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Russian aviation, Europe's biggest market, led by LCC Pobeda

Analysis

The Russian Federation is now Europe's biggest aviation market by seats, having recovered 82% of its 2019 capacity in the week of 07-Jun-2021. By contrast, Europe's historical leader, the UK, has recovered only 19% and now ranks seventh.

Russia's performance has been strengthened by its domestic market, the largest in Europe, which is back above 2019 levels of capacity and traffic.

Total passenger numbers (domestic and international) carried by Russian airlines were back to 77% of 2019 levels in Apr-2021, the most recent month for which data are available, compared with approximately 20% for Europe as a whole.

Russia's leading airline, Aeroflot, carried only 45% of pre-crisis traffic in Apr-2021, but its regional subsidiary Rossiya carried 80%. Remarkably, its LCC Pobeda was 33% above Apr-2019 passenger numbers.

Summary

  • Russia is Europe's biggest market by weekly seats. It has recovered 82% of 2019 weekly capacity, more than any other large European country.
  • Russia has Europe's largest domestic market, which is back above its 2019 levels of capacity and traffic.
  • This has helped Russia's total traffic performance to recover faster than Europe's as a whole.
  • Aeroflot was Russia's biggest airline by passenger in Apr-2021. Its LCC subsidiary Pobeda has grown above its 2019 size and is the group's main growth engine.

Russia is Europe's biggest market by weekly seats

According to data from CAPA/OAG, Russia is the biggest market in Europe by airline seats in the week commencing 07-Jun-2021 – up from seventh place in the equivalent week of 2019.

The UK, which was the biggest market two years ago, is now ranked seventh.

Europe: top 10 countries by seats, week of 10-Jun-2019 compared with week of 7-Jun-2021

10-Jun-19

7-Jun-21

Rank

Countries/Territory

Seats

Rank

Countries/Territory

Seats

% of 2019

1

United Kingdom

7,100,711

1

Russian Federation

3,027,267

82%

2

Germany

6,026,365

2

Spain

2,198,721

37%

3

Spain

5,888,607

3

Turkey

1,949,594

50%

4

France

4,261,705

4

Germany

1,702,012

28%

5

Italy

4,242,442

5

Italy

1,500,858

35%

6

Turkey

3,875,253

6

France

1,458,440

34%

7

Russian Federation

3,674,235

7

United Kingdom

1,371,078

19%

8

Netherlands

1,884,294

8

Greece

838,458

48%

9

Greece

1,742,115

9

Netherlands

720,571

38%

10

Switzerland

1,431,564

10

Portugal

662,863

48%

Russia has recovered 82% of its 2019 weekly capacity

Moreover, total seat capacity to/from/within Russia is at 82% of 2019 levels. Among Europe's top 10 countries by seats for this week (7-Jun-2021), this is comfortably the highest percentage of pre-crisis capacity. 

This percentage has fallen only slightly from 84% of the 2019 weekly seat numbers in the previous week, which was a peak level during the coronavirus pandemic crisis so far. Russia has consistently been significantly above the European average on this measure throughout the crisis.

Russia's 82% level in the week of 7-Jun-2021 compares with 41% for all of Europe.

Russia has been at, or above, 50% since mid Jul-2020, whereas Europe as a whole has not risen above 45% at any point since before the crisis.

Russian Federation and all Europe: weekly airline seat capacity as a percentage of 2019 levels, 30-Dec-2019 to 30-May-2021

 

Russia has Europe's largest domestic market

The Russian domestic market is the biggest in Europe by seats in the week of 07-Jun-2001, more than twice the size of number two Turkey (Russian domestic was also number one before the crisis, but only 44% bigger than Turkey in the equivalent week of 2019).

In all of 2019, the Russian domestic market accounted for 51% of seats, which compares with an average of 24% across all European markets. This has helped Russia's overall airline market to weather the crisis.

Russia's domestic market was less severely hit by the onset of the pandemic, falling to a low of 40% of 2019 levels in May-2020, whereas its international market fell to just 5% in Jun-2020.

Moreover, domestic capacity recovered more rapidly, rising above 100% of 2019 levels between late Jul-2020 and mid Oct-2020.

Although it then fell to 80% by late Nov-2020, Russia's domestic market has risen to a new high of 119% of 2019 seats in the week of 07-Jun-2021. Its international capacity is at 43%, having reached a pandemic era peak of 48% in the previous week.

The domestic market increased its share of total Russia capacity to 75% in 2020, and this has risen to 78% in the first 23 weeks of 2021.

Russian Federation: domestic, international and total weekly airline seat capacity as a percentage of 2019 levels, 30-Dec-2019 to 30-May-2021

 

Russian domestic traffic is the world's strongest growing domestic market

Domestic Russia is strong, not only in capacity terms, but also in passenger traffic.

IATA data indicate that Russia recorded domestic RPK growth of 11.0% versus 2019 in Apr-2021 (the most recent month for which data are available), with domestic load factor down only 1.0ppt, to 79.9%.

This RPK growth was stronger than in any other major domestic market in the world (the only other large domestic market to achieve positive growth versus Apr-2019 was China, with an increase of 6.8%).

Domestic RPK growth* versus the same month of 2019, Mar-2021 and Apr-2021

 

Russian passenger numbers are performing better than for Europe as a whole

Its domestic market has buoyed Russia's total passenger traffic relative to Europe-wide performance.

Russian airlines carried 69.2 million passengers in 2020, or 54% of 2019 numbers (source: Russia's Federal Air Transport Agency). This compares favourably with global passenger numbers, at just 39% of 2019 levels (source: IATA).

Russian airlines achieved 48% of 2019 RPKs in 2020, compared with 30% for all European airlines.

The traffic outperformance comparison has continued into 2021.

According to Russia's Federal Air Transport Agency, Russian airlines carried a total of 7.2 million passengers in Apr-2021, of which 6.2 million (86%) were domestic passengers.

Total passenger numbers were 77% of Apr-2019 levels, while domestic passenger numbers were at 112%.

Passenger data for Europe as a whole in Apr-2021 are not yet available, but preliminary data from ACI Europe indicate a level of approximately 20% of 2019 numbers for the month.

Total passenger numbers (million) carried by Russian airlines, Apr-2019 and Apr-2021

 

Aeroflot was Russia's biggest airline by passenger in Apr-2021

Russia's leading airlines – those carrying more than 0.5 million passengers in Apr-2021 – had widely varying results in terms of traffic growth versus 2019 for the month.

In Apr-2021 Aeroflot, the country's largest airline, suffered a 55.1% fall in passenger numbers, to 1.37 million, according to the Federal Air Transport Agency.

S7 Airlines' traffic was just under Aeroflot's, at 1.35 million – almost back to 2019 levels (only 0.7% below Apr-2019).

Pobeda has grown above its 2019 size

In Apr-2021 Aeroflot's LCC subsidiary Pobeda increased passenger numbers by 33.1% versus Apr-2019, to 1.0 million.

Aeroflot's regional subsidiary Rossiya experienced a 20.4% decline from 2019, to 0.64 million, just ahead of Ural Airlines' 0.62 million (11.0% below Apr-2019).

Russian Federation: passenger numbers (million) for leading airlines, Apr-2019 and Apr-2021

 

Pobeda made a rapid recovery from the COVID-19 crisis after carrying no passengers in Apr-2020 and May-2020, returning to year-on-year passenger growth by Jul-2020 (when traffic was up by 1.6% vs Jul-2019).

Pobeda then achieved double digit growth in passenger numbers from Aug-2020 to Oct-2020 and broadly stable numbers in Nov-2020 and Dec-2020. The LCC was profitable in 2020.

In the first four months of 2019, its traffic grew by 36% compared with the equivalent period of 2019, at a load factor of 92.3%. It remained profitable in 1Q2021.

Pobeda is the main growth engine for the Aeroflot Group

In May-2021, Pobeda added Moscow Sheremetyevo, the main hub of its parent Aeroflot, to its Moscow Vnukovo-centred network. It is confident that it can achieve 25 minute turnaround times at Sheremetyevo and is operating in partnership with Aeroflot via a codeshare.

Pobeda plans to have 10 Boeing 737-800s based at Sheremetyevo by the end of summer 2021. Aeroflot will transfer 50 of the type to Pobeda from 2021 to 2023.

Pobeda is the main growth engine for the Aeroflot Group, with plans to grow from 10 million passengers in 2019 to 55-65 million in 2028.

This compares with Aeroflot airline's planned growth from 37 million to 35-40 million and Rossiya's planned growth from 12 million to 20-30 million over the same time frame.

Pobeda has the crucial advantage of being Russia's only LCC, and it seems that there is currently nothing, not even a global pandemic, to stop its growth. Others have been considering launching LCCs in Russia, but Pobeda has a considerable head start, and is backed by the resources of the Aeroflot Group.

If Pobeda can successfully adapt its business model from being a pure point-to-point operator to embracing connections with Aeroflot, growth (and profitability) look set to continue.

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