A shot at Russian routes

The Transport Ministry is preparing a tender for routes between Prague and Russian airports that are currently the sole domain of state-owned Czech Airlines (ČSA), opening the possibility for challenges from private airline companies for the lucrative routes.

Routes between Prague and Russia's two largest cities, Moscow and St. Petersburg, are currently restricted by a bilateral agreement required by Russia that limits the routes to only one carrier, which until now has been ČSA. Although the European Commission recently sent notices to most EU member states warning them that such treaties violate EU antitrust law, Russia has "so far not accepted the provisions of the draft agreement" to change the policy, said Marek Illiaš, a ministry spokesman.

In the meantime, according to a new amendment to the law on civil aviation effective this year, tenders for exclusive traffic rights to third-party countries will be put up every five years and are open to carriers from all EU member states, Illiaš said.

"The laws were long in favor of the ČSA, and we never had the opportunity to get these routes until now. This regulation should have been adopted much sooner," said Vladimíra Dufková, a spokeswoman for Travel Services, the country's largest private carrier.

Dufková said Travel Service will bid on the Prague-Moscow-Tel Aviv route as well as that of Prague-Moscow-St. Petersburg, offering prices as low as half of those dictated by ČSA.

"This is a textbook example of a duopoly between ČSA and Aeroflot, as price and tariff conditions are practically set the same," she said. "If the purpose of a tender for routes with limited traffic rights is to maximize the overall economic efficiency, which includes giving clear benefits to passengers with low air fares while helping the country macro-economically [through increased passenger levels], we cannot imagine that Travel Service will fail in the selection process."

ČSA operates along with state-owned Prague Ruzyně airport under the joint-stock company Český aeroholding (ČA), and though Dufková said she was confident in the transparency of the process, there is still at the very least an appearance of a conflict of interest. The structure is unusual because ČSA's interests in holding on to certain routes can run counter to the airport's interests in having the most competitive airlines, and thus the most passenger traffic, passing through the airport.

Traffic between the Czech Republic and Russia is increasing by leaps and bounds, which in addition to their exclusivity, makes the routes that will be put up for bid even more attractive.

Seat capacity levels between Prague and Moscow have increased 145 percent since 2000, and 118 percent between Prague and St. Petersburg, according to Andreas Akerman, assistant editor at Anna.aero, a website dedicated to airline network news and analysis.

In addition, private carriers are establishing more routes between Russia and the Czech Republic less restricted by the bilateral agreement, illustrating market demand as passengers are willing to even go through secondary airports, he said.

For example, Czech Connect, a small carrier, launched in March flights between Karlovy Vary in the Czech Republic to Yekaterinburg in Central Russia as well as between Brno and airports in St. Petersburg and Moscow.

Even so, ČSA seems likely to emerge the winner in bidding. The airline is already established and has the advantage of being an alliance partner with Aeroflot, which is beneficial to both carriers as they both operate hubs on either end of the routes.

"They compete with each other, but there's no doubt that at the same time they benefit because they are part of each others' feeder networks," Akerman said, which means Aeroflot passengers going through Prague can connect to ČSA flights, and vice versa.

Hana Hejsková, a ČSA spokeswoman, would not comment on possible competition, but said traffic in Eastern Europe, especially in the Russian Federation and Ukraine," has "great potential."

"[The] Czech Republic is one of the most frequent and favorite destinations for Russian tourists," she said.

Bids on tenders for the exclusive routes will be evaluated based on the types and level of air services offered, frequency of air services and capacity, proposed start date of the operation, availability of services offered to users, tariffs ordered and whether transport services offer continuity and integration into existing network lines, Illiaš said.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com