Evgeny Chudnovsky , Ekaterinburg Airport (Koltsovo) - Аэропорт "Кольцово"
Release Date: 2010-11-15
Evgeny Chudnovsky, General Director of Koltsovo Airport (Ekaterinburg), has been interviewed by Russianavia.net to discuss the main achievements of Koltsovo Airport as an international hub, its current priorities in development strategy and the prospects of attracting new international airlines.Mr. Chudnovsky, could you briefly point out the main achievements related to International Koltsovo Airport in Yekaterinburg over the last years?
It was the time of implementing an ambitious reconstruction project of Koltsovo airport: complete reconstruction of the entire infrastructure and improvement of the airport terminals. As a result, we currently operate 80,000 sq. m of modern airport terminals with parking, hotel run by an Austrian operator, direct railway connection, and dedicated VIP facility. We have also reconstructed all facilities, upgraded ground support equipment, constructed a new catering service and we are now working on the NEW cargo terminal. The new, 3,000 m long runway, reconstructed in 2008-2009 through federal funding, is capable of accepting all types of aircraft except A380.
We are proud to announce that Koltsovo is the largest regional airport in Russia after Moscow and Saint-Petersburg in terms of passenger turnover, in terms of its geographic position and route network.
What was the amount of the total investments?
We have invested 12 billion rubles over the last four years, with 4.5 billion rubles of federal and 7.5 billion rubles of private funds.
What is the current outstanding debt?
Today’s net debt is close to 2.5 billion rubles, with sales of 6 billion rubles.
As the third largest regional airport in Russia, what is Koltsovo’s current strategic priority?
We’re creating the first regional hub in Russia on the basis of Koltsovo airport. In this respect, the key strategic aspect is to find a systematic way to attract regional airlines to Koltsovo to add up to Rusline based in Yekaterinburg and Region Avia who we have supported to start up their project. One of our important strategic levers is an advanced system of motivating the regional fleet: we provide up to 60% of airport charges, 50% off ground handling charges and up to a 20% discount on fuel.
Why was this strategy chosen? Another factor that matters a lot in Russia is long-term relations…
You have to understand that what the Russian aviation is missing is regional aviation. It has no foundation, that is why 85% of air traffic goes through Moscow which amounts to 11 million people per year.
The most common aircraft currently operated within the structure of the Russian aviation are A320 for 160 seats that cannot fly to smaller cities, such as Rostov, on a daily basis. This means that there is no regional fleet to fly from, for example, Yekaterinburg to Moscow or any other big city.
There is also no motivation to create regional airlines: Moscow is connected with almost every big Russian city which redirects 85% of traffic to Moscow while the interregional air connections are very poor. In this regard, Yekaterinburg’s advantage is being the most developed regional city in terms of geography. In reality, this is a vicious circle: no one is interested in creating regional airlines because the biggest are based in Moscow that has the most developed product due to the absence of regional hubs and regional aviation.
As for bigger airlines like Transaero or S7, they are not interested to invest in regional aviation because it contradicts their strategy. The regional routes and feeders require, as I have said, regional type of fleet and a lot of investments. Furthermore, not only do you have to compete with Moscow but also with the railways that are heavily subsidized by the state.
From a business perspective, what measures should be taken, in your opinion?
The most economically efficient incentive is to exempt the regional fleet from VAT and abolish import taxes for spare parts. Notably, Ilyushin Finance has announced at a recent conference that they were ready to organize financial lease of foreign fleet which is an important achievement to lobby regional aviation.
Our goal is to develop regional aviation in Russia because it is crucial to move our projects forward. The trigger is subsidizing the regional airlines and investing into Russian airports to turn around the traffic that is now going through Moscow.
With regard to this approach in June 2010 we launched flights of a regional carrier AirVolga (Rusline). Currently, there are two new aircraft based at Koltsovo doing ten new routes.
What was the general response?
What we wanted was to launch a pilot project to test the market response which was wonderful. The approach was not only to subsidize the airlines but also to take the risks: this means that if an airline makes losses, we compensate them. The occupancy rate and the income were 2.5 times better than had been initially expected. Although we have to subsidize the airlines, the overall economic effect improves as you get more flights because this is the so-called economy of scale at work here.
The aim was to understand what the economy of regional aviation was. As a result, we have made sure that, even with a very high discount on our part and sometimes other airports, the airlines still make losses. Thus, we came up with a proposal to exempt the Russian regional airlines from air navigation charges, take–off and landing and navigation security. Without these charges, the ticket cost falls about 13% which is more or less breakeven. But we believe that it would be fair if the state subsidizes air navigation because this would lift this burden off the shoulders of the airlines.
Unfortunately, we, as an airport, cannot offer more because Koltsovo is controlled by the regulator.
You have mentioned that 85% traffic comes from Moscow…
This is an average across Russia. The approximate traffic figure for Yekaterinburg is 38%. Currently, we have more than 40% international traffic going mostly to Turkey, Egypt, Europe…
What international airlines fly to Yekaterinburg?
Lufthansa, Finnair, Air China , Czech Airlines, Turkish Airlines, Flydubai… Next year we hope to launch flights with Air France and a few airlines from the CIS. In November 2010, we are opening a direct flight to Kiev.
How do you evaluate the viability of opening new routes and attracting new international airlines?
First of all, we participate in Routes events that are quite successful in terms of bringing new airlines. We have cooperated with Lufthansa Consulting to work out an efficient approach to estimating the viability of new routes. However, the problem is that there are very few viable routes. Most of the existing demand has already been met by the current airlines. To make a qualitative step, we need regional fleet. One of Koltsovo’s advantages is completely new infrastructure, a developed route network and a certain number of airlines. Economу wise, Koltsovo is on the edge of viability to fly to Europe with the same type of aircraft. We’re the biggest in the region and we have the best chances to attract people as a transit point between Europe and Asia.
If the regional aviation develops, we will manage to increase all routes and attract the passenger flows, but the first step is to increase the frequency of interregional flights.
How many years would this improvement require?
A lot has been accomplished already, so it should not take more than one year. Even with two regional aircraft, we have good connections with Khanty-Mansiysk, Nizhnevartovsk, Surgut, Kazan…
Is cargo an important direction of business nowadays?
The configuration with cargo is more or less the same. Similarly, the problem is lack of supply on behalf of the aviation industry to transit cargo from Europe to the Russian cities. As a result, the cargo is flown to Moscow and then trucked from Moscow. There are very few specialized cargo flights.
We have dedicated this year for development of cargo traffic and prepared a marketing plan for a new cargo terminal. Even if we don’t take into account Ural Federal Region and the flow of transport from Koltsovo, it is possible to increase cargo ten-fold because the demand is there.
To increase the daily cargo capacity, we have signed an agreement with Air China in the end of 2009 to open two Beijing-Yekaterinburg routes with A330, with a 20 t load for every flight. This has given us a three-fold increase of import this year. Then, in April 2010 we have opened the Amsterdam-Yekaterinburg-Shanghai route with AirBridgeCargo, with a weekly load of 100 t. On the infrastructure level, we’re building a new cargo terminal. Our ultimate aim is to improve the cargo infrastructure.
Both passenger and cargo flights development is not easy. On the other hand, it creates synergy: if you develop regional feeders, you will also become a regional cargo hub.
One of the major problems with cargo transport coming to Russia is customs clearance. The state has made a decision to discontinue doing the customs clearance in Moscow and implement it at the border of the Russian Federation. The airports are the borders, so it gives us a nice perspective of being the only customs clearance hosting in the region. Our biggest task now is to commit the foreign freight forwarders to see Yekaterinburg as a strategic market and start collecting cargo for Yekaterinburg not for Moscow.
We have already opened two strategic routes to China and Europe, and we carefully watch the tonnage of every flight. Flights to Europe or Asia hardly get any cargo on the way back, so they are flexible which helps us.
Which other things would you like to see happening under your control?
We have a lot of ambitions but our highest priorities concern developing regional aviation in Russia and developing the regional hubs. We have prepared the infrastructure and developed not only the financial incentives that I have mentioned before, but also the internal IT procedures to combine products of two different airlines for interregional flights. But, as I have said, the most important step is to subsidize the regional aviation: the rest will develop as a consequence.
What satisfactions have the people given to you?
Our task for the next two years is to consolidate a few regional airports such as, for instance, Nizhny Novgorod, Samara, Irkutsk, because Koltsovo has the necessary experience and understanding to do it right.
Ekaterinburg Airport (Koltsovo), the third largest regional airport in Russia, is the gateway to Ekaterinburg, capital of the Urals region, and one of the strongest and most developed Russian industrial centers. More than 30 Russian and foreign partner airlines connect Ekaterinburg with more than 80 international cities.
| Company: | Ekaterinburg Airport (Koltsovo) - Аэропорт "Кольцово" |
| Position: | General Director |
| Country: | 俄罗斯 |