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Company News

29 August 2017

AEROFLOT ANNOUNCES 6M 2017 IFRS FINANCIAL RESULTS

Мoscow, 29 August 2017 – Aeroflot Group (“the Group”, Moscow Exchange ticker: AFLT) today publishes its condensed consolidated interim financial statements for the six months ended 30 June 2017, in accordance with International Financial Reporting Standards.

6M 2017 Financial Highlights for Aeroflot Group

  • Revenue increased to RUB 234,860 million, up 4.9% year-on-year;
  • EBITDAR reached RUB 46,057 million. The EBITDAR margin was 19.6%;
  • EBITDA reached RUB 15,403 million. The EBITDA margin was 6.6%;
  • Net income totalled RUB 2,890 million.

Shamil Kurmashov, PJSC Aeroflot Deputy CEO for Commerce and Finance, commented:

“In the first half of 2017 Aeroflot Group continued its operational growth, with passenger numbers increasing by 16.6% year-on-year to 23.0 million. This growth is driven by increasing demand for air transportation, and respective need for additional passenger capacity. Passenger capacity on international and domestic routes increased by 18.8% and 11.9%, respectively, while the passenger load factor rose 2.0 p.p. year-on-year to 80.6%.

“Group revenue increased by 4.9% to RUB 234.9 billion on the back of our continued strong operational performance, driven by increased passenger traffic. Revenue grew at a slower pace than operational indicators due to exchange rate fluctuations, which affected FX-denominated revenues and led to a decrease in yields on international routes.

“Operating costs also increased along with operational volumes. The strengthening of the ruble in the reporting period had a positive effect on operating costs, unlike in previous reporting periods, when the exchange rate negatively impacted the cost of operating leases, aircraft maintenance and airport tariffs. At a unit cost of RUB 3.08 per seat-kilometre, the Group saved up to 30 kopeks per seat-kilometre, or roughly 10% of CASK. However, a 10% increase in the price of aircraft fuel as a result of higher oil prices meant that Aeroflot Group did not realised all benefits from the strengthening of the ruble. As fuel prices rise, it is particularly important to increase fuel efficiency. The Group has continuously increased its fuel efficiency in recent years, and as a result fuel consumption per available seat-kilometre across Aeroflot Group amounts to 22.8 grams.

“As a result of the strengthening of the ruble and reduction in foreign exchange revenue, combined with higher costs for aircraft fuel (the main factor affecting operating costs), EBITDA decreased to RUB 15.4 billion. The EBITDA margin was 6.6%.

“Despite the reduction in operating profitability, Aeroflot Group’s net income for the reporting period was on a par with last year’s result, at RUB 2.9 billion. This was mainly due to a significant reduction in debt through repayment of loans and borrowings ahead of schedule, as well as savings on non-operating costs.

“We enter the third quarter – traditionally a high season for Russian civil aviation – with favourable conditions: the exchange rate and the fuel prices are at a ‘normalised’ level, and we continue our active demand-oriented revenue-management programme. We are maintaining the pace of operational growth on both foreign and domestic markets, and this allows us to be optimistic about the second half of the year.”

Key operating highlights

 

6M 2017

6M 2016

Change

Passengers carried, thousand PAX

22,962

19,695

     16.6%

- international

10,245

8,092

     26.6%

- domestic

12,717

11,603

      9.6%

Revenue Passenger Kilometres, million

59,392

50,011

18.8%

- international

35,523

28,276

     25.6%

- domestic

23,868

21,735

      9.8%

Available Seat Kilometres, million

73,719

63,617

     15.9%

- international

43,742

36,830

     18.8%

- domestic

29,978

26,787

     11.9%

Passenger load factor, %

80.6%

78.6%

          2.0 p.p.

- international

81.2%

76.8%

          4.4 p.p.

- domestic

79.6%

81.1%

         (1.5 p.p.)

In 6M 2017, Aeroflot Group carried 23.0 million passengers, up 16.6% year-on-year.

Key financial highlights

RUB million, unless stated otherwise

6M 2017

6M 2016

Change

Revenue

234,860 

223,824

           4.9%

EBITDAR[1]

46,057 

58,397

        (21.1%)

EBITDAR margin

19.6%

26.1%

(6.5 p.p.)

EBITDA1

15,403 

30,035

        (48.7%)

EBITDA margin

6.6%

13.4%

(6.8 p.p.)

Operating profit

7,697 

23,250

        (66.9%)

Operating profit margin

3.3%

10.4%

(7.1 p.p.)

Profit for the period

2,890

2,467

         17.1%

Net profit margin

1.2%

1.1%

0.1 p.p.

 

Revenue

RUB million, unless stated otherwise

6M 2017

6M 2016

Change

Passenger traffic revenue

200,799 

188,112

6.7%

          - scheduled passenger flights

188,416 

181,096

4.0%

          - charter passenger flights

12,383 

7,016

76.5%

Cargo flight revenue

7,183 

5,218

37.7%

Other revenue

26,878 

30,494

(11.9%)

Total revenue

234,860 

223,824

4.9%

In 6M 2017, Aeroflot Group’s revenue increased by 4.9% year-on-year to RUB 234,860 million.

Revenue from scheduled passenger flights increased by 4.0% year-on-year to RUB 188,416 million, boosted by an increase in passenger traffic.

Revenue growth was affected by a decreased in yields, primarily on international routes, following the strengthening of the ruble and the knock-on effect on FX-denominated revenue.

Revenue from charter flights increased by 76.5% to RUB 12,383 million, driven by an increase in the operations in this segment following the launch of Rossiya’s charter programme.

Cargo revenue rose by 37.7% year-on-year to RUB 7,183 million as Aeroflot Group added new wide-body aircraft to its fleet, and cargo and mail volumes grew 44.3%.

Other revenue decreased by 11.9% year-on-year to RUB 26,878 million as a result of a decrease in FX-denominated revenues from airline agreements due to changes in the exchange rate.

Operating costs

RUB million, unless stated otherwise

6M 2017

6M 2016

Change

Aircraft servicing and passenger services

45,961 

40,120

          14.6%

Staff costs

38,324 

31,032

          23.5%

Operating lease expenses

30,654 

28,362

            8.1%

Aircraft maintenance

15,682 

17,525

          (10.5%)

Sales and marketing, administration and general expenses

14,507 

12,843

          13.0%

Depreciation, amortisation and customs duties

7,706 

6,785

          13.6%

Other net expenses

18,112 

19,117

           (5.3%)

Operating costs less aircraft fuel

170,946 

155,784

            9.7%

Aircraft fuel

56,217 

44,790

          25.5%

Total operating costs

227,163 

200,574

           13.3%

In 6M 2017, aircraft fuel costs increased by 25.5% year-on-year to RUB 56,217 million. This was due to the rise in average price of aircraft fuel in rubles in the context of changes in the price of oil and exchange rates, and also the increase in operational volumes and flying time.

The strengthening of the ruble helped to mitigate the increase in expenses due to the expansion of business volumes. Operating expenses less aircraft fuel costs increased by 9.7% year-on-year to RUB 170,946 million.

Expenses related to aircraft servicing and passenger services amounted to RUB 45,961 million, a 14.6% increase year-on-year, due largely to the increase in passenger traffic. This item was additionally impacted by new initiatives aimed at boosting service quality.

Staff costs rose 23.5% year-on-year and amounted to RUB 38,324 million, as a result of salary indexation in accordance with the labour contract, an increase in the number of staff to support operational growth, and also growth of the variable component of salaries linked to key corporate indicators.

Operating lease expenses rose to RUB 30,654 million, an 8.1% increase year-on-year due to expansion of aircraft fleet (net increase of 36 aircraft, or 16.9%, year-on-year), as well as the doubling of the three-month LIBOR rate in the first half of 2017 compared to the same period last year.

Aircraft maintenance costs fell 10.5% year-on-year to RUB 15,682 million due to strengthening of the ruble and negligible adjustments in the maintenance facilities schedule.

Selling, general and administrative expenses (SG&A) grew by 13.0% year-on-year to RUB 14,507 million. Increased SG&A costs were connected to higher remuneration for sales following an increase in sales, and to the development of IT infrastructure.

Amortisation and customs tariffs increased by 13.6% year-on-year to RUB 7,706 million, due to Aurora taking ownership of new aircraft and other equipment over the past 12 months.

Other expenses decreased by 5.3% year-on-year to RUB 18,112 million due to a reduction in costs for global distribution systems following a decrease in the ruble equivalent of FX-denominated expenses.

As a result, Group EBITDAR totalled RUB 46,057 million, while the EBITDAR margin was 19.6%. EBITDA totalled RUB 15,403 million, and the EBITDA margin was 6.6%.

Non-operating gains and losses

RUB million, unless stated otherwise

6M 2017

6M 2016

Change

Operating profit

7,697

23,250

        (66.9%)

Loss from sale and impairment of investments

(70)

(3,429)

       (98.0%)

Finance income

4,783

7,890

       (39.4%)

Finance costs

(4,159)

(5,074)

       (18.0%)

Realised hedging result

(2,748)

(8,655)

       (68.2%)

Share of results of associates

34

(45)

-

Result from disposal of companies

-

(5,726)

 -

Profit before tax

5,537

8,211

        (32.6%)

Income tax

(2,647)

(5,744)

     (53.9%)

Profit for the period

2,890

2,467

         17.1%

Finance income decreased by 39.4% year-on-year to RUB 4,783 million, mainly due to lower FX earnings.

Finance costs declined by 18.0% year-on-year to RUB 4,159 million as debt levels fell, leading to a reduction in the cost of debt servicing.

The realized loss from hedging of RUB 2,748 million was attributable to settlements under derivative instruments recognised in equity, as well as from a realised result related to hedging of US dollar-denominated revenue through US dollar-denominated lease obligations.

As a result, despite a decrease in profitability at the operational level due to macro-economic factors (FX rate on revenue, and the cost of oil), thanks to a reduction in the Group’s debt load, net profit amounted to RUB 2,890 million, roughly flat year-on-year.

Debt and liquidity

RUB million, unless stated otherwise

30.06.2017

31.12.2016

Change

Loans and borrowings

17,448

20,367

       (14.3%)

Finance lease liabilities

112,374

122,736

        (8.4%)

Pension liabilities

929

805

        15.4%

Total debt

130,751

143,908

         (9.1%)

Cash and short-term investments

88,133

37,795

      133.2%

Net debt

42,618

106,113

       (59.8%)

Net debt / EBITDA

0.[2]

1.[3]

-

Total debt as of 30 June 2017 decreased by 9.1% versus 31 December 2016 to RUB 130,751 million. The reduction is the result of repayment of loans and borrowings both as they came due and ahead of schedule, and adjustments in the valuation of financial leases due to the changes in the RUB-USD exchange rate as of 30 June 2017 versus 31 December 2016. Despite significant repayments, cash and short-term investments more than doubled versus 31 December 2016 and totalled RUB 88,133 million.

As of 30 June 2017, undrawn lines available to Aeroflot Group from major Russian and international banks amounted to RUB 92.8 billion.

Investor enquiries

Aeroflot Investor Relations

+7 (495) 258-06-86

ir@aeroflot.ru


[1] EBITDAR = EBITDA + operating lease expenses. EBITDA = operating profit + depreciation & amortisation + customs duties.

[2] Calculated based on EBITDA for the 12 months ended 30.06.2017 of RUB 63,373 million.

[3] Calculated based on EBITDA for the 12 months ended 31.12.2016 of RUB 78,004 million.