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. Last Updated: 07/27/2016

Sibir Soars Toward Being No. 2 Airline

Regional airline Sibir announced Tuesday that a revamped sales strategy and a growing number of passengers are helping it move closer to its goal of becoming Russia's second largest carrier.

The Novosibirsk-based airline moved up from seventh to fifth place in passenger volumes among Russian airlines for the first half of 1999, according to the Federal Aviation Service. Last year Sibir carried 3 percent of all passengers flying on Russian airlines.

Last year, when total passenger turnover in Russia decreased 11 percent, Sibir managed to increase its turnover by 3 percent. Cargo volumes grew 30 percent, compared with an average decline of 24 percent.

However, even Sibir is unable to beat an aviation market reeling from low consumer demand and increasing costs, Sibir chief financial officer Konstantin Koshman said.

Fuel prices have soared 300 percent since last year, forcing Sibir to spend more than 50 percent of its revenues on fuel, he said. That cost accounted for 32 percent of its revenues in mid-1998.

"We hope that the company will break even this year," he said.

For the first half of 1999 Sibir posted a loss of 10 million rubles ($500,000). The airline took a loss of 27 million rubles last year.

Sibir officials said the airline had in part narrowed its losses by launching a new sales strategy that includes offering direct ticket sales at new international branches in Beijing and Hannover, Germany, and new Russian branches in Sochi, Tomsk and a few other regional cities.

In March the airline stopped selling air tickets to the Main Agency of Civil Aviation, a federal aviation regulator that had accumulated large debts to Sibir.

The carrier then stopped selling tickets to consolidator Transport-Clearing Company in September.

Under the airline's new strategy, it launched a flight to China and increased the frequency of weekly flights to Germany to 11. Next year Sibir plans to fly up to 22 times a week to Germany.

Analysts said Sibir is one of the strongest companies in a sector going through consolidation.

"It is one of the fast growing companies in the sector," said Yevgeny Satskov, transportation analyst with Renaissance Capital.

Russia has some 300 air companies, many of which lease just a couple of planes.

Sibir has cut deals with authorities in a number of Siberian cities, many of which had small air companies, and expanded in the regional market, said Anna Dumnova, transportation analyst with United Financial Group brokerage.

The air carrier earlier this year tried to team up with the debt-laden Vnukovo Airlines, a deal that would have pushed the airline up to the No. 2 spot. Industry insiders said the merger fell apart after Sibir managers asked for a 50 percent stake in the merged company instead of a third as had been agreed.

Vladislav Filyov, Sibir's director general, denied those allegations Thursday. He said no merger is currently being considered by the two airlines.