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* Investments seen at $100 mln in two years
* Ticket prices will be up to 40 pct lower
* Aeroflot is Russia's largest airline
By Gleb Stolyarov and Megan Davies
MOSCOW, Oct 10 (Reuters) - Russian carrier Aeroflot plans to launch a low-cost airline next year, it saidon Thursday, aiming to make air travel more affordable in theworld's largest country with fares up to 40 percent cheaper thanits current prices.
Dobrolet, which roughly translates to mean "Goodflight",will initially focus on domestic routes, starting next year withseveral destinations for Muscovites including St Petersburg,Samara and Ekaterinburg. But by 2016 it also aims to be flyingto Kiev and Istanbul.
"The company (Dobrolet) ... should help our passengers,especially less well-off ones, become more mobile," Aeroflot'schief executive Vitaly Saveliev told reporters on Thursday.
The demand for travel is rising as the country's middleclass grows and state-controlled Aeroflot said a low-costairline could successfully compete on price with train ticketsin Russia.
Boeing estimates that over the next 20 years airtraffic to and from the CIS region of Russia and ex-Sovietstates will grow at a rate of 4.4 percent annually and that thenumber of passengers carried by Russian airlines rose 15.5percent to 74 million in 2012.
Aeroflot said it will invest $100 million over the comingtwo years in Dobrolet, at which point it aims for the airline tobe profitable even though it said ticket prices are expected tobe up to 40 percent less than its current economy class service.The first eight planes will be Boeing 737-800s which will beleased, the company said.
"The routes they plan for this company are popular places inRussia so I think there would certainly be demand if the priceis 20-40 percent lower," said analyst Olga Doronina at VTBCapital.
"This low-cost airline which Aeroflot plans is to fly mainlyon domestic routes or to CIS countries (the former Sovietrepublics), so the main competition will be domestic airlines,"Doronina said, citing Russia's second-biggest carrier, AKTransaero as a rival.
However, she said that in order to be able to offer the lowprices the budget airline wants Aeroflot will have to lobby forlegislation to allow it to sell only non-refundable tickets and charge additional fees for food and luggage.
The airline will be Russia's only low cost carrier. Otherswhich tried and failed were SkyExpress and Avianova, whichhalted operations in 2011, according to Russian media reports.
UK-based easyJet Plc, Europe's second-largestlow-cost carrier, has also seen an opportunity in the Russianmarket, launching a service earlier this year between London'sGatwick and Moscow's Domodedovo airports.
Hungarian budget carrier Wizz Air also flies to Russia, fromBudapest.
Aeroflot also reported half-year results on Thursday, withearnings before interest, tax, depreciation and amortisation up42 percent at $352 million on revenue up 14 percent at $4.1billion.
