Page 104 - RusRPTNov19

9.1.3 Aviation sector news
Russian air carriers sent a letter to Vice PM Akimov and Minster of Transport Ditrikh suggesting support measures . The Ministry of Transport supports the initiative, as the industry’s losses for 8M19 amounted to RUB40bn. The following measures were suggested: The jet fuel price in the damping surcharge mechanism to be lowered to RUB40,000 (vs RUB48,300 currently). To increase the coefficient of the jet fuel excise tax reimbursement from 2.08 to 35. And a one off payment of RUB23.5bn
Putin orders the government to ensure the support of air carriers in 2019 . Air carriers will receive support from the Sovereign reserve fund. Russian Air carriers sent a letter to Vice PM Akimov and Minister Of Transport Ditrikh on October 7 suggesting support measures. Among the suggested measures were a lower jet fuel price in damping surcharge mechanism (from the current RUB48,300 to RUB40,000/t); an increase in the coefficient of jet fuel excise tax reimbursement from 2.08 to 3.05; and a one off payment of RUB23.5bn.
In September, the Russian aviation industry grew 4% y/y, to 12.4mn PAX , while RPK increased 8% y/y to 31.5bn pkm. Aeroflot Group (AFLT) PAX rose 6% y/y, outperforming the industry growth. While Aeroflot Airlines’ numbers were flat, Pobeda’s growth of 44% y/y continues to pull the group up. 3Q19 traffic stood at PAX 18.5mn, up 7% y/y. The cooling industry growth resulted in a 4% m/m decline in excess capacity in August, which might be reflected in the healthier industry and stronger yields, we believe. Jet fuel still looks down. In September, we estimate that jet fuel prices were 13% lower y/y, which would result in 3Q19 prices also being down 13% y/y and support AFLT’s financials. We reiterate our Buy recommendation with a 12-month Target Price of RUB130 (ETR 32%).
Russian Ministry of Transportation has prepared the distribution scheme of fuel cost subsidies, recently ordered by the President Vladimir Putin to be paid out to domestic air carriers as compensation for 2018 jet fuel cost spike, Vedomosti daily reported on October 25 citing unnamed federal officials. As
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