Week of December 22, 1997

The CIS Alliance

By Vovick Karnozov

Anodina was the first to speak upon the signing of the documents. She said, "This is the first case when two carriers from different CIS countries form a union. The agreements just signed are important not only for Uzbekistan and Russia, but the whole of the Commonwealth, in the spheres of economics and politics. In the conditions of a very tough competition for markets that is taking place today in the world, including that in the aviation industry and air transportation market, the two companies have understood the need of cooperation and made practical steps in this direction."

She noted that although the high-ranking CIS politicians and state officials had tried to initiate the integration process before, their efforts had brought little. Now, enterprises seem to have understood the necessity to create, by joining forces, a common economic area in the territory of the former USSR, which would help increase the rate of economic development and tighten links between transport companies and industrial enterprises.

Not so long ago, Russia and Uzbekistan signed an interstate agreement for joint design and production of civil aircraft. This has allowed the Ilyushin design bureau of Moscow and Chkalov's Aviation Production Association of Tashkent to speed up work on introducing the Il-114P 60-seat regional turboprop and its freighter version, the Il- 114T, into series production. Not so long ago, MAK awarded the factory in Tashkent a certificate for production of these types.

Both Transaero and Uzbekiston Khavo Yullari, Anodina continued, are deservedly counted among the leading operators in the CIS and well known in the international community. IATA named Transaero one of the world's most rapidly growing operators. Later, the International Flight Safety Fund cited both carriers for their trouble-free operation during the last five years. The foundation of the CIS Alliance has created a favourable background for the forthcoming visit to Uzbekistan of Russian premier Victor Chernomyrdin. Uzbekistan is the only member in the CIS which shows a growth in industrial output this year, while the others still can not shake off the shock from the collapse of the USSR.

Since the USSR collapsed, civil aviation has been degrading in the whole of the CIS with the exception of Uzbekistan. President Islam Karimov - former employee of the aircraft production factory in Tashkent - gives every support to his aviators. Under governmental guarantees, they received up to $1 billion in the last six years in the form of long-term credits from US, European, Japanese, Korean and other financiers. This has allowed a renewal of the country's air traffic control system and a rebuilding of its four major airports in the cities of Tashkent, Samarkand, Bukhara and Urgentch.

Although Uzbekiston Khavo Yullari inherited many Soviet-made aircraft from a regional department of Aeroflot, its most frequently flown and beloved airplanes are these from Western manufacturers - two Boeing- 767-300ERs and one Boeing-757, as well as two A-310s (plus one on order). This year the company took delivery of three Aero Regional (International) RJ-85s. Already prepared is a plan to take a dozen Boeing aircraft to replace old Tu-154Bs and Tu-134s.

Transaero's fleet is much smaller than that of its partner (14 against over 100), but contains more Western planes - ten Boeing (five 737- 200s and five 757s) and three McDonnell Douglas DC-10s. The only indigenous type in the inventory is a solo example of the Il-86. Later this month Transaero is to receive two Boeing-737-400s taken on operating lease from a German company. The fleet expansion program announced last winter calls for acquisition of the new-generation Boeing-737 and the Boeing-767, "at least ten of each type." In addition, at Paris '97, Transaero signed a letter of intent with Ilyushin and VASO factory on six Il-96M airliners with Pratt & Whitney engines and Rockwell Collins avionics.

In terms of number of Western airplanes, Transaero and Uzbekiston Khavo Yullari are second only to Aeroflot - Russian International Airlines (ten A310s, two B-767s and one DC-10-30F). Now, the newly-formed CIS Alliance is on par with Aeroflot in both the size of fleet (over 110 aircraft) and volume of air traffic (roughly 4 million passengers annually).

Before starting a dialogue with Transaero, Arslan Ruzmetov approached Valery Okulov, general director of Aeroflot, with a similar offer. Having not found an understanding with the "first among equals," Ruzmetov naturally came to Aeroflot's rival, which appeared to be more sensitive to the idea of cooperation. Ruzmetov thus explains the necessity for CIS operators to join forces, "Foreign airlines are trying to fill the vacuum created after the break-up of the Soviet Union. If we do not fill this vacuum ourselves today, foreign operators will do it tomorrow. The goal for our union is to protect our markets, in both Uzbekistan and Russia."

It should be noted that although Transaero agrees with the need of market protection, it is more oriented in exploring new business opportunities rather than defending the existing market. Aleksandr Pleshakov knows that the leading foreign operators are united into four big alliances - the first one was formed by Lufthansa, United Airlines; the second is built around British Airlines; the third and fourth are Delta and KLM with their partners. According to his data, members in these four alliances carry 40% of passengers in the global scale, generating about 85% of all profit in the world's airline industry.

"Western colleagues told me that this cooperation gives them an increase from 5 to 20% depending on a particular segment of the market," Pleshakov says. According to him, globalizing the market allows airlines to turn from competition to cooperation and further development. "We, in the CIS, understood this trend and are trying to act in a similar way," Pleshakov says.

Although the CIS Alliance is several times smaller than the four alliances named above, it does not lose much in terms of geography. Transaero's network of routes lies from Norisk in the north to Hong Kong in the south, and Vladivostok in the east to Los Angeles in the west. Uzbekiston Khavo Yullari's outer points are Jakarta and New York.

Aleksandr Pleshakov says, "Tashkent and Moscow are 3,000 km away from each other, and our task is to strengthen links between the two capitals, but not only. We have plans on new routes, and how to compete with foreign airlines. Restrictive measures are not the right approach. Instead, we should offer a higher regularity of flights and safety, a wider network of routes and ticket offices in the CIS, coupled with the same level of comfort and onboard services."

The major goal for the alliance is to consolidate the potential of its members in the market for passenger conveyance. The points selected for cooperation are making use of each other's network of routes and ticket offices, stocks of spare parts, aircraft-maintenance facilities, personnel-training centres and infrastructure in airports. The two airlines have established working groups tasked with coordination of arrival/departure times, introduction of a flexible tariff system on "linked" flights and correction of fleet-expansion plans in order to achieve unification in the types of aircraft.

Today, Transaero and Uzbekiston Khavo Yullari have only two types in common, the Ilyushin Il-86 and Boeing B-757. With the arrival of the first B-767 in Transaero colours - planned for the next year - the number will rise to three. Transaero is considering the Aircraft Repair Plant No.243 in Tashkent as the place to perform maintenance procedures on its Boeing aircraft. Pleshakov says, "Aircraft maintenance is very expensive, and this is what determines flight safety in the first place. It is difficult to perform maintenance procedures on an aircraft in the Russian winter - in Tashkent the conditions are much better."

According to Pleshakov, Transaero is considering taking the Il-114 turboprop for operation on domestic routes. Uzbeki aviators have already performed operational trials on two prototypes and are going to do so on two Il-114T freighters. The national carrier has reached understanding with a Western company on investments into assembly of a batch of PW-127-powered airplanes intended for usage on Uzbekistan's domestic routes. If both operators choose the Il-114, they will have one more type in common.

The CIS Alliance is said to be open to other operators "with a similar vision of market-development strategy and interesting ideas." The alliance does not call for establishing joint ventures or exchange of shares or property - it is purely technical. Speaking about those who may join the Alliance in the near future, Pleshakov said, "The Ukraine has two interesting airlines - they are invited. We also expect certain operators from the Caucuses region to join us. We are interested in finding at least one partner in the western part of the CIS and at least one in the Caucuses region." Arslan Ruzmetov, however, made it clear that "with outdated, not competitive airplanes in the fleet an operator can not join our alliance because we need high quality services, the highest standards and professionalism."

The CIS Alliance has received a series of warm addresses from various Russian politicians. Anatoly Adamishin, the minister for cooperation between CIS countries, said, "The economy of the Soviet Union was built up as a unitary complex. Since the USSR collapsed, many links have been torn off, and any single step of former Soviet republics towards each other is important because it leads us to restoration of our common economic potential. In that sense the CIS Alliance shows the right way for other CIS companies." On 22 December Russian Premier Victor Chernomyrdin is going to Uzbekistan, and Adamishin believes the foundation of the CIS Alliance will benefit the atmosphere of this visit and lead to new important agreements between the two countries in the aviation sphere.

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