Paul Duffy/MOSCOW
Being married to President Boris Yeltsin's elder daughter certainly gave Valeri Okulov the right connections to become director-general of Aeroflot - Russian International Airlines (ARIA). There was more to his appointment than that, however - he won 98.5% of shareholder support in elections for the post at the airline's annual general meeting in May. This is an impressive result at a company where the Russian Government's share is 51%, and the voters usually pay no attention to the state's wishes.
Okulov had one major advantage over his opposition - he has worked for Aeroflot since the 1970s, flying Antonov An-24s, An-12s, An-124s and Tupolev Tu-154s as a flight navigator, firstly from Yekaterinburg, and later from Moscow Sheremetyevo, ARIA's base. The previous director-general, Marshal Yevgeni Shaposhnikov, had come from the air force, and his predecessor was with Aeroflot's international commercial department. The airline's staff regarded both men as intruders. Okulov, however, was known to the staff, and was popular. He had been appointed to the board in November 1995 at the time of Shaposhnikov's succession, and had developed a core of advisors during his 17 months as a director.
Difficult decisions
In his new role as director-general, he has to lead ARIA through the middle and late stages of conversion from a centrally controlled airline to a market-led commercial business. Fortunately for him, some of the difficult decisions have already been taken by Shaposhnikov - the order for Boeing 737-400s, for example - and Okulov will not be blamed for what the Russian aviation industry regards as an act of treachery.
He still has tough decisions to make, however. With traffic volumes in Russia down to about 30% of their 1990 levels overall, only newcomer Transaero and what is now ARIA have shown real growth in the past few years. In 1996, ARIA carried 3.8 million passengers some 14.6 billion kilometres, and, although this is still below the 1990 figures of 4.7 million passengers and 15.8 billion kilometres, it is a substantial recovery over the past three years.
In the Soviet Union era, Aeroflot, together with the railways and bus services, formed part of a national-transport system, which meant that the fares had little to do with economics. Air fares were essentially equivalent to those of the surface systems, which is why Soviet passenger volumes had reached 137.5 million by the time the Soviet Union collapsed in 1991. Now that economic reality has set in, fares represent real costs more closely.
ARIA has done much to improve the poor Soviet-era service, and has made efforts to bring it up to Western standards by training cabin crews as new aircraft come on stream.
"We have carried out extensive market research on the needs of the Russian passenger, and we have found that these are not being met in several areas. The routes and schedule times need to be improved," says Okulov. "While there is a new generation of monied Russians willing to pay reasonable fares for good service, there is also a large market of not-so-rich people anxious to travel, but at lower fares. For them, high fares are a disincentive. So we have been working to develop a fare structure that will open the skies to more people," he adds.
Broader network
He says that ARIA has broadened its network. "Traditionally, the Sheremetyevo-based Aeroflot division has flown only international passengers, but with international competitors like Lufthansa and Finnair now open to Russian passengers, we have had to face up to a problem - last year Finnair carried some 600,000 people on the Moscow-Helsinki route and we carried just 200,000. We know that many of Finnair's passengers flew onwards to other destinations."
Lufthansa has opened routes from Germany to an increasing number of Russian cities, and, according to Okulov, has taken passengers "-who traditionally would have flown to Moscow and transferred to our services". He adds: "Sheremetyevo has been a problem for transfers. We know it and our board has been considering what to do. We have to improve transfers, and minimise delays, at the airport. If we can do it, it will be as easy for our passengers to transfer flights at our base airport as it is for them to do it in Copenhagen, Frankfurt or Helsinki. We are beginning to fight back: the hub we started in Shannon in Ireland two years ago taught us some lessons - indeed we plan to revitalise it and expand it."
Okulov says that ARIA will set up new hubs in Russia, starting with Sheremetyevo and St Petersburg (where services to New York, Tokyo and Vladivostock may be established). Novosibirsk and Yekaterinburg will also be turned into hubs - all four cities are large and have developing industries which are of interest to foreign business travellers. Local airlines operate in each of these hub cities, and Okulov says that ARIA is developing contacts with them to build codesharing partnerships and harmonise schedules for connections.
"We won't swallow them," he says. "We plan to expand alongside their growth. We are also working to develop tourist travel. At first, most of this will be outbound Russians, but as the Russian infrastructure develops, we will build incoming tourist traffic. It is not our policy to wander from our prime business. We are an airline and we offer airline-related services - we are not hoteliers, and we don't plan to be, but we certainly will look at travel services."
ARIA may make two major announcements at the Moscow air show on 19-24 August. "We will launch a new advertising campaign," says Okulov, "and we will announce our fleet requirements to bring us up to the 2005-10 period. We have a fleet of 113 aircraft of nine types. We have looked at our needs, and have decided to be fairly conservative. We plan to operate six aircraft types with five different engine types."
ARIA's position is well known on some of these types - it has Ìrm orders for 17 Ilyushin Il-96Ms, plus three Il-96Ts, all powered by Pratt & Whitney PW2337s. The carrier has also ordered ten Boeing 737-400s with CFM56-3 engines, although persistent reports in Russia say that this is a choice forced on ARIA as a condition of the US ExIm Bank funding the Il-96M/T programme. It is known that the airline plans to keep the Il-86, which is popular with passengers, until 2005. The airline is also under pressure from the regional government of Kazan to buy the KAPO-built Tupolev Tu-214, to replace its 29 Tu-154s.
Of ARIA's other aircraft types, its 28-strong fleet of long-range Ilyushin Il-62s has shrunk in the past year to seven serviceable aircraft, while its six Il-96-300s will be joined by a seventh this year, but are not popular with passengers because of their uncomfortable seats. Its Ilyushin Il-76 freighter fleet, which has high operating costs, will probably be replaced by cargo versions of the Tupolev Tu-214 freighter, while the airline's one McDonnell Douglas DC-10F is unlikely to be kept in the long term. The carrier's sole An-124 is leased from another company and is not regarded as an ARIA aircraft, while its Tu-154 fleet is not expected to serve much beyond the year 2000. Two Boeing 767s had been taken on five-year leases and are likely to be disposed of as Il-96Ms join the fleet. Its Airbus A310s will be retained, however, and the fleet may be expanded.
This leaves the Tupolev Tu-134s, and they are due to be replaced by the much larger Boeing 737-400. "Two of the 13-strong fleet have been transferred to a new subsidiary known as Aeroflot Plus," says Okulov. "We are working to add a new service - business charters. We have installed new business interiors into two Tu-134s, and the first charter for the new airline took place late in June - from Moscow to Shannon. We will add a Western business jet in the Dassault Falcon class shortly."
Okulov says that in Soviet times Aeroflot had almost no connection with the aviation-manufacturing industry. "Now the airframe and engine designers and manufacturers are calling regularly. The Il-96-300 was the last aircraft where we were expected to take what we were given - nowadays we will choose what we consider to suit us best."
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Okulov says that Aeroflot is adding to its simulators at its training centre at Sheremetyevo. "We will soon have at least one for each current, plus each planned, aircraft type, and are happy to train crews from other airlines on these. In August, our technical base will get JAR [Joint Aviation Requirements] 145 approval for the A310 up to C-check level. We are likely to seek the same for other Western aircraft - the 737 and, possibly, the 767."
ARIA is receiving many proposals for business ventures from Russian and international companies, but will not consider them unless they relate to its core businesses - passenger and cargo transportation, training, maintenance and business aviation.
"I am very conscious of my responsibility to the many excellent people who work for Aeroflot - I will be doing all I can to justify their confidence," says Okulov.
Source: Flight International