Russia to bolster control over its airlines

The Russian government will strengthen control over carriers, which are significantly increasing their fleet, Russian Prime Minister Dmitry Medvedev said during the meeting on improving the regulation of passenger air travel on November 8, 2017. Also, the government is planning to monitor the financial condition of these airlines.

Russian Prime Minister said that it is necessary to improve the quality of control over carriers, “as we have a lot of carriers compared to other countries” and a sharp increase in the fleet does not necessarily means the development of an airline, but may indicate its financial problems.

“The airlines constantly lease new aircraft and sells tickets for new flights operated by these aircraft to cover the costs needed for maintaining the old ones, ” Medvedev stated.  “Thus, a so-called “pyramid” appears, which, in the end, ends very regretfully for the airline.”

Dmitry Medvedev noted that in recent years Russia has made progress in improving the regulation of the aviation industry. He recalled that in October 2017, the government prolonged a preferential VAT rate for domestic air transportation until the beginning of 2021.The VAT rate will remain at 10%.  According to the Minister, thanks to this, tickets for domestic flights have become more accessible to citizens.

Earlier, the Transport Ministry repeatedly offered to extend the VAT  rate or even annul it, but this initiative did not find support in the Ministry of Finance and the Ministry of Economic Development. The volume of falling income due to the low VAT rate is estimated to be worth $535 million in 2018 and  $555 million in 2019, Izvestia informs.

According to Russian Federal Transport Agency, domestic airlines carried 80.97 million passengers in January-September, 2017. It is 19.7% more than during the same period in 2016. Earlier in 2017, Russian Transport Minister Maxim Sokolov reported that carriers with the unsatisfactory financial condition may be deprived of their right to sell tickets or may even lose their license.

The Russian government started to strengthen its control over airlines after, in September, the country ’s VIM-AVIA faced financial problems and canceled its flight, leaving thousands of passengers stuck at the airports. The airline suspended all charter operations in September 2017. On November 4, 2017, the airline’s license has been invalidated by the Russian authorities, therefore, the airline is no longer able to resume any services.

Source – AeroTime

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