ATOR Advises Ministry of Transport to Make Domestic Flights Cheaper

Vladimir Savelyev, 13.12.2013 15:23

According to ATOR (Association of Tour Operators of Russia), the main reasons for the systematic decline in domestic flight numbers are as follows: unreasonably high flight prices, underdeveloped domestic air route network, excessively expensive airport service and new airline policies which hinder competition and facilitate further ticket price growth.

The experts at ATOR consider the development of passenger transit industry in the country impossible without introducing reduced tariffs for children, senior citizens and people with disabilities. To bolster the argument, the organization cites global statistics that show the young and the old to be the most active travelers.

“Special offers, despite being present on paper, are close to impossible to actually use, since upon booking it turns out that there are no available seats, or the offer either does not cover the flight or, with all taxes considered, the eventual ticket price is at least the same as that under a standard tariff,” the letter says.

ATOR mentions one of the latest trends – airlines abolishing agent commissions. Being driven into this financial corner, agents will have to charge extra for tickets to keep their profits, which, according to the association members, will lead to at least a 500-1000 rubles rise in ticket prices.

Dmitry Gorin, the General Director of the VIP Service company, thinks it possible for ticket price increase to be even bigger – from 800 to 1,500 rubles.

“Cutting the agent commission has become a trend this year,” said the expert. “Carriers lowered it from 7-9% to 3-5%, on some routes even canceling it altogether. After January 1 Aeroflot will abolish commission and adopt a bonus-based system, wherein sales and their growth rate will determine the agents’ compensation. These bonuses will not be easy to get.”

Mr Gorin believes that in these circumstances the players of the passenger sales market will opt for consolidation to soften the financial blow.

In addition to ATOR’s recommendations Gorin spoke in favor of introducing non-refundable tickets, which will also lower the transit price.

ATOR also advocates the expansion of domestic flight network which is currently far too small. For instance, “Novosibirsk-Kaliningrad is a transfer flight through Moscow, which, for all intents and purposes, makes Russia’s Baltic resorts inaccessible to the region’s residents due to the flight price of 41,000 rubles. Direct flights to Russian balneology resort Kavkazskie Mineralnye Vody (Caucasian Mineral Waters) are currently available for the citizens of only nine cities.”

Another suggestion of ATOR concerns abolishing (at least partial) of VAT (18%) for domestic flights, for example in cases when the ticket is a part of a tour package.

Roman Gusarov, the editor-in-chief of http://www.aviaru.net/ , considers it a moot idea. “The counterpoint is that abolishing VAT will produce no effect, since passenger market players, whose services are included in the ticket price, will immediately restore the price to the previous level. This move can also prompt other organizations, such as Russian Railways, to follow suit, which will have very negative consequences. VAT is one of the principal taxes and the government relies on it heavily,” he said.

According to Senior Executive Vice President of ATOR Vladimir Kantorovich, the association called on the Ministry of Transport to set up an Interdepartmental Task Force for solving domestic flight problems.