Despite fuel price increases trains stem air travel price increases (284 words)

Published: 3/12/2001

According to the civil aviation agency, the GSGA, the average airline passenger ticket increased by 45%, to Rb3500 during 2000 - an increase in $ terms of 27%, to $125. The primary reason for the rise above inflation was the substantial increase in fuel prices during the year, which rose, according to Moscow-based investment bank United Financial Group, by 82% during 2000 to $206 per tonne, having started the year at $113. Costs to airlines however, were probably higher as carriers tend to acquire their fuel from intermediaries based at and often controlled by the airports, which are reported to have increased prices faster than the wholesale market. According to the GSGA, the effect of these price hikes has been to increase fuel as a percentage of costs for airlines from 29% in 1999 to 40% in 2000. Despite these rising costs, the airlines have been unable to pass on increases to passengers, particularly on short- to medium-haul routes, given the price of railway travel. The level of price competition between the two modes of transport is illustrated by the fact that the cheapest air ticket from Moscow-Sochi (the latter being one of Russian's Black Sea resorts) costs Rb2050 ($ 73), while the train costs only Rb427 ($15) for a coupe wagon (approximately 2nd class). From Moscow - St. Petersburg by train costs only Rb318 ($11), whereas by air, the cheapest ticket costs Rb1570 ($56). Even accepting the considerable benefits of speed gained by flying over rail travel, the price differentials for the average Russian are difficult to ignore and continue to impact load factors.

Article ID: 2408