Aeroflot to launch budget airline

National carrier ... Aeroflot said the new airline could begin operations from the end of October. Source: AFP

RUSSIAN flag carrier Aeroflot will create a new low-cost unit after Western sanctions grounded its first effort to enter the market, the airline's chief executive says.

"We will after all register a new airline," Aeroflot chief executive Vitaly Savelyev was quoted as saying by Russian news agencies.

He said the company's low-cost carrier, Dobrolyot, had worked well during the six weeks it was allowed to operate.

Dobrolyot was forced to shut down because it flew to Russian-annexed Crimea and was therefore hit by EU sanctions imposed over the Kremlin's alleged support for pro-Russian rebels in Ukraine, including the cancellation of the leasing contracts for its Boeing aircraft.

"We are holding talks with leasing companies and the first steps show that they want to work with us," said Savelyev.

He said possible routes were still being worked out, but that the new airline could begin operations from the end of October when the winter schedule begins.

Savelyev said flights to Crimea, which Russia annexed from Ukraine in March, would depend on demand.

Services to the popular Black Sea summer resort are usually cut back during the winter months.

New fuel-efficient jets are key to the success of low-cost airlines as the high cost of fuel often makes it their biggest expense.

Leasing allows new airlines the opportunity to acquire aircraft more quickly without huge upfront investments.

Dobrolyot, which operated two Boeing 737-800 aircraft when it was forced to shut down, had planned to lease another six this year to begin flying to a handful of Russian cities.

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