An ex-minister and a former director of Sheremetyevo Airport are teaming up to launch an air taxi service next year, potentially servicing hundreds of cities currently without an air link.
The new venture -- which is seeking financial backing from the World Bank -- plans to offer flights for roughly 15 rubles (50 cents) per kilometer, equal to Moscow taxi rates.
"There are 9,500 cities separated by a distance of 1,000 kilometers that are not served by air," Yevgeny Andrachnikov, chairman of Avia Management Group, which will run the service, said at the company presentation Thursday. "We are going to fill this niche."
Operating under the name Dexter, Avia Management plans to begin flights from Moscow's Vnukovo Airport to Nizhny Novgorod, Kazan and Samara as soon as February. By the end of next year, the aim is to connect 18 cities located within 1,000 kilometers of one another.
The 430-kilometer trip from Moscow to Nizhny Novgorod on a four- to six-seater plane will cost 9,400 rubles ($320) one way, compared with to 16,000 rubles for a business class ticket on scheduled air service and 3,000 rubles for a first-class train compartment.
The brains behind Avia Management is former Sheremetyevo executive Sergei Nedoroslev, whose Kaskol aerospace group holds roughly one-quarter of the new company.
The rest is owned by Industrial Investors, which is controlled by former Fuel and Energy Minister Sergei Generalov, who served in Boris Yeltsin's government.
The total budget for the new service will be around $70 million, including start-up costs and includes the price of an initial fleet of 45 Russian-made single-engine M-101 turboprops.
The planes are made by a plant with links to Nedoroslev's Kaskol.
Andrachnikov declined to say when the company would make its first profit or how much it was expecting in revenues in its first year.
To help offset costs, Avia Management is in talks with the International Finance Corp., the World Bank's lending arm, over a $15 million loan.
"We have gone through two-thirds of the approval process with IFC. We have cleared the creditor committee and now await their board decision in January next year," Andrachnikov said.
Conditions for the eight-year IFC loan would include giving the lending corporation a share in profits and an option to buy shares in the future.
Milana Gorshkova, an investment officer at IFC's infrastructure group in Moscow, confirmed the progress of negotiations and the volume of the proposed loan. "We are interested in this project, and we know its sponsors very well," she said, praising its potential benefit to the country's aviation industry and consumers.
IFC previously gave financial backing to cargo airline Volga-Dnepr, which is partly owned by Kaskol.
Avia Management's target market is Russian and foreign mid-level managers, who are keen to cut the time they spend traveling, Andrachnikov said, citing the inconvenience of current routes such as Perm to St. Petersburg, which requires changing planes in Moscow.
In addition to shuttle flights, the company will offer flights on demand, lease aircraft to corporate clients and ship light cargo of up to 750 kilograms.
The start of the new service comes at a time of strong growth in aviation, with passenger numbers on scheduled service enjoying double-digit increases and businessmen spending hundreds of millions of dollars on private jets.
Despite the boom in the aviation sector, market experts are skeptical about the new venture's potential for success, given the country's poor infrastructure and a limited number of clients willing to pay that much for the service.
"I doubt they will find a lot of customers willing to pay $300 for 500 kilometers," said Boris Rybak, head of aviation consultancy Infomost.
Leonid Koshelev, board chairman of Jet 2000, a Russian business charter operator, said Avia Management's shareholders would probably have to subsidize the service through their other businesses.
The company will have a tough time entering the market, said Alexander Kanishchev, Aeroflot's top route planner.
"What concerns me is the airport network," he said, adding that many regional airports were run down to such an extent that they could jeopardize safety.
"Businessmen who love life are unlikely to settle for a single-engine aircraft," he added.
The idea of shuttling passengers between cities is not new.
Last year, City Hall unveiled an plan to start a taxi service within the city and a 200-kilometer radius of Moscow using light helicopters and small airplanes due to start this year.
Under that plan, a 20-minute flight to the Moscow region would cost 35 euros ($42) to 50 euros, and a one-hour flight in economy class 150 euros. A business-class ticket would cost 400 euros to 600 euros, while traveling first class would cost up to 11,000 euros.
The new venture -- which is seeking financial backing from the World Bank -- plans to offer flights for roughly 15 rubles (50 cents) per kilometer, equal to Moscow taxi rates.
"There are 9,500 cities separated by a distance of 1,000 kilometers that are not served by air," Yevgeny Andrachnikov, chairman of Avia Management Group, which will run the service, said at the company presentation Thursday. "We are going to fill this niche."
Operating under the name Dexter, Avia Management plans to begin flights from Moscow's Vnukovo Airport to Nizhny Novgorod, Kazan and Samara as soon as February. By the end of next year, the aim is to connect 18 cities located within 1,000 kilometers of one another.
The 430-kilometer trip from Moscow to Nizhny Novgorod on a four- to six-seater plane will cost 9,400 rubles ($320) one way, compared with to 16,000 rubles for a business class ticket on scheduled air service and 3,000 rubles for a first-class train compartment.
The brains behind Avia Management is former Sheremetyevo executive Sergei Nedoroslev, whose Kaskol aerospace group holds roughly one-quarter of the new company.
The rest is owned by Industrial Investors, which is controlled by former Fuel and Energy Minister Sergei Generalov, who served in Boris Yeltsin's government.
The total budget for the new service will be around $70 million, including start-up costs and includes the price of an initial fleet of 45 Russian-made single-engine M-101 turboprops.
The planes are made by a plant with links to Nedoroslev's Kaskol.
Andrachnikov declined to say when the company would make its first profit or how much it was expecting in revenues in its first year.
To help offset costs, Avia Management is in talks with the International Finance Corp., the World Bank's lending arm, over a $15 million loan.
"We have gone through two-thirds of the approval process with IFC. We have cleared the creditor committee and now await their board decision in January next year," Andrachnikov said.
Conditions for the eight-year IFC loan would include giving the lending corporation a share in profits and an option to buy shares in the future.
Milana Gorshkova, an investment officer at IFC's infrastructure group in Moscow, confirmed the progress of negotiations and the volume of the proposed loan. "We are interested in this project, and we know its sponsors very well," she said, praising its potential benefit to the country's aviation industry and consumers.
IFC previously gave financial backing to cargo airline Volga-Dnepr, which is partly owned by Kaskol.
Avia Management's target market is Russian and foreign mid-level managers, who are keen to cut the time they spend traveling, Andrachnikov said, citing the inconvenience of current routes such as Perm to St. Petersburg, which requires changing planes in Moscow.
In addition to shuttle flights, the company will offer flights on demand, lease aircraft to corporate clients and ship light cargo of up to 750 kilograms.
The start of the new service comes at a time of strong growth in aviation, with passenger numbers on scheduled service enjoying double-digit increases and businessmen spending hundreds of millions of dollars on private jets.
Despite the boom in the aviation sector, market experts are skeptical about the new venture's potential for success, given the country's poor infrastructure and a limited number of clients willing to pay that much for the service.
"I doubt they will find a lot of customers willing to pay $300 for 500 kilometers," said Boris Rybak, head of aviation consultancy Infomost.
Leonid Koshelev, board chairman of Jet 2000, a Russian business charter operator, said Avia Management's shareholders would probably have to subsidize the service through their other businesses.
The company will have a tough time entering the market, said Alexander Kanishchev, Aeroflot's top route planner.
"What concerns me is the airport network," he said, adding that many regional airports were run down to such an extent that they could jeopardize safety.
"Businessmen who love life are unlikely to settle for a single-engine aircraft," he added.
The idea of shuttling passengers between cities is not new.
Last year, City Hall unveiled an plan to start a taxi service within the city and a 200-kilometer radius of Moscow using light helicopters and small airplanes due to start this year.
Under that plan, a 20-minute flight to the Moscow region would cost 35 euros ($42) to 50 euros, and a one-hour flight in economy class 150 euros. A business-class ticket would cost 400 euros to 600 euros, while traveling first class would cost up to 11,000 euros.
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