Aeroflot Group Consolidated financials (IFRS) 6M2013 · 1.Introduction 2.Market position of the...
Transcript of Aeroflot Group Consolidated financials (IFRS) 6M2013 · 1.Introduction 2.Market position of the...
Aeroflot Group
Consolidated financials (IFRS)
6M2013
Moscow
October 10, 2013
Speakers:
Shamil Kurmashov
Chief Financial Officer
Head of Network and Revenue Management
Giorgio Callegari
Deputy CEO for Strategy and Alliances
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
Aeroflot Group key events
January – September 2013
2
Aeroflot won in 3
nominations of “Wings of
Russia” Awards:
“Airline of the year
– passenger carrier
on domestic routes
in group I”,
“Airline of the year
– passenger carrier
on scheduled
international
routes”,
“Russian airline –
leader of passenger
preferences”
The Company issued
Exchange bonds
series BO-03 with 3-
year maturity period
and 8,3% annual
interest rate.
13 new aircraft were
added to Aeroflot fleet
including seven Airbus
A320, two Airbus A321,
four Boeing 777.
According to World
Airline Awards rating
Aeroflot was
recognized as The
Best Airline in
Eastern Europe
Total dividend payout
for 2012 amounted to
1 292 mln. rub.
(26% of Net Income
according to RAS) or
1,1636 rub. per
share.
Aeroflot confirmed
compliance to IOSA
standards for the fifth
time. The certificate was
extended until 14.10.2015.
According to Airline
Business rating Aeroflot
Group is among Top-5
European and Top-25
Global Airlines by
revenue in 2012
Aeroflot is an official
sponsor of XXVII
Summer Universiade in
Kazan,
Manchester United
football club and
Brooklyn Nets
basketball club.
Aeroflot celebrated 90
years anniversary in
March 2013
Aeroflot phased in first
Full-Flight Simulators for
Airbus А330 and
SSJ-100 aircraft in
Russia.
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
Russian air transportation market
3
Passenger Traffic of Russian Civil Aviation (RCA)
[mln. pax]
Market share of the Group for 6m2013
[% of passenger turnover]
Market share of the Group for 6m2013
[% of passenger traffic]
Source: TCH, Ministry of Transportation of Russia
Source: TCH Source: TCH
• Passenger traffic of RCA in the first 6 months of 2013 amounted to 37,4 mln pax, exceeding the result of
the first six months of 2012 by 17,1%.
• Aeroflot Group Market Share in RCA in terms of passenger traffic amounted to 37,8% in the first 6 months
of 2013.
* Including passenger traffic of integrated companies from 15.11.2011 to 31.12.2011
** Aeroflot forecast, consolidated budget of Aeroflot Group for 2013.
37,2% 37,8%
39,8%
* **
Market position of the Group
in the first 6 months of 2013
4
Passenger traffic [mln.pax.] Passenger turnover [bln.pkm.]
Source: TCH Share in RCA
* АЕА – Association of European Airlines (scheduled flights data)
** AAPA – Association of Asia Pacific Airlines
• Significant increase in operating indicators of Aeroflot Group is connected to Rostec aviation assets
integration and route network optimization.
• The growth pace in operational performance of Aeroflot Group significantly exceeds the dynamics of АЕА
and AAPA growth rates.
Source: TCH, Aeroflot estimates
Growth rates of basic operating indicators
[%, 6m2013 to 6m2012]
* **
37%
15% 11% 11%
5%
39%
22%
9% 8%
5%
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
Route network efficiency of JSC “Aeroflot”
in the first 6 months of 2013
5
• Route network continued to evolve along with higher frequencies and expanding number of destinations in
the first 6 months of 2013.
• Connectivity ratio of Aeroflot own flights in the first 6 months of 2013 increased by 16,6% to 12,07 (in the
first 6 months of 2012 – 10,35).
• Transfer passenger traffic in Company’s route network in the first 6 months of 2013 grew by 26,1%
compared to the results of the first 6 months of 2012 and amounted to 3,7 mln. passengers, 36,4% of total
passenger traffic in the first 6 months of 2013.
• In winter 2013/14 timetable the following new routes are planned to be launched from Moscow:
Karaganda (7 frequencies per week), Ulan-Ude (3 frequencies per week), Chita (four frequencies per
week), Rostov (seven frequencies per week), Tbilisi (seven frequencies per week).
• Lower average charter week frequencies per route in the first 6 months of 2013 were caused by
redirection of certain routes from charter to scheduled frequencies and restructuring of route network.
Average week frequency per route Flights dynamics by region [%]
Routes 6m2012 6m2013 Change
Scheduled 21,5 23,8 11%
Charter 0,4 0,2 -50%
International Scheduled 8,6 9,5 10%
Domestic Scheduled 17,9 19,7 10%
Medium-haul 9,2 10,1 10%
Long-haul 4,5 5 11%
Total 17,5 19,8 13%
Route network –
Summer 2013 timetable
• In Summer 2013 Aeroflot Group operates flights to 212 destinations including subsidiary companies routes
and flights executed under code-share agreements.
• The highest capacity growth rates are registered at the most promising and dynamically developing
domestic market destinations. 6
Capacity growth [ASK]
in Summer 2013 timetable vs. Summer 2012 timetable (March-October)
Capacity growth [ASK] by region
in Summer 2013 timetable vs. Summer 2012 timetable (March-October)
International Domestic International Domestic
Asia Europe Russia America Africa Middle
East
Europe Russia CIS
Summer 2012 timetable Summer 2013 timetable
JSC “Aeroflot” operating indicators
dynamics by region
[%, 6m2013 vs 6m2012]
• Following the approved strategy of strengthening positions on domestic routes and popular tourist
destinations, Aeroflot significantly increased its long-haul transportation capacities.
• Moderate pressure on operating indicators in Africa and Middle East is connected with political instability in
these regions. 7
Fleet of Aeroflot Group
as of 30.06.13
8
Type of aircraft Aeroflot Donavia Rossiya
Airlines
Orenair Vladivostok
Air
SAT Airlines Total
Ilyushin Il-96-300 6 - - - - - 6
Tupolev Tu-154 - - 5 - - - 5
Antonov An-24 - - - - - 2 2
Mil Mi-8 - - - - 3 1 4
Total number of a/c owned 6 - 5 - 3 3 17
Airbus A-319 4 - 9 - - - 13
Airbus A-320 1 - - - - - 1
Airbus A-321 21 - - - - - 21
Airbus A-330 8 - - - - - 8
Boeing 737 - 1 - - - 2 3
Boeing 777 4 - - - - - 4
Antonov An-148 - - 6 - - - 6
Tupolev Tu-204 - - - - 6 - 6
Total number of a/c under finance lease 38 1 15 - 6 2 62
SSJ 100 10 - - - - - 10
Airbus A-319 11 5 7 - - - 23
Airbus A-320 50 - 9 - 6 - 65
Airbus A-330 14 - - - - - 14
Boeing B-737 - 3 - 23 - 1 27
Boeing B-767 5 - 3 - - - 8
Boeing B-777 - - - 3 - - 3
McDonnell Douglas MD-11 3 - - - - - 3
DHC 8 Series 300 - - - - - 4 4
DHC 8 Series 200 - - - - - 2 2
Total number of a/c under operating lease 93 8 19 26 6 7 159
Total number of aircraft 137 9 39 26 15 12 238
• The Group is renewing aircraft fleet, substituting older aircraft with modern fuel-efficient aircraft.
• 67% of the Group's aircraft were under operating lease agreements, 26% – under financial lease.
* As of 30.06.2013 these aircraft are non-operational
** As of 30.06.2013 1 of these aircraft is non-operational
*
**
*
Fuel efficiency
9
Flight Hours
[ths. hrs]
Specific fuel consumption
[gr/tkm]
• During the last four years flight hours of JSC “Aeroflot” increased on average 11% annually. Cumulative flight hours of Aeroflot Group in the first 6 months of 2013 increased by 9,6% compared to the first 6 months of 2012.
• Specific fuel consumption of JSC “Aeroflot” during the last four years decreased on average by 8% annually. At Aeroflot Group level specific fuel consumption in the first 6 months of 2013 decreased by 2,4% compared to 6 months of 2012.
• Fuel efficiency of JSC “Aeroflot” and Aeroflot Group fleet consistently improves on the back of increase in flight hours.
JSC “Aeroflot” Aeroflot Group
CAGR = 11%
CAGR = -8%
+11,4%
+9,6%
-2,4% -1,5%
Order and phase off plan of JSC “Aeroflot”
as at 05.09.2013
Type of aircraft Delivered as
at 05.09.2013 2013 2014 2015 2016
Short-haul
SSJ-100* - - 8 12 -
Medium-haul
A-320 7 8 3 - -
A-321 2 5 - - -
Long-haul
B-777 4 4 6 3 3
B-787 - - - - 2
TOTAL 13 17 17 15 5
10
Type of aircraft Phased off as
at 05.09.2013 2013 2014 2015 2016
Medium-haul
A-319 - 1 3 4 -
A-320 - 4 2 - 4
А-321 - - - - 3
Long-haul
B-767 2 3 4 - -
Ilyushin Il-96 - 3 3 - -
TOTAL 2 11 12 4 7
• In 2013-2016 according to existing contracts (as at 05.09.2013) Aeroflot will increase its fleet by 54 new aircraft.
• 13 new aircraft were added to Aeroflot fleet from 01.01.2013 to 05.09.2013 including seven Airbus A320, two Airbus A321, four Boeing 777; 4 additional aircraft are planned to be delivered by the end of the year including 1 Airbus A320 and 3 Airbus А321.
• At the forthcoming Extraordinary General Meeting of Shareholders (15.10.2013) decisions on operating lease of 50 Boeing 737 aircraft and on rescheduling of the delivery of 22 Airbus A350 aircraft to 2018-2023 period would be considered.
* 10 SSJ-100 aircraft are planned to be transferred to subsidiaries in 2015
• Major operating indicators of the Group exceed prior year figures.
• Higher operating indicators in 2013 were achieved on the basis of organic growth.
Aeroflot Group
operating indicators dynamics
11
Passenger traffic
[ths.pax.]
Seat load factor
[%]
Passenger turnover
[mln.pkm.]
Passenger capacity
[mln.ask.]
* Proforma including results of integrated companies 2011 2011 proforma 2012 2013 *
• In the first 6 months of 2013 JSC “Aeroflot” and Aeroflot Group RASK remained flat, lower yields were
conditioned by higher seat load factor (+1p.p.).
• In the first 6 months of 2013 JSC “Aeroflot” and Aeroflot Group cargo yields increased.
Revenue rates
12
Yield: PAX revenue / RPK
[US cents / pkm.]
RASK: PAX revenue / ASK
[US cents / ask.]
Cargo yield: Cargo revenue / CTK
[US cents / tkm.]
+6,2% +3,8%
-2% -3%
176132
195148
ОАО "Аэрофлот" Группа Аэрофлот
Headcount and labor productivity
13 • Labor productivity of both JSC “Aeroflot” and Aeroflot Group significantly increased.
Headcount 31.12.12 30.06.13 Change
Aeroflot 16 418 17 294 5%
Aeromar 2 938 2 918 -1%
Rossiya airlines 3 493 3 515 1%
ORENAIR 2 366 2 547 8%
Vladivostok Avia 1 519 1 507 -1%
SAT Airlines 773 779 1%
Donavia 1 063 1 070 1%
Aerofirst 717 0
Sherotel 257 249 -3%
Aerofot-Finance 4 4 0%
TOTAL 29 548 29 883 1%
Labor productivity
1 5061 191
1 7271 405
ОАО "Аэрофлот" Группа Аэрофлот
529440
593506
ОАО "Аэрофлот" Группа Аэрофлот
+15% +18% +12%
+15% +11% +12%
Passenger turnover/Average
Headcount
[mln.pkm/units]
Passenger traffic/Average
headcount
[ths.pers./units]
Revenue/Average headcount
[$ ths./units]
JSC “Aeroflot” Aeroflot Group JSC “Aeroflot” Aeroflot Group JSC “Aeroflot” Aeroflot Group
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
• Revenue of Aeroflot Group for the first 6 months of 2013 increased by 14% compared to the first 6 months
of 2012.
• Growth rates of Aeroflot Group revenue outpaced growth rates of operating costs resulting in improvement
of operating and EBITDA margins.
• Lower operating costs growth rates originate from synergy effects from maintenance and repair operations
and general and administrative functions centralization as well as favorable jet fuel market environment .
• Change in net income of Aeroflot Group in the first 6 months of 2013 in comparison with the corresponding
period of 2012 was caused by negative exchange rate differences particularly for finance lease obligations
nominated in US dollars.
Key financials
14
Index unit Aeroflot Group
6m2012 6m2013 change
Revenue $ mln. 3 614 4 133 14%
Operating costs $ mln. 3 516 3 966 13%
EBITDAR* $ mln. 516 644 25%
EBITDA** $ mln. 247 352 43%
Operating income $ mln. 98 167 70%
Net income $ mln. 7 2 -71%
EBITDAR margin % 14,3% 15,6% 1,3p.p.
EBITDA margin % 6,8% 8,5% 1,7p.p.
* EBITDAR = EBITDA + Operating lease expenses
** EBITDA = Operating income + Amortization + Customs duties
Group’s revenue factorial analysis
15
The Group’s revenue
[$ mln]
Traffic
Volumes
Air carriage
tariff Others
Σ 3 614 Σ 4 133 6m2012 6m2013
Other income +3,5%
Total revenue +14,4%
Cargo traffic -0,6%
Passenger traffic +16,7%
The substantial increase in Aeroflot Group’s revenue was caused primarily by the growing volume of carriage
due to optimization of route network.
17
Operating income of the main
companies of the Group
16
Operating income / loss of the subsidiaries
[$ mln]
6m2012 6m2013
• JSC “Donavia”, OJSC “Rossiya airlines” and JSC “Vladivostok Air” started delivering positive operating
profitability in the first 6 months of 2013.
• Aeromar and Sherotel continue to deliver positive profitability.
• JSC “ORENAIR” and JSC “SAT Airlines” registered operating losses in the first 6 months of 2013.
Operating loss of JSC “ORENAIR” was caused by redirection of certain routes from charter to scheduled
frequencies and restructuring of route network.
Donavia Rossiya
airlines
ORENAIR Vladivostok
Air
SAT Airlines Aeromar Sherotel
Structure of the Group’s net income
17
Elements of Aeroflot Group’s net income
[$ mln]
• The total loss of OJSC “Rossiya airlines”, JSC ”Vladivostok Air”, JSC “ORENAIR” and JSC “SAT Airlines”
in the first 6 months of 2013 amounted to $45 mln. which is 58% less than in the corresponding period of
2012 ($107 mln.).
• Integrated companies continue execution of centralization and cost-cutting procedures and activities.
• Donavia, Aeromar and Sherotel remain profitable.
∑= -45 mln.
** Due to the fact that Vladavia repaid it’s obligations to JSC “Aeroflot”, previously created bad debt provision was released in JSC “Aeroflot” financials, this operation is
eliminated on the Group level.
*
(8)
2
* Total amount of net assets and goodwill of Aerofirst disposed at the Group level is $7 mln., income from disposal of Aerofirst was recognized in JSC “Aeroflot” financials
in the amount of $18 mln. (sale revenue of $40 mln. – cost of investments $22 mln.). Total financial result of the deal is $11 mln.
Factorial analysis of the Group’s net
income
18
Breakdown of the Group’s net income
[$ mln]
• Substantial increase in revenue of Aeroflot Group was caused by higher traffic volumes.
• Growth rates of Aeroflot Group revenue outpaced growth rates of operating costs resulting in
improvement of operating and EBITDA margins.
• Pressure on net income of Aeroflot Group in the first 6 months of 2013 was caused by negative exchange
rate differences, which amounted to $112 mln.
∑= 518 mln
∑= -449 mln
^
^ Including passenger service costs growth by $43 mln., aircraft and traffic service growth by $102 mln., sales and marketing cost growth by $26 mln.
* Disposal of Aerofirst
** Net result for deals with derivative securities, including expiration of the SWAP deal with CITI and Alfa bank in the amount of $24 mln.
(112)
2
• Increase of Aeroflot Group total debt by 6% at the end of June 2013 comparing to the end of 2012 was
mainly caused by delivery of 4 Boeing 777 aircraft for JSC “Aeroflot” operations.
• Total debt expansion was offset by a substantial increase in cash positions, which resulted in overall net
debt decrease by 3% at the end of June 2013 comparing to the end of 2012.
• Total debt/EBITDA ratio of Aeroflot Group decreased from 3,9 to 3,6.
• Net debt/EBITDA ratio of the Group substantially decreased from 3,2 to 2,7.
TOTAL DEBT / EBITDA* [x]
Debt leverage of Aeroflot Group
19
NET DEBT / EBITDA* [x]
* EBITDA = EBIT + depreciation + custom duties depreciation
For 6 and 9 months indicators EBITDA is annualized..
Index units Aeroflot Group
31.12.12 30.06.13 change Borrowings $ mln 706 417 -41% Finance lease liabilities $ mln 1 882 2 335 24% Pension liabilities $ mln 15 22 47% Customs duties $ mln 19 12 -37% Total debt $ mln 2 621 2 787 6% Cash and short term investments $ mln 501 717 43%
Net Debt $ mln 2 121 2 069 -3%
6m2012
Aeroflot Group in comparison
with foreign competitors
20
Total Debt* / EBITDA** [x] Operating margin[%]
6m2012 6m2013 6m2013 Average for peers = 5,3
5,3
• Operating indicators of the Group rose at substantially higher growth rates than those of most of it’s
competitors.
• Moreover Aeroflot Group consistently demonstrates one of the highest operating margins and the Group’s
debt leverage is at more comfortable levels than the average.
Index ASK, bn RPK, bn SLF, % Revenue , $ mln EBITDA, $ mln
6m2012 6m2013 change 6m2012 6m2013 change 6m2012 6m2013 change 6m2012 6m2013 change 6m2012 6m2013 change
Aeroflot Group 43,8 51,5 18% 32,7 39,3 20% 75% 76% 1 p.p. 3 614 4 133 14% 248 352 43%
Peers
Air Canada 53,0 53,3 1% 43,2 43,7 1% 81% 82% 1 p.p. 5 916 5 917 0% 314 361 15%
LATAM Airlines^ 64,9 65,8 1% 50,1 52,2 4% 77% 79% 2 p.p. 6 413 6 508 1% 437 695 59%
Turkish Airlines 44,6 54,1 21% 33,5 42,7 27% 75% 79% 4 p.p. 3 708 4 538 22% 283 517 83%
China Eastern Airlines 65,2 72,9 12% 51,5 57,9 12% 79% 79% 0 p.p. 6 365 6 725 6% 1 435 1 300 -9%
Qantas Airways 69,2 68,5 -1% 55,0 53,8 -2% 79% 79% 0 p.p. 6 628 8 609 30% 852 919 8%
Source: Bloomberg, company reports * Total Debt = Borrowings + Financial lease liabilities
** EBITDA = Operating income + DD&A
^ 2012 year – pro forma accounting for joint financial result of LAN Airlines and TAM Airlines
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
OJSC “Rossiya Airlines”:
Execution of functional strategies
Commercial
functions
Business model Regional carrier based at Pulkovo
• Optimization of network and schedule
• Optimized schedule on key Moscow-St Petersburg direction, no
more competition with Aeroflot
• Number of routes reduced from 120 to about 70 (dependent on the
season) by dropping unprofitable flights
• Optimized (closed) representative offices, functions are merged into
Aeroflot offices (Abroad and RF)
Production functions • Lower number of aircraft types (phase out of Boeing 737)
• Significantly improved operating results of An-148 and other
aircraft types
• Optimized costs of airworthiness maintenance
• Optimized staff structure
• General cost optimization
Financial functions
Key achievements Actual tasks
• Function’s hand over to Aeroflot:
• Switching from Amadeus
to Sabre
• Network planning and
revenue management
transfer
• Decreasing the number of routes
to 59
Working through possible options
regarding cancellation / change /
significant improvement of existing
leasing conditions:
• 6 х Antonov An-148 (IFC)
• 9 х Airbus А319 (VTB-leasing)
• 3 х Boeing В767 (ILFC)
21
Retention of market share in St.
Petersburg (at least 50%)
Reaching break-even point is possible only on condition of complex fleet and debt restructuring.
Integration is to be completed by 2014
JSC “Donavia”:
Execution of functional strategies
Regional carrier based at Rostov
• Completed adoption of unified fiscal policy, tax accounting rules
and accounting for sales
• Organization of ground handling (of passengers and aircraft) in
Mineralnye Vody
• Development of a pilot project to centralize the function of MRO,
contraction functions merger, approval of plans and schedules of
MRO, centralizing pool of spare parts, engineering, quality control
• Completed complex fleet restructuring
• Adoption of the standard product "region“
• Transfer of all commercial functions to Aeroflot
• Approval of a new code-share agreement
• Commercial unit was liquidated
Organization of permanent base for 3
Airbus A319 aircraft at Mineralnye
Vody
• Procurement centralization
• Phase off of Boeing 737 family aircraft
• Forming the fleet on the base of Airbus
A319
Commercial
functions
Business model
Production functions
Financial functions
Donavia was successfully integrated in the Group structure.
Key achievements Actual tasks
22
JSC “Avrora” (Far Eastern Company):
Execution of functional strategies
Commercial
functions
Business model
Production functions
Financial functions • Completed adoption of unified fiscal policy, tax accounting
rules
• Completed integration of ground handling of Aeroflot flights in
Vladivostok and Khabarovsk
• Vladavia’s Yak-40, Mi-8, А-330 phased-out
• Measures to centralize MRO development functions, centralize
pool of spare parts, engineering, quality control are executed
• Phase in of Airbus A319 aircraft;
• Further fleet optimization considering
economic efficiency;
• Commercial functions of Vladivostok Avia transferred to Aeroflot;
• Vladivostok Avia sales organized via Aeroflot representative /
sales offices;
• Route network of Vladivostok Avia was optimized;
• 100% code-sharing agreement was concluded and is currently in
force;
• Fuel procurement was centralized;
• Leasing contracts on aircraft were revised.
• Aeroflot Group development strategy execution
• Execution of plan of measures on integration of SAT Airlines and Vladivostok Avia
• Receipt of government subsidies for
interregional, regional and local
carriages
• Merger of Vladavia and SAT networks
• Transition to a unified schedule
• Centralization of main operations
control at Aeroflot / management of
regional route network at local level
Execution of Aeroflot plans on the Far Eastern Company creation is possible on condition of
government subsidies receipt and fleet restructuring.
Key achievements Actual tasks
23
Integration is successfully completed, it is necessary to mitigate the risk of dependence on a
single customer.
• Extension of long-haul fleet
JSC “ORENAIR”:
Execution of functional strategies
Commercial and
production
functions
Business model Touristic carriages from Russian cities from bases in
Turkey/Egypt/Thailand
• Centralizing of all charter programs of JSC “Donavia”
and JSC “Vladivostok Air” in Southern and Far
Eastern Federal Districts
• Ongoing transfer of charter flights program by
Rossiya Airlines to/from St Petersburg
• Efficiency of operating and financial indicators
Mitigating the risk of dependence on a single
customer
Financial functions Completed adoption of unified fiscal policy, tax
accounting rules
Key achievements Actual tasks
24
R: 182
G: 196
B: 204
R: 135
G: 157
B: 179
R: 59
G: 100
B: 135
Цвета заливки графиков и фигур
R: 22
G: 44
B: 66
R: 178
G: 178
B: 178
Цвет контура
R: 0
G: 176
B: 80
R: 0
G: 112
B: 192
R: 255
G: 255
B: 255
R: 0
G: 0
B: 0
R: 255
G: 0
B: 0
R: 1
G: 40
B: 120
R: 0
G: 128
B: 0
Цвет текста
Minimizing risks that might arise due to
possible development of new low-cost
carrier on Russian market
Aeroflot is developing new low cost carrier with consideration of previous market practices.
New carrier will perform its first flight next year.
Low cost carrier development
25
Wining market share from
competitors, by providing a more
affordable alternative for the customers,
with out harming Aeroflot
Penetrating into new market segment,
due to focusing on price-sensitive
passengers
Protective
strategy (minimizing risk of
losing market)
Strengthening
market
position (Increasing market share)
Proactive development to ensure
readiness to compete with international
low-cost carriers
1 2
4 3
Aeroflot is pursuing following goals with low-cost carrier development:
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
Conclusions
26
• In the first 6 months of 2013 the main operating indicators of Aeroflot Group increased
compared to the corresponding period of previous year.
• Revenue of Aeroflot Group’s increased by 14% in the first six months of 2013, outpacing
growth of operating costs which resulted in improvement of operating and EBITDA margins.
• Lower operating costs growth rates originate from synergy effects from maintenance and
repair operations and general and administrative functions centralization as well as favorable
jet fuel market environment .
• Change in net income of Aeroflot Group in the first 6 months of 2013 in comparison with the
corresponding period of 2012 was caused by negative exchange rate differences.
• Total debt/EBITDA ratio of Aeroflot Group decreased from 3,9 to 3,6, Net debt/EBITDA ratio
of the Group substantially decreased from 3,2 to 2,7.
Table of contents
1.Introduction
2.Market position of the Group
3.Operating highlights
4.Financial results
5.Integration process status
6.Conclusions
7.Appendix
Amid increased market volatility on the back of unfolding European
crisis Aeroflot follows a prudent risk management policy and hedges
its exposure to currency volatility (EUR weakening), higher fuel
prices and higher interest rates (LIBOR linked finance lease
payments).
Aeroflot entered a number of transactions, covering 53% of 2013F
open EUR position:
– According to 3-year transaction terms on EUR/RUB, Aeroflot
receives monthly compensation in case EUR exchange rate
moves lower than the level comfortable for the Company, but
Aeroflot has to pay compensation to the counterparties in case
EUR strengthens at the expiration of the contract. Possible losses
are compensated by higher converted revenue of the Company.
– According to 1-year transactions terms on EUR/USD, Aeroflot
receives monthly compensation in case lower EUR exchange rate,
in the meantime possible losses connected to stronger EUR
exchange rate are compensated by higher converted revenue of
the Company.
– Potential losses on all the transactions are limited.
In autumn 2012 Aeroflot entered a number of transactions in order to
hedge fuel price increase for the period of 3 years. In case oil prices
increase the Company receives monthly compensation, in the
meantime Aeroflot will have to pay compensation to the banks in case
of lower oil prices only at the expiration of the contract. Such losses
are compensated by lower fuel costs for the Company. Currently c19%
of annual consumption (2013F) of the Company is hedged.
Currently c30% of LIBOR linked finance lease payments are
hedged by means of converting floating rate to fixed rate.
Source: Aeroflot data, Bloomberg
Market risk management: currency,
interest rate risk, fuel price hedging
Mechanism of the long-term currency risk hedging
transaction
Launch
A
B
D
C
Aeroflot receives monthly
compensation during 3-year term
Aeroflot pays at
expiration
3 years
EUR dynamics in 2011–2013
The strategy is aimed to mitigate the high level of market
volatility of EUR
Aeroflot hedged 53% of open position in EUR (2013F), 19% of 2013F fuel consumption and 30% of LIBOR
linked finance lease payments
Aug-10 Feb-11 Sep-11 Apr-12 Oct-12 May-13
27
Hedged
revenue structure, 2012
RUB 48%
Source: Aeroflot data, Bloomberg
Currency risk management at
JSC “Aeroflot”
Costs structure, 2013F
Others
3%
RUB
40%
EUR
6%
Revenue structure, 2013F
USD.
20%
EUR
48%
RUB
32%
USD.
51%
Hedged
revenue structure, 2013F
USD 38%
EUR 26%
RUB 36%
RUB
27%
USD and
oth. 23%
EUR
50% EUR
8%
RUB
62%
USD and
oth. 30%
Costs structure, 2012 Revenue structure, 2012
Effective currency risk hedging allowed to lower the effective share of EUR in revenue structure converging it
with costs structure 28
EUR
29%
USD and
oth. 23%
Key operating indicators of
Aeroflot Group airlines
* According to IFRS
29
Indicators Period Rossiya
airlines ORENAIR
Vladivostok
Air
SAT
Airlines Donavia Total
Passenger traffic (th. pax)
Actual 6m2013 1 930 1 430 546 119 576 4 601
Actual 6m2012 1 858 1 164 540 118 466 4 146
Change % 4% 23% 1% 1% 24% 11%
Passenger turnover (mln.pkm)
Actual 6m2013 3 922 5 360 1 263 112 840 11 497
Actual 6m2012 3 774 3 881 1 611 113 685 10 064
Change % 4% 38% -22% -1% 23% 14%
Seat load factor, %
Actual 6m2013 73,0% 80,5% 64,9% 56,5% 64,5%
Actual 6m2012 73,5% 83,1% 63,8% 58,3% 64,4%
Change % -0,5 п.п. -2,6 п.п. 1,1 п.п. -1,8 п.п. 0,1 п.п.
Flight hours, hrs
Actual 6m2013 50 494 39 867 17 884 4 080 13 217 125 542
Actual 6m2012 49 992 31 800 19 358 4 535 12 482 118 167
Change % 1% 25% -8% -10% 6% 6%
Revenue*, $ mln. Actual 6m2013 456 310 192 45 138 1 141
Net profit/loss*, $ mln. Actual 6m2013 -26 -17 -1 -2 15 -31
Operating indicators
indicators units JSC “Aeroflot” Aeroflot Group
6m2012 6m2013 change 6m2012 6m2013 change
Passenger turnover mln. pkm 22 619 27 775 23% 32 682 39 272 20%
International routes 15 564 19 064 22% 21 736 26 397 21%
Domestic routes 7 055 8 711 23% 10 946 12 875 18%
Passenger capacity mln. ask 30 235 36 035 19% 43 820 51 508 18%
International routes 21 182 25 094 18% 28 835 34 372 19%
Domestic routes 9 053 10 941 21% 14 985 17 136 14%
Tonne-kilometers mln. tkm 2 567 3 013 17% 3 517 4 086 16%
International routes 1 839 2 115 15% 2 400 2 780 16%
Domestic routes 728 898 23% 1 117 1 306 17%
Passenger traffic th. pax 7 938 9 542 20% 12 083 14 142 17%
International routes 4 731 5 666 20% 6 851 7 957 16%
Domestic routes 3 207 3 876 21% 5 232 6 185 18%
Cargo and mail carried tonnes 91 247 91 449 0,2% 105 780 105 338 -0,4%
International routes 71 146 66 583 -6% 73 620 68 552 -7%
Domestic routes 20 101 24 866 24% 32 160 36 786 14%
Seat load factor % 75% 77% 2% 75% 76% +1,7 п.п.
International routes 73% 76% 3% 75% 77% +1,4 п.п.
Domestic routes 78% 80% 2% 73% 75% +2,1 п.п.
Flight hours hours 218 557 243 526 11% 336 724 369 068 10%
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