Joined: 24 Dec 2006
|Posted: Tue Jan 30, 2007 5:35 am Post subject: Russia's First Budget Airline Debuts
|By ALEX NICHOLSON
Russia's first budget airline took to the skies Monday in a bid to win a sizable share of the fast-growing, $7 billion domestic market by 2012.
Sky Express is making a modest start, leasing two Boeings 737s it has decorated with bright purple, yellow and blue lettering across each plane's fuselage and the silhouette of a person flying on the tail.
But the company is hoping to expand fast and win passengers who now opt for the slow but cheaper railways. It is offering one-way tickets from Moscow to the Black Sea and other destinations for as little as $19. In comparison, on Monday flag carrier Aeroflot was offering return tickets to Sochi for around $240.
"Unfortunately over the past 10 years it has become very difficult for most of the population to fly," said Sky Express Director Marina Bukalova.
Initially, the company, which is hoping to mimic the fast growth seen by European budget carriers Ryanair (nasdaq: RYAAY - news - people ) and easyJet, will fly just two flights daily to the Black Sea resort city of Sochi. The company would eventually expand its fleet to eight Boeings by the spring, flying to destinations in the Ural mountains, Siberia and southern Russia, airline spokesman Vitaly Korenyugin said.
"The market was starved of budget airlines, it was high time something like this was started up," said Richard Wallis, spokesman for the European Bank for Reconstruction and Development in Russia, which has so far contributed $10 million to the company's initial $48 million capitalization.
In an attempt to overcome local wariness of using credit cards to buy online, as well as low credit card ownership in general, Korenyugin said the company had opened a sales network that will enable customers to pay for tickets at 56,000 locations around the country, including post office branches and state-owned bank Vneshtorgbank.
Korenyugin said the company hopes to garner a 7 percent market share by the end of the year, and control 25 percent within five years - a forecast competitors called optimistic.
Ilya Novkhatsky, spokesman for Russia's biggest internal carrier, S7, which controls about 15 percent of the domestic market, warned that the opportunities for cost-cutting on Russia's market were low.
"There is one airport, one fuel company and one catering company: the conditions for a low-cost airline in the European sense don't simply don't exist in Russia," he said.
But passengers checking in to the inaugural flight welcomed the low prices. "There is a risk, but I think it's great ... it lets you save and allows you to do other things like renting a car or going skiing one more time," said Irena Degtyareva.
Not everyone was pleased by the no-frills approach.
Igor Sidorov handed his ticket back - his travel agent never mentioned the 15-kilogram luggage ceiling. At an extra $5 per kilogram he said he would have to pay nearly $80 in excess luggage fees for his skis and boots.