Aeroflot plans to boost passenger traffic 6% annually to 65 mln by 2030

MOSCOW. Jan 30 (Interfax) - Aeroflot's board of directors has approved a development strategy to 2030, according to which passenger traffic will grow 6% annually, the Russian flag carrier's CEO, Sergei Alexandrovsky, told reporters.

Aeroflot Group, which includes the airline of the same name as well as Pobeda and Rossiya airlines, carried 40.7 million passengers in 2022, when the Russian aviation industry faced restrictions due to Western sanctions, down 11% from a year earlier. Alexandrovsky said that this year, the group expected to carry up to 43.5 million passengers, an increase of almost 7% year-on-year. The group's passenger traffic is expected to reach 65 million by 2030.

"Aeroflot is planning to increase annual passenger traffic at a higher rate than the sector average," Alexandrovsky said.

The total passenger traffic of Russian and foreign airlines in the Russian market amounted to 108 million last year, according to Aeroflot. It is expected this will reach 128 million passengers by 2030 with an annual increase in traffic by 2.2%.

The group's share of the Russian market by 2030 will therefore increase from the current 40% to 50%, Alexandrovsky said. He said growth was expected due to the expansion of the aircraft fleet, the opening of new regional bases and new flight destinations abroad.

Aeroflot's previous development strategy was adopted in 2020. The group expected to increase its passenger traffic to 130 million by 2028 from 60.7 million in 2019, half of them carried by the low-cost Pobeda airline.

"Now it's not just Pobeda - the entire Aeroflot group is turning into a driver for the development of all Russian civil aviation," Alexandrovsky said.

Regional focus

Like the previous strategy, the new one calls for increasing the group's presence in Russia's regions. There are plans to develop three clusters with base airports: in the south of the country for flights to regions and transfer to the Middle East; the Far East, including for transfer to Asia; and in the Volga region and Urals, for transportation within the region and transfer to south Urals/Siberia.

"Bases have essentially been established in Sochi, Krasnoyarsk and in the Far East - in Vladivostok and Khabarovsk. Our agenda includes choosing a regional base in the Volga and Urals cluster. I think our choice will be made by 2025-2026, and will be able to start operating," Alexandrovsky said. Kazan, Ufa, Yekaterinburg are among the airports under consideration.

"We are also considering another base in the southern cluster. One of the options is Mineralnye Vody," he said.

The total estimated volume of passenger traffic through regional bases by 2030 is estimated at up to 7 million, excluding flights to Moscow and St. Petersburg.

Fleet

The group's fleet will have about 500 aircraft by the end of 2030, according to the strategy, compared with 349 at present. Alexandrovsky said 70% of them would be Russian-built, including 339 for which a framework agreement has been concluded with the United Aircraft Corporation.

"So far, we only have a framework contract, but we are working on firm contracts. The first two aircraft, SSJ-NEW, are scheduled for delivery in December 2023. Obviously, we will move to a firm contract in the near future," Alexandrovsky said.

Aeroflot expects to receive the first all-Russian MC-21 in the fourth quarter of 2024. Aircraft from the first deliveries, according to Alexandrovsky, will be distributed between Aeroflot and Rossiya.

The group will need about eight full-flight simulators to train pilots to operate the Russian-built planes, Alexandrovsky said. "There are no deadlines for the delivery of simulators yet. We are waiting. Usually a simulator appears after the aircraft, six to eight months after delivery," he said.

According to the previous strategy, only Rossiya, whose fleet by 2028 was estimated at 250 aircraft, was supposed to receive and roll out new domestically produced aircraft. Aeroflot and Pobeda planned to expand only by adding Boeing and Airbus. In general, it was expected that the group's fleet would grow to 590 aircraft by 2028, including 235 Russian planes.

Digital

Aeroflot plans to switch entirely to Russian software by 2030, Alexandrovsky said. Most of the import substitution is planned for the period to the end of 2024.

Last year, Aeroflot made the transition from the American Sabre to Russia's Leonardo flight reservations system, Alexandrovsky said. Basically the system works, but a number of client services are still unavailable, he said.

"We will significantly expand the list of available services by the end of the first quarter, and continue to work on implementing more than 400 improvements to the Russian system in 2023," he said.

Also, Aeroflot plans this year to hold a competition and launch a project to switch from SAP ERP to the Russian enterprise management system. The company hopes to implement this project within two years.

Finances

The strategy envisages the group achieving a positive financial result, Alexandrovsky said. He did not say how Aeroflot performed last year.

"Based on the 2022 results, we feel absolutely confident from the point of view of servicing our obligations and from the point of view of free cash flow," he said.

He also said the group's leverage at the end of 2023 would be no higher than at the end of last year. The company is not in need of any further financial recovery measures this year.

Aeroflot's air fares are expected to be in line with inflation in 2023. "Going forward it's down to the market, purchasing power, demand," he said. Aeroflot generally kept prices level with the previous year in 2022, he said.

In keeping with the strategy, Aeroflot plans to increase revenue from additional services "through the development of partnerships with advanced services," he said. The goal is to double the share of such revenues in the group's total revenue.