ROUTES CIS: Koltsovo Airport - Room to Grow in Ekaterinburg

The Ural Mountains in central Russia have traditionally been considered the natural boundary between Europe and Asia, and now the region’s principal airport is hoping it too can become a crossroads between the two continents.

As the main gateway for the Ural Federation Region, Koltsovo Airport (SVX) serves a vast area of central Russia that is roughly 20 times the size of the Netherlands and home to 40 million people. Little wonder then that the airport is the fifth busiest in Russia in terms of traffic, behind the hubs of Moscow and St Petersburg, having handled 3.5 million people last year, a 20 per cent increase on 2010.

But, while SVX already has an extensive network covering 110 destinations – including 66 international points in the CIS, Europe, Middle East and elsewhere – its vision is much bolder. In fact, its officials believe Koltsovo can become the lynchpin of a new central Russian airport system connecting western Russia to Asia.

“Right now people have to travel to Moscow to reach cities such as Beijing, Toyko, Manila, Bangkok and Hong Kong, so we want to have several Asian legacy carriers with year round scheduled flights to allow people to reach destinations in China, Indonesia, Thailand and business cities such as Taipei, Shanghai and on to Australia – this is our number one priority right now,” explains Dmitriy Zaikin, Deputy Commercial Director at Koltsovo Airport. “For the future the dream is to become a hub between western Russia and the Far East, but first we need more Asian carriers to do this.”

The airport scored a major coup a few years ago with the launch of Ekaterinburg – Beijing services by Air China, but the carrier was forced to withdraw soon after but the good news is they are now planning to return, says Ilona Fominykh, Head of Marketing at SVX. “Two years ago, Air China came to serve the Ekaterinburg-Beijing route but it had to suspend it due to internal reasons, because they had changes in their management, and had a serious problem with crew shortages. However, they are going to resume operations and, hopefully, later this year Hainan Airlines will operate here to fill the gap,” she explains.

Indeed the team has reported positive discussions with Asian airlines at Routes Asia in Chengdu in April and World Routes 2011 in Berlin, where talks also took place with a number of European carriers including Air France, airberlin, Swiss, Alitalia, Meridiana fly, Iberia and Vueling. The interest shown by those airlines means the gateway calculates it could have direct scheduled air services to Paris, Berlin, Zurich, Geneva, London, Madrid, Barcelona and other cities by the end of 2014.

While the priority is developing its Asian network, Fominykh and Zaikin are also very keen to build more connections with Western Europe. Currently the airport is only connected to a handful of destinations by scheduled services, such as Prague, Rome, Frankfurt and Vienna and Istanbul. “We do think that European destinations are certainly underserved right now, we do have international carriers at Ekaterinburg, such as Lufthansa, Finnair, Turkish Airlines, Czech Airlines, but we also want to attract European LCCs,” says Zaikin. This has led to conversations with Wizz Air and airberlin, but a key challenge is the LCC business model. “The only problem with European LCCs is the distance its five or six hours and their aircraft strategy and crew strategy doesn’t allow them to operate long distances,” he says.

Ekaterinburg did have a direct service to London courtesy of BA and then bmi but this ended following the economic crisis in Europe. Nevertheless, the airport continues to add new markets to its network. In November 2011, flydubai began a new service to Dubai. Ural Airlines has also resumed direct Ekaterinburg – Kiev services and added Sochi and Mineralnye Vody to its summer schedule. But, what is the case that Koltsovo is presenting to carriers? Well just a quick look at its vital statistics makes it clear that the airport has something important to offer.

The Ural Federal Region accounts for 90.5 per cent of all Russia’s natural gas production, 65 per cent of its crude oil production and 42 per cent of the country’s non-ferrous metal industry. It is also home to the major heavy industrial centres of Magnitogorsk, Chelyabinsk, not to mention the fast developing capital Ekaterinburg. Although it has suffered following the economic crisis, trade between the Ural region and China stood at an impressive $718 million in 2010, while GDP is higher than the Russian average.

But, Ekaterinburg also has a strong appeal as a leisure destination. Founded in 1723, the city boasts a number of 18th and 19th Century palaces, cathedrals and houses, close by is something to compete with Pisa – the leaning tower of Nevyansk, a 60-metre high building erected between 1726 and 1740. Further afield there are the thermal springs of Tyumen and the mighty Chusovaya River that intersects the boundary between Asia and European carving out some stunning natural scenery. Ekaterinburg also benefits from a much older form of transport. The city is a stop on the Trans-Siberian railway, a line stretching 9,289km from Moscow to Vladivostok. Originally built to encourage trade in the 19th century, the railway is now a major attraction that entices tourists from around the world.

But, what do you do when you think your airport does not have sufficient feeder services to nearby markets? Do you offer airlines incentives, reduce landing fees or just wait and hope. Well SVX came up with a novel solution to this problem. It began by purchasing four Embraer E-120 Brasilia (30-seater) aircraft, which it then leased to RusLine to be operated on high frequency short-haul flights. Now RusLine and other carriers fly the planes to domestic destinations, including Perm, Tyumen, Omsk, Magnitogorsk, Sovetsky, Orenburg, Kostanay and Karaganda.

“When we tell this story everybody is surprised because the airport has four Embraer to lease to a regional airline so it can feed flights to bring passengers to Ekaterinburg to feed onto other destinations,” says Fominykh. “We actually talked about that at World Routes, and a lot of people are still talking about it.” SVX’s executive is also working hard to make the airport a modern gateway to attract airlines. The airport’s 43,00sqm international and 42,000sqm domestic terminals, with a combined 10 airbridges, have been modernised, increasing their capacity to 8mppa and linked them with its revamped VIP terminal to allow for easy transfer between them.

In 2008 a railway station was added heralding the launch of the Aeroexpress line to downtown Ekaterinburg in 40 minutes. Airport Hotel Ekaterinburg was added in 2009. But, it is SVX’s cargo facilities that have been the most recent focus for expansion. A new ‘Air Cargo Logistics Village’, encompassing 197,000sqm of warehouses, cargo terminal, offices and trucking facilities, opened in the second quarter of 2012.

“The old cargo building was really outdated with no storage facilities, the new cargo village can handle all types of cargo and it is going to be expanded again by 2015,” says Fominykh. “Its going to be a state-of-the-art facility and will be able to handle all materials. It will also be equipped to accommodate international mail. We are currently only able to handle domestic mail.”

So could the new facilities help attract large cargo operators like KLM and Korean Air? “Why not,” says Ilona, who hints that DHL may also move to the gateway. The airport operator’s ambitions do not end at just expanding the role of SVX though, its private operator is now in the process of building an entirely new airport system that could some day rival the likes of TAV Airports Holdings and Fraport.

In February 2011, the Renova Group, a major conglomerate Russian business and majority owner of SVX, acquired a 73.6 per cent stake in state-run Nizhniy Novgorod International Airport and 71.2 per cent in Samara’s Kurumoch International Airport through Kurumoch-Invest, a company set up to run the facility. As part of the privatisation agreements, the airport authority has pledged to invest billions of roubles to develop new terminals at both airports in the next two years.

Koltsovo’s management is now appraising further investment opportunities at a number of Russian airports, such as Vladivostok, Rostov, Kaliningrad and Irkutsk. And plans are already afoot to establish a standalone airport authority to take over the strategic management of the Renova Group’s airports. It would probably be fair to say that Koltsovo’s ambitious plans for the future are almost as vast as the region it serves.

This story appears in the latest issue of Routes News, which can be read here Routes News. A copy of the world air service development magazine is also in all delegate bags at Routes CIS.