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Modest growth
The Russian air transport sector continues to grow faster than those in Europe or the USA. However, in absolute figures, the performance of Russian carriers remains considerably lower. In the first six months of 2013, Russian airlines carried 37.4 million passengers, or 17.7% up year-on-year from 2012. Nevertheless despite — and, in a sense, even due to the growing passenger numbers, the sector is failing to resolve a number of chronic problems. "Such rapid development is inevitably accompanied by new challenges," says Deputy Transport Minister Valery Okulov. "The sector’s existing problems get exacerbated and lead to shortages in certain areas. The most pressing shortages are those of pilots (primarily captains) and aircraft of all sizes. Another problem is that the airport infrastructure requires renovation." In addition, international passenger traffic continues to outstrip domestic traffic in Russia. In the first six months of this year, Russian airlines carried 20.14 million passengers internationally, or 23.8% up year-on-year. Over the same period, domestic passenger figures grew 10.1% to 17.3 million. Aeroflot and Transaero remain the two largest Russian carriers with the greatest portion of scheduled international flights, and continue as the fastest growing on the top five of Russian airlines. Aeroflot saw its passenger numbers grow 20.2% in the first half of 2013, to reach 9.5 million; Transaero reported 26.4% growth to 5.5 million. S7 Airlines carried 17% more passengers with 3.2 million. This carrier had been previously growing behind the market because of its cost-cutting and efficience-boosting program launched in order to pay out accumulated debt. By contrast, UTair Aviation slowed down from its previous 20-25% annual growth rate, carrying 3.8 million passengers in the first six months (7.1% growth). The top five airlines continue to dominate the market by carrying 64.1% of all passengers in the Russian air transport sector. One of the reasons for this is the absence of new players on the market. The new regulations requiring carriers to have a minimum fleet size have further constrained start-up opportunities. Charter carriers are thriving in Russia. Nordwind reported a 52.2% increase in passenger numbers to 1.5 million people; Orenair’s traffic grew 22.9% to 1.4 million passengers, and that for IFly increased a whopping 88% to 446.2 million. However, the charter air travel business is extremely susceptible to the political developments in the most popular tourist destinations, including Egypt. Political instability in that country prompted Moscow in August to advise Russian citizens against visiting Egypt. It is therefore possible that for some charter carriers, the 2013 results will not prove all that impressive after all.

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