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. Last Updated: 07/27/2016

Aeroflot Finds Pot o' Gold in Ireland

For MTOne of SkyNet's two 737-400s. Aeroflot sees SkyNet's Moscow-Amsterdam-Shannon route as a springboard for other cities.
SHANNON, Ireland -- Aeroflot has found its lucky charm. Just nine months after helping a small, Shannon-based airline get off the ground, Aeroflot is seeing its passenger traffic swell and branching out to new destinations in Europe -- all without spending a kopek.

The airline is SkyNet, which was founded by 20 Irish and U.S. investors in June and flies two leased Boeing 737-400 jets with white and blue markings.

Business has been so good that SkyNet is expecting to break even already next month, when it acquires a third 737.

"By sometime this summer we should be profitable," said SkyNet CEO Paul Williamson, who with the other investors has spent more than $5 million on the airline.

Under a code-sharing agreement with Aeroflot, SkyNet is flying six times per week from Moscow to Shannon with a stopover in Amsterdam. A round-trip economy class ticket costs $400.

SkyNet on St. Patrick's Day on Monday is inaugurating a second route, from Moscow to Shannon via Dublin. The flight will be offered twice per week.

Later this year, the airline hopes to expand to Brussels, Dusseldorf and Geneva -- and maybe to the United States as well.

Aeroflot, which does not have any equity in SkyNet, sells all of the tickets and passes over to SkyNet its share of the proceeds -- an arrangement that Williamson said helps cut costs while assuring SkyNet of a steady flow of passengers.

"I like the Aeroflot connection. I like the professionalism of all the guys on the Aeroflot side," Williamson said. "It enables us to do more than we can do with a small outfit because they have people in their departments who are very useful to us."

SkyNet reckons that about 20,000 passengers fly between Russia and Ireland each year.

For Aeroflot, the arrangement appears to be a win-win situation. Russia's flagship airline gets to keep up its presence in Europe, divert its own aircraft to other routes and still make a healthy profit.

"Nine months later we can say this is a real airline that knows how to fly, its financial situation is getting better and we are positive about its opportunities in the U.K., Europe and the United States," Aeroflot CFO Alexander Zurabov said at a recent meeting with SkyNet officials at the Shannon airport.

He said the number of passengers on the Moscow-Amsterdam segment have jumped 48 percent since SkyNet took over the route in June. Aeroflot's revenue on the route has increased by $1.3 million, he said, declining to disclose the profit.

Europe accounts for 40 percent of Aeroflot's profit and 36 percent of its passengers.

The 737s that Aeroflot previously flew to Amsterdam are being used for flights to Norilsk, Warsaw and Hamburg.

What Aeroflot sees as its main advantage with SkyNet, however, is the opportunity to gain greater access to Europe under the EU's open-skies policy.

"This [Moscow-Amsterdam-Shannon route] is a springboard for other destinations," Zurabov said.

"Together with SkyNet, Aeroflot is studying the mechanism of the open-skies policy in Europe," said Boris Krivchenko, Aeroflot's commercial manager in Ireland and a liaison with SkyNet.

The open-skies policy allows EU airlines to fly to any destination they wish within the European Union.

With this in mind, Aeroflot started shopping around for a European airline more than two years ago. It held failed negotiations in 2001 with bankrupt Virgin Express Ireland, Richard Branson's Shannon-based airline.

"Our love affair with Virgin Express was very short," Zurabov said.

Aeroflot backed out over concerns about acquiring the low-cost carrier's debt load.

SkyNet and Aeroflot officials declined to give specific figures for passenger traffic and revenues.

SkyNet technical director Noel Madigan said it was unusual for a fledgling airline to break even in less than a year.

"You normally break even with a fifth aircraft," said Madigan, who came from Aer Lingus as did most of SkyNet's 82-strong staff.

Perhaps no one is more pleased about SkyNet than Martin Moroney, the director of the Shannon airport.

"Aeroflot is now becoming for us again a very, very good partner and giving us a new opportunity of growing business at Shannon for the benefit of the airport, the region, the Irish government and SkyNet," Moroney said.

Aeroflot flew up to 17 Il-86 jumbo jets per day through Shannon and on to Havana and cities in North and South America in the 1980s and early 1990s. It dropped the stopover after obtaining jets certified to make nonstop trans-Atlantic flights from Moscow.

Aeroflot officials said SkyNet provides a chance to resurrect Shannon as a trans-Atlantic hub.

"The U.S. market is interesting for us since it would allow us to expand to destinations where there is insufficient traffic from Moscow," Zurabov said.

Aeroflot flies to New York, Washington, Los Angeles, Seattle and San Francisco but has dropped flights to Miami and Chicago. It carries less than half of all passengers between Russia and the United States. An intergovernmental aviation agreement signed between Ireland and Russia in 1993 allows Russian airlines to fly passengers from Ireland to North America.

Boris Rybak, head of Infomost, which advises airlines such as Volga-Dnepr and UTAir, said the SkyNet partnership is a sign that Aeroflot is thinking more competitively.

"This is a very interesting project that differs greatly from what Aeroflot used to do," Rybak said.