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31 Aug, 2009 06:28

Avianova lifts off as budget travel makes Russian inroads

A new low-cost airline has spread its wings in Russia. Fares starting at eight dollars look appealing, but there's still not much of a market for this model.

The low-cost airline is still a new concept in Russia. The first such carrier – Sky Express – made its first flight in 2007. Overall air passenger numbers in Russia are still low – just 22 or 23 million people a year.

That's about half of the traffic in the UK, which has less than half the population. The low-cost model – base fares without additional services like free food and checked baggage – has had trouble competing with traditional players. Valery Okulov, Deputy Transport Minister says there are some key factors in the absence.

“There is no market. For development of low-cost travel, there are some essential factors. The first is large-scale passenger flows between cities. We have only Moscow-St. Petersburg. Moscow-Sochi in summer. And let's say Moscow-Ekaterinburg. Second – using alternative airports. It's less expensive, but we simply don't have them.”

Now another low-cost carrier – Avianova – has entered the Russian market. Its fleet is comprised of two Airbus A320 planes. Fares start at 250 roubles – about $8. But that prices doesn’t include airport taxes and fees – which make the minimum total cost closer to $20. Avianova Shareholders' Representative, Andrew Pyne, says the investment behind the new airline is a vote of confidence in Russia.

“There are many challenges in this market, but there are many challenges in many other markets. A substantial amount of our investment comes from overseas. I think that's a vote of confidence in the Russian economy.”

Demand for air travel in Russia is down in the face of the recession. But what's really holding the low-cost concept back is a lack of aviation infrastructure, which would let airlines take on the railways on a level playing field.