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Air Travel Costs to Rise After Fuel Price Hike

Russia’s already expensive air fares look set to increase and hurt the industry.

Published: August 27, 2014 (Issue # 1826)



  • According to Rosaviatsia, the last three months have seen an average rise in the cost of aviation fuel of 6 to 7 percent.
    Photo: Denis Abramov / Vedomosti

A rise of up to 7 percent in the price of aviation fuel at Russian airports since May will push up costs for domestic carriers, making Russia’s already notoriously expensive air fares more costly and damaging the competitiveness of Russian airlines on the international market, aviation watchdog Rosaviatsia said Aug. 21.

Rosaviatsia monitored the cost of aviation fuel in 30 Russian airports over the last three months, finding average rises of 6 to 7 percent, the agency said in a statement.

“This summer’s sudden increase in the cost of aviation fuel was not expected by airlines and was not part of their operational plans,” the statement said. The result will be increased costs for passengers, it added.

Oleg Panteleyev, head of aviation news agency AviaPort, estimated that 100 rubles ($2.77) would be added to the average standard air fare.

The share of the cost of aviation fuel in the price of a ticket is around 30 to 40 percent, Andrei Sogrin, spokesman for Russia’s flagship carrier Aeroflot, told the newspaper RBC Daily.

Russia’s second-largest airline Transaero branded the price hikes as “ungrounded” and said they were “harmful for domestic carriers and could lead to increased ticket prices for passengers.”

Panteleyev blamed the rise in the cost of fuel on seasonal factors: “July and August are peak months for airlines, and the oil companies skim the cream off carriers during this period,” he said, adding that aviation fuel price also tracks the price of technologically similar diesel fuel, which is now being bought up by the government for its emergency winter reserves, creating supply shortages.

Over the course of 2013, the price of aviation fuel rose by almost 4 percent.

Dmitry Baranov, lead analyst at Finam Management investment company, said that the rise in prices was exacerbated by relatively low competition in the Russian aviation industry.

“There are still monopolies in some segments [of the industry]. In many airports there is still only one choice of fuel depot, and an idea to create alternative fueling centers in airports previously voiced by the government did not work out,” Baranov said.





 


ALL ABOUT TOWN

Saturday, Nov. 22


Russian Premier League-leaders Zenit St. Petersburg return from the international break to take on Kuban Krasnodar at Petrovsky Stadium this evening at 7 p.m. Tickets for the game can still be purchased on the club’s website, at the Petrovsky Stadium box office or in any of the club’s merchandise stores.



Sunday, Nov. 23


Get in the holiday spirit at today’s Winter Bazzar at the Astoria Hotel. Featuring gifts from around the world such as French eclairs, Dutch cheeses and Indian jewelry, the annual event organized by the International Women’s Club will feature 18 international stands and raise money for charity through the sales of a diversity of products that further illustrate the city’s international connections.



Monday, Nov. 24


Dr. Axel Schulte, Department Head at Fraunhofer Institute for Material Flow and Logistics in Dortmund, Germany, is the featured speaker at the SPIBA Industrial Committee lecture on “The Fourth Industrial Revolution: Digitalization of the Supply Chain.” The event begins at 4 p.m. at the Graduate School of Management at 3 Volkohvsky Pereulok and registration is required by Nov. 21 either by emailing office@spiba.ru or calling 325 9091.



Tuesday, Nov. 25


Tag along with AmCham during their “Industrial St. Petersburg” Tour program today. This incarnation of the ongoing series will visit Philip Morris Izhora and include an Environmental Health and Safety Committee meeting.


Find out how to expand your business east during the “Business With China” forum beginning today and concluding tomorrow at the Lenexpo convention center. The largest Russian forum dedicated to business with the Asian giant, topics that will be discussed include logistics, customs clearance, trade financing and many more.



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