The Russian Air Transport Market has Stood the Recession and Currency Devaluation Testing

14 november 2017

As the Russian economy has slowly but surely been pulling out of the recession, significant differences have been observed between the trends in domestic and international flights, Analytical Center experts noted in a new bulletin on the current trends in the Russian economy.

According to Russia's Federal Air Transport Agency (Rosaviatsia), since October 2016 the sales of passenger flights in Russia have returned to growth (+4.9% on an annualized basis) as a result of renewed growth in international flight sales (+2.8%), something that happened for the first time in two years. An important contribution to the total trend in passenger turnover was made by the fast recovery in the demand for tourist travel to Turkey after the ban on chartered flights was lifted in September 2016. 2017 saw growth in both domestic and international passengers, the analysts note.

According to the experts, the corporate makeup of air traffic changed in 2015–2017 after some Russian and foreign companies left the market. The most noticeable event in the industry was the cessation of operations by Transaero in October 2015. According to the data of Russia's Federal Air Transport Agency, before the company left the market it had the second largest market share after Aeroflot in terms of the number of passengers carried. In October 2017 VIM-Avia, a carrier that used to be in the top ten in Russia, had its operator certificate suspended.

"The crisis trends, and especially the devaluation of the ruble in 2015 drove up fares, but collapsing effective demand and the launch of the low-cost carrier Pobeda in 2016 drove down flight prices in the economy class," the experts write. In the 9 months of 2017 Russian air carriers reduced prices by 4.3% on the same period of 2016, the analysts note.

On the whole, they conclude that the air travel market in Russia has stood the test of recession and currency devaluation but the sector has undergone considerable consolidation in the past three years.

For more see the bulletin Recovering Demand for Air Travel.

For other bulletins on the current trends in the Russian economy see Publications.