November 1, 2008｜Russia
Researcher, Institute for Russian & NIS Economic Studies, Japan Association for Trade with Russia & NIS
Aeroflot and the state-owned group “Rostekhnologii” have been fighting a fierce battle over the aviation companies in the Russian Far East. Regarding the practically decided allocation to Aeroflot, with the bankruptcy of Dalavia an opportunity has again come around for Rostekhnologii, and things have developed where what happens next is completely unpredictable. There is even the possibility of it developing into a large-scale realignment involving airlines from other regions.
What can be clearly stated at the present time, however, is that it is difficult for the three companies of Dalavia (Khabarovsk Krai), Vladivostok Air (Primorsky Krai), and SAT Sakhalin Airlines (Sakhalin Oblast) to survive separately, and that sooner or later they will come under the umbrella of Moscow’s colossal capital.
The reason Moscow capital is interested in the aviation companies of the Russian Far East lies in the equipment the air carriers possess and the regular international services they have with Japan, and the ROK, etc. If it can acquire the air carriers of the Russian Far East, which has a relatively large-scale operation, Rostekhnologii, which aims to establish an air carrier to vie with Aeroflot, will be able to obtain aviation assets in one stroke. For Aeroflot too, which is creating a strengthening of air routes to the Asia-Pacific region, the network of international routes held by the three companies are assets that it desperately wants.
What is thus brought to mind is Moscow capital’s foray into the ports of the Russian Far East. The foray into the ports of the Russian Far East by Moscow capital began from around 2003 and at present all the main ports fall under the umbrella of Moscow capital. As to what was consequently brought to the ports of the Russian Far East, cargo volumes have increased, but the problem of the development of port infrastructure has been neglected. The content of the cargo also is skewed toward the commercial goods advantageous for Moscow capital, and at the end of the day, as far as Moscow capital is concerned the ports of the Russian Far East are only exit points for exporting the companies’ own products. For example, the Commercial Port of Posyet in the southern part of Primorsky Krai, through a foray by the steel group “Mechel”, has ended up becoming a port dedicated to coal. In this there is absolutely no medium-to-long-term strategy nor any idea of “for the sake of the development of the Far East.” What there is is just the advantage of the companies themselves.
As aviation and ports differ, nothing can be said categorically, but if the aviation companies of the Russian Far East come under the umbrella of Moscow capital, while the reduction of relatively expensive fares, the replacement of decrepit materiel, and the filling out of a network service are anticipated, under a Moscow-centered system of services there is the fear that the regionally tight-knit air transportation system to date will be cut. In the event where operations are out of tilt, the local and international routes of the little-populated Russian Far East will not necessarily be eliminated first.
Differing from the ports, the realignment of aviation companies is progressing under state leadership. While there are various factors in the bankruptcy of Dalavia, including the spike in aviation fuel, when all is said and done the greatest factor is the difficult operational constitution in response to the rapidly changing environment characteristic of state-owned enterprises, and the inefficient operation thereof. Aeroflot or Rostekhnologii?—in the end it’s going to be the state-owned enterprise. The larger the size becomes the more unable to respond rapidly to changes in the environment, and it is the norm for the state sector that the inefficient sections go on swelling. Russia is attempting to tread the same-old track. Am I the only one who can’t help but think that?