Russia
Russia to scrap fees for flights over Siberian airspace
- Russia has since the early 1970's, imposed a fee on airlines whose flight paths crossed Siberian airspace. In 2006 Russia had agreed to eliminate the fees but the government backtracked by linking the agreement to its acceptance into the World Trade Organisation, something which had seemed unlikely until a recent flurry of negotiations cleared the way for Russia to join the WTO. However the European Union has stated that it would veto the Russian entry unless it received a clear commitment from the Moscow government that the fee struction would be scrapped.
In a letter to EU Trade Commissioner Karel De Gucht dated Nov. 7, viewed by The Wall Street Journal, Russian Minister of Economic Development Elvira Nabiullina pledged to put into force an agreement struck in 2006 that until recently appeared dead.
The pact would eliminate more than $400 million in annual charges that Moscow levies on European airlines for crossing its territory en route to Asia. If it takes effect, European airlines could boost frequencies to countries including China, Vietnam and Malaysia, whose economies are growing strongly. The charges are apparently form part of commercial contracts that European airlines enter into with Russia's national airline, Aeroflot. Airlines that don't pay the fee risk being denied access to Russian airspace, European aviation officials say. Asian airlines also pay fees to Aeroflot for flights to Europe but those charges aren't addressed by current talks.
Russia could benefit from foreign carriers' increased frequencies through rising air-traffic-control income, which is separate from the overflight charges.
The charges add roughly $100, or 10%, to the price of each affected round-trip ticket and can tip the economics of many routes from profit to loss, said Craig Jenks, president of Airline/Aircraft Projects, a consulting firm in New York that has studied the fees.
Russia may join the 153-country group as early as next month. As Russia's WTO accession talks accelerated, European aviation officials renewed their push to enact the 2006 pact, under pressure from EU airlines. The carriers fear that WTO accession is the only leverage the EU has over Russia to eliminate the charges.
According to the letter from Ms. Nabiullina, Russia will begin removing the overflight charges on Jan. 1 if Russia joins the WTO next month. Under an updated version of the 2006 pact, any new European flights across Siberia wouldn't be subject to the fees. From Jan. 1, 2014, all Siberian overflight fees would be eliminated.
The change could offer a lift to European airlines at a crucial time. Passenger and cargo traffic in Europe and the U.S. are weakening but fuel prices remain high, putting many carriers in a bind. Fast-growing airlines from the Persian Gulf region, which don't need to cross Siberia for most Asian routes, are poaching ever more traffic from European rivals.
It has been estimnated that if the fees are removed and European airlines pass along the savings in lower fares, traffic on affected routes could increase by roughly 12% and airlines could add new routes.
EU officials want to remove an impediment to both European airlines' operations and deeper economic ties between Europe and Asia. In Brussels, officials are concerned by the rise of Asian economic power and deepening U.S. ties, exemplified by a series of summits around the Pacific that U.S. President Barack Obama is now holding with Asian countries.
