Structural and financial issues still require to be addressed (800 words)

Published: 12/6/2000

800 Mikhail Vasilyev ,the head of the Aviation Staff Trade Union of Sakha, has been recently reflecting on the performance of air transport in the region in the regional newspaper Yakutiya and has given some interesting insights into the region's situation. For Vasilyev, the year 2000 has been promising for the region with the movement out of bankruptcy administration for the major regional carrier Sakhaavia, now controlled by the regional government, after 18 months of negotiations with its creditors regarding the restructuring of its debts. With the effect of restoring the carrier to “normal operations”. Vasilyev, adds that the federal government for the first time in many years provided funding for the overhaul of the runways at Yakutsk, Chokurdakh and Belaya Gora. The Alrosa Mirny also started operating the An-38, which was regarded by Vasilyev as a positive improvement although reports have suggested that the experience with the aircraft has been less than ideal, with both aircraft grounded for long periods of time until quite recently. The formation of two new airlines in the region - Ilin and Yakutsky Airlines, the latter formed by Yakutsk Airport, was also seem as a positive move in a sector beset with airline failures. Ilim, a private airline, has been operating for worked for 8 months out of Magadan, using four An-2s and several Mi-8s, one them reported to be new. The General Director of the airline, Andrey Koryakin says that he believes the airline can operate profitably in the area by creating a stable customer base among users in the region such as local administrations, forest protection and businessmen. The airline has re-established flights between Magadan and Borogontsy, Amga, Churapcha, Ytyk-Kyuel, reported to have been closed for the last five years, with plans to make weekly flights to these destinations year round. Problems for the region however, persist with the winter period bringing cancellations of scheduled flights and the cessation of Polyarny flights after the 16th of October due to outstanding fuel debts. Sakhaavia and Vilyui have however, continued to operate despite defaulting on their fuel debts to supplier AeroportGSMservice the primary fuel supplier in the region. According to Vasilyev, the situation is likely to continue to deteriorate as the winter progresses. The conditions for the airlines having been further aggravated by debts to airports and fuel shortages. It is also unclear at this point whether the government will impose price caps on fuel following similar actions last year. With some difficulty according to reports, leading air transport figures in the region have persuaded the Sakha government to provide finance for the Ministry of Health of 11.8m rubles (although 14m was requested) to pay debts to a number of aviation enterprises including Polyarny, Sakhaavia,Vilyui and Zryanskoye, with the payments to be made in two parts of 6m. The general structure of the air transport in the region has also been the subject of considerable uncertainty. discussions there has been no emergence of a proposed merger of regional airlines with Alrosa or the clear creation of two airlines from the current carriers within the region one serving intra regional routes and the other inter regional routes, generally expected to have emerged from the a Sakhaavia/Yakutsky Airl;ines agreement earlier this year. The decree issued by the regional government in April 2000 to restructure Polyarny Airlines, resulted in the split of the air enterprises nine airports from the airline. The effect was however, to leave the airports with very low traffic made worse by the suspension of the airline's activities in October and burdened with the previous enterprise's debt; Chersky being left with 136m rubles, Ust-Nera 67.5m, Sangar around 15m and Mama 18m. Struggling Polyarny are also required to pay 3.4m rubles to AirportGSMservice for fuel debts, but will only receive 1.9m from the 6m rubles in the Ministry of Health's first tranche of funding suggesting the resotoration of services may be difficult. The impact of this for all carriers will mean that flights currently operating with fare limits through subsidy will probably cease to fly, although commercial flights continue to raise prices to reflect costs. The situation is however, unlikely to improve in the short term, as airports have to increase their tariffs from their present level to even make breakeven or simply survive. A number of airports have already increased the tariffs by 30%, with the commensurate knock on effect on airlines in terms of fares and the airline's financial condition. During the last nine months Sakhaavia has lost 3.8m rubles, on the Yak-40 route Yakutsk-Neryungri-Yakutsk alone. At the ten months stage it reported losses curiously by type 10 months of 10.25m rubles for the An-2, 0.9m for the L-410, 5.18m for the Yak-40 and 0.35m for its An-24.Profitabiltiy on routes to Ust-Nera, Ust-Maya, Zhigansk, and Tiksi has only been made possible by reducing the number of flights. Currently the region's fleet of 322 aircraft are only about 32% operational on a “best case scenario” according to Vasiliyev, although an investment of only 22.5m rubles is required to release twelve overhauled Mi-8s and eight An-2s currently at repair aviation plants awaiting payments.

Article ID: 2231