President of Russia Vladimir Putin: Mr Savelyev, good afternoon.
Head of Aeroflot Vitaly Savelyev: Hello.
Vladimir Putin: Mr Savelyev, the airlines industry is certainly among the most affected ones, this is an obvious fact. We are practically in constant contact with you and have repeatedly discussed this subject. Planes are parked at airports, crews are also “on the ground,” they are not flying. It is not clear what our partners in many countries, including Europe, will do, as they still cannot clear the situation among themselves. And it is not clear when they will open their borders and territories to third-country nationals, including Russian citizens, even during the summer holidays.
In this regard, your assessments are certainly very relevant when it comes to what state the industry is in now. How do you see a way out of this situation?
We have already discussed this many times, however, I think that it is time to return to this issue again and outline some concrete steps.
Please go ahead.
Vitaly Savelyev: If you don’t mind, I have a brief presentation.
Mr President, I would like to start by simply telling you about last year’s performance, this is very important in order to understand how we are going to survive the crisis.
Aeroflot Group of Companies successfully completed the year 2019; we transported 60.7 million passengers. In terms of this indicator, we remain in the top twenty global carriers, which is very important for us. We showed a nine-percent growth. We earned 678 billion revenue, a 10-percent growth, it was also really vital for us, it now helps us to stay on the market.
We have a fleet of 359 aircraft, including Aeroflot operating a fleet of 246 aircraft. And our EBITDA at the end of the year was 169 billion – this is a very big indicator, this is a 11.5-percent increase.
Most importantly, the group’s main driver of growth is Pobeda Airlines. I would like to take this opportunity to thank you once again for believing in this project and supporting it five years ago when the laws were adopted that specifically backed low-cost airlines in Russia. Over these five years, Pobeda has demonstrated remarkable results. More than 30 million people have flown with the airline. In 2019 Pobeda carried 10.3 million passengers. The company is growing at the rate of 43 percent.
Vladimir Putin: The seat occupancy rate is very high.
Vitaly Savelyev: Ninety-four percent is an unparalleled rate. Pobeda operates a Boeing 737 fleet and for many performance indicators as an operator of this type of aircraft, it is a recognised world champion.
Today I would like to report on a new strategy that we would like to propose. This strategy is primarily aimed at increasing passenger traffic that is, helping Russians to be more mobile. It is also aimed at cutting fares significantly, which is very important for us under current conditions. This is what makes Pobeda a leading low-cost company and it is really vital for us.
Your comments are absolutely correct. It is not our first crisis, and Aeroflot is tremendously experienced in recovering. The current crisis is, of course, severe. In April our passenger operations dropped by 95 percent, the occupancy rate was only 33 percent. It was an absolute disaster for us. Compared to 2019, it is extremely low. Our daily passenger traffic is usually 110,000 to 120,000 people. But now we can see that Russians are starting to fly again. This is very important for us.
As you can see, the Lufthansa Group, Austrian Airlines, KLM and Air France suffered similar losses. Because of the crisis, their operations also dropped by 96 to 98 percent. We have all been affected and the recovery will be quite hard for all of us.
Vladimir Putin: Air France lost 98 percent.
Vitaly Savelyev: Yes, 98 percent.
Vladimir Putin: Austrian Airlines lost 99 percent.
Vitaly Savelyev: Yes.
We expect a 50-percent recovery and hope to carry about 30 million passengers this year.
I would like to note that our group has certain commitments that are very important for us, and we would like to reaffirm and preserve them. First of all, this is the support for Russian aircraft production. As you know, this year we are going to receive eight Sukhoi Superjets. Our fleet has 54 planes now, and next year we agreed to purchase another 14 planes as part of the agreement to purchase 100 aircraft we signed two years ago in your presence: the United Aircraft Corporation and Aeroflot Group. Aeroflot will have 150 Sukhoi Superjet planes. This is a large number, and we will use them.
Judging from our purchases, we believe that technically, the planes are starting to largely progress, they can fly for more than six hours, which is very important, too. Let me remind you that, according to the original design, a plane has to fly 8.2 hours per day, which is very close, and it begins to show good performance characteristics.
We are also the main buyer of the Irkut MC-21. We are waiting for this plane: we have a firm contract for 50 planes and an option for another 35. This means that our group will receive 85 planes. These are our agreements we have confirmed with the Ministry of Industry.
Now onto our responsibilities on flat rates. We are implementing them now despite our difficult conditions. We are flying, flying a bit less often because the demand has dropped. But we offer flights almost daily: to the Far East, Simferopol and Kaliningrad. The passenger load is low, about 50 percent, but still.
Vladimir Putin: And what about seating?
Vitaly Savelyev: We have agreed with Rospotrebnadzor, we persuaded them, the entire world recognises that a plane is a sealed capsule, and all aircraft, especially new ones, have HEPA filters that provide deep cleaning to the level of 99–97, approximately the level of operating theatre. Air changes every three to five minutes. Air is taken from the compressor located under the engine and is heated to 290 degrees. Formally, it is very difficult to fall ill on board. This is also shown by the statistics among our flight attendants. Our cabin crews have almost never fallen ill on board, only a small percentage. This is the world practice. Therefore, we agreed that there will be masks and gloves on board.
Vladimir Putin: Will pilots wear them too?
Vitaly Savelyev: Yes. But there will be no staggered seating. We will use a normal seating arrangement, otherwise it is impossible to take off. The economy will not work, or rather it will work against us.
The airports will keep social distancing in place for some time, with masks and gloves, too.
But I would like to say that, due to fewer passengers, up to 50 percent of capacity, we use staggered seating because we can. However, we remain adamant that the risk of getting infected on board is very low.
I would like to say a few words about support, Mr President. If it is possible we will return to this a bit later on but for now I would like to speak about ways of trying to overcome this situation. The models we have just shown in the Government and worked on with the Ministry of Economic Development and the Finance Ministry, show that even with the optimistic rather than the worst-case scenario, the whole civil aviation industry, not just Aeroflot, should take off and operate in Russia without any restrictions.
For instance, Pobeda has launched a new offer: tickets with them are 60 percent cheaper, selling at 999 roubles. When passengers buy tickets, its planes look as if they are almost full but then before departure their seats are only 80 percent occupied. Why? This is because many passengers are refusing to fly because the cities they are going to still have restrictions in place which scare passengers and they don’t fly. Of course, we understand this is the epidemiological situation but with all these restrictions we will not be able to fly.
Vladimir Putin: They will make decisions on lifting these restrictions but not because the aviation industry or, to be more precise, the aviation transport industry is having a hard time but because the situation is changing for the better. They are themselves interested in a full house. Practically all executives, all governors tell me about their plans on the stage-by-stage lifting of these restrictions.
Vitaly Savelyev: This is very important because as soon as we do this, the situation will change radically. And then we will recover if we start flying normally. We estimate that we will restore the level of 2019, last year, by December in terms of domestic flights.
International flights, if we start them, with special permission… We can look at the countries that are beginning flights.
In reality, there are quite a few companies that are starting to fly. I have a separate presentation whereby European companies, those from the Arab Emirates are starting to fly and re-establish their airport slots. We are planning, if this happens and we will start flying, we will reinstate our flight traffic up to 80 percent by December. By the end of the winter season, notably, the end of next March, we will be able to reach the 2019 level in terms of international flights.
And, of course, we would like to reinstate transit flights.
Mr President, we had a very good transit situation. We fought for it for seven years in China and brought the Chinese to Europe. In the past three years we were the number one foreign company. They called us “the most favoured foreign company.” We ousted Qatar Airways, a five-star carrier, and occupied its niche for three years. Of course, we are eager to get this position back again because we worked so hard to achieve it. This is a fairly large flow, about 10 million passengers and it is very profitable.
We have now approached the strategy which I would like to describe to you separately, in more detail. It is aimed at what I mentioned to you, notably, increasing the passenger traffic and considerably reducing ticket prices.
Vladimir Putin: All right then.