Jetrader - July/August 2012 - 16

State of the Regions

Russia & CIS
As passengers increase, fleets are evolving and success of low-cost carriers remain in question
By Polina Zvereva, Air Transport Observer for Jetrader Despite the constantly growing number of passengers last year, the Russian airline market wasn’t able to solve the problems it has been trying to settle in recent years. The percent of the population that travel by air is still low, most of the domestic routes are going via Moscow and not between the regions, and the international ﬂights are mostly performed by one carrier. During 2011, Russian airlines carried 64.1 million passengers, a 12.6 percent increase over 2010. International passengers rose 13.2 percent to 31.4 million; domestic passengers increased 12 percent to 32.7 million. Total revenue passenger kilometers increased to 166.7 billion, a 13.4 percent growth over 2011, and exceeded the best result of the Soviet aviation market history of 1990—159.5 billion passenger kilometers. Aeroﬂot remains in ﬁrst place in the rating of the largest carriers in the country with 14.2 million passengers (+25.6 percent). It was followed by Transaero Airlines, which carried 8.5 million passengers, up 27.2 percent year-over-year. UTair was in third place with 5.8 million passengers (+31.3 percent). S7 Group, which includes Sibir and Globus, carried 6.6 million passengers in 2011, up 11.4 percent. St. Petersburg-based Rossiya Airlines, which is becoming a part of Aeroﬂot group, carried 3.5 million passengers. The experts pointed out that the share of the ﬁve biggest airlines is growing constantly—it increased from 53.1 percent to 57.9 percent during 2011. As a result, the smaller carriers and the start-ups have less chance to develop their business. the same low level. According to experts, this ﬁgure doesn`t exceed 5 to 7 percent. The number of passengers is increasing because those who are ﬂying are traveling more. The state authorities are trying to change the situation by subsidizing the ﬂights from Russian Far East to the central and south regions of the country for young and elderly people. In 2012 it is planning to spend RUB 2.5 billion ($85.3 million) on this program, and it is forecasted that nearly 400,000 people will use the subsidized tickets. However, even this governmental support won`t change the situation signiﬁcantly.

Carrier Strength
The number of carriers working on the Russian market is moving in the opposite direction of the number of passengers. At the beginning of 2011, there were nearly 160 airlines in the country, but by the end of the year, this ﬁgure decreased to slightly more than 120. Russian aviation authorities withdrew 37 air operators’ certiﬁcates (AOC) including AOCs of two low-cost carriers in the market—Sky Express and Avianova. The Federal Air Transport Agency Rosaviatsia head Aleksandr Neradko said that during the last two years there were no companies receiving new AOCs. The Avianova and Sky Express withdrawal led to the endless discussion of whether the low-cost carrier model is possible in the Russian market. Most of the experts are skeptical, saying that in existing economical conditions and existing airport infrastructure, low-cost carriers won’t be successful.

Fleet Changes
As the competition for passengers heats up, the carriers increased their ﬂeets in 2011. According to the Region investment company, during 2010-2011 Russian airlines acquired more than 200 additional aircraft—most of them were Western-built. The State Research and Development Institute for Civil Aeronautics reports that last year 89 percent of Russia’s passengers were carried by Western-built aircraft. Passenger trafﬁc on Russian aircraft decreased from 9 percent in 2006 to 5 percent in 2011. Soviet-built aircraft still has a 6 percent share but it is decreasing permanently. During the last years Rossiya Airlines got six new Russian-Ukranian An-148s, and Aeroﬂot now is operating eight SSJ 100s. The Western-built aircraft share will remain high. In 2011 the carriers’ ﬂeets grew faster than the number of passengers—load factor decreased one point to 77.2 percent. Load factor on international routes fell 0.7 point to 81.1 percent.

Regional & International Routes
While they gained more aircraft, Russian airlines had to ﬁnd the best ways to use the aircraft more effectively on the new routes. But the number of destinations connected by the air transport didn’t increase signiﬁcantly. Most of the carriers are interested in the routes connecting the country capital, Moscow, with other regions. The networks from big regional cities are also developing, but they are not as active as Moscow. According to Russian Association of Air Transport Operators (AEVT), in the domestic ﬂights market 74.2 percent of passengers arrived or departed from Moscow and in the international ﬂights segment this share was 68 percent. The number of connections in the country at the beginning of 2012 was 834 covering 202 cities. In 1992 there were 4,780 connections, which included 432 cities in the country. Carriers don`t want to take the risks opening the ﬂights between the cities that haven`t been connected during recent years, as it will demand huge investments to attract passengers. International scheduled routes are not easy to launch since the ﬂights between Russia and other countries are coordinated by

Passenger Travel
Though the statistics show a growing number of passengers, the share of the Russian population that can travel by air is remaining at

16 The ofﬁcial publication of the International Society of Transport Aircraft Trading

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