From the transcript:

Mikhail Mishustin: Good afternoon, dear Vitaly Gennadievich!

We have a difficult situation in the air carrier market, and Aeroflot, as the country's key air carrier, of course, also bears significant costs due to the coronavirus situation. In particular, the number of domestic flights decreased significantly, and the practical interruption of international traffic affected, among other things, the company's income and its work. But I want to say that the support measures that have been taken enable the company today to preserve, first of all, its personnel potential. In fact, I know, you talked about this, all specialists, pilots, ground personnel work in a group. And to support the aviation industry, the Government has taken a number of important decisions. In particular, it made the aviation industry one of the worst affected and allocated the appropriate resources. In particular, within the framework of this assistance to air transport enterprises, a system of deferrals and benefits is provided. In addition, we have allocated 23.4 billion rubles as compensation for expenses due to the reduction in passenger traffic to Russian airlines in general.

The government has also included Aeroflot in the list of strategic enterprises that receive additional support measures. I signed an order to provide the company with state guarantees for loans in the amount of 70 billion rubles. We will also continue to take action that will enable the aviation industry to thrive in the future.

Vitaly Gennadievich, I would like to hear from you, your opinion on how things are in the aviation industry in general, including in the airline. Maybe you can say a few words about the global transportation market and what is happening there. And of course, I would like to hear, among other things, about the development strategy of the Aeroflot Group, taking into account the situation that has developed due to the coronavirus.

V. Savelyev: Thank you, Mikhail Vladimirovich.

First of all, I would like to personally thank you very much and express my deep respect - and in your person to the entire Government - for the decisions that you have taken in relation to the aviation industry in general and Aeroflot Group in particular. You mentioned the guarantees that we will receive now for lending. We are ready for this.

A few words about the company and what is happening in general.

We ended 2019 very successfully. We have carried 60.7 million passengers. According to this indicator, we, as the Aeroflot group, are still among the twenty largest carriers in the world. We operate a fleet of 359 aircraft; Aeroflot has a fleet of 246 aircraft. We received 678 billion rubles in revenue, which is about 11% growth. Our EBITDA also amounted to more than 11% - 169 billion rubles. The group's net profit amounted to 13.5 billion rubles, which is more than three times higher than established by the board of directors. The successful end of last year allowed us just to hold out this period of the beginning of the pandemic quite confidently, but the question itself dragged on.

I would like to note that the low-cost airline Pobeda is the main driver of Aeroflot Group's growth. I believe that this is one of the most successful projects in the aviation industry of the Russian Federation. Pobeda has been in operation for five and a half years. During this period, she transported more than 30 million people. It transported 10.3 million people last year. Pobeda is a world record holder in many respects, for example, in the operation of Boeing 737 aircraft, it operates a fleet of 30 aircraft. According to this indicator, it is the best - this is the assessment of Boeing itself. Seat load: Pobeda has a seat load of 94% on average over the year. During the summer, Pobeda's load is up to 100%. For example, the Aeroflot group has an overall seat occupancy of 82% (averaged), while Aeroflot has 79%. These indicators speak about the effectiveness of Pobeda. For five and a half years, "Pobeda" has earned more than 14 billion rubles in net profit, and the effectiveness of "Pobeda" is quite high. In all international aviation groups, there is always a low-cost airline, which is the main driver of growth in both capitalization and value in general.

One can also say about Pobeda that 12% of passengers who use Pobeda today have never flown by plane in their lives. This is the efficiency with which Pobeda works.

As for the pandemic, you are absolutely right. The pandemic has hit all airlines, both foreign and Russian. And for us there were very difficult periods, especially April - May, when the drop in passenger traffic was 93–95%. And now we have finished June - a decline of about 83–85%, but we are already recovering. I can say that at the moment we are making about 300 flights a day. This is not enough, we usually do 800, but we already transport about 30-33 thousand people a day. We usually transport 110-120 thousand people. But quite recently, just a month ago, we transported only 3-5 thousand. Therefore, the support of the state represented by the Government and the fact that you are starting to contribute to the restoration of the market is very important for us. As an example, I can cite the indicators of foreign companies. The same Lufthansa fell by 95%, the Air France-KLM group of companies fell by 96-98%. And the state also provides them with significant assistance. Lufthansa received € 9 billion and Air France € 7 billion. These companies are larger than us - the Air France-KLM group is about 35% larger than Aeroflot.

You mentioned what the state is doing for us - and in this case it is very important. Of course, Aeroflot, having such a scale, has lost a lot, but we have retained the team, which is very important for us, we have retained the business. And we, as a special enterprise, went through the entire procedure for obtaining this state guarantee. We prepared a mathematical model, we worked it out - and the Ministry of Economic Development - passed all the commissions. We worked with the Ministry of Finance, there was a government commission under the leadership of your first deputy, Andrey Removich Belousov. We received 70 billion rubles.

Mikhail Mishustin: This is a loan, government guarantees for five years.

V. Savelyev: Yes, this is a loan. In general, the Aeroflot group of companies received substantial assistance. Of course, this effect is very important for us.

But what is most important: in this model, which I described to you, Mikhail Vladimirovich, we have laid down an optimistic scenario according to which we need to fly. The aviation industry is very capital intensive, and if we do not start flying ... According to the model, we must start flying in domestic traffic, then we can recover quite efficiently and quickly. The restoration of Russian aviation will be faster than that of the world and European ones. First of all, we have experience. I have been with the company for 12 years already, and we went through less severe crises, but we still saw them.

In general, the Russian aviation industry is growing at a rate of about 9-10%. If we take the global industry, it is growing by about 6%, the European - 4.5%. Therefore, we will recover faster.

But the most important thing for us is the implementation of flights. As for our strategic obligations, Mikhail Vladimirovich, we keep them, and all the strategic goals that have been set are domestic aircraft ... We have confirmed our contract for 150 Sukhoi SuperJet aircraft, 54 aircraft are in our fleet today, we operate with them. And we have an order for 50 aircraft, a firm contract, MC-21, and 35 vehicles for them is an option. This number of cars will be permanently in the Aeroflot group, thus we are fulfilling our strategic obligations to the aviation industry.

We also keep our flights at flat rates - this is a socially significant mission for us - in five cities of the Far East, Kaliningrad and Simferopol.

Mikhail Mishustin: Vitaly Gennadievich, pay special attention to the development of tourism this summer. Today we are taking a lot of measures to support special places, we are opening the tourist season in Russia, and Aeroflot could be a good helper - of course, at reasonable rates - in terms of transporting our citizens within Russia. And then, when you enter the international market, I hope that many of these routes can continue.

V. Savelyev: Yes, we understand this task as well. I want to tell you that I will acquaint you with the new strategy a little later. It was developed in December last year, but it is now very relevant. The strategy is called 30/30. What does it mean? We are ready to increase the passenger traffic by 30 million, that is, we wanted to carry 100 million passengers by our 100th anniversary, this is very large, then we will probably enter the top ten airlines in the world, aviation groups. But we can actually transport 130 million. And the second 30 - we can reduce prices in economy class by 30%. I will now explain to you how this can be. This is quite a serious study, and we can really do it.

With regard to flights. Now they are starting to fly, they fly very intensively. Let's say Air France has opened 57 routes to 35 countries today. We can - all Russian airlines, including the Aeroflot group, if we do not set a date when we can do this, we have to sell tickets - we can simply lose historical slots. Look, an international network, say Qatar Airways, a five-star airline, our competitor in Asia. We pushed them aside in China - for seven years we fought with them for the right to be the best transit country from China to Europe, we defeated them, in the last three years Aeroflot was recognised as the best foreign airline in China. We squeezed them out, we pushed them back. Now we can lose it, because they are already starting to actually fly. Today they are mastering 89 routes in 49 countries. Etc. Here I can say for every company, including Belavia, including all other companies: a massive expansion across Europe is starting. Therefore, Mikhail Vladimirovich, I have prepared proposals for you separately. If you will, we will discuss them in more detail later.

IATA is an international organization that has existed since 1945, it includes 290 carriers worldwide. There is a Board of Governors, where I have been a member for 10 years. Their recommendations and requests to all governments (I am also addressing you): it is necessary to somehow change the norm of two weeks of isolation for something. This is an appeal to all countries. Europe is canceling it now. Because you can do whatever you want - we fulfil all the requirements of Rospotrebnadzor: both pre-flight preparation and on the plane during the flight - but the two-week quarantine really scares off our tourists and scares off passengers. And this applies to all airlines. Therefore, this is one of the topics that IATA asked to discuss with all regulators.

Mikhail Mishustin: Probably, IATA should first of all talk with the World Health Organization. And to understand that since the epidemiological situation in countries is different, then IATA cannot be such a recommendation to all countries - to do it all at once. It all depends on how countries assess the epidemiological situation. This is what the WHO says. Therefore, we will proceed, of course, from the situation in this area - to follow the requirements of Rospotrebnadzor.

V. Savelyev: This is absolutely true. And many of our cities have already opened - regarding tourism and the development of our transportation. We have only a part of cities in the Russian Federation still closed, and about 20 cities that require a two-week quarantine. Many cities have already opened, hotels have opened, recreational facilities that are very popular for the population have opened, and, of course, all companies, the Aeroflot group in particular, are focused on these cities.

A few words, if I may, about the strategy I mentioned.

Mikhail Vladimirovich, how can this be done - to implement the 30/30 strategy? We have four companies in the group. And if Aurora is a regional company operating in the Far East, we manage it separately, then Aeroflot, Pobeda and Russia occupy their niches.

Aeroflot has been and remains the premium segment. And as the global trend shows, the premium segment remains: it is not growing as fast as, say, the low-cost segment, but it will continue to grow.

Pobeda is the second company. Today it ranks fourth in Russia in terms of passenger traffic. This is a company that can really compete with Western companies, because it is a classic low-cost airline.

We want Aeroflot to focus on long-haul flights in the new strategy to make it a five-star company. I'll show you how this can be done later. And Pobeda, having joined Aeroflot's routes, will significantly change the picture due to the cheapness of tickets - 10% of its tickets are sold at a price of 499 rubles now, and before that they were sold at a price of 999 rubles - this is very significant for a passenger (why such a load is so great!) thing. And the Rossiya company will focus on social areas (in particular, flat tariffs) and on the operation of domestic equipment, because Aeroflot will operate only with a long-haul fleet.

How will it look like. Aeroflot will ... Today we have four Skytrax stars in service and five stars of the American APEX association in service. We can actually enter the top ten companies (these are the companies that today represent five-star companies on Skytrax). I would like to draw your attention to the fact that, apart from Lufthansa, all other companies do not carry more than 35 million passengers, because the quality of service can only be provided on a narrow segment - it cannot be infinitely expanded. And Aeroflot in this niche, given our fleet (we have a super-modern fleet, you know), we can really claim a place in this group - in the top five. This will be a significant increase in capitalisation, and service, and quality of service, and prestige both for the airline itself and for the state as a whole. Aeroflot today has the same fleet as Pobeda, both companies operate Boeing 737-800. But at Aeroflot, this Boeing consists of 156 seats, because we have business class, we have a kitchen, we have an economy class. "Pobeda" is completely one economy class, and there is no kitchen equipment, thus it is lighter, that is, the takeoff weight is lighter.

Mikhail Mishustin: How many seats are there?

V. Savelyev: 189. This is the first. Second, on the U-turn. We turn the car around for almost 50 minutes - an hour, that is, we clean it, because we are a top service and we must do it. We load catering. Pobeda does not have this - Pobeda turns the car around in 25 minutes. This is almost twice as fast. This is also essential.

And on the operation of the aircraft itself. If we operate the car for about 10-11 hours a day, then Pobeda is the world champion, it uses the car 14 hours a day. All these parameters allow us to say that "Pobeda" today can give better prices than those that exist on the market. That is why we are talking about a 30% reduction in these prices.

And "Rossiya" remains in the social group, where it will, like other groups, fulfil its social role.

I have already told you a lot about Pobeda. I can also say that Pobeda is in demand. There is great respect for all passengers, they are used to it, and according to our survey, more than 60% of passengers are ready to fly Pobeda just because it is cheap tickets and high-quality service.

What will this picture look like by 2027–2028? Aeroflot will focus on the five-star company and operate a fleet of 170 aircraft. We will have 35-40 million passengers. This corresponds exactly to the five-star companies that operate in the market today. Pobeda will carry 55–65 million passengers. And this is very significant when it comes to price. It will operate with a medium-haul fleet of about 170 aircraft.

Rossiya Airlines will fulfil social needs and operate domestic equipment. It will have 250 cars, of which 235 are of domestic production, which is very important. Of course, if the MC-21 is a successful aircraft - and we believe in it and hope - we will also use it at Aeroflot. For now, we are simply giving the opportunity to gain experience and practice.

And highlights are global indicators. We are really saying that average prices will decrease by about 30% in economy class, because today this fact has been recorded - Pobeda flies the cheapest on the market. Capitalisation growth will be significant. And this is a fact, because Pobeda will be the main driver of this. Profit growth will also be significant, and then it will be possible to talk about dividends and those issues that the group of companies can solve for Russia, in particular, for our Russians.

Mikhail Mishustin: Vitaly Gennadievich, thank you. The plans are really well thought out. The strategy that you have today, it seems to me, can be very effective. And I think that the measures we have outlined will enable Aeroflot, as you said, to become one of the ten largest airlines in the world.