UTair Aviation

Russian network airline traffic continues to rebound, but without LCCs

Russia is becoming a serious force in aviation through the significant growth reported in both passenger and cargo transportation over the last 11 years. It is no surprise, partly considering the massive land area the Russian Federation covers, that aviation is increasingly seen as an efficient way for mass transportation of people and goods across the nation and further afield.

2009 saw the first decrease in passengers carried in the century’s first decade, with numbers declining 9.5% to 45.1 million. However starting in the following year, traffic rebounded with positive figures reported in 2010. The rebound is continuing in 2011, according to the latest traffic figures released by Russia’s Federal Air Transport Agency. The figures show overall growth in both passenger and cargo volumes in the 10 months to Oct-2011, including a 12.3% year-on-year increase in passenger numbers.

This growth comes from the nation’s network carriers, with low-cost operators making hardly any noise in the market. Despite the ever-increasing demand for air travel, Russia still does not have a significant level of low-cost carrier penetration from home or foreign carriers, and the LCC sector took a step back earlier this year with the bankruptcy of Avianova.

Avianova bankruptcy spotlights instability in alluring emerging markets

The bankruptcy of Avianova, Russia’s fastest-growing LCC, highlights the difficulties of emerging markets that lure investors and their LCC start-ups into complex but evolving sectors with promises of explosive growth. Avianova's bankruptcy follows financial difficulties after a dispute between its two shareholders, Russia’s A1 Investments and US-based LCC investor Indigo Partners, showcasing the risk of foreign-managed operations in markets that have only recently begun to open up. It is an experience Avianova CEO Andrew Pyne was exposed to at his previous start-up, low-cost long-haul carrier Viva Macau based in the captivating region of the Pearl River Delta. And in the other big growing market – China – LCCs are still trying to gain a foothold.

Avianova’s collapse is a major setback for the development of the low-cost sector in one of the world’s fastest-growing markets with low LCC market share. But the Russian market, despite its myriad regulatory, geographic and infrastructure challenges, remains a market brimming with potential for low-cost operators. LCC penetration remains very low, and demand for air travel, particularly in the short-haul space, continues to grow at breakneck speed. Further LCC start-ups are inevitable, but foreign-backed entrants are unlikely to be attracted.

Russia can lay claim to being one of the world's most dynamic air transport markets

Sometimes seen as the laggard of the BRICs, Russia’s recent performance demonstrates it is anything but. The Russian Government, aviation regulators and major industry players are increasing efforts aimed at addressing structural inefficiencies, which should drive future growth and unlock the potential of a country ideally suited to air transport.

Asia's first time flyers the big winners as Paris Air Show PR juggernaut winds down

The major beneficiaries of this week’s frenetic (public relations) activity just outside Paris live half a world away. They are Asia’s emerging travellers – the millions that have never stepped inside an aircraft, but for whom air travel is becoming attainable. That opportunity took a major step forward as Asian carriers – many of whom the world had never heard of a decade or even five years ago – stepped up in front of the world’s media to order narrowbodies for the mass markets they see blossoming at home.

Strong Russian growth story continues in 1Q2011

Rosaviatsia, Russia’s Federal Aviation Agency, announced in Apr-2011 that Russian airlines carried 11.1 million passengers in 1Q2011, a 10.1% increase over the same period in 2010.