During the first nine months of the year, Aeroflot continued to actively develop its route network and grow traffic volumes ahead of its targets and the company’s operational growth, combined with active revenue management and strict cost control, helped to minimise the impact of external factors, like higher fuel costs.
Key highlights
Revenue for the first none months of the year was up 11.9% to RUB 381,341 million, RPKs increased by 6.3% to 73.5 billion RPKs. Passenger numbers increased by 8.0% to 26.8 million passengers. In Q3, RPKs and passenger numbers grew by 8.4% and 10.5%, respectively;
Revenue growth for 9M 2018 was boosted by changes to key currency rates (the euro appreciated against the ruble by 12.9% year-on-year, and the US dollar by 5.5%);
Revenue per available seat-kilometre (RASK) was positive (+5.8% in 9M 2018 year-on-year, and +8.4% in Q3 2018 year-on-year), due to growth in passenger load factor while maintaining yields at the level of H1 2018.
Revenue growth continued to accelerate in Q3 2018 to 13.8% year-on-year (compared with +10.6% in H1 2018).
Cost of sales in 9M 2018 was RUB 362,946 million, up 22.6% year-on-year. This was due to the growth of the Company and higher traffic volumes (Aeroflot’s capacity grew by 7.8%, while number of flights rose by 11.0%), as well as the impact of external factors including a significant increase in the cost of jet fuel as well as higher costs for air navigation services, airport charges and ground service costs on the back of an increase in service charges at a number of airports.
The biggest impact on costs in 9M 2018 was growth in the cost of aviation fuel, the Company’s largest operating cost line. Fuel costs rose by RUB 29,549 million (+46.9% year-on-year), in part due to an increase of 36.5% in the cost of kerosene in rubles year-on-year amid a significant rise in the cost of Brent crude (average cost per barrel in dollars in 9M 2018 increased by 38.5% year-on-year).
Leasing and aircraft and engine maintenance costs increased due to the expansion of Aeroflot airline’s fleet by 37 aircraft over the last 12 months.
Higher staff costs were driven by an increase in salaries and incentives to flight crew to improve the attractiveness of the Company’s employment terms, as well as an increase in the number of flight personnel on the back of the growth of the Company’s business.Cost growth was also driven by an increase in costs for air navigation services, airport charges and ground service costs in the context of an increase in the number of flights completed and higher service costs at a number of airports in Russia.
A number of optimisation measures undertaken by management to mitigate external pressures enabled the Company to decrease sales costs in 9M 2018 by 4.7% year-on-year; a significant reduction was achieved in Q2 and Q3 2018 (in Q3 2018 sales costs decreased by 8.7% year-on-year).
Growth of the net result from other activities for 9M 2018 was RUB 10,983 million (+49.9%) amid an increase in revenue from planned phase out of aircraft (RUB 3,095 million), dividends from subsidiaries (RUB 1,967 million), reduction in interest expenses (in 9M 2017 interest payments totalled RUB 800 million; there were no interest expenses in 2018), etc.
As a result of the factors listed above the net profit for 9M 2018 was RUB 15,626 million.
Despite pressure from external factors, including substantial growth in the cost of fuel, management was able to keep control of costs during Q3, which is the key period in terms of profitability.
The net profit for Q3 was RUB 22,809 million, just 7.4% down year-on-year. Excluding the impact of external factors, adjusted profit for Q3 2018 increased, while adjusted profit for 9M 2018 was comparable to the year-ago period.
