20
16
Higher
Values

ANNUAL REPORT
PJSC AEROFLOT

Company Profile

Aeroflot Group Airlines

Aeroflot Group is Russia’s largest airline group and one of Europe’s leading passenger airlines.

Aeroflot is Russia’s biggest carrier, leader of the Russian civil aviation industry, and one of the oldest airlines in the world. Aeroflot is based in Moscow Sheremetyevo Airport.

Rossiya is one of Russia’s largest carriers and the market leader in the North-West of the country. Based in Pulkovo (Saint Petersburg), Vnukovo (Moscow) and Rostov-on-Don airports. In addition to its scheduled flights, Rossiya operates charter flights.

Aurora is the Group’s carrier in the Russian Far East. It is based at Vladivostok, Yuzhno-Sakhalinsk and Khabarovsk airports and operates flights between the key population centres in the Far East and Eastern Siberia and flights from its base airports to remote cities and villages of the region.

Pobeda is the Group’s low-cost carrier, launched to further increase social mobility. Pobeda is based at Vnukovo airport in Moscow.

2016 Results

In 2016, Aeroflot Group achieved high operating and financial results despite the challenging situation in the passenger transportation market. The Group strengthened its market position thanks to its effective strategy, which is well adapted to external requirements and is based on a presence in different market segments, and also to digitalisation and focus on financial discipline.

42.3%
share of the Russian air transportation market
43.4 mn
passengers carried
10.3%
passenger traffic increase
14.1%
international passenger traffic increase
7.6%
domestic passenger traffic increase
42.1%
share of international passenger traffic
81.5%
Passenger load factor
3.1 p.p.
passenger load factor increase
326
scheduled routes
51 country
flight network
153
unique destinations in the summer schedule, 144 in the winter schedule
SkyTeam
Aeroflot is a member of the global alliance
292
aircraft in the fleet
30
aircraft – net increase in the fleet
4.2 years
average age of Aeroflot airline fleet
6.5 years
average age of Aeroflot Group fleet
4 stars in the Skytrax rating – Aeroflot airline
Aeroflot is the Best Airline in Eastern Europe according to Skytrax World Airline Awards
37
long-haul aircraft have Wi-Fi access points
72%
Aeroflot airline’s Net Promoter Score
36.6 thousand
people employed by the Group companies (as at 31 December 2016)
Social Support, Non-state Pension Coverage – responsible approach to employees
7 thousand
free tickets issued as part of the Mercy Miles project
Support for Russian sports, culture, and cinema
7+
corporate governance rating assigned by the Russian Institute of Directors
3
independent directors on the Board of Directors
Compliance with the key requirements of the Corporate Governance Code
40.4%
free float
RUB
495.9 billion
revenue (+19.4%)
RUB 137.6 billion
EBITDAR, 27.7% EBITDAR margin
RUB 38.8 billion
net income
RUB 91 billion
decrease of net debt

Operating and Financial Highlights

Passenger traffic

MILLION PAX

Passenger load factor

%

Passenger turnover

billion RPK

Available seat-kilometres

billion ASK

Revenue

RUB BILLION

EBITDAR and EBITDAR margin

RUB BILLION AND %

EBITDA and EBITDA margin

RUB BILLION AND %

Net profit

RUB BILLION

Investment Case

Aeroflot Group

  • Leader of the Russian air transportation market
  • Young and efficient aircraft fleet
  • Business highly adaptable to macroeconomic environment
  • Stable operational growth and improving financial results
The Group’s strength Description & objective 2016 results
Business diversification based on a multi-brand strategy Diversification of the Group’s activity by segment to maximise flexibility in any economic environment Integration of regional companies (Donavia and Orenair) to create a single regional carrier in the mid-market price segment, Rossiya airline. Further development of Pobeda airline. In 2016, Pobeda carried 4.3 million passengers.
Presence in attractive market segments Expansion in profitable segments and in markets with the long-term potential Flights to new destinations in Kazakhstan launched in 2015 (about 0.5 million passengers carried). The frequency of flights to London increased (from 21 to 35 flights per week). Aeroflot airline’s passenger traffic on international routes increased by 10.6%.
Standardised high-quality product Ensuring consistently high product quality to attract and retain passengers Aeroflot was awarded 4-Star Airline status and recognised as the Best Airline in Eastern Europe for the fifth time by Skytrax World Airline Awards.
Balanced route network built around the hub at Sheremetyevo airport Diversification of destinations to optimise presence in regions with different demand patterns and network development to promote synergies The Group continued to improve route network quality: scheduled flights frequency grew by 4.8%, driving better flight connectivity. Route network expansion promotes transit traffic growth, including in the international transit segment: Aeroflot airline carried 3.7 million passengers in the segment.
Efficient financial management and consistent cost control Cost optimisation to ensure competitive edge RASK growth (+10.3%) outpacing CASK growth (+5.7%).

Key Events

Developing a multi-brand platform

28 March

The new reorganised Rossiya airline, formed from the integration of the Group’s three regional carriers (Rossiya, Donavia, and Orenair), launched flight operations.

31 December

Pobeda airline’s passenger traffic reached 4.3 million (+38.7% y-o-y).

FOR MORE DETAILS SEE
THE STRATEGY SECTION

Improving the fare system

28 January

Aeroflot airline reduced fares for its own and subsidiaries’ outbound flights under its commercial management by 10%.

1 November

Aeroflot airline introduced an improved fare structure. The difference between fare categories was reduced significantly in the new flexible fare line, making extra services and privileges more affordable for passengers.

FOR MORE DETAILS SEE
THE SALES AND DISTRIBUTION SECTION

Continuous fleet upgrade

25 August

PJSC Aeroflot and United Aircraft Corporation announced the completion of the firm contract for the delivery of 30 Sukhoi Superjet 100 aircraft. In 2017 and 2018, the Company expects to receive 20 more SSJ100 aircraft.

23 September

During the year, the Company worked to accept aircraft previously operated by Transaero: a total of 12 Boeing 747 and Boeing 777 were accepted, as well as 6 Airbus A320Family aircraft from the bid book.

FOR MORE DETAILS SEE
THE AIRCRAFT FLEET SECTION

Passenger service and new technologies

1 July

Aeroflot lifted the restriction on the use of mobile phones and tablets during take-off and landing.

19 July

Aeroflot started cooperation with TripAdvisor. As an electronic feedback platform for air passengers, TripAdvisor enables Aeroflot to improve customer feedback handling and customer service.

1 September

Aeroflot reduced the cost of the Internet on-board (in-flight Wi-Fi) service and introduced a time-based rate. Internet connection is available on-board all the airline’s wide-body aircraft.

6 October

Aeroflot provided access to Apple Pay for its passengers.

FOR MORE DETAILS SEE
THE INFORMATION TECHNOLOGY SECTION

Developing corporate governance, investor relations and increasing transparency

31 March

Aeroflot launched an updated version of its website for shareholders and investors. The completely new IR section will offer information and resources for the investment community in a modern, convenient, and user-friendly format.

8 July

Aeroflot was assigned a 7+ corporate governance rating by the Russian Institute of Directors, based on the monitoring results.

18 October

Aeroflot held the Capital Markets Day, a meeting between the Company’s top managers and leading Russian and foreign investors and analysts.

FOR MORE DETAILS SEE
THE CORPORATE GOVERNANCE SECTION

Enhancing the IT infrastructure

29 March

Aeroflot launched its own online lost baggage tracking service based on the World Tracer international tracking system.

28 June

Aeroflot switched to the Aeroflot Bonus loyalty programme management system based on the innovative Oracle Siebel Loyalty Management platform.

18 August

Aeroflot airline and SAP completed the transition to the SAP HANA ERP platform to increase business process productivity.

19 September

Aeroflot and Technoserv IT company completed a new data centre based on Hewlett Packard Enterprise equipment. The project increased the capacity of the Company’s main data centre by 2.5 times.

FOR MORE DETAILS SEE
THE INFORMATION TECHNOLOGY SECTION

Route network development

1 June

Aeroflot launched scheduled flights to Valencia and Alicante (Spain) and to Lyon (France).

30 October

Aeroflot launched domestic flights on the new domestic route from Moscow to Syktyvkar.

FOR MORE DETAILS SEE
THE ROUTE NETWORK SECTION

Increasing social mobility

11 January and 28 September

Aeroflot’s CEO Vitaly Saveliev. They discussed the airline’s results and future plans, the situation in the air transportation market, including Transaero crisis resolution, the low-cost carrier development, and the flat fare programme aimed at improving transport connection with Russia’s remote regions and increasing mobility across Russia.

FOR MORE DETAILS SEE
THE CORPORATE SOCIAL RESPONSIBILITY SECTION

Supporting sports

24 May

Aeroflot acted as the official carrier of Russia’s national basketball teams.

28 July

Aeroflot’s SU7150 special flight delivered Russia’s Olympic team from Moscow's Sheremetyevo airport to Rio de Janeiro (Brazil), that hosted 2016 Summer Olympic Games.

FOR MORE DETAILS SEE
THE CORPORATE SOCIAL RESPONSIBILITY SECTION

Events after the reporting period

7 February and 18 April 2017

The Aeroflot brand was recognised as the world’s most powerful brand in the airlines industry and the strongest brand in Russia by Brand Finance.

8 February 2017

Aeroflot won East Capital’s Best Growth Award.

7 March 2017

Fitch Ratings international agency affirmed Aeroflot’s rating at ‘B+’, Outlook Stable.

10 April 2017

Aeroflot was recognised as the Best Airline in Europe by users of ТripAdvisor, the world’s largest travel website.

11 April 2017

Aeroflot was recognised as the most popular foreign airline in China at the annual Flyer Award Ceremony 2017.

Industry Recognition and Awards

Awards

  • Aeroflot airline was awarded four stars (out of five) by Skytrax (a global consulting company considered the world’s most influential assessor of airline and airport service quality) for its high-quality service. Aeroflot airline was recognised as the Best Airline in Eastern Europe by Skytrax World Airline Awards for the fifth time.
  • For the fourth time in a row, Aeroflot won the Condé Nast Traveller Readers’ Choice Award as the Best Russian Airline.
  • Aeroflot won the Readers’ Choice prize at Air Transport News Awards 2016. The airline’s CEO Vitaly Saveliev was named Leader of the Year.
  • Aeroflot Group companies won in a number of categories of the Wings of Russia national airline award. Aeroflot was recognized as the Russian Airline of the Year — People’s Choice and won in the International Carriage category.
  • Aeroflot won the Best.ru/Company of the Year national business award in the Transport category.
  • Aeroflot airline’s in-flight entertainment system interface won silver at the International Design Awards in the Multimedia / Interface Design category.
  • Aeroflot won the prestigious travel award, Business Traveller Russia and CIS, in the Best European Airline, Best Business Class on Medium-Haul Flights, and Best Airline in Russia and CIS categories.
  • Aeroflot won the prestigious SAP Value Award in the IT sector, in the Expanding Horizons category, for the transition to a new level of business transformation.
  • Aeroflot received the independent award Innovation Time 2016 in the Transport and Mechanical Engineering category.
  • Once again, Aeroflot won the prestigious international Randstad Award as the most attractive Russian employer in the Transport and Logistics category.
Read more

Ratings

  • Aeroflot received the top rating (seven out of seven stars) as the safest airline in the world. The rating is compiled by Airlineratings.com, an independent rating website, on a regular basis.
  • In the rating compiled by the international analytical portal anna.aero, Aeroflot Group was rated among top 20 global carriers by the number of new destinations, and among top 3 by new routes with the most frequent flights. Pobeda airline was rated No. 7 globally by the number of new routes launched.
  • According to Routehappy, a search engine for comfortable flights, Aeroflot is among the top 10 airlines globally in terms of on-board Wi-Fi Internet access for passengers on long-haul flights.
  • Aeroflot was rated eighth in the Top 10 Airlines in the World 2016 rating compiled by TripAdvisor based on passenger reviews.
  • Aeroflot came second among the world’s best airlines and remains the best air carrier in Russia according to National Geographic Traveler.
  • The low-cost carrier Pobeda was rated the third best Russian airline by National Geographic.
Read more