Moscow, 4 March 2019 – Aeroflot Group (“the Group”, Moscow Exchange ticker: AFLT) today publishes its consolidated financial statements for the three months (4Q) and full year (FY) ending 31 December 2018, in accordance with International Financial Reporting Standards.
| RUB million, unless stated otherwise | 4Q 2018 | 4Q 2017 | Change | 12M 2018 | 12M 2017 | Change |
| Revenue | 145,225 | 128,161 | 13.3% | 611,570 | 532,934 | 14.8% |
| EBITDAR | 11,522 | 20,792 | (44.6%) | 122,479 | 121,808 | 0.6% |
| EBITDAR margin | 7.9% | 16.2% | (8.3) p.p. | 20.0% | 22.9% | (2.9) p.p. |
| EBITDA | (13,591) | 2,709 | - | 33,598 | 56,015 | (40.0%) |
| EBITDA margin | - | 2.1% | - | 5.5% | 10.5% | (5.0) p.p. |
| (Loss) / profit for the period | (16,777) | (4,089) | - | 5,713 | 23,060 | (75.2%) |
Andrey Chikhanchin, PJSC Aeroflot Deputy CEO for Commerce and Finance, said:
“In 2018 Aeroflot Group carried 55.7 million passengers, an 11.1% increase year-on-year. Growth of operational metrics resulting from the expansion of our route network and additions to the fleet were accompanied by significant developments in the Group’s strategy. Aeroflot, our flagship airline, moved domestic flights to a new, modern terminal at Sheremetyevo airport, leading to an increase in service quality on the ground. Rossiya moved its scheduled flights from Vnukovo to Sheremetyevo, leading to improved transit connectivity with Aeroflot’s core network. Pobeda significantly increased growth rates, expanding the availability of its low-cost product offering. Finally, another important landmark was the updating of the Group’s long-term targets for the next five years.
“The most significant factor affecting the Group’s financial results for 2018 was the unprecedentedly fast increase in the average cost of jet fuel, as well as depreciation of the ruble. Across the Group, jet fuel prices increased by 36%, which at the Group’s consumption volumes led to additional cost of RUB 48 billion. The depreciation of the ruble created additional pressure on the financial results, given that almost half of the Company’s costs are FX-denominated.
“In this situation, a special optimisation programme was launched in addition to existing measures to boost operational efficiency and reduce costs. The programme focused on active capacity and revenue management in addition to direct cost reduction, and has already delivered results: excluding fuel, CASK for the full year increased by just 0.8%, despite increasing currency pressures on FX-denominated cost lines. We were thus able to limit increases in total unit costs, including fuel, to 9.2%. In a climate in which domestic consumers are being conservative with their travel spending, we were able to generate RASK growth of 4.9% while maintaining load factor levels.
“High fuel prices and excess capacity in the market persisted during the low season in Q4. The correction in oil prices was reflected in jet fuel prices only in December, but had a limited effect, while average jet fuel prices remained above the levels of the previous year. Currency pressures on operating costs in Q4 did not weaken, but rather strengthened. These factors explain the increased loss for the final quarter of the year.
“However, despite the record increase in the price of jet fuel and the depreciation of the ruble, thanks to its extensive optimisation programme the Group was able to record a profit for the year of RUB 5,713 million.”
| 4Q 2018 | 4Q 2017 | Change | 12M 2018 | 12M 2017 | Change | |
| Passengers carried, thousand PAX | 13,462 | 11,789 | 14.2% | 55,710 | 50,129 | 11.1% |
| - international | 5,978 | 5,329 | 12.2% | 24,737 | 22,550 | 9.7% |
| - domestic | 7,483 | 6,460 | 15.8% | 30,973 | 27,579 | 12.3% |
| Revenue Passenger Kilometres, million | 34,723 | 30,841 | 12.6% | 143,151 | 130,222 | 9.9% |
| - international | 20,524 | 18,627 | 10.2% | 83,249 | 77,034 | 8.1% |
| - domestic | 14,199 | 12,214 | 16.3% | 59,901 | 53,188 | 12.6% |
| Available Seat Kilometres, million | 43,682 | 38,457 | 13.6% | 173,075 | 157,211 | 10.1% |
| - international | 26,663 | 23,610 | 12.9% | 102,843 | 93,429 | 10.1% |
| - domestic | 17,019 | 14,847 | 14.6% | 70,231 | 63,781 | 10.1% |
| Passenger load factor, % | 79.5% | 80.2% | (0.7) p.p. | 82.7% | 82.8% | (0.1) p.p. |
| - international | 77.0% | 78.9% | (1.9) p.p. | 80.9% | 82.5% | (1.5) p.p. |
| - domestic | 83.4% | 82.3% | 1.2 p.p. | 85.3% | 83.4% | 1.9 p.p. |
In 2018, Aeroflot Group carried 55.7 million passengers, up 11.1% year-on-year.
| RUB million, unless stated otherwise | 4Q 2018 | 4Q 2017 | Change | 12M 2018 | 12M 2017 | Change |
| Passenger traffic revenue | 124,318 | 107,888 | 15.2% | 534,292 | 458,390 | 16.6% |
| - scheduled passenger flights | 117,046 | 99,803 | 17.3% | 496,454 | 427,529 | 16.1% |
| - charter passenger flights | 7,272 | 8,085 | (10.1%) | 37,838 | 30,861 | 22.6% |
| Cargo flight revenue | 6,061 | 5,226 | 16.0% | 18,900 | 16,526 | 14.4% |
| Other revenue | 14,846 | 15,047 | (1.3%) | 58,378 | 58,018 | 0.6% |
| Total revenue | 145,225 | 128,161 | 13.3% | 611,570 | 532,934 | 14.8% |
In 2018, Aeroflot Group’s revenue increased by 14.8% year-on-year to RUB 611,570 million.
Revenue from scheduled passenger flights increased by 16.1% year-on-year to RUB 496,454 million, driven by an increase in passenger traffic. Revenue growth was affected by an increase in yields, primarily on international routes, due to the weakening of the ruble against the euro and the consequent effect of this on FX-denominated revenue.
Revenue from charter flights increased by 22.6% year-on-year to RUB 37,838 million, due among other factors to an increase in unit yields on charter flights and the expansion of Rossiya’s charter programme
Cargo revenue rose by 14.4% year-on-year, to RUB 18,900 million as cargo and mail volumes grew by 11.2%.
Other revenue increased by 0.6% year-on-year to RUB 58,378 million due to a rise in FX-denominated revenues from agreements with other airlines, which was offset to a significant degree by a decrease in maintenance of aircraft belonging to other airlines, as well as the introduction of the new IFRS 15 standard, which affects the classification of service fees for reservation changes between other revenue and revenue from scheduled passenger flights.
| RUB million, unless stated otherwise | 4Q 2018 | 4Q 2017 | Change | 12M 2018 | 12M 2017 | Change |
| Aircraft servicing and passenger services | 28,321 | 21,712 | 30.4% | 108,589 | 96,418 | 12.6% |
| Staff costs | 21,502 | 22,292 | (3.5%) | 82,817 | 82,801 | 0.0% |
| Operating lease expenses | 25,113 | 18,083 | 38.9% | 88,881 | 65,793 | 35.1% |
| Aircraft maintenance | 13,518 | 10,186 | 32.7% | 45,527 | 36,433 | 25.0% |
| Sales and marketing, administration and general expenses | 9,265 | 12,293 | (24.6%) | 31,743 | 36,139 | (12.2%) |
| Depreciation, amortisation and customs duties | 3,598 | 4,160 | (13.5%) | 13,941 | 15,604 | (10.7%) |
| Other net expenses | 11,198 | 8,145 | 37.5% | 38,551 | 36,650 | 5.2% |
| Operating costs less aircraft fuel | 112,515 | 96,871 | 16.1% | 410,049 | 369,838 | 10.9% |
| Aircraft fuel | 49,899 | 32,741 | 52.4% | 181,864 | 122,685 | 48.2% |
| Total operating costs | 162,414 | 129,612 | 25.3% | 591,913 | 492,523 | 20.2% |
In 2018, aircraft fuel costs increased by 48.2% year-on-year to RUB 181,864 million. This was due to a 36% year-on-year increase in the average price of aircraft fuel in rubles amid changes in the price of oil, as well as an increase in flight numbers and flying time.
Operating costs, excluding aircraft fuel costs, increased by 10.9% year-on-year to RUB 410,049 million.
Expenses related to aircraft servicing and passenger service amounted to RUB 108,589 million, a 12.6% increase year-on-year, due primarily to the growth of passenger traffic and increased airport fares. Optimisation of service costs helped to reduce the rate of increase of these expenses.
Staff costs remained at RUB 82,817 million. Despite an increase in salaries for aircraft captains effective from the start of 2018 and an increase in staff numbers to support the Group’s operational growth, the Group was able to reduce the rate of growth of these expenses by decreasing remuneration paid to senior management as well as through revaluation of the reserve for future payments.
Operating lease expenses rose to RUB 88,881 million, a 35.1% increase year-on-year, due to significant expansion of the fleet (net increase of 47 aircraft, or 16.8% year-on-year), as well as due to a year-on-year increase in LIBOR (average three-month LIBOR increased by 1.05 p.p. to 2.31%).
Aircraft maintenance costs grew by 25.0% year-on-year to RUB 45,527 million. Maintenance costs were significantly affected by an increase in volumes of technical maintenance due to expansion of the fleet and the changing composition of regular maintenance work in the comparable periods, as well as FX effects.
Selling, general and administrative expenses (SG&A) decreased by 12.2% year-on-year to RUB 31,743 million, following the launch of the programme to optimise costs, including marketing and advertising spend.
Amortisation and customs tariffs decreased by 10.7% year-on-year to RUB 13,941 million, due among other factors to the ongoing reduction in the number of aircraft on financial leases.
Other expenses increased by 5.2% year-on-year to RUB 38,551 million amid an increase in commissions charged by banks and costs for services associated with communication and the booking system.
As a result of these factors, EBITDAR totaled RUB 122,479 million. The EBITDAR margin was 20.0%.
| RUB million, unless stated otherwise | 4Q 2018 | 4Q 2017 | Change | 12M 2018 | 12M 2017 | Change |
| Operating (loss) / profit | (17,189) | (1,451) | 11.8х | 19,657 | 40,411 | (51.4%) |
| Loss from investments, net | (686) | (36) | 19.1х | (689) | (144) | 4.8х |
| Finance income | 853 | 778 | 9.6% | 4,164 | 7,127 | (41.6%) |
| Finance costs | (2,539) | (1,894) | 34.1% | (7,904) | (8,225) | (3.9%) |
| Realised hedging result | (1,863) | (1,387) | 34.3% | (6,788) | (5,613) | 20.9% |
| Share of results of associates | 75 | 30 | 2.5х | 254 | 170 | 49.4% |
| Results from disposal of companies | 1,240 | - | - | 1,240 | - | - |
| (Loss) / profit before tax | (20,109) | (3,960) | 5.1х | 9,934 | 33,726 | (70.5%) |
| Income tax | 3,332 | (129) | - | (4,221) | (10,666) | (60.4%) |
| (Loss) / profit for the period | (16,777) | (4,089) | 4.1х | 5,713 | 23,060 | (75.2%) |
In 2018, finance income decreased by 41.6% year-on-year to RUB 4,164 million, reflecting lower earnings from exchange-rate differences, as well as a general trend towards lower interest rates in Russia, which affects interest income from deposited free cash.
Finance costs decreased by 3.9% year-on-year to RUB 7,904 million, primarily due to reduction in the cost of debt servicing on the back of significant debt reduction in 2017.
The realised loss from hedging of RUB 6,788 million was attributable to a realised result related to hedging of USD-denominated revenue through USD-denominated lease obligations.
Aeroflot Group’s net profit for 2018 amounted to RUB 5,713 million, down 75.2% year-on-year.
| RUB million, unless stated otherwise | 31.12.2018 | 31.12.2017 | Change |
| Loans and borrowings | 3,486 | 3,181 | 9.6% |
| Finance lease liabilities | 93,224 | 100,689 | (7.4%) |
| Pension liabilities | 908 | 922 | (1.5%) |
| Total debt | 97,618 | 104,792 | (6.8%) |
| Cash and short-term investments | 30,148 | 54,909 | (45.1%) |
| Net debt | 67,470 | 49,883 | 35.3% |
| Net debt / EBITDA | 2.0x | 0.9x | - |
Total debt as of 31 December 2018 decreased by 6.8% compared to 31 December 2017 to RUB 97,618 million. The reduction was due to a decrease in finance lease liabilities following the decommissioning of 11 aircraft and reclassification of several aircraft to assets held for sale.
As of 31 December 2018, undrawn lines available to Aeroflot Group from major Russian and international banks amounted to RUB 84.2 billion.
