Where the east, meets far eastern growth

The Commonwealth of Independent States (CIS) consists of twelve nations, spanning some 22 million square kilometres. Spread across 17 million km2 in Asia and 5 million km2 in Europe, the region encompasses 11 time zones and a myriad of geographical constraints, which means that transportation remains a challenge. One consequence of this is a high urbanisation rate of around 70%: the CIS has 22 cities with more than one million inhabitants, which already concentrate most of the wealth and economic development in the region.

The economic performance of the CIS has been impressive over recent years, averaging 7.2% GDP growth per annum from 1999 to 2006. This has been achieved through strong inflows of energy export earnings, expansion in the manufacturing and construction sectors, and booming domestic demand. The current global economic development and the energy commodity price, which is anticipated to remain high, provide the basis for robust future growth. CIS countries are expected to mirror Indian and Chinese economic development with Gross Domestic Product (GDP) set to grow at 6.8% per annum for the next five years. In addition, domestic demand growth is expected to be the highest in the world, at over 10% a year between 2006 and 2011.

Another consequence of this recent economic development is that the real disposable income of households has risen considerably in the last eight years; averaging 23.5% a year, to give a cumulative growth of 340%. This has enabled an increasing number of the region�s inhabitants to consider international travel, leading to a 125% growth of outbound tourism since 1999. In fact, Russian travellers, are now the fourth largest source of tourists travelling from the European continent.

Over the same period, the capacity offered to, from and within the CIS countries has grown steadily, with international and regional markets doubling to eight billion Available Seat Kilometres (ASKs) a month, reflecting average growth of more than 8% a year. Airlines in the region now benefit from operating both within the region and more internationally, relying less on the traditional routes and traffic flows.

In fact, operations between the CIS and other significant international destinations, offering over 4,000 monthly seats have doubled from 55 international city pairs operated in 2000 to 110 today.

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Airlines in the CIS have realised that in order to accommodate their strong demand for air transport and build competitive strength, they have to match the productivity and efficiency of other airlines. This has been achieved in part by adding newer and more efficient aircraft to the CIS fleet, which is now an average 6.5 years younger and 75% more productive than it was ten years ago. The current order backlog suggests this trend will continue. Further
airline consolidation is expected in the region, as the means to improve market coverage, efficiency and productivity.

This strong growth of traffic to, from and within the CIS will continue. The region�s annual average growth of 6.3% will far exceed the world average. In fact, the next ten years will see even more significant growth of 7.5%. International markets are expected to grow slightly quicker than domestic or intra-regional traffic, which is forecast to grow at 7.2% over the next ten years. Traffic to Asia-Pacific, Africa, the Middle East, Europe and the Americas are all expected to grow in excess of 8% a year to 2016.

The CIS is atypical for an emerging market in the sense that the fleet�s size increase is not as dramatic as elsewhere. However, in terms of additional productive capacity, airlines of the CIS will grow in a similar fashion to those in India and China.
A significant portion of future capacity requirements will be achieved through an increase in aircraft productivity, gained through the replacement of older equipment with newer and more eco-efficient aircraft. These newer aircraft typically represent the productive equivalent of 1.6 older generation aircraft. As a result, the CIS fleet of passenger aircraft with more than 100 seats is expected to double from 696 aircraft today to 1,322 by 2026. Most of these will be single-aisle aircraft, such as the A320 Family, which are currently prominent in the region�s fleet. The number of twin-aisle aircraft will also grow steadily to satisfy the higher demand for international travel.

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