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Saturday, February 17, 2018

Russian airlines being greedy is not a good life

The tendency of Russian carriers to cancel existing norms of free baggage allowance has become another evidence of the serious crisis in the market of passenger air transportation. The Russians have less to fly abroad, increasingly in Russia, and that this has led most airlines to the brink of bankruptcy.

Losing lucrative international traffic, airlines are increasingly immersed in loss, and it causes them to pursue a policy of total reduction costs. But aviators will have to work hard to convince public opinion that their goal is survival, not profit on the passengers.

For myself and for the guy

“Soon the plane without extra baggage will be allowed only naked”

Information that the Russian airlines have applied to the Ministry of transport of the Russian Federation with a proposal to introduce a number of restrictions on free baggage, appeared in “the Russian newspaper”. Shortly before that, the Minister of transport Maxim Sokolov said that his office plans to work on the relevant bill with the future convocation of the state Duma.

Currently, the minimum weight of the free baggage allowance on vessels of civil aviation established by law. Article 106 of the Air code of the Russian Federation States: “the norms of free baggage allowance, including things belonging to the passenger, are set depending on the aircraft type and may not be less than ten kilograms per passenger”. Proponents of the abolition of this rule believe that it is not consistent with the principles of the baggage that exist in civil aviation in other countries.

“I understand that we are talking about what airlines are offering to give at their discretion the right to determine free baggage allowance, as is done all over the world, – commented the newspaper VIEW CEO of consulting company InfoMost Boris Rybak. – If it is really so, the initiative correct, because in other countries, the free baggage allowance in law never spelled out – it is one of the points of the contract which the airline makes with the passenger. We have also a legacy of the days when airlines were a single network model.”

The head of the portal Avia.Ru the novel of hussars considers that the current free allowance of Luggage is an illusion, because in aviation nothing is free, and can not be in principle. The potential shipping costs would be as free baggage still lay in the tariff. In other words, now passengers without Luggage are still paying for a service that in reality he is not always, and if your free allowance be abolished, then the airlines an opportunity to reduce tariffs.

“Recently, our whole family flew to rest. According to the norms of free baggage allowance included in the fare, the airline that we flew, we could carry 115 pounds, and really we have had only 30. It turns out that we paid for the baggage that was lucky, although if the rules on free carriage was not, the airline could sell us tickets at a lower price” – led Gusarov case from their own practice.

Flying at a loss

For the first time the proposal to abolish the standards of free baggage allowance arose at the Ministry of transport a few years ago, when the Russian air passenger market showed enviable growth rates. Now, however, industry experts attributed the baggage initiative with the deplorable situation facing the market after the devaluation of the ruble. “Because of the high cost of tickets and the falling purchasing power of the airlines are losing customers and look for opportunities to reduce costs. But today all their internal reserves already exhausted, is to pay attention to such trifles as the baggage rules. Though from such small things eventually add up a pretty decent amount,” – says Roman Gusarov.

The financial condition of Russian airlines really poor. A month ago, “Kommersant”, citing the President of the Association of air transport operators Vladimir Tazuna, said that by the end of the first quarter of the largest domestic carriers suffered losses in the amount of 24 billion rubles. This amount consists of the difference between the loss on domestic lines at 25.6 billion rubles (for comparison: in the first quarter of last year, he was 19 billion) and a profit of 1.5 billion to the traditionally more profitable international routes. In particular, a net loss of “Aeroflot” according to Russian accounting standards, the company recorded in the first quarter to 3 billion rubles, “Ural airlines” – 1.6 billion rubles, “UTair” – 1.4 billion rubles. In comparison with this order of numbers profit companies, which still managed to stay in positive territory, was much more modest, for example, S7 in the first quarter recorded a profit of 117.6 million.

At the same time, the decline in passenger traffic which last year, according to Rosaviation, and so fell by 1.2 per cent to 92.1 million. For the first half of the total number of passengers decreased by 7.6%. In the segment of domestic transportation passenger traffic for the first half of last year, by contrast, grew by 7.7%, but, as can be seen from reporting carriers, profit domestic destinations bring. For example, the “Taimyr” passenger traffic in January–June increased by 14.3% (to 2.8 million passengers), but the financial result was still negative in the first half, the company received a net loss of 1.9 billion rubles.

The case of the backpack Arshinova

The main lobbyist for the initiative on the abolition of the free baggage allowance is considered a “daughter” of “Aeroflot – airline-discounter “Victory”. However, differentiated tariffs depending on the amount of Luggage and number of Luggage pieces have long used, and those of the Russian airline, which belong to the “classic”. For example, S7 is present the rate of “Economy base”, according to which free can only carry hand Luggage weighing up to 10 kilograms and for the rest of the Luggage need to pay the ticket on the route Rostov-na-Donu – Moscow on such fare will cost 4800 rubles, and the fare of “Economy flexible” inclusive of Luggage – two thousand more. It is clear that such innovations do not cause welcoming attitude of the passengers, responsive jokes in the spirit “soon in the plane without extra baggage will be allowed only naked.”

But even if the norms of free baggage allowance will be cancelled, take advantage of this, not all airlines, says Gusarov. For example, Aeroflot’s free baggage allowance is now 23 pounds – this is due to the specificity of the market in which runs the main Russian carrier. Aeroflot has to compete in the premium segment with a foreign airline, and here any free trial service item becomes a significant advantage. But for his child discounter “Victory” this would be a useful innovation. “For example, each of the 180 passengers on the flight “Victory” will take 10 kilos of Luggage plus hand Luggage is already about two tons, is quite a serious increase in take-off weight plus the processing cost of the Luggage, comparable to the carriage of 20 passengers. For “Victory”, which not so long ago began to fly abroad, it will be important because it has to compete with foreign discounters, and the West is no requirement for a minimum free baggage allowance no”, – said Gusarov.

Actually, it is “Victory” and became the principal conductor of this principle in the Russian market of air transportation. Currently, the company limits the free baggage allowance established by the Air code, the minimum weight of 10 kg, the same limit applies to carry-on baggage, which also have size restrictions (no more than 55 x 40 x 20 centimeters). On these measures, the carrier has to go, so that passengers do not carry excessive Luggage as hand Luggage.

In General, the list of those things (hand Luggage) which the passenger is entitled to carry excess of the free baggage allowance defined in paragraph 135 of the General rules of air transport (far-82), approved by order of Ministry of transport of the Russian Federation in June 2007. It includes items such as a purse or briefcase, a paper folder, suit holdall, portable office equipment, cradle, crutches, stretcher or wheelchair for transport of disabled persons and so on (all covered in baggage policy “Victory”), but never an explanation of what is considered, for example a purse or briefcase.

The interpretation of the rules related to carry-on baggage, have become the subject of litigation. On 22 July, the Moscow Arbitration court dismissed the claim of “Victory” for Rostransnadzor, which airline is actually required to recognize the backpacks subject to payable for the carriage in the cabin. The lawsuit was the result of the verification of the carrier at the request of the Deputy of the state Duma Alena’s Arshinova which “Winning” has taken an extra cost of 2 thousand rubles for the carriage of a backpack. The results of the audit of the company was issued an order to eliminate violations, but “Victory” has decided to challenge it in court.

Examining the circumstances of the case, the court held that, in addition to a backpack, no other Luggage near Arshinova not been with him, and has taken a definite decision in her favor with a caveat: “it is well Known that there are many kinds of handbags, which vary in appearance and form, according to the method of wearing them, there are evening and casual handbags, clutch handbags, oversized handbags, handbags-satchels, bags, backpacks, bags, briefcases etc.

Thus it seems that by installing the free passage of such kind of Luggage as a purse,” the applicant [i.e., in this case, “Victory”] retained the right to decide what type of handbag fits or does not fit under this definition, which is unacceptable and is contrary to paragraph 135 FAP-82″.

The choice of two evils

The story of the backpack of the Deputy of Arshinova demonstrates that the initiative of the airlines by changing the rules of the baggage allowance will face very strong opposition in public opinion, which will contribute to the policy.

“Will accepted the proposition, depends on the position of a number of departments, – says about the future of the initiative Gusarov. Specialists of the Federal air transport Agency is competent enough, the argument of the airlines is clear to them, but Sony can not make legislative initiatives. The transport Ministry is also competent experts, but it is not known, whether will give them the go-ahead to promote these initiatives the management of the Ministry. If the media will advance the view that the abolition of free baggage allowance infringes the rights of passengers, the transport Ministry may be afraid to go to the conflict and everything will remain as it is. But in the end the loser will still remain a passenger, because the higher fixed costs of carriers, the less stable their financial situation. This will further the bankruptcy of the airlines, which are now mostly working at a loss. The way out of this situation – subsidization of tariffs, but this is an additional burden on the budget, which will fall on the shoulders of taxpayers. It is a vicious circle.”

This logic can be understood if to reiterate the economy of the Russian airlines. Complaints of expensive tickets have become common place, but we should not forget that after an almost two-fold devaluation of the ruble the cost of air travel has not grown in a comparable way, although the currency component in the cost structure of airlines is very high. As noted in his plenary talk at the April conference “Aircraft Finance and lease Russia and CIS Director of the Scientific center of economic monitoring, analysis and prediction, state research Institute of civil aviation Alexander Friedland, from 2004 to 2014, the cost of rental and leasing of aircraft increased by 351%. Combined with the rising costs of borrowed funds and a decline in traffic is significantly increased risks of aviation business.

Meanwhile, according to the recently published data of the booking portal Tutu.ru on domestic routes, rising prices last year averaged only 12%. A year ago, this same service reported that the average price of domestic flights increased in comparison with the summer of 2014 (i.e. before devaluation) by only 9.1 percent. The tickets abroad for the last year grew in price more significantly, about 30%, but in this segment and so it is a prolonged drop associated with the increase in total expenses for foreign travel after the devaluation. Ultimately, all these factors generate high losses of airlines and force them to look for additional ways to save money.


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