Insulated from Competition, Belavia Profits and Modernizes
Whilst 2014 was a bad year for the Belarusian economy on the whole, it brought in plenty of profit for Belavia, Belarusian Airlines and Minsk National Airport.
Without any competition from low-cost airlines, Belavia has been able to safely modernise its fleet of planes and not lose its grip on the market. Whereas in the past the National Airport looked like a trip back to the USSR, nowadays travelling from Minsk is much more comfortable.
Belavia is just one example of this shift in the industry, and it is making more money and becoming increasingly modern. For instance, passengers will have no trouble checking in using a mobile device and they even offer free meals and beverages, which is rare for short-haul flights these days.
The recent growth in Belavia's profits may be unsustainable in the long-run, however, as passenger demand declines due to the unfolding economic crisis. Belarus’s only national airline will also continue losing its staff to higher-paying Russian airlines.
Even if Belavia struggles, Belarusians can simply book a flight from Vilnius airport, which is a short train ride away from Minsk and is well-connected to the rest of Europe with an abundance of low-cost airlines.
Rising Demand and Weak Competition Bolster Profits
The plunge in oil prices has bolstered airline industry profits across the globe. The story of Belavia’s rise is more complicated, however. The success of Belarus’s national airline was driven not so much by the falling costs of fuel, but by the rise in domestic demand for travel and discriminatory laws.
In the past, few could afford an international flight from Minsk due to incomes that were, relative to the price of tickets, too meagre to afford such luxuries. But today a growing number of Belarusians are travelling abroad for holiday and business. Many choose to fly with Belavia.
The state-owned company has also benefited from protectionist economic policies. The absence of competition from low-cost European companies such as Ryanair or Wizzair allows Belavia to modernise in a safe and secure environment. According to aviation expert Aliaksiej Marchuk, if Ryanair and Wizzair want to fly from Minsk they need to agree to a whole series of burdensome regulations with the National Airport and Belavia.
The most important aspect of this being the fact that Ryanair and Wizzair would have to be serviced on the ground by Belarusian Airlines. This means that Belavia engineers will provide all technical support to low-cost airplanes. Workers from Ryanair or Wizzair will have no right to.
Given the obsoleteness of Belarus’s aviation carriers and infrastructure, modernisation is one of the key first step towards improving the airline’s image. Modernisation has dramatically transformed the appearance of Minsk National Airport. Prior to the 2014 renovations, the majority of comments on Foursquare, a discovery service mobile application, had described the airport as being in a shameful state. Dark and deserted, the airport building lacked escalators, cafes, and resting places. Following the recent modernisation, funded by a loan from China, the airport has obtained a broad range of conveniences, including a gym for customers.
The airport’s external infrastructure is also being improved. Over the next three years, a new runway will be built at a cost of at least $300 million, Aliaksiej Marchuk told Belarus Digest.
This modernisation push is being accompanied by an increase in clientele numbers. Over a 10-year period passenger traffic via Minsk National Airport has increased fivefold. In 2014 2.6 million people visited the airport.
|Data: Airports Council International, Minsk Airport|
Improving Belavia’s Image to Woo Consumers
Belavia had a number of notable achievements in 2014. The airline transported nearly 2 million passengers, a 22.3% increase from the previous year. Its cargo loads grew 9.6% from the previous year.
The company earned $15 million in 2014, making it one of the highest earning Belarusian state-owned companies at present. At the same time, the airline has invested into renewing its ageing fleet. The company acquired two new Embrayer-195 planes and three used Boeing 737-300 planes. In January 2015, Belavia bought a Boeing 737-800; four more Boeings are slated to arrive by 2016. The new aircraft are set to replace Belavia’s older TU-154Ms, thus bringing an end to Belavia’s reliance on aircraft produced in Russia.
Despite the respectable age of Belavia’s current aircraft, the airline has acquired an image as a safe transportation provider. Belavia’s only major accident happened in 2008 in Armenia when passengers and staff were safely evacuated from a plane that had overturned and caught fire during takeoff.
The company’s image continues to improve. In 2014 Belavia finally launched its own online reservation system. Belavia’s customers can now check in using mobile phones. What is more, bucking the current trends of Europe’s low-budget airlines, Belavia’s flights include a free beverage and meal service.
Due to these improvements, Belavia can now compete with low-cost companies that fly out of Vilnius. For example, a round-trip flight from Minsk to Warsaw now costs €99, cheaper than a direct train. One can also buy a round trip flight from Minsk to London for a mere €244.
With some help from Boeing specialists, Belavia has engaged in a rebranding exercise. During the Christmas holidays, Belavia’s stewards were dressed up as Santa Claus and Snow Maiden (Snegurochka), another traditional holiday figure. To improve its image with younger customers, Belavia went as far as hosting a concert by Belarusian rock group J-Mors on a flight to Amsterdam.
Open Skies Have Limits
How much can Belavia grow? Given the deteriorating state of Belarus’s economy, growth prospects are looking increasingly dim. According to various estimates, Belarus’s economy will be in crisis for at least three years. This means that fewer Belarusians will be able to afford holidays in Turkey, Egypt or Bulgaria, which are currently the top destinations for Belarusian charter flights.
At the same time, Belavia will remain unable to offer long-distance flights. The airline currently lacks large aircraft, and the domestic demand for long-distance flights remains insufficient to warrant the airline’s expansion in this direction. Belarusians flying to Beijing or New York will continue to rely on foreign airlines in the near future.
Marchuk told Belarus Digest that even if Belavia were to acquire larger aircraft, the appropriate infrastructure is lacking. The National Airport remains the only airport in Belarus where wide-body aircraft can safely land. If there is bad weather, large airplanes have to be redirected to neighbouring countries.
For many Belarusians with Schengen visas, booking a low-cost flight from Vilnius Airport, which is accessible from Minsk by train and is often called the second Minsk airport due to its proximity, may remain a cheaper travelling alternative.
Competition from Russian airlines will also remain a threat for Belavia. In 2012, Aeroflot tried to buy Belavia, and sought to prohibit it from flying to Russian cities other than Moscow. Since then the parties have reconciled, but an outflow of Belarusian personnel to Russian companies remains a problem. Aeroflot can afford to pay much more than the average $7,000 annual wage of Belavia pilots.
Belarus Welcomes Top EU Leaders: A Rare Show
The leaders of France, Germany, Russia and Ukraine agreed to hold peace talks in Minsk on Wednesday, 11 February, in an effort to avert a full-scale war in Ukraine.
The last German and French leaders to visit Minsk were Adolph Hitler in 1941 and Georges Pompidou in 1973. In the twenty years of Alexander Lukashenka's reign in Belarus, only two European leaders (Silvio Berlusconi and Dalia Grybauskaitė) set their foot in Minsk.
As the international community eagerly awaits positive results of the peace talks in Minsk, the Belarusian public is also impatient to see whether Lukashenka will be able to charm his European guests in the year of the presidential election in Belarus.
During their phone conference on Sunday, 8 February, Angela Merkel, François Hollande, Vladimir Putin and Petro Poroshenko chose Minsk as a venue of their 'Normandy format' meeting.
Ukrainian President Petro Poroshenko was the first to call his Belarusian counterpart in order to confirm Minsk's willingness to host the talks. A few minutes later, Alexander Lukashenka, on a short skiing holiday in Sochi, discussed the subject at a personal meeting with Vladimir Putin:
Do not worry and come. We will organise everything… We will do everything we can here in Belarus to find a way out of the situation [people in Ukraine] have faced.
The meeting in Minsk on 11 February can be canceled at the last moment if the parties' experts fail to agree on a basic framework of the peace deal. Three presidents and a chancellor will not come to the Belarusian capital to inaugurate another failure. In fact, the 'Normandy Four' already abandoned their much-publicised decision to hold a similar meeting in Astana, Kazakhstan on 15 January.
Ironically, less than two weeks ago Alexander Lukashenka spoke strongly against the Normandy format. During his 'open dialogue' with the press, he blurted out:
I can't imagine yet any format for negotiations other than Minsk [format]… Most importantly, the proposed [Normandy] format… is to happen at the highest level… They will make general political statements; we heard enough of them.
At that time, Lukashenka was extremely jealous of the negotiating parties' decision to accept President Nazarbayev's invitation and meet in Astana. Evidently, he cannot care less about the format as long as Minsk remains the site and symbol of the peace talks on Ukraine.
Minsk's symbolic significance may have played a role in the decision of the 'Normandy Four'. The agreements based on the Minsk Protocol led to a real and relatively lasting reduction in violence in Eastern Ukraine. These agreements remain a reference point for further talks between the conflicting parties even if Kyiv, Donetsk and Moscow tend to disagree on their interpretation.
Merkel and Hollande understand that Lukashenka will reap the fruit of their visit to Minsk Read more
The logistical and political convenience of Minsk may have mattered more. Minsk is much closer in flight time to Berlin, Kyiv, Moscow and Paris than Astana. Lukashenka's neutrality in the Ukrainian crisis and his genuine willingness to help achieve its speedy resolution also comfort Ukraine and Russia.
Merkel and Hollande may be less happy with Minsk's choice as a venue for talks. They understand that the regime in Belarus will reap the fruit of their visit to the country. However, it looks like that the West is willing to pay this price to reach a peace deal in Ukraine.
Is Lukashenka Happy to Have Guests?
The decision to hold the 'Normandy Four' summit in Minsk suits Lukashenka to perfection, both in his international and domestic agenda.
Domestically, it plays well into his hand on the eve of the presidential election. He is no longer a European pariah. World leaders come to Belarus in recognition of his peace-making efforts and the country's stability and security. Europe needs Minsk to settle conflicts on the continent.
Internationally, the visit of Merkel and Hollande extends the window of opportunity opened initially by the meeting between the Eurasian "troika", Petro Poroshenko and three EU commissioners held in Minsk on 26 August 2014. This time, the Belarusian president gets direct access to the true European decision-makers.
Alexander Lukashenka has always believed in his personal charisma and ability to make a good impression by his seemingly frank and outspoken nature during personal encounters. However, he rarely got an opportunity to test his "charms" on European leaders.
Any Experience with Visitors from Europe?
Indeed, the regime's disregard for human rights, rule of law and electoral standards has long prevented most European leaders from receiving the Belarusian president in their capitals or travelling to see him in Minsk.
Since 1994, only two EU leaders visited Belarus Read more
Alexander Lukashenka, together with many other officials, are under US and EU travel bans imposed in response to brutal crackdown on the opposition. The only realistic opportunity for him to approach Western leaders has so far been restricted to chance encounters in meeting halls and corridors of the UN, OSCE or other international fora. However, he is a rare guest there as well.
Belarusian diplomats made it their priority to break this self-imposed wall of isolation, so far with very limited success. In twenty years of Lukashenka's reign in Belarus, only two leaders of EU countries made their way to Minsk.
What Brought Berlusconi and Grybauskaitė to Minsk?
On 30 November 2009, Silvio Berlusconi, the then Italian prime minister, came to Minsk on a six-hour visit. The Italian leader and his Belarusian host signed a number of bilateral agreements and discussed trade relations and humanitarian cooperation. Alexander Lukashenka was not slack at publicly interpreting Berlusconi's visit as an "eloquent gesture of support to Belarus in the international arena".
Both Italian and Belarusian opposition groups criticised Silvio Berlusconi for his overtures towards the authoritarian regime. One cannot be sure of the criticism' effect on the eccentric Italian politician. Anyway, his promise to lead in person a group of Italian executives to Minsk remained unfulfilled.
A year later, on 20 October 2010, President of Lithuania Dalia Grybauskaitė made a one-day working trip to Minsk, shortly before the presidential election in Belarus. Her staff explained the visit by the desire to remind her Belarusian counterpart about the importance of free and democratic elections for future relations between Belarus and the EU.
Independent experts believed that two other motives were behind Grybauskaitė's travel to Minsk: promotion of Lithuania's trade and transit interests and an attempt to bring Belarus further away from Russia, as the visit happened in the midst of an information war between Moscow and Minsk.
Outsider in His Own Residence?
For Lukashenka, the meeting of the 'Normandy Four' in Minsk is an excellent opportunity to join in top-level international diplomacy. He can certainly expect having brief bilateral meetings with Merkel and Hollande. Lukashenka may want to use these meetings to strengthen the trend on his "acceptability" in Europe.
However, unlike during the August meeting between the European and Eurasian "troikas", the Belarusian ruler can hardly count on a seat at the negotiation table in his own residence when the 'Normandy Four' will meet. Diplomacy is not where Lukashenka scores. He will have to wait for the meeting's results behind the closed doors, like everybody else.