Vladimir Spiridonov, Aerofuels Group - Аэрофьюэлз
Release Date: 2009-04-06
Date: March 26, 2009How did a private company like Aerofuels Group manage to become one of the leading jet fuel suppliers in Russia?
Aerofuels Group was created in 1995 and it took us four to five years to develop. We’ve been constructing fuel loading stations in airports since 1999, and since then we’ve been developing quite aggressively building a chain of fuel loading stations.
Currently we have the widest network in Russia, with 14 own fueling stations and services available at about 21-22 airports in total. The network is mainly concentrated in regional airports, with our staff, equipment, fuelers and quality control laboratories for fuel and lubricants in each of our fueling stations. Basically, the fuel supply system was copied from the major Western oil companies. We refuel about 100 Russian airlines - Aeroflot, Rossiya, Transaero and etc, and smaller regional airlines, the major foreign airlines flying to Russia as well as smaller charter airlines.
Civil aviation representatives complain about difficult times but your company is boasting amazing results for 2008, with a 15% growth in fuel supplies. How do you explain the discrepancy between your company’s result and the general results across the industry?
We were one of the few to feel the crisis coming because aviation as a sector is very sensitive to market changes. Ten years ago, just before the crisis of 1998, we noticed that passenger flow stated to grow intensively, exceeding the normal growth rate. Straight after the crisis, in early 1999, passenger flow began to regain its growth - from 25 mln to 50 mln passengers per year indicating that the economy was returning to normal conditions. By analogy, last year we saw that the passenger flow was overgrowing again on the most popular tourist destinations, an obvious parallel with the last crisis, and tried to be prudent in terms of providing non-secured loans to our customers, unlike some other companies.
This year won’t be easy for any aviation company, and all countries are facing similar problems: lower passenger flow and cargo transport. However, our company has been pursuing its own strategy of development based on our own resources, and we managed to concentrate on the segment of aviation fuel supply that remained virtually unaffected. Russian air transport market has been growing very fast over the last 10 years and, although many airlines have replaced older Russian-produced aircraft with less fuel consuming foreign aircraft, kerosene consumption increased.
One of our crucial advantages against bigger companies is that our company in more aggressive and less bureaucratized. We are quicker to come to the market and we have a wide fueling geography: from Pskov in the West to Petropavlovsk-Kamchatsky in the East.
Over the past 15 years you’ve been investing heavily in infrastructure; Aerofuels Group is one of the few companies to build its own fueling stations. You have also announced ambitious investment plans. Has the global financial crisis changed the plans and what are your investment plans for the months to come?
We have been constructing and developing own fuel supply facilities constantly over the last 6 years all over Russia - in Irkutsk, Ufa, Petropavlovsk-Kamchatsky, Perm, Ulan-Ude - and reconstructing the existing facilities. Despite the crisis, we’ll continue investing in fueling stations.
We have finished the construction of a new fueling station in Novosibirsk, one of the largest Russian airports and one of the leading Siberian airports. We have recently purchased an oil depot near the Vladivostok airport, the largest airport in the Far East of Russia, and we’re currently reconstructing it to start fueling there.
Most people in Russia regard companies going for big IPOs as big success stories. Your company has remained private. Could an IPO be a faster way to get more financial assets? Or has staying private saved you from defaulting?
A few years ago we took two decisions: not to borrow on the open market and to remain a private company without share capital because an IPO also implies huge expenses, whereas the stock price does not fully reflect the actual value of the company.
You have implemented a very aggressive development strategy remaining very conservative in terms of management. This is not so common in Russia, with many companies growing tremendously fast and taking huge risks. Is your client portfolio wide enough to resist sudden changes?
Luckily, we started working before the crisis of 1998 and have gained enough market experience. As we fuel hundred airlines, our portfolio is diversified enough.
Did the bankruptcy of TOAP reshuffle the cards on the market?
TOAP operated in wholesale fuel supplies, a slightly different segment, whereas we are more retail-oriented. TOAP operated a lot in regional airports, so its withdrawal enhances our position on the regional market.
One of the important characteristics of your company is a partnership with Shell in Domodedovo. Why did you not replicate this agreement in other airports?
Shell is one of the leading companies on the world aviation market; they fueled the first aircraft in 1909. Every 7th ton of aviation kerosene in the world is fueled by Shell. We arranged a joint venture with Shell with the purpose of attracting foreign carriers to Domodedovo. Now we have over 50 regular clients in Domodedovo: Singapore Airlines, British Airways and American Airlines. Most importantly, Shell works according to IATA standards, so it brought us experience of a foreign company operating in Russia according to IATA standards.
How are your relations with Chinese airlines, especially in the east of Russia?
I expect our relations to actively develop in the Siberian region: Chinese airlines plan new charter flights to Irkutsk this summer; there’s also a program for Novosibirsk where we have constructed a new fueling station. Chinese airlines also fly to Pulkovo in Saint-Petersburg and Domodedovo in Moscow, where we also have fueling stations.
Last year you announced the launch of an alternative fueling station in Kamchatka. As a specialist, what do you call an alternative fueling station?
It’s an independent and integrated fueling station based on an oil depot that stores, processes and provides kerosene for the fueler. Besides, we have purchased the first fuel tanker that ships kerosene to the Kamchatka oil product market. Last year there was a shortage of light-end oil products, so this allowed decreasing fuel transportation costs to Kamchatka by about $50 per ton.
Generally, commissioning alternative fueling stations spares 10-20% of the fuel price. Operation of our alternative fueling station in Irkutsk allowed saving 1.5 bln rubles over 4 years.
The Federal Target Program envisages about seven big hubs in Russia. What about the regional airports?
There are about 320 airports with about 60 strategically important airports. In about 40-50 airports fuel supply can be demonopolized to reduce the price and improve the quality of fueling. In smaller airports fueling standards can be improved approaching the IATA standards.
As aviation is crucial for Russia, the Government is taking steps to address the issue of fuel pricing and demonopolize the fueling stations that we inherited from Soviet times. In Europe this took place 40-50 years ago, and now in each airport there are a few independent fueling chains.
Last Friday Igor Sechin, Deputy Prime Minister, hosted an important meeting with the major Russian oil companies, Federal Antimonopoly Service, Federal Air Transport Agency (Rosaviatsia), Ministry of Transport and Aerofuels Group, with the purpose of elaborating working principles to reduce aviation kerosene prices. In general, the main principles of developing fuel supply system are clear: to sell kerosene through a fuel exchange; to create, construct and commission alternative fueling stations in large airport and have free access to airport infrastructure. Our major concern is that Russian airlines get aviation kerosene at a fair price. The priority of the Russian market is to have stable airlines. The crisis will definitely accelerate demonopolization and lower fuel prices in order to protect the airlines.
| Company: | Aerofuels Group - Аэрофьюэлз |
| Position: | General Director |
| Country: | Russian Federation |