Aeroflot to Open Low-Cost Unit After EasyJet, Wizz Enter Russia
Stock Chart for Aeroflot - Russian Airlines OJSC (AFLT)
OAO Aeroflot, Russia’s largest airline, plans to establish a discount division at a cost of $100 million over two years after specialist no-frills operators EasyJet Plc (EZJ) and Wizz Air Ltd. targeted its home market.
The Dobrolet unit will commence domestic services next spring using eight Boeing Co. (BA) 737-800 planes -- the same model employed by Ryanair Holdings Plc -- Aeroflot Chief Executive Officer Vitaly Savelyev told reporters in Moscow today.
Russian President Vladimir Putin last year backed plans for low-cost flights, which will require legal changes to permit non-refundable tickets, charging for meals and the hiring of foreign pilots. The Aeroflot proposal comes after the failure of previous discount startups SkyExpress and Avianova, which closed in 2011 despite being backed by billionaire Mikhail Fridman’s Alfa Group and U.S. private equity firm Indigo Partners.
Dobrolet -- which means “good flier” in Russian -- may carry 1 million passengers next year and as many as 10 million in five years, Savelyev said. State-owned Aeroflot attracted 17.7 million people last year and had sales of $8.1 billion.
Costs at the new unit will be cut by 40 percent through direct ticket sales and a capacity boost achieved through a reduction in seat pitch, Aeroflot said. Dobrolet, which will be based “in the Moscow region” and initially serve the most popular destinations in European Russia, will also charge for checked bags, more comfortable berths and priority boarding, as well as inflight food, its parent company said.
Luton, England-based EasyJet, Europe’s second-largest low-cost carrier after Ireland’s Ryanair (RYA), commenced flights from London Gatwick airport to Moscow Domededovo on March 18 and began serving the Russian capital from Manchester 10 days later.
Wizz, based in Hungary, added flights to Moscow Vnukovo airport on Sept. 23.
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