S7 Airlines calls for the reimbursement of direct fixed costs
Russia’s second largest airline is urging the government to provide more specific measures to help airlines through the crisis
Russia’s second largest carrier by passenger traffic, the privately owned S7 Airlines, operated just 50 per cent of its normal flight schedule in early April. “We have been forced to adjust our schedule with regards to the current levels of demand and actual traffic, so we’re cutting frequencies on the majority of our routes,” Evgeny Chernyshev, the airline’s representative with responsibility for central Asia at its Novosibirsk Tolmachevo hub, admitted in an interview with the RBC outlet. “In the on-going global crisis, the industry needs direct cost reimbursements, as the coming summer season is not expected to bring much relief,” he added.
S7 Airlines is adjusting its schedule to the existing traffic demand by reducing frequencies across its normal flight programme. “If you look at flights from [S7’s original Novosibirsk base], last week the number of [our] flights reduced by 25 per cent and will continue to reduce by 45 per cent this week,” Chernyshev revealed. Some flight crews have been sent on vacation due to the curtailed operations, and the recruitment of new personnel is currently on hold, he admitted.
The unprecedented scale of the on-going industry crisis calls for “comprehensive support” from the government, Chernyshev insisted in his interview. “Some of these [support] mechanisms developed earlier, have been successfully implemented. Adjusted to the crisis conditions, they could be introduced immediately,” he observed.
Among the government measures suggested by S7 Airlines are the waiving of value added tax (VAT) for all domestic flights, starting from June 2020 and through 2029; tripling the existing state subsidies for regional flights; driving the existing fuel excise tax reimbursement to 7,000 roubles per tonne of fuel; and introducing a moratorium on increasing airport fees until the end of 2021.
Apart from these indirect measures, airlines also need direct compensation payments for their operational costs, and it is essential to elaborate an efficient algorithm for calculating the losses resulting from restrictions of international flights – and to have all of this approved as soon as possible. “We believe that compensation at the rate of two roubles per-seat-km on each of the cancelled flights would be reasonable,” Chernyshev suggested.
These views come as Russian airlines are yet to receive the promised government compensations for the 2018 fuel cost spikes, the S7 manager reminded. “These allocations would be timely as ever now,” he said.
Complete certainty of the future of international air travel remains questionable, especially as it is unlikely that the bulk of international services will be fully resumed this summer. With regard to the domestic segment, “we’re lucky if the demand in the high season remains level with 2019,” Chernyshev admitted.
“The structure of domestic air travel has thus far not changed at all. But the demand has decreased drastically, and evenly across the entire route network. Perhaps customers will replace their planned European holidays with resorts in the south of Russia. But, right now, no such trend is being observed,” he concluded.
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