/ Letter from the Chief Executive officer
Business results in 2012 give extra cause for celebration as Aeroflot marks its 90th birthday in 2013. Last year our Company secured its positions as Russia’s flag carrier in the air transport industry and qualified as one of the principal airlines worldwide.
Aeroflot achieved consistent monthly passenger traffic numbers above one million in the reporting year for the first time in its history. About 17.7 million people used our services in 2012, which is 24.6% more than in 2011, and represents the highest annual figure in the entire post-Soviet period. Aeroflot Group (including subsidiary airlines) carried 27.5 million passengers in 2012.
Passenger turnover rose by 20.0% to 50.5 billion passenger-kilometers. A rating by the specialized international publication, Airline Business, placed Aeroflot among the Top 5 European airlines in 2012 by passenger turnover and rate of turnover growth.
Aeroflot is also in the European Top 5 by passenger turnover capacity, which rose by about 20% to 64.9 billion available seat-kilometers in 2012. We also entered the Top 10 European carriers by the crucial criterion of passenger load factor, achieving a figure of 77.9% in 2012.
Aeroflot combined above-average growth of carriage with financial stability and strong margins in its core business during 2012. Revenue totalled USD 8.138 billion, which is 51% more than in 2011, and EBITDA rose by 4% to USD 671 million. A decline of net income by 66% to USD 166 million was due to non-recurring items in 2011 (receipts from the sale of shares in subsidiaries and affiliate companies during 2011) and spending on consolidation of newly acquired airline assets.
Aeroflot’s asset consolidation project is the largest ever undertaken in the Russian airline industry, and it is now entering a new stage. In 2012 we unveiled plans to set up a low-cost airline within Aeroflot Group as well as a new Far East operator based on SAT Airlines and Vladivostok Air. Aeroflot is building an airline holding with key indicators, which will compare with those of the largest global players on today’s air transportation market. Group companies are pursuing a well-targeted and flexible policy to enter specific market segments and take leading positions in those segments. Aeroflot itself will continue to expand its business and reinforce its positions as a premium-class airline with global reach.
Aeroflot celebrates its 90th anniversary with a brand that is stronger than ever, enhanced by its status as one of the longest-established and best-known airlines in the world. Brand Finance, the world leader in corporate brand appraisal, estimated value of the Aeroflot brand in 2012 at USD 1.3 billion, putting the company in 18th place among the world’s Top 20 most valuable airline brands.
Our route network developed further and became more efficient in 2012. New domestic routes were opened from Moscow to Tomsk, Nizhnekamsk and Orenburg. Aeroflot also launched international routes from Sheremetyevo to Stuttgart, Krakow, Bologna, Odessa, Kharkov, Dnepropetrovsk, Donetsk, Vilnius and Tallinn, and began regular flights to Guangzhou, Miami and Tenerife. Regular flights linking Ekaterinburg with Larnaca were also introduced.
Aeroflot is the most technically advanced airline in Russia and has one of the youngest aircraft fleets in Europe. At the end of 2012 the Company fleet numbered 128 modern aircraft. Previous shortages of aircraft to fulfil specific transport roles have been overcome. The Company is the first airline in Russia to include the short-haul Sukhoi SuperJet-100 (the most significant recent development by Russia’s civil aerospace industry) in its fleet, and also helped with final testing of the aircraft.
Our services to passengers, both in-flight and on the ground, improved in 2012. Availability of alternative check-in was expanded: by the end of 2012 passengers could check in for Aeroflot flights from 79 airports in the world via Internet, and check-in via mobile phone was possible at 35 airports worldwide. Aeroflot has gained a strong presence in social networks, thus ensuring rich customer feedback. Our company has been acclaimed the best Russian corporate account on Twitter and we have embarked on a programme to install Wi-Fi Internet connection on our long-haul aircraft (the number of aircraft with Wi-Fi capability should reach 19 in 2013).
Aeroflot confirms its reputation as a European leader by passenger service quality year after year, as shown by data from the International Air Transport Association (IATA), and the SkyTeam Alliance (of which our Company is a member). The highly popular international airline portal, Skyscanner, consistently rates Aeroflot among the Top 5 European airlines by quality of its in-flight catering, and judges the uniforms worn by our cabin crew as the most stylish in Europe. We received a total of 14 industry awards and prestigious international awards during 2012, when we were voted “Best Russian Airline” in the Readers’ Choice competition by Conde’ Nast Traveller.
We make safety our absolute priority and levels of flight safety reached their highest levels for 20 years. Our safety indicators match the best international standards and are governed by strict criteria, including those prescribed in IATA certificates (IOSA for operational safety and ISAGO for safety of ground operations). Aeroflot gives much attention to difficult issues of aviation security, including the urgent problem of coping with restless passengers.
Our strategy is designed to take maximum account of the needs and best interests of Russia and of its air transport system. Our 90th anniversary has prompted us to look back with pride, but also to consider the long-term development prospects for Aeroflot. This Annual Report and the Annual General Meeting of Shareholders in 2013 will contribute to this process. Aeroflot’s history and its status today represent the best-possible proof that a strong country needs a strong civil aviation fleet. To build a fleet worthy of a great country in the 21st century is our strategic goal, and it is my belief that such a goal is fully compatible with the interests of Russia and of all the Company’s shareholders. The excellent work that has been done and continues to be done by the Aeroflot team is the best guarantee that this challenge will be met.