Vitaly Saveliev, Aeroflot Group CEO, has steered the airline back to its former glory, but says there is still much to be achieved
Aeroflot once operated the world’s largest fleet as the monopoly supplier of air transport to the USSR. Today, it is focused on competitiveness. As CEO Vitaly Saveliev explains, the establishment of a low-cost subsidiary and a relentless drive towards digitization point to a positive future.
Are you happy with the performance of the airline and did the soccer World Cup meet your expectations?
In 2018, the Group continued to grow its network, adding new destinations and increasing capacity on the most popular routes. Our results clearly illustrate that this approach has been effective.
In the first half of the year, the Aeroflot Group carried 24.9 million passengers, which is 8.2% more than in the same period last year. Group revenue totaled 265.8 billion rubles, an increase of 13.2%. Like most airlines around the world, profitability is under pressure from fuel prices. To offset increased fuel costs, in addition to on-going cost control programs, we launched a number of new cost initiatives.
As for the World Cup, which Russia hosted this summer, we are more than happy with the results. In addition to contributing to operational and financial results, the tournament proved an excellent opportunity to demonstrate our product to foreign visitors. We saw strong demand on the majority of domestic and international routes. In Russia, in addition to our high-frequency network which allowed us to meet this increased demand, we developed and launched a special program of direct flights between the World Cup host cities.
So, the overall outcome was positive, although it wasn’t without difficulty. The share of transit passengers decreased on certain routes because of the high demand for direct flights. For the most effective use of our resources, flight schedule optimization was implemented, which meant reducing the capacities on routes to Asian destinations and increasing them on routes to Europe and the United States.
Aeroflot is a Russian national champion, and as such one of our additional aims is to support Russian manufacturers to strengthen the country’s position in the global aviation industry by purchasing innovative Russian-built aircraft
How do you want to position the Aeroflot brand? Do you want to be seen as a Russian or international brand?
We are a leading global airline with an international outlook, though we embrace the Russian character of our brand wholeheartedly. We want the Aeroflot brand to be perceived as an international brand with Russian roots and global scales. When I became CEO in 2009 and brought in new management with the aim of thoroughly modernizing Aeroflot, many people suggested that we drop Aeroflot’s longstanding logo. Instead, we kept it because we are proud of our Russian identity and heritage, and embrace our history.
We celebrated our 95th anniversary in 2018, making us the third-oldest airline in the world. During World War II, Aeroflot played a crucial role supporting our forces that freed Europe and the rest of the world from the Nazis. By 1990, Aeroflot had entered the Guinness Book of World Records as the world’s largest airline by passengers carried. This is quite a legacy and one that we are very proud of.
What can you tell us about Aeroflot’s fleet strategy?
The cornerstone is an extremely young and modern fleet. Our fleet is made up of Airbus A320s, A330s, Boeing 737s, Boeing 777s and Superjet 100s (SSJ). The average age of our fleet is four years. In the near future, we plan to introduce the long-haul Airbus A350 aircraft.
Aeroflot is a Russian national champion, and as such one of our additional aims is to support Russian manufacturers to strengthen the country’s position in the global aviation industry by purchasing innovative Russian-built aircraft.
We are the leading operator of the Russian-built, short-haul narrowbody Superjet 100, with 50 SSJs in our fleet. In September 2018, Aeroflot and United Aircraft Corporation signed an agreement for the delivery of another 100 Superjet 100 aircraft. On top of that, we are expecting delivery of 50 Russian medium-haul MC-21 aircraft.
In total, our company will receive 200 domestic aircraft by 2026. Aeroflot has always played an important role in the manufacture
of Russian aircraft. It has helped to perfect all Soviet and Russian aircraft.
Does the government understand the value of aviation and are there regulations that need updating or changing?
The government understands the importance of civil aviation for the development of Russian regions and national economy. In recent years, Russia has adopted large-scale amendments to aviation legislation. Russian airlines now have the right to sell non-refundable tickets and basic fares as well as to hire foreign pilots; measures that laid the foundation for low-cost domestic flights.
The successful introduction of a mechanism to blacklist highly disruptive passengers means we have been able to significantly increase levels of safety on-board and strengthen measures against hooliganism. Aeroflot has actively supported these changes. This has made it possible to increase the competitiveness of Russian airlines in the global market and integrate Russian aviation legislation with international legislation.
Work is underway to develop the national aviation industry and to increase the appeal of Russian aircraft manufacturing. A lot is being done to change legislation across various legal areas; civil law, taxation, and customs. It will be necessary to develop new laws and adjust existing aviation laws and regulations to ensure that civil aircraft are maintained to the highest international standards.
1923 - Aeroflot was founded in 1923 as Dobrolet and during the Soviet era, was the national airline and the largest in the world. After the USSR broke up, Aeroflot became a joint stock company, and is still 51%-owned by the Russian state
Aeroflot Group launched a low-cost subsidiary in 2014. Could you tell us how the airline is faring?
From a standing start, Pobeda has expanded to fly to 30 destinations outside Russia and is on track to carry more than 7 million passengers this year, a 50% increase year-on-year. This will allow Pobeda to take its place among Russia’s five largest airlines by passenger numbers.
The launch and build-out of Pobeda is one of the biggest accomplishments in Russian business in the last decade. We built a completely new company from scratch. In fact, we brought a segment of the aviation industry—the low-cost sector—to Russia for the first time. Pobeda’s operational efficiency has been confirmed by Boeing. According to the manufacturer, Pobeda has the highest flight time on Boeing 737NG among all airlines that operate the aircraft globally.
Pobeda also provides a valuable contribution to Russian society, improving mobility from the Russian regions, generating high-quality jobs and allowing millions of lower-to-middle income Russians to fly for the first time.
In recent years, Aeroflot has undergone significant changes in terms of digitization
Technology is such an important part of the airline business. How does Aeroflot leverage technology?
In recent years, Aeroflot has undergone significant changes in terms of digitization.
The main priority is our passenger and their satisfaction, so we do our best to make the passenger’s digital experience as easy and enjoyable as the physical experience. Aeroflot’s website is Russia’s biggest online store, and our mobile app has become a fully-fledged passenger companion and was recently recognized as the best app of the year.
Passengers are increasingly expecting Internet service on-board. Our response to customers’ wishes is the gradual roll-out of wireless Internet access on all aircraft across our fleet. Today, all Aeroflot long-haul aircraft are equipped with Wi-Fi access and we are installing Wi-Fi on our medium-haul aircraft.
In addition to the digitization of the customer experience, we are actively working on the digitization of our internal procedures, from office work to aircraft maintenance. Thanks to the use of advanced industry solutions, Aeroflot has managed to automate 100% of business procedures.
One key area of development is the use of Big Data. We are successfully leveraging Big Data in digital marketing and we’re confident that these technologies will allow radical change in other areas of Aeroflot’s activities.
An important milestone in Aeroflot’s digitization process was the introduction of NDC standards. This year, we received a level 3 certificate, and we hope that Aeroflot will be able to improve the efficiency of the agency channel due to this technology.
We pay special attention to digitizing how Aeroflot employees work. For example, we discontinued use of paper documentation, both at management level and at the level of the cabin crew and pilots who now use iPads to access flight documentation. The company’s senior executives use the Manager’s Monitor system, specially designed for the needs of Aeroflot, with online access to more than 500 indicators of the company’s activities and performance.
298 destinations served by Aeroflot Group across three continents
361 aircraft make up Aeroflot Group fleet
4.1 years is the average age of the Aeroflot fleet
10th Aeroflot is part of the SkyTeam Alliance, joining as the 10th member of the alliance in April 2006
Next year will mark your 10th anniversary as CEO of Aeroflot. What do you consider your biggest accomplishments?
In 2010, the President [Vladimir Putin, then Prime Minister] set Aeroflot management the task of creating a fully-fledged aviation holding. At the start, our core assets were limited to a number of weak, disparate regional airlines that the state transferred to Aeroflot’s control. In parallel, we launched Russia’s first low-cost airline from scratch.
As a result of focused efforts and several strategic transformations, today, in addition to Aeroflot, the Group includes Rossiya, one of the largest Russian airlines; Pobeda, an efficient low-cost carrier; and Aurora, a far Eastern airline. In 2016, for the first time in Russia, an aviation holding was created.
A real breakthrough was the creation of Pobeda Airlines. Pobeda has had a huge impact on the accessibility of air travel for Russian people. For the first two years of its existence, more than a million people were able to afford air travel for the first time. Since its creation, Pobeda has carried more than 15 million passengers. And ahead of schedule, Aeroflot once again became one of the largest airlines in the world. In 2017, Aeroflot officially joined the global top 20 and European top five (among legacy carriers). Aeroflot’s passenger traffic has increased from 8.6 million in 2009 to
32.8 million in 2017. On an Aeroflot Group level, we transported 50.1 million passengers over the past year, a record figure for modern times.
We are optimistic about our future and we do our best to make sure that the passenger experience with us is always convenient and comfortable.