Andrew Pyne, Avianova - Авианова
Release Date: 2010-06-06
Andrew Pyne, CEO of Avianova, was interviewed by Russianavia.net to talk about successful operations of the new low cost carrier on the Russian market, its objectives and long term perspective.To begin, can you explain the general structure of Avianova as a corporate body?
Avianova’s two major shareholders are A1 from the Alfa Group in Russia and Indigo Partners, a company that has extensive experience in low-cost carrier investments in the U.S. and elsewhere
What was the first step that Avianova undertook to develop as a new airline back in 2007? Obviously, you had to face a market gap in the low-cost carrier market in Russia.
The market gap was clear I agree: the domestic market in Russia remains chronically underdeveloped and is less than half the UK’s domestic market, very surprising given the huge size of the country and its population. The factors that have been holding back aviation development in Russia are pretty obvious: primarily high fares but also safety concerns and frankly poor customer service standards. In our own business we ve attempted to address these issues: the response from the market has been positive: we ve carried nearly 500 000 passengers in nine months of operations. Our trademark 250 rouble fares have had huge appeal wherever we ve flown.
What were the quantitative and qualitative objectives that the company set back in 2007 and what is the overall scope of the business plan for 2007-2012?
We ve drawn on global experience both within the shareholder group and within the management team to target three areas: 1/ rigorous cost management – of course!; 2/ a focus on developing a dense domestic network covering the European part of Russia – we re now at 18 destinations; and 3/ implementing global best practice in terms of the professionalism, safety and quality of the operation.
Did you have to customize any initial operational points specifically for Russia? Obviously, customers in the U.S. and Russia are different…
Clearly every market is different – even within Russia this holds true. But the key point, very simple with universal application, is that low costs enable us to offer low fares which drives passenger volume: we re creating a new market here and we can only do that if the fare structure is right – and if the product is appealing. OK, these are principles and objectives apply across all markets; but it s the means to achieving these objectives that may have to be adjusted to suit local circumstances.
Maybe, the main challenges in Russia were related to the ways of administering the business?
Economic regulation of the airline industry here is – in global terms – relatively heavy and it helps perpetuate the status quo. However you have to work under the regulatory structure that exists and then argue the case for liberalization from within the industry. Our point is that liberalizing the industry further would create huge economic and social benefits for Russia.
What is the average hour range of the routes that you plan to develop in Russia?
Currently our average sector is about 1.7 hours. We don t see that changing radically in future. We are looking at developing more bases in Russia: we are already operating flights beyond St Petersburg to cities like Krasnodar and Sochi – which we also serve from Moscow. The key criteria for base selection will be cost and operational efficiency but access to a large population base is also clearly important.
Avianova has recently moved from Vnukovo to Sheremetyevo as its basic airport in Moscow…
I can’t say that we had any serious issues with Vnukovo airport as a base – we had a very successful launch there – but Sheremetyevo offers the space to grow: we’re virtually the only operator now in Sheremetyevo’s terminal B, which has all the attributes we would look for in a dedicated low cost terminal.
What is the benefit for an airport from having a low-cost carrier based there?
I think there are two levels of benefit here: firstly, any airport interested in passenger volume growth – and I guess they all should be! - has to be targeting low cost carriers. Typically LCC s drive a much more aggressive passenger growth rate through airports than traditional carriers can. Airports need LCC s to serve them if they want to be successful – but the bigger prize is of course to attract an LCC to select your airport as a base. A 4 to 10 aircraft operation could drive between 1 to 3 million incremental passengers a year. And these are truly incremental because LCC s create new travel markets rather then poaching traffic from other carriers.
Secondly, there are broader social and economic benefits to a region from having LCC links. Kazan for example still has huge potential to grow in terms of Russian domestic tourism. If people have the chance to travel for 250 roubles from say Moscow, Yekaterinburg, Kaliningrad or Saint Petersburg to Kazan for you re creating an entirely new tourism market. There is also the opportunity of developing strong business links. It’s conventional to say that businessmen don’t fly low-cost airlines but it is simply not true: Avianova already has a significant number of business travelers – I think we appeal in particular to the owners and managers of small businesses. So regional economies benefit at a number of levels from having LCC service and particularly an LCC base. I think the evidence supporting that viewpoint is clear globally; it s a message that now is being understood and accepted within Russia as well.
Valery Okulov, ex-CEO of Aeroflot, has mentioned the training of human resources as one of the hardest issues for the Russian airlines. How has it been for Avianova?
I agree it s a tough issue but then the regulatory regime itself contributes to the problem: it takes us 14 weeks to train a flight attendant here; in western Europe or the US you d be looking at two or three weeks. So the regulatory burden needs to be lightened. In general I think we have an advantage in recruitment: I think that the excitement of being part of the fastest growing airline in Russia, with good promotion opportunities very early on in your career, the excitement of sharing the success of a dynamic company: these are factors that encourage people to join us. They certainly don t join for high wages! We also draw experience from overseas, and that attracts people who want to learn new skills and new ways of doing business.
As the fastest growing Russian airline, what further strategic steps does Avianova envisage?
We aim to grow the airline rapidly but sensibly. There s a huge market gap here to fill by providing a combination of low fares, safe flights and a convenient, good quality, product. It’s a pretty simple proposition but obviously difficult to get right. In terms of the number of passengers, we ve carried nearly half a million in just over nine months. For most of that period we were operating only two airframes; now we re up to five. We have a mature and experienced management team so we understand the risks involved in running ahead of the market; measured growth in response to market demand is probably the best way to characterize our approach.
On a more personal level, how has your experience been here as a representative of the English culture? Did you sense any particular cultural or social discrepancies?
To be honest, there s a reasonable cultural overlap between Russia and the UK. It s obvious that a lot of Russian people enjoy English literature and culture; and vice versa! . I always found Russia a very interesting place to visit in the past, so relocating here wasn’t a particularly daunting experience. I ve enjoyed my (nearly) three years here very much.
Mr. Pyne, what would be your final message to the international audience of www.RussianAvia.net?
I d like to encourage people both here and from overseas to fly Avianova soon - and enjoy what is undoubtedly the best value for money in Russian skies!
| Company: | Avianova - Авианова |
| Position: | CEO |
| Country: | Russian Federation |