Sibir targets Vnukovo by joining with Perm Airlines to attack Vnukovo's 25% market share in the Ural and Siberian markets

Published: 11/16/1999

In a move designed to squeeze Vnukovo out of the Ural and Siberian markets, Sibir Airlines has announced plans to forge an air alliance with state-owned Perm Airlines and Perm company, Avialeasing. Under the agreement, which has yet to be signed according to Sibir Airlines, the participants will combine to found a new structure to operate medium and long haul flights from cities in the Urals. As part of the deal, Sibir has apparently promised to lease from Avialeasing three Tu-214s now under construction in Kazan, powered by Perm Motors PS-90As. The deal is reported to be worth some Rb 1 billion ($38m), with payment for the aircraft being made within ten years. In addition, Sibir will receive the right to operate a Tu-214, belonging to Perm Airlines, on the route Novosibirsk-Moscow. Greatly improving Sibir"s efficiency on the route when compared with the Tu-154 currently operated. Filov estimates that Sibir, if the alliance goes ahead and Sibir can fund new planes, it could reduce its prices by 30% and increase passenger volume by at least 30%. Vnukovo"s current market share of the Siberian and Urals market is less than 25%. At present, its ticket prices are some 30% less than Sibir"s. Vnukovo has yet to respond to Sibir"s latest challenge, but it could resort to one of its favourite tactics: that of slashing fares, so forcing both airlines to operate loss-making routes. Recent reports of the condition of Vnukovo Airlines, currently starting it"s restructuring, would suggest that it has either little appetite or stamina for such tactics at present.

Article ID: 1087