Vitaly Saveliev: Aeroflot out in the open

- I never doubted I would see aircraft models in your office. Is it a legacy inherited from your predecessor?

- I am sure you would agree it would be rather strange of me to keep models of railway steam engines or space rockets here. We leased this building in Arbat Street after I joined the company in April 2009. There were no model planes in the old office. What is far more important, in those days Aeroflot didn’t have corporate e-mail, either.

- How did Aeroflot manage to carry on then?

- The old ways. By using paper. There were hard copy documents all over the place.

- Now the walls of your offices are adorned with awards and various business recognitions.

- In the past, Aeroflot never placed very high in international rankings, so there was nothing to put on display. The plaques on these walls are visual teaching aids for our staff. And for the visitors who come here. Everybody can easily see the company is developing. We have achieved a lot in recent years.

- Like what?

- Each award has its own history. For instance, in 2016 we obtained four stars from Britain’s Skytrax. This is the most authoritative appraiser of the quality of air services in the world. Their auditors scrutinize more than 800 criteria. It took us several years to attain that goal. De facto we enjoyed recognition in the industry in the past. Aeroflot was reputed as one of the best in Europe, but it was put on record officially for a variety of reasons. There are more than 3,000 air carriers around the world, but just forty of them have earned four gold stars. This is a sort of premier league for such criteria as the level of comfort and reliability. There you will find Emirates, Lufthansa, British Airways, and Air France… Now Aeroflot has joined them. We take great pride in this achievement.

- But some airlines have five stars, don’t they?

- There are just nine such air carriers in the whole world. None of them are European or American. They are either Asian or from Persian Gulf countries: Qatar Airways, Singapore Airlines, Cathay Pacific Airways, Asiana Airlines, Hainan Airlines, ANA All Nippon Airways, Garuda Indonesia, EVA AIR and Etihad Airways.

There are some other rankings, too, where we are present alongside the very best. Take, for instance, the Net Promoter System (NPS) – a metric measuring customer loyalty. We were the first in the Russian airline industry to use it back in 2010. I came to Aeroflot from the telecommunications sector, where NPS is a key benchmark. The scores are awarded by a special international appraiser. The polled passengers – and there are very many of them, at least several thousand – are asked: “Would you recommend Aeroflot to your relatives, friends and neighbors?” Then there follows a detailed questionnaire that focuses on the slightest details of the quality of meals and catering service on board. To my recollection our latest rating was as high as 72%. In this respect Aeroflot is second best after Emirates. The leading European air carriers are now mulling a variety of excuses for not offering meals to their passengers on flights that last less than five hours. We, on the contrary, have been doing our utmost to improve the quality of meals and services.

The NPS is a good prompter that instantly lets us know what extra options our passengers would like to enjoy in flight: USB ports for electronics, a collection of movies or music programs… We make many of our changes after studying these requests. And each extra point scored, our consultants tell us, yields us a hefty $15 million dollars of additional revenues. These are not trifles I’m talking about, but very specific commercial gains. This explains why Aeroflot kept growing even against the market trends, when the ruble’s devaluation sent the Russian air industry into a nose dive.

We obtained two 2016 Air Transport News Awards in two categories. Our ambitions are not a secret to anyone. Under the strategy covering the period through 2025 we hope to join Europe’s Top Five and the world’s Top Twenty global air groups in terms of passenger traffic and revenue. A five-star rating from Skytrax is among our goals, too. We are already working on a roadmap. Very large costs are involved. And far from everything depends on Aeroflot. For instance, business class departure and arrival lounges must be available. No single company or airport can bear all costs on their own. This is unfair. There are to be joint projects, if the partners find providing support for us worthwhile.

We are conducting talks with the board of directors of Moscow’s Sheremetyevo Airport. This program is of interest to them, because it allows for increasing the number of loyal passengers.

I always keep in touch with the main investors – Arkady Rotenberg and Alexander Ponomarenko. We have meetings at the company board level. Just recently we inspected Sheremetyevo’s facilities still under construction, including the tunnel under the airfield. A tremendous amount of work has been done. I have some photographs for you to see. Take a look. All of us dressed properly: the hard hats, worker outfits, high boots…

Investors spend real money and they are by no means indifferent about the returns they will get and when. To be able to contest a five-star rating the proper groundwork has to be laid. In the meantime, Sheremetyevo already operates at peak capacity. The existing facilities are no longer enough. We have shifted to a six-wave mode of operation, using Europe’s major airports as an example. But that’s the limit. We cannot achieve more no matter how hard we try. The whole air traffic will have to be reorganized first.

- What are the waves you are talking about?

- I mean the traffic peaks that occur every 24 hours. In 2009 there were only two waves – one in the morning and another in the middle of the day. Six is the maximum. We make 630 outbound and return flights between pairs of cities every 24 hours. That’s some 80,000 passengers. This explains why it is so important for us to ensure that Sheremetyevo makes improvements. We are certain it will.

Five stars is not the ultimate end, though. We should have a sober judgement of our own resources. We keep a close watch on the front-runners and compare their costs with our own capabilities. Each has one’s own merits. Some offer better meals, while others boast more comfortable seats and larger room between the rows of seats, making it easier to stretch your legs…

When in 2009 we declared we were destined to become a premium segment air carrier, we saw many skeptical grins: just another adventure doomed to fail, ha ha! We started with new uniforms for our flight attendants. This triggered a torrent of criticism. Gift packaging is all these guys can think of, and that’s where they’ll stop, we heard many say. In the meantime, a new uniform was our first step just because we turned an attentive ear to psychologists. It is very important for passengers to see who welcomes them on board, that person’s appearance. During a certain period of time Aeroflot had no uniformity in that respect. Flight attendants were free to decide what they should wear at work. Some preferred colored blouses and skirts, and others, white blouses and pantsuits. It might seem an unimportant detail to some, but passengers began to have a feeling of uncertainty and anxiety. That’s why the psychologists advised us to change the uniform first. The old one was utterly out of date. As for the plane’s livery, we have preferred to preserve it instead of launching a comprehensive rebranding program.

For the first two years we heard only bad news: this is no good and that is disgusting, food is tasteless and the luggage is lost… Today’s problems remain many. We are still very far from ideal. But we go on working and addressing issues. And people can see that.

- And what can you say about Deputy Prime Minister Dmitry Rogozin’s advice addressed to Russian airlines they should stop using foreign aircraft? How about that?

- I believe it would be more appropriate to put this question to Rogozin first. He is a professional. His idea is clear by and large. There are Russian aircraft and there must be options encouraging our airlines to purchase them. What such options can be? Rogozin speculated that the most lucrative routes might be awarded to companies flying domestically-made aircraft.

- But no special permission from the federal government is required for flights inside Russia.

- Precisely. I’m talking about foreign routes. Certainly, the air carriers need preferential treatment. When we agreed to have the Sukhoi Superjet-100 (the contract had been concluded before I joined Aeroflot), certain subsidies were promised. We have not seen them, though. The government’s resolution expired before the planes reached us. We have made several queries but no solution has followed to this day.

Let me say once again: to encourage Russian companies to take on new aircraft for promotion some very specific steps and proposals from the government are needed. This applies not only to Aeroflot.

- Rogozin speculates breathing a new life into Ilyushin-114 and Ilyushin-96-400 is a possibility.

- We have made a reply already. We explained that Aeroflot sees no place for these planes in its fleet at this time.

- Oh, yes, it was in March 2014 that you withdrew from operation the previous model of Ilyushin-96 and apparently heaved a sigh of relief.

- That’s what I am driving at. Please remember: when I joined the company we had 26 Tupolev-154 liners. By 2010 the last was gone. The media slammed me as the terminator of the Russian aircraft manufacturing industry. But for God’s sake, do I look like a killer? Those Tupolev-154s were great planes – 15-20 years ago. But they are too fuel-intensive, they devoured too much fuel.

Government incentives do make sense at the initial stage, no denying that, but Russia would like to market planes internationally. Prime Minister Dmitry Medvedev keeps saying that we must deliver products matching world standards. If our Ilyushin planes are good enough – fine! Otherwise, no incentives will help. We had a long experience of operating six Ilyushin-96 jets. This plane is very costly to fly.

We are very concerned about fuel consumption per passenger per kilometer. If the aircraft burns more fuel than its foreign competitors, customers will be hard to come by. Let’s learn to make aircraft at the level of world standards first. Then you are welcome.

- One has the impression that Russian air carriers and aircraft manufacturers exist in different centuries and even in different countries. Our aircraft manufacturing industry is stalled way back in the 20^th century, in the Soviet Union.

- It is true. We do purchase foreign planes. Whatever some people around may say, these planes are equipped far better and are superior in quality. Where does the problem lie? Not a single aircraft manufacturer – be it in the United States or in Europe – does everything on its own. The whole world relies on cooperation. In the meantime we would like to manufacture everything on our own. The way I see it, it would be far better to keep manufacturing that part of the plane in which Russia uses its critically important technologies the best way. For instance, we make the landing gear, the undercarriage of titanium. This market niche is ours.

Or, for instance, Russia sells space rocket engines. The Americans take them despite their own policy of sanctions. They cannot do without such technologies. Let us focus on these areas first. It is common knowledge that European avionics is the best in the world.

In the long run we can do everything ourselves, but the end product will turn out costly and not competitive. In the meantime, making products in cooperation with partners, by investing the best knowhow… This would make Russia secure from being ousted from the market altogether. That’s my personal vision, though. The Chinese are trying to make their own plane to the last rivet. Let’s wait and see what will come of it. Let me say it again that pooling efforts is a solution that is far closer to my understanding of the problem. Take cooperation with China’s COMAC over a long haul plane…

There is no ban prohibiting US and European air carriers from using planes manufactured by their competitors. No such ban exists. Or has ever existed. Ryanair flies only Boeing 737-800s. Half of the Air France KLM group’s fleet consists of Boeing planes. And Airbus is significantly present in the fleets of US air carriers. The American Airlines Group is the world’s largest operator of A320s.

True, each country keeps pressing for its own interests, but bans would be counterproductive.

- How about the MS-21 plane? Are you looking forward to it?

- Very much so. If this aircraft turns out to be what has been promised, it will be a real competitor to Boeing 737 MAX and Airbus 320Neo. We saw the plane when it was rolled out. The fuselage is bigger and the portholes are larger… In the end everything boils down to cost efficiency and quality. If the Irkut corporation sticks to the promised parameters, this will be a great breakthrough. The plane being developed is within a niche that is in the greatest demand.

Very tough competition is in store for us and we’ve got to be prepared. Many planes are on offer in this segment: Airbus and Boeing deliver about 50 a month and 600 planes a year each. If we are to gain a segment for our MS-21, we should be making at least half as many. We will never achieve any growth if we make no more than 30-40 planes a year. Technologies keep developing and the competitors will push ahead with their innovations.

- Does the promised date when you are to have the first MS-21s remain unchanged – the end of 2018?

- In any case we know no other date. At the beginning of February the board of directors met and it the issue was raised of the 20 Sukhoi Superjet-100 liners that Aeroflot is supposed to get in addition to the 30 we already have. We agree to have them, but at the same time we are asking concrete questions about the dates, details and schedules of delivery.

The same applies to the MS-21s: we’ve got to have a clear idea of the configuration and layout and the real dates to be able to make plans and to set the money aside for the purchase.

We are prepared to order fifty planes.

- Don’t you find somewhat worrisome the negative experience of operating the SSJ, which seems to have technical problems too often?

- Look, Aeroflot is a state company and the SSJ-100 is an international project involving many countries. The Italians and the French make the engines together with Russia. Nobody uses force to dictate anything to Aeroflot. We believe that this plane must fly. Who but us will be able to make it happen? In the whole country there is no other such company. True, this implies certain costs. In a sense it’s a headache. If Aeroflot were a private company, its shareholders might refuse to do that. But we respond to this situation with understanding.

We believe that the SSJ-100 will be flying properly.

Take any foreign plane, the very same Dreamliner. Did it go out of order less frequently? It was recalled very often. And it remains to be seen whether the Airbus 380 has a future. Possibly, the potential market for the Superjet-100 was misjudged somewhat, but the infantile disorders that surface in the process of operation are curable. That’s what the incentives and preferences are meant for. They enable the operator company to address them in a working fashion.

- How many Superjets had to be grounded for a while due to stabilizer problems?

- Ten planes all in all. The problem has now been addressed. All planes continue to fly.

I’m saying again that we will eagerly have domestically manufactured planes, provided their quality is good enough. We are not against it.

- Are you going to share some Superjets with the air carrier Rossiya?

We operate within one group. When the SSJ-100 fleet grows to 50, then we will give thought to this.  For now we need all 30 planes we have ordered. At the moment Rossiya has no routes where it might use this plane.

- A few words about routes, by the way. Are you going to request summertime prolongation to operate the international flights you’ve inherited from Transaero when it went bankrupt?

- Naturally. Currently we’re talking about 37 routes. Initially there were 92 of them and then 56… We agreed that we would be able to obtain the prolongations until we have regained the losses we sustained when we had to carry Transaero passengers at the end of 2015 and in 2016. Aeroflot spent nearly 17 billion rubles. We have managed to recover only a little more than three billion so far. Where are the resources that will let us compensate for those costs? We haven’t received all the Transaero planes we were entitled to yet. We were expected to get twenty four-liners to support the flight prolongations. In reality we have twelve. Another two are in the handover process. All the rest require costly repairs and maintenance. The leasers are unprepared to spend so much. They find it unprofitable.

- What planes are you talking about?

- Mostly Boeing-747s. We’ve had hired personnel especially for them. We’ve created a maintenance group, but making the planes airworthy again is a luxury too costly for us.

- In other words, the planes are nothing but overused junk?

- In a sense, yes. They were kept in operation until full wear and tear, without paying any attention to maintenance.

- When do you think you will be able to recover the money spent on Transaero passengers?

- According to our own estimates, in five to seven years from now. If we fail to get our money back, next time Aeroflot may refuse to extend a helping hand to an embattled company. When the decision was made in favor of carrying Transaero’s passengers, the debates turned white-hot. The board of directors was divided.

- Were you personally for that decision?

- Let us put it this way: I saw no other way of avoiding utter collapse. When everything happened even I had a shudder. We had no experience of responding to such critical situations. And do you know what we were being told then? Come on, there are very few passengers, just 650,000 of them! A little earlier, when in 2008 half a million passengers of AirUnion were stranded, the whole nation was in turmoil, let alone Vnukovo airport.

Shall I now tell you how many passengers we carried in the end? Two million. Two million, mind you! Who else would have coped with that but Aeroflot? The government had no money.

- What do you think about speculation over breathing new life into the deceased company?

I’m the wrong man to put the question to. Non-science fiction stories are no hobby of mine. Theoretically it might be possible to set up a new airline and go in business, although air industry analysts say the there is excess supply in the market of some 800,000 seats. We are on the threshold of a situation where somebody may opt for dumping tactics again. I can see no reason why anyone would try to relaunch Transaero… How can we go about the business of debts? Aeroflot has won a great deal of cases in courts, something like seven billion rubles. If the receiver thinks we may agree to write off the debts, such hopes are futile. Aeroflot will not do that. May they give back what they owe us. As much as the law requires.

The population’s purchasing power is decreasing and the Russian air market is shrinking. In 2016 it was down by another 4.1 percent. In fact, only Aeroflot shows growth. If the price of crude is in the range of $50-60 per barrel, as many predict, and inflation stays at a level of 4%, slight growth may occur. Yet the market will stay far below what it was previously, when passenger traffic was at 120 million a year. Air carriers will be unable to use their capacity fully. Consequently, more bankruptcies may follow.

- Do you have any 2016 statistics at your disposal already?

- We will disclose the financial results as soon as the auditors have confirmed them. The passenger traffic situation looks as follows: As a group of companies we have carried 43.4 million passengers. Aeroflot proper accounts for 29 million. 

- Do you keep the flat-rate air fares?

- We do. The president’s support will last for another two years. Five cities in the Far East, and also Kaliningrad and Simferopol are involved in the program. Flat rate fares are already available. At the end of 2017 we will make a decision whether to raise the prices by the inflation rate or to keep them unchanged. For now we believe that we will be able to afford the freeze, if we achieve greater effectiveness on other routes.

- What’s the situation involving Egypt?

- We are ready and waiting for instructions to follow. I believe that a decision will be made in the first quarter of this year. The political will does exist. A new airport is being created in Cairo. We will open our office there as soon as flights begin. Security is the top priority. We need guarantees. Inspections are in progress. Egypt is a major tourist destination, just as is Turkey. It will help redistribute the current flows of holiday-makers and create new ones. An overall growth can be expected then.

On the other hand, as far as I can see, our people are getting a taste for Russian resorts. Sochi and Crimea have been traditionally popular, but now the Far East has joined in. The flat rate ticket prices play a certain role. They will not be offered on either Egyptian or Turkish routes. So it would be wrong to say that we have been just staying idle and waiting for the Egyptian sky to reopen.

Time flies, don’t you know. Recent events are easily erased from people’s memory. In 2009 Aeroflot carried 8.6 million passengers. The emphasis was on foreign flights, while domestic traffic accounted for half of the amount. On intra-Russian flights with its four million passengers Aeroflot was number two. S7 was first and UTair, third. When we finalized our 2025 strategy, many said they had no faith in it. It’s a mockery of common sense, we were told. Making such long-term plans is senseless. We avoided entering into debate but hired the global management consulting firm Oliver Wyman. They scrutinized our business plan to come up with this conclusion: the plan is quite realistic, but there are two major risks – a shortage of pilots and Sheremetyevo’s infrastructures. We’ve eliminated both risks now. Back before the crisis we obtained permission to hire foreign pilots. Twenty four foreign pilots continue working for Aeroflot although the ruble’s devaluation has in fact slashed their salaries by half.

- And how many of them did you have at first?

- Under the authorized quota we were allowed to invite up to eighty foreign pilots a year, but we needed captains first and foremost. We hired 36, most of them from Europe. Incidentally, one Serbian pilot is in the process of obtaining Russian citizenship.

Now, a few words about Sheremetyevo that I’ve briefly mentioned already. In the past, rows and disputes were frequent and many. Now we live in peace and harmony. First we had doubts if the airport would be able to accommodate 30 million passengers a year. Now it is realistic to set a target of 50 million and, with the commissioning of the northern terminal, of 80 million. Aeroflot today would be inconceivable without Sheremetyevo. The Khimki and Lobnya suburbs have turned into cities in their own right, where 70 percent of our personnel have homes.

- And yet you’ve leased an office building in Arbat Street in downtown Moscow.

- The explanation is simple. In 2009 the building in Melkisarovo was still under construction and in any case it was unable to house all of the company’s employees. When I joined Aeroflot, it had a staff of 14,700. A good memory for numbers is part of my profession. The world’s average integral rate in the airline industry is one thousand personnel per one million passengers. An airline company that carries 8.6 million passengers a year is to have an optimal staff of 8,600. We had twice as many.

It was a time of crisis and we took an unpopular measure to slash 2,500 jobs – non-flight personnel, mostly administrators and managers. Debates and scandals were unavoidable. Once a month I met with the employees – the pilots, the flight attendants and the ground services to explain my point of view.

These days we carry 29 million passengers. The company has a staff of 21,000. The rate is better than the average one. Naturally, we lacked space to accommodate the personnel. Before, Aeroflot’s headquarters was in Leningradsky Prospect. That office was 50% more costly than the current one. Back during the crisis years we identified a far less costly solution. The company is split between two sites. All core personnel that keeps the company going, the people who provide services to passengers and are connected with Sheremetyevo – is based in Melkisarovo. I make visits there once every ten days on average. The back office – the lawyers, the strategists and the commercial services - has remained in Arbat Street. It is far easier for bankers and partners to contact us there, while going to Melkisarovo and back makes little sense… People’s time is precious and this is right.

As far as personnel reductions are concerned, at that moment I proposed the following solution: the company will retain half of the wage fund. Aeroflot’s wages were low then, while these days they are above the industry’s average.

- Will you share any figures, please?

- An air liner’s captain gets about 470,000 rubles (all bonuses and surpluses included). The one who also works as an instructor is paid more. And the co-pilot gets about 320,000-350,000 rubles.

- What’s the situation in Europe and Asia?

- Before the 2014 devaluation we were approximately on par. These days calculations in hard currencies are more difficult. In Europe a Lufthansa air pilot makes about 12,000-14,000 euros a month. The first pilot that agreed to work for us was German. Foreigners enjoy no special privileges. They get as much as their Russian counterparts. Naturally, when the ruble slumped, some left Aeroflot. All have families to support. Nothing personal…

- Nothing personal, you say? Then a very personal question, may I? I have the strongest suspicion you are a dog-hater.

- Come on, are you kidding? I grew up in the company of dogs. My mother is a dog trainer, although geologist was her first profession. We kept three dogs at home. The last won fourteen medals and two badges. He was a boxer named Zeus.

- But you are now charging 75 euros per pet one way. It’s not very humane, I should say.

- We’d avoided raising the prices for many, many years. Should you ask me, I brought up this issue at a board meeting last autumn on purpose. The problems Aeroflot has with carrying dogs are too numerous to count. Dogs of the fighting breeds often bite their way out of their cages and then run about the luggage compartment. Just recently a French bulldog died on board. We’ve made some inquiries and found out that there are certain brachycephalic breeds that are banned from travelling by air in Europe in principle. Dogs may die of emotional strain. That passenger sued us, claiming that his pet’s death was due to hypothermia. In the meantime, there was another brachycephalic dog on board the same plane, but nothing happened to it… In a word, we’ve raised the ticket prices for animals, but they are no higher than European prices.

In general, if you take our economy class prices on a dollar-per- kilometer basis, you will see that Aeroflot’s rates are the lowest in the group of traditional air carriers. The Daily Telegraph says our rate is seven cents per kilometer. Only four low-cost airlines are ahead of us. We have not raised economy class prices since 2015. That in the wake of the ruble’s devaluations Russians still find the prices too expensive is a totally different matter. But we have not changed air fares inside Russia. We did so on foreign routes, because we have to pay in hard currency for everything – airport services and the overflight fees… We’ve got to compensate for these costs somehow.

The airline business is a low margin one around the world. We have jet fuel contracts with Rosneft, LUKOIL, and Gazpromneft. Pricing is pegged to oil and the dollar exchange rate. We pay the Russian fuel companies’ bills in rubles, but on the basis of the current exchange rate. And for all planes, including the Sukhoi Superjet, for which we pay in rubles. Their prices are based on the exchange rate, too. For licenses and leasing, as well as insurance fees, we pay in hard currencies. No Russian companies are capable of providing insurance. They invariably team up with foreign partners. Should Aeroflot try to indulge in dumping policies, it would have the same plight as the company we discussed for so long today. Consequently, we have to seek a market balance. True, our economy class, including foreign flights, is the cheapest. This is a hard fact. As for Aeroflot’s business class, it is expensive. It costs nearly a third more than Lufthansa’s, for instance. But have you ever tried flying German business class? At best the flight attendant would care to pull down the window shade for you – Have a good rest, Damen und Herren! That’s all. Ours is one of the best business classes in Europe. The meals are in the world’s top ten. My dear friends, that’s what you pay for. And it cannot be otherwise. The company cannot afford to operate at a loss.

Whenever I’m asked about prices, I always reply they cannot be cheap or expensive, high or low. Prices are balanced. Some routes are loss-making, while others yield profits. We keep an eye on the costs, that’s our duty.

- Are air hooligans a great problem for you? I reckon they are, since you discussed this issue with Vladimir Putin himself in great detail…

- You know, I’ve tried to address this problem for six years of the nearly eight years I’ve been in charge of Aeroflot. A bill on tighter measures against debauchers on board underwent the first reading in the State Duma back in 2014. It has been stalled ever since.

In all fairness I must say that this initiative of ours enjoyed verbal support all the way. No decisions were made, though. Or the decision-making process was made more complicated. Everybody started talking about infringements on passengers’ rights. I always point to foreign experience. Everything has been invented long ago. You just borrow the best practices and implement them. The way I see it, it is the passengers, and not debauchers, who deserve protection. Why do we urge a half-a-million ruble fine for those who are to blame for an emergency landing? That’s the minimum of our extra expenses. Extra refueling, disrupted flight connections and compensations to passengers cost us 500,000 to one and a half million rubles. The Europeans charge at least 100,000 euros for such forced landings. In the meantime, one of our brave guys tore an air hostess’s clothes (there was even a story about that on the TV news) only to get away with a fine of 1,000 rubles - less than $100. And it was all over. Is one thousand rubles an adequate compensation? What do you think?

The same applies to the handcuffs and belts. There is still no permission to use them.

Black lists are crucial, too, I believe. Europe and North America have common lists of trouble-makers. Should you create problems on any flight, all other airlines will refuse to service you in the future. Our proposal is Russia’s individual air carriers should start making their own lists first. Should you get blacklisted just once, you’ll have no right to board Aeroflot planes for five years. Make a journey from Vladivostok to Moscow on foot or by train. Or try to fly a different air carrier. The one who disagrees should feel free to go to court. Last October a passenger from India caused a delay of our flight from Geneva. When he realized he was late for the plane he claimed there was a bomb on board. The departure was delayed. A Swiss court the next day sentenced that Indian passenger to six years in jail. Imagine, the next day! A six-month prison term! This works. And that’s the way it should be here.

What are we offered instead? May special sky marshals be present on board each plane. Marshals, you say? We have 630 flights a day. We’ve calculated we would have to give free rides to about 3,000 people at our own expense. True, there are air marshals in Israel and in the United States, but only on those routes where the risk of a terrorist attack is high.

Planting CCTV cameras on board is another idea. Excellent! My question is who is going to pay?

Some call for arming the flight attendants with electroshock weapons. Now please imagine that a rowdy person has to use a cardiac stimulator device. Such a possibility should not be ruled out. OK, but what if some of our personnel knocks the guy out and the man’s heart stops? Who will go to jail for the disproportionate use of force then? In other words, it is far better to start using what the others have tested in practice already, and not invent everything anew.

Since the day I had an audience with the president last October there have been 76 cases of debauchery on board. A musician hit our employee in Kaliningrad with his head and broke the employee’s nose, paid a 1,000-ruble fine and was allowed to go. There are special psychologists providing advice to our crews. We had to create a special unit for that purpose. Our stewardesses fear they may fail to keep a critical situation under control. How can one expect a young woman to cope with a rowdy man? Most of the debauchers are robust men.

A decision is to be made right away, or else it’ll get drowned, should it be postponed again…

Incidentally, we’ve asked the IATA about the way Russian passengers behave on foreign airlines. Do you know what place our passengers take on the lists of debauchers? One of the last ones. They are one of the most disciplined and law-abiding! When they are not at home. Probably, this is some specific feature of our mentality: we get rude, punch and kick only when we are at home, while abroad we prefer to toe the line and stay polite so as not to be apprehended. When our tough guys board KLM, Lufthansa or British Airways planes, where the service and meals are worse, they prefer to stay quiet. It’s a custom of ours.

- You’ve earned the reputation of an effective dictator. Is this a compliment?

- I consider myself a manager with a mixed authoritarian-democratic style of administration.

- Does a style like that exist at all?

- It’s international practice. Don’t you see, ours is a paramilitary organization in a sense, with its own harsh rules and code of conduct. God forbid if an emergency comes up. Aviation will be aviation. There is no place for being lax and sentimental.

It is very easy to drown in endless debates on any issue. But what’s the use of such debates? You know, in a foreign university I was explained that the adoption of a specific decision is the end product of each manager’s work.

- Have you received instruction abroad?

- It was a fashionable trend in the perestroika years, back in 1987-1988. I did go to Japan and to the United States. Everything is of interest to you when you are young. I was even invited to deliver a series of lectures, on the condition I brushed up my English. I speak with a very strong accent. I would have refused anyway, because my strongest wish was not to teach others, but to do business myself. I’ve never regretted those trips, because I really learned a great deal of what was totally new. Claus Møller shared a lot with me. I know him personally. Many of the things I learned from him I still use in may daily work. First and foremost, in managing my own time.

For instance, I start each morning at 7:00 by reading the company’s daily performance report. I want to be sure everything is under control. The passenger is our top priority. It is the passenger that lets us earn a living. Claus Møller and Janelle Barlow co-authored a book called A Complaint is a Gift. I made all my staff read it. One of the sections is devoted to Pan American. The airline went bankrupt when the management’s KPIs included a reduction in the number of complaints. As a result everybody was keen to rig statistics to understate the real level of criticism, and not eliminate the root causes. Everything that we do in terms of our technologies and services is expected to draw customers. I keep telling both customers and colleagues: we get our wages from our passengers, we are on the passengers’ payroll. The one who thinks he gets his salary from the cashier is told that he has knocked on the wrong door and chosen the wrong company. To me the passenger is always right.

- A very neat and beautiful formula it is.

- I should say this is the gist of our business. May I quote Møller once again, for I trust him a lot: if an angry passenger tells you what exactly he does not like, there is a chance he will fly with you at least one more time. If he’s lodged no complaint, nothing will help. He’s gone forever. This says it all. Last December, in cooperation with IBM and Technoserve Consulting we launched a special application in Big Data with the aim to study passenger complaints on social media. This is important to me.

- Your Pobeda low-coster is a target of criticism very often.

- That’s logical. This is a low-price service. People pay very little money for flying a new plane but they are angry they have to pay for every extra option. We would like to sell up to one-third of our tickets for 999 rubles. For next to nothing!. But if you are going to fly not alone, if you also have a dog, a little kid, a stroller and a 15-kg backpack and would like to have lunch in flight, then my advice is you should not fly Pobeda by any means, for it will turn out more expensive than Aeroflot’s economy class. Don’t you know how it usually happens with our people? They read only what they want to read. In the meantime, they will have to pay for everything, for all extra options. You would like to get the seats for the whole family next to each other? Pay an extra 140 rubles. That’s not an awful lot of money, isn’t it? We have agreed to let children under twelve years of age travel with one of the parents for free. Now take Ryanair or Easyjet: you haven’t ordered seats next to each other, then you should be glad to have the ones available. That’s your problem! This is what a low-coster airline’s business is all about. People in Russia are not used to this kind of treatment, some feel offended…

What caused SkyExpress to go bankrupt? It was stubborn enough to push ahead with its price dumping policy. Pobeda does not do this type of thing. In 2016 it posted three billion rubles of net profit ahead of schedule. That’s more than we had expected.

Aeroflot keeps a plane in the air for twelve hours a day on the average, while Pobeda’s normal rate is 15 hours a day. Aeroflot makes a liner ready for the return flight in 45-50 minutes. Pobeda manages to do the same twice as fast. The moment the passengers leave the plane after arrival new ones take their seats on board. The passenger compartment is cleaned once in 24 hours. The flight attendants just pick up the litter during the day. Pobeda’s planes seat 189. The room between the seats is small. Bigger legroom would push up air fares to cover the costs.

The risk of scandals should not make you feel scared. Not a single low-coster in the West evades them. What is most important, Pobeda in 2015 carried 3.1 million passengers, and last year, 4.3 million. This means it is in good demand. The company keeps growing. By 2019 its fleet will grow to 30 aircraft. We buy some and we plan to lease four Boeing 737-800s. Most low-costers lease half of the planes in use, while they fully own only the other half.

Many in Russia are still unaware of how unique this product is. We depend on the costs of airports’ services. For instance Kirov’s airport raised the prices of services. We left it.

- Do you have any plans for introducing in-flight meals?

- On all flights lasting less than three hours we offer only soft drinks. Pobeda’s planes are not equipped with kitchens. This helps reduce takeoff mass. We do our utmost to cut corners. No miracles happen.

- Any intention to open new routes?

 - Pobeda keeps doing that all the time. Just recently we obtained access to Alanya. Flights there will begin in the spring.

- Have you flown Pobeda yourself?

Just once. It was a trial flight. Of course, this is not the segment for me. I prefer to fly business class, but not because I am a CEO. I find it more convenient. But for a person who is in dire need of getting from A to B and whose budget is tight, Pobeda is the right choice. An absolutely new plane, leather seats. True, there may not be enough room for some, but it’s fast and cheap.

- Do you think privatization of your subsidiary company, Rossiya, is still on the agenda?

- It is up to the government to decide. I would not be in a hurry. Rossiya carries nine million passengers a year and we have no wish to sell it. We may drop out from the rankings of the global players based on passenger traffic statistics, and this is fraught with considerable risks.

As for Aeroflot as such, I am for privatization. The company costs a lot now, more than three billion dollars. Our shares grew in virtually no time. Prices tripled over just one year, although at a certain point the shares slumped to 20 rubles a piece. That was in 2014, with the introduction of sanctions. Now one share costs nearly 180 rubles and the nearest forecast promises 210 rubles.

- Do you own shares yourself?

- Yes I do. I acquired it with permission from the board of directors. And from my wife…

Whose consent did you obtain first?

My wife’s. I used family savings. I officially invested the funds into the company from my Sberbank account. That was three or four years ago.

- Did you make the purchase on a downtrend?

- No, but the price was low. Then the shares slumped further due to the Transaero affair, but we – the family and myself – were well aware that we were making a long-term investment. I do have confidence in Aeroflot.

- Is this the main asset that you own?

- Yes, it is. I have no stakes in other companies. I feel the market and I can see the prospects. As far as Aeroflot’s privatization is concerned, one should be aware that it will be far easier to do that after the domestically manufactured aircraft have been commissioned. There are eleven directors. When changes to its composition follow, the government will have five representatives instead of today’s eight. Five against six, and a Russian plane may never get into the company’s fleet because the voting results will be against it.

You see? It is up to the board of directors to make a decision. Please, don’t forget: 495 of Aeroflot’s investors are private ones. For instance, the largest independent investment funds, such as Sweden’s East Capital have built up their aggregate stake to ten percent. Next year they may contest one or even two seats on the board.

- Which of your previous experiences have turned out most useful to you in your present capacity?

- It’s really hard for me to say. I’ve tried different industries. It’s easier for me to say where I have not worked…

I graduated from the mechanical engineering department of the Leningrad Polytechnic. Our professors shared with us a very simple formula: we are teaching you the skill of learning. Ours was a very strong group. There were 28 of us in the first year. Five years later eleven obtained graduation diplomas. But everybody received very good, fundamental instruction. I am a mechanical engineer. By and large it makes no difference for me where I apply my knowledge. True, I ventured into the airline business without having any related experience. For about six months my deputies and myself – all with a background in telecommunications – spent four hours each Saturday attending lectures on aviation. First, there were consultants from McKinsey, and then from Bain. We had to spend some time finding our bearings in this new field. On the other hand, each of us had some experience in telecommunications to our credit. We promptly developed a website and launched e-mail. Digitizing Aeroflot is our brainchild that I take special pride in. I believe it was a gigantic stride forward. According to Bain, we are in the 4^th or 5^th place in the world in terms of digitizing business and technological processes.

Only the Americans are better than us. Look: I open my iPad, enter the Manager’s Monitor system and see at once how everything works. The system shows all the changes that have taken place over the past twenty four hours across 427 parameters. It is not a team of managers that delivers a presentation once a month, the way it happens in some other organizations. Everything happens automatically. In the morning I have in front of me all the information I need. I can travel in time back one week, one month, three months, a year. To see all the 427 parameters. Seat occupancy rates, the number of passengers carried, and the operation of payment systems and of the call center. Everything is in there. This is a considerable advantage for making a competent decision.

My experience in telecommunications, where I worked for four years, was of great help.

Remote access, online registration, barcode scanning from smartphones, and on board wi-fi, which we introduced in Russia faster than anybody else… The idea of digitization gave Aeroflot a powerful boost. The whole team was very enthusiastic about it. In 2016, 130 billion rubles worth of Aeroflot tickets were sold though the website, which became the largest on-line shop in Russia. That’s more than any other e-commerce retailer in the country. Our on-line retail turnover proved the greatest. We don’t have offices in Piccadilly and Champs-Élysées any more. We closed them down. What’s the point of keeping staff there? Everybody has drifted into the world wide web. Big Data for me is the company’s second wind. It promises bigger revenues and lower costs. I feel its my true duty (please excuse my zeal) to address these issues. They are my real obsession.

Now we are coming close to the possibility of keeping track of all luggage using special markings. Each passenger will know where his suitcase, if it’s with him on the plane.

No technology exists separately from service, otherwise it will not pay for itself.

- And what experience have you borrowed from the banking business?

- I spent eleven years working in that environment.

No one has to explain to me what a debt-to-EBITDA ratio is. As far as I can remember, in 2011 we for the first time received statistics from Rosavia and I started asking daughter companies’ directors various EBITDA-related questions. None of them works with us today. I do hope all of them are well and in good health. When they left my office, as I was later told, they started sharing impressions. That new boss Saveliev, said one, is not in his right mind. What does that “EBITDA” thing mean? They decided I must be swearing… For some reason it was a widely held belief in Russia that the person running an airline must be an ex-pilot himself or someone somehow related with aviation. There is no such thing elsewhere in the world. All the ex-pilots who run companies in the west also have some extra education – in economics or management. For instance, a former pilot runs Lufthansa, but before that he had spent a long time doing administrative jobs. His predecessor was a specialist with experience in banking. And Alitalia was governed by telecom managers.

Naturally, I was not born with the dream of becoming the CEO of Aeroflot. It just happened.

- And what was your long-cherished dream?

I grew up in a family without a father: only my mother – a geologist and my grandmother – a school teacher. I always wished to become a self-made man capable of earning a living and supporting the family. After university I spent seven years working at a construction site in Siberia, making money and gaining professional experience as an engineer. I had been a good student and was free to select employment from a list of jobs offered to me. I was also invited to take a post-graduate course, but the government stipend was too small, just 90 rubles a month. Also, there was an opportunity to take a foreman’s job at an industrial plant and get a wage of 110 rubles a month. A sum just enough to make ends meet. With no chances of starting a family or saving for a rainy day. And no chance of doing any odd jobs on the side. All of a sudden there was an offer from the Sayano-Shushenskaya Hydro, where I was promised an interesting job, a good wage and a corporate apartment. I accepted. I started my career as a tune-up engineer with a basic salary of 130 rubles, and also bonuses and paid leave. In 1984 I was an industrial association’s chief designer with a salary of 600-700 a month. That was a decent income then.

Of course, I worked very hard to make my way up the career ladder, to help my family… My mother is 88 now. I wish her good health. I’ve always been aware of my responsibility for my family. I never forgot the effort and money my mother spent to rear me and to help me get on my feet.

- You are good at boxing. You hold the title Master of Sport, isn’t it?

- It happened so. Generally speaking I am fond of many team sports – ice hockey, football and volleyball. In high school I tried free-style wrestling to learn the basics of self-defense.

At university I decided I should learn to swim. At the time I couldn’t even tread water. I joined a swimming class and at the very first training session I jumped into the swimming pool with everybody else. Everybody swam off, while I remained idle holding the lane rope. The coach asked me: “Why don’t you swim?” “I don’t know how,” I replied. “I’ve come here to learn.” Then I was told that everybody in the swimming group was improving skills and nobody was going to instruct me from the beginning. I went to the physical education department and told my story. All groups were packed to capacity – speed skating, track-and-field athletics, and even freestyle wrestling. There was only an opening in the boxing group. I agreed to join and in six months’ time I grabbed the title of the institute’s champion. Then there followed the championship of the university students’ sports society Burevestnik and so on and so forth.

- Did you learn swim in the end?

- Yes. I used a book for that. It was when I returned from Siberia at the age of 26. I swim all strokes but the butterfly. I go to the pool on Sundays and always swim one kilometer. It’s a must. For staying in good shape and mood. My wife and daughter are both night owls, while I am an early riser. At eight o’clock in the morning I’m already there.

- And when did you appear on the boxing ring last time?

- In the gym I do punch bags and pads once in a while. No sparring fights these days, though. One thing I know for certain: one punch to the jaw will knock the opponent out instantly. Not send him into flight two or three meters back, which we can sometimes see in the movies. He’d just collapse on the spot. Or a punch to the solar plexus… I still remember everything, but never use it. Why should I? Boxing is a highly dangerous sport. The risk of an injury is high. I suffered a nose fracture and a ligament rupture. These days boxers are obliged to wear masks. In those days we used only the cup and the mouth guard. Injuries were frequent.

- You also studying painting for six years.

- My mother wished to see me doing some hobby. We were people of moderate means and could not afford to buy a musical instrument. Even an accordion was an unaffordable luxury. She took me to an art school. I did not object. By now that hobby of mine has developed into photography.

When I arrived in Leningrad, my first intention was to apply to an architectural institute, but then for a number of reasons I changed my mind and decided in favor of mechanical engineering. By a sheer accident. With time I developed a great affection for that department. I still believe that the student years were one of the best in my life.

- Have you ever tried to calculate how many hours you’ve spent on board airplanes since the time you took over Aeroflot?

At a certain point I set myself a target – one million kilometers. But I exceeded it very long ago, before I joined Aeroflot. After university I had a job at a tune-up department of the power engineering institute Orgenergostroi. I had to fly four times a month. From Leningrad to Krasnoyarsk and Abakan via Moscow and back. Also, I visited my mother regularly. She lived far away then.

At Aeroflot I'm focused mostly on office work: it’s about strategy and management… This is a time-consuming job, so in recent years I have to fly rarely. No more than twice a month, vacation included.

On New Year holidays I went to St. Petersburg to see my mother for a day. That was it. In December and January we are riveted to our seats – both my deputies and myself. Until our vacationers have flown out for their holidays and flown back home.

- Was it a nervous situation this year?

- At first, yes. No two winters are alike. Snowfalls came early and disruptions followed. We canceled a total of 128 flights. There were many complaints. The prosecutor’s office was making checks, but there is no way of stopping a snowfall by pushing a button. Natural calamities do occur at many other places. The Turks canceled nearly a thousand flights, even more than the Europeans and the Americans. It takes time to clean the runways and treat the planes with de-icing fluids… The speed of traffic dwindles instantly.

For some reason people in other countries react to such situations with greater understanding, while here the social networks instantly brim with anger and fury.

Million-dollar deals fall apart, plans are ruined, life is not worth living any more and there’s the last moneybag left intact! Wake up, take a look at what is happening around the world! Many European and US airlines are agreeing through IATA that bad weather will be an officially recognized reason for flight cancellation. It’s force-majeure.

- When stormy weather comes it was made in heaven?

- Precisely. Sheremetyevo cannot afford to purchase extra equipment just in case of a weather emergency that happens once in a hundred years. We make our plans on the basis of average statistics.

- Is it a great stress for the crew to know there’s the company’s CEO on board?

- The pilots do know that I am on board, of course, because the seat is reserved in advance. I can also suspect that the very best crew of all is selected when I’m going to fly, but I often change flights. I can decide to fly a little bit earlier or a little bit later. One can never guess.

- What do you usually do when in flight?

- I seldom watch movies. I spend most of the time reading. Recently I read The Silkworm, that J.K. Rowling published under a pseudonym. I also look through Big Data stuff. I find it quite interesting.

- I’ve noticed that on your Instagram page that you update quite regularly there is not a single photo taken on board a plane. Is this a matter of principle?

- To begin with, taking a good picture when you are on board is a problem. The most remarkable ones can be made during descent, when the plane enters the clouds and begins to land. The camera is heavy. Air turbulence may cause me to drop it. I may injure someone or get injured myself. I strictly follow the instructions: I fold the table, put the window shade up and return the back of the seat into the vertical position…

Yes, I do know that some photographers try to take pictures even during descent, but I can’t do that.

- Do you ever enter the cockpit during the flight?

- I have no right to do that on my own or even if the captain invites me. Only if the air traffic controller on the ground has been notified. No outsider is allowed into the cockpit. Whoever that outsider may be. There has to be a special permission from the airline’s security service. I cannot knock on the cockpit’s door and walk in. It won’t be opened. And I won’t be banging on the locked door, either.

- But your camera is always with you, isn’t it?

- Certainly. I took my first pictures when I was in eighth grade. My mom gave me a Smena-8 camera - a low-cost 35-mm manually operated device - as a gift. Later on I tried virtually every single Soviet-made camera. When I started making good money in Siberia, I bought myself a Kiev-6S mirror camera and then a medium-format Kiev-88. In the 1990s I opted for foreign makes. First a Minolta. Nikon and Canon followed. Now it’s Nikon again.

- You’ve even become the company’s official ambassador in Russia.

- Nikon picked twelve people. I was chosen by sheer accident. It took a whole year to make the decision, because unlike everybody else I am not a professional photographer. The quality of pictures was not the issue, but that professionals make their living by photography, while for me it is a hobby. I’d been interviewed many times before being awarded the ambassador status. It was agreed that I would conduct a master class soon. I’ve identified a niche for myself and there is something of interest that I can tell potential customers of Nikon products. I would like to demonstrate the process of editing photos with Lightroom and the merits of the exposure bracketing technique, which allows you to blend several HDR shots into one. When it gets a little bit warmer, I’ll choose some objects in Moscow to show you how it works.

I’m in good command of 90% of Lightroom’s capabilities. I take off-line lessons from French photographer Serge Ramelli. His technique of processing images is most close to mine. Sometimes I read that photographs must be published as they are, because it’s wrong to make life more beautiful than it is. I say this does not make sense to me. No lens will be able to convey what the human eye can see. It’s no use competing. A photograph must express unique, individual features. Otherwise what’s the reason of pushing your camera’s shutter button?

I’m not acquainted with all the ambassadors. I’m on friendly terms with Oleg Zotov, a portrait and fashion photographer. Kirill Umrikhin is fond of taking pictures of water sports competitions. Viktor Lyagushkin has gone still farther… deeper, I should say. He makes shots under water. And Daniil Korzhonov is a wonderful landscape photographer.

- How much time do you reserve for your hobby?

- On Sundays I spend three or four hours processing the shots I’ve taken over the past week. I take pictures whenever I can. Today I’d hoped to take several shots in the morning, but a business meeting at the presidential staff changed my plans. I had to postpone it. Possibly I will be able to stop for a couple of minutes on the way when I go for lunch. I’ve developed a good knack of it. A good day, lots of sunshine and beautiful scenery is all that I need. Instagram audiences are very demanding. Subscribers get up and go if you post no fresh contributions for too long…

Just recently I displayed a panorama of three shots glued manually. When I conduct the master class I try to tell how to make it without a tripod. When we fly to some place, each is free to select the favorite pastime. I take the camera and go for a stroll. London, Paris, St. Petersburg, Rome and so on. I like to take pictures in tiny European towns. When I’m on vacation, I like to do nighttime photography. I really love it. Everything is calm and quiet around. I put the camera on the tripod and admire the night lights. Even the most ordinary place acquires very different features in the dark.

- Does the status of Nikon’s ambassador imply any privileges?

- I enjoy a 15% discount on new equipment. I haven’t used the opportunity to take anything for testing yet. The option is very useful, though.

- Has it occurred to you to turn your hobby into a profession?

- Then I’d have to give up my present job. This may be a possibility, though, when I retire… Life is too short. Nothing is permanent. It’s wrong to stay at one place for too long. You should leave when it’s time to quit.

- Have you set any deadlines?

- No. Too many projects are still unfinished. There’s Big Data, and Strategy-2025 and the low-coster…

My second five-year contract will expire at the end of 2018. Then it will be the time to make a decision – for me and the government, which is in the position to appoint Aeroflot’s CEO.

- A long while ago, when you still were a child, you wrote a twelve-point plan for life. And the last position on that list was a government minister’s job.

- That’s true. But I’ve grown up somewhat since. My priorities in life have changed accordingly. A ministerial seat ceased to be a long-sought end long ago. It’s not what you are called but what you do in life that really matters.

In any case, there’ll be a presidential election first. The head of state will then make up his mind who can be of use and in what capacity. I am certain I have no career ambitions and I am not going to cling to my current job. I have left companies on many occasions in the past. I know what I have achieved with Aeroflot. I’d like to leave a positive inheritance to my successors for them to judge the scale of what I’ve accomplished.

- Have you been ever late for a flight?

- Usually I leave for the airport well in advance to be there with an hour to spare.

It’s far better to take my time there over a cup of coffee. My iPad, e-mail and books are with me. I do my utmost to forestall any contingency. I remember one day in St. Petersburg I was stalled in a terrible traffic jam. Well aware I may be late for the flight I made a phone call to Pulkovo Airport to say I’d fly later. True, I’d have caused a ten-minute delay at the most, but I believe that there is one law for all. After all, the passengers on that plane, more than a hundred of them, had already taken their seats. It was a matter of our image. I had to wait just a short time to board the next flight. That was the only time. Period.