Rising prices for air tickets: there is no need to wait for a quick exit from the crisis

Irina Mishina

On domestic Russian flights, according to analysts' reviews, the average ticket price will increase from 9 to 14 thousand rubles. Air tickets to foreign countries are becoming generally unavailable due to their cost. What will happen to the prices for flights further, the journalist Irina Mishina found out from Galina Sorokina, Doctor of Economics, Professor of the Department of World Economy and International Economic Relations of the State University of Management.

- Is it possible to expect a reduction in prices for air travel abroad and on domestic flights in the foreseeable future? What exactly, what factors will affect pricing?

- The price depends not only on the cost of goods and services. To a greater extent, it is influenced by the level of competition, the ratio of supply and demand. First, the sanctions imposed on Russia have dramatically increased the cost of oil, thereby raising the cost of aviation fuel. Secondly, a series of bankruptcies of major air carriers in 2015-2019, mergers and acquisitions of airlines - all this reduced the level of competition. The air carrier market was, in fact, monopolized. This was also influenced by the departure of European airlines from the Russian market. Fourthly, due to the closure of airspace by some countries and the south of Russia, traditional routes have been changed or lengthened, and many flights have been cancelled. All this together affected the cost of flights and, accordingly, the cost of air tickets.

- The increase in prices for air transportation did not begin today and not in connection with sanctions and restrictions. This trend started back in 2019-2020. What was it about?

- The 2020-2021 pandemic exacerbated the problems of air carriers. According to the International Air Transport Association (IATA), the volume of world passenger air transportation in 2020 fell by almost 66% compared to 2019. Compared to 2019, the volume of air travel was 58.4% lower. In order to maintain the level of necessary technical and technological costs for flights and the maintenance of aviation equipment, airlines were forced to raise prices. This crisis has been exacerbated by a series of flight cancellations due to covid restrictions.

- Now the demand for air transportation is noticeably falling. Why does this not lead to a drop in value? Or at least price equalization?

- In order to maintain the fleet of aircraft in proper condition, as well as to pay for the use of airports, to maintain the staff, airlines are forced to save a certain amount of income to cover costs. Therefore, with a decrease in passenger traffic, the price structure is already influenced not by market laws, but by the cost of services and the growing share of fixed costs of the company attributable to 1 flight and, accordingly, to 1 ticket for a passenger.

- Why don't air tickets get cheaper when the dollar exchange rate falls?

- Indeed, many consumers expected that when the dollar fell, airfare prices would also fall. But the dollar exchange rate can only affect the cost of aviation fuel and services at foreign airports. This is not the main factor affecting prices.

- Why Turkey and the UAE are increasing tariffs for air travel? Ticket prices for these destinations are constantly rising. Now the price of an air ticket from Moscow to Antalya ranges from 39,949 to 46 thousand rubles ...

- One of the most common pricing criteria is competitor orientation. In this regard, many foreign companies, focusing on the high prices of Russian air carriers, also inflate ticket prices. It can also be assumed that the UAE and Turkish airlines are trying to cover the risks of potential sanctions by Western states with the high cost of tickets.

- For which foreign destinations prices are now relatively acceptable?

- The most optimal, of course, are the prices to the EAEU countries. Especially to places where traditional flight routes have not been changed. For example, a flight to Bishkek will cost about 12 thousand rubles. A flight to the United Arab Emirates will cost about 25 thousand rubles. Turkey at least 30 thousand. Tickets to countries where the flight route has changed are charged much more expensive.

- What should we expect from air transportation tariffs in the near future?

- The sanctions imposed on Russia in 2022 were supplemented by other problems. These are reviews from foreign aircraft manufacturers and lessors of leasing agreements, arrests of aircraft of Russian air carriers in foreign airports, restrictions on flights over the territories of “unfriendly” countries, an increase in the cost of oil along with an increase in the cost of oil products. In addition, it is necessary to update and repair the existing fleet. There is an understanding that rapid import substitution of high-tech products, such as aircraft and parts for them, cannot be counted on. In other words, one should not expect a quick exit from the crisis for the national aviation industry either.

- Russia is a big country, aviation has always played an extremely important role in its life. Won't higher airfare become a divisive factor?

- The increase in rail fares at some point reached a level where the cost of a railway ticket was higher than the cost of an airplane flight, so a limited increase in air fares will certainly affect the decrease in geographic mobility. But not so critical as to be the cause of regional disunity.