Published: 10/29/2001

In the aftermath of 11th September, Russian airlines still seem to be suffering little of the pain experienced by western carriers and, in some cases, such as the private airline Transaero, they are using the market's softness and subdued demand for aircraft as an opportunity to negotiate more favourable lease deals. Volumes, with the exception of some of the US routes, have been largely unaffected by the tragedy in New York. Domestic travel continues its remarkable recovery, fuelled by an economy that is currently buoyed up, according to various market surveys, by high levels of consumer confidence, disposable income growth, a high level of investment spending and oil demand underpinning the economic upturn. While the airlines are publicly confident, there are hints of a more cautious outlook, reflected in this month's winter schedules, which show some rethinking over where growth might come from over the next six months. All the schedules reveal a number of changed frequencies or closed routes, outside of the country in particular, and there are examples where previously announced plans for route expansion have clearly been changed. For the larger airlines, however, judging by the rash of nine-month figures, growth is steady and looks likely to remain so. The trend has been accelerated by competitive pricing of rail against air on some of the lucrative high volume routes, as the Putin administration pushes through a programme of structural reform that is having the impact of increasing historically low rail prices. The beneficiaries of the improving market conditions will inevitably be the larger carriers, while the smaller regional players continue to fight for their existence in a market that is an unforgiving as ever to the remnants of Russia's early 1990's air transport system. The casualty list grew this month when Baikal Airlines, having struggled to survive for the last three years and deprived of the parachute of a takeover by Sibir, ceased flying after the GSGA withdrew its licence, leaving it simply as a collection of aircraft leased out to other airlines. The GSGA official line remains that it will continue to weed out not only the small two or three aircraft operators, but also the larger regional players that have failed to restructure and survive in bankruptcy or by the largess of regional governments, but only as the living dead. Other carriers, however, are actually pursuing aggressive expansion strategies. Siberian regional carrier, Novobirskavia, for example, in the belief that it is under the food chain of larger super regional carriers such as Sibir and KrasAir, is aiming to build a business that will complement rather than compete with the larger carriers, by attending to intraregional routes. The finances, even of the openly ambitious, however, remain suspect and have benefited little from the pick up in the overall air transport markets in Russia. Novobirskavia and other players will probably have to wait - if they can hold out that long - to see Russia's economic recovery percolate down to the regions outside of the major centres. The next few months will determine whether Russia and the CIS will catch the general slowdown being experienced elsewhere, but for now the Russian passenger seems largely undeterred by any heightened risk imposed by the international situation. They appear to accept such risks as a fact of life, as a result of the country's war in Chechnya and recent events make little difference to that sombre reality.

Article ID: 2862