Russia’s air transport industry is setting its sights on the global market, having overcome the dark days when financial problems threatened the sector’s very survival.

Effectively, the industry is entering a third phase in its post-Soviet existence. At first, the issue was merely staying afloat; then the focus turned to serving the large domestic market and shoring up the sector’s financial wherewithal. Now, airlines and manufacturers have ambitions beyond the confines of Russia and its immediate neighbors.

Russian carriers have figured out how to overcome domestic hurdles to import and operate Western airliners, leaving behind the shackles associated with flying inefficient Russian designs. Moreover, they’ve found ways to lure international financial institutions to help their growth. Additionally, they are forging links with leading world airline alliances and even attempting to take control of struggling European carriers.

After almost a decade of stagnation that marked the 1990s, Russian airlines have demonstrated an impressive passenger growth rate of about 9% a year. Although fuel-cost increases in 2004-05 reduced traffic development, most carriers have adapted to the new conditions by cutting operating costs, increasing fares and modernizing fleets.

The fuel-price hike wasn’t all bad news. Although it initially depressed traffic volume when ticket prices rose, it also stimulated the Russian economy so that within six months, passengers were willing to digest the higher cost of flying.

Last year, overall passenger numbers carried by Russian operators increased by 8.34%, to 38 million, compared with 2005. Strong traffic is projected well into the next decade. Results this year signal how robust the market is: Passenger volume for the first six months was 16.2%, a level exceeding expectations.

The Russian State Research Institute of Civil Aviation forecasts annual passenger growth of 7.5-9.5% through the end of the decade, with a gradual slowdown to 5.1-7.8% through 2020.

Still, Russia maintains an overabundance of airlines. More than 180 are listed on the national registry of commercial operators. But there has been notable consolidation, especially among the main carriers. According to Transportation Minister Igor Levitin, most of the traffic is generated by the country’s top 10 airlines, which account for more than 65% of passenger volume, while the top five transport nearly half. At midyear, the five market leaders were Aeroflot, S7 Airlines, Transaero, Rossiya Airlines and UTair. The “big five” largely dictate the tone for the entire sector.

Russian flag carrier Aeroflot handles roughly 10% of total volume on domestic routes and dominates more than 25% of international traffic. In the first half of 2007, the airline served 3.773 million passengers, with an impressive 17.9% growth, compared with the same period in 2006.

Aeroflot was also the first Russian airline to become a member of a global alliance—the Air France-KLM-dominated SkyTeam. To meet entry requirements, Aeroflot significantly improved its standards of operations, service and safety. It also leads the list of Russian carriers successfully passing the International Air Transport Assn.’s Operational Safety Audit (IOSA).