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favourable base effect, "although the VAT increase from 2019 might support demand at the end of the year."
The demand drop in 2019 could be avoided due to the continuous government support . Russian government will spend RUB10bn ($143mn) on supporting car demand in 2019, Tass reported on September 15 citing the Minister of Industry and Trade Denis Manturov, without providing further details.
Previously in July Russian government extended the program of car sector support until 2020, providing RUB15bn ($240mn) worth of state financing for discounted leasing for an annual 0.045mn car sales.
Discounted loans for consumers on the car market and "cash for clunkers" utilisation programme helped the domestic car market recover in 2017 and 2018 after four years of decline. The performance of the top seller on the Russian market Avtovaz carmaker and its Lada model has been supported by state initiatives .
9.1.3 Aviation sector news
The Russian government has asked state-controlled banks Sberbank and VTB to set up a regional air carrier , Vedomosti d aily said on October 17 citing unnamed sources. The new airline could be established after 2019 with a passenger turnover of 6mn-10mn people annually. Regional transportation interconnectivity is one of the main goals of Russia's six-year transportation infrastructure development plan . Direct regional flights (not passing through Moscow) have to increase to 50% of domestic flights by 2024 from 23% in 2017, according to President's Vladimir Putin's May Decree. Sberbank and VTB carrier could become a major competitor to Aeroflot and S7 Group, the two largest air carriers with 50mn and 14.3mn passengers transported in 2017, respectively. In the meantime Aeroflot received another RUB300mn ($5mn) of state subsidies for developing routes to the Far East districts, Tass reported in a separate report citing the Ministry of Transportation. Overall the government spent RUB3.8bn on supporting regional flights to Far East, Kaliningrad, and Crime for seven carriers (Aeroflot, Alrosa, Nord Star, S7, Urals airlines, UTair, and Yakutia). In September reports suggested that Aeroflot plans to launch four regional aviation hubs in addition to the one in Moscow's Sheremetyevo airport, potentially developing more routes from St Petersburg, Sochi, Krasnoyarsk, and one of the cities of the Urals region. Aeroflot Group has already boosted its presence in the Russian regions by launching domestic airline Rossiya and low cost Pobeda. The ambitions to boost its regional
92 RUSSIA Country Report November 2018 www.intellinews.com