S7 To Join oneworld

November 15^th saw S7 and its subsidiary carrier Globus, join the oneworld alliance. This announcement was immediately followed by the news that S7 would acquire eight new jets, six A320 aircraft and two B737-800 aircraft which will be used for Globus, the charter arm of S7. Formerly Siberia Airlines, S7 has now developed into a full service network carrier with a focus on both leisure and business traffic.

NEW MARKETS

S7 has its main base at Moscow Domodedovo Airport from where it operates 500 weekly flights according to November Flightbase data, equivalent to 44% of its total network. S7 will offer a number of new markets to the oneworld alliance, with a strong eastbound network from Moscow feeding its Domodedovo hub to western markets in Europe. S7 operates over 70 destinations in its network with 35 of these in Russia. Markets such as Vladivostock, Khabarovsk, Magadan and Yakutsk will all be new destinations for the oneworld alliance. Many of these cities have large populations and therefore potential for large passenger lift.

It also serves countries in the CIS such as Kyrgyzstan, Tajikistan, Turkmenistan and Azerbaijan. S7 has a strong network in Siberia with a number of based aircraft in Novosibirsk providing a secondary hub in central Russia.

Whilst existing oneworld partner Malev, does have a focus on eastern European operations, this has largely been confined to the Balkan market such as Belgrade, Pristina and Skopje.

Oneworld has very little presence in Russia with its existing members, Malev serves Moscow Sheremetyevo and British Airways serves Moscow Domodedovo and St Petersburg. Iberia also operates a double daily also to Moscow Domodedovo.

Markets in the CIS are of of significant interest to airlines and their alliances, with strong economic growth and a low propensity to fly, the worlds alliances are keen to gain a foothold in the Russian market.

FUTURE POTENTIAL FOR ONEWORLD

Russia is restricted in terms of bilateral agreements and access into the major Russian markets is difficult. As airlines have struggled to gain access to the major markets with their own aircraft, and the regional Russian airports often exclusively operated by Russian based carriers, airlines have continued to struggle to access these markets and having an alliance or codeshare partner to serve these markets has proved the easiest way for airlines to access these growing markets.

With SkyTeam having a significant presence in the shape of Russia’s largest carrier Aeroflot, the race amongst the other alliances has been on to secure a leading Russian carrier. Star Alliance had tried to build a hub at Moscow Domodedovo through the Air Union alliance which included member carriers such as Kras Air, Domodedovo Airlines and Samara Airlines.

According to IATA BSP data S7 is the second largest carrier in Russia in terms of passengers carried between July 2009 and July 2010.

The table below illustrates this

Source IATA BSP data July 2009-July 2010

For S7, the benefits of joining oneworld will be palpable. The oneworld alliance will offer S7 passenger a worldwide network of passengers to connect to with the likes of Iberia, American Airlines and Royal Jordanian. With Kingfisher Airlines and Air Berlin also set to join the oneworld alliance, S7 passengers from regional airports particularly will now have a worldwide network to connect to.