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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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Air Astana plans more rapid growth in 2014 but Kazakhstan airline market shows signs of slowing down
Air Astana is planning another year of double-digit capacity growth in 2014 as the Kazakhstan flag carrier expands its 767, A320 and E190 fleets. The carrier will focus on further expansion in the CIS and Central Asia region, but new 767-300ERs will also enable some capacity growth across its long-haul network.
ASK growth of 15% is expected for 2014, following 16% growth in 2013. But Air Astana plans to slow down expansion in 2015, ending a period of five consecutive years of expansion at a pace of approximately 15% per annum.
Market conditions have become less favourable in 2013, impacting load factors and profit margins. The prospect of increased competition, including the possible opening of Kazakhstan’s domestic market to Russian carriers, clouds Air Astana’s medium to long term outlook.
The United Arab Emirates’ newest airport, Dubai World Central (DWC), opened its passenger terminal on 27-Oct-2013 and its first commercial passengers. The operator was Wizz Air, the Eastern/Central European LCC, with a flight from Budapest. Wizz Air Group (which includes Wizz Air Ukraine) also launched Bucharest, Sofia and Kiev from DWC as the winter season commenced.
According to Wizz Air CEO József Váradi, Wizz Air expects to handle 250,000 passengers on services to DWC in the first year of operations. Based on the four routes launched this week, this would imply load factors averaging 95%. Although Wizz Air’s 2012 load factor was more than 85%, this seems very ambitious for new routes, even in the hyperbolic world of low-cost airlines. More likely, Wizz Air plans to add frequencies and/or routes through the year.
Either way, it demonstrates the carrier’s confidence in taking the narrowbody LCC model further than most on routes that look to be under-penetrated. Mr Váradi is even talking of adding flights to India from DWC.
It may not attract the same sort of attention as Le Bourget or Farnborough, but the MAKS International Aerospace Salon is the venue where Russia’s airlines, leasing companies and aircraft manufacturers hammer out the final details of major orders. The bi-annual event, which wrapped up at the end of Aug-2013, saw more than USD21 billion in orders and commitments made, a record for the show and a qualified success for the Russian aerospace industry.
Russia’s state-owned United Aircraft Corporation (UAC) and its subsidiaries recorded orders and commitment for more than USD12 billion. Agreements signed by UAC at MAKS 2013 covered orders for 178 aircraft, comprising 96 Sukhoi Superjet 100s and 82 Irkut MS-21 aircraft. Including other agreements signed at the airshow – mostly military – the orders boosted the value of the company’s backlog by 30%. Including letters of intent and provisional purchase agreements, UAC’s total order portfolio is now close to RUB1.5 trillion (USD44.8 billion).
Russia’s Yamal Airlines has been transforming its operations over the past year with significant network development and fleet modernisation and expansion. The airline transported 912,000 passengers in 2012 and is aiming to increase its passenger traffic to 1.5 million in 2013.
Yamal is currently Russia’s 10th largest carrier overall with 42,500 total weekly seats on offer, according to CAPA and Innovata data. Domestically it is the seventh largest carrier in Russia with around 38,500 weekly domestic seats offered.
The Aeroflot Group is the leading airline group in the Russian Federation by some distance. Its airlines have strong market positions at its hubs across the country, which extends from Europe to within a short distance of China, Korea and Japan. The group has been profitable for over twenty years and its passenger traffic is growing at double digit rates.
Its market position has benefited from a government “national champion” policy, through the 2011 acquisition of a number of state-owned regional carriers. Nevertheless, its 2012 profits were diluted by losses in the newly acquired subsidiaries.
In an attempt to address this, its two carriers in Russia’s Far East are to be merged. Moreover, the major European country with the lowest LCC penetration looks as if it may soon have its very own no-frills airline after Aeroflot’s recent announcement that it plans to establish a new LCC subsidiary.
flydubai is continuing to rapidly expand its extensive network in the CIS region with nine new destinations being launched in 2013. flydubai’s rapid growth in the CIS market will be followed by sister carrier Emirates, which recently unveiled plans to also serve Kiev from Jan-2014.
Dubai-Kiev Boryspil will be Emirates’ first service to the Ukraine and third overall in the CIS along with Moscow Domoededovo and Saint Petersburg. Further CIS network expansion by Emirates is likely to come as low-cost narrowbody operator flydubai continues to develop the Dubai-CIS market, growing routes to the point they can also support widebody service from Emirates.
Emirates announced on 11-Jul-2013 plans to launch daily Dubai-Kiev Boryspil service on 16-Jan-2014, using three-class, 258-seat A340-500s. Emirates’ service will be only the second carrier providing first class seats into Ukraine, following Uzbekistan Airways’ weekly Boeing 767-300 service.