Money-Growing: Big Promises for Small Aviation

Russia has no private aviation and no privately-owned aerodromes, while the existing landing strips are in a deplorable condition. What prevents their development is not a lack of finances – there are investors in this country willing to invest funds in the sector – but the domestic legislation that seems to be intentionally impeding the development of a potentially profitable sector that has many fans.

The aerodromes where small aviation aircraft are based are going through hard times. Perestroika and the post-perestroika disintegration of the economy dealt a heavy blow to civil aviation. Approximately 1,000 aerodromes closed down in a country that covers a sixth of the earth’s surface, with only a single railway – the Transsib – linking its western regions to the eastern coast.

Only by Helicopter

The need to develop small aviation, restore the existing sector and build new aerodrome facilities is self-evident. Many towns and villages across Russia at certain times of the year cannot be reached by land or by boat. For example, the ancient town of Mezen in Arkhangelsk Region can only be accessed by road in winter when the surrounding marshes freeze over.

There are thousands of similar places in Russia; even in the Moscow Region, which is believed to have a well-developed road network, there are areas reachable only by helicopter.

With the out-of-town real estate market booming, ranch houses in remote rural areas are becoming more popular. Helipads will become an essential feature of such properties as people who value their time will undoubtedly opt for a helicopter as a means of getting to their ranches from their country houses, realty consultants are convinced.

Only by air is the government able to send help to people stranded in disaster areas, only by air can a businessman quickly get to a distant destination, only by air is it possible for a tourist to get to the most beautiful parts of the country.

But it appears the Transport Ministry of Russia does not share that point of view. It is no coincidence that most legal acts issued over the past years have “stalled” the development of small aviation, with many draft bills put on hold.

As a result, there is no such thing as private aviation in Russia, although privately-owned aircraft account for the biggest part of general aviation in many countries. At the same time, according to unofficial reports – there are no official data available – there are over 3,000 private aircraft in Russia. Approximately 1,000 planes are registered at the Amateur Aviation Federation (FLA).

General purpose aviation – which includes civil aircraft involved in all sorts of operations excluding scheduled airline services and non-scheduled commercial flights, in line with a definition adopted by the 1994 Chicago Convention – is mentioned in the Russian Air Code, but there are no legal procedures regulating the registration and certification of aircraft clubs and aircraft.

The operations of the Amateur Aviation Federation were suspended indefinitely after two planes crashed near the Myachkovo airfield last summer. The procedure of certification, too, was suspended in August 2004.

Russia’s Transport Ministry has been working on a federal plan for the development of small aviation for eight years. In March of this year the ministry again failed to meet the deadline set for submitting the draft to the government for consideration.

No official explanation followed. Analysts had expected that in addition to the draft the ministry would submit a blueprint outlining procedures for the certification of light general aviation aircraft drafted by the head of the Federal Transport Inspection Service, Aleksandr Neradko. Initially, the draft was expected to be finalized in December 2004. But that document, too, was put on hold. Consequently, there is no general purpose aviation in Russia.

The only relatively efficient body active in the sector is the public organization ROSTO. Establishing an aircraft club and registering a plane is easier at ROSTO. But even within that group there is no unity, notes Sergei Sokolov, deputy chairman in charge of aircraft at ROSTO (DOSAAF USSR).

Some ROSTO representatives believe that the group should focus on the promotion of civil aviation; others are convinced that it should address state aircraft. Civil aviation lacks developed mechanisms of operation; before they are introduced into law the development of non-commercial civil aircraft is virtually impossible. On the whole, the situation can be described using the words of one pilot who said: “The government invents methods to stop flying.”

International Standards

Across the globe small aviation brings in good revenues. Addressing a conference entitled “The general aspects of general aircraft development in Russia”, Valery Shaposhnikov, chairman of the International Air Security Foundation (renamed as Partnership: Flight Security), noted that the annual turnover of the general aviation market in the United States stands at $50 billion, with the number of jobs exceeding 500,000.

Aleksandr Klimchuk, head of the Aerosoyuz helicopter company, which is a part of the Nicole Aero holding, reports that there are some 200,000 privately-owned aircraft in the United States. “Following the 9/11 terror attacks private flights were suspended worldwide. Except for the U.S.,” he adds. “Annual tax revenues from that sector run as high as nearly $4 billion.”

The development of general aviation boosts economic development by creating favorable conditions for the growth of business in the areas where it is used.

Marcel Felten, senior vice-president of the International Aircraft Owners and Pilots Association, noted that a survey conducted in Switzerland in 1993 had revealed that the general turnover of the general aircraft services in that country amounted to 700 million Swiss francs, or 2.5 million francs ($480,000) for every non-commercial aircraft.

According to Felten, 89% of all civil aircraft in the world belong to general aviation, 87% of all flights are made by general aviation, and 80% of pilots fly general aircraft. Another important sphere where general aviation is involved is the training of pilots, both for private aircraft and for regular commercial flights. Statistics show that approximately 24% of all flying hours are training, while private schools train over 50% of all airline pilots.

Russia’s Specifics

As the civilized world promotes small aviation Russia is still following its own, special path. A demand for small aircraft does exist in this country, but an aircraft owner with a pilot's license has little hope of taking off. Procedures for certifying private aircraft are so rigid that it is virtually impossible to cut through the red tape.

The Federal Aviation Rules outlining the procedures for general aviation operations took effect on January 1, 2005. Before taking off an amateur pilot is required to submit a pilot's license issued in compliance with state standards to the Transport Ministry, as well as an airworthiness certificate, documents confirming the aircraft’s registration at an airfield where it will be stored, a technician's certificate or an agreement for the servicing of the aircraft, agreements on flight control, air navigation, medical and weather services, and so on – in total, about a dozen different documents.

It is hardly surprising that few people are willing to go to all that trouble. And this is not the only challenge general aviation is facing.

Other countries practice a notification procedure where all you have to do before takeoff is to notify air traffic control service accordingly.

In Russia, to leave the ground on board a private plane, says Aleksandr Kutuzov, head of the Aerosoyuz aircraft club and a co-founder of the legendary pilot group Strizhi (Swifts), a pilot is required to lodge an application to a special air traffic control service before 14-00 the day before the flight, and to answer 18 questions on an application form. On the following day, two hours before takeoff, the pilot has to apply for permission. And only after permission is granted – which does not always happen – can he board the plane and take off.

Bird’s Eye View

Of course, comparing Russia’s potential with that of Western Europe or the U.S. is hardly appropriate. Russia’s nascent aircraft market is still too weak. It is only being formed, says Sergei Sabanin, project director at Aerosoyuz.

But by the year 2010 Russia will generate demand for 8,000 new aircraft for corporate and private use, according to estimates by the U.S. Department of Commerce.

There are many areas ripe for development in Russia’s general aviation field. They include pilot training, aviation sport, air patrol, tourism, small cargo carriage and agriculture. Corporate and business aviation, too, has potential.

Today’s Russia is witnessing rapid developments in pilot training courses and air sports. Corporate aviation is developing slowly, although it is obvious it is capable of making good profits. The most important factor is that such flights save time.

Private aircraft owners are free to fly without the constrictions of a timetable, using small airfields for takeoff and landing, or even basic airstrips whose number considerably exceeds that of runways available at larger aerodromes used by commercial airlines. Besides, quite often there is a small airfield situated closer to a private aircraft owner’s place of residence. All this helps to considerably shorten travel time.

Moreover, no time is wasted on flight check-ins, waiting to collect luggage, etc. Another important factor is that a pilot is able to fly directly to the required destination without having to change planes or stop over somewhere along the way. The third factor, which has become more significant of late, is flight safety. Outsiders are not allowed to board private planes.

The Morava aircraft club that offers corporate flights has compared the flight time from Moscow to Saratov. A privately-owned Cessna covers the distance in 2 hours 35 minutes; a Yak-42 needs 2 hours 55 minutes; passengers on commercial airlines spend most of their time at flight check-in and the formalities of leaving the plane.

A flight to Lake Seliger is one of the more popular routes. The plane lands directly on an unpaved airfield, within 17 kilometers of the town of Ostashkov.

Another area of development for general aviation is an air taxi service provided by helicopters. The idea has been discussed in Moscow for a number of years now. City Hall allocated 27 million rubles to implement a plan for the development of the air taxi service, the Interfax news agency reported on January 18, 2005.

The Atlant-Soyuz airline company, along with Mosvneshinforma, a company that won the bid to research the air taxi market, was assigned to develop the plan and outline the primary tasks for its implementation.

After the program is endorsed a special company is to be established to oversee the project. As the program is being devised its authors will select sites in the Moscow Region for the development of new aerodromes or the redevelopment of existing facilities for future air taxi operations.

Unfortunately, aviation experts are skeptical about the project. They agree that it has potential, but the approach to the project by city officials shows the government has little interest in its implementation.

The development of general aviation would require the restoration and re-equipping of the entire infrastructure as well as the existing aerodromes. Besides air travel, aerodromes also have their own additional sources of revenues such as the maintenance and servicing of private aircraft.

Aerodrome Realities

As many as 95% of all the existing airfields are located on federally-owned land, de-facto operated by the Defense Ministry. Most of those plots are used jointly by air force units and aircraft clubs. For example, the Morava aircraft club is based at an aerodrome used by a military pilot school in Kaluga. Formally, both Morava’s pilots and aircraft belong to the pilot school.

ROSTO runs over 70 aerodromes across Russia, including 10 in the Moscow Region, says Sergei Sokolov. ROSTO owns airfield facilities in Kolomna, Serpukhov and Yegoryevsk. Though an aerodrome in Stupino is federally owned, all the pilot training courses are provided by ROSTO’s Chkalov aircraft club. This is quite a common situation. Sometimes, one airfield is operated jointly by several aircraft clubs.

Small aerodromes where small aircraft are based are cost efficient but their revenues are meager. On the whole, they owe their existence largely to their staff’s enthusiasm. None of ROSTO’s aerodromes have been closed despite the hard times Russian aviation has been experiencing.

The Chkalov central aircraft club is active at the airfields in Stupino, Drakino, Vyazniki (Vladimir Region) and some others. The aircraft were mostly inherited from the Soviet-era DOSAAF. New aircraft are provided by members of the club – private individuals.

The club receives minimal financial support from the government. The main source of income is pilot training. Training on board the Evro Star plane offered by the Morava club in Kaluga costs approximately $6,300 for 42 flight hours. The theory courses are free. The 2nd Moscow aircraft club, based in Podolsk charges $8,000 for 42 flight hours on board a Yak-52, plus 63 hours of ground training.

“Oil-based products are the key expenditure item for aircraft companies,” says Vladimir Gorbunov. “They eat up nearly 50%. Maintenance of the aerodrome and public utility charges take up another 15%, plus maintenance of aircraft and salaries to the staff.” On the whole, aerodromes bring low returns. “The rate of return is just enough to stay afloat,” Gorbunov agrees. “It is just that this gives a group of enthusiasts an opportunity to do something they really enjoy.”

Air tours do not make any money for the club. “The cost of repairs of a helicopter or a plane can run up to thousands of dollars,” Sergei Sabanin explains. Like cars, aircraft require regular technical maintenance. Often the club spends all its revenues on repairs, he says.

The sale of aircraft to individuals and after-sale services can bring good profits to aircraft clubs, however. Aerosoyuz is the official dealer for the U.S.-based Robinson Helicopter that sells 100 helicopters annually. By comparison, Russia’s Kamov plant sells only 30 helicopters per year. Aerosoyuz has arranged for official certification of the Robinson R44 helicopter in Russia. Nowadays, R44s can be used in civil aviation. The price of an R44 is approximately $450,000.

Provincial aerodromes could become attractive centers, Vladimir Gorbunov believes. To that end, they should be used as venues for championships, air-shows; that would require the development of public amenities such as hotels, cafes, swimming pools, children’s playgrounds, etc. Attracting investors is not the most difficult task, he says. What is more complicated is to secure all the necessary permission and to operate in full compliance with the law.

Aerosoyuz’s Sabanin agrees. A project for the development of a sports and leisure center offering unique air services could prove especially successful, Sabanin believes. The company plans the development of just such a facility – under the working name of Aeropark – in Sorochany, outside Moscow, where it has bought a 55-hectare plot of land.

The future park will feature an aerodrome, a special “transformable” zone to be used as a venue for air-shows and competitions, a hotel, a sports center, a show-room, exhibition facilities, a paintball field, an off-road route, an indoor swimming pool, tennis courts, a parking area and children’s playgrounds. The project is estimated to be worth $30 million with financing to be provided mostly by Russian companies. The pool of investors, however, has not yet been fully formed.

At present the company is looking for appropriate plots of land in the west and southwest of the Moscow Region. But Aerosoyuz will not be able to launch the development of Aeropark before the government revises its stand on small aviation and introduces legislation governing general aviation in the country. “We are ready to begin work, but we cannot because we do not know what the future will bring,” says Sabanin.

Alas, the government’s position remains unchanged, and it is sufficient to recall the Myachkovo aerodrome case. Following two plane crashes near Myachkovo in the summer of 2004 the aerodrome was closed down. Nikita Mitin, a prosecutor with the Moscow Transport Prosecutor’s Office, told the Gazeta.Ru Web site that the facility had been inspected for the first time in early 2004.

The inspection revealed that the aerodrome had failed to meet certain requirements. The prosecutor’s office warned Ivan Sharapov, chief executive at OAO MAUS (Myachkovo Air Services), that all the defects had to be eliminated. In the summer of the same year two planes – a Zlin and a Li-2 – crashed at Myachkovo several weeks apart.

In the same interview Nikita Mitin noted: “Many of the complaints made against aviators lately are to a certain extent exaggerated. I cannot say who is lobbying the issue. Some would like to use Myachkovo for the development of a race track; others want to use the plot for the development of a prime residential property.”

Most aviators agree that the move to close Myachkovo was intended to deal a blow to general aviation and the Amateur Aviation Federation. Back in 1993 the Myachkovo aerodrome was transformed into the MAUS air services company.

In the summer of 2004 MAUS was taken over by the FINPROMKO group that purchased a 60% stake in the company. The initial investment stood at over 100 million rubles.

Before Myachkovo was closed 29 private aircraft clubs operated there. All of them belonged to the Amateur Aviation Federation. Myachkovo was the headquarters of the federation. A spokesperson for MAUS reported that in 1996 general aircraft made 10,500 takeoffs and landings at Myachkovo; in the first six months of 2004 that figure stood at 27,000.

The Myachkovo aerodrome is very important for the development of general aviation in the region. There is no other place for private aircraft around Moscow, according to Nikita Mitin.

Today, with Myachkovo closed, the company still continues to pay taxes to the federal and local budgets, salaries to the staff and bears all the expenses for maintaining the aerodrome facilities that occupy 128.5 hectares.

At the same time, the company is taking the necessary steps to certify its services. The size of investment for the restoration of the aerial survey fleet is estimated to be worth tens to hundreds of thousands of dollars.

All those measures are being taken as part of a program drawn up by the company management for the restoration and future development of the Myachkovo Aviation Services. In the future, the company plans to offer air services to corporate and individual clients, and to create conditions for the development of small aviation with private aircraft based at Myahkovo.

“Russia today is experiencing high demand for corporate flights,” Sergei Anikin, chief executive at MAUS, says. “Each year the number of flights grows by 10-15% on average. But still, the demand for such services in Russia is lower than in the West. So far, we still have no clear-cut legislation in that sphere.”

The aerodrome facility is expected to be of high quality. There are numerous examples in the West. For example, in France there is an international airport catering for corporate and small aviation, equipped with a state-of-the-art air traffic control tower, a passenger terminal, aviation business properties, large parking areas and four hangars.

Once it is re-opened the renovated aerodrome hopes to resume aerial surveys for government bodies and major private businesses. Those services are seen as one of Myachkovo’s key sources of revenue in the future.

Myachkovo is currently mulling a project to establish a new airline company. Although earlier aerial surveys were fully financed by the government and brought no income, these days those services are likely to bring in considerable profits, Sergei Anikin is convinced. The airport also receives income for air traffic control services. But today the main task is to get the airport re-opened.

Another promising project is the construction of an aerodynamic tube (stand) currently being carried out at the Korobcheyevo aerodrome in the town of Kolomna. The project was launched in 1998 by several individuals who later established a society called Vega for promoting air sports. Vega’s contact information was not available but the Chkalov central aircraft club confirmed to Vedomosti that the project still existed.

The aerodynamic tube is at the same time an attraction and a parachute simulator that can be used for practicing freefall jumps. There are only a few simulators of this kind in the world. The U.S. has the largest number of them – 10. Russian sportsmen go to the U.S. to train in winter.

Korobcheyevo was chosen as the site for a reason – it was there that the general designer performed his first parachute jumps.

Initially, the tube was expected to be opened in the spring of this year. But, an informed source in ROSTO explained that construction had to be postponed for another year due to reasons of a bureaucratic nature. In a statement posted on its Web site, Vega said that “before 2003 the project had no support from third parties which resulted in delays in its implementation and increased the duration of construction.”

Experts believe, the tube will be popular with Russian sportsmen, extreme sports fans and foreigners. The price of a ticket is expected to be significantly lower than in Europe.