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19

Aeroflot — An Airline With A Dream

Russian airline with the image problem seeks troubled in expansion path...

For most airlines, the banning of smoking on all flights may not seem like a particularly radical move. But for Russia's flag carrier Aeroflot the recently introduced ban marks a major shift in policy.

In one of the most tobacco friendly countries in the world, where restrictions on smoking in public places are rarely observed if introduced at all, Aeroflot's move could alienate its traditional customers.

For Aeroflot though, the move is symbolic of its attempt to re-mould itself as a modern, international carrier, and to end its reputation of being a low priced relic of rather unfriendly Soviet-style service.

Since its birth in the early years of the aviation industry Aeroflot has enjoyed a near monopoly in its domestic market, and was the only choice for the few Soviets traveling abroad.

When the country began to open itself to competition in the late 1990s, Aeroflot lost its virtual monopoly and, as a result, the revenues.

The company lost out badly to foreign airlines as its ticket booking software was obsolete, and its flights were absent from almost all online booking companies.
Foreign travel agents complained about

Aeroflot's reluctance to issue electronic tickets and to provide its passengers with the now widely accepted practice of picking up a booked ticket just before the departure. In addition to the computer problems, Aeroflot also had an image of being unsafe.

But in recent years, under Valery Okulov, the company's chief executive and Russian former president Boris Yeltsin's son-in-law, Aeroflot has started to regain market share.

When the Russian currency was devalued in 1998, the company found itself in a position to cut costs and prices. And with the economy rebounding, Aeroflot enjoyed a sharp rise in sales of domestic flights.

The company, which generates the major of its revenues in the former Soviet Union and Western Europe, was relatively untouched by the crisis which gripped the aviation industry following 11th September.

Passenger numbers increased by 15% in 2001 and the company even managed to record a small profit. Now Aeroflot is targeting the international market. Last year the company employed Identica, a London based consultancy, to improve the carrier's image.

Damian Schogger from Identica says that there is a misconception of Aeroflot in the West. Although it has a image of badly maintained or dangerous planes, its safety record is among the top 5% of the world's carriers.

But Aeroflot faces several problems as it seeks to expand. Aeroflot spokeswoman, Irina Dannenberg cites Russia's lack of international standard airports as one of the main obstacles to the airline's development.

Moscow International Sheremetyevo airport, built in the late 1970s, is already running at full-capacity, and construction of a new airport is not expected anytime soon. Aeroflot also needs to modernise its fleet of 111 planes, of which only 27 are Western-built Boeings or Airbuses.

The small size of the company means raising cash to buy or lease planes is not easy, even though the recent slump in the aviation industry has cut leasing costs. The industry troubles have also pushed down ticket prices across the industry, reducing Aeroflot's price advantage over other airlines.

Analysts agree that Aeroflot is set to maintain its dominance within the Russian domestic market, as low-cost airlines are not expected to threaten in the near future.

But the company could face problems with any international expansion plans.
Analysts says the airline could be squeezed between the large European flag carriers and low-budget airlines such as Ryanir and Easyjet. Banning smoking is a start, but it seems that Aeroflot still has much to do before it can be seen as a serious international player in the aviation industry.

Author: Neftegaz.ru