Passenger case: airfare surcharges proposed to be limited
During the collapse at Moscow airports, some passengers had to pay 84,000 rubles to fly to Irkutsk in economy class, as the dynamic pricing system reacted to a sharp increase in demand for air tickets. After that, several State Duma deputies immediately came up with initiatives to limit the cost of flights. An appeal is currently being prepared to the Ministry of Transport and the Federal Antimonopoly Service with a request to prohibit ticket prices from rising by more than 20% due to "high demand." Is it really possible to limit dynamic pricing, Izvestia investigated.
How the State Duma proposes to solve the problem
Vladislav Davankov, Deputy Speaker of the State Duma, spoke about the situation with a passenger who had to fly from Moscow to Irkutsk during the collapse at the capital's airports in his Telegram. The passenger did not get on his flight, and the tickets were non-refundable. I had to buy new ones, but prices rose sharply: in economy class they cost 84 thousand rubles one way. It would be possible to fly cheaper, for 39 thousand rubles, but with a 52-hour transfer in St. Petersburg.
"Thousands of people were forced to stay at Sheremetyevo, Vnukovo, Domodedovo and dozens of airports across the country. Many of them have small children. They were glad to fly somewhere else, so as not to spend the night in the terminals. And the airlines decided to make money from this," the State Duma deputy wrote.
He stressed that one can understand the problems with technical support, the lack of hotels and food for passengers — after all, there is an emergency situation. But he called the increase in ticket prices several times "an attempt to cash in on someone else's problem."
In this regard, he, together with Ksenia Goryacheva, is currently preparing an appeal to the Ministry of Transport and the Federal Antimonopoly Service with a request to ban ticket price increases of more than 20% due to "high demand." Especially in conditions of force majeure.
This is not the first such initiative. On July 10, State Duma deputy Sultan Khamzayev called for a general ban on airlines from using dynamic pricing when selling tickets.
In June, MP Yana Lantratova proposed to introduce price regulation for domestic flights on public holidays. She said that "during periods of increased demand for air transportation <...> there is an unjustified, multiple increase in the cost of air tickets." Lantratova suggested setting the maximum allowable margin level on public holidays and defining "price corridors" in booking systems.
Izvestia sent requests to the Ministry of Transport, the Federal Air Transport Agency and the Federal Antimonopoly Service. The Federal Air Transport Agency and the Ministry of Transport forwarded the questions to the FAS.
The FAS of Russia told Izvestia that the service controls the cost of air tickets in economy class for domestic transportation in order to prevent their unjustified growth.
"When monitoring routes that show a significant increase in the cost of air tickets compared to the same period last year, the Federal Antimonopoly Service of Russia analyzes the costs and revenues of airlines in each direction separately," the agency explained.
The Federal Antimonopoly Service of Russia also analyzes quarterly financial statements, as well as factors affecting airline operations in general. If signs of abuse of a dominant position are detected, including cases of unjustified price increases, the antimonopoly service "promptly takes response measures."
Why do prices rise so much during force majeure
Georgy Mokhov, Vice President of the Russian Union of Travel Industry (PCT), founder of the Persona Grata law agency, notes that now the cost of air transportation is formed automatically using a dynamic pricing system.
— The closer the departure time, the more scarce the destination and the higher the demand, the higher the price. It can grow multiple times with a sharp jump in demand," he told Izvestia. — This is not the malicious intent of greedy airlines specifically in times of collapse and force majeure, it is a program that responds to an objective number of requests, regardless of the cause and external circumstances.
Mokhov emphasizes that in conditions of force majeure, that is, in case of unforeseen circumstances, it is impossible to quickly rebuild the pricing program, so the price rises sharply, but falls when peak demand passes. Dynamic pricing works in the same way in online services for the sale of hotel seats, says the expert.
— It is theoretically possible to provide for state regulation and set a maximum increase in the price of transportation under certain circumstances. This will require a very precise legal formulation of the circumstances that caused the flight stoppage or transportation restrictions. But, for example, attempts by the Federal Antimonopoly Service to pass such a bill for hotels were unsuccessful," notes the PCT Vice President.
Tatiana Rakulova, a member of the expert council of the All-Russian Association of Passengers, notes that unregulated tariffs are set for air passenger transportation and rail transport, but on the other hand, there are multibillion-dollar subsidies from the state in these same areas. Therefore, she believes, the state has the right to legally influence pricing. Or at least check how the excess profit is spent.
Oleg Panteleev, the head of the Aviport agency, however, emphasizes that attempts to rewrite the Air Code contradict the interests of both the transport industry and the passengers themselves. The fact is that dynamic pricing, which has already become the de facto global industry standard, "is the most market-based mechanism that ensures compliance with the interests of both the consumer and the service provider."
— If you set a threshold for the cost of tickets, then either the average price will become noticeably higher than it is now, or tickets will disappear from sale for the next two to three months, - the interlocutor of Izvestia notes. — Both are extremely unfavorable scenarios for most consumers.
Alyona Yakovleva, founder and Managing partner of RosCo Group of Companies, notes that the Federal Air Transport Agency and other regulatory authorities may impose restrictions or requirements on carriers, for example, if necessary, to increase the availability of air tickets, but such measures are rarely used, are temporary and require special solutions.
— The government and regulators can also impose price restrictions through regulations or orders, for example, during mass evacuations, as was the case during the pandemic. However, this is also rather an exception to the rule," she notes.
At the same time, companies themselves can introduce tariff restrictions on their own initiative. For example, taxi aggregators did this by introducing limits on the cost of travel during mass events or emergencies in order to ensure the availability of the service, notes Alena Yakovleva.
How to solve problems
The expert emphasizes that carriers periodically participate in the coordination of pricing policies with government agencies through agreements or tariff commissions. However, she believes that legislative norms can be expanded to provide clearer regulation, while retaining the ability of market participants to set flexible prices.
— Nevertheless, dynamic pricing helps to put cheap tickets on sale long before the flight: the closer the departure date, the higher the price tag. With this approach, carriers do not lose most of their profits due to late bookings," the Izvestia interlocutor noted. — In addition to direct legislative regulation, it is possible to use air transportation subsidies in socially significant areas, increase pricing transparency at the level of individual market participants (especially during peak seasons), and apply antimonopoly legislation to prevent market monopolization.
Note that by September, all Russian airlines will have to formulate their own commercial policies. Companies will have to explain how the initial price is formed and what are the rules for rejecting it. The Ministry of Transport confirmed to Izvestia that this work is currently underway jointly with the FAS of Russia.
And Oleg Panteleev points out that the best way to ensure the affordability of air transportation is to maintain a competitive environment in the industry and provide airlines with a sufficient number of carrying capacities, that is, modern, reliable, economical domestic aircraft.
Anton Koren, General Director of the Center for Strategic Research in Transport (CSRT), emphasizes that a dialogue with airlines is needed. In its current formulation, the Davankov and Goryacheva initiative requires evaluation: it is important to understand whether its implementation is possible without prejudice to the organization of air transportation using dynamic pricing and established approaches to ensuring that airlines recoup losses incurred during the low season.
— On the other hand, there are already commercial airline policies that maximize the balance of interests of both airlines and passengers, — said the interlocutor of Izvestia.
He predicts that the discussion of the initiative will end soon, as the high season will simply be over by the potential time of its consideration this year.
Anton Koren adds that as a balanced solution, taking into account the losses incurred by airlines in this high season, it is advisable to find a mechanism to curb price increases in dialogue with airlines.
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