Tuesday, 27 August 2013

Risk-on at Aeroflot

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The largest airline in Russia by every metric, Aeroflot has the most to gain or lose from changing fortunes in the country's aviation industry. The flag carrier has consciously put itself at the forefront of all sectors – acquiring regional subsidiaries, planning a low-cost offshoot, and championing Russian-made aircraft. It is a strategy that could pay off handsomely, but also exposes the state-owned airline to heavy downside risk.

The decision to acquire controlling stakes in six regional operators in 2010 – Rossiya, Orenair, Kavminvodyavia, Saravia, Vladivostok Avia and SAT Airlines – brought Aeroflot's domestic market share above 33%. Kavminvodyavia has since been closed, while Saravia was re-sold in 2011. Vladivostok Avia and SAT Airlines are now being merged under a new brand for the Russian Far East. Aeroflot also owns Donavia, which serves southern Russia from its base in Rostov-on-Don...