Russia's Pobeda may face low cost airline competition
The head of Russia's competition authority, the Federal Antimonopoly Service (FAS), has called for more competition in the country's low cost airline segment. He has even suggested that Aeroflot launch another LCC to compete with its low cost subsidiary Pobeda.
Pobeda is the country's only LCC, with 7.2 million passengers in 2018 giving it a 5.2% traffic share. It has 100% of domestic LCC capacity and approximately 40% of international LCC capacity to/from Russia, against fragmented foreign low cost competition.
Pobeda has grown rapidly since its Dec-2014 launch and the relative underpenetration of air travel in Russia suggests that it will be able to continue to channel latent demand through its low fares.
However, Pobeda's load factor has peaked, and it slipped to an underlying operating loss in 1H2019.
More low cost competition would help to accelerate the growth in air travel's penetration levels in Russia and might even focus Pobeda on an even more efficient cost structure. Aeroflot's preference would be for others to launch competitor airlines.
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