Heavy losses at Samara Airlines attributed to cut throat competition

Published: 6/22/1999

Samara Airlines has reported losses of 43.3 m roubles ($1.6 m) on revenues of 381 m roubles ($14.65 m) at the end of 1998, after producing a profit in 1997 of 4.5 m roubles. The results were announced at the company's AGM, with the losses being attributed to stiff price competition with Vnukovo, Transaero and Aeroflot on the Moscow route, leading to accusations of selling tickets at dumping prices by Samara. In response to the competition, Samara cut prices but still lost 55,700 passengers over the year. On the Moscow route alone, between 35m roubles and 45m roubles of revenue were lost. Charter flights, as a source of profits, apparently disappeared during the period. This is in line with many other Russian charter carriers. Despite being one of the largest regional air carriers, Samara has been struggling over the last 12 months, with reports of substantial drops in service. In some cases, this has resulted in cancelled flights and, at a more basic level, no in-flight refreshments. Possible mergers with other airlines are rumoured, with Volga Airlines being mentioned as a possible candidate. Samara Airlines is currently state-owned, with the state property agency controlling 51% of the company. The competitive situation for Samara Airlines in this region is unlikely to get any easier, particularly with the forthcoming integration of Sibir and Vnukovo, and the more aggressive regional strategy of Aeroflot, all of which are continuing to attack their long haul routes.

Article ID: 611