Page 88 - RusRPTJul19

9.1.3 Aviation sector news
Russian air carriers posted a cumulative record-loss of RUB45.3bn ($704Mn) in January-March 2019, RBC business daily reported on June 17 citing a report by industry association. The loss posted by the industry is alarming, as it is already almost as much as the RUB50bn loss posted by the sector for the entire 2018, despite the seasonally weak first quarter during which the leasing payments peak and loading factors are lowest. Out of the RUB43bn loss the lion shares was from the top 10 largest airlines and mostly caused by a 30% rise in the cost of jet fuel. As reported by bne IntelliNews, the industry is being compromised by high fuel prices and declining incomes, while the Finance Ministry recently resisted supporting the carriers in the face of rising fuel prices. Fuel costs amounted to RUB89bn out of total costs of RUB352bn, while RUB93bn accounted for leasing costs and RUB53.6bn for airport fees. Analysts surveyed by RBC believe that fuel costs outpacing the revenues indicate that the carriers have been avoiding sharply raising the ticket costs as they battle for market share.
During the annual live national phone-in Russia's President Vladimir Putin spoke in favour of including bitumen and jet fuel in the damping surcharge mechanism. The initiative would imply that oil producers will be compensated for the difference between the domestic and net back export price of jet fuel, which could cap jet fuel price growth. As reported by bne IntelliNews, due to high jet fuel prices Russian airlines posted a record-loss in the first quarter of 2019, following a cumulative loss in 2018, risking a series of bankruptcies in the sector and/or increasing ticket prices. Regional carrier UTAir has already defaulted on bond payments and national carrier Aeroflot has been reporting poor results.
88 RUSSIA Country Report July 2019 www.intellinews.com