Upturn in economy boosts airline industry (850 words)

Published: 2/22/2001

The GSGA has reported that Russian airlines carried 21.76m passengers in 2000, an increase of 1.4% over 1999 and growth for the first time since 1990, mainly due to the recovery in international traffic. Aeroflot, Pulkovo, Krasair and Sibir, carried over 50% of the passengers. The market An increase of 18% in passenger numbers on international routes was accompanied by a decline in domestic traffic of 7%; a reversal in the trend witnessed in 1999, when international traffic declined by 15% and domestic traffic grew by 3% (reflecting a change in vacation patterns among Russians after the 1998 financial crisis). In 2000, having recovered from financial trauma, Russians began to return to the beaches of Turkey and Cyprus, indicating a longer-term trend among an increasingly affluent Russian middle-class. Domestically, route networks suffered consolidation as domestic operators (confronted by low demand and markedly higher costs, as a result of rises in fuel prices) began to pare their flights in response to the general population's inability to pay even the relatively low prices of Russian airlines. Airlines proving to be a poor competitor, on short to medium distance routes, against the significantly cheaper railways. Aeroflot remains the dominant Russian carrier internationally, with a 44% share of Russian international flights, after an 8% increase in traffic during 2000. Its share of the market however, fell from 48% in 1999, to its previous 1998 percentage. The decline in Aeroflot's share appears largely attributable to the recovery of the charter market and the increasing competition from other domestic operators, who have been steadily improving their international offering over the last 18 months. Domestically, Aeroflot has increased its share to 10% from 8% in 1999, and well up from the 5% recorded in 1998. The airline has recently stated that its target is to achieve a 30% share by 2005. Revenues for the airlines increased by 43% from Rb61.7bn in 1999 to Rb88.3bn in 2000 (with $ up by 25.3% from $2.5bn to $3.1bn), reflecting the improved mix of international traffic over domestic. Costs however, continued to rise by 40.5%, from Rb57.8bn to Rb81.2bn in 2000 (and 23.1% in $, from $2.3bn in 1999 to $2.9bn in 2000). Fuel was the main driver, but was accompanied by increased airport and air traffic control fees. An average reported monthly salary rose to Rb4,200, 35.5% more than in 1999 (an increase in $ of 18.7%, from $125.7 to $149.3). Cargo Cargo and mail traffic in 2000, on both international and domestic routes, grew by 7% to 530,000 tonnes. The cargo traffic continued to be dominated by the largest players, with four carriers - Aeroflot, Atlant-Soyuz, East Line (despite being grounded for a number of months) and Volga Dnepr - carrying 50% of the country's traffic. The recovery of traffic is attributable to the growing Russian economy particularly evident within the oil industry.Additional growth was provided according to the GSGA by the need to deliver supplies to remote communities in Northern Russia suffering deprivation as a result of adverse weather conditions and slow delivery of supplies. Safety According to GSGA the safety level in 2000 improved justifying its firm management of the large rump-end of small operators within the Russian airline industry, which contributed to the decline in the number of airlines operating, from 323 in 1999 to 294 in 2000. Although the decline of operators still appears to be falling at a slower rate than we expected last year, when the FSVT stated it would not licence single aircraft operations and those without maintenance facilities. During 2000, Russian airlines recorded 17 accidents - a reduction of 19% on the 21 recorded in 1999. 2000 saw 5 crashes as opposed to the 7 crashes in 1999, which accounted for the loss of 20 and 43 people respectively. According to GSGA none of the crashes involved scheduled airlines and Russia continued to keep its record of no loss of life in four years on scheduled carriers, placing Russia's record in line with or better than most members of ICAO. The Fleet The decline of the Russian fleet continued in 2000 with a fall in numbers fo aircraft of 11% from 1999 to 6540 aircraft and helicopters reflecting the growing age of aircraft with new aircraft being acquired. Those new aircraft that are being brought into service however, have not been well reviewed by the GSGA, who largely support the recent claims made by Aeroflot as to the new Russian types' unreliability. Despite very few deliveries during the year, the GSGA singled out the PS-90A engine for particular mention, despite a relatively small installed base, commenting that engines had been removed from the wing for repair outside of scheduled maintenance on no fewer than 32 occasions (with 7 complete engine failures). Perm has defended the engine, saying that removals were often shown to be unnecessary. It does seem that the engine on which much of the future of the Russian aircraft industry depends, despite substantial improvement, still requires considerable work.

Article ID: 2369