Aeroflot announces Q4 and 12M 2018 RAS financial results

04 February 2019

Moscow, 4 February 2019 – PJSC Aeroflot (“the Company”, Moscow Exchange ticker: AFLT) today announces its financial results for the fourth quarter and twelve months of 2018 in accordance with Russian Accounting Standards (RAS). RAS results are presented on a non-consolidated basis.

Key results in accordance with RAS, RUB million

Q4 2017Q4 2018ChangeHighlights12M 201712M 2018Change
105,957123,35616.4%Revenue446,649504,69713.0%
(104,313)(136,738)31.1%Cost of sales(400,269)(499,683)24.8%
1,644(13,382)-Gross profit /(loss)46,3815,013(89.2)%
1,508(12,830)-Net profit/(loss)28,4432,796(90.2)%

Comments on Q4 and 12M 2018 RAS financial results

  • In 2018 Aeroflot continued to actively develop its route network and grow traffic volumes. The Company’s operational growth was supported by strict cost control and active network and revenue management. The Company’s optimisation programmes have had a significant positive impact. Given the current economic environment the Company has successfully managed to mitigate unprecedented pressure on its financial results from high fuel prices and exchange-rate movements. Thus, market factors had a significant impact on financial results, including the fourth quarter, during which continued pressure on profits from high fuel prices was accompanied by a continued increase in competition in the sector.
  • Revenue for 12M 2018 was RUB 504,697 million, an increase of 13.0% year-on-year. This was driven by growth of Aeroflot’s operational indicators, as well as changes to key currency rates:
    • in 2018 RPKs increased by 6.7% to 98.0 billion RPKs. Passenger numbers increased by 8.9% to 35.8 million passengers (in Q4, RPKs and passenger numbers grew by 7.9% and 11.6%, respectively);
    • Revenue growth for 2018 was boosted by changes to key currency rates (the euro appreciated against the ruble by 12.2% year-on-year, and the US dollar appreciated against the ruble by 7.5% year-on-year);
    • The Company has been able to generate positive yields (+7.4% in 2018) due to active management of capacity and active sales monitoring and analysis as well as adjustment of fuel surcharges following an increase in fuel prices. However, in Q4 2018, the growth of revenue per available seat-kilometre (RASK) slowed on the back of load factor trends, and stood at 5.7% for the full year of 2018;
    • Revenue growth continued to accelerate in Q4 2018 to 16.4% year-on-year (compared with +11.9% in 9M 2018) due to expansion of operations, the development of the route network in Russia and abroad, and more efficient use of the fleet.
  • Cost of sales in 12M 2018 was RUB 499,683 million, up 24.8% year-on-year. This was due to the growth of the Company and higher traffic volumes (Aeroflot’s capacity grew by 8.4%, while the number of flights rose by 12.3%), as well as the impact of external factors including a significant increase in the cost of jet fuel as well as higher costs for air navigation services, airport charges and ground service costs on the back of an increase in service charges at a number of airports.
    • The biggest impact on costs in 2018 was growth in the cost of aviation fuel, the Company’s largest operating cost line. Optimisation measures to mitigate any further increase in fuel costs included negotiations with fuel suppliers and optimisation of operating processes. Fuel costs rose by RUB 41,749 million (+47.7% year-on-year), mainly driven by 36.6% surge in the cost of jet fuel in rubles year-on-year amid a significant rise in the cost of Brent crude (the average cost per barrel in rubles in 2018 increased by 37.7% year-on-year). Reported non-consolidated RAS results of PJSC Aeroflot reflect the significant impact of jet-fuel prices on the Company’s financial results. The consolidated results are expected to show an even greater impact of the increase in jet-fuel prices, estimated at RUB 48 billion for 2018.
    • Leasing, aircraft, and engine maintenance costs increased due to the expansion of aircraft fleet (accounted for in RAS accounts of PJSC Aeroflot) by 26 aircraft in 2018.
    • Higher staff costs were driven by an increase in salaries and incentives to flight crew to improve the attractiveness of the Company’s employment terms, as well as an increase in the number of flight personnel on the back of the growth of the Company’s business.
    • Cost growth was also driven by an increase in costs for air navigation services, airport charges and ground service costs in the context of an increase in the number of flights completed and higher service costs at a number of airports in Russia.
  • A number of optimisation measures undertaken by management to mitigate external pressures enabled the Company to reduce sales costs in 12M 2018 by 15.2% year-on-year; a significant reduction was achieved in Q2-Q4 2018 (in Q4 2018 sales costs decreased by 36.4% year-on-year). In Q4 administrative costs decreased by 3.2% year-on-year.
  • Growth of the net result from other activities for 12M 2018 was RUB 5,938 million (+16.2%) amid an increase in revenue from planned phase out of aircraft (RUB 5,321 million) and reduction in interest expenses (in 12M 2017 interest payments totalled RUB 801 million; there were no interest expenses in 2018), as well as measures undertaken by PJSC Aeroflot to cut expenses.
  • As a result of the factors listed above the net profit for 12M 2018 was RUB 2,796 million.