Recovery of the Russian air travel market is gaining traction. According to the latest report by the country’s aviation authority Rosaviatsiya, in the first half of 2021 Russian airlines carried collectively 44.093 million passengers, down only 23.5 per cent on the same period of the pre-crisis 2019. Even more, the figures have improved to just 11.9 per cent below the ‘norm’ in June, up from 19.7 per cent in May. Sluggish restart of international travel due to slow reopening of national borders has led to shift of demand onto the domestic travel destinations. Whilst the international segment is still notably below the 2019 activity, hardly reaching quarter of the pre-pandemic levels with 5.87 million passengers, the domestic passenger traffic for the first six months of 2021 has already exceeded the same period of 2019 level by 15.2 per cent.
AEROFLOT GROUP SHIFTS FOCUS ON LOW-COST DIVISION
During first six months of 2021, Russia’s largest airline group, Aeroflot, was accountable for 18.557 million passengers, or 42 per cent of the country’s traffic. The June results for the entire group, which includes flagship Aeroflot, low-cost carrier Pobeda and Rossiya Airlines, were just 17.8 per cent below same month of 2019, to 4.6 million passengers. Amazingly, the domestic segment has improved 29.9 per cent on 2019 level reaching 3.9 million passengers.
The group’s title carrier Aeroflot, primarily focused on international premium service segment, is still being affected by the pandemic aftermath. The demand, plagued by continued uncertainty of wide border opening and declining household income, is shifting towards low fare travel. The group has therefore adapted its strategy to foster the growth of its low-cost division Pobeda Airlines. Russia’s only LCC served 1.393 million passengers in June – an incredible 53.8 per cent up on the same month in 2019. The seat load factor for Pobeda has reached 94.5 per cent (versus 80 per cent average for the entire group). To support that growth, the group is optimizing its fleet strategy, whereby 50 of Aeroflot’s Boeing 737-800s are being transferred to the budget division’s fleet. The hand-over of 14 aircraft scheduled for this year has been completed in time for busy summer. To further improve fleet utilization, these aircraft have remained at Aeroflot’s Moscow Sheremetyevo base (IATA: SVO), and a code-sharing agreement is now in place between Aeroflot and Pobeda.
UNLEASHING THE DOMESTIC MARKET POTENTIAL
Aeroflot, in the meantime, is also reshaping its business to unleash the full potential of Russia’s significant domestic market. In advance of the summer travel season, the airline has launched an inter-regional flight programme featuring an array of new leisure destinations in the south of Russia, including flights from 13 cities across the country to resort destinations on the Black Sea. Passengers from Arkhangelsk, Chelyabinsk, Samara, Kazan, Murmansk, Novosibirsk, Perm, Ekaterinburg, Tyumen, Ufa, Orenburg, Syktyvkar, Surgut can now benefit from direct connections to holiday destinations Sochi, Simferopol, Anapa, Krasnodar and Rostov-on-Don. Frequencies on existing routes have been nearly doubled. Another popular tourist attraction, Lake Baikal, is served by direct flights to Irkutsk from Moscow and Saint Petersburg.
On the other part, frequencies of flights from country’s capital and largest city, Moscow to towns in Ural, Siberia, Far East and Volga Region (including Irkutsk, Khabarovsk, Krasnoyarsk, Niznevartovsk, Yekaterinburg, Samara etc.) have doubled or even tripled on some routes. The intense summer schedule is promoting domestic travel, supported by the Russian government’s incentives. “The development of transportation between Moscow and federal districts to the East of Russia’s central European part is a priority of Aeroflot’s strategy aimed at providing enhanced connectivity of the country’s remote regions and improved mobility of the Russian population at large,” the airline says in a statement.
GEARING UP FOR INTERNATIONAL RECOVERY
Whilst streamlining its domestic operations, Aeroflot is also preparing for the imminent relaunch of international travel. Several major overseas markets for leisure tourism, including Turkey and Egypt, have already opened up for Russian customers. But the major hope for full-fledged recovery is linked to the vaccination process, which is gaining momentum in Russia. Efforts are also underway for mutual validation of vaccines. If this work is completed within several months, borders may re-open with Europe and China before the end of the year.
In the meantime to help facilitate international travel, Aeroflot and Rossiya became first Russian airlines to test IATA Pass. Aeroflot is staging a month-long experiment using the digital health document from July 19 to August 19 on flights between Moscow and London. Owing to the IATA Travel Pass app to be installed by travelers on smartphones, pre-flight formalities will take less time. The IATA Travel Pass contains all the details of traveler’s health required for the flight, including results of COVID-19 PCR tests. The company credits 5,000 bonus miles to travelers using the app during the test period.
Gearing up to cater for the pent up demand, Aeroflot has launched hub operations at its new Krasnoyarsk base (IATA: KJA). The hub’s inauguration service features five destinations in Russia – Krasnodar, Simferopol, Blagoveshchensk, Sochi and Irkutsk served by Boeing 737-800s, but the hub’s beneficial geographical location in the heart of Siberia and at the crossroads between Europe and Asia holds potential for gradual expansion by transporting international travelers. More than 100,000 passengers are expected to use Aeroflot’s first regional hub in the summer of 2021. The launch of the international hub in Krasnoyarsk is a milestone for both our airline and the whole of Russia’s transport system,” asserts Aeroflot CEO Mikhail Poluboyarinov. “The air hub means new opportunities for our passengers, reduced travel time and fewer connections per trip, attractive air fares and all the possibilities of our Group’s route network.”
At Sheremetyevo, the airlines major hub, all of Aeroflot’s flights have been transferred to Terminal C, adjacent to Terminal B, which serves domestic flights. This facilitates transfer for connecting passengers and offers increased capacity to Aeroflot, as air travel recovers.
FLEET MODERNISATION ON TRACK
As demand is forecast to recover gradually, Aeroflot Group has resumed its fleet modernization and optimization programme. This year the group expects to take delivery of 34 brand new aircraft, including 19 for the flag carrier Aeroflot (six Airbus A320neo, three A321neo, seven A350 widebodies and three Boeing 777-300ERs).
According to the group’s new strategy, Airbus New Engine Option narrowbody family aircraft will make the core of Aeroflot’s new fleet. The A320neos are powered by CFM’s LEAP-1A26 engines and configured with 156 seats, including 12 in business class. The A321neos have 196-seat cabin layouts, including 12 seats in business class. The A350-900s powered by Rolls-Royce Trent XWB-84 engines, feature three-class cabin configurations with 28 seats in business, 24 in comfort and 264 in economy class.
As of June 30, 2021, the group had 344 aircraft in its combined fleet. The group is planning to phase out 24 older aircraft this year.
AEROFLOT NAMED STRONGEST AIRLINE BRAND GLOBALLY BY BRAND FINANCE
Aeroflot has again been named the strongest airline brand globally in 2021 by Brand Finance, the world’s leading independent brand valuation consultancy, recognizing the stable positions and growth potential of the Russia’s national carrier in the global market despite the aviation’s worst crisis. The airline has been at the top of the rating since 2017.
Brand Finance noted that Aeroflot retained its market positions and a strong presence in consumers’ mind despite reduced air travel. Analysts emphasised the Russian airline’s new strategy encompassing gradual aircraft fleet renewal.
Aeroflot scored a very strong 89.5 out of a possible 100 on Brand Finance’s Brand Strength Index (BSI). This is equivalent to the ААА rating.
“Once again, Aeroflot has been named the world’s strongest airline brand”, Savio D’Souza, Valuation Director, Brand Finance said. “The airline’s strong and vast heritage, paired with its constant strive to innovate and improve its strategy, stand it in good stead to put itself in a solid position in the global airlines market once international travel restrictions ease.”
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