Small airlines kicked out with safety standards up
New regulations, which include providing, ground proximity warning apparatus on all planes comes into effect next year. The measures are seen as urgent by the Russian authorities. The government has increased the requirements for airlines after a series of plane crashes caused by technical failure.
Analysts say smaller companies have few options, and they will have to merge with Russian or foreign operators to survive. But not all small airlines have a chance to join key participants of the market.
“Most of domestic airlines face difficulties and get financial support from the state. Investors aren’t interested in them”, says Kirill Markin, analyst from InvestCafe.
“The market is very tough for smaller air companies due to the high fuel prices and high leasing cost”, said Alexey Astapov, analyst from “Gasprombank”. “Either they find a niche in the market which will turn profitable or they go out of business”.
Some air carriers that offer domestic flights would still get financial support from the state, but they would also have to fulfill the technical requirements. Russian authorities will consider providing financial backing for airlines from the Siberia region, the Russian Far East, Ural region and Northern West Federal District.
Russian travellers wouldn’t notice a drop in the number of Russian airlines. “The situation in Russia is unique. About 130 air companies operate in Russia; it’s more than any other European country. But about 90% flights are provided by 20-25 large carriers”, Mr Astapov says.
The largest Russian air companies “Aeroflot”, “Utair” and “Transaero” would benefit from new regulations, Mr Markin supposed. ”They can expand their business and improve their financial indexation by purchasing local rivals”.