Above us only sky…

Interview with Gazpromneft-Aero CEO Vladimir Egorov

Journal "Gazprom" Владимир Егоров

Answering our questions CEO, JSC Gazpromneft-Aero, Vladimir Egorov.

— Vladimir Egorovich, let’s start with operational results.

— We supplied more than two million tonnes of aviation fuels through “wing-tip” refuelling in the first nine months of 2014 — almost as much as we supplied during the whole of 2013. Total sales volumes in the first three quarters of 2014 were 2.9 million tonnes. In other words, retail sales amounted to 70 percent — and that’s growing, as a result of improvements to service quality and greater confidence on the part of Russian and international partners. We expect year-end results to show wing-tip sales of more than 2.6 million tonnes, with total sales volumes exceeding 3.6 million.

— To what do you attribute exceeding sales in 2013?

— To serious work on the part of management. We continue to work closely with Russian and international aviation companies and airports, signing several new contracts. For example, we’ve begun refuelling India’s national airline, Air India, at Domodedovo (since 1 April, 2014), and have concluded a cooperation agreement with the UAE’s Flydubai — the fourth Persian Gulf carrier we refuel in Moscow (we are already supplying fuel for regular flights on Emirates, Qatar Airways and Etihad Airways). Today we refuel more than 75 international airlines either under direct contracts or through subsidiaries.

Throughout 2014 we have considerably extended the geographic range of our collaboration with the Aeroflot group of companies, refuelling flights at Domodedovo, Tomsk, Orsk and Voronezh. Another new partner in 2014 was Saratov Airlines, flying on regional routes. We also began refuelling for chartered flights carrier RoyalFlight. All of which helped increase sales.

— Speaking of Aeroflot, do you work with their low-cost carrier?

— Yes, we work on this.

— And how are things developing internationally?

— We supplied more than 230,000 tonnes of aviation fuels internationally in the first 10 months of 2014. Growth here was higher even than on the domestic market, at 46 percent (157,000 tonnes). A significant factor here being our collaboration with major Russian airlines. We continue to expand our international refuelling network with these and, moreover, several of them have held tenders for 2015. We’re also increasing refuelling volumes at international airports for the Latvian national carrier, AirBaltic — a genuinely unique project, refuelling an international carrier, outside of Russia. And, I’m delighted to report, our partners are seeing tangible benefits under this arrangement.

Overall, our presence abroad has increased to about 150 airports (an increase of more than 20 in 2014). The year-end estimates suggest that refuelling volumes internationally will increase by 30 percent, reaching 285,000 tonnes.

In 2014 we also entered into a strategic partnership agreement with Shell Aviation, giving us the opportunity to increase the number of airports at which we can offer refuelling services by a further 1,500 — an opportunity of outstanding potential.

— And what’s in it for Shell Aviation?

— We offer them the same access to our own refuelling complexes.

— And your plans for international expansion haven’t changed?

— In 2014 we updated our development strategy to 2025. Certain quantitative indicators have been amended: the planned increase in total sales volumes of aviation fuels, to 5.6 million tonnes, is six percent higher than the figure approved in 2012. Total volumes of “wing-tip” sales will reach 4.5 million tonnes by 2025. This growth is in line with planned increases in the production of aviation fuels at Gazprom Neft refining facilities.

As regards geography, consistent with previously adopted strategy we plan to expand the business to countries in the Asia Pacific region and the Middle East while, at the same time, expanding into the European aviation fuels market.

— Is China interesting to you?

— Yes, we’re committed to supplying fuel in this market. Urumqi airport is particularly promising, as far as we’re concerned. But still more interesting, at the moment, are the countries of Central Asia. And, in general, we’re considering all areas covered by Russian airlines.

In Russia, our priorities remain the Volga region, and Western and Eastern Siberia — pretty much those regions around Gazprom Neft refineries.

— And production capacity in Serbia is being used for export?

— No, products from our Russian refineries are exported to Europe. Aviation fuels produced by NIS are almost entirely consumed by the domestic market in Serbia. In the event of any surplus there are export contracts in place, and any surplus will be exported to neighbouring countries. But we’re talking very small amounts.

Going back to strategy, I would point out that by 2025 the number of refuelling complexes directly owned by the company should reach 52 (they currently stand at 40).

In 2014, we established a joint enterprise with Omsk airport, buying a 50-percent share in the local refuelling complex. We also signed an agreement with Renova Group, the managing company of “Airports of the Region”, on construction of a 20,000-tonne-capacity refuelling complex at the new Saratov-Central international airport, being built for the 2018 World Cup, with construction due to start in 2015. The old airport will be closed: it’s located within the city, and its location means it cannot accept high-capacity aircraft.

We also plan to build our own refuelling complex at the Chita-Kadala civil airport, and are currently in the process of appointing project management contractors. Construction is expected to begin in 2015, with the airport being brought into operation in 2017.

— Do you have any plans for expansion in the Russian Far East?

— We have to be realistic. Our furthest enterprise towards the east is the Omsk Refinery: transporting fuels to the Far East from there is not profitable. The furthest point for us is Chita.

— How are things developing with the Ministry of Defence?

— We carry out work at aerodromes owned by the Ministry of Defence of the Russian Federation, fulfilling our obligations in terms of timely aviation refuelling as well as modernisation of production facilities. Refuelling complexes are being built, as well as modern laboratories for quality monitoring of aviation fuels, and we’re buying new fuel tankers.

— Is your business impacted by fluctuations in seasonal demand?

— We haven’t really noticed any seasonal fluctuations for the last three years. People have started flying more, with mobility increasing by about 10–12 percent per year — as it has, incidentally, in several Asian countries. In Europe, the increase is about two to three percent. That’s for 2013.

— And 2014??

— It’s too early to draw any conclusions. But airlines carried more passengers in the first nine months of 2014 than in the same period the preceding year, mainly on the basis of growth in domestic passenger traffic. International flights are also up, but to a lesser extent. Freight transport is more or less unchanged. New routes are being used, as the regional network gets re-established. We’re currently working on the possibility of developing aviation gasoline (avgas). This fuel, essential for small aircraft, is currently only available exclusively on import.

— What tankers do you use?

— We do not use a single foreign-produced tanker within the domestic market. We buy them from Aviatechnology, a company from Stupino. They make them themselves (only the chassis are made in Kaluga, at the Volvo factory, and they also buy in pumps), with each tanker adapted to meet the customer’s specific requirements. They’re currently the best producers of that kind of equipment, and we’re their biggest customer.

— How are your training initiatives going?

— Together with the IATA Fuel Quality Pool (IFQP, a group of airlines that actively share fuel inspection reports and workload at locations worldwide), in October 2014 we held — for what was, already, the sixth time — training sessions in airport refuelling, at our own refuelling complex in Novosibirsk, at Tolmachevo International Airport. This is the only such initiative in Russia delivering training in aviation refuelling to international standards, and the training facility in Novosibirsk is one of only four in the world certified by IATA for that purpose.

We pay particular attention to the continued professional development of our production specialists. Under the auspices of the Ulyanovsk Higher Civil Aviation School we have established an education centre, allowing the ongoing training of Gazprom Neft specialists in aviation refuelling. Specialist educational programmes have been developed, and a practical training facility established. Some 100 Gazprom Group specialists go through this facility every year.

— And what are your plans for 2014?

— We expect to have delivered more than 450,000 tonnes of aviation fuels for foreign airlines’ flights in Russia — more than double the levels of 2013. We’re working on a range of international projects. In other words, we’re moving forward.