AviaAM Leasing: Intensifying ‘Westernization’ of the fleet in Russia & CIS
Recently one of the leading CIS carriers – UTair – has placed an order for 20 new Airbus A321 aircraft. The acquisition is ‘part of … fleet modernization program to match the company's policy … to improve service and develop the … route network,’ said UTair Aviation CEO Andrey Martirosov. The acquisition clearly indicates the further alteration of regional carriers towards Western-built aircraft, which currently correspond to over 60% of the entire regional fleet.
Passenger market growth
The intense modernization of the fleet is being triggered by aging Soviet/Russian aircraft, as well as by promptly developing local air travel market. For instance, during the first 9 months of 2012 in the Russian Federation alone the number of both commercial and charter flights have increased by over 6% compared to the same period of previous year.
Table 1. Total number of flight in Russia during Jan-Sep 2012, the Russian Federation‘s Federal Agency for Air Transport data
‘One of the main factors which are maintaining high growth of the market is the successful restoration of the regional economy. The aggregated GDP of the region increased by 4.4% during the first seven months in 2012, with Russia to remain as the major source of economic dynamism in the CIS region. Another factor which enhances the regional air travel is the intensifying development of the regional airport infrastructure, which is planned to attract several billions of euro of investment until the end the current decade,’ commented the Deputy CEO of AviaAM Gediminas Siaudvytis.
Aging fleet
Aging fleet
With many CIS states intending to scrutinize their aviation legislation, further limiting the operation of over 15-20 old aircraft, including Soviet-era ones, many (if not all) operators are forced to phase out some of their fleet and replace it with newer, Western-built airplanes. In early 2000 the ratio of Russian/Western aircraft in the region was approx. 95 to 5. As a result of intense fleet modernization, the number of Soviet/Russian aircraft declined by approx. 66%, while the number of Western airplanes rocketed by almost 10 times.
Table 2. Western/Non-Western aircraft fleet in the CIS 2002-2012, Ascend data.
Furthermore, in Russia - the major aviation market in the region - local aviation authorities are aimed at enhancing domestic air transportation industry and improving its quality and reliability, since approx. 67% of the entire regional fleet is older than 10 years and almost 30% of the fleet is older than 20 years. Driven by the government’s intentions regional airlines are now in the process of full renewal of their fleets. Both local and federal authorities are providing the carriers with fiscal support in order to facilitate the transaction to newer aircraft. Considering the relative absence of Russian-built regional aircraft, regional airlines are further increasing the ‘Westernization’ of the fleet by importing.
Table 3. Imported and local aircraft fleet in the CIS by age. Ascend data.
Future development
While the air travel demand in CIS rises, regional carriers are enhancing their capabilities. Unfortunately, Russian aircraft manufacturers are yet to develop their production capabilities to satisfy the market demand. Meanwhile regional operators are ought to import foreign aircraft in ordered to ensure their further expansion and higher competitiveness with foreign carriers. Driven by the competitive nature of the market and low fuel-efficiency of older generation aircraft, during the last 10 years local operators have phased out over 190 Yakovlev (Yak), over 90 Ilyushin (Il) and over 400 Tupolev (Tu) aircraft, replacing them by Boeing, Airbus, ATR and other western-made aircraft. Another issue, which forces carriers to purchase or lease Western-built airplanes, is the aftermarket. Russian OEMs mainly source the aircraft manufactures, while reserving almost no inventory for the aftermarket. This naturally raises the demand for Western aircraft, which have a wide scale of aftermarket solutions around the globe. However, should the Russian & CIS aviation achieve its middle- and long-term goals, it is more than likely that the regional aircraft industry will see a new age of prosperity.