Aeroflot Group Airlines

CHAPTER 1 COMPANY PROFILE 02 03 Aeroflot Group Airlines Aeroflot is Russia s biggest carrier, leader of the Russian civil aviation industry, and one of the oldest airlines in the world. Aeroflot is based in Moscow Sheremetyevo Airport. Rossiya is one of Russia s largest carriers and the market leader in the North-West of the country. Based in Pulkovo (Saint Petersburg), Vnukovo (Moscow) and Rostov-on-Don airports. In addition to its scheduled flights, Rossiya operates charter flights. Aurora is the Group s carrier in the Russian Far East. It is based at Vladivostok, Yuzhno-Sakhalinsk and Khabarovsk airports and operates flights between the key population centres in the Far East and Eastern Siberia and flights from its base airports to remote cities and villages of the region. Pobeda is the Group s low-cost carrier, launched to further increase social mobility. Pobeda is based at Vnukovo airport in Moscow. 29.0 million PAX 8.8 million PAX 1.4 million PAX 4.3 million PAX 82.7 101.8 20.5 25.2 2.2 3.0 6.7 7.6 81.3% 189 81.1% 67 73.0% 24 88.3% 12 Scheduled routes in 2016 Scheduled routes in 2016 Scheduled routes in 2016 Scheduled routes in 2016 Domestic 46 International 87 Total 133 Domestic 68 International 44 Total 112 Domestic 17 Local 18 International 16 Total 51 Domestic 59 International 13 Total 72 66.7% 20.2% 3.2% 9.9% MULTI-BRAND STRATEGY IS AVAILABLE AT PAGE 33 OPERATING RESULTS IS AVAILABLE AT PAGE 44 ROUTE NETWORK IS AVAILABLE AT PAGE 51 AIRCRAFT FLEET IS AVAILABLE AT PAGE 67

04 2016 Results 05 In 2016, Aeroflot Group achieved high operating and financial results despite the challenging situation in the passenger transportation market. The Group strengthened its market position thanks to its effective strategy, which is well adapted to external requirements and is based on a presence in different market segments, and also to digitalisation and focus on financial discipline. Staying on a growth track Connecting cities and continents Delivering the best offers Ensuring sustainable development Improving corporate governance Enhancing financial stability 42.3% share of the Russian air transportation market 43.4 million passengers carried 326 scheduled routes 51 country flight network 4 stars in the Skytrax rating Aeroflot airline 36.6 thousand people employed by the Group companies (as at 31 December 2016) 7+ corporate governance rating assigned by the Russian Institute of Directors RUB 495.9 billion revenue (+19.4%) 10.3% increase 14.1% international passenger traffic increase 153 unique destinations in the summer schedule, 144 in the winter schedule SkyTeam Aeroflot is a member of the global alliance Aeroflot is the Best Airline in Eastern Europe according to Skytrax World Airline Awards Social Support, Non-state Pension Coverage responsible approach to employees 3 independent directors on the Board of Directors RUB 137.6 billion EBITDAR, 27.7% EBITDAR margin 7.6% domestic passenger traffic increase 42.1% share of international 292 aircraft in the fleet 30 aircraft net increase in the fleet 37 long-haul aircraft have Wi-Fi access points 7 thousand free tickets issued as part of the Mercy Miles project Compliance with the key requirements of the Code RUB 38.8 billion net income 81.4% passenger 3.1 p.p. passenger increase 4.2 years average age of Aeroflot airline fleet 6.5 years average age of Aeroflot Group fleet 72% Aeroflot airline s Net Promoter Score Support for Russian sports, culture, and cinema 40.4% free float RUB 91 billion decrease of net debt

06 Operating and Financial Highlights 07 traffic MILLION PAX % Revenue RUB BILLION EBITDAR and EBITDAR margin RUB BILLION AND % New record set for, which reached 43.4 million passengers in 2016. In 2016 the Сompany has significantly enhanced its operational efficiency with passenger reaching a record high of 81.5% as Aeroflot Group was adding capacity only backed by consumer demand for transportation. Strict cost control and effective pro-active revenue management resulted in increased profitability. In 2016 EBITDAR increased by 33.4% backed by expansion of Сompany and revenue growth exceeding operational expenses inflation and resulted in record EBITDAR margins of 27.7%. 2016 43.4 10.3% 2016 81.4% 3.1 p.p. 2016 495.9 19.4% 2016 137.6 27.7% 2015 39.4 13.4% 2015 78.3% 0.5 p.p. 2015 415.2 29.8% 2015 103.1 24.8% 2014 34.7 10.7% 2014 77.8% (0.4) p.p. 2014 319.8 9.9% 2014 48.7 15.2% 2013 31.4 14.3% 2013 78.2% 0.1 p.p. 2013 291.0 15.0% 2013 51.0 17.5% 27.5 67.6% 1.3 p.p. 78.1% 253.0 60.1% 38.5 15.2% traffic change Revenue EBITDAR EBITDAR margin BILLION RPK BILLION ASK EBITDA and EBITDA margin RUB BILLION AND % Net profit RUB BILLION Rapid passenger turnover growth of 14.8% in 2016 outpaced global average growth of 5.9%. Balanced expansion of capacity on domestic and international routes has enabled the company to support efficiency of operations. Increased profitability was made possible by strict control of operating costs and effective revenue management. In 2016, net profit amounted to RUB 38.8 billion, which reflects the profitable growth of the core business and the lack of one-off effects recorded in previous years. 2016 112.1 14.8% 2016 137.7 10.4% 2016 78.0 15.7% 2016 38.8 2015 97.6 8.4% 2015 124.7 7.7% 2015 58.7 14.1% 2015 (6.5) 30.9 2014 90.1 5.6% 2014 115.8 6.2% 2014 24.8 7.8% 2014 (17.1) 10.8 2013 85.3 14.3% 2013 109.1 14.1% 2013 31.8 10.9% 2013 7.3 74.6 61.9% 95.6 59.3% 20.9 8.2% 5.2 EBITDA EBITDA margin Reported net profit/loss Adjusted net profit1 1 Adjusted net profit for 2014 and 2015 excludes result from derivatives, reserves, and other one-off effects.

08 Investment Case 09 Aeroflot Group Leader of the Russian air transportation market Young and efficient aircraft fleet Business highly adaptable to macroeconomic environment Stable operational growth and improving financial results Business diversification based on a multi-brand strategy Diversification of the Group s activity by segment to maximise flexibility in any economic environment Standardised high-quality product Ensuring consistently high product quality to attract and retain passengers Efficient financial management and consistent cost control Cost optimisation to ensure competitive edge Presence in attractive market segments Expansion in profitable segments and in markets with the long-term potential Balanced route network built around the hub at Sheremetyevo airport Diversification of destinations to optimise presence in regions with different demand patterns and network development to promote synergies 2016 results Integration of regional companies (Donavia and Orenair) to create a single regional carrier in the mid-market price segment, Rossiya airline. Further development of Pobeda airline. In 2016, Pobeda carried 4.3 million passengers. Flights to new destinations in Kazakhstan launched in 2015 (about 0.5 million passengers carried). The frequency of flights to London increased (from 21 to 35 flights per week). Aeroflot airline s on international routes increased by 10.6%. Aeroflot was awarded 4-Star Airline status and recognised as the Best Airline in Eastern Europe for the fifth time by Skytrax World Airline Awards. The Group continued to improve route network quality: scheduled flights frequency grew by 4.8%, driving better flight connectivity. Route network expansion promotes transit traffic growth, including in the international transit segment: Aeroflot airline carried 3.7 million passengers in the segment. RASK growth (+10.3%) outpacing CASK growth (+5.7%).

10 Key Events 11 Developing a multi-brand platform Continuous fleet upgrade service and new technologies Increasing social mobility 28 March The new reorganised Rossiya airline, formed from the integration of the Group s three regional carriers (Rossiya, Donavia, and Orenair), launched flight operations. 31 December Pobeda airline s reached 4.3 million (+38.7% y-o-y). FOR MORE DETAILS SEE THE STRATEGY SECTION ON PAGES 30-39 25 August PJSC Aeroflot and United Aircraft Corporation announced the completion of the firm contract for the delivery of 30 Sukhoi Superjet 100 aircraft. In 2017 and 2018, the Company expects to receive 20 more SSJ100 aircraft. 23 September During the year, the Company worked to accept aircraft previously operated by Transaero: a total of 12 Boeing 747 and Boeing 777 were accepted, as well as 6 Airbus A320Family aircraft from the bid book. FOR MORE DETAILS SEE THE AIRCRAFT FLEET SECTION ON PAGES 67-75 1 July Aeroflot lifted the restriction on the use of mobile phones and tablets during take-off and landing. 19 July Aeroflot started cooperation with TripAdvisor. As an electronic feedback platform for air passengers, TripAdvisor enables Aeroflot to improve customer feedback handling and customer service. 1 September Aeroflot reduced the cost of the Internet on-board (in-flight Wi-Fi) service and introduced a time-based rate. Internet connection is available on-board all the airline s wide-body aircraft. 6 October Aeroflot provided access to Apple Pay for its passengers. 11 January and 28 September Aeroflot s CEO Vitaly Saveliev. They discussed the airline s results and future plans, the situation in the air transportation market, including Transaero crisis resolution, the low-cost carrier development, and the flat fare programme aimed at improving transport connection with Russia s remote regions and increasing mobility across Russia. FOR MORE DETAILS SEE THE CORPORATE SOCIAL RESPONSIBILITY SECTION ON PAGES 98-115 Supporting sports Route network development 1 June Aeroflot launched scheduled flights to Valencia and Alicante (Spain) and to Lyon (France). 30 October Aeroflot launched domestic flights on the new domestic route from Moscow to Syktyvkar. FOR MORE DETAILS SEE THE ROUTE NETWORK SECTION ON PAGES 51-66 Improving the fare system 28 January Aeroflot airline reduced fares for its own and subsidiaries outbound flights under its commercial management by 10%. 1 November Aeroflot airline introduced an improved fare structure. The difference between fare categories was reduced significantly in the new flexible fare line, making extra services and privileges more affordable for passengers. Enhancing IT infrastructure 29 March Aeroflot launched its own online lost baggage tracking service based on the World Tracer international tracking system. 28 June Aeroflot switched to the Aeroflot Bonus loyalty programme management system based on the innovative Oracle Siebel Loyalty Management platform. 18 August Aeroflot airline and SAP completed the transition to the SAP HANA ERP platform to increase business process productivity. 19 September Aeroflot and Technoserv IT company completed a new data centre based on Hewlett Packard Enterprise equipment. The project increased the capacity of the Company s main data centre by 2.5 times. FOR MORE DETAILS SEE THE INFORMATION TECHNOLOGY SECTION ON PAGES 89-92 FOR MORE DETAILS SEE THE INFORMATION TECHNOLOGY SECTION ON PAGES 89-92 Developing corporate governance, investor relations and increasing transparency 31 March Aeroflot launched an updated version of its website for shareholders and investors. The completely new IR section will offer information and resources for the investment community in a modern, convenient, and user-friendly format. 8 July Aeroflot was assigned a 7+ corporate governance rating by the Russian Institute of Directors, based on the monitoring results. 18 October Aeroflot held the Capital Markets Day, a meeting between the Company s top managers and leading Russian and foreign investors and analysts. 24 May Aeroflot acted as the official carrier of Russia s national basketball teams. 28 July Aeroflot s SU7150 special flight delivered Russia s Olympic team from Moscow's Sheremetyevo airport to Rio de Janeiro (Brazil), that hosted 2016 Summer Olympic Games. FOR MORE DETAILS SEE THE CORPORATE SOCIAL RESPONSIBILITY SECTION ON PAGES 98-115 Events after the reporting period 7 February and 18 April 2017 The Aeroflot brand was recognised as the world s most powerful brand in the airlines industry and the strongest brand in Russia by Brand Finance. 8 February 2017 Aeroflot won East Capital s Best Growth Award. 7 March 2017 Fitch Ratings international agency affirmed Aeroflot s rating at B+, Outlook Stable. 10 April 2017 Aeroflot was recognised as the Best Airline in Europe by users of ТripAdvisor, the world s largest travel website. 11 April 2017. Aeroflot was recognised as the most popular foreign airline in China at the annual Flyer Award Ceremony 2017. FOR MORE DETAILS SEE THE SALES AND DISTRIBUTION SECTION ON PAGES 76-78 FOR MORE DETAILS SEE THE CORPORATE GOVERNANCE SECTION ON PAGES 134-166

12 13 Industry Recognition and Awards Awards Aeroflot airline was awarded four stars (out of five) by Skytrax (a global consulting company considered the world s most influential assessor of airline and airport service quality) for its high-quality service. Aeroflot airline was recognised as the Best Airline in Eastern Europe by Skytrax World Airline Awards for the fifth time. For the fourth time in a row, Aeroflot won the Condé Nast Traveller Readers Choice Award as the Best Russian Airline. Aeroflot won the Readers Choice prize at Air Transport News Awards 2016. The airline s CEO Vitaly Saveliev was named Leader of the Year. Aeroflot Group companies won in a number of categories of the Wings of Russia national airline award. Aeroflot was recognized as the Russian Airline of the Year People s Choice and won in the International Carriage category. Aeroflot won the Best.ru/Company of the Year national business award in the Transport category. Aeroflot airline s in-flight entertainment system interface won silver at the International Design Awards in the Multimedia / Interface Design category. Aeroflot won the prestigious travel award, Business Traveller Russia and CIS, in the Best European Airline, Best Business Class on Medium-Haul Flights, and Best Airline in Russia and CIS categories. Aeroflot won the prestigious SAP Value Award in the IT sector, in the Expanding Horizons category, for the transition to a new level of business transformation. Aeroflot received the independent award Innovation Time 2016 in the Transport and Mechanical Engineering category. Once again, Aeroflot won the prestigious international Randstad Award as the most attractive Russian employer in the Transport and Logistics category. Ratings Aeroflot received the top rating (seven out of seven stars) as the safest airline in the world. The rating is compiled by Airlineratings.com, an independent rating website, on a regular basis. In the rating compiled by the international analytical portal anna.aero, Aeroflot Group was rated among top 20 global carriers by the number of new destinations, and among top 3 by new routes with the most frequent flights. Pobeda airline was rated No. 7 globally by the number of new routes launched. Aeroflot was rated eighth in the Top 10 Airlines in the World 2016 rating compiled by TripAdvisor based on passenger reviews. Aeroflot came second among the world s best airlines and remains the best air carrier in Russia according to National Geographic Traveler. The low-cost carrier Pobeda was rated the third best Russian airline by National Geographic. According to Routehappy, a search engine for comfortable flights, Aeroflot is among the top 10 airlines globally in terms of on-board Wi-Fi Internet access for passengers on long-haul flights.