Moscow Sheremetyevo Airport

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.

Air Malta troubles worsen as unions flex muscle and LCCs grow

Air Malta’s troubles have become more acute as the struggling carrier’s unions increase their opposition to large-scale redundancies. Prime Minister Lawrence Gonzi has stated the present situation is increasingly worrying, particularly in light of the EUR77 million the government has poured into the airline since Jun-2011.

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.