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This document has been prepared by PJSC “Aeroflot” (the “Company”). By attending the meeting where the presentation is made, or by reading the
presentation slides, you agree to the following.
This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to
purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its presentation or distribution form
the basis of, or be relied on in connection with, any contract or investment decision.
No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness.
No representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or
agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its
contents.
This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements
regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial
condition, liquidity, prospects, growth, strategies, and the market in which the Company operates. By their nature, forwarding-looking statements involve
risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you
that forward-looking statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition and
liquidity and the development of the market in which the Company operates may differ materially from those made in or suggested by the forward-
looking statements contained in this document. The Company does not undertake any obligation to review or confirm expectations or estimates or to
update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation.
Disclaimer
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Agenda
Time Content Speakers
9.00 – 10.00 Registration and Coffee
Part I – Management Presentations
10.00 – 10.15 Aeroflot Today and Tomorrow Vitaly Saveliev (CEO)
10.15 – 10.50 Market Update and Strategy Overview Giorgio Callegari (Deputy CEO for Strategy and Alliances)
10.50 – 11.30 Network, Fleet and Financial Overview Shamil Kurmashov (Deputy CEO for Commerce and Finance)
11.30 – 11.50 Marketing Strategy and Customer Service Mikhail Fandeyev (Marketing Director)
11.50 – 12.40 Q&A Session
12.40 – 13.00 Lunch Break
Part II – Site Visits
13.00 – 15.00 Flight Crew Training Center IR, Heads of Divisions
15.30 – 16.30 Hangar IR, Heads of Divisions
17.00 – 17.30 Hub Control Center IR, Heads of Divisions
17.50 – 18.20 Operational Control Center IR, Heads of Divisions
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AEROFLOT TODAY AND TOMORROW
VITALY SAVELIEV
CHIEF EXECUTIVE OFFICER
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#1 airline in one of the world’s largest markets with leading positions on both domestic and international routes
Global network with 153 unique destinations (300+ routes) in 51 countries serviced by one of the youngest fleet globally1
Multi-brand offering to appeal to a broad customer spectrum across geographies
Superior product and customer experience (Aeroflot awarded Four Star Airline status by Skytrax)
Efficient operating model underpinned by effective yield and cost management
Experienced management team and international standards of corporate governance
1
2
3
4
5
6
Aeroflot – #1 Russian Carrier with a Global Network
Note: Network statistics are based on summer 2016 schedule. Youngest average fleet among airlines with fleet over 100 aircraft as of October 2016.
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415.2
bn RUB
106.1
bn RUB
Transformation of Aeroflot Group: Operational Improvements
• Over the course of the last 7 years the Group has shown an extraordinary operational and financial transformation.
11.1
mn
39.4
mn
PAX
3.5X x
REVENUE
3.9X x
PASSENGER LOAD
FACTOR
78%
8.1 p.p. +
FUEL
COMSUMPTION
>30.0
(20.0%) > (8.6 yrs) >15 yrs
6.4 yrs
FLEET
AGE
2009 2015
gr / ASK
23.1
gr / ASK
Note: fleet age for 2009 as of the beginning of the year. Average age of 6.4 in 2015 is for Aeroflot Group (for comparability purposes). For Aeroflot airline average age is 4.3 years.
78%
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Transformation of Aeroflot Group: Optimization of Structure
• Aeroflot Group completed reorganization and established airline holding with presence in all market segments.
From Non-integrated Subsidiaries to Product-
focused Model
Premium Mid-priced Low-cost Far East
Not-integrated subsidiaries:
Multi-brand product offering:
Development of LCC
• Established in 2014 Pobeda has quickly become one of the largest airlines in the Russian market
• Leading (and only) true low-cost carrier in Russia (with 3.1 mn PAX transported in 2015)
• One of the fastest developing LCCs globally (according to Airline Business magazine)
• Developed domestic route network with 35 unique routes
• Focus on domestic market (10-15% capacity abroad on highly-demanded routes)
• High share of promo to attract public attention: 10% of tickets sold for 999 RUB
• Financial performance ahead of the initial expectations
1
2
3
4
5
6
7
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Recognized Level of Excellence
Best European Airline, Best Airline in
Russia and CIS, Best Business-class
in Mid-haul Segment
Best Russian
Airline (2016, 2015,
2014, 2013)
Readers’ Choice
Prize
Skytrax
Best Airline in Eastern
Europe (2016, 2015, 2014,
2013, 2011)
Skytrax
4-star Airline Rating
(2016)
• Aeroflot service quality is recognized by a number of prestigious industrial awards and prizes.
7-star Safety Rating
Best Russian Airline (2015, 2014, 2013)
Best Airline Cuisine Top-10
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B2P
• Aeroflot’s current strategic focus is to further develop IT systems and introduce new digital technologies to promote operational efficiencies and customer experience.
Other
Flight management
system (ASOU PD)
Support systems
35% 100%
2010 – 2015 Before 2009 2016 – 2020
Initial Digitalization IT Systems Consolidation Cutting-Edge Technology Deployment
Fragmented IT-systems impeding operational gains
Core IT-systems for aviation operations support developed
Implementation of the three core platforms (Sabre, SAP and Lufthansa) to optimize IT infrastructure and reduced operating expenses
Over 50% of passengers use Aeroflot digital services (e.g. tickets sales, online check-in etc)
Broad use of Big Data analytics
Personalized targeting of customer communication
Successful implementation could create incremental revenue for the Group
XX% - share of automated business processes
Aeroflot – Digital Take-off
100%
Unstructured data
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Key Strategic Priorities of Aeroflot Group
2025 Strategic Target Ranking in
2009
Ranking in
2015 2025 (Achievement Estimate)
TOP-20 airlines by PAX globally
TOP-5 airlines by PAX in Europe
Over 70 million passengers 11.1 mn 39.4 mn
Over 30 million domestic passengers 4.9 mn 23.4 mn
Note: 2009 traffic number for Aeroflot and subsidiaries (Nordavia and Donavia). Aeroflot standalone – 8.6 mn PAX.
Source: Flightglobal, Company estimates.
68 24
10
7 15
• Aeroflot has made significant progress towards achieving its long-term goals.
• To achieve its long-term goals, Aeroflot plans to continue development of IT and introduce digital solutions, further consolidate its position in Skytrax rankings and continue active development of low-cost operations.
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Global Industry Trends
Global Airline Industry Continues to Show Resilience…
Sources: IATA, EIU, AirlineMonitor, US Energy Information Administration. 1 Expenditures by international inbound visitors in 51 largest countries. 2 Aviation Turbine Kerosene.
Passenger Traffic Revenue Operating Profit ROIC
… on the Back of Operational Improvements in the Time of a Variety of External Challenges
2005-2015 Average: 594
2005-2015 Average: 20.5 3.3%
6.2% 5.9%
9.3%
2005 2010 2014 2015E
2005-2015 Average: 2.8
Tourism Spending1 Fuel Unit Cost
bn PAX $ bn $ bn %
Air Connectivity
# of unique city pairs, thousand
455 510
641
844
2005 2010 2014 2015E
4.4
27.6 35.1
59.5
2005 2010 2014 2015E
1.71
2.15
2.70
1.52
2005 2010 2014 2015
413
564
751 718
2005 2010 2014 2015E
11.9
14.1
16.3 16.6
2005 2010 2014 2015
$ bn
2.1
2.7
3.3 3.6
2005 2010 2014 2015E
• Global airline industry shows strong growth in traffic and profitability and improved efficiency backed by growing demand, connectivity and other factors despite external challenges.
2005-2015 Average: 4.8%
75.0%
78.7%
79.9% 80.4%
2005 2010 2014 2015E
Passenger Load Factor
$/gal of ATK2 %
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201
179
140
118
109
108
101
94
90
88
79
70
68
61
56
52
49
49
47
45
43
41
40
39
35
American Airlines
Delta Airlines
United Airlines
Southwest Airlines
China Southern Airlines
Lufthansa Group
Ryanair
China Eastern Airlines
Air China
IAG
Air France-KLM
EasyJet
LATAM Airlines Group
Turkish Airlines
SkyWest Inc
Emirates Group
Qantas
AirAsia Group
ANA Holdings
Lion Group
Etihad Group
Air Canada
Avianca
Aeroflot
Air Berlin
Aeroflot Group in the Global Context
Top-25 Airline Groups Globally and #7 in Europe One of the Youngest Fleets Globally
153 Unique Destinations Including 98 International
Source: Company data, ACAS. 1 Fiscal year ends in June.
Partnership with Leading Global Companies
4.3
4.8
4.9
5.2
6.0
6.2
6.3
6.4
9.2
10.8
10.9
11.8
12.6
13.7
17.0
Hainan
Garuda
China Eastern Airlines
Emirates
Turkish Airlines
Air China
Ryanair
Qantas
Lufthansa Group
American Airlines
Air France
British Airways
United Airlines
Delta Airlines
mn PAX, 2015
- European airlines
Within SkyTeam… … and other partners
• Operational strength and global partnerships put Aeroflot among the leading global players in the airline industry.
#1
#2
#3
#4
#5
#6
#7
#8
#9
#10
#11
#12
#13
#14
#15
#16
#17
#18
#19
#20
#1
#2
#3
#4
#5
#7
#X - position in the world
#X - position in Europe
Average fleets’ age of largest airlines (selected), years
1
#6
for Aeroflot airline (and 6.4 for Aeroflot Group)
#21
#22
#23
#24
#25
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Russian Market
… Lead to Changing Passenger Transportation Mix…
…and Improved Affordability of Flights…
… Has Lead to Restoration of International Flights and
Further Growth of Domestic Air Transportation
244%
79% 41% 28% 29%
2000 2005 2010 2014 2015
0.2 0.3
0.5
0.8 0.7
2000 2005 2010 2014 2015
Aeroflot average fare1 as % of average monthly income
Air passengers per capita
51 47 40 35 37 38 28
131 125 108
96 88 87 75
13 19 29 46 53 52
68
19 25 14 9 7 7 5
12 23 40 62 51 44 67
226 239 231
249 236 228
243
2000 2005 2010 2014 2015 2016 2017 2020 2025
Auto traffic on domestic routes Rail traffic on domestic routesAir traffic on domestic routes Rail traffic on international routesAir traffic on international routes
Int.
D
om
esti
c
+0.7% +0.7% -4.4%
Sources: Rosaviatsia, World Bank, UK Civil Aviation Authority, USA Bureau of Transportation Statistics, General Directorate Of State Airports Authority of Turkey, Eurostat, World. Development Indicators, Rosstat, Company estimates based on data from Transport Clearing House, Сenter for Strategic Development in Civil Aviation, Russian Railways. 1 Calculated as passenger revenue divided by PAX.
• There is great potential for growth of the Russian air traffic market, which is demonstrated by recent structural changes.
13 19 29 46 53 52
68 12
23
40
62 51 44
67
26 42
69
109 103 96
135
2000 2005 2010 2014 2015 2016 2017 2020 2025Domestic International
Inte
rnat
iona
l D
om
esti
c
+10.9%
-10.8% +3.8%
Passenger transportation structure evolution by type, mn PAX
Air transportation market, mn PAX
Low Air Traffic Penetration…
0
1
2
3
10
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
Air p
assengers
per
capita
3.5
2.8
1.7
1.5
0.7
Passengers per capita
Air passengers per capita vs. GDP per capita ($), 2015
GDP per capita ($)
Russia
Austria
Brazil
Bulgaria
China Croatia
Finland
France
Germany
Greece
Italy
Malaysia
Netherlands
Portugal
Romania
Spain
Switzerland
Thailand
UAE
UK
US
EU-27
Turkey
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44.6%
13.1%
6.4%
6.0%
13.8%
16.1%
Aeroflot as the Market Leader
Leader on the Russian Market…
…which Continues to See Consolidation by Key Players
Top-20 Russian Airlines
Group
• Aeroflot keeps a leading position on the Russian market due to its efficient business model and unique capabilities.
19.7
5.8
2.8 2.7
6.1 7.1
AeroflotGroup
ForeignCarriers
Others
+1.8
+1.1 +0.4 (0.6)
(0.9) (0.1)
mn PAX, 6M 2016 Increase/decrease in mn PAX
Airline PAX,
6M 2016 Business model
Aeroflot 13,438,100 Premium segment with wide regional and international network
S7 4,327,139 Middle segment with wide regional and international network
Rossiya 3,658,422 Regional charter operating in the middle price segment
UTair 2,823,985 Big player in regional flights
Ural Airlines 2,659,801 Regional and international airline with both scheduled and
charter flights
Pobeda 1,990,762 Low-cost regional and international airline
Globus 1,458,741 Operates under S7 brand targeting regional destinations
AZUR Air 855,219 Charter airline targeting main holiday destinations
VIM-avia 753,630 Operating scheduled international flights
Aurora 607,040 Connecting Far East and Siberia regions
Nordwind 585,722 Primarily links airports in Russia with holiday destinations
around the Mediterranean Sea and the Indian Ocean
NordStar Airlines 541,463 Regional airline targeting Krasnoyarsk region
Yamal 534,357 Regional airline targeting Tyumen region
Orenburg airlines 375,253 Charter flights to Russian regions and main holiday destinations
Red Wings 360,840 Scheduled and charter flights for Pegas Touristik
Pegas fly 330,093 Charter flights for Coral Travel and Sunmar travel agencies
Royal Flight 324,708 Regional airline targeting Arkhangelsk region
Nordavia 265,044 Regional airline targeting Yakutia region
Yakutia 249,674 Charter and VIP flights
RusLine 189,866 Operate regional and international flights from Saratov
Foreign Airlines
Other Russian Airlines
37.0%
12.0%
9.7%
7.2%
4.7%
14.6%
14.9%
PAX, 6M 2015 PAX, 6M 2016
Aeroflot Group
Source: TCH, Rosaviatsia, Company estimates.
Group
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2025 Strategic Goals
Top-5 European airline by revenue and passenger traffic
Top-20 global airline by revenue and passenger traffic
Total annual passenger traffic of more than 70 mn passengers, including 30 mn on the Russian market
Share of transit passengers through Aeroflot’s hub in Moscow at least 32%
Market expansion based on implementation of multi-brand strategy
Multi-brand Strategy
1
Global Network
2
Strategic Partnerships
3
Infrastructure
Expansion
4
Key Pillars of Aeroflot’s Corporate Strategy
Strategy 1 Strategy 2 Strategy 3 External (infrastructure) 4
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16.4 27.5 31.4 34.7 39.4
2011 2012 2013 2014 2015
CAGR: 24.5%
158.0 253.0 291.0 319.8
415.2
2011 2012 2013 2014 2015
CAGR: 27.3%
20.5% 30.0% 30.3% 31.1% 36.7%
2011 2012 2013 2014 2015
+16.2 p.p.
30.1% 32.7% 35.5% 39.2% 44.2%
2011 2012 2013 2014 2015
+ 14.1 p.p.
Leading positions in European and global
rankings by passenger traffic
Leading positions in European and global rankings by revenue
Development of hub-and-spoke model
Increasing presence in various geographical and
price segments
• Aeroflot Group has achieved substantial progress on its way to meeting its long-term strategic goals.
PAX, mn
Revenue, RUB bn
Russian market share, %
1
2
3
4
2025 Strategy Progress
Strategic Goal
Share of transit PAX, %
2011 – 2015 Progress 2025 Goal Status
5
7
– position among European airlines – position among airlines globally
5
TOP-5 European TOP-20 Global PAX >70 mn Domestic PAX > 30 mn
Share of transit passengers: 32%
TOP-5 European TOP-20 Global
Broad presence on the market
7
23
24
# #
Multi-Brand Strategy 1 Global Network 2 Strategic Partnership 3 Infrastructure Expansion 4
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39.4
61.5
2015 2016 2017 2018 2019 2020 2021
Russian market International transit traffic
Aeroflot Pobeda
Rossiya Aurora
~22 mn
incremental
PAX
+56%
Ke
y g
row
th
drive
rs:
Aeroflot Group Traffic Growth Projected Sources of Growth
CAGR: 7.6%
Identifying Sources of Future Aeroflot Group’s Growth
Creation of united airline company Rossiya
Capturing new market opportunities
Expansion
New Rossiya reaches full potential
Realization of Potential
Sustainability of profit margins
Strategic use of the multi-brand product strategy
Sustainable Growth
• Aeroflot and Pobeda are expected to be the main contributors to the growth of the Group in 2016–2021.
PAX, mn
Multi-Brand Strategy 1 Global Network 2 Strategic Partnership 3 Infrastructure Expansion 4
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POSITIONING
2015 OFFERING:
2016 OFFERING:
Scheduled flights
Hub and spoke model, international and domestic flights
High frequency Economy and
business class
Short- to long-haul
Narrow-body aircraft Wide-body aircraft
Business tourism Visiting friends and
relatives Tourism
Moscow: Sheremetyevo
PREMIUM PRODUCT MID-PRICE REGIONAL / CHARTER PRODUCT
Business model
Flight range
Aircraft fleet
Target group
Share of int.
routes in PAX1
Scheduled and charter flights
Point-to-point (P2P) flights within Russia Limited connectivity Popular international destinations Charter flights to the most popular tourist destinations
(international and domestic) Economy and business class Short- to long-haul
Narrow-body aircraft Wide-body aircraft
Visiting friends and relatives Tourism Business tourism
Moscow: Vnukovo Saint-Petersburg: Pulkovo Regions: Orenburg, Rostov-on-Don
Scheduled flights
P2P flights via Moscow P2P flights within regions High passenger load factor
and fleet utilization Economy class
Up to 3-4 hours
Narrow-body aircraft
Tourism Visiting friends and relatives
Moscow: Vnukovo
Scheduled flights
Passenger flights in the Far East
Local flights to remote destinations within the region
Economy and business class
Short- and medium-haul
Narrow-body aircraft
Visiting friends and relatives Tourism Business tourism
Vladivoskok Khabarovsk Yuzhno-Sakhalinsk
~50% (extensive
geography)
~20-30% (mainly within the CIS)
and including charter
~9% (international
flights launched
in late 2015)
~20%
(Asian
countries)
LOW-COST PRODUCT PRODUCT FOR FAR EAST
Focus airport
Multi-Brand Strategy: New Vision 1
Regional product for Far East
• Simplified multi-brand product offering to capture customers in every market segment: from premium to low-cost.
POSITIONING PREMIUM PRODUCT LOW-COST PRODUCT PRODUCT FOR FAR EAST MID-PRICE REGIONAL PRODUCT CHARTER PRODUCT
1 Data as of H1 2016.
Multi-Brand Strategy 1 Global Network 2 Strategic Partnership 3 Infrastructure Expansion 4
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Aeroflot’s Strategic Priorities Key Operating Results
62% 9%
4%
25%
60% 9%
4%
27%
O&D passenger traffic1
Passenger traffic on highly competitive markets1
Competitive pressure1
Transit market1
Transit structure, 2015 Structure development by 2021
26.1
38.8
2015 2021
Focus on Servicing Transit Passenger Flows 2021 Strategy Highlights
CAGR: 7%
170
225
2015 2021
CAGR: 5%
1 O&D passenger traffic (direct traffic) – both Aeroflot and competitor conduct direct flights, Passenger traffic on highly competitive markets – Aeroflot offers flights with stopover in the hub while competitor conducts direct flights, Competitive pressure – Aeroflot performs direct flights while competitor offers connecting flights, Transit market – both Aeroflot and competitor offer flight only via respective hub. 2 average aircraft in the fleet during the year (may not coincide with the aircraft in the fleet as of the end of the period).
Positioning • Premium airline with young fleet and high service standards
• Based in SVO in Moscow
• Hub and spoke model
Network
• Focus on the long-haul network development (6-7 destinations
points to be added annually over the next 5 years)
• Further transformation of SVO to the rolling hub model
• Frequency and capacity reduction on a number of domestic routes
• Use of JVs / code sharing agreements to grow market presence
Fleet
• Fleet renewal to maintain modern and efficient fleet
• Increasing share of Russian aircraft in the fleet (50 MC-21 planned
for 2018-2024 deliveries)
• 2021 target fleet size – 225 aircraft
Transit
• Growing share of one connection transit traffic due to network
expansion, hub development and general transit market growth
• Retaining transit market share due to closed nature of Russian
market and high competition
1 Aeroflot Airline: the Group’s Flagship Carrier
FY 2014 FY 2015 Change H1 2015 H1 2016 Change
PAX (mn) 23.6 26.1 10.6% 12.0 13.4 12.2%
International 12.5 13.4 7.8% 6.4 6.8 6.7%
Domestic 11.1 12.7 13.7% 5.6 6.7 18.3%
RPK (bn pkm) 67.1 74.1 10.4% 34.2 38.3 12.2%
International 42.7 46.8 9.6% 22.2 24.5 10.4%
Domestic 24.4 27.3 11.8% 11.9 13.8 15.5%
PLF 78.2% 79.3% 1.1 p.p. 76.9% 78.9% 2.0 p.p.
International 75.9% 77.7% 1.8 p.p. 76.4% 76.5% 0.1 p.p.
Domestic 82.5% 82.2% (0.3 p.p). 77.9% 83.4% 5.5 p.p.
PAX, mn Fleet size 2
• Aeroflot is and will continue to be the engine of the Group’s growth.
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2015 2021
9.1
13.0
2015 2021
Rossiya’s Strategic Priorities
• New Rossiya airline is expected to crystalize the Group’s proposition in the mid-price market segment.
Key Operating Results
Consolidated Share of Rossiya, Orenair and Donavia 2021 Strategy Highlights
PAX, mn
CAGR: 7%
1 Rossiya Airline: the New Vision
Positioning
• Focus on regional operations in the mid price segment with
selective exposure to international routes
• Unite Rossiya, Donavia and Orenair under one brand to better
cope with the current macro conditions and improve efficiency
Network
• Based in LED, VKO, ROV, subsidiary in Orenburg, take-off from
Simferopol
• Focus on regional operations, limited charter programme
• Not targeted transit of c. 20% of airline’s PAX
Fleet • Increasing share of Russian aircraft in the fleet – 20 SSJ to be
added over 2016 – 2021 and simultaneous phasing out of 15 A319
• 2021 target fleet size – 78 aircraft
PAX • Target PAX to grow to 13 mn due to capturing market opportunities
in the Moscow market as well as in leisure and charter segment
Fleet size 1
CAGR: 5%
19%
% of Aeroflot Group’s PAX, as of H1 2016
FY 2014 FY 2015 Change H1 2015 H1 2016 Change
PAX (mn) 10.0 9.1 (9.0%) 4.3 3.7 (14.2%)
International 4.4 2.3 (46.9%) 1.1 1.0 (8.6%)
Domestic 5.5 6.7 21.2% 3.2 2.7 (16.2%)
RPK (bn pkm) 21.1 17.0 (19.4%) 7.8 7.6 (2.0%)
International 12.1 5.8 (52.1%) 2.6 3.1 20.2%
Domestic 9.0 11.2 24.7% 5.2 4.5 (13.1%)
PLF 76.6% 74.1% (2.5 p.p.) 70.6% 77.0% 6.3 p.p.
International 77.9% 76.1% (1.8 p.p.) 72.5% 81.1% 8.6 p.p.
Domestic 74.9% 73.1% (1.8 p.p.) 69.7% 74.3% 4.6 p.p.
1 Average aircraft in the fleet during the year (may not coincide with the aircraft in the fleet as of the end of the period).
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25%
17%
15%
11%
32%
Russian Leisure Market Evolution Group’s Proposition for Leisure and Charter Segment
Key Players by PAX(1)
as of H1 2016
1.9
mn
PAX
• Charter airline business model
• 60% charter / 40% regular routes
• Plans to consolidate Aeroflot Group’s charter
operations
Before
2015
0.2
0.6 0.8
0.5
1.9 2.2
PAX (mn) RPK (bn pkm) ASK (bn)
2.1
7.0
Revenue (RUB, bn)
• In 2014 Aeroflot Group decided to reduce its exposure to the leisure segment due to a negative market outlook; however Group has revisited its approach after changes in competitive landscape in the segment.
H1 2015 H1 2016
1 Leisure Market & Charter Programme
After
2015
• Charter flights were transferred under united
regional brand
• Limited charter programme due to general market
decline and Group’s decision to reduce its presence
in the segment
• Cooperation with Biblio Globus
Aeroflot Group Charter Flights
Others
19.5 18.8
2013 2015 2016E 2017F 2018F 2019F 2020F
PAX, mn
1.1% 2.6% 1.4% 3.8% 1.3% 3.4% 1.4% 3.7%
Share of the Group’s total (for revenue –
share in PAX revenue)
Source: Company data, Euromonitor, EIU, IMF, Development center, Gfk, Federal Agency for Tourism (Russia Federation), TUI, Bain. 1 Includes companies that approved publication. Multi-Brand Strategy 1 Global Network 2 Strategic Partnership 3 Infrastructure Expansion 4
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12
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2015 2021
2021 Strategy Highlights
Pobeda’s Strategic Priorities Key Operating Results
• Pobeda is expected to be one of the main contributors to the growth of the Group in 2016–2021.
Pobeda’s Network – Summer 2016
Routes from Moscow Routes from Sochi Routes From Anapa
3.1
8.1
2015 2021
CAGR: 17% CAGR: 14%
1 Pobeda Airline: Group’s Low Cost Carrier
Positioning • The only Russian LCC, a timely value proposition to cost
conscious passengers
Network
• Based in VKO
• P2P low frequency flights
• Increased focus on regional network development (intra-
regional flights)
• Limited focus on international flights (less than 15% of PAX)
Fleet • B737-800 as the major aircraft
• Up to 5 aircraft to be added in 2017
• 2021 target fleet size – 26 aircraft
PAX • 2021 target PAX of 8.1 mn
Moscow
Belgorod
Gelenzhik
Rostov
Anapa Krasnodar
Nazran
Vladikavkaz Makhachkala Sochi
Astrakhan
Volgograd
Ulyanovsk
Kazan
Kirov Perm
Ufa Magnitogorsk
Chelyabinsk
Ekaterinburg
Tyumen
Surgut
Novosibirsk
Bergamo
Bratislava
Cologne
Memmingen
Girona
Samara
Cheboksary
Larnaca
Nalchik
Paphos
Tivat
N. Novgorod
Yaroslavl
Nizhnekamsk
Voronezh
Saint Petersburg
FY 2014 FY 2015 Change 1H 2015 1H 2016 Change
PAX (mn) 0.1 3.1 – 1.1 2.0 80.7%
International – 0.0 – – 0.2 –
Domestic 0.1 3.1 – 1.1 1.8 65.1%
RPK (bn pkm) 0.1 4.7 – 1.7 3.1 82.1%
International – 0.0 – – 0.4 –
Domestic 0.1 4.7 – 1.7 2.7 59.8%
PLF 78.0% 81.2% 3.2 p.p. 81.0% 84.0% 3.0 p.p.
International – 68.8% – - 68.4% –
Domestic 78.0% 81.3% 3.3 p.p. 81.0% 86.8% 5.8 p.p.
Routes from Saint Petersburg
PAX, mn Fleet size 1
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59% 60% 88%
102% 112%
62%
162%
90%
155%
204% 201%
St. Petersburg Volgograd Ekaterinburg Sochi Tyumen Novosibirsk Vladivostok
2-class compartment ticket price as % of Aeroflot ticket price² 2-class compartment ticket price as % of Pobeda ticket price²
628.0
523.8
n/a
624.2 595.4
474.6
Aeroflot Rossiya Pobeda
2014 2015
548.4
n/a
578.1
353.2
Aeroflot Pobeda
Pobeda Competitive Strength: Air and Rail Ticket Pricing
Air Ticket Prices Have Been
Decreasing Relative to Rail Ones…
Source: Company estimates, Federal Passenger Company, Russian Railways, Rosstat. 1 Calculated as passenger revenue divided by PAX. 2 Calculated on the basis of the lowest available price for air tickets with departure in mid-November 2016 as of September 27, 2016.
3,640
2,439
1,513
Pobeda Rail deregulated(1st and 2nd
class sleepingcompartment,
int. routes)
Rail regulated(3rd class open
sleeping andsitting)
Regulated segment (open
sleeping and sitting cars)
Deregulated segment
(compartments and premium
compartments)
Total: 91.2
Aeroflot Ticket Prices are Very Close to Russian Railways 2-class Compartment
• Air ticket prices have become competitive vs. rail ticket prices.
• Travel time by air has an outstanding advantage over other transport means on the Russian market.
… Competing with the Deregulated
Rail Segment…
60.9
(67%)
30.3
(33%)
8.0%
(7.9%) (7.5%)
5.5% 6.8%
13.4%
3.8% 6.0%
2012 2013 2014 2015
Aeroflot Group domestic routes
Russian Railways
Average fare1, RUB Average fare1 growth Russian Railways passengers 2015, mn
…which Represents c. 30 mn Rail
Passengers
1
Effective Market Segmentation
Sochi destination
PAX (thd) and PLF
Moscow - Ekaterinburg
PAX (thd) and PLF
79.8%
80.3%
78.8%
81.7% 82.3% 82.6%
78.7% 83.6%
(0.6)% 13.7% 5.4%
High base effect of 2014 on SVO-AER route due to Winter Olympic Games (incremental PAX of 68 thd for Aeroflot airline in Feb and March 2014 Y-o-Y)
Distance from Moscow 651 km 1,073 km 1,667 km 1,622 km 2,144 km 3,191 km 9,302 km
Av. travel time by rail 6h 20min 22h 28h 50min 30h 50min 34h 49h 50min 156h
Travel time by air 1h 10min 1h 50min 2h 20min 2h 30 min 2h 40min 4h 8h 30min
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21 17
2015 2021
Aurora’s Strategic Priorities Key Operating Results
1.1
1.4
2015 2021
Aurora’s Network – Summer 2016 2021 Strategy Highlights
CAGR: 4.1% CAGR: (3.5%)
Positioning • The Group’s carrier in the Russian Far East, operating scheduled
commercial and subsidized local flights between distantly located
cities in the Far East
Network
• Based in Vladivostok, Yuzhno-Sakhalinsk and Khabarovsk airports
• Scheduled flights to 23 destinations:
- 11 domestic regional
- 12 international routes
• 13 domestic local flights (10.1% of carrier’s PAX in 6M 2016)
Fleet • Focus on fleet optimization and unification
• Target fleet size – 17 aircraft
PAX • 2021 target PAX of 1.4 mn
1 Aurora Airline: Single Far Eastern Regional Carrier
• Streamlining of Aurora development plans to better serve market demand.
FY 2014 FY 2015 Change 1H 2015 1H 2016 Change
PAX (mn) 1.1 1.1 7.1% 0.5 0.6 19.9%
International 0.2 0.2 10.3% 0.1 0.1 28.5%
Domestic 0.8 0.9 6.2% 0.4 0.5 17.6%
RPK (bn pkm) 1.7 1.9 7.1% 0.8 1.0 16.8%
International 0.3 0.4 11.5% 0.2 0.2 27.8%
Domestic 1.4 1.5 6.1% 0.7 0.8 13.9%
PLF 75.1% 71.6% (3.5 p.p.) 66.5% 68.0% 1.5 p.p.
International 68.8% 57.2% (11.6 p.p.) 58.5% 66.4% 7.9 p.p.
Domestic 76.8% 76.4% (0.4 p.p.) 69.1% 68.5% (0.6 p.p.)
Novosibirsk
Khabarovsk
Krasnoyarsk
Irkutsk
Seoul
Harbin
Magadan
Beijing
Petropavlovsk-Kamchatsky
Yuzhno-Sakhalinsk
Vladivostok
Dalian
Busan
Yakutsk
Hong Kong
Routes from Khabarovsk
Routes from Vladivostok
Routes from Y.-Sakhalinsk
PAX, mn Fleet size 1
Yuzhno-Sakhalinsk
Shahtersk
Okha
Kurilsk
Khabarovsk
Vladivostok
Kavalerovo
Plastun Terney Dalnerechensk
Dalnegorsk
Amgu Svetlaya
Edinka
Yuzhno-Kurilsk
1 Average aircraft in the fleet during the year (may not coincide with the aircraft in the fleet as of the end of the period).
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0.6 1.2 1.5
1.9 2.4
2.7
3.6
6.1
2009 2010 2011 2012 2013 2010 2015 2021
Key International Transit Markets
№ Market Current
Position
2021 Target
Position
Action
Strategy
1 Northeast Asia– Western Europe Top-10 Top-10 Defend
2 Southeast Asia – Western Europe Top-20 Top-10 Expand
3 Middle East – Western Europe Top-20 Top-10 Expand
4 Southwest Asia– Western Europe Top-20 Top-10 Expand
5 Middle East – Northern America Top-20 Top-10 Expand
6 CIS – Western Europe Top-5 Top-5 Defend
7 Eastern Europe – Northeast Asia Top-5 Top-5 Defend
8 CIS – Northern America Top-5 Top-5 Defend
9 Eastern Europe – Southeast Asia Top-5 Top-5 Defend
10 CIS – Northeast Asia Top-5 Top-5 Defend
• Aeroflot gradually but consistently increased presence in key international markets.
Strengthening Positions in International Transit Segment 2
Aeroflot Strategy on International Transit Markets
CAGR: 9.2%
5
6 1
2
4
7
8
10
9
3
NEA
SWA
SEA
ME
CIS
WE
EE
NA
International Transit Traffic
11.8% 11.6% 10.6% 14.0%
Share of International Transit in Aeroflot Airline PAX
International Transit Traffic (PAX mn)
10.3% 10.5% 7.2%
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• SkyTeam membership and code share agreements allow Aeroflot to increase presence on existing markets and enter new markets.
SkyTeam
• Active member of the alliance since 2006
• Participation in alliance’s initiatives (Sky Transfer
Accelerator, Sky Link Sprint, Sky Port and Sky Priority)
• Access to 87 incremental markets (up from 63 in 2009)
via SkyTeam in H1 2016
• Strengthened relationship with Air France, KLM, Alitalia
and China Eastern Airlines
• SkyTeam encompasses 1,062 destinations in 177
countries in 2016
665.4 mn
(annualized)
Code
Sharing
• Expansion of own network and more efficient utilisation
of fleet
• 29 existing code-share agreements, including 26 with
foreign partners and 3 with Russian airlines
• Signed a new code-share agreement with S7 Airlines,
start of code-share flights - from 1 July 2016
• Access to 79 incremental markets (up from 76 in
H1 2015) via code sharing agreements in H1 2016
• Improving connectivity and capturing more transit
passengers
• Number of marketing routes 263 in H1 2016
168,511
(H1 2016)
Expanding Network via Alliances and Agreements 3
Summary Overview Segment Passenger Traffic Selected Airlines
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Available Resources
Global Alliances
Strategic Partnerships
Build Presence in the Promising Markets
Leverage strategic partners’
sales
Offer new code share
itinerary options
Improve Yield
Combine strategic partners’ positions in large markets
Sync. schedules
on frequently
served routes
Leverage strategic partners’
high market share
Reduce Cost
Rationalise service in
high-frequency markets
Sync. network to/from jointly-served
markets
Key Benefits
and
Implications
• Aeroflot is actively developing strategic partnerships with multiple global carriers to increase its competitive position, brand visibility and increase economies of scale.
Strategic Partnerships: Aeroflot’s Approach 3
Global
Partnerships
is a Means to
Achieve 2025
Targets
Setting-up a number of strategic partnerships with leading airlines globally
Including code share agreements
Multi-Brand Strategy 1 Global Network 2 Strategic Partnership 3 Infrastructure Expansion 4
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Infrastructure Expansion to Support Future Growth
Railway terminal
Construction of 3-rd
runway
Terminal B
Cargo (freight) terminal
Fuel-filling complex
Interterminal tunnel
Reconstruction of roads
31
47 55
59
2015 2020 2025 2030
Interterminal tunnel Reconstruction of
roads Railway terminal
5 6 7
1
2
3
4
5
6
7
SVO Traffic Forecast
SVO Site Outlay 2015–2017 SVO Hub Development Programme
Terminal B Cargo terminal Fuel-filling complex
Runway-3 1 2 3 4
CAGR: 4%
• 44 additional take-offs and landings per hour
• Completion date – 2018
• Focused on domestic flights
• Annual passenger capacity – 15 mn
• Area – 100 th m2
• Annual cargo capacity – 680 th tones
• Area – c. 90 th m2
• Capacity – 1 mn tones in 2017 (30% of total
airport volume)
• 2 terminal-to-terminal tunnels (passengers and
baggage)
• Length – 2,100 m
• Max connecting time – 50 min
• Better connection between South and North
terminals
• Comfortable direct entrance to the airport
terminal, 4 lanes
• New railway track
• 15 minutes time interval between
“Aeroexpress” trains
4
Source: Public domain, Sheremetyevo International Airport corporate presentation.
PAX, mn
• Sheremetyevo is set to become one of the most modern airports in Europe, increasing Moscow’s attractiveness as a transit hub for international passengers and providing a solid foundation for Aeroflot’s long-term strategy.
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• Moscow (SVO)
based
• Hub-based
model with focus
on network
quality
• Exploiting transit
market
opportunities
• Based LED,
VKO, ROV;
branch in REN
• Mainly
scheduled,
limited charter
flights
• Transit potential
of ~ 20%
• Based in
Moscow (VKO)
• Low-frequency
P2P flights
• Focused on the
development of
domestic
routes, limited
number of
international
routes (≤ 15%)
Approach to Network Development
Aeroflot Group Network Development Strategy (1/3)
Network of Aeroflot Group’s Airlines
Fundamental net work development principles
• Network development is based on the multi-brand model ensuring maximum coverage of the air transportation market and presence in various price segments across different regions.
• Based in VVO,
KHV and UUS
• Performs
commercial
regional flights
and subsidized
local flights
Network convenience and coverage
Increasing flight frequencies
Selective addition of
destinations
Origin & destination principle
Network development goal/result
Network synergies: viable and competitive connectivity
options
Network development instruments
Moscow
Rostov-on-Don
St. Petersburg
Yuzhno-Sakhalinsk
Khabarovsk
Orenburg Vladivostok
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Relatively Stable Number of
Destinations…
Aeroflot Group Network Development Strategy (2/3)
• Moderate growth of destinations, focus on increase in frequencies on scheduled routes across all segments (international and domestic, long- and mid- haul) to improve network quality.
152
141 142
153
142
137 137
2013 2014 2015 6M 2016
Summer schedule Winter schedule
# of destinations1
… due to Focus on Network Quality
and Frequency…
9.6
11.1 11.8
10.9
11.5
2013 2014 2015 6M 2015 6M 2016
Average scheduled flight frequency2
CAGR: 10.9%
4.9%
… with Further Improvements
Possible Across the Segments.
9.7
13.2
12.1
6.7
International Domestic Mid-haul Long-Haul
Average scheduled flight frequency2
1 2016 summer schedule. 2 Average weekly frequency per route for Aeroflot Group excl. Pobeda.
98 abroad
55 in
Russia
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1.8 1.7
6M 2015 6M 2016
2.4
2.7
3.6
2013 2014 2015
11.6% 11.8% 14.0%
16.0% 16.7% 16.7%
7.9% 10.7%
13.5% 35.5%
39.2% 44.2%
2013 2014 2015Domestic - DomesticInternational - Domestic / Domestic - InternationalInternational - International
15.3% 13.2%
16.0% 16.2%
11.6% 11.7%
42.9% 41.1%
6M 2015 6M 2016
… Backed by Convenient Location of Aeroflot Hub
Aeroflot Group Network Development Strategy (3/3)
Source: Company data, IMF, Eurostat, RITA, Russian State Statistics Service, Rosaviatsia. 1 Data for Aeroflot airline’s own flights.
Growing share of transit of Aeroflot airline in Sheremetyevo Average weekly frequency per route
2.2%
0.0%
Growth
6M 2016
4.0%
… Results into Growing Aeroflot Airline’s Transit Flows
Increasing international transit PAX, mn
CAGR 22.3%
• Increasing flight frequency improves connectivity and supports Aeroflot’s traffic growth in Sheremetyevo airport.
• Advantageous geographical positions and Group’s efforts support traffic growth on key European and Asian
destinations.
Growing Connectivity of Aeroflot Flights1 ...
Connectivity ratio
From/To Paris London Vienna Stockholm Rome
Tokyo Via Moscow 15:00 15:05 13:45 13:15 14:55
Via Dubai 18:30 18:55 17:15 17:45 17:30
Shanghai Via Moscow 14:05 14:10 12:50 12:20 14:00
Via Dubai 17:25 17:50 16:10 16:40 16:25
Hong Kong Via Moscow 15:00 14:40 13:20 12:50 14:30
Via Dubai 18:30 17:10 15:30 16:00 15:45
Moscow
Shortest
geographical
distance
12.4 12.4
21.9 22.8
15.7 16.0
13.9x 18.8x
6М 2015 6М 2016
10.7 11.5
12.4
19.3 20.3
22.9
13.2 14.4
16.1
12.7x 13.5x 16.0x
2013 2014 2015
International Domestic Combined
232 235 240
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345
437
160
180
155 161
178 188
167 179
345
437
298
364
234
323
264
281
268
278
125
150
175
200
225
250
275
300
325
350
375
400
425
450
2010 2015
Development of Wave-Based Schedule
• Aeroflot has developed it’s base airport – SVO – into a hub based on connectivity waves with convenient options for transit passengers.
• Migration from wave model to “rolling hub” and increasing average aircraft capacity target to overcome infrastructure constraints in SVO and promote efficiency of operations.
Rolling waves
2016
2010 Total WB1 Total Total Total WB1 Total WB1 WB1 WB1
Increase in Average Seat per Plane Drives Capacity Growth
Source: Company data 1 Wide-body aircraft
Aeroflot Operations Development in Sheremetyevo Hub (1/2)
Average # of seats per aircraft
+27% +27%
+22%
+13% +4%
+38%
+6%
+6%
+7%
+4%
Wave 3
(America,
Russia)
Wave 6
(all destionations) Wave 2
(all destinations)
Wave 1
(Europe,
CIS, Russia)
Wave 4
(Europe,
CIS, Russia)
Wave 7
(Europe,
CIS, Russia) Wave 5
(Europe,
CIS, Russia)
Wave 1
(Europe,
CIS, Russia) Wave 2
(all destinations)
Wave 3
(Europe,
Russia)
Wave 4
(Europe,
CIS, Russia)
Wave 5
(CIS, Middle
East, Russia,
Beijing) Wave 6
(all destinations)
Wave 7
(Middle
East, CIS,
Russia)
Ou
tbo
un
d f
lig
hts
In
bo
un
d f
lig
hts
Wave 8
(Europe, CIS,
Russia)
Wave 8
(Europe, CIS,
Russia)
Wave 8
(Europe,
CIS,
Russia)
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Multi destination waves (all-to-all)
Focus destination waves (selected connections)
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• Aeroflot still sees development opportunities in SVO airport with the current infrastructure capacities before
launch of the new terminal and third runway.
• Current initiatives are based on the development of the new wave and expansion of underutilized (less
intense) waves that will help to further boost connectivity.
Aeroflot Operations Development in Sheremetyevo Hub (2/2)
Inbound
flights
Russia, CIS
Europe,
Russia,
CIS
Russia, CIS,
America, China,
India, Middle East
America, Russia
Russia, CIS,
Europe
Europe, Russia,
Asia
Asia, Europe, Russia, CIS
Russia,
Europe, CIS Russia,
Europe
Europe,
Russia, CIS
Russia, CIS,
Europe Europe, Russia,
CIS, America, China
Europe, Russia
Europe, CIS,
Russia, New York
Russia (Far East),
Europe Russia, CIS,
Middle East,
Beijing
CIS, Russia
Outbound
flights
- new wave added in 2016 summer schedule
Aeroflot Airline 2016 Summer Schedule
01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 00:00
- potential development in SVO before 2018 given current infrastructure capacity
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Network Overview: Balanced Development Across Regions
mn PAX bn ASK PLF
Russia
Europe
Americas
Asia
Middle East
14.0 17.6 23.4
10.3 11.6
2013 2014 2015 6M2015
6M2016
59% 37.5 43.6
56.3
25.8 26.8
2013 2014 2015 6M2015
6M2016
78% 80% 79% 75% 81%
2013 2014 2015 6M 2015 6M 2016
8.3 8.2 8.0 3.7 4.1
2013 2014 2015 6M2015
6M2016
25.4 25.5 23.8 11.4 12.7
2013 2014 2015 6M2015
6M2016
76% 74% 74% 71% 71%
2013 2014 2015 6M 2015 6M 2016
0.9 0.8 0.8 0.4 0.4
2013 2014 2015 6M2015
6M2016
9.5 8.8 8.4 4.0 4.6
2013 2014 2015 6M2015
6M2016
80% 79% 83% 80% 84%
2013 2014 2015 6M 2015 6M 2016
2.4 2.5 2.7 1.3 1.5
2013 2014 2015 6M2015
6M2016
19.2 21.0 22.5 11.0 12.7
2013 2014 2015 6M2015
6M2016
78% 75% 79% 79% 79%
2013 2014 2015 6M 2015 6M 2016
3.0 3.0 2.0 0.9 0.9
2013 2014 2015 6M2015
6M2016
10.6 10.6 7.6 3.6 3.6
2013 2014 2015 6M2015
6M2016
85% 82% 78% 77% 76%
2013 2014 2015 6M 2015 6M 2016
Share (6M 2016)
21%
Share (6M 2016)
2% Share (6M 2016)
8% Share (6M 2016)
5% Share (6M 2016)
42%
Share (6M 2016)
20%
Share (6M 2016)
7% Share (6M 2016)
20%
Share (6M 2016)
6%
Share (6M 2016)
Trends (2013-16 YTD)
• Russian market is a star performer
for the third year in row
• Increasing frequencies
• Selected addition of new
destinations
• Intelligent capacity management:
additional destinations and
increasing frequencies
• Operating numbers supported by
increased transit passenger flows
• Higher demand resulted in PLF
improvement
• Exploiting transit potential
• Optimization of capacity to leisure
markets in the region
• Capacity expansion on selected
routes
• Increased transit demand from Asia
• Addition of new destinations
• Frequencies and destination optimization
(incl. suspension of flights to Egypt and
decrease in frequencies to Turkey)
• Increased frequencies to key routes in
the region
• Aeroflot Group maintains presence in all major regions with intelligent expansion and capacity management taking into account market conditions.
• Aeroflot succeeded to reverse and/or mitigate downward trends in the key markets.
CIS 2.8 2.6 2.5 1.3 1.1
2013 2014 2015 6M2015
6M2016
6.8 6.3 6.1 3.1 3.2
2013 2014 2015 6M2015
6M2016
76% 77% 78% 76% 80%
2013 2014 2015 6M 2015 6M 2016
6% Share (6M 2016)
5% Share (6M 2016)
• Positive demand trends for
Caucasian republics and launch of
Kazakhstan
• Negative contribution from
suspension of flights to Ukraine
1
2
3
4
5
6
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17,854
19,694
269
69
363
867
272
PAX 6M2015
Top 10International
Routes
OtherInternational
Routes
Top 10DomesticRoutes
OtherDomesticRoutes
NewDestinations
PAX 6M2016
1.5%
0.4%
2.0%
4.9%
1.5%
10.3%
St Petersburg Ekaterinburg
Sochi Mineralnye Vody
Simferopol Samara
Krasnodar Vladivostok
Kaliningrad Kazan
Top 10 International Markets Group’s PAX Evolution (thd PAX)
Top 10 Domestic Routes
Total Share of Group’s PAX – 19.1%
Total Share of Group’s PAX – 21.1%
718
1 All Pobeda’s traffic (incl SVX and AER) is included in other domestic routes as it serves respective markets from VKO airport and targets completely different market segment.
6M 2016
6M 2016
Network Overview: Key Markets and Growth Decomposition
• Constant focus on domestic and international destinations with highest demand and expansion in the new market segment (LCC) paired with a low risk growth strategy.
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Aeroflot Group Fleet Development Strategy
Approach to Fleet Development
• Utilization of several (but limited) aircraft types from several producers due to the
larger fleet and focus on premium segment:
― Enables targeting different markets of various size (example: use of Airbus and
Boeing aircraft in different passenger capacity classes for long-haul flights -
Airbus A330 (300 seats) and Boeing 777 (400 seats)
― Enables flexibility, maximization of operational efficiency and load factors
― Allows receiving the best possible offers from suppliers (and lessors)
• Utilization of Airbus A320 and Boeing 737-800 aircraft on scheduled flights
• Boeing 777 and 747 are used on charter and tourist flights and flights to Far East
• Focus on narrow- body aircraft
• Optimization and unification of the fleet
• Utilization of Airbus A320 aircraft on scheduled flights
• Utilization of a standartisation approach
• The fleet is completely comprised of Boeing 737-800
Fleet Evolution Ownership Structure
2012 6M 2016 by # of aircraft
Total: 257 Total: 233
Owned 1%
Operating lease 80%
Finance lease 19%
Operating lease 65%
Finance lease 26%
Owned 9%
• Aeroflot maintains a balanced fleet expansion strategy focusing on consistent fleet renewal and long-term strategic goals for each brand.
# of aircraft (average number for the year)
17%
-3%
6%
4%
5% X% - CAGR, 2016-2021
182 225
59
78 20
17
12
26
273 296
315 324 335
346
2016 2017 2018 2019 2020 2021
• A320 family
• B737 NG
• SSJ100
• A330
• B777
Total: 5 types
• A320 family
• B737
• B747
• B777
Total: 4 types
• DHC-6
• DHC-8 (2 subtypes)
• A319
Total: 4 types
• B737 NG
Total: 1 type
Airline General Considerations and Fleet Development Principles Focus Producers Type Number
Classes Narrow b. Wide b.
• n/a
• n/a
• Economy
• Comfort
• Business
(extended
seat or
full-flat)
• Economy
• Business
• Economy
• Business
• Economy
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Execution of Fleet Strategy: Enhancing Fleet Standardization
2011 2015 2018 Structure
SSJ100
Аn-148
Yak-42
An-12
An-24
An-26
DHC-8-200/300
Tu-134
SSJ100
Аn-148
DHC-8-200/300
DHC-6-400
SSJ100
DHC-6-400
DHC-8-300
DHC-8-400
A319/320/321
B737 (Classic)
B737 (NG)
Tu-154
A319/320/321
B737 (Classic)
B737 (NG)
A319/320/321
B737 (NG)
MC-211
A330
B767
B777
Il-96
Тu-204
MD-11F
A330
B767
B777
A330
B747
B777
66%
18 types 10 types 10 types
Narrow-body (regional)
Narrow-body (medium-haul)
Wide-body (long-haul)
1 Irkut MC-21 is a twin-engine mid-range Russian jet airliner, which is now being developed and to be produced by the United Aircraft Corporation (UAC) Group.
17%
17%
• Focus on modern aircraft types is the main principle for the fleet development strategy ensuring long-term efficiency.
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25.3
17.5
30.9 35.6
64.8
2013 2014 2015 H1 2015 H1 2016
31.8
24.8
58.7
13.3
30.0
2013 2014 2015 H1 2015 H1 2016
291.0 319.8
415.2
176.5
223.8
2013 2014 2015 H1 2015 H1 2016
Proven Track Record of Strong Financial Performance
Strong revenue growth on the back of increasing RASK and yields and expanding passenger traffic
Pro-active approach to revenue management helped to materialize FX effect on international fares despite macro headwinds
CAGR: 19.5%
26.8%
Margin
10.9% 7.8% 14.1% 7.5% 13.4%
Operating CF (RUB bn)
28.9 36.0 69.7 42.7 75.3
Revenue (RUB bn) EBITDA (RUB bn) and Margin FCF (RUB bn)
• Aeroflot Group delivers strong results amid expanding operations, active revenue management and strict cost control.
• The Group consistently generates positive and growing cash flows adjusting to volatile external environment.
Profitability improvement over the years on the back of efficiency initiatives and tight cost control in the volatile environment
Continued EBITDA and EBITDA margin expansion in 2016
Positive free cash flow generation due to operating strengths
Significant improvement in FCF and OCF in H1 2016 on the back of demand pickup and stronger bookings
CAGR: 35.8%
x2.3
CAGR: 10.4% 82.1%
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Revenue and Cost Management Strategy
• In order to deliver results and improve profitability Aeroflot focuses both on exploring revenue opportunities
and control over cost inflation where possible and introducing dedicated cost cutting projects.
Active revenue management
Exploring new geographical markets and new market niches
Exploiting ancillary revenue opportunities
Cost cutting programmes
Specific efficiency initiatives
Efficiency based strategy
Strong
Financial
Performance
Ma
na
gin
g r
eve
nu
e
Con
tro
llin
g c
osts
3
2
1
3
2
1
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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Approach to Revenue Management
• Aeroflot has significant share of revenue denominated and/or linked to FX which helps to the mitigate FX effect on
operating expenses due to its pro-active approach to revenue management.
• Pro-active approach implies relevant actions based on the demand and market environment that targets positive
RASK dynamics (important both in RUB depreciating and appreciating environment).
… Delivers Results
RUB 39.5%
EUR 14.3%
EUR-linked 25.7%
USD and
other 20.5%
Sophisticated Approach to Revenue and Capacity Management …
Network management based on O&D
flows rather than particular flight legs Accessing profitability based on the
network effect in addition to the
performance of each route and
particular flight Offering various booking classes
depending on consumer strength and
demand
Origin & Destination
core principle of the revenue
management
Consistent Pricing
core principle of pricing policy
Diversified Revenue
Streams by Currency
core fare setting principle
Consistent fare adjustment to avoid
price shocks to the consumer in case of
significant FX fluctuations - PLF
implication is taken into account High flexibility with capacity deployment
closer to the departure (and various
business/economy composition) – to
optimise PLF)
Principles Related Metric
1
Group collects revenue in various
currencies (RUB, EUR, USD and other)
as fares are set in various currencies
― Domestic - in RUB
― Outbound international – EUR
― Inbound and transit (EUR, USD and
other currencies)
Diversified revenue (Aeroflot Group revenue 6M 2016)
Growing share of transit of Aeroflot airline (% of AFL PAX)
Improving RASK - better yields without compromising on PLF (RUB)
Price
Promo level
Web demand
Booking cancelations
Seats available by class
Past data
Seasonality
Sales speed
Current bookings
Ancillary
Competitor prices
Key Pricing and Revenue Management Factors
35.5% 39.2% 44.2% 42.9% 41.1%
2013 2014 2015 6M2015
6M2016
2.4 2.4 2.8
2.5 3.0
2013 2014 2015 6M2015
6M2016
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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3.06 3.04
3.58
3.29
3.76
2013 2014 2015 H1 2015 H1 2016
109.1 115.8 124.7
58.8 63.6
2013 2014 2015 H1 2015 H1 2016
Effective Capacity and Revenue Management…
PLF (% and y-o-y p.p. change)
ASK, bn
0.1
8.2%
Growing Demand for Air
Transportation…
PAX, mn
…Backed by Intelligent Capacity
Management…
…Translated into Solid Unit
Revenue Growth
Yield for scheduled flights (RUB/RPK)
• Well-planned capacity growth that took into account markets trends and balance of supply and demand helped to increase load-factors and unit revenues at the same time.
CAGR: 6.9%
CAGR: 12.0%
10.3%
(0.4) 0.5
0.0
2.9
CAGR: 8.2% 14.6%
1
31.4
34.7
39.4
17.9
19.7
2013 2014 2015 H1 2015 H1 2016
78.2% 77.8%
78.3%
75.7%
78.6%
2013 2014 2015 H1 2015 H1 2016
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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3.07 2.98
3.26
2.95
3.32
2013 2014 2015 H1 2015 H1 2016
… Both on Domestic and International Scheduled Routes
Despite Proactive Approach to
International Yields…
… as well as Domestic Yield
Management…
… Aeroflot Group Still Secures Pricing
Advantage in the Global Context
RUB/RPK RUB/RPK 6M 2016 yields – USD cents /RPK
• Attractive value proposition for consumers is one of the key strengths of the Group vis-à-vis foreign carriers which attracts new passengers and retains them thanks to superior product quality.
3.05 3.07
3.86
3.55
4.12
2013 2014 2015 H1 2015 H1 2016
CAGR: 12.6% 16.1% CAGR: 3.0% 12.6%
8.37
7.94
7.44
6.61
5.66 5.36
Qantas AirCanada
easyJet Latam TurkishAirlines
Aeroflot
1
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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Exploring Additional Revenue Opportunities 3 2
New routes in the markets of presence in (H1 2016 vs H1 2015):
― Domestic routes: Saratov, Magadan
― International routes: Alicante, Valencia, Lyon
Ancillary Revenue New Markets and Segments
New Products
RUB 12.5 bn ancillary revenue in
H1 20161
48.6% share of revenue from
partners under frequent flyer programme in other
(ancillary) revenue
LCC revenue in H1 2016
RUB 8.0 bn
• Aeroflot Group strategy pursues opportunities for generating incremental revenue through new market and routes,
as well as an ever-expanding range of value-added ancillary services.
New markets: Kazakhstan (Aktau, Aktobe, Almaty, Astana, Atyrau,
Shymkent)
Pobeda addresses the LCC market segment that previously was underserved in Russia
Incremental revenue in H1 2016 from new destinations opened in LTM RUB 3.3 bn
Incremental revenue from Pobeda airline amounted to
RUB 4.7 bn in H1 2016
Incremental revenue from ancillary services and other revenue amounted
to RUB 0.7 bn RUB in H1 2016
Hotel revenue
Catering services onboard and Duty Free sales
Other partnerships – Europcar and DreamLines cruise operator
6.2% ancillary revenue
growth in H1 2016 y-o-y
Partners, including under frequent flyer programme
Baggage fees
Seat upgrades (Space + business)
Third-party refueling services, ground handling and MRO
+
Total revenue in H1 2016 from new destinations added in 2013 – H1 2016
amounted to RUB 8.1 bn
1 Other revenue as reported in IFRS accounts (excluding the line with airline agreements). This amount doesn't include income from various fees accounted as part of airline revenue (i.e. baggage fees).
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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Continuous Quest for Cost Efficiencies
• Aeroflot is committed to operational and financial efficiency achieved via various means - from fundamental
principles of business strategy to dedicated efficiency programmes.
Efficiency Based Strategy Long-Term Efficiency Initiatives Cost-Cutting Initiatives
1 3 2
Aeroflot Group’s corporate strategy, fleet and network strategy result in enhancing operational efficiencies that drives financial results improvements
Strategic initiatives that particularly target operational and financial efficiency
Initiatives that have been implemented to cut specific costs, including programmes related to crisis trends in the Russian market in the beginning of 2015
Examples:
• Fleet optimization (order book and phase-out of existing aircraft)
• Network and headcount optimization by regional subsidiaries
• Administrative costs optimization
• Merger of regional subsidiaries
Examples:
• Operation of standardized modern and fuel efficient fleet and fuel consumption optimizations
• Effective fuel supply management
• Focus on connectivity and development of hub in SVO
• Development of multibrand strategy
Examples:
• Installation of sharklets
• Optimization of printed products
• Optimization of loading of meals, water, etc.
Continuous growth of business efficiency
Ongoing incremental savings represent additional contribution to improving
profitability
Prompt reaction to changing environment helped minimize adverse
external effects
Cost-cutting Initiatives 3 Revenue Management 1 New Revenue Streams 2 Efficiency Based Strategy 1 Efficiency Initiatives 2 3
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Cost Item % of OpEx % of FX portion Aeroflot Approach
Fuel 22.3% 69.8%
Monitoring and controlling of fuel consumption via optimizing routing and refuelling
Focus on maintaining efficient fleet
Continuous negotiations with suppliers (focus on formula-linked pricing)
Aircraft, Traffic and
Passenger Servicing 20.0% 42.2%
Optimizing operations (i.e. overnight stop and parking etc) to reduce cost
In-house catering company promoting synergies for on-board service
Negotiations with airports on non-regulated tariffs
Staff 15.5% 7.6% Indexation strictly linked to productivity, variable compensation - to KPIs
Optimizing headcount in subsidiaries (reduction of duplicate functions)
Continuous focus on productivity is further supported by LCC roll-out
Operating Lease 14.1% 99.5% Established relations with key global lessors and producers
Deployment of various aircraft types promotes flexibility and efficiency
Continuous market monitoring for efficient deal structures
Maintenance 8.7% 81.6% Continuous negotiations with MRO service providers to improve pricing
Increasing share of in-house MRO (A-Tekhnics)
Fleet renewal strategy – new aircraft required less MRO time and money
SG&A 6.4% 26.2%
Optimizations of duplicate functions in subsidiaries
Introduction of IT software to increase administrative personnel productivity
Stringent control of marketing and administrative costs
D&A and Customs
Duties 3.4% 0.0%
Decreased focus on finance lease (due to higher cost)
Steps taken to phase-out aircraft in finance lease (to be replaced by new aircraft)
Other OpEx 9.5% 63.3%
Promoting efficiency of sales channels (i.e. growing share of on-line)
Establishing procedures to minimize one-off effects
Cost control over other minor operating expenses
Operational Costs Overview
• Dealing with large portion of costs affected by external factors Aeroflot has to focus not only on controllable expenses
(RUB), but also on cost items influenced by macro factors (FX) executing dedicated optimization initiatives.
1
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1.76 1.91 2.22 2.14
2.45
0.73 0.75
0.76 0.76 0.70 2.49 2.66
2.97 2.90 3.15
2013 2014 2015 H1 2015 H1 2016
CASK - ex-fuel CASK - fuel
Unit Cost Evolution: Aeroflot and International Peers
• Limited expansion of CASK due to strict cost control and efficiency initiatives within the Group.
• Consistent excess of total RASK growth over CASK inflation which drives profitability growth.
• Aeroflot is the leader among international peers in both fuel and non-fuel cost efficiency.
Controlled CASK Inflation
CAGR: 9.4%
8.6%
CAGR: 11.1%
18.9%
3.30
4.08 3.79
5.34
1.10
0.86 1.31
1.47
4.40
4.95 5.11
6.81
H1 2016 H1 2016 H1 2016 H1 2016
1 PAX Revenue/ASK. 2 Converted to RUB using average CBR FX rates. 3 6 months ended 31 March 2016.
RUB/ASK
X% - Total RASK1 growth
H1 2015 H1 2016 3
Cost Advantage vs. Foreign Peers
RUB/ASK2
1
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24.8
23.5
23.1 23.2 22.8
2013 2014 2015 H1 2015 H1 2016
312.6
308.2 304.5
315.4
298.4
2013 2014 2015 H1 2015 H1 2016
Modern Fleet Reducing Fuel Costs
• Aeroflot Group has achieved efficiency gains in fuel costs (across all subsidiaries, including Aurora) as new
generation aircraft were put into operation and old and less fuel-efficient were phased out.
• Aeroflot Group will continue its strategy of deploying modern aircraft and therefore additional fuel savings should
come from regional subsidiaries and increasing LCC contribution effect.
Airline % of Fuel
Consumed
Relative Fuel
Consumption
Contribution to Unit Fuel
Savings (FY15 vs 13)
In line ~85%
In line
No material
contribution to
Group’s fuel savings
Below
average ~15%
Above
average
No material
contribution to
Group’s fuel savings
Aeroflot Group
Average
consumption
per ASK
-
Track Record of Increasing Fuel Efficiency Aeroflot Group Fuel Consumption by Subsidiary
Fuel consumption per ASK (gr/ASK)
1
CAGR
(3.6%)
(1.4%)
CAGR
(1.3%) (5.4%)
Fuel consumption per RTK (gr/TKM)
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100% 93%
113% 106%
200%
Average fuelprice
SVO Russianregionalairports
Airportsabroad
CIS airports
Efficient Fuel Supply Management
• Aeroflot deploys dedicated IT solutions for tankering to optimise fuel consumption given the price differential in the airports in Russia and abroad.
Approach to Fuel Supplies
Comments
Unified
Platform
Subsidiary airlines switched to Aeroflot’s fuel
procurement platform in 2013, and have since
realised significant efficiencies
Key
Suppliers
Large Russian integrated oil companies
Direct contracts with leading global players in
foreign airports (AFS, Shell, AirBP, Gazpromneft-
Aero, Sinopec)
Formula-
linked
Pricing
Formula-linked pricing in 25 airports in Russia, fixed
pricing contracts at 19 Russian airports
All 5-year contracts were terminated as of January
2016 in favour of 1-year contracts with formula-
linked pricing
Majority of fuel purchased in Russia (73% of
volume) and almost all fuel at international airports
supplied at formula-linked price
Formula
In Russia: Jet fuel price = NW Europe (FOB
Rotterdam) price x Discount x FX rate1 x 1.182 +
Storage + Fuelling fees (if applicable)
Abroad: Jet fuel price = Platt’s + applicable fees
Other
Hedging strategy review completed and discussed
by the Board (suspended for now, awaiting
approval)
Changes in taxation system (jet fuel excise and
reimbursement introduced in 2015)
Pricing Differential due to Economies of Scale
Attractive pricing in
SVO airport promoted by economies of
scale and efficient fuel
supplies strategy
₽ 29,763/t
₽ 27,593/t
₽ 33,559/t
₽ 31,528/t
₽ 59,439/t
Limited exposure to fuel supplies in
airports with higher than average fuel
price
1
Share of fuel
purchases
Fuel price:
relative to
average (%) and in RUB
6M 2016
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6
7
8
9
10
11
12
13
14
0 2000 4000 6000 8000
9.4 9.3
9.5
8.9
9.4
10.5 10.5
10.3
10.2 10.1
2013 2014 2015 6M 2015 6M 2016
Aeroflot Group Aeroflot Airline
Efficient Operations and High Utilisation Rates
Despite High Pace of Fleet Expansion Aeroflot
Group Was Able to Maintain Utilization…
Flight hours per day, average for 6M 2016
Flight hours per day
…on the back of Strong Performance of
Subsidiaries and Key Aircraft Types 1
average flight leg,
km
• Aeroflot has already achieved high utilization rates and targets to maintain and improve utilization on the back of LCC expansion.
• Aircraft utilization is a derivative of aircraft type deployed, flight leg and network, share of low-cost vs. premium operations as well as seasonality factor.
• Widebodies tend to have higher utilization than narrow bodies and narrow bodies for regional flights.
• Efficient exploitation of Aeroflot wide-body fleet, potential to further improve utilization of narrow bodies.
• Narrow bodies for regional transportation allow us to efficiently operate with high PLF at the certain markets with less demand and pronounced seasonality and add frequencies to increase convenience (frequencies = market share).
1
Wide body aircraft
Narrow body aircraft
1 Utilization and average flight leg for particular airline is shown for comparison purposes (rather than to indicate exact flight leg).
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9.7 9.9
12.2
10.8
13.3
2013 2014 2015 H1 2015 H1 2016
1,188 1,244
1,342 1,307 1,362
2013 2014 2015 H1 2015 H1 2016
1,059 1,109
1,189 1,157
1,202
2013 2014 2015 H1 2015 H1 2016
17.9 19.0 20.4 19.4 21.2
9.3 9.6
9.7 9.3
10.7
3.2 3.6
3.9 3.7
4.3
30.4
32.2
34.0 32.4
36.2
2013 2014 2015 H1 2015 H1 2016
Aeroroflot airline Airline subsidiaries Non-airline subsidiaries
Track Record of Improved Productivity
Note: H1 numbers are presented on annualized basis.
• Headcount growth linked to operational and top-line growth resulting in sizeable improvement in labour
productivity and translates into increasing operational profitability.
Aeroflot Group Headcount is
Efficient in Terms of…
… Number of PAX Serviced by both
Group’s and Airlines’ Employees …
… and Traffic Revenue Attributed
to Airlines’ Employee
CAGR
5.8% 11.8%
PAX per employee (Aeroflot Group)
PAX per employee (Airlines)
Note: H1 numbers are presented on annualized basis.
CAGR
12.1% 22.5%
Employees, thd RUB mn per airline employee
1
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2.98
2.52 2.39 2.39 2.40
2013 2014 2015 H1 2015 H1 2016
Current Status and Plans Overview Aeroflot Group MRO Capacity Overview
MRO
facilities
Strong team of approximately 2,000 MRO specialists
7 hangars for MRO in SVO, LED, VKO and REN and additional
hangar for regional aircraft in UUS
– Plans for construction of 1 hangar in SVO by 2018
– EASA certification for Boeing and Airbus aircraft maintenance
Organization
of MRO by
subsidiary
Currently over 85% checks conducted in-house
Third party
clients
60 third-party customers and 14 airlines served helping to increase
efficiency of hangars utilization (between scheduled checks of
Group’s aircraft)
A-Technics
goals and
rationale
Becoming key MRO facility of Aeroflot Group to implement
technical inspection in hangar facilities in Vnukovo airport and
Orenburg
Utilization of industry best practices and realization of synergies
with existing technical inspection platform of the Group
Building effective technical inspection company by utilizing unique
technical personnel competencies (i.e. wide-body fleet (B777,
B747) maintenance
Focus on reduction of the volume of Aeroflot Group’s technicall
inspection outsourcing and increase provision of services to third-
party airlines
Achieving operational profit by the end of 2017
MRO and Development of Own Facilities
Saint-Petersburg
Moscow
Orenburg
Number of
Hangars Headcount Capacity2
7 (+1 by 2018) > 2 000 ppl > 3 350 000
ppl/h
SVO (Aeroflot)
Maintenance staff
Hangar
Technical bases
VKO REN
1 060 ppl
+150 (4th)
130 ppl
4601 ppl
4th SVO hangar commissioning in
2018
LED (Rossiya airline)
630 ppl
2 1
2
2
2
3
6 1
Hangar capacity
CAGR: (10.4%) 0.4%
Maintenance Man-Hour / Flight Hour Ratio
1
Outsourced stations
In-house capacity
(hangars)
• Young fleet promotes improvement of fleet reliability and results in less time and money spent on MRO.
• Aeroflot Group focuses on developing its own MRO facilities to further improve efficiencies: creation of A-Technics will reduce the volume of maintenance outsourcing as well as to realize synergies with existing technical inspection platform of the Group.
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Long-Term Efficiency Initiatives
Optimization of printed products
Replacement of ULD with lightweight
devices
Replacement of liquid soap with foam,
etc.
Improving of technological processes
1
• Aeroflot is constantly pursuing various optimization initiatives to deliver better results for its shareholders.
• Generated savings of approximately 300 mn RUB only in 2015 (despite postponement of initiatives roll-out to subsidiaries after decision on regional subsidiary airlines integration).
Reducing the weight of the loaded aircraft
2
Cabin I-PAD instead of paper
Installation of sharklets (13 a/c with sharklets)
Introduction of innovative solutions and technologies
3
2
Energy efficiency programme in offices
and other facilities
Fuel consumption during aircraft
maintenance
Optimization of aircraft loading
(catering and water tanks)
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Optimizations in
the Subsidiaries Operational Improvements to Stimulate
Profitability of Aeroflot Airline Cost-cutting – General and
Administrative Costs
Response to Changing Market Environment
RUB 7.2 bn savings in 2015
RUB 4.0 bn savings in 2015
RUB 2.0 bn savings in 2015
3
• Network and fleet optimization
• Optimization of administrative expenses • Network and fleet optimization
• Rescheduling deliveries
• Headcount optimizations
• Cutting of administrative costs
• Aeroflot Group’s prompt reaction to the changing market environment shows Company’s flexibility and readiness to promptly implement complicated decisions.
• Initiatives helped to generate substantial costs savings due to termination or substantial reduction in loss-making operations.
• Positive effect of 2015 translated into 2016 and helped to improve profitability.
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Extracting Synergies from Subsidiary Consolidation
• The merger of Rossiya, Donavia and Orenair simplifies operational structure of regional subsidiaries and over the medium term will deliver tangible strategic, sales and cost synergies (worth several billion roubles going forward despite integration costs in 2016).
3
Positioning and Brand
• Unified product for the regions with clear positioning for the passenger
• Unified service standards and pricing policy
• Increased marketing efficiency
Operational Efficiency
• Efficiency of network management
• Flexibility in fleet management
• Standardized HR policies ensure superior customer experience
Financial Efficiency
• Centralization of financial management, headcount reduction, IT integration, elimination of overlapping activities and other SG&A expenses optimization
• Increasing efficiency of supplies due to economies of scale (single contracts with suppliers)
• Facilitation of intergroup interaction and control from the parent company
Stimulating sales
Reducing costs
Single Champion in the Mid-tier Segment Operational Efficiency and Synergies
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Financial Management Strategy
Financial leverage • Maintain leverage over the cycle (excl. one-off and external effects) in
line with the global industry average
Liquidity targets
Funding targets and debt structure
Hedging policy
Dividend policy
• Maintain minimum cash balance to cover scheduled payments, excess liquidity is placed on overnight deposits
• Conservative management of excess liquidity based on cash flow forecast
• Top tier banks placement and limit of cash concentration
• Borrowing by both PJSC Aeroflot and subsidiaries based on alternative analysis
• Diversified sources of funding by maturity and currency
• Unsecured debt (borrowings)
• 25% of the net income under IFRS according to the approved by the AGM dividend policy
• Subject to the guidelines from the major shareholder on dividend pay-out (possibility to increase pay-out – decree for SOE – up to 50%)
• Awaits BoD approval
Financial Targets Comments 6M 2016 Status
• Stringent financial policy to ensure successful development of the Group.
• Net Debt/EBITDA – 1.6x
• Adjusted Net Debt/ EBITDAR – 3.9x
• Cash – RUB 58.6 bn
• Undrawn credit lines RUB 77.8 bn
• Awaits BoD approval
• No dividends paid for 2015 in 2016
• Dividend pay-out for 2016 will be determined in 2017
• Borrowings RUB 43.1 bn
• 41% RUB, 38% USD, 21% EUR
Aircraft leasing • Decision is based on the total funding cost and financial implications • Operating leasing
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Pillars of the Marketing Strategy
Target customers across a diversified
range of brands
Carry out effective advertising, PR and
social media campaigns
Ensure customer service excellence
Strengthen loyalty
through Aeroflot Bonus
Lead in digital
integration
Advertising campaigns aimed at promoting services in Russia and strengthening Aeroflot’s
brand internationally in a cost-efficient manner
• Aeroflot focuses on all stages of the passenger flight cycle from attracting new passengers to ensuring high
standards of our product to analyzing feedback and developing effective FFP and marketing campaigns to retain
our clients.
Aeroflot captures growth across domestic and international markets by offering high quality services to a wide range of customers
Customer excellence at all touch points increases loyalty
• Extraordinary customer pre-flight experience is sustained by user friendly online environment, global customer office network and customer support through a multi-lingual call centre available 24/7/365
• Superior ground experience is achieved through offering comfort and convenience to customers and constant focus on operational efficiencies
• Outstanding flight experience across all classes is built around wide selection of high-quality food and beverages, inflight entertainment programmes and connectivity
Aeroflot Bonus programme and co-branded partnerships help sustain customer loyalty
Remain at the forefront of the airline industry’s digital innovation by integrating cutting edge solutions to drive future brand and efficiency gains
Group marketing strategy
1
2
3
4
5
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Targeting the Following Types of Passengers
Russia’s #1 airline. Modern and comfortable aircraft. Premium service offering
Customer Targeting Across a Diversified Range of Brands
• We segment the market into three categories by trip purpose (business, leisure and mixed) with each of the group
also divided by passenger price sensitivity (comfort, value and savers).
• The Group’s four brands target different customer segments with tailored pricing, product offering, brand identity and
marketing activities.
Positioning
Ideal combination of quality and price for travel
in Russia and abroad
Fulfilling a socially important mission of
facilitating travel to/from the Russian Far East
Low-priced travel aboard modern aircraft
Promotional Concept
• Tactical advertising (new routes, seasonal sales, etc.)
• Image promotion via partnerships & sponsorships
• Online: web, social, targeting using Big Data
• Creation/support of brand awareness
• Focus on regional markets
• Charter program
• Leverage Group umbrella effect
• Focus on relevant regional media markets
• Minimal effort expended on brand positioning
• Leverage Group umbrella effect
• Focus on word-of-mouth and recommendations from friends and family
• Strong social media focus
• Promotional sales offers
Traveller (comfort)1
Primary goal: leisure, VFR2 Priorities: schedule, comfort,
airline image
Vacationer (comfort)1
Primary goal: leisure, VFR2 Priorities: schedule, comfort,
airline image
Business (comfort) Primary goal: business
Priorities: schedule, comfort
Traveller (value) Primary goal: business
Priorities: price, schedule, fare conditions
Business (price-sensitive) Primary goal: business
Priorities: price, fare conditions, schedule
Business (value)
Primary goal: business Priorities: schedule, price, comfort
Traveller (price-
sensitive) Primary goal: leisure, VFR2
Priorities: price, schedule`
Charter Primary goal: leisure
Priorities: price, schedule
Practical (value) Primary goal: business
Priorities: price, schedule, fare conditions
Business (value)
Primary goal: business Priorities: schedule, price, comfort
Business (price-sensitive) Primary goal: business
Priorities: price, fare conditions, schedule
PRIORITY
PRIORITY
PRIORITY PRIORITY PRIORITY
1 Traveller Comfort are those who travel frequently, while Vacationer Comfort are those who travel around once per year. 2 VFR = Visiting friends and relatives.
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Brand Diversification: Livery and Concept
Airline Livery
• Livery aims to strengthen customer perception of airlines’ product diversification.
Logo Uniform
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Marketing Additionally Targets Customers by Geography
• Driving growth across domestic and international markets with targeted marketing campaigns.
Targeting Russian Consumers:
Moscow and the Regions
Targeting European Consumers: Fly
from Europe to Asia via Moscow
Targeting Asian Consumers: Fly
from Asia to Europe via Moscow
Across all of Russia, mainly targeting cities where Aeroflot operates its flights
Germany, UK, Spain, Italy, France and others countries China, Hong Kong, South Korea, Japan
• Promoting newly launched flights to consumers
• Maintaining high level of brand recognition via sponsorship programmes
• Informing international passengers on flight options to Russia
• Informing international passengers on international transit options via Moscow
• Informing international passengers on flight options to Russia
• Informing international passengers on international transit options via Moscow
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• Booking and Payment
• Itinerary changes
• Ancillary services
The Role of Marketing at Aeroflot
Pre-flight Experience
(purchasing tickets)
Marketing campaigns to attract passengers
Pre-flight Experience
(at the airport)
Inflight Experience
Frequent Flyer Programme
Marketing campaigns to retain passengers
Key Elements of Experience Focus in 2015-2016
Attracting
passengers
Post-flight
services and
passenger
retention
Ensuring
high
standards
of our
product
• Check-in (airport and online)
• Updated information
• Lounge
• Boarding, Disembarkation, Luggage
• Seat and Comfort (travel kit, blanket, etc)
• Food and Beverages
• Inflight entertainment
• Other: Space+, duty-free, etc
• Schedule (departure/arrival)
• Connectivity and transit
• Frequency
Flight and Trip Related Experience
• Developing Aeroflot website to facilitate bookings, payments and attract passengers’ focus on the relevant information
• Improving passenger experience in home airports in Russia
• Better service abroad – Sky Priority
• Improvements in business class across all aspects of experience
• Selected improvements in economy class
• Developing network,
offering optimal schedule, promoting connectivity in hubs
Feedback and complaints
1
2
3
• Marketing is integral to the Aeroflot business model, in particular driving customer acquisition and
retention.
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Customer Service Excellence: Pre-flight
Overview
• Booking, check-in and flight status updates from desktop, mobile or
Aeroflot app
• Flexible payment options: multi-currency, payment over phone, wire
payment for SME customers, online payment systems
• Ancillary services: Aeroexpress tickets, travel insurance, car hire,
virtual gift certificates and hotel booking
Overview
• Wide network of customer service offices and call centre to support customers before they travel
― 8 offices in Moscow, 3 at Sheremetyevo airport, 74 elsewhere in Russia and 91 in foreign countries
― Multi-language call-centre and dedicated lines for Aeroflot Bonus elite level members
Overview of Aeroflot International Offices
Key achievements in 2015-2016
• Development of the call-center:
― Opening of additional premises in Volgograd (in addition to Vladimir)
― Launch of Korean language call-center line
― Introduction of free Internet Call to call centre directly from all nine language versions of the website
― Further improvements of the IVR
• Launch of SMS notifications to inform passengers they can register for flights online
• Optimisation of offices, with 5 facilities closed in order to focus resources on more profitable locations
Online Booking and Support Ticket Offices and Call Centre
• Aeroflot prides itself on excellence in every interaction with passengers, including before the flight.
Website Mobile applications
Supportive- iOS support features (PassBook, Apple Watch and iBeacons)
Best in class - App store ratings of at least 4 out of 5 stars
Wide - support for all main mobile operating systems (iOS, Android and WindowsPhone)
Design – continuous introduction of improvements, crowdsourcing project launched in September 2016
Fast growth - ticket sales via web site rose from 10% of sales in 2009 to 25% in 2015
User-friendly - translated into 9 languages (added Chinese and Korean)
Customer-oriented - self registration via the website
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Customer Service Excellence: At the Airport
• Improving operational efficiency through faster and more streamlined processes.
Consistent focus on and investment in operational efficiency resulting in better customer experience and cost savings
Focus on optimising check-in and baggage flow processes
– Registration kiosks in international airports and at Aeroexpress train stations
– Baggage flow optimisation initiatives
Grouping flights at Sheremetyevo Terminal D to ensure minimum security control and boarding time
Offering business class domestic and transit passengers premium services at lounge at Sheremetyevo D Terminal
Faster and more streamlined connecting process for transit passengers following roll-out of new IT infrastructure, streamlined check-in and boarding procedures and training for front line staff
SkyPriority, available in 85+ destinations, allows for priority check-in, baggage drop-off, security and boarding lines
Ensures consistent quality of service and long-term loyalty of priority customers
125 Wi-Fi hotspots in all terminals
Fast Track service rolled out in 16 key European airports plus Bangkok and Tokyo
New electronic scales for hand luggage at boarding gates
Business Class lounges reaching international standards, e.g. Sheremetyevo lounges equipped with individual charging stations
Launch of online Baggage Tracing Service by Aeroflot
Consistent Improvement of Ground Experience Efficiency and Quality – Access to Sky Team Lounges
Key Achievements in 2015-2016
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Customer Service Excellence: On Board
Key achievements 2015-2016:
• All 36 long-haul aircraft are equipped with wireless internet access (new Wi-Fi fares introduced)
• Portable electronic devices are allowed to be used in Airplane Mode throughout the entire flight
Key achievements 2015-2016:
• Replacement of entertainment system - Samsung Galaxy Tab S 8.4 with Premier IFE
• Upgrade of travel kits - Salvatore Ferragamo (for flights of 6 hours +)
• CAUDALIE brand cosmetics in business class lavatories (for flights of 8 hours +)
• National dishes on flights to Asia
Key achievements 2015-2016:
• Increased bookings in comfort class by 20.7% for 1H 2016, year-on-year
• All Comfort Class seats equipped with USB charging ports for mobile devices
• New menus rolled out featuring exquisite food by world class chefs
High standards of comfort and service, individual approach, maximum choice and attention to details from highly-trained multi-lingual cabin crew
Spacious seats on narrow-bodies and separate cabin with comfortable spacious full-flat seats on A330 and B777
Multi-course gourmet meals
Offered on B777-300ER
Spacious and comfortable seats with increased row space
Up-scale and wide menu options
Travel kits, blankets and pillows
In-seat back 10.6’’ display entertainment system
Skytrax 4-star passenger service from a highly trained multilingual cabin crew
Optimum level of comfort and service
Ergonomic seats, blankets and pillows
In-seat back 9’’ display entertainment system (A330 and B777) offering a wide range of Western and Russian film and television programming
Fully flat beds on A330 and B777 Ergonomic seats in Economy class Nearly 100 cm of space between seats
• Tactical projects to further improve service on board.
Economy Class Comfort Class Business Class
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4.0
4.6
5.1 4.8
5.5
2013 2014 2015 1H2015
1H2016
Enhanced Loyalty through Aeroflot Bonus Programme
• Bonus programme aimed at retaining customers and increasing their loyalty.
Continuing Efforts to Improve the Programme Largest FFP in Russia and Eastern Europe
Partners of the Programme
• Developing programme to increase its attractiveness to members
― Strengthening partnerships - 60 new programme partners added since the start of 2016
― Expanded geography of mile redemptions for travel class upgrades at check-ins.
• Developing IT solutions to enhance convenience of FFP members
― Interactive route map with Aeroflot Bonus mile calculator added to customer dashboard as well as enhanced feedback messaging
― SMS notifications, ability to upgrade service class for bonus miles, purchasing tickets for bonus miles via mobile application, etc.
• IT solutions for targeting and increasing marketing campaigns efficiency
― Big Data and CRM projects launched to develop recommendations for members and develop customized email campaigns
19.1%
Aeroflot Bonus membership (mn) Growth by Segments (1H 2016 y-o-y)
+17.5%
+14.2%
+16.2%
+19.2%
Basic
Silver
Gold
Platinum
13.7% 13.0% 14.3%
Airline Partners Co-brand (Banks) Other Partners (Earning Miles) Other Partners (Spending Miles)
Over 5.5 million members to date, with 143 thousand Elite and Elite+ members (Silver, Gold and Platinum)
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Promoting the Brand
• Aeroflot leverages the full marketing toolkit to engage with its target audiences.
Over 150,000 followers on Instagram
Over 140,000 followers on Facebook
Over 130,000 followers on Twitter
Over 500,000 views on YouTube
Wide range of advertising channels used in Russia and internationally (TV, digital, OOH and press)
One the most valuable transportation brands globally and in Russia according to Brand Finance
Active sponsorship of sport as brand promotion, including official carrier of Manchester United and CSKA football teams
“…Aeroflot has turned things around, rising in
global airline-quality rankings and becoming a
darling for investors.”
Media Engagement Generates Right Kind of Press Smart Advertising and High-Profile Sponsorships
Top-rate social media with large following
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Corporate Sponsorships
• High level of strategically-chosen sponsorship activity aimed at increasing brand loyalty among target audience.
FC Manchester United
(official carrier) Russian Football Union
FC CSKA
(official carrier) Russian Basketball Federation
BC CSKA
(official carrier) Russian Chess Federation
Russian Olympic
Committee Russian Cinema
Russian Paralympic
Committee Theatre festival Golden Mask
RosFARR KVN
Russian Golf Association SPIEF’16
Russian Cycling
Federation Eastern Economic Forum
Volleyball Federation
of Russia
Football-related projects 67.5% Other sports
initiatives 23.0%
Cultural projects
9.5%
Spending on Sponsorship Programmes Key Partners
2015
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Retain and develop high-margin customers
through estimating income levels of each client on the basis of their lifecycle
(Cutomer Lifetime Value module) and acquisition of new high-margin customers
using “look-alike” methodology
Determine customer propensity
to respond to communications/offers across various channels (Customer
Propensity and Price Sensitivity Module), while identifying which
channels play a role in a successful transactions (Channel Efficiency
Module) to enhance effectiveness of communications and increase the share
of sales via Aeroflot’s own channels
Enhance the precision and commercial efficiency
of marketing communications by using information about passengers and
potential clients from various sources (Client 360 module)
Increase sales of tickets and ancillary services by displaying alternative or additional offers on possible destinations/services
based on past flights, correlations and partner data (Service Recommendations Module)
Big Data: The Next Big Thing in Marketing (1/2)
Understand social network activity
to identify customer preferences and communicate with clients based on this
knowledge
• Big Data will allow us to micro-target customers to boost sales, market more effectively and increase loyalty.
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Big Data: The Next Big Thing in Marketing (2/2)
• Big Data has the potential to generate incremental revenue and enhance the Group’s competitive advantage.
Operating systems
ACS
Automated online marketing
Dynamic behavioral segmentation
High yield clients acquisition
Advanced client analytics
Client Lifetime Value growth
Social networks
CRM structured data
Big Data unstructured data
Category
Project Timeline
Big Data Framework
Activities
Testing & Training
July Q2 2016 Q1 2016 2015
Preparation
Concept Development 12/16/2016
Commercial operation of System
August September October November December
Phase 2. Recommendations Service Module Customer Propensity and Price Sensitivity Module, Channel Efficiency Module
Phase 1 - Client 360 Module and Customer Lifetime Value Module
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Best Russian Airline
(2016, 2014, 2013)
4th Star awarded
in 2016
Best Airline
in Eastern Europe
(2016, 2015,
2014,2013 & 2011)
Recognized Service Leadership and NPS
• Aeroflot’s achievements in client services have been recognized by independent industry experts, professional
community and passengers and helped to significantly increase NPS.
Recognition for Outstanding Service and Achievements
Best Russian Airline
2013, 2014, 2015 7-star safety rating
Best European airline
(best business-class
in mid-haul segment)
Best Airline Cuisine
Top-10 Readers’ Choice Best Russian Airline
Results in Consistent Improvements in NPS
Dedication to high level of client service backed by relevant and effective marketing strategy has helped us to increase NPS (Net Promoter Score) for several years in row
― According to estimates, our NPS remained stable in H1 2016
Increase in NPS Index translates into incremental passenger traffic and revenue growth
52%
56% 58%
67% 72%
2011 2012 2013 2014 2015