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the same times the oil price shock has been a boon for aviation: 64% lower fuel prices support these recoveries.
In Russia, traffic fell 92% y/y to 946k PAX in May due to quarantine measures, VTB Capital (VTBC) said in a note. Aeroflot Group’s traffic declined 94%. Management said that these flights covered only variable costs. However, in June, domestic traffic rapidly grew, as restrictions eased, and were up 1.5x m/m. As of 9 June, demand grew 64% w/w after the lockdown was lifted from Moscow. International flights might be resumed in July.
In Turkey, traffic fell 100% to negligible 48k PAX, as cities were closed for quarantine. Turkish Airlines did not operate scheduled flights and stood on the ground. In June, restrictions were lifted and domestic flights were resumed with a 60-90% load factor. Turkey restarted international flights to nine European cities on 10 June, plans to reopen 40 countries by July.
In Europe, flight numbers were down 86%; gradual recovery started in April. As of 3 June, the decline was 81%. European airlines are set to vastly resume their flights this month, though, as Intra-EU borders reopen.
In the US, traffic fell 90% to a 7mn PAX. In the first week of June, it rebounded to an 85% decline. Airlines are revising their plans upward. United expects to operate 23% of capacity in June vs. the 10% expectation it voiced a month ago.
In China, traffic fell only 55%, as the country stopped the spread of coronavirus more than a month ago. In June, it starts to reopen international flights.
2.13 ​ ​Russia’s shrinking Middle Class
“The official forecast from the Economy Ministry is that real disposable incomes of Russians will drop 3.8% this year and partially rebound in 2021 (by 2.8%). Without government measures to support households, the real decline in incomes would definitely be worse. But not very much, I think,” ​Ivan Tkachev economics editor at RBK​ said in an op-ed.
The problem is that the support package for consumers is not very large – around 800bn rubles ($11.4bn) – and it is largely concentrated on the most vulnerable social groups or middle-class families with kids. A typical family with two kids (around three-quarters of families in Russia) will receive up to 25,000 rubles ($357) each in the second quarter of 2020, in additional social benefits. There are no payments planned beyond June.
In my example, this translates to 6,250 rubles ($90) per member of a household, or roughly $30 a month. Compare that with the 32,500 rubles ($465) per month of cash resources available to an average Russian household (according to Rosstat data for 2019), or 47,000 rubles ($672) for the “core” middle class, according to Higher School Economics research, and you’ll see that the government’s paychecks add roughly 4.5-6.5% to typical household income this year – not a huge sum given the magnitude of the crisis.
Independent economists predict at least an eight% fall in real disposable incomes this year. In theory, the government could spend much more on social support during the crisis, but they perceive it as throwing money down the drain.
The middle class – an elusive concept for Russia – will definitely shrink in 2020-2021. According to 2019 estimates, 38% of Russians belong to the broader middle class, but there are only seven% of the population that share all socio-economic features of the middle class (countryside residence, or
20​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com