Russian carrier backs off from direct investment but forms partnership with new Shannon-based airline to boost access to European markets (475 words)

Published: 11/12/2001

Having confirmed in July that it was in talks with a consortium of US and Irish investors for an airline startup operating out of Shannon, Aeroflot appears to have stepped back from outright involvement, with the announcement of its relationship with the formation of Shannon-based passenger carrier, SkyNet, led by CEO Dick Healy, an experienced airline manager and consultant. According to Healy, quoted in the Irish Times, the new airline will have a “close commercial relationship”, with Aeroflot, involving writing tickets on each other's routes, but the airline would not be a shareholder in the new venture, which is reported to be funded by a group of UK and US investors. Previous reports had suggested the involvement of Tom Kane, formerly MD of GEAC and GPA and a former senior executive at Aer Lingus, but the two directors now named are US investor, Carl Phorfziemer and Paul Williamson, a US-based Irish businessman. It is not known which new destinations will be served by the new airline out of Shannon and Dublin, but Healy says they are likely to include Aeroflot's European destinations of Paris, Berlin, Brussels, Milan and Amsterdam, serviced initially by two leased 737s and two further aircraft in 2003 with a target of 20 737s by 2005. In contrast to much of the original thinking indicated by Aeroflot's interest in Virgin Express Ireland earlier this year, the new airline will not be a low cost carrier and will provide "a full-service offering business and economic class," says Healy. This is an interesting business call in a troubled European air transport sector, just days after British Midland (BMI), the UK's second largest carrier, announced its intention to follow the low cost route and downgrade its current full service product. The airline is now recruiting staff and it reports that it has secured the financing to lease the initial aircraft by April 2002, flying under an Irish operating licence. Healy reports that 100 people, including crews and administrative staff, will be employed by the new airline in the Shannon industrial park by next year, some of them already recruited from Virgin Express Ireland that ceased operations from Shannon in February. How the new startup applies to Aeroflot's strategy is not entirely clear, given that it appears to be linking with a small full service carrier, which is precisely the type of operation regarded by some commentators as being the most vulnerable element of the current market shake-out. The timing of the announcement is also curious, but perhaps its move away from direct investment is an indication of its own misgivings, even if the development could give the carrier the access to the European markets it has sought for some time.

Article ID: 2903