Carrier struggles to keep routes going (560 words)

Published: 9/11/2000

The Chechen war has posed significant problems for state-owned Dagestan Airlines based at Makhachkala Airport (which is owned by the airline). Before the war, the airline flew to St.Petersburg, Samara, Nizhnevartovsk, Ekaterinburg, Surgut, Aktau (Kazakhstan) and made charter flights to the United Arab Emirates, Saudi Arabia, Turkey, Israel, Italy, Greece. International routes accounted for 30% of the airlines revenues. Since 5th November 1999 however, the banning of international flights from Makhachkala Airport by the Russian Government, accompanied by the fall in domestic volumes as passengers sought to avoid the region, have left the airline struggling. This is even with Moscow flights, which are now down to three a week, although load factors are currently reported to be running at 90%. The airline however, complains although volumes are good, ticket prices remain low and fail to compensate for the high price of fuel in Dagestan, which currently runs at $300 a tonne significantly above the average Russian price of $230. The company has increased ticket prices raising them by 33% in May 2000 from 1470 to 1950 rubles in response to increase in fuel prices by the airline's local supplier Lukoil's Volgograd Refinery. The company however, claims that even with the rise, ticket prices still do not cover costs and should be closer to 2500 rubles for breakeven. The airline however, believes that any further rise in prices will be extremely detrimental to passenger numbers. Currently the airline provides services using an An-24 once a week to Krasnodar, Rostov and Mineral Waters. In August 2000 the company opened routes from Barnaul and Kemerovo to Frankfurt-am-Main and Hanover. The airline's fleet of four Tu-154Ms, acquired since 1994 with the assistance of the Dagestan Government and responsible for 95% of the airline's revenue, two An-24s (only one flyable) and two Mi-8s, remains severely under utilised. On 16th July 2000 the company re-opened regular flights from Makhachkala to St. Petersburg and plans to acquire a Tu-134 with the support of Dagestan Government to re-open the Makhachkala-Samara- Nizhnevartovsk route. The use of Makhachkala Airport by the military has also caused the airline problems as up to 70 flights a day by military Il-76 and An-22 carrying 250 tonnes of supplies have significantly exceeded the runway's specifications and caused damage estimated at 22m rubles ($0.8 m). Additionally the Ministry of Defence owes 19m rubles ($0.7 m) and Ministry of Internal Affairs owes 6m rubles ($0.2 m) for services and use of the airport. Even before the conflict the airport required reconstruction, estimated by an Italian consultant in 1995 to involve the renovation of the airport's terminal, the repair and extension of the runway up to 3000 m and the construction of a new hangar at a total cost of $215m. The project has been on hold as a result of the war, but the company believes that an improvement in the Chechnya situation may bring investors to the project given the airport's position as the most southerly airport in Russia. The management has kept the airport and the airline together despite the decision in 1994 by the Dagestan Government to split the two. This decision was later rescinded after the efforts of Alexei Jabrailov, the airline's General Director. He has been in charge of the company, which employs 1000 people, since 1992 and is a Parliamentary Deputy.

Article ID: 2066