Rouble's fall has created turbulence for Russian airlines
While nation's carriers are benefiting from drop in oil prices, many expenses are paid in foreign currencies and fewer locals are flying
Their international competitors may be cheering tumbling oil prices, but the collapse in the rouble has meant major financial turbulence for Russian airlines who have expenses in foreign currencies.
The rouble has slumped by 40 per cent this year against the dollar and euro, mostly due to crude oil prices falling by half in the past six months as Russia's economy is heavily dependent upon oil exports. As jet fuel accounts for upwards of a quarter of the cost for flights, most airlines are set to see a boost to earnings.
Russian airlines also stand to benefit, but that is expected to pale in comparison to the double whammy resulting from the drop in the value of the rouble.
First, traffic on their most profitable international routes has dropped as Russians stopped travelling as their purchasing power has been eroded, not to mention ticket prices being jacked up twice by 10 per cent.
Second, the airlines have considerable costs in foreign currencies - mostly aircraft leases - which have nearly doubled in rouble terms as the currency has slumped.
According to Deutsche Bank, Russia's leading airline Aeroflot earns 90 per cent of its revenue in roubles while 60 per cent of its costs are in foreign currencies.