Transaero Airlines celebrated its 21st birthday last year by revealing significant growth in traffic and, more importantly, profits.
In 2011, the airline handled 1.78 million passengers on its domestic network and 6.67 million on its international flights, up 32.4% and 25.9% on the previous year, respectively.
Revenues were up 42% on 2010 to $2.65 billion and the carrier recorded a net profit during 2011 of $56 million, up an impressive 215% on the previous year.
In the week preceding Routes CIS, the airline went on its latest shopping trip, visiting the St Petersburg International Economic Forum in Russia’s second city and returning to the capital with a new order for the Sukhoi Superjet and a firm contract with Airbus for the A380, together valued at almost $2.3 billion at list prices.
These followed recent deals to acquire A320neos and B747-8Is and B787 Dreamliners. But what are the airline’s plans for these new aircraft and what network opportunities will they create?
“We will use these new aircraft partly for fleet renewal but also to enhance our activities in some key existing markets and to take advantage of the better operating economics of the latest generation airliners to open new air links across Russia, the CIS and wider international markets,” explained Dmitry Stolyarov, deputy director general, Transaero Airlines, in an interview with Routes News.
“However, we will retain a number of our existing fleet as many classic B737s and B767s are coming to the end of finance leases. As we will shortly own these outright, they will become cheap for us to operate and we will retain them for this reason.”
Fleet and aircraft orders
The airline’s four A380s will have a three-class configuration, seating around 700 passengers, and have been earmarked for use on the airline’s leisure routes, serving markets such as Egypt, Thailand, Turkey and the Caribbean.
“At the moment the largest demand for this sized aircraft is mainly to leisure destinations,” said Stolyarov. “By the time we receive the first aircraft in 2015 we hope the business climate in Russia will have continued to grow, by which time we could consider flying them on business routes.”
These business routes are candidates to be flown with the airline’s new B747-8Is. Transaero has four of the type on order and plans to configure them in a four-class arrangement for 460 passengers.
“They will enable us to continue our development in the North American and Asian markets,” confirmed Stolyarov. “With a strong onboard product, we will have a service that is competitive with others on these key business routes.”
The arrival of three Dreamliners in 2014 will also open up new opportunities for Transaero. Configured in a three-class, 262-seat arrangement, they will enable the carrier to operate routes that were previously not viable with larger equipment and could be used on direct routes to destinations in Brazil and Australia, for example.
“This is the reason we selected the aircraft,” explained Stolyarov. “We can take advantage of the excellent operating economics and efficiency of the airliner to serve destinations that we previously could not reach directly.”
However, it is actually the arrival of up to 16 Sukhoi Superjet 100-95Bs that could mark the most notable short-term development for Transaero. The airline has placed a firm order for six of the aircraft and option for 10 more for delivery between 2015 and 2017 and will configure them in a two-class arrangement, seating eight Business Class and 82 Economy passengers.
According to Stolyarov, these aircraft will be used to open up new bases in Russia’s north-west and far-east regions and to enhance domestic connectivity. The initial base will be in St Petersburg, with the second (using the option aircraft) to be located at either Khabarovsk or Vladivostok.
Originally based at Moscow’s Sheremetyevo International Airport, Transaero switched to Domodedovo in 2001, one of the city’s smaller facilities, but a significant investment has seen it position itself as Moscow’s largest airport by passenger traffic.
But this growth has come at a slight cost for Transaero, with limited capacity now available for its growing fleet of wide bodied aircraft. As a result, the airline operates a split airport model with flights from Sheremetyevo, Domodedovo and recently introduced domestic and international services from Vnukovo.
According to Stolyarov, Sheremetyevo is mainly used as its leisure gateway, with charter services to several international destinations. These are all flown using wide bodied equipment, he said, owing to the runway and airspace limitations. While Domodedovo remains home, Transaero is also developing its activities at Vnukovo, having signed a long-term agreement with the airport operator to build its network there.
“We are initially using Vnukovo to serve some of the destinations that we have multiple daily frequencies, for example Tel Aviv and Kiev, splitting the schedule between Domodedovo and Vnukovo,” explained Stolyarov. “We are also aware that the more efficient transport links into downtown Moscow from Vnukovo would be popular with business passengers and we are ensuring we offer flight schedules that meet this demand. We have also switched our domestic flights to Khabarovsk and Petropavlovsk–Kamchatka to take advantage of the connection opportunities at Vnukovo.”
Five years ago, Transaero only operated charter services but now around 85% of its flights are flown on a scheduled basis. This figure would be higher but for one major barrier: bilateral restrictions in Russia. “The fact is that the majority of the bilateral agreements were concluded in the times of the Soviet Union when there was only one carrier, Aeroflot. All agreements therefore limit the rights to just a single carrier from each side,” explained Stolyarov.
According to Stolyarov, there are still 71 international agreements in place that limit the operations from Russia to a single local carrier, but he acknowledges there have been efforts to liberalise the market.
“In most cases it is Transaero that has been the driving force of this liberalisation,” Stolyarov added. There are still a number of ‘closed’ markets that remain attractive to Transaero and it is currently working with the authorities to try and secure access. “Prague in the Czech Republic interests us, as do parts of Scandinavia, while CIS markets of Turkmenistan and Kyrgyzstan have a lot of potential,” said Stolyarov.
However, there have been successes in 2012. Alongside its new routes to Los Angeles and Yerevan, Transaero launched its first scheduled flights to Italy in June, with links to Milan, Rome and Venice from Moscow and St Petersburg. Later this year, it will inaugurate flights from Moscow Domodedovo and Vnukovo to Paris Orly in a codeshare with Aigle Azur on the latter route. It is also set to inaugurate flights to Tokyo from both Moscow and St Petersburg, having already secured slots at Narita International Airport.
Looking ahead, Transaero is hoping to introduce its first services to the Indian subcontinent before the end of the year, with flights to Amritsar to commence in the “near future”. Another option is the airline’s fifth freedom rights which could offer links from Moscow to Singapore via New Delhi.
Although Transaero has worked relatively closely with members of the Star Alliance, Stolyarov said there are no immediate plans to join it or any of its rivals. “We are open for discussions with any airline or alliance, together or separately,” he explained.
“If Star Alliance is interested in securing us as a partner we are open to talks.” With no current ties, Transaero is free to enter any codeshare or interlining partnership it pleases and Stolyarov believes this is the best course of action for the business.
One key partnership decision just around the corner is what will occur on the busy Moscow–London route. Transaero cooperates with UK carrier bmi, with each offering a double daily service.
However, following bmi’s purchase earlier this year by IAG, parent of British Airways and Iberia, its rights will end when the airline ceases operations in October.
IAG and bmi
Under the terms of the bilateral agreement with Russia, the UK’s Civil Aviation Authority is permitted to allocate a second UK carrier on the route and it is expected to make a decision within the coming weeks and Stolyarov confirmed Transaero is “ready to cooperate” with whoever secures the rights.
The Russian carrier is understood to have already held informal talks with Virgin Atlantic, including discussions about potentially flying the route for the UK carrier, as it currently does not have the aircraft capacity for the service. “Our experience shows that our partnership with bmi was a success for both parties. We wouldn’t actually rule out cooperating with BA either,” added Stolyarov.
Transaero certainly has ambitious plans to position itself as a principal operator in Russia’s domestic and international markets and its fleet expansion policy shows it has the financial muscle to support its growth aspirations. With major upgrades to its in-flight product also part of its short-term investment, the young pioneer is looking forward to more Russian ‘firsts’ as it continues its dramatic growth.
This article features in Routes News 2012 Issue 5