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Company News

01 December 2014

Aeroflot announces 9M 2014 IFRS Results

Moscow, 1 December 2014 — Aeroflot Group («the Group», Moscow Exchange ticker: AFLT) today published its consolidated financial statements for the nine months ended 30 September 2014, in accordance with International Financial Reporting Standards.

9M 2014 Financial Highlights

• Revenue amounted to RUB 236,698 million, up 6.5% year-on-year; • EBITDAR was RUB 40,180 million resulting in an EBITDAR margin of 17.0%;

• EBITDA was RUB 23,559 million resulting in an EBITDA margin of 10.0%;

• The Group’s loss for the period was RUB 3,563 million;

• The Group’s adjusted net profit was RUB 12,907 million.

Shamil Kurmashov, JSC Aeroflot Deputy CEO for Finance and Network and Revenue Management, said: "Despite the increasingly challenging economic and geopolitical environment, Aeroflot and its subsidiaries successfully increased their passenger traffic on domestic routes and the majority of international routes, which contributed positively to year-on-year revenue growth in nine months 2014.

«However, in the third quarter Russian airlines faced serious challenges, in particular a sharp decline in the rouble exchange rate versus key foreign currencies, as well as continued weakening of consumer demand and a downturn in the tourism industry. All these factors, as well as non-recurring events, impacted our financial performance. After adjustments for foreign exchanges losses, however, the Group remained profitable both in the third quarter and in nine months 2014.

«In this environment, we continue to focus on optimisation of capacity and our route network, as well as operating cost controls and efficient financial risk management. We are confident that the Russian airlines market holds significant long-term growth potential. This is why Aeroflot continues to modernise its fleet, which is now the youngest in the world, and has also launched a new low-cost carrier that will develop a top-quality offering for price-sensitive passengers, allowing further strengthening of the Group’s market position.»

Aeroflot Group 9M 2014 Financial Highlights

RUB million, unless stated otherwise

9M 2014

9M 2013

Change

Revenue

236,698

222,353

6.5%

EBITDAR[1]

40,180

49,810

(19.3%)

Margin

17.0%

22.4%

(5.4 p.p.)

EBITDA[2]

23,559

35,764

(34.1%)

Margin

10.0%

16.1%

(6.1 p.p.)

Operating income

13,662

26,870

(49.2%)

Margin

5.8%

12.1%

(6.3 p.p.)

Profit / (loss) for the period

(3,563)

17,237

-

Margin

-

7.8%

-

Adjusted profit for the period[3]

12,907

20,284

(36.4%)

Margin

5.5%

9.1%

(3.6 p.p.)


[1] EBITDAR = EBITDA + operating lease expenses.

[2] EBITDA = operating income + depreciation & amortization + customs duties.

[3] Profit adjusted for net foreign exchange loss related to revaluation of finance lease liabilities, provisions for impairment of accounts receivable, pre-term return of aircraft, and for other non-recurring items.

Revenue

RUB million, unless stated otherwise

9M 2014

9M 2013

Change

Traffic revenue

202,174

190,621

6.1%

- scheduled passenger flights

188,834

177,534

6.4%

- charter passenger flights

13,340

13,087

1.9%

Cargo flights

5,968

7,269

(17.9%)

Other revenue

28,556

24,463

16.7%

Total revenue

236,698

222,353

6.5%

Aeroflot Group’s revenue increased by 6.5% year-on-year to RUB 236,698 million during 9M 2014, mainly due to growth in revenue from scheduled passenger flights and other revenue. The Group’s passenger traffic increased 10.5% year-on-year, which helped lift revenue from scheduled passenger flights up 6.4% year-on-year, totalling RUB 188,834 million. The Group’s revenue from charter passenger flights was RUB 13,340 million, up 1.9% year-on-year. The slowdown in growth of charter passenger flights revenue was mainly due to overall market developments in this segment, as well as to JSC Aeroflot ceasing to carry passengers under block charter agreements (the least profitable passenger segment).

Revenue from cargo flights was down year-on-year, mainly due to JSC Aeroflot’s decision to discontinue operations of its dedicated cargo fleet in 2013, switching to belly cargo operations.

Among the key drivers of the 16.7% year-on-year growth in other revenue to RUB 28,556 million were increased airline agreements revenue, revenues related to the Aeroflot Bonus programme and refuelling services revenue.

Operating costs

RUB million, unless stated otherwise

9M 2014

9M 2013

Change 

Aircraft servicing and passenger services

45,361

39,606

14.5%

Staff costs

38,225

31,741

20.4%

Operating lease expenses

16,621

14,046

18.3%

Aircraft maintenance

16,430

13,974

17.6%

Sales and marketing, administration and general expenses

14,303

14,143

1.1%

Depreciation and amortisation

8,761

7,865

11.4%

Custom duties

1,136

1,029

10.4%

Other costs and expenses

17,461

13,719

27.3%

Operating costs less aircraft fuel

158,298

136,123

16.3%

Aircraft fuel

64,738

59,360

9.1%

Operating costs

223,036

195,483

14.1%

Operating costs increased by 14.1% year-on-year to RUB 223,036 million, primarily due to the increased scale of the Group’s operations, and significant non-recurring events. Changes in the rouble exchange rate versus key foreign currencies also significantly affected the growth of operating costs.

Aircraft fuel costs increased 9.1% year-on-year in 9M 2014 to RUB 64,738 million, mainly driven by changes in aviation fuel prices, weakening of rouble, as well as by growth in passenger traffic, expansion of the Group’s fleet and additions of new routes.

Operating costs less aircraft fuel were up 16.3% year-on-year to RUB 158,298 million.

Aircraft servicing and passenger services costs increased 14.5% year-on-year to RUB 45,361, which was mainly attributable to the increased scale of the Group’s operations and a rise in passenger traffic, as well as to the impact of exchange rate changes.

Staff costs increased 20.4% year-on-year to RUB 38,225 million on the backdrop of growth in the Group’s headcount, larger scope of work and increased reserve for annual leave, as well as a salary indexation at the end of 2013.

Operating lease expenses rose by 18.3% year-on-year to RUB 16,621 million, mainly driven by changes in foreign currency exchange rates and by expansion of the Group’s fleet.

Aircraft maintenance costs amounted to RUB 16,430 million, up 17.6% year-on-year, primarily due to rouble exchange rate changes and growth in tariffs.

Sales and marketing, administration and general expenses remained practically unchanged year-on-year at RUB 14,303 million.

Depreciation and amortisation costs increased by 11.4% year-on-year to RUB 8,761 million, while customs duties grew by 10.4% year-on-year to RUB 1,136 million. The growth in both items was driven by expansion of the Group’s fleet.

Other operating costs and expenses increased by 27.3% year-on-year to RUB 17,461 million, mainly due to creation of provisions for impairment of accounts receivable and provisions for pre-term return of aircraft, as well as increased communication expenses and costs related to booking systems.

As a result of the aforementioned factors, the Group’s 9M 2014 operating income was RUB 13,662 million or 5.8% of total revenue. The Group’s EBITDAR was RUB 40,180 million or 17.0% of total revenue.

Non-Operating Income and Expenses

RUB million, unless stated otherwise

9M 2014

9M 2013

Change

Operating income

13,662

26,870

(49.2%)

Finance income

1,684

2,321

(27.4%)

Finance costs

(18,609)

(7,300)

154.9%

Share of results of associates

22

36

(38.9%)

(Loss) / profit before income tax

(3,241)

21,927

-

Income tax

(322)

(4,690)

(93.1%)

(Loss) / profit for the period

(3,563)

17,237

-

Profit margin

-

7.8%

-

Adjusted profit for the period[1]

12,907

20,284

(36.4%)

Adjusted profit margin

5.5%

9.1%

(3.6 p.p.)


[1] Profit adjusted for net foreign exchange loss related to revaluation of finance lease liabilities, provisions for impairment of accounts receivable, pre-term return of aircraft, and for other non-recurring items.

Finance income decreased by 27.4% during 9M 2014, primarily due to a decline in income from hedging instruments.

The increase in finance costs to RUB 18,609 million for 9M 2014 was mainly due to a net foreign exchange loss of RUB 14,091 million, resulting mainly from revaluation of finance lease liabilities, as well as due to an increase in interest expense (RUB 3,360 million) and losses on hedging instruments (RUB 845 million).

As a result of the aforementioned factors, the Group’s loss for 9M 2014 amounted to RUB 3,563 million.

The Group’s 9M 2014 profit adjusted for net foreign exchange loss related to revaluation of finance lease liabilities, as well as provisions for impairment of accounts receivable, pre-term return of aircraft and other non-recurring items was RUB 12,907 million.

Debt

RUB million, unless stated otherwise

30 September 2014

31 December 2013

Change

Loans and borrowings

12,892

13,406

(3.8%)

Finance lease liabilities

108,655

72,036

50.8%

Pension liabilities

715

707

1.1%

Customs duties

235

436

(46.1%)

Total debt

122,497

86,585

41.5%

Cash and short-term investments

30,693

18,933

62.1%

Net debt

91,804

67,652

35.7%

Net debt/EBITDA[1]

4.7х

2.1х

-


[1] Based on trailing twelve months consolidated EBITDA.

The 41.5% increase in total debt during 9M 2014 to RUB 122,498 million was mainly driven by a rise in liabilities under FX-denominated finance lease contracts following the changes in rouble exchange rates versus the dollar and euro.

As of 30 September 2014, Aeroflot Group had undrawn credit lines from the largest Russian and international banks totalling RUB 26,480 million.

[1] Profit adjusted for net foreign exchange loss related to revaluation of finance lease liabilities, provisions for impairment of accounts receivable, pre-term return of aircraft, and for other non-recurring items.

Aeroflot’s 9M 2014 IFRS results conference call and webcast

Aeroflot is pleased to invite investors and analysts to join its 9M 2014 results conference call and webcast to be held today at 5:00 pm Moscow time (2:00 pm London; 9:00 am New York). Shamil Kurmashov, Aeroflot’s Deputy CEO for Finance and Network and Revenue Management, and Giorgio Callegari, Aeroflot’s Deputy CEO for Strategy and Alliances, will host the call.

The conference call and webcast details are provided below.

Conference call dial-in details:

Conference ID: 2733623

Russia: +7 495 705 9450

UK (local access): +44 20 3427 1919

UK (toll free): 0 800 279 5736

USA (local access): +1 646 254 3363

USA (toll free): 1 877 280 2342

Webcast link:

http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2463

A transcript of the conference call will be posted on the Company’s website www.aeroflot.ru.

Investor enquiries

Aeroflot Investor Relations

+7 (495) 258-06-86

ir@aeroflot.ru

Media enquiries

Aeroflot Press Service

+7 (495) 752-90-71

+7 (499) 500-73-87

+7 (495) 753-86-39

presscentr@aeroflot.ru 

About Aeroflot

Aeroflot is Russia’s flagship carrier and one of the largest airline groups in Europe. In 2013, its 90th anniversary year, Aeroflot carried 20.9 million passengers (31.4 million passengers as Aeroflot Group including subsidiaries), a record for any Russian airline. A proud member of the SkyTeam global airline alliance, Aeroflot and its partners serve 1,052 destinations in 177 countries worldwide. Aeroflot operates the youngest fleet in the world (among the major airlines), numbering 152 Airbus, Boeing and Sukhoi airliners. Aeroflot is among the global leaders in aviation safety. The company’s European Community Safety Assessment of Foreign Aircraft (SAFA) Index, which is the main globally recognized safety parameter, is comparable to global peers. The first Russian carrier to enter the IATA Operational Safety Audit (IOSA) register, renewing its registration for the fifth time in 2013, Aeroflot has successfully passed the IATA Safety Audit for Ground Operations (ISAGO) and is fully ISO 9001:2008, ISO 14001:2004 compliant. In 2014 Aeroflot was named by SKYTRAX as the Best Airline in Eastern Europe for the third time. Find more at www.aeroflot.com.