AEROFLOT LAUNCHES LOW-COST BUSINESS

Russian flag carrier Aeroflot Russian Airlines has looked to its past to support its future growth and selected the name Dobrolet for its new low-cost division which is expected to launch operations in spring 2014. The brand was the name of the joint-stock company first established in the Soviet Union in 1923 and the predecessor to today’s modern day operation.

The new business has been established with an estimated investment of $100 million over its first two years of operation, will operate from the Moscow region from spring 2014 and in its initial stage will fly on busy links within the European part of Russia, most likely launching on the Moscow – St Petersburg route. However, in an exclusive interview with The HUB at World Routes, Giorgio Callegari, deputy general director for strategy and alliances, Aeroflot Russian Airlines revealed that international growth could occur at a later stage.


Dobrolet will operate a fleet of Next-Generation Boeing 737-800s in a single-class, all-Economy arrangement, initially growing to a fleet of eight aircraft at the end of its first year of service and growing at a rate of eight aircraft per year thereafter. The business will be headed by Vladimir Gorbunov, Airbus's regional director for Russia and former boss of the short-lived Russian budget carrier, Avianova.

The low-cost airline model has failed to take-off in Russia as restrictive bilaterals and hard legislation have made it difficult for carriers to succeed despite the massive potential. A number of foreign carriers have now commenced flights into Russia, most notably easyJet, Vueling and Wizz Air and others, including Ryanair, have expressed interest in flying domestically within the country.

The launch of Dobrolet is Aeroflot’s way of combating this possible competition as well as to reverse a decline in domestic market share as local rivals S7 Airlines, Transaero Airlines and UTair have strengthened their grip on the local market. However, executives confirm the carrier will only take to the skies if Russia amends laws forbidding airlines from selling non-refundable tickets that can only be purchased through the Internet.

According to Aeroflot, Dobrolet will offer fares up to 40 per cent cheaper than rivals thanks to its more densely configured aircraft, using only direct ticket sales and by offering chargeable ancillaries for a more comfortable seat, checked baggage, priority boarding, and meals on board.

The launch of the new business comes at a positive time for Aeroflot, which continues to buck global trends and report strong financial and traffic results. For the first six months of 2013, Aeroflot Group has posted a 70 per cent increase in operating profit to $167 million on revenues of $4,132.6 million, up 14 per cent on the same period last year. EBITDA amounted to $351.9 million, up 42 per cent on the corresponding period in 2012. The marked improvement in economic performance was caused by non-cash revaluation of finance lease liabilities denominated in foreign currency, according to the carrier.

In our exclusive interview with Giorgio Callegari we find out more reasons for the airline’s successful performance, learn more about its low-cost business, Dobrolet, and learn more about its partnership strategy and membership of the SkyTeam global airline aliance: Routes Online