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The passenger air transportation sector in Russia can be characterised by significant competition. Aeroflot is majority owned by the Russian Government and is the flag carrier and largest airline of the Russian Federation. The three major airports serving Moscow are Sheremetyevo International Airport (SVO), Domodedovo International Airport (DME) and Vnukovo International Airport (VKO). Aeroflot dominates the domestic passenger market in Russia, however other airlines also provide frequent national and international services and they include S7 Airlines, Transaero, UTair Aviation as well as VIM Airlines and Nordavia. The Federal Agency for Air Transport of Russia is the government that is responsible for rendering governmental services and managing governmental property in the sphere of air transport (civil aviation) and the usage of air space over the Russian Federation.
Airports in Russian Federation
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Russian regional airline RusLine is pursuing significant expansion in summer 2013, including the launch of five routes from Chelyabinsk Airport.
The fast-growing regional operator is Russia’s 16th largest domestic carrier with about 9,500 weekly domestic seats and about a 1% share of the Russian domestic market, according to CAPA and Innovata data. It is based at Moscow Domodedovo Airport, where it is currently the 10th largest domestic carrier.
But RusLine’s capacity will nearly double over the next couple of months as it launches several routes, including from Chelyabinsk and a new base at Voronezh, and adds capacity in several existing markets. The carrier plans to offer almost 20,000 weekly domestic seats in the Russian domestic market in Jul-2013, giving it almost a 2% share.
Siberia-China seat capacity grew 202% between 2003 and 2012 and China's northern City of Harbin is now jockeying to become a network hub for Siberia. The airport accounts for 15% of Siberia-China capacity, far less than the largest Chinese airport, Beijing, 1000km to its southeast. Harbin offers geographical advantages to Siberian cities in the far east while Beijing can serve those with some circuitry as well as western Siberian cities. Urumqi in China's far west could also be a hub for Siberia, supporting China Southern's development of Urumqi as a West Asia/CIS hub.
The motivation is simple. Siberia's 40 million population has proven an increasingly important trade relationship for China – so much so that in the economic turmoil of 2009, Siberia was the only part of Russia to maintain a positive investment trend. China is tapping Siberia for resources ranging from wood to oil and, increasingly, hydroelectricity from Siberia's numerous rivers. Russia's largest private energy company forecasts Siberia's GDP could triple in 15 years.
Russia is preparing to open up its aviation market to more low-cost competition, in a potential game changing move that could lead to significantly more local and foreign LCC capacity over the next few years. In its efforts to create an environment able to foster low-cost competition, various changes to aviation legislation are in the pipeline.
Leading Russian carriers have signified their interest in entering the low-cost market while foreign LCCs have stated their interest in operating to, from and within Russia. The upcoming changes to legislation could lead to a significant increase in LCC activity in the country, with forecasts of LCCs gaining up to 35% market share within 10 years.
Transaero, Russia’s fourth largest carrier, is pursuing further growth across its domestic and international networks. Transaero will be operating a 20% larger schedule in summer 2013 compared to summer 2012 with considerable expansion in Eastern Europe and Central Asia.
The carrier’s widebody fleet, which is already the largest in Russia, is set to increase over the next several years, leading to further ambitious expansion across its medium and long-haul network. The carrier already operates a widebody fleet of about 50 aircraft consisting of 747-300/400s, 767-200/300s and 777-200/300s, and plans to take three new types over the next few years – A380s, 747-8Is and 787s.
Kuban Airlines ceased operations on 11-Dec-2012, filing for bankruptcy with the Krasnodar Region Arbitration Court. It had been in financial difficulties for some time. Kuban Airlines accounted for just under 16,000 seats per week to Russia’s aviation market, ranking it the 20th largest carrier in the country based on weekly seats offered, according to Innovata data.
The bankruptcy filing also apparently spells the end for the first of Russia's mostly unhappy LCCs. Established in 2006, the former self-standing LCC, SkyExpress, had been folded into Kuban in Oct-2011 and operated under its own brand as a low cost division under Kuban's AOC, while retaining the SkyExpress identity.
Some Russian carriers have already signalled their intention to step in to replace services on some routes and UTair stands to benefit most from the collapse, particularly on domestic services from Moscow Vnukovo Airport.
Russia is seeing increasing low-cost airline activity with a number of recent developments pointing to the opening of the eastern nation’s LCC market. Since the collapse of the country’s only LCCs Avianova and Sky Express in Oct-2011, there has been no domestic low-cost traffic but there has been growth in international low-cost traffic from foreign carriers.
The domestic market would also receive a boost if Russia authorises foreign LCCs to compete domestically, which is currently being considered. Such a change in policy could lead to domestic services being introduced by leading European LCC groups such as easyJet and Ryanair as well as lead to the launch of new LCC subsidiaries from Russian full service airline groups such as Aeroflot and Transaero.
easyJet has unveiled plans to enter the Russian market in early 2013, initially with flights from London Gatwick to Moscow but the carrier is also interested in several other international routes from the UK and Switzerland to Russsia. Ryanair is also interested in entering the Russian market and has applied for traffic rights in the UK-Russia market.