Airlines compete on meals, service and fancy jets

"I defy anyone who gets on board one of our aircraft and say that it's old."

- Richard Creagh,Ukraine International Airlines.

Ihor Korolenko, director of Kyiv-based travel agency Zagorye, said the times are long gone when customers tended to look down on Ukrainian airlines.

When it comes to selecting an airline, what matters now are price, service and convenient connections.

He calls it an "inferiority complex" when some customers still gripe about having to fly a local airline - a complaint that was much more common several years ago.

Korolenko adds that when it comes to service, local and foreign airlines are now on par with their European peers.

However, Korolenko believes that flight attendants on some European airlines flying to Ukraine often act as if they're "being punished" when serving this particular destination, sometimes being openly rude to Ukrainian passengers.

Moreover, he says that in some cases Ukrainian carriers may even be a better choice, since, unlike some European carriers, they still serve meals during the flights. In his opinion, few things could be more discouraging for passengers than having to pay 5 euros for a sandwich or a euro-and-a-half for a cup of coffee.

Irishman Richard Creagh, vice president of Ukraine International Airlines, thinks that while such a move represents just a small fraction of airlines' overall attempts to cut costs, he believes it has had a very negative psychological impact.

"I believe that the customer should be the last place for your reduction of costs," Creagh said, adding that UIA has no plans to introduce such measures on its flights.

Antonio Cuoco, German-based Lufthansa's director general for Ukraine, is even more scathing when it comes to the subject of free meals and drinks on board for economy-class passengers.

"We are not a low-cost carrier opening our hands and asking 2 euros for a cup of Coca-Cola."

Lufthansa currently operates six daily flights from the Kyiv, Donetsk and Dnipropetrovsk in Ukraine to Frankfurt, Munich and Dusseldorf in Germany.

Unlike Korolenko, Creagh says that he still often notices that the country an airline is based in will influence a customers' choice.

"Increasingly, we have to change people's minds. They have to get on board and they have to have a good experience."

Creagh is positive that as his airline becomes more well-known, it will increasingly take more of the foreign flight market share.

At the same time, Creagh prefers to avoid the subject of competing with big international carriers, stressing the importance of flights in cooperation with its partners, such as Austrian, a UIA shareholder, KLM or Iberia, when both airlines sell their share of seats on the flight.

Cuoco of Lufthansa says that Ukraine's airline market is growing so fast that it is not appropriate to talk about competition - there is enough business for everyone.

Both Cuoco and Creagh are adamant, however, about the negative impact of European carriers that are subsidized by their national governments, which in turn allows the companies to sell tickets at dumping prices.

"If you take the airline business as a whole, it is a badly managed business. Where else is almost everyone losing money?" Creagh exclaimed.

Creagh foresees tougher competition on UIA's Rome route, given that Italy's Alitalia, which he says is a government-subsidized airline, is entering the market this winter.

At the moment, UIA is expanding its operations to the Middle East with its newly launched Kuwait and Dubai routes. It also plans to re-launch its Milan destination in May. UIA operates 200 weekly scheduled flights to destinations in Europe, the Middle East and Ukraine. The airline's average load rate in 2005 was nearly 60 percent on international flights and 50 percent on local ones.

Jet matters

"I defy anyone who gets on board one of our aircraft to say that it's old," Creagh said, adding that after disposing of their older Boeing 737-200 models, UIA can now boast a relatively young fleet of 12 Boeing 737s, which are, on average, less than 10 years old.

UIA bought its first spanking new jet in 1999, while most of its planes have already been used, mainly by major carriers from European countries. Whatever UIA discards goes to the Southeast Asian and African markets.

Creagh says it might cost up to $100,000 more a month to lease a brand new aircraft than a similar used one. He says that considering all of the market conditions, now is a better time to lease aircraft than to buy them. Usually UIA leases a used aircraft for no more than five years.

Another Ukrainian airline, Aerosvit, plans to lease three used Boeing jets and two Ukrainian-made An-148 planes if they pass EU certification. The company currently has 12 Boeing jets serving 55 routes to 27 countries, in addition to 11 domestic routes with an average seat-occupancy factor of nearly 74 percent in 2005.

In comparison, this year Lufthansa plans to buy 15 of the latest A-380 jets, which have a seating capacity of 800 people. On average, Luthansa's jets are no more than six years old, since it's the company's policy to buy new planes directly from the manufacturer.

Vlad Lavrov, Kyiv Post Staff Writer
Feb 08 2006