Aeroflot Group 6 Months 2014 Financial Results Moscow August 28, 2014 Speaker: Shamil Kurmashov Deputy CEO for Finance, Network and Revenue Management Giorgio Callegari Deputy CEO for Strategy and Alliances 1
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 2
Key Highlights Aeroflot Group continued to outperform the Russian market in passenger traffic, solidifying its leading position across domestic and international routes Revenue growth of 9.4% year-on-year supported primarily by stronger traffic, as positive FX effect was offset by lower fares in weaker economic environment Significant impact on cost base and profitability from: - Rouble decline against USD and EUR - Non-recurring events Aeroflot s strategy remains intact with increased focus on cost control and efficiency 3
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 4
Russian Air Transportation Market 61.5 56.7 35.3 32.8 Russian Total Passenger Traffic (m PAX) 1 70.5 41.2 80.1 47.3 26.2 23.8 29.2 32.7 35.4 39.2 27.5 31.4 17.4 11.6 14.1 16.4 11.1 16.0 6.6 6.2 7.9 9.4 5.0 4.9 6.2 7.0 11.5 14.0 14.1 15.7 8.0 7.9 6.2 7.7 2008 2009 2010 2011 2012 2013 6m 2013 6m 2014 Domestic Routes 91.6 56.2 103.7 64.4 International Routes 45.9 50.2 28.7 30.0 17.3 20.2 2008 2009 2010 2011 2012 2013 6m 2013 6m 2014 Aeroflot Group Passenger Traffic (m PAX) CAGR 2008-13 2014-17F Aeroflot Overall 19% 20% 20% 20% 30% 30% 31% Market Share 2 International 2 19% 19% 19% 20% 28% 27% 28% 26% Domestic 2 19% 21% 21% 21% 33% 35% 36% 38% 13% 8% CAGR 2008-2013 21% 23% 7% 5% 9% 11% 31% Russia remains high-growth air transportation market with an expected CAGR of 6% over the next 3 years Aeroflot continues to grow above market further improving its market share Source: TCH, Company estimates 1 Incl. foreign carriers traffic. 2 Market based on passenger traffic of both domestic and foreign carriers. 5
Aeroflot Group Market Position Passenger Traffic (6 months 2014, m PAX) Russian Passenger Traffic 1 31% 15.7 19 % 20 % 19 % 20 % 19 % 18 % 17 % 17% 18% 28 % 24 % 25 % 22 % 18 % 18 % 18 % 12% 8.7 8.8 5.8 9% 9% 4.5 4.4 4% 53 % 56 % 55 % 58 % 63 % 64 % 65 % 2.2 Aeroflot Group Transaero S7 Group UTair Group Ural Airlines Foreign Carriers Others (Over 40 Regional Carriers) 2008 2009 2010 2011 2012 2013 6M 2014 Top 5 Carriers Other Russian Carriers Foreign Carriers Market Share 1 Continuing growth of market share controlled by top-5 leading domestic players led by Aeroflot Source: TCH, Rosaviatsia, Company estimates 1 Based on passenger traffic of both domestic and foreign carriers. 6
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 7
Networks Operated and Key Statistics # of Flights Dynamics of Aeroflot Group by Region (6M 2014 / 6M 2013) Europe CIS Russia Asia North and Central America Middle East and Africa Total (18.4)% 4.8% 5.7% 6.8% 6.5% 9.7% Summer 2014 Season Overview 17.0% In summer 2014 season (30-Mar to 25-Oct), Aeroflot Group is operating flights to 141 destinations in 54 countries Aeroflot and its partner airlines under code share agreements are operating 356 destinations to 66 countries New destinations in Russia (Novyi Urengoy) and CIS (Karaganda) Seasonal summer destinations: Gelendzhik, Iraklion, Thessaloniki, Dubrovnik, Split and Tivat Average Weekly Flight Frequency per Route of Aeroflot Group 6M 2013 6M 2014 Change Scheduled 8.0 9.0 12.5% Charter 0.8 0.3 (62.5)% International Scheduled 6.0 7.0 16.7% Domestic Scheduled 10.0 11.0 10.0% Medium-haul 1 7.8 8.8 12.8% Long-haul 1 5.0 5.3 6.0% Overall 2 8.0 9.0 12.5% 33% Transit Passenger Traffic of Aeroflot Group in Sheremetyevo 38% 41% 42% 40% 36% International Flights Domestic Flights Total Flights 2013 2014 Moderate growth of destinations without more significant increase in frequencies on scheduled routes, continuing downscale of charter operations Source: TCH, Ministry of Transportation 1 Scheduled flights 2 Passenger flights including charter flights. 8
Traffic and Capacity Development by Regions (%, 6M 2014 vs. 6M 2013) North and Central America Europe Russia 0.1 % 2.1 % 0.8 % 3.0 % 24.8 % 17.6 % 13.8 % 2.5 p.p (0.1)% -2.4 % (2.0) p.p (1.5) p.p Passengers carried RPK ASK SLF Middle East and Africa Passengers carried RPK ASK SLF CIS Passengers carried RPK ASK SLF Asia 1.0 % 0.4 p.p. 1.3 % (0.6) % Passengers carried (2.2) p.p. (4.7) % (7.3) % RPK ASK SLF Passengers carried (0.5)% (1.1)% RPK ASK SLF (7.0)% Passengers carried (3.3)% (3.6) p.p RPK ASK SLF Russian market the star performer in H1 2014 Weaker performance on European routes due to RUB depreciation vs EUR and overall cautious consumer sentiment Decline in PAX and RPK growth on Asian routes mostly as a result of charter network downscaling CIS region declined due to lower frequency of flights to Ukraine North American market was stable, while our Middle Eastern and African flights continued to be under pressure due to macroeconomic headwinds 9 Source: Data presented based on management accounting
Key Operating Indicators 2,256 2,157 2,022 1,745 1,883 1,620 Monthly Passenger Traffic ( 000 PAX) 2,481 2,542 2,241 1,842 1,984 2,858 2,306 2,610 2,244 3,371 3,080 2,649 3,797 3,394 3,453 3,018 2,979 3,072 2,803 2,703 2,389 Jul-2014 3,797 % vs Jul-2013 11.9% % vs Jun-2014 12.6% % 7M 2014 vs 7M 2013 11.0% 2,365 2,316 2,101 2,044 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 6,180 5,929 4,879 5,650 5,418 4,518 Monthly Passenger Turnover (m pkm) 6,528 6,622 6,506 6,392 6,929 5,100 5,381 7,341 5,833 8,606 8,098 6,972 9,761 8,909 7,896 9,138 8,141 8,044 7,510 7,295 6,560 Jul-2014 9,761 % vs Jul-2013 9.6% % vs Jun-2014 13.4% % 7M 2014 vs 7M 2013 5.2% 6,363 6,253 5,980 5,848 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8,538 7,771 8,753 8,536 8,097 7,128 8,281 8,395 6,776 6,186 6,834 Monthly ASK (m ask) Monthly Seat Load Factor (%) 7,156 8,065 9,869 10,599 11,273 9,447 10,159 10,590 10,665 9,844 9,454 8,412 8,591 8,800 9,219 9,380 8,920 8,386 7,867 8,005 Jul-2014 11,273 % vs Jul-2013 6.4% % vs Jun-2014 6.4% % 7M 2014 vs 7M 2013 5.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 73% 76% 72% 73% 72% 73% 79% 78% 75% 76% 75% 75% 2012 2013 2014 74% 73% 72% 86% 87% 80% 84% 87% 82% 81% 86% 84% 77% 76% 79% 78% 73% 76% Jul-2014 86.6% 73% vs Jul-2013 2.5 p.p. vs Jun-2014 5.4 p.p 7M 2014 vs 7M 2013 (0.0) p.p Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Strong PAX growth rate Moderate growth of ASK and RPK impacted by restructuring of fleet at subsidiaries level Gradually improving seat load factor 10
Revenue Breakdown Traffic Revenue Breakdown by Type (H1 2014) Revenue from Scheduled Passengers Carriages (RUBm) 1 Charter Passenger Flights 5.9% Cargo 3.1% 6M 2013 6M 2014 Y-o-y Change Russia 37,351 42,965 15.0% Scheduled Passenger Flights 91.0% Europe 28,415 30,855 8.6% Scheduled Traffic Revenue Breakdown by Region (H1 2014) Europe 27.8% Asia 13.9% North America and Central 6.9% Other 12.6% Russia 38.8% Asia 14,170 15,378 8.5% North and Central America 6,580 7,665 16.5% Other 2 13,936 13,960 0.2% Revenue growth across all regions with most notable increases in Russia and North and Central America 1 Data presented based on management accounting. 2 Includes CIS, Middle East and Africa 11
Revenue Units Yield: PAX Revenue / RPK (RUB / RPK) 4.3% 2.76 2.88 RASK: PAX Revenue / ASK (RUB / ASK) 3.3% 2.11 2.18 6M 2013 6M 2014 6M 2013 6M 2014 Yield (RUB / RPK) 1,2 RASK (RUB / ASK) 1,2 2.92 2.99 2.91 2.85 2.19 2.21 2.19 2.21 International Domestic 6M 2013 6M 2014 International Domestic Total yield increased by 4.3% in RUB terms, which was a combination of decreasing yields on domestic market and improving yields on international market Increased RASK by 3.3% in RUB terms as a result of improved commercial performance 1 For scheduled flights of Aeroflot Group (excluding charter flights) 2 Data presented based on management accounting 12
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 13
Short-haul Medium-haul Long-haul Aeroflot Group Fleet in Operation Type 1 Aeroflot Subsidiaries Total Owned Financial Lease Operating Lease Total Change 30-Jun-2014 30-Jun-2014 30-Jun-2014 30-Jun-2014 30-Jun-2014 30-Jun-2014 31-Dec-2013 31-Dec-2013 Boeing B-767 2 3 5 - - 5 8 (3) Airbus A-330 22-22 - 8 14 22 - Tu-204-2 2-2 - 6 (4) Boeing B-777 10 3 13-10 3 7 6 Ilyushin Il-96-300 2 6-6 6 - - 6 - McDonnell Douglas MD-11 2 3-3 - - 3 3 - Total 43 8 51 6 20 25 52 (1) Airbus A-319 8 31 39-13 26 39 - Airbus A-320 64 13 77-1 76 67 10 Airbus A-321 26-26 - 21 5 26 - Boeing B-737 5 30 35-2 33 30 5 Total 103 74 177-37 140 162 15 DHC 8 Series 200-3 3 - - 3 2 1 DHC 8 Series 300-4 4 - - 4 3 1 Antonov An-148-6 6-6 - 6 - SSJ-100 9 1 10 - - 10 10 - Total 9 14 23-6 17 21 2 Total fleet 3 155 96 251 6 63 182 235 16 Continued renewal of fleet, replacing old aircraft with modern fuel-efficient aircraft Average age of JSC Aeroflot s aircraft fleet in operation is 4.0 years, one of the youngest fleets in the industry Disciplined approach to adding new capacity to the market 1 As of 30-Jun-2014. 2 Aircraft not in operation to be phased out in 2014. 3 Excluding 4 Mi-8 helicopters and 1 An-24 aircraft. 14
Aeroflot Group Fleet Order and Phase-Out Schedule Total Aircraft Delivery Schedule in Accordance with Existing Contracts 1 Type of Aircraft Delivered as at 30-Jun-2014 2014 2015 2016 2017 Long-haul² 51-3 5 9 A-330 22 - - - - B-767 5 - - - - B-777 13-3 3 - B-787 - - - 2 9 Medium-haul 177 11 13 31 26 A-319 39 - - - - A-320 77 1-9 7 A-321 26 - - 7 4 B-737 35 10 13 15 15 Short-haul 23 8 12 - - An-148 6 - - - - SSJ-100 10 8 12 - - DHC-8 7 - - - - Total 251 19 28 36 35 Aircraft Phase-Out Schedule in Accordance with Existing Contracts 1 Type of Aircraft Total Phase-Out: July 2014-2017 2014 2015 2016 2017 Long-haul 14 8-4 2 B-767 3 2 - - 1 B-777 2 - - 1 1 Ilyushin Il-96 6 6 - - - MD-11 3 - - 3 - Medium-haul 43 5 6 16 16 A-319 7-4 - 3 A-320 15 4 1 7 3 A-321 3 - - 3 - B-737 18 1 1 6 10 Short-haul 5-3 1 1 DHC-8 5-3 1 1 Total 62 13 9 21 19 Aeroflot has flexibility in terms of aircraft additions A320 family and SSJ aircraft can be financed via operating or finance lease and B737NG will be phased-in under operating lease By the end of 2014, Aeroflot plans to phase out all Il-96, two B-767, one B-737 and five А-320 family aircraft as result of expiring lease term 1 Excluding 4 Mi-8 helicopters and 1 An-24 aircraft. 2 Including six Il-96, two Tu-204 and three MD-11 15
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 16
Key Financial Results of Aeroflot Group RUBm 6M 2013 6M 2014 6M 2014 (ex. non-recurring expenses³) Revenue 128,180 140,281 +9% growth 140,281 +9% growth EBITDAR¹ 19,967 16% margin 16,657 12% margin 18,754 13% margin Net Income / (loss) 45 0% margin (1,905) neg. margin 375 0% margin Operating Free Cash Flow² 22,096 26,476 +20% growth 26,476 +20% growth Revenue growth driven by expanding passenger traffic Declining EBITDAR and net income as a result of RUB depreciation impact on costs and non-recurring expenses Higher cash flow generation due to growth of unrealized transportation revenue (cash sales) 1 EBITDAR = EBITDA + operating lease expenses; ² Operating Free Cash Flow = net cash flow from operations - net capex on tangible and intangible assets + net pre-delivery payments for aircraft. ³ Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) (RUB1,817m), provision for pre-term return of MD-11 (RUB874m), gain on pre-term return of TU-204 (RUB594m (RUB411m for Net Income)) 17
RUBm Revenue Analysis 9% 10,791 10,084 (9,383) 609 Net positive impact of 701m 128,180 140,281 6M 2013 Volume Currency Pricing Other 6M 2014 Revenue growth was a result of traffic volume growth, as currency effect was offset by softer fares on the back of macroeconomic headwinds and intensified market competition 18
Cost Analysis 6M 2014, RUBm 28.4% 19.6% 17.2% 6.3% 6М 2013 6М 2014 (excl. currency and non-recurring expenses) 2,3 6M 2014 Y-o-y Change (excl. currency and non-recurring expenses) Y-o-y Change Fuel 36,942 39,256 40,236 6.3% 8.9% Opex (ex. Fuel) 86,057 95,516 101,429 11.0% 17.9% Aircraft, Traffic and Passenger Servicing 24,239 26,604 27,714 9.8% 14.3% Staff 21,357 24,304 24,304 13.8% 13.8% SG&A 1 9,039 8,974 8,974 (0.7)% (0.7)% 6.5% 8.2% Maintenance 8,675 8,582 9,268 (1.1)% 6.8% Operating Lease 9,053 10,313 11,627 13.9% 28.4% 3.9% 9.9 % D&A and custom duties 5,733 6,414 6,414 11.9% 11.9% Other Expenses² 7,961 10,325 13,128 29.7% 64.9% Total Opex 122,999 134,772 141,665 9.6% 15.2% Operating costs impacted by non-recurring events and rouble depreciation which mostly affected cost of operating lease, maintenance and aircraft, traffic and passenger servicing costs 1 Includes sales and marketing expenses and administration and general expenses. 2 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) (RUB1,817m), provision for pre-term return of MD-11 (RUB874m), gain on preterm return of TU-204 (RUB594m) 3 Currency impact on both fuel cost for operations and resale to third parties with latter accounted as other expenses 19
CASK 6M 2013 Δ in Staff (ex. SBC¹) Δ in SBC¹ Δ in Fuel² Δ in Maintenance Δ in Air, Traffic and PAX Δ in Operating Lease Δ in D&A and CD³ Δ in Other costs⁴ (ex.nre⁵) CASK 6M 2014 (ex.nre⁵) NRE⁵ CASK 6M 2014 Group Unit Costs Cost Per ASK ($ cents) 1.5% (4.2)% 7.70 0.03 (0.08) (0.18) (0.05) (0.05) 0.05 (0.02) (0.02) 7.38 0.11 7.49 Cost per ASK declined by 2.7% positively impacted by decline of staff, fuel, maintenance and air, traffic and PAX costs and negatively by introduction of share-based compensation programme, operating lease and non-recurring expenses, including provisions for doubtful accounts receivable from tour operators 1 Share-based compensation 2 Refers to both fuel costs for operations and resale of fuel to third parties accounted as other expenses 3 Customs duties 4 Other costs include SG&A and other expenses 5 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204 Note: Costs and expenses converted at 31.02 and 34.98 RUB per $ for H1 2013 and H1 2014 respectively 20
Managing Fuel Costs Continuous fuel supply optimisation 5-year supply contract at Sheremetyevo and 1-year supply contracts in 29 regional airports across Russia Majority of fuel purchased in Russia (83%) and almost all fuel at international airports supplied at formula-linked price Jet fuel price = NW Europe (FOB Rotterdam) price x Discount x FX rate 1 x 1.18 2 + Storage/Fuelling/Supply fees (if any of these applicable) Average fuel purchase price of $900/ton (c.rub31,500/ton 3 ) in H1 2014 vs $915/ton (RUB28,300/ton 4 ) in H1 2013 (1.7% y- o-y decrease in USD terms) Average Fuel Price ($/ton) (1.7)% Fuel Consumption per ASK (gr/ask) (4.0)% 25 24 6M 2013 6M 2014 Fuel Consumption per ATK (gr/atk) (1.5)% $915/ton (c.rub28,300/ton) $900/ton (c.rub31,500/ton) 201 198 6M 2013 6M 2014 6M 2013 6M 2014 Aeroflot is achieving efficiency gains in fuel costs as new aircraft are put into operation, while old and less fuel-efficient ones are in the process of phase out 1 USD/RUB exchange rate as per the Central Bank of Russia 2 Assuming 18% VAT rate 3 Based on average H1 2013 exchange rate of 31.02 RUB/USD 4 Based on average H1 2014 exchange rate of 34.98 RUB/USD 21
Headcount Overview and Labour Productivity Headcount H1 2013 H1 2014 Y-o-y Change Aeroflot JSC 16,083 17,321 7.7% Aeromar 2,865 3,225 12.6% Subsidiary Airlines 8,742 8,677 (0.7)% Other 1 2,435 2,376 (2.4)% Total 30,125 31,599 4.9% Airlines Labour Productivity 2 Traffic Revenue / Avg. Headcount (RUB 000 per employee) 4% RPK / Avg. Headcount (m pkm per employee) PAX Traffic / Avg. Headcount (passengers per employee) (0)% 6% 3,603 3,734 1.30 1.30 469 496 6M 2013 6M 2014 6M 2013 6M 2014 6M 2013 6M 2014 Sizeable improvement in labour productivity has resulted in increasing traffic revenue and PAX traffic per employee 1 Other includes AeroMASH AB, Aeroflot Riga, Sherotel and Aeroflot-Finance. 2 Based on Aeroflot JSC and subsidiary airlines average headcount. 22
Adjusted Operating and Net Income Analysis 6M Adjusted Operating Income Build-Up (RUBm) 874 1,817 (594) 713 (1,384) Operating Income 6M 2014 Provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) Provision for pre-term return of MD-11 6M Adjusted Net Income Build-Up (RUBm) Gain on pre-term return of TU- 204 Adjusted Operating Income 6M 2014 1,817 874 (411) 375 (1,905) Net Income 6M 2014 Provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) Provision for pre-term return of MD-11 Gain on pre-term return of TU- 204 Aeroflot Group remained profitable on operating and net income basis adjusted for non-recurring provisions Adjusted Net Income 6M 2014 23
Operating Income 6M 2013 Volume Other Pricing FX benefit FX drag Fuel* Staff Aircraft, Traffic and PAX* Operating Leases* D&A and CD** Other opex*** Adjusted Operating Income 6M 2014 NRE**** Operating Income 6M 2014 Group Operating Income Analysis 6M Operating Income Evolution, y-o-y basis (RUBm) 10,791 609 10,084 (4,796) 5,181 (9,383) (2,730) (2,947) (2,365) (1,260) (681) (1,790 ) 713 (2,097) (1,384) Total revenue change of 12,101m Total recurring expenses change of 16,569m Revenue growth driven by higher passenger volumes offset by increased costs due to FX movement and non-recurring provisions * Excluding currency impact ** Custom Duties *** Other operating expenses include SG&A, maintenance costs, other operating expenses (excluding currency effect and non-recurring expenses; including leased aircraft return provision) **** Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204 24
Aeroflot JSC Rossiya Airlines Vladivostok Air Donavia Orenair Aurora Sherotel Aeromar Others (including minority) Group Net Income H1 2014 NRE¹ Adjusted Group Net Income H1 2014 Adjusted Group Net Income H1 2013² Group Net Income Aeroflot Group Net Income (RUBm) 1,835 (708) (527) 163 2,280 375 (293) 407 52 267 (3,143) (251) (1,905) Total net loss of subsidiary airlines of 3,808m Continuing restructuring of subsidiaries combined with non-recurring expenses contributed to negative reported net income for the period 1 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204 2 Net income for 6M 2013 adjusted for non-recurring gain on disposal of Aerofirst (RUB338m) 25
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 26
Leverage and Liquidity Debt (RUBm) 30-Jun-2013 30-Jun-2014 Change 3.8 x Total Debt / LTM EBITDA¹ 2.6 x 4.3 x Borrowings 13,638 14,403 5.6% Finance Lease Liabilities 76,389 97,308 27.4% Pension Liabilities 722 735 1.8% 30-Jun-2013 31-Dec-2013 30-Jun-2014 Finance Lease Repayment Schedule (RUBm) 2 60,327 Customs Duties 402 300 (25.4)% 5,588 10,434 10,629 10,330 Total Debt 91,151 112,746 23.7% Cash and Short Term Investments 23,464 36,817 56.9% H2 2014 2015 2016 2017 2018+ Borrowings Structure by Currency 9% Finance Lease Structure by Currency 3% Net Debt 67,687 75,929 12.2% 91% 97% Manageable debt level 12% RUB USD 88% Cash position of RUB 36,817m and undrawn credit lines of RUB19,817m 1 Total debt does not include capitalised operating lease expenses 2 Future payments in dollars converted into roubles at exchange rate of 33.6306 RUB per USD 27
Operating Free Cash Flow 6M 2014 Operating Free Cash Flow (RUBm) 19.8% 19,673 26,703 2,169 26,476 (2,396) 22,096 2,244 1,766 7,030 5,586 (1,361) (1,205) Profit Before Income Tax D&A Interest Expense Unrealized Net FX Loss Other Adj. before Working Capital Changes Cash Flows from Operating Activities before Working Capital Changes Working Capital Changes and Income Tax Net Cash Flows from Operating Activities Net Capital Expenditures Net Pre-delivery Payments for Aircrafts Free Cash Flow 6M 2014 Free Cash Flow 6M 2013 Substantial cash flow generation over the last 6 months and ahead of summer season 28
Table of Contents 1. Key Highlights 2. Market Update 3. Operating Performance 4. Fleet Overview 5. Financial Performance 6. Capital Structure and Liquidity 7. Appendix 29
Key Operating Data for JSC Aeroflot and Aeroflot Group JSC Aeroflot Aeroflot Group Unit 6M 2013 6M 2014 Change 6M 2013 6M 2014 Change Passenger Turnover m pkm 27,774 31,171 12.2% 39,272 40,927 4.2% International Routes 19,064 20,205 6.0% 26,397 25,787 (2.3)% Domestic Routes 8,711 10,966 25.9% 12,875 15,140 17.6% Passenger Capacity m ASK 36,036 40,749 13.1% 51,508 54,066 5.0% International Routes 25,094 27,065 7.9% 34,373 34,560 0.5% Domestic Routes 10,941 13,684 25.1% 17,136 19,507 13.8% Tonne-Kilometres m tkm 3,013 3,113 3.3% 4,086 4,009 (1.9)% International Routes 2,115 2,003 (5.3)% 2,779 2,508 (9.8)% Domestic Routes 898 1,111 23.7% 1,307 1,501 14.8% Passenger Traffic 000 PAX 9,542 10,962 14.9% 14,142 15,666 10.8% International Routes 5,666 5,918 4.4% 7,957 7,948 (0.1)% Domestic Routes 3,876 5,044 30.1% 6,185 7,717 24.8% Cargo and Mail Carried tonnes 91,449 66,511 (27.3)% 105,338 75,993 (27.9)% International Routes 66,583 38,671 (41.9)% 68,552 40,058 (41.6)% Domestic Routes 24,866 27,840 12.0% 36,786 35,935 (2.3)% Seat Load Factor % 77.1 % 76.5 % (0.6)p.p 76.2 % 75.7 % (0.5)p.p International Routes 76.0 % 74.7 % (1.3)p.p 76.8 % 74.6 % (2.2)p.p Domestic Routes 79.6 % 80.1 % 0.5p.p 75.1 % 77.6 % 2.5p.p Flight Hours hours 243,526 266,194 9.3% 369,073 383,432 3.9% Yield RUB / pkm 286 298 4.2% 276 288 4.3% RASK RUB 220 228 3.6% 211 218 3.3% 30
Key Financial Data for JSC Aeroflot RUBm, Unless Otherwise Stated 6M 2013 6M 2014 Change Revenue 97,388 113,790 16.8% RPK 1 (m pkm) 27,774 31,171 12.2% Yield 2 (RUB/pkm) 2.9 3.0 3.4% EBITDAR 3 15,377 15,024 (2.3)% Margin (%) 15.8% 13.2% (2.6)p.p EBITDA 4 9,597 6,904 (28.1)% Margin (%) 9.9% 6.1% (3.8)p.p Operating Income 4,963.0 1,578.0 (68.2)% Margin (%) 5.1% 1.4% (3.7)p.p Net Income 2,035 1,835 (9.8)% Margin (%) 2.1% 1.6% (0.5)p.p Net Debt 5 43,671 57,086 30.7% Note: Financial data as per IFRS before intercompany eliminations. 1 RPK = revenue passenger kilometre. 2 Yield = PAX Traffic Revenue / RPK. 3 EBITDAR = EBITDA + operating lease expenses. 4 EBITDA = operating income + depreciation & amortisation + customs duties. 31 5 Net Debt = borrowings + finance lease liabilities + pension liabilities + custom duties cash and short-term investments.
Key Financial Data for Aeroflot Group RUBm, Unless Otherwise Stated 6M 2013 6M 2014 Change Revenue 128,180 140,281 9.4% RPK 1 (m pkm) 39,272 40,927 4.2% Yield 2 (RUB/pkm) 2.8 2.9 3.0% EBITDAR 3 19,967 16,657 (16.6)% Margin (%) 15.6% 11.9% (3.7)p.p EBITDA 4 10,914 5,030 (53.9)% Margin (%) 8.5% 3.6% (4.9)p.p Operating Income / (loss) 5,181 (1,384) NM Margin (%) 4.0% (1.0)% (5.0)p.p Net Income / (loss) 45 (1,905) NM Margin (%) - (1.4)% (1.4)p.p Net Debt 5 67,687 75,929 12.2% Note: Financial data as per IFRS before intercompany eliminations. 1 RPK = revenue passenger kilometre. 2 Yield = PAX Traffic Revenue / RPK. 3 EBITDAR = EBITDA + operating lease expenses. 4 EBITDA = operating income + depreciation & amortisation + customs duties. 32 5 Net Debt = borrowings + finance lease liabilities + pension liabilities + custom duties cash and short-term investments.
Key Operating Data of Subsidiary Airlines Passenger Traffic ( 000 PAX) Passenger Turnover (m pkm) Donavia Rossiya Airlines Orenair Vladivostok Air Aurora Dobrolet Total 6M 2014 794 2,177 1,244 5 466 19 4,704 6M 2013 576 1,930 1,430 546 119 4,601 Change, % 37.8% 12.8% (13.0)% (99.1)% 291.6% 2.2% 6M 2014 1,134 4,145 3,679 8 766 24 9,756 6M 2013 840 3,922 5,360 1,263 112 11,497 Change, % 35.0% 5.7% (31.4)% (99.4)% 583.9% (15.1)% 6M 2014 69.1 % 72.4 % 75.8 % 56.4 % 72.9 % 88.6 % 73.3 % Seat Load Factor, % 6M 2013 64.5 % 73.0 % 80.5 % 64.9 % 56.5 % 74.3 % Change, p.p 4.6p.p (0.6)p.p (4.7)p.p (8.5)p.p 16.4p.p (1.0)p.p 6M 2014 16,602 54,810 32,483 122 12,970 251 117,238 Flight Hours, hours 6M 2013 13,223 50,494 39,867 17,884 4,080 125,548 Change, % 25.6% 8.5% (18.5)% (99.3)% 217.9% (6.6)% Revenue 1, RUBm 6M 2014 4,847 14,660 8,474 138 4,911 77 33,107 Net Income 1, RUBm 6M 2014 163 (708) (3,143) (527) 407 (188) (3,996) Aurora 33 1 According to IFRS, before intercompany eliminations.
Summary Financial Tables Income Statement 6 months 30-Jun-2013 6 months 30-Jun-2014 Traffic Revenue 113,667 121,796 Other Revenue 14,513 18,485 Revenue 128,180 140,281 Operating Costs (96,600) (109,009) Staff Costs (21,357) (24,304) Depreciation and Amortisation (5,052) (5,586) Other (Expenses)/Income, Net 10 (2,766) Operating Costs (122,999) (141,665) Operating Profit 5,181 (1,384) Finance Income 1,979 2,615 Finance Costs (6,616) (2,434) Share of Results of Equity Accounted Investments 13 (2) Profit Before Income Tax 557 (1,205) Income Tax (512) (700) Profit for the Period 45 (1,905) Attributable to: Shareholders of the Company 151 (1,745) Non-controlling Interest (106) (160) 34
Summary Financial Tables Balance Sheet 31-Dec-2013 30-Jun-2014 Assets Current Assets Cash and Cash Equivalents 18,660 36,703 Short-term Investments 273 114 Accounts Receivable and Prepayments 55,690 51,942 Aircraft Lease Deposits 405 219 Income Tax Receivables 476 472 Expendable Spare Parts and Inventories 4,927 5,172 Derivative Financial Instruments 1,034 1,531 81,465 96,153 Non-current Assets Equity Accounted Investments 123 106 Long-term Investments 6,099 6,098 Aircraft Lease Deposits 1,088 1,132 Deferred Tax Assets 2,174 3,214 Other Non-current Assets 5,955 5,024 Prepayments for Aircraft 12,318 15,398 Property, Plant and Equipment 88,777 119,152 Intangible Assets 3,350 3,096 Derivative Financial Instruments 1,175 1,844 Goodwill 6,660 6,660 127,719 161,724 Total Assets 209,184 257,877 35
Summary Financial Tables Balance Sheet (continued) 31-Dec-2013 30-Jun-2014 Liabilities and Equity Current Liabilities Accounts Payable and Accrued Liabilities 36,248 47,436 Unearned Transportation Revenue 16,334 29,730 Deferred Revenue Related to Frequent Flyer Programme 577 675 Provisions 881 2,100 Short-term Borrowings 5,029 6,155 Finance Lease Liabilities 8,688 10,911 Derivative Financial Instruments 214 463 67,971 97,470 Non-current Liabilities Long-term Borrowings 8,377 8,248 Finance Lease Liabilities 63,348 86,397 Provisions 1,655 2,305 Deferred Tax Liabilities 1,647 1,874 Deferred Revenue Related to Frequent Flyer Programme 1,862 2,098 Derivative Financial Instruments 4,546 5,316 Other Non-current Liabilities 5,298 4,532 86,733 110,770 Equity Share Capital 1,359 1,359 Treasury Stock (3,573) (3,571) Accumulated Gain on Disposal of Treasury Shares 1,659 1,659 Investment Revaluation Reserve (10) (10) Cumulative Translation Reserve (28) - Hedge Reserve (383) (551) Retained Earnings 61,122 59,185 Equity Attributable to Shareholders of the Company 60,146 58,071 Non-controlling Interest (5,666) (8,434) Total Equity 54,480 49,637 Total Liabilities and Equity 209,184 257,877 36
Summary Financial Tables Condensed Cash Flow Statement 6 months 30-Jun-2013 6 months 30-Jun-2014 Operating Cash Flow before Working Capital Changes 10,158 7,030 Net Cash Flows from Operating Activities 21,173 26,703 Net Cash Flows Used in Investing Activities 1,133 (28) Net Cash Flows Used in Financing Activities (13,936) (8,632) Net Increase/(Decrease) in Cash and Cash Equivalents 8,368 18,043 Cash and Cash Equivalents at the End of the Period 23,438 36,703 37
Aeroflot Group Structure JSC Aeroflot Airlines Service companies JSC Donavia 100% CJSC Aeromar In-flight catering 51% JSC Sheremetyevo Base airport 8.96% JSC Orenair 100% JSC Rossiya Airlines 75%-1 share CJSC AeroMASh-AB Aviation security 45% CJSC Transport Clearing House 3.85% JSC Aurora Airlines 1 51% LLC Aeroflot-Finance Financial services 99.99% Alt Reiser Travel agency 100% JSC Vladivostok Air 52.16% LLC Dobrolet 100% CJSC Sherotel Hotel services Aeroflot Aviation School 100% 100% Ongoing subsidiary airline integration and streamlining of the corporate structure Note: Aeroflot Group consolidates all entities: JSC Aeroflot and all subsidiaries. 1 Previously was operating as SAT Airlines. 38