Aeroflot's innovative mini-hub at Shannon has yet to achieve glory and looks set for a revamp. Mark Odell reports.

Sam Quayle's jaw is in danger of joining the undercarriage of the US charter flight he boarded just over five hours ago in New York, as the aircraft touches down on the west coast of Ireland. 'Either the Russians have invaded since I last watched CNN or the pilot's got lost and flown us to Moscow,' he speculates, as he struggles to pick his chin off the floor, still flabbergasted by the identity of the aircraft lined up at the terminal building. Any first-time visitor arriving at Shannon airport on a Friday afternoon may be equally puzzled by the preponderance of Aeroflot liveried aircraft in this quiet corner of Europe.

After Aer Lingus, the Russian airline is the second biggest operator at Shannon with 42 flights a week this summer, explains Yuri Nikolaevich Grigoriev, station manager for Aeroflot Russian International Airlines (Aria).

What the somewhat perplexed Mr Quayle has seen in operation is Aria's transatlantic mini-hub, which feeds passengers from three former Aeroflot directorates - St Petersburg-based Pulkovo, Mineralnye Vody-based Kavminvodavia and Minsk-based Belavia - and from the Slovak Republic's capital Bratislava into Aria's four transatlantic flights to Chicago, Miami, New York and Washington. The mini-hub operates westbound on Fridays and eastbound on Saturdays, but Aeroflot also operates to Moscow, the US and Havana, continuing to Latin America, throughout the week.

To those familiar with the historic links between the now fragmented Aeroflot and Shannon, the presence of the mini-hub may not seem as remarkable. From 1980 until the dissolution of the Soviet Union, the flag carrier had its own fuel farm at the airport to save its precious hard currency earnings, and used Shannon as the refuelling stop on its transatlantic sectors. But the mini-hub only started operating in May 1995 and is a rare example of how commercial realities have for once won over the seemingly irresistible and damaging trend of fragmentation in the CIS air transport sector.

It is ironic that commercial necessities at Aria, in the form of fleet modernisation, are now threatening the further existence of the hub, and its future may rest in a collaboration between the three feeder carriers and Irish flag carrier Aer Lingus.

A lot of the impetus for creating the mini-hub came from airport operator Aer Rianta. Shannon airport is basically a hangover from the days when technology limitations dictated the need for a refuelling stop on all US-Europe services. Since those days are long gone, the state-owned airport operator is always looking for innovative ways of boosting its scheduled links. Apart from daily flights to Manchester and London, the only other European scheduled services out of Shannon are to the airports linked to Aria's mini-hub.

Eugene Pratt, Aer Rianta Shannon's traffic development manager in charge of the hub, put a reasoned commercial argument to the three carriers feeding the mini-hub - Belavia, Kavminvodavia and Pulkovo - highlighting the competitive threat of both western and eastern European carriers, which were syphoning off longhaul passengers over their home bases on to the US. Moreover, the use of Shannon as a hub would allow the feeder carriers to operate at least one of their aircraft - either a Tu-154 or Tu-134 - to the limits of western Europe. 'We told them: "your choice is either to let the likes of Lufthansa and SAS take your traffic or fly to the furthest point in Europe that you can and retain some of the revenue you would otherwise have lost",' explains Pratt.

On Aria's side, the carrier already had fifth freedom rights from Shannon to Chicago, Miami and Washington and was granted so-called wayport rights for the Shannon-New York operation, allowing the carrier to transfer connecting passengers between its New York service and the three feeder carriers.

Aria has had an Il-62 flying charters from Shannon since 1989 and the wayport rights meant the carrier could use that aircraft to fly a scheduled stand-alone sector between Shannon and New York, thereby improving the use of the aircraft, explains Grigoriev. As Aria already operates a nonstop B767 service between Moscow and New York, the carrier has no interest in feeding its own traffic through Shannon.

Similarly, the nonstop B767 service from Moscow to Chicago means that Aria has no interest in promoting the Chicago mini-hub connection. Instead, the Il-62 that operates the Shannon-Chicago sector arrives in Ireland via Bratislava under one flight number (SU147) and operates the transatlantic segment under another (SU327). Aria's only services from Moscow to Miami and Washington are through Shannon using Il-62s, making them a natural part of the mini-hub.

Feeding Aria's mini-hub at Shannon instead of flying into Moscow/Sheremetyevo has its advantages: connection times are no longer than 2.5 hours and passengers can wait in the comfort of a new departure area, rather than contend with a more difficult transfer at Sheremetyevo. Indeed, passengers from Mineralnye Vody would have to travel right across Moscow to Sheremetyevo as their services to the Russian capital arrive at Vnukovo airport - some 60km away.

The mini-hub sounds fine in theory, but the commercial performance is not impressive. Pratt says it was responsible for 26,500 passenger movements in its first year, while in pure transit passenger terms Grigoriev estimates that some 11,000 passed through the hub in both directions between May and December 1995. The solution would be to attract more carriers from the CIS to use the hub, says Pratt. Air Moldova had filed for authority to fly to Shannon to join the hub but did not start operations for undisclosed reasons. Pratt says the Russian enclave of Kaliningrad 'has expressed interest' in operating a joint venture with Kavminvodavia but he has heard nothing more.

At least two peripheral factors are conspiring against attracting further carriers to the hub. Fragmentation of the aviation sector within Russia has produced hundreds of operators, many of them nursing a strong desire to launch their own international services. If they are pulled back into the 'old Aeroflot fold they may feel they will lose that opportunity,' suggests one Russian analyst.

Secondly, there is the emotive issue of national pride and identity. Having freed themselves from the central control of Moscow, most of the newly independent states are loath to be seen turning back the clock in such a high-profile manner as feeding Aeroflot. The one exception here is the Belorussian flag carrier Belavia: Minsk is committed to retaining strong economic and military ties with Moscow.

Air Ukraine is a good example of a carrier that could provide the extra feed to make the Shannon hub work. The carrier currently uses Shannon for technical stops for its Il-62s, which serve New York three times a week and Chicago and Toronto once weekly. But Valeri Sergueev, the carrier's station manager, remains circumspect about joining the hubbing operation, pointing out that the carrier enjoys load factors of almost 100 per cent on its Chicago service: 'At the moment we consider it is better to operate our own aircraft,' he says, 'but we are still keeping the option in mind to use the hub programme.' The other problem is that Air Ukraine does not possess the traffic rights to use the hub, although Sergueev says the carrier has applied for them, suggesting that if the rights are forthcoming 'Aeroflot could always use our aircraft as a backup for New York.'

Ultimately, these issues may all be irrelevant as far as Aria is concerned. The carrier is currently looking to modernise its fleet further - most probably by adding to its six A310s and two B767s - and a decision could come as early as October. Indeed, one source close to the carrier says it is considering phasing out its 27 Il-62s as they come up for heavy maintenance checks. The addition of long range, new technology aircraft will remove the need for a stopover at Shannon. Grigoriev says Aria will replace its Il-62 service to Washington with an A310 in the winter schedule, but says he is still trying to save the 'cooperation' at Shannon, which he says is 'successful.' Indeed, he is adamant that in the summer 1997 schedule, Aria will station either a B767 or an A310 at Shannon, but other airline sources question the commercial viability of this.

Indeed, Aria has already downgraded its hub operations this summer. When the mini-hub started last May, the carrier was offering two weekly New York connections, but it dropped the Wednesday flight in the last winter schedule and failed to reinstate it this year.

The other main hope for the three feeder carriers, and any other emerging CIS airlines that Pratt may be able to persuade to join the hub, lies in the Irish national carrier Aer Lingus. 'Should the Aeroflot service disappear, I'm sure Aer Lingus would pick up the slack,' he says. This would certainly justify Belavia's decision to feed both Aeroflot and Aer Lingus at Shannon. Indeed, the Belorussian carrier has cooperated with Aer Lingus since 1991 at Shannon and had to resist pressure from Moscow to force it to feed Aria exclusively when the mini-hub started last year, according to Belavia's station manager Sergei Pavlovich.

One unquantifiable drawback facing the three CIS feeder carriers at Shannon, should Aria pull out, is that feeding Aer Lingus will result in higher through fares to the US, and in turn this could suppress demand. On the positive side, Pratt may find the task of persuading other emerging CIS carriers to feed into a 'neutral' carrier like Aer Lingus slightly easier than persuading them to cooperate with the former flag carrier of their imperial masters.

Source: Airline Business