Russian Journalist and Putin Biographer Talks to Industry Experts About the Next Generation of Air Travel and What it Can Do for the Future of the Russian Economy
Prominent Russian Journalist and Putin Biographer, Mr. Alexander Korobko talks to Mr. Pascal Najadi, President of the Swiss Merchant Finance Firm, Najadi & Partners AG and Mr.Oliver Meier, Founder & President of Metropolitan Airlines, Zurich, Switzerland.
Question Alexander Korobko (AK): Mr. Najadi, you are seen in Russia as a doer, a promoter of foreign direct investment in to the Russian Federation for quite some time now. In January of this year you published a report, Is Russia really in Crisis? You were right with your assessment that Russia never was in a crisis but was facing a mere macro economic challenge to work harder. How do you see Russia performing today five months after your report? What are the most significant areas, economic sectors, that you are focusing on with your partners?
Pascal Najadi (PN): First let me answer the question on my last report. As I predicted the Russian Ruble regained much strength since January of this year in fact it has become the best performing currency to date now ranging around 50 to 51 per USD, back from the 60 and 70s, the short downward spike we saw end of last year. Reserves have seen a gain of USD 3 billion and the oil price has breached the USD 60 per barrel level. Let us not forget, and I repeat myself here, that the Russian economy is constantly diversifying and improving its productivity, its a steady evolutionary process that is taking place and its in my view, again, rather positive in the grand measure of things.
Now to your second question.There are three sectors that are at the core of our strategy. Transport-Tourism, Real Estate and energy sector projects. Whereby the latter is quite common as a first choice among global conglomerates I wish to highlight here the importance of transport and tourism investments for Russia. The transport segment in Russia that will see the most efficient implementation cost is and will be the air transport modules. I am speaking of connecting Russians with Russians via the air. President Putin and his government made clear statements about this very process going in to national implementation, spearheaded by Aeroflot.
The Russian Federation spans over a gigantic area of no less than 17.125 million square kilometers including Crimea, that is no less than 417 times the territory of Switzerland. One has to really look at this map and grasp this colossal staggering territory with huge distances and dimensions, nine time zones in one nation, this is the market, quite big indeed. To manage such colossal size of territory demands special skill, technology and discipline. Air transport is the most efficient cost transport module to connect Russians. Efficient airlines run a cost factor around USD 25 cents per offered seat kilometer, that cost beats all other transport implementation and operations costs such as railways or highways that would have to be newly built in to a very diverse and in large areas like Siberia, harsh topographic and meteorological circumstances. The ‘air factor’ as I like to term it here is the winning formula if implemented locally, modular and interconnected with the regions and the overall medium to long distance network offered of Aeroflot, a very good quality carrier one must say.
This leads us to look at another growth market, Tourism in the Russian Federation. This sector is highly promising. There are countless impeccable outstanding natural wonderland spots all over Russia that are and will be discovered by the global tourism market. Its a wonderful investment story developing with Hotels and Resorts that are sprouting up like mushrooms over time, a great vector to invest now into. Russia has it all, all climates all types of topographies and access to several seas, shorelines, lakes and rivers of immense beauty. I wish to highlight the magical lake Baikal here just as one of many examples or the Russian Far East, Petropavlovsk-Kamchatskiy where you can do Heli- Skiing in the morning on one of the Volcanoes, the Volcano 3456 is the dominant one when you look out of your Hotel room, 3456 being the meters of altitude of this prime example of a Volcano. Then in the afternoon you go to one of the lakes in the wilderness to observe the bears catching salmon at eye range from the safe distance on a bridge, a truly amazing spectacle to watch. In theRussian Federation there are countless such touristic examples that yet have to and will be discovered by the middle and upper class tourism market.
Mr. Oliver Meier, CEO of Metropolitan Airlines says: “Metropolitan Airlines is connecting people, cities and local economies. Most of the flights will allow day trips between our city pairs.”
Question AK: Mr. Meier. You are the founder and President of the new Swiss Boutique Airline, Metropolitan Airlines planning to serve specific European destinations out of Zurich. Can you please explain your vision and how you have defined the niche.
Oliver Meier (OM): Metropolitan Airlines is connecting people, cities and local economies. Travelling throughEurope’s regions is for many top of the list of problems; and this is especially true for people who have to travel for business. The demand for regional air connections is currently not met by the incumbent Network Airlines and Low Cost Carriers. Many regional routes between so called Tier- 2 cities have no direct flight connections. Metropolitan Airlines will offer direct travel solutions which are several times more convenient than alternative options; namely more competitive than connecting flights, trains, buses etc. Most of the flights will allow day trips between our city pairs.
Question AK: Can you explain to us if your unique new concept could also find fertile grounds and air in the Russian Federation?
OM: Looking at situation in Russia; yes I see very fertile grounds for our business model. Like anywhere in the world, the demand for air travel is rising in the Russian Federation. Flying is in most cases the best if not the only option travelling through this vast country. The Russian population would appreciate our affordable fares, the reliability of our services and the customer oriented attitude of our Metropolitan team members. So again; yes I am very confident that our business model would be a tremendous success in your country.
“Russia is over 417 times the territory of Switzerland, Air transport is the most efficient cost transport module to connect Russians,” says Mr Pascal Najadi.
Question AK: Mr. Najadi, how do you rate the socio economic situation in Russia today?
PN: This is a question I am very happy to answer by first making a compliment to all Russians and specifically to the President of Russia, Vladimir Putin. I also had the pleasure reading the Biography PUTIN published by you and Mr. Hutchins in 2012, it helped me to much better understand the human, the Uber-Russian, the phenomenon Putin, a great book, compliments. In my view, and I have had the honor to advise several heads of states in other regions of the world in my career, President Putin has done a job second to none and this not only for the Russians that come first but also for the investment climate in Russia for us foreigners. We observe tremendous progress made in Russia over the last 15 years, specially in the realms of legal transparency.
Also important is the modernisation of the Russian Banking sector. If we look at Sberbank for instance, the largest bank majority owned by the Bank of Russia, we see a positive market adjustment, up to specs risk control and management and customer oriented bank product modernisation to standards of Western banks. It is indeed a fascinating process to witness. Never have I ever been able to witness such a colossal positive transformation process anywhere else in the world in such a relatively short period of time if one looks at evolution and her normal speeds in other cases.
Russia and Russians have achieved this through hard work, nothing came easy, to say it’s just the oil and gas wealth is only the half truth. If you look at Saudi Arabia or Nigeria you also see massive oil and gas flows but not even a mere hint of the socio economic progress that has been achieved in Russia by Russians with the wise, strict and open minded leadership of Putin, one really can make this compliment with good consciousness if one has had the chance to look, as I just mentioned, other scenarios around the world. Last but not least all this has been achieved without any aggression wars, unlike the American history that is marred with global wars and conflict, a bad example visible to each and every world citizen not needed to be a political science expert.
Q: Mr. Meier, you eloquently told us a great deal about your specific vision about air transport. Can you perhaps tell us a little more how you see your air transport vision connect to the infrastructure on the land, trains, cars and in some cases shipping per se?
OM: Commercial aviation is the backbone of any modern economy. In developing economies, such as the Emirate of Dubai, Aviation makes up about 27% of the GDP. In more diversified economies such as Switzerland, aviation contributes to about 5% of the GDP. When you compare ground based transportation with aviation you will find out that in most cases the investments for highways, roads and high-speed trains are significantly higher than the implementation of an airline service. The longer the travel distance the more pronounced this effect becomes. The high investments in longer range ground based transportation can often not be justified on economic grounds.
Question AK: Mr. Meier, can you elude a bit more about what makes or brakes a sophisticated air transport concept, what are the risks and where lie the opportunities?
OM: From an entrepreneurial perspective, very few industries offer such a high scalability as the airline industry does. The economies of scale are significant in this industry. However, from outside the airline business is often perceived as an easy and sexy business; especially the part about “easy” is clearly not the case. An airline requires a clear corporate mission, clearly defined target markets, a solid organization and last but not least a very strong management team with substantial airline industry experience. If these crucial points are not respected an airline can lose a lot of money very quickly.
Question AK: Last but not least, your airline safety – some say, the smaller airlines, whilst still safe, don’t quite reach the standards of top airlines?
OM: Nothing could be further from the truth. Airline safety does not depend on the size of the airline or the size of the aircraft operated, but it depends on the safety culture and management organization in the airline. Metropolitan Airlines will receive its Air Operators Certificate from the Swiss Federal Office of Civil Aviation which is well known in the industry for being very strict in monitoring and policing airline safety in Switzerland. We are however not satisfied with this already very high standard required by the authorities, voluntarily we invest more in flight safety than required. In example; we invest more in the training of our Pilots and other safety critical personnel than required by law. As President I make sure that everyone in Metropolitan Airlines understands that safety is paramount.
Question AK. Mr Najadi how would you summarize the current economic situation for Russia?
PN: The time for Russia to shine has come, we are proud to be part of this exciting socio economic progress.