Russia's Aeroflot sizes up Airbus, Boeing for narrow-body order

SINGAPORE (Reuters) - Fast-growing Russian airline group Aeroflot AFLT.MM is considering a "sizeable" order for Airbus SE AIR.PA A320neo family and Boeing Co's BA.N 737 MAX narrow-body aircraft, a top executive said on Tuesday.

Aeroflot aircrafts are seen at Sheremetyevo International Airport outside Moscow, Russia, July 7, 2015. REUTERS/Maxim Shemetov

The country’s biggest airline has yet to order the next generation of fuel-efficient aircraft to replace its fleet of 146 A320 family jets and 54 737-800s as of June 30.

“That is something that we are looking at,” Aeroflot Deputy General Director for Strategy and Alliances Giorgio Callegari told Reuters of the potential order on the sidelines of the CAPA Asia Summit 2017.

“Probably in the next year we will at least know the direction. It will be a sizeable order,” he said, declining to provide estimated numbers.

Callegari said Aeroflot wanted to retain both Airbus and Boeing narrow bodies in its fleet because it used them in different seating configurations and did not want to be reliant on a single manufacturer.

Aeroflot, which has an average fleet age of just 4.1 years, increased capacity across its premium and low-cost carriers by 16.2 percent in the nine months ended Sept. 30 and still filled a higher percentage of its seats than in the prior year.

It expects the growth rate to slow slightly in the fourth quarter, with a full-year capacity forecast of 12-14 percent growth, Callegari said.

Russian aviation market conditions were particularly challenging in 2015 and 2016, after sanctions by the United States and Europe, along with weak oil prices, hit the Russian economy and the rouble, killing consumer demand.

Demand started to recover along with the economy and Aeroflot has benefited from its scale and the bankruptcies of Russian carriers Transaero in 2015 and VIM Airlines this year.

“The market is proving us right and offering us the possibility of growing,” Callegari said. “Others don’t seem to have such a successful approach. It makes some market segments more approachable because they cease to operate.”

However, Aeroflot reported a 40 percent drop in its non-consolidated net income under Russian Accounting Standards (RAS) in the nine months ended Sept. 30 to 25.5 billion rubles ($437.72 million), which ATON brokerage attributed to a lack of foreign exchange gains compared to last year.

Aeroflot is a member of the SkyTeam alliance alongside carriers including Delta Air Lines DAL.N, Air France KLM SA AIRF.PA and China Eastern Airlines Corp Ltd 600115.SS.

It has codeshare arrangements with other airlines but has yet to agree a joint venture deal allowing it to coordinate scheduling and pricing.

“We are having constructive conversations with a number of parties but no joint ventures are finalised yet,” Callegari said, adding airlines in Europe and Asia were the focus of talks.

($1 = 58.2565 rubles)

Reporting by Jamie Freed; additional reporting by Jack Stubbs in Moscow; Editing by Gopakumar Warrier