Flights within Russia have risen in price by 22%: this is the sharpest increase since 2008

Aviation expert Panteleev: “Prices will continue to rise. It’s unavoidable”

Flights within Russia in economy class in 2023 have increased in price by an average of 22%, Rosstat reported. This is the sharpest increase since 2008. Moreover, judging by statistics, the demand for air carrier services is not falling. Have Russians’ incomes really increased so much or are citizens giving away their last money just to fly away? Oleg Panteleev, executive director of the AviaPort agency, told MK how prices for air tickets will change in 2024 and whether the authorities will provide large-scale financial support to carriers.

– What factors led to such a serious increase in the price of air tickets?

– It is worth noting that there are different methods for assessing changes in the cost of air tickets. The methodology used by Rosstat raises certain questions among both the Ministry of Transport and the Federal Antimonopoly Service (FAS). However, we can argue about percentage points, but the fact that prices are rising is obvious. The price increase consists of two main components. Firstly, airlines’ expenses have increased significantly since 2020. Jet fuel became more expensive, and airport taxes became more expensive. The ruble exchange rate has adjusted significantly. At the same time, first because of the pandemic, then because of its consequences, airlines could not increase tariffs in the same proportion as their expenses increased. In 2022, against the backdrop of CBOs and sanctions, the government took extraordinary measures to support airlines. These measures have yielded serious results. We see that transportation has been maintained at a high level. It is very important that the 100 billion rubles that were allocated in 2022 and the additional 25 billion that were allocated a little later made it possible to keep tariffs at a fairly low level. In 2023, airlines no longer received large-scale budget support. In order to maintain profitability amid rising costs, airlines had to raise fares. But they haven’t raised rates at a rate consistent with their spending since 2020. Now it has become inevitable.

The second point is that despite rising prices, both traffic volumes and seat occupancy are increasing. This suggests that effective demand exists and citizens are willing to fly at higher prices. In other words, the income of that part of the population that flies frequently has increased to a greater extent than the price of air tickets has risen. According to Rosstat, the growth rate of air ticket prices is lower than the growth rate of wages.

– Economy flights have increased in price by 22%. This is the most popular segment. Why was he the one who came under attack?

– It’s just that Rosstat only evaluates the dynamics of changes in tariffs in the “economy” category. In addition, in principle, Rosstat monitors price dynamics specifically in the mass consumer segment. I compared the dynamics of price growth from 2019 to mid-2023 for railway transport, taxis, bus transportation, air transport and hotels. Air prices during this period grew more slowly than other modes of transport and related travel services. In 2023, air tickets were rising in price faster than some other types of transport services. But if you look at price changes since 2019, air travel has become less expensive. In general, air travel remains more affordable than rail travel.

– Which Russian destinations have risen in price more than others?

– This is more difficult. As for long-haul flights (most of the flights are from Moscow to the Far East), one of the largest air carriers maintains so-called flat tariffs. Those that do not change throughout the year. Of course, airlines are reviewing them, but they still remain the best offer on the market. This is not market pricing and this fact complicates the ability to calculate which direction is becoming more expensive.

– Is the state going to provide financial assistance to airlines this year?

– Air transportation subsidies did not stop due to several government regulations. The scale is quite large: about 25 billion rubles. But what’s the point? Transportation for Far Eastern residents and direct flights between regions on some routes are subsidized. The situation here has not changed, but the extraordinary subsidies that existed in 2022, unfortunately, are no longer available. Traffic volumes are growing and airlines are meeting key indicators in terms of the number of passengers carried. The second point is that the financial performance of companies does not cause concern to the regulator. No one is breathing their last, which means there is no basis for large budget support.

– In this case, how can flight prices change this year?

– If there are no force majeure events, then we will observe an increase in prices, since inflation processes do not change. It’s unavoidable. Now carriers continue to record an increase in demand for transportation. If demand collapses, then they will have to evaluate the situation and either adjust prices down or cut flights. Any scenario is possible. But not in the next block.