Low-cost transportation has appeared on the domestic aviation market since the mid-2000s. The first low-cost airlines were plagued by failures, but their experience became the basis for the development of this business model and the creation of the successful Russian low-cost airline Pobeda. In this article we will talk about what problems our first low-cost airlines faced and how things are in this business today.
Causes of the first failures
Planes. As we have already said, the main reason for reducing airline costs is the new aircraft fleet, which does not require repairs and does not threaten downtime. Sky Express, one of the first Russian low-cost airlines, had in its arsenal already quite used (on average 19 years) Boeing 737 airliners. Due to their age, the aircraft regularly require repairs, and since low-cost airlines usually fly very often and try not to delay flights, downtime negatively impacts schedules. Another important point of cost reduction – avoiding downtime on the ground, also did not work in the case of Sky Express: their ships flew on average 6 hours a day, and this is not enough even for standard airlines.
Avianova, another low-cost airline from the middle of the last decade, had A320 airliners in its fleet, among which there were no completely new ones, although the age of 5-8 years was still young for the aircraft. Their ships flew a lot: 12.5 hours a day. But all the same, Avianova experienced disruptions in its schedule and flights began to be delayed.
Regulatory framework. Another problem for the first low-cost airlines was the inflexible regulatory framework of that time: a ban on the sale of non-refundable tickets (how to return a non-refundable ticket while saving up to 90% of its cost, read here),
the need to provide meals during the flight, mandatory baggage allowance. In addition, large customs duties were imposed on the import of large ships (from 180 seats), which increased costs, because these are the kind of airliners – Boeing 737 and Airbus A320 – that low-cost airlines need.
“Dobrolyot” and “Victory”: modern success
The right time.The budget company Pobeda, which in 2014 became the successor to Dobrolyot, which had been working on the market for about a year, took into account all the rules for creating an aircraft fleet for a discounter: they have 12 young (average age – no more than a year) Boeing 737-800 with 189 seats in the cabin , each ship flies 14 hours a day, there are 5,000 passengers per company employee (the world average is 1,000 – 1,500, EasyJet – 6,800, Ryanair – 8,600).
In addition, Aeroflot chose the right time to create a subsidiary low-cost airline: VAT for tickets for domestic air travel was lowered from 18% to 10%, and passengers increasingly began to travel within the country by air.
The right people. The crisis increased the desire to save money, and clients of Sky Express and Avianova, which had left the market, were happy about the emergence of a new low-cost airline. In addition, a modern type of passenger has appeared in Russia, who prefers to travel even short distances by air, does not carry huge bags with them and is ready to give up the usual amenities for the sake of economy, and, if desired, pay for pleasures on board.
Problems of Russian low-cost airlines
Scandals. Pobeda Airlines, just a year after the start of operations, entered the top five in terms of the number of passengers carried (3.1 million in 2015). This indicates the efficiency and growth of the company. Why then is there so much fuss about this low-cost airline? The main reason is that we are all accustomed to the basic free set of services on board: food, seat selection, amount of luggage. The low-cost airline offers them for money, and for those who have not read the rules of transportation, misunderstandings and dissatisfaction arise, which block the joy of the low ticket price. If you play by the rules, everything will go smoothly. You will be sure that you will arrive on time, while saving.
Experience of foreigners. Many people think that the problem with low-cost airlines arises from the harsh Russian reality, against which even the brightest ideas are shattered. In fact, there are plenty of misunderstandings in the West as well. For example, Ryanair sued a passenger for refusing to give him a baby stroller, and after losing the case, imposed on customers the financial costs of providing this service on board, raising the price of the ticket.
What about the hype around parents and children being separated during a flight? It turns out that this is done not only at Pobeda: this problem arises due to the automatic distribution of seats in the cabin. The same Ryanair is going to take money from September to return children under 12 years of age to their parents on board, and the flight attendants of the domestic low-cost airline are relocating separated families free of charge and are not yet planning to make this service paid.
Airports. We have already talked about the fact that the low price of air tickets also depends on the use of provincial rather than main airports. The lack of such air terminals in Russia is the main problem for domestic low-cost airlines. And it is precisely this factor that prevents the emergence of new players in the budget aviation market. In almost all major cities of Russia there are no secondary airports or they are inactive. For example, in Yekaterinburg, apart from Koltsovo Airport, there are no landing sites that can accommodate a Boeing 737 or A320. However, in Moscow, Pobeda does not reject the possibility of relocating from Vnukovo to Ramenskoye near Zhukovsky near Moscow, if there is a direct railway line. Perhaps here, as in Europe, low-cost airlines will help develop peripheral airports.
We will talk about what awaits low-cost airlines in the near future and how they affect the aviation market as a whole in the next article.
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