Short-haul aircraft have been destroyed in the Russia skies

23.12.2011 — Analysis

The Sverdlovsk Region intends to upgrade its transportation infrastructure by the 2018 World Cup. The plans include a large transit hub to be developed at the Koltsovo Airport site in the near future. Experts do not see any logic between the Ekaterinburg aviation hub project and the intention of the authorities to build a high-speed railroad connecting Ekaterinburg and Moscow; besides, the idea can hardly be accomplished in today's economic environment. As the RusBusinessNews columnist has found it out, the business community is not going to make any investment in development of regional air transportation without a comprehensive government program aimed to increase mobility of Russian people.

According to the forecast offered by the commercial agency of Koltsovo Airport, in 2011 services provided by the airport will be used by 3.3 million people. It is by 600 thousand people more than in 2010, but by 2 million less than in 1991. The shrinking of the passenger traffic during the post-Soviet time distorted the national system of air transportation: At present, up to 75% of all the flights depart from Moscow that has become the largest connection hub. 36% of the passengers use flights from Koltsovo to fly to the Russian capital.

Ekaterinburg would not mind drawing over some of the Moscow passenger flow, thus turning into a connection hub along the route from Europe to South-East Asia. However, in the opinion of Maxim Vasin, candidate of economic sciences, then the city will have to provide services at least to 20 million passengers annually. The expert thinks that this level can be reached only through concurrent development of three components: regional transportation, domestic air lines and regular international flights.

Yuliya Fedotova, the strategic communication director at Koltsovo Airport, states that regional transportation does not exceed 15% of the total traffic. The airport executives realize that Koltsovo passenger flows can increase only if they are backed up by transit passengers, taking into account that the local consumer demand has reached the peak. The problem is expected to be solved through the new hub. However, the frequency of flights between Ekaterinburg and neighboring regions leaves much to be desired. Business people are reluctant to wait for the return flight for 2-3 days; therefore, they opt for transit flights via Moscow. Keeping this in mind, the Koltsovo administration has attempted to boost the frequency of air trips by using various marketing, commercial and technological tools.

For example, in 2011, the airport purchased four Embraer-120 turbo-propelled aircraft for 150 million rubles and leased them to the RusLine airline company. More than 100 million rubles were allocated by the airport to compensate risks associated with roll-out of new routes: Having set the rate of 1 ruble per kilometer, the carrier, jointly with Koltsovo, launched flights to Perm, Nizhny Novgorod, Kazan, Magnitogorsk, Omsk, Tyumen, Orenburg, Karaganda and Kostanay.

Following its strategy for development, Koltsovo Airport has started motivating air carriers to open new routes and increase frequency of flights, having offered them substantial (up to 60%) rebates for ground servicing of regional flights and a 15% discount for kerosene. The experiment started only a few months ago; therefore, it is too early to make any conclusion. Nevertheless, experts doubt that airlines - though enjoying preferential treatment - will be able to consolidate the passenger flow from neighboring regions without government support.

Not long ago the RF Federation Council held the conference addressing the situation in the regional aviation. In particular, it was declared that over the past 10 years the number of passengers had doubled, while the regional transportation had halved. The gap between the short-range and long-range aviation is expanding: The number of local flights goes down by 9% annually. Since 1992, 973 aerodromes have been closed down as loss-making even without paying land taxes. Expensive aviation fuel, outdated aircraft fleet, high airport costs result in cost prohibitive flights: The average ticket price for regional flights exceeds the average monthly salary paid to residents of remote Russian areas. The low solvency of the population turns into low passenger traffic.

In this situation, there are hardly any chances to re-channel some flows from the Moscow aviation hub to regional airports. All the attempts to create hubs in Krasnoyarsk and Kaliningrad failed: The local airlines were not able to compete in prices with their peers offering transit flights via the Russian capital. Kirill Shubin, the former general director of Koltsovo Airport, OJSC, saw the concept of transportation, including transportation from and to other countries, through Kaliningrad as very interesting and adequate in terms of prices, but the Kaliningrad KD-Avia did not have sufficient resources - it had to fall out of the race. Its followers from other regions are going to face the same destiny, if nothing changes in the industry tightly linked to incomes of the population.

The participants of the Federation Council conference offered a number of recommendations to the country's government. Experts think that the tax burden should be decreased, the certification procedure should be simplified for small airports, rates for airport services should be transparent, favorable investment climate should be created for development of transportation infrastructure, competition among fuel suppliers should be encouraged, manufacturers of small airplanes should be supported, etc. All these measures require a comprehensive government program for development of the aviation industry.

Oleg Dunayev, head of the expert group at the Federation Council, thinks that government authorities should motivate companies to increase frequency of flights offered for regional routes; however, nothing has been done yet. In Russia there is the program for subsidizing of Far-East transportation, but Koltsovo does not participate in it. "This project, Yu. Fedotova says, is well-known and is, undoubtedly, useful; however, unfortunately, only Moscow, St. Petersburg and Sochi take part in it among the cities of the European part of Russia".

Yevgeny Chudnovsky, the general director of Koltsovo Airport, OJSC, thinks that in order to maintain growth rates of regional transportation, up to 50% of the flight cost within the distance of up to 700 kilometers should be compensated from the budget. He estimates that the development of the route network in the Ural Federal District will cost about 8 billion rubles a year. With the lapse of time the budget burden will decrease.

The government of the Sverdlovsk Region supports the idea of development of the regional aviation. On the other hand, it makes every effort to lobby the project of construction of the high-speed railroad between Moscow and Ekaterinburg by the 2018 World Cup. Experts have no doubt that there will be no money to support both projects.

The lack of priorities in development of the transportation infrastructure in the Sverdlovsk Region aggravates the disagreement in the actions of the government and business: Without incentives for extension of regional transportation, airline companies flying from Koltsovo are concerned about their economics rather that about the hub, launching new long-haul flights from other cities. This policy can play a low-down trick with the Ekaterinburg hub. Even today, Koltsovo Airport has excessive infrastructure: according to M. Vasin, only 12% of the existing runway capacity and 32% of the passenger terminal capacity are being used.

Vladimir Terletsky