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“Orenburzhye” airline preparing for its first anniversary

Written with participation of "Flight Line" experts

Why did the successful airport establish a new airline in its base? 

Sergey Mordvintsev: It was a logical idea as it was necessary to maintain the local airlines, restore inter-regional transportation and promote the mobility of population. I would like to remind you that our air enterprise since the Soviet times has been a complex of its own airport and air squadron based in Orenburg. Once we used to be a single Federal State Unitary Enterprise "Orenburg airlines", the airport has been formed out of it in 2010. That is why due to increasing demand for transportation; it was decided to restore its own air squadron. The idea was supported by the administration of the Orenburg region, it was extremely important in strategic and tactical plan, as the company is owned by the region. In order to participate in the regional transportation subsidy program a consent from the regional authorities was required, since 40% of the subsidies comes from the regional budget (60% - federal). As a result, “Orenburzhye” airline began its flights on April 1, 2013.

Did the expectations come true over the years; did the company achieved the planned results?

S. M .: Ever more! Today "Orenburzhye" is the leader among regional carriers: it accounts for two-thirds of all local transportation carried out in the Volga Federal District! Over the past year, the airline carried 1.5 times more passengers than in 2014. It is our another achievement - we have served almost 100 thousand people.

The fleet of the Airline consists of the L-410. Why was this type of aircraft chosen?

S. M .: Earlier, in 1980-90s this type of aircraft was operated by the Orenburg squadron, so training for these aircraft types was carried out by our specialists in the shortest possible time. Flight crews and engineering staff were trained. It is important to note that the fleet of “Orenburzhye” consists of L-410 UVP E20 - a new, modern type of aircraft, designed to carry 17 passengers within 800 kilometers – it is perfect for local and regional transportation. Operational experience confirms their high reliability and operational safety and excellent flight characteristics, including take-off and landing on short unpaved runways, it also facilitates the use of the aircraft on domestic routes.

The next question will be to you as an expert. How will the planned cancellation of VAT on domestic transportation influence on the activity of your enterprise, especially given the fact that it includes both airline and airport?

S. M.: There are two options - the VAT rate of 0% and the cancellation of VAT (that is "no VAT at all"). In the first case, the airline will produce a VAT refund providing supporting documents. Typically, such a procedure is usually delayed for three months or more and requires additional financial costs as a percentage for the bank guarantee. Still, it is more profitable for the airlines than the state decision to cancel VAT for domestic air transportation. According to the tax legislation and particularly in accordance with the Art. 170 of the Tax Code of the Russian Federation, the airline being not a VAT payer may not recover the tax from the budget. Unrecovered VAT is accounted in the cost of goods (works, services), which will increase airline costs and worsen its financial position. Moreover, it may increase prices for tickets.