Operator's Moscow base new home for Chelyabinsk assets (705 words)

Published: 6/20/2001

On 28th May, Chelyabinsk Airlines (ChelAl), one of the operating companies within the Chelyabinsk Airlines Holding (CAH), suspended flights, having transferred both aircraft and routes to associated airline, Encor. Encor is now controlled by the holding company's former General Director, Sergey Yashin and is operating out of Moscow's Domodedovo Airport, having transferring there from Chelyabinsk. The company says that its other holdings, including refuelling facilities and terminals at Chelyabinsk Airport, will continue to operate as before. Both the transfer of aircraft, now being repainted in the Encor livery, and the reallocation of the routes to Encor seem to have met with no objection from the GSGA, which has transferred responsibility for the routes from the Ural Department of the GSGA to the GSGA in Moscow. The GSGA is responsible for the 15% of the airline holding owned by the state, the balance being owned by unspecified parties (59%), assumed to be associated with management, and 20% held by employees. According to Yashin, the reasons for the transfer to Moscow were twofold. First, the airline was concerned with the encroachment of the regional government in the airline's business: three years ago, it attempted to take a holding by challenging the airline's privatization and starting a court battle that was to last two years. Yashin further claims that the authorities that also owned the runway at Chelyabinsk Airport restricted the airline's development by limiting the runway's use, despite the airline investing its own funds in the runway's completion. He also contends that the regional government encouraged Aeroflot to enter the market in September 2000 to compete with Chelyabinsk and Encor on the Moscow route, although the carrier was reported to have planned to start flying to the city in 1998. Secondly, it is his belief that, if the airline was ever to succeed, it had to break out of the low volume markets of the Urals region, where Chelyabinsk is not even the first city and establish itself as a major national player. To achieve this, it needed to operate out of Moscow. Therefore, three years ago, Encor entered Moscow's airline market and escaped the clutches of the Chelyabinsk authorities by establishing a base at Domodedovo Airport. Yashin considers that this move allowed the company to defend its airline interests from the emerging competition of Aeroflot in the regional markets, while being closer to potential federal support for the industry. Yashin says that most of the employees formerly engaged by Chelyabinsk Airlines will be transferred to Encor, but he has made it clear that Encor will not employ those who “do not want and do not know how to work”. There are reports that he has fired at least one of the leaders of the airline's trade union leaders, Alexander Reiman. According to Anatoly Borisov, head of the pilots and flight crew's union, Encor has so far only re-employed personnel on the basis that they do not remain members of the trade union and has therefore appealed to the region's governor (and arch rival to Yashin), Petr Sumin, for assistance in this respect. Sumin has responded by instructing the regional prosecutor to investigate the situation at the company. Since Encor was reported to be carrying 82% of the holding's traffic, the airline's closure seems to streamline the holding company's airline activities, although it is notable that Chelyabinsk's closure severs links with the region, even while it remains its major business base. Three years ago, Encor was re-registered in Moscow, in anticipation of Aeroflot's move into the regional market. As a result, the airline has been able to respond to the competitive threat from Aeroflot's Tu-134 flights three times a week to Chelyabinsk from Moscow with 18 flights from the airline's combined schedules. Encor also operates on the regular routes in Iran, Malaysia, and Indonesia. The fleet inherited from Chelyabinsk includes seven Yak-42Ds, eight Tu-154s, three Tu-134s and one An-12. This year, the carrier expects to take additional aircraft from Buryatsky Airlines, based in Ulan-Ude and Kaliningradavia, with whom the airline is developing unspecified strategic relationships and it expects to double the size of its fleet by the end of 2001.

Article ID: 2596