Russia's economic policy committee of the State Duma, the lower house of Russia's parliament, submitted a bill intended to amend the legislation on competition and natural monopolies in Russia to limit the maximum share of any airline on the domestic market to 25% (RIA Novosti/Kommersant, 07-Apr-2011). The amendments to the legislation may be approved by the Duma by the end of 2011. There are currently no local airlines in Russia with a domestic market share of more than 25%. The largest carrier in the market, Aeroflot, accounts for around 15% of domestic market share. However, the carrier has claimed the bill in its current form may jeopardise the company's plans to become a global Russian airline. "These amendments, after Russia's accession to the World Trade Organisation, will not allow Aeroflot to compete with the world's other largest airlines," the carrier said. The committee also reportedly instructed the Federal Anti-Monopoly Service to work out common air ticket pricing criteria for all airlines and admit foreign companies to the domestic market, if the demand for air tickets exceeds supply. The Service stated it is not against the bill but added that it had not taken any part in its development. It also said that the country's regulatory base had to be improved to resolve the problem of prices on domestic services.
Russia may admit foreign airlines to domestic market
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This second part of the report on S7 highlights its respectable track record of growth in its operations and profitability since the establishment of its subsidiary Globus in 2008. In 8M2016 its passenger growth rate accelerated to 25%, after a 6% increase in 2015. Although demand for international air travel to/from Russia has slumped due to geopolitical developments, S7 has benefited from growth in the domestic market and from capacity cuts by foreign competitors on international routes. It has also benefited from the 2015 collapse of Transaero (although Aeroflot has gained more from this).
S7 Airlines Part 1: Russia's #2 airline's main focus is domestic, with pockets of strength in Asia
S7 Airlines, together with its subsidiary Globus, achieved a 25% increase in passenger numbers in the first eight months of 2016. Passengers flying the S7 brand totalled 10.6 million in 2015, making it Russia's second biggest airline after Aeroflot (thanks also to the collapse last year of former number two Transaero). This first part of CAPA's report examines S7's current network. A second part will analyse its growth, fleet and financial track record.
Moscow Domodedovo is S7's biggest airport and its main hub for the domestic market, which accounts for around two thirds of its seat capacity. Domodedovo is also its hub for international routes to Europe (mainly Eastern and Central Europe). Although it is the biggest airline at this airport, on a city pair basis on many routes from Moscow there is significant competition from the market leader Aeroflot, whose main hub is Sheremetyevo.
However, S7 also has a noteworthy network to cities in Northeast and Southeast Asia from regional airports elsewhere in Russia, in particular Novosibirsk and Vladivostok. Competition on these Asian routes is much less severe: indeed, S7 is the only operator on the majority of its routes to NE/SE Asia and its position is further boosted by codeshares (including with Aeroflot).