Jet fuel prices in Russia have been on the rise since the end of February this year. On the exchange, the price increase has amounted to 13.6%, while at the airport fueling complexes (TFCs), it has been slightly less than 6%. However, these complexes respond to rising exchange quotes with a delay ranging from two weeks to a month.
Various estimates suggest that fuel accounts for 25-35% of the ticket price. Its price increase is bound to affect flight costs; the question remains how much of this growth will be transmitted to ticket prices.
The spike in prices is attributed to soaring oil quotes resulting from the conflict in the Middle East. Globally, jet fuel prices have risen significantly more than in Russia—by 60-120%. The highest increases have been recorded in Europe and Asia. The International Energy Agency (IEA) has even suggested a potential fuel shortage in Europe, while Bloomberg has already warned of an increase in flight cancellations.
According to the Russian Ministry of Energy, there is currently no risk of a fuel shortage within the domestic market, as the country fully meets its internal demand for jet fuel. Production capacities and reserves are sufficient to continuously fulfill the needs of airlines. Regarding price volatility, officials attribute it to market dynamics influenced by external conditions, assuring that the situation does not require urgent regulatory action.
It's important to note that a damping mechanism exists for jet fuel prices in Russia. This mechanism is similar to the one employed for motor fuel but has a significant difference: it compensates not producers but carriers—airline companies. The government reimburses 65% of the difference between the export price of jet fuel and the fixed price set by the government for the domestic market. The Ministry of Energy has clarified that this damping mechanism currently helps keep final prices for jet fuel at a relatively low level.
However, this compensation is not complete. Consequently, while the price of jet fuel is rising slowly and remains significantly lower than in the rest of the world, other factors contribute to this growth. As noted by Yuri Stankevich, Deputy Chairman of the State Duma's Energy Committee, indirect impacts from global market conditions are evident as jet fuel is a market-traded commodity; global prices of oil and oil products set a benchmark. If prices or risks of shortages rise in Europe, this affects the export alternatives for Russian producers. That said, a direct dependence does not currently exist—the Russian market is largely insulated from European influences. The primary drivers of price increases include seasonal demand spikes, unscheduled maintenance at oil refineries, rising logistics costs, and overall inflationary pressure.
Russia's jet fuel production volume is approximately 12,000 tons per year, which is more than sufficient for its domestic market, according to Nikita Illeritsky, an expert in oil and gas sector services at Kept. Typically, 10-15% of the total production was allocated for export.
Russia fully meets its internal demand for jet fuel with no risk of shortage.
Managing partner at NEFT Research, Sergey Frolov, notes that Russian airlines are entitled to excise tax deductions, which also serves as a price containment mechanism for jet fuel and, consequently, airfare. He estimates that airline ticket price increases will remain within the average inflation level.
Stankevich states that the current situation regarding jet fuel does not appear critical. Fuel accounts for about 25-35% of the cost of air transportation (depending on the route type). If the price of jet fuel rises by approximately 10-15%, the direct contribution to ticket price increases could be around 3-5%. However, airlines also consider other factors—such as the exchange rate, leasing payments, airport fees, and demand.
Illeritsky has no doubt that if jet fuel prices continue to rise, airlines will inevitably pass these costs on to transportation prices.
An industry source confirmed to RG the expert's statements, noting that this transition is already occurring. Domestic airlines cannot completely disregard rising global prices. This is especially true for international flights, wherein planes are refueled at global prices rather than Russian rates.
According to representatives of the tourism business, the increase in fuel costs both domestically and abroad directly affects ticket prices. The costs are rising unevenly and depend on the flight duration. The Association of Tour Operators of Russia (ATOR) has noted a sharp increase among foreign airlines, especially regarding prepaid seat blocks. For instance, FUN&SUN reported that a tour to Egypt has risen by $57 per person, while fuel surcharges on certain routes have surged by more than $110. In Thailand, the average price increase has been $119, with some departure cities seeing hikes of up to $129. The most significant spike occurred in Vietnam, with an average increase of $161 per person (about 27,500 rubles for two), and on certain routes, it reached $200 (34,200 rubles for two). ATOR emphasizes that airlines are issuing additional invoices for upcoming flights already booked at previous prices, with many passengers already having received their tickets and vouchers.
Moreover, the direction of international tourism plays a role. Currently, travelers from Russia mainly visit friendly countries, particularly in the south and east. Due to the conflict in the Middle East, airlines must navigate around dangerous zones, which increases the consumption of already expensive fuel.
The government has tools to contain prices, Stankevich points out. Primarily, this includes adjusting the damping mechanism, imposing temporary restrictions on the export of certain oil products, reaching agreements with oil companies, and subsidizing air travel on socially significant routes.
Sergey Tereshkin, CEO of Open Oil Market, believes that stimulating jet fuel sales through the exchange—a public platform that simplifies monitoring of wholesale prices—is the most effective strategy. He argues that export bans or subsidies cannot achieve the desired results that can be attained through supplier competition.
Dmitry Gusev, Deputy Chairman of the Advisory Council of the "Reliable Partner" Association and a member of the expert council for the "Gas Stations of Russia" competition, expressed a different opinion. He insists that there’s nothing stopping airlines from building reserves or working directly with producers. This would average out prices and protect them from external price fluctuations. The expert strongly believes that airlines should start managing their own risks. For example, by purchasing futures—if they incur losses in the physical market, they can gain in the paper market. He argues that the perpetual support of the government and state regulation in the industry needs to be phased out. Airlines are commercial entities that pay dividends to shareholders and bonuses to employees, not farmers who can't harvest due to rising fuel costs.
Companies in the Aeroflot group, S7 Airlines, Ural Airlines, and Nordwind Airlines did not respond to RG's inquiry.
Source: RG.RU
