The first leg of an Aeroflot London-to-Katmandu flight last November began smoothly enough as the Ilyushin-86 backed away from the gate almost on schedule. Then the plane stopped, however, to remain immobile for hours. Neither the delay nor the swarm of black flies that filed the hot passenger cabin was explained until the unsmiling stewardesses emerged to distribute glasses of lukewarm water and said that there were “technical troubles.”
The aircraft eventually flew to its hub, Sheremetyevo Airport in Moscow, to meet a connecting flight to Nepal, which arrived four-and-a-half hours later. In the air again, the plane meandered from the United Arab Emirates to Bahrain and back, looking for a place to refuel. It finally arrived in Katmandu 29 hours after leaving London.
Aeroflot has never been overly concerned with providing the kind of service that Westerners have come to expect. As part of the Soviet Union’s command economy, its singular mission has been to provide the greatest possible supply of air travel at the lowest possible cost to Soviet citizens.
Now, with the collapse of the Soviet Union, the disappearance of subsidies and the virtual certainty that its monopoly will crumble – Lithuanian Airlines was carved out in 1990, followed by Air Ukraine, Armenian Airlines and, most recently, Estonian Air – Aeroflot must transform itself into a self-sufficient business.
To that end, it has been forming joint ventures with airlines around the world to secure much-needed hard currency and expertise. It has also raised its fares to rates that, although still ludicrously low by Western standards, better reflect costs. In Russia alone, Aeroflot fares climbed by 300 percent this month, and passengers are now required to pay at least some of the cost of international flights with hard currency.
The collapse of Communism has brought an avalanche of business and tourist travel – a potential bounty for the airline, since it charges foreigners rates that are competitive with other carriers. Aeroflot now has 20 flights a week from Moscow and St. Petersburg to New York. By next year, the number is expected to increase to 37. In addition, it now has landing rights in Chicago, San Francisco, Miami and Anchorage.
Aeroflot is also in an excellent position to provide service between Europe and Asia; the trans-Siberian route saves four to six hours over traditional polar routes.
Easily the world’s biggest airline, Aeroflot has 5,400 planes that carried more than 138 million passengers last year. (By contrast, American Airlines’s 616 planes carried about 75 million passengers.) Nevertheless, some market analysts question whether Aeroflot, handicapped by outdated aircraft and airports, primitive management techniques and abysmal service, can survive.
“Aeroflot is in total chaos, and it has been in total chaos for years,” says Keith McMullan, president of Avmark Aviation Economist, a London-based airline consulting firm. “It should be one of the first Soviet organizations to enter a state of total collapse.”
A sprawling enterprise with 500,000 employees, Aeroflot is responsible for all aspects of air travel, in part explaining why it is ineffective at any one aspect. It is in charge of air traffic control, crop spraying, fuel distribution, 120 airports and educational institutions for personnel.
Last month, Russian officials acknowledged that more than half of Soviet airports were closed because of jet fuel shortages, and that 40 percent of Aeroflot’s planes had been grounded due to a lack of spare parts. International service has not been interrupted, but flights to Ukraine, the Caucasus and Kazakhstan have been all but eliminated. Ticket holders have taken to the runways in protest.
A senior air traffic controller told Tass that Aeroflot had a record 36 crashes during the first 11 months of 1991, with 252 people killed. Komsomolskaya Pravda, a leading newspaper, commented: “Flying Aeroflot is now about as safe as playing Russian roulette.”
Since the bulk of Aeroflot’s operations – including about 90 percent of its international business – are in Russia, most of Aeroflot will remain intact, at least for now. But ultimately even Aeroflot’s Russian operations are likely to be broken into smaller, competitive airlines.
The decentralization will distract from Aeroflot’s current modernization efforts, but the potential payoff is obvious. “Once it is broken into manageable units, it can finally be run rationally,” said James Halstead, an airline expert with Hoare Govett, a London-based merchant bank.
Sitting behind a desk that holds eight telephones, half of them direct lines to Government ministers, Vladimir M. Tikhonov, the Aeroflot official responsible for international operations, described another debilitating aftereffect of the Soviet Union’s collapse: Some now-independent republics have used Aeroflot tickets to sell seats on Western airlines, keeping the precious hard-currency proceeds and sticking Aeroflot with the bill for reimbursing Western carriers.
“We just received the invoices for the last six months, and they were for millions of dollars,” Dr. Tikhonov said. “It’s a time bomb. They are out of control.”
Of all its problems, however, Aeroflot’s reputation for providing abysmal service is the most obvious. Flight schedules are so frequently missed that Mr. McMullan concludes: “Aeroflot is never quite sure of where its planes are.”
Communism itself, with its lack of competition and reward, is largely to blame. Aeroflot had no imperative to provide attentive service.
Add to that more current economic problems. “No food,” Dr. Tikhonov said. “No drink. You don’t have happy and pretty stewardesses when they leave their planes to go to stores that are empty. It is impossible to have a first-class airline in an economy that is in ruins.”
To the Communists, Aeroflot’s great triumphs were the number of passengers it carried and its low ticket prices. A two-hour flight cost a passenger the equivalent of about two hours of pay. The volume of subsidies required to maintain the fares is unknown, but the size of the problem was reflected in a story told at the International Monetary Fund-World Bank meeting in Bangkok last October by Norman Lamont, Britain’s Chancellor of the Exchequer.
On a trip to Kiev, the Chancellor met a woman who had flown several thousand miles from her home in Kazakh to sell watermelons. Her round-trip Aeroflot ticket was so inexpensive that she had to sell just a dozen melons to pay for her ticket and make a profit.
One problem in setting fares is that Aeroflot has no idea what its costs for individual flights are. It has always flown blind, without the discipline considered basic in the West – cost accounting, cost benefit analysis or capital budgeting.
“They have a single pot for revenues, and they just take money out of the pot for expenditures,” said Ian Dale, a strategic planner with British Airways, one of Aeroflot’s growing swarm of joint-venture partners.
Aeroflot’s effort to transform itself leans hard on joint ventures with Western companies, trading expertise and capital for access to Aeroflot markets, airports and air space. This approach is born of necessity: With so little hard currency, few Western materials can be purchased.
“We could not jump the gap to become a first-class airline without help,” said Nikolay N. Pechnikov, the Aeroflot official responsible for the line’s 42 joint ventures.
The partnerships date back to the mid 19080’s, in Ireland, where Cuba-bound planes stopped for refueling. Due to Aeroflot’s lack of hard currency, the Irish airport authority suggested that Aeroflot barter for landing rights and other services with jet fuel. Aeroflot became Shannon Airport’s prime user in the 1980’s and its relationships with Irish companies have continued to expand.
More important, the experience helped demonstrate the value of cooperating with the West to Government officials who were wary about joint ventures. “We had to overcome a lot of resistance from internal sources, and it was an extremely painful process,” Dr. Tikhonov said.
John Borkowski, a senior strategist at British Airways, said of Aeroflot leadership: “It was clear that some of them felt that if they could operate an airline with a half-million employees that they did not accept the need for outside help.”
However, with the freedoms provided by President Gorbachev’s reforms, Aeroflot was able to form partnerships with Austrian and All Nippon Airways. Other cross-border ventures were formed to build hotels in the Soviet Union, set up Aeroflot travel agencies throughout Europe and improve in-flight catering.
Aeroflot has also made some judicious purchases from the West, including passenger reservations systems from International Business Machines and boarding passes from Rand McNally. It will probably also have to invest in long-haul, Western-made planes.
But for the moment, there are more pressing concerns. “Aeroflot is in a total and constant battle to survive,” said Dr. Tikhonov.
