Russian UBAA sees ‘significant’ growth

 - May 17, 2008, 11:30 PM

Compared with its presence at previous EBACE shows, the Russian business aviation contingent this year has grown to such an extent that it includes two industry associations and a significant cluster of exhibitors practically forming a separate Russian “street” in the exhibit hall.

The United Business Aviation Association (UBAA), founded the week after EBACE’07, now unites 25 companies compared with the 21-strong membership of Russia’s older National Association of Business Aviation (NADA, to use its Russian acronym). NADA took over from the country’s previous Association of Business Aviation (ADA), established more than 10 years ago, but had to re-register under a new name in 2005.

“We are not competitors,” insisted UBAA executive director Maxim Fedosov. “Both associations aim at improving the climate for business aviation in Russia. We are happy each time NADA does something good in that direction. We expect NADA members to be happy when we succeed in the same direction.” UBAA claims to try to be closer to the real needs of the Russian business aviation community and is aiming for further consolidation of the country’s relatively new industry.

The most recent example of that work is assembling the dedicated Russian area here at EBACE. “Seven Russian companies are taking part in EBACE’08, and five of these are UBAA members. Our association initiated creation of the so-called ‘Russian street’ within the show territory,” said Fedosov.

Located in Exhibit Hall 5, Row 1900, the Russian street comprises the booths of VIPPORT/Vnukovo-3, the Planeta Aviation Group, JetAero, RusJet and RusAero. “All members in our association are independent companies, so we can only advise them, not command,” explained Fedosov. “If a company does not want to be with us on the Russian street, that’s it, we would not object. But the companies that are members in our association have joined UBAA in order to keep together, work hand-in-hand and solve mutual tasks together.”

The main task for UBAA at EBACE’08 is to demonstrate to the European business aviation community that the Russian market is growing and becoming more coherent. “We do use foreign-made jets, European technologies and a [Western] business approach, but we are not going to dissolve into Europe,” Fedosov told EBACE Convention News.

These days, many major Western business aviation companies are present in the Russian market. “Everybody wants to fly to Russia and earn money in our home market,” said Fedosov. “This market is not so large as in the U.S. or Europe, but business aviation is growing now,” he claimed.

According to UBAA, Russian bizav growth last year reached 15 percent and daily traffic through Russian airports averages about 150 flights by Russian and foreign-registered business jets.

There are varying estimates as to the size of the Russian business jet fleet–most of which is concentrated in Moscow. According to UBAA vice president Aleksandr Evdokimov, the total is about 300 aircraft. Of these, the number of purpose-built business jets is roughly equal to that of commercial airliners fitted with VIP interiors to serve as corporate or personal transports.

Most of foreign aircraft are registered outside Russia, either in Europe or in offshore territories such as the Cayman Islands. Out of 70 Russian-built business aircraft on the Russian registry only three are “true” business jets; the others are converted Tupolev 134/154 and Yakovlev 40/42 airliners.

Around 70 foreign-registered business jets are effectively based at Russian airports. The country’s foreign-made helicopter fleet has risen to 300, including 70 turbine-powered models that mainly serve executive and private users.
VIPPORT-Consulting recently conducted its own survey of Russian business aviation.
According to commercial director Artyom Pastukhov, the survey revealed that around 80 business aircraft purchases are made in the country each year and, at any given time, there are about 40 pre-owned aircraft on the market.

Tax Net Is Tight

Many operators of older Russian aircraft, such as the Tu-134VIP, are now in the market for Western replacements and Pastukhov said many have come here to EBACE as part of their search. However, if these Russian clients do purchase, for example, a Bombardier Challenger and bring it onto the Russian registry they will have to pay a 20-percent import tax and 18-percent VAT sales tax.

In fact, the Russian government has issued a directive reducing import tax for Challenger-class aircraft to 10 percent and has promised to scrap the tax altogether for dedicated business jets and converted airliners carrying fewer than 50 seats. However, according to companies involved in handling these imports, the country’s creaking bureaucracy makes it so hard to clear customs on this basis that they end up paying the full tax just to make the deals happen.

Ground-handling and flight-support specialist RusAero has been coming to EBACE since its inception in 2001 and has found it valuable in terms of meeting both new and existing clients. “Relations built on contacts in person prove both lasting and rewarding,” said RusAero commercial director Olga Gerasina. “You cannot say everything you want on the phone or in a letter. Meeting in person is something irreplaceable in our business.”

About 70 percent of all flights that RusAero handles in the Moscow area take off or land at Vnukovo Airport, which has emerged as the Russian capital’s main business aviation gateway. Just three years ago, most of RusAero’s business was at Sheremetyevo Airport, but a massive rebuilding project there has led to drastic reduction in slot availability for business aircraft.

“We had to shift to Vnukovo, and many of our clients fell in love with it: the highway there is very good and the airport itself is closest to city center,” said Gerasina. “We still have some clients loyal to Sheremetyevo and some who put their faith in Domodedovo–so they help us keep a presence at the three Moscow airports.”
RusAero has teamed with VIPPORT, which in 2005 emerged as the exclusive operator of Vnukovo-3, as the business aviation enclave at Vnukovo is called.
Not all Russian companies are in Row 1900. Both flight-support and handling company Streamline-Ops and executive charter firm Jet2000 have tried to remain independent of Russian business aviation groups, and at this year’s EBACE they are holding a joint exhibit in Booth No. 909, away from UBAA’s Russian street.

According to Streamline-Ops operations director Gleb Melnikov, his company’s attendance at EBACE is quite different than it was three years ago. “When it was my first time at EBACE, I had no schedule; I wanted to see who was there, talk to them and find out what we could do together,” he explained. “Now, it is a totally different situation. We have many clients and partners in Europe, so we need to see them, talk to them and refresh personal ties.”

Jet2000 chairman Leonid Koshelev has not missed an EBACE event and his reasons for coming here are unchanged. “By having a stand at EBACE we demonstrate that we are keeping afloat, that we work hard and always try to improve,” he said. “Since most of our flights are to Europe, we find the EBACE audience as having a lot more in common with us than that of the NBAA show.”