Armenia joins Russia in aviation fuel shortages, while prices reach Rb 5500 a tonne

Published: 10/26/1999

According to reports from Armenia, Yerevan International Airport is suffering fuel shortages due to unreliable supplies of aviation fuel by rail and road passing through Armenia's neighbour Georgia. To cope with the problem, the airport has been asking airlines to lower loads or divert to Sochi in Russia, 450 km to the north to refuel before flying on to Yerevan. Some operators have even been carrying light loads from Moscow landing at Sochi and then carry fuel on to Yerevan for refuelling of other aircraft. In the Far East and Siberia, problems continue with Krasair planning to cancel flights from Krasnoyarsk to a number of destinations including Vladivostok, Nizhny Novgorod, Moscow, Novosibirsk, St.Petersburg, Samara and Kiev during the week following 23rd October. Moscow based carrier, Domodedovo Airlines is also experiencing similar problems and expects to cease flying from the Far East to Moscow at any moment due to fuel shortages. Shortages of aviation fuel have become the norm for many of the airlines operating in the Far East and Siberia, caused often not by the lack of funds, but simply by the lack of crude at the refineries in the Far East to produce aviation fuel, such as the Ordzhonikidze refinery in Khabarovsk, which is capable of producing fuel, but does not have the crude to process. This has left even the local carrier, Vostok Airlines, without fuel and requiring the delay or cancellation of flights. Only long-term contracts with refineries and oil producers have allowed airlines to escape problems, such as Aeroflot's relationship with Lukoil, or the use of extensive contacts and close supervision by Vladivostokavia at Angarsk Refinery, although even it is having problems sourcing crude. According to the FSVT, fuel prices in Russia reached the level of the international market in October, having risen from Rbs 1500 tonne in October 1998 to Rbs 5500 at present, the largest proportion of that increase coming in the last couple of months, according to Vladimir Andreyev, Director General of the FSVT. For Andreyev, despite raising ticket prices by over 60% in the last three months, the airlines are still failing to compensate for rising fuel prices, which have rocketed from 22% of costs in the middle of last year to an estimated 36%. For the FSVT, there is a need for the government to police the role of intermediaries (www.concise.org 12th October 1999), but they accept overall that prices will only fall when supply starts to outstrip demand, as it is likely to do so now that the price is at world levels, and therefore, reduce both crude and aviation fuel exports to allow some equilibrium in the 12 m tonne a month market.

Article ID: 1023