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Will things never be the same again?

Empty parking spaces on the snow-laden Vnukovo-3 airfield is a rare sight- and doesn’t fail to produce a deep impact on anyone who remembers Moscow’s busiest bizav hub at the same time last year. The question it seems to pose is whether the spring will ever return to this once flourishing corner of the business aviation world.

According to the United Business Aviation Association (UBAA)- business aviation traffic in January 2009 fell 2.3% below the level of 2006. Russian operators’ business has suffered noticeably more (down 27.8% from January 2006 results) than that of foreign operators (up 18.8% from January 2006 results) working on the Russian market. Basing its forecasts on the 2008 traffic trend and January’s figures- the UBAA foresees that 2009 will show a 20-30% decrease compared to last year’s results- with national operators showing more loss than their foreign competition.

Most local operators and charter brokers admit that the demand for their services has suffered an acute decline- estimated by some at almost 50%- which has led to increased competition and a 15-20% decrease in flight hour prices. According to Jet Trading Group’s Artiom Pastukhov- nearly one third of all aircraft belonging to Russian owners are now for sale- and half of the fleet which is left in operation consists of potential ‘for sale’ candidates- should their owners receive an adequate offer.

The usually positive players on the Russian scene are all in agreement that the industry is in the state of alert- while business aviation users strive to optimize their business structures and cut costs. However- whereas certain expenses can be avoided by switching to the scheduled carriers- there are still many routes where business charters cannot be replaced when it comes to flexibility or convenience.

Rustem Arinov- Head of Aircraft Management at Moscow’s office of Capital Jets- forecasts that the decrease in demand will continue in the medium-term- following the deteriorating economic situation- but once business comes around from the shock caused by the ongoing crisis (6-9 months after the economy starts to recover)- people will start using business jets again. When this will happen is the question on everybody’s lips.

In the meantime operators working on the Russian market do the same as their clients – look for ways to enhance their efficiency. Some of the international operators- like European VistaJet- have chosen to temporarily suspend their plans for Russian expansion until brighter days inevitably arrive. However- says Sergey Koltovich- who currently acts as consultant for Jet Alliance- while things will pick up again- the market may never be the same again in the region. According to him- the days of large-cabin luxurious jets are in the past- and business aviation is likely to finally mean what it says: business. His key phrase at the recent Business Aviation Forum-2009 was “money has become more valuable than showing-off”- which produces a major impact on the industry in this region.

Another effect of the crisis- say representatives of the industry associations- along with inevitable decrease in the number of operators- and especially charter brokers- may be that the remaining companies will be more aggressive in fighting for what has traditionally been lagging in this country: imperfect regulations and infrastructure- unfair import policy and absence of domestically produced aircraft.

In March one more barrier was removed in the issue of import customs duties on aircraft- spreading the “zero tax” to the entire range with empty weight from two-20 tons. Another important development underway is the set of regulations which will legalize aircraft ownership rights in Russia. Debate since 2004 with participation of the Russian Business Aviation Association- it is now nearing its final approval by the State Duma.

Whether optimistic or downbeat- it remains clear that the financial crisis and decreasing oil prices have changed the face of Russia’s business aviation clientele. However- as costs need to be cut- but traveling still has to be done- we might be witnessing the rebirth of Russia’s long-defunct general aviation- says Peter Hogsberg- Regional Director of Air Alpha (a Danish firm representing Pilatus and Piper Aircraft in Russia).

Offering much optimism about the future of smaller single and twin-engine turboprops on the country’s vast territory- and having finally acquired Russian type certificates for Pilatus PC-12 and four Piper models- and established a maintenance station in Samara- Air Alpha is anticipating a relevant market response.

“Russia in my opinion- is the place for business aviation- even with the economic crisis we’re seeing at the moment that’s hit everybody”- says Hogsberg. “If you look at the size of the country- even though most business is really happening in the European part- and you look at the infrastructure that is hardly existent here- there are places where you can’t get to any other way than by air.

“People will still do business- even with the economic crisis going on. In due time it will blow over- and everyone will be back to trying to earn money. I cannot see how we can’t succeed. It’s a sure thing- because we have the product- the need is there and there’s no substitute”- he concludes.

Elizaveta Kazachkova is the staff writer for Moscow-based Air Transport Observer- Russia's expert airline business publication- where she oversees the Business Aviation section. She can be contacted at kazachkova@ato.ru

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