Foreign carriers may have a choice of over flight deals to choose from (1200 words)

Published: 9/20/2000

Transaero has outlined some of its plans for the near future, which include new tariffs, an upgrade of facilities at Shermetyevo Airport and a more general objective of breaking Aeroflot's monopoly of royalties for international over flight of Russia, not to be confused with air traffic fees paid to the Ministry of Transport, and it's primacy on major routes under some of the current bilateral agreements. Royalties The over flight revenues are a particular bone of contention for the private carrier, that argues that despite the fact that it is the official carrier on a number of routes, Aeroflot still receives all the Russian over flight revenues from foreign carriers, that Transaero believes that it should share. The size of the revenues is unclear, but could represent as much as $250m of revenue, which Aeroflot currently accounts for as non-operating income. For those European carriers whose countries are signatories of the International Air Services Transit Agreement (IASTA), which eliminates royalties for using air space of under the agreement, Russia remains according to one government source “an irritation and inconsistent”. Russia remains a non-signatory of the agreement and royalty payments are currently decided as a commercial arrangement between Aeroflot and the foreign carriers over flying the country. This situation's continuation however, is a source of some debate among European carriers particularly, and is the subject of considerable discussion between the European and Russian aviation authorities. It is unlikely that the introduction of yet another party will improve their acceptance of the situation, although a little competition if Transaero succeeds, could drive the cost of the royalty payements down. The size and accounting for over flight revenues has been an area that Aeroflot has been reluctant to discuss in the past. With questions answered misleadingly to be charitable, suggesting erroneously that monies are transferred to the state with Aeroflot purely acting as a collection agent for a fee. Given the opaqueness of Russian accounting, these comments have been difficult to challenge and the company has been able to obscure the revenue, which has served the management well, as it enhanced the company's performance, and one assumes improved the take for those accused of involvement in the siphoning of Aeroflot's cash flow. In an effort to participate in this low investment cash flow, Transaero is reported to be in negotiation with several unnamed airlines from UK, Germany and Israel to collect over flight fees. Arguing that Transaero as the sole carrier on a number of routes under bilateral agreements and has the right to take royalty payments for use of air space from carriers originating from the countries on the other side of those agreements. The motivation for Transaero interest in the royalty payments appears to be motivated by the interest of Israeli carriers, a route on which Transaero is the sole carrier, to start over flying Russia to destinations in the Far East and South East Asia. According to Transaero the over flight arrangements currently in place are regularly renegotiated and it will be prepared to offer a better commercial deal than Aeroflot to carriers. It should therefore take the revenue on those routes that it has official carrier status, as that position under existing agreements, the airline argues, gives it the right to negotiate. Transaero expects to sign its first agreement by the end of the year using its potential windfall to finance the acquisition or lease of new Russian aircraft. New route access Transaero has also made it clear that another aspect of Aeroflot's dominance of the Russian international air transport market is unacceptable. Under the current intergovernmental agreement between France and Russia Aeroflot is the sole carrier to the major French destinations of Nice and Paris. Transaero believes this lack of competition is stifling the development of tourism between the two countries and has asked the Ministry of Foreign Affairs and Ministry of Transport to consider an increase in the number of the Russian carriers on the routes. New terminal improvements Transaero has also reported that it has signed an agreement with Sheremetyevo International Airport the ongoing development of terminal one for Transaero. The agreement, which is the second stage of a programme that started in 1995, builds, according to Transaero, on the significant improvement in passenger service, increases of capacity, introduction of business halls, reconstruction of check-in points and luggage handling systems. Transaero's spokesman declined to put a value on the first stage of improvements other than to say it was financed form their own resources by the participants. According to the spokesman Transaero specifically equipped 3 new business halls and assisted in the improvement of the check-in areas. The second stage of developments for 2000-2001 is reported to be reviewing the: - introduction of an automated check-in system - preparation a transit and transfer zone and installation of walkways - studies of the extension of aircraft parking - the development of a bus terminal In service terms the two parties are also looking to reduce waiting time for luggage to a maximum of 30 minutes for planes carrying luggage in the hold and 45 minutes for those carrying it in containers. While Transaero and the airport will fund developments from their own resources, they intend to attract funding from external sources, although as usual they are reluctant to discuss specific sums involved. According to a company spokesman Transaero's commitment would not be significant. Airport staff servicing the new facilities dedicated to Transaero would however, be paid and trained by the airline. Standby introduction Tariff option development by the airline will involve the introduction on the 1st of November of a new ticket package called the Social Ticket on its Moscow - St. Petersburg route. The round-trip ticket will cost only Rb 100 (without airport duties). The ticket will be aimed at the group of people that the government requires the airlines provide 50-100% discounts too, such as disabled people, senior citizens, war veterans etc. Transaero's spokesman said that this ticket, effectively a standby ticket, will use unsold seats on its flights and will be restricted to those entitled to government mandated discounts and was the airline's response to the government's call to support the less fortunate. New tourist tarrif On the 20th September Transaero introduces another tourist tariff on its Moscow - London, Moscow - Strasbourg, Moscow - Frankfurt, Moscow - Pathos routes. Round trip will cost only $199 without airport duties. According to Transaero the low price will encourage budget travelers. The ticket however, has to be bought directly from Transaero. The pilot scheme will run through till the end of the year and will be extended if it proves to be successful.

Article ID: 2081