A Fleet of Aged Airbuses and Boeings Builds up in the Urals

29.09.2009 — Analysis

The number of Western aircraft leased out by Ural airline companies has already topped fifty. A RusBusinessNews reporter discovered that old, second-hand airplanes are being purchased under the pretext of upgrading the existing aircraft fleet. The process, which so far has not been controlled by the government, can result in more flight delays caused by technical reasons and undermine the financial foundation of the airlines themselves.

In 2009 the airline companies based in the Urals Federal District have sharply accelerated the aircraft fleet upgrading process. Decommissioned Soviet Tu-134 and Tu-154 aircraft are replaced solely with leased Western-made aircraft.

Soviet aircraft fleet inherited by the Russian airlines had been exploited up to the beginning of the 21st century. Its replacement was caused by two key reasons. Firstly, the international aircraft operating rules have become more stringent. Il-62, Il-76, Il-86, Tu-134, Yak-40 and the unmodified Tu-154, in particular, can no longer fly to European and American airports due to unacceptably high noise emission.

The second reason is as important. The competition in the Russian sky has toughened and several carriers began to operate the same routes (especially those to Moscow). In these circumstances, the airlines have curtailed passenger flight costs significantly mainly by saving on fuel consumption. The amount of jet fuel used by Soviet airplanes accounts for up to one half of the flight costs. Modern Western aircraft consume nearly twice as less fuel.

Currently, four airline companies based in the Urals Federal District - UTair, Ural Airlines, Yamal and Kolavia operate 51 western aircraft. UTair pioneered in this field in 2005 by leasing a short-haul ATR-42. After that, scores of ATRs, Airbuses and Boeings flew to the Urals.

Interestingly, despite the global economic crisis and a decrease in passenger air traffic throughout Russia, the number of leased airplanes is but increasing in the Urals. The ongoing year 2009 has already shown record figures. In January - September, UrFD air carriers have leased 18 aircraft: UTair - seven Boeing-737, Ural Airlines - six А-320 and two А-321, Kolavia - two А-320 and one CRJ-200.

"UTair will continue receiving Boeings 737-500 in the current year: three more airplanes will be commissioned in September - October", airline press-service informed RusBusinessNews. "Structural improvement of short-haul aircraft fleet makes Utair a strong competitor in the passenger transportation market, the company increases traffic volumes and expands the geography of flights."

The Ural Airline Press Service informed RusBusinessNews that, in 2010 the company plans to lease 4 more А-320.

Active purchases of western aircraft, however, entail a number of threats. Most of the airplanes leased are 15 years old or older, and have been previously operated by 3 to 4 airline companies. For example, 7 out of Utair's 13 Boeing-737 had made their first flight in 1994, 4 out of 13 ATR-42 airplanes made their first flight back in 1987, the rest of the airplanes are only 1 to 3 years younger. Four out of Ural Airline's 14 aircraft have been utilized since 1991 (and were also operated by African domestic airlines). All these factors result in flight delays due to "technical unavailability of aircraft," making passengers wait for a backup airplane for 5 hours or longer.

Another threat is airlines' financial state. Leasing of another batch of expensive aircrafts puts more debt on the air carrier. Experts estimated that in order to make full and timely payments for leased aircraft, the airline company must utilize Airbuses or Boeings 15 to 17 hours a day, and the flights should be occupied by no less than 70%. This requires the establishment of a well developed logistics service. Otherwise, air carriers may go bankrupt as was the case with the Ekaterinburg Aviaprad airline in February 2008, which was (commercially) inefficient in utilizing several Boeing 737 aircraft it had leased.

Thus, purchases of expensive western-made aircrafts by UrFD based airlines must be accompanied by rapid development of logistics, expansion of the destination network and an increase in the frequency of flights. At first sight, things look good here. In 2009, the Urals Airlines managed to launch regular flights from Ekaterinburg to Beijing and Gandzha, from Samara to Moscow, Dubai, Erevan and Baku. The UTair Airlines began to operate flights from Moscow to Mineralnye Vody, from Samara to Anapa and Sochi. Meanwhile, according to Rosaviation January-July statistics, the UTair Airlines decreased its passenger traffic by 3.6% and the Ural Airlines by 9.4% compared to the same period last year.

Leasing of Western-made airplanes is a double edged sword. Russian authorities could regulate this process not only by establishing high custom tariffs and implementing protective policy aimed at supporting domestic aircraft industry, but they could also prohibit acquisition of aircraft older than 15 years.

Pavel Kober