Aeroflot Singapore service would improve Australia-Russia connectivity

17 November, 2017

Aeroflot has no aspirations of operating to Australia but could improve its offline presence in Australia if it expands its network in Southeast Asia.

Aeroflot currently serves 13 destinations in East Asia including five in greater China, two in South Korea, two in Thailand, two Vietnam, one in Japan and one in Mongolia. Its main hub in Moscow is linked with 11 of these destinations as Busan and Harbin are only served from eastern Russia.

Australia is a relatively small offline market for Aeroflot, catering mainly to the Australian Russian community. Aeroflot deputy general director for strategy and alliances Giorgio Callegari told CAPA on the sidelines of the 7-Nov-2017 CAPA Asia Aviation Summit that most of its Australia traffic connect to Aeroflot flights at Seoul Incheon, Shanghai Incheon and Tokyo Narita. Aeroflot has two daily flights to Shanghai on 777-300ERs, while it serves Seoul and Tokyo with one daily A330-300 flight.

Seoul is a hub for SkyTeam partner Korean Air and Shanghai is a hub for SkyTeam partner China Eastern. There are multiple airlines operating flights from Australia to Tokyo which have interline arrangements with Aeroflot.

Aeroflot does not use Ho Chi Minh as a connecting hub for Australia-Russia traffic although it has a partnership with Vietnam Airlines. Vietnam Airlines competes in the Australia-Russian market, offering online connections from Melbourne and Sydney to Moscow.

Singapore Airlines and Thai Airways also serve Moscow and offer connections to several points in Australia. Mr Callegari said Aeroflot is considering launching services to Singapore after it takes delivery of new A350s, which are slated to be delivered from 2019. Singapore would be an ideal connection point for Australia and help support a Moscow-Singapore route as the Moscow-Singapore market has relatively limited local traffic. However, a partnership - or at least a strong interline - with Qantas or Singapore Airlines would be needed.

In addition to the Southeast Asian competitors, several North Asian carriers and the three Gulf carriers compete in the one-stop Australia-Russia market. Emirates is the market leader by a wide margin, accounting for approximately 32% of Australia-Russia bookings in the year ending Aug-2017, according to OAG Traffic Analyser data. Qatar Airways and Singapore Airlines both accounted for a 12% share of bookings, making them virtually tied as the second largest competitors.

Sydney-Moscow is the largest Australia-Russia city pair, accounting for 26% of total Australia-Russia bookings in the year ending Aug-2017. Melbourne-Moscow is the second largest city pair with a 17% share followed by Brisbane-Moscow at 10% and Perth-Moscow at 8%. Traffic from Australia to Saint Petersburg is relatively small, accounting for slightly more than 10% of total Australia-Russia traffic.

There are nearly 80,000 Russian Australians including nearly 20,000 that were born in Russia. Tourism is not a big segment of the Australia-Russia market but is growing. Tourism Australia reported 14,800 Russian visitors for the year ending Aug-2017, representing a 16% increase over the prior year.

Aeroflot is one of the fastest growing airlines in the world. During a presentation at the CAPA Asia Aviation Summit on 7-Nov-2017, Aeroflot CEO Vitaly Saveliev said that Aeroflot traffic grew from only 11 million passengers in 2009 to 43 million in 2016. He pointed out that Aeroflot was the 18th largest airline in the world based on 2016 passenger numbers.

However, Aeroflot still has a relatively small long haul network and currently operates only 38 widebody aircraft. Mr Callegari said Aeroflot's widebody fleet will grow to 50 aircraft over the next five years but the airline has a conservative approach to adding new long haul destinations and will focus most of its future expansion on existing destinations.