Russian watchdog proposes to privatise Aeroflot's lowcoster Pobeda

Russian watchdog proposes to privatise Aeroflot's lowcoster Pobeda
budget airline Pobeda
By bne IntelliNews August 14, 2019

Russia's Federal Antimonopoly Service (FAS) has proposed the privatisation of the budget airline Pobeda, part of the national air carrier Aeroflot Group, RBC business portal reported on August 14 citing the letter sent by the head of FAS Igor Artemyev to the Transportation Ministry in July.

FAS argues that Pobeda is cutting its domestic flights to avoid cannibalising the flights of its group peers Aeroflot and Rossiya. At the same time the presence of Pobeda on routes brings the price down for other carriers as well, as the prices of the budget operator are on average 10% lower, the watchdog estimates.

The Kremlin recently urged industry players to bring the prices of domestic flights down, so FAS suggestion is in keeping with government policy. A privatised Pobeda could focus on domestic destinations and bring down the famously expensive internal flights.

Sources in Pobeda told RBC that Pobeda is switching to foreign destinations because they carry higher margins that allow the carrier to maintain low prices. Also, the carrier runs a fleet of 30 Boeing 737-800, and there are only about 20 airports in European part of Russia able to dock those, which would make expansion of regional destinations difficult.

In 2018 the company carried 7.1mn passengers, to earn RUB35.5bn ($538mn) in revenues and RUB2bn profit under Russian Accounting Standards. In 2019 Pobeda plans to carry 10mn passengers, and 25mn-30mn passengers by 2023. 

Sources close to the company told Vedomosti daily that Pobeda plays an important role in the ambitious expansion strategy of Aeroflot, which plans to double group turnover to 100mn people by 2023.

 

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