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Company News

21 November 2006

АК&М rating agency confirms solvency rating assigned to JSC "Aeroflot-Russian Airlines" as "A+" level with stable perspectives

АК&М rating agency has confirmed the solvency rating assigned to JSC "Aeroflot-Russian Airlines" as level "A+" with stable perspectives, This means, that the company belongs to the group of borrowers with high reliability level. Risk of inopportune fulfillment of obligations taken by such a borrower is minor. In perspective, the level of solvency would rather remain the same.

As the Agency's report states, Aeroflot is characterized by high degree of demand for the services rendered. The company is a passenger and freight carrier on both domestic and international air lines. Aeroflot's share on the passengers conveyance market in 2005 was 24.2%. Priority direction of business development of the company is to widen international passengers conveyances, which in 2005 actually provided 62% in overall incomes of the company. In spring 2006 Aeroflot has joined the SkyTeam international aviation alliance, and this enabled the company to broaden its offer and to enhance the potential. This will facilitate the growth of aviation conveyance volumes.

The company also features low level of encumbrances. All liabilities of Aeroflot are properly secured by existing cash flows and assets, sufficient to ensure all the loan and leasing payments. Decreasing of short term liabilities of Aeroflot by 3.3% down to $127 million on the one hand, and increasing of long term liabilities by 11.4%, i.e. up to $357.3 (в оригинале пропущено: тысяч? миллионов?) on the other hand resulted in better structuring of the debts. Despite the absolute debt growth, the EBITDA ratio to the overall liabilities of the Company in terms of MSFO has grown up in 2005, and this evidences the lower encumbrances and level of liability. Aeroflot does not face shortage of working capital to cover short term liabilities, and the company demonstrates considerable rates of growth for the current assets on the background of growing current liabilities. And this result in better liquidity.

The company also demonstrates high performance efficiency with apparent enhancement of the majority of financial indexes. Assets and own capital profitability indexes show that Aeroflot's management efficiently uses all the borrowed funds. Growth of the net profit as of MSFO in first half of 2006 by 78.7%, growth of yield by 15.7% and growth of EBITDA by 36.6% define significant growth of sales profitability and operational efficiency.

The report also mentions that within the last years Aeroflot demonstrates good dynamics of development, both with regard to financial issues and to the main business of the company. The company keeps enhancing majority if financial indexes, which allow the company to conform with the level of the world leading air carriers. At the same time current business tendencies allow to expect considerable enhancement of financial indexes in the end of 2006.

The company has high level of information transparency. The agency has mentioned high quality and good informational content of financial reports the company makes available to the community. Besides, Aeroflot keeps enhancing corporate culture, and this ensures farther growth of the company's transparency.

Although the major part of aviation services are realized with modern airplanes, among the other factors limiting the assignment of a higher rate, the report names the high degree of wearing for domestically manufactured aircraft fleet, it also states that theses airplanes do not comply with the modern environmental, technical and economical requirements. On the other hand, the company's policy aimed at upgrading of the aircraft fleet resulted in better indexes characterizing airplanes wearing and better efficiency of the main business. In terms of the number of new generation airplanes Aeroflot is the leading company in Russia, while the flight safety parameters of the company correspond to those adopted by major world aviation companies.

As the risk factor threatening Aeroflot the report names significant growth of competition level, and expansion of foreign companies which year by year lower the share of the company on the market of international conveyances. Another important thing is the remaining growth of the number of charter flights existing on the background of starting stagnation of regular flights market, which remains the main priority for Aeroflot.

Financial positions of Aeroflot are still affected by fuel prices. However, negative influence of fuel prices is partially neutralized by Aeroflot policy aimed at hedging of this risk and permanent measures aimed at enhancement of the fuel consumption efficiency.

OAO “Aeroflot – Russian Airlines”. Based in Moscow, Sheremetyevo Airport. Founded in 1923. The biggest Russian aviation company controlling about 11% of domestic and 39% of international transportation markets of Russia. Member of global aviation alliance Sky Team, elected by the readers of Global Traveler magazine as the "Best aviation alliance". In 2005 Aeroflot delivered 6,8 million of passengers in 89 cities of 47 countries. Having a fleet of 85 vehicles Aeroflot makes 302 flights a day. Net profit of the company in 2005 was 6.032 billion Rubles. More details about the company are available at: www.aeroflot.ru and www.skyteam.com