Bloomberg News

UTair May Join Star Alliance to Expand Beyond Russian Market

August 30, 2005

UTair Aviation (UTAR), a Russian airline, is considering joining Star Alliance led by UAL Corp.'s United Airlines, which would give the company access to the network of the world's largest airline grouping.

``We are holding consultations now about whether we'll be able to join Star Alliance,'' Igor Blinov, a UTair spokesman, said yesterday in a telephone interview from Surgut, a city in western Siberia. ``Working in one team with global leaders of air transportation, common standards and a shared destination network are undoubtedly positive for the company.''

Membership would give Star Alliance's 16 carriers access to UTair's 90 destinations and 150 daily flights in Russia and beyond and enable UTair customers to use the more than 15,000 connecting flights a day operated by other airlines in the group to 840 destinations in 150 countries. Airline alliances help carriers increase sales and cut costs by feeding passengers onto each others' networks and permitting joint supply purchases.

Star Alliance, which also includes Deutsche Lufthansa AG (LHA), ACE Aviation Holdings Inc. (ACE/H)'s Air Canada and Singapore Airlines Ltd. (SIA), is trying to persuade airlines in China, India and Russia to join. TAP-Transportes Aereos Portugueses SA became Star Alliance's 16th member in March, South African Airways is set to join later this year and Swiss International Air Lines Ltd. will become a member next year.

OAO Aeroflot, Russia's largest airline, signed an accord in 2004 to begin exclusive talks for membership with SkyTeam, which includes Delta Air Lines Inc., Northwest Airlines Corp. and Air France-KLM Group, rather than with Star Alliance. The Moscow Times last month said five regional carriers, including KrasAir, are forming a group to challenge state-controlled Aeroflot.

Star Alliance is still investigating possibilities in Russia, Christian Klick, a Frankfurt-based spokesman for the group, said today. He declined to name any carriers under consideration.

Meeting Requirements

Joining Star Alliance may take UTair another year or two as the Russian carrier wants to meet membership requirements before requesting talks with the group, Blinov said.

UTair last year handled 1.47 million passengers and it aims to carry 1.91 million travelers this year, with a fleet of 109 aircraft. Net income rose 29 percent in 2004 to 107 million rubles ($3.8 million) on a 30 percent increase in sales to 8.61 billion rubles.

Growth was spurred by ``high volume of oil and gas production in the area with an undeveloped network of railways and highways,'' according to UTair's Web site. The company began as the civil aviation department of Tyumen, a region in Russia, under the Soviet Union, becoming the Tyumenaviatrans publicly traded company in 1991 and receiving its current name in 2002.

UTair is now one of Russia's five biggest carriers and the largest operator of Russian-made helicopters in the world, according to its Web site.

Alliances' Size

Star Alliance says it has a 27 percent share of the world's passenger traffic. SkyTeam holds 22 percent, and the Oneworld alliance, led by AMR Corp.'s American Airlines and British Airways Plc, has 18 percent of global traffic, according to Star Alliance figures.

Lufthansa, Europe's second-biggest airline, receives a ``triple-digit'' million-euro sales gain each year from membership in the alliance, the Cologne, Germany-based carrier's Chief Executive Wolfgang Mayrhuber said in June.

To contact the reporters on this story: Susanna Ray in Frankfurt at sray7@bloomberg.net; Maria Ermakova in Moscow at mermakova@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.


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