Business Aviation in Russia: The Long Road Out of the Dark
The modern history of Russian Business Aviation has began with a dissolution of the Soviet Union in 1991, and the establishment of many independent aviation enterprises, located in the key cities throughout the territory of the Russian Federation. Once being controlled and regulated by the centralised system, now these enterprises were fully privatised and able to offer the business aviation service to anyone. Previously, only governmental representatives and general managers of strategic objects could fly privately. But now, as the waves of privatisation were running through the newly formed country, the pool of new business aviation clients has started to form – clients who wanted the highest levels of mobility and flexibility, after decade of business stagnation and lack of entrepreneurship, almost deadlocked by the Soviet system.
Yet, the whole aviation sector was going through some very difficult times – deficit of funding, waves of redundancy, undeveloped market vulnerability, uncertainty about the future and therefore lack of business sustainability. Taking advantage of the situation, the clients who could afford flying privately have started to become a patrons for the selected aviation enterprises, receiving in return a control over the management of these organisations and ability to become aircraft owners themselves. First private aircraft have started to emerge on the market – mainly Yakovlev Yak-40 and Tupolev Tu-134 aircraft, with a cabin being reconfigured to the VIP layout. These aircraft were registered in Russia and put under Aircraft Operator Certificate (AOC) of a local aviation enterprises, thus making a legal framework for a commercial aviation activities, both for the aircraft owners and for the third-party charter customers.
Still, as a deregulation has slowly started to kick in, many aircraft owners have realised the advantages of the foreign aircraft registries and tax-avoidance schemes. It was inevitable that sooner or later a “private” sector of business aviation in Russia will be formed. While some large corporations have intended to use the privately registered aircraft solely for the purposes of their executive’s corporate travel, the main interest of the private aircraft owners was minimisation of all possible expenses connected to the ownership and operation of the aircraft. Taking in account completely deregulated market and relatively little control from the aviation authorities – the possibility to arrange “gray charters” have came into place. Owners have started to offer their private, foreign-registered and non-certified aircraft for a commercial charter purposes. At first, it probably looked as something bizarre, but as time went by – this phenomena has established itself as a concrete and solid sector of the business aviation market in Russia.
On the basis of anonymity, several Russian business aviation brokers have agreed to provide their personal statistics of the “gray charters”, and on the average – at least 30% of de-facto commercial charters originating in Russia, or operating to/from Russia, are being illegally performed on a privately-registered aircraft. According to the brokers, this is the current and developed state of market, and they just adapt to the client requests (including finding the better price on the private aircraft, as compared to the licensed commercial aircraft).
However, it is important to highlight the opposing point of view from the operator’s side, both Russian and foreign. For instance, according to Mr. Andrey Opryshko (Business Development Director of Estonian operator “FortAero”), continued presence of illegal charters on the Russian market is heavily downgrading the levels of trust and professionalism. “Clients are forthrightly risking their lives in the pursuit of the lower prices, sometimes without a clear understanding of the possible consequences, both in terms of legal aspects and safety of the flight operations. The key to eradication of the illegal charter operations is in the progressive education of the clients by all affiliated parties (client representatives, brokers, and operators)”, states Mr. Opryshko.
On the other hand, in the opinion of Mr. Nikolay Minkov (Charter Sales Manager of Russian operator “InsatAero”), the systematic corruption and slovenliness in the Russian business aviation sector obviously prevents the self-recovery of the market. “Careless attitude and reckless willingness to generate maximum profit takes over the common sense, and eventually leads to the illegal operations. It is time to start seriously thinking about the safety, we are not in the nineties anymore”, concludes Mr. Minkov.
Nevertheless, many aviation brokers have completely ruled out the use of “gray charters” with the introduction of the company policies and guidelines, excluding the possibility of placing a customer on a private aircraft. For example, Russian branch of a global brokerage player Air Charter Service has a strict company rule to work only with a licensed commercial operators, having a legal AOC, as the whole ACS Group is operating under the same rule. Besides, even domestic Russian brokerage companies are understanding the necessity to move towards a regulated and “clear” market. As claimed by Mr. Grigory Ioffe (Managing Partner of a brokerage company Peremena Avia), “the market has organically developed during the last decade, the number of clients and operators on the market has stabilised”. According to Mr. Ioffe, during the upcoming years the Russian market will be becoming more “mature”, which is a positive factor.
Generally speaking, after twenty-five years of continuous development, Russia is a promising, yet vulnerable business aviation market. There are still many obstacles to overcome, particularly “grey charters”. The solution to elimination of such concerns are, perhaps, continuous discussions on the regulatory level, and recognition of necessity to work clearly by all the parties involved in the business aviation operations in Russia. Illegal operations shall be consequentially tackled, and eventually abolished. Most probably, it could be a first small step in a very long journey towards a clear and legal Russian business aviation market.
Author: Victor Rudnov