President of Russia Vladimir Putin: I am aware that you are prepared to report on your company’s performance in 2017, but let us begin with a subject that worries a great many of your passengers – rates, flat rates.
General Director of Aeroflot – Russian Airlines Vitaly Savelyev: Mr President, you are absolutely right.
First of all, allow me to report that Aeroflot is now well and truly back in the global civil aviation club 30 years on. In 2009, when I joined the company, Aeroflot ranked 68th internationally in terms of passenger traffic, and now we are in 20th place, that is, we have joined the top twenty international leading airlines. This is an important achievement not only for us but for our country too.
I will tell you a little later separately, if I may, about the current developments on the market. Pobeda, our low-cost carrier, which was created with your participation, has shown impressive results.
With regard to flat rates, in fact, they are very popular. We fly to five cities in the Russian Far East, Kaliningrad and Simferopol. Our passengers, the Russian people, really like it. This year, we carried 1.5 million passengers using flat rates and since the beginning of 2015, 4.5 million passengers.
Since the passengers are disappointed that we run out of flat rates fairly quickly, we have a proposal, if you agree, to transfer our airline Rossiya to flat-rate arrangements next year as well. That will provide about 75 percent of additional seats, and we will thus make an equivalent of 900,000 seats available on the market.
The only thing is, there will be a small difference in prices, considering that Aeroflot is a premium segment, and we will have to raise the rate to the Far East from 22,000 rubles to 25,000 rubles for a return trip. Rossiya airlines will then start flying at our current flat rate of 22,000 rubles for a round trip.
Aeroflot will leave flights to Kaliningrad and Simferopol without adjustment for inflation. If such a proposal is interesting, we are willing to consider it, and make it happen through our airline’s subsidies.
Vladimir Putin: Good. Let us do it.
Vitaly Savelyev: May I ask you my second question straight away? We want to suggest to you what we see as a good idea. Next year is very important for us – Russia will be hosting the FIFA World Cup.
Vladimir Putin: Will you let fans travel free of charge?
Vitaly Savelyev: We could but…
Vladimir Putin: I know this is a good idea – you will charge them one ruble.
Vitaly Savelyev: No, not free of charge Mr President. We will charge them five rubles. We want the World Cup to be a great success.
We will charge all the Russian fans five rubles (including all charges and fees) for a one-way trip on all Aeroflot routes to any city that is hosting the World Cup matches. To avoid hype, we will sell tickets three days before a match and three days after it.
We would like to ask you, as we noted in our letter, to instruct our partner Roscongress to help us distribute air tickets using FAN IDs and match tickets.
Vladimir Putin: Are you referring to the matches of the Russian team?
Vitaly Savelyev: Yes, the Russian team alone.
This amounts to about 70,000 seats for us. Naturally, we are pegging hopes on our team. If our team gets to the finals, this number will increase. This is why we proceed from this figure.
We think our team should perform well and its fans should be happy. This is why we are submitting this initiative to you. If you support it, we will start selling tickets to our fans as of January 1.
Vladimir Putin: All right.
Vitaly Savelyev: If I may, I would like to say a few words about our company.
Vladimir Putin: Yes, go ahead please.
Vitaly Savelyev: Mr President, I told you that we have become one of the world’s top twenty companies ahead of time. We were supposed to reach the required parameters in 2025 but we did it this year. We carried over 50 million passengers, including 25 million in Russia.
Vladimir Putin: What place do you occupy in Europe?
Vitaly Savelyev: We are seventh in Europe. In 2009, we were 15th. Europe has major players but we have the time. We should be among the world’s top five companies by 2025. I hope that we can achieve this before that year.
This year was particularly generous to us in terms of awards. We received over 60 awards of all kinds, but I will focus on a few of the most interesting ones.
The first award concerns Aeroflot becoming the world’s and Russia’s strongest aviation brand. The strongest brand is also the most recognisable brand with particular customer loyalty. We are pleased to know that we represent Russia not only in the aviation business, but all other businesses as well.
With regard to the second, just a month ago, we received five stars from the US company APEX, which is comparable to Skytrax in Europe. We are a five-star company by American standards, and the decision was made by passengers.
We also confirmed our four-star rating assigned to us by Skytrax. It has to be confirmed annually, which we managed to accomplish this year.
On December 10, we received a World Travel Award, also known as the World Tourist Oscar. We are the world's leading aviation brand. This brand is indicative of loyalty as well. Importantly, we received this award up against Emirates.
We have also become China’s favourite foreign airline. We managed to achieve it this year. We outdid the five-star Qatar Airways, and this is also important for us.
The world’s largest traveller website recognised us as the best in Europe, and our business class as the best internationally.
A few words, if I may, about the Aeroflot Group. First, I would like to thank you for your support and signing the laws on black lists, which we discussed about a year ago, and the law on baggage-free rates. All of that makes it possible for the Aeroflot Group to develop on a fairly sustainable basis. Aeroflot remains a premium segment airline. We will have transported about 33 million passengers by the end of this year.
Rossiya Airlines, our subsidiary, works in the middle-class segment and will transport 11 million passengers; Pobeda will transport 4.7 million passengers, and Aurora Airline 1.5 million. In general, we will have transported over 50 million passengers by the end of 2017.
On a separate note, I would like to take a moment and say a few words about Pobeda. Initially, with your support, we created Dobrolet, which fell under sanctions later. We decided not to waste our time and just reformatted it by launching Pobeda. In fact, Pobeda turned out to be a victory for us [Pobeda means victory in Russian – Tr.]
This company is an absolutely independent market participant. We do not finance it, nor do we support it in any other way. It has been profitable for the second straight year. This year, we expect it to bring a net profit of 3.5 billion rubles, just like in previous years, half of which will be paid out as dividends.
In two years, Pobeda carried over 11 million passengers, including over a million that had never travelled by air. They were railway passengers on which we relied. The passengers are content with Pobeda.
There are many questions, but there is one good thing about Pobeda – it is the world champion in using American Boeings. It keeps them in the air for 16 hours. It takes at most 36 minutes to turn them around on the ground. They are 95 percent full.
The main point is that Pobeda does not depart from Vnukovo alone where it is based. It also flies from other Russian cities – St Petersburg and Sochi. We are moving it further into the central part of Russia. Today Pobeda makes half of its flights from cities outside the Moscow hub.
I think this is an interesting slide (showing slides) where we show the development of the European and US markets – from five to 6.8 percent. The figure for the world market is 6.8 percent.
Mr President, in our estimate, our market will grow by 21 percent for the first time. I am referring to the civil aviation market, which is very important because people primarily give up travel when they are running out of money and begin to save. As you can see, the decline started in 2015.
The Aeroflot Group was continuously growing. It was growing steadily but slowly. This year we see considerable growth, and if it proves that high, as we expect, it will reach 121 million, and this will be the biggest passenger traffic figure in the past nine years.
Vladimir Putin: I hope the purchasing power has grown a bit.
Vitaly Savelyev: The economy is doing better, and the purchasing power has grown. The airlines that openly engaged in dumping quit the market. In general, the situation is getting back to normal, and we are witnessing this. As I said, Aeroflot will carry 33 million, and the main point is that it is not a monopoly or dominant company in the market. Our flights make up just 41 percent of the market. We have competitors on every route.
We are trying to preserve our competitive advantage that is linked with the upgrading of our fleet. Our fleet is the youngest in the world (the average age of our aircraft is 4.1 years) among the companies with over 100 aircraft.
Mr President, this diagram shows (showing the diagram) the passenger loyalty index. We have measured it since 2009. We are behind Emirates only by two-tenths of a percentage point. Other European airlines are two or three times below us.
One percentage point of this index gives us the revenue of 1.3 billion rubles. In other words, Aeroflot is working well according to its own passengers.