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Company News

02 March 2015

Aeroflot Announces FY 2014 IFRS Financial Results

Moscow, 2 March 2015 — Aeroflot Group («the Group», Moscow Exchange ticker: AFLT) today published its consolidated financial statements for the twelve months ended 31 December 2014, in accordance with International Financial Reporting Standards.

2014 Financial Highlights

• Revenue reached RUB 319,771 million, up 9.9% year-on-year, on the back of a 10.7% increase in passenger traffic;

• EBITDAR1 amounted to RUB 48,674 million or 15.2% of revenue;

• Adjusted net profit2 amounted to RUB 10,844 million.

1. EBITDAR = EBITDA before operating lease expenses. EBITDA = operating income + amortization and depreciation + customs duties.

2. Net profit adjusted for foreign exchange losses and provisions for receivables, redelivery of aircraft and other non-recurring items.

 

Shamil Kurmashov, JSC Aeroflot Deputy CEO for Finance and Network and Revenue Management, commented:

«Despite the unstable macroeconomic environment, Aeroflot Group continued to grow in 2014 and increased the number of passengers carried by 10.7% to 34.7 million. The growth in passenger numbers was primarily driven by an increase in domestic operations and a growth in traffic to key international destinations. In the fourth quarter, despite a significant deterioration in external economic conditions, Aeroflot Group outperformed the airline industry on monthly operating metrics. In particular, in December Group’s passenger traffic was up by 16.0% on the back of a 35.5% increase in passengers on domestic flights. Passenger traffic dynamics was the main driver of revenue growth that amounted to 9.9% in 2014.

In the second half of 2014, Russian air carriers faced serious external challenges, the major ones being a significant depreciation of the ruble and the resulting fall in consumer demand and downturn in the international travel market, which affected the annual financial results of the Group.

In 2014 the Group was profitable at operating profit level, despite external economic factors, supported by our focus on efficiency and cost control. Revaluation of finance lease obligations and other non-recurring primarily non-cash items resulted in the net loss of RUB 17.1 billion. Net profit adjusted for foreign exchange losses and non-recurring expenses amounted to RUB 10.8 billion.

We are confident that the Russian air transport market has a strong long-term potential and that our strategy and tactics are appropriate to respond to the current external challenges. Diversification of the market segments we operate in, expansion of low-cost operations, geographically balanced route network and partnerships with international companies, backed by our cost optimization and productivity enhancement programs, will provide support to our results and partially mitigate negative external impacts.»

Aeroflot Group FY 2014 Operating Highlights 

 

 

2014

2013

Change

Passengers carried (thousand)

 

34,735

31,391

     10.7%

International

 

17,096

17,391

     (1.7%)

Domestic

 

17,640

13,999

     26.0%

Revenue Passenger Kilometres (million)

 

90,075

85,273

5.6%

International

 

55,107

56,113

     (1.8%)

Domestic

 

34,968

29,161

     19.9%

Available Seat Kilometres (million)

 

115,834

109,064

       6.2%

International

 

72,219

71,530

      1.0%

Domestic

 

43,615

37,534

     16.2%

Seat load factor

 

77.8%

78.2%

  (0.4 p.p.)

International

 

76.3%

78.4%

   (2.1 p.p.)

Domestic

 

80.2%

77.7%

     2.5 p.p.

For the full year 2014, Group traffic totalled 34.7 million, a 10.7% year-on-year increase. Traffic results were mainly driven by passenger traffic on domestic routes that rose by 26.0% with a 2.5 percentage points (pps) increase in the seat load factor, on the back of increased flight frequencies and capacities addition on high-demand routes. 

Aeroflot Group FY 2014 Financial Highlights

RUB million, unless stated otherwise

2014

2013

Change

Revenue

319,771

290,956

9.9%

EBITDAR1

48,673

51,026

(4.6%)

EBITDAR margin

15.2%

17.5%

(2.3 p.p.)

EBITDA1

24,839

31,849

(22.0%)

EBITDA margin

7.8%

10.9%

(3.1 p.p.)

Operating profit

11,268

19,795

(43.1%)

Operating profit margin

3.5%

6.8%

(3.3 p.p.)

Profit/(loss) for the period

(17,146)

7,335

-

Net margin

-

2.5%

-

Adjusted profit for the period2

10,844

15,944

(32.0%)

Adjusted net margin

3.4%

5.5%

(2.1 p.p.)

1. EBITDAR = EBITDA before operating lease expenses. EBITDA = operating income + depreciation & amortization + customs duties.

2. Net profit adjusted for foreign exchange losses and provisions for receivables, redelivery of aircraft and other non-recurring items.

Revenue

RUB million, unless stated otherwise

2014

2013

Change

Passenger traffic revenue

268,636

247,768

8.4%

scheduled passenger flights

253,613

230,594

10.0%

charter passenger flights

15,023

17,174

(12.5%)

Cargo flights

8,718

9,778

(10.8%)

Other revenue

42,417

33,410

27.0%

Total revenue

319,771

290,956

9.9%

In 2014, Aeroflot Group’s revenue increased by 9.9% year-on-year to RUB 319,771 million, primarily as a result of an increase in the revenue from scheduled passenger flights and other revenues.

Revenue from scheduled passenger flights increased by 10.0% to RUB 253,613 million, boosted by a 10.7% growth in passenger traffic year-on-year. Revenue from charter flights decreased by 12.5% to RUB 15,023 million, which is associated with the overall market dynamics in this segment.

Cargo revenue declined from a year earlier, mainly due to the decision of Aeroflot to suspend its dedicated cargo fleet in 2013 and switch to belly cargo operations.

Other revenues increased by 27.0% year-on-year to RUB 42,417 million, mainly driven by increased airline agreements revenue, revenues related to the Aeroflot Bonus programme and refuelling services revenue.

Operating costs 

RUB million, unless stated otherwise

2014

2013

Change

Aircraft servicing and passenger services

61,070

52,830

15.6%

Staff costs

52,148

45,349

15.0%

Operating lease expenses

23,834

19,177

24.3%

Aircraft maintenance

19,224

20,374

(5.6%)

Sales and marketing, administration and general expenses

22,206

21,471

3.4%

Depreciation, amortization and custom duties

13,571

12,054

12.6%

Other costs and expenses

29,251

20,778

40.8%

Operating costs less aircraft fuel

221,304

192,033

15.2%

Aircraft fuel

87,199

79,128

10.2%

Operating costs

308,503

271,161

13.8%

Aircraft fuel costs for 12 months of 2014 increased by 10.2% year-on-year to RUB 87,199 million. This increase is driven by the dynamics of oil and jet kerosene prices and weakening of the ruble as well as an increase in the Group’s traffic volume, fleet expansion and addition of new routes. 

Operating costs less aircraft fuel grew by 15.2% from a year earlier to RUB 221,304 million.

Aircraft servicing and passenger services costs amounted to 61,070 million, up 15.6% from 2013. This increase is primarily due to the change in the ruble’s exchange rate against foreign currencies (+7.7%), expanded scale of operations and traffic volume (+ 3.0%), and the change in service rates (+4.9%).

Staff costs went up by 15.0% from 2013, to RUB 52,148 million, due to an increase in the Group’s personnel headcount and scale of operations (+4.3%), indexation of salaries at the end of 2013 (+2.2%) and other factors (+8.5%), including a revision of the incentive system made in subsidiary airlines to bring it in line with the standards of JSC Aeroflot.

Operating lease expenses amounted to RUB 23,834 million, representing a 24.3% increase year-on-year, mainly due to the change in the ruble’s exchange against foreign currencies (+16.2%), as well as the expansion of the Group’s fleet during the year (+7.0%).

Aircraft maintenance costs decreased by 5.6% to RUB 19,224 million, mostly due to the capitalization of a part of repair costs and changes to the maintenance program following decommissioning of MD-11 and IL-96 aircraft.

Sales and marketing, administration and general expenses amounted to RUB 22,206 million, representing a slight change from the previous year.

Depreciation, amortization and custom duties expenses grew by 12.6% to RUB 13,571 million due to the expansion of the Group’s fleet.

Other expenses totalled RUB 29,251 million, up 40.8% year-on-year, mainly due to the provision made for impairment of receivables.

Owing to the above factors, the Group’s operating income for 2014 amounted to RUB 11,268 million (3.5% of revenue). EBITDAR was RUB 48,673 million (15.2% of revenue).

Non-operating gains and losses 

RUB million, unless stated otherwise

2014

2013

Change

Operating income

11,268

19,795

(43.1%)

Finance income

2,471

2,686

(8.0%)

Finance costs

(28,399)

(8,814)

222.2%

Hedging result

(1,723)

-

-

Share of results of associates

31

37

(16.2%)

(Loss)/profit before income tax

(16,352)

13,704

-

Income tax

(794)

(6,369)

(87.5%)

(Loss)/profit for the year

(17,146)

7,335

-

Profit margin

-

2.5%

-

Adjusted profit for the year1

10,844

15,944

(32.0%)

Adjusted profit margin

3.4%

5.5%

(2.1 p.p.)

1. Net profit adjusted for foreign exchange losses and provisions for receivables, redelivery of aircraft and other non-recurring items.

Finance income in 2014 decreased by 8.0% compared to the previous year, due to lower profits from hedging instruments. 

The increase in finance costs to RUB 28,399 million in 2014 was primarily due to the foreign exchange loss of RUB 9,720 million, which stemmed mainly from revaluation of finance lease liabilities, increased interest expense (RUB 4,934 million), and losses on hedging instruments (RUB 13,740 million).

Due to the above factors, the Group incurred a net loss of RUB 17,146 million in 2014.

Net profit adjusted for foreign exchange losses and provisions for receivables, redelivery of aircraft and other non-recurrent items amounted to RUB 10,844 million in 2014.

Debt 

RUB million, unless stated otherwise

31.12.2014

31.12.2013

Change

Loans and borrowings

24,203

13,406

80.5%

Finance lease liabilities

149,278

72,036

107.2%

Pension liabilities

659

707

(6.8%)

Customs duties

169

436

(61.2%)

Total debt

174,309

86,585

101.3%

Cash and short-term investments

27,508

18,933

45.3%

Net debt

146,801

67,652

117.0%

Net debt/EBITDA

5.9х

2.1х

-

Total debt grew by 101.3% for the 12 months ended 31 December 2014, to RUB 174,309 million, mainly due to an increase in liabilities under finance lease contracts denominated in foreign currency resulting from the change in the ruble’s exchange rate against the dollar and the euro. 

As of 31 December 2014, undrawn credit lines available to Aeroflot Group from major Russian and international banks totalled RUB 21.6 billion.

Aeroflot’s FY 2014 IFRS results conference call and webcast

Aeroflot is pleased to invite investors and analysts to join its FY 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:

Russia: +7 495 213 0977

UK: +44 20 3427 1912

UK (toll free): 0 800 279 4841 USA: +1 212 444 0896

USA (toll free): 1 877 280 1254

Conference ID: 1711281

Webcast link:

http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2561

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 2014 Aeroflot carried 23.6 million passengers (34.7 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 major airlines, numbering 151 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.