Growth attributed to better scheduling and less competition (650 words)

Published: 1/26/2001

Sibir has reported its preliminary results for 2000.Flying 7.1% more flights (8191) during the year, Sibir carried 832,728 passengers, an increase of 11.8% on 1999. The company also carried 8,993 tonnes of cargo (0.7% more than in 1999). Figures, in passenger traffic growth terms, exceed the market's overall growth of 1%. The company also stated that the airline's punctuality was higher - recording 84.6% of its flights on time - although this is a slight decline on the 90% recorded in 1999. The increased use of the Il-86 on charter routes and the Novosibirsk route, was attributed to passenger growth; with the aircraft's flying hours increasing by 14.2%, despite concerns expressed about its economy. While for the balance of the fleet, Tu-154Bs and Tu-154Ms, use rose by 2.5% and 1.5% respectively on domestic flights. The hours flown by the airline's Tu-134 declined by 24%; reflecting the cancellation of loss-making routes within the CIS (with the aircraft disposed of in December 2000). Sibir did not comment on the level of flying undertaken by its Tu-204, as the aircraft was only introduced in December 1999. Sibir attributes the growth in traffic to a number of factors: · Opening of additional routes (to Anapa, Omsk, Munich, Hanover and Barnaul) and increased frequencies on existing routes · Signing of line agreement with Lufthansa giving Sibir's passengers access to the German carrier's and alliance's network (July 2000) · Improved coordination of scheduling for major long-haul regional flights, Moscow-Novosibirsk with Novosibirsk-Yakutsk, Vladivostok-Irkutsk with the Irkutsk-Moscow route · Introducing special pricing for transit passengers, e.g. in November 2000 for those who travel on the Blagoveshensk-Novosibirsk-Moscow route · Winning market share from departing Transaero on the Novosibirsk -Moscow route, and Vnukovo Airlines failing to provide flights, due to local difficulties with Tolmachevo Airport (over fuel payment); the impact being to raise passengers carried by 5%, despite a fall in overall volume on the route of 25%. · Opening additional representative offices (Frankfurt, Moscow, Sochi and Novokuznetsk) and developing its own sales network, with an increase in the number of agents · Introducing discounts to attract passengers in low traffic season. · Successful charter programme in summer 2000. The slight increase in cargo traffic of 0.7% (up from -3% at the ten-month stage) reflects the increased load factors of the airline's planes, as the carrier has no dedicated cargo aircraft. If their seat load factor increased, they would have to carry less cargo. The airline has rebalanced its Chinese flights away from the accompanied cargo shuttle route, to Tianjin, in favour of Beijing's higher business mix, in 2000. Sibir reported that as of January 2001, it operates 28 aircraft (including 11 Tu-154B, 9 Tu-154M, 7 Il-86 and 1 Tu-204-100). It acquired the Tu-204, previously operated by Perm Airlines in April 2000, having initially leased from Avialeasing. The financing for the Tu-204 was made by a loan of $15.8m from Sberbank for 4.5 years. Sibir plans to acquire 1 or 2 additional Tu-204 from Aviastar, and in the longer term, several Tu-214 from KAPO. Sibir's financial results were better in 2000 than in 1999 (the company reported losses for 1999 of Rb 32.8 m/$ 1.3 m.). Sibir did not disclose details stating that financial results for 2000 are not yet available, but said that its gross margins had improved due to: · Control of vacant seats in the reservations system · Cancellation of non-profitable flights · Introduction of new technologies · Introduction of new reservation rules · Operating the efficient Tu-204-100 Higher ticket prices during the period and improved low season incentives to Moscow from Novosibirsk, Tomsk, Kemerovo and Barnaul (introduced in October), also assisted to improve margins. Sibir announced its 11-month revenues had increased by 50% in ruble terms, due to revenues from routes to Moscow, Germany and China. The company's operating costs also increased around 50% in ruble terms, due to an increase in fuel prices and airport duties; offsetting, in part, the top line growth.

Article ID: 2327