Possible cornering of the cargo market

Published: 5/5/2000

Moscow based carriers East Line and Atlant - Soyuz will sign an agreement in mid-May to cooperate in the cargo market according to the companies. According to Amiran Kurtanidze, General Director of East Line, the main purpose of the proposed alliance would be to cooperate on the development of both regular and charter cargo carrying, primarily through offering free access to routes on which each airline is the official carrier. For the smaller cargo carriers further consolidation of capacity poses a serious threat. The combined share of the imported cargo market for the two carriers is now reported to be 43%, with East Line controlled Domodedovo Airport controlling 50% of the city"s cargo volume. As the Moscow City Government is a major shareholder controlling Atlant-Soyuz with a shareholding of 26%, it seems unlikely that the venture will receive anything other than support for the city authorities, particularly as the airline is the city"s official carrier. With it nearest competitors having shares of between 5-7%, the cooperation by the two airlines will be a dramatic consolidation of the industry. One that will be made even more efficient by the move of the Atlant –Soyuz from its present base at Chkalosvsky Air Force base to Domodedovo, with its commensurate improvement in capacity utilization for the East Line controlled enterprise. Although the agreement will initially cover cargo traffic it appears likely that it may expand into passenger carrying. Atlant –Soyuz has a well-developed charter passenger business, in contrast to the Eats Line 48,000 passengers a year business and The cooperation first will be only on cargo market. But then it can affect passenger charter transportation as well. East Line is far behind passenger carriers as this share is not higher than 5 % in East Line's business. Last year East Line carried only 48,000 passengers. Unlike East Line Atlant - Soyuz actively develops passenger charter business and this is good for East Line as it is going to increase passenger traffic through Domodedovo. The suspicion from some quarters is that using the Association of Moscow Airlines, the two carriers will seek to fix rates and squeeze out the regional carriers from the Moscow international market.

Article ID: 1544