The Battle for Kamchatka

With a 20-year history of serving the Russian Far East, Alaska Airlines is no stranger to turbulence. But even airline veterans were taken aback when the company’s inaugural flight to the Kamchatka peninsula city of Petropavlovsk was turned back at the border this June by Russian air traffic controllers, who claimed that the airport was not open to international flights.

The passage was completed the next day, but planned weekly flights were postponed by local authorities until late August, and it took a decree by Prime Minister Viktor Chernomyrdin to confirm that Petropavlovsk airport was indeed open to international flights. By this time the decree had little practical value. It was signed just one week before the end of the airlines' summer flight schedule aimed at the adventure tourism market.

Last minute turn-abouts are nothing new to Alaska Airlines and its Far East experience, which began in 1970 with a dozen charter flights to Khabarovsk. Flights to Leningrad and two more destinations were added the following year, with service continuing until 1972.

Cost considerations and, according to an Alaska Airlines history, Ògovernment-to-government wrangling over reciprocal air service" stopped traffic for the next 16 years. The link was reestablished when ÔFriendship Flight IÕ crossed the Bering Strait on a special flight between the Chukotka town of Provideniya and Nome, Alaska in 1988. And when Presidents Mikhail Gorbachev and George Bush signed the first annually updated bilateral air service agreement between their two countries in 1990, the way was cleared for the existing service.

The Seattle-based carrier launched its regular Russia service on June 17, 1991 with flights from Anchorage to Magadan and Khabarovsk. Vladivostok was added to the program in June, 1993.

However, neither perestroika nor the passing of the Soviet Union have guaranteed consistent progress toward a regular business presence. The current trouble in Kamchatka began with the attempted opening of the Petropavlovsk route and came to a head with the first flight's refusal. Russian aviation and diplomatic authorities stalled, claiming later that the international air terminal was not ready. However, Aeroflot passengers who used the airport just three weeks later were able to relax in the new terminal's large, wood-paneled departure lounge.

The current off-season has given concerned parties the opportunity to reflect on where and why things went wrong. So far, mostly speculation has emerged.

Efforts to re-launch the Kamchatka-Alaska flights eventually brought the direct intervention of US Ambassador to Russia Thomas Pickering and a July summit in Anchorage between Alaska Airlines, US Federal Aviation Administration representatives and Major General Viktor Voitenko, deputy commander-in-chief of the northeastern Border Guard.

US aviation authorities have since hinted that a jurisdictional dispute between the Border Guard (formerly a branch of the KGB) and civil aviation authorities may have been the cause of the problem.

"We were briefed that there was an internal communication problem in Russia between the regional Department of Air Transport (DAT) elements and the Border Guard," said Charlene Derry, an international liaison officer for the US Federal Aviation Administration (FAA).

The July summit didn't occur until Alaska Airlines first threatened, then actually lodged formal objections to some Russian flights with the FAA. As a result, several previously scheduled Aeroflot and Volga Dnieper Airline cargo flights were refused permission to land in the United States.

In addition, although the FAA was closely involved in the dispute from the start, Derry said that Russian authorities never told her agency that the flight had been closed because the new Petropavlovsk terminal wasn't ready for international traffic until Major General Viktor Voitenko of the Border Guard made the claim at the July summit.

"That was the first time a specific reason had been put forth," Derry said.

Others would like to believe that competition is behind the incident. For lack of more concrete explanations, airline spokespersons are hesitant to dismiss it as a factor.

"There's something there that's stopping us and I don't know what it is," said Ron Peck, Alaska Airline’s Director of Marketing for Alaska and Russia. "We know that a lot of the traffic that goes to Khabarovsk and Magadan is going to go right to Petropavlovsk. There's a very big piece of the marketing pie that will now just circumvent Magadan and Khabarovsk. To be frank, Aeroflot doesn't like it. Whether or not they've got enough power to stop that, that's not for us to decide."

Indeed, when Petropavlovsk airport is closed to Alaska Airlines, international travelers bound for Kamchatka have no choice but to fly with Aeroflot, via Magadan or Khabarovsk.

The manager of Aeroflot's Anchorage office, Alexander Balaur, described his company's relationship with Alaska Airlines as "friendly competition," adding that it was Aeroflot that helped its US colleague by delivering passengers from Petropavlovsk to connecting cities after their flight had been turned away this summer.

While Alaska Airlines may carry more passengers on comparable flights, Balaur added, Aeroflot has the advantage of greater baggage and cargo capacity.

"For the moment, I would say we're helping each other," he assessed.

Bureaucratic in-fighting, no-holds barred competition, or simply bad luck, Alaska Airlines has vowed to continue its Kamchatka service again next summer.

"We have told them ‘We are not going away from Petropavlovsk,’” Peck said. “‘You are not going to discourage us from getting in there and we're going to keep pressure on you to get in there.’"

Interestingly enough, Alaska Airlines’ ‘Petropavlovsk episode,’ while costly, hasn't diminished the airline's enthusiasm for the Russian Far East market. Instead, it has provided an object lesson for future problems.

"The only way Russians seem to respond is if you have a reciprocal amount of pressure you can put on them," said Peck.

Problem is, the increased independence of Russia's regions has made the proper pressure point more difficult to identify.

"It was easier to deal with single entities under the old Soviet Union," Peck lamented, "One of the mistakes we made with Petropavlovsk was not dealing with Moscow earlier on in the process."

Peck's perplexity is a common one since Russian decentralization. No clear patterns have emerged to tell international businesspeople when to go to the capital and when it's more fruitful to negotiate on the local level.

From an operational viewpoint, though, in cities where Alaska Airlines' jets land eleven times zones east of Moscow, change has indeed come.

"We're dealing with inexperienced people in the international market place. It is difficult. On the other hand, the individual entities tend to be more cooperative. They tend to want to make sure you stay there," Peck continued.

Balaur, who worked in Russia's foreign affairs ministry when the bilateral air service agreement was being negotiated, considers that increased airborne commerce is a goal of both nations. The immediate harm that the Petropavlovsk incident caused in this respect is clear. The cost of the lingering uncertainty cannot be measured.

But it was felt. For one, several adventure vacation businesses, including Seattle-based REI, Inc., had planned tours to Kamchatka this year. Others were considering expansion to the region and planned to watch the success of this summer's new route launch closely.

"From a marketing standpoint, they've screwed it up," said Peck. "What's happened, is interested companies who are looking to operate programs there are kind of gun shy. We have a bigger challenge next year because we have to basically start all over again and re-market and get the word out that we will have a viable operation."

Despite the hassles and direct financial losses, Alaska Airlines remains adamant that a regular service to Kamchatka is a goal worth pursuing.

"We believe that it will become the major tour destination for all of the Far East," he declared, adding that the carrier will continue to learn, and play by, Russia's rules.

"If we think we're going to go in there and say 'If you don't change your system we're getting out!' they're going to say, 'Then get out!' If we're going to be there, we're going to pay the piper. That's basically the system. I don't see it changing regardless of what the small businessman, or even fairly big businessman, says."