High Flyer Spreads its Wings

Aeroflot has just launched its low-cost carrier Pobeda and is aiming to increase the frequency of flights on its current international routes. Aeroflot is a winner in the combined performance and investment performance categories. CEO Vitaly Savelyev gives an insight into his strategy.

Aeroflot

Vitaly Savelyev

Aeroflot aims to be among the top five European carriers and the top 20 global carriers by 2025. How far are you towards meeting that objective and what still needs to be done?

Aeroflot aims to be a top-five European and top-20 global airline in terms of passenger traffic and revenue by 2025. We are currently on track to achieve these goals and some expert industry assessments have even put us ahead of schedule. For example, Aviation Week's 2013 Top-Performing Airlines ranking placed Aeroflot seventh globally among large carriers with more than $6 billion of revenue, ahead of peers including Lufthansa, Air China, International Airlines Group (British Airways and Iberia) and Air France-KLM.

Aeroflot offers a premium service compared to many airlines, in terms of young aircraft, food and beverage, refunds on tickets and so on. But this also keeps ticket prices high. Do you plan to change that?

One of Aeroflot's priorities is to make air travel in Russia more accessible, and we have done a lot in this area. On our initiative foreign pilots have been granted permission to work in Russia, and non-refundable tickets have been introduced. All of this has a positive effect on reducing the cost of tickets.

The most essential step is the creation of a national low-cost air carrier. We are dedicated to increasing mobility and accessibility of transport among Russia's regions, and our budget carrier is focused on price-sensitive customers.

As for Aeroflot this is an airline offering a premium level of service that is highly rated by all our passengers and international trade organizations. In terms of in-flight quality of service, Aeroflot is the best in Europe and among the leading airlines globally. For the past three years our airline has grown its Net Promoter Score, which reached 58 per cent in 2013, surpassing that of some of its most eminent competitors. This year the British consultancy Skytrax, which produces the most authoritative quality of service rankings globally, named us the Best Airline in Eastern Europe for the third time. The safety and comfort of our passengers are our main priorities. Today Aeroflot has the youngest fleet in the world among major airlines and the highest level of service on board. These are our main competitive advantages and are key drivers of our success.

You have called for an end to monopoly on international routes so that the market is liberalized, as is happening domestically. How would this benefit Aeroflot?

Russia has an open market with four to seven competitors serving each destination. We believe that this is a good thing, because companies can thrive only in a competitive environment. Passengers can see all the benefits that Aeroflot offers, such as its modern fleet, service and exceptional punctuality, only by being able to compare us with other airlines. In the end the passenger is always the winner.

The EU sanctions grounded Aeroflot's low-cost unit Dobrolet by stopping it from leasing Boeing aircraft. You've rebranded the airline as Pobeda, which means victory. How have you solved the leasing issue?

The imposition of severe sanctions against Dobrolet made it impossible to use this historic Russian brand, but the low-cost project is still an important part of our strategy. This was the main reason for Aeroflot Group to launch a new budget carrier with different name. The choice of the name Pobeda is directly related to the upcoming anniversary of the victory in the Second World War, and is illustrative of defiance and symbolizes victory over the difficulties and external challenges faced by Russia and its people this year. Under the brand Pobeda the company is launching winter season flights to a number of Russian cities and different regions, from the south to Siberia.

Pobeda will have 40 aircraft by 2018. What is the number at launch, and how many domestic Russian routes will you serve initially?

Pobeda currently has four new single-aisle Boeing-737-800 NG that are designed to carry 189 passengers in a single class. Next year we are planning to extend the fleet up to 13 aircraft. In November 2014 Rosaviatsya issued an air operator certificate to Pobeda and in accordance with Russian legislation the carrier started selling tickets. Pobeda will make daily flights from Moscow to Volgograd, Samara, Yekaterinburg, Perm, Tyumen and Belgorod. The carrier completed its maiden flight on December 1 from Vnukovo International airport, Terminal A. Tickets are in high demand among our passengers. In the first 12 hours alone, Pobeda sold 7,000 tickets to six destinations. The most popular destinations are Yekaterinburg, Tyumen, Perm and Volgograd.

Aeroflot received its first Sukhoi Superjet 100 last year. How many will it operate, and over what timetable?

Aeroflot is the launch buyer and the largest Russian operator of Sukhoi Superjet-100. At the moment we have 10 SSJ-100 in full specification. The total order stands at 30 aircraft. At the end of November 2014 Aeroflot and Sberbank Leasing struck a deal for the purchase of 10 aircraft through financial leasing. We expect that these 10 aircraft will join our fleet by the end of April 2015. The SSJ-100 is designed to carry 87 passengers in two-class composition with 12 seats in business class and 75 seats in economy class. The maximum flight range is 2,400 kilometers so the aircraft serves both domestic and international destinations.

Aeroflot achieved a number of firsts in its history: the first airline to operate a route exclusively with jet aircraft and the first regional jet service. How will the airline distinguish itself in the future, as the market becomes more competitive?

Aeroflot Group is the powerhouse of the Russian aviation market and aims to occupy a competitive place alongside major airlines globally. As I said at the beginning our goal is to become a top-five European and top-20 global airline in terms of passenger traffic and revenue. Aeroflot today is an airline with a global outlook. Together with our SkyTeam partners we serve more than 1,000 destinations in 177 countries. As a national carrier our company prioritizes the development of domestic destinations, particularly to improve transport accessibility in remote regions of Russia. We are fully aware that it is impossible to claim the global title without being a national champion. The domestic market is our core, and the basis for our growth internationally. 


Doing Business in Russia 2014
Doing Business in Russia 2014
The ‘CEO of the Year Russia 2014’ awards come at just the right time. They celebrate the achievements of the best CEOs. They are a lesson in the possible, a benchmark to aspire to and something to be proud of.
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