S7 to renew fleet, phase out Russian planes to stay profitable
20 Oct 2008
Formerly called Sibir, the Moscow headquartered S7 Airlines has outlined plans to phase out the last of its 35 Russian-built fleet of aircraft, mainly on account of low passenger demand.
S7's CEO Vladislav Filev told the media that S7's 27 Tu-154s and eight Il-86s would be grounded, as it was necessary for the airline to remain profitable. S7 is Russia's second-largest airline in terms of passengers, and said that its maintenance costs would reduce 50 per cent with the grounding of the vintage Russian fleet. On the flip side, the airline would also have to reduce manpower to the tune of 600 crew and 1,000 MRO (maintenance, repair and overhaul) positions in the wake of the closure of its base that handles Tupolev and Ilyushin maintenance.
Filev said that the airline was not growing fast, and that these measures would ensure that the airline is in better shape for the winter season. He said S7 will focus on growing yield instead of seat factor, and would need load factors in the lower 70 per cent in order to break even.
S7 is counting on heightened efficiency to maintain its 12.6 per cent market share with fewer aircraft. Filev said that the number of flying hours per aircraft may go up from an average 368 to as many as 600 for the airline to maintain its market share.
S7 operates 21 A320 family aircraft, seven Boeing 737-400s, seven Airbus A310s and one Boeing 767-300ER. Filev said that by late 2009, S7 would have 30 A320 family aircraft, six Boeing 737-400s, nine Boeing 737-800s, seven Airbus A310s and five Boeing 767-300s.
Filev was quoted as saying that he did not expect the first of S7's seven Boeing 787 Dreamliners to arrive until 2014.
The airline is anticipating revenues of around $1.8 billion in the current year, higher than last year's $1.2 billion. Last year the airline flew 5.7 million passengers. Filev said that even though S7's cash had reduced on account of the global crisis, he said the airline was in better shape than other Russian airlines, and would try to ''die last''.
Aeroflot has a hold over 18.1 per cent of the Russian market of 45 million passengers per year. Filev said that he anticipates consolidation in the Russian aviation industry through bankruptcy as opposed to mergers. He said mergers did not make sense for S7, as most of the Russian carriers fly Russian planes, which are the ones that S7 has decided to phase out.
