According to various estimates, the share of fuel in the price of airline tickets is 25-35%. The increase in fuel prices cannot help but affect ticket prices; the question remains as to how this growth will be translated into fare increases.
The surge in prices is largely attributed to soaring oil quotes resulting from the conflict in the Middle East. Global prices for aviation kerosene have risen significantly more than in Russia, by 60-120%. The steepest price increases are observed in Europe and Asia. The International Energy Agency (IEA) has even suggested the possibility of fuel shortages in Europe, while Bloomberg has warned of an increase in the number of flight cancellations.
The Ministry of Energy has assured "RG" that Russia fully meets its domestic demand for aviation fuel and that there are no risks of shortages in the internal market. Production capacities and reserves are sufficient to consistently meet the needs of air carriers. As for price volatility, it is market-driven and influenced by external factors. The situation currently does not warrant urgent regulatory measures, the ministry affirms.
It is important to note that there is a damping mechanism in place regarding aviation kerosene in Russia. This is analogous to the damping mechanism for automotive fuel, but with one significant difference. It is paid not to fuel producers, but to carriers - airlines. The government reimburses 65% of the difference between the export price of aviation kerosene and the fixed price determined by the government for the internal market. The Ministry of Energy clarified that this mechanism currently helps keep final prices for aviation fuel at relatively low levels.
However, this compensation is not complete. Therefore, even though the cost of aviation kerosene is rising slowly and remains significantly lower than in the rest of the world, it is still on the rise due to other factors. As noted by Yuri Stankevich, deputy chairman of the State Duma Committee on Energy, global market conditions exert indirect influence: aviation fuel is a market product, and global oil and petroleum product quotes set the benchmark. If prices in Europe are rising or there are risks of shortages, this affects the export alternatives for Russian producers. However, there is currently no direct dependence, as the Russian market is largely isolated from Europe. The main factors driving price increases include seasonal demand increases within the country, unplanned maintenance at oil refineries (refinery downtime), rising logistics costs, and overall inflationary pressure.
The production volume of aviation kerosene in Russia is around 12,000 tons per year, which is more than sufficient to meet domestic market needs, according to Nikita Illeritsky, an expert on the oil and gas sector from the consulting firm Kept. Typically, 10-15% of the total production volume is exported.
Russia fully meets its domestic demand for aviation fuel, with no risk of shortagesManaging partner of NEFT Research, Sergey Frolov, notes that Russian airlines are entitled to excise tax deductions, which also serves as a mechanism for curbing prices on aviation fuel and, consequently, on air tickets. He estimates that the increase in air fares will align with the average inflation rate.
According to Stankevich, the situation with aviation kerosene does not currently appear critical. Fuel constitutes approximately 25-35% of the cost structure for air transport (depending on the type of route). If the price of kerosene were to rise by, say, 10-15%, this could directly contribute to a ticket price increase of around 3-5%. However, airlines also consider other factors, including currency exchange rates, leasing fees, airport charges, and demand.
Illeritsky is confident that if the rise in aviation kerosene prices accelerates, airlines will inevitably transfer these costs to ticket prices.
An industry source confirmed to "RG" the expert's assertions. This is already happening. Domestic airlines cannot completely ignore the increase in global prices. This is especially relevant for international flights, where planes are refueled at world prices rather than Russian ones.
Representatives from the tourism business informed "RG" that the rise in fuel prices, both domestically and internationally, directly impacts ticket prices. The cost increases unevenly, dependent on the length of the flight. The Association of Tour Operators of Russia (ATOR) reports significant price hikes among foreign airlines, especially for prepaid blocks of seats. For instance, FUN&SUN announced that a tour to Egypt increased by $57 per person, while fuel surcharges on some routes rose by more than $110. In Thailand, the average additional cost amounted to $119, with certain departure cities seeing increases of up to $129. The most notable jump occurred in Vietnam, where the average increase was $161 per person (approximately 27,500 rubles for two), with some destinations seeing increases of up to $200 (34,200 rubles for two). ATOR noted that airlines are issuing additional bills for flights scheduled soon, which were already sold at previous prices, affecting many tourists who have already issued tickets and vouchers.
Moreover, the direction of outbound tourism plays a role. Currently, Russian travelers primarily visit friendly countries, notably those in the south and east. Due to the conflict in the Middle East, airlines have to navigate around dangerous zones, increasing the consumption of already expensive fuel.
The government has the tools to curb prices, emphasizes Stankevich. Primarily, this includes adjusting the damping mechanism, imposing temporary export restrictions on certain types of petroleum products, agreements with oil companies, and subsidizing air transportation on socially significant routes.
Sergey Tereshkin, CEO of Open Oil Market, believes it is most effective to stimulate aviation fuel sales through the stock exchange, a public platform that simplifies monitoring wholesale prices. Export bans or subsidies will not yield the results that can be achieved through supplier competition, he asserts.
Dmitry Gusev, deputy chairman of the Supervisory Board of the "Reliable Partner" Association and a member of the expert council for the "Gas Stations of Russia" contest, presented a unique perspective. He insists that airlines are free to build inventories or work directly with producers. This would average out prices and protect them from external price swings. The expert is confident that airlines should start hedging their risks independently, for instance by purchasing futures - experiencing a loss in the physical market but winning in the paper market. Relying on eternal government assistance and regulation in the industry should be discarded. Airlines are commercial entities paying dividends to shareholders, compensating employees, rather than farmers facing crop failures due to rising fuel prices.
Companies within the Aeroflot group, S7 Airlines, Ural Airlines, and Nordwind Airlines did not respond to "RG" inquiries.
Source: RG.RU
