Published: 5/22/1998

At a press-briefing at Domodedovo airport of Moscow, Nikolai Svistunov, first deputy head of theMoscow regional administration, told journalists that the privatisation of Domodedovo Aviation Industrial Association (DPO GA) has been completed and that the time has come to exploit the advantages of the new system in further development of the airport. "The doors [for investors] are now opened and I believe we will be able to show the advantages of a well thought-out privatisation", he said. In accordance with the privatisation plan (see CP697.1, issue 48), DPO GA was divided into three independent companies, which by now have been officially registered and have begun their activities. These three are the unitary state enterprise Administration of Domodedovo Airport, Aviaservis Domodedovo joint-stock company with a controlling stake in state possession and Domodedovo Airlines with 25% state interest (see also AL1297.1, issue 54). At one time DPO GA's share of the total payments to the local budget of Domodedovo region (around the town of Domodedovo with a population of 20,000) amounted to 60%; it has now dropped by half due to the rapidly developing non-aviation businesses around the airport. Today, there are more than 250 small firms and 15 large enterprises based in the airport. In all, the airport supports 14,000 jobs. Last year the local authorities gathered Rbs550bn of dues and payments into local, regional and federal budgets, including Rbs270bn in Domodedovo region's budget. The next stage for Domodedovo airport will be to fix total payments into the Moscow regional and federal budgets at 1997 levels for the next three years. Svistunov believes that this move will create very favourable conditions for whose who want to invest in the airport. Also under consideration is the plan to establish a free economic zone near the airport. Svistunov says that the Moscow regional administration considers Domodedovo as the most promising Moscow airport in terms of future development. Firstly, it currently occupies 1200 hectares, with 1500 hectares more reserved under its long-term development plan, which was recently approved by the Moscow regional administration. Although currently the air traffic via Sheremetievo is noticeably higher than that at Domodedovo, the situation might change in the near future due to the limited land resources available to Sheremetievo. Today, Domodedovo has two runways separated by 2km. Both are away from residential areas of the city and nearby towns, which is considered as a big advantage over its major competitors, Vnukovo and Sheremetievo. But perhaps the biggest advantage of Domodedovo over other Moscow airports is that it has obtained a dedicated, powerful investor in the form of the East Line group. The overall cost of all investment projects initiated by East Line group in Domodedovo airport is said to be $171.3m. East Line was founded in 1990 with a goal to set up a well-functioning cargo route to China. The business has proved highly lucrative, lifting East Line's annual turnover to $1bn in 1996 and $1.5bn in 1997. Today, some 80% of all Chinese goods are transported to Moscow by East Line Aviation. East Line has its own operator, East Line Aviation, which claims to be the largest cargo operator in Russia. The airline began cargo operations to China with Il-76 freighters six years ago. In 1995 its traffic was 30,000 tonnes, in 1996 99,000 tonnes and 120,000 tonnes in 1997. East Line Aviation has a fleet of 52 cargo and passenger aircraft. The existing capacity of East Line's cargo terminals can handle 20 fully-laden Il-76s daily. East Line's expansion has led to Domodedovo now handling 45.5% of all cargo traffic using Moscow's four airports (Sheremetievo, Vnukovo, Domodedovo and Bykovo). In January 1998, East Line established a new company, East Line Handling (ELH), with a task to offer airlines flying to Domodedovo airport a comprehensive package of services and keep them at the highest possible quality level. This will eliminate the need for an airline to have at least ten agreements with various airport bodies. Although East Line Handling is part of the East Line Group, it also represents 52 operators flying to Domodedovo on a regular basis and many charter operatorsfrom time to time. Sergei Rudakov, who heads the airport sector at the East Line group, says, "We know that the quality of service cannot happen overnight, but there is an understanding that if we do not manage to offer a substantially higher level of services than in other Moscow airports, we will not attract operators and will not be competitive." East Line believes in a bright future for Domodedovo, investing a big part of its revenues into construction of new facilities to the airport infrastructure. In November last year it put in use its second cargo terminal, worth $17m, thereby doubling the existing cargo capacity. Work on the third terminal, worth $14m, begins in May. Main contractors for these terminals have been ENKA of Turkey and Codest of Italy. The two existing cargo terminals occupy 5000 and 9500sq.m respectively. Also, East Line invested $12m in an on-board food processing plant enabling it to meet international standards and to supply foreign airlines with high-quality food. Another $5.2m was invested into the reconstruction of the air crew hotel and $10m into oil-and-fuel facilities. In March, East Line announced its ambitious plans to erect a big passenger terminal complex. Sergei Budylin, who heads this project, told ConCISe that in August last year a piece of land, five hectares, was allocated for the new building. In April, East Line initiated a tender between 50 companies for engineering and construction work on this project. Later they united into seven consortia, out of which three won the first part of the tender. The final choice was made between a German consortium led by Hotchtif, Lahmeyer and ABB and two British ones in favour of the former. The winner is to provide full design documentation to East Line in May. Subcontractors should be selected by July, to begin construction work immediately. By the end of 1999 the first series of terminal, worth $75m, with a capacity of 800 passengers in the peak-hour should be completed. Then it is planned to increase the figure up to 2,100 passengers/hour. Under the designation Domodedovo-2, the new terminal will have two sectors, one for intra-CIS, the other for international flights. Budylin says that the capacity of the terminal will be a little bigger that that of the existing terminal built back in 1967. According to him, the whole project which includes the terminal and associated facilities, will cost some $250m. Among these facilities will be a new hotel and a three-storey car park for 800 cars. Budylin says that as of today, only East Line finances the Domodedovo-2 project, but it is expected in the near future that financing will be on a 50/50 basis, together with an international consortium led by the European Bank for Reconstruction and Development. (AP598.1) (VK)

Article ID: 178