Aeroflot outlines low cost airline plans
Russian airlines have been toying for a while with the idea of creating a low cost airline in the country. In a way, Russia is the last frontier" of the low cost airline industry and this is not a coincidence, there are a number of operational and, mainly, regulatory factors that prevent the emergence of a proper low cost airline industry in Russia (for those interested, we detailed some of them in this post of 2011 about why low cost airlines have not take-off in Russia). Most of these obstacles remain today.
For example, Russian airline regulations make it compulsory for carriers to make all rickets refundable, to serve complimentary food and drinks on-board and not to charge for baggage.
Add to that pilot scarcity, only Russians are allowed to fly Russian airliners and the growth of the industry is straining the pilot formation system to the point that Russian pilots are currently quite well paid, with salaries above 400,000 rubles per month being the norm.
Deficiencies in infrastructure also contribute, like the lack of secondary airports near the main cities and the harshness of the Russian winter, which adds to the cost of keeping airports open, costs which the airports pass on to airlines.
And while there might be little to be done against the Russian winter, de-icing bills will continue to come through, and it make take some time to upgrade regional ariport infrastructure, a few things are moving in the regulatory front.
Aeroflot is confident that some of the regulations that prevent airlines from de-aggregating different service elements will soon be eased. If this happens (Russia's Prime Minister recently expressed its support for low cost airline development in the country), Aeroflot might be ready to launch its new low cost airline as soon as six months from now.
What type of low cost airline can Russian travelers expect?
From conversations with Aeroflot sources one feature of the new low cost airline seems quite clear: it is going to operate under a different brand and as a separate entity within the Aeroflot Group.
We have also learned already that it is going to be a pure "hard discounter". Quoting Aeroflot's CEO, Vitaly Saveliev, Aeroflot's new low cost carrier is going to be "a tough product, with seats like those of a commuter train". In short, high density seating, non-reclinable seats and no optional service upgrades. In short, more of a Ryanair than a Jetblue, a Vueling or a Norwegian. This way Aeroflot's new airline expects to offer fees between 20 and 40% lower than Russian airlines' average.
By branding separately and offering a totally different level of service, Aeroflot does not cannibalize its own current passengers while aiming to stimulate the market, attracting people that are currently not flying, but using Russia's vast railway network instead.
Routes and fleet of the new airline
Aeroflot's low cost airline is going to focus on the main trunk routes out of Moscow, mainly in the European side of Russia, although there is no confirmation yet of which ones these will be. Another unknown is how many aircraft and of what type are going to compose its fleet. We must bear in mind, though that Aeroflot has currently a large number of aircraft on order many of which would be able to fulfill this mission, like the 50 Boeing 737 NG and 50 Russian-made mid-size Irkut MC-21s.
The result will be an Aeroflot group structured around three types of airline:
- Aeroflot's main line, that will be positioned as a "premium" product
- Aeroflot's new low cost carrier
- Aeroflot's regional airlines (Rossiya Airlines in St.Petersburg, Donavia in Southern Russia, Orenair in the Urals area with strong focus on the charter market as well as Aeroflot's new Far East subsidiary, whose name has yet to be decided)
Further market growth ahead?
The development of a low cost airline industry in Russia is likely to stimulate the market, as it did in Europe and the
US in its day, and open the skies for whole new segments of travelers that are currently using land transportation. This should make possible for the Russian air travel market to keep growing well above of the country's GDP growth rate.
If such growth takes place, will airports be able to absorb this whole new traffic (particularly in the Moscow area)? This is a story for another post...