Moldovian air transport sector struggles to find equilibrium

Published: 10/8/1999

It appears that the liberalization of the aviation sector in Moldova is achieving mixed results in this very small air transport market as three major competitors, state owned Air Moldova, Moldavian Airlines and Air Moldova International slug it our for passengers. According to Victor Tsopa, Director General of the State Administration of the Civil Aviation of Moldova, there is 15 other passenger and cargo airlines registered in the country, including several that have foreign shareholders. Tsopa contends in the face of fierce competition, local airlines have to merge to fend off bankruptcy, in common with other smaller western where similar consolidations have occurred. The breakup of the state aviation activities into a number of entities is however, according to local sources,limiting the pace of change. The state's aviation activities have been broken up into Moldatsa responsible for ATC, Air Moldova, flag carrier of the Republic of Moldova, flying a mixed fleet of owned and leased aircraft to regional destinations and Western Europe and the three state owned airports Kishinev, Belts and Kakhul. The requirement from these entities for capital from government has been high with Moldatsa receiving an Italian loan of $5m to install Italian equipment, a process that at the time of writing was nearing completion. Kishinev's airport is also in the process of undergoing at extensive refit to bring it up to international standards involving improving baggage handling and passenger processing facilities. Some Moldavian airlines use 100 passenger Yak-42s on the longer European routes according to Tsopa, which given the relatively low utilization of the aircraft, under ten hours a day, gives them an advantage over the more expensive leased Boeing 737.In a market severely depressed market since last year's financial crisis, the Boeings, which require 250-300 hours a flying time a month to be profitable, makes even the fuel economy of the Yak-42 look attractive, with leasing costs a third of those of the Boeing-737's $400,000 per month. On the shorter regional routes, Moldavian Airlines has used leased SAAB-340s profitably, but state owned Air Moldova, which plans to improve the quality of its service to passengers, has decided to dispose of its obsolete fleet of eight An-24s, selling or leasing them to market's with lower passenger requirements. During 1999 the escalation of fuel costs - anticipated to reach $300 per ton by the end of 1999, well above the current levels of $225-$250 per ton - may well result in rises in ticket prices for the Moldavian carriers. Fuel is supplied mainly from Russia and Belarus, although Romania's cheaper costs have resulted in it becoming increasingly the favoured source. However, given the extent of competition amongst airlines, fuel costs may not impact prices, but will impact the margins of already pressed carriers. It is generally agreed that transit routes provide the sole opportunity for increasing air traffic in Moldova. Between 1996 and 1998, profits were generated on transit flights to Western Europe from Donetsk, Dnepropetrovsk, Rostov, Simferopol, Kharkov and Volgograd. The 1998 crisis inevitably led to a steep decline in passenger numbers from the CIS. Some routes were consequently abandoned followed by others, including flights to Perm, Ufa, Samara and Yekaterinburg. Moldova according to the has established the most liberal air traffic regulations in south eastern Europe according to the State Administration of the Civil Aviation. Every day, around 25 aircraft from Russia, Scandinavia and the Baltic states fly in transit to Turkey, Cyprus and near Eastern countries. Foreign airlines only have to file an application for these transit flights, for which no fee is charged over and above the cost of the ATC service and meteorological information.

Article ID: 960