Russia’s S7 Airlines to launch a new low-cost carrier

According to airline officials on July 28, S7 Airlines, Russia’s private airline, is planning to start a new low-cost carrier next year in a market that is considered to be underserved by low-cost carriers (LCCs). The new Russian low-cost carrier will take off for the first time in July 2022.

In the first three years, Russia’s low-cost newcomer intends to expand its fleet by six or eight planes per year. S7 wants to buy 24 new Airbus A320neo aircraft for the new airline by 2024, with a total passenger flow of more than 7 million people from 2022 to 2024.

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As it will not be seeking any loans, the group will invest RUB2.5 billion to RUB3 billion rubles (USD34-41 million) in the project’s first stage, with a return on investment of four years. The airline anticipates being able to acquire Russian government subsidies through a regional airline subsidy program. The network will primarily focus on point-to-point connections between regions in central Russia, avoiding Moscow. It aims to transport approximately 1 million passengers in its first year of operation, increasing to 6-7 million by 2024.

The airline did not specify the routes but claimed that Omsk, Chelyabinsk, and Kazan Int’l are among the important cities where it currently sees demand. The new airline’s name and brand will be announced separately, and it will operate as a separate company from S7 rather than as a subsidiary. S7 Airlines’ director of strategy, Grigory Davydov, will be the start-general up’s director.

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Pobeda (DP, Moscow Vnukovo) of the Aeroflot Group is now Russia’s only low-cost carrier, with a fleet of forty-four leased B737-800s. The new airline will most likely become Russia’s second low-cost carrier and a direct competitor of Pobeda Airport. The new low-cost airline will begin selling tickets on April 1, 2022, with the maiden flight scheduled for July 2022.

Tatiana Fileva, the chairman of S7’s board of directors, said during the announcement, “It plans to lease planes with 186 passenger seats, four of which have already been contracted and another four are in the works.

People’s salaries are decreasing, particularly during the pandemic. There is absolutely a gap in Russia for increasing the number of seats on low-cost carriers,” she added. “We see significant potential in the interregional transportation segment, which we are unable to cover under the present S7 Airlines business model,” she said. This market share is applicable to any airline that follows the low-cost airline model.”

A new airline’s team is currently being assembled. It will also include individuals from other S7 group holding companies with a wealth of expertise and will be able to apply it successfully in a new project. The new team will be involved in constructing the route network, the selection of airports, and the creation of tariffs in the near future.

Direct interregional flights within Russia will be the core of the route network. The Russian Ministry of Transport “also drew attention to the need to create another low-cost airline,” according to S7 Airlines, which could improve accessibility from Central Russia to other regions.

“The Russian Federation’s Ministry of Transport stands for the continual development of a low-cost transportation system throughout the country,” says Vitaly Savelyev, Minister of Transport of the Russian Federation. According to him, this task is being carried out according to the President of the Russian Federation’s instructions to increase population mobility. The establishment of a new low-cost airline will largely meet the population’s demand for low-cost transportation in Russia.

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