably on many of its routes, particularly those to Moscow where ticket receipts are not even covering the cost of the fuel according to Sisov, continuing a problem that he outlined in November 1999. Losses are also being incurred on flights to Mama and Erbogachen, a financial situation exacerbated by the state"s debts to the airline, which go back to 1995 and now stand at 18m rubles. Baikal has requested that these debts be offset against the airline"s tax liabilities. Routes to Yakutsk and Bodaibo continue to generate revenues and profitability. At the employees" conference Sisov undertook to pay the remaining backlogs of salary payments in February - how he intends to fund the payments is another matter, although press reports mention that the airline has been deriving revenue from flights to China and is looking at opportunities in Africa. The employees however, agreed to give the temporary manager their support and cease protest stoppages while Sisov endeavours to reach an agreement with creditors The solution to the airline"s problems according to Sisov is to break the airline up into a series of specialist companies as he outlined in November of 1999. This he says, answers customers" preferences to deal with specialist companies in maintenance, local airline, long haul, cargo and general aviation under the control of Aviation Corporation Baikal. Sisov also believes that the separation of individual businesses will focus managers on their activities and make the possibility of attracting investment more likely. Sisov is now confronted by the challenge of convincing the creditors after the extension expires in May 2000, that he can pull the airline through and that the year he had been given is not sufficient to achieve change. This is a particularly difficult task given the 21% of votes represented by the Omsk- based Western Siberian Air Traffic Control and Irkutsk insurance company Afes who are promoting the liquidation of the airline"s assets, despite Sisov"s argument that further sales of aircraft will only hasten the airline"s demise. According to reports, the disposal of the aircraft would clear the outstanding debts as the airline"s financial position has not deteriorated during administration. During his period as temporary manager, the airline has reopened some routes including international flights, restored some of the airline"s fleet and tackled issues such as ticket distribution and the allocation of costs by state-owned agencies. Associated articles: www.concise.org 10th August 1999; 22nd September 1999; 16th November 1999; 23rd November 1999;

Article ID: 1461