Lufthansa Ready for a Smoother Ride in 2009

MTRonald Schulz, Lufthansa's regional director for Russian and CIS operations.
After moving to a new airport, seeing a key regional partner collapse and posting record growth for Russia in 2008, Lufthansa says it now wants to let the dust settle before making any major changes in the region.

Lufthansa, the largest foreign carrier in Russia, still expects to see passenger growth here in 2009, but its search for a partner will have to wait until there is more stability among domestic carriers, said Ronald Schulz, the company's regional director for Russia and the CIS.

"Next year we won't have double digit growth of the previous years, but we will be growing in market share," he said. Lufthansa had its best year since moving to Moscow in 1965, Schulz said, and it was also the company's best year globally — despite a fourth quarter fall in demand across the industry.

Lufthansa is the largest carrier in the 24-member Star Alliance, which was looking for a Russian member when the country's aviation industry was thrown into chaos this summer by soaring jet fuel costs that left smaller and regional carriers heavily in debt.

AiRUnion, a Russian alliance that signed a strategic partnership deal with Lufthansa in July 2007, was ultimately bailed out by a state corporation and its assets will be included in a still unformed airline, Rosavia, with other government airline holdings.

"We are even more careful now. At the moment, there is no discussion with Russian companies to join Star Alliance," he added. "Nobody even knows what Russian airlines will still be around in a year."

Vitaly Vantsev, Rosavia's head, has already expressed interest in joining, but the airline will be flying out of crosstown Vnukovo Airport. And with Aeroflot looking to acquire a stake in S7, currently Russia's second-largest carrier, Lufthansa says the alliance would now rather wait.

Schulz said no talks were being held with Rosavia.

The airline, which does not yet have an airline operation certificate, is being created by the Moscow city government and state-run Russian Technologies. Mayor Yury Luzhkov said in November that Rosavia was intended as a counterweight to Aeroflot, the country's largest carrier.

Earlier this month, Lufthansa signed bilateral agreements with Transaero and UTAir permitting the airlines to sell each other's tickets as a convenience for passengers, and it has also prolonged similar agreements with Aeroflot and S7.

S7 and Transaero operate from Domodedovo. UTAir mainly flies from Vnukovo, while Aeroflot is based at Sheremetyevo and is part of the rival alliance Sky Team.

The decision to move Lufthansa from Sheremetyevo to Domodedovo this spring was motivated in part to be operating out of the same airport as other Star Alliance members, including BMI and Austrian Airlines, Schulz said.

"Our relations with Sheremetyevo were improving steadily over the past few years, but most of Star Alliance partners are at Domodedovo," he said. "It's a European airport, and customer satisfaction is a big factor."

Lufthansa operates 73 weekly flights to Domodedovo, and also flies to St. Petersburg, Samara, Nizhny Novgorod, Kazan, Yekaterinburg, Rostov-on-Don, Perm, and Ufa. The company is also allowed to fly to Tyumen and Irkutsk under an agreement between Russia and Germany.

Schulz said there were no plans to launch new Russian destinations next year and that the company usually changes planes instead of frequency to accommodate growing demand. "Rather than flying extra frequencies to have extra seats, we switch from a Boeing 737 to a [larger] Airbus 321, adjusting capacity to the needs of the market."

Besides the 170 aircraft Lufthansa is already planning to add over the next six years, Sukhoi's new Superjet 100 may find a spot in the company's fleet, Schulz said. "We would never rule out a new aircraft," he said.

"It's been tested, and it's an economical craft ordered by other airlines."

He said a diverse fleet and the company's ability to hedge 70 percent of fuel put Lufthansa in a good position during the crisis.

Schulz first came to work for Lufthansa in Russia in August 1998 and was appointed regional director this August, he said. Russia is now one of three strategic markets for Lufthansa, along with China and India.

"It's always a challenge to work here, but it's not impossible," he said.