OREANDA-NEWS. September 09, 2010. The Federal Antimonopoly Service (FAS Russia) has analyzed the markets of air transportation services and has found that these markets are experiencing a steady recovery growth. In seven months of 2010 passenger traffic grew by 29.8% in comparison with the first seven months of 2009; international traffic increased by 33.2%, domestic transportation – by 26.7%, and local traffic - by 3%. Passenger-kilometers increased by 35.2%, including international growth – 42.9%, domestic – 25.3%, and local – 1.4%, reported the press-centre of FAS Russia.

In 2010, however, the pre-crisis level (2008) was surpassed insignificantly (by 2-5%). The aggregate demand for air transportation services remains unsatisfied; one of the main reasons is a high level of tariffs.

High tariffs are maintained at aircraft under-loading. Passenger seat loading on international flights is 8% higher than on domestic flights. Airlines have a variety of tariff plans but customers do not clearly see a connection between the level of tariffs with the services rendered – procedures for both fixing and applying the tariffs are not transparent. Even with under-loading, the system for sale of tickets by airlines does not allow tariff reductions, acceptable for the passengers.

Deputy Head of FAS Russia, Anatoly Golomolzin, points out that the cost of aviation fuel is the major factor affecting transportation costs. “To improve the situation, in 2008-2010 FAS Russia and its regional officers initiated more than 80 cases for violating the antimonopoly law on the markets of aviation fuel and services for supplying aviation fuel”, reminds Anatoly Golomolzin. “As a result of the efforts of FAS Russia and changes in the market, the prices for aviation fuel in various airports around the Russian Federation have fallen down by 1.5 times in comparison with their maximum during the crisis. As fuel prices are going down and aviation fleet is being modernized, the share of airlines costs for aviation fuel has been reduced from 40-45% to 24%. However it has not translated in lower airfares”.

High level of air fare is also a result of underdeveloped competition, particularly, on regional and local routes. The networks of regional and local airports are poorly developed. At the same time, entry of a competing air carrier to an air route results in tariff reduction on average by 30%, while the next competitor causes further reduction of the air fare.

To decrease administrative barriers, upon a FAS Russia’s initiative, No.397 Decree of the Government of the Russian Federation of 23rd June 2007 abolished traffic quotas and licensing of certain routes. It opened additional possibilities for developing competition between air carriers.

FAS Russia also drafted the Rules for non-discriminatory access to natural monopolies in airports. The Rules were approved by No.599 Decree of the Government of the Russian Federation of 22nd July 2009 and came into force on 22nd October 2009. They enable airlines to expand route networks and create conditions for developing competition between providers of airport services. However, market analysis shows that around 90% domestic routes are still served by a single air carrier or two air carriers; traffic on such routes accounts for 23% of total passengers.

Using the data of the Tariff Registration Centre, FAS Russia analyzed over 650,000 tariffs for 3,100 routes, set by 90 air carriers in 2007- the first six months of 2010. FAS discovered that in September 2008 – June 2010 the “normal economy” tariff (for economy class with no restrictions for the conditions of their application) increased from 30% to 300% and over on 380 routes with annual traffic over 1000 passengers. The air carriers that set such tariffs have over 35% market shares on the routes in questions”, says Anatoly Golomolzin.

Therefore, FAS Russia has instructed its regional offices to check whether the tariffs, set by the airlines on the routes, for which the growth of air fare was identified, are justified. Should the signs of antimonopoly violations be revealed, offices of the Federal Antimonopoly Service must enforce antimonopoly norms.