Denis Pavshinsky, Region Avia - Авиакомпания «Регион-Авиа»
Release Date: 2009-01-27
In a Moscow afternoon, www.RussianAvia.net ‘s team was delighted to met with Denis Pavshinsky, Chief Executive Officer of Region-Avia Airline (www.regionavia.ru), a private airline operating regular passenger and freight services throughout Russia which not only surprised yes for his skills in the air-transport industry, analytical capabilities but also by his vast curriculum, ranging from former member of the Government of the Tver region as well as a large experience on “scale-investment projects.As a new generation of Russian businessmen, what has motivated you to be in the air- transport business and create Region-Avia back in 2006?
I believe that air-transport business attracts many people and I’m not an exception. Maybe it’s also due to the fact that in my former commercial activity I was a frequent flyer and I understood that unfortunately, some passengers are too prejudiced towards aviation-transport and I decided to understand the reasons. As a result, I decided to get a pilot’s license. So, from the very beginning my activity with An-28 was not just a business project but also almost a hobby. However, as I professionally approach everything, I made a more detailed insight in the sector and it became clear that air transport segment is very defragmented in Russia and there is a free niche for a business project.
In the landscape of the Russian Federation, it seems there are many airlines operating, not often in the good functioning. What made you conclude that there was room for one more airline?
Of course, we reviewed the market situation at the point when Aeroflot split into 384 separate airlines. To give you an example, back in 1991 there was one airline, Aeroflot and 3 years later - during the peak year of creating new airlines - there were 384 of them. About 150 airlines still remain.
However, our assumption was that in the segment of regional aviation in Russia the volume of air transportation was about 100 mln people during 1991. It is clear that at least 95% of all these passengers accounted for domestic transportations. Results of 2007 showed that the volume of domestic passengers in Russia was 22 mln people. Accordingly, we understand that the volume of domestic flights correlates with the state of economy and the GDP. Today Russian economy is at the level of late 80-ies. A five-fold difference in the number of flights means that either the potential of growth of domestic flights is at its bottleneck or it’s the problem of system that doesn’t let to develop the potential. There is a universal formula that works for any economy: 1% of GDP gives a 2% increase of domestic transportations. Reduction of the key economic indicators decreases the business activity indicator which is not yet used in Russia. The population mobility indicator in Russia is currently 0.3. Ministry of Transport plans to increase this level to 0.6. This correlates with the growth of GDP in Russia.
The system common in USA and the EU - a basic national carrier with a developed network and a lot of smaller feeder carriers concentrated around it is a good example of a system that Region-Avia as a company wanted to use, integrating minor companies in Russia.
So based in the analyses Region-Avia has done; do you still think is it possible to establish a system of smaller feeder carriers in Russia?
Yes, we do think is possible in the long term. The final objective of such a system is to become the partner of the leading world airlines. To achieve that, we plan to develop our own network and transport people to different hubs that only exist on a scheme. Today 75% of all the transportations of 150 airlines account for the Moscow Aviation Hub - the only existing hub in Russia. For this reason Ministry of Transport approved the concept of 11 hubs in order to decentralize the system.
Do you believe that the economic and managerial conditions are there in order to make this “hub” system work in Russia?
Absolutely, taking into account the positive economic indicator I have mentioned before, and also considering that as far as resources are concerned, over 4 years state and private investments increased four-fold and large managing companies have been created to run airports that are considered federal property. Such companies are Eastline (Domodedovo), Renova (Koltsovo), Novoport (Tolmachevo). This is private capital that is invested in airports alongside state subsidies allowing the construction of a new infrastructure.
Growth of transportation volume today reached 18-20% yearly although the segment of international transportations with foreign carriers is growing faster.
The number of Russian airlines are currently decreasing, would you estimated this is due to economic crisis and fuel supply issues?
I don’t think the problem is fuel or economic crisis - we have a problem with management. Efficient management means building an economically feasible model of operation, replacement of fleet and reorganization of route network. It is not efficient to keep asking the state for money.
What can be done to make Russian airlines more effective? What are the key variables and how did Region-Avia learn through its mistakes?
First of all, we, unlike many other companies, are not one of the 384 pieces of the former Aeroflot company, we are a newly created airline that is revitalizing historical regional routs. Concerning our fleet, from the very beginning we focused on aircraft of maximum efficiency, considered the market trends and estimated its capacity. As a result of prior analysis, we chose Embraer regional aircraft with 30 seats as an optimal load.
Why the choice of a Brazilian made plane for Russia?
As we see it, it will be the most economically efficient aircraft for Russia. We want to be a feeder airline, we understood our closer competitor for travelers are railroads, since it is the only transport mode that covers such isolated points inside our large country. But since Region-Avia’s passenger needs better service and quality with a similar tariff, so this sets us in a clear model. Besides, Embraer aircraft fly to Alaska and Canada, so it’s apt for Russian climate conditions. It is certified for use in Russia; minimum allowed outdoor temperature is -35 C.
In a broader perspective, when international passengers fly to or through Russia, they tend to be very concerned by the quality of the air-transport facilities and even more when they have to travel to the inner regions for which the air-transporter tends to have very obsolete aircraft. Could you tell us why Region-Avia could be reliable way to explore inner Russia?
Although it is common to be afraid of flying, statistics show that aircraft is the safest mean of transport. I fully agree that for Russian aircraft it is no prospects from the economic point of view. From the safety prospect the aircraft are excellent.
If we speak about Region-Avia, we create our image and our objective in maximum transparency. One of the strategies is to enter financial markets; besides, from the very start we began preparing to IOSA certification to prove that we comply with all requirements for equipment preparation and servicing quality. This certificate allows concluding interline agreements with any other airline. We expect to get the certification before the end of 2009.
With such forward thinking project, do you think you’ll manage to achieve something in regional aviation?
Everything has already been done; because the air routes where there, what Region-Avia does is to restore them. However we’re very far from the level of the year 1985. It is impossible to achieve it only with Region-Avia forces. If we speak about the route network, our two-year prospect is to expand the route network adding there flights from Moscow, Samara, Yekaterinburg, Novosibirsk, Sochi.
If we speak about our mission, it is to restore the historic routes between the Russian cities. We plan to achieve it by 2010-2011 (two million passengers from 5 main hubs). We plan to operate up to 35 aircraft with a sufficiently high level of utilization. This is the only economically feasible option. Our advantage is that we don’t make up the route network but we first form an idea and then see what the most efficient approach can be.
Thanks Mr. Pavshinsky for your comments to www.Russian-Avia.net !
| Company: | Region Avia - Авиакомпания «Регион-Авиа» |
| Position: | General Director |
| Country: | Russian Federation |