Aeroflot’s New LCC to Fly Under ‘Victory’ Brand
Russian national carrier, Aeroflot Russian Airlines will this weekend open reservations for its new low-cost division which is expected to launch operations across a domestic network on November 17, 2014. The new business will operate under the brand, Pobeda, or ‘Victory’, a possible defiance against the introduction of Western sanctions over Ukraine that grounded its predecessor, Dobrolet.
The new business will operate with a small fleet of around four Boeing 737-800s transferred from its parent and will initially fly from Moscow to Belgorod and Volgograd in the European part of Russia, to Kazan and Samara on the Volga River, to Yekaterinburg and Ufa in the Urals Federal District, and to the Siberian cities of Tyumen and Surgut.
According to Russian transport sources a formal application to the Federal Air Transport Agency for an air operator certificate was made in early October after a review of its strategy highlighted it would be difficult to resurrect the Dobrolet operation in the short-term due to the continued sanctions.
It is believed that Aeroflot continues to see Dobrolet as a future business opportunity and as such the new Pobeda division will operate from Vnukovo International Airport in the Russian capital rather than Sheremetyevo International Airport where Dobrolet was headquartered and home to Aeroflot’s mainline hub business.
Dobrolet suspended all operations on August 4, 2014 after newly imposed European Sanctions against Russia in light of ongoing investigations into the Malaysia Airlines MH17 tragedy and Russia’s role in the Ukraine crisis, impacted its operations. Aeroflot Russian Airlines said at the time the “temporary” grounding came as a result of annulled aircraft insurance agreements, the suspension of the supply of aeronautical information and leasing, repair and maintenance agreements relating to its Boeing 737-800 fleet.
Behind the Brand
In Russian, the word 'Pobeda' (written Победа, pronounced 'Pobyaydar'), means 'Victory'. A popular theme in Russian culture - many towns have a Victory Square, named after the defeat of Nazism in the Great Patriotic War (what they call World War Two).Aidan Stradling, Director, Anglo-Russian Centre in North East England
The grounding followed just days after the European Union (EU) broadened its sanctions against Russia and added Dobrolet to its list of companies that EU persons and entities are prohibited from doing business with. In documentation the EU said that as a subsidiary of a Russian state-owned airline, Dobrolet had exclusively operated flights between Moscow and Simferopol since Russia’s annexation of Crimea. “It therefore facilitates the integration of the illegally annexed Autonomous Republic of Crimea into the Russian Federation and undermines Ukrainian sovereignty and territorial integrity,” it added.
Dobrolet launched operations in June this year between Moscow’s Sheremetyevo International Airport and Simferopol, in the disputed Crimea region of Ukraine. It was in the process of a major domestic expansion with flights from the Russian capital to Volgograd commencing on August 1, 2014 and services to Samara (from August 15, 2014), Ufa (from August 16, 2014), Ekaterinburg and Perm (from August 29, 2014), Surgut (from August 30, 2014) and Kazan (October 1, 2014) all due to commence shortly after its grounding.
Aeroflot initially maintained operations on the routes between Moscow and Simferopol and Volgograd by transferring these to another subsidiary, Orenburg Airlines, but ended these last month.
According to Aeroflot’s director general and the chairman of the board of directors of the new budget airline, Vitaly Saveliev, the imposition of severe sanctions against Dobrolet made it “impossible to continue the use” of this historic Russian brand.
“This was the main reason for launching the Aeroflot Group’s new budget carrier with a fundamentally different name. The name of the new company ‘Victory’ is directly related to the upcoming anniversary of the Great Victory and symbolizes our common victory inevitable over those difficulties and external challenges faced by our country and our people this year," he said.
Like Dobrolet, Aeroflot has lofty ambitions for the new low-cost carrier growing at a rate of around eight aircraft per year to 40 aircraft by 2018 when its route network will consist of more than 45 domestic and international destinations and passenger numbers grow beyond ten million.
To date, 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.
In our analysis, below, we look in greater detail at the Russian domestic market and Aeroflot’s own capacity over the past ten years. During this period (2004 – 2013) available seats have doubled from 24.7 million to 49.9 million. Between 2004 and 2012 Aeroflot’s share of capacity rose a modest 5.9 percentage points from 13.4 per cent in 2004 to 19.3 per cent in 2012, but then jumped to 23.9 per cent in 2013 and is forecasted to rise to 36.1 per cent this year after the full integration of the networks of regional partners into its mainline business.