Aeroflot · RUS:AFLT
Aeroflot — Investor Presentation (June 2014)
49 slides from Aeroflot's investor presentation, June 2014
Slide 1: Aeroflot – Russian Airlines Investor Presentation
AEROFLOT – RUSSIAN AIRLINES INVESTOR PRESENTATION June 2014
Slide 2: Disclaimer
Disclaimer This communication has been prepared by and is the sole responsibility of the issuer that is the subject of this communication. This communication is provided for information purposes only. Any offering of any security or other financial instrument that may be related to the subject matte
Slide 3: Aeroflot Today – #1 Russian Carrier with a Global Network
Aeroflot Today – #1 Russian Carrier with a Global Network 1 #1 airline in one of the fastest growing global markets with leading positions on both domestic and international routes 2 An expanding global network with 1411 destinations in 54 countries (incl. Russia) 3 Best product and customer experie
Slide 4: Modern Global Airline, Rich 90-year Heritage
Modern Global Airline, Rich 90-year Heritage 2010-2011: New 1991: 2000: Listed modern terminals 2006: Joined 2014: Launch of Reorganised as on Moscow D & E put into operation Official airline SkyTeam Low Cost Carrier Joint Stock Exchange at Russia’s main airport alliance Company (+25 gates and 17m p
Slide 5: Strategic Overview: Market Dynamics and Aeroflot's Approach
Strategic Overview: Market Dynamics and Aeroflot’s Approach 4
Slide 6: Global Air Transportation: 2014 a Rebound Year
Global Air Transportation: 2014 a Rebound Year Demand: European PAX Growth Accelerating in 2014 Supply: European ASMs1: Risk for 2014? 24% 120 000 40% 18% 96 000 30% 12% 72 000 20% 6% 5,3% 48 000 10% 0% 24 000 0% (6)% 0 (10)% (12)% янв-2010 янв-2011 янв-2012 янв-2013 янв-2014 янв-2005 июл-2006 янв-2
Slide 7: Regional Growth Trajectory
Regional Growth Trajectory Growth Rates for 2013-2032 Global North America Europe Russia and CIS 5,9% 4,7% 3,2% 3,3% 3,5% 4,0% 2,5% 1,8% RPK Growth GDP Growth RPK Growth GDP Growth RPK Growth GDP Growth RPK Growth GDP Growth Latin America Middle East Asia Pacific 6,4% 5,8% 5,2% 4,5% 4,0% 3,7% RPK Gr
Slide 8: Emerging Markets' Fundamentals
Emerging Markets’ Fundamentals 10 Largest Economies in 2030 Global Middle Class by 2032 5,211 2030 GDP ($ trillion, Nominal) Global Middle Class¹ (millions of people) 757 x2 Other 3,576 578 47,5 2,228 3 526 x4 Asia Pacific 35,8 432 2 038 4,1 856 10,4 265 262 253 North America 8,7 6,7 6,6 6,3 5,4 5,2
Slide 9: Significant Strength of the Russian Market
Significant Strength of the Russian Market Russian Total Passenger Traffic Growth (m PAX)¹ Passengers per Capita Overview2 UK 3,2 132,2 139,4 117,2 124,4 103,7 110,2 USA 2,6 83,7 88,5 61,5 73,6 78,4 64,4 68,8 1,5 EU-27 35,3 26,2 … 39,2 41,4 43,7 46,0 48,5 50,8 Russia 0,7 2008 2013 2014E 2015E 2016E
Slide 10: Aeroflot: a Market Leader
Aeroflot: a Market Leader Domestic and International Passenger Traffic in Russia (2013) Largest market share in Russia exceeding the combined market Market share of the 3 most sizeable competitors Others Position Market size is set to increase as a result of implementing multi- 18% brand strateg
Slide 11: 2025 Strategy
2025 Strategy LEADING GLOBAL AIRLINE Top 5 European and top 20 global airline group by revenue and passenger turnover 70m passengers per year, 30m domestically Extensive customer reach and broad market penetration Sustainable returns to shareholders Innovation/ Multi-brand Global Strategic S
Slide 12: Multi-brand Strategy: Capturing Demand Across Segments and Geographies
Multi-brand Strategy: Capturing Demand Across Segments and Geographies Business Regional Traffic Leisure Price Sensitive Regional Business Model: direct flights Short-haul (1-1.5 hr flight) Regional jets Business Model: demand- Business Model: high based frequencies, direct frequency direct
Slide 13: Continued Improvement of Subsidiaries' Performance
Continued Improvement of Subsidiaries’ Performance Operating Income / Net Income ($m)1 2012 2013 Change Highlights Full integration into Aeroflot group completed — Commercial functions transferred to Aeroflot — Standardised product and service offering — Unification of aircraft fleet 16 / 17 (2) /
Slide 14: Dobrolet Project Summary
Dobrolet Project Summary Product Offering Ticket Pricing Discount 20-40% discount compared to fares of A typical LCC offering to attract price “traditional” carriers sensitive customers Majority of tickets are non-refundable Substantially different from Aeroflot’s Sales of tickets via dire
Slide 15: Network and Fleet
Network and Fleet AEROFLOT AZ” issian Airlines Ru:
Slide 16: Networks Operated and Key Statistics
Networks Operated and Key Statistics Flights Dynamics of Aeroflot JCS by Region (%) Average Flight Frequency per Route of Aeroflot JSC Europe 7,4% 20121 2013 Change CIS 30,3% Scheduled 12.0 13.2 10.0% Charter 0.8 0.4 (50.0)% Russia 14,8% International Scheduled 9.7 10.7 10.3% Asia 4,5% Domestic Sche
Slide 17: Traffic and Capacity Development
Traffic and Capacity Development (%, 2013 vs. 2012) North and Central America Europe Russia and CIS 49,0 % 48,1 % 51,4 % 20,4 % 18,3 % 21,8 % 18,6 % 17,2 % 17,5 % 1,3 p.p 0,7 p.p (1,8) p.p Passengers RPK ASK SLF Passengers RPK ASK SLF Passengers RPK ASK SLF carried carried carried Middle East and Af
Slide 18: Summer 2014 Schedule
Summer 2014 Schedule Increase in Available Seat-Kilometres (ASK) in Summer 2014 compared with Summer 2013 Long-Haul Destinations Mid-Haul Destinations 12% 9% 27% 6% Domestic International Domestic International Long-Haul Destinations Mid-Haul Destinations 17% 27% 4% 6% 1% 17% 27% North and Central A
Slide 19: Integrated Approach for a Modern, Safe, Cost Effective Fleet
Integrated Approach for a Modern, Safe, Cost Effective Fleet 1 Fleet Planning 2 Fleet Acquisition Network requirements drive capacity needs Business case driven decision Short lead time for capacity decisions Maintaining healthy competition among Continuous fleet modernisation aimed at
Slide 20: Aeroflot Group Fleet in Operation
Aeroflot Group Fleet in Operation Type1 Aeroflot Subsidiaries Total Owned Financial Lease Operating Lease Boeing B-767 5 3 8 - - 8 Airbus A-330 22 - 22 - 8 14 Long-haul Tu-204 - 6 6 - 6 - Boeing B-777 5 3 8 - 5 3 2 Ilyushin Il-96-300 6 - 6 6 - - McDonnell Douglas MD-11 3 - 3 - - 3 Total 41 12 53 6 1
Slide 21: Fleet Replacement Plan for Aeroflot Group
Fleet Replacement Plan for Aeroflot Group Planned Changes Winter 2013/14 Fleet Winter 2017/18 Fleet Phased Out Phased In 53 Aircraft 45 Aircraft B-767 Tu-204 A-350 A-330 A-330 IL-96 B-777 Long Haul Tu-2041 B-767 A-350 B-777 MD-11 B-7872 IL-96 MD-11 164 Aircraft 227 Airc
Slide 22: Aeroflot Group Fleet Order and Phase-Out Schedule
Aeroflot Group Fleet Order and Phase-Out Schedule Total Aircraft Delivery Schedule in Accordance with Existing Contracts1 Type of Aircraft Delivered as at 31-Jan-2014 2014 2015 2016 2017 Long-haul 53 5 3 5 9 A-330 22 - - - - B-767 8 - - - - B-777 8 5 3 3 - B-787 0 - - 2 9 Ilyushin Il-96 6 - - - - Tu
Slide 23: Financial Overview
Financial Overview AEROFLOT AZ” issian Airlines Ru:
Slide 24: Growing Revenue Units: Trend of a Decade
Growing Revenue Units: Trend of a Decade ASK (bn) and Seat Load Factor (%) Passenger Traffic (m PAX) 77,1% 77,0% 78,1% 78,2% 31,4 69,7% 70,2% 70,9% 70,2% 109,1 27,5 68,2% 68,4% 95,6 60,0 16,4 50,8 14,1 43,9 42,6 10,2 11,6 11,1 32,9 34,9 39,7 8,1 8,7 31,7 7,3 2004 2005 2006 2007 2008 2009 2010 2011 2
Slide 25: Growing Financial Metrics: Trend of a Decade
Growing Financial Metrics: Trend of a Decade Revenue (US$m) EBITDAR and EBITDAR Margin 1 602 9 136 8 138 22% 1 238 893 1 065 1 024 21% 21% 5 378 20% 18% 4 603 25% 4 319 723 747 15% 3 808 3 346 618 23% 19% 2 993 462 506 16% 2 159 2 540 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006
Slide 26: Continuous Quest for Cost Efficiencies
Continuous Quest for Cost Efficiencies Cost Per ASK ($ cents) Continuous negotiations with fuel suppliers to 8,32 8,14 1 Fuel achieve more competitive pricing 7,81 Active monitoring of fuel consumption 1,85 1,68 1,50 Focus on increased productivity 0,74 0,64 0,62 Optimising team structures t
Slide 27: New Modern Fleet and High Utilisation Rates Reducing Fuel Costs
1 New Modern Fleet and High Utilisation Rates Reducing Fuel Costs Aeroflot Group Fuel Consumption per ASK (gr/ASK) Aeroflot Group Fuel Consumption per RTK (gr/tkm) (7.1)% (3.8)% (4.2)% (0.6)% 28 330 26 315 25 313 2011 2012 2013 2011 2012 2013 Aeroflot is achieving efficiency gains in fuel costs as
Slide 28: Efficient Workforce Supporting Growing Volumes
2 Efficient Workforce Supporting Growing Volumes Headcount Structure for Airline Operations RPK / Avg. Airlines Headcount (m pkm per employee) 31-Dec-12 31-Dec-13 % 9% Cabin crew 10,179 11,020 8% 3,38 Maintenance and repairs 4,204 4,048 (4%) 3,09 Airport services 4,900 5,166 5% Sales and marketing 2
Slide 29: Strong Balance Sheet and Comfortable Leverage Level
Strong Balance Sheet and Comfortable Leverage Level Debt ($m) Total Debt/LTM EBITDA 31-Dec-2012 31-Dec-2013 Change 3,6x 3,9x 2,9 x 3,2 x 2,6x 2,1 x Borrowings 706 410 (42%) 31-Dec-2011 31-Dec-2012 31-Dec-2013 Finance Lease 1,882 2,201 17% Total Debt / EBITDA Net Debt / EBITDA Liabilities Borrowings
Slide 30: Operating Free Cash Flow and Liquidity
Operating Free Cash Flow and Liquidity 2013 Operating Free Cash Flow ($m) 60 1 035 105 909 104 (126) 335 26 794 (141) 578 430 Profit Before Depreciation Interest Unrealized Net Other Adj. Cash Flows Working Capital Net Cash Flows Net Capital Net Pre-delivery Free Cash Flow Free Cash Flow Income Tax
Slide 31: Corporate Governance
Corporate Governance AEROFLOT AZ” issian Airlines Ru:
Slide 32: Corporate Governance Overview
Corporate Governance Overview Corporate Governance Highlights Key Corporate Governance Areas Key Corporate Governance principles Balanced structure of the Board of Directors with representatives of the Board Structure Government, minority shareholders, management and independent directors – Tran
Slide 33: Key Management Bodies Role in Corporate Governance
Key Management Bodies Role in Corporate Governance Board of Directors Role in Corporate Governance Management Board Role in Corporate Governance Key priorities for the Board are Aeroflot’s day-to-day operations are directed by the CEO and Executive Board – Ensuring Aeroflot’s long-term sustainab
Slide 34: Appendix: Supplementary Materials
Appendix: Supplementary Materials 33
Slide 35: RASK-CASK peer group analysis
RASK-CASK peer group analysis RASK (Passenger Revenue) [$ cents / ASK] 10,99 9,00 9,81 9,37 8,79 8,40 8,84 8,26 7,13 7,57 Aeroflot Air France-KLM Copa Holdings Delta Airlines IAG LatAm Airlines Lufthansa Group Turkish Airlines US Airways Average peer group RASK CASK [$ cents / ASK] 12,39 12,15 10,31
Slide 36: Operating indicators of Aeroflot Group
Operating indicators of Aeroflot Group Passenger traffic [ths. pax] Passenger turnover [mln. pkm] 3 394 3 453 3 080 9 138 3 018 8 909 3 072 2 703 8 098 8 044 2 542 2 610 2 979 2 481 2 803 7 295 2 365 6 929 8 141 2 306 2 649 2 316 6 622 7 896 2 256 6 528 7 510 2 157 2 241 6 180 6 363 6 253 2 022 2 38
Slide 37: Track Record of Profitable Growth with Strong Future Growth Opportunities
Track Record of Profitable Growth with Strong Future Growth Opportunities Passenger Traffic Development (m PAX) Size of Bubble: # Passengers (m PAX) ~70+ 31.4 27.5 16.4 14.1 11.1 11.6 10.2 8.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2025 Aeroflot delivered impressive growth over the last deca
Slide 38: Maintaining Modern Fleet – Among the Youngest in Europe
Maintaining Modern Fleet – Among the Youngest in Europe Passenger Fleet Structure: JSC Aeroflot1 Average Fleet Age of Selected Airlines (2012)1 16,2 15,0 139 16 13,4 13,0 12,9 125 11,7 11,0 16 109 9,7 9,5 13 9,4 10 94 7 7,1 90 6,8 88 6,7 6,6 6,4 6 9 5,4 5,3 6 32 10 11 9,3 8,4 11 102 110 6,0 90 71 5,
Slide 39: High Quality of Maintenance – Leveraging Own MRO Facilities
High Quality of Maintenance – Leveraging Own MRO Facilities Maintenance Man-Hour / Flight Hour Ratio Summary Overview (for Aeroflot JSC) Own MRO Facilities (23)% (8)% (23)% — Strong team of 354 qualified engineers and 1,665 technicians — Own maintenance bases at Aeroflot and subsidiary airlines 3,
Slide 40: Key Financial Results of Aeroflot Group
Key Financial Results of Aeroflot Group $m, Unless Otherwise Stated Q4 2012 Q4 2013 Change FY 2012 FY 2013 Change Revenue 2,117 2,104 (0.6)% 8,138 9,136 12.3% RPK1 (m pkm) 18,388 19,910 8.3% 74,617 85,273 14.3% Yield2 ($ cents/pkm) 9.3 8.8 (5.4)% 9.1 9.1 - EBITDAR3 169 27 (84.0)% 1,238 1,602 29.4% M
Slide 41: Revenue Breakdown
Revenue Breakdown Traffic Revenue Breakdown (FY 2013) Revenue from Scheduled Passengers Carriages ($m)1 Y-o-y 2013 2013 2012 Change Charter Passenger Flights 6.7% 41% Russia 3,000 2,562 17.1% Cargo 3.8% 35% Europe 2,526 2,278 10.9% 17% Asia 1,250 1,050 19.0% Scheduled Passenger Flights 89.5% 4% N
Slide 42: Revenue Units
Revenue Units Yield: PAX Revenue / RPK ($ cents / pkm) RASK: PAX Revenue / ASK ($ cents / ASK) (5.4)% 0% (5.7)% 0% 9,3 8,8 9,1 9,1 7,0 7,1 7,1 6,6 Q4 2012 Q4 2013 2012 2013 Q4 2012 Q4 2013 2012 2013 Yield ($ cents / pkm)1 RASK ($ cents / ASK)1 10,5 10,4 8,3 8,5 8,1 8,1 6,6 6,6 International Domestic
Slide 43: Group Unit Costs
Group Unit Costs Cost Per ASK ($ cent) (4.1)% (2.2)% 9,01 0,17 0.08 8,81 8,14 (0.19) 7,81 (0.26) 0,01 (0.11) (0.02) (0.20) CASK 2012 ∆ in Staff ∆ in Fuel ∆ in ∆ in Other¹ CASK 2013 CASK Q4 ∆ in Staff ∆ in Fuel ∆ in ∆ in Other¹ CASK Q4 Maintenance 2012 Maintenance 2013 Achieved CASK reductions are
Slide 44: Cost Analysis
Cost Analysis FY 2013, $m Q4 2013 Y-o-y Change FY 2013 Y-o-y Change 29.2% 29,2% Fuel 607 0.7% 2,485 8.6% Opex (ex. Fuel) 19.5% 19,5% Aircraft, Traffic and 406 4.4% 1,659 14.3% Passenger Servicing 16.7% 16,7% Staff 420 22.4% 1,424 14.7% 7.9% 7,9% SG&A1 227 14.6% 674 10.7% 7.5% 7,5% Maintenance 198 23
Slide 45: Group Operating Income Analysis
Group Operating Income Analysis Annual Operating Income Evolution, y-o-y basis ($m) 70 29 82 899 31 (311) (182) 622 (207) (66) (82) 358 x 1.7 Operating Air Carriage Air Carriage Other Revenue Fuel Fuel Carriage Fuel Price Staff Costs Aircraft, Traffic D&A³ Other Operating Operating Income 2012 Volum
Slide 46: Group Net Income
Group Net Income Aeroflot Group Net Income ($m) 39% 281 (21) (2) 24 230 (17) (3) 25 0,4 5 166 (63) Total net loss of subsidiary airlines of $105m JSC Rossiya Donavia Orenair Aurora Vladivostok Sherotel Aeromar Aerofirst² Other Group Group Aeroflot Airlines Air¹ (including Net Net minority) Income 20
Slide 47: Aeroflot Group Structure
Aeroflot Group Structure JSC Aeroflot Airlines Service companies 100% CJSC Aeromar 51% JSC Sheremetyevo 8.96% JSC Donavia In-flight catering Base airport JSC Orenair 100% CJSC AeroMASh-AB 45% CJSC Transport 3.85% Aviation Security Clearing House OJSC Rossiya 75%-1 share Airlines Alt Rejser 100% LLC
Slide 48: Aeroflot Shareholding Structure and Privatisation Update
Aeroflot Shareholding Structure and Privatisation Update Aeroflot Shareholding Structure1 Privatisation and Listing Update Aeroflot is on the list of Russian state-controlled SC Rostec companies potentially to be privatised in 2014-2016 Treasuries 3.5% 6.0% — Final decision has not been issued b
Slide 49: Thank You!
THANK YOU! For additional information please contact Aeroflot Investor Relations Team: Website: http://www.aeroflot.ru/cms/en/about/shareholders_and_investors E-mail: ir@aeroflot.ru Phone: +7 495 258 0686 Fax: +7 499 500 6963