Russia’s AiRUnion joins Star Alliance

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10:44 19.11.2007
text: Gazeta.kz
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Russia’s airline alliance AiRUnion is joining Star Alliance, the world’s largest airline network. An agreement to begin the procedure will be signed in Vienna today. Lufthansa and Austrian Airlines will act as AiRUnion’s curators and partners. So far, Aeroflot has been the only Russian company to join an international alliance, SkyTeam. For AiRUnion, membership in Star Alliance will provide access to business passengers and will sharply expand its territory of operation, reports Analytical department of RIA RosBusinessConsulting.

AiRUnion was created in 2005. In 2006, its companies carried over 3.3 million passengers, making AiRUnion the third largest passenger carrier in Russia. The alliance includes KrasAir, Domodedovo Airlines, Omskavia, Samara and Sibaviatrans. The main owners are brothers Boris and Alexander Abramovich.

Star Alliance unites 21 airline carriers, including United Airlines and Lufthansa. Its planes make more than 15,000 flights to 800 airports a day. AiRUnion hopes for an inflow of new passengers as a result of cooperation with Star Alliance.

A three-party agreement on AiRUnion’s admission into Star Alliance will be signed with Lufthansa and Austrian Airlines, which will act as curators for the Russian alliance, Boris Abramovich, Chairman of AiRUnion’s Supervisory Council, told reporters. “AiRUnion will have to meet Star Union’s standards for fleet, onboard services and other parameters,” Abramovich said. It could take up to a year and a half to bring AiRUnion in line with Star Alliance’s standards. “But there are no any specific requirements,” Abramovich stressed. He hopes that membership in the alliance would also help increase load factor on domestic flights as there will be more passengers on connecting flights. In addition, AiRUnion will take over some of Star Union’s passengers flying to Russia.

As an example to demonstrate the positive effects gained from alliances, Boris Abramovich pointed to Hungary’s Malev, which is owned by AirBridge Zrt, a subsidiary of AiRUnion. Last spring, the Hungarian carrier joined Oneworld alliance, and its passenger turnover climbed by 6 percent in the following six months, up from 1-2 percent a year before. Boris Abramovich said Malev would remain with Oneworld.

Foreign partners are preparing to work with AiRUnion. This summer, Lufthansa announced plans to move from Sheremetyevo to Domodedovo. The German carrier needs a Russian partner with a large network of domestic routes. Lufthansa also signed a strategic partnership memorandum with AiRUnion to unite their route networks in order to optimize transfer flights in Russia and Germany.

Lufthansa’s desire to expand its presence on the Russian market urged it to find a partner among local carriers, says Oleg Panteleev, chief analyst at Aviaport agency. “Having failed to win favor with Aeroflot, Luftgansa turned to other Russian carriers, and its choice fell on AiRUnion,” he said. This could have a positive effect on both AiRUnion and Lufthansa, believes Boris Rybak, at Infomost consultants. “Of course, Lufthansa could have found another partner, but it has been cooperating with AiRUnion for several years already. Joining the alliance can be seen as a strong move on the part of the Abramovich brothers,” he added.

Rybak hopes that Lufthansa will help AiRUnion improve its financial situation. This summer, the Russian alliance owed a total of RUR 2 billion (approx. $81.6m) for airport services in Domodedovo, to Ilyushin Finance Co. leasing company for fuel and navigation services, and also to insurance companies. AirUnion partly solved its debt problem by issuing RUR 3 billion (approx. $122.4m) in credit-linked notes (CLN) in early October. Star Alliance will increase AiRUnion’s passenger base, boosting its profits.