Aeroflot · RUS:AFLT
Aeroflot — FY2014 Earnings Presentation
50 slides from Aeroflot's earnings presentation, Mar 2, 2015
Slide 1: Aeroflot Group 12 Months 2014 Financial Results
Aeroflot Group 12 Months 2014 Financial Results Shamil Kurmashov Deputy CEO for Finance, Network and Revenue Management Giorgio Callegari Deputy CEO for Strategy and Alliances Moscow, Russian Federation March 2, 2015 1
Slide 2: Disclaimer
Disclaimer This document has been prepared by JSC “Aeroflot” (the “Company”). By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following. This document does not constitute or form part of any advertisement of securities, any offer or in
Slide 3: Agenda
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 3
Slide 4: Russian Air Transportation Market
Russian Air Transportation Market 2009 – 2014 Q4 2014/2013 International Routes 7.8% 150.0 Domestic Routes 130.0 111.8 103.7 Growth CAGR Growth Russian Total110.0 91.6 FY13-14 FY09-14 Q4 13-14 Passenger 90.0 80.1 70.5 65.5 1.8% Traffic 70.0 56.7 56.2 64.4 1.8% 14.9% (6.0)% 47.3 (m PAX)1,2 50.0 32.8
Slide 5: Significant Growth Potential of Russian Aviation Market
Significant Growth Potential of Russian Aviation Market Russian Market Remains Significantly Underpenetrated Domestic Passenger Traffic (Russian Civil Aviation) Airline PAX per capita per year1 Million PAX 3.2 46.3 2.6 39.2 35.4 1.5 32.7 1.22 29.2 17.9% 10.8% 0.7 12.0% 8.1% 22.6% UK USA EU-27 Russia
Slide 6: Aeroflot Group Market Position
Aeroflot Group Market Position Passenger Traffic 2014, m PAX Passenger Traffic 2014 dynamics, y-o-y Aeroflot Group Market 31.1%1 37.3%2 15.7% 16.0% 14.6% 14.7% 13.8% 11.6% 34.7 10.7% 10.2% 10.3% 9.2% 9.9% 11.9% 8.0% 11.9% 10.3% 9.5% 9.5% 6.3% 18.4%1 8.9% 8.6% 9.2% 8.0% 16.7%1 22.1%2 6.0% n/a 2.3% 11
Slide 7: Aeroflot Group Overview
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 7
Slide 8: Successful multibranding strategy
Successful multibranding strategy Brand Business model Focus Airport PAX Contribution 1 • Flagship carrier • Moscow (Sheremetyevo) Network/ • Premium product 23.6 68.0% Scheduled • High income, middle class, leisure segment • Focus on direct and transit routes via • Saint-Petersburg St. Petersburg (
Slide 9: Aeroflot’s Low Cost Carrier ‒ Pobeda
Aeroflot’s Low Cost Carrier ‒ Pobeda Overview of Pobeda LCC Penetration Comparison by PAX (%) • Oct. 2013: launched under Dobrolet name 38% – 67.8 ths PAX carried by August 2014 30% – Flights suspended in August 2014 due to EU sanctions 27% after 55 days of operations • Sep. 2014: new legal entity l
Slide 10: Aeroflot Group Network
Aeroflot Group Network # of Flights Evolution by Region1 Geographic Network – Winter 2015 Schedule (2014 / 2013) Russia 19.3 % Murmansk Novy Urengoy Arkhangelsk Saint-Petersburg Syktyvkar Surgut Yakutsk Nizhnevartovsk Stockholm Perm Tyumen Nizhny Novgorod Novokuznetsk Europe 5.6 % Hamburg Kaliningra
Slide 11: Aeroflot is Uniquely Positioned to Capture Growing Transit Passenger Flows
Aeroflot is Uniquely Positioned to Capture Growing Transit Passenger Flows Increasing Frequency of Flights1 Improves …and Supports Aeroflot’s Transit Traffic Growth in Connectivity… Sheremetyevo Share of Transit of JSC Aeroflot in Sheremetyevo Connectivity ratio 11.0x 12.7x 13.5x CAGR 39.2% 2012-201
Slide 12: High-quality Service Standards and Customer Loyalty
High-quality Service Standards and Customer Loyalty Customer Loyalty (NPS index) Aeroflot Bonus Members (’000) +9pp +13.7% 67% 4,551 58% 4,002 56% 52% 3,359 44% 2,724 2,293 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Aeroflot awards Global Travel Newspaper (South Korea) Best Airline in Top 5 E
Slide 13: Operating Performance
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 13
Slide 14: Operating Data – Q4 & 12M 2014
Operating Data – Q4 & 12M 2014 JSC Aeroflot Aeroflot Group 4Q 4Q 12M 12M 4Q 4Q 12M 12M Y-o-Y Y-o-Y Y-o-Y Y-o-Y 2013 2014 2013 2014 2013 2014 2013 2014 Indicator Unit Passenger Traffic th PAX 5,170 5,777 11.7% 20,902 23,610 13.0% 7,384 8,204 11.1% 31,391 34,735 10.7% International Routes th PAX 2,963
Slide 15: 12M 2014 Traffic and Capacity Dynamics (Y-o-Y)
12M 2014 Traffic and Capacity Dynamics (Y-o-Y) North and Central America Russia CIS 26.0 % 0.6 % 19.9 % 16.2 % 2.5p.p. 0.4p.p. (0.2)% (0.2)p.p. (0.5)% (7.7)% (7.4)% (7.8)% Passengers RPK ASK SLF Passengers RPK ASK SLF Passengers RPK ASK SLF carried carried carried Europe Middle East Asia 14.3 % 8.0
Slide 16: Revenue Breakdown
Revenue Breakdown Traffic Revenue Breakdown by Type Revenue from Scheduled Passengers (RUBm)1 12M 2014 4Q 2013 4Q 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y Scheduled Charter Russia 19,977 25,245 26.4% 89,215 104,008 16.6% Passenger Passenger Flights Flights 5.4% 91,4% Europe 14,263 16,881 18.4% 63,387 67,9
Slide 17: Scheduled Flights Revenue Units
Scheduled Flights Revenue Units Traffic Yield: PAX Revenue / RPK (RUB / RPK) Traffic RASK: PAX Revenue / ASK (RUB / ASK) Q4 2014 12M 2014 Q4 2014 12M 2014 7.8% 6.0% (0.5)% (0.7%) 3.18 2.33 2.36 2.35 3.06 3.04 2.20 2.95 Q4 2013 Q4 2014 12M 2013 12M 2014 Q4 2013 Q4 2014 12M 2013 12M 2014 Yield PAX Rev
Slide 18: Opportune Time for Aeroflot
Opportune Time for Aeroflot 1 2 Diversified product offering High quality service and reliable provides maximum flexibility in operations a cyclical market • Group’s offering covers various price 1 • Young western-built fleet easily segments from up-scale to low budget transferable from one route to
Slide 19: Fleet Overview
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 19
Slide 20: Aeroflot Group Fleet Overview
Aeroflot Group Fleet Overview Aeroflot Group Fleet in operation 1 Average Age of the Fleet 2 Fleet Average Age 4.1 10.4 Azul 3 4.1 Hainan Airlines 4.3 8.8 7.7 Lion Air 4.7 7.0 Garuda Indonesia 4.9 251 Republic Airlines 5.3 209 222 232 Xiamen Airlines 5.3 Qatar Airways 5.7 Shenzhen Airlines 5.7 Jet A
Slide 21: Aeroflot Group Fleet Structure
Aeroflot Group Fleet Structure Financial Operating Total as of Total as of Change vs. Type1 Aeroflot Subsidiaries Owned Lease Lease 31-Dec-2014 31-Dec-2013 31-Dec-2013 Boeing 767 - 3 - - 3 3 8 (5) Airbus A330 22 - - 8 14 22 22 - Long-haul Tu-204-300 - - - - - - 6 (6) Boeing 777 10 3 - 10 3 13 7 6 2
Slide 22: Financial Performance
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 22
Slide 23: Financial Highlights
Financial Highlights RUBm Q4 2013 Q4 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y (where applicable) Revenue 68,603 83,073 21.1 % 290,956 319,771 9.9 % EBITDAR1 1,216 8,494 >6x 51,026 48,673 (4.6)% EBITDAR1 margin 1.8 % 10.2 % 8.4p.p. 17.5 % 15.2 % (2.3)p.p. EBITDA (3,915) 1,280 n/a 31,849 24,839 (22.0)% EBIT
Slide 24: Aeroflot vs. International Peers – Track Record of Profitable Growth
Aeroflot vs. International Peers – Track Record of Profitable Growth PAX growth (y-o-y) ASK growth (y-o-y) RPK growth (y-o-y) Sales growth (y-o-y) EBITDAR margin Company 4Q14 FY14 4Q14 FY14 4Q14 FY14 4Q14 FY14 4Q14 FY14 11.1% 10.7% 7.9% 6.2% 5.3% 5.6% 21.1% 9.9% 10.2% 15.2% 0.5% 1.7% (0.2)% (0.6)% 0
Slide 25: Revenue Analysis
Revenue Analysis 9.9% 25,232 20,974 (15,861) (1,529)* Net positive impact of RUB 9,371m RUB mln 319,771 290,956 12m2013 Volume Currency Pricing Other 12m2014 • Positive contribution of volume growth and Rouble devaluation to revenue growth was partially offset by softer tariff policy in the volatile
Slide 26: Cost Analysis
Cost Analysis Y-o-Y change, net Y-o-Y Change, Y-o-Y Operating Expense Y-o-y Q4 2013 Q4 2014 of FX effect and 12M 2013 12M 2014 net of FX effect Change (RUB million If not stated otherwise) Change NRE and NRE 19,768 22,461 13.6 % 2.4 % Fuel 79,128 87,199 10.2 % 5.4 % 55,910 63,006 12.7 % (1.6)% Opex
Slide 27: Group Unit Costs
Group Unit Costs Cost per ASK (RUB) Q4 2013 Q4 2014 Y-o-Y Operating Expense 12M 2013 12M 2014 Y-o-Y 0.75 0.79 5.3 % Fuel 0.73 0.75 3.8 % 2.11 2.21 4.5 % Opex (ex. Fuel): 1.76 1.91 8.5 % 0.50 0.55 10.1 % Aircraft, Traffic and Passenger Servicing 0.48 0.53 8.8 % 0.51 0.49 (5.1)% Staff 0.42 0.45 8.3 %
Slide 28: Effective Fuel Costs Management
Effective Fuel Costs Management Flight hours (th hours) Fuel Consumption per ASK (gr/ASK) Fuel Consumption per ATK (gr/ATK) 5.0% (4.0%) (2.9%) (3.6%) (5.4%) 776 815 203 202 25 195 197 6.9% 24 23 23 189 202 Q4 2013 Q4 2014 12M 2013 12M 2014 Q4 2013 Q4 2014 12M 2013 12M 2014 Q4 2013 Q4 2014 12M 2013 1
Slide 29: Headcount Overview and Labour Productivity
Headcount Overview and Labour Productivity Headcount 31-Dec-2013 31-Dec-2014 Y-o-Y Aeroflot JSC 17,891 18,981 6.1 % Aeromar 2,949 3,371 14.3 % Subsidiary Airlines 9,366 9,845 5.1 % Other 263 242 (8.0)% Total 30,469 32,439 6.5 % Airlines Labour Productivity PAX Traffic Revenue / Avg. Headcount PAX Tr
Slide 30: Operating Income Evolution
Operating Income Evolution (RUBm) Total revenue change Total recurring expenses change of 37,342 mln of 28,815 mln 25,232 20,974 (1,529) (15,832) (4,293) 19,795 3,480 (15,861) (6,800) 14,396 3,128 (4,165) (735) 11,268 (1,543) (1,517) (5,938) Other Fuel* Staff NRE*** FX benefit Operating Leases* D&A
Slide 31: Adjusted Operating and Net Income Analysis
Adjusted Operating and Net Income Analysis 12M Adjusted Operating Income Build-Up (RUBm) 1,746 702 2,485 1,805 14,396 11,268 Operating Income A/R provisions for IDEAL MD11 early return Provision for regular TU204 early return Adjusted Operating 12M 2014 Tour and PGS repairs and maintenance Income 12
Slide 32: Capital Structure and Liquidity
1. Market Update 2. Aeroflot Group Overview 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 32
Slide 33: Leverage and Liquidity
Leverage and Liquidity Debt profile Net Debt / LTM EBITDA¹ RUBm 31-Dec-2013 31-Dec-2014 Change 5.9 Borrowings 13,406 24,203 80.5% Finance Lease Liabilities 72,036 149,278 107.2% 4.7 Pension Liabilities 707 659 (6.9)% 2.9 Customs Duties 436 169 (61.3)% 2.1 Total Debt 86,585 174,309 101.3% Cash and Sh
Slide 34: 12M 2014 Operating Free Cash Flow
12M 2014 Operating Free Cash Flow (RUBm) 4,374 (30.2)% 16,090 (6,717) 14,795 35,977 31,603 (11,741) 25,097 17,519 4,934 12,136 (16,352) Profit Before D&A Interest Unrealized Other Adj. Cash Flows Working Net Cash Net Capital Net Pre- Free Cash Free Cash Income Tax Expense Net FX Loss Before From Cap
Slide 35: Appendix
1. Market Update 2. Monthly Traffic Statistics 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 35
Slide 36: Aeroflot Group Successfully Managed Through The Financial Crisis
Aeroflot Group Successfully Managed Through The Financial Crisis Passenger Traffic Dynamics, y-o-y Market PAX growth, y-o-y Aeroflot JSC PAX growth, y-o-y 33.9% 32.8% 29.6% 23.5% 23.5% 24.5% 22.3% 18.5% 20.2% 15.1% 31.9% 12.7% 29.1% 9.4% 9.8% 23.3% 22.0% 17.7% 16.8% 13.7% 10.7% 15.7% (3.8%) 4.9% 7.3
Slide 37: Resilient Performance Through 1998 Crisis
Resilient Performance Through 1998 Crisis Russian total passenger traffic (m PAX) Russian total passenger turnover (bn pkm) International Domestic International Domestic 28.2 28.0 64.5 64.7 26.2 26.4 61.5 60.6 23.3 22.4 23.0 55.5 53.4 53.4 16.9 36.1 32.5 18.8 16.4 33.8 31.3 17.1 29.6 30.8 27.6 14.9
Slide 38: Aeroflot Contingency Plan
Aeroflot Contingency Plan 1 • Rigorous approach to network planning and review with focus on profitable Network routes 2 • Comprehensive analysis to determine most efficient use of aircraft capacity Capacity • Disciplined and selective approach to adding new capacity to the market 3 • Optimization o
Slide 39: Monthly Traffic Statistics
1. Market Update 2. Monthly Traffic Statistics 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Succeeding in a Challenging Environment 8. Appendix 39
Slide 40: 12M 2014 Aeroflot Group Operating Results
12M 2014 Aeroflot Group Operating Results Monthly Passenger Traffic (m PAX) Monthly Passenger Turnover (bn pkm) 12M 2014: +10.7% Y-o-Y 12M 2014: +5.6% Y-o-Y December 2014: +16.0% Y-o-Y December 2014: +7.6% Y-o-Y 7.6% 11.9% 9.2% 9.6% 6.7% 9.5% 9.2% 6.3% 9.8 9.8 3.8 3.8 4.2% 9.1 8.0% 5.9% 3.5 8.9 8.6
Slide 41: Aeroflot Group Domestic and International Traffic and SLF
Aeroflot Group Domestic and International Traffic and SLF Monthly Domestic Passenger Traffic (m PAX) Monthly International Passenger Traffic (m PAX) 12M 2014: +26.0% Y-o-Y 12M 2014: (1.7)% Y-o-Y December 2014: +35.5% Y-o-Y December 2014: (1.9.)% Y-o-Y 25.9% 26.8% (4.7)% 0.5% 21.5% 26.5% (0.3)% (4.3)
Slide 42: Operating Data – January 2015
Operating Data – January 2015 JSC Aeroflot Aeroflot Group Indicator Unit January 2014 January 2015 Y-o-Y January 2014 January 2015 Y-o-Y Passenger Traffic th PAX 1,587 1,811 14.1% 2,256 2,656 17.7% International Routes 933 1,015 8.8% 1,248 1,208 (3.2%) Domestic Routes 654 796 21.7% 1,008 1,448 43.6%
Slide 43: Key Operating Data of Subsidiary Airlines
Key Operating Data of Subsidiary Airlines Rossiya Vladivostok Donavia Orenair Aurora LCC Total Airlines Air Passenger Traffic 2014 1,736 5,192 3,035 5 1,051 107 11,125 (‘000 PAX) 2013 1,354 4,590 3,141 1,077 326 - 10,488 Y-o-Y 28.3% 13.1% (3.4%) (99.6%) 222.0% - 6.1% Passenger Turnover 2014 2,448 10
Slide 44: Aeroflot Group Fleet Order and Phase-Out Schedule
Aeroflot Group Fleet Order and Phase-Out Schedule Total Aircraft Delivery Schedule in Accordance with Existing Contracts Type of Aircraft Delivered during 12M 2014 2015 2016 2017 2018 2019 - 2024 Long-haul 6 3 5 9 13 20 B777 6 3 3 - - - B787 - - 2 9 8 3 A350 - - - 5 17 Medium-haul 40 14 31 34 14 - A
Slide 45: Key Financial Data for Aeroflot Group
Key Financial Data for Aeroflot Group RUBm, Unless Otherwise Stated Q4 2013 Q4 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y Revenue 68,603 83,073 21.1 % 290,956 319,771 9.9 % RPK1 (m pkm) 19,910 20,966 5.3 % 85,273 90,075 5.6 % Yield2 (RUB/pkm) 2.87 3.17 10.4 % 2.91 2.98 2.6 % EBITDAR3 1,216 8,494 >6x 51,026
Slide 46: Key Financial Data for JSC Aeroflot
Key Financial Data for JSC Aeroflot RUBm, Unless Otherwise Stated Q4 2013 Q4 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y Revenue 53,678 68,390 27.4 % 221,315 257,685 16.4 % RPK1 (m pkm) 14,864 16,393 10.3 % 60,226 67,122 11.4 % Yield2 (RUB/pkm) 2.91 3.18 9.2 % 3.01 3.10 2.8 % EBITDAR3 (418) 9,769 n/a 39,365
Slide 47: Summary Financial Tables: Income Statement
Summary Financial Tables: Income Statement Q4 2013 Q4 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y Traffic Revenue 59,656 69,212 16.0% 257,546 277,354 7.7% Other Revenue 8,947 13,861 54.9% 33,410 42,417 27.0% Revenue 68,603 83,073 21.1% 290,956 319,771 9.9% Operating Costs (57,033) (64,601) 13.3% (212,105) (2
Slide 48: Summary Financial Tables: Condensed Balance Sheet
Summary Financial Tables: Condensed Balance Sheet 31-Dec-13 31-Dec-14 Change,% Assets Current Assets Cash and Cash Equivalents 18,660 26,547 42.3% Accounts Receivable and Prepayments 55,690 56,769 1.9% Other Current Assets 7,115 8,897 25.0% Total Current Assets 81,465 92,213 13.2% Non-current Assets
Slide 49: Summary Financial Tables: Condensed Cash Flow Statement
Summary Financial Tables: Condensed Cash Flow Statement 4Q 2013 4Q 2014 Y-o-Y 12M 2013 12M 2014 Y-o-Y Operating Cash Flow before (2,320) 5,264 n/a 32,944 31,603 (4.1)% Working Capital Changes Net Cash Flows from Operating 371 1,498 >4x 28,945 35,977 24.3% Activities Net Cash Flows Used in Investing
Slide 50: Investor Relations Contacts
Investor Relations Contacts Address: 119002 Russia, Moscow, Arbat St. 10 Telephone: +7 (495) 258-06-86 E-mail: ir@aeroflot.ru Website: www.aeroflot.ru 50