Annual Report 2015


Financial Review

Financial Highlights

RUB 415.2 billion
Key figures of statement of profit or loss, RUB million
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. y-o-y to 14.1% and 24.8%, respectively.

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, RUB million
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%
Note: In the charts and tables featured in this Annual Report, immaterial deviations in the calculation of percentage changes, subtotals and totals are explained by rounding.
Revenue breakdown, 2015

Contribution analysis of revenue growth, RUB million
Contribution analysis of revenue growth

29.8 %
revenue growth

In 2015, Aeroflot Group's revenue grew 29.8% y-o-y to RUB 415,173 million, driven by higher revenue from scheduled passenger flights and other revenue.

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% y-o-y increase in Aeroflot Group's passenger traffic in 2015. In 2015, charter flight revenue went down by 59.1% to RUB 6,146 million due to Group's decision to reduce presence in this market segment and the overall decline in the leasure market.

Cargo revenue rose by 10.5% y-o-y despite a 6.0% reduction in the cargo and mail segment due to the growth of cargo yields.

Other revenue was up 31.9% y-o-y and stood at RUB 55,968 million primarily due to increase in revenue from airline agreements denominated in foreign currency following depreciation of the Russian currency.

Passenger Yields

Scheduled flight yields, RUB
Scheduled flight 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

20.3 %
growth in operating costs
Operating Costs, RUB million
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.)
RUB 66.8 million
FX effect on operating expenses

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% y-o-y, primarily due to the Rouble exchange rate movements. Excluding the foreign exchange loss, these costs went up by 8.4%, driven by the Group's expansion, the increased passenger traffic, and changes in service fees.

Staff costs went up by 6.7% y-o-y to RUB 55,619 million mainly due to the Group's headcount growth prompted by the larger scale of operations, as well as due to higher salaries of employees of Aeroflot's representative offices in rouble terms and additional incentive payments to cabin crews.

Operating lease expenses stood at RUB 44,415 million, a growth of 86.4% y-o-y, which was primarily related to the effect of the Rouble exchange movements (this item is almost entirely denominated in US dollars). Other contributing factors were the fleet expansion (the net increase in the Group's leased fleet was represented by nine aircraft, or 4.7%, y-o-y) and a higher LIBOR rate in the reporting period.

Aircraft maintenance costs increased by 66.7% y-o-y to RUB 32,042 million, mainly due to the Rouble exchange movements. Excluding the foreign exchange loss, these costs went up by 8.2%, driven primarily by higher maintenance volumes.

Sales and marketing, administration and general expenses gained 17.5% y-o-y and reached RUB 26,084 million, mainly driven by the expanded operations and higher sales and marketing expenses pegged to hard currencies.

Depreciation, amortisation and customs duties grew by 7.6% y-o-y and amounted to RUB 14,596 million due to additions of new Boeing 777-300ERs to Aeroflot Group's aircraft fleet under finance lease agreements in 2014 and respective realisation of wide-body aircraft addition effect in 2015.

Communication expenses went up by 65.6% y-o-y and amounted to RUB 12,890 million as a result of higher foreign currency expenses in rouble terms on global distribution systems.

Other net income/expenses went down by 26.2% y-o-y to RUB 15,852 million. The resulting value of this item was influenced by recognition of the income from the adjustment of VAT on code-sharing agreements and the income from reimbursement of fuel excise tax, as well as accruals of provisions for accounts receivable from Transaero for passenger flights.

Operating costs breakdown, 2015

Contribution analysis of changes in operating costs, RUB million
Contribution analysis of changes in operating costs * Note: Excluding FX change factor

Revenue and Cost per Available Seat-Kilometre

RASK growth

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% y-o-y, while CASK amounted to RUB 2.97, up 11.7% y-o-y.

Revenue and cost per available seat-kilometre, RUB
Revenue and cost per available seat-kilometre


14.1 %
EBITDA margin

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.

EBITDA and EBITDA margin
EBITDA and EBITDA margin

Finance Income and Costs

Non-operating profit and loss, RUB million
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

Condensed consolidated statement of cash flows, RUB million
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

RUB 69.7 billion
cash flow 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 y-o-y (2014: RUB 11,279 million). However, 2015 saw the following changes in the working capital recorded in the statement of cash flows: accounts receivable and prepayments increased by RUB 2,251 million due to an increase in accounts receivable as at 31 December 2015, in line with the revenue growth by 29.8% in 2015. Cash flows from operating activities were largely affected by an increase in accounts payable and accrued liabilities, in line with the growth in operating costs by 20.3% in 2015.

Free cash flow

RUB 30.9 billion
free cash flow

In 2015, free cash flow totalled RUB 30,894 million, up by RUB 13,409 million, or 76.7% y-o-y, which was driven by the increase in net cash flows used in investing activities by RUB 20,278 million, and the increase in net cash flows from operating activities by RUB 33,687 million.

Key drivers of y-o-y change in net cash flows used in investing activities are:

  • 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 in 2017–2018, 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% y-o-y) to RUB 30,693 million, driven among other factors by the effect of exchange rate fluctuations in the amount of RUB 1,327 million (RUB 5,075 million in 2014).

Net capital expenditure
and cash flows,
RUB million
Cash flow from operating activities and free cash flow, 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.


Aeroflot Group's net capital expenditure
Net capital expenditure, RUB million
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

Condensed consolidated statement of financial position, RUB million
31 December 2014 31 December 2015 Change
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%
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%
Assets as at 31 December

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.

Change in prepayments for aircraft (long-term portion), RUB million
Change in prepayments for aircraft (long-term portion)
Change in prepayments for aircraft (short-term portion), RUB million
Change in prepayments for aircraft (short-term portion)

Current assets

RUB 315.2 million
Aeroflot Group's assets (as at 31 December 2015)

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.


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

RUB 36.6 billion
cash, cash equivalents and short-term financial investments (as at 31 December 2015)

In 2015, total current liabilities had a gain of 31.8% y-o-y (by RUB 42 ,945 million), primarily driven by a surge of RUB 36,742 million in short-term loans and borrowings and current portion of long-term loans and borrowings. To a lesser extent the growth was attributed to a RUB 6,222 million increase in unearned traffic revenue, RUB 5,799 million increased in accounts payable and accrued liabilities, RUB 5,170 million increase in provisions for liabilities. Current liabilities in derivative financial instruments went down by RUB 21,459 million.

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

Debt, RUB million
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% y-o-y, to RUB 233,729 million, primarily driven by the increase in loans and borrowings, as well as revaluation of finance lease liabilities.

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.

RUB 36.8 billion
undrawn credit facilities (as at 31 December 2015)

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
Net debt/ EBITDA ratioA
Breakdown of loands and borrowings by currency as at 31 December 2015
Finance lease payment schedule, RUB million
Finance lease payment schedule

Breakdown of total debt
Loan portfolio as at 31 December 2015
Bank Interest rate Currency Short-term loans and borrowings and short-term portion of long-term loans and borrowings 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