Three Russian Majors Launch LCC Plans

By Maxim Pyadushkin
Source: Aviation Week & Space Technology
January 27, 2014

The first few attempts to begin low-cost air service in Russia failed. Two local start-ups, Sky Express and Avianova, ceased operations in 2011. But now the country's largest airliners are giving it another try.

Major carriers here are introducing low-cost service plans, each one unique. All are likely to incite price wars between the first- and second-tier airlines. And some of the conditions that have made low-cost air travel difficult to establish persist because the government has yet to alter some of the regulations that have stifled airlines from offering typical LCC features. So whatever the airlines plan for now will be an adaptation of the universal model; the real breakthrough is likely only possible when more liberalization of the air transport market is achieved.

Transaero, the country's second-largest airline by passengers carried, launched its form of low-cost service from Moscow's Domodedovo International Airport on Jan. 14. The airline added a new discount class to its traditional classes of service that is available on a number of domestic routes and to European, Middle Eastern and Commonwealth of Independent States (CIS) destinations. It will use only Boeing 737 Classics and Tupolev Tu-214 narrowbodies for the discount-class flights.

The airline will continue to serve the same destinations with full-service operations from its other Moscow base, Vnukovo International Airport. The first day of its discount-class service, Transaero flew nearly 5,000 passengers to various CIS cities, achieving a close-to-100% seat-load factor.

Russian Federal Aviation Rules do not allow the airline to apply many of the restrictions that would be typical for low-cost service in other parts of the world. Transaero's discount fare includes free drinks and snack food, and even full meals, depending on the length of the flight. Passengers are allowed 10 kg (22 lb.) of luggage before fees are incurred. Some variants of the discount-class tariff even allow passenger to take business-class seats and check in 20 kg of luggage—the same weight that is accorded to the airline's regular economy-class customers. In addition, discount-fare tickets are refundable.

Russia's largest carrier, Aeroflot, complained about these fee constraints when it set up its low-cost subsidiary, Dobrolet, in October 2013. “Low-cost carriers will not take off in Russia if we do not harmonize our legislation with the global standards [including] non-refundable tickets, [and fees for] onboard meals, luggage and foreign pilots,” CEO Vitaly Saveliev said at the time. He expressed his hope that the government will legislate more LCC-friendly rules by year-end, but no proposed amendments have been adopted so far.

Nevertheless, last December Dobrolet applied for an air operator's certificate with the Federal Air Transport Agency. The process usually takes two months. Aeroflot has not yet designated a major airport for its LCC. Dobrolet will initially limit its services to the European part of Russia, although foreign destinations are reportedly included in the 2016 timetable. The start-up intends to offer up to 40% lower fares compared with legacy carriers.

According to initial plans, the new carrier was expected to start operations in spring 2014. In the first year, Dobrolet's fleet will include eight new Boeing 737-800 narrowbodies in all-economy-class configuration. The fleet will later grow by eight aircraft per year. Aeroflot plans to invest $100 million in its new subsidiary during the first two years.