Aeroflot Group remained profitable in 2017

Russia’s low-cost carrier Pobeda remained profitable in 2017, but its sister airline Rossiya failed (Photo by Leonid Faerberg / Transport-Photo.com)

In accordance with International Financial Reporting Standards (IFRS), the Aeroflot Group reported a net profit in 2017, in a market affected by increasing competition from both home and abroad.

Only the parent airline Aeroflot and its low-cost subsidiary Pobeda contributed positive financial results for the airline group last year. Subsidiary company Rossiya Airlines made a loss, despite the fact that it has now grown into the country’s second largest airline in terms of passenger numbers.

In the 12-month period, the group’s revenues grew to 532.93 billion rubles (about $9.5 billion), up 7.5 per cent year-on year, marking 2017 as “another landmark year” for the Aeroflot group, says the audited financial statement. Passenger numbers rose by 15.4 per cent to 50.1 million and RPKs grew even more, by 16.2 per cent.

The group efficiently utilised its significant capacity additions – up 14.2 per cent year-on-year – resulting in an increased load factor of 82.8 per cent, 1.4 per cent higher than in 2016, says the statement.

A combination of unfavourable foreign exchange (FX) fluctuations and higher fuel prices during the year meant that net income for 2017 was down by more than 40 per cent to 23.06 billion rubles, compared with the previous year’s 38.8 billion rubles net income.

Aeroflot explains the reduced financial results in 2017 as “the impact of FX swings and higher fuel prices – as well as the lack of the material currency differences on the return of pre-payments for aircraft that [positively] affected the 2016 results” when pre-payments for an order for 22 Boeing 787s were returned to Aeroflot, after the carrier gave up its purchase rights to Russian leasing company Aviacapital-Service.

Shamil Kurmashov, Aeroflot’s deputy CEO for Commerce and Finance, points out: “In turn, the significant reduction of the debt burden thanks to pre-term repayment of credit lines during the year, as well as economies on other non-operational costs, supported net profit, which came in at [near to] 23.1 billion rubles.”

Sister carrier Pobeda remained profitable in 2017, with net income of 2.8 billion rubles, 24 per cent lower year-on-year. The low-cost carrier’s revenue and passenger numbers grew respectively 7.9 per cent to 20.6 billion rubles and 6.9 per cent to 4.6 million passengers.

Rossiya Airlines’ net loss of 2.1 billion rubles in 2017, was a sharp contrast to that carrier’s 3.8 billion rubles net profit in 2016. The negative contribution came despite an impressive growth in operational achievements. In 2017 revenue grew almost 30 per cent to 94.8 billion rubles, as a result of a 26.7 per cent surge in passenger numbers to 11.2 million.

Aurora, the group’s far eastern subsidiary has not yet published its financial results.

Overall, in 2017, even though the group’s airlines collectively carried 50.1 million passengers, 15.4 per cent more than the previous year, its share of the Russian air transport market slipped from 42.3 to 40.5 per cent.

Aeroflot cites “a changing competitive landscape, international carriers adding capacity back into the Russian market” – and the increased activities of Russia’s second-tier carriers.