Fuel shortage cuts wings of Russian airlines

Russian traders are alarmed at the sudden disappearance of aviation fuel from the market.

They say a hike in prices is imminent, with a fuel deficit likely before the end of October.

The main factor behind the deficit is thought to be the growing number of passengers using airlines in Russia, whereas the oil refineries around Moscow and Moscow regions ceased operating at full capacity. Additionally, in September, the Defense Ministry made a large order for aviation fuel.

This comes just as Russia’s last remaining budget airline Avianova is quitting the market. Early on Monday morning the company announced a shortage of funds had forced it to cease operations – much to the dismay of its passengers.

Avianova is not the first low-cost operator to have its wings clipped. Domestic competitor Sky Express has also struggled, a problem many attribute to conditions on the ground.

“Russia’s aviation infrastructure is not yet prepared for low-cost business models as the industry cannot provide alternative airports or fuel suppliers,” former Sky Express marketing director Max Poberezhnik, from Aviacassa.Ru, told RT. “Most of the services provided to low-cost airlines are monopolized, and as a result it’s impossible to make a ticket price significantly lower.”

Such factors have led to a bumpy ride for Avianova’s joint-owners and two major stakeholders: A1 representing the Russian consortium Alfa Group and the American-based Indigo Group.

The two recently fell out, with A1 accusing the US partners of failing to supply their half of the $24 million cash injection needed to keep the company airborne.

Industry analysts see the real problem as the amount of capital needed for low-cost Russian operators to take off.

“What’s missing is governmental support,” Poberezhnik told RT. “The imports duties for foreign-made aircraft amount to 40 per cent, which is a pretty huge burden for any airline, not to mention the low-cost ones.”

It is consumers in Russia who are feeling the effects, with air fares often failing to compete with other forms of transport.

Nonetheless those working at the country’s major airports think Avianova at least made a good attempt at rectifying the situation.

“Avianova’s achievement was that it got those passengers who previously preferred to use domestic railroad or bus routes into the air,” Sheremetyevo Airport spokesman Roman Genis told RT. “After being brought crashing down, low-cost air travel in Russia may now take some time to regain altitude, a flight path that many think will need a guiding hand to aid competitiveness.”

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