Troubled airline struggles alongside startup Angara (400 words)

Published: 12/12/2000

Still teetering on the verge of bankruptcy Baikal Airlines is seeing a gradual improvement in its business as a result of its flights to China, but local regional flights continue to generate losses as a result of carrying subsidised travellers and the failure of the regional government to reimburse the airline. The company, bankrupt since early 1999, which has had almost a year of extensions to allow an agreement to be reached on restructuring, is due to sign a debt rescheduling agreement with its creditors on the 14th of December. According to a report from the local media in Irkutsk, the experience of another start up regional carrier Angara Airlines, created by the Irkutsk based Aircraft Repair Factory 402, contrasts markedly with Baikal. It is operating “efficiently” and planning to expand its existing services. In fact so successful has Angara been, that there is a proposal to eliminate the competition between the two carriers in favour of developing a single airline; the decision as to which it should be is, as yet, undecided. The competition between the two carriers according to local sources has become farcical. Despite low volumes, flights are on the same days to the same destinations with the airlines tempting prospective passengers, on the one hand, with the inducement of free coffee and rolls, and on the other - with free beer. The airlines operate four aircraft respectively. The Angara fleet is leased, payment for which is aircraft overhaul at Aircraft Repair Factory 403; Baikal own their own aircraft. Angara are reported to have expressed interest in buying Baikal, offering to pay in cash. This follows earlier reports that suggested Angara was interested in a merger with the Baikal regional business Baikal-MVL and that they had largely withdrawn from long distance carrying through an arrangement with Sayany Airlines.This arrangement led to speculation that Sibir could be interested in taking the airline over afer taking control at Sayany. Baikal, however, has held out. According to sources, the regional administration favours a merger of the two entities rather than Angara taking over Baikal. They feel that both airlines have something to offer. The Deputy Governor of the region, Anatoly Sobol, says that the authorities would like these airlines to reach a compromise as soon as possible. Earlier discussions of a merger with Bratsk Avia have apparently disappeared. Given regional competition from aggressive airlines with better fleets, the local assessment is that the airlines have to come together if the region is to own a competitive carrier on inter- and intra- regional routes.

Article ID: 2243