A surge during pandemic: Tulpar Air increases revenue amid rising demand for charter flights

Lockdown hit air carriers immediately

The aviation industry felt the impact of the coronavirus almost immediately. The first lockdown forced the businesses to come up with new measures to stay afloat. The largest airline and national airline of the United Kingdom, British Airways, sold part of the corporate collection of paintings at auctions.

Singapore Airlines arranged restaurants with 450 seats each in two unused airliners. The theme of the establishments was corresponding — food according to the tariffs “economy” and “business class”.

Creativity didn't help much. According to the International Air Transport Association, due to quarantine measures and border closures, the losses of the world's airlines in 2020 exceeded $85 billion. Many of them were forced to cut hundreds of employees and increase their credit load. For example, Delta Airlines plans to raise $6,5 billion, United Airlines — $6,8 billion, and Spirit Airlines — $850 million.

“The year 2020 turned out to be one of the worst in history for representatives of the aviation industry both in Russia and in the world. The closure of international flights forced airlines around the world to put to their aircraft earth and cancel new orders. In particular, the net loss of the world's leading aerospace corporation and the largest manufacturer of passenger aircraft, Boeing, in 2020 amounted to $11,94 billion against $636 million a year earlier," says Natalia Pyryeva, an analyst at Finam Group.

A reduction in passenger traffic in domestic flights worldwide reached 57,5%, and in international flights — 91,9%.

The situation also affected the caution of passengers — in the conditions of uncertainty and closed borders, early bookings were sharply reduced. Airlines especially need them in the off-season. According to statistics from the International Air Transport Association, in September 2020, the volume of ticket bookings for the quarter ahead fell by 70% compared to last year.

Thus, the association predicted the restoration of global air traffic to the pre-crisis level only in 2024.

Losses of airlines exceeded 120 billion rubles in Russia

Russian carriers have been affected by the pandemic along with their foreign counterparts. In the first half of 2020, the volume of passenger traffic of Russian airlines decreased by half. At the same time, passenger traffic of domestic airlines fell by 42,5%, and of international airlines — by 64,3%.

Summer navigation improved the overall result of air transportation only by a few per cent in the first three quarters of 2020. According to the Association of Air Transport Operators, the operating loss of the 35 largest Russian passenger airlines in the first half of the year amounted to 121 billion rubles.

The ministry of transport and road management of Tatarstan, in turn, reported on the situation in the republic at the year-end board meeting.

According to the ministry's information, out of all types of transport, air transport was affected the most, with a drop of more than 50%. Moreover, the airports of the republic received much larger amounts of compensation than air carriers. For example, the Kazan International Airport received over 160,8 million rubles during the downtime, and UVT Aero received about 9 million rubles.

“Against the background of the spread of the virus in Russia, the airline UVT Aero experienced an outflow of customers and, as a result, a decrease in revenue. But it continued to perform almost all flights on destination network. Since April 2020, the occupancy of passenger seats in aircraft cabins has sharply decreased. In the first half of last year, this figure was about 30%. In the first half of 2020, UVT Aero carried 104,437 passengers, in 2019 — 113,001 people, that is, there was a decrease of 8%," explains Pyotr Trubaev, the director general of UVT Aero JSC.

Tulpar Air increased its traffic volume by 5,1% due to charter flights

In such conditions, other areas of aviation applications are becoming popular: cargo and mail transportation, emergency services, new types of aviation work in the fuel and energy sector and agriculture. The companies in the field of corporate transportation were also the winners.

One of the main destinations of Tulpar Air is business charter flights. Last year, it increased the volume of air transportation by 5,1% or 37,062 thousand rubles. They brought the main profit of the company last year — 99,95% of the total volume. In 2018 and 2019, the volume of revenue from air transportation was 99,4 and 99,7 per cent.

“The number of orders has increased, there has become more work, as the need for charter flights has increased. This is very simply explained: the flight routes and the number of flights of airlines flying on regular flights have significantly decreased. Plus the risk of getting sick in crowded places also pushes people to book a charter flight. Using any crisis as an opportunity is a feature of Tulpar Group. We have serious plans to increase charter flights. If before the crisis we mainly specialised in corporate services, now we have entered the market and are actively flying. We have even increased the staff, hired two new pilots and plan to increase the fleet of aircraft this year," said Azat Khakim, the chairperson of the board of directors of Tulpar Air PLC.

The company's profit from sales almost doubled to 91,990 thousand rubles. In the year before last, the indicators were at the level of 47,421 thousand. The same applies to net profit: 34,676 thousand rubles in 2019 and 72,140 thousand rubles. last year.

The total value of the company's assets as of 31 December 2020 is at the level of 224,082 thousand rubles, which is by 21,7% higher compared to the data at the beginning of the year. By the end of the year, Tulpar Air's own funds had grown by 73%.

The average monthly salary of the airline's employees reached 166,934 rubles.

Future of aviation industry: demand for lower capacity aircraft will grow

While business transportation continues to grow, the rest of the airline industry is still going through difficult times. According to experts, the market expects a slow recovery. Azat Khakim, the chairperson of the board of directors of Tulpar Air PLC, believes that the geography of flights and their regularity may change in Russia after the pandemic. Lower capacity aircraft will become more popular.

Pyotr Trubaev, CEO of UVT Aero, believes that one of the main tasks now is to ensure the transport accessibility of regions with a decent level of safety and quality. The carrier plans to expand its network of routes, including subsidised flights, and hopes to gradually open international routes along with activity in the domestic air transportation market.

Natalia Pyrieva, an analyst at Finam Group, suggests that the stabilisation of the situation depends on the speed of mass vaccination.

“An important factor is the return of effective demand for air transportation, as the income of the population has significantly decreased during the pandemic. Few will have the opportunity to afford tourist trips when it becomes possible. The recovery of international air traffic to pre-crisis levels is expected by about 2024, while in the domestic markets we can see good indicators by the end of 2021," comments Natalia Pyryeva.