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. Last Updated: 07/27/2016

Sky's the Limit for Sibir Airline Chief

NOVOSIBIRSK, Western Siberia — Vladislav Filyov, general director of the Sibir airline, is playing a busy host these days.

Last week, Filyov entertained none other than the British ambassador and Rolls-Royce officials at his home base in Novosibirsk. Rolls-Royce dropped by to hawk engines for Sibir's Tu-204 jets. Filyov used the opportunity to press his high-ranking guests for access to a direct route to London.

While the visit was a first for Rolls- Royce, Sibir has of late been entertaining a number of delegations.

"Airbus and Boeing visit us regularly," said Sibir spokesman Igor Volkov.

All this attention is mounting as Sibir, ranked by many analysts as one of Russia's best managed airlines and strongest regional players, moves quickly to overtake rival Pulkovo, which was the No. 2 airline after Aeroflot in passengers carried last year.

Sibir's passenger loads are soaring. Its scheduled routes are spreading out. Its number of chartered flights is comparable to Aeroflot's. It's breaking into tourism. And it's about to complete the gobble up of another big airline, Vnukovo, in a merger that will mark the first deal of its kind in Russia.

Sibir now has 60 aircraft consisting of Il-86s, Tu-154s and Tu-204s, and operates flights to over 50 destinations, with rights to fly to even more. The airline also has plans afoot to float American Depositary Receipts on international capital markets, a move that would make it the third airline to do so after Aeroflot and Tyumenaviatrans.

The Sibir of today is the product of a major turnaround orchestrated by Filyov, his wife, Natalya Filyova, and a young management team that they cobbled together when they took the wheel in late 1990s. Natalya Filyova acts as the airline's chief financial officer.

"A lot of the growth in Sibir has come about because Filyov has taken over other airlines in the west Siberia region in order to give a base for his airline to grow," said independent aviation analyst Paul Duffy.

Sibir was set up in 1992 with aircraft from the Novosibirsk division of the mammoth Soviet-era Aeroflot fleet, whose disintegration gave birth to hundreds of small airlines. But keeping the airline aloft was no simple feat.

"In 1997 the airline was as good as dead. Pilots ruled the company without any notion of the economics of the business," said Volkov. "They would fly to any destination without calculating whether it would bring a profit."

When Filyov, now 38, was appointed general director in 1998 he saw only one way to save the airline — a massive restructuring. He quickly spun off noncore businesses such as sports facilities, kindergartens and airport shops.

"We did not want to have anything extraneous," Filyov said.

Filyov also brought on board 3 1/2 years ago Peter Smith of British-based Phoenix Project Management Ltd. to, as the Sibir chief said, "help get the commercial side to correspond to common sense."

And it all began with a mop and detergent. "I told him [Filyov] that it was not about Boeings or Airbuses but about dirty toilets," Smith recalled. "The next morning … he went with the first shift of cleaners, did not like what he saw, sacked them all, picked up the mop and cleaned it himself. This set the company alight."

The cleanup extended to every aspect of Sibir's operations.

Smith took reporters to Sibir's cavernous — and tidy — hangar at Novosibirsk's Tolmachyovo Airport. "When they started it was filthy [and] engines were piled up everywhere," he said. "Now they've cleared it."

In fact, 30 percent of the maintenance team's workload is now servicing the planes of other airlines, including several from China.

"Filyov has been able to bring about leadership in his airline by showing that he is prepared to do whatever needs to be done whether it's cleaning the aircraft or welcoming a passenger," said Duffy.

"There's a military air about the management style," Smith said.

Filyov served as an officer in the army's Strategic Missile Forces from 1985 to 1993. He later polished his business skills as a manager in a number of companies including power giant Unified Energy Systems.

Colleagues describe Filyov's lifestyle as hectic and say they have to keep on their toes to keep up with him.

"The key to success in any company lies in its management," said Yulia Zhdanova, transportation analyst with United Financial Group. "Filyov has a young and energetic team that is using opportunities for growth."

A good idea can earn an employee a $500 bonus. And they are teeming with ideas. One such idea recently raised by the management was direct flights to London that, if allowed, would move Sibir onto turf currently controlled by Aeroflot and Transaero.

Sibir already flies to three German cities, as well as to China, Israel, South Korea and United Arab Emirates. It has charter flights to Turkey, Spain, Cyprus, Egypt and Thailand.

The airline is looking to boost its passenger numbers to 2.1 million this year, second only to Aeroflot's targeted 5.9 million passengers and roughly one-tenth of what Russia's 300 domestic airlines carried last year.

But with high operating results, it will be years before the airline nets a profit, Filyov said, declining to give figures.

Sibir has taken on Vnukovo's debt of about $20 million and borrowed several million dollars from Sberbank to finance the purchase of two Tu-204 jets. The loans, which are backed by a 51 percent stake in Sibir, come due in five years.

"I believe we have many areas in which to spend money, and since our shareholders agreed to the merger [with Vnukovo] one has to understand that we have to pay huge debts and can hardly expect a profit in the near future," Filyov said.

Sibir already controls Vnukovo's fleet, routes and cash flows.

The merger of Sibir and Vnukovo into a new airline could have created serious competition on the domestic market for Aeroflot. But in late March, Sibir and Aeroflot announced a deal under which they would coordinate their routes.

Filyov said the alliance was proposed by Sergei Frank, transport minister and head of Aeroflot's board. The government has the biggest stakes in both airlines — 51 percent in Aeroflot and a blocking stake in Sibir.

"Aeroflot and Sibir are looking at a mutual use of routes," said Mikhail Koshman, Sibir's head of public relations. "We are in a situation in which one airline has a plane standing idle because it does not have a license to fly a certain route while the other has a license but does not have an aircraft handy."

The alliance with Aeroflot "will help the airlines avoid direct competition," said UFG's Zhdanova, adding, "They will divide up their routes and will use their aircraft more effectively."

Looking back, Filyov said, Sibir has come a long way — but his job is far from over.

"The quick growth of the airline resulted from the fact that we were ready to listen to what specialists from the West were saying," he said. "There is still a lot we can learn from them."