Russia’s top airlines report half-year losses

Transaero and UTair, two of Russia’s top-5 airlines in terms of traffic volumes, have reported net losses for the first six months of 2015. As follows from their financial reports (based on the Russian accounting principles), Transaero’s losses amounted to RUR 8.577 bln (US$ 129 mln), or 30% down year on year. UTair’s performance was even less optimistic: a loss of RUR 3.5 bln against RUR 5.5 bln worth of profit for the same period last year.

Transaero’s revenues grew 3% to RUR 50.42 billion. The carrier is committed to carrying on with its effort to “upgrade operational efficiency”. The plan includes “capacity and route network optimization, further cost cuts, and a yield increase”, according to the report.

By contrast, UTair’s revenues were down 32.9% to RUR 21.981 bln. The distressed airline’s management blames “the aftermath of macroeconomic and industry shocks lasting since 2014” for the deterioration of financial performance. It points specifically to a nosedive in air travel demand and an overall crisis in the travel industry, which have led to charter cuts and a sharp rise in the airline’s cost base due to a massive shift in the currency exchange rate. The latter means that the Russian airlines’ expenditures on aircraft leasing, fuel, and servicing at international airports have tripled and continue to go out of control. “Price dumping on several routes as a result of several players’ erroneous assessment of the true depth of the crisis” is being cited as an accompanying factor. The company also admits that its strategy of increasing capacity in 2014 had been “excessive”.

Transaero’s overall debt obligations amount to RUR 107.171 bln (as of July 30, against RUR 85.654 billion in early 2015), UTair’s, RUR 100.172 bln (up from RUR 75.741 bln).

Russia’s flag carrier and largest airline, Aeroflot, has also reported losses worth RUR 1.063 bln for the first half of the year.