Russian airlines microcosm of economic bind

By Cui Heng Source:Global Times Published: 2015-11-5 23:33:06

Illustration: Liu Rui/GT

Although the Islamic State (IS) claimed responsibility for the Russian air crash in Egypt's Sinai Peninsula, the terrorist group is believed to have no missiles capable of hitting a passenger jet that had already been airborne for 20 minutes. Thus the IS may be running a bluff in an attempt to boost its influence. Whether the crash is connected to terrorism remains unknown.

There is no doubt that the accident has stricken a heavy blow to Russia's aviation industry, which has been striving to improve its public image.

The Kremlin in recent years has provided tremendous support in finance and management to the aviation industry. The effects are indeed outstanding, but this plane crash may have ruined years of effort by the Russian government.

Russia's economy, under multi-layered crises, cannot be overly dependent on raw materials any more. It is unavoidable that the country's economic focus will shift to other industries. While analysts believe that Moscow's economy will still depend on energy and raw materials in the short term, this must change in the long run.

The Russian government, since the economic downturn in 2012, has been guiding the development of its non-energy industry so as to lower its economic dependency on energy prices. Given disadvantages in human resources and technology, Russia has no solid foundation to develop its manufacturing industry, so it is focusing on the service and tourism industries.

In fact, the 2012 Winter Olympics in Sochi, the 2015 World Championships in Kazan and the 2018 World Cup all serve as great opportunities for Russia to develop its service and tourism industries. After all, the international games can attract global attention in a short period of time and Moscow can take advantage of these occasions to show its national image to the world. In addition, the ruble, following the Ukrainian crisis, has witnessed a sharp depreciation. This enhances the purchasing power of foreign tourists.

Putin's government has devoted tremendous efforts to building Russia's national image. For instance, Russian Aeroflot has purchased a large number of new airplanes and enhanced the quality of its service. These efforts, however, may have been counteracted by the plane crash.

People's negative attitudes toward Russia's national image have been magnified under the media's spotlight. The stereotype that Moscow's air travel is unsafe has been reinforced. Despite the high costs of building its national image, the crash can ruin all previous efforts. It is a heavy blow to the country's service and tourism industries.

Viewed from another perspective, the crash has demonstrated that medium and small enterprises are struggling for survival in the competition with state-owned large firms. These medium and small companies are responsible for most of the air crashes taking place in recent years. Pressured by large airline companies, they can only make a profit by minimizing their maintenance costs.

Analysts argue that to overcome economic difficulties, the government should support these small and medium airline companies. Yet the reality is not that ideal. The large firms, especially those owned by the state, have been established during Putin's term in office. These enterprises were founded to strengthen the government's control over the economy. This is at the cost of the interests of the medium and small companies, whose survival depends on a free economy.

This is the dilemma Moscow's economy is facing. On the one hand, it relies on state-owned enterprises. On the other, it has to avoid any damage caused by large-scale firms to the survival prospects of medium and small companies.

The author is a PhD candidate at the Center for Russian Studies, East China Normal University.

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