Experts predict stabilization of the air travel market

10 november 2016

In the past 2 years Russia’s air travel market has contracted dramatically and its structure has changed: a lot of passengers have switched to cheaper modes of transportation, destinations have changed and the number of trips has plummeted, the Analytical Center experts write in the “Public Demand for Air Travel” bulletin that analyses the current trends in the Russian economy.

Last year the number of airline passengers fell for the first time since 2008 from a historic high of 93.2 million recorded in 2014 to 92.1 million in 2015. Experts say one of the reasons must have been the decline in travel outside the former USSR, which, however, was partially compensated for by a modest increase in domestic travel. It wasn’t just the depreciation of the ruble, higher ticket prices and more families deciding to vacation in Russia as a result that drove the changes in the international air travel market. The geopolitical situation played a role as well: in Nov 2015 restrictions were imposed for Russian tourists on travel to popular vacation destinations in Turkey and Egypt.

In 2016, airline ticket sales continued to fall in Russia: the total number of passengers in the first 9 months of 2016 was down 7.9% on 2015, with the number of passengers travelling to destinations outside the former USSR falling by a whopping 26.5% year on year with the total decline over the past two years exceeding 40%.

At the same time, as the experts note, the five airlines that have the largest amount of passenger traffic saw their ticket sales go up by 18% in January and August 2016, as a result of an increase in the number of transit passengers and a decrease in competition affected by fewer flights by foreign airlines and the closure of Transaero. in the 9 months of 2016 the total number of passengers fell by 9.8%, but if Transaero is excluded from the 2015 statistics, then 2016 can be said to have seen 11% growth in passenger traffic. Thus, the remaining airlines have taken over more than 45% of Transaero’s passenger traffic.

Passenger traffic increased in 2010-2014 as Russians became more wealthy after the 2008-2009 crisis, the specialists are sure. In 2015, airline tickets went up in price by 14%, primarily because of the depreciation of the ruble, because airlines have to pay foreign airports in foreign currency. At the same time, household spending on air travel fell by 12% in 2015. Euromonitor experts forecast that the trends towards lower household spending on air travel will continue in 2016, but the rate of decrease will slow down to 5.5%.

The decision to lift the ban on flights to Turkey and Egypt in 2016, which are expected to resume in the spring of 2017, will help the sector to recover, but analysts say airlines will only be able to achieve the same sales as before the crisis in 2018-2019. Experts predict that in the fall of 2016 airline ticket sales will continue to fall at the current rate, while by 2017, the fall in passenger traffic should stop. At the same time, the double-digit growth figures among the market leaders are clear evidence that the sector is being consolidated, which may reduce competition for some destinations.

For more, see the “Public Demand for Air Travel” bulletin.

For other issues of our bulletin on current trends in the global economy see Publications.