Moscow, 1 March 2018 – Aeroflot Group (“the Group”, Moscow Exchange ticker: AFLT) today publishes its audited financial statements in accordance with International Financial Reporting Standards for the year ended 31 December 2017.
Shamil Kurmashov, PJSC Aeroflot Deputy CEO for Commerce and Finance, commented:
“2017 was another landmark year for Aeroflot, as the Group’s airlines carried 50.1 million passengers, 15.4% more than the previous year. We took full advantage of the opportunities offered by the growing passenger transportation market in both the scheduled and charter segments. The Group continued its sustainable growth on domestic and international routes. The Group utilised its significant capacity additions – up 14.2% year-on-year – efficiently, resulting in an increased load factor of 82.8%, 1.4 p.p. higher than in 2016. This is a particularly notable achievement given our already high load factor, which has now increased for three years in a row, adding a total of 5.1 p.p.
“The financial results for the year reflect a normalisation of profitability and the effect of a number of market factors that had already had an impact on our 9M 2017 results. Yields came under pressure from a changing competitive landscape and international carriers adding capacity back into the Russian market, while the re-opening of the Turkish market led to structural changes in demand. On the other hand, higher oil prices and the change in ruble and currency correlation pattern rate put pressure on fuel costs, a key expense item accounting for 24.9% of operating costs. The key tools available to help us manage the impact of these macro factors are an efficient system for purchasing fuel on favourable conditions, as well as continued incremental improvements in fuel efficiency. In 2017 specific consumption was 22.8 g per seat-kilometre, a reduction of 0.6% year-on-year.
“The fourth quarter saw the continuation of some positive trends that first began to emerge in the third quarter. In Q4 2017 we were able to achieve an increase in the pace of revenue growth to 11.9%, compared to 7.5% for the year, as well as a slow-down in cost growth. EBITDA for the quarter reached RUB 2.7 billion, or 3.2 times more than the final quarter of 2016. The key factor here was increased yields, which also showed an improved trend during the period (year-on-year growth of 1% in the fourth quarter compared to a year-on-year decrease of more than 5% in 9M 2017).
“Given the impact of FX swings and higher fuel prices – as well as the lack of the material currency differences on returns of pre-payments for aircraft that affected the 2016 results – the financial result for 2017 was lower, reflecting the normalisation of profitability. In turn, the significant reduction of the debt burden thanks to pre-term repayment of credit lines during the year, as well as economies on other non-operational costs, supported net profit, which came in at RUB 23.1 billion.”
| 2017 | 2016 | Change | |
| Passengers carried, thousand PAX | 50,129 | 43,440 | 15.4% |
| - international | 22,550 | 18,289 | 23.3% |
| - domestic | 27,579 | 25,151 | 9.7% |
| Revenue Passenger Kilometres, million | 130,222 | 112,110 | 16.2% |
| - international | 77,034 | 63,433 | 21.4% |
| - domestic | 53,188 | 48,678 | 9.3% |
| Available Seat Kilometres, million | 157,211 | 137,654 | 14.2% |
| - international | 93,429 | 79,334 | 17.8% |
| - domestic | 63,781 | 58,320 | 9.4% |
| Passenger load factor, % | 82.8% | 81.4% | 1.4 p.p. |
| - international | 82.5% | 80.0% | 2.5 p.p. |
| - domestic | 83.4% | 83.5% | (0.1 p.p.) |
In 2017 Aeroflot Group carried 50.1 million passengers, up 15.4% year-on-year.
| RUB million, unless stated otherwise | 2017 | 2016 | Change |
| Revenue | 532,934 | 495,880 | 7.5% |
| EBITDAR[1] | 121,808 | 137,567 | (11.5%) |
| EBITDAR margin | 22.9% | 27.7% | (4.8 p.p.) |
| EBITDA1 | 56,015 | 78,004 | (28.2%) |
| EBITDA margin | 10.5% | 15.7% | (5.2 p.p.) |
| Operating profit | 40,411 | 63,254 | (36.1%) |
| Operating profit margin | 7.6% | 12.8% | (5.2 p.p.) |
| Profit for the period | 23,060 | 38,826 | (40.6%) |
| Net profit margin | 4.3% | 7.8% | (3.5 p.p.) |
| RUB million, unless stated otherwise | 2017 | 2016 | Change |
| Passenger traffic revenue | 458,390 | 421,377 | 8.8% |
| - scheduled passenger flights | 427,529 | 403,760 | 5.9% |
| - charter passenger flights | 30,861 | 17,617 | 75.2% |
| Cargo flight revenue | 16,526 | 12,589 | 31.3% |
| Other revenue | 58,018 | 61,914 | (6.3%) |
| Total revenue | 532,934 | 495,880 | 7.5% |
In 2017, Aeroflot Group’s revenue increased by 7.5% year-on-year to RUB 532,934 million.
Revenue from scheduled passenger flights increased by 5.9% year-on-year to RUB 427,529 million, driven by an increase in passenger traffic. Revenue growth was affected by a decrease in yields, primarily on international routes, due to the strengthening of the ruble and the consequent effect of this on FX-denominated revenue.
Revenue from charter flights increased by 75.2% to RUB 30,861 million, due among other factors to the growth of Rossiya’s charter programme.
Cargo revenue rose by 31.3% year-on-year to RUB 16,526 million as the Group added new wide-body aircraft to its fleet and cargo and mail volumes grew by 32.8%.
Other revenue decreased by 6.3% year-on-year to RUB 58,018 million, due mainly to a decrease in the ruble equivalent of FX-denominated revenues from airline agreements as a consequence of changes in the exchange rate.
| RUB million, unless stated otherwise | 2017 | 2016 | Change |
| Aircraft servicing and passenger services | 96,418 | 87,227 | 10.5% |
| Staff costs | 82,801 | 64,682 | 28.0% |
| Operating lease expenses | 65,793 | 59,563 | 10.5% |
| Aircraft maintenance | 36,433 | 38,236 | (4.7%) |
| Sales and marketing, administration and general expenses | 36,139 | 30,294 | 19.3% |
| Depreciation, amortisation and customs duties | 15,604 | 14,750 | 5.8% |
| Other net expenses | 36,650 | 36,292 | 1.0% |
| Operating costs less aircraft fuel | 369,838 | 331,044 | 11.7% |
| Aircraft fuel | 122,685 | 101,582 | 20.8% |
| Total operating costs | 492,523 | 432,626 | 13.8% |
In 2017, aircraft fuel costs increased by 20.8% year-on-year to RUB 122,685 million. This was due to an increase in the average price of aircraft fuel in rubles amid changes in the price of oil and exchange rates, as well as an increase in flight numbers and flying time.
The strengthening of the ruble mitigated the increase in expenses due to the growth of the business. Excluding fuel costs, operating expenses increased by 11.7% year-on-year to RUB 369,838 million.
Expenses related to aircraft servicing and passenger service amounted to RUB 96,418 million, a 10.5% increase year-on-year, due primarily to the growth of passenger traffic and increased airport taxes. This item was also impacted by new initiatives aimed at boosting service quality.
Staff costs rose 28.0% year-on-year and amounted to RUB 82,801 million, as a result of salary indexation in accordance with the collective bargaining agreement, an increase in the number of staff to support operational growth, growth of the variable component of salaries linked to the achievement of corporate KPIs, and an increase in unused vacation accrual, as well as payment of bonuses to pilots.
Operating lease expenses rose to RUB 65,793 million, a 10.5% increase year-on-year, due to expansion of the fleet (net increase of 42 aircraft, or 17.7%, on operating leases compared with 31 December 2016), as well as an increase in the average six-month LIBOR rate in 2017 compared to 2016.
Aircraft maintenance costs fell by 4.7% year-on-year to RUB 36,433 million. Aircraft maintenance costs were significantly impacted by the strengthening of the ruble, аs well as by ongoing development of A-Tekhnics, our maintenance subsidiary, resulting in increasing volumes of in-house maintenance and implications for cost allocation by nature.
Selling, general and administrative expenses (SG&A) grew by 19.3% year-on-year to RUB 36,139 million, due to increased investment in marketing campaigns, in particular promoting Aeroflot in key international markets. This programme is delivering notable results, as Aeroflot carried 4.4 million international transit passengers in 2017, a 18.6% increase year-on-year.
Amortisation and customs tariffs increased by 5.8% year-on-year to RUB 15,604 million, due to the introduction of IT equipment during the year.
Other expenses increased by 1.0% year-on-year to RUB 36,650 million.
As a result of the impact of these factors, EBITDAR totalled RUB 121,808 million, and the EBITDAR margin was 22.9%. EBITDA totalled RUB 56,015 million, and the EBITDA margin was 10.5%.
| RUB million, unless stated otherwise | 2017 | 2016 | Change |
| Operating profit | 40,411 | 63,254 | (36.1%) |
| Loss from sale and impairment of investments | (144) | (2,935) | (95.1%) |
| Finance income | 7,127 | 19,802 | (64.0%) |
| Finance costs | (8,225) | (9,443) | (12.9%) |
| Realised hedging result | (5,613) | (12,310) | (54.4%) |
| Share of results of associates | 170 | 12 | - |
| Result from disposal of companies | - | (5,099) | - |
| Profit before tax | 33,726 | 53,281 | (36.7%) |
| Income tax | (10,666) | (14,455) | (26.2%) |
| Profit for the period | 23,060 | 38,826 | (40.6%) |
Finance income decreased by 64.0% year-on-year to RUB 7,127 million, mainly due to lower earnings from exchange-rate differences.
Finance costs declined by 12.9% year-on-year to RUB 8,225 million as debt levels fell, leading to a reduction in the cost of debt servicing.
The realized loss from hedging of RUB 5,613 million was attributable both to settlements under derivative instruments recognised in equity and to a realised result related to hedging of USD-denominated revenue through USD-denominated lease obligations.
Aeroflot Group’s net profit for 2017 amounted to RUB 23,060 million.
| RUB million, unless stated otherwise | 30.12.2017 | 31.12.2016 | Change |
| Loans and borrowings | 3,181 | 20,367 | (84.4%) |
| Finance lease liabilities | 100,689 | 122,736 | (18.0%) |
| Pension liabilities | 922 | 805 | 14.5% |
| Total debt | 104,792 | 143,908 | (27.2%) |
| Cash and short-term investments | 54,909 | 37,795 | 45.3% |
| Net debt | 49,883 | 106,113 | (53.0%) |
| Net debt / EBITDA | 0.9x | 1.4х | - |
Total debt as of 31 December 2017 decreased by 27.2% compared to 31 December 2016, to RUB 104,792 million. The reduction was due to repayment of loans and borrowings both as they came due and ahead of schedule, as well as to adjustments to the valuation of financial leases due to changes in the RUB-USD exchange rate as of 31 December 2017 compared to 31 December 2016. Despite significant repayments, cash and short-term investments increased by more than 45.3% versus 31 December 2016 and totalled RUB 54,909 million.
As of 31 December 2017, undrawn lines available to Aeroflot Group from major Russian and international banks amounted to RUB 103.2 billion.
[1] EBITDAR = EBITDA + operating lease expenses. EBITDA = operating profit + depreciation & amortisation + customs duties.
