The Allplane Podcast #24 - Russian commercial aviation, with Boris Rybak
Few people know Russian commercial aviation better than Boris Rybak.
He is the founder and CEO of Infomost Consulting and ATO Events, a group of media and events companies that organize Russia’s largest aviation conferences (Wings of the Future, MRO Russia, Airport of the Future and Digital Aviation Russia, among others) and publish some of the most respected publications covering the commercial aviation industry in the Russian-speaking world (among them Russia Aviation Insider, which is published in English).
An engineer by background, Boris started his career in aviation working as an aircraft designer for some of the most prominent Soviet aircraft design bureaus. That was in the 1980s, an era that bears very little resemblance to the very competitive Russian airline industry of our day.
In this episode we talk about the current panorama in Russian aviation, what were the trends shaping it before the pandemic hit and how Russian airlines have been coping with the new normal (surprisingly, a handful of Russian airlines have managed to grow during the coronavirus crisis!).
We also review the main airlines in Russia and the prospects for low cost and regional airline development. We even found some time to discuss the prospects for the ongoing Russian airliner programmes, the MC-21, the Sukhoi Superjet and the long-haul jet being developed jointly with China, with Boris giving us his opinion as an engineer.
So much here in this conversation that we may have to do a follow up episode soon to delve into some of the topics we outlined here….!
In the meantime, enjoy Russian aviation with our guest today, Boris Rybak!
Download this episode from:
Apple Podcasts / iTunes, Spotify, Google Podcasts or Stitcher
Things we talk about in this episode:
Boris career: from aircraft designer in the Soviet Union to aviation media entrepreneur
Review of the main aviation conferences in Russia
General overview of the Russian aviation sector: size of the market and trends
How the Covid crisis has affected Russian air traffic
How Russian commercial aviation has been totally transformed since the messy transition of the post-Soviet years
Review of major airlines in Russia, who are the movers and shakers?
Low cost airlines in Russia, a story of growth
Regional airlines in Russia: the next big thing?
Investment in Russian airports
Development of regional airline networks in Russia
Prospects for air traffic development in Russia
Prospects for Russian-made airliners
Resources:
ATO Events website, for aviation, airline and airport conferences in Russia
Wings of the Future Conference (the 2020 edition is on 11-12 Nov!)
Russia Aviation Insider, the English-language publication of the Infomost Consulting group, covering all things commercial aviation in Russia
Aeroflot group strategy as of 2020
About S7, technology and innovation & flight review
Wizz Air new Saint Petersburg base
An overview of aviation in the Russian Far East
How Pulkovo airport (Saint Petersburg) looks like
My piece for CNN about the MAKS air show
Pics from the MAKS air show 2019 edition (including some pics from the cabin of the MC-21 and the mock up of the CR-929 Russian-Chinese wide-body airliner)
My chat about Russian aviation on AirInsight
The podcast where we talked about Russian airliners with AirInsight’s Addison Schonland
Podcast Music: Five Armies by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/3762-five-armies
License: http://creativecommons.org/licenses/by/4.0/
Interview Transcript (coming soon!)
(please note that, although we strive to make it as close as possible to the original recording, the transcript may not be 100% accurate)
Hello and welcome to a new episode of the Allplane podcast
Where, every week, we cover some aspect of the aviation industry in the company of those that know best about it
But, first of all, allow me a quick reminder that you can find all episodes of this podcast as well as many other interesting stories about aviation on our website Allplane.tv.
Today we are travelling to the largest country in the world by landmass, a place where, as you may imagine, commercial aviation is absolutely essential
And also a place that has played, and up to a degree, continues to play, a significant role in the development of new aircraft types.
I am talking, of course, about Russia.
When it comes to airlines, I can say a lot has changed since the messy times that followed the downfall of the Soviet Union.
Today Russia is quite a dynamic air travel market that has even managed to see some segments grow during the covid pandemic, with whole categories like low cost and regional airlines driving most of the action.
So, I have invited Boris Rybak, one of the experts out there that knows best the Russian airline market.
Boris is the founder and CEO of Infomost Consulting and ATO Events, the group of companies that organizes the largest airline conferences in the Russian speaking world, such as MRO Russia, Wings of the Future, Digital Aviation & Travel, Airport of the Future and Aircraft & Lease Russia and CIS
And manages as well several publications about this industry, among them Russia Aviation Insider, which is in English.
We talked with Boris for over an hour about all these and other topics, which I hope will give you a good overview of the Russian aviation industry.
And without further ado, let me introduce our guest today…
Hello, Boris, how are you?
Hello. I'm fine. Thank you.
I'm very happy to have you here today, because we're going to talk about one of the most exciting commercial aviation markets in the world, which is Russia. And you are big experts in the Russian market. Because you manage the media and events company that organizes the largest and most important aviation conferences in Russia. I'm going to ask you now to explain a little bit about this, as well as some media that also cover the Russian aviation industry in depth. So can you tell us a bit more about yourself and about the conference as you organize so that we can set up the context?
Okay, thank you again, for the introduction. My name is Boris Rybak. I'm a former aircraft designer since then, and I've got a big interest in the emerging Russian airline market and been heavily involved in developing independent Russian airlines since the early 90s. We've got information services, called jointly called Air Transport Observer, a monthly magazine, and consultancy services. So to make it short, we are deeply involved in Russian airline business, airports, MRO services, and everything which relates to civil aviation.
Yes, for the international audience, I would like to comment that one of the publications you have is a very interesting and useful source about Russian aviation, and it's called the Russian aviation Insider. I'm going to post a link on the show notes. That's a web portal in English where you can find lots of information about the latest developments in the Russian and not only Russia, but also all the countries around Russia, like Kazakhstan, etc. All in one website. That's one of the media platforms that you run.
Yeah, that's correct. We are trying to cover all former Soviet Union republics and all former Eastern Bloc countries Shortly speaking all Russian speaking aviation area
And you also run a number of conferences that I've got the chance to attend a few times the largest, I don't know if it's the largest but the one that covers all aspects of aviation In Russian neighboring countries is called the wings of the future is happening in a few days time actually, I think in November.
That's true. Yeah.
And you also run a few others like MRO, Russia, digital aviation, you also run an airports conference. Those are a meeting point for professionals in the Russian speaking countries.
Actually biggest by numbers are MRO Russia and CIS exhibition and conference, we've got typically 1200 delegates and 100 exhibitors from 70 countries. So actually, in our part of the role it is the biggest MRO conference, Wings of the Future is more about foresight, and attempting to understand how things will develop in near and midterm future. This conference is pretty much about transportation, but still issues like aircraft industry, travel industry, broader things for a younger audience, I would say where it might support it by major aircraft manufacturers like Airbus, Rolls Royce, avionics manufacturers, and startups, which deal with city mobility and things like that. So anybody is welcome. Registration is on site. easy, accessible now.
When is the next edition? It's in a few days time, right?
Yeah, it's on 11th and 12th of November.
Okay, so I'm gonna post a link as well. I'm still not sure when this podcast is going to be published, as we have the conference call now to record the podcast, but certainly before that date, so people interested in Russian aviation will find the link there. Yeah, so actually, Russia, it's quite an interesting part of the world when it comes to aviation because it's got its own dynamics. It's a region on unto itself. And I would like to start by discussing a little bit the General landscape in the Russian commercial aviation market. We are talking about a market that in normal times - this year is going to be a bit different - but in normal times in 2019, it was about 220 million passengers in Russia. I'm talking about Russia only now and about, I think, 60% of them are domestic. If I'm correct, that's obviously because it's such a huge market, a huge, huge country in terms of land. And also it's a growing market. I mean, in the last few years, we have seen a number of developments like the growth of low cost. Airline segments have also seen Aeroflot become a prime carrier internationally, and a number of other carriers in the market. And we can talk about this later. But I think one of the next, maybe one of the next expected developments will be the development of the regional air transport inside Russia connecting all the secondary cities, on third tier cities between themselves. What can you tell us about the current moment the Russian market is going through and of course, the COVID pandemic this year?
Of course, that's another important factor, I would say, is the decisive factor right now. In 2019. Russian civil aviation Russian airlines actually surprised numbers of passengers and the cargo carried for the best years of the Soviet Union. And it's slightly surprising, but during the last almost 20 years, starting from 2001, Russian civil aviation has been growing faster than the world's average. And typically with a double digit increase annually, which was slightly surprising for analysis because it didn't relate to GDP, as it should be in an established market. Well, a well developed and established market. The only explanation is they're starting with very low mobility for the country in the early 90s. People are willing to travel for leisure and business.
I must say if I can stop you here on second, I must say in the Soviet times, Aeroflot was a huge airline or used to be I think the largest airline in the world, flying everything from helicopters to small commuter planes all the way to international long haul routes. And then of course, there were the 90s. That was a very difficult time. And perhaps the 90s is also when Russian aviation got a bit of a bad reputation in some ways, because it was a very, very complex time. And there were a number of incidents in those years. Can we say this period is finally over? So right now playing in Russia, it's quite, you know, it's a very competitive market, you have lots of very competitive airlines that fly modern fleets. How would you describe this current landscape?
First of all, you're absolutely right. About travel times in ages, and there are actually very bad weary black years during this period with a number of fatal accidents, it was a very serious concern for all professionals here. Unfortunately, we cannot say yet that this situation finally changed. We had some problems with flight safety in 2010, and 11, and 12. We've got these unfortunate accidents. With so-called Superjet two years ago, however, we've got a number of airlines which demonstrate work quality services, and a very high level of flight safety. And generally, it's very important to mention that during these last 20 years, 30 years, Russian aviation actually reinvented itself. Let me explain. In Soviet times, Eastern Bloc countries and the former Soviet Union lived in isolation from the rest of the world, international aviation developed in certain way, for example, universal working language was and still is English language. And it doesn't matter. If you're flying in Indonesia, or the United States or African countries, you expect that anybody can speak reasonable English. In Soviet Union and Eastern Bloc countries, universal aviation language was Russian. The transition period in not only changed from Soviet build equipment and aircraft and helicopters, but the whole system of maintaining aircraft operating aircraft, it was not easy, actually, all aircraft are very similar, which is quite natural, but still, there are a lot of small and very important differences. Also, in the philosophy of designing aircraft, Western built aircraft are quite different in certain aspects from Soviet Union design aircraft. So this transition wasn't easy, but it happens now. And you know, it would be amazing that in 1995, even a large Siberian airline had just a dozen people who could speak English and employed 15,000. Now almost everybody can speak English.
And so also very forward looking professionals as well. I can, I can say because I know some of them. Yeah. All initiatives, applications. Some other interesting stuff. Yeah, I will put some links to some of these projects that I've covered in the site things in payments with cryptocurrency, blockchain for refueling... There's lots of different very advanced initiatives taking place right now in the Russian market, and most of them are the initiative of the airline.
Yeah, that's true. And a huge change happened with airports, people who are older, potentially could remember old Soviet airports especially degrading during the last years of Soviet Union and first years of independent Russia. And it was not a pleasant place, including the international gateway to the country Sheremetyevo Airport. Today we've got pretty modern facilities in most large cities, and Moscow and St. Petersburg are taking the lead in that Moscow airports dramatically changed during the last 10-15 years, getting much more comfortable and receiving good ranking in international regions jointly with the whole system. They are growing in terms of traffic every year. So you're absolutely right. Technology, advancements with Russian airlines and airports are quite impressive.
And I can say I have traveled to, I have seen some of the old airports, still a few in some in the regions mainly, and some of the new airports and it's like two different planets. I mean, you have still both existing in the system, but I think in the World Cup in 2018, that was a big, there was a big renewal initiative, lots of investment going into these new airports.
Absolutely. That's right.
So if you had to explain the structure of the Russian commercial aviation market, to someone that doesn't know anything about it, how would you start? I would say there is a big group which is Aeroflot then there's a group of large private companies like S7, which is now the largest, I think, right now because of the effects of the pandemic and, and the lack of international connections, I think S7 became the largest airline in Russia
That's correct. Aeroflot group is still larger as a group, but as an individual airline brand S7 now it's number one carrier.
You have other carriers, like UTair, Ural. And then a whole range of regional and local carriers, some leisure oriented carriers, it's also quite a big market of all the Russian people going to warm places to spend their holiday. That's also four or five specialized carriers in this market. How would you describe this market?
You quite correctly describe the whole configuration, so after a long struggle with the strategy, Aeroflot finally has got what I think is very reasonable. And we're a promising strategy dealing with three brands Aeroflot, like inter continental first class luxury airline, a low cost carrier, which is a basis for future growth. Its low cost carrier called Pobeda, which is going to iterate most of Aeroflot domestic flights and short and meet whole international slides using a narrow body fleet of Boeing 737. And by the way, this first class Aeroflot airline, it looks like it will be an all Airbus airline operating mostly A350 aircraft and A320 family. Mostly A321.
Yeah, actually, there was this news story quite recently, and I was quite surprised, because until now, Aeroflot had a kind of dual fleet card strategy with both Boeing and Airbus. And then they also had an order for Russian made future MC-21 airliner. They also had a significant number of superjets. But it seems that now, it's been decided that there's going to be a complete realignment of all the airlines in the Aeroflot group. So as you mentioned Aeroflot to become Airbus only, and the Russian made jets are going to another subsidiary called Rossiya which is going to be focusing mainly on the domestic market, and also from some routes outside Moscow. So in St. Petersburg, and I think all the regional or the regional bases, and then you have the low cost airline, that in principle is going to get all the 737s from Aeroflot. But I read that they might actually transition to Airbus in the medium term.
It's not certain I understand they are just underway in making an assessment of what type of narrow bodies they're going to concentrate on in the future.
From the new study that explained this. It looked like they were trying to do like Wizzair in in Europe with A321 and get lots of capacity there with with those
Yeah, it's a good aircraft and the capacity is also very good. So we will see, I think, five should decide and define his fleet strategy by the end of this year. And naturally because of the pandemic, they've got enough time to think about what they actually want to have. So we've got these Group Aeroflot, which will eventually dominate the Russian airline market.
And there are two other airlines as well that we haven't mentioned but briefly Ural Airlines based in Yekaterinburg in the Ural mountains, and UTair which is based and serving West Siberia, and S7, serving Moscow market and the Novosibirsk market. Although we must say that all of these airlines also serve the large, very large market, which is Moscow. It's important that they got a very strong foothold in certain areas, which are actually far away from Moscow, they have origins, each of them in different cities, actually, many of these airlines that are now private, and they are competitors to Aeroflot. They started as parts of the old Soviet Aeroflot that operated in the regions, I think, right and current and then when the Soviet Union disappeared, Aeroflot was broken in many different airlines. Of course, there was the main line, Aeroflot remained, but many of the different regional units were broken. And they were taken over by private investors that then developed them into what are now all these other airlines, private airlines that operate in different town halls to call it some way across Russia. And also in Aeroflot group, there is another interesting airline, which is the Far East, Aurora that is based in the part of Russia, it's on the Pacific coast. It's partly owned by Aeroflot, and I think partly owned by the Regional Government. And it's basically oriented towards Asia, you have this airline, which is 11 time zones, away from Moscow gives an idea operationally it has to operate a separate entity because it's basically there's very little overlap time-wise. And it flies in the region in the far east of Russia, but also going to Korea, going to Japan, to all the countries nearby. What's going to happen there because I read that Aeroflot wanted to divest from that airline, and maybe there was a new airline being created to increase air service in that part of Russia.
New Aeroflot strategy doesn't include these airlines, they are in frozen development, and Aeroflot made it absolutely clear that they would like to leave it alone. The Russian government has a plan to develop what they called Far East airline. There are discussions whether they should be a new start up or should be an airlines union of existing airlines, and talks about that are held virtually every week. And the basic scenario is to have two airlines from Yakutia and Aurora, from Sakhalin, and organize a sort of Alliance, they call it union of airlines with joint marketing strategy with joint and coordinating fare policies. But so far, it's not clear who will have decisive stakes in these airlines or this union when actually all three major regions. Yakutia, Khabarovsk, and Sakhalin are actually willing to have control over these unions, which is not not feasible, actually, somebody should compromise these ambitions. And hopefully, by next high season we'll have some remarkable organization.
And there's also Rossiya, which is another subsidiary of Aeroflot that is mostly focused on the domestic market, it does have some international flights as well. What's interesting is that it seems that it's gonna get a Russian fleet. As soon as the MS 21 becomes available. It's gonna get a relatively large number of them. It's going to be flying mostly inside Russia.
That's correct. And the role of these airline is mostly to promote socially important issues. Help government to implement industrial policy. Historically, this airline during the last several years, was responsible for providing connectivity between central Russia and Russian Far East flying between Moscow and St. Petersburg and cities on as you said, Pacific cost of Russia. The peculiarity of this operation is that it was, and still is, heavily subsidized by the government and they got so-called flat fares. No matter where you're flying, no matter what's going on on the market. It's a flat fare. And I would say we're low in real real terms. It's something like $300 return flight from Moscow to Vladivostok.
Yes, I remember. I did actually fly to Sakhalin, from Moscow in the winter, which is not the high season, but still I think it cost me like, Yeah, something like $300 return.
I suspect that you are not eligible, because it's mostly for young people and pensioners. So there are certain categories.
Well, I found it on the airline website…very cheap. It’s an 11 hour flight, so it's, like flying from Europe to California, more or less.
Yeah, that's true. That's the government trying to stimulate people to move more between central Russia and the Pacific Coast. And they're flying other subsidized routes. So idea that these airlines would be a launch customer and I will say, operational trial ground for new types of Russian designed and Russian build aircraft looks pretty much logical.
And that that's actually a good prop for the for the next topic I wanted to introduce and that the development of the low cost airline sector in Russia, which it's relatively new, and actually, I must say, I had the chance to participate in in the launch of the previous iteration of Pobeda, which was called Dobrolet at the time. So it's a project I know well, and I have seen that in the last few years it's been growing a lot. And I was reading some statistics, even in the time of Coronavirus has kept growing like crazy. I saw some numbers in September. It grew by 17% Compared to the previous year, which is quite amazing.
Yeah, that's true. That's true. Actually, it's the fourth or third attempt to develop a low cost airline in Russia. Historically, the first one was small company didn't live long. Another one was thought of with international investors and existed for a couple of years, without any real success, then it was shortly Dobrolet. And finally, everything was in place with the airline called Pobeda, which is claimed to be a complete success by Aeroflot group, you can see it actually is, regardless of certain controversy, I would say, which is typical for LCCs, all around the globe, but the other is loved by Russian people, and they would vote for these airlines with, rubles and dollars. And you know success or failure of a low cost airline is in 100% load factor, if you can have your planes flying, I would say 12-13 hours a day fully loaded with passengers, you've got the chance to be successful, if you don't have these two components, a very high utilization rate. So you've got an extremely high utilization rate of the aircraft, and you've got commercial load factor approach and 100%, then you can keep fares pretty low. Otherwise, there is actually no chance.
Yeah, and I must say that it operates a pure low cost model, even like ultra low cost in some ways. So you pay for example to get not only the bag that goes on the hold, but if you want to bring cabin baggage, you need to pay for it. It's not selling any food on board, which that's very different from other low cost airlines you find in Europe. But it's very efficient. And it seems that it's going well for them. I think it helps that international distances are so large, and until now pretty much the alternative for many people was to take the train or the bus that can mean spending days moving around. So that's a big difference. But we can say that, although there are not so many pure low cost airlines in Russia, in some parts of the country, in some routes, you have very intense competition. I mean, you can fly relatively cheap on some of the main segments, because there's maybe like four or five airlines flying at the same time on a specific route, like I don't know, Moscow to Sochi, for example, or some of these areas. So it the price competition is quite intense.
You know, partly, the absence of many low cost airlines in Russia can be explained by the fact that most of Russian Airlines have got what we call hybrid model, they've got a significant part of their tickets sold for very low price comparable to low cost airlines. And at the same time, they've got business class in their aircraft configuration. And at certain moments, S7 and UTair are competing with Pobeda in a very efficient way I would say.
Yeah, and one of the things that has happened during this crisis of COVID is actually that there's been a focus on the domestic market. Right now, Russia is pretty much closed, not completely closed, but there are serious limitations on who can enter the country. So that means that basically the international market, that was the main business for Aeroflot, for example, has pretty much disappeared, but the airlines are deploying capacity in the domestic market. So you have airlines like S7, Pobeda, Utair and Ural Airlines, they are operating on these internal routes. And actually, I have been checking the numbers. In September for example, the domestic market grew by nearly 7%, 6.8% of growth, in terms of number of passengers which is quite impressive considering that everywhere people are flying less and the total market in Russia decreased by nearly 32%, 31.7%. That's mostly because of international flights. So yeah, you have even six airlines. I'm just checking the number from Russian aviation insider now. But you have six airlines that managed to increase the number of passengers compared to 2019. Again, quite impressive. Yeah, it seems that the people in Russia right now, despite the crisis, continue to fly just as before or even more.
Furthermore, it's surprising, but it's actual real figures. So, we've got no doubt about that. It's not easy to explain the reasons behind that. The only thing is clear that we've got extremely low fares. And that means that airlines definitely have not got as much revenue as they would have in a normal situation.
And one of the well actually, because of the situation, the airline, as we mentioned earlier, the airline that now is the largest carrier in Russia, another interesting airline called S7, which it's known because of its very bright green aircraft. It's also a very interesting airline, because actually its owner, I heard some comparisons with Richard Branson, as you know, up to what point that's the case or not, but it's, yeah, it's a very entrepreneurial business. He was even investing in space tourism activities. Also, it's an airline that has always been very innovative when it comes to adopting new technologies. So what else can you tell us about this S7? Is it likely it's gonna continue holding these number one spot in the Russian market?
Good question. Look, if international travel will recover, or float, definitely will take over. If not, if not, I'm not actually sure, because s seven is definitely one of the most efficient airlines, not only in Russia, but for I would say one of the most efficient and best managed airlines in the world.
You define it as a hybrid airline. I mean, it operates. It's not a low cost airline. But it's not super expensive either.
It's what we call a hybrid model. First of all, they focused on a typically younger audience, than typical legacy airlines. S7 is only about the future, the young people like it. And it's actually fun to play and fun to fly. They've got very well advanced apps for mobile devices, and they've got a very friendly website, the whole passenger experience is very good. And operationally they are extremely efficient. They have an extremely high utilization rate for the aircraft. They got very flexible fare policies that they're managed in more than what I would say it's very good airline from any side. Again, you know, it's a service market, if you are good people like you're willing to buy your services. If you're not that good, people are not willing to buy your services, no matter how cheap it is, or whatever success of a certain airline is a sort of reward for what they've been doing for the last five or six years. Getting through were complicated times when buying power of Russian passengers declined dramatically after 2014 And nevertheless, they provided transportation. They've got a base in Novosibirsk. They're actually based over there. They've got huge maintenance facilities over there as well. So actually, this transformation to cover more routes inside Russia was relatively easy for them. Because they are very strong in Moscow, but it's not the only market they are very strong in and very important.
And actually that's another interesting market that now it's been the object of much talk in Russian aviation. The development priority for the government is the regional market, because there are many, many flights in Russia going through Moscow and St. Petersburg. But I think now we are starting to see some other carriers deploying capacity to link all these secondary and third tier cities between themselves a bit like what has happened in in Europe, for example, where you have the development of many city pairs that seem seems a bit unlikely, just a few years ago, but the overall growth of the market has made possible and the right, the right product, the right prices, has made it possible for many, many of these regional markets to emerge. And here we have two, we have two players that are already well established, and already for quite a few years, UTair, and also there is another carrier in South Russia, Azimuth, that it's actually one of the carriers that has been growing during this crisis. And I think there are other carriers as well that have a project to develop this regional segment of the market. What do you think are the perspectives here?
It's extremely complicated. As we all know, regional transportation is a natural loss generator, it's extremely difficult to meet. And when you're a regional operator it's true for all countries, global markets, whatever. However, right now, the whole world variation and rationalization is actually experiencing a transition between the hub and spoke model, which was developed in the United States in the early 70s. And successfully used by actually all countries for, I would say, almost 50 years. But until recently, these hub models started to lose their attractiveness to the airlines. And, as you correctly mentioned, flights between city pairs are getting more and more popular in that respect and interest in transformation, which gives a chance to regional airlines to be viable, independent operators of regional routes. We are seeing this process right now in the United States, in Europe and in Russia as well, you've politely said that many flights in Russia are tied to Moscow or St. Petersburg. In reality, these two cities contribute more than 80% of all traffic.
Wow. Wow.
Yeah, it's virtually all now airlines like S7 and UTair are developing inside Russia, now simply serving in different regions. For some historical reasons. South and Central Russia, was left without any own airline. And naturally Moscow based airlines like Aeroflot, Pobeda and S7, just trying to take the cream of this pie and serving only high intensity routes. And they were absolutely not interested in developing intra region rule. And on the other side, as an airline, based in the south of Central Russia, naturally it is interesting to develop its own home region first, and then go to Moscow. So similar situations are in certain parts of Siberia. And you mentioned the Russian Pacific coast and Russian Far East as we call it. Absolutely the same situation. They need local regional airlines, which will concentrate on serving regional markets. So it goes like that. And we've got a couple of pretty well established regional airlines in Central Russia. We've got three or four of them in Siberia, and hopefully with governmental support for this regional development, they will be able not only to survive and overcome this COVID-19 crisis, but establish themselves as permanent players on regional markets.
Do you see any role for foreign airlines, especially the low cost foreign airlines to play a role in this regional traffic development? I don't know, maybe there's another vector for Russia's regional airports, particularly in the European part of Russia, to get more connections, like in Saint Petersburg, for example. I don't know if Ryanair had some project as well, to get into the Russian market, I will need to check that but EasyJet was in the market for some time, I think then they exited the market. Do you see any chances here in international low cost connectivity?
Yes, of course. What makes it an extremely interesting and extremely sensitive area . Unfortunately, Russia and the European Union failed to sign any type of air traffic agreement. And right now, relations between the European Union and Russia in the air transport area, are still going by bilateral air traffic agreements with each individual member of European Union 27 different agreements, and they are seriously different. But basically, this type of air traffic agreement is based on parity. So to make it simple, it defines the number of seats from each side and it should have an equal number of routes. It's a very obsolete system, which hasn't existed in Europe for 20 years. It's a huge limitation for developing international air traffic. In international aviation, we've got something like actually eight levels of air freedom. So seventh freedom is where you can fly between two countries, which is not the country of your registration. It would be called cabotage freedom as freedom of air and it's not allowed. That's why Ryanair has got limitations to fly to cities in Europe, which are not served by Russian airlines and at a distance more than 200 kilometers from points served. Large legacy airlines tried to fly to Dresden or Bratislava or other relatively small locations in Europe and failed all the time, when Ryanair or EasyJet goes to see traffic is boosted. Airports are recovering. So in that respect, they're probably the most efficient stimulus for everybody. Developing [St. Petersburg] as fast as the rest of Russian aviation market will need some boosters, actually it was the idea behind this decision. They are desperately trying to increase their traffic. Yeah. And honestly, honestly, it's almost impossible task to do when you've got fantastic airport and fantastic airline based 150 kilometres out, in Helsinki, in when you've got the major Russian hub, just 800 kilometers away from you it's extremely difficult to develop any traffic, because you know Helsinki and you know Finnair is reserved for transfer traffic, Helsinki airport is a great airport as well.
Yeah, it is
Yeah, I've been talking to many of my friends, they told me, We haven't been in Pulkovo for decades. Just jump in your car and go to Helsinki and fly anywhere.
But the thing is that it is a great tourist destination. And that's actually one of the next topic I wanted to introduce is how, actually this pandemic, with a closed borders is making many people holiday inside Russia, stimulating all these traffic to tourist destinations inside Russia that are often overlooked. Because many, many people in Moscow, for example, tend to holiday, when they have some free days, maybe they go to Europe, the people that can afford it. Of course they go to, to places like London, Paris or Italy,
Barcelona, Barcelona.
Yeah. Yeah, the flight is always full! Yeah. And other people are more on the beach, tourism side, they go to Egypt to Turkey on packages. So now, most of these people are discovering Russian tourist destinations. And I guess that eventually some of this traffic might actually day because people are, you know, discovering all these national parks and all these places in Siberia, St. Petersburg as a city. What do you think about this tourism traffic in Russia? What's the perspective that you see for it? I mean, do you think it's going to be one of the big drivers in years to come, or it's going to remain more of our visiting friends and relatives and business as it was mainly until now.
I am pretty much optimistic. But you know, the development of tourist traffic is very simple. You mentioned soccer championship, if you've got decent infrastructure, you definitely will have some people visiting you. If you don't have any infrastructure, you can talk about that for decades, nobody is going to be seen, whatever you can offer. And in most of these cities outside of Moscow, you simply cannot find a decent hotel to stay. That's why nobody was actually looking for that. Because when you've got a holiday break, or if you've got a weekend break, you don't expect yourself to be fighting to find hot water or food or whatever your selected destination, where you are pretty much sure that you've just jumped out of a plane. And we'll have fun for a couple of days and fly back. Travel within Russia till very recently was a sort of different kind of Safari. And not many people are willing to take this type of adventure.
Yeah, I see what you mean.
Yeah, I've been traveling around my country more than most of my compatriots. And I know what I'm talking about it. 20 years ago, not that long ago, in 1999. In the seat of Novosibirsk, a major cultural and scientific center of the former Soviet Union there were 0 hotels which could be described as four star hotel so yeah, I've been witnessing how the hospitality industry was developing in Russia and I will tell you it was slow. It was a very slow development. But thank God, we've got a much better situation now. And actually, all major cities have pretty good facilities in different categories. So you can find reasonably good tourist hotels, we've got four and five stars hotels in most of the big cities. And I actually think if we'll have more ways of accommodation, quickly developed, probably because of pandemic situation, like Airbnb or something like that, that can create much better development of domestic travel and domestic tours.
And most of these people will fly…
Just last autumn, my wife and I and the family of my friends made a car trip to another location. It's almost 500 kilometres outside of Moscow. It was amazing, actually. The accommodation was fine and the food was excellent. We played in some clubs over there. So we've got a fun evening, one night. So it's actually very good. And if we're talking about Moscow, around Moscow with these, I would say, between 500 and 1,000 kilometres, we've got a couple of dozens of very interesting destinations, they should be flown for sure. Because it'd be too far for driving.
Yes, indeed, it's very interesting to see how the tourism industry develops in Russia, because I think that one of the sectors has big potential, at least as far as I have seen in my travels. Just to wrap it up. I wanted to ask you, you're a you're an engineer, you have worked in aircraft design, what's your take on the Russian airliners, we have right now a program that is producing aircraft already and in service that is the SuperJet then there is one coming up, that is the MS-21. It should come up, I think next year already, by the end of next year, if I'm correct, if there are no delays, and then there's one even further into the future that it looks like it's becoming increasingly doubtful, but still there, which is the long range long haul airliner with the Chinese, what do you think? is going to be the landscape in a few years time? particularly interested in the prospects for the MS-21. We actually discussed it here in this podcast with a friend of mine, Addison Schonland, who runs Airinsight in the US and he's much interested in the prospects for this aircraft. And we talked about it a little bit but I would like to know your opinion as well on the prospects for MS-21 and potentially for the also for the future Russian Chinese longer range airliner and and the SuperJet that it seems to have been a bit not as successful as expected originally,
Let's try to make it simple and not to overburden people who listen with the technical details, Sukhoi Superjet is a previous generation aircraft designed by an organization and people who mostly have no experience or designing single passenger aircraft at the same time at this type of design design process for these aircraft, there was a wrong marketing assumption that regional planes will be in high demand for very long period of time. Unfortunately, this assessment proved to be wrong for all regional aircraft manufacturers and we know what happened with Bombardier, we know what happened with Embraer and which were looking very promising at the moment when the so called Superjet was launched I mean in early 2000. Another complication was that these group of people who had never been dealing with civil aircraft design. And it was actually the first attempt in Russia to be an integrator, have a large number of systems from different suppliers starting from engines, avionics, all aircraft systems and major systems like landing gear for example. So all these factors, unfortunately, played a role and another factor company was not able to organize mass production of these planes. They always claim that they've got not enough orders. But in reality they've got all planes they managed to manufacture flying with with real customers, mostly in Russia, but also outside of Russia. So, a number of wrong assumptions and I will say objective difficulties resulted in a very slow production rate, the peak production rate was achieved at 24 aircraft per year, but typically they manufactured less than 10. And it's not enough, I would say. So currently, we've got something like one heritage aircraft operational,
I heard that one of the issues was with the post sale support
Look, Sukhoi Civil Aircraft is an ex military manufacturer, they've got no idea how to maintain aircraft in civil service, the systems they introduced were very different from what we've got in civil aviation globally. So it failed because it was wrong from the very beginning. So it can hardly be named as a success. On the other hand, MS-21 is very promising and it's not previous generation design is actually next generation design and people from Yakovlev design bureau have got experience with passenger planes in Soviet times, they're trying to achieve actual high performance and being actually innovative in different areas starting from size of passenger cabin, to lightweight construction, lightweight design of the Wing or the airframe elements. So hopefully they will manage to be more successful. On the other hand, there is an actual challenge in producing these aircraft. Look, Airbus is producing 42 Actually 50 narrow body aircraft per month and this is actual serious production, when you are selling hundreds of aircraft you've got the chance to find remedies for all problems, all initial initial flaws and designs and systems integration and so if you are building a couple of aircraft, it is totally different way of dealing with aircraft because you mentioned these what how they call it after sales support, you'll have to have spare parts…if they're building spare spare parts and system in dozens they will cost like they're made of gold. So it's everything interconnected. Another problem for all manufacturers around the globe is that they are developing aircrafts for decades. By the time they start flight test, these aircraft are obsolete they are actually from the previous generation. Yeah. And the costs of these developments escalate ridiculously. It's actually a lot of fun. In the 60s and 70s five Russian design bureaus and five American design bureaus built prototype aircraft, virtually every year, every second year. One of these prototypes was placed into series production. Costs were three orders of magnitude less. But now, if you don't have 5 billion US dollars and 10 years for development, you're simply not going to talk to your clients. It's ridiculous. Trust me.
Yeah. Actually, yesterday I was talking with a company that is going to be in the podcast soon as well, that are working on hydrogen propulsion. Yeah, we were talking about how, once you have all the system in place, it's very costly to change. So now, if you want to really change the technology, it's not just the technology that must work. But the whole ecosystem built around that, that needs to move. And that's very slow, even if, you know, now, lots of people are working on these electric and hydrogen designs, but there's all the backlog of the current technology that is going to be around for decades in principle. So it's an interesting situation in the coming years. What do you know, as we move into these disruptive technologies, how this transition is going to happen?
Yeah. It's actually a big thought. And it's quite a different subject, but probably not for this podcast. But look, a guy who was Lockheed Martin skunk works division developed and built for flight test two, absolutely revolutionary new technology planes, called f 117. The first stealth fighter, two planes for 14 months, for 33-34 million US dollars, an absolutely new technology. Nobody has got experience of doing that. They made everything, they built real full scale prototypes for these fighters within 14 months, for 34 million US dollars. That happened in 1974. But with all inflation, and everything, you understand 34 million US dollar crazy transfer in eight to 10 billion US dollars currently, which is typical price tag for developing simple passenger airplanes wide body planes, like the C929,I can't remember what they call Russian-Chinese wide body…
But then that project that doesn't have a date yet, right. I mean, it's in the next decade?
I've heard it is frozen for the time being. It's a pity, actually, because we must train Chinese designers to master and manage all designing and building all types of aircraft. Because I've got the impression that pretty soon they will be manufacturing all flying aircrafts, like their manufacturer, all electronics right now or all clauses and almost everything.
Yeah, so we'll see. I'm gonna post a link on the show notes, because in the last edition of the Max Air Show, there was a mock up of this project, just a mock up where you could visit it, and they were showing it around. So yeah, quite, quite interesting. But yeah, well, I think we've covered lots of grounds. There are so many things happening in Russia, and I think we still left some out of the table. But I think yeah, I think that's been a great conversation to get really an update about all the hottest things taking place. Now in the Russian commercial aviation industry. If someone wants to know more about the conferences that you manage, and the websites you manage, where should they look
ato.ru it's a major Russian language inside and events.ato.com, the site for conferences are have got a lot of information.
Very good. I'm gonna put the links on the notes anyway. And hopefully Yeah, if there's some people that are listening to us they're interested in go check them out
And actually, I don't know if it makes sense or not, you can put the email there. In any case, everybody knows that. So they can write me and I typically answer, so why not?
Very good. So thank you very much, Boris, it's been a real pleasure.
It was a pleasure
Thank you so much, hopefully. Bye. And one more thing before you go. Remember, you can subscribe to the opening podcast on Apple podcasts on Spotify on Google podcasts, Stitcher, and many other platforms. If you like this podcast, please don't hesitate to give it a good rating or to recommend it to a friend. See you soon.