S7 Airlines (S7, Novosibirsk) has confirmed plans to create a low-cost carrier by spring 2022 and will order twenty-four new Airbus aircraft for the purpose by 2024, local media quoted the chairman of the airline’s board of directors, Tatiana Fileva, as saying on July 28.

Fileva had already revealed last week that Siberia-based S7 Group, Russia’s largest private aviation holding, would create a new budget airline for regional traffic, aiming to carry more than 7 million passengers by 2024.

At a press conference on the morning of July 28, she said that the new airline’s fleet will consist of A320-200neo and an agreement had been signed on the delivery of the first four aircraft of the type, the newspaper Kommersant and RBC News reported.

The fleet will grow to six to eight leased aircraft in the first three years of operation and more than 20 by 2024. Tickets will go on sale on April 1, 2022, and flight operations will commence in July 2022.

The group’s own investment in the project in its first stage - it will not be seeking loans - will total RUB2.5 billion to RUB3 billion rubles (USD34-41 million), Fileva said, with a return on investment after four years. She expects the carrier will be able to obtain Russian state subsidies under a programme supporting regional airlines.

The network will focus on point-to-point routes linking regions mainly within central Russia, bypassing Moscow. It aims to carry about 1 million passengers in its first year of operation and 6-7 million from 2024.

According to Fileva, also an S7 Group shareholder, the segment of interregional transportation is where the company sees the most potential - a market “which we cannot cover within the framework of the current S7 Airlines business model.” The route networks of Europe’s low-cost carriers also tend to connect regions, she noted.

“We will now start negotiating with the airports,” she said.

She declined to name specific routes but said that key cities where the company currently sees demand include OmskChelyabinsk, and Kazan Int'l. The name and brand of the new airline will be presented separately and it will exist as a separate entity from S7, not as a subsidiary. Fileva named Grigory Davydov, currently S7 Airlines’ director of strategy, as the start-up’s general director.

In early May, sources told the business daily Vedomosti that S7 Group was considering setting up a new LCC, claiming that the new carrier may be created on the basis of former wholly-S7-owned production carrier Globus (GH, Novosibirsk), which completed its merger into S7 by December 2019. Fileva confirmed this idea. Russia’s civil aviation regulator (Rosaviatsia) cancelled Globus’ air operator’s certificate (AOC) in November 2020. Now it will be restored, she said.

At the moment, Russia’s only budget carrier is Aeroflot Group unit Pobeda (DP, Moscow Vnukovo), which operates a fleet of forty-four leased B737-800s. However, in April, transport minister Vitaly Savelyev - who was chief executive of Aeroflot Group before becoming minister in November 2020 - told reporters that his ministry was “negotiating” the creation of another airline, a low-cost one.