Siberia airlines anounces cost cutting measures in conjunction with the rise in fuel prices


Siberia Airlines’ current fleet consists of 52 aircraft, the majority of which are of Soviet or Russian production and includes: 28 Tu-154M, 8 Tu-154B, 12 Il-86 and 2 Tu-204. These aircraft are less fuel efficient than their counterparts abroad and are more costly to operate. Siberia Airlines’ fuel expenditures are generally higher than those of western airlines, which utilize aircraft of Western production, and comprise over 60% of overall flight exploitation costs. Since the start of 2004, jet fuel prices in Russia have increased on average by more than 30% and are projected to increase further through the end of the year.

In an effort to limit the amount of the increase that is passed on to its passengers in the form of fare increases, Siberia Airlines is taking further actions in cutting operating costs, the primary of which is the grounding of the Tu-154B aircraft. These aircraft meet all safety and reliability metrics but fall behind both newer models Tu-154M and next generation airplanes (see table).

The original plan to decommission the Tu-1545B fleet was to be completed by 2007, however with the sharp rise in fuel costs, its continued utilization is not practical. The new plan is to begin taking Tu-154B out of service starting in October and complete the decommissioning by the end of 2004.

"The early decommissioning of Tu-154B aircraft will not significantly impact Siberia’s winter flight schedule, as during this time, the number of flights is significantly reduced as compared to the summer season.— remarked Anton Yeremin, Commerce Director of Siberia Airlines

In 2005, flight schedules will be developed using the current fleet which will be augmented by newer, more fuel efficient next generation airplanes. "

In addition to the decommissioning of T-154B aircraft, Siberia Airlines continues other cost cutting measures. Efforts continue to optimize the operations of the airline and to continue to reduce non-flight expenses. In October, Siberia Airlines plans to launch its online sales channel through their Internet website, which will further reduce distribution costs.

As the measures above cannot in the short term compensate for the sharp rise in fuel costs, beginning on October 1st, in addition to the fuel surcharges currently effective on international flights, a $5 USD fuel surcharge will be effective on all domestic flights and all flights to and from CIS countries. In accordance with international practices, this surcharge will remain in affect during the period of high fuel prices. The surcharge will be collected during the purchase of tickets and will be directed towards fuel expenses. These measures allow the Airline to partially compensate for the rise in fuel prices and to ensure the continued operations of the Airline in this time of difficulty for all air transport companies.

Table. Efficiency comparisons of Siberia Airlines fleet.

Type of AircraftMaximum Commercial LoadFuel Consumption GSM/hour
Тu-154B 17,3 6,0
Тu-154М 17,5 5,0
Il-86 39,2 10,5
Тu-204 18,3 3,5
А310 29,0 4,7

In 2003, Siberia Airlines was ranked first among Russian airlines in Domestic volume and second in the overall number of passengers served. In 2003 alone, the airline served 3.4 million passengers.

In 2003, Siberia Airlines was the first Russian company to be awarded the Flight International Aerospace Award for "Corporate Strategy". This was followed by the Air Transport "Market Leadership" award in February 2004.