Page 123 - RusRPTSept21

In 2022, Russian industry traffic will be no less than 2019 levels. We agree and see 2022F traffic at 135mn PAX, up 6% from the 2019 level. Currently, it is only 12% short.
Development of the Russian LCC market
The Russian market has potential – with 50% of passengers ready to fly on lowcosters vs. 30% in Europe. We note that Pobeda is the only lowcoster in Russia, and its current market share is 15%. So, capturing even 30% would imply a doubling of its traffic, as we see no other large lowcosters in the medium term.
Pobeda welcomes S7 launching a new lowcoster, planned for 2022, and does not see it as a risk. We view this comment as being in line with the S7 statement that it would try to avoid direct competition with Pobeda. We also note that its projected 2024 traffic is 8mn PAX, just 18% of the traffic expected by us for Pobeda.
Strategy
Pobeda has cancelled its order for 20 B737 MAX aircraft, and is considering a variety of other options. Pobeda made this fixed order back in 2018. However, the market has changed since then and new contracts might be concluded at lower prices, so it will benefit from the cancellation, in our view.
It has time to choose between ordering of B737 MAXs or A320neos, and will receive 20 B737 NG from Aeroflot per annum for the next two years. We think that the decision will be made in 2022-23 as it has to get new aircraft in 2024.
(E)SG
Pobeda is the greenest airline in Russia. We note that lowcosters claim to be the most environmentally friendly airlines, due to their high utilization rates, which leads to low emissions per passenger. In the US, this position is occupied by Frontier Airlines, and in the EU by Wizz Air.
The CEO sees no 'green' risks in Russia. We disagree. The CORSIA system is to be introduced in Russia in 2027 (see our Russian Transportation – ESG agenda is knocking on the door, of 16 July), and more regulations might come.
ES(G)
123 RUSSIA Country Report September 2021 www.intellinews.com