Airport Infrastructure Development Are the Construction and Re-Construction of the Airports in the Cities That Will Host the 2018 FIFA World Cup Russia
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AIRPORT INFRASTRUCTUREDEVELOPMENT IN RUSSIA FLANDERS INVESTMENT & TRADE MARKET SURVEY Airport infrastructure in Russia December 2014 André DE RIJCK, Vlaams Economisch Vertegenwoordiger in Moskou Economic Representation of Flanders c/o Embassy of Belgium Mytnaya st. 1, bld.1, entrance 2, 119049 Moscow, RUSSIA T: +7 499 238 60 85/96 | F: +7 499 238 51 15 [email protected] Introduction In 2013, the Russian airports contributed significantly to the passenger traffic volume increase in Europe. In this way the total number of passengers in Europe was increased by 50,8 mln. people, 15,9 mln. pax from them (31,3% of traffic growth) are accounting for Russia. In 2014, Russia ranked 74 among 144 countries (in 2013 - 93rd among 148 countries) by the quality of its infrastructure in the top-list of the Global Competitiveness report 2014-2015, prepared by World Economic Forum. Russia's position in the countries rating list in terms of the quality of infrastructure Libya 144 Lebanon 140 Bangladesh 130 Brazil 120 Ghana 110 Bulgaria 100 India 90 Uruguay 80 Russia 74 China 64 Guatemala 60 Chile 50 Latvia 40 Cyprus 30 Malaysia 20 France 10 Switzerland 1 0 20 40 60 80 100 120 140 160 The infrastructure of the Russian Federation is a fast developing sphere due to the initiatives from both the public and private sectors. Private investors are backing large-scale transport projects, including those in the airport sector. Following the concession agreement for one of Russia's biggest airports, St Petersburg's Pulkovo, a number of other regional airports have been subject to a concession or privatized. Major recent deals include those for the Perm Bolshoye Savino Airport and the Krasnoyarsk Yemelyanovo Airport. The main goal of such projects is to increase the handling capacity and to reconstruct terminals and runways. In the next few years, there are some expectations for further consolidation of this sector in the form of a small number of interregional airport holding companies. Russia's position in the countries rating list in terms of the air transport infrastructure Some experts think that the rating list of the Global Competitiveness Report is not giving the completely updated status picture, as it is based on statistic information and public opinion poll results of top-managers, but it obviously reflects the positive dynamics and essential trends in this area. 2 Mauritania 140 Haiti 130 Bolivia 120 Bhutan 110 In 2014, Russia ranked 79 Kuwait 100 among 144 countries (in Uruguay 90 Russia 79 2013 – 102nd among 148 Italy 70 countries) by the quality of Egypt 60 Israel 50 its air transport Greece 40 infrastructure. Malta 30 Portugal 20 Spain 10 Singapore 1 0 20 40 60 80 100 120 140 160 Airport Airport Airport Airport Airport Year Infrastructure Infrastructure Infrastructure Infrastructure Infrastructure Industry value as Industry value, Industry value Industry value Industry value % of Transport RUB bln Real growth (%) as % of Total as % of total Infrastructure Infrastructure Construction 2012 8 77.3 2.9 4.5 2.2 2013e 7.9 85.8 4.5 4.5 2.2 2014f 7.8 94.9 4.0 4.4 2.2 2015f 7.8 104.8 4.0 4.4 2.2 RF Fed. State Statistics Service (e-estimated, f-forecast) According to the (Russian) Federal Air Transport Agency, the priorities related to the airport infrastructure development are the construction and re-construction of the airports in the cities that will host the 2018 FIFA World Cup Russia. The largest projects of regional airports reconstruction (Source RBC daily 14.11.2014) Federal and Regional budget Funds (bln.RUB) Other Funds (bln.RUB) Volgograd (Volgograd) 2016 4,1 0,62 Nizhny Novgorod (Nizhny Novgorod) 2018 6,5 1,2 Kazan (Kazan)-2014 4,3 4,8 Tsentralny (Saratov) 2017 7,7 1,5 Khrabrovo (Kaliningrad) 2017 4,9 8,9 Kurumoch (Samara) 2017 11,8 8,7 Koltsovo (Ekaterinburg) 2016 7,2 16,8 Yuzhny (Rostov-on-Don) 2018 18,9 18,3 3 Airport infrastructure in Russia I December 2014 Brief info about Russian civil aviation Number of civil aircraft in operation (passenger & cargo) -2,8 thousand (2013) Number of airlines: 123 (2014) Number of airports: 222 (2014) Number of International airports: 72 (2014) From 1991 and after the Soviet Union Era, the number of airports in Russia has been reduced by six times from 1450 to 222, due to a lack of funding followed by the weak demand for air transportation in the regions. From mid 2000s, the air transportation began to revive. The average annual growth reached 14% in 2010, one of the highest rates in the world, due to a boom in tourism and the fact that some passengers changed their traveling habits, giving priority to plains over trains. Number of the airports in Russia (Source: FAVT stat.) 1600 1400 1450 1200 1000 800 876 600 400 533 393 200 332 315 304 297 222 0 1991 1995 2000 2005 2010 2011 2012 2013 2014 Passenger traffic rose 18% to record 142 mln. in 2013. The Dynamics of traffic volume operated by the 120 Russian airlines at the airports of the Russian Federation (mln.pax, Source:FAVT) 100 84,5 80 74 64 60 56,9 49,8 45,1 45,1 40 mln.PAX 35,1 38 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 4 National backbone of the airports of the Russian federation International Hub Airports Krasnodar International Airport Khabarovsk International Airport Main trends of airport development infrastructure in Russia - Following the results of 2013, the Russian market demonstrated the fastest growth rate (+13,5%) of passenger traffic in the airports of the Eastern Europe region; - The development of regional airports - the expansion of the regional route network. Among the essential factors that boost this tendency is a low market saturation in the field of regional air transport operations. Only 15% of the Russian population prefers to use air flights to travel. The development of the regional airports is a first step in providing local air flights at a price comparable to the one of a railway ticket; - The overload of the Moscow Aviation Hub and obvious routes network orientation on Moscow airports; - The increasing activity of the largest regional players on the market such as the Basel Aero, RENOVA Group (Airports of regions) and the Novaport company; - The Focus on the regions of the South of Russia concerning infrastructure development. The Basel Aero company operates the airports of the Krasnodar region (see the table on page 8), the ones in the Rostov –on –Don and Volgograd/Astrakhan regions are operated by the RENOVA Group (key private investor) and the Novaport company, accordingly. The airports of Rostov-on Don and Krasnodar are considered as future regional hubs in this region and potential leaders on this market. 5 Airport infrastructure in Russia I December 2014 Moscow Aviation Hub (Sheremetyevo, Domodedovo and Vnukovo airports) 35 Moscow air hub (mln.pax) 30,7 30 28,2 25,8 29,3 25 22,3 26,2 20,4 20 22 DME 15,4 19,1 SVO 15 12,7 VKO 10,8 15,1 11,2 10 12,7 10,1 6,7 12,1 9,5 8,9 10,8 7,9 5 2,8 5,1 3,1 2,5 3,5 0 1995 2000 2005 2010 2015 The Vnukovo market share of air operations is amounting only to 16% of MAH operations. Domodedovo, Sheremetyevo and Vnukovo Air Operations share in % 16 43 DME SVO 41 VKO The privatization process has already a visible effect on Russia's airport sub-sector with a forecast of 4.0% of real growth in 2014 with the two Moscow main airports (Domodedovo and Vnukovo) being privatized or semi- privatized. Sheremetyevo is the only one remaining under state control. The government is now considering the opportunity of all the three airports privatized by one investor. In Domodedovo, the volume of passenger traffic increased by 11 times since the year 2000. Sheremetyevo and Vnukovo airports showed an increase of 2.7 and 3.2 times respectively for the same period. The Moscow Aviation Hub accounts for over 50% of the passenger traffic. The traffic increased by 10% to 71,2 mln. passengers in 2013. Over 65- 70% of all the flights are routed through Moscow, 10% through Pulkovo St. Petersburg airport and 25% from other Russian airports. According to expert estimations, it will take 3-4 years to solve the problem of the overcrowded terminals, and this will obviously not happen before 2018. For this reason, the MAH infrastructure is steadily on the rise. In times of peak traffic, which occurs on holidays and during the summer, the airports are unable to manage the traffic flow. As a result aircrafts are spending 6 extra time in the air, which means extra expenses and the terminals being overcrowded with passengers. Some experts acknowledge that without large-scale investments in the construction of new runways, the expansion of terminals and the upgrade of the air traffic systems, the handling capacity of the MAH could achieve its maximum. For example, Transaero, the Russian second-biggest airline, has to fly through all three Moscow airports since the capacity of its core airport Domodedovo is not sufficient. AIRPORT Type Beneficiary/Structure Pax traffic in Revenues in 2012 2013 in (bln.RUB)/growth y- mln/growth y-o-y o-y DOMODEDOVO Private “Domodedovo “ Airport – Mr. 30,7/+9% 39,9 bln. Dmitry Kamenschik and CC “Aerotropolis” SHEREMETYEVO State ROSIMUSHCHESTVO – 83,04% 29,3/+12% 17,6bln/+8,6% assets share VNUKOVO Semi-privately 2 companies- 11,2/+11% n/a Aeroport Vnukovo Ltd (ROSIMUSHCHESTVO assets share 74,7% + remaining assets of JSC Vnukovo Invest) “Vnukovo International Airport”: ROSIMUSHCHESTVO 25%+1 assets + Corwell Finance Ltd.