Rosaviatsiya [Federal Air Transport Agency]

Rosaviatsiya [Federal Air Transport Agency] is the agency responsible for air transportation in Russia. Om 16 October 2008 Prime Minister Vladimir Putin dismissed Yevgeny Bachurin as head of the Federal Air Transportation Agency (Rosaviatsiya), replacing him with Gennady Kurzenkov.

With the breakup of Aeroflot into many small airlines, travel within the NIS is often unreliable. Domestic air travelers must often cope with unpredictable and/or inaccurate schedules and difficult conditions, including deterioration of centralized systems of maintenance, poor service, overloading and fuel shortages. Air travel within Russia, particularly in remote regions, is unreliable in terms of operations and safety. Some local airlines do not have advance reservation systems but sell tickets for cash at the airport. Flights often are canceled if more than 30% of the seats remain unsold.

Few Russian airlines are members of the International Air Transport Association (IATA), which maintains internationally recognized standards for safety. The U.S. Federal Aviation Administration (FAA) has assessed the Government of Russia as being in compliance with ICAO international aviation safety standards for oversight of Russian air carrier operations.

Russia's rapidly developing air transport industry grew by around 20% in 2007 and in the first five months of 2008 Russian airlines continued to report growth at that level. However, in the last three months growth slowed, though in August total passenger numbers were still up 3.9% on the previous year.

As of early 2001, a total of 294 airlines were officially registered in the country. Many of them are fully owned by the state, and in many others the state is a major shareholder. Since the August 1998 financial crisis in Russia, which buried the hopes of many airlines, domestic airlines have learned to work in the new conditions, and there were reasons to believe the market for air-transportation services had stabilized and begun to grow.

Nearly 90 percent of the passenger-transportation market is controlled by the top 30 airlines, and 50 percent by the top four - Aeroflot, Pulkovo, KrasAir and Siberia. In the segment of cargo transportation, 50 percent of the market is controlled by Aeroflot, East Line, Atlant-Soyuz and Volga-Dnepr. In 2008 S7 (Siberian Airways) maintained its lead over Aeroflot as Russia's leading domestic airline. A new Moscow based carrier, combining Moscow Government airline Atlant-Soyuz and Air Union - was registered in November 2008. Rostekhnologii General Director, Sergey Chemezov, says it would be the outcome of two years of planning. "A decision was made over two years ago by the Russian government to create a company that would be an alternative to Aeroflot. Today the founders of this state-run company met for the first time."

Provisionally named "Russian Airlines" - the new carrier would fly both domestic and international routes, carrying both passengers and cargo. An agreement was made along with the administration of Siberia's Krasnoyarsk Territory in September to merge several AiRUnion alliance members to ease cash-flow problems. Moscow Mayor, Yuri Luzhkov says the new airline will put an end to these problems. "The creation of the company will replace a whole line of air companies that lie in a state of financial and technical troubles - and in a state of bankruptcy."

Earlier in 2008, AiRUnion was unable to pay for jet fuel - with Russian airports responding by refusing to service their planes - stranding thousands of travellers. The creation of this new company was a way for the Moscow City Government and the State Corporate Rostekhnologii to address both issues that are faced by the air transportation sector and also help to meet growing demand for services. The new carrier created a domestic hub network - including Moscow's Vnukovo airport, and bases in St. Petersburg, Krasnoyarsk, and Khabarovsk. Analysts say that's a long-held ambition of Russia's largest airline Aeroflot - but it had been unable to achieve it.

Elena Sakhnova, Transportation Analyst, VTB Capital, says the airline may have considerable clout in the marketplace. "This is a state-owned airline and this may mean that we will see a lot of lobbying, a lot of support, a lot of budget money going to this company. And it may mean that competition may not be freer and that other airlines might suffer."

One major challenge for the new airline will be a fleet upgrade. The state-supported company will need the means to purchase foreign-made aircraft compliant with environmental regulations in order to fly abroad. Most of Air Union's existing fleet are Soviet-era aircraft, which will not compete with rival airlines like S7 and Aeroflot which mostly fly modern Boeings and Airbuses.

In 2007 the Ministry of Transport of the Russian Federation and Rosaviatsiya developed their Concept for the Aerodrome (Airport) Network Development of the Russian Civil Aviation till 2020. The Concept defines the list of the largest international airports now regarded as air transport hubs in the establishing national networks of airports.

Moscow's three airports and St Petersburg Pulkovo are by far the busiest Russian airports. All airports in Russia suffer from major seasonality issues with demand in the summer months almost twice as high as during the, often very harsh, winter season. Modernization of the Russian international airports and upgrading 10 largest of them into multi-terminal hubs matching the highest international standards was declared to be the strategic goal by Rosaviatsiya in 2005.

There are 393 airports in Russia, 70 of them are international. However, the level of airport infrastructure is very low, which creates serious obstacles to the development of the Russian market for air transportation. For years, Russian airports remained little more than passenger and cargo handling facilities. Almost none of Russia's airports meets airlines' requirements for modern, international airports. Many of them are unable to provide even minimal levels of services to their customers: Russian and foreign airlines and passengers. Practically all of Russia's airports need modernization and significant investments to improve runways, passenger and cargo terminals, technological systems, air traffic control, transport and communications. Investment programs for airport restructuring and development have been carried out very slowly due to difficulties in attracting investments. At the same time, passenger transportation on international and domestic routes continues to grow by 10-15% annually.