Russian airlines are slashing flights due to a growing shortage of planes, as the economic crisis in the country intensifies. Businesses and consumers have been hit by a double whammy of spiralling inflation and high interest rates.
In a desperate bid to bring inflation down, the Central Bank was forced to hike interest rates to 21% late last year, a record high in recent years. High interest rates have added to the woes of Russian businesses, particularly those heavily leveraged on bank loans.
Many are struggling to pay back their debt and face uncertain futures as they fight to stay afloat.
Sectors hit particularly hard by the tough economic conditions include retail and construction, with mass bankruptcies looming.
Now, the aviation industry is facing an existential crisis as it struggles to cope with the impact of Western sanctions.
Export bans have cut off both the supply of planes and, more importantly, spare parts to Russia.
This is a pressing problem for the industry as US-made Boeings and EU-made Airbus planes account for two-thirds of Russia’s commercial fleet, carrying about 90% of passengers.
As a result, airline companies have been forced to slash flights as their fleets of airworthy planes diminish rapidly.
In a bid to counter Western sanctions, the Kremlin has tried to revive its own domestic aviation production industry.
However, this is much easier said than done, as companies struggle to meet Kremlin-ordered production timelines.
According to this schedule, Russia is supposed to build 1000 new planes by 2030, as it seeks to kick its dependence on Western technology.
Yet, only five new planes have been built to date, in a major blow to the Kremlin’s ambitious plans for the industry.
As Kyrylo Shevchenko – a former head of Ukraine’s National Bank – noted, it will take “600 years” to meet the Kremlin’s target if production output continues at this rate.
In a further blow to the industry, the Russian airline S7 has been forced to scrap its £65million gas turbine engine plant in Saint Petersburg.
