A slower pace than 1999, but according to management sustainable

Published: 5/15/2000

Krasnoyarsk-based KrasAir, the largest Siberian carrier and, on the basis of its results in 1999, the nation's third largest passenger carrier behind Aeroflot and Pulkovo, according to Boris Abramovich, General Director of the 51% state-owned airline. This position is somewhat debated by Vnukovo Airlines who claim that they have the third position, although the 43.5% fall in their passenger numbers in 1999 contrasted markedly with those of Krasair, which rose by 27.6% to 763,000 passengers in 1999. Allowing them to move up the rankings of airlines to fourth largest carrier in 1999 after being sixth largest in 1998, makes it one of the fastest growing major airlines. A joint stock company, KrasAir also owns the ICAO category 1 Krasnoyarsk Airport, opened in 1980. The management reports are that the airline generated a profit in 1999, although the level or nature of the profitability has not been disclosed by the airline, and reportedly comes after several years of losses. During 1999 the number of passengers carried rose from 598,000 to 763,000 with passenger traffic rising from 2.1 billion passenger kms to 2.883 billion, with cargo volume rising from 14,800 thousand tons to 19,900. Load factors rose by 6.3% to 62.2% on revenues that increased from 0.848 billion rubles in 1998 to 1.801 billion rubles in 1999. The company's strong progress has been helped by the stabilisation of the air transport market after the 1998 financial crisis and the improvement in management since the appointment of the current General Director Boris Abramovich in June 1998, replacing Boris Mikhailov. Abramovich came to KrasAir from another Siberian carrier startup that Siberaviatrans founded in 1995, which he ran with his brother Alexander. Since his arrival at KrasAir, Abramovich's new management team has found the funding to increase the airline's number of airworthy aircraft from 20 to 30 by January 1999 and to 40 by Spring 2000. In 1999 alone, the airline spent over 80m rubles spent on fleet overhaul, including 11 new NK-86 engines for the airline's 3 Il-86s and major overhauls for 23 D-30K-series engines for Tu-154Ms and Il-76s. Lifetime resources were extended for nine Tu-154s, one Il-62, three Il-76, three An-26s and two Yak-40s. On the scheduled passenger market, which made up 70% of profit in 1999 according to the airline, KrasAir has increased the frequency of flights flown from Norilsk, from six a week in 1998 to 13 in 1999, with the support of large local industrial enterprises, most notably Norilsk Nikel. The company has however, abandoned its servicing of Irkutsk. The Moscow-Norilsk route is now flown under a code-sharing agreement by KrasAir's Tu-154M with improved interior (126 seats in two class layout) and Transaero's Boeing 737-700, and it is planned in the future to use a. Tu-204. Under the code-sharing agreement between KrasAir and Transaero, over 900 flights have been made carrying 310,000 passengers many of them on the Krasnoyarsk-Moscow route. Transaero ceased flying this route after returning all its long-haul 767s and 757s in 1999. In 1999, the company expanded its charter business, with 425 flights carrying 42,572 passengers and 10,624 tons of cargo. The most popular destinations were China, Turkey, South Korea, Cyprus, Bulgaria, Thailand and Indonesia. The airline also started Il-86 and Tu-154M charter flights from Sheremetiyevo Airport in Moscow, although the bulk of passengers according to KrasAir were passengers in transit from KrasAir-originated Siberian flights. To allow better connections the airline also moved the daily Il-86 service from Krasnoyarsk to Moscow from Moscow's Domodedovo Airport to Sheremetievo, leaving a daily Tu-154M service to Domodedovo. To ensure that it keeps control of its own cashflow and continues to expand it in Russia's Byzantine ticketing system, the airline opened 14 new sales points in Siberian cities in 1999. This increased its own sales from 150,000 tickets in 1998 to 220,000 in 1999, with 22.5% of tickets in the first quarter of 2000 sold directly by the airline. The airline has also introduced a new marketing approach to keep and acquire passengers using discounts and a frequent flyer program. The airline's fleet of five Il-76 freighters increased cargo carried by by 2.5 times in 1999 on routes linking Krasnoyarsk with Norilsk, South Korea and China and it plans a siginificant increase from 19,900 tonnes in 1999 to 24,000 in 2000. A regular Il-76 charter service was also opened between Seoul in Korea and Koln in Germany. In 2000, KrasAir plans to carry 790,000 passengers with the objective, according to Abramovich, of higher profitability reflecting the improvements the airline made in 1999 in the utilisation of its fleet. The airline, despite an increase in the number of routes, is looking to raise load factors by 1% on a fleet that, at the beginning of 2000, consisted of fifty aircraft including Il-86, Il-76, Il-62, Tu-154, Yak-40 and An-26. With the exception of three Tu-154Ms and one Il-76 leased from other operators, all the aircraft are owned and, in contrast to 1998 and 1999, are not leased to any other operators. KrasAir has recently acquired a VIP-configured Tu-134 and is to take two more Tu-134s in standard 76-seat configuration. The two standard Tu-134s will be used to develop new routes and replace Tu-154s on routes with low winter load factors. In 2000 the airline plans to increase the utilisation of its fleet of Tu-154Ms, which account for 70% of the airline's flights, by 47% and on the Il-76 fleet by 43%. The Il-86, although profitable on the Moscow route and summer charters, has an uncertain future because the producer of the aircraft's engine, KKBM, has ceased production of the NK-86, suggesting major overhaul in the future may be difficult. The Il-62s with an average airframe age of 23-24 years will be withdrawn from service in the near future. Abramovich said that the aircraft was not sufficiently fuel-efficient to make a profit, even on the long-haul routes for which it was designed, with fuel accounting for 70% of the aircraft's operational costs. On routes with duration of five hours, the Il-62 will be replaced by the Tu-204.

Article ID: 1774