OREANDA-NEWS. April 10, 2014. Deputy Head of Federal Antimonopoly Service (FAS Russia), Anatoly Golonolzin, took part in the V Eurasian Transport and Logistics Forum – “Barriers and Growth Points for the Russian Transport Infrastructure”, organized by “Vedomosti” business daily.

In his presentation on the problems of transport complex, Anatoly Golonolzin pointed out that in the past ten years the transport sector had been experiencing considerable changes due to structural reforms. The consequences of these reforms were developing intra-specific competition as well as competition between particular types of transport.

At the earlier stage, railway transport was the leader of structural changes and efficiency. It was facilitated, first of all, by tariff deregulation in particular market segments (four- and two-berth compartments, enhanced comfort trains) and introducing a system of flexible price regulation (economy class). Increased rates were accompanied only by enhanced quality of services, while passengers were able to choose between cheap regulated and more expensive deregulated services of higher quality. As a result, the volume and share of passenger railway transportation were growing from the beginning of the 2000s to 2006. Since 2004, however, there were no further improvements in sectoral tariff-making. Moreover, some industry solutions, such as decreasing the number of long-distance trains (132 in the past three year), one-time growth of regulated tariffs in 2013 by 20%, etc., resulted in decreasing the traffic volume.

“According to Rosstat [Russian Federal States Statistics Service], the share of railway transport in the overall passenger traffic in the past seven years has been decreasing. In 2009 - 2012 railway transport switched places with aviation transport in the total structure of passenger departures. The railway share reduced from 40.7% in 2009 (the highest share - 44.5% was in 2006) to 30.5% in 2012. At the same time, the share of aviation increased from 30.3% (in 2004 the share was 20.2%) to 41.3% in 2012”, pointed out Anatoly Golonolzin. “Preconditions for improving the situation emerged with the start of work of “FPK” OJSC in 2010. The company receives infrastructure services from “Russian Railways’ OJSC and along with several private companies is involved in long-distance passenger transportation. In 2013, “FPK” OJSC, jointly with FAS Russia, applied a dynamic pricing system on 20 routes with developed competition (120 trains); it increased railway passenger traffic by 2.7%. In contrast, passenger departures in other segments of long-distance railway passenger transport in 2013 reduced by 5%”.

Railway transport experiences the strongest competition in passenger carriage from air transportation.

Anatoly Golonolzin characterized in detail the measures aimed at developing air transportation. He emphasized that “passenger air transportation started growing from the beginning of the 2000s. Recently passenger air transportation in the Russian Federation has been sustainably developing at an accelerated pace, considerably ahead of the world trends. The aggregate increase of passenger traffic in 2007-2013 was 87.9% (!)”.

To a considerable extent (mostly) those results became possible due to the measures of supporting competition in air transportation, among which Anatoly Golonolzin emphasized the following: completing in the mid-1990s property and organizational division of integrated air companies involved in airport and transportation operations; introducing at the end of the 1990s – the beginning of the 2000s flexible regulation of the tariffs for airports services by the antimonopoly authority (the former Ministry of Antimonopoly Policy) that created preconditions for competition in this field; removing in 2007 administrative barriers for entry to the markets of domestic air transportation in the form of route licensing; removing technological and economic barriers for access to the services of natural monopolies and infrastructure in airports by adopting in 2009 the Rules for non-discriminatory access; state-by-stage liberalization (from 2008 to present) of international air transportation in the CIS as well as air traffic with the third countries.

Anatoly Golonolzin reminded that experience of flexible tariff regulation of airports, for the first time used by the Ministry of Antimonopoly Policy at the beginning of the 2000s, encouraged growth of competition in Moscow airport hub: traffic in Sheremetyevo and Vnukovo airports increased by 2.7 and 3.2 times accordingly, and in Domodedovo airport - by11 times (!). The speaker pointed out that private airport had demonstrated the best results, even in spite of the reaction from the aviation authorities.

Under the new air transportation licensing rules, approved by the Government of the Russian Federation upon a FAS proposal, airlines independently determine the flight routes and form their own destinations networks without any intervention from regulators. Domestic market has the “open skies” policies. According to the passenger traffic, the share of competitive routes, where three and more companies operate, increased from 72% in 2007 to 84% in 2013.

In 2008, the Council of the Heads of the CIS Governments approved the proposals outlined in a report drafted by the Headquarters for Joint Antimonopoly Investigations in the CIS, at the Interstate Council on Antimonopoly Policy. Measures for developing competition included increasing the number of appointed carriers, adding the number of city pairs for air traffic, eliminating tariff coordination between air carriers, applying antimonopoly control measures to the services in airports and on fuel markets in the CIS. As a result, air traffic in the CIS increased by more than 2.5 times (!) in the past four years. The achieved progress indicates a high potential of strengthening economic cooperation in the CIS space. The issues of further liberalization of aviation markets, the concept of “Single Sky” are being actively discussed under the framework the Common Economic Space (Belarus, Kazakhstan, Russia with the prospects of Armenia and Kyrgyzstan joining the Common Economic Space).

Several cases against Russian aviation authorities were investigated for preventing entry to international transport markets. The situation improved after the Ministry of Transport formed the Inter-branch Commission for Access of Carriers to International Routes. Examples of successful liberalization were transportations to Italy (Rome, Venice, Milano), the UK (Moscow – London), France (Moscow – Paris), etc. The result of active liberalization efforts was a strong growth of international carriage – on average 20% annually for the past four years. At the moment, there is work in progress on specifying the procedures for access of carriers to international transportation on the basis of competition requirements, and elaborating the criteria for subsequent selection of competing airlines.

Recently airports services have experienced radical changes. For the first time, general standards on developing competition in ground handling were set in the Rules for access to the services of natural monopolies in airports (approved by No. 599 Decree of the Government of the Russian Federation of 22.07.2009). In the four years after the Decree was passed the situation with airport services improved significantly.

Analysis of enforcement practice of the Rules for access to airport services shows that competing operators have emerged in ground handling, both competitive and earlier classified as natural monopolies, which restricts growth of prices for their services. At the moment, additional requirements for competition support are being added to the Rules; the most important of them are mandatory presence of alternative operators in million-plus airports and possibility for access to not only airport services but also to facilities using which those services are provided.

Anatoly Golonolzin emphasized that today it is possible to talk not only about competition in airports but also about competition between airports. According to a survey of airports and service consumers (airlines and passengers) conducted by FAS, more than half of the responding airports with federal status (30 out of 47 airports) operate, in their opinion, in competitive conditions, which force them to improve the quality of services, devise new strategies of competition for customers. At the same time, all surveyed regional airports (75) pointed out at the presence of competitors (typically, airports with the federal status).

Summing up, Anatoly Golonolzin emphasized the importance of implementing a system of measures, aimed at sustainable multiannual growth of air carriage. Such measures include: development of airport infrastructure using open, transparent procedures of attracting investors, as well as public-private partnership mechanisms; drawing into economic circulation previously removed airports, aerodromes, and landing grounds, particularly, by simplifying certification procedures, construction norms and rules; subsequent improvement of tariff regulation (long-term tariff-making and applying methods of comparative prices and tariffs); deregulation of airports operations in the areas where the necessary competition conditions are formed; combining measures of state support to regional and local aviation and stimulating further development of competition on routes; prospective development of competitive market of aviation fuel and aviation fuel supply; creating conditions for airport operations as business units oriented towards satisfying a growing demand; improving the system of air tickets sales; increasing transparency of aviation operations, particularly, information disclosure standards in line with the best international practices; equalizing the taxation conditions for international and domestic air carriage, etc.

FAS believes that the proposed measures shall encourage not only a sustainable growth of air transportation but also generate changes in the structure of air transportation market. A sustainable growth of mainline traffic must continue. An outrunning growth of regional and local transportation, low-tariff air carriage, business aviation, general purpose aviation, cargo operations, and services of regional and local airports must be supported.

Such measures are mainly drafted and formalized in the form of Road Maps approved by the Government of the Russian Federation, particularly, the Road Map on “Developing Competition and Improving the Antimonopoly Policy”. Anatoly Golonolzin said that implementing this system of measures must be especially significant under the conditions of a decelerated economic growth and deteriorated macroeconomic indicators. He expressed confidence that the outlined system of measures should be of principal importance for the future sustainable growth of air transportation and economics in general.