Since the break-up of Aeroflot, the number of independent airlines in the CIS has grown to around 500.
Paul Duffy/MOSCOW
THE AIRLINE INDUSTRY in the former Soviet Union has seen some remarkable changes in the past four years. From a supposedly single airline, Aeroflot in 1991, before the break-up began, the number had grown to just over 400 in Russia alone by the end of 1994, with almost 100 more in the 14 other former Soviet republics.
Few of these were new airlines, however. The old Aeroflot had 32 major divisions and about 100 small units, which to all intents and purposes operated independently of each other, although the old ministry of civil aviation provided them with their fleets, airports, staff and fuel, taking in return their income. These 130 or so units became the first "new" airlines.
Even that did not stop the disintegration: many of these units subdivided into three, four or five sub-units, sometimes resulting in airlines with just a single aircraft - perhaps an Ilyushin Il-76, or even an Antonov An-2 or Mil helicopter. In one case, a single Il-76 formed the entire fleet of three different airlines.
Over 260 of the 500 airlines were formed from Aeroflot units. Another 120 airlines were founded from transport sections of Soviet industry, because many large designers, research bodies, ministries and large industrial organisations had been provided with their own aircraft fleets to transport their staff and materials. In Soviet days, these aircraft were flown much less often than the airline-operated aircraft - perhaps 200-300h a year, compared to 1,200-1,500h for airliners. Today, these relatively young aircraft still have adequate operational life remaining.
The first non-Aeroflot airline permitted to operate in Russia came from an industrial background. Volga-Dnepr was formed in 1991, after the Soviet Government agreed to "sell" two Antonov An-124 Ruslans to a Bulgarian company, for the military price, (reputed to be one million roubles, then about $200,000). This outraged the workers and management of the Ulyanovsk production factory (now Aviastar) where the An-124 was built. They demanded that, if the Government was going to sell the aircraft at that price, then the factory should be allowed to buy them. The Government agreed. Meanwhile, the factory was negotiating a marketing agreement with UK cargo carrier Heavylift. Thus was born Volga-Dnepr.
Antonov and UK carrier Air Foyle, reached a similar agreement and these two partnerships, have developed a world niche market for outsize freight, which Alexei Isaikin, Volga-Dnepr's general director, described at Flight International's Moscow conference in April, as having "grown to more than 16 times the 1991 level, in just four years". Today, Volga-Dnepr owns six An124-100s, and can call on five more. It has now begun scheduled services to China with Il-76 freighters, and is considering adding Boeing 747s to develop scheduled cargo routes to the West. The An-124, ideal for bulky cargo, is not as suitable for the palletised systems used in the West.
Another perhaps 50 new airlines came directly or indirectly from military units. Several transport squadrons applied successfully for licences to fly mainly cargo charters and thus stretch their economies in a time of dwindling military budgets. With rare exceptions, these operate domestically. In Soviet times, most of their aircraft were painted in Aeroflot colours. Little has changed. Some have had Aeroflot titles removed, but have been reluctant to spend scarce resources on paint.
SECOND CATEGORY
The second category of military-related airlines includes many of the "new" Il-76 and An-12 cargo operators. These appeared when an air force transport unit had aircraft available and needed to earn money. In those circumstances, a civil company sometimes grew around it, with civil management and marketing personnel liaising with base commanders. Examples of this category include Ukrainian carrier Atlant - an efficient airline, well regarded by Western charterers, which include the United Nations. Another substantial user of Ukrainian air force Il-76s is Veteran Airlines of Moscow. Along with 16 or so Il-76MDs based at Simferopol, Veteran also manages and operates four Il-76s owned by the Ilyushin design bureau. Veteran's president, Yuri Egorov, is an Ilyushin test pilot, and its chief executive, Mikhail Alekseev, worked in Ilyushin's commercial department.
"Our relations with Ilyushin and with our military partners give us considerable advantages in operating," says Alekseev. "We can draw on an excellent range of crews to fly any mission. We will then train them to understand and meet our requirements. We can adapt an aircraft for a particular role - for fire fighting or oil patrols. We can use test pilots if necessary," he adds.
The last category is the genuinely new operator. The best known of these is Transaero. This is popular with passengers, who appreciate the improved cabin service and punctuality offered by the airline, which began by sending its cabin crew to Paris for Western-style training.
"If our aircraft colours and our cabin standards are sometimes taken to be those of Air France, that's no disadvantage to us," says Alexander Pleshakov, Transaero's president. "We are working hard to introduce normal Western service, in a market that is accustomed to disservice," he says.
Transaero is a target for the ill feelings of the aviation industry, which sees its policy of operating Western aircraft as an unwelcome development when industry is in massive depression.
"Although Soviet/Russian aircraft may cost a lot less to buy," says Pleshakov, "we can't make money with them. We can with Boeings."
Gennadi Gurtavoi, Transaero's vice-president, says that the airline's Boeing 757s will be operated for over 400h each a month during this summer. Transaero's shareholders include Ilyushin and Yakovlev.
Another new operator is Stela, an Irkutsk-based operator of six Antonov An-32s and two An-26s, also building up a tourist business around Lake Baikal. Even Boeing personnel speak highly of the service offered by Stela. It's general director A Stepanov attributes compliments, to picking the right people to operate the aircraft.
Sergei Isakov, director-general of another new airline, Oriol Avia, is a former merchant navy sailor. He began the airline in 1992, buying Yakovlev Yak-40s, which he offered for consular and business charters. Foreseeing the fall in rouble values, Oriol bought three Yak-42s and three Tupolev Tu-204s before they were certificated. He then put down "substantial deposits" on two An-124s, but did not take delivery. Today, Oriol has passed its three Tu-204s on to Aeroflot - Russian International Airlines (ARIA), the international division of Aeroflot, and keeps its Yak-40 and Yak-42 fleet busy on charter services.
AIRLINE DIFFICULTIES
While there are undoubted success stories, there have been many difficulties for most of the airline industry. In 1990, the combined Aeroflot carried 137.5 million passengers and 2.9 million tonnes of freight and mail. Four years later, passenger numbers had fallen to below 33 million, and cargo to 443,000t. In 1990, the fare from Moscow to Kiev was the equivalent of two days' wages. In 1994, it had risen to 15 days average pay, but, by this time, a new generation of cash-rich Russians was emerging, and they prevented passenger numbers from falling even further.
In his annual report for 1994, the director of Russia's air-transport department, Vadim Zamotin, says that, of the 413 air operators in the country, 156 had earned some 99.6% of the total revenues of the industry. The other 257 had earned little or nothing. Some of these are small operators, perhaps with a single An-2, or Mil Mi-2 helicopter, but most of these companies have little prospect of surviving.
Zamotin's department has cancelled the licences of 89 operators so far this year, in a drive to improve operational and safety standards, and ordered others to ground some 80 aircraft.
The economics of 1994 have had one remarkable effect on airline numbers. They have slowed - perhaps even stopped - the airlines' will to separate. In some regions, notably Komi and Krasnoyarsk, the multitude of former Aeroflot sections has begun to join together again. Obviously, this can make sense in some cases - for example, the Igarka section of Krasnoyarskavia separated and formed itself into a new air company. Igarka is a small town of a few thousand inhabitants, situated just north of the Arctic Circle, without any road or rail connections to the outside world. A few thousand people is not an economic base on which to operate even a small airline, but Igarka could not survive without its air connections. It made sense to rejoin a larger enterprise, which could carry some of the costs, and was in a better position to campaign for essential state support.
While the huge fall in traffic volumes has had an equally dramatic effect on many of the "new" airlines, it has had one or two advantages. At least the aircraft fleet has not been aging as rapidly as it would otherwise have done. In the West, an airliner sitting on the ramp is bad economic news, but, in the former Soviet Union, aircraft had been given "free" to the airlines, so that little economic penalty resulted from disuse. The fall-off in traffic volumes has not had much effect on the domestic load factor, but has affected the frequency of service and, instead of nine or ten flights a day linking Moscow and St Petersburg, there are now four or five.
This has had a real benefit for the operators. Five years ago, some 200 airliners were needed from Soviet aviation factories each year. The huge changes in the country, the failure of the industry to bring forward new aircraft with adequate economics, engines and avionics, the virtual collapse of the rouble and the economic system, meant that production fell to about one-tenth of that number. Even the last few produced were difficult to pay for, and sometimes took months to sell. At least the hours not flown gave breathing space to the operators who would otherwise have had to replace them.
COMPETITION
Originally, only one Aeroflot division would serve most routes, but competition is now evident. It started with Transaero, pushing hard to gain approval to operate scheduled services. Its first was to the Arctic city of Norilsk. Most expected Transaero to fail, as Norilsk is a difficult destination to serve. Transaero applied a Western marketing approach to the destination, however. Like the Vnukovo division of Aeroflot, it used an Ilyushin Il-86 to launch the service but, unlike Vnukovo, it fitted a Western interior, reducing the seating from 350 to 255 and offering good cabin service. It won the traffic and, three years later, the once-a-week Il-86 service has grown to a six-times weekly, 757 operation.
The Moscow to Vladivostock route was previously served once a day by the Domodedovo Aeroflot division. Now Transaero has a daily 757, while Orient Avia, another new operator, which started by buying the last three Il-62s to be built, also flies the route daily. Domodedovo now has two return flights daily.
In the wake of collapsing production in the former Soviet aircraft factories, Western airliners have to a small extent filled the void. Today, there are eight Airbus 310s, two McDonnell Douglas DC-10s, two Boeing 767s, six 757s, two 747SPs, 17 737s, five 727s, one 707 and one Lockheed TriStar, plus some executive jets being flown in the 15 countries of the former Soviet Union. Fourteen of these are new aircraft, but most of them are inexpensive and well into their service lives, often 20-30 years old.
There will undoubtedly be more, but it is more likely to be a trickle than a flood. The engineering director of Vnukovo Airlines, Mikhail Bulanov, says: "Russian airlines are used to Russian aircraft. They are tough and built to withstand our poor airports and rough weather. We would like to have fleets of new Boeings, but not many can afford them - and we understand our Ilyushins and Tupolevs."
Diamond Sakha, based in Yakutsk, leased two A310s from Airbus, both built in 1988 and ex-Pan American aircraft. At Flight International's Moscow conference, Valentin Sushko, chairman of the Avia Register, stated that the airline was refused permission to operate them from a city where winter temperature falls to -70¡C, because the authorities could not be satisfied that the airline could operate the aircraft at that temperature. Fortunately for Diamond Sakha, ARIA took over its operation, adding the aircraft to its four-strong A310 fleet.
With traffic down and costs still rising, most airlines have a tough road ahead if they are to survive. The former Soviet Union paid little attention to marketing, and many of the airlines still seem to think that the market will come to them. A lot of effort will be needed before the market for air travel is determined and settles down. This may seem surprising, in a huge country with very limited surface access, but airlines will need to build up services, to destinations within 2-3h flight time, to at least a morning and evening return, to permit business travelers to avoid losing too much time, particularly when little adequate hotel accommodation is available.
In Soviet times, an international traveler arriving at Moscow's Sheremetyevo Airport had no choice but to spend half a day travelling to the far side of the city to other airports if he wished to continue onwards to the south or east. While Moscow was a hub, none of its four civil airports was a hub in itself. Now ARIA has begun to develop some domestic routes from Sheremetyevo. Vnukovo and Domodedevo are also talking about "hubbing", but little progress has yet been made.
PROFITABLE BUSINESS
Two areas of business have proved profitable for carriers in the former Soviet Union. The first of these is cargo. The military background of the aviation industry saw the development of a worthwhile range of cargo aircraft and helicopters; with few purpose-built Western freight aircraft and, despite high operating costs, the cargo carriers have been able to gain business domestically and internationally. Stage three is now looming for the backbone of Soviet jet-transporters, the Il-76. Although the new Perm PS-90-powered version has now been flown, the investment needed to replace the huge number in service will be difficult to fund.
International scheduled and charter passenger services continue to be profitable - deutschmarks and dollars are still valuable commodities in the region. Thus, many carriers are anxious to develop foreign schedules and charters. ARIA has traditionally been the sole operator on international routes, and continues to provide over 60% of these services, but other companies are also pushing to win licences. Transaero now operates scheduled services to Tel-Aviv, Berlin and Frankfurt, with a service to London being flown on sub-charter to RIAIR. Former Aeroflot divisions in the east operate services to the US West Coast, but other divisions such as St Petersburg, Mineralnie Vody and Krasnoyarsk Avia are flying routes from their cities under the Aeroflot designator. Many are flying charter services. The inclusive-tour market from Russia is beginning to grow, and is allowing any of the 120 airlines approved to fly international services to bid for this market, or to set up related travel companies.
While it is easy to see the future for the industry of the huge region, how to get to the future is not so easy. Massive structural development is needed. New aircraft have to be funded and developed. New airport runways, terminals, access roads and hotels are all urgently needed. Reservation systems, sales and ticketing services need to be dragged from the past.
Hangars and modern diagnostic equipment will be needed urgently to speed up the maintenance time on ex-Soviet aircraft. The manufacturing and overhaul industries will have to develop better support services. Staff will need to be retrained to develop sales and marketing skills, and customer services need improving.
How are these to be funded? It is pointless calling on the Government, because similar crises exist in almost all of the region's life and industry. The future must come from within, and only the air-transport departments and the MAK (inter-state aviation committee) have the leadership and authority to begin the process - with help from international friends.
Source: Flight International
