“If passengers stop paying, companies will start to sell short”
The cost of an economy class flight in Russia has reached its highest since the beginning of the century: almost 7,000 rubles per 1,000 km of travel. This was reported by Rosstat. Where did such a sharp rise in tariffs come from? It would seem that until recently the authorities helped the industry with large-scale subsidies: 100 billion rubles to compensate for operating expenses. Wasn't it enough? Why did carriers have to get into passengers' pockets again? For clarification, we turned to a well-known industry expert — the executive director of the Aviaport agency Oleg Panteleev.
— We see that airlines are facing rising costs, — said Oleg Panteleev, — It is clear that they need to somehow compensate for these costs. Last year, the aviation industry was helped by large-scale support from the state. In addition to the 100 billion rubles allocated by the government from the federal budget, the fuel damper also worked, which allowed carriers to save a lot on jet fuel costs. In addition, for a significant part of 2022, the ruble exchange rate against the dollar was very strong. All this together significantly improved the economy of airlines and gave them the opportunity to set tariffs at a low level.
— In the spring, there were reports that airlines received huge losses in their core operations. That is, their tariff revenue did not cover the costs. Airlines kept tariffs only due to one-time support from the state and savings on the exchange rate. It follows from this that if the airlines are not given something compensatory, then they will come to the passengers for this money. It makes perfect sense.
— In absolute terms, air tickets are becoming more expensive, and yes, this is unpleasant. But not everything is so clear. For example, we can compare the average cost of economy class flights per 1,000 km and the average accrued wages and calculate how many thousand kilometers a monthly salary is enough on average. It turns out that since 2011 our salary opportunities have grown from 5,000 km to about 11,000. It turns out that in absolute terms, prices are rising, but in relative terms they are falling. The long-term trend towards higher affordability of air travel and growth in air travel continues. Therefore, in fact, more and more people are flying.
— When we talk about the mass audience, here the demand is very elastic. In segments of the population where the level of income is low, people are largely guided by the price level. An important benchmark is also the ratio of prices and real disposable incomes. But there are certain pitfalls here. Everyone knows the proverb “Across the sea, a heifer is a half, but a ruble is transported.” So now there is a paradoxical situation. A ticket, conditionally, in Sochi is relatively cheap, but a hotel, even a low-class one, will be expensive. Therefore, if a person plans to spend three weeks on the warm sea, then paying even a bed will have a much greater impact on the total budget than a flight.
— If we are talking about the role of the state as a regulator, then it is important for him that «the wolves are fed, and the sheep are safe.» That is, so that passenger traffic does not decrease, and airlines do not go into losses. For the first four months of the year, transportation is growing relative to the previous year. In addition, airlines performed quite well in 2022, so they have financial fat. Therefore, I assume that the government sees that airlines are not dying, and then why give them money.
-Airlines, in the vast majority, use software and analytical systems called revenue management system. Its meaning is to maximize revenue from each flight. With this tool, carriers analyze when they need to sell a lot of tickets, but cheap, and when they need to sell a few, but so expensive that the revenue is higher. Yes, if there is a mass passenger, millions of people are willing to pay, then the company will set a higher fare. If passengers stop paying, companies will start selling short.
— They will only cut prices if there is some major external impact.