Moscow Vnukovo airport: will the Qatar Airways deal go ahead?
A couple of years ago Qatar Airways surprised the air transport business by signing an MoU for the acquisition of a 25% stake in Moscow's Vnukovo Airport.
Moscow Vnukovo International Airport is one of three airports serving the city of Moscow, and one of the largest airports in Russia. Located 28km southwest of city, the airport features a high speed rail link between Kievsky Train Station in downtown Moscow and the Airport's passenger terminals. The airport acts as an alternate for Domodedovo and Sheremetyevo airports.
Qatar is not the only airline to engage in the airport operating business, and the CAPA Airport Investors Database lists more than 30 other such examples where airlines have tried (and in some cases succeeded) in entering the airport sector.
But the deal is still not yet finalised, and with everything that is going on just now, together with previous examples of difficulties where foreign companies have tried to invest in Russian airports (such as Fraport at St Petersburg), there is no guarantee that this deal will be concluded.
And in any case Qatar Airways is preoccupied now with its investment in Kigali, Rwanda.
- Qatar Airways is in the process of acquiring a 25% stake in Moscow's Vnukovo Airport, but the deal has been delayed and may take up to two more years to finalize.
- The acquisition would provide Qatar Airways with a stronger presence in Russia, complementing its existing operations in the country.
- The Federal Antimonopoly Service of Russia has welcomed the proposed deal and expects it to be beneficial to the national economy.
- Vnukovo Airport is the third busiest airport in Moscow, handling both low-cost and full-service carriers.
- The airport has seen significant growth in passenger numbers, reaching 24 million in 2019.
- Qatar Airways' investment in Vnukovo Airport could enhance the airport's alliance credentials by attracting more airline partners.
Summary
- The Qatar Airways/Moscow Vnukovo deal is ongoing and could be closed in two years.
- But we are already two years in on a deal that should have been finished in eight weeks.
- Russia's Federal Antimonopoly Service (FAS) has already welcomed the deal.
- With 24 million ppa, Vnukovo has some gravitas by Russian and international standards.
- Vnukovo is short on alliance airlines, and Qatar Airways (oneworld) is a welcome addition.
- With the deal still not signed, Qatar Airways' commitment to Rwanda needs to be borne in mind.
Deal "could be closed in two years" - but that's already two years in
Jun-2020: Moscow Vnukovo Airport chairman Vitaliy Vantsev said the deal for the sale of a 25% stake in the airport to Qatar Airways could be closed within two years. Mr Vantsev said: "When we fulfil all the conditions for entering the deal, it will go ahead".
Vnukovo is one of the four Moscow airports, and the third busiest after Sheremetyevo and Domodedovo.
The deal has been a long time in the making, and many observers will be surprised that after it seemed to be closing, the timescale has been changed in this manner, even allowing for current events on a global scale.
It was as recently as Sep-2019 that Qatar Airways' CEO Akbar Al Baker said the deal could be closed by the end of 2019 if the results of checks currently in progress were satisfactory, and he added that the checks were nearing completion.
Before that (Oct-2018), both parties had been talking in terms of 1H2019, and Vnukovo's GM Vasily Aleksandrov said: "All major issues have been worked out. There are only a few small things that still needed to be settled" and "much has been done" to sign the agreement by the end of 2018; however, 1H2019 was "more realistic".
Even before then, in Jul-2018, Akbar Al Baker had said that the airline would "sign the MoU and then begin the purchasing process" for the acquisition once the due diligence process was complete, but that "It is taking longer than we thought... but our interest is still there".
A history of vacillation but strong ties already exist
So there is a history of vacillation on this deal.
Moscow Vnukovo Airport first signed an MoU to sell the stake to Qatar Airways in Apr-2018. The airline was originally given eight weeks to finalise the agreement.
As for its raison d'être, when the MoU was signed, Akbar Al Baker, said: "Such an investment will complement the strong ties we have already established with the country, with our launch of direct services to St. Petersburg late last year, as well as our triple-daily flights to Moscow. All our investments are part of our existing expansion strategy".
Qatar Airways may also see this as part of its strategy concerning the Gulf blockade of the emirate.
FAS gives nod of approval
Vitaliy Vantsev expressed confidence that the agreement would be mutually beneficial and would provide synergy for the development of both parties.
But Russia's Federal Antimonopoly Service (FAS) stated that the acquisition would require an application to FAS. The application would also be considered by Russia's Government Commission on Monitoring Foreign Investment. FAS Deputy Head Andrey Tsyganov said FAS welcomed the proposed deal and expected it to be beneficial to the national economy.
Moscow Vnukovo International Airport is one of three airports serving the city of Moscow, and one of the largest airports in Russia. Located 28km southwest of city, the airport features a high speed rail link between Kievsky Train Station in downtown Moscow and the Airport's passenger terminals. The airport acts as an alternate for Domodedovo and Sheremetyevo airports.
Mainly low cost, but with a sizeable full service complement
Although Vnukovo handles predominantly low cost traffic, it also has 24% full service carriers in its capacity mix.
Moscow Vnukovo Airport seats by business model: week commencing 08-Jun-2020
The largest airline by some degree is the Aeroflot-owned LCC Pobeda, with 63% of seat capacity.
Moscow Vnukovo Airport seats by airline: week commencing 08-Jun-2020
It's bigger than you think
Since 2012 passenger numbers have increased from 9.7 million to 24 million (2019), with 11.8% growth achieved last year.
While the majority of the seat capacity (89%) is on domestic flights, there are international services, for example, to the Baltic States, Eastern Europe, Italy and the UK, often offering a low cost alternative to the full service ones from other Moscow airports.
Moscow Vnukovo Airport network map for the week commencing 08-Jun-2020
Qatar Airways can boost Vnukovo's alliance credentials
One benefit Qatar Airways will bring to the airport is by increasing its airline alliance credentials if the airline begins operating there, which is likely.
Currently there is a limited showing by Star Alliance and SkyTeam, which jointly have only 6.3% of capacity, with the vast majority being unaligned.
Moscow Vnukovo Airport seat capacity by airline alliance: week commencing 08-Jun-2020
A big commitment has been made to Rwanda
Russia is not the only country where Qatar Airways has sought to forge an alliance recently.
Qatar Airways signed an agreement with Rwanda's Government to acquire a 60% stake in Kigali Bugesera International Airport. The project to develop Kigali Bugesera will require an estimated investment of USD1.3 billion, and the airport will be equipped to handle up to seven million passengers per annum once phase one development works are completed. It will become one of the most significant airports in Central Africa.
Mr Al Baker said the single-runway airport will be equipped eventually to accommodate up to 10 million passengers per annum and "will be a very efficient hub in a very stable country". With that remark he is presumably modelling it on Qatar.
Both the airline and the country have previously shown interest in investing in the airline business, for example in the Indian airline Indigo and Alisarda, the holding company for Meridiana, Air Italy and Meridiana Maintenance; a deal that was completed in 2017. Alisarda also holds a majority stake in GEASAR, owner and operator of Olbia Costa Smeralda Airport.
However, owning a small stake in an airport operator in Sardinia is quite different from taking major stakes in key airports in Africa and Russia. The Russian deal is yet to be finalised, and there may be plenty more hurdles to cross yet.
But it does look as if this will be a direction that Qatar Airways continues to follow in the future, as long as there are no crises along its path. In both Africa and Russia that can happen - as numerous airport investors will testify.