S7 launches new LCC in Russia - some thoughts

Interesting news coming out of Russia today.

S7 Airlines, the country’s largest private airline (and for some time during the pandemic the largest carrier overall although I guess Aeroflot has retaken the crown by now) has just announced it is setting up a new low cost airline, which will be fully owned, but a separate entity.

The new airline, whose name or branding is not yet known, will start operating one year from now and the plan is that it will operate mainly between second and third tier cities (that is bypassing Moscow and Saint Petersburg mainly).

There has been a growing interest in the regional air travel market in Russia, top-down from the government, but also, I guess, spurned by the growth of domestic tourism (which has boomed in a year in which covid-related restrictions have made international travel very difficult).

Aeroflot has set up its own regional bases, while other airlines have also been expanding in this market, for example a re-fleeted Red Wings and Azimuth, a regional airline based in southern Russia that, until now was the only Superjet-only operator in the world, but not for much longer because last week it announced a deal to lease 6 Airbus A220-300s.

In the low cost front, S7’s new budget carrier will compete with Pobeda, Aeroflot’s own LCC, which is considered the only true low cost airline in the Russian market. Although, my own experience is that, at least on trunk routes it is possible to get tickets quite cheap from a handful of airlines (something we talked about on our dedicated podcast episode about commercial aviation in Russia with expert Boris Rybak and also in this video chat I did for AirInsight).

There are also quite a few routes that are subsidised. For example, in Winter it is possible to fly to the Far East of Russia from Moscow, to places like the beautiful island of Sakhalin, 11 hours away, for very competitive prices.

S7 had already quite a “hybridised” product, so I guess the new airline is going to aim towards the ULCC end of the market.

What we know for sure is the choice of aircraft, the Airbus A320neo, also quite a surprise taking into account that the government is pushing for airlines to use Russian-built aircraft, particularly in the domestic market and the Superjet in particular is being adopted by domestic airlines in different parts of the country. But S7 is already a large A320-family operator so I guess it makes lots of sense. The fleet is expected to reach 24 aircraft by 2024.