RUSSIA: Skyrocketing Fuel Prices Drive Up Airfare

The price of airplane fuel has risen 30 percent in Russia in the last month to nearly $1000 per ton. That will drive up the fuel expenses for the 15 largest Russian airlines by at least 10 billion rubles per year. Fueling companies say that the cause of the price rise is higher prices for the fuel when it comes from oil companies, although others say that oil companies have redirected their resources toward the more profitable diesel fuel, leaving a shortage on the aircraft kerosene market.

Vera Adamova, commercial director of the Sheremetyevo fueling company, says that her company's profits remain flat as prices rise. Prices for fuel at airports where more than one provider work competitively are about 15 percent lower than at airports with a monopoly provider.

The Russian market for plane fuel lags behind the world market by about a month, which also bodes ill for the market, since world prices have risen from $650 to over $900 in the last month. Fuel prices make up 40-50 percent of airlines' expenses, and those price rises will soon be felt in ticket prices. At Aeroflot and Siberian Airlines (S7), they acknowledge that the fuel surcharge on their tickets, which now ranges from $10 to $30, may rise. That in turn will be felt by the airlines in passenger flow.

The price of airplane fuel has risen 30 percent in Russia in the last month to nearly $1000 per ton. That will drive up the fuel expenses for the 15 largest Russian airlines by at least 10 billion rubles per year. Fueling companies say that the cause of the price rise is higher prices for the fuel when it comes from oil companies, although others say that oil companies have redirected their resources toward the more profitable diesel fuel, leaving a shortage on the aircraft kerosene market. Vera Adamova, commercial director of the Sheremetyevo fueling company, says that her company's profits remain flat as prices rise. Prices for fuel at airports where more than one provider work competitively are about 15 percent lower than at airports with a monopoly provider. The Russian market for plane fuel lags behind the world market by about a month, which also bodes ill for the market, since world prices have risen from $650 to over $900 in the last month. Fuel prices make up 40-50 percent of airlines' expenses, and those price rises will soon be felt in ticket prices. At Aeroflot and Siberian Airlines (S7), they acknowledge that the fuel surcharge on their tickets, which now ranges from $10 to $30, may rise. That in turn will be felt by the airlines in passenger flow.
Via: Kommersant
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