Aeroflot Group’s new strategy gains traction

Aeroflot Group remains the undisputed leader of the Russian air transport market, and the changes brought forth by the pandemic have proven that the management has taken the right course for transforming the group. Implementation of the renewed strategy set for the period until 2028 , which was approved in the midstream of the COVID-19 pandemic, is indeed helping to reduce the cost of travel for passengers, improving the mobility of Russia’s population and gives momentum to Aeroflot’s further development.

Russia – along with China and the USA, countries with large domestic markets – is leading the global recovery in air traffic. In April 2021 Russia’s commercial aviation continued recovery at a higher rate than global average. According to the country’s aviation authority Rosaviatsiya, during that month Russian airlines carried collectively 7.18 million passengers, just 23 per cent less than in April of the pre-crisis 2019.

Russian airlines’ passenger traffic, pax

Aeroflot Group with its three subsidiary airlines – title carrier Aeroflot, low-cost carrier Pobeda and Rossiya Airlines – remains the undisputed market leader. Despite the still largely restricted international travel, the national carrier reclaimed its traditional first line in the ranking of Russia’s largest airlines. In the meantime, Pobeda is proceeding with its streamlined growth – the LCC carried 32 per cent more passengers in April 2021, than in the same month of 2019. Rossiya Airlines’ traffic was just 20 per cent below pre-crisis level. Combined, the group’s traffic reached 3 million passengers, including 2.6 million passengers on domestic routes, up 3.6 per cent on the pre-COVID level. The average seat load factor was decent 78 per cent.

These achievements are results of a set of anti-crisis measures and gradual implementation of Aeroflot Group’s renewed 2028 strategy adopted in July last year. The core of the strategy is the group’s segmentation and a clear emphasis on the subsidiary airlines’ specific business models. One of the objectives is to reduce the domestic economy class rates by 30 per cent. Aeroflot will focus on developing the most revenue-generating medium and long-haul routes. The budget service segment will be developed through growth of Pobeda Airlines and its code-sharing agreement with Aeroflot. Rossiya Airlines, in turn, concentrates primarily on regional middle-segment air travel within Russia, including socially significant destinations, while operating a fleet of Russian-made aircraft.

AEROFLOT BRINGS INTERNATIONAL EXPERTISE TO DOMESTIC ROUTES

Undoubtedly, all participants of the air transport market, which sustained worse damage from the COVID-19 crisis than any other sector of the economy, are having a difficult time. But the full-service legacy carriers are the ones that have been hit most. These airlines have been developing complex and large-scale international route networks over decades. Russia’s flagship carrier Aeroflot, which traditionally represents Russia in intergovernmental bilateral agreements, is one of these.

To preserve the company’s potential and its workforce, and to be ready to climb to a high level once the market opens up, the airline has chosen a weighed, justified and probably the only correct tactic. Equally unable to influence the restart of international travel and wait for world-wide reopening of state borders, Russia’s national carrier shifted its focus on the domestic market, which can benefit from the experience of the highly qualified staff and the modern aircraft fleet of the country’s largest airline.

In late May Aeroflot embarked on its massive domestic regional flight programme avoiding Moscow, the largest in its modern history. The airline launched direct flights to the Black Sea resorts from 13 cities across Russia. Starting June 1 it will launch operation from its first regional hub at Krasnoyarsk, serving destinations in the South and Far East Federal Districts. At the same time, passengers, who use the airline’s main base Moscow Sheremetyevo airport for domestic travel also benefit from the airline’s enhanced capabilities. Aeroflot has added new routes and significantly increased frequencies to destination in Urals, Siberia, the Far East and Povolzhie region. On some routes the frequencies have doubled and even tripled, particularly on those connecting Moscow with Krasnodar and resort cities in Krasnodar region and Crimea.

In April the partial recovery of international air travel continued, but it remains largely restricted. Based on the approvals of the national authorities, service was restored to the UAE, the Maldives, Egypt, Belarus, Kazakhstan, Kyrgyzstan, South Korea, Japan, Serbia, Finland, Azerbaijan, Armenia, India and the Seychelles. Another welcome news were the bilateral decision to resume air service between Russia and further five countries – Iceland, Malta, Mexico, Portugal and the Saudi Arabia.

Increasing frequencies and launch of new flights facilitate the gradual recovery of the airline’s capacity, which is strictly aligned with the increase in demand and economic effect.

Taking advantage of the forced gap in operations, Aeroflot is proceeding with its fleet optimization plans, which include transfer of some aircraft types to its sister airlines and a thoughtful modernization of its own fleet.

Within the framework of redistributing the fleet within the group, Aeroflot is transferring its Boeing 737-800s to LCC Pobeda, and Superjet 100s to Rossiya’ fleet.

To be prepared for growth during the post-coronavirus recovery, and retain its competitive advantages in the segment outlined by its new strategy, which is medium- and long-haul travel, Aeroflot has embarked on the gradual replacement of its older aircraft with the best Western-bult aircraft available on the market.

To ensure “five-star” service, this year the airline is planning to take delivery of three long-haul Boeing 777-300ERs, seven wide-body Airbus A350-900 and nine narrow-body Airbus A320neo family aircraft.

An important stage in fleet modernization effort started in late May, when the airline took delivery of the first of its new Airbus А320neo family aircraft, which will make the core of its single-isle fleet in the future. These aircraft are replacing A320ceos, which are being gradually phase out, and Boeing 737-800s, which are being transferred to Pobeda.

THE FOCUS IS ON POBEDA

Whilst flag carrier Aeroflot, due to objective reasons (virtually non-existent international air travel, reduced business traffic and degraded purchasing power of the country’s population) is unable to quickly return to the pre-crisis traffic levels, the airline group is redistributing its resources with the logical priority to the low-cost carrier Pobeda. The LCC division is challenged with driving the airline’s passenger numbers up, in line with the group’s development strategy. In accord with this plan, the title carrier is transferring its entire 50-strong Boeing 737-800 fleet to its budget division. The process will be gradual – this year 10 aircraft will change operator, followed by 24 in 2022 and remaining 16 in 2023. Along with the aircraft, the national carrier will cede to Pobeda some of its routes from Sheremetyevo airport, which have been operated under a code-share agreement with Aeroflot for the first time starting May. Pobeda’s summer schedule includes 14 new domestic routes from Sheremetyevo. The LCC will operate up to 20 daily flights from Russia’s busiest airport. Pobeda’s traffic target at this airport for 2021 is over 1.5 million passengers, who will benefit from its lower rates.

Line maintenance for Pobeda’s flights from Sheremetyevo is provided by A-Technics, the MRO subsidiary of Aeroflot group.

For now, however, Moscow’s smaller Vnukovo airport remains the main base for Pobeda.

The group’s emphasis on Pobeda is bearing its fruit – in April the LCC demonstrated significant traffic growth, having carried 1 million passengers, up 32 per cent to the same month of the pre-crisis 2019. The seat load factor averaged impressive 92.7 per cent.

ROSSIYA, THE WORLD’S LARGEST OPERATOR OF SSJ100

The fact that Rossiya Airlines’ traffic was only 20 per cent below “normal” in April is a proof that the goal for the airline was identified correctly – to focus its operations mainly on regional middle cost segment within Russia, serve the socially significant routes and operate Russian-made aircraft.

Adding smaller 100-seat Russian-made Superjet 100 aircraft enabled the airline to increase the frequencies on popular routes and open new destinations, providing more flexibility on departure time to customers and making flights convenient to everyone.

Transfer of SSJ100 to Rossiya’s fleet from Aeroflot started in December 2020. At present 31 regional jets have joined Rossiya’s fleet, which makes the airline the world’s largest operator of the type. Also, the rate of growing its fleet is the highest of all operators globally, at this time. According to the group’s ambitious plans, by the end of this year Rossiya will have 66 Superjet 100s flying its routes. The SSJ100 fleet is currently based in Sheremetyevo, from where it operates 14 routes, some of them not served by any other airline in Aeroflot group. Rossiya is also gearing up to start operating these aircraft from St. Petersburg, its historical base.

To ensure the high dispatch reliability of its SSJ100s Rossiya has contracted A-Technics for providing both line and base maintenance for the type, both at Sheremetyevo and at other airports.

Western-made aircraft will continue to serve Rossiya’s scheduled and tourist flights.