|WEEKLY MARKET UPDATE | RUSSIA||20 April – 24 April, 2020|
in what appears to be a first sign confirming the
fears of the Russian air transport community that state-owned Aeroflot will enjoy priority beneficial state support
amidst the on-going coronavirus crisis, the Russian government has announced
the allocation of 300 million rubles (US$4 million) from reserve funds to the
flag carrier to subsidize the continuation of air services between Moscow and
the enclave city of Kaliningrad. Traditionally, Kaliningrad has also been
served by the flights of S7 Airlines
and Utair – two privately owned airlines offering a lower
airfares tariff than that provided by Aeroflot, the nation’s premium carrier.
However, with this state injection, the largest airline can now offer lower
prices for the same level of service. Industry experts believe the government
decision is a ‘strange and dangerous’ one. The announcement confirms that
Aeroflot is to receive an additional 300 million rubles of state subsidies
specifically for its services between the Russian capital and Kaliningrad,
which is the nation’s westernmost territory. The funds – which equate to 2,560
rubles per passenger – will be allocated to the airline on a monthly basis
provided its airfares are the same as the cheapest railway tickets on the same
route. As of now, Aeroflot’s lowest one-way fare on the route is a fixed 4,880
rubles. Thus, with the state subsidy factored in, the airline will generate
7,440 rubles (US$99) for each ticket sold. According to the new government
regulation, by the end of 2020, Aeroflot is expected to carry some 114,000
passengers on the route. The measure is unprecedented in the Russian air travel
industry. Previously, Aeroflot received subsidies only for providing services
to passengers entitled to social benefits – those below the age of 23 or above
60, and for young multi-child families. These subsidies will remain throughout
2020 as well and will be allocated separately from the ‘compensation for lost
earnings. Following the lock-down of international air travel and the
introduction of restrictions on movements inside the country, the Russian government
is set to allocate more than 23 billion rubles to support the country’s
ailing airlines affected by the on-going Coronavirus pandemic, Russia’s
president Vladimir Putin promised last week. However,
it is still not clear how and when the funds will materialize and what the
principles for their distribution would be.
The owner of the S7 announced the timing of the resumption of international flights. According to Vladislav Filev, this will happen no earlier than in a year. Without state support, industry players will see a reduction in their aircraft fleet, but private carriers also have a chance to survive.
Russia’s airline industry will require state support through the COVID-19 crisis amounting to at least US$5 billion (between 350 and 400 billion rubles) in order for it to return to its pre-crisis 2019 business levels, Vladislav Filev, the owner of the country’s largest private carrier S7 Airlines, has estimated in an interview with Kommersant business daily.
He estimated the necessary amount of support at $ 5 billion. «Self-isolation measures will lead to the fact that a small number of people will get sick, so we will not receive collective immunity, which implies a second wave of the epidemic,» he said. According to Filev, the second wave of the pandemic will again lead to restrictive measures by the government. Along with that, Filev believes that the chances that the government will indeed allocate anywhere near this amount of money to the nation’s troubled airlines are scarce. He says that the degree of state commitment will depend on the levels of air services that the government will want to preserve – and whether it is fully committed to such intentions at all. Nevertheless, Filev insists there should be a level playing field for all industry participants and that this aspect should take priority over direct government support.Without state support, after the crisis, passenger traffic will halve – from 120 million to 60 million passengers a year, the main owner of S7 believes.
Aeroflot and Pobeda airlines will stop selling air tickets through the Aviasales metasearch engine, a TACC source said. This information was confirmed on April 21 by representatives of airlines and the airline ticket sales service. It is noted that cooperation will be terminated in May 2020. The parties were unable to agree on the new amount of the commission. According to the source, the airlines sent letters asking Aviasales to reduce the amount of its commission, threatening otherwise to terminate the contract. “Cooperation will be suspended from May 1, 2020. We are now seeing a serious decrease in purchasing opportunities and are focusing on the maximum cost reduction in order to offer customers more favorable rates,” an official representative of Pobeda told reporters. Aeroflot said the company focused on building direct sales. “To promote the product and develop new sales channels, Aeroflot plans to focus on promoting its own website and mobile application,” said the official representative of the airline, Julia Spivakova.
Most Russian nationals (57%) plan to spend the upcoming May holidays and summer at home or at their dachas, while about 30% hope they will be able to travel domestically or abroad, according to a survey carried out by the Russian Public Opinion Research Center. This reported by TASS. Eleven percent hope to take a trip to another Russian city at a given point in time. Four percent hope they will be able to travel to Crimea, and six percent plan a trip to the Black Sea. Three percent cherish the aspiration of visiting foreign countries, while two and one percent of those surveyed accordingly plan trips within the former Soviet Union, and among them specifically to the Baltic states. Thus, about 30% of the Russian nationals polled in April planned trips for the May holidays or for summer, the pollster said in a survey presented to an online conference hosted by TASS on Tuesday. The top three among the domestic destinations were Krasnodar in southern Russia, St. Petersburg, and Altai. Abkhazia, Belarus, Armenia were named as the most popular destinations among the former Soviet republics. As for foreign countries, Turkey, the United Arab Emirates and Egypt were mentioned. pollster conducted similar surveys in March and in early April. In April, most Russians (72%) said their plans for May or summer holidays had not changed in the past two months, while plans of the other 26% did change. The rest of the polled Russians were undecided. In March, 81% said their plans had not changed, while 17% said that they had revised their holiday arrangements. The main reasons to revise the plans in April were coronavirus (50%), the lockdown (34%), a ban on leaving Russia (11%). As for March, coronavirus dominated as well (55%), while 17% of the surveyed people were worried about the plummeting ruble. An exit ban was a matter of concern for another 13%
On April 22, TourDom.ru editorial staff analyzed the reviews on the pages of social networks of the popular hotels of the Antalya coast: Lonicera World 4 *, Lonicera Resort and Spa 5 *, Meridia Beach 5 *, Long Beach Resort and Spa 5 *, Saphir Hotel and Villas 4 * + and got an impression about the plans of tourists regarding their rest. Most of the comments indicate that the Russian tourist is aware of the seriousness of the situation due to the COVID-19 pandemic and does not plan his vacation before the fall of 2020. “Moreover, the operators announced the transfer of funds to new tours of the same tourists and with the preservation of the previous parameters, without surcharges,” writes Lyudmila from Kaluga, choosing a Meridia hotel for the third time. According to a survey on TourDom.ru for April 21 on the topic “What do your tourists choose?”, Out of 435 participants, 41% chose the option “I want to get my money back”. At the same time, the most comfortable model for the travel industry – postponing the tour for a year is preferred by a minority, only 9%.
They called for the immediate reform of the law on liability insurance for tour operators in connection with the crisis of the tourist market due to the coronavirus. Insurance companies refuse to insure the risks of tour operators, saying that under the existing conditions this risk is 100%.
tour operators stopped the sale of outbound tours until August 1, 2020. Such information by Profi.Travel
on April 23rd was confirmed by representatives of Pegas Touristik and Coral
Turkish media also reported on the intentions of the ANEX Tour to launch the tours on August 1st, however, company representatives in Turkey later denied these data. According to sources in the Turkish office, the tour operator is ready to start working with the Russian market earlier than the specified date. At the same time, other tour operators still retain their plans for travel destinations. At TEZ Tour they are open for booking from June 1st, 2020. “At the moment, sales of tours for dates until May 31st, 2020 on the website of the tour operator TEZ TOUR are suspended.
As of June 1, TUI Russia is currently “targeting”, moreover, both foreign tours and packages in Russia are open for booking from this date.
Biblio-Globus has opened for booking most of the foreign destinations since the beginning of May, including Italy. The exceptions are Spain and Montenegro, which can be booked from June. The tour operator has unavailable for sale the UAE, India and Tanzania. In the retail market, they are still cautious about the information about the May dates of the tour packages formed by the company. According to one version, this is a technical error in the system.
A curfew has been introduced in the country, and entrances to resorts are closed. As a preventative measure, from April 10 to 30, the Phuket authorities stopped the island’s airport. Foreign diplomats and consular staff, and those arriving on behalf of the Government of the Kingdom to fight the coronavirus, are allowed. Independent tourists who still could not return to their homeland on time remain in the country. Foreigners whose visas expired on March 26, 2020 or later will be given an automatic visa extension until April 30, 2020. Summer in Thailand is a low season, so a recovery in tourist flow is expected by fall.
The country has defined a period of self-isolation until April 30. Most hotels are on hold until further notice by the Vietnamese government. But resort hotels are actively negotiating with Russian tour operators on cooperation in the winter season – 2020/2021 and summer-2021.
Not many cases of the disease have been confirmed in the country – arounf 300 people. However, a curfew has been established. The issuance of electronic visas has been temporarily stopped, the Colombo airport is closed, only export flights are carried out from it. Hotels are closed due to lack of seasonal demand. The period from April to October is a low season, regardless of the situation. There are practically no tourists currently. Therefore, tourists are expected by November, the local travel industry expects that the coronavirus factor by this period will already be insignificant.
The flow of tourists is completely stopped, on March 27, when the Maldives closed the issuance of tourist visas, visiting local islands (where the local population lives) is prohibited, movement between the resort islands is possible only with special permission. The quarantine is valid until June 30. During the period of downtime, some hotels are engaged in renovation, some are closed. Those hotels that continue to work and from where it is possible to arrange transfers by speedboat to the airport (seaplane transfers and domestic flights are stopped) are aimed at tourists who are not able to fly away due to cancellation of the flight. The Maldives is expected to be available for visitors no earlier than late June.
All hotels and the airport are closed until the end of May, and all English schools went on vacation until the end of June. Airlines are still selling tickets for June, and several hotels have issued special offers for this month. Much will depend on the epidemiological situation in the country, if the health authorities manage to control the situation. Now, the tourism office does not give forecasts on the timing of lifting restrictions on traveling around the country.
Starting March 31, all public beaches in Bali began to close indefinitely until a special notice from the authorities and religious communities in charge of the beaches. Now, about half of small and medium-sized hotels are entering conservation mode at least until May 31, large chain hotels continue to work, localizing the territory in one building with a 5-10% load.
there currently is one of the lowest Covid-19 infection rates. The country’s
authorities decided to begin the gradual cancellation of quarantine on May 4,
first stores and enterprises providing services will open, and hotels will
start operating on June 1.
“The deadlines are absolutely real, the Greeks adhere very strictly to all restrictions, people responsibly approach the prohibitions introduced, and statistics show that everything is safe in the country. At the same time, the Greeks take another month (May) – a timeout to fix the result,” said Alexander Tsandekidi, Director General of Mouzenidis Travel. First, we are talking about domestic tourism. As for the international, according to the managing director of TEZ TOUR Greece Dimitris Haritidis, “the question is how other countries will open their borders. Now there are several scenarios for the start of the season: some believe that this will happen from July 1, others from the middle of the month. ”
Russia confirmed 5,849 new coronavirus infections on Friday, bringing the country’s official number of cases to 68,622. Overall, 615 people have been killed by the virus. At least 21 Russian regions have requested digital travel passes a week after coronavirus-hit Moscow enacted its system to enforce lockdown measures and slow the deadly outbreak, the Communications and Press Ministry said Wednesday.
According to Analytical Credit Rating Agency, in the context of the spread of the new coronavirus the Russian economy may decline by 4-4.5% this year and recover to growth of 2-3% in 2021 in the baseline scenario. The duration of economic recovery critically depends on how the banking system will be able to close liquidity gaps in the affected labor-intensive sectors, as well as on whether the state will increase support for consumer demand. The pessimistic scenario predicts a drop in real GDP by 7–7.5% and the beginning of economic recovery only in 2022. The economic growth in 2021 will be 0.5%, and in 2022 it will accelerate to 3.9%. According to the optimistic scenario, the decline in GDP in Russia this year will be 0.8%, and in 2021 it will be replaced by an increase of 1.8%.
After a slight recovery last week, Russian ruble lost some 2% of its value to euro with average 82.14 rub per euro for 20-25 April. However, after the Central Bank measures aimed to support ruble value, it gained 2.54 points, and Friday 24.04 rate is 81.15 rub per euro.
As reported by the Federal State Statistics Service, consumer prices for the period from April 14 to 20 increased by 0.2% on average, as a week earlier. Inflation has reached 0.7% since the beginning of April, and 2.0% – since the beginning of the year. German Gref, the head of a state-owned Russian bank Sberbank, expects the inflation rate below 3% at the year-end.
Since the introduction of the self-isolation regime due to the coronavirus on March 28, the unemployment rate in Moscow has increased by 45%. The level of registered unemployment in Moscow before the pandemic was 0.4%. Now, the registered unemployment rate amounts to 0.66%.
According to BCG study (formerly known as Boston Consulting Group) and Russian research company Romir, more than two-thirds of Russians predict an economic recession and almost as many believe that “the worst is yet to come”. In Moscow, 44% of respondents feel financial insecurity, while in the regions this figure has already reached 47%. Regardless of age, all Russian consumers will reduce their spending in the next six months. Expenses will decrease by 15% on average for all product categories. A drop in demand is expected in 90% of product categories. The most affected area will be entertainment and leisure. Over the next six months, 65% of Russians will save on air travel, 63% will reduce costs for hotels, and 53% – on intercity trains.