Despite the far-reaching negative effects of big falls in traffic and spending from Russians that have been experienced by airports and travel retail operators outside Russia, inside the country air travel remains buoyant.

 

Data provided to TRBusiness by analyst Counter Intelligence Retail show that in the 11 months to November (year-to-date) the country’s three biggest international hubs – Moscow Domodedovo (DME), Moscow Sheremetyevo (SVO), and Saint Petersburg Pulkovo (LEN) – continued to see strong growth.

 

The three airports showed growth as follows: DME was up +8.7% to 30.9m, SVO grew by +8.1% to 29.4m and LEN had the best performance with a rise of +11.1% to 13.3m (see table below).

 

These results are on the back of full-year growth last year of +9.2%, +11.7% and +15.2% respectively, showing a slowdown at each airport this year compared to 2014.

 

 

DUTY PAID WINS, NOT DUTY FREE

A closer look at the traffic trend in 2014, however, paints a bleaker picture for travel retailers in international departure lounges. According to CIR data and sources at each of the three airports, the driver of the traffic growth has been almost entirely domestic.

 

At DME the busiest airport in Russia, the total number of domestic passengers from January to November 2014 increased by +21.7% yoy, while international traffic fell by -1.8% to 16.8m

 

DME says: “The main driver of the increase in the (domestic) segment was passenger traffic to the Crimea: the Simferopol destination increased its air traffic almost fourfold.” The trend is an indicator of the strength of feeling Russians have towards Crimea whose annexation from Ukraine almost a year ago led to sanctions from the west.

 

The highest growth on international routes came from Hurghada, Sharm El Sheikh, Kishinev, Larnaca and Verona. In January-November, 2.7m passengers were transported on these routes, an increase of +69.2% yoy.

 

Meanwhile at SVO, in the 10 months to October, international traffic stalled at 16m passenger, the same level as 2013 says the airport, while domestic traffic soared by +24.4%. Only LEN showed growth of both segments with domestic traffic up by +23% and international by +1.5% according to the airport.

 

FINANCIAL UNCERTAINTY PREVAILS

While the rouble has lost 32% of its value this year, and was in freefall against the Euro since November (see chart above) on the back of the falling oil price and biting sanctions, it perked up in mid-December. Nevertheless, the Central Bank of the Russian Federation had to intervene on Monday last week to stabilise the currency with a huge 6.5 percentage point hike in the interest rate to 17%.

 

On top of that, yesterday the CBR was forced to make its first bailout to the tune of RUB30bn ($518m) to save Trust Bank, a retail bank, from bankruptcy.

 

A Reuters poll of 11 economists suggests that the Russian economy will slip into recession in 2015, the first since the global financial crisis with inflation close to double digits. According to the median of predictions, gross domestic product will fall by -3.6% next year following growth of +0.5% in 2014. At the start of this year analysts had forecast economic growth of +2%.