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Impact of Subsidizing Air Routes in Russia on Passenger Traffic Dynamics

  • INDUSTRIES AND INTERINDUSTRY COMPLEXES
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Studies on Russian Economic Development Aims and scope

Abstract—

The paper considers the problem of evaluating the effectiveness of subsidies for air transport in Russia in terms of attracting additional passenger traffic. The study primarily focuses on regional air routes bypassing the city of Moscow. An extensive database on air routes in Russia, the amount of subsidies to air carriers, and regional macroeconomic indicators for 2012–2021 was used to estimate the effects. Statistical hypotheses are tested using panel data models and logistic regression. The results of the analysis show that there is a statistically significant effect of subsidizing air routes in Russia in terms of changes in passenger traffic. At the same time, the response to subsidies on various air routes is different. Several typical clusters have been identified among them, which differ in the degree of passenger traffic elasticity to subsidies. Based on the binary choice model, a “reverse” test was formulated to assess the statistical significance of subsidies, which also confirmed the drawn conclusions.

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Notes

  1. According to the authors and expert information, the cost of spare parts has increased three to eight times, depending on the type, and the time of delivery through intermediary countries has increased two to three times.

  2. DAL, domestic air lines (in Russia); IAL, international air lines (from/to Russia).

  3. With passenger traffic on a flight of 60 to 100 people.

  4. There were no available and sufficient data for a comprehensive analysis of the impact of subsidies on local routes. In addition, mostly local routes are typical for the SibFD and Far Eastern Federal District, and subsidies often play a major role in the availability of air transportation in general. In other words, without subsidies, most of the local routes would not exist at all.

  5. The simultaneous inclusion of investment and GRP factors into the model had to be abandoned due to their close statistical connection. In this case we observed a quite typical situation for multicollinearity: obtaining signs of coefficients opposite to those expected in the theory. The situation with the index of population’s income and population and GRP is similar. The model was considered separately for the groups of weakly correlated factors and the version with higher coefficients R2 was chosen.

  6. The test is “reverse” in the sense that, based on the observed change in passenger traffic during the reporting period, an attempt is made to assess the likelihood that this air route received a subsidy during the reporting period.

  7. The share was calculated using the ratio of the passenger traffic critically dependent on the subsidy determined by the model to the total passenger traffic on the route.

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ACKNOWLEDGMENTS

The authors express their special gratitude to A.S. Neretin (Project Manager at the Center for Infrastructure Economics LLC, an expert in transport planning) for his contribution to the collection and analysis of initial data, as well as critical comments on analyzing the results.

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Authors and Affiliations

  1. Institute of Economic Forecasting, Russian Academy of Sciences, 117418, Moscow, Russia

    P. A. Lavrinenko

  2. Central Economics and Mathematics Institute, Russian Academy of Sciences, 117418, Moscow, Russia

    A. N. Bereznyatskiy

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  1. P. A. Lavrinenko
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  2. A. N. Bereznyatskiy
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Correspondence to P. A. Lavrinenko.

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Translated by I. Pertsovskaya

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Lavrinenko, P.A., Bereznyatskiy, A.N. Impact of Subsidizing Air Routes in Russia on Passenger Traffic Dynamics. Stud. Russ. Econ. Dev. 34, 627–639 (2023). https://doi.org/10.1134/S1075700723050088

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