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Company News

29 August 2018

Aeroflot announces 6M 2018 IFRS financial results

Moscow, 29 August 2018 – Aeroflot Group (“the Group”, Moscow Exchange ticker: AFLT) today publishes its condensed consolidated interim financial statements for the six months ended 30 June 2018, in accordance with International Financial Reporting Standards.

Aeroflot Group financial highlights

RUB million, unless stated otherwise

Q2 2018

Q2 2017

Change

6M 2018

6M 2017

Change

Revenue

153,880 

131,735 

16.8%

265,822 

234,860

13.2%

EBITDAR1

35,596 

32,315 

10.2%

46,363 

46,057

0.7%

EBITDAR margin

23.1%

24.5%

(1.4 p.p.)

17.4%

19.6%

(2.2 p.p.)

EBITDA1

14,354 

16,539 

(13.2%)

6,622 

15,403

(57.0%)

EBITDA margin

9.3%

12.6%

(3.3 p.p.)

2.5%

6.6%

(4.1 p.p.)

Profit / (loss) for the period

6,315 

8,229 

(23.3%)

(5,228) 

2,890

-

Andrey Chikhanchin, PJSC Aeroflot’s Deputy CEO for Commerce and Finance, said:

“Aeroflot Group disclosed first-quarter results under IFRS for the first time this year. Today’s publication of our half-year results provides investors and analysts with the opportunity to analyse our results for the second quarter and to make quarter-on-quarter comparisons across key indicators.

“In 2018, Aeroflot Group has continued to deliver operational growth, expanding the geographical coverage of its network and adding capacity on routes where we have seen the highest demand. The growth rate of passenger numbers in the second quarter accelerated to 9.6% year-on-year from 6.6% year-on-year in the first quarter, bringing the total increase for the first half to 8.2%, for a total of 24.9 million passengers. Traffic growth accelerated while we maintained a positive trend in yields, which increased by 8.6% year-on-year in the second quarter, compared to an increase of 3.6% year-on-year in the first quarter. Revenue from passenger traffic improved as a result, reaching RUB 135.5 billion in the second quarter, a 19.2% increase year-on-year, and 8.1 p.p. faster than the growth seen in the first quarter. The uptick in revenue was supported by the Company’s proactive approach to revenue management – including tactical optimisation through capacity and load factor management – as well as currency effects and increased demand for flights during the group stage of the World Cup in June.

“Nonetheless, revenue grew at a slower pace than costs. The key factor affecting operating costs was growth in aviation fuel prices, which increased by almost 30% year-on-year in the first half of 2018 with acceleration of growth during second quarter. In this context, management approved an extensive programme to mitigate external impact on the Company’s financial results, including initiatives on both the revenue and cost side. The programme has already had an effect on the costs side; excluding fuel, CASK increased by just 1.5% in the first half of 2018, and fell by 1.1% in the second quarter despite growing currency pressures on FX-denominated cost items, as well as increasing airport fees. We have also seen significant economies on SG&A expenses. At the CASK level, we have also seen economies on personnel costs, which reflects our efforts to maintain high labour productivity.

“As a result of active revenue management and implementation of cost-management initiatives, Aeroflot Group in the second quarter recorded a net profit of RUB 6.3 billion. The financial result for the second quarter partially mitigated the loss for the first quarter, and reduced the overall loss for the first half to RUB 5.2 billion. Aeroflot Group intends to maintain strict control and optimizationof costs to support optimal financial results in the prevailing economic climate.”

Key operating highlights

 

 

Q2 2018

Q2 2017

Change

6M 2018

6M 2017

Change

Passengers carried, thousand PAX

13,871

12,660

       9.6%

24,856

22,962

8.2%

- international

6,171

5,668

      8.9%

11,059

10,245

7.9%

- domestic

7,699

6,993

     10.1%

13,797

12,717

8.5%

Revenue Passenger Kilometres, million

35,244

32,459

8.6%

63,987

59,392

7.7%

- international

20,365

18,992

      7.2%

37,932

35,523

6.8%

- domestic

14,879

13,466

     10.5%

26,054

23,869

9.2%

Available Seat Kilometres, million

43,358

39,209

     10.6%

79,982

73,719

8.5%

- international

25,457

22,895

     11.2%

47,961

43,741

9.6%

- domestic

17,901

16,314

      9.7%

32,020

29,977

6.8%

Passenger load factor, %

81.3%

82.8%

 (1.5 p.p.)

80.0%

80.6%

(0.6 p.p.)

- international

80.0%

83.0%

  (3.0 p.p.)

79.1%

81.2%

(2.1 p.p.)

- domestic

83.1%

82.5%

   0.6 p.p.

81.4%

79.6%

1.7 p.p.

               

 

In 6M 2018, Aeroflot Group carried 24.9 million passengers, up 8.2% year-on-year.

Revenue

 

RUB million, unless stated otherwise

Q2 2018

Q2 2017

Change

6M 2018

6M 2017

Change

Passenger traffic revenue

135,456 

113,594 

19.2%

232,352 

200,799

15.7%

  - scheduled passenger flights

124,862 

106,080 

17.7%

215,969 

188,416

14.6%

  - charter passenger flights

10,594 

7,514 

41.0%

16,383 

12,383

32.3%

Cargo flight revenue

4,400 

3,805 

15.6%

8,178 

7,183

13.9%

Other revenue

14,024 

14,336 

(2.2%)

25,292 

26,878

(5.9%)

Total revenue

153,880 

131,735 

16.8%

265,822 

234,860

13.2%

In 6M 2018, Aeroflot Group’s revenue increased by 13.2% year-on-year to RUB 265,822 million.

Revenue from scheduled passenger flights increased by 14.6% year-on-year to RUB 215,969 million, driven by growth of passenger traffic.

Revenue growth was affected by an increase in yields, primarily on international routes, as the ruble weakened against the euro and the consequent effect of this FX-denominated revenue.

Revenue from charter flights increased by 32.3% year-on-year to RUB 16,383 million, due among other factors to the growth of Rossiya’s charter programme.

Cargo revenue rose by 13.9% year-on-year to RUB 8,178 million as cargo and mail volumes grew by 10.6%.

Other revenue decreased by 5.9% year-on-year to RUB 25,292 million, due among other factors to a decrease in fuelling volumes and 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 and recurring revenue.

Operating costs

RUB million, unless stated otherwise

Q2 2018

Q2 2017

Change

6M 2018

6M 2017

Change

Aircraft servicing and passenger services

26,726 

24,807 

7.7%

48,634 

45,961 

5.8%

Staff costs

20,255 

19,736 

2.6%

41,659 

38,324 

8.7%

Operating lease expenses

21,242 

15,776 

34.6%

39,741 

30,654 

29.6%

Aircraft maintenance

11,790 

7,503 

57.1%

20,259 

15,682 

29.2%

Sales and marketing, administration and general expenses

7,918 

8,336 

(5.0%)

14,078 

14,507 

(3.0%)

Depreciation, amortisation and customs duties

3,037 

3,906 

(22.2%)

6,901 

7,706 

(10.4%)

Other net expenses

7,752 

10,248 

(24.4%)

16,944 

18,112 

(6.4%)

Operating costs less aircraft fuel

98,720 

90,312 

9.3%

188,216 

170,946 

10.1%

Aircraft fuel

43,843 

28,790 

52.3%

77,885 

56,217 

38.5%

Total operating costs

142,563 

119,102 

19.7%

266,101 

227,163 

17.1%

In 6M 2018, aircraft fuel costs increased by 38.5% year-on-year to RUB 77,885 million. This was due to almost 30.0% year-on-year increase in the average price of aircraft fuel in rubles as oil prices fluctuated, as well as an increase in numbers of flights and flying time.

Excluding aircraft fuel costs, operating costs increased by 10.1% year-on-year to RUB 188,216 million.

Expenses related to aircraft servicing and passenger service amounted to RUB 48,634 million, a 5.8% increase year-on-year, due primarily to the growth of passenger traffic and increased airport fees. Optimisation of service costs constrained the growth rate of this cost item.

Staff costs rose 8.7% year-on-year and amounted to RUB 41,659 million, as a result of an increase in salaries for aircraft captains, effective from the start of 2018, as well as due to an increase in staff numbers to support the Group’s operational growth.

Operating lease expenses amounted to RUB 39,741 million, a 29.6% increase year-on-year, due to significant expansion of the fleet (net increase of 59 aircraft, or 23.7%, on operating leases compared with 30 June 2017), as well as a year-on-year increase in the Libor rate in 6M 2018 (average three-month Libor rose by 1.0 p.p. to 2.13%).

Aircraft maintenance costs grew by 29.2% year-on-year to RUB 20,259 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 growth of maintenance costs due to higher product quality demands.

Selling, general and administrative expenses (SG&A) decreased by 3.0% year-on-year to RUB 14,078 million, following the launch of a cost optimisation programme.

Amortisation and customs tariffs decreased by 10.4% year-on-year to RUB 6,901 million, due to a revision of plans for the use of fixed assets and an increase in projected length of service, as well as a reduction in the number of aircraft on financial leases.

Other expenses decreased by 6.4% year-on-year to RUB 16,944 million, due to a decrease in reserves for regular aircraft maintenance and repair work.

As a result of the impact of these factors, EBITDAR totalled RUB 46,363 million. The EBITDAR margin was 17.4%.

Non-operating gains and losses

RUB million, unless stated otherwise

Q2 2018

Q2 2017

Change

6M 2018

6M 2017

Change

Operating profit / (loss)

11,317 

12,633 

(10.4%)

(279

7,697 

-

(Loss) / profit from investments, net

(108) 

(13) 

-

107 

(70) 

-

Finance income

1,242 

2,812 

(55.8%)

2,124 

4,783 

(55.6%)

Finance costs

(2,436) 

(2,121) 

14.9%

(4,369) 

(4,159) 

5.0%

Realised hedging result

(1,691) 

(1,357) 

24.6%

(2,984) 

(2,748) 

8.6%

Share of results of associates

45 

45 

-

43 

34 

26.5%

Profit / (loss) before tax

8,369 

11,999 

(30.3%)

(5,358

5,537 

-

Income tax

(2,054) 

(3,770) 

(45.5%)

130 

(2,647) 

-

Profit / (loss) for the period

6,315 

8,229 

(23.3%)

(5,228

2,890 

-

In 6M 2018, finance income decreased by 55.6% year-on-year to RUB 2,124 million, reflecting lower earnings from exchange-rate differences, as well as a general trend towards lower interest rates in Russia.

Finance costs increased by 5.0% year-on-year to RUB 4,369 million, primarily due to effect from exchange-rate differences and recognition of long-term insurance deposits on aircraft leases at fair value. The increase in finance costs was partially compensated by a decrease in debt in 2017, which led to a reduction in the cost of debt servicing. 

The realised loss from hedging of RUB 2,984 million was attributable to a realised result related to hedging of USD-denominated revenue through USD-denominated lease obligations.

Aeroflot Group’s net loss for 6M 2018 amounted to RUB 5,228 million. 

Debt and liquidity

RUB million, unless stated otherwise

30.06.2018

31.12.2017

Change

Loans and borrowings

3,524

3,181

10.8%

Finance lease liabilities

92,632

100,689

(8.0%)

Pension liabilities

943

922

2.3%

Total debt

97,099

104,792

(7.3%)

Cash and short-term investments

97,755

54,909

78.0%

Net debt

(656)

49,883

-

Net debt / EBITDA

-

0.9x

-

Total debt as of 30 June 2018 decreased by 7.3% compared to 31 December 2017 to RUB 97,099 million. The reduction was due to a decrease in finance lease liabilities following the decommissioning of four aircraft and reclassification of several aircraft to assets held for sale.

As of 30 June 2018, undrawn lines available to Aeroflot Group from major Russian and international banks amounted to RUB 91.7 billion.

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