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. Last Updated: 07/27/2016

$33 to Sochi? $260 to New York? Price War!




Russia's airlines are in the middle of what can only be described as a price war as they struggle to compete for a diminishing post-crisis market. Many foreign carriers, meanwhile, have lowered fares as well in what some industry players say is an attempt to judge the future viability of their service in this country.


"The airlines are just looking to do what they can to keep the passengers in the seats," said Paul Duffy, an independent airline consultant.


In the latest example of fare slashing, Aeroflot has announced 30 percent cuts in its business class tariffs, starting Tuesday and running through the end of March, but excluding the peak period from Dec. 16 to Jan. 17.


With the new fares, a round-trip, business-class ticket to New York from Moscow leaving Nov. 20 and returning 10 days later would cost 24,742 rubles ($1,650 at Monday's exchange rate), the airline's ticketing agency said.


To compare, according to the Aero Club travel agency, the next cheapest business-class ticket is on Delta, which offers a round-trip fare of $2,600.


But Aeroflot is not alone in its reductions. KLM is offering a $460 economy class round-trip fare to New York, and Air France flies to Los Angeles for about $600, the travel agency Andrew's Consulting said. Each of these tickets is about $130 cheaper than it would have been earlier in the year.


Other major airlines like SAS, Lufthansa and Delta all have similar promotions running through the middle of December.


Alla Fedulova, manager for ticket sales at Andrew's Consulting, attributed today's prices, some of which she said were among the lowest she had ever seen, in part to the traditional travel lull between the summer and Christmas peak seasons.


SAS district manager Gunther Solinger agreed, but said the lower prices were also a result of a drop in demand due to the crisis.


"There have been more empty seats, so naturally prices come down," he said.


Pierre de Baecque, Air France's general manager for the CIS and Poland, said the current fares of $390 round-trip to Paris and $440 round-trip to any European city served by Air France are the lowest the carrier has ever offered.


Some airlines are bringing out the gimmicks, too. If two people fly together, for example, British Airways offers a round-trip ticket to London for $270 per person. Perhaps most strange of all, however, is Aeroflot's fare of $260 to several destinations in the United States, with the only catch being that the airline picks when you get to fly.


The price wars are even more intense on the domestic market with companies like Vnukovo Airlines cutting fares at a time when ruble costs are rising as the Russian currency weakens against the dollar. The carrier, which is now flying out of Domodedovo airport after a dispute with its former home of Vnukovo airport, recently announced a fare of 500 rubles (about $33) one-way to Sochi from Moscow and 300 rubles ($20) one-way to Tyumen.


Alexander Pleshakov, chairman of the board of Russia's second largest carrier, Transaero, denounced the current price wars.


"With some of these fares it is clear that the airline is charging less than it costs them to fly," he said at a recent news conference. "In the end, the customer will lose out from this kind of behavior."


While Pleshakov might be accused of not being completely unbiased on this topic, Duffy said that he makes a good point.


"Initially the stronger airlines can afford to take some losses for a while, which is likely to put some of the smaller airlines out of business," Duffy said. "Competition will then suffer because of this."


He said that Aeroflot's cuts are a recognition that the airline has been unable to compete for business-class passengers, who have traditionally preferred the more familiar Western carriers.


"Aeroflot is quite right in understanding that most business travellers are flying foreign carriers and if they want to attract that type of passenger they are going to have to offer something else, like a lower price," Duffy said.


De Baecque said the big discounts offered by many of the foreign carriers are simply a way of testing the market.


"Since the start of the crisis the question for most foreign airlines is, is there still a market in Russia," he said. "[These promotions] are a way of saying 'Hello market, how are you?'"


Ulrich R?ger, Lufthansa's regional director for Russia and the CIS, said he thought the current low prices represented a trend, with longer-term implications.


With the Russian market, he said, "We are not talking about 150 million people, we are talking about 3 to 5 million" who can afford to fly.


For the airlines and for a lot of other industries "the times of high yield prices ... I think are over," he said.