The brouhaha surrounding Russian airport development is finally evolving into action. The public private partnership (PPP) model for Russian airports is taking off and with it comes a plethora of opportunities for airport equipment and ICT companies around the globe. Helsinki is an ideal location from which to harness these opportunities. Situated next door and host to a cluster of airport equipment companies already engaged in conversations with Russian airport holding companies, Helsinki continues to trade successfully with its neighbour.
So, as airport equipment and ICT companies ramp up their plans to access the Russian market, Helsinki is emerging as the place from which to penetrate this burgeoning market. The rewards for he who dares in this gigantic land-mass could be immense. Did you know, for example…
…airspace is huge
Airspace in Russia measures approximately 26km2 million. In 2012 there were 1.2 million flights, up 5% on 2011 with more growth of international sectors flown than domestic. By 2020, all air traffic control in Russia will have been modernised to international standards using a model that splits this vast country into four regions. Major works are in the pipeline to build new air traffic control towers and by 2014 a new air traffic control facility to manage the congested Moscow region will be operational. More hubs to take traffic away from the Moscow region will have to be addressed. Work is underway to integrate civil and military air traffic control; and there are collaborative efforts taking place with the US and Germany to increase satellite communications and data transmission.
…infrastructure is the key
The elephant in the room is a lack of infrastructure on the ground. However active the Federal Government is on the air traffic control front, circumstances surrounding terra firma are the burning issue. While runways, taxiways and all other airside infrastructure will probably remain the property of the federal government, regional governments will act as levers to ensure that airfields are fit for purpose, modernised and maintained so that investment in landside infrastructure provides the returns that private investors in terminal buildings and the traveling public – be it domestic or international – expect of modern airports. The race is on to make this happen.
…the PPP model is set to fly
In the absence of capital to develop airport terminals throughout the regions, the public private partnership (PPP) model is set to fly. Witness the highly acclaimed Pulkovo Airport example with its teams of investors expertly intertwined with the elite of airport management. The opportunities are real and present. It has become clear that investors have a distinct preference for interacting with regional rather than the federal government, and the Presidential Decree allowing the transfer of airport assets to the regions (as long as there is private investment too) is facilitating the PPP model. But this is business and there have to be profits for investors as well as an airport terminal to the governor’s expectations…a fine balance indeed but failure to achieve both equates to failure of the project.
…projects must be bankable
The International Finance Corporation (IFC), part of the World Bank Group and already deeply involved in Russia, is highly vocal that Russian airport projects have to be bankable. Unlike airlines – with their low margin, high cost profiles – airports are a relatively secure investment target and should therefore be attractive to consortia of investors. And the IFC is clear that capital expenditure (for both infrastructure and equipment financing) is always better managed by the private sector than the equivalent public body. The bank is highly welcoming of the new PPP law being adopted in Russia and sees them as a catalyst for further infrastructure and airport equipment financing in the country.
…plans must engage airlines
Airports might attract the travelling public but the business case for airport development has to be the accommodation and engagement of dominant airlines. Mike Forster, of Forster Associates and proponent of a plan to solve London’s congestion issues, is emphatic that airport master-planning should primarily be about serving airlines, their goals, their fleets and understanding their financial stability. The reality is that international routes from Russia tend to be profitable whereas domestic routes struggle to perform financially and may seek subsidy. But international airlines expect international standards and the international aviation community is being invited to participate – an opportunity for all, as long as set-up conditions are secure.
The reality is that airport equipment and ICT suppliers have everything to win by supporting and engaging in Russia’s drive to develop its airport network. Perhaps Airport of the Regions is a good example of where things are headed. The asset management company has in its portfolio Yemelyanovo Airport in Krasnoyarsk as well as Koltsovo near Yekaterinburg, Kurumoch near Samara and Strigino at Nizhny Novgorod. Large-scale reconstruction in Samara is already underway following a public tendering process. The next round of tendering is being prepared and the timing is perfect for international suppliers to engage.
To do so from a Helsinki base ticks all the boxes. It is adjacent, transparent, EU-based, expert in R&D, engaged in cleantech and, most importantly, open for business.
More about Finnish aviation community: airportcluster.fi