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President of Russia Vladimir Putin: Mr Savelyev, let us look first at the company’s overall state. How do you assess the current situation, particularly given the significant changes on the air service market? First, I would like to know about short distance flights, international flights to regular tourist destinations that are not being used today as actively as we would like.

Secondly, what are the peculiarities that you see today on the domestic transport market? I would particularly like to hear about your reaction to the departure of such a major carrier as Transaero. What is Aeroflot doing to deal with the issues that have arisen? What is your overall assessment of the situation? In addition, I would like to hear about the special rates we have introduced for cities in the Far East, Crimea and the North. And one more issue – our low-coster, the company with low rates, how is it doing?

General Director of Aeroflot Russian Airlines Vitaly Savelyev: Mr President, we have closed the year 2015. I would like to report that Aeroflot and Aeroflot Group of Companies are doing quite well. Aeroflot has carried 26.1 million passengers, which is a 10 percent growth against the previous year. We have been growing every month over the entire period. As the Group, we show a 14 percent growth with 39.4 million passengers, which is a significant number.

The market has changed, of course, in the sense that passengers have been travelling more within Russia, and we are seeing a certain drop in the number of passengers on our international flights. However, many people are flying within Russia, which has given the Aeroflot Group a 34 percent growth, and this is quite a significant figure; so, we are totally refocusing our operations.

As regards the market, I would like to tell you that Aeroflot has completely fulfilled the task it was set to carry Transaero passengers. We carried about 1,9 million passengers, and there is just a small group left, whom we are refunding the full cost of the tickets purchased for this year.

Besides, just as planned, Aeroflot has opened 6,000 job opportunities within the company and in our subsidiary, Rossiya Airlines for former Transaero staff. More than 2,000 people have already taken up jobs with us, all former Transaero staff.

We have also entered into a leasing agreement with our lessors – Sberbank Leasing, VTB Leasing and VEB Leasing – to take Transaero aircraft into our fleet. We are talking here about 34 former Transaero aircraft, including long-range ones. They are currently undergoing maintenance and we expect to see the first one ready in March.

The departure of Transaero from the market has not caused any significant imbalance within Russia. Fortunately, Aeroflot has not become a monopoly, despite the significant numbers. I would like to tell you that if we take into account the foreign airlines that also carry Russian passengers, the Aeroflot Group accounts for 37 percent of the market. If we take only Russian airlines, there are such statistics, we still stand at 42 percent, nothing like 50 percent or higher.

We will see how things go this year, we still hope Russian citizens will continue travelling and we hope to see changes for the better on this market.

When Transaero engaged in predatory pricing, it accounted for over 40 percent of the market, therefore all market participants felt its departure as a positive development because the 13 million passengers it carried in 2014 were distributed among the other airlines, with UTair, S7 and Ural Airlines all getting their share. We consider the overall market situation to be positive. Therefore, the task we were set [to carry Transaero passengers] has been completely fulfilled. I believe this will improve the market situation.

I would like to say that aviation is a very competitive market. The state has done everything to ensure growing competition in this sector, therefore, despite the crisis, we can see a noticeable levelling out.

We have a project that you approved, our low-cost airline project that I would like to say a few words about. As you may remember, after the sanctions were introduced, the Dobrolet project was frozen – we were not allowed to fly. However, in the two months of operation, we saw there was a demand and we knew this project was efficient.

Laws were passed with your help, thank you, that made it possible, among other things, to introduce non-refundable rates the low-coster uses. We did not wait for the sanctions to be lifted and launched the project under the new name of Pobeda.

This was in December of 2014, and by December 2015 we carried 3 million passengers. The project proved a success, Mr President. We suggest other airlines follow suit because we are no monopoly here either, though the niche turned out to be very lucky.

Now Pobeda has 12 aircraft and is launching its first international flights, and flights to Kaliningrad, though domestic flights are its priority. Importantly, we do not fly only from Moscow: we have quite a few direct flights from Yekaterinburg and other cities to Sochi and other places, in other words, we are distributing the flow.

Now over to the so-called flat rates. Last year we supported this idea, which is treated differently by different people. Some say this is not exactly a market mechanism, but we have seen a demand for the flat rates and decided to carry on with them this year. In addition to the previously introduced flat rates of 7,500 rubles to Kaliningrad and Simferopol, we have launched a winter return flat rate of 5,000 rubles to Kaliningrad, and 7,000 rubles from Moscow to Simferopol.

As for the Far East, we did return flights to 4 cities: Khabarovsk, Vladivostok, Yuzhno-Sakhalinsk and Petropavlovsk-Kamchatsky, all for 17,000 rubles, fees and taxes included. Now the return rate is 20,000 rubles – we raised it slightly due to inflation, which we have more or less fixed.

With the introduction of the summer schedule in late March, tickets to Kaliningrad and Simferopol will cost 8,500 rubles, while now we have the special winter rates.

This practice has also proven efficient, though we have to bear in mind that we cannot use the flat rates on a broad scale so as not to undermine competition and put our colleagues – the other airlines in Russia flying the same routes – in a difficult situation. This may happen, so we are limiting the number of such flights.

Vladimir Putin: This is a practice you need to continue. You should clearly not undermine anyone else on the market, but the most important thing we need to ensure is that Russian citizens have the opportunity to move around in their own country, and there should not be a place or a region in the Russian Federation that citizens cannot fly to or from. Therefore, you should undoubtedly carry on with this.

Vitaly Savelyev: Thank you. We can see it, and we are doing it. I believe that with the arrival of Transaero fleet in time for the summer scheduling – many of the craft will go to Rossiya Airlines – we will be able to increase our capacity to the Far East from 10 to 30 percent, which will be significant.

Vladimir Putin: You and I have spoken on many occasions about ordering aircraft from domestic manufacturers. What is happening here?

Vitaly Savelyev: Currently we have 168 aircraft. We maintain our competitive edge by having one of the youngest aircraft fleets in the world, which is a serious competitive edge. We are successfully using the Sukhoi Superjet: we received another 4 in December, bringing our total to 26 aircraft.

In the next 4–5 months, we expect to receive another 4 aircraft, bringing the total number to 30 – this is under the contract we already have. We are now finalising an agreement with the Sukhoi Civil Aircraft Company (SCAC) for another 20 Superjets. This would bring the total number of these aircraft to 50.

We have also signed a Memorandum of Understanding and Offer for the purchase of 50 MC-21 (Yak-242) aircraft. We also have great hopes for this model, especially now as they are developing a new engine. We hope these aircraft to significantly enhance our Group.

Vladimir Putin: How many passengers do they take?

Vitaly Savelyev: About 230.

Vladimir Putin: And what about the Sukhoi Superjet?

Vitaly Savelyev: It carries 87 passengers, and there are classifications of up to 100.

Vladimir Putin: Which flights do they operate on?

Vitaly Savelyev: The Sukhoi Superjets are used on all flights within a 2,500-kilometre range. And we fly everywhere: to Sochi, to St Petersburg. If an international flight is within this distance, we can use these aircraft as well. We see no limitations, and we make full use of them.

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