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Vitaly Saveliev: We can take a punch

The CEO of Aeroflot in Top Business Officials: a special project from TASS
Andrey Vandenko 
Andrey Vandenko

Andrey Vandenko was born on November 8, 1959 in Lugansk, Ukrainian SSR. In 1982, he graduated from the Taras Shevchenko National University of Kiev with a degree in journalism. Since 1989, he has been living and working in Moscow. For over 20 years, he has built his career as a journalist specializing in interviews. His work is published predominantly in Russia’s leading mass media outlets, and he is the recipient of numerous professional awards.

Part 1
On flying like the birds, crash landing, money in somebody else’s pocket, digitization and the ability to take a punch

- How come people don’t fly like the birds?

- Because we are people. But since the days of Leonardo da Vinci the human race has devised a variety of solutions to compensate for this handicap. We have invented all sorts of flying machines, including airplanes.

- But today we are confined to the airspace of our home country. The consumer rights watchdog Rospotrebnadzor won’t let us out.

- Some have already been given the green light. As you may know, selected resumption of international air traffic began on August 1. For the time being, the scale is rather limited, but the ice has been broken.

- Turkey, Britain and Switzerland are popular, while Tanzania is an exotic destination. Where would you like to travel yourself when restrictions related to Covid-19 are lifted?

- You know, right now my greatest concern is not about when I’ll be able to fly somewhere. Instead, it’s about what needs to be done to restore the company’s operations to normal as soon as possible. The Coronavirus pandemic has resulted in very stringent restrictions. This crisis is really the only one of the sort I’ve encountered over the eleven and a half years I’ve been with Aeroflot.

The situations we experienced before were different. Take the 2010 eruption of that volcano in Iceland whose name is difficult to pronounce. Nearly the whole world was at a standstill. In Europe, we were the only air carrier that continued to make regular international flights. For the first time ever we showed Aeroflot’s real value to our international clients and partners. Remember that?

- Of course, I do.

- Everybody felt scared that the volcanic ash might affect flight safety. We scrutinized the condition of planes and engines to conclude that there were no risks and continued to transport both our citizens and foreigners. It took foreign airlines two weeks to change their mind and resume flights.

Or take the bird and swine flu and the Ebola virus. These were all major challenges… Aeroflot is 97 years old. We’ve lived through many crises and we know how to survive them and get back to normal.

It has to be acknowledged, though, that the Coronavirus has proved to be a long ordeal. It’s been going on for many months now and has dealt a hard blow to the transportation industry and tourism, too. We are just one of the many airlines that have experienced its impact. The industry has been affected all over the world.

- It was essentially a crash landing.

- Nothing could be worse. In March and April, we were literally stalled. Three to five thousand passengers a day in contrast to 110,000-120,000 a day a year ago. That’s next to nothing, if you remember the scale of our business. In the middle of July we approached 59% of the passenger traffic we had last year. Our expectations are about 30 million passengers against last year’s 60.7 million. This is a harsh reality, but we are not the only ones. Our foreign counterparts are in a similar position. Large airlines were hit the hardest. For instance, Lufthansa and Air France-KLM. They stayed grounded for the most part this past spring. They all developed major cash gaps. There were no passengers, but their mandatory expenses remained.  Lease contracts and employee salaries need to be paid…

Aeroflot passenger planes at Krasnoyarsk International Airport  Andrei Samsonov/TASS
Aeroflot passenger planes at Krasnoyarsk International Airport
© Andrei Samsonov/TASS

When we can fly again and our business is operating like normal, the Aeroflot group will be spending 6.7 billion rubles a month on salaries alone. This is a lot, of course.

- Did you resort to pay cuts during the period of halted operations?

- Yes, we did. But only for senior managerial personnel.

- How significant were those cuts?

- It depends. For three months, we paid a little more than half of the usual amount. Certain rises followed, but the salaries of top managers will be down on aggregate anyway. We made this decision on our own.

And no bonuses are expected in the near future.

- In the meantime, 2019 bonuses to the company’s management totaled 2.1 billion rubles. That’s quite a lot.

- There’s been some sort of misunderstanding. It is true that we achieved good parameters in recent years, but those kinds of bonuses have not been made.

Let me explain the origin of the figures you’ve mentioned. First, the sum concerns the company’s management in the broad sense, including all key managers in subdivisions. Second, the sum incorporates not only the variable component of remuneration, but also the basic part, which is the salary proper. Before the budget period begins a list of clear parameters outlining the company’s effectiveness and a system of incentives for the management are approved. In other words, those who achieve a certain KPI are entitled to some remuneration.

Annual results are used to automatically establish remuneration in accordance with audited financial parameters. But this is still an abstract reward. It exists only on paper. In other words, it is the maximum amount that can be paid. It is this figure that is featured in the company’s financial statements. Then our corporate procedures are utilized. The board of directors evaluates specific amounts and makes decisions about whether to pay them or not.

In the current situation the board of directors ruled that part of the amount to be paid in remuneration to the management for 2019 will be postponed. Let me repeat once again that it is wrong to say that management received hefty bonuses for last year.

Besides, the issue you’ve brought up has another side to it… More often than not Aeroflot is called a public company. This is not the case. We are a public joint stock company. Our main task in accordance with the law and our charter is to derive profit. This is precisely what my job is. The board of directors uses bonuses to motivate personnel to excel at work. That’s the mode of operation any company should stick to, be it public, joint stock or private.

… Sometimes I wonder why the public gets so nervous about our bonuses.

- I would not say that this is the main focus of public concern, but the habit of counting money in somebody else’s pocket is still there.

- Let us recall the spring of 2009, when I was contracted to run the company.

Aeroflot was on the verge of bankruptcy. This is not an exaggeration. The seat occupancy rate was 64%. Let me explain something to make it easier to understand: each extra percentage point is equivalent to several billion rubles of revenue. If less than 70% of seats are occupied, the flight isn’t economically practical.

That’s the kind of company I took over eleven years ago. The state would not give us money or provide any other assistance. I had to implement harsh measures. We dismissed two and a half thousand people and declared bankrupcy for two units: Aeroflot Cargo and Aeroflot Plus. Twenty six Tupolev-154 jets were withdrawn from operation as economically ineffective. Something had to be done about that situation.

At that time, Aeroflot carried 8.6 million passengers a year and had a work force of 14,700. The average integrated world rate is one thousand employees per one million passengers. An airline that carries 8.6 million passengers a year should have a staff of about 9,000.

In 2019, the Aeroflot group carried 60.7 million passengers. The personnel of the group’s aviation component totals 35,000. Although according to the mentioned parameter it could have been about 60,000. In other words, wages and salaries would have to be paid to an extra 25,000 employees. This answers your question about effectiveness and top manager bonuses.

Prime Minister Mikhail Mishustin made a report to the State Duma a couple of weeks ago. I found the part on digitization most noteworthy. We all know how the Federal Tax Service has changed and the way it works today. I can say the same about Aeroflot. In terms of digitization we are number four on the list of the world’s leading airlines. In 2009, when I joined the company, there were 176 software products and various platforms that the company was trying to use simultaneously. Read my lips. One hundred and seventy six!

Nowadays all of our processes are automated. We made gradual transition to three platforms. We use SAP for our accounting and internal corporate affairs. It took us several years to introduce SAP. It was a major investment, but now we have everything digitized. We also use Lufthansa Systems for billing as well as the ticket booking system Sabre.

Regrettably, these are not Russian products, but no domestically developed counterparts of this level are available at the moment. Naturally, we always gladly use Russian software as long as it is of proper quality and is not inferior to world standards. We use Kaspersky Lab’s antivirus and Manager’s Monitor from Anatoly Karashinsky’s IBS Group.

- This is all interesting, but we’ve drifted away from the main subject. Let’s get back to the pandemic-related crash landing. You have experience as a boxer and made the rank of Candidate for Master of Sport.  These are things that should give you the ability to block a punch.  Have you been able to do that this time around?

- You know, in boxing not all punches can be blocked. In the years I participated in this sport I had my nose broken and some joints damaged. There is no way of winning a fight without getting punched. But we are trying hard to hold on. We are avoiding layoffs and are working hard to keep our work staff intact. And we have no intention of dropping our strategic goals.

Aeroflot has confirmed to the Ministry of Industry and Trade that it is going to purchase domestically built aircraft. Despite existing financial constraints we will acquire another eight Sukhoi Superjet-100 planes this year and another fourteen next year.

Sukhoi Superjet 100 plane of Russia's Aeroflot Airline Company  Marina Lystseva/TASS
Sukhoi Superjet 100 plane of Russia's Aeroflot Airline Company
© Marina Lystseva/TASS

Flat tariffs on far eastern routes remain, however hard we find keeping them. There’s also Simferopol and Kaliningrad. We stand by our obligations. It’s true that we had to drop sponsorship contracts, but this is an objective reality. We literally have no money to fund them the way we once used to.

And we were also unable to return cash to passengers for flights canceled during the first stage of the pandemic. We offered vouchers that can be exchanged for tickets in the future. The government supported us. Otherwise we would have required tens of billions of rubles in subsidies.

- The vouchers were a temporary measure that had to be taken during the force majeure period, weren’t they?

- That’s right. They were used only in particular conditions from the end of February to May when the influx of cash ran dry. Now that flights have resumed, we are returning money for unused tickets purchased after May 1 if the tariff allows it.

- Was there any chance for you to manage the situation without government support?

- We drafted three scenarios, three packages of solutions I would have activated depending on the circumstances. Precisely the way it was done in 2009.

- Plans A, B and C?

- Correct. I would prefer not to disclose the details. It’s our internal corporate business, but measures to be taken in case of a crisis should be kept handy. At the very least there can be personnel cuts, and at the most there can be the auctioning or bankruptcy of subsidiaries for the sake of survival. We decided to avoid this.

Now back to 2009 again. Aeroflot was then ranked as a regional company. Now our group is part of the world’s top twenty passenger airlines. We did not dismiss anybody or declare any bankruptcies. We believe this is the way it should be. But to enforce these decisions we need government support for the industry.

If we look at Europe, which has long lived by market economy laws and where competition is developed well enough, we can see that Lufthansa received 9 billion euros from the German government in exchange for a 20% stake, which in fact is tantamount to partial nationalization. Air France-KLM was granted 7 billion euros, but 7,500 employees had to be let go.

We keep a close watch on how our Western counterparts run their business and use them as a guideline. They are on our radar screens, you can say, since they are our direct rivals. But at the same time we follow our own path. You’ve drawn a parallel between our business and the boxing ring. We prefer to combine defense and attack tactics and have retained the ability to take the punch for the time being. We haven’t cut a single job and we have no plans to do this in the near future. We hope that the situation will get better by the end of this year. In fact, it is getting better already.

My hope is that the industry will recover slowly but surely.

- You’ve mentioned your Western counterparts. Some of your partners on the home market are complaining that Aeroflot has grabbed the lion’s share of government aid.

- You know, I have a very good personal relationship with  industry colleagues. Let us agree that other major Russian airlines, and not just the Aeroflot group, belong in the class of what is often called system-forming enterprises and have the right to count on government support.

- But your lobbying leverage is very different from everybody else’s. You can take your problems to Putin and Mishustin right away.

 Russia's President Vladimir Putin and Aeroflot CEO Vitaly Saveliev  Alexei Nikolsky/Russian Presidential Press and Information Office/TASS
Russia's President Vladimir Putin and Aeroflot CEO Vitaly Saveliev
© Alexei Nikolsky/Russian Presidential Press and Information Office/TASS

- That’s beside the point!

- Don’t you belittle your own merits and achievements!

- Listen, we were trailblazers.  We have created mathematical models, we’ve undergone scrutiny by various commissions at the Ministry of Economic Development, we have presented solid arguments to prove that our cash gap calculations were correct and that our requests for assistance to Aeroflot were well-founded. After that we spent a while persuading experts at the Ministry of Finance and then a government commission.

Everybody else was and still is free to do so, too. My advice to my industry colleagues is to not hold a grudge but to keep working hard.

Part 2
On old-time competitors, newly-acquired phobia, international flights and air fares

- When will Aeroflot start flying the way it should, and not at part throttle?

- As I’ve already told you, in April and May we handled a tiny five percent of the usual passenger flow. Currently we move more than 30,000 people a day. When the pandemic peaked, we were making 50-80 flights a day. Now that number is more than 300.

- What’s the situation during a usual season? Say, the summer of 2019?

- More than 800. We are recovering, although not as fast as we would like to.

You must have heard that S7 Airlines has been Russia’s leader on the domestic passenger market for three months running.

- Do you find this annoying?

- Listen, they fly from Moscow’s Domodedovo and from Novosibirsk’s Tolmachyovo airport, too. They are also enjoying the benefits of the Russian government’s resolution N. 1242 on subsidies for regional flights inside Russia. Bear in mind that these are not from Moscow.

They fly because they get assistance. We cannot afford this. More than 240 planes of 360 are grounded. Aeroflot is a hostage of its status of an air carrier based in the country’s capital. We will catch up and recover some day, that’s clear. But the current circumstances are what they are. They require patience and self-control. Just remember how many cities remained closed to incoming traffic just recently. In Simferopol there was a two-week quarantine. Mineralnye Vody was closed completely. The Krasnodar Region…

- We hope that everything will be reopened sooner or later, but hasn’t it ever occurred to you that passengers may develop a new type of phobia: some will avoid flying out of the fear they might get infected on board?

Passengers at Mineralnye Vody Airport Valery Sharifulin/TASS
Passengers at Mineralnye Vody Airport
© Valery Sharifulin/TASS

- We’ve already explained and proved to one and all that these fears are groundless. No special seating pattern is needed. The modern passenger plane is an absolutely safe environment. It is an airtight capsule where the air is processed nonstop. All of these horror stories are nothing but populist speculations by armchair experts. New planes are as sterile as operating rooms.

People want to fly! We see this in our booking statistics. Seats began to be filled instantly as soon as passengers learned that they would not have to stay in self-isolation for two weeks after arrival.

Naturally, we are looking forward to the moment international flights will be restored completely. These flights yield half of our annual revenue. But many factors do not depend on us.

First of all, our own wish to fly to other countries is not enough. The readiness of hosts to welcome us is no less important.

What’s more, decisions like this are made by the anti-crisis task force on the basis of recommendations from the consumer rights watchdog, Rospotrebnadzor.

There are three basic parameters. One is that the parameter of disease transmission rate in the country should not be more than one. Secondly, the average daily growth rate for the past 14 days should be no higher than 1%. And thirdly, the number of confirmed cases over a two-week period per 100,000 of the population has a permissible index of no more than 40.

We are waiting, getting ready and hoping.

- But there’s no way of putting the summer season on hold. It will be over in a month.

- We defended an optimistic scenario and to implement it we obtained government money in the form of guarantees. We were reluctant to take more than we actually needed and asked for permission to fly inside the country beginning in June. It worked.

There are regular international flights starting in August. This scenario is being implemented. We do have a chance. If everything happens the way we anticipate, our passenger traffic inside Russia will be back to normal by the end of 2020. We hope that our international flights will be up to the 90% mark by March 2021. By the end of next year’s summer season we expect to regain all international routes.

This doesn’t include transit, though. This task will be a little bit trickier.

- Is your plan for carrying 100 million passengers in 2023 hopelessly buried?

- The pandemic has made certain adjustments, of course. Very likely this target will be very hard to achieve. Nobody knows which way life will turn us. But the Russian market always recovers faster than any other. There are several explanations for this. First, our passenger traffic has always grown faster than the world average. Over the past few years the growth rate was about 9-10% a year. You can compare that to the world average of 5-6%. In Europe, it is still slower: 4-5%. In fact, we were growing twice as fast as our neighbors.

Second, in Russia there exists what is sometimes called deferred demand. As soon as borders are reopened, people will start flying at once: rest and leisure are a basic human need. In our country there are not enough tourist facilities equatable to those available in Turkey, Egypt, Thailand or Israel.

Russians will certainly try to take the best advantage of the remaining six to eight weeks when the weather at southern resorts will be still warm.

- How much time will it take you to restart regular international flights?

- Operationally we have everything in place. The booking system is set to enable the function that allows passengers buy tickets. That’s all. In a normal situation such a restart would take four to six weeks. At the moment everything is in a ripe condition. We do not rule out that we will be able to resume flights within two weeks. If the seat occupancy rate is at least 75%, we will get things going.

People at Sheremetyevo International Airport, 2020 Valery Sharifulin/TASS
People at Sheremetyevo International Airport, 2020
© Valery Sharifulin/TASS

There is another problem we have not touched upon yet. I foresee the possibility that some Russian air carriers will go bankrupt in the autumn. Of the one hundred licensed Russian airlines only 48 are present on the market in reality. There are some very strong players, such as S7 Airlines. It’s noteworthy that Vladislav Filev is a talented manager with a keen foresight and feel for market opportunities. There are some other noteworthy rivals. To cut a long story short, the top 20 account for 97% of the traffic. But the others have their clients, too. Here we’ve got a problem. According to experts’ estimates, 12%-14% seats on the market in 2019 were redundant. What is happening now that the market has slumped 50%? Nobody has stopped yet. This means that companies resort to dumping tactics. They do not hesitate to go to great lengths in the competition for passengers. It is good news for those who fly and bad news for those who provide the service. The net effect for the air carriers may be a very sad one. Utmost competence and caution are needed.

- But Aeroflot does not indulge in dumping policies. Your prices bite hard, to say the least.

- I would not say so. Our fares are close to Pobeda’s. We are left with no choice.

- A friend complained to me the other day he was going to fly Aeroflot to Gelendzhik. One business class ticket was offered for 280,000 rubles. He needed six. In the end the whole family chose S7 Airlines, which charged less.

- Let me explain. Three and a half years ago we spent a while studying dynamic pricing with a working group from the Federal Antimonopoly Service (FAS). In the end we arrived at a common conclusion that it enables us to sell many economy class tickets below the economically feasible level.

Now a few words about the tickets to Gelendzhik. I bet they were purchased a day or two before the departure. Naturally, the price was the highest. That’s the gist of dynamic pricing. The passenger who buys an expensive business class ticket subsidizes 3-4 economy class passengers.

When we are criticized, the critics usually take the price of a ticket on offer from some European company and say: Air Baltic or even Lufthansa will fly you from Riga or Hamburg to Paris for 50 euros, while Aeroflot makes you pay through the nose. This argument does not hold water. We do not know the situation where our counterparts are at the moment or the demand for tickets at a certain moment in time.

Let’s take the official statistics - most foreign airlines are open to public scrutiny – and divide one figure by another. The problem is easier than Newton’s Binomial Theorem. In the end we get the RASK – revenue per available seat kilometer.

- What is it in layman’s terms?

- Aeroflot’s RASK is 5.9, KLM’s - 10, Air France’s – 10.5, and Lufthansa’s – 12.6. It might surprise you that medium haul flight economy class tickets from Air France-KLM are 54% more expensive than Aeroflot’s, and those from Lufthansa are 38% more expensive.

When it comes to long-haul routes where the quality of our services is certainly not inferior to those of European carriers and in some respects is even better, Air France-KLM sells tickets at prices 73% above ours. And Lufthansa charges 115% more than we do.

Aren’t you tired of doing math yet? Then let’s calculate the YIELD. It’s the key indicator showing how effective an airline is. The revenue is divided by the actual passenger traffic. Aeroflot’s YIELD is 3.9, Air France-KLM’s - 5.6, and Lufthansa’s - 6.3. They are twice as expensive. How come you forget to do these kinds of calculations, my dear friends?

- It’s because people buy their tickets at a certain price with their hard-earned money and they don’t care a bit to find out what this creature called YIELD looks like.

- But passengers need to have an idea of what pricing is all about…

Here’s another example… You certainly go shopping to buy food once in a while, don’t you?

- From time to time.

- So do I. Tastes differ. Some prefer Globus Gourmet, and others prefer Azbuka Vkusa, Perekrestok, Magnit or Pyatorochka or some other retail chain. Let’s establish the same prices everywhere! Why don’t we demand this? Should 200 grams of beef cost the same at McDonald’s and Arkady Novikov’s and Alexander Rappoport’s restaurants. Why don’t thoughts like this ever cross our minds?

Aeroflot operates one of the youngest fleets of aircraft in the whole world. Each plane costs tens of millions of dollars. New aircraft are far more expensive to lease than those 10-15 years old. On Aeroflot flights you will find sixteen different meal options. Don’t forget to throw in the waiting costs. This is all priced in our airfare.

Our Pobeda subsidiary is no frills, that’s true. Its planes are not equipped with kitchens. Only 25 minutes are spent on the ground to get ready to fly back. This explains why the prices are so low. In the meantime, Aeroflot needs an hour to make preparations for the next flight. Cleaning the plane and loading meals on board takes time.

- It is good when there is an opportunity to choose between a luxury delicatessen and a cheap fast food joint. But what if you have to fly where Aeroflot is in fact a monopoly and don’t have cheaper options?

- I’ve already told you that last year we carried 60.7 million passengers. The aggregate traffic of Russian airlines in 2019 was 128 million passengers. Our share is less than a half.

If foreign airlines that fly to Russia are included, you’ll find 147 million passengers a year. We control only 42% of the market. When people say that Aeroflot is a monopoly on the market, I strongly disagree.

You can compare Lufthansa in Germany that controls about 80% of the national market, Air France with nearly 90% and Alitalia with almost 80%.

The market realities are as follows: either you pay and fly Aeroflot, thus compensating for the company’s costs, or go and look for an alternative. They do exist. All of Europe has opted for lowcosters. Ryanair today is larger than Lufthansa. The Irish do not ask their government for subsidies even during this crisis. WizzAir, the Hungarian lowcoster, and EasyJet are in the same position.

This is the era of lowcosters. Is Aeroflot too expensive for you? Then you are welcome to fly Pobeda!

Part 3
On stars, a lake of kerosenejet fuel, cargo traffic, dogs and cats and a photo camera

- You’ve mentioned your aircraft fleet. This year you started receiving Airbus A350-900s. Was the acquisition ill-timed?

- That’s a bad question. We had not anticipated the Coronavirus pandemic, nor did anybody else. We had plans that the new Airbus would make its first flight to Singapore in September 2020… For the time being we’ve obtained only one plane of the eleven that we originally expected. Apparently the delivery of the others will have to be postponed for a year or two. We are in the process of negotiations… Today we just cannot see where and how we might use them.

Airbus А350-900 of Aeroflot's fleet at Pulkovo International Airport Marina Lystseva/TASS
Airbus А350-900 of Aeroflot's fleet at Pulkovo International Airport
© Marina Lystseva/TASS

Whenever Aeroflot is on the agenda, it should be remembered that it is Russia’s pride. The company represents its country very decently and demonstrates that Russians are capable of providing top-notch services. I’ve been a member of the IATA board of governors for ten years running. There are thirty of us in the world. The International Air Transport Association incorporates 290 companies accounting for 90% of the world air traffic. Aeroflot is a global player. The London-based international air transport organization Skytrax has awarded us its four-star rating. And the New York-headquartered Airline Passenger Experience Association gave us five stars. I do hope that we will eventually get five stars from Skytrax, too. I believe that new planes would have helped us achieve this goal in 2020. Sadly, things turned out differently…

You know, before I joined the company neither my family nor I flew Aeroflot due to the poor quality of service. In those days I lived in St. Petersburg. For flights to Europe I preferred Finnair. I liked that company very much. And for trips to Moscow I used Transaero. When I began my Aeroflot career in 2009, my first thought was what should be done to ensure I would want to fly it myself? That’s how the concept of developing the company in the premium segment emerged.

Something like that has happened several times since. Just remember what Pobeda was like five years ago. Criticism was rampant. Many said that the lowcoster idea was fake. Avianova and Sky Express fell through with a crash because they were not full-fledged lowcosters. They merely used dumping tactics. I replied that I would undertake the establishment of a company like this on the condition that  several laws be adopted in Russia regarding non-refundable tickets, foreign pilots and luggage rules… In the end these legal acts came to be. I’d like to stress that they were adopted for the sake of all lowcosters, not for us personally.

Over five years Pobeda has carried 30 million passengers and has posted a net profit of 14 billion rubles.

We held our own opinion poll and found out that 60% of those questioned believe that Pobeda provides decent services. Completely new planes matching high quality standards are its greatest merit. The controversies over the lack of meals and hand luggage issues have died down. On the other hand, the service is truly inexpensive.

- And in great demand. Has Pobeda managed to operate at a profit during the pandemic?

- It went into the red, not as deeply as we did, though. Pobeda will recover faster than the others. While Aeroflot has been reducing prices temporarily as a forced measure, Pobeda is operating in a normal environment. All of us have drifted towards the lowcoster market domain. But our spending has remained the same while revenue has slumped. Pobeda has been in its low cost segment of the market all along.

- What are your plans regarding leasing?

- We are negotiating the deferral of payments. There are no other options to choose from. We cannot cancel these arrangements. The leasers borrowed from their banks against contracts with us.

You know, we are the last link in the service chain. We are being criticized for ticket prices, but nobody takes the trouble to look at unduly high rates of airport services and soaring fuel prices. The Aeroflot group consumes 4.3 million tonnes of jet fuel a year. A small lake!

And can you imagine how many people we employ? The airports, the services, catering and handling… Aeroflot alone gets 150,000 lunchboxes a day. The meal kits need to be cooked, assembled and delivered… For this we need people and money.

Of course, everything is interrelated. The cash influx has begun to be restored. Today we can make payments to at least some of our providers. Let me say once again that the resumption of international flights is crucial. They are the source of more than half of our revenues. Domestic passenger traffic is greater. It accounts for more than 60%. But international tickets are more expensive.

What’s more, half of Aeroflot’s payments – leasing, aircraft insurance and fuel - are pegged to hard currency exchange rates. At the beginning of the year the dollar cost 62 rubles. And now? Nothing has changed for us at all. Our payments still depend on foreign currency rates as they did before.

- Have you revised the salaries of air pilots and crews?

- Everybody in the company, including myself, gets paid in rubles. There have been no pay rises.

- Didn’t this trigger an exodus of personnel? At a certain point pilots began to drift towards China.

- They are already coming back. They had been lured by double wages. Now China is grounded. Only one air carrier flies there…

When I was a young man, I wished to earn more, too. I graduated from the mechanical engineering department of Leningrad Polytechnic and went to Siberia for seven years to earn money and to save enough for an apartment of my own.

- The Sayano-Shushenskaya Hydro?

- Yes. I returned when I earned enough to buy an apartment. Had I stayed in Leningrad upon graduation, I would’ve never been able to afford it. I’d lived in a small town called Cheryomushki with a population of 40,000. Compare it with St. Petersburg’s five million. Even Tashkent, where I was born, had one million residents.

I spent seven years there. But I knew perfectly well what I was doing all that for. I had an interesting job but not a very interesting life. I was just making money to be able to settle down some day.

It’s up to the pilots to choose. It is possible to try to make good money in China where there are no special social guarantees, where you have to live God knows where and how and to work 1,000 hours a year… The Aeroflot group is another option. We are very different in all respects. Everything operates in strict accordance with the rules, the working conditions are different and there are social guarantees, but the salaries are lower.

This explains why we supported the law on foreign pilots. There was an odd situation: Russian pilots were free to seek employment elsewhere, while we were prohibited from hiring foreign personnel. This paradox was eliminated.

Twenty foreign pilots still work for us even now during the crisis.

- During the pandemic you began to provide cargo transportation services. Was it worth it?

- Life left us no other choice. We did this out of despair. It was pretty clear that it was a temporary measure. A passenger plane cannot be turned into a cargo one. A different configuration is needed. But the economy is a universal engine. The planes remained idle on concrete runways while we were paying the lease and parking and housing charges…

- Haven’t your “birds” turned rusty during this period of grounding?

- Don’t you worry. Maintenance has been regular. Also, we reshuffled them from time to time.

Before making cargo flights we covered the cabin with polyethylene film. The planes were loaded only with light boxes – medical masks, protective suits and soft parts and components. In the luggage compartments we transported equipment at the request of the Ministry of Industry and the Ministry of Health ranging from lung ventilators to spare parts for Kamaz trucks.

Medical masks uploaded to a plane, 2020 Aeroflot Press Service
Medical masks uploaded to a plane, 2020
© Aeroflot Press Service

- It’s like loading a Maybach with potatoes.

- No denying that, but our idea was to keep the pilots flying. After two months of idleness they begin to lose their skills. There are not enough air simulators for everyone. In this way the crews remained busy and in good shape. Cargo flights also allowed us to make some money to compensate for part of the costs. It’s better than doing nothing.

- You use the same flights to take passengers abroad.

- Yes. We requested permission from the federal air transport agency Rosaviatsiya for combined cargo and passenger flights. We take passengers only one way – from here to there. And then we fly back with cargo. Do you see my point? Otherwise our planes would fly there empty. Why shouldn’t we take passengers on board? After all, the passengers we are transporting aren’t just sightseers who have decided to tour Europe. These passengers are diplomats, people with dual citizenship or residence permits in other countries. Other passengers have special permission to go abroad for medical treatment or urgent surgery.

The lists are authorized by Tatyana Golikova, the chief of the anti-virus task force. The logic is simple: the more we earn on each flight, the smaller compensation the government will pay us. Formally we might feel free not to carry anybody. Once the flight has been paid for, it’s easy to fly an empty plane. Who cares? But from the standpoint of national interests it would be the wrong decision.

- When did you fly last time yourself?

- To Germany in November of last year. Ever since then, all my trips had to be canceled.

I was due to meet with Lufthansa’s CEO Carsten Spohr in Hamburg. Our purpose was to see their technical division in action. We use its services. They are very advanced specialists.

- We’ve discussed birds already. Now it’s time to look at pets – cats and dogs. There was a popular outcry over an evacuation flight from Shanghai. Some passengers were not allowed to take their pets with them. Before that there was a cat that had to be chased about the passenger compartment and dogs hurt or frozen in the cargo compartment….

- I expected these questions… There has been too much fake information and exaggerations about all this.

First, services being provided to animals on the ground are the responsibility of handling companies. Aeroflot has nothing to do with this.

Second, we’ve already explained the Shanghai affair. It all began when a young volunteer distributed several dozen dogs among passengers before the evacuation flight and asked them to register the pets in their names. The Boeing-777’s cargo compartment houses eight cages. Nobody had notified us of the plan to evacuate the animals. The incident did not have a very happy ending.

Some people must have meant well. It was an attempt to squeeze seventy cages into a plane where there was no place for them.

As a matter of fact, we did our best to evacuate the animals several days later. This time only eighteen showed up. Both cats and dogs, each supplied with proper documents, traveled to Moscow on a cargo flight. Safe and sound.

That’s the end of the story.

I would not like to spend more time discussing this. There are far more serious problems. Wintertime is in store for us. It’s not going to be an easy period. The winter season is always hard to get through even in better situations. But we will manage.

Aviation is a very complex and tricky business. At first I usually got very emotional about any minor incident. Now I try to stay calm. Whatever we might be doing, there will always be critically-minded people.

My mission is to take care of the country’s prestige and the company’s development, and not my own future.

- The board of directors just recently approved your strategy for the group’s development until 2028. Aren’t you trying to look too far beyond the horizon? At the end of the eight-year period there will be a lot of water under the bridge…

- You know, right after I joined Aeroflot we drafted a program extended until 2020. Some were making fun of me: Saveliev will be long gone by then. There is enough time for five dismissals and six resignations of one’s own accord. He’ll bow out as soon as the flight attendants have new uniforms…

But we have implemented that strategy to the full extent. We created Russia’s first-ever classical aviation holding company which is present in all market niches – from the premium class to the low-cost segment.

The time is ripe to move on.

Ticket sales are no longer a solution to all issues. We will be developing artificial intelligence, because without it the chances of building an effective aviation company look bleak. Moreover, there are also non-aviation incomes. Their share in the Aeroflot group is about 9.5%, which is one of the best parameters in Europe. We hope to build it up to 20%.

The hardware is getting better. The aviation industry is making rapid headway. Some aircraft parts and components are already 3D-printed. The progress is obvious. In the past the flight crew consisted of four members. Then it was reduced to two. I reckon that in the foreseeable future planes will be flying with no crews at all. Our time is a very thrilling one!

- You have a contract till 2023, but, as judging from the current plans, you hope for it to be renewed. 

- I never make guesses. I just always remember how important it is to quit at the right moment. The team that I’ve worked with for many years has proven its professionalism. And we still find it enjoyable to generate and implement ideas together.

We have great plans!

- How long is it since you last used your camera? You are still Nikon’s ambassador, aren’t you?

- I am. But I haven’t taken any pictures for about a year now. I don’t have a minute to spare. I’ll start going around with my camera again when life is back to normal…

Andrey Vandenko