As air fares have increased five-fold since 1990, so air travel in Russia has declined dramatically. Until there is a more even distribution of wealth, the population will continue to stay at home

From its peak in the final throes of the Soviet Union, when Aeroflot - then the nation's only air transport enterprise - carried 120 million passengers in a single year, air travel in Russia has collapsed. Last year, just one-sixth of that figure was carried by the nation's airlines.

The slump in air traffic was also reflected in the closure of a large number of airports, especially in the outlying regions, leaving many rural communities without crucial air service. From a total of 1,302 airports in commercial use at the end of 1990, only 533 remain in service. But 5.9% growth in gross domestic product last year and a similar performance in 2001 have finally begun to pull Russia's air transport out of its decline.

In its 2000 annual report, Russia's civil aviation authority, the GSGA, reported small improvements in several key indicators. Passenger numbers rose by 1.4% to 21.8 million, with traffic was up by just 0.1% to 53.5 billion revenue passenger kilometres (or 33 billion miles). Load factors were in the mid-60s, which is still comparatively poor by western standards.

Interestingly, the growth came entirely from international service, which was up by 17.5%. Conversely, domestic traffic was down 6.7%, adding a note of concern to the general optimism. The situation was reversed in the cargo sector, however, where the domestic market grew faster, although international traffic accounted for almost 70% of the total 530,000t carried in the year, a 7.3% rise.

According to the GSGA, airline revenues amounted to 83.7 billion roubles ($2.95 billion) last year, representing a leap of nearly 53%. The industry also turned in an operating profit more than four-fold higher at 2.4 billion roubles. However, nearly half of total revenues were and virtually all of the operating profit came from Aeroflot. The nation's other 300 airlines are still struggling to escape from losses.

Improvements in traffic were maintained during the first eight months of this year to August, when passenger numbers climbed 15.5% and cargo was up 5.4. While these figures are still way below the 1990 peak and sharply illustrate the enormous slump suffered in the wake of the Soviet disintegration, the trend is, for the first time, upward.

But this was before 11 September, since which time airlines and airports have reported sharp drops in traffic. Although Russia is not expected to be as affected as the West, the outlook for 2002 traffic is still far from certain.

Aeroflot market gains

While today's Aeroflot is a mere shadow of its former self, it nevertheless continues to loom large over the market and is poised to make further gains. The carrier flies to 108 destinations in 54 countries, and carried 3.7 million passengers and 96,000t of cargo in 2000. It accounted for 45% of the country's international passenger and 32% of its cargo traffic.

A major push since 1997 to regain its former dominance of domestic air transport has also paid off for Aeroflot. However, while it is definitely ahead of its nearest competitor, the abundance of airlines in Russia ensures that traffic is shared among many, with no one carrier streaking ahead.

There are strong signs that the fragmentation of the domestic market is being addressed. The decentralisation of the immediate post-Soviet time - which gave rise to more than 400 airlines - is slowly being reversed, says Aeroflot director of corporate property Kirill Budaev. Alliances and mergers in progress or mooted will lead to a more efficient air transport system in the hands of a few robust carriers, rather than the present multitude, he says.

An example of this is found in the merger between Moscow's ailing Vnukovo Airlines and healthier Sibir Airlines, based in Novosibirsk, which is moving forward and should be completed as soon as the question of Vnukovo's debts are settled. Some integration of the network and the fleet has already begun.

Sibir and Aeroflot have also signalled their intent to combine route networks and develop a hub-and-spoke system based around Moscow and Novosibirsk. The two points would be linked by shuttle flights, feeding into Aeroflot's international routes from Moscow. The deal would enable Aeroflot to enlarge further its domestic network, while Sibir would gain more international passengers.

On the question of an eventual merger, Sibir general director Vladislav Filov has been quoted as taking the possible coupling with Aeroflot "very seriously". For his part, Aeroflot head Valery Okulov only says he does not rule it out in the longer term. A combination of the two would have annual revenues of around $2 billion and carry more than 8 million passengers.

Domestic rivals

Focusing almost entirely on the domestic market, the companies lining up behind Aeroflot have been able to ride the post-11 September storm better than most and are developing fast. Pulkovo Aviation and Tyumenaviatrans, for instance, have been largely unaffected by the international situation.

St Petersburg-based Pulkovo Aviation is a clear second behind Aeroflot, carrying more than 1.6 million passengers last year on a scheduled and charter route network serving 65 destinations in Russia and the CIS, with another 48 internationally. It has a fleet of 48 Russian-built jet aircraft, and owns and operates its main airport. In 1996, it completed the international terminal Pulkovo-2, and plans to add another new terminal in the near future, although financing for this project appears to be a stumbling block.

Tyumenaviatrans operates a complex multi-level transport system providing vital services in the vast West Siberia region of Russia and beyond. It also has two airline subsidiaries - Tyumens-petzavia and Irtyshaviatrans, the latter based in Kazakhstan - and fully owns six airports, with minority holdings in five more. The figures for 2001 indicate overall growth so far this year of almost 60%, says head of strategic planning Alexei Kokine. In the first eight months, passenger figures of over 670,000 exceeded those for the whole of 2000.

The airline operates some 60-80 flights a day linking the West Siberian towns of Surgut, Tyumen, Khanty-Mansiysk and Nishnevartovsk with points in Central and Southern Russia. However, it is the expansion of its international activities and the increased volume of its helicopter charters that have contributed most to growth, says Kokine. He also lists improvements in management, flight safety and in-flight service standards as major factors in the airline's success.

Yet another Siberian airline, KrasAir, has made the most of the strategic location of its Krasnoyarsk hub between the eastern and western parts of Russia, mounting a strong challenge to nearby Sibir Airlines. It has formed a loose alliance with Chelyabinsk Airlines and Moscow-based Domodedovo Airlines, which allows it to reach into the European part of Russia.

KrasAir's ambitious plans include replacing its entire fleet over the next four years. It will purchase some of these all-Russian aircraft jointly with Transaero, which is itself working hard to solve the financial troubles which have seen it plunge in recent years after being Russia's second carrier.

After suffering a 24.6% loss of passenger traffic last year to just over 431,000, Transaero has recorded a slight increase of 4.9% so far this year. However, owing to the global traffic slump, it has revised its 2001projections downwards, now expecting to record no increase on the annual total. It has also reduced its all-Western fleet to eight aircraft.

Top 10 Russian airlines by passengers - 2000




Passenger thousand

Numbers change







Pulkovo Aviation

St Petersburg




Vnkovo Ailines





Sibir Airlines















AJT Air Int





Ural Airlines










Samara Airlines




Total top 10 carriers 11,731 2.6%


Soviet-era fleets

In terms of aircraft, Transaero is very much the exception. Most of Russia's airlines continue to be saddled with large, outdated Soviet-era fleets. The GSGA report suggests that in 2000, Russia's airlines operated 6,540 aircraft and helicopters, including 1,918 older jets and turboprops, all but a handful of them manufactured in the countries of the former Soviet Union. Many are no longer serviceable, and if airlines are to produce a lasting recovery, the acquisition of new and more efficient aircraft suitable for their altered route structures is essential.

The issue is politically sensitive for the government, which must balance the needs of two important local sectors. Experts point to a lack of state funding when explaining why the Russian manufacturing industry has failed to produce the types of aircraft that the market needs. On the airline side, the high cost of finance has made it extremely difficult for carriers to re-equip, in spite of the low initial purchase cost of local Russian-built aircraft.

A few progressive airlines, such as Sibir, KrasAir and Dalavia, have resorted to complex barter deals for new aircraft. Others have bypassed local offerings, finding - like Aeroflot - ways of avoiding paying the high import taxes and value added tax levied by the government.

There are many explanations for the sharp decline in air travel in Russia over the past decade, but one statistic illustrates the underlying problems faced by the population: the average fare is now five times that of 1990, while income has remained relatively stagnant.

The slow, but steady growth of the middle classes in Russia today offers some hope, but unless wealth is distributed more evenly, rather than being concentrated in a few pockets of prosperity, Russians will continue to stay at home in large numbers.

Source: Airline Business