Is the flag carrier beginning to experience domestic competitive pressures? (616 words)

Published: 12/18/2001

In contrast to some of its competitors, Aeroflot while reporting that it carried 370,200 passengers in November 2001 has not provided comparable data for November 2000. Figures provided by the company in January 2001 however, stated that the airline carried 380,700 passengers in November 2000, suggesting the airline suffered a 2.8% decline in passenger numbers in November 2001. A decline however, that was not entirely unexpected, given the impact on international travel of the 11th September. The airline however, has reported that its international traffic grew by 1.8% in the month, suggesting that the decline came in the airline"s domestic business. The decrease in domestic travel is explained in part at least, by a reduction of 3% in the number of flights in the Aeroflot winter schedule 2001/2002 introduced on the 28th October with the cancellation of 19 unprofitable routes. It is unclear however, what the exact impact was of cutting these 19 routes was in traffic terms and what the growth rate was on the remaining schedule. Seat load factors at 60.6% in November 2001, were better than the industry average according to Aeroflot, but according to figures already released represented a 1.8% decline on the 61.7% recorded in November 2000. Aeroflot did not release figures for November 2001 covering mail and cargo transportation, but reported an increase for mail transportation of 41.5%, with cargo down by 13.6% over November 2000, attributable according to the company, to the decline in traffic on international routes and the withdrawal of the Il-76 from those routes. Aeroflot also appears to be continuing the consolidation of its fleet on foreign aircraft with those aircraft in service flying on average 2.2% more hours during November, although the overall fleet flew 6.6% less hours, reflecting withdrawal of the Il-76s and less use of the soon to be withdrawn from scheduled service, Il-86 and Il-62. While the airline did not release the January-November 2001 figures, simply adding the November figure to the released 10 month figures, suggests a 16% increase in passengers for the airline to 5.5m passengers. A rise that reflects the increased winter schedule of 2000/2001 when flights rose by 19% on the previous year and a summer schedule that grew by 51% on the previous year. The airline"s seat load factor came in flat at 66% for the first 11 months of 2001, after 65.8% in the same period in 2000. The utilisation of the airline"s operating aircraft also rose markedly in the period, rising by 9.2% to 9.5 hours a day. The company reported that its mail transportation increased for the first 11 months by 59% and cargo transportation (96% of cargo business)decreased by 5.8% reflecting the low international demand and the phasing out of the Il-76 on international routes. International routes constituted about 85% of the airline"s cargo business at the ten month stage. On domestic routes the airline carried 10.9% more cargo than a year ago. In Aeroflot"s view, the results represent a stable performance in the wake of the 11th September crisis in international air transport and reflect the airline"s planning. While accepting most of the airline"s comments and being encouraged by the international traffic in November. The soft figures domestically, suggest that the airline is finding continued growth within Russia a challenge, as other players become both more adept and better organised. Successful acquisition of passengers at point of departure remains a key plank in Aeroflot"s strategy and there is little doubt that November"s figure and possibly the 11 month data will have caused management to look at its domestic strategy and evaluate whether it is on course, given that its overall growth for the11 months puts it well behind some of its emerging competitiors.

Article ID: 2963