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27 Aug, 2007 04:05

Budget airlines – a long way to go

Hot on the heels of Russia’s first budget airline, Sky Express, launched earlier this year, several other newcomers are jumping into the segment. But they may not find the infrastructure needed to “take off”.

Red Wings is the latest rookie on the low-cost airline market in Russia. The brainchild of billionaire and parliament member Aleksandr Lebedev, it is teaming up with Germany’s low-cost carrier Blue Wings to operate flights to Russia, Turkey and the Middle East.

But the project’s partners know better than to hope for a sizable chunk of the market: 

“That will be a very small share for the beginning. If you compare it to Turkey, in Turkey we have 27% of the market share, and if you look to Russia, it will be a very small percentage. As you know, in Russia there is a lot of competition,” Joern Hellwig, CEO, Blue Wings, asserts.

While competition may be high, budget airlines in Russia have plenty of headroom for growth:

“With all this economic growth seen recently, we have not achieved the level of passenger traffic in the air that was achieved, say, in Soviet times and that tells us that there are people that can potentially fly, but probably current prices are way too expensive for them to do so. Therefore there is a market for low-cost airlines,” pointed out Eduard Faritov, an analyst of Renaissance Capital Group.

Red Wings will use locally made Tupolev-204 mid-range planes in addition to Airbus A-320 used by its partner Blue Wings.

In fact, regional aircraft are the future for the industry. Experts say they will account for over 40% of the Russian market, leaving larger planes such as the Boeing 747 with under 5%.

Although budget airlines are tiptoeing into the Russian market, it looks like the country is still a long way from the airfare wars that have helped slash airfares for millions of passengers worldwide in recent years.