Pulkovo reports volume down and profits up, but does not explain why

Published: 6/10/1999

St Petersburg based carrier, Pulkovo Aviation Enterprise, which is one of Russia"s largest scheduled airlines, saw a decrease in passenger traffic of 18% in 1998, with an even more dramatic decline in cargo of 60%. In revenue terms, sales fell by 21% to $ 166m during 1998, although costs decreased by 23% over the period. Despite the alarming decline in volume, the company has reported an increase in operating profit to $17 million: up 9% on 1997. The reason for such an increase is unclear. As the figure is an operating figure, and exchange gains are taken below operating results, the rise cannot be explained by the one-off gains from devaluation. Pulkovo also reported an increase in volume of 2% in Q1 1999, but did not specify whether this related to RPK, passengers or cargo. It also recorded increases in volume on its domestic routes during the first quarter of 1999, despite price increases of between 10-15% since the crisis in August 1998. According to reports, Mr Boris Demchenko, Chief Executive Officer of Pulkovo, plans to reduce the number of international flights, while rebuilding the international terminal at Pulkovo airport in 1999. Construction is scheduled to begin in the late summer of 1999. Mr Demchenko also intends to seek investment from Russian sources rather than looking for foreign capital. The identity of the Russian investors has not been revealed. It is also reported that the company plans to start construction of a cargo terminal with Lufthansa later this year. No additional details have been provided. While the situation for Pulkovo remain relatively reasonable in the short term, it is one of the prizes of the airline market in Russia, given its access to the lucrative St Petersburg and the surrounding regional market. It would seem likely, however, that this position will come under considerable pressure as Aeroflot seeks to develop both its domestic routes and its access to the St Petersburg as a source of international travellers. Some commentators consider that, in order to compete, the airline is going to have to work a great deal harder in the future.

Article ID: 576