Aeroflot Director General Okulov talks about debt reduction and activity at Aeroflot being better than competitors think

Published: 6/2/1999

In an interview with Izvestia on the 1 June, the Director General of Aeroflot Valery Okulov commented that the Balkan crisis had hit their business along with the ongoing problems of Russia"s poor financial condition, but business was a lot more robust than many of their competitors thought. The company had slashed funding and had reduced the company"s hard currency debts in 1998. Although he did not go into any detail of the indebtedness reduction and his statement contradict in part those figures published by the AK&M financial information agency, which showed a marked increase in debt, but did not distinguish between Russian and hard currency. Concise assumes that the removal of Berezovsky controlled Swiss intermediary Andava as its primary funding agent has allowed some debt restructuring which may have brought some improvement. In fact Okulov alluded to this by stating that “Aeroflot was hooked on a needle of dependence to suppliers and service companies". Accounts payable grew by 247% year on year according to AK&M, the reason for this growth was not discussed by Mr. Okulov, but we assume in part this is attributable to increased domestic activity in 1998 and await the official figures in the next two weeks. Passenger volumes of 4.45 million although record numbers belied a load factor level of 47.4% in cargo down 2.6% from the previous year and a load factor of 57.8% in passenger services a decline of 3% on 1997. The target for passengers carried in 1999 of 5 million may prove a difficult target to hit and we would expect to see expectations talked down over the next few months. The Balkan crisis has virtually eliminated traffic to the region for Aeroflot and apparently reduced the number of Russians travelling to the US. Although no figures supporting the decline where mentioned, the US Embassy has reduced the number of US visas issued after the recent demonstrations outside of their building in Moscow. Strategically Okulov said that Aeroflot was looking to expand its activity in a broad range of travel related activities through it existing subsidiaries in an effort to find more profitable sectors to work in parallel with its airline activities. These area included hotels, airport technical support and express parcel delivery. The first step in this refocusing of the business had already taken place according to Okulov in the launch of their own passenger terminal at Sheremetyevo Airport in Moscow at a cost of $300 million which would be completed within the next five years.

Article ID: 557