Russian airline aims to substantially strengthen market share (523 words)

Published: 2/14/2001

Aeroflot has reported expected net profits of $15m for 2000, a substantial reduction on its earlier expectations of $30m. It attributes the lower figures to higher-than-expected fuel costs. For 2001, Aeroflot states its main aims unsuprisingly, to be flight safety and improvement in the quality of management by retaining and attracting suitably qualified individuals. This year the carrier plans to carry in excess of 5.9 m passengers (+15%) up from 5.1m in 2000 (10.7% increase on 1999), with a smaller increase in cargo and mail from 108,001 tonnes in 2000 to 110,000 tonnes in 2001. The company plans to increase its commercial load factor by 1% and its seat load factor by 2% - to 67.7%. This level of growth, although lower than the recovery in international traffic of 2000, will still add considerably to the airline's top line. An increase of just 1% on seat load generates $16.8m in additional revenues and an increase of 1% in commercial load adds $ 22.7m. Beyond laying out their expectations on market share, the company did not make any forecasts regarding the load factors on the domestic market. Last year their load factor fell by 2%. Aeroflot expects to gain 19% of sales from Russia, CIS and Baltic, 11% from Africa and the Middle East, and 32% from Europe. Aeroflot plans to get an operating lease on the A-310, but for considerably fewer than the previously estimated fifty. The airline is also strengthening its medium- and short-haul capacity by leasing 2 Tu-154M and 3 Tu-134. It also said that it intended to “swap” one of its increasingly expensive Il-62s for 2 Tu-134, thereby considerably reducing any speculation of the airline having leased western aircraft to supplement its short-haul capability before the possible adoption of the Tu-334. The airline has announced its decision to extend the lease on 4 А310 to 2006. It expects to take delivery of an Il-96T, provided leasing for the aircraft can be arranged. The airline has said that it intends to have 30% of the Russian domestic market by the end of 2005. The 30% share would be a substantial improvement on the 8% at the end of 1999 and 10% at the end of 2000. The target suggests that the airline, despite the recent announcement of what are considered to be enhancing mergers and alliances among Russian domestic carriers, still feels that it is able to pick up share from carriers flying from major destinations within Russia. It does seem optimistic, in what is an increasingly competitive market, unless Aeroflot feels that its emerging competitors are inadequately capitalised to compete with the newly invigorated airline in terms of standard of aircraft and service. Aeroflot's share price has shown considerable pace to date with its price up by 38%. The reason for the share rise is however not attributable to the airline operation itself, but more probably to buying from Russian buyers and the rumoured buying of the Siberian Aluminium Group. The latter is discounted as being unlikely, having already committed itself to a number of large acquisitions and any investor taking a large stake still has to contend with the fact that the state owns 52% of the airline and is unlikely to revisit the situation that it experienced with Boris Berezovsky, when a minority shareholder effectively controlled the airline.

Article ID: 2357