As of today, the federal center owns all Russian airfields, as well as airport property, which cannot be privatized. Until now, airports were listed as strategic facilities, consequently no one dared to talk about their possible privatization. Russian airports were controlled by the so-called federal state unitary enterprises, which were created in 2001. For instance, the Administration of Civilian Airports federal state unitary enterprise, owns the state's property at Moscow's civilian airports. There are four main airports in Moscow -Sheremetyevo, Domodedovo, Vnukovo and Bykovo - as well as a number of airports for state-owned experimental and light-engine aircraft. The four largest airports have seven runways. Overall, Moscow has 13 runways, which handle about 22.5 million people each year. Annually, the airports make about $70 million.
Nevertheless, private companies now manage runways and the accompanying facilities at Sheremetyevo, Vnukovo, Domodedovo and elsewhere. Such companies have signed long-term (70-90 years) leases and airlines pay them for take-off and landing.
Most of these companies understand that investment is a key to successful business operations. They fund the development of airports that do not belong to them. However, private companies do not lease every airport and therefore the state has to spend a large amount of money to maintain airport infrastructure in many regions.
Airport development programs are very expensive because airports comprise passenger terminals, airfield services, refuelling facilities, aircraft hangars and many other facilities. Airfields are not the most inexpensive component of an airport, asit costs more than $1 billion to build a runway. Because airport equipment must conform to rigid standards, all airport equipment, including lamps, are much more expensive than any similar household appliances.
Prices tend to soar as a result. For instance, aircraft parking areas cost $10 million without equipment and the related infrastructure. Such parking areas would cost at least twice that amount if an underground fuel pipeline were constructed there.
Unsurprisingly, Transport Minister Igor Levitin suggested privatizing this federal property at a cabinet session. According to him, this property should be transferred to the companies currently managing the airport facilities. No one objected, which confirmed that the air traffic sector had to be privatized.
How can these deals be formalized? Russian airports are still listed as strategic facilities, and consequently, private businessmen cannot purchase them without certain limitations. A businessman might eventually decide that his airfield is unprofitable and transform it into an ultra-modern amusement park, or build mansions there. In these cases, many Russian cities with only one airport would be cut off from the outside world.
Another possible legal battle is that a company that owns specific runway would use its competitive advantage to reduce ticket prices to the detriment of other airlines. This would directly violate anti-trust legislation and consumer rights. There are numerous other problems as well. In other words, Russia lacks the necessary regulatory and legal base for transferring such facilities to the jurisdiction of airport owners. It is nearly impossible to privatize strategic facilities quickly enough.
The government has already suggested drafting a set of basic regulatory and legal documents, which would promote partnerships between the state and the private sector in the air transportation sector. Concession mechanisms are also being contemplated, however, the State Duma has failed to pass a concession bill since 1996 (the document has since become obsolete). Consequently, a new concession bill must be drafted.
Meanwhile Russian authorities agree that a joint center for analyzing, managing and coordinating various state-private projects should be established within the Economic Development and Trade Ministry. It appears that private business may gain control of airfields but the state will continue to hold some of the shares.
