Analysis of the dynamics of air passenger transportation in Russia
Last year failed to meet the expectations of the Russian aviation market in terms of traffic recovering to the 2019 level. The start of the year instilled hope as the number of internal passengers had already exceeded the pre-pandemic level in January and February, while a predicted recovery of international flights could have resulted in the industry’s operating indicators beating the results of not only 2021, but also the record year of 2019.
However, sanctions imposed on the Russian aviation sector, above all the closure of the skies above most European countries, wiped out plans to restore international traffic. Consequently, Russian airlines focused on domestic destinations.
The relatively favorable opening months of 2022 enabled the market to record 16% growth of the number of passengers transported in Q1 compared to the same period in 2021. However, in the following months, the sector’s performance lagged behind 2021, which resulted in the number of passengers for the year as a whole declining by 14% (95 mln passengers in 2022 vs. 111 mln in 2021).
Figure 1. Passenger traffic of Russian airlines, mln passengers
Sources: Federal Air Transport Agency, Ministry of Transport, ACRA
The decline of the number of passengers to 95 mln pushed the Russian aviation market back to levels last seen in 2014–2015. Despite the comparable indicators for the number of passengers, their structure compared to the aforementioned years differ significantly. In 2014, the share of international traffic was 50%, and then declined to 43% in 2015, a crisis year for the industry. In 2022, the international segment accounted for a 19% share. Despite the fact that the geopolitical climate was also aggravated in 2014–2015, the situation that the industry was facing then and its prospects were much more understandable and predictable.
Figure 2. Comparison of the structure of passenger traffic in 2014–2015 and 2022
Sources: Federal Air Transport Agency, Ministry of Transport, ACRA
ACRA is positive about the steps taken by the government and airlines to develop the domestic transport industry; they allowed the market to get through the pandemic period relatively safely and demonstrate sufficient traffic volumes in 2022. The domestic market may become the basis for 2023. ACRA sees three scenarios for this year.
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Inertial scenario. This scenario assumes no changes in the geopolitical situation and the current restrictions for the Russian aviation market. Airlines will continue to operate the existing fleet, and the supply chains for spare parts, consumables, etc. will remain. The total amount of direct and indirect subsidies and other forms of government support will amount to RUB 50–100 bln. Under the inertial scenario, ACRA expects the passenger traffic of Russian airlines in the range of 85–95 mln passengers for 2023, of which domestic routes will account for at least 85%.
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Stress scenario. This scenario assumes a significant aggravation of the geopolitical situation, tightening of, or stricter control over, the sanctions regime, and the total amount of direct and indirect subsidies and other forms of government support at less than RUB 50 bln. Under this scenario, the Agency assumes that passenger traffic will drop below 85 mln in 2023, with the share of domestic routes at no lower than 90%. The severity of the decline will depend on the degree of materialization of the scenario’s assumptions.
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Optimistic scenario. Geopolitical tensions are eased and the most of restrictions against the Russian aviation market are lifted. Under this scenario, the number of passengers may amount to 95–110 mln in 2023, and the share of domestic routes may be in the range of 75–85%, while a greater effect can be expected in 2024–2025.
ACRA considers the inertial scenario to be the most probable, while the likelihood of the optimistic scenario is low.
ACRA assumes that the inertial scenario’s assumptions are only acceptable for a transitional period in the development of Russian civil aviation on a short-term horizon as a temporary measure. The state is determined to replace the main portion of the fleet with Russian-made aircraft. According to the Comprehensive Program for the Development of the Russian Federation’s Air Transport Industry until 2030, the average number of SSJ-NEW and MC-21 airplanes manufactured annually is expected to be 20 and 44, respectively, in 2025–2030, and the total share of domestically manufactured aircraft in the fleets of Russian airlines should exceed 80% by 2030. To achieve these goals, it is necessary to finalize creation processes and start industrial production of a line of aircraft engines, medium-haul and short-haul aircraft and avionics, and to deploy and develop after-sales and repair services. Significant investments are required. Otherwise, today’s temporary measures may become permanent.
