The business aviation world has long listed Russia as a so-called ‘emerging’ market. As the traditional powerhouses, namely the EU and US, struggled during the global recession, Russia continued to climb.
But with political turmoil leading to sanctions, one has to wonder, is Russia still a key market for business aviation?
Statically speaking, a case can be made that Russia remains a hot market. In 2013 the country saw its total fleet size increase 12.3% – for a total of 182 aircraft. Sure, this places the country well outside the global fleet ‘Top Ten’ – and even behind fellow BRIC country Brazil (which ranks number two with a fleet of 1,564) – but its double digit increase is hard to ignore.
According to Bombardier’s latest market forecast, Russian business leaders rely heavily on business aviation, where great distances over inhospitable terrain make ground transport challenging. Further, the country’s commercial network to these areas is inadequate, at best.
Due in part to improvements in infrastructure, the report sees the medium and long-term outlook for the region as remaining positive. Bombardier forecast the region receiving 1,430 business jet deliveries between 2014 and 2033, representing a fleet CAGR of 6% over the period.
Restricted by sanctions
That being said, the current political crisis cannot be ignored. Not only will sanctions likely have long-term effects, they are also having an immediate impact.
WingX Advance’s July Business Aviation Insight shows that flights from Russia were down 12% for the month and 7% year-to-date. This is equivalent to 150 flights per month for the course of the year so far.
According to WingX Advance Managing Director Richard Koe, the situation is only getting worse. “Our most recent August monitoring shows the decline is picking up and approaching the 20% mark,” he says.
The report goes on to show that this reduction is occurring in both charter and private flights and is the result primarily of diminished jet activity. Interestingly, activity from Western Europe to Russia has not yet felt the sanction’s effect – in fact, activity to and from Germany is actually up. However, connections into Eastern Europe are down and Koe expects that, unless the crisis is defused, a similar trend will soon follow in Western Europe.
Looking at the impact sanctions are having on manufacturers, Gulfstream, who has traditionally been a strong player in Russia and the CIS, has felt the bite of western sanctions. With nearly a quarter of the company’s European fleet being in Russia, needless to say some of these clients are the individuals being targeted by EU and US sanctions. This can make it difficult for the manufacturer to not only deliver aircraft to Russian customers, but also to support those already owning a Gulfstream aircraft.
According to Gulfstream Vice-President of Communications Steve Cass, whether or not a customer can receive an aircraft or support depends on where the individual falls on the US sanction list – meaning work in Russia is on a case-by-case basis.
It’s not just Gulfstream, but the entire industry that is feeling the sanction’s impact. As Avinode Managing Director Oliver King said back at EBACE in May: “Although 2014 started ok, we are concerned with the effect the Russia/Ukraine crisis will have on flight activity numbers.”
In summary, sure, business in Russia goes on. But just how much business is yet to be seen.
http://www.fly-corporate.com/article/regulatory/jetexpo2014/russian-market-questions-abound Nick Klenske