Paul Duffy/MOSCOW Kevin O'Toole/LONDON
Given the fragile state of its economy, it comes as little surprise that Russia's aviation industry had another tough year in 1994. Traffic continued a steady downward drift, which has already begun to take its toll on the smaller regional carriers and airports which proliferate throughout the region.
The picture was confirmed at the end of January in the Russian Ministry of Transport (MoT) annual report on the state of civil air transport. Presenting the report, Vadim Zamotin, head of the air-transport department, spelled out the largely grim statistics on the industry's performance in 1994. Among them was the fact that Russia's airlines carried fewer than 33 million passengers during the year, marking a fall of 18% over an already depressed 1993.
While the figures are undeniably poor, there are some bright spots now visible through the general gloom, such as better performance on international routes, to offset some of the domestic decline. That helped keep the fall in revenue passenger kilometres (RPK) to 13%, despite the drop in passengers carried.
There is also evidence that the industry's contraction is beginning to slow down, or even reverse, as the upheavals which followed the collapse of Communism in 1990 begin to subside.
Russian airlines had carried nearly 140 million, mostly domestic, passengers before the collapse, but that number went into a tailspin in 1991. Even in 1993, passenger traffic was still falling by one-third. The 1994 decline seems modest by comparison.
The ministry's forecasters suggest that, this year, the volume of traffic may at last begin to recover, rising by 2.7%, to 75 billion passenger kilometres. The volume of international traffic is expected to be even greater, with growth of 4.2%.
Since the lifting of restrictions on foreign travel, Russians have been taking advantage of their new freedoms. Three years ago, the number of citizens making a border crossing was no more than 1.2 million. By 1994, that had risen to 72 million people.
The MoT has been keen to translate this demand for foreign travel into increased international air traffic. New routes have been negotiated for 1995, with more airline and airport operators licensed to provide regular foreign services.
A similar picture emerges for cargo traffic. Overall figures were again down by 13% in 1994, at 1,450 million tonne kilometres, but international cargo traffic grew by 21.5%. Forecasts for 1995 predict that the overall level of traffic should at least be maintained. It is worth noting that the ministry figures do not include those for Volga Dnepr, now carving out a sizeable international market for itself as an independent Russian cargo airline.
The fall in staff numbers also appears to be bottoming out. In 1990, the Russian air-transport sector employed a total workforce of over 600,000. By 1993, it had shrunk to little over 280,000. In 1994, the number quitting the industry was down to 21,000, leaving a workforce of 262,000. The fall in 1995 is predicted to be in the region of only 5,000.
FINANCIAL PERFORMANCE
Although the MoT goes on to report that the industry's financial performance was "difficult" in 1994, here, too, there are a few notes of optimism.
The civil-aviation sector as a whole is estimated to have earned a 5.5% profit on sales of nearly 14,000 billion roubles (or roughly $3.4 billion at present market-exchange rates). That compares with a margin of 4.6% in 1993. Hard-currency revenues have also risen dramatically, to $1.2 billion, over the past 18 months or so.
Most of the larger operators have remained profitable, according to the ministry report. It suggests that around 165 of the country's merged airlines turned in profits during 1994, together earning about 500 billion roubles .
The usual warnings apply about financial accounting in the former Soviet Union, however. Profitability in Russian terms can mean little more than recording a positive cashflow, with scant allowance for capital purchases, or for financial items such as debtors or creditors.
The remaining 250 or so operators racked up combined losses of over 200 billion roubles, but most of these are relatively small operations, often operating in remote regions as the only method of transport.
Since the collapse of the old centralised system and the end of the single Aeroflot banner, the number of new independent airlines springing up in Russia has been staggering. By the end of 1994, there were no less than 413 registered Avia companies - equivalent to those holding an air-operator's certificate in the West.
According to the ministry, virtually all of the traffic was carried by only 157 of these companies, with the remaining 256 accounting for an almost negligible 0.4%.
The regions worst hit in 1994 were areas such as Yakutsk in the far north-east, where aviation losses mounted to 80 billion roubles. Privolskaka Airlines lost another 30 billion.
Incomes in these outlying regions are often low and people can find it difficult to pay existing fares, let alone the sort of rates needed to make services economically viable. Perhaps significantly, the ministry's report makes no mention of any possible state aid for these routes.
The problem of mushrooming ticket prices and the deadening effect that this is having on passenger demand, is compounded by poor accounting controls.
By the end of the year, ticket agencies owed some 500 million roubles to airlines for tickets, a situation which adds considerably to the financial problems of the industry and is bringing some companies close to bankruptcy.
The number of casualties is almost certain to rise rapidly in 1995 as the authorities increase their inspections of the industry. The Department of Air Transport, which picked up regulatory responsibilities for licensing airlines and routes, plans to issue new, compulsory, standards governing the level of services to be offered by airlines, airport and ticketing operations.
In 1994, 24 aviation companies declared themselves bankrupt, including airlines such as Maikopski, Abakan, Mineralnyvoda and Baikal, as well as major overhaul factory No 411. Airports in Arkhangelsk, Astrakhan, Magadan and Rostov on Don were also among the aviation concerns running out of cash.
The number of airports in Russia has fallen, from almost 3,000 in 1990, to end 1994 at the 1,000 level. Admittedly, many of these are little more than local aerodromes, but they still provide important passenger and freight services to the regions. The ministry defines only 67 as major "Federal" airports, including 43 with authority for international services.
The bulk of the traffic passing through the airport system is on the main domestic routes. These accounted for 73% of all departure traffic, with international services netting another 13%. The rest came from routes to other states within the former Soviet Union (10%) and utility aircraft services (4%), including passenger flights to small communities.
INFLATION AND EFFICIENCY
The industry's attempts to right itself after the 1990 crisis have not been helped by Russia's rampant inflation. Monthly salaries jumped almost fourfold during 1994 to average more than 450,000 roubles over the year. By the start of 1995, the average employee was taking home closer to 670,000 roubles (or roughly $175) a month. A predicted 80% rise in salaries during this year will do little more than keep pace with inflation.
The rouble price of aviation fuel has undergone a similar steady rise. Consumption actually fell by some 10% during 1994, in line with decreased demand, but the value has soared.
Fuel prices averaged 255,000 roubles per tonne over the year, or more than twice the 1993 average. By the start of this year, the price was standing at 425,000 roubles.
At the same time, fuel efficiency has dropped by another 6%, to average 778 grammes per tonne kilometre. This means that the efficiency rating has now worsened by almost a quarter over the past three years.
Aircraft use and productivity have been casualties of falling traffic demand, with figures edging down again for most types. Only the Ilyushin Il-96 and Il-86 show utilisation gains for 1994.
Figures are not given for most of the Western-built aircraft beginning to appear in service with Russia's airlines, including Boeing 767, 757 and 737 types. Of those that are recorded, the undoubted utilisation star was again the Airbus A310. The type achieved an average of 3,776 flight hours, which, although down from 1993, was well clear of the next-best performer, the Ilyushin Il-62 at 1,237 flight hours.
It is not clear whether these A310 figures relate only to the four-strong fleet operated by Aeroflot - Russian International Airlines (ARIA), or whether the former Pan Am A310-200 delivered to Almazi-Sakha is included.
The fall in utilisation is not only caused by the drop in passenger numbers. Another factor is the delay in obtaining spare parts, which can result in an aircraft remaining grounded - often for six months at a time. For much of 1994, ARIA only had 12 Il-62s available from its own fleet of 28 and had to borrow capacity from other state-owned airlines.
With the industry still in a state of transition, meaningful estimates of capacity utilisation are hard to gauge, but passenger load factors are given at average of 60.7% for the year. The average hides a relatively healthy performance on domestic services at 63.4%, and a poor result on international operations at a mere 54.1%.
One of the problems, especially on international flights, is that flights are regularly closed for bookings too early "in anticipation of demand". This results in many busy flights showing up as full at the ticket office, but travelling with only 50-60% load factors. Steps are being taken to change the practice.
There is little doubt that serious structural changes will have to be made in the industry before it begins to regain its health. In particular, there is a desperate need for new, more efficient, aircraft. That issue will be addressed by the second part of this report in Flight International, 22-28 February.
Source: Flight International
