Troubles for Vnukovo Airlines, Russia"s number two airline, continue with a 40% drop in passenger numbers and losses of 100m rubles last year.

Published: 3/7/2000

Despite the efforts of recently appointed general director Alexander Krasnenker to increase its popularity with passengers, the airline has admitted a 40% drop in the number of passengers carried, down to 933,000, and losses of 100m rubles in 1999. In particular, this has to be viewed in the context of Russian air transport as a whole, which saw a decline of only 4% in the number of passengers carried during the year. For the first time in a decade, the FSVT reported a 4.4% growth in domestic passenger growth, although there was a drop of 17% in total passengers carried on international flights. The decline of the airline also comes at a time when Sibir has set it sights on taking the number two position in Russia and is currently planning a hub at Vnukovo Airport. Sibir, which planned to merge with VA last year, expects to double its traffic in 2000 to 1.5m passengers while continuing to run very high load factors, which last year averaged 70.1%. With its economic and trade union troubles continuing, and the appointment of yet another general director, Krasnenker, in September 1999, VA has failed to keep afloat by offering much lower air fares than the market average during the past summer season. During the past three years, VAL has seen seven resignations of its general managers because of their inability to rescue the airline. Since his appointment, Krasnenker has reported a significant increase in punctuality of flights, up fro 15-20% in early 1999 to 93% in February 2000. However, this holds little weight against the fact that out of 54 aircraft listed in the VA fleet (including Il-86, Tu-154B, Tu-154M, Tu-204 and Yak-42D), only 13 are currently in air-worthy condition. A key part of Krasnenker's plans for the revival of VA is to put two more Tu-204s into air-worthy condition by the summer season and to increase the operable fleet of Tu-204s to seven by upgrading aircraft from the Tu-204 test programme to the standard set by RA64011. He is also planning a vast programme to improve airplane interiors for those flying scheduled services, with help from companies in Sweden and Denmark. VA currently maintains scheduled services from Domodedovo and Vnukovo airports in Moscow to 12 destinations in Russia and two in CIS, as well as regular charters to Tel Aviv, Istanbul, Barcelona and Khurgada. It also plans to restore several regular internal services this April and to provide scheduled services in the summer from Vnukovo, Domodedovo and Sheremetievo. According to Krasnenker, the administrations at these airports have agreed to freeze old debts temporarily providing that the company meets current payments for airport services. VA expects to pay off a considerable part of the debts by offering tourist operators charter flights in the summer to ten European countries, Turkey and Tunisia. However, all these revival plans need investment. Whether this is possible is debatable for a company with such a poor credit history and constraints placed on Krasnenker. According to reports in the Russian magazine, Company, last September, Krasnenker is restricted under his five-year contract to employing only two people directly, an assistant and a secretary, and is specifically prohibited from forming his own team within VA. Krasnenker claims, however, that he has already acquired some credits under his 'honest name'. This is somewhat surprising, given that Krasnenker has been the subject of close scrutiny from agencies investigating the handling of Aeroflot's affairs by managers affiliated to Boris Berezovsky. After an internal investigation, Krasnenker was fired from his position as senior vice-president and commercial director and widely regarded as Berezovksy's man. It was suggested last September that Krasnenker had broken his links with Berezovsky and was seeking to carve a career for himself in the Russian airline business. However, it now appears that Berezovksy is renominating him for the Aeroflot board. For the present, VA managers have said that the practice of offering the lowest airfares has been abolished and, as of 1st March, the company's tariffs are close to those of competing airlines. VA has also introduced a wide spectrum of tariffs, from a cheap 'X tariff' to first class, with an upgrade option available. To stimulate sales, VA has also agreed to increase agents' commission to 9% and has initiated a tender for the three best sales agents for long-term contracts on 'very favourable terms'. Whether this achieves any improvement in passenger numbers and the airline's fortunes remains to be seen. Associated articles: www.concise.org; 28th September 1999;22nd September 1999; 29th February 2000

Article ID: 1515