Dobrolet nears take-off, but can Aeroflot's LCC subsidiary achieve the required cost structure?

Russia's parliament, the Duma, recently adopted a bill allowing Russian carriers to offer different fare classes and non-refundable tickets. The law will enter into force 60 days from its official publication, effectively creating the conditions to allow low-cost carriers to establish in the domestic market. Meanwhile, Aeroflot's planned new LCC subsidiary, Dobrolet, is nearer to its planned launch, reported to be in May-2014 with a service from Moscow to St Petersburg.

At Aeroflot's Capital Markets Day (13-Mar-2014), it provided more details of Dobrolet's business model (close to a pure LCC) and of its planned network development (11 destinations in 2014, rising to 36 after five years). With plans to price its tickets at a discount of 20% to 40%, we assess if and how it can achieve the necessary cost savings to ensure profitability.