Tyumenaviatrans reports falls in losses, but margins still under pressure

Published: 8/25/1999

A Russian news agency has reported that the 1999 first half results of Surgut-based Tyumenaviatrans' (TAT), under Russian accounting standards, show a significant decline in net losses. The company's margins however, continued to decline over the period and it remains loss making. As with most of Russia's regional airlines, TAT remains under intense pressure from a combination of poor economy and competition. The sales decline of 82% year-on-year in the first half of 1999 is attributable to the following: ·substantial decreases in the number of passengers carried, revenue passenger kilometres and hours flown; ·ticket prices in rubles frozen after the financial crisis in August 1998; ·cuts in ticket prices in rubles, to win the few passengers available; and ·a decline in ruble revenues of 30%, given the company had little in the way of offsetting dollar income. This is slightly surprising, given the large amount of international helicopter work undertaken by the company. During the period, however, the airline managed to increase its load factor by 7%, by cancelling some of its under-utilised intraregional routes, which it had been continuing to service largely because of government requirements. The low subsidy it received was rarely paid in full. The decrease in operating costs was principally due to the fall in the number of flights, although with the oldest Yak-40 fleet in Russia, which is the backbone of its domestic flights, it seems unlikely that the fall in costs will continue. The decline in costs was exceeded by the decline in revenues, thus margins continued to decline. Given its position as one of the world's largest helicopter operators, TAT should be expected to be relatively successful operator. It has, however, found that the weakness in the world and the domestic oil industry has impacted on both its biggest customers and in the region it primarily services. The situation is unlikely to improve in the short term, given the age of the TAT fleet. Even the acquisition of some new Tu-154Ms from Aviakor will still leave them with a fleet of which a large proportion is unserviceable and requires to be written off. The acquisition of further aircraft for replacement is also going to be a very piecemeal process, due to funding constraints. The company recently moved its operations from Tyumen to the other major regional centre, Surgut, so absorbing Surgutavia, which was previously part of the Tyumen division of Aeroflot, from which TAT emerged in 1992 and only split with TAT in 1994. The move was described by the General Director of TAT as being "expensive", but essential if the airline was to preserve its control over traffic from the region from other competitors.

Article ID: 783