Aeroflot Russian Airlines has reported increased revenues and net profits, but risks a significant drop in income if an important revenue source is closed off by European negotiators.

Total revenues for last year came to $1.6 billion, up 11% from $1.4 billion in 2000, with a net profit of $21.9 million. However, Aeroflot benefits greatly from "airline revenue agreements".

These deals, which were signed in the 1970s and 1980s between the Soviet Union and the then state-owned European flag carriers, compel foreign carriers to pay Aeroflot every time they operate a flight through Russian airspace which does not have a competing Aeroflot equivalent.

Last year this arrangement netted Aeroflot $273 million ($272 million in 2000), which accounts for about 22% of the carrier's operating revenues.

Western governments and airlines agreed to this due to the cost savings offered by the trans-Siberian routes. Although Western carriers are reluctant to make an issue of the matter, the European Union (EU) transport commissioner Loyola de Palacio has begun negotiating in an effort to overturn the arrangement.

Aeroflot's operating profits came to $10.7 million before tax and a net tax rebate of $11 million brought after-tax profits to $21.9 million. Last year, these figures were $39 million, with a tax charge of $28 million, leaving the after-tax position at $11 million.

Profits are down because of restructuring, but the airline says the restructuring plan will enable it to cut costs in the long term.

Passenger numbers came to 5.8 million, a 14% increase on 2000's 5.1 million.

Source: Flight International