1999 financial results and plans for 2000

Published: 5/23/2000

On 18th May 2000, Surgut-based carrier Tyumenaviatrans (TAT), recently gaining profile internationally due to the service of its heavy lift Mi-26s with the UN in Sierra Leone, held its AGM in Moscow. After the AGM, the supervisory board of the company elected a new Chairman Vladislav Nesterov, replacing Alexander Fraiman who remains as Deputy Chairman. It decided however, not to pay a dividend despite the company's return to an operating profit of 26.7m rubles ($1.1m). At the pre-tax level, losses, although improved by 75%, remained at 15.8m rubles ($600,000) after 1998's loss of 63.5m rubles. Net earnings however, suffered from heavy tax and pension charges bringing losses to 165.5m rubles ($6.7m) for 1999, an improvement of 18% in rubles on 1998 and 67% in dollars. Revenues during 1999 fell in $ terms by 53% to $37.9m, reflecting falls in both passengers and freight of 19.2% and 14.2% in dollars, respectively, and rising by 19% overall in rubles. Load factors on 510,928 travellers saw improvements in both cargo and passengers rise by 12.2% to a credible 66.4%. The mix of business also showed some signs of change, with international business such as the UN's work falling from 6.8% of revenues to 4.1% despite being denominated in hard currency, with the domestic helicopter and scheduled airlines service increasing their share of the business. Domestic business was helped by orders from oil companies Sibneft and Surgutneftegaz , the former contract being for Tu-154s to carry oil workers. TAT's fleet, despite its large size of 273 aircraft remains only about 30% flyable, with some aircraft categories such as helicopters and smaller aircraft looking very weak due primarily to age, with only 10% of the airline's 52 An-2s flying and 31% of the 15 Mi-26s. Among the larger aircraft the Yak-40s are only 32% flyable out of a fleet of 22 aircraft. The only categories with full flying capability appear to be the later variant Mi-8s, although the earlier Mi-8Ts are less than 26% flyable out of 134 aircraft of this type. The larger airliners, such as the six-154s delivered between 1995 and 1999, are all flying as are the two leased Tu-134s.The company will take delivery of a Tu-154 this year from Aviakor, although recent strikes and power problems may delay that delivery. The airline has however, been criticised by the FSVT for its poor safety record in its helicopter operations, with the loss of three Mi-8s in 1999 and one in 2000, although the airline claims that, given the size of its fleet, these are not surprising. With only 26% of the Mi-8 fleet flying however, the figure appears high. On the cost side and despite dramatic fuel rises in 1999, expenses were kept under control, being flat in ruble terms and down by 61% in dollars. helped by an agreement signed with its major client and fuel supplier Surgutneftegaz, under which fuel was supplied by the producer in return for services worth $15m. This cost was however, not accounted as a fuel cost and therefore had the effect of substantially reducing fuel as a proportion of total costs to 18.4% substantially below the industry average, reducing the fuel charge in dollar terms from $12.7m to $6.8m in 1999. The company reduced its headcount by 15% in 1999 ending the year with 3,729 people and reducing wage costs from $27.5m to $9m in 1999. In contrast to one-off gains of 1998 the airline experienced substantial write-offs of overdue accounts receivable in 1999, with a hit of -$1.7m, although with adjustments the negative contribution narrowed to $600,000. During 2000 TAT, according to Victor Bachurin, Director of International Activity, expects to significantly increase revenues from its international activities from $4.1m to $21m on the basis of a number of agreements including UN tenders already signed. This includes two Mi-8MTWs to East Timor, the continued operation of the two Mi-26Ts in Sierra Leone, an Mi-8T in Western Sahara and seven Mi-8MTWs in South Africa with Heyns Helicopters. Other contracts include operating An-24s and Yak-40s for the UN and other agencies. The Sierra Leone contract particularly is seen as being in possible jeopardy after a UN crew from Nefteugansk Aviation was seized by rebels, although the company believes that this is unlikely given that the conditions are typical of many of the regions the UN operates in. This year the airline will participate in three new UN tenders which are normally for around 1500-2000 hours a year. The airline however, says the contracts are very competitive with eight or nine operators competing for the business, some of which, according to TAT, are prepared to bid with no regard for costs, particularly mentioning Ukrainian operators. Other overseas business includes contracts with Elak KFT in 1999. After a fall of RPK of 10% in 1999, General Director Andrei Martirosov plans to grow RPK to 1billion in 2000 on an increase of load factor of 1%, bringing revenues of $72m ($37.8m 1999) and an unspecified net profit. This improvement will come about as a result of top line growth and restructuring, which will reduce costs by as much as 20% according to Natalia Fedotova, the carrier's financial director. The improvement will be brought about by better financial systems and particularly control of the airline's affiliated airport network, which gave the airline a large tax bill and poor control of cash flow.

Article ID: 1803