Airlines take hammering as passenger numbers slide

Air passenger traffic in Russia fell 20% in February on the same period last year. Some airlines claim there is too much competition and have called on the weakest players to leave the market.

One rouble per share…That's what Russia’s low-cost airline Sky Express has offered Moscow's government to buy 75% of its stock.  The carrier says slowing demand, plus a sharp rise in interest rates, makes it hard for many airlines to make it on their own.

And a tough competitive environment is not helping either, according to Managing Director, Marina Bukalova.

“Demand is now up to 30% lower than what the market can offer. This generates dumping and tough competition – but there are no reserves for it! Those carriers fighting for passengers by slashing tariffs to levels lower than the base price are just moving closer to the end.”

Andrey Martirosov, Managing Director of private Russian carrier U-Tair, says consolidation of the sector is healthy and unavoidable…

“Commercial aviation in Russia is very young – just over 15 years old. Consolidation is a natural process. The structure of the business is crystallizing, shaping up the leading carriers.”

Analysts say, every 5th Russian airline may leave the market this year as passenger traffic shrinks by up to 15%. But its not just a Russian phenomena. This week the International Air Transport Association said global airlines will lose $5 billion dollars in 2009, almost twice as much than they originally forecasted.