Russia Tourism Report Q2 2009

Tourism Overview The most recent data on foreign visitor arrivals continue to be relatively positive, with arrivals up some 6% year-on-year (y-o-y) in the first nine months of 2008 to about 18.5mn. Included in these data, foreign tourist arrivals increased a favourable 7.6% y-o-y. Concerning major source markets for visitor arrivals, Finland, China and Germany recorded increases of 1%, 8% and 5% y-o-y respectively, although of these data, arrivals attributed to tourism were down for all three countries (falling 8%, 3% and 3% y-o-y respectively). Arrivals from the US were up 8% y-o-y (tourists up a strong 12% y-o-y), while visitors from the UK were up a buoyant 25% y-o-y (with a 19% y-o-y increase in tourists).

Forecast Scenario BMI has revised up slightly the estimated growth rate in foreign visitor arrivals last year to about 5% y-oy.

In 2009, however, we anticipate a relatively sharp decline in arrivals but recovery in the following year.

This view is largely based on downward revisions to our growth forecasts for Ukraine, Kazakhstan, the eurozone and the US – major source markets. Meanwhile, growth in arrivals over the remainder of the forecast period to 2013 is expected to remain modest. Looking beyond this period, the Russian Sports and Tourism Ministry announced in January 2009 that it plans to bid to host the 2018 FIFA World Cup.

Domodedovo International Airport Recently released data show that growth in passenger traffic at Russia’s main aviation hub, Moscow’s Domodedovo International Airport, slowed sharply in 2008 but remained relatively strong at 9% y-o-y, to over 20.4mn passengers (following a 22% y-o-y increase in 2007). The highest growth was recorded on destinations such as Frankfurt, St. Petersburg, Munich, Kaliningrad, Khabarovsk, Sochi, Kishinev, Vladivostok, Vienna and Krasnodar. Passengers on international routes reached almost 12.1mn, up about 12% y-o-y, while traffic on domestic routes totalled nearly 8.4mn, a 5.1% increase on 2007.

Aeroflot In 2008, Russian national airline Aeroflot carried 11.6mn passengers, an increase of about 14% on the previous year. The number of passengers on domestic routes increased a buoyant 19% y-o-y to over 5mn.

Preliminary financial results for 2008 show revenue growth of some 26% y-o-y, while costs were curbed, despite a substantial rise in jet fuel prices. The company expects net profit to fall to around US$85mn in 2008, down markedly from US$313mn a year earlier. Due to the financial crisis, Aeroflot forecasts a 10% to 20% fall in Russian traffic volumes in 2009.

S7 Airlines Recently released data for 2008 show S7 Airlines transported almost 5.9mn passengers, up 3.4% on 2007, which represents a modest increase compared with growth in recent years (the growth rate also fell sharply during the course of the year). In line with worsening economic conditions, the airline reportedly cancelled its contract for 15 Boeing 787 Dreamliner aircraft in January 2009, stating that it will seek to lease the planes instead.

Transaero During 2008, Transaero continued to record substantial growth in passenger traffic. The number of passengers grew to almost 4.9mn, 50% more than in the previous year. According to the company, Transaero remains Russia’s second largest carrier on international routes, with over 4.2mn passengers.