Vladimir Karnozov

While Russian traffic measured in passenger kilometers rose 20 percent over the first three quarters of the year, the country's airline industry remains in an “unstable financial situation,” according to speakers at the November 1 to 2 Wings of the Future conference in Moscow. The 15th annual event attracted more than 400 aviation professionals who flocked to Moscow three months after the U.S. Congress voted to impose additional sanctions on Russia.

 


While acknowledging that the sanctions might frighten off U.S. investors, Danny Thorniley, president and founder of DT Global Business Consulting, insists that the Russians and their partners have learned to manage them. He described the business climate in Russia as “not booming, but OK,” while calling the conditions for businessmen and investors “survivable and manageable.” Even though “super-profits” observed at the turn of the century have disappeared, said Thorniley, the Russian market has stabilized and appears poised to grow at a 2 percent average rate into the foreseeable future, creating a solid basis for investing.

 


Vladimir Tasun, chairman of Russia’s Association of Air Transport Operators, reported that Russian airlines generated a loss of 18 billion roubles ($309 million) in the first half of 2017 compared with a 13 billion rouble ($223 million) loss during the same period last year. He predicted that the year will again end with a negative result for the industry despite an expected 11 percent increase in the airlines’ income, partly due to a 16-percent rise in airport charges and a 30-percent jump in fuel costs, all accrued in the national currency.

 


In the absence of official statistics from government bodies, various sources give different estimates for the collective financial results of the Russian airline industry, ranging from 10- to 13 billion ruble losses to a profit of 2.9 billion in 2016. But no one disputes that 2014 and 2015 brought a negative result, and that 2017 will most likely do so as well. All agree that the airlines face financial pressures fraught with more bankruptcies following that of VIM-Avia last month.

 


Moscow-based Infomost Consulting notes that the recent traffic growth does not correlate with an almost flat gross domestic product. It further states that the national fleet remains oversized. Instead of downsizing, VIM-Avia embarked on an aggressive expansion strategy, increasing its seating capacity by 18 percent in 2016. It accumulated large debts and ceased flights on October 15.

 


A survey of 40 major Russian domestic air routes indicates that average fare per thousand kilometers flown varies between $46 and $90, compared with $120 to $150 in the U.S. The difference results in the inherent unprofitability of Russia's domestic routes, barely compensated by the profits coming from international services. Price wars and decreased income of the Russian population from 2014 to 2017 did not allow the local industry to improve. Even though fares measured in the national currency grew by 67 percent over the past four years, the rouble continued to lose value compared to the dollar.

 


Although a number of previous attempts to establish a low-cost carrier failed, Podeba—Russia’s only surviving low-cost carrier—has performed rather well recently with its 13 Boeing 737-800s. Partly for that reason, Norwegian Air Shuttle chief executive Bjorn Kjos said he thinks that Russia will one day open itself to the idea of budget airlines, like Norway did in 2002. Since then Norwegian has grown into the world’s sixth largest LCC with fleet of more than 140 Boeing jets. Kjos said he believes in a tremendous opportunity that an expected tourist boom might bring the country, calling St. Petersburg and Vladivostok “gold mines…that must be made into the gateways to Europe and the Far East.”&nbsp;

News about commercial airlines, including regulations, aircraft orders, safety, acquisitions, and mergers.

Russian Traffic Rises, but Airlines Endure Instability

Speakers at Wings of the Future conference in Moscow express cautious optimism

2024 Corporate Aviation Leadership Summit

Charles Alcock

News and developments about airplanes, helicopters and unmanned air vehicles used in all varieties of operations, including airlines, military, business, commercial, general aviation and private.

News about environmental issues relating to aircraft operations, including noise issues, emissisions, and regulations. See Fuel for biofuel.

News and issues relating to international air transport and cargo carriers, national airlines and regional airlines, including aircraft, engines, personnel, acquisitions, accidents, safety, security and training.

Agreement between start-ups could lead to orders for up to 15 aircraft

Skyhop Plans Island Routes With Noemi's Electric Seaplane

Howard Hardee

Airline plans to gradually replace its Embraer E-Jet fleet

A220’s Performance Drives BermudAir’s Fleet Growth

Partners say eVTOLs could accelerate response times in crowded Indian cities

Air India Backs SkyDrive Emergency Medical eVTOL Plans

News and issues relating to the aerospace industry that are related to the science, engineering and business of flight in space involving civil, industrial and military applications, and similar topics related to flight in the atmosphere of the Earth that are not covered more directly by other AINonline subject channels. In other words, both astronautical and aeronautical subjects, except for those aeronautical topics that are specifically covered elsewhere on this website.

Rival Boeing arguably claimed bragging rights at the Farnborough International show

Airbus Balances Shareholder Returns and New Aircraft

New developments at airports including regulations and noise issues; legal disputes; openings, acquisitions and mergers.

Connections to London Heathrow and Manchester airports will start first

Virgin Firms Up eVTOL Air Taxi Alliance with Joby

News and developments about everything that goes into the cabin of an aircraft, from floor coverings to headliners, with a special emphasis on in-flight entertainment, communications and other electronics for passengers. If it is in the cabin of an aircraft, it’s covered here.

More In Airlines

Skyhop Plans Island Routes With Noemi's Electric Seaplane

Agreement between start-ups could lead to orders for up to 15 aircraft

A220’s Performance Drives BermudAir’s Fleet Growth

Airline plans to gradually replace its Embraer E-Jet fleet

Air India Backs SkyDrive Emergency Medical eVTOL Plans

Partners say eVTOLs could accelerate response times in crowded Indian cities

Airbus Balances Shareholder Returns and New Aircraft

Rival Boeing arguably claimed bragging rights at the Farnborough International show

Virgin Firms Up eVTOL Air Taxi Alliance with Joby

Connections to London Heathrow and Manchester airports will start first

ATR Chases New Regional Markets for Twin Turboprops

Iran war and wider geopolitical pressure stall buying decisions

Embraer Racks Up E-Jet Orders at Farnborough

30 firm orders led by Abra

Gulf Air May Buy JetZero’s Blended-wing-body Z4

Japan Airlines also expresses interest at Farnborough Airshow

AIN Products

SUBSCRIPTIONS

RESOURCES

ABOUT AIN