We will fly until Monday – Newspaper Kommersant No. 16 (7461) of 01/30/2023

Aeroflot, in its new strategy, plans to occupy half of the Russian transportation market by 2030, while reducing passenger traffic expectations by half compared to pre-crisis plans – to 65 million people. Achieving the goals mainly depends on the domestic aviation industry, which thereby shifts the risks of their failure. Compared to the previous strategy, approved in 2020, the group’s fleet expectations in 2030 have become more modest – 500 aircraft instead of 600, and 70% of them will be Russian.

Aeroflot Group plans to carry about 65 million people by 2030, thus increasing its market share to 50%, CEO of the airline Sergey Aleksandrovsky told reporters on January 27 as part of the presentation of the new strategy until 2030.

We are talking about an increase in traffic by 6% per year: by the end of 2023, Aeroflot expects a passenger traffic of 43.5 million people, which is 28% lower than the group’s figures for 2019.

Aeroflot’s previous strategy, adopted in 2020, assumed an increase in passenger traffic to 130 million people and a 30% reduction in the cost of economy class tickets, thanks to which it received the unofficial name “30/30”. The new strategy can be described as “70/30”: according to the conservative forecast of the group, the fleet will be about 500 aircraft by the end of 2030, of which 70% will be Russian vessels. Now the fleet of the group has 354 aircraft, of which 78 are SSJ 100s. Within seven years, Aeroflot plans to receive 339 new Russian aircraft (another 89 SSJs, 210 MS-21s and 40 Tu-214s).

“This forecast may be revised towards a more optimistic one in terms of increasing the number of imported aircraft and, accordingly, the market share,” said Mr. Aleksandrovsky. According to him, new aircraft from the first deliveries will be distributed between Aeroflot and Rossiya.

It is unclear whether Pobeda will receive new vessels. In the previous strategy, it was the low-cost airline that was supposed to become the point of growth in passenger traffic within the group and overtake the parent company in this indicator.

Sergey Aleksandrovsky only noted that not only Pobeda, but the entire Aeroflot group is now becoming the driver for the development of all Russian civil aviation.

Aeroflot’s forecast indicators are synchronized with the government’s program for the development of the aviation industry, according to which passenger traffic should reach 116 million people by 2030 (including 11.6 million people on international routes). Based on these forecasts, experts call Aeroflot’s plans “adequate to the changed reality.” Aeroflot’s bet on faster traffic growth than the industry is due to fleet expansion, new regional bases and entry into new international markets.

Kommersant’s interlocutors call international flights the most reliable “growth point”. The group has withdrawn 94 aircraft from the Bermuda registry and is hoping to buy more of the fleet, which should expand its geography of flights. In particular, it is planned to increase the frequency of flights on existing destinations to China up to seven per week, Sergei Aleksandrovsky said. “International transportation for us, of course, is much more profitable than domestic, two or three times,” said Mr. Aleksandrovsky.

The strategy presented to journalists is completely devoid of any goals in terms of financial indicators.

Mr. Aleksandrovsky only clarified that no additional actions are expected to improve the company’s financial recovery in 2023, and the group’s debt burden “was reduced in 2022” and will not increase in 2023.

The new strategy, like the previous one, retains the thesis about the different positioning of the group’s companies, but the role of Aeroflot itself has been blurred. If in the past strategy Aeroflot was defined as a “global premium carrier”, now it is a “traditional carrier” offering a “high-level product”. In the past, the airline was focused on “long-haul and high-yielding medium-haul flights from Moscow”, now Aeroflot will retain a “wide range of fares”, focusing on business class.

Since the beginning of the sanctions, experts have noted that the group’s product line is now mixed, taking into account the “parent company’s entry into the price territory of a low-cost airline.” However, Mr. Aleksandrovsky assured that Aeroflot “won’t go down to the level of Pobeda” tariffs. On average, last year the group, according to him, maintained the level of tariffs in 2021, this year they are expected to rise in line with inflation.

A number of Kommersant’s interlocutors in the industry indicate that the key pillars of the strategy are tied to two vulnerable factors – the growth in passenger traffic and the schedule for the delivery of new aircraft, the observance of which is questionable.

The group expects the first two import-substituting SSJ 100s in December 2023, but there are no firm contracts yet. Six MS-21s were expected in 2024, but now deliveries have been postponed: the first two aircraft are expected by the end of 2024.

Responsibility for the implementation of the Aeroflot strategy, in fact, rests with the Ministry of Industry and Trade and the plan for the production of aircraft adopted by it in 2022, Andrey Kramarenko, senior researcher at the Institute of Transport Economics at the Higher School of Economics, concludes: “The point of the strategy is to, in case of failure, find the culprit outside the group “In this regard, the solution is quite elegant.”

The strategy completely ignores the financial aspect, which it would be fair to count on in a document of this kind, and does not disclose the expectations of state budget support, says Igor Smirnov, senior director for corporate ratings at Expert RA. “The acceptable financial performance of the group at the end of 2022 is beyond doubt, taking into account the subsidies received, but in the future, expectations of greater openness are more than justified,” he concludes, adding that “the informational secrecy of the group may come from sanctions and other risks.”

There is “nothing revolutionary” in the updated strategy, but this is not required, Oleg Panteleev, Executive Director of Aviaport, notes: “For the current period of time, not quantitative, but qualitative indicators and the definition of the main directions of movement are important.” The key task of the group, according to Oleg Panteleev, is related to maintaining the stability of the business, including positions in international markets, and not with the growth of traffic volumes and market share.

Aigul Abdullina