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Aeroflot's ambitions for the future - and proud history

31 Jan 2019 by BusinessTraveller
Aeroflot's ambitions for the future - and proud history
Panov Aeroflot

Andrey Panov is Deputy Chief Executive of Aeroflot, and responsible for the airline’s strategy and marketing.

Panov joined Aeroflot in December 2018 after working for seven years as a consultant at Bain & Co, rising to become a partner in the Moscow office. During his time there he was also one of the drivers behind the launch of Aeroflot’s budget airline, Pobeda, which last year carried more than 7 million passengers.

Business Traveller spoke with him at Aeroflot’s offices in Moscow, where he explained that one of the airline group’s strategic aims for 2023 was to carry 100 million passengers.

Why focus on hitting that number rather than, for instance, making a profit?

“Making a profit is, of course, important, but so are our passenger numbers,” Panov said. “The airline has several strategic aims for its 2023 plan, including carrying a total of 100 million passengers across the group, up from 56 million in 2018.

“Of course, many airlines aim for growth, but you must understand the history of the Aeroflot brand – the world’s strongest airline brand by Brand Finance’s account. Aeroflot was once the largest airline in the world, carrying 130 million passengers across the old Soviet Union. When the break-up came, many airlines were formed from the splinters and Aeroflot’s passenger numbers dropped as low as three million, with civil aviation in Russia as a whole at 22 million.

“That process was reversed when the current CEO, Mr Vitaly Saveliev, took over in 2009 and heralded the airline’s turnaround. Aeroflot’s passenger traffic increased many-fold, from 8.6 million in 2009 to 32.8 million in 2017 (50.1 million as Aeroflot Group), a record figure of modern times. In 2016, the construction of a fully-fledged airline holding was completed, making history in Russian aviation.”

Panov Aeroflot 2

Panov continued: “Ahead of schedule, Aeroflot once again became one of the largest airlines in the world. In 2017, Aeroflot officially joined the global top 20. This marked the achievement of the core aim of the previous ‘Strategy 2025’. So now we have set ourselves a new aim of carrying up to 100 million by 2023. Instrumental to this target the anticipated rise in international transit traffic from 5 million in 2017 to 10-15 million in 2023.

“Such targets give all of us working for the airline something to aim for, and reflect our pride in the airline.”

Competition, however, has never been so fierce, and there is no shortage of options for travellers needing to use a hub to reach Asia, for instance. Why should they choose Aeroflot as opposed to, say, one of the large airport hubs in the Middle East?

“For international traffic, Aeroflot has the significant advantage that Moscow is on the way to Asia, unlike the Middle East carriers, so it saves time to use Moscow,” he said.

When asked whether this was very similar to some other airlines’ strategies, Panov smiled and said that Aeroflot has a host of advantages over competitors, which also fly to a number of destinations in Asia and promote their hubs as the most direct route between Europe and Asia.

“We also have important cost and efficiency edge over many peers, both in terms of the volume of flights, which is why passenger numbers are important, but also because of lower labour costs despite high education and proficiency level of personnel,” he said. “Moscow also has the advantage of a large home market – 20 million in Moscow’s catchment area and of course the 146 million population of Russia.”

He added: “We also operate the youngest fleet of any airline worldwide that flies at least 100 aircraft. The average age of our fleet is four years, which makes us very cost-competitive, helps to reassure the public on safety concerns and is more environmentally friendly, both in terms of fuel consumption and noise.”

The Aeroflot Group has a large fleet of some 360 aircraft in total, but these are spread across the various airlines in the group, which include Pobeda, Rossiya and Aurora. Panov said that having several different aircraft types across such a large fleet was not unusual and was inevitable given the history of the airline, but also meant that it could achieve the best price when buying new aircraft, something it has done a lot of in recent years.

There are plenty who still doubt Aeroflot’s ambitions, but recent achievements can’t be denied and serve as a good inspiration.

“When Aeroflot decided to launch its own low-cost airline, there were plenty of people who didn’t believe it would work,” Panov said. “It cost approximately US$50 million to launch, and during first three years it made approximately a total profit of US$100 million.”

On whether Pobeda was creating demand or merely satisfying demand that was already there, Panov said that even with the recent resurgence of flying in Russia, the number of flights was still a bit less than 1 per person, much lower than in other countries with comparable level of economic development. This creates huge market potential.

For Aeroflot, new aircraft deliveries will continue, and the A350-900 will arrive in the first half of next year. When international travellers are deciding whether to fly with Aeroflot, the improvements in fleet and service on board will obviously help, but so will the experience of transiting at its hub, Moscow Sheremetyevo International.

“The opening of the new Terminal B has allowed the gradual transferring of domestic flights and freed up much-needed space for international flights in Terminal D,” Panov said.

“And construction is continuing, not just on new terminals but the new third runway. I am confident that the investment in the airport will result in more new lounges to add to the ones already recently opened. We work together well with the airport, with the passengers in mind.”

aeroflot.com

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