Russia May Let Foreign Budget Lines Fly Domestic Routes

Russia may give foreign low-cost airlines access to domestic routes for the first time, to develop internal competition and cut air ticket prices, the Federal Anti-Monopoly Service (FAS) said Tuesday.

“The issue of inviting foreign low-cost airlines here and developing infrastructure for the creation of Russian low-cost air carriage is now being discussed very actively,” FAS head Igor Artemyev said after a meeting of the government commission on competition and the development of small and medium business.

The commission meeting, chaired by First Deputy Prime Minister Igor Shuvalov, agreed urgent measures to develop competition on the domestic airline market and cut air ticket prices, Artemyev said.

The measures to increase competition on the airline market will also apply to fuel and filling facilities and airports, he said.

“Today the Transport Ministry, FAS and the Economics Ministry have agreed that all airports transporting over one million passengers a year should have at least two fuel and filling complexes while airports carrying over five million passengers must have three such facilities. This will create competition in the fuel sector,” he said.

Deputy Transport Minister Valery Okulov, who oversees the domestic aviation sector, said the ministry had also drafted a law allowing foreign pilots to work on Russian airlines. Currently, Russian law forbids foreign pilots from flying aircraft within Russia unless they are taking off or landing there.

Russia’s Association of Air Transport Operators warned in summer domestic airlines were facing bankruptcy over soaring operating costs, particularly fuel prices.

The aggregate losses of Russia’s top 35 airlines hit 14.5 billion rubles ($450 million) in 2011. Of these airlines, 22 companies ended last year in the red, after posting profits in 2010.

The uncontrolled growth of fuel and ground maintenance costs was the main reason for the airlines’ losses, said the Association, which unites over 100 airlines.

Air ticket prices increased by 11.8 percent on average in 2011 whereas aviation fuel prices soared 30.7 percent, while ground maintenance costs have risen by 119-211 percent in the past five years, the Association said.


Leave a comment