OREANDA-NEWS. July 30, 2010. Russian airlines increased their passenger traffic 30.9% in 1H10 YoY to 24.5m people, according to Rossaviatsia. In June, the number of passengers rose 25.9% YoY to 5.8m, following the 30.1% growth posted in May. The most significant traffic growth rates were demonstrated by Orenburg Airlines (+61%) and UTair (+47%), although the biggest player is still Aeroflot, which has market share of about 21%, reported the press-centre of OTKRITIE Financial Corporation.

View: The continued increase in air-traffic from the lows of February 2009 is clearly positive for the industry. Nevertheless, we still forecast overall passenger traffic for FY10 at 48m passengers, which is 4% below the pre-crisis level of 50m passengers posted in 2008. UTair, in particular, has outpaced the industry in terms of growth, thereby increasing its market share from 7.7% year ago to 8.6%. Aeroflot also improved its passenger load rate from 70% to 75%.

Valuation and Action: Our valuations for both UTair and Aeroflot stock are currently under review, though both companies look attractive on the multiples. According to Bloomberg consensus, UTair trades on a 2010 EV/EBITDA of 6x and Aeroflot trades at 5.8x, while the global average for 2010 is approximately 9.4x.