Financial Review
Financial Highlights
2014 | 2015 | Change | |
Revenue | 319,771 | 415,173 | 29.8% |
EBITDAR | 48,674 | 103,118 | 111.9% |
EBITDAR margin | 15.2% | 24.8% | 9.6 p.p. |
EBITDA | 24,840 | 58,703 | 136.3% |
EBITDA margin | 7.8% | 14.1% | 6.3 p.p. |
Operating profit | 11,268 | 44,107 | >3.9x |
Operating profit margin | 3.5% | 10.6% | 7.1 p.p. |
Loss for the period | (17,146) | (6,494) | (62.1%) |
In 2015, Aeroflot Group achieved a significant increase in revenue by 29.8% driven by solid operating results — a 13.4% passenger traffic growth with the increase in the passenger load factor by 0.5 p.p., as well as by the Group's proactive approach to network and revenue management throughout the year.
In response to the worsening market environment Aeroflot Group introduced a number of initiatives to optimise the fleet and cut costs, which helped us curb operating expenses on the back of the national currency depreciation. Together with the foreign exchange gain effect on revenue realised through the Company's proactive approach which factored in economic environment fluctuations, these measures drove up our operating profit margins — in, particular, EBITDA and EBITDAR increased by 6.3 p.p. and 9.6 p.p.
In 2H 2015, Aeroflot Group was the key contributor to the Russian air transportation market stabilisation, having successfully stepped in for Transaero's passengers support. Total expensed costs related to Transaero amounted to RUB 16,811 million, which had an additional adverse effect on the Group's financial performance — in 2015, the Group incurred the net loss of RUB 6,494 million, which is still an improvement over the previous year.
Revenue
2014 | 2015 | Change | |
Passenger flight revenue, including: | 268,636 | 349,574 | 30.1% |
Scheduled passenger flights | 253,613 | 343,428 | 35.4% |
Charter passenger flights | 15,023 | 6,146 | (59.1%) |
Cargo flights | 8,718 | 9,631 | 10.5% |
Total traffic revenue | 277,354 | 359,205 | 29.5% |
Other revenue, including: | 42,417 | 55,968 | 31.9% |
Airline agreements | 21,605 | 31,596 | 46.2% |
Revenue from partners under frequent flyer programme | 7,685 | 10,275 | 33.7% |
Other revenue | 13,127 | 14,097 | 7.4% |
Total revenue | 319,771 | 415,173 | 29.8% |

In 2015, Aeroflot Group's revenue grew 29.8%
The key driver of the passenger flight revenue increase was the revenue from scheduled passenger flights that showed a 35.4% growth and reached RUB 343,428 million on the back of a 13.4%
Cargo revenue rose by 10.5%
Other revenue was up 31.9%
Passenger Yields

In 2015, blended scheduled flight yields increased by 18.0% due to growth in yields on both international (by 25.7%) and domestic (by 9.2%) destinations. Strong international yield growth primarily resulted from the foreign exchange effect as all fare groups — for outbound and inbound flights and for international transit — are denominated in hard currencies. However, due to material portion of revenue from outbound flights and respective share of revenue shaped by the purchasing power of the Russian consumers, increase in the Group's international yields was realised mainly because of proactive approach to network and revenue management.
Moderate yield growth on domestic routes resulted from the Group's focus on supporting the growing domestic traffic and the increasing share of Pobeda low-cost carrier. In addition, domestic yields were supported by the lower VAT rate which was reduced from 18% to 10% to foster Russian airlines.
Operating Costs
2014 | 2015 | Change | |
Aircraft fuel | 87,199 | 94,382 | 8.2% |
% of revenue | 27.3% | 22.7% | (4.6 p.p.) |
Operating costs, excluding aircraft fuel | 221,304 | 276,684 | 25.0% |
% of revenue | 69.2% | 66.6% | (2.6 p.p.) |
Aircraft, traffic and passenger servicing | 61,070 | 75,186 | 23.1% |
% of revenue | 19.1% | 18.1% | (1.0 p.p.) |
Staff costs | 52,148 | 55,619 | 6.7% |
% of revenue | 16.3% | 13.4% | (2.9 p.p.) |
Operating lease expenses | 23,834 | 44,415 | 86.4% |
% of revenue | 7.5% | 10.7% | 3.2 p.p. |
Aircraft maintenance | 19,224 | 32,042 | 66.7% |
% of revenue | 6.0% | 7.7% | 1.7 p.p. |
Sales and marketing, administration and general expenses | 22,206 | 26,084 | 17.5% |
% of revenue | 6.9% | 6.3% | (0.6 p.p.) |
Depreciation, amortisation and customs duties | 13,571 | 14,596 | 7.6% |
% of revenue | 4.2% | 3.5% | (0.7 p.p.) |
Communication expenses | 7,784 | 12,890 | 65.6% |
% of revenue | 2.4% | 3.1% | 0.7 p.p. |
Other expenses, net | 21,467 | 15,852 | (26.2%) |
% of revenue | 6.7% | 3.8% | (2.9 p.p.) |
Total operating costs | 308,503 | 371,066 | 20.3% |
% of revenue | 96.5% | 89.4% | (7.1 p.p.) |
Aircraft fuel costs increased 8.2% year-on-year to RUB 94,382 million due to the weaker ruble as well as higher traffic. Excluding the foreign exchange rate effect, aircraft fuel costs were down 18.8% year-on-year as a result of the lower oil price and the success of measures to boost the Group's fuel efficiency. Operating costs less aircraft fuel increased 25.0% year-on-year to RUB 276,684 million.
Aircraft servicing and passenger services costs stood at RUB 75,186 million, up 23.1%
Staff costs went up by 6.7%
Operating lease expenses stood at RUB 44,415 million, a growth of 86.4%
Aircraft maintenance costs increased by 66.7%
Sales and marketing, administration and general expenses gained 17.5%
Depreciation, amortisation and customs duties grew by 7.6%
Communication expenses went up by 65.6%
Other net income/expenses went down by 26.2%

Revenue and Cost per Available Seat-Kilometre
Efficient management of route network, capacity, revenues and costs provided for the Group's RASK growth rate outstripping the CASK growth rate. In 2015, the traffic RASK was RUB 2.80 per seat-kilometre, up 19.2%

EBITDA and EBITDAR
In 2015, Aeroflot Group's EBITDA increased to RUB 58,703 million, with EBITDA margin increasing from 7.8% in 2014 to 14.1% in 2015. The Group's EBITDAR also grew in 2015 up to RUB 103,118 million. EBITDAR margin went up from 15.2% in 2014 to 24.8% in 2015. Margins were driven by yield growth outstripping cost inflation as a result of the aforementioned factors.


Finance Income and Costs
2014 | 2015 | Change | |
Operating profit | 11,268 | 44,107 | >3.9x |
Finance income | 2,471 | 15,811 | >6.4x |
Finance costs | (28,399) | (37,715) | 32.8% |
Hedging result | (1,723) | (23,746) | — |
Share in results of associates | 31 | (17) | — |
Loss before income tax | (16,352) | (1,560) | (90.5%) |
Income tax expense | (794) | (4,934) | — |
Loss for the period | (17,146) | (6,494) | (62.1%) |
Finance income for 2015 increased more than six times year-on-year to RUB 15,811 million, mainly due to positive effect from revaluation of derivative instruments not subject to hedge accounting and interest income earned on bank deposits.
The increase in finance costs to RUB 37,715 million for 2015 was mainly due to the impairment of the Group's loan to Transaero, as well as an increase in interest expenses and realised losses on derivative instruments not subject to hedge accounting.
The realised loss from hedging of RUB 23,746 million is attributable to settlements under derivative instruments recognised in equity, as well as to the effect of revenue hedging with liabilities in USD (finance lease).
As a result of the above factors, the Group posted a net loss for 2015 of RUB 6,494 million.
Cash Flows
2014 | 2015 | Change | |
Loss before income tax | (16,352) | (1,560) | (90.5%) |
Depreciation and amortisation | 12,136 | 13,306 | 9.6% |
Change in provisions | 4,328 | 10,353 | 139.2% |
Foreign exchange loss | 14,795 | 849 | (94.3%) |
(Gain)/loss on change in fair value of derivative financial instruments | 9,869 | (11,885) | — |
Hedging result | 1,723 | 23,746 | — |
Interest expense | 4,934 | 7,737 | 56.8% |
Loss on derivative financial instruments, net | 2,813 | 19,803 | — |
Loss/(gain) on sale of investments and accrual of provision for impairment of investments and loans issued | (1) | 9,159 | — |
Gain on recovery of VAT | (285) | (8,021) | — |
Other adjustments | (2,439) | 800 | — |
Working capital changes and income tax paid/refunded | 4,456 | 5,377 | 20.7% |
Net cash flows from operating activities | 35,977 | 69,664 | 93.6% |
Purchases of property, plant and equipment and intangible assets | (6,160) | (9,196) | 49.3% |
Purchases of investments and deposits placement | (2,552) | (20,393) | — |
Proceeds from sale of investments and deposits return | 1,869 | 6,405 | 242.7% |
Prepayments/return of prepayments for aircraft, net | (11,741) | (14,880) | 26.7% |
Other | 92 | (706) | — |
Net cash flows used in investing activities | (18,492) | (38,770) | 109.7% |
Free cash flow | 17,485 | 30,894 | 76.7% |
Proceeds from loans and borrowings | 18,398 | 73,331 | 298.6% |
Repayment of loans and borrowings | (9,870) | (36,267) | 267.4% |
Proceeds from disposal of treasury shares | 2 | — | — |
Repayment of the principal of financial lease liabilities | (15,629) | (19,455) | 24.5% |
Interest paid | (3,409) | (5,914) | 73.5% |
Dividends paid | (2,833) | (88) | (96.9%) |
Payments on settlement of derivative financial instruments, net | (1,451) | (39,682) | — |
Proceeds from sale of treasury shares to non-controlling shareholders | 119 | — | — |
Net cash used in financing activities | (14,673) | (28,075) | 91.3% |
Effect of exchange rate fluctuations | 5,075 | 1,327 | (73.9%) |
Net increase in cash and cash equivalents | 7,887 | 4,146 | (47.4%) |
Cash and cash equivalents at the beginning of the year | 18,660 | 26,547 | 42.3% |
Cash and cash equivalents at the end of the year | 26,547 | 30,693 | 15.6% |
Cash flows from operating activities
In 2015, net cash flows from operating activities reached RUB 69,664 million (2014: RUB 35,977 million), with loss before income tax amounting to RUB 1,560 million (2014: RUB 16,352 million). Key non-cash adjustments of loss before income tax made to net cash flows from operating activities for 2015 were related to:
- change in provisions in 2015 in the amount of RUB 10,353 million (2014: RUB 4,328 million), mainly attributed to accrual of the provision for liabilities Transaero and the provision for scheduled maintenance and repair of aircraft;
- gain on the change in fair value of derivative financial instruments of RUB 11,885 million (2014: loss of RUB 9,869 million), primarily due to maturity and expiry of fuel options;
- hedging result in 2015 in the amount of RUB 23,746 million (2014: RUB 1,723 million), which increased
y-o-y mainly due to reclassification of the realised loss on option agreements to which cash flow hedge accounting model was applied from the hedging reserve to the hedging result, in the amount of RUB 18,654 million (2014: RUB 0), as well as due to the effect of revenue hedging with liabilities in foreign currency in the amount of RUB 6,279 million (2014: RUB 536 million); - loss on derivative financial instruments in the amount of RUB 19,803 million (2014: RUB 2,813 million);
- loss on sale of investments and accrual of provision for impairment of investments and loans issued, in the amount of RUB 9,159 million, due to the accrual of provision for impairment of Transaero loans;
- gain on recovery of VAT in the amount of RUB 8,021 million from recognition of VAT on code-sharing in
2013–2015 between Aeroflot Group companies; - depreciation and amortisation of RUB 13,306 million (2014: RUB 12,136 million).
Working capital
In 2015, working capital change was RUB 11,238 million, virtually flat
Free cash flow
In 2015, free cash flow totalled RUB 30,894 million, up by RUB 13,409 million, or 76.7%
Key drivers of
- placement of deposits totalling RUB 11,741 million (2014: RUB 2,486 million), purchases of investments, and loans issued primarily to Transaero airline for RUB 8,652 million (2014: RUB 66 million);
- proceeds from sale of investments and deposits return, primarily from Pobeda airline, due to maturity;
- prepayments of RUB 22,707 million (2014: RUB 21,361 million) for 22 Airbus A350 aircraft expected to be delivered in
2018–2023, A320/A321 aircraft expected to be delivered in2017–2018, and return of prepayments of RUB 7,827 million (2014: RUB 9,620 million) for Boeing 777 and SSJ100 aircraft; - purchases of property, plant and equipment and intangible assets, totalling RUB 9,196 million (2014: RUB 6,160 million).
In 2015, the internal-financing ratio (net cash flows from operating activities to capital expenditure) stood at 813.1% (596.2% in 2014).
Cash and cash equivalents grew by RUB 4,146 million (15.6%
and cash flows,
RUB million
Capital Expenditure
In 2015, purchases of property, plant and equipment primarily included three DHC 8-Q402s purchased by PJSC Aeroflot for RUB 2,501 million (to be subsequently transferred to Aurora airline), one DHC 8-Q300 purchased by Aurora airline for RUB 534 million, as well as one Boeing 737 NG full flight simulator purchased for RUB 619 million and a Boeing 737 computerised flight simulator classroom purchased for RUB 37 million.
Purchases of intangible assets in 2015 mainly included SAP development software, as well as other software solutions and licences for office and other IT systems.
8.6
billion
31 December 2014 | 31 December 2015 | Change | |
Purchases of property, plant and equipment and intangible assets | (6,160) | (9,196) | 49.3% |
Purchases of investments | — | (5) | — |
Proceeds from sale of property, plant and equipment | 126 | 603 | 378.6% |
Gain on disposal of investments | — | 30 | — |
Net capital expenditure | (6,034) | (8,568) | 42.0% |
Consolidated Statement of Financial Position
31 December 2014 | 31 December 2015 | Change | |
ASSETS | |||
Cash, cash equivalents and short-term financial investments | 27,508 | 36,610 | 33.1% |
Other current assets | 64,705 | 96,696 | 49.4% |
Total current assets | 92,213 | 133,306 | 44.6% |
Property, plant and equipment | 116,044 | 104,494 | (10.0%) |
Other non-current assets | 69,461 | 77,394 | 11.4% |
Total non-current assets | 185,505 | 181,888 | (1.9%) |
TOTAL ASSETS | 277,718 | 315,194 | 13.5% |
LIABILITIES AND EQUITY | |||
Current liabilities | 135,136 | 178,081 | 31.8% |
Non-current liabilities | 156,087 | 173,233 | 11.0% |
Total equity | (13,505) | (36,120) | — |
TOTAL LIABILITIES AND EQUITY | 277,718 | 315,194 | 13.5% |
Non-current assets
In 2015, non-current assets lost 1.9% and reached RUB 181,888 million, mainly due to the decrease in property, plant and equipment by RUB 11,550 million, or 10.0%, primarily resulting from depreciation and amortisation of property, plant and equipment and their reclassification to assets held for sale. The change in non-current assets was influenced by prepayments made in 2015 for aircraft to be supplied under prior years' contracts, recorded as other non-current assets. Net change in prepayments for aircraft amounted to RUB 6,050 million.


Current assets
In 2015, current assets gained 44.6% and reached RUB 133,306 million, primarily driven by the increase in accounts receivable by RUB 19,548 million and reclassification of property, plant and equipment to assets held for sale in the amount of RUB 7,689 million. In addition, the change in current assets was influenced by the increase in deposits placed with banks for more than 90 days for RUB 4,957 million. The increase in cash amounted to RUB 4,146 million.
Equity
In 2015, equity, including non-controlling interest, dropped by RUB 22,615 million to a negative value of RUB 36,120 million.
The key driver behind this change was the increase in the hedging reserve of RUB 16,063 million, which comprised revaluation of derivatives under IAS 39 and revaluation of financelease liabilities. Another contributor to the drop was retained earnings, which primarily went down by the loss of RUB 5,829 million incurred in 2015 and attributable to the shareholders of the Company.
For more details on equity capital, please see Note 31 to the 2015 consolidated financial statements.
Current liabilities
In 2015, total current liabilities had a gain of 31.8%
Non-current liabilities
In 2015, non-current liabilities increased by 11.0%, or by RUB 17,146 million, and reached RUB 173,233 million. The key drivers of this increase were finance lease liabilities which grew by RUB 12,654 million due to the rouble depreciation in 2015.
Debt and Liquidity
31 December 2014 | 31 December 2015 | Change | |
Loans and borrowings | 24,203 | 68,460 | 182.9% |
Finance lease | 149,278 | 164,524 | 10.2% |
Pension liability | 659 | 745 | 13.1% |
Customs duties | 169 | — | — |
Total debt | 174,309 | 233,729 | 34.1% |
Cash, cash equivalents and short-term investments | 27,508 | 36,610 | 33.1% |
Net debt | 146,801 | 197,119 | 34.3% |
Net debt / EBITDA | 5.9x | 3.4x | — |
As at 31 December 2015, total debt increased by 34.1%
Aeroflot Group's loans and borrowings were both fixed-rate and variable-rate and were mainly used to finance the working capital. In 2015, additional loans were obtained to restructure derivative liabilities. The shares of foreign currency and rouble-denominated liabilities in the loan portfolio are 66.9% and 33.1%, respectively. The share of foreign currency loans increased due to new loans obtained in foreign currencies and the change in balance caused by the rouble depreciation.
Finance lease liabilities are entirely denominated in foreign currencies; however, 51.5% of liabilities under finance lease agreements mature as late as 2020 and further.
As at 31 December 2015, Aeroflot Group had RUB 36,840 million undrawn from its credit facilities from major Russian and international banks.
Net debt / EBITDA ratio


Breakdown of total debt
Bank | Interest rate | Currency | Short-term loans and borrowings and |
Long-term loans and borrowings |
VTB Bank (Austria) | 3M Libor+5.25% | USD | 10,996 | — |
Sviaz-Bank | 3M Libor+5% | USD | 9,386 | — |
Credit bank of Moscow | 5% | USD | 7,304 | — |
Sovcombank | 1M Libor+5.25% | USD | 7,288 | — |
BO—03 series bonds | 8.3% | RUB | 5,103 | — |
Rosbank | 1M Libor+4.5% | USD | 4,378 | — |
VTB Bank | 3M Libor+4.9% | USD | 3,657 | — |
Nordea Bank | 1M Libor+5% | USD | 1,290 | — |
Alfa Bank | 21% | RUB | 1,200 | — |
İŞBANK | 4.5% | USD | 1,022 | — |
SMP Bank | 13.75% | RUB | 960 | — |
GPB | from 13% to 17% | RUB | 760 | — |
Sberbank of Russia | from 12% to 15.5% | RUB | 252 | 12,875 |
BFA Bank | 14% | RUB | 18 | 1,500 |
Other | — | USD | 471 | — |
Total | 54,085 | 14,375 |