Inflation and fuel to hamper Russian airlines’ profitability recovery: credit agency

Russian credit rating agency AKRA believes the country’s air transport sector is unlikely to return to pre-crisis profitability levels until at least 2025, despite the trend towards recovery. AKRA, based in Moscow, says the sector – which had been “on the verge” of unprofitable operations even before the pandemic – faces an increase in operating expenditure generated by rising inflation. It adds that fuel costs, in particular, show “even more unfavourable dynamics” for airlines, with the price index for jet fuel at Moscow airports about a third higher than the 2019 average. Russia’s passenger air transport market came close to pre-crisis levels in the second half of last year, with the country’s airlines carrying 11m passengers in October 2021 – just 1% below the figure for October 2019. Even though this recovery trend weakened in November, there is evidence of a pick-up for early 2022. But AKRA stresses: “It is still premature to talk about the full recovery of the industry.” It states that the structure of the market, in terms of domestic and international transport, has changed and there is a “persistence” of low fares, driven by strong competition, which is slowing the pace of revenue recovery.<br/>