3-Month Losses of Major Russian Airlines Reached $376 mln in Q1 2016

3-month Losses of Major Russian Airlines Reached $376 mln in Q1 2016

Photo: sigmalive.com

In the first quarter of 2016, the operating losses of major Russia airlines amounted to RUB 24 billion ($376 million), the Kommersant reported referring to the Association of Air Transport Operators (AATO).

AATO President Vladimir Tasun informed the paper that the biggest air carriers of Russia posted losses amounting to RUB 25.6 billion in the domestic market, almost RUB 6 billion above the losses in Q1 2015. At the same time, profit from international air transport services was a mere RUB 1.5 billion.

Probably, air companies need government contracts for the transportation of socially vulnerable groups of population, or ease the tax burden for airlines as much as possible, Vladimir Tasun said.

Russia’s airlines suffered several setbacks in 2015 due to a worsening political climate.

Commercial flights to Russian holiday hotspot Egypt were cancelled after the bombing of flight A321 over the Sinai desert in November last year while all commercial flights between Ukraine and Russia were also suspended.

Charter flights to Russian tourist favorite Turkey have also been cancelled for the last eight months, after a Russian jet was shot down by Turkish forces on the border with Syria.

Russia’s Transport Ministry announced that charter flights to Turkey are set to resume shortly following an official apology from Turkish President Recep Erdogan for the downed Russian plane.

The plunging value of the ruble has also forced many Russian holidaymakers to stay at home, with oil prices still struggling to gain significant ground. The 2015 closure of Russia’s largest private airline Transaero also contributed to the sector’s overall decline.

Losses on domestic routes totalled 25 billion rubles ($391 million) in the first quarter of 2016, while profits on international routes reaching just 1.5 billion rubles ($23 million). The figures show a substantial jump from the first quarter of 2015, when losses totalled 16 billion rubles ($250 million).

“In the current economy, even a minimal [ticket] price rise would just worsen the situation,” Tasun said.

“What is needed is a more strategic response from the industry and continued state support. It’s obvious that we won’t be able to bring back demand just by raising prices and reopening charter flights to Turkey.”

Experts have warned that airliners need to develop coordinated policies on raising ticket prices and reducing surplus energy supply and overhead costs, Kommersant reported. The Ministry of Transport submitted proposals last month to reduce VAT on domestic passenger flights until the end of 2017, but the plans are yet to be approved.

Source: ruaviation.com

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