“There are no signs of a decline in demand yet” – Newspaper Kommersant No. 229 (7430) dated 12/09/2022

The Deputy General Director of S7 Group spoke to Kommersant about how much flights abroad are more profitable than domestic flights, and about the impact of subsidies on ticket prices and demand dynamics. Alexey Dokuchaev.

— To what extent did international flights (IR) turn out to be more profitable than domestic ones this year?

– We can say that the rates were comparable. International traffic started quite late, some time had to be spent on rebuilding the route network. The return of tangible volumes was completed by the high summer season. The profitability of these flights was quite close to domestic and 2019 levels.

— Isn’t MVL 1.5–2 times more profitable than domestic ones?

– Definitely not one and a half times, but not one to one, but somewhere in between.

— How much higher could ticket prices in the country be without an anti-sanction subsidy for 100 billion rubles?

– Tariffs for a passenger per kilometer, according to our calculations, were lower this summer by 4%, that is, without subsidies, we could talk about an increase in prices by 8-10%.

– Subsidies have not been in effect since November. Have you noticed the impact on demand or pricing?

– No, the low season has begun, and the peak of the drop in demand just falls on mid-November – the end of the second decade of December. Then this lasting phase – from the end of the New Year holidays to the beginning of the high season in spring – does not allow prices to rise, we reduce them.

— S7 estimated the likely decline in passenger traffic without subsidies this year by 20-25%. Should we expect a fall in 2023?

– There are no signals yet to lower the passenger traffic bar, as well as in terms of tariffs: we do not see any drama in this sense.

– In the event of a decrease in demand in 2023, will it make sense to stop the fleet to save aircraft life?

– In practice, I repeat, there are no signs of a decline. And while there is demand, we are more interested in flying – with or without subsidy programs. It is difficult to guess what the situation will be like in the summer: the changes in supply and demand depend on many factors. But we hope to extend the subsidy program, and we are not alone. It was this measure that saturated our schedule with demand, which everyone has been worried about since March.

— Has the competition on international flights intensified as the fleet of other carriers “de-bermudized” by the end of summer?

On the one hand, we noticed it. On the other hand, it is difficult to call it a struggle for a passenger, since the volumes of containers are completely different from what they were a year ago. It is not yet necessary to talk about the usual competitive realities. But passengers want to fly more abroad: we see this both in the speed of bookings and in search queries, even on routes that are not yet available. And we will try to meet the demand, look for opportunities in all countries where there is a market.

— What kind of non-monetary support measures does the industry need?

– First of all, it is important to solve the problem with alternate airports capable of receiving aircraft at night. This issue is most acute in Siberia, the western part of the Far East and in the border areas. All carriers present there feel the impossibility of increasing capacity without a 24/7 schedule. This applies not only to domestic flights in the regions, but also to transit routes. Airport support measures would allow us to provide better connections for flights from East to West through our hub in Novosibirsk and offer more convenient products in the Far East.

Interviewed by Aigul Abdullina