Aeroflot Update

Transcript

Giorgio Callegari:Well, the Russian air market is proving to be very resilient, as we thought it would be, and it's growing again after, as you rightly said, a couple of years of serious challenges. The growth trend has shown itself again in the last quarter of 2016, and it's continued in the first quarter of 2017, and the outlook Well, I think we're doing it as a result of a combination of actions that we've taken. Obviously, the multibrand strategy is the pillar of our approach to market segmentation, so we're trying to, and obviously apparently succeeding in, offering different products to different market segments at the right price point and And we can do that because we have continuously invested in improving our efficiency so that our cost base is consistent with our price point. Yes, the Aeroflot Group now is based on basically 4 brands. The premium brand, which is Aeroflot, so for the premium passenger, both domestic and international. Aeroflot is a 4-star Skytrax-rated carrier. Then we have Rossiya. Rossiya is our regional carrier operating mostly out of St. Petersburg. and serving some leisure market out of Moscow. We then have Aurora in the Far East. That's a very small carrier, but a very successful example of combining commercial flying with subsidized flying for customers that would not have the ability to travel except for air services. And then a very successful addition to the group, our low-cost company, Pobeda, which carried 4 million passengers in 2014. How do you see the future of the group? 44 million passengers in 2016 with only 12 aircraft. You know, the definition of low cost is very difficult. I mean, it's subjective rather than difficult. We think that with the kind of efficiency that we have, our cost base is very low. We operate, as you rightly said, I mean, long-haul domestic services both as Aeroflot and Rossiya, and Rossiya certainly has a lower cost base. Whether we need to extend the Pobieda brand to long-haul low-cost is something that certainly we are looking at, but so far we've not seen the need to implement. Well, I'm lucky enough to have seen alliances from the beginning, so I mean, I was fortunate to be working on actually creating an alliance that never saw the light together with Alitalia, KLM, Northwest, and Continental at the time. So I did believe in the value of alliances at a certain moment. Now alliances have sort of, in my opinion at least, partially lost their raison d'être in the sense that when you have alliances with 25 carriers, it's very difficult to give a consistent customer proposition because it's 27 different operators with different service standards, different pricing policies, different business models. And therefore I think that alliances are an interesting and useful tool, but are no longer the answer in the current environment. What is happening is that you see alliances more and more replaced by bilateral agreements across alliances, because the most recent announcements have been Lufthansa and Cathay Pacific, so a stalwart of STAR that for many years has preached the discipline of being strictly alliance members only, joining with a Oneworld founder. And as a reply, Singapore Airlines with Air France. So you see that more and more what is driving business decisions is the need to provide your customers with products that meet their expectations. That's a very good question. We as airline, we don't think in terms of 18 months because that would be probably too short. I mean, we need to be planning over a longer horizon. And the challenges that we have and the opportunities that we have are both keeping our customer focus. So we need to continue to improve our product. So we've reached the 4-star level, but we don't think that's enough. So we want to go further. And at the same time, we want to ensure that all the upside that we still see in the Russian market is fully exploited.

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