Is Russia phasing out Siberian overflight royalties for foreign airlines?

Cash or credit card? (Picture: view of Moscow at night from a Brussels Airlines A320)

Cash or credit card? (Picture: view of Moscow at night from a Brussels Airlines A320)

When you hear about airline ancillary revenues surely the first thing that comes to your mind are things like sandwiches or lottery tickets, but what about getting $200M a year from your own competitors?

This is what happens in Russia, where Aeroflot, as successor to the Soveit flag carrier of the same name is entitled to receive roaylty fees from airlines that overfly Russia on their way to their final destination, the so called Siberian overflight royalties.

Russia, had, in principle, pledged to phase them out by 2014, or so was at least being reported on Russian media as recently as the end of last August...but from the latest news we got on this issue it now appears much less clear...Siberian overflight fees might actually remain in place.

This is unlikely to go down well in the European Union, that has already some diplomatic rows open with Russia, as Siberian overflight royalties affect mainly European airlines flying to East Asia, as the most direct route between Europe and Asia goes over Siberia.

The European Union sees regards these fees as discriminatory and even threatened to take legal action against its own members that are trying to negotiate a more favourable bilateral treaty with Russia for their own airlines.  

The phase-out of this fee scheme was actually taken for granted in official documents that link it to Russia's accession to the WTO.

Besides the fact that we are talking about a lot of money, that, quite literally, falls from the sky, Siberian overflight fees could become a useful bargaining tool at a time when the EU is pushing for a airline carbon trading scheme that Russia, among other countries, does not accept. 

One more thing to factor in is the effect a phase-out would have on Aeroflot's bottom line just when the state is preparing to sell part of its equity stake in the stock-market, to the point that the overflight fees might make the difference between profit and loss.

RussiaMiquelAeroflot, EUComment