Privatized Remnant of Aeroflot Takes Off for Open Market

Soon after the breakup of the Soviet Union, scheduled flights on Aeroflot barely got off the ground.

Shortages of fuel and parts and poor employee morale left the airline stranded.

But in Lithuania at least, the privatization of part of what was once the world’s largest air carrier has become a test run for competing in the open market.

With more than a dozen flight-worthy planes left by Aeroflot and a new Boeing 737 leased from GPA of Ireland, Lithuanian Airlines (LAL) now has 12 flights a week from Vilnius to Berlin, Frankfurt, Warsaw, and Copenhagen. London and Paris are on the near-term wish list. LAL will continue to fly more than 1 million passengers a year to former Soviet republics, with service to Moscow, St. Petersburg, and even Kazakhstan.

LAL director Alvydas Stricka bristles at the suggestion that Aeroflot gave the company anything: “We did not inherit planes from Aeroflot. We paid for them over the years--double their value, in fact, considering the way they were amortized. And on the day we took possession of the fleet, half were grounded for safety reasons,” he says.

In a vacant corner of the Vilnius airport a collection of 20 planes and helicopters wait for either major overhaul or the scrap yard.

“Match the fares collected by the Lithuanian division of Aeroflot for Moscow against the expenses for maintenance, fuel, and employee salaries for those planes,” Mr. Stricka says, “and you will see we paid new prices for very old planes.”

Stock in LAL is currently controlled by the Lithuanian government, but Stricka says that a public offering is not far away.

Despite a refurbished look, punctuality, and a courteous staff not seen during the old Aeroflot days, LAL is taking its punches in the free market. Part of the problem, at least, comes from its arrangement with competitors who act as its sales agents in the West. The carrier does not yet have its own offices abroad.

Another hitch developed when $1 million earmarked for advertising and public relations in the West disappeared as a Moscow bank ran short of dollars last November.