Transaero orders ten Tu-204s, but looks for state support

Published: 8/25/1999

According to Russian newspaper, Kommersant, Transaero has signed an agreement with Aviastar to purchase ten Tu-204s, contingent on the expected Russian government support for Russian-made aircraft (www.concise.org July 8th 1999) Transaero, previously an operator of an almost entirely western fleet, suffered more heavily than most from Russia's financial crisis, owing to its dependence on leased foreign aircraft. From its inception, it developed and marketed its service on the basis of being a western style operator, and was the first of the Russian carriers to introduce a business class on domestic routes. It is also reputed to have benefited from the fact that its Chairman, Alexander Pleshakov, is the son of the Chairman of MAK, one of Russia's aviation agencies. The fact that Transaero, along with Aeroflot, was allowed breaks on duties on imported aircraft has been put down by many in the industry to “Mom's unseen hand”. Transaero's present crisis, however, has forced it to return much of its leased fleet and reduce its staff by some 60% (www.concise.org. April 13th 1999). The quality of service has deteriorated, with delays in flights and the closure of routes. It has been contended that, in fact, Transaero was toiling prior to August 1999, owing to some poor aircraft and route choices that led to some significant losses in the early part of 1998, which were simply masked by positive PR. The company has also been subject to considerable political and managerial upheaval, as the existing management has fought with large shareholder, Boris Berezovsky, to maintain control of the airline. The battle appears to have been won by Pleshakov to date but, given the recent ascendancy of Berezovsky, it would be premature to declare the final result. The upheaval has led to the removal of senior managers, at a time when a high level of skills was required. Under these conditions, it seems that Transaero is seeking to reincarnate itself through the signing of this new protocol, although a Tu-204 deal has been discussed for some time. The timing of the announcement, as Russian operators await the decision of the government regarding its support of airlines in buying Russian aircraft, suggests Transaero's intention to align itself with the Russian industry. It should be cautioned, however, that the recent change of government might yet again jeopardise the long-promised assistance. The contract calls for six of the ten Tu-204s to be delivered in 2000. These may well be from the large inventory of 'white tail' aircraft that currently sit at Aviastar and other plants. So far, the terms of the deal have not been reported and Kommersant has reported that, in addition to favourable government treatment, Transaero still has to find an acceptable lease structure. This suggests that Transaero may be exploiting the opportunity to improve its market profile, both with competitors and the government, without incurring the actual cost of buying the aircraft, which it probably cannot fund. The airline has previously declared that it would have 40 Boeings by 2000. In 1998, Pleshakov claimed that Transaero would be a large buyer of Russia's other major aircraft project, the Il-96M, but neither statement has yet proved to be anything other than words.

Article ID: 790