Russian airlines facing bankruptcy

PanARMENIAN.Net - Russian airlines are facing bankruptcy over soaring operating costs, the Association of Air Transport Operators warns, RIA Novosti reported citing the July 9 edition of Kommersant business daily.

The aggregate losses of Russia’s top 35 airlines hit 14.5 billion rubles ($450 million) in 2011. Of these airlines, 22 companies ended last year in the red, after posting profits in 2010.

The airlines' flagging results come at a time of growth in the Russian air passenger market, which grew 11 percent last year and by 20 percent in the first half of 2012, the Association said.

The uncontrolled growth of fuel and ground maintenance costs is the main reason for the airlines’ losses, said the Association, which unites over 100 airlines.

Air ticket prices increased by 11.8 percent on average in 2011 whereas aviation fuel prices soared 30.7 percent, while ground maintenance costs have risen by 119-211 percent in the past five years, the Association said.

Air navigation service costs jumped 124 percent for Russian domestic airlines and 200 percent for international lines in that period.

Regional airlines are the worst hit by the soaring costs but they may stay afloat if the government cancels VAT for internal flights and import duties on aircraft with a capacity of up to 72 seats, the Association said.