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2 May, 2008 07:22

Jet fuel monopolies hurting Russian airlines

The price of jet fuel is starting to be a heavy burden for Russian airlines, which pay more than their European and American counterparts.

They say if jet fuel prices continue to rise, some domestic airlines could go bankrupt.

The airlines blame the situation on a monopoly in the market.

Jet fuel costs account for 37 per cent of the total expenses of airlines in Russia, the world’s largest producer of hydrocarbons, while in Europe it accounts for only 20 per cent. Airlines blame a lack of fuel-saving airliners in Russian fleets and a monopoly in the sector.

Valery Okulov, the President of Aeroflot, the country’s leading carrier, says it is a serious danger for domestic airlines. “We are paying more than Chinese and even European airlines,” he said. “It’s ridiculous!”

With high export taxes for fuel, oil producers try to sell it on the domestic market at a price to compensate for tax losses. The fuel is then sold to a filling station, which is a monopolist in each particular airport, and which then adds its own mark-up to arrive at the final retail price.

The Russian government is being called on to open access to the filling stations to all jet fuel suppliers, so that competition might help to drive down prices.

Russia’s vast territories make aviation the only mean of transportation in some regions.

High jet fuel prices mean dearer air tickets. And in a country of eleven time zones, where affordable air transport can mean the difference between life and death for distant communities, air travel is no luxury.