Martirosov remains reluctant to buy Russian helicopters(1100 words)

Published: 3/16/2001

Tyumenaviatrans, Russia's largest civil helicopter operator and the fifth-largest airline, based in Surgut, has reported an impressive improvement in its financial results under Russian Accounting Standards (RAS) for 2000, following a 226% revenue improvement at the end of the first half. Full year figures showed an increase of 124% in sales, from $ 37.8 m in 1999 to $84.5 m in 2000. According to the company's General Director Andrey Martirosov, the company showed its first net profit in three years.

Revenues

The company's sales have increased 124% in dollar terms from $ 37.8 m in 1999 to $84.5 m in 2000. According to Martirosov the company has 3 main sources of revenues:

· regular passenger domestic transportation by aircraft (40.4%)

· helicopter services (25.4%)

· international operations (25.1%).

The company additionally derives 5.5% of its revenues from charter flights for local oil companies. The balances of revenues (3.6%) come from airport management services (TAT operates wholly owned airports in Noyabrsk, Berezovo, Igrim, Tyumen, Mys-Kamenny and Tazovsky) and international flights.
TAT's improvement in revenues is largely attributable to the following factors:

· high oil prices boosted demand for helicopter services from the local oil industry. Leading to a significantly higher utilisation of the company's helicopter fleet with an increase of 17.5% hours in flying hours in 2000 over 1999.

· higher demand for passenger services to and from the region by residents and business benefiting top line growth. As result the company carried 62% more passengers in 2000 comparing to 1999. According to Martirosov the company was ranked 3rd in 2000 in terms of passengers carried on domestic routes after Aeroflot and Pulkovo. A marked improvement on its 9th position in 1999.

· better utilisation of the airline's fleet improving operating performance. The company's seat load factor increased 3% from 66.4% in 1999 to 68.4% in 2000.

· strong growth in dollar denominated helicopter contracts. The company earned $21 m in 2000 from international operations comparing to $4 m in 1999.

Costs

The main source of costs for TAT, are employees' costs, represented 24% of the carrier's total costs total, reflecting the average salary increased 75% hike from $150 in 1999 to $262 in 2000.
Jet fuel costs representing a comparatively low 21% of total costs, compared with the GSGA's figure of an average of 36.6%, reflecting according to Martirosov, the fact that two major customers Surgutneftegaz and the UN provide their own fuel.
In 2000 TAT recorded a net profit of $ 17.4 m following losses in 1999 and 1998, exceeding the market expectations of $8-10m. According to Martirosov TAT plans to pay dividends for 2000, but he did not give any further details saying that the Board of Directors will discuss this issue at the end of March or in early April.
Igor Petrov, acting financial director of TAT explained the charge of $2 m for adjustments (under RAS) as being caused by payments to the state and various write offs.

Plans for 2001

The company remains optimistic for 2001 with contracts for $16.5m already signed according to Victor Bachurin, TAT's General Director of international operations. The UN has extended TAT's contract supporting peace keeping missions in Eastern Timor and Sierra Leone, which should assist the company in generating revenues of $24.5m from international operations in 2001.

According to Martirosov the airline has held the Surgutneftegaz's helicopter contract for $30m, by winning a tender, with a resultant increase hours flown rising by 64.1% from 264,566 hours in 2000 to 434,079 hours in 2001. The company also plans to increase passenger volumes by 10.3% in 2001 from 653,835 in 2000 to 719,967 in 2001 by opening around 10 routes to Russia's southern cities/resorts and other Russian regions, in addition to international resorts (UAE, Turkey, Greece, Cyprus, Bulgaria, Hungary and Yugoslavia)

Bachurin also said that the company was developing its fire fighting capability in answer to what it sees to be growing demand in Europe, Asia and the Americas. He added that the company was also in talks with several foreign companies about the creation of joint ventures. He said that joint ventures would not only include helicopter operations, but also helicopter repair. TAT refused to comment further about this but Martirosov said that the agreements could be signed with well-known companies. TAT was involved in discussions with UK based Bristow Helicopters at the end of last year, but according to Paul Gliddon of Bristow its discussions with TAT remain ongoing.

Martirosov rejected the claims of low safety levels for the airline, despite being officially identified by the FSVT as having one of the worst records among Russia's 25 largest carriers last spring.. He said the company pays much money to keep the safety at the high level. Martirosvo at a press conference argued that "The risk of death in car crash on the way to the airport is much higher than in the aircraft".

Martirosov also rejected claims that the Mi-8 is unreliable aircraft, saying the numbers of accidents reflected the large number in service rather any more systemic problem, adding interestingly "Do you know that knifes are the most common tool for murder? Does it mean knifes are dangerous and should be banned?" He said that TAT is happy with Mi-8, but did again lament the lack of availability of medium and light helicopters, saying that the Mi-8 wass unprofitable for uses such as pipeline monitoring.

TAT is continuing to look for light/medium helicopters and Martirosov answered claims of not considering Russian producers, by repeating his charge that producers such as Kazan Helicopter Plant (KHP) show little inclination to come to TAT and persuade him to buy their products. He said however, add that TAT did recently visit KHP to look at the Ansat, but would not elaborate on whether TAT would purchase the light helicopter. He did add that they had had talks with Eurocopter.

Commenting on the reports of the creation of super regional airline within the Khanty Mansisk Autonomous District sponsored by the regional government,consisting of local airlines TAT, Tyumen Airlines, Kogalym Airlines, Yamal Airlines. Martirosov said that he supports the concept of mergers and acquisitions as being the best solution for Russian airlines. As for the development of the Khanty Mansisk airline he thinks the merger of local airlines is still some way off.

Article ID: 2427