Problems arising from FSVT reorganisation

Published: 6/28/2000

The problems of FSVT's current reorganisation have prevented Sakahilin Air Routes (SAT) from starting their new route Yuzhno—Sakhalinsk - Moscow with the Il-62 because of the delay in issuing a licence for the route. According to Vladimir Romanov, the head of the transport and communication department of the Sakhalin Region administration, SAT's management is currently in Moscow trying to get a licence from the Ministry of Transportation, which has absorbed the FSVT and is now responsible for route licences. Quoted in the local press, Romanov has said that it is possible that the delay in issuing the license is the ploy of officials to assist Moscow airlines, specifically Domodedovo (DAL), which is also fly on the Yuzhno—Sakhalinsk route. Andrey Kolesnik, SAT's commercial director, also supports this view, implying that SAT's cheaper tickets pose a competitive threat for the Moscow-based carrier. The public grousing of Romanov follows a number of attacks from the region's government aimed at Domodedovo Airlines. This culminated in a speech in February 2000 by the region's governor Igor Farhutdinov, in which he accused DAL of operating a monopoly approach to pricing and of providing an inadequate service and an undertaking that the regional government would assist the local carrier in starting an alternative service. According to reports, SAT is looking, with regional support, to drive prices down even further provided it gets the licence, especially if it can negotiate lower fuel prices with local producers and mitigate the airline's high cost of operation from its Yuzhno-Sakhalinsk base, currently 1.5 times that of Moscow. The region, as it undertook in February, has already helped the airline achieve long haul capability by assisting in the acquisition of the Il-62s. Romanov says that despite the delays he is confident that the licence will be eventually issued, but is not sure when. The impact for DAL of the new competitor will be painful if aggressive price-cutting does occur, but the present chaos over the licence appears to be the almost entirely due to the reabsorption of the FSVT back into the Ministry of Transport. In fact many commentators are commenting that the current disruption of all the agency's areas of responsibility suggests that the general concerns relating to safety, expressed at the recent announcement of the changes, may have some foundation. SAT operates one Boeing 737, seven passenger An-24s, one cargo An-26 and two passenger Il-62s and flies to destinations in China, Korea, Japan, Novosibirsk, Irkutsk, Khabarovsk and cities on Sakhalin Island.

Article ID: 1884