Far from facing extinction, Sibir Airlines is on the prowl, looking to maintain domestic supremacy and deliver a powerful challenge to rival Aeroflot
The decision by Sibir Airlines to acquire Sukhoi's new Russian Regional Jet (RRJ) is a clear sign that the Novosibirsk-based carrier is determined not only to consolidate its dominant position in the Russian domestic market but, also, to throw down a formidable challenge to rival Aeroflot.
Sibir plans to take delivery of 50 of the 95-seat RRJ-95s, worth over $1 billion, and put the type into service from 2007. However, this timeframe may be optimistic, given the delays to Russian aircraft projects in recent years due to lack of funding. Announcements of large orders for aircraft have also often proved illusory but Sibir general director Vladislav Filev says "the structure of financing [the RRJs] is currently being developed".
Sibir's RRJ commitment can be viewed essentially as the launch order for the aircraft and an early contract signature ensures the stated in-service date can be met. "The plan on integrating the RRJ fleet into our network structure is already under way," says Filev. "By 2007, when the aircraft will be put into production, Sibir's domestic and international route network will be expanded. The RRJ can be operated on routes such as those from Moscow to Chelyabinsk, Sochi and Leipzig; between Novosibirsk and Irkutsk; and from Irkutsk to Khabarovsk." Contrary to recent speculation, Filev insists there are no plans to acquire Boeing 717s as an interim measure pending delivery of the RRJ. But the airline may well have to look to the West to overcome temporary capacity shortages since it has no 100-seat capacity aircraft in the current fleet: that comprises 12 Ilyushin Il-86s, 38 Tupolev Tu-154s, two Tupolev Tu-204s, and two A310-300s leased from Airbus Leasing II until 2007.
This shortage could become acute if Sibir is to meet its growth projections and retain first place in the domestic market. "We plan to increase passenger volumes by 15% annually and are determined to stay in front and strengthen our leadership in the domestic market," says Filev. "We have entered the Ural region, where we were not present until this year, and will actively develop our presence in this market."
In 2003, Sibir Airlines carried 3.4 million passengers, 58.3% on domestic routes, mainly out of its principal hubs of Irkutsk, Moscow Domodedovo and Novosibirsk. This represents a 30% increase over the previous year. Its progress continued in the first six months of 2004 when, as a result of 20 new services from its hubs and from western Siberian cities, passenger figures, at 1.5 million, rose by 17.1% compared with the same period last year.
Growth strategy
A few years ago, Sibir was in discussions with Aeroflot, with a view to creating an integrated domestic network that would have linked Sibir's Novosibirsk hub into Aeroflot's international connections from Moscow. There was even a rumour of a full merger. It would now appear that this may have been wishful thinking by Aeroflot, which wanted to regain its former dominant position in the home market.
While there has been some airline consolidation in Russia, Sibir's strategy now is to grow from within. "The period of acquisitions ended in 2001 with Vnukovo Airlines," says Filev. "Although this year we had to buy a controlling interest in Chelyabinsk Aviation Enterprise to enter the Ural market, this was a [necessary] exception. We are developing without acquisitions now."
Filev is less adamant about the possibility of joining a global alliance to further ambitions in the international arena. Having distanced itself from Aeroflot, which is due to join the SkyTeam alliance, Sibir has moved closer to Lufthansa. The German carrier has been material in developing links with Russia, with the two airlines now operating services between six German cities and five in Russia. "Lufthansa, the leader of the Star Alliance, is our closest Western partner," Filev confirms. "We communicate a lot and share experience, but it is too early to speak of an alliance." Sibir's growing status is clearly attractive to the alliance, while offering the airline greater access to international markets.
The carrier will consolidate its position on holiday flights to Egypt, Turkey and the United Arab Emirates but is hampered, says Filev, by bilateral agreements - especially in Europe - that only allow one Russian carrier to operate scheduled services. That carrier invariably is Aeroflot, but Sibir is mounting an increasingly dynamic challenge.
REPORT BY GÜNTER ENDRES IN LONDON
Source: Airline Business
