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Aviation History
1997
1997 - 2204.PDF
BUSINESS Lufthansa to study low-cost airline option ANDRZEJ JEZIORSKI/MUNICH LUFTHANSA IS considering establishing a new, low-cost airline to combat continuing losses on its domestic network. The new service could eventually have a fleet of some 50 aircraft and would offer ticket prices 20% below current Lufthansa levels. The German airline says that it is losing "hundreds of millions" of deutschmarks on domestic routes. Most of these losses are attributed to services which do not link into the airline's primary hubs at Frankfurt and Munich, and feed no passengers into long-haul flights. According to Carl Sigel, opera tions chief for Lufthansa's passen ger services, the airline is "especially threatened" on these routes by low-cost start-up carri ers, which try to siphon passengers off from Lufthansa's network. Sigel says that if the company does not react immediately, losses will con tinue to increase. Lufthansa hopes that more passengers would board a low-cost domestic carrier Starting a new airline is one pos sible solution being considered. Sigel says that dropping the loss- making routes and losing market share as a result would be unaccept able, while Lufthansa would prefer to avoid contracting other airlines to fly the affected routes on its behalf. He believes that the best solution is a new product within the company, which Lufthansa says could take the form of a new airline, or a service such as the now-defunct Lufthansa Express. The new product, informally dubbed "Lufthansa light", would keep down costs by cutting cabin services and introducing higher- density seating. Lower salaries are also likely, although the airline has tens to deny that the project will lead to "wage dumping". Lufthansa says that the project is at a very early stage, and the com pany is now looking for a project manager to examine all options and hold talks with representatives of the Lufthansa workforce. The air line says that it is too early to discuss timetables for the proposal, and the concept is "not in any decision making process at this time". • Meanwhile, Lufthansa has revealed a strong turnaround in its financial fortunes over die first half of the year, raising pre-tax profits threefold to DM397 million ($213 million). The recovery was led by a strong recovery in sales, which rose by nearly 10%. Lufthansa admits that the weak ness of the deutschmark against the US dollar helped the result by around DM 12 5 million, but argues that the majority of the gains came from solid traffic growth and tight control of expenses. Labour costs were virtually unchanged, while staff numbers are down by 1%. Lufthansa Cargo also made a profit of DM33 million, turning around its losses from a year ago. 3 ARIA included on 1998 public auction list AEROFLOT RUSSIAN In ternational Airlines (ARIA) has been included in a list of com panies to be privatised at public auctions in 1998. Sheremetyevo International Airport, Moscow's main international gateway, is also included among the candidates. Maxim Boiko, who heads Russia's committee for state prop erty, says that the list has been sub mitted for approval to the Russian parliament. It includes 3 7 compan ies with share capital worth 30 tril lion roubles ($5 billion). The privatisation list centres on companies in the lucrative gas, oil and communications industries, which are likely to be attractive to investors. It is envisaged that 51% of ARL\ will be put up for sale, while Sheremetyevo is is expected to be divided between a state- owned authority controlling run way and infrastructure, and a pub- lically-owned airport services provider. A similar arrangement has already been used at domestic hub Domodedovo. • P&WC Rus aims for subcontractor network in Russia PRATT & Whitney Canada's new Russian subsidiary, formed after the break-up of the engine joint venture with Klimov, is planning to establish a network of subcontractors to make parts within Russia. Klimov's resistance to such outsourcing was a key rea son behind the break-up of the original venture. P&WC Rus was formed at the end of August, when P&WC finally bought out Klimov's 49% in their joint venture (Flight Inter national, 20-26 August). P&WC marketing and interna tional business development man ager Joseph Torchetti says that the split came as a result of "radically different" opinions over the course of the venture, including the issue of outsourcing. Klimov had hoped that P&WC would install a full production plant at the venture's St Petersburg base, while the Canadian company believed that there was already sufficient production capacity to be used elsewhere in Russia. Alexander Sarkisov, Klimov general designer, has declined to discuss the split, referring to it only as a "divorce". P&WC plays down any acrimony, pointing out that Klimov still retains a fully opera tional PT-6 test cell which may be used by the Canadian manufactur er in future. P&WC has now surveyed the production potential of nine possi ble suppliers in Russia, including the Kazan and Perm plants. "There are at least 43 engine parts which we want manufactured in Russia," says Torchetti. The new company will now work on "a variety of projects, from the PW300, to the FF6 turboprop to new projects for the future", says P&WC. The Russian subsidiary is intended to make Russia part of P& WC's global sourcing strategy as the market in the region opens up, the company explains. The P& WC PW206 turboshaft is already being included on the Kazan Ansat light helicopter. • Samara and Kazan plants join in new Russian engines venture THE CONTINUING integ ration process within the Russian aerospace industry has led to the creation a joint venture around the NK Engines design bureau in Samara and Kazan Engine production plant. The operation, registered as the NK Engines finance-industrial group (FPG), will design and build a range of rocket and aero-engines. The joint venture also includes rocket-engine manufacturer Mo- torostroitel and combustor-spe- cialist Metallist-Samara, the Kuznetsov engine-development operation and other operations in Samara and Kazan. The new NK Engine FPG promises a tenfold increase in pro duction over the next five years. It adds that cash now being generated by major contracts for gas-pump ing equipment and Russia's space agency, will be used to fund the NK-89 liquid gas and NK-93 duct ed-fan programmes. • 20 FLIGHT INTERNATIONAL 3 - 9 September 1997
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