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Company News

04 March 2019

AEROFLOT ANNOUNCES 4Q AND FY 2018 IFRS FINANCIAL RESULTS

Moscow, 4 March 2019 – Aeroflot Group (“the Group”, Moscow Exchange ticker: AFLT) today publishes its consolidated financial statements for the three months (4Q) and full year (FY) ending 31 December 2018, in accordance with International Financial Reporting Standards.

Key financial highlights

RUB million, unless stated otherwise

4Q 2018

4Q 2017

Change

12M 2018

12M 2017

Change

Revenue

 145,225

   128,161

     13.3%

   611,570

   532,934

     14.8%

EBITDAR

  11,522

     20,792

    (44.6%)

   122,479

   121,808

       0.6%

EBITDAR margin

    7.9%

     16.2%

(8.3) p.p.

      20.0%

     22.9%

(2.9) p.p.

EBITDA

(13,591)

       2,709

-

     33,598

     56,015

    (40.0%)

EBITDA margin

-

       2.1%

-

       5.5%

     10.5%

(5.0) p.p.

(Loss) / profit for the period

(16,777)

    (4,089)

-

       5,713

     23,060

    (75.2%)

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

“In 2018 Aeroflot Group carried 55.7 million passengers, an 11.1% increase year-on-year. Growth of operational metrics resulting from the expansion of our route network and additions to the fleet were accompanied by significant developments in the Group’s strategy. Aeroflot, our flagship airline, moved domestic flights to a new, modern terminal at Sheremetyevo airport, leading to an increase in service quality on the ground. Rossiya moved its scheduled flights from Vnukovo to Sheremetyevo, leading to improved transit connectivity with Aeroflot’s core network. Pobeda significantly increased growth rates, expanding the availability of its low-cost product offering. Finally, another important landmark was the updating of the Group’s long-term targets for the next five years.

“The most significant factor affecting the Group’s financial results for 2018 was the unprecedentedly fast increase in the average cost of jet fuel, as well as depreciation of the ruble. Across the Group, jet fuel prices increased by 36%, which at the Group’s consumption volumes led to additional cost of RUB 48 billion. The depreciation of the ruble created additional pressure on the financial results, given that almost half of the Company’s costs are FX-denominated.

“In this situation, a special optimisation programme was launched in addition to existing measures to boost operational efficiency and reduce costs. The programme focused on active capacity and revenue management in addition to direct cost reduction, and has already delivered results: excluding fuel, CASK for the full year increased by just 0.8%, despite increasing currency pressures on FX-denominated cost lines. We were thus able to limit increases in total unit costs, including fuel, to 9.2%. In a climate in which domestic consumers are being conservative with their travel spending, we were able to generate RASK growth of 4.9% while maintaining load factor levels.

“High fuel prices and excess capacity in the market persisted during the low season in Q4. The correction in oil prices was reflected in jet fuel prices only in December, but had a limited effect, while average jet fuel prices remained above the levels of the previous year. Currency pressures on operating costs in Q4 did not weaken, but rather strengthened. These factors explain the increased loss for the final quarter of the year. 

“However, despite the record increase in the price of jet fuel and the depreciation of the ruble, thanks to its extensive optimisation programme the Group was able to record a profit for the year of RUB 5,713 million.”

Key operating highlights

 

4Q 2018

4Q 2017

Change

12M 2018

12M 2017

Change

Passengers carried, thousand PAX

13,462

11,789

     14.2%

55,710

50,129

     11.1%

- international

5,978

5,329

     12.2%

24,737

22,550

      9.7%

- domestic

7,483

6,460

     15.8%

30,973

27,579

     12.3%

Revenue Passenger Kilometres, million

34,723

30,841

12.6%

143,151

130,222

9.9%

- international

20,524

18,627

     10.2%

83,249

77,034

      8.1%

- domestic

14,199

12,214

     16.3%

59,901

53,188

     12.6%

Available Seat Kilometres, million

43,682

38,457

     13.6%

173,075

157,211

     10.1%

- international

26,663

23,610

     12.9%

102,843

93,429

     10.1%

- domestic

17,019

14,847

     14.6%

70,231

63,781

     10.1%

Passenger load factor, %

79.5%

80.2%

 (0.7) p.p.

82.7%

82.8%

  (0.1) p.p.

- international

77.0%

78.9%

 (1.9) p.p.

80.9%

82.5%

  (1.5) p.p.

- domestic

83.4%

82.3%

    1.2 p.p.

85.3%

83.4%

    1.9 p.p.

In 2018, Aeroflot Group carried 55.7 million passengers, up 11.1% year-on-year.

Revenue

RUB million, unless stated otherwise

4Q 2018

4Q 2017

Change

12M 2018

12M 2017

Change

Passenger traffic revenue

   124,318

107,888

  15.2%

   534,292

   458,390

 16.6%

  - scheduled passenger flights

   117,046

 99,803

 17.3%

   496,454

   427,529

16.1%

  - charter passenger flights

       7,272

   8,085

(10.1%)

     37,838

     30,861

 22.6%

Cargo flight revenue

       6,061

    5,226

 16.0%

     18,900

     16,526

 14.4%

Other revenue

     14,846

 15,047

  (1.3%)

     58,378

     58,018

   0.6%

Total revenue

   145,225

128,161

  13.3%

   611,570

   532,934

 14.8%

In 2018, Aeroflot Group’s revenue increased by 14.8% year-on-year to RUB 611,570 million.

Revenue from scheduled passenger flights increased by 16.1% year-on-year to RUB 496,454 million, driven by an increase in passenger traffic. Revenue growth was affected by an increase in yields, primarily on international routes, due to the weakening of the ruble against the euro and the consequent effect of this on FX-denominated revenue.

Revenue from charter flights increased by 22.6% year-on-year to RUB 37,838 million, due among other factors to an increase in unit yields on charter flights and the expansion of Rossiya’s charter programme

Cargo revenue rose by 14.4% year-on-year, to RUB 18,900 million as cargo and mail volumes grew by 11.2%.

Other revenue increased by 0.6% year-on-year to RUB 58,378 million due to a rise in FX-denominated revenues from agreements with other airlines, which was offset to a significant degree by a decrease in 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 revenue and revenue from scheduled passenger flights.

Operating costs

RUB million, unless stated otherwise

4Q 2018

4Q 2017

Change

12M 2018

12M 2017

Change

Aircraft servicing and passenger services

   28,321

     21,712

     30.4%

   108,589

     96,418

 12.6%

Staff costs

   21,502

     22,292

      (3.5%)

     82,817

     82,801

    0.0%

Operating lease expenses

   25,113

     18,083

     38.9%

     88,881

     65,793

  35.1%

Aircraft maintenance

    13,518

     10,186

     32.7%

     45,527

     36,433

  25.0%

Sales and marketing, administration and general expenses

      9,265

     12,293

    (24.6%)

     31,743

     36,139

(12.2%)

Depreciation, amortisation and customs duties

      3,598

       4,160

    (13.5%)

     13,941

     15,604

(10.7%)

Other net expenses

   11,198

       8,145

     37.5%

     38,551

     36,650

   5.2%

Operating costs less aircraft fuel

  112,515

     96,871

      16.1%

   410,049

   369,838

 10.9%

Aircraft fuel

    49,899

     32,741

     52.4%

   181,864

   122,685

  48.2%

Total operating costs

 162,414

   129,612

      25.3%

   591,913

   492,523

  20.2%

In 2018, aircraft fuel costs increased by 48.2% year-on-year to RUB 181,864 million. This was due to a 36% year-on-year increase in the average price of aircraft fuel in rubles amid changes in the price of oil, as well as an increase in flight numbers and flying time.

Operating costs, excluding aircraft fuel costs, increased by 10.9% year-on-year to RUB 410,049 million.

Expenses related to aircraft servicing and passenger service amounted to RUB 108,589 million, a 12.6% increase year-on-year, due primarily to the growth of passenger traffic and increased airport fares. Optimisation of service costs helped to reduce the rate of increase of these expenses.

Staff costs remained at RUB 82,817 million. Despite an increase in salaries for aircraft captains effective from the start of 2018 and an increase in staff numbers to support the Group’s operational growth, the Group was able to reduce the rate of growth of these expenses by decreasing remuneration paid to senior management as well as through revaluation of the reserve for future payments.

Operating lease expenses rose to RUB 88,881 million, a 35.1% increase year-on-year, due to significant expansion of the fleet (net increase of 47 aircraft, or 16.8% year-on-year), as well as due to a year-on-year increase in LIBOR (average three-month LIBOR increased by 1.05 p.p. to 2.31%).

Aircraft maintenance costs grew by 25.0% year-on-year to RUB 45,527 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 FX effects.

Selling, general and administrative expenses (SG&A) decreased by 12.2% year-on-year to RUB 31,743 million, following the launch of the programme to optimise costs, including marketing and advertising spend.

Amortisation and customs tariffs decreased by 10.7% year-on-year to RUB 13,941 million, due among other factors to the ongoing reduction in the number of aircraft on financial leases.


Other expenses increased by 5.2% year-on-year to RUB 38,551 million amid an increase in commissions charged by banks and costs for services associated with communication and the booking system.

As a result of these factors, EBITDAR totaled RUB 122,479 million. The EBITDAR margin was 20.0%.

Non-operating gains and losses

RUB million, unless stated otherwise

4Q 2018

4Q 2017

Change

12M 2018

12M 2017

Change

Operating (loss) / profit

(17,189)

 (1,451)

11.8х

     19,657

     40,411

(51.4%)

Loss from investments, net

    (686)

      (36)

 19.1х

        (689)

        (144)

  4.8х

Finance income

853

     778

9.6%

       4,164

       7,127

   (41.6%)

Finance costs

 (2,539)

 (1,894)

 34.1%

   (7,904)

    (8,225)

    (3.9%)

Realised hedging result

 (1,863)

  (1,387)

 34.3%

    (6,788)

    (5,613)

 20.9%

Share of results of associates

         75

        30

2.5х

         254

         170

     49.4%

Results from disposal of companies

   1,240

       -  

            -  

       1,240

            -  

            -  

(Loss) / profit before tax

(20,109)

  (3,960)

5.1х

       9,934

     33,726

  (70.5%)

Income tax

   3,332

    (129)

-

   (4,221)

  (10,666)

  (60.4%)

(Loss) / profit for the period

(16,777)

 (4,089)

4.1х

       5,713

     23,060

  (75.2%)

In 2018, finance income decreased by 41.6% year-on-year to RUB 4,164 million, reflecting lower earnings from exchange-rate differences, as well as a general trend towards lower interest rates in Russia, which affects interest income from deposited free cash.

Finance costs decreased by 3.9% year-on-year to RUB 7,904 million, primarily due to reduction in the cost of debt servicing on the back of significant debt reduction in 2017.

The realised loss from hedging of RUB 6,788 million was attributable to a realised result related to hedging of USD-denominated revenue through USD-denominated lease obligations.

Aeroflot Group’s net profit for 2018 amounted to RUB 5,713 million, down 75.2% year-on-year.

Debt and liquidity

RUB million, unless stated otherwise

31.12.2018

31.12.2017

Change

Loans and borrowings

           3,486

3,181

           9.6%

Finance lease liabilities

         93,224

100,689

          (7.4%)

Pension liabilities

              908

922

          (1.5%)

Total debt

         97,618

104,792

           (6.8%)

Cash and short-term investments

         30,148

54,909

         (45.1%)

Net debt

         67,470

49,883

          35.3%

Net debt / EBITDA

              2.0x

0.9x

-

Total debt as of 31 December 2018 decreased by 6.8% compared to 31 December 2017 to RUB 97,618 million. The reduction was due to a decrease in finance lease liabilities following the decommissioning of 11 aircraft and reclassification of several aircraft to assets held for sale.

As of 31 December 2018, undrawn lines available to Aeroflot Group from major Russian and international banks amounted to RUB 84.2 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