Regional carrier struggles to survive despite government support

Published: 3/17/2000

The efforts to help struggling carrier Nizhny Novgorod Airlines (NNA) are on the verge of collapsing as the airline announced losses for 1999 of $0.7m, despite a recovery plan drawn up with the help of the Russian Academy of Civilian Aviation, which promised to show a profit. Alexander Batyrev, the Vice Chairman of the Nizhny Novgorod region said that the situation required government intervention, but was unclear as to what exactly the region's economic agencies could do to rescue the carrier. The airline's continuing losses have not come as a surprise. The airline has been in receivership since February 1999 and locked in a price and traffic war with Aeroflot, which it had little hope of winning. The offer by the Aeroflot to buy NNA in 1998, was turned down by its shareholders, primarily the airline's employees and the state. This decision was seen as being particularly curious, as the airline's managers had made it clear, prior to the rejection of the bid, that they saw the only hope for the airline's future was to form a partnership with Aeroflot. An additional factor for such a decision was that NNA's main route to Moscow flew into Bykovo Airport, which is regarded as an unpopular destination due to its lack of onward connections. The response of Aeroflot to the rejection of its offer has been to begin to build up Nizhny Novgorod as a regional hub in partnership with the regional government who operate Nizhny Novgorod International Airport and increasingly marginalize the local carrier by offering longer haul options from the city. On the Moscow route the pressure on the airline has continued as Aeroflot has offered better connections and what is considered to be a better quality fleet and service.

Article ID: 1703