Russian air carriers post record loss in 1Q19

Russian air carriers post record loss in 1Q19
Russian air carriers posted a cumulative record-loss of RUB45.3bn ($704Mn) in January-March 2019
By bne IntelliNews June 18, 2019

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.

The situation could change in 2020 as the carriers risk sustaining two consecutive years of losses. RBC reminds that net profit of Russian national air carrier Aeroflot was slashed four-fold under IFRS in 2018, but the company recently said it is not intending to raise prices. 

The CEO of another carrier S7 Vladimir Obyedkov previously noted that the number of passengers carried in Russia tripled to 116m people in the past three years. In the meantime the flight prices remained flat, and carriers are driven into losses, he argued, pointing for need of more state support.

 

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