Belavia faces decline in recovery at crucial moment of modernization | Analysis
Just days before the Ryanair hijacking incident plunged the Belrusian flag carrier Belavia into yet another crisis, it began commissioning its first Boeing 737 Max as part of its efforts to exit the current one.
Belavia agreed in 2018 to lease a batch of the Max 8 and received its first aircraft in April – two years later than expected, following the type’s prolonged downtime. It had started performing its own test flights in mid-May, after another delay as Boeing carried out additional inspections of the plane’s emergency power control systems.
The carrier had chosen to put the plane into service on Warsaw and Kiev routes, popular destinations on its network, but within a week the two capitals were among a growing number of cities closed to Belavia flights in response to the Belarusian government hijacking Ryanair flight – apparently for political purposes – to Minsk on 23 May. He was forced to find alternative sectors, among a reduced number of options, on which to exploit the Max.
Belavia’s situation will be somewhat intimidating for its new boss, Igor Cherginets, who only took over from longtime director Anatoly Gusarov three months ago and overseeing the commissioning of the 737 Max. The carrier had also brought a third Embraer 195-E2 in early May after taking its second in March.
“Due to circumstances beyond the control of the airline, Belavia is forced to cancel dozens of flights during the peak season,” the carrier said. “The situation is complicated by the fact that the carrier has recently started to recover from massive flight cancellations due to the pandemic. “
Belavia’s annual financial results for 2020 show the airline suffered a net loss of br 92.1 million ($ 36.4 million) – a contrast to the previous profit of br 68.2 million – while passenger traffic halved and revenue fell more than 40% to 522 br. million.
The airline suspended scheduled flights to several countries in the first half of 2020 and reduced the frequency on other scheduled routes as transit flows slowed, while charter and humanitarian operations were also severely affected.
Belavia says it has “managed to adapt quickly” and find new markets, including ship crews and seasonal workers, to maintain the transit flow of passengers in Minsk. The carrier claims to have been praised by foreign governments – including those of Sweden, the United States, the United Kingdom, Israel and Russia – for providing flights at a time when transportation options were limited.
It partially restored services to several cities in its network in the second half of the year, and even opened new routes to cities like Vienna and Tashkent, although the resurgence of the pandemic has slowed the airline’s recovery.
Belavia generated BR 360 million in scheduled flight revenue last year, down 45%, and BR 131 million in charter revenue, down 29%.
It decommissioned seven older aircraft last year and introduced four newer models, including two Boeing 737-800s, an Embraer 195-E2 and an Embraer 175. It ended 2020 with a fleet of 30 aircraft, including nine 737-800 and six older 737s. , 13 regional Embraer jets and two Bombardier CRJs.
“Despite the global crisis caused by the pandemic, the airline continued to renew the aircraft fleet under a previously concluded lease contract,” Belavia said in its 2020 financial report.
The modernization with an “expensive new aircraft”, combined with other circumstances, put pressure on the airline’s liquidity ratios, he added, but said aircraft acquisitions and contracts operating leases were a “major investment” in the airline’s future development, and its financial situation “gradually improving”.
Cherginets, speaking as Belavia prepared to launch 737 Max flights in mid-May, said confidently: “Without a doubt, the modernization of the fleet will facilitate the expansion of the route network, the opening of [destinations], and an increase in passenger traffic.
But the repercussions of the Ryanair incident put Belavia’s recovery progress at risk. Several countries in the European Union have banned Belavia flights and it has also had to cancel services to the Russian enclave of Kaliningrad, just 250nm from Minsk but virtually inaccessible with airspace restrictions in place.
Despite the problems, he proceeded to open a new Russian route to Ufa on May 31.
Belavia employed nearly 2,100 people at the start of 2021 and says it has not laid off any staff as a result of the pandemic.
But he admits that with forced flight cancellations and the rerouting of other services, cutting costs and maximizing staff are “unpleasant but logical steps” – though he insists that the “cuts mass “are not contemplated.
Belavia has not yet quantified the damage inflicted, citing the “rapidly evolving situation” and the fact that its priority is to meet the needs of its customers.
The state-owned airline is not the only Belarusian aviation entity disrupted by the stalemate.
With the recommendation of the European Union Aviation Safety Agency that flights avoid Belarusian airspace, the Belaeronavigatsia air navigation service is expected to lose the revenue stream from air traffic control charges.
Eurocontrol lists the unit charge for route services in Belarus in 2021 at € 43.28 ($ 52.75), the total charge for a flight depending on the distance flown and the aircraft’s maximum take-off weight.
The Ryanair incident turned out badly for Belaeronavigatsia, which had officially opened its new air traffic center in Minsk a week earlier on May 15.
Belaeronavigatsia claims that the new center, with its modernized equipment, is the most important project to be carried out by the organization in the past five years, capable of tripling the capacity of Belarusian airspace and “building the potential of transit of the country ”- although between the pandemic and the isolation of the Minsk flight information region, the lack of capacity is unlikely to be a troublesome problem in the short term.