Vladimir Putin has recently announced the decision on unifying Sheremetyevo and Vnukovo airports. Tens of billions of rubles will be spent from the federal budget in the network of this unification, but the government assures that the unified company may be profitably privatized.

However, industry experts believe that it is just the beginning of operation aimed at merger of Domodedovo airport (controlled by the private East Line Group) by the government. Thus, the holder of Russia’s largest airport may change soon.

 VVP and VPP (meaning "flight strip")

Prime-Minister Vladimir Vladimirovich Putin has decided to unify Sheremetyevo and Vnukovo airports before the meeting on development of Moscow Transport Hub held last week and attended by almost every high official from federal and Moscow government along with heads of Russia’s largest transport companies. The Prime-Minister announced the consolidation of 100% of Sheremetyevo shares owned by the Russian government and 75% shares of Vnukovo airport owned by the Moscow government. "This step is aimed at creating a single network, rebuilding it and then privatizing it in accordance with its new market value ", — explained Vladimir Putin. 

He also has made it clear that the State is ready to use funds from the budget for these purposes. First of all, Russia will reckon with Moscow government. "Historical Moscow’s costs on Vnukovo development are about 45-50 billion rubles; we will pay this amount from rhe federal budget ",— said the Prime-Minister and he also added that the capital’s mayor, Sergey Sobyanin has promised to use these funds for Moscow subway development. In addition, the Prime-Minister has instructed the Ministry of Finance to provide the finance for reconstruction of one Vnukovo’s runway by 2012 and for construction of the third runway in Sheremetyevo. "We try to provide conditions for increase of passenger and cargo traffic, which gives capabilities of specializing Vnukovo and Sheremetyevo and as a result, significantly decrease the load upon federal budget by means of economy in the area of infrastructure ",— explained Putin. 

At the same time, the largest airport of the Moscow Air Cluster, owned by East Line Group, is disconnected from cash flows running into billions from the federal budget. The chairman of Domodedovo’s airport’s Board of Directors, Dmitriy Kamenshik, has doubted that the offered plan of Sheremetyevo development is optimal during the meeting and has recommended the construction of third runway in Domodedovo first. Vladimir Putin has noted that the decision has already been made and it won’t change. ‘As for Domodedovo, I have not made any decisions yet’, and has offered Kamenshik to continue negotiations with the Ministry of Transport. But top-managers of East Line Group have strained relations with the Ministry of Finance because of this third runway. 

A source familiar with the Ministry’s position has noted that the decision of closing one of Domodedovo’s runways will be made in 2014. He has explained that the construction of a new runway along with reconstruction of the old one needs a great amount of budgetary investments, while there is no need in increasing of airport’s capacity at the moment. The Ministry of Transport believes that the airport may exist without third runway for at least ten years, holding up London’s Heathrow as a model, which provides passenger traffic of 60 million passengers a year using two runways. At the same time it is important to provide the development of Aeroflot based at Sheremetyevo airport, since it will face the infrastructure problems in a few years< because two airport’s runways are dependent and can not be used simultaneously. 

Curious to relate, but Aeroflot has supported the idea of constructing the third runway in Domodedovo. The carrier’s CEO, Vitaliy Savelyev has forecasted that his company and its partners from the Sky Team alliance will have required more capacities than Sheremetyevo is able to provide by 2020, thus transferring a part of flights to Domodedovo will be the only possible solution. However, the government’s press-service, has published a message on its website following the meeting’s results, noting that Domodedovo airport will have three independent runways by 2020. 

The industry experts are confident that this governmental decision is the consequence of idea regarding unification of all three Moscow Air Cluster’s airports in a single structure. The first Vice-Premier, Igor Shuvalov, has announced this idea a year ago and the Minister of Economical Development, Elvira Nabbiulina, has confirmed his words. The information regarding this project has been insufficient this time and the State’s offer to private airports’ shareholders has been unknown. A consortium, including Credit Suisse and "Troyka Dialog", has finished its work on preliminary assessment of all three airports’ assets in December 2010. In accordance with their assessment, Vnukovo’ cost is $0,5-0,7 billion, Sheremetyevo’s — $1,6-2,4 billion, Domodedovo’s — $4,1-5,1 billion, thus the State’s share in the unified company may not exceed the blocking shareholding and the private Domodedovo’s shareholders will control the company. To prevent this scenario, analysts have suggested the State using golden share, buy out the private shares or bring in the additional assets. 

There is no information regarding which way has been chosen by the officials but it is clear that unification of Vnukovo and Sheremetyevo is one step towards the creation of civil aviation mega-holding. The fact that the airports’ specialization, mentioned by Putin, is not clear without Domodedovo, is in favor of this version. "Usually the distribution of functions is made in accordance with types of transportation, one airport is focused on business-aviation, second – on cargo transportation and the third is functioning as a passenger hub ",— speculates the Air-transport Rewiev’s editor in chief, Alexey Sinitskiy. However, according to this logic, the most suitable airport for business-aviation is Vnukovo, for cargo transportation – Sheremetyevo, since a large cargo network is being built at this airport, and the international passenger hub is destined to be developed in Domodedovo, because only Domodedovo has a large territory available for construction of multiple independent runways. 

The officials’ arguments regarding possibility of creating a single transportation cluster, based on airports having a long-distance location, also do not stand up to criticism. The connecting time must be not greater than two hours for the airport system to become a transitional hub, which is impossible to provide even using the railway transport. "Even if we organize rapid and comfortable move for the passengers and their luggage from one airport to another, such a transit hub will relinquish to the other international hubs ",— said the Aviaport’s editor in chief agency, Oleg Panteleev. The economic feasibility of separating the airports by charter and regular flights is not clear and Putin’s statement regarding relocation of all the charter and low-cost flights to Gromov Flight Research Institute’s in Ramenskoe seems the most alarming to the experts. The experts agree with the Prime-Minister’s statement that the State is not a good owner for the airports, since it is hard to manage them for the officials. 

Meanwhile, the editor in chief of AVIA.RU portal, Roman Gusarov, believes that the Ministry of Transport and government’s activities may be aimed not only on increase of their assets’ price, but also on decreasing the Domodedovo’s price. "I think that the question of third runway’s construction is used by the officials to pressure East Line during bidding for Domodedovo assets",— the expert believes. He does not exclude that the potential investor which does not want to have such a strong rival on his territory, may be the reason for the idea’s of unification origin. "The unification of all three airports in a single holding helps to increase the price of the privatized company and also eliminate a strong rival from the Moscow market without any need to fight for the passenger ",— speculates Gusarov.

Rumors regarding the possible change of Domodedovo’s owners, which have already been exciting the aviation community for at least 6 months, have been sparked recently by Dmitiy Medvedev’s statement, letting them go beyond the framework of intra-industry discussion. Formally the East Line company’s ultimate owners are located abroad, but businessmen Dmitriy Kamenshik and Valeriy Kogan are usually considered to be the ones. According to one of journalists’ versions, they really own the airport and the controlling stake is owned by Valeriy Kogan whose appearance among the company’s owners has guaranteed the protection against Rosimishestvo’s judicial claims regarding airport’s privatization. This information has not been officially confirmed but there is no point in believing that the president has no information on the country’s largest airport’s owners. Possibly it was some kind of a signal from the authority to the management to demonstrate its dissatisfaction. 

Meanwhile, the conflict between the Domodedovo’s owners and Ministry of Transport, Igor Levitin in particular, has been known for a long time. The question of canceling the financing of Domodedovo’s third runway construction and starting the development of Sheremetyevo’s third runway has been solved by Putin in the last July during meeting at Mineralnye Vody airport. This decision has been entrenched in a respective protocole and it has alarmed Domodedovo. The airports administration has published an open letter to Igor Levitin soon after that requesting to carry out the reconstruction of highway to Domodedovo. but the Ministry has refused. A source, close to the Ministry of Transport, confirms that the officials and Domodedovo owners have very strained relations. "It is not about the existence of private shareholders, it is about specific position of several people, which do not want to take into account the specifics of cluster’s development, while making their decisions, and coordinate their plans with the Ministry of Transport". According to him, the State does not plan to pressure Dmitriy Kamenshik, but “now he has some time to think on feasibility of his requests ". 

Anyway, the officials have allowed the private owners of Domodedovo to remain independent although without any support from State’s side. The private shareholders of Vnukovo has not had such an opportunity. The chairman of Vnukovo-Invest’s Board of Directors, Vitaly Vantsev (owns a minor share of the airport) has reported that he has inquired after the deal only during the meeting and the deal’s structure has not been discussed with him. In Roman Gusarov’s opinion, the government has an opportunity to train in finding compromise with private shareholders of Vnukovo’s terminal D and then try to overpower Dmitriy Kamenshik.

However, Domodedovo’s owners still have a chance to keep their property. According to the experts, the unification of Domodedovo and Sheremetyevo is a very complicated process with a large number of risks and unclear prospects. Mega-project of unifying all the state-owned airlines in a single carrier Rosavia, which should have become an Aeroflot’s rival, has been commented in the same way. All the same persons have taken part in this project and Putin has made all the main decisions. As a result, none of the decisions have been performed, the project has failed and the State was forced to pass the assets to Aeroflot to save them. Let’s see what happens next.

Sheremetyevo airport. Has two parallel runways 3700 and 3550 meters-long. The runways are dependent (distance between the runways is less than 2 km, thus they can not be used simultaneously. Airport’s passenger traffic was19.3 million passengers in 2010.

The airport is being managed by JSC “Sheremetyevo international airport”, 1005 of airport shares are owned by Rosimushestvo. It owns 6 terminals including passenger terminals B (ex-Sheremetyevo -1), C, E and F (ex-Sheremetyevo -2), and a cargo terminal. The total area of passenger terminals is 251,000 square meters, the airport’s capacity is — 22,5 million passengers annually.

“Sheremetyevo international airport” also owns “Vladivostok international airport”, which is performing project of Vladivostok’s airport reconstruction for carrying out APEC-2012 summit.

JSC Terminal manages terminal D, Aeroflot has its controlling stake and the rest of shares are distributed between VEB and VTB. Terminal’s area is — 172,000 square meters, terminal’s capacity is — 12 million passengers a year.

The passenger traffic was 22,3 million passengers in 2010.

Airport’s managing company is East Line Group, the shareholding structure is unknown. Air-terminal complex has an area of 135,000 square meters, terminal’s capacity is — 21 million passengers a year.

Administration of the airport has declared its plans of expanding the passenger terminal: the total area of the terminal will have increased to 275,000 square meters by April 2012.

The passenger traffic was 9.5 million passengers in 2010.

Passenger terminals В (international flights) and D (domestic flights) have a total area of 55000 square meters and capacity of 8 million passengers a year. The first order of new passenger terminal A has been put into operation in 2010, its area is — 174000 square meters, capacity — 7 million passengers a year.

The airport’s assets are owned by Moscow government and a group of private shareholders headed by Vitaly Vantsev. In particular, JSC Vnukovo Airport, which has the new terminal A on its balance, is owned by Moscow government (75%) and Vnukovo-Invest (25%), while JSC Vnukovo International Airport, which owns the international terminal B, is owned by Moscow (25%) and JSC “Aviatsionno-Neftyanaya Kompaniya” (75%).