Despite the current environment, the airline hopes to report a profit in 2001, stresses its support - in principle - of Russian aircraft and lays out a pragmatic approach to alliances (830 words)

Published: 11/12/2001

Transaero celebrated its tenth anniversary on 5th November since the first Il-86 flight from Moscow to Tel Aviv in 1991 under the UN code. Olga Pleshakova, General Director, was optimistic about the airline's future and expects that this year's financial and operating results for the airline will be no worse than in 2000, with around the same number of passengers carried this year as the 430,000 carried in 2000. This figure is short of the 500,000 targeted for the full year, but Pleshakova points to the difficult market conditions and an extremely competitive price environment as now making this an unrealistic objective. The company still expects to finish the year with a profit of $1m, after losses in 2000. Pleshakova attributes the improvement in the company's financial performance to the closure of flights to London, Frankfurt and Strasbourg, although the airline intends to restart the flights to the latter two centres in early December and to London by the middle of December, in order to meet seasonal demand. As recently hinted by Pleshakova, the airline had also been able to improve its lease rates for its fleet of two B-737-700s and five B-737-200s, reflecting a high supply, low demand situation, allowing considerable scope for negotiation. The company also reiterated that it was able and willing to return aircraft where lessors were not prepared to negotiate rates down, citing an A-310 returned in December 2000 as an example. Transaero is currently in discussions for the lease of two A-310s or two B-767s, although Pleshakova would not name the potential lessor on the grounds that no deal has been sealed, although she did say that she expected a conclusion within ten days. Pleshakova added that the airline intends to return several B-737-200s and replace them with newer aircraft. There are also plans to issue short term commercial papers by the end of the year to provide funding for fleet modernisation. The three to four month paper will be the first issue by the airline, but Pleshakova gave no indication as to whether this would be part of an ongoing programme and said that the airline would release details at a later date. Commenting on the acquisition of foreign aircraft in preference to Russian-made alternatives, Pleshakova said, that as graduate of the Moscow Aviation Institute, she was committed to the Russian industry, even going as far as to say that her favourite aircraft was the Il-86, but that circumstances currently did not allow the airline to acquire them. Pleshakova said that, despite Ilyushin Finance's victory in the government's lease tender, the Transaero agreement with Ilyushin Finance for the Tu-204 was not included in the programme. It remains unclear, therefore, who will provide the financing for the acquisition of the Tu-204's to be leased to the airline by Ilyushin Finance and the leasing company still has to come up with a proposed solution. Pleshakova said Transaero is quite open to the idea of acquiring Russian aircraft and is ready to consider all proposals for the leasing of the Tu-204, Tu-214 and Il-96. Referring to the recent round table held by the GSGA to assist the promotion of alliances between Russian carriers, Pleshakova said that she is in favour of alliances, but suspects that the GSGA's real agenda is to reduce the number of carriers. She also said that the environment for alliances is still weak and has not substantially improved since 1994, when Transaero signed some of the first airline alliances in Russia and the CIS when there was no legal basis for such agreements. Igor Desyatnichenko, Aeroflot's Deputy General Director of Economics believes little has changed in this respect. Pleshakova said Transaero's call to airlines' management from Russia and the CIS to meet and discuss potential coordination of capacity on routes had not been successful, with only one reply from Aeroflot and that demand on some routes continues to outstrip demand by a substantial factor. According to Pleshakova, on the Moscow-Nizhnevartovsk route, supply is more than two times higher than demand, with daily flights operated by Transaero, Aeroflot and Tyumenaviatrans (TAT) flying 14 flights a week and Vnukovo Airlines-Siberia Airlines (Sibir) with three flights a week. She said that, in the past, when the route was serviced just by Transaero and Aeroflot, there was a supply and demand balance, but the GSGA then issued two more carrier's licences. Now, with demand for 2000 seats, there is a supply of 4200 seats and despite this, the GSGA decided to license a fifth carrier on the route. Pleshakova still believes that, despite the lack of success in her efforts to bring a number of carriers together, Aeroflot's interest suggested that Transaero could at least come to an agreement with the largest carrier, although she was not prepared to elaborate on this.

Article ID: 2906