Feature

New Player in the Russian Aviation Industry

After the collapse of the Air Union alliance, which united several regional Russian airlines companies, the situation in the Russian aviation industry became a matter of concern for the government and under their guidance, 11 domestic carriers merged in October 2008 to create the newly formed airline called "Russian Airlines". The new carrier will have more than 300 aircrafts at its disposal, which is almost twice as many as Aeroflot. Experts say that Russian Airlines will become a serious competitor to the main national carrier Aeroflot and will become one of the country's largest air carriers. The airline plans to have up to 3 key hubs including St. Petersburg, Krasnoyarsk in Siberia and Khabarovsk in the Far East of Russia.

Until now Aeroflot was the dominating airline on international routes, including the payment of all flying rights which is paid by foreign airlines to Russia. Both Aeroflot and the new airline are partly state owned but appear to be backed by different fractions in the government. 25% of Aeroflot's shares are owned by its chief executive Valery Okulov, son-in-law of the former Russian president, Boris Yeltsin, and 30% are owned by Russian oligarch Alexander Lebedev, who has prickly relationships with the present government as he also owns some of Russia's most out spoken newspapers. The new airline is to be 49% owned by Moscow city government which is headed by Mayor Yury Luzhkov, and 51% by Rostechnologies, a recently established company which is greatly favoured by the present government.

Some experts believe that the government to be the only serious player in the Russian aviation market, which after a series of bankruptcies, principally caused by a huge increase in jet fuel prices in 2008, has been going into a crisis.  As a result, the government has decided not to try to support any of the existing privately run airlines, but to make a radical step and create a new state airline. Aeroflot officials remain skeptical about the launch of a new carrier during an economic downturn. Aeroflot's Chief Executive, Okulov, is quoted to say that "sending a new player into a falling market in simply creating a bubble".