Introduction of non-refundable tickets will not allow passengers to save significantly
Who does not risk
Recently, the Ministry of Economic Development's website published a revolutionary draft law prepared by the Ministry of Transport "On Amendments to Articles 107 and 108 of the Air Code of the Russian Federation." The first article regulates cases in which an airline may deny boarding to a passenger or remove them from the aircraft. The second article establishes the client's liability for refusing the flight.
Currently, there are virtually no penalties: if you decide to return a ticket more than 24 hours before departure, only a small fee for booking and document processing will be withheld. If plans change within the last 24 hours, you will still get three-quarters of the ticket price back.
We owe this state of affairs to the Federal Antimonopoly Service, which in 2007 banned airlines from selling non-refundable tickets. The head of the agency, Igor Artemyev, was surprised by the very existence of such a practice. "You can return train tickets, you can return theater tickets, but here you can't. Why not?" he protested.
In 2010, when Vladimir Putin instructed the FAS to deal with excessively high airfare prices, the antimonopoly officials again reprimanded some airlines (mainly so-called low-cost carriers) for attempting to sell non-refundable tickets in circumvention of regulations. However, in the end, the FAS decided that the aviation business is too specific, and the risk of mass ticket returns inevitably increases their cost.
"FAS analysis shows that even with incomplete load, airlines do not reduce ticket prices for fear of mass returns," says Deputy Head of the Agency Anatoly Golomolzin. "The proposed structure will allow reducing ticket prices by at least 25%, and planes will fly with greater load."
In other words, the main motive of the state is to reduce airfare prices. Incidentally, it is thanks to this that non-refundable tickets sell like hotcakes in Europe. For example, with Lufthansa from Moscow to Athens (with a transfer in Munich) this summer you can travel for about 10,000 rubles on a non-refundable fare, or 20,000 rubles on a more flexible fare. That is twice as expensive. It turns out that the risk of losing all the money and the fee for peace of mind are the same – 10,000 rubles, given that the probability of traveling is always higher than canceling it.
In Russia, however, airline tickets contain a hidden premium for the carrier, insuring against mass returns. To calculate its size, you need to know the cost of the flight, which is a trade secret at all airlines. In theory, the introduction of non-refundable tickets should reveal this secret. But do not be deceived – the price reduction is unlikely to be significant. Many factors that distinguish the Russian market from the European one can neutralize even the 25% discount that officials talk about. There can be no question of prices for non-refundable tickets falling more than twice, as with Western airlines.
Unstable fare
Airlines can recoup a flight in two ways: fill the aircraft cabin 100% or raise ticket prices. Since the first almost never works in Russia, flying has to be more expensive. "Currently, the carrier calculates the cost of a particular flight based on the average aircraft load factor," says Roman Gusarov, editor-in-chief of the Avia ru portal. "Usually it is 60-70% of the cabin. That is, if an aircraft with a capacity of 150 seats is flying, the cost of the flight is divided not by 150 passengers, but by 100-110. Thus, the carrier guarantees its profitability. And if more tickets are sold, then good, that's unplanned profit."
According to Rosaviatsiya data, for January–April 2012, the "big five" Russian airlines (Aeroflot – Russian Airlines, Transaero, UTair, S7 Airlines, and Rossiya, which together carry about 70% of all passengers) had a seat occupancy rate of 74.46%. And for the entire 2011 – 76.88%. Logically, if airlines were sure they could sell 100% of tickets, for example by selling them on a non-refundable basis, prices should drop by that same 25% that FAS and the Ministry of Transport talk about.
According to calculations in the explanatory note to the draft law, the share of "no-shows" among the five largest domestic airlines averages 8%. If we take the industry's revenue for 2010 as a basis, the annual loss would be 22.7 billion rubles. Non-refundable tickets are supposed to recover part of this money. Their share is proposed to be limited to 30% of all tickets sold, to prevent the aviation market from sliding into dumping. It turns out that savings will be about 7 billion rubles per year. It is by this amount that the cost of non-refundable tickets can be reduced. However, on a national scale and considering the number of flying Russians, such a discount looks simply ridiculous.
"Discount fares are a matter of each airline's commercial policy," says Oleg Panteleev, editor-in-chief of the specialized information agency AviaPort. "As a rule, carriers use them to stimulate demand in the so-called low seasons when flight occupancy is moderate. But when high occupancy is expected for a particular flight, carriers leave only high-priced tickets. Although these are the same economy class tickets."
Occupancy indeed depends on the season. For example, in November, Lufthansa offers flights to Greek Athens for as little as 3,000 rubles on a fare without the possibility of return or date change. Meanwhile, the flexible fare still costs the same 20,000. However, in Russia, people fly in winter only for business trips when tickets are paid for by organizations. The vast majority of our passengers simply do not need winter discounts. Flights abroad to warmer places are a different matter. These mainly involve charters, which have their own pricing rules.
No Seats Available
The government seeks to lower fares specifically for domestic air travel. Due to the vast difference in the level of competition, international flights are sometimes cheaper than domestic ones. In our country, 80 percent of all flights take place from May to September. Then the country falls into a winter hibernation, and planes fly empty. Many flights are simply canceled. In winter, our airlines survive on loans, which they recoup during the high season by shamelessly jacking up prices. So how can there be cheap non-refundable tickets?!
Even if the authorities manage to convince airlines to reduce prices by that very 25%, it will not make things much easier for those flying domestically. Judge for yourself. Suppose, for example, you decide on July 2 of this year to fly from Moscow not to the south, but to the most ordinary Yekaterinburg, which, it would seem, is just a stone's throw away by air. With one of our most well-known carriers, this pleasure will cost you 12,350 rubles round trip. The promised discount for non-refundability by officials would reduce the fare to 9,262 rubles. Admit, that's not such a significant saving. And yet you risk losing the money in full if something prevents you from making the trip.
Finally, in Russia there are many other factors that will keep airfares higher than European levels. According to estimates by Aeroflot CEO Vitaly Savelyev, only 5-6% of the ticket price goes to administrative expenses, production activities, and employee salaries. The rest is for the maintenance of the aircraft fleet, insurance and duties on imported aircraft and equipment (30%), fuel and refueling mixtures (24%), airport fees and navigation services (22%), sales organization, promotion, and service (9%). It turns out that about 76% of the ticket price is related to those components that suffer from a lack of competition or high taxes.
Lawyers warn: in such a market, introducing non-refundable tickets is fraught with numerous lawsuits. Experts expect that some airlines (especially small ones) may try to sell the seat to someone else in the hope that the passenger who bought a non-refundable ticket will not fly. Such cases existed even before the ban on non-refundable tickets. So if new tariffs do appear, it is probably not advisable to buy a ticket from an airline with a not-so-spotless reputation. It may turn out that after boarding, you find your seat already taken.
Artyom NIKITIN.
