Matthias A. Merzhäuser
The Malta Independent on Sunday of 6 April reported that Russian tourists are angry about UK visa procedures, and that the language-learning sector is likely to shift to Ireland, Malta and the USA.
This market segment however is only part of the tourism mix. Having dealt with various regions in earlier discussions, the Russian market will now be examined regarding its potential for route development.
Moscow
This summer, Domodedovo, the modern airport south of Moscow, and Sheremetjevo, the Aeroflot hub north of Moscow, are both with Air Malta. Aeroflot itself has practically withdrawn from operating tourist flights, and code-shares here on the Sheremetjevo flight.
Given the road infrastructure challenges Moscow has to tackle (crossing the city by car can take half a day), linking the two airports can be justified.
There is also a big contrast in terminal infrastructure between Domodedovo and Sheremetjevo, as the latter has retained some of its dubious Soviet / post-Soviet charms.
From summer 2005, Vnukovo, on Moscow’s west end, saw regular once weekly charters by Atlant Soyuz, a smaller airline partly owned by the city of Moscow.
For the 2008 season there seems to be no Atlant flights or any flights from Vnukovo. Clearly, Air Malta’s Domodedovo run remaining healthy is crucial for guaranteed connectivity.
Looking at statistics,
Air Malta’s year-round Domodedovo run in the 2007 season was clearly leading, both in total and by monthly comparison, followed by their Sheremetjevo run, while Vnukovo stood third but was limited in total volume due to the shorter period of service (June to September).
The stark contrast between Domodedovo and Sheremetjevo figures shows that customers prefer the more modern airport. Air Malta was one of the first foreign carriers to link this airport: a correct step.
In turn, a month-to-month peak season comparison shows that Vnukovo proved quite stronger than Sheremetjevo at equal frequency operated with equal flight equipment and equal seat capacity available.
Winter flights are meagre. Air Malta trashed out one-way seats at Lm16 or equivalent for this 3000km run where they “enjoyed a monopoly” (or rather: nobody else would keep the route open during the lean months), which says a lot about load factors. In the 2007/2008 winter, Air Malta ran once weekly to Domodedovo and Sheremetjevo each, an improvement on the winter before when one had one flight in total. Fares surely cannot be blamed.
During the winter months, Russian tourists (just like others) either choose the really warm, sunny places (e.g. Egypt, UAE, Thailand, Indonesia) or skiing places (Switzerland, France, Austria), or shopping/city destinations (London, New York, Paris, Düsseldorf, Shanghai etc.). So seasonality of a sun-and-sea oriented market is part of the issue.
While flights alone cannot solve the seasonality issue, one can still take a look for possible improvement.
Russian carriers with a strong local marketing infrastructure, also as regards tour operators, operational flexibility, and source market know-how, could help expand also beyond Moscow, indubitably the biggest single source.
Today, Russia’s airline industry is thankfully in an incomparably better state than in the 1990s, both technically and financially thanks to a recovering economy and the Putin government pushing through tough standards. The ongoing consolidation and fleet modernisation process, actively welcomed by the government, keeps on track, while improving consumer market performance provides a good perspective to natural growth in the private travel market.
Gazprom
A key behind the recovery of the Russian economy is the energy market. Gazprom is one of the key figures. Europe’s most highly valued concern also has in-house travel agencies/tour operators, providing special offers to its 400,000 staff. Maybe one could see at least some of them holidaying in Malta instead of flying to other places.
One can certainly promote Malta as a conference/meeting destination for management or special events (Lukoil, see MTmidweek 10 October 2007), but there is also business beyond these glamorous cases. There could be general incentives or just ordinary holiday packages for general staff who can afford it (from senior technicians to middle management).
If just only one out of 40 Gazprom employees were to visit Malta, taking one to three persons along with them and stay for two or three weeks, this would mean quite some business.
Malta has had a steady flow generated by a Danish union-related organisation for decades, so one could at least probe the possibility of a similar partnership.
The last decade
While scanning through my records, I came across a short article from ToM dated 21 August 1997 about developments regarding incoming tourism from Russia.
NTOM (MTA predecessor) was doing some heavy promotion work. Tourism Minister Karmenu Vella had met earlier that year with Aeroflot who expanded their services (see also article by your truly on TMIS, 23 March). Apart from Moscow and St Petersburg services, charter flights were coming from key cities like Jekaterinburg and even, believe it or not, Orenburg.
From 1998 to 1999, passenger figures plummeted, only recovering to just surpass the 1998 level in 2004, only to fall slightly below again in 2005, recovering in 2006 with a further positive 2007.
But before anyone tries to construct a relationship between political changes in Malta and the dent in Russia-sourced tourism development, one should take a look at recent economic history: the big economic crisis Russia experienced. This hit the population to almost existential levels.
The comparative economic stability that followed, improved world market prices for oil, gas, minerals and steel helped the Russian economy. State and private enterprise employees are now paid for their work, which sounds strange, but was no way taken for granted in the 1990s when folks were happy to receive delayed payments of seven or nine months only to see the rouble crash. Improved incomes, more confidence in jobs, and more participation in the wealth of the national economy for more people positively affected outgoing tourism.
The only market at present, more or less sufficiently tapped for Malta, is Moscow, but even here improvement potential can be had. The difference between 1998 and 2007 was something like a mere 4,000 arrivals from a metropolis whose consumer market can in no way be compared to that of a decade ago. But while the higher income concentration is certainly in Moscow, one could also look at other centres.
St Petersburg
In 2007, the route to/from the big city of St Petersburg carried just as many passengers as the Malta Plovdiv (central Bulgaria) run filled with Malta-sourced tourists.
Currently, Air Malta runs once weekly charters as part of the summer schedule. Maybe teaming up with Rossiya Russian Airlines www.rossiya-airlines.ru/en could improve this due to local strength for a scheduled service open to tour operators, maybe with one flight operated by Air Malta and one or two extra ones by Rossiya.
Rossiya dominates the St Petersburg market. Rossiya (Russia State Transport) initially started as the commercial arm of the government flight with an Airbus, Tupolev and Ilyushin fleet (they still operate the presidential flying unit).
If one cannot fill Air Malta’s Airbuses in St Petersburg for additional frequencies, or even a once weekly operation for an extended season, one might consider Rossiya’s smaller Boeing 737-500s, eventually even the smaller Antonov 148s (deliveries still due; 10 own orders plus eight via IFC leasing). This could mean more demand-oriented capacity (80-115 seats) combined with competitive unit costs. Rossiya also has larger planes available, from a 140-seat Airbus A319s (just like Air Malta’s) and Tupolev 160-seaters, to Boeing and Ilyushin widebody jets. The route could grow either by extending the season or by increasing volumes through better market access, or both.
Rossiya are also strong in the Moscow market and have a solid, long-term perspective. Actually, they are based at Vnukovo. They are the biggest State-owned Russian carrier and Russia’s number three as regards passenger numbers, with a wide route portfolio, including numerous vacation spots in Italy, Greece, former Yugoslavia etc. directly competing with Malta: http://rossiya-airlines.com /en/about/aboutus/geographyflights/.
Kaliningrad
The Russian enclave on the Baltic Sea surrounded by Poland and Lithuania, is, despite its “island” status developing positively lately thanks for example to its special fiscal policy for new investment. While local carrier KD Avia keeps its 20 B737 fleet busy mostly with this connecting traffic between the EU and the CIS, some charters to the Mediterranean should also be possible. Tour operators could also contract Air Malta or some Russian operator.
Nizhny Novgorod and other places
At least some charters from Nizhny Novgorod, a major centre for general industry and IT (e.g. Intel) 400kms east of Moscow, and maybe also other centres like Samara, Kazan, Rostov or Jekaterinburg, might be evaluated. These are all more important and economically healthier than Orenburg that somehow, at least reportedly, worked in the nineties.
Tour operators
One could set a modest target of for example 15,000 arrivals from places outside Moscow. If these were to spend 20 bed nights each (because Russian tourists tend to stay longer than average), this would mean 300,000 genuinely additional bed nights. To achieve the same sum of bed nights with low-cost-trippers staying two nights (argued to be the ideal tourists during the campaign for fat subsidies), one would need 150,000 arrivals. One wonders in which of the two cases more subsidies would be paid (now that one pays subsidies even for parallel flights) for an equal bed-nights spent results.
Carrier or tour operator incentives could be designed in such a way that one would agree just on a volume figure of tourists to be brought, not specifying where from in Russia and what frequency, and just exclude Moscow and the once-weekly St. Petersburg charter to avoid eventual cannibalisation, or let them be included provided Air Malta are contracted for the present flight volume. In recent years Air Malta proved the only steady figure on the route. It is essential that it is not thrown out of the Moscow route.
A seasonal base?
If a Russian tour operator (consortium) or airline operator could base a plane in Malta over the summer, and run one or maybe two holiday flight pairs a day to/from Russia to different places basically not linked as present, or even including twice weekly to the home base in Moscow, there should be no unnecessary red tape. A scenario could be: twice weekly Moscow, once or twice weekly St Petersburg, and once weekly each to Kaliningrad, Nizhny Novgorod and one or two other places.
Seven flight pairs are not enough to keep an expensive new western aircraft occupied. A Tupolev-154M, even a late model with comparatively few hours, from the early to mid 1990s, with cabin standard comparable to that of contemporary western aircraft, has quite low capital costs. So even running one flight pair a day, hence just eight operational hours, is no problem as regards utilisation. Certainly one has three flight-deck crew rather than two on western or new Russian aircraft, but wages are lower, which compensates. Higher specific fuel consumption could be countered by low capital costs. MIA has very low parking (ground-time related) and landing (weight related) fees. Rising fuel prices stress this according factor: one should not be too optimistic. Alternatively, a B737 or A320, with lower specific fuel consumption but higher capital costs, could be an option, but one needs higher utilisation – and generating 14 weekly flight pairs will be basically impossible.
The carrier should be supported just like a certain carrier that has support thrown after it for parallel flights on the easiest of all routes – London.
The easiest solution would be tour operators contracting Air Malta. Unit cost-wise they are very competitive, maybe except if faced with Transaero’s jumbos, while offering a low marketing risk (140 seat A319s). The only challenges are the distribution channels and maybe the right connections.
An overview of other generally interesting Russian carriers
Low-cost carrier S7 Airlines (formerly Siberia Airlines) has a wide network and fleet (from smaller Airbus A319s via the Tu-154M to Airbus and Ilyushin widebodies) portfolio. Although it has acquired a few B747-400 jumbo jets second-hand, S7 Airlines has Boeing B787 Dreamliners on order to replace aging Airbuses and Ilyushins.
AiRUnion is an airline group around Kras Air. Kras Air’s own fleet ranges from sBoeing 737s and Tupolev 154s to Boeing 767 and Ilyushin 96 and 86 widebodies. Kras Air is developing a low-cost/no-frills arm called SkyExpress with a planned fleet strength of 45 Boeing 737s, though strategically oriented on Russian domestic and western/central EU flights. AiRUnion code-shares with EU airlines and is a Lufthansa Technik customer, while a major Kras Air shareholder also runs Malev.
Transaero www.transaero. com, the private airline pioneer of Russia, today also has a dozen B747 jumbo jets as part of its fleet. These are sent not only on long haul flights to Southeast Asia or the Caribbean but also to Spain, Turkey, Greece, Tunisia or Croatia, carrying up to 470 tourists at a go. Last year Transaero ordered a number of Airbus widebodies while deliveries of new Tupolev 214 200-seaters have started, expanding their all-Boeing (B737, B767, B747) fleet. Furthermore B777s (like the one Emirates runs to Malta) will join the fleet. The B737s run on European or domestic lower capacity or higher frequency routes.
Furthermore, VIM Air (Boeing 757), Ural Airlines (A320, Tu-154, Il86), KMV or Vladivostok Air (A320, Tu 234, Tu-154M) are examples of smaller, further alternatives flying charters to competing destinations around the Med.
The competitors
Also, when ordinary Russian tourists might be more patient than others if things are going a bit slow like for example with services, one must offer a fair product.
Due to its geographic proximity, Antalya in Turkey is a booming mass-market and low costs destination for Russian tourists who are offered a day’s “guided cultural tour’”. What they get is a 30-minute visit to that tiny harbour after which, for the rest of the day, they are dropped for hours at one shopping outlet after the other in the middle of building sites or hotel ghettos, until they are so bored that they buy something. Malta prices are a bit higher, but a better product. Many Russians really want to see something that is different from home, with a good portion of sunshine added to it.
Today Russian tourists are already regarded as being the biggest spenders on average in Malta. On the one hand this certainly is due to the luxury segment, though one should also not assume that every Russian tourist is a Roman Abramovich. For the mass market, all-inclusive offers for 3- and 4-star hotels are very welcome: calculable costs, less risks.
It is no use putting up tourists near (or surrounded by) a construction site, in the same kind of ugly building they have at home, litter strewn around, drunken ‘students’ reeling around the place, or being fleeced by the locals. It is good that one is now aware of these problems and taking remedial measures.
True, some tourist authorities (e.g. in Austrian ski resorts) meanwhile advise hoteliers to try and limit the number of Russian tourists, as sometimes the ways of a few very high spending tourists are regarded as a bit unconventional by the traditional Western clientele. In Antalya, hoteliers had to adjust and budget for middle-class tourists more enthusiastic than the former on average about food, drink and swimming pool use. One has to seek a balance it is not a panacea. But with Russian incoming tourism still underdeveloped in Malta, one should not already start discussing how to limit it. Also, the great majority of tourists are very conventional, and semi-xenophobic campaigns against younger Russian females with negative stereotypes (I once recall ‘The Russians are coming’) are out of place. Certainly one cannot exclude the one or other case one does not like – but just think of some “language students” from “all important” markets reeling around in certain areas.
A challenge indeed might be the issue of visas, which involves a lot more bureaucracy. On the other hand, maybe one could team up with another country for a practical solution. As other EU Mediterranean tourism-oriented countries profit from the Russian market, there is no reason why Malta should not.