Aeroflot and Pulkovo sign comprehensive agreement of cooperation giving the flag carrier significantly better access to St Petersburg

Published: 1/10/2000

Aeroflot and the state-owned Pulkovo Aviation Enterprise have signed a cooperative agreement covering jointly operated routes, the unification of tariffs and the coordination of flight schedules. It has even been suggested that Pulkovo passengers may be entitled to join the Aeroflot frequent flyer plan. The agreement was signed on 24th December between Valery Okulov of Aeroflot and Boris Demchenko of Pulkovo. Aeroflot started flying from St Petersburg only in 1995. The agreement gives the airline improved access to this very important market - Russia"s second largest – that is currently dominated by Pulkovo, which carries 60% of the city"s domestic traffic. In particular, the agreement will allow Aeroflot to link its international flights into the Pulkovo domestic networks, in addition to increasing the frequency of its own 20 flights a week from the city, with an expansion of transit flights to S.E Asia, USA and Europe. According to Pulkovo, it expects the agreement to lower operating costs and improve load factors. Aeroflot has the stated strategic objective of creating a number of hubs within Russia, so improving its catchment for long haul flights and has made public its intention to absorb what it calls ‘stable airlines". To date, the indications are that it would rather create new regional airlines and absorb the assets of other airlines, if the rumoured Donavia emerges in Rostov-on-Don. Pulkovo, part of an increasingly rare breed of state-owned airlines, potentially remains a target for Aeroflot, and it has made it evident from its comments that it sees itself as the leading party in this agreement. Privatisation of the state entity has been on the government"s agenda for some years and still remains a possibility, despite the reported opposition of the current airline management. State ownership for Pulkovo has limited its access to capital as it has found in its negotiations with the EBRD for financing of its new international terminal. Privatisation would however, break the link between the airport and raise costs for what is viewed as not being a notoriously efficient carrier. For Aeroflot, the agreement may be beginning of a longer term objective, which is unlikely to see the carrier absorbed into Aeroflot, but does not rule out its potential absorption as a regional feeder to the flag carrier and may have the effect of excluding potential bidders by tying the St Petersburg carrier closely to the Aeroflot network and systems.

Article ID: 1296