OREANDA-NEWS. December 21, 2010. Deputy Head of FAS Russia Anatoly Golomolzin reported to the Government Commission on Transport and Communications “On Improving Competition Mechanisms in the Air Transportation Market”. The air transportation market is of key importance in the Russian Federation as more than 60% of the country are the regions with the population over 15 million people, for whom aviation is irreplaceable and often the only means of transportation. The size of the country and its geopolitical features determine a significant role of air transport as a powerful factor of integration. On the basis of the detailed analysis, the report outlines the measures which can principally improve the situation on the market of air transportation, reported the press-centre of FAS Russia.

In the last few years, upon the initiative of the antimonopoly authority, the Government of the Russian Federation adopted legal acts, that allow air carriers to freely select routes and provide for non-discriminatory access to airport services. Prices for aviation fuel were reduced, particularly due to the FAS Russia’s efforts. Already three fourths of all transportation falls to competitive routes, served by three and more air carriers. The proportion of such carriage in the overall volume of domestic transportation was consistently increasing: from 73% in 2007 to 76.2% in 2009 году. In January – October 2010 lift capacity increased by 27.1% in comparison with the similar period of 2009. In the same period, passenger traffic increased by 31.5%.

FAS Russia analyzed more than 650,000 rate offers made by air carriers in the last two years for all existing air lines in the Russian Federation. A new entrant to the market (route) on average reduces the airfare by 28.5%, two new air carriers – by 32%, and three – by 39%. From April 2008 to December 2009 on the routes where no single carrier has the dominant position the rates increased on average by the 8.1%, while on the routes which have the dominant carrier - by 50-60% for the same period. In the last 18 months / two years the air fare for about 380 routes increased by 30% and more. At the moment regional antimonopoly offices, following the instructions form FAS Russia, are inspecting these routes. Antimonopoly violations were discovered, in particular, in Krasnoyarsk, Kaliningrad, Rostov-on-Don and Khanty-Mansiysk.

It is impossible to resolve the problem only by investigating antimonopoly violations.cases. Radical improvement of the situation on the market in general is necessary. Russia still has not reached the volume of passenger traffic it had twenty years ago. The share of the Russian Federation in the global passenger and cargo transportation is very low, and in 2009 it was below 2%. It is unacceptable when Russia is on the 28th position in the world for transport availability – index 0.35 (to compare with the UK– 1.5, the USA – 2.5, Norway- 4.5). In the recent year the overall growth of air transportation was mainly due to foreign travels. At the same time the proportion of domestic carriage reduced consistently from 75% in 1990 to 44% in 2009 and the proportion of carriage within the CIS– from 18% to 6%.

The proportion of transportation abroad exceeds in multiples transportation between federal districts along all directions in North-Western and Central Districts. Превышение Cross-border routes exceeds domestic routes (except transportation to the Central District) in Privolzhie, Siberian and Southern District. The Russian Far East Federal District is the only one where transportation within the District considerably exceeds volume of traffic on external air lines - over 1million people in 2009 and in 2008. The lowest level of domestic transportation is in Provolzhie (96,000 people in 2007-2009) and in the Southern Federal District (169,000). These data show that transport connection between regions is utterly insufficient and domestic connections are rather poor.

Most of domestic passenger flow concentrates on the main lines, where there are several competing airlines. However, fewer than 25% passengers raveling on socially important regional and local routes (90% of total number of routes), are served by one or two airlines. Around 75% passengers fly through Moscow, regional carriage accounts for 22%, and local – for 3%. In 1990 26% passengers used to fly through Moscow, while regional transportation comprised 46%, and local – 27%.

In twenty years the airport network in the Russian Federation reduced by more than four times. Only 62% airports have paved runways and 70% of airport facilities were commissioned around twenty years ago. Lighting navigation aids are installed in two thirds of airports. The degree of wear-and tear of fixed assets in airports network is very high. Benign situation in Moscow aviation node is mainly due to competition between the three main airports (Domodedovo, Sheremetyevo, Vnukovo). Recently airports in several large cities have undergone modernization and development, particularly, through various forms of private-public partnership. The main problem is backwardness of the network of regional and local airports.

The rates in large and small airports vary considerably: from 1.5 times for kerosene and refueling to 3.1 times to aviation safety and up to 3.8 раз for take off and landing. One of the reasons is excessive regulatory requirements for small and medium airports, and too much administrative burden from the regulators. Most of airports do not operate as business units trying to increase air transportation. The system of tariff regulation also does not stimulate them. This situation requires optimization of the functions and the scope of reference of executive bodies in the field of transport and changing the law regulating air transportations. In November the Government Commission for Administrative Reform already considered and approved some of these proposals. FAS Russia will introduce new proposals on the issue before the end of the year.

In 2009 the cost structure affecting airfares changed in comparison with 2008. Although the main expenses remain aviation fuel and lubrication materials, their proportion increased considerably from 38.4% in 2008 to 25% in 2009. Expenses increased for regulated rates for airport and air navigation services as well as for the lease of aircrafts, lease payments and production expenses.

FAS Russia drafted proposals aimed at improving the current situation and reaching the main goals, such as: by 2020 increasing passenger air traffic by 4 – 5 times, cargo transportation - by 8 – 10 times; increasing the number of operational airports (aerodromes) at least twofold; developing conditions for overrunning growth of the low cost segment of transportation, general aviation, including business aviation; considerable increase of proportion and the volume of regional and local carriage. Based on the FAS proposals, supplemented by the Ministry of transport of the Russian Federation and approved by session participants, the Government Commission on Transport and Communications gave instructions to promptly devise and approve the programme for developing the air transportation market. Implementing the proposals will make air transportation fully available to the population of the Russian Federation.