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Annual Report 2005 2005 Aeroflot made rapid progress towards membership of the SkyTeam global airline alliance

Aeroflot became the first Russian airline to pass the IATA (IOSA) operational safety audit Aeroflot annual report 2005

Contents

KEY FIGURES > 3 CEO’S ADDRESS TO SHAREHOLDERS> 4 MAIN EVENTS IN 2005 > 6

IMPLEMENTING COMPANY STRATEGY: RESULTS IN 2005 AND PRIORITY TASKS FOR 2006 Strengthening market positions > 10 Creating conditions for long-term growth > 10 Guaranteeing a competitive product > 11 Raising operating efficiency > 11 Developing the personnel management system > 11 Tasks for 2006 > 11

AIR TRAFFIC MARKET Global air traffic market > 14 The passenger traffic market in Russia > 14 Russian airlines: main events in 2005 > 15 Market position of Aeroflot Group > 15

CORPORATE GOVERNANCE Governing bodies > 18 Financial and business control > 23 Information disclosure > 25

BUSINESS IN 2005 Safety > 28 Passenger traffic > 30 Cargo traffic > 35 Cooperation with other air companies > 38 Joining the SkyTeam alliance > 38 Construction of the new terminal complex, Sheremetyevo-3 > 40 Business of Aeroflot subsidiaries > 41 Aircraft fleet > 43 IT development > 44 Quality management > 45

RISK MANAGEMENT Sector risks > 48 Financial risks > 49 Insurance programs > 49 Flight safety risk management > 49

PERSONNEL AND SOCIAL RESPONSIBILITY Personnel > 52 Charity activities > 54 Environment > 55

SHAREHOLDERS AND INVESTORS Share capital > 58 Securities > 59 Dividend history > 61 Important events since December 31, 2005 > 61

FINANCIAL REPORT Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended December 31, 2005 > 64 Financial results > 65 Independent auditors’ report > 70 Consolidated statement of income > 71 Consolidated balance sheet > 72 Consolidated statement of cash flows > 73 Consolidated statement of changes in shareholders’ equity > 75 Notes to the consolidated financial statements > 76

APPENDIXES Main terms of interested party transaction > 104 Glossary of terms and abbreviations > 105 Operational statistics > 106 Aeroflot Group representative offices > 110 Route network of the Aeroflot Group > 114 General information > 116 Key figures

Business performance Unit 2005 2004 2003 2002 2001

Traffic revenue USD millions 2,079.9 1,735.5 1,369.0 1,244.3 1,221.1 Total revenue USD millions 2,539.6 2,158.8 1,716.0 1,563.0 1,558.0 Operating income USD millions 297.2 240.5 168.5 162.3 51.9 Net income USD millions 189.8 172.1 126.7 89.3 20.1 Shareholders' equity (as of December 31) USD millions 558.9 402.9 281.2 164.8 77.7 Capital expenditures USD millions 204.1 324.3 217.7 60.4 82.2 Personnel in airline sector (average) 17,064 16,808 15,854 16,049 16,287

Capital market figures

Earnings per share US cents 17.9 15.9 11.4 8.0 1.8 P/E ratio (as of December 31) 8.3 7.9 6.0 4.3 19.7 Market capitalization (as of December 31) USD millions 1,566.0 1,368.0 766.3 383.2 395.4

Traffic statistics

Passengers carried millions 8.1 7.3 6.4 5.9 6.2 Cargo tons carried thousands 151.5 148.9 116.9 111.9 103.8 Revenue passenger kilometers billions 22.5 21.6 18.9 18.3 19.6 Revenue ton kilometers billions 2.9 2.8 2.3 2.2 2.3 Passenger load factor % 68.4 68.2 68.8 68.2 65.7 Weight load factor % 58.1 58.4 57.0 56.5 53.7 Available ton kilometers per employee thousands 292.8 287.6 257.3 244.2 266.5 in airline sector Aircraft (as of December 31) 118 114 106 121 129 Aeroflot annual report 2005

CEO’s address to shareholders

Dear Shareholders,

Results for 2005 in the Russian civil aviation industry force a new assessment of our business outlook and working practices. After 12–14% annual growth in the number of passengers carried by Russian airline companies during 2001-2004, passenger traffic growth in 2005 was only 3.9%, and most of that came from international charter flights and not from regular carrying. Passenger traffic on the Russian domestic market grew by only 1.8%. These figures reflect stagnation in the airline industry, which had inevitable impact on our business. Causes of the stagnation are well-known: headlong growth of fuel prices, expansion of foreign carriers on the Russian market, growth of prices for services of monopolistic compa- 4 nies in the aviation business, as well as administrative reform which is still continuing with respect to our sector. Aeroflot was seriously affected in 2005 by suspension of operations with Il-96-300 aircraft, but still managed to carry out all of its duties to passengers. In such difficult conditions, where the “rules of the game” were changing almost monthly, Aeroflot had to pursue an extremely flexible policy, reacting appropriately to negative factors as they arose and taking measures to minimize the consequences. The company often found itself forced into “emergency management” techniques, adapting traffic capacities and schedules and making non-standard decisions in order to deal with non-standard situations. These extra efforts have been rewarded. The company is in a strong position. We have drasti- cally reduced the Company's debt portfolio. We have been successful in limiting growth of costs and ensuring financial stability. Profit of Aeroflot Group in 2005 was USD 189.8 million. Investor confidence in Aeroflot is demonstrated by rapid growth of Aeroflot's share price and market capitalization, offering satisfaction to our shareholders. Several events in 2005 deserve special mention in view of their importance for Company development. First and foremost, construction work finally started last July on a new terminal at Sheremetyevo Airport. The work is proceeding to schedule, and we are resolutely committed to completing and commissioning Sheremetyevo-3 in November 2007. Final completion of the project will give Moscow a fully-fledged modern air transport hub and raise competitive- ness of Aeroflot. The new terminal will unite internal, international and CIS carrying, and will realize Russia's transit potential. We view the new terminal and the existing international terminal, Sheremetyevo-2, as a unified entity. Important decisions were taken in 2005 on acquisition of new, highly efficient aircraft for our fleet. We have contracted 12 new craft in the A320/321 family (five A320s and seven A321s). Seven of the new planes will join our fleet this year and the others at the start of 2007. We have also contracted two B767s, which will arrive this year. The expansion program is ongo- ing: the Company fleet of B767s will be increased this year and in 2007; we will invest in a new generation of high-quality long-haul aircraft to enter service in 2010-2011; and we will continue to make extensive use of B767s until aircraft of the new generation are commis- sioned. We have contracted 30 short-haul RRJs (Russian Regional Jets), built by Sukhoi Civil Aviation, for short-haul purposes. These planes will start to enter the company fleet in 2008. Aeroflot continued to implement new technologies last year, and the main achievement was installation of the Sabre ticket sales and booking system. Preparations for launch of Sabre lasted over a year and there were teething problems. These problems have been resolved. We rate installation of Sabre as a success and it has given us a number of clear competitive advantages. We are introducing Internet bookings, and will soon be able to accept ticket payment by credit card over the Internet. CEO’s address to shareholders

These are steps on the way to introduction of e-ticketing. Aeroflot already has the technical capabilities and software to launch a full system of e-ticketing. But, unfortunately, this cannot be done without relevant steps by government to create a suitable legal and regulatory tax framework. We are doing our best to speed up this process. In October 2005 Aeroflot successfully underwent the IATA Operational Safety Audit (IOSA), becoming the first Russian company to receive the IOSA stamp of approval. We worked consistently and methodically in 2005 to achieve one of Aeroflot's main strategic objectives — membership of the SkyTeam global airline alliance. Much difficult work was carried out to make our procedures compatible with SkyTeam technologies. We reached a number of codesharing agreements with SkyTeam members, agreed joint use of VIP lounges and did much to combine our frequent flyer programs. Aeroflot ensured that it meets SkyTeam standards in IT, conduct of business, airport service and other areas. The lessons of 2005 have made it clear that we are living in a new economic reality, characterized by high prices for aviation fuel and increasing competition. We are confident that the Company board has made the right decision in choosing a development strategy, which positions Aeroflot as a network airline and focuses on expansion of transit carrying. We believe that this strategy is the most promising for Group development. Aeroflot's budget and business plan, approved at the end of last year, call for expansion of operations and revenue in 2006. Achievement of the plan requires faster growth of revenues compared with costs. The Company has analyzed various scenar- ios, all assuming a highly competitive environment in 2006, and has taken appropriate decisions for optimization of the route network. 5 Increase of passenger traffic compared with 2005 will be concentrated in regions, which offer the highest margins. The Company has reserves for improving key indicators: the Sabre ticketing system will be used to improve revenue management, and performance will be helped by membership of the SkyTeam alliance and high quality of service to our passengers. Steps to improve business efficiency in 2006 will include launch of operations by the new 100% subsidiary, Aeroflot-Cargo, and creation of a charter airline subsidiary. We are also pursuing plans to acquire more assets of regional airlines inside Russia. Meeting tough challenges is something Aeroflot is used to. We have met them and overcome them by intensive work, carried out professionally and responsibly by our thousands of loyal staff. We have no doubt that our strategy is the right one, and that it is being properly implemented. The current state of the global airline market poses new challenges, but I am convinced that Aeroflot's integrated team of professionals is a match for them and will again prove capable of working and competing in the toughest conditions Leadership has to be fought for in any industry, and we are ready for a long-term sustained effort to secure such leadership. The international air transport market was in retreat during 2005, but an advance is sure to follow and Aeroflot will be in the vanguard.

Sincerely yours, Valery Оkulov Aeroflot annual report 2005

Main events in 2005

Aeroflot was the carrier for guests of the Russian Winter Festival in Trafalgar Square (London, UK). This large-scale event was organized by the Russian-British Cultural Association and the Russian news 01.05 agency RIA Novosti with support from Moscow and London city halls. On February 14 the Aeroflot Open Chess Tournament 2005 began in Moscow, offering prize money of USD 175,000. Aeroflot took the role of Tournament organizer and financial sponsor for the fourth time. The Tournament was held with support from the Association of Chess Federations and the Tourism 02.05 Committee of the Moscow City Government. On March 15 the Aeroflot CEO, Valery Okulov, and the president of Korean Air, Youngho Kim, signed a codesharing agreement for joint operation of the Moscow-Seoul route. The agreement is in preparation for Aeroflot's inclusion in the SkyTeam Alliance. On March 23 Aeroflot completed transfer of all its offices to the Sabre automated air ticket booking and sales system. Sabre is an advanced airline booking software, which already serves about 300 million 03.05 customers worldwide 6 On March 24 Aeroflot won the Wings of Russia competition, taking first prize among passenger carriers on international routes as well as a prize for cargo carrying on domestic and international routes.

On April 1 Aeroflot, Sberbank of Russia and the Visa international payment system began a campaign to expand use of the Visa Aeroflot card, issued by Sberbank. From April 1 until May 31 anyone who opened a Visa Aeroflot card at a Sberbank branch was exempt from costs associated with opening of the account, obtained one year's free account servicing, and was offered 3000 bonus miles under the Aeroflot Bonus scheme. 04.05 On April 27 the SkyTeam Committee gave its support to Aeroflot's membership of the Alliance. On April 28 the Aeroflot Bonus scheme won a Freddie Award — the most prestigious international award for customer loyalty schemes.

From May 5 to May 25 Aeroflot maintained its tradition of helping World War II veterans to meet their comrades in arms across the former USSR and other countries. Former soldiers, POWs and those who endured the Siege of Leningrad travelled free of charge on regular Aeroflot flights to any part of the Russian Federation and Europe. More than 5500 veterans received free air tickets from Aeroflot. On May 12 the Aeroflot CEO, Valery Okulov, and president of Italian airline Alitalia, Giancarlo Cimoli, signed a codesharing agreement for joint operation of the Moscow-Milan route in preparation for 05.05 Aeroflot's inclusion in the SkyTeam Alliance. On May 31 the Victory Committee, headed by the President of Russia, Vladimir Putin, awarded Aeroflot a medal marking the 60th Anniversary of VE Day in recognition of the Company's contribution to the spir- it of patriotism and for its help in organizing VE Day celebrations.

On June 7 Aeroflot celebrated seven years since the start of regular flights between Moscow and Perm. The Company carried about 180,000 passengers and 600 tonnes of cargo between the cities in that period. On June 18 Aeroflot held its Annual General Meeting of Shareholders On June 18 Aeroflot and its 100% subsidiary, Terminal, completed the tendering competition to select 06.05 a general contractor for construction of Sheremetyevo-3, the new terminal at Shermetyevo International Airport.

On July 6 the Russian Deputy Minister for IT and Telecommunications, Dmitry Milovantsev, and the CEO of Aeroflot, Valery Okulov, signed an agreement on cooperation in development of electronic document handling in civil aviation. On July 7 Aeroflot held a further meeting with SkyTeam on support for Aeroflot's inclusion in the Alliance 07.05 On July 12 Aeroflot was named the winner of the first All-Russian Competition to find the Best Russian HR Department of 2005. Main events in 2005

On August 16 the CEO of Aeroflot, Valery Okulov, Executive Chairman of Vneshtorgbank, Andrei Kostin, and the CEO of Terminal, Kirill Budaev, signed a memorandum of mutual understanding on participation in the Sheremetyevo-3 terminal construction project. 08.05 On September 6 the CEO of Aeroflot, Valery Okulov, the CEO of Sheremetyevo International Airport, Mikhail Vasilenko, and the CEO of Terminal, Kirill Budaev, signed a memorandum of mutual understanding on participation in the Sheremetyevo-3 terminal construction project. On September 19 Aeroflot held an EGM in absentia with postal voting. Shareholders approved a large interested party transaction, by which the Company acquired six new Il-96-300 aircraft on a financial leasing basis from Ilyushin Finance Co. On September 23 the Aeroflot CEO Valery Okulov, the President of the Russian Olympic Committee, 05 Leonid Tyagachev, and the Head of the Federal Agency for Physical Culture and Sport, Vyasheslav Fetisov, 09. signed an agreement on transportation of Russian sportsmen, the official Russian delegation and guests to take part in the 20th Winter Olympics in Italy. On September 23 Aeroflot presented the pilot version of its new real-time ticket booking system. 7 On October 6 pictures from the collection of the Pushkin Fine Art Museum in Moscow were despatched to Tokyo on an Aeroflot DC-10 cargo plane for a 6-month exhibition at the Fukuoka City Exhibition Center. Pushkin Museum staff and other experts view the collection as priceless. On October 13 Aeroflot and Air France chaired a further meeting of the SkyTeam Committee on expansion of bilateral cooperation and prospects for cooperation in the SkyTeam Alliance. On October 18 Aeroflot was named the winner of the competition Best Risk Management System in 10.05 Industrial Companies, and received a diploma from PricewaterhouseCoopers in recognition of the achievement. On October 19 Aeroflot was successfully audited as complying with IATA-IOSA international safety standards.

On November 17 Aeroflot celebrated 10 years from the start of regular flights to the city of Khabarovsk in the Russia Far East. Aeroflot carried about 300,000 passengers and over 4,500 tons of cargo on the route during that period. 11.05 On December 7 Aeroflot and Sukhoi Civil Aircraft announced signing of a contract for delivery of 30 planes from the new RRJ (Russian Regional Jet) family. On December 12 Aeroflot began to operate information kiosks and self-service ticket booking in its sales offices. On December 14 the Moscow Registration Chamber registered a supplement to the Aeroflot corporate charter (Appendix № 1) on creation of a Company subsidiary in St. Petersburg. On December 15 Aeroflot carried out technical testing of its full-cycle automated system for electronic ticket services to customers on the Moscow-Los Angeles-Moscow and Moscow- Delhi-Moscow routes On December 15 a bilateral agreement came into operation on partnership between the Aeroflot 12.05 Bonus and OK Plus ˇCSA (Czech Airlines) frequent flyer schemes. The agreement is in preparation for Aeroflot's inclusion in the SkyTeam Alliance. On December 16 Aeroflot opened a representative office in Prague to serve the Czech Republic and Slovakia. On December 30 Aeroflot, the company Terminal, Sheremetyevo International Airport and two leading Russian banks — Vneshtorgbank and Vnesheconombank — signed a memorandum on cooperation in the Sheremetyevo-3 terminal construction project. Implementing Company Strategy: Results in 2005 and Priority Tasks for 2006

10 Strengthening market positions

10 Creating conditions for long-term growth

11 Guaranteeing a competitive product

11 Raising operating efficiency

11 Developing the personnel management system

11 Tasks for 2006 New York Aeroflot annual report 2005

Implementing Company Strategy: Results in 2005 and Priority Tasks for 2006

In 2005 Aeroflot continued its progress towards the strategic goal of building a world-class airline. Management and staff were focused on strengthening positions on the Russian air transport market, creating conditions for steady growth in the future, ensuring a competitive product, raising operating efficiency and developing the Company's personnel management system. Strengthening market positions

Major increase of fuel prices in 2005, a slower growth trend on the Russian air transport market and limited scope for acquisition of more efficient aircraft led Aeroflot to focus on expanding its presence on the domestic air transport market. Increase of domestic business 10 volumes was achieved by organization of joint operating and marketing activities with the Company's airline subsidiaries, Aeroflot-Nord and Aeroflot-Don. The Group was thus able to increase its domestic carrying much faster than average market growth, both in terms of passenger traffic and passenger turnover. Creating conditions for long-term growth

Aeroflot continued to work on key strategic projects aimed at achieving long-term growth of Company value. The project for restructuring and expansion of the Company's aircraft fleet involves gradual decommissioning of the older generation of aircraft and acquisition on leasing terms of modern, fuel-efficient aircraft, which can compete with fleets of other international airlines. The Company has held negotiations with aerospace manufacturers and aviation leasing companies, and has prepared deals to complement its medium-haul fleet with craft from the A320 family and to acquire B767 aircraft for the long-haul fleet. A tender has been held and a contract has been signed for acquisition of regional planes, and the process of choosing the best long-haul aircraft for a future stage of fleet restructuring has also begun. The Company has reached the investment stage in its project to build a new terminal - Shermetyevo-3 — at Shermetyevo Airport. The new terminal will offer passenger service that matches standards at leading international airports, convenient transfers between Aeroflot's domestic and international routes, and connections between Aeroflot routes and a large number of other airline routes, as well as attracting transit passenger flows between Asia and Europe/America. ENKA development company was chosen in 2005 as general contractor for the project, the project's technical and financial parameters were agreed with Sheremetyevo International Airport, financing of the first stage was organized, and construction work actually began. Another strategically important project for Aeroflot is accession to the SkyTeam international airline alliance. SkyTeam is the second biggest international alliance, and includes such airlines as Air France-KLM, Alitalia, Delta, Continental Airlines, Korean Air, AeroMexico, Czech Airlines and Northwest Airlines. Joining the alliance will make Aeroflot more competitive, increase revenues, and reduce costs thanks to network optimization, uniform service standards, brand globalization, unification of customer loyalty schemes, and creation of synergies in procurement, and technical and ground service. An agreement was signed in September 2004 on Aeroflot's commitment to the SkyTeam alliance and measures were taken in 2005 to ensure fulfilment of requirements, which the alliance imposes on all its members, and to begin cooperation with alliance members in all business aspects. Implementing Company Strategy: Results in 2005 and Priority Tasks for 2006

Guaranteeing a competitive product

Aeroflot is developing a step-by-step program to improve its product quality. In 2005 the Company focused efforts on improvement of in-flight service for business class passengers: long-haul B767 aircraft are being equipped with lie-flat seats and a new system of in-flight entertainment is being installed. New services are also being developed for other passenger classes. In 2005 Aeroflot began to install the first stage of its electronic booking and registration technologies, and a system of Internet ticket booking was piloted. The Company introduced WAP-services that transmit important information to passengers via mobile telephone. Raising operating efficiency

The Company prioritizes improvement of its operating efficiency, importance of which has grown in parallel with growth of fuel prices. Optimization of the route network and marketing improvements have helped Aeroflot to achieve significantly better returns on its air carrying: passenger yield rose by 14.3% in 2005 to 8.13 cents/RPK and cargo yield rose by 23 % to 28.3 cents/ton kilo- metre. Passenger load factor and weight load factor remained close to the level in 2004. The Company used its assets efficiently: the average percentage of the fleet in good working order rose from 71% to 73% and daily average flight hours per aircraft increased by 0.3 hours to 7.6 hours. The Company also made greater use of fuel-efficient aircraft: daily average flight hours per foreign-made aircraft rose by 10.8% to 11.8 hours and daily average flight hours for 11 Russian-made aircraft increased by 4.2%. Aeroflot continues to work on cost reduction, encouraging staff to take a major role in optimizing business processes. However, unit costs grew by 13.4% in 2005 compared with 2004, most of the growth being accounted for by increased jet fuel spending (+44%). Management efforts ensured that all other costs of providing services and maintaining Company structure were kept at the levels of previous years. Developing the personnel management system

Aeroflot made a special effort last year to develop corporate culture, viewing it as a key factor for successful implementation of Company strategy. Aeroflot's corporate philosophy depends on shared values among Company staff and suitability of those values for achieving Company goals. Management decisions should be implemented to the letter, business processes and staff should be oriented to the customer. In 2005 every member of Aeroflot's staff received a copy of the Aeroflot Staff Member's Book, setting out the Company's goals and main business principles. The first stage of the effort to instil corporate philosophy included trainings, seminars, and round tables, at which staff discussed the Company's key concepts and learnt about corporate culture. Middle and senior managers were given the opportunity to study modern techniques of personnel management based on corporate values. Tasks for 2006

The priority tasks for Aeroflot in 2006 are: • to create the basis and essential conditions for growth of Company value; • rapid growth and increase of market share by companies in Aeroflot Group; • economically efficient carrying; • measures to restructure and expand the aircraft fleet; • implementation of the plan for construction of Sheremetyevo-3 terminal; • entering the SkyTeam alliance and taking part in its work; • introducing new passenger classes on all Aeroflot routes. Air Traffic Market

14 Global air traffic market

14 The passenger traffic market in Russia

15 Russian airlines: main events in 2005

15 Market position of Aeroflot Group Paris Aeroflot annual report 2005

Air Traffic Market

Global air traffic market

Conditions were tough for the airline industry worldwide in 2005. Total losses in the industry were USD 6 billion. The main cause of this critical situation is growth of prices for jet fuel. Cost increases have forced airlines to seek new ways of saving money, including large-scale staff redundancies. Airlines in Asia achieved overall profit of USD 2.9 billion in 2005, European carriers showed USD 1.8 billion profit, but the US air transport industry suffered losses totalling USD 10.8 billion. In September 2005 two leading US airlines, Delta and Northwest, declared themselves bank- rupt and sought court protection from creditors. Two other big US companies, United Airlines and US Airways, underwent the same process in 2002. So four of the six biggest US airlines are now officially insolvent. However, US law allows a stay of execution in recovery of debts and the airlines are continuing to operate at present. US antitrust law has prevented companies from improving efficiency via consolidation, but 14 this process has taken off in Europe. Lufthansa has taken over bankrupted Swissair, Air France has bought KLM, Austrian Airlines now owns Slovak Airlines, and the UK's Virgin Express has signed a memorandum on merger with SN Bruxelles Airlines. On the positive side, air passenger turnover worldwide increased by 7.6% in 2005 and passenger load factor rose by 0.9 of a percentage point to 75.1%. IATA forecasts slowdown of traffic growth to 5-6% in 2006, but higher ticket prices and lower payroll costs will help to improve the situation for airlines. Nevertheless, the industry will not emerge from its crisis in 2006: IATA expects airlines to show overall losses of USD 2.2 billion this year. The passenger traffic market in Russia

Russian airlines carried 35.1 million passengers in 2005 (3.9% more than in 2004), passenger turnover was 85.8 billion passenger kilometers (3.4% increase y-o-y), and cargo and mail traffic was 630,700 tons (3.7% less y-o-y). Effect of higher ticket prices, due to increased cost of jet fuel, was most noticeable on regular routes. Increase of Russian airline passenger turnover on regular routes was less than 2%, while growth of passenger turnover on relatively inexpensive non-regular flights was 7.8%. The biggest growth was on flights for holiday- makers travelling abroad from Russia and the CIS: passenger turnover growth in that segment was 10.2%. There was a stagnation in domestic traffic during the first eight months of 2005: domestic passenger traffic decreased by 1% y-o-y in this period. However, there was an upturn in the last four months, when passenger traffic was 8% higher than in the same period of the previous year. The full-year result was thus 1.8% higher than in 2004. Foreign airlines made further inroads to the Russian market in 2005. They carried 7.3 million passengers to and from Russia, 13% more than in 2004. Foreign airlines have the advantage of modern aircraft with a wide range of seating capacities, and several of them deployed larg- er aircraft on some Russian routes. A number of foreign companies have started offering Russian routes for the first time in the last two years. These include China Eastern Airlines, Emirates, Iberia, Qatar Airways, Pakistan International Airlines, Thai Airways International, as well as the low-cost carriers, Germania and Germanwings. Annual passenger traffic carried by these airlines is now approaching one million. Volume of the Russian air traffic market including carrying by foreign companies was 42.4 million passengers in 2005, which is 6.4% more than in 2004. Air Traffic Market

International passenger traffic by Russian airlines Russian airlines: main events in 2005 (shares of total passenger numbers)

Last year all leading Russian airlines reacted to the rapid growth of jet fuel prices by starting large-scale replacement of their fuel-inefficient fleets, consisting mainly of Aeroflot Group 31 aircraft produced in the USSR. Lack of competitive modern Russian-made aircraft Vim-Avia Group 12,8 forces airlines to buy abroad. However, customs duties and the necessity to pay VAT (amounting in total to 41.5% of the price of the aircraft) forces companies to buy Sibir 9,6 heavily depreciated foreign craft. Pulkovo 8,8 Last year Vim-Avia, which had not previously risen above 20th place in ranking of AirUnion Group 8 Russian airlines by passenger volumes, shot to 6th place in the ranking, thanks to deployment of a fleet of 12 B757 aircraft. Other companies, which significantly Transaero 7,9 expanded their business were UTair (by 20.6%), Transaero (by 17.6%), Sibir (by 10.8%), and Pulkovo (by 6.4%). Companies in the top-10, which reduced their passenger traffic in 2005, included Ural Airlines (by 12.2%), Dalavia (by 4.3%), KrasAir Domestic passenger traffic by Russian airlines (by 6.6%) and Domodedovo Airlines (by 6.1%). The latter two are both members of (shares of total passenger numbers) AirUnion, which reduced its overall carrying by 6.5% in 2005. Market position of Aeroflot Group Aeroflot Group 16,6 Sibir 13,9

Passenger turnover of Aeroflot Group in 2005 was 22.5 billion passenger kilometers, AirUnion Group 10,1 representing 26.2% of all traffic by Russian airlines. The Group carried 8.1 million pas- UTair 8,8 sengers, or 23% of the Russian airline total. Aeroflot Group kept its unchallenged lead- 15 ership in regular international traffic with 62.8% of total international passenger Pulkovo 7,5 turnover and 74.3% of carrying on routes beyond Russia and the CIS. Ural Airlines 2,8 Passenger traffic by the Aeroflot subsidiary, Aeroflot-Nord, saw a major increase of 84.1% in 2005. Growth of passenger traffic by the Group's second subsidiary, Aeroflot- Don, was more modest and close to the industry average. Most of the increase in traffic Aeroflot Group: Aeroflot; Aeroflot-Don; Aeroflot-Nord. by Aeroflot subsidiaries was domestic, so growth of Aeroflot passenger traffic on internal AirUnion Group: KrasAir; Domodedovo Airlines; Samara; Omskavia; routes was at a high level of 18%. Aeroflot's share of the domestic market increased from Sibaviatrans. 14.1% to 15.6% by passenger turnover and from 14.4% to 16.6% by passenger traffic. Vim-Avia Group: Vim-Avia; Russkoye Nebo. Aeroflot Group carried 151,500 tons of cargo and mail in 2005. Cargo turnover was 2.2% higher y-o-y and Aeroflot Group s share in total cargo turnover of Russian airlines increased from 28.5% to 31%. Corporate Governance

18 Governing bodies

23 Financial and business control

25 Information disclosure Prague Aeroflot annual report 2005

Corporate Governance

Aeroflot is the largest airline in Russia and its shareholders include the Russian government, as well as Russian and foreign legal entities and individuals. The Company contributes to pros- perity of its shareholders, creates attractive working conditions for its staff, and serves the interests of the state and society as a whole. The Company takes its corporate and social responsibilities very seriously and is working to improve its system of corporate governance, which is a decisive factor for success in the current business environment. The international rating agency Standard & Poor's noted a number of positive changes in corporate governance practices at Aeroflot in 2005 compared with 2004. The agency commended activities by the Board of Directors and the Company's transparent and committed attitude to investor relations. In order to support corporate government standards and implement recommendations the Aeroflot BoD ratified two important internal documents in 2005: a statute “On corporate information policy” and a statute “On the internal audit service”. Governing bodies 18 Shareholder meetings Two Aeroflot shareholder meetings were held in 2005. On June 18, 2005 the Company held its Annual General Meeting of Shareholders. As recorded by Minutes № 16 (June 18, 2005) the AGM approved the Annual Report for 2004, financial accounts for 2004, use of profit for 2004, dividends for 2004 (RUR 0.7 per share), new BoD membership and membership of the Supervisory Commission, and choice of the auditing company HLB Vneshaudit as the Aeroflot auditor for 2005 (for financial statements in accordance with Russian Accounting Standards). On September 19, 2005 the Company held an Extraordinary General Meeting of Shareholders in absentia by postal vote to approve a major transaction interested party, by which the Company would acquire six new Il-96-300 aircraft from Ilyushin Finance Co. on a finance leasing basis. Rights to vote on the issue were limited to 47.38% of shareholders (owners of voting shares in the Company, who were not interested parties in the deal) and 30.5% of shareholders actually voted. The transaction was thus approved by the EGM (Minutes № 17, September 19, 2005). Main conditions of the transaction are listed in the Appendix to this Annual Report.

Board of Directors of Aeroflot

Membership of the Board of Directors selected by the Company AGM on June 18, 2005 Victor Petrovich Ivanov (born in 1950) — Chairman of Board of Directors, aide to the President of Russia. Graduated from the Bonch-Bruevich Leningrad Electrotechnical Telecommunications Institute. 2000–2004 — Deputy Head of the Russian Presidential Administration.

Vladimir Nikolaevich Antonov (born in 1953) — First Deputy CEO of Aeroflot for Business Operations. Graduated from the Moscow Railway Engineering Institute. 1995–2002 — Deputy CEO of Aeroflot for Economic and Aviation Security, Deputy CEO for Aviation Security, Vice-President for Aviation and Operating Security, Deputy CEO for Aviation and Operating Security. Corporate Governance

Mikhail Robertovich Butrin (born in 1967) — Managing Director of CJSC United Financial Group. Graduated from the Plekhanov Institute of the National Economy (Moscow). 2000–2003 — Executive Director of the Moscow office of Chichester Trading Ltd. 2003–2005 — Vice-President of National Reserve Bank.

Igor Nikolaevich Grechukhin (born in 1964) — Director of the Department for Property and Land Relations (Natural Resource Economics) at the Ministry for Economic Development and Trade of the Russian Federation. Graduated from the Mozhaisky Military Engineering Institute, the Financial Academy attached to the Russian Government; and the Professional Appraisal Institute of the Financial Academy. 2001–2004 — Deputy Head of the Department for Property and Land Relations (Natural Resource Economics) at the Ministry for Economic Development and Trade of the Russian Federation.

Leonid Alekseevich Dushatin (born in 1960) — First Deputy CEO of National Reserve Corporation. Graduated from the Moscow Financial Institute. 1996–2002 — Vice President and Head of the Fuel and Energy Section, Deputy Executive Chairman, Member of the Executive Board of National Reserve Bank.

Mikhail Yurievich Kopeikin (born in 1954) — Deputy Head of the Cabinet Office of the Government of the Russian Federation. Doctor of Economics, Professor Graduated from the Ordzhonikidze Management 19 Institute. 1996–2003 — Head of Economics Department, Head of Economics and Property Management Department at the Cabinet Office of the Government of the Russian Federation.

Valery Mikhailovich Okulov (born in 1952) — CEO of Aeroflot. Graduated from the Civil Aviation Academy. 1996–1997 — First Deputy CEO of Aeroflot for Operations and Administration.

Alexander Vasilievich Tikhonov (born in 1957) — Director of the Structural Reform Department of the Ministry of Transport of the Russian Federation. Graduated from the Kiev Higher Naval Political College. From 2000–2004 — Deputy Head of Department, Head of Department of the Property Ministry of the Russian Federation; Head of the Section for Management of Scientific and Social Organizations at the Federal Agency for Management of Federal Property.

Alexey Konstantinovich Uvarov (born in 1975) — Deputy Head of Management Department at the Federal Property Management Agency. Graduated from the Moscow Institute of Chemical Engineering; Academy of the Federal Tax Police Service, professional re-qualification courses at the Russian Public Service Academy specializing in legal principles of state administration. 2000–2004 — Chief Specialist of Department for Management of Property in Industry and Construction, Head of Department for Property in the Defense Complex, Deputy Head of the Department for Management of Property in Industry and Construction. Aeroflot annual report 2005

Alexey Victorovich Fedorov (born in 1952) — Officer of the Russian Federal Security Service. Graduated from the Moscow Institute of Transport Engineers. Since 1985 — Officer of the Federal Security Service.

Vladimir Nikolaevich Shablin (born in 1951) — Senior Vice President of National Reserve Bank. Graduated from the Leningrad Naval Engineering College, and the Financial Academy attached to the Russian Government, majored in banking. 2000–2003 — Deputy CEO of Unicom Management Services (Limassol, Cyprus).

Stakes of BoD members in Aeroflot share capital, % (as of December 31, 2005) Victor Ivanov – Vladimir Antonov 0.000425 Mikhail Butrin – Igor Grechukhin – Leonid Dushatin – Mikhail Kopeikin – Valery Okulov 0.002528 Alexander Tikhonov – Alexey Uvarov – Alexey Fedorov – Vladimir Shablin – 20 Corporate Governance

Report of the Board of Directors on Aeroflot business development in 2005 Activities by the Aeroflot BoD in 2005 complied with requirements of the Federal Law on Joint-Stock Companies, the Aeroflot Company Charter, the Company Article concerning the BoD, and the Aeroflot BoD Action Plan for the period from June 2005 to June 2006. The BoD held 17 meetings during 2005, at which it considered 81 issues relating to current business and ways of implementing Company development plans. More than 200 decisions were taken to advance Company development and increase capitalization. Key issues were: • the Aeroflot strategic development concept up to 2010; • flight safety; • restructuring of the Company's aircraft fleet; • IT development; • activity by the Company subsidiary, Terminal, and work on construction of the Sheremetyevo–3 terminal complex; • the Company's financial and commercial activity.

Decisions, which were taken and are being implemented, relate to Aeroflot's operating, marketing and financial business, including development of Aeroflot's ground support at Sheremetyevo Airport, development of cargo carrying, and improvement of passenger service. Decisions by the Board of Directors are the basis, on which the Company's executive officers carry out their duties. The Aeroflot BoD provisionally approved the Annual Report for 2005 (Minutes № 14, May 17, 2006). As in previous years, remuneration to BoD members and reimbursement of their costs (provided for in Point 2 of Article 64 of the Federal Law on Joint-Stock Companies) were not paid in 2005.

Executive Board of Aeroflot 21 The Executive Board held 47 meetings in 2005, dealing with issues of key importance to the Company. Matters discussed included: • flight safety; • financial state of the Company; • restructuring of the aircraft fleet; • reconfiguration of the aircraft fleet; • construction of the new terminal, Sheremetyevo-3; • installation of new IT solutions; • passenger service; • management of companies, in which Aeroflot has stakes; • social issues; • insurance.

Executive Board in 2005 Valery Mikhailovich Okulov (born in 1952) — Executive Board Chairman, CEO of Aeroflot. Graduated from the Civil Aviation Academy.

Vasily Nikolaevich Avilov (born in 1954) — Head of Aeroflot Administration. Graduated from the Dzerzhinsky Higher Naval Engineering College.

Vladimir Nikolaevich Antonov (born in 1953) — First Deputy CEO for Business Operations. Graduated from the Moscow Railway Engineering Institute.

Evgeny Victorovich Bachurin (born in 1964) — Commercial Director. Graduated from the Moscow State Teacher Training Institute for Foreign Languages.

Yury Ilyich Belykh (born in 1941) — Technical Director and Head of Aviation and Technical Section. Graduated from the Moscow Aviation Technology Institute. Aeroflot annual report 2005

Anatoly Ivanovich Volymerets (born in 1951) — Director of Aeroflot's Ilyushin Il-96/Il-86 Flight Team. Graduated from the Civil Aviation Academy.

Vladimir Vladislavovich Gerasimov (born in 1957) — Deputy CEO for Procurement. Graduated from Moscow State University.

Boris Petrovich Eliseev (born in 1957) — Deputy CEO, Director of the Aeroflot Legal Department. Graduated from the State University of the Far East.

Alexander Alexandrovich Koldunov (born in 1952) — Deputy CEO, Head of Flight Safety Inspectorate. Graduated from the Civil Aviation Academy.

Oleg Mikhailovich Osobenkov (born in 1946) — Deputy CEO, Head of Personnel Department. Graduated from the Moscow State Institute for International Relations.

Mikhail Igorevich Poluboyarinov (born in 1966) — Deputy CEO for Finance and Planning. Graduated from the Moscow Financial Institute.

Vladimir Vladimirovich Smirnov (born in 1959) — Deputy CEO, Director of Aeroflot Ground Control. Graduated from the Civil Aviation Academy.

Stanislav Georgievich Tulsky (born in 1947) — Deputy CEO for Flight Operations, Director of Flight Section. Graduated from the Civil Aviation Academy.

Changes in the Executive Board 22 Oleg Mikailovich Osobenkov was relieved of his duties by decision of the BoD (Minutes № 17, April 28, 2005) due to his leaving the Company at his own request (Point 3, Article 77 of the Labour Code of the Russian Federation).

Stakes of Executive Board members in Aeroflot share capital, % (as of December 31, 2005) Vasily Avilov 0.0000002 Vladimir Antonov 0.000425 Evgeny Bachurin – Yury Belykh 0.000004 Anatoly Volymerets 0.002623 Vladimir Gerasimov 0002528 Boris Eliseev 0.0000002 Alexander Koldunov 0.002528 Valery Okulov 0.002528 Mikhail Poluboyarinov 0.000425 Vladimir Smirnov 0.002623 Stanislav Tulsky 0.002528

Remuneration to Executive Board members In accordance with Article 5.8 of the statute “On the Aeroflot Executive Board”, approved by the annual shareholders' meeting of Aeroflot held on May 25, 2002 (Minutes № 8), “the terms and compensation of Executive Board members, including benefits and social guarantees, shall be specified in accordance with the positions they hold, statutory legal acts of the Russian Federation and of the Company, which regulate conditions of payment for employees, definition and amount of benefits and social guarantees for Company employees, and also the staff list, and will be laid down in employment contracts signed between Executive Board members and the Company. The amount of remuneration and bonuses payable to Executive Board members shall be specified by the Company's Board of Directors”. As specified by the standard contract, which was approved by the Aeroflot BoD on September 27, 2000 (Minutes № 3), a monthly remuneration equal to RUR 10,000 (ten thousand roubles) is paid to each member of the Executive Board in addition to the salary paid for official duties in their primary positions. Corporate Governance

Financial and business control

The system of internal control over Aeroflot's financial and business activities is governed by current Russian law, the Aeroflot Charter, the statute “On the Aeroflot Audit Commission”, the statute “On the Board of Directors of Aeroflot”, the statute “On the BoD Audit Committee”, and the statute “On the Aeroflot Internal Audit Service”.

Audit Commission Aeroflot's Audit Commission exercises control over financial processes of the Company, its sub-divisions, services, branches and representative offices. The job of the Audit Commission is to carry out complex and timely checks and reviews of the Company's finances and to analyze the findings, with special attention to accounting accuracy, efficiency of financial operations and compliance of those operations with Russian law, decisions by general meetings of shareholders and Company BoD decisions.

Members of the Audit Commission Nikolay Anasovich Galimov (born in 1972) — Chairman of the Aeroflot Audit Commission, Deputy Director of the Finance Department of the Ministry of Transport of the Russian Federation. Graduated from the Plekhanov Russian Economic Academy, and the Academy of Labour and Social Relations. 2001–2003 — Head of the Methodology Department of the Ministry of Finance of the Russian Federation. 2003–2004 — Head of the Methodology Department of the Tax Debt Department at the Ministry of Taxes and Duties of the Russian Federation.

Vladimir Sergeevich Goryachev (born in 1951) — Section Head of the Federal Air Transport Agency. Graduated from the Moscow Institute of Management. 1992–2000 — Deputy Head of the Economics and Reform Section of the Russian Federal Aviation Service, Deputy Director of the Federal Air Transport Service. 23 Zinaida Nikolaevna Dunaikina (born in 1954) — Head of Information and Analysis in Aeroflot's Operational Security Department. Graduated from the Moscow State Institute for International Relations. 1989–1997 — Economist at Aeroflot's Central International Agency.

Vera Grigorievna Mironova (born in 1950) — Head of the Finance and Economics Section of the Federal Air Transport Agency. Graduated from the All-Union Correspondence Institute of the Food Industry. 2000–2004 — Deputy Head of Department at the Ministry of Transport of the Russian Federation.

Alexey Evgenievich Tarasov (born in 1972) — Head of the Legal Department of National Reserve Corporation. Graduated from the Moscow State Institute for International Relations. 2000–2002 — Head of Business Restructuring Department, Head of Investment Financing and Credit at Ingosstrakh-Soyuz Bank. 2002–2004 — Vice President of National Reserve Bank, Legal Advisor to Chairman of the Executive Board. Aeroflot annual report 2005

Changes in the Audit Commission The annual shareholders’ meeting on June 18, 2005 re-elected two members of the previous Audit Commission (appointed by the Annual Shareholders Meeting on July 24, 2004): Zinaida Dunaikina and Alexey Tarasov. Nikolay Galimov, Vladimir Goryachev and Vera Mironova were elected to the new Audit Commission.

Audit Comission activity Activity by the Aeroflot Audit Commission in 2005 was governed by statutory requirements of the Federal Law on Joint-Stock Companies, the Aeroflot Charter, the statute “On the Aeroflot Audit Commission”, and also in accordance with the schedule for auditing work at Aeroflot during 2005. The Audit Commission held five meetings in 2005, at which it considered issues arising from the program of checks and reviews, prescribed by its work schedule.

Remunerations to members of the Audit Commission No salaries or other material reward for members of the Audit Commission were envisaged for payment or actually paid during 2005.

Internal audit The main task of the Internal Audit Service at Aeroflot is to ensure that internal control mechanisms are efficient and appropriate. This is ensured by audit and monitoring of operating and financial processes, checks of the Company's structural sub-divisions and representative offices, and of accounts and other documentation, including special investigations when necessary. The Service carried out more than 40 checks (reviews) in 2005 and presented its conclusions in each case. Recommendations formulated on the basis of the checks will increase efficiency of the current system of internal control and improve Company operating mechanisms.

24 External auditors Aeroflot's financial statements for 2005 prepared in accordance with Russian Accounting Standards were audited by HLB Vneshaudit. Aeroflot's financial statements for 2005 prepared in accordance with International Accounting Standards were audited by Deloitte & Touche. Corporate Governance

Information disclosure

Aeroflot discloses information about its business in compliance with Russian law, requirements of Russian and foreign securities market regulators, requirements of securities trading organizers, the Corporate Governance Code, the Company's own statute “On Corporate Information Policy”, and best international practice in the sphere of information disclosure. Aeroflot came third in a transparency ranking of 11 Russian government-controlled companies, carried out last year by Standard & Poor's international rating agency. Only Gazprom and UES were ranked higher than Aeroflot, whose transparency level was found to be 57%, compared with average 47%. Aeroflot took first place in the section of the study devoted to “Composition and Working Procedures of the Board of Directors and Management”. Aeroflot's main disclosure principles are regularity and punctuality in supplying information, its accessibility to all shareholders and interested parties, its accuracy and completeness, and observance of a proper balance between openness and con- fidentiality to ensure protection of the Company's business interests. Information disclosure is carried out by means of: • press releases; • press conferences; • quarterly meetings to disclose operating and financial information; • regular meetings between senior Company officers and representatives of the investment community, at which Company officers comment on Aeroflot's current business and development prospects; • publication on Aeroflot's corporate internet site www.aeroflot.ru of internal docu- 25 ments, operating and financial results, material facts, management presentations and reports on the Company by investment analysts; • the English language version of the corporate site, and particularly the Investor Relations section of the site; • the Company's specialized Shareholder and Investor Relations Service.

Information about Aeroflot can also be found on the sites: www.skrin.ru and www.db.com. Business in 2005

28 Safety

30 Passenger traffic

35 Cargo traffic

38 Cooperation with other air companies

38 Joining the SkyTeam alliance

40 Сonstruction of the new terminal complex, Sheremetyevo-3

41 Business of Aeroflot subsidiaries

43 Aircraft fleet

44 IT development

45 Quality management Mexico Aeroflot annual report 2005

Business in 2005

Safety

In October 2005 Aeroflot successfully passed IATA's official safety audit (IOSA — International Operational Safety Audit). All IATA member airlines must undergo this audit before the end of 2007. IOSA auditing is a condition for membership of the SkyTeam airline alliance. International experts checked the following aspects of Aeroflot's operations as part of the IOSA inspection: • company organization and management; • flight operations; • engineering and technical maintenance of aircraft; • servicing of aircraft on the ground; • operational management and ground control; • in-flight service; • flight safety; • cargo carrying and carrying of dangerous cargoes.

Strongly positive assessment of Aeroflot safety provisions are a tribute to the professional- ism of flight, engineering and technical staff, and to the efficiency of Aeroflot's safety systems. 28 In connection with the international safety audit, Aeroflot has issued several documents which are the first of their kind in Russia, including the “Flight Safety Documentation System” (designed to comply with new ICAO requirements), “Guide to Flight Safety” and “Guide to Ground Servicing”. Aeroflot was included in the IOSA register in March 2006.

Flight safety Results in 2005 show that the Company's main priority - ensuring flight safety — is already implemented to international standards and the trend is positive: flight safety in 2005 was 99.96% (improved from 99.95% in 2004), which puts Aeroflot inside the range for international airlines (99.9% to 99.98%). In order to ensure high levels of safety the Company has put in place strict controls over flight organization, aircraft use, technical state of aircraft and observance by staff of safety procedures. Work to improve professional standards of flight personnel, technical personnel and ground personnel has also been important in achieving excellent safety results. The Company's Aviation Technical Center (ATC), which is directly responsible for maintenance of the Aeroflot fleet, continued its efforts to improve operations in 2005. From the start of last year much work was done to ensure that the Company could carry out heavy technical maintenance (C-checks) of its long-haul B767 aircraft independently, and Aeroflot engineers were the first in Russia to undertake C-checks of B767s at the start of 2006. Acquisition of maintenance know-how for these new aircraft will ensure further development of the Aeroflot ATC as Russia's prime maintenance center for Russian- and foreign-made aircraft. The decision by Air France to transfer responsibility for maintenance and repair of its A320 aircraft to the Aeroflot ATC is an endorsement of the high quality of technical service provided by the ATC. The Center has been carrying out independent C-checks for A320s since December 2004. Business in 2005

On August 22, 2005, the Federal Service for Transport Supervision (FSTS) decided to suspend operations by Russian airlines with Il-96-300 aircraft due to safety concerns. The suspension was justified by incidents arising from design and manufac- turing faults in the braking system of these aircraft. Aeroflot was thus forced to suspend flights by six Il-96-300s, which represent 40% of the Company's long-haul fleet. The Company took special steps to meet its obligations to passengers in this difficult situation, using other planes, changing flight frequencies on several international routes and stepping up joint operations with partner airlines. The aircraft manufacturers took urgent steps to address the concerns and prescrip- tions of the FSTS and all of Aeroflot's Il-96-300s were able to resume flights from October 4, 2005. The Company took the following steps in 2005 to raise efficiency of its flight safety provisions: • designed the first stage of a program for analysis and assessment of flight safety risks; • implemented a new standardized report on the state of flight safety, based on IOSA recommendations; • improved the data base, which the Company uses to organize information on aviation incidents; • designed a new procedure, entitled “Conduct regarding the operator's certificate, commissioning of new aircraft, obtaining flight permits and admissions, and cooperation with partner airlines”; • activated a system for monitoring of the Company's flight safety provisions.

Flight security Aeroflot has a high-quality system of flight security, ensuring that passengers and 29 staff are protected from any illegal interference in Company operations. Security measures are being constantly improved. Flight security provisions at Aeroflot comply with Russian law, statutory requirements of international civil aviation organizations (ICAO, IATA, ЕСАС); statutory requirements of national civil aviation regulators (in force at airports, to which Aeroflot flies), ISO 9000:2000 international standards, and requirements of other documents on flight security. In 2005 Aeroflot's flight security service carried out audit checks at the companies Aeromar and Airport Moskau (inspecting flight security, on-board catering provisions and cargo handling at Sheremetyevo Airport). The Company also carried out internal audits to ensure security in baggage handling. Security programs already being implemented by Aeroflot were expanded. Additional measures include 100% baggage checks, presence of security staff on high-risk flights, security measures at Company facilities, deployment of sniffer dogs with trained handlers, and procedures for dealing with rowdy passengers. Aeroflot annual report 2005

Passenger traffic Operating results

Group operating data 2005 2004 % International traffic Passengers carried thousands 4,906.1 4,830.4 101.6 Revenue passenger kilometers millions 16,319.4 16,469.5 99.1 Available seat kilometers millions 23,917.0 24,257.7 98.6 Passenger load factor % 68.2 67.9 0.3* Weight load factor 56.9 57.1 –0.2 Share of scheduled traffic** % 97.8 97.5 0.3* Domestic traffic Passengers carried thousands 3,165.9 2,444.5 129.5 Revenue passenger kilometers millions 6,194.8 5,159.9 120.1 Available seat kilometers millions 8,988.6 7,475.8 120.2 Passenger load factor % 68.9 69.0 –0.1* Weight load factor 62.2 62.0 0.2 Share of scheduled traffic ** % 99.4 99.8 –0.4* Total for international and domestic traffic Passengers carried thousands 8,072.0 7,274.9 110.9 Revenue passenger kilometers millions 22,514.2 21,629.4 104.1 Available seat kilometers millions 32,905.6 31,733.5 103.7 Passenger load factor % 68.4 68.2 0.2* Weight load factor 58.1 58.0 0.1 30 Share of scheduled traffic ** % 98.3 98.0 0.3*

* p.p. — percentage points. ** In revenue passenger kilometers.

Traffic volume In 2005 Aeroflot continued to strengthen its position as the leading Russian airline by more rapid development of carrying. However, worsening of the fuel price crisis (factual price growth for jet fuel was 44%) and growth of other air transport costs forced the Company to raise its ticket prices. In particular, the Company increased its fuel supplement to ticket prices on several occasions. Significant growth of ticket prices across the route network and tougher competition on some Russian and international routes led to reduction of passenger flows, as demand proved elastic to ticket price changes. In these circumstances Aeroflot took steps to minimize costs and losses by optimizing flight capacities on some routes. The following factors also had impact on traffic volumes and decline in demand for airline services: • natural disasters in South-East Asia; • suspension of operations with Il-96-300 aircraft at the annual peak period; • reduced regularity on some routes due to technical problems with aircraft leased from GTK Rossiya (Tu-214, Tu-154 and Тu-134 aircraft); • cancellation of the winter schedule of charter flights to Hurghada and Sharm El Sheikh.

Aeroflot Group carried 8.1 million passengers in 2005, and flew 22.5 billion passenger kilometres. The passenger load factor grew by 0.2% to 68.4%. Business in 2005

International passenger traffic Passengers carried (millions) Aeroflot carried 4.9 million passengers on international routes in 2005, representing an increase of 1.6% from 2004. International traffic accounted for 60.7% of pas- 2001 6.2 sengers and 72.5% of passenger turnover in 2005. Most of international passenger traffic (97.8%) was on regular routes. Traffic capacities were reduced by 1.4% and 2002 5.9 the passenger load factor increased by 0.3 p.p. to 68.2%. 2003 6.4

Domestic passenger traffic 2004 7.3 Aeroflot carried 3.2 million passengers on domestic flights in 2005, an increase of 2005 8.1 29.5% from 2004. Passengers on domestic flights were 39.3% of all passengers carried by the Company last year. Passenger load factor was 68.9% down by 0.1% from 2004 due to increase of traffic capacities by 20.2%. Passenger turnover on Revenue passenger kilometers (billions) domestic flights rose by 20.1%. Nearly all domestic carrying was on regular flights.

Flight hours 2001 19.6 Operational flight hours, using the Company's own planes, increased by 16.3% . 2002 18.3 The average ratio of aircraft in service during 2005 was 72.2% (+2.2 p.p. compared 2003 18.9 with 2004 ). 2004 21.6 Average daily flight hours for all aircraft rose by 0.3 hours to 7.6 hours. Average daily flight hours per aircraft in service were unchanged from 2004 at 10.4 hours. 2005 22.5 Among foreign-built aircraft the highest level of flight hours was achieved by A310s, which showed 14.2 hours per day (+7.1 hours compared with 2004), while B767s were in service for average 14.1 hours per day (–1.0 hours compared with 2004), Available seat kilometers (billions) and B777s were in service for average 14.1 hours (–0.2 hours compared with 2004). Average daily flight hours for Russian-built planes were 8.5 hours for Il-96s 2001 28.7 (–2.8 hours compared with 2004 due to the flight suspension in August-October) and 6.9 hours for Тu-154s (+0.5 hours compared with 2004). 2002 25.8 2003 27.5 31 Route network 2004 31.7 Aeroflot served 88 routes in 2005. Including agreements in force with partner airlines the Company offered passengers 110 routes. 2005 32.9 Main aims of work in 2005 to optimize the route network were as follows: • creation of a broad network of routes in Russia and Europe with high frequency (at least seven services per week on most of these routes); Passenger load factor (%) • development of a long-haul route network focused on destinations in North America and Asia; 2001 64.2 • attraction of transit passengers from Russia to Europe; 71.6 • cooperation with other airlines to organize carrying of passengers from Russian 67.1 2002 72 regions to most international destinations; 67.7 • more efficient use of the aircraft fleet. 2003 72.5 67.9 2004 69 68.2 2005 68.9

International routes Domestic routes Aeroflot annual report 2005

International traffic In 2005 Aeroflot increased flight frequency on its own routes from Moscow to Baku, Barcelona, Bishkek, Bucharest, Vienna, Venice, Dubai, Zagreb, Cairo, Los Angeles, Madrid, Milan, Nice, Paris, Beijing, Prague, Rome, Istanbul and Tehran. Flights to Seattle and Hanoi were suspended. Aeroflot successfully operated codesharing agreements with 27 Russian and foreign airlines in 2005. New agreements were reached with five airlines: Air Malta, Alitalia, Korean Air, JAT and Dalavia. Flights of partner airlines increased frequency of services to Milan, Seoul and Belgrade. Aeroflot continued to establish codesharing agreements with airlines in the SkyTeam alliance as part of the decision to include Aeroflot in the alliance. Agreements were reached with АeroMexico, Delta, KLM, Continental Airlines and Northwest Airlines, both for flights on direct routes (linking hubs of the signatory airlines) and on other routes.

Domestic traffic On the domestic market, Aeroflot increased frequency of its flights between Moscow and the cities of Ekaterinburg, Krasnodar and Astrakhan. Frequencies, including flights by partner airlines, also increased to Anapa, Omsk and St. Petersburg.

Traffic structure on regular routes in 2004–2005 Region Passengers carried Revenue passenger Available seat Passenger (thousands) kilometers kilometers load factor (millions) (millions) (%) 2005 2004 2005 2004 2005 2004 2005 2004 North America 318.5 331.6 2,749.6 2,736.5 3,770.6 3,710.0 72.9 73.7 Africa & Middle East 237.5 329.3 732.2 881.0 1,203.4 1,384.5 60.8 63.6 Asia 852.2 880.5 5,399.7 5,224.5 7,623.0 7,516.4 70.8 69.5 Europe 2,680.1 2,508.2 5,887.2 5,158.6 9,071.8 7,891.3 64.9 65.4 Russia 3,145.7 2,435.6 6,151.6 4,782.8 8,912.8 6,938.1 69.0 68.9 CIS & Baltics 694.5 684.6 1,221.7 1,090.3 1,806.7 1,584.5 67.6 68.8 Total 7,928.5 7,169.8 22,142.0 19,873.7 32,388.3 29,024.8 68.3 68.5 32 Quality indicators Aeroflot improved quality indicators of its route network in 2005. Average route frequency rose to 7.8 flights per week per route (7.5 in 2004), and average frequency including flights by partner airlines was 8.7 flights (8 in 2004). The number of connections between Aeroflot's own flights increased by 3.1% in 2005 (connections with other airlines increased by 0.9%). The connection ratio for the entire Company network rose by 8% to 22.8, while the number of flights declined by 2.8%. The network connection ratio for connections with other airlines increased by 6.1% to 6.9. The number of connections including flights by partners rose by 27.7% and the connection ratio for the entire network including partner flights rose by 16.2% to 38.1, while the number of flights including flights by partners rose by 8.2%. The network connection ratio with other airlines was 8.7 including partner flights. Number of transit passengers increased by 7% from 840,000 to 899,000.

Product and brand development Product Aeroflot aims to provide a stable quality service, matching service quality of leading European airlines. Aeroflot's product is safe, convenient and comfortable travel in the air. The product offering includes the route network and flight timetable, service on the ground and in the air, as well as environment and furnishings, which define the consumer experience of Company customers in sales offices, the airport and on board Company planes. Aeroflot does everything it can to ensure that passengers feel safe, confident and comfortable, both on the ground and in the air. Product development efforts in 2005 were as follows: • extension of the Company's new concept of service to all Company flights and all forms of interaction with customers; • further brand development; • personnel training; • improvement of service at the airport; • installation of electronic booking and registration technologies; • opening of a new booking and information call-center. Business in 2005

The Company's new service motto — “Russian hospitality: the best of tradition and modernity offered with sincerity and feeling” — was used as a keynote to achieve new standards of service on a number of routes: Paris, Nice, Copenhagen, Stockholm, Amsterdam, Frankfurt, Berlin, Dusseldorf, Rome, Milan, Cairo, Tehran, Hamburg, Madrid, Barcelona, Venice and Oslo. New on-board passenger classes were launched in 2005: • President class — improved business class on B767 flights. The Company has equipped seven of its aircraft on routes to North America (US and Canada) and Asia (Tokyo and Bangkok) with lie-flat seats, which tilt to an angle of 14 degrees from horizontal; • Premier class — improved business class on A319/320/321 aircraft (medium-haul flights to most European destinations); • Kommersant class — improved economy class.

A new type of in-flight entertainment was introduced in business class from March 2005: DigEplayers Video On Demand, which is a portable device allowing real-time choice between 30 full-length feature films and 100 hours of music. By the end of 2005, as part of the new service concept, 95% of cabin and flying staff were wearing a new uniform created by the celebrated Russian designer, Victoria Andreyanova. Responding to the popularity of Aeroflot flights in Japan, Japanese assistants have been working with cabin crew on the Moscow-Tokyo-Moscow route since December 2005 in order to overcome language difficulties. Presence of Japanese staff ensures extra comfort for passengers and improves service quality.

Brand In 2005 Aeroflot-Russian Airlines won the gold medal in the “Service” category at the eighth annual competition to find the most successful brand creations and brand development on the Russian market: “Brand of the Year/EFFIE”. The “People's Brand” rating has awarded prizes to brand leaders every year since 1998 on the basis of national votes by Russian consumers. The national vote in 2005 confirmed Aeroflot as “Best Airline” for the second consecutive year. The following projects in 2005 were particularly important for development of the Company's new corporate style: • furnishing of 20 Aeroflot sales offices and representative offices in Russia and abroad (New York, Istanbul, Belgrade, Kula Lumpur, Tokyo, Tbilisi, Astrakhan, etc.); • steps to ensure that interior design at offices of Aeroflot agents matches the Company's corporate style; 33 • the first part of the Company's “Brand Book”, designed to help Aeroflot employees identify and implement the new corporate style, was completed and distributed; • Aeroflot took part in the twelfth Moscow International Travel and Tourism (MITT) exhibition with its own 200 square-meter pavilion divided into thematic sections: “Comfort”, “Healthy Eating”, “Aeroflot Bonus” and “Travel”; • the Company created its own children's character, “FoxFlot”, to help deliver its internet message and put the character at the center of a unified program for children — Aeroflot UNIOR, — which brings together communication tools (internet site, competitions, event marketing, etc.) and products (travel packs, etc.).

Authoritative international research has confirmed the success of Aeroflot's efforts to improve service quality and update its corporate style: • the UK agency, SkyTrax Research, which brings together 95 international airlines, selected Aeroflot as the airline, which has done most to improve quality of its in-flight service; • research by IATA Business Insight found that Aeroflot took fourth place among 11 main European airlines for quality of its business class.

The Freddie Awards — an international poll of hotel customers to select the best airline frequent flyer scheme — gave a number of commendations to Aeroflot Bonus. The Company's frequent flyer scheme took: • first place in the Best Bonus Promotions category (best system for awarding air miles to loyal customers); • second place for Best Member Communications (best system for keeping in touch with participants of the frequent flyer scheme); • second place for Best Web Site. Aeroflot annual report 2005

Breakdown of regional representative offices’ Passenger ticket sales passenger revenue in 2005 Ticket sales in Russia are carried out by company representative offices in the 10.2% 4.9% regions, by Moscow and regional agencies and by the Company's own sales offices in Krasnodar region Volga region Moscow. The biggest share of sales in Russia is through Moscow agencies (67.4%). 14% 27.9% The share of sales in representative offices and subordinate regional agents is Urals Siberia 19.7%, and the share of sales in the Company's own sales offices is 12.9%. Total revenue from ticket sales through agents and Aeroflot representative offices in Russia increased by USD 127.5 million (16.5%) in 2005, which is a considerable

16.4% achievement. North West There are 89 agencies selling Aeroflot tickets on the Moscow market. Growth of sales 26.6% by Moscow agents in 2005 (including sales through the Transport Clearing Chamber) Far East was 15.8% (USD 94.9 million more than in 2004). Sales on the regional market were via 28 representative offices and 228 regional agencies, working under supervision of the representative offices. Sales by regional agencies and representatives offices increased by USD 32.6 million (19%) in 2005. Breakdown of passenger revenue generated by sales offices Most sales outside Moscow are in Siberia and the Far East. 18.3% 52.1% As part of the Company's drive to expand on regional markets new Aeroflot repre- Representative offices BSP/ARC sentative offices were opened in 2005 in the towns and cities of Anapa, Kemerovo, Barnaul and Tyumen. The Company's own offices showed growth of ticket sales by USD 17.57 million (15.2%) in 2005. In 2005 the center for information and booking at the Company's own sales offices 29.6% in Moscow launched a new freephone number (8-800-333-5555) for calls from else- Official agents where in Russia and an international group was set up to take calls in English, German, French and Italian. These new facilities are estimated to have brought extra revenue of USD 27.5 million. 34 Increase of sales via all channels was achieved by improvement of the agent commission system, increase in the volume of corporate sales, development of transit, multimodal and special carrying, increased informational support for sales, and spe- Scheduled passenger revenue breakdown by region, 2005 cial offers (particularly “Prices melt in the wintertime” and “Foreign destinations 1.4% under the hammer”). 2.5% Other international flights Other international flights from/to Moscow Ticket sales abroad were via the Company's own representative offices, official 7.4% agents (firms that have direct agreements with Aeroflot), and through the BSP/ARC North America from/to Moscow 41.9% Europe from/to Moscow systems of neutral agents. 19.5% Work continued in 2005 to increase sales via the BSP/ARC system, which is an eco- Asia from/to Moscow nomical and secure way for airlines to sell tickets. The share of BSP/ARC in the structure of foreign sales rose by 17.8% in 2005 and represented 52.1% of the total. This structural change helped to increase overall foreign sales revenue from passenger carrying by 6.7% and also reduced costs due to payment of agent commissions 27.3% Domestic flights by 9% compared with 2004. In order to ensure a high load factor on flights and to generate additional revenues from passenger ticket sales Aeroflot is rapidly increasing special carrying on foreign markets (for students, crews of ships, etc.), working to promote mixed carrying (air and rail and catalogue sales), expanding its network of corporate customers, and Scheduled cargo revenue breakdown by region, 2005 developing a targeted incentive approach to its agent network. Sales abroad grew by USD 42.5 million in 2005, which was an excellent achievement in view of the fact 0.2% 7.4% Other international flights that the Company air fleet did not expand last year (and even contracted when flights North America from/to Moscow from/to Moscow with Il-96-300 craft were suspended at the peak of the summer season), and that six 8.4% 38.4% Other international flights Asia from/to Moscow representative offices ceased to operate in 2005 (Singapore, Lisbon, Tel-Aviv, Sharja, 1.4% Montreal, Ho Chi Minh City), while offices in Seattle and Hanoi were shifted to off-line Domestic flights operations).

24.2% Europe from/to Moscow Business in 2005

Cargo traffic

Trends in air freight are important indicators of national and global economic development, and they also depend to a large extent on the state of the economy. Economic growth in Russia and elsewhere support growth of the air freight business. In order to structure and improve efficiency of its cargo business, the BoD of Aeroflot decided in October 2005 to set up a new subsidiary, Aeroflot-Cargo. Aeroflot's plans for development of its cargo business in the medium and long terms are as follows: • 2006 — creation of the new company, Aeroflot-Cargo; • further talks on inclusion in the SkyTeam Cargo alliance; • 2006–2008 — withdrawal of four DC 10-40 aircraft and their replacement with up-to-date cargo planes; • 2006–2010 — development and implementation of a market strategy, focused on: • strengthening positions on the Asia-Europe market by optimizing hub operations; • entering the promising Indian and Middle East markets; • developing new hubs; • stepping up domestic freight carrying and developing bases in Russia and the CIS; • annual increase of cargo flows and revenue from cargo business by at least 25%.

Russia's strategic location on the world map is a major trump card for Aeroflot as it begins realization of this strategy. The Company also has the advantages of a developed network of regular passenger routes and representative offices, commercial rights, experience and qualified staff.

Operating results

Group operating data 2005 2004 % International traffic Freight and mail tons carried thousands 122.4 125.6 97.5 35 Cargo ton kilometers millions 762.5 758.4 100.5 Revenue ton kilometers millions 2,231.2 2,240.6 99.6 Available ton kilometers millions 3,915.5 3,923.4 99.8 Weight load factor % 56.9 57.1 -0.2 Domestic traffic Freight and mail tons carried thousands 29.1 23.3 124.9 Cargo ton kilometers millions 114.6 99,8 114.8 Revenue ton kilometers millions 672.1 564.2 119.1 Available ton kilometers millions 1,080.7 910.0 118.7 Weight load factor % 62.2 62.0 0.2 Total for international and domestic traffic Freight and mail tons carried thousands 151.5 148.9 101.7 Cargo ton kilometers millions 877.1 858.2 102.2 Revenue ton kilometers millions 2,903.3 2,804.8 103.5 Available ton kilometers millions 4,996.2 4,833.4 103.4 Weight load factor % 58.1 58.0 0.1 Aeroflot annual report 2005

Cargo and mail (thousands) Cargo volumes Aeroflot Group carried 151,000 tons of cargo and mail in 2005, an increase of 1.7% 2001 103.8 from 148,000 tons in 2004. 2002 111.9 Cargo turnover in 2005 was 877.1 million ton kilometers, up by 2.2% from 2004. The weight load factor rose by 0.1 p.p. to 58.1%. 2003 116.9 The average revenue rate per ton kilometers in 2005 was USc 28.3, which was 23% 2004 148.9 higher than in 2004. 2005 151.5 International cargo traffic International carrying represents 84% of total cargo and 88% of cargo turnover of Aeroflot. Aeroflot carried 122,500 tons on international flights in 2005, which Weigh load factor (%) is 2.5% less than in 2004. The Company's DC-10s carried 57% of total cargo (67,800 tons or 16% more than in 2004). 51.6 Passenger aircraft carried 54,700 tons of cargo. Tightening of customs rules for 2001 63.2 goods imports and reduced carrying capacities in regions with large flows of goods 55.5 2002 60.9 (South-East Asia, Japan, America), partly due to the temporary suspension of operations with Il-96-300s, had negative impact on cargo carrying by passenger aircraft, 2003 55.4 63.7 which declined by 20%. 57.1 Overall weigh load factor on international flights was 56.9%, which is 0.2 p.p. less 2004 62 than in 2004. 2005 56.9 62.2 Domestic cargo traffic Freight carrying inside Russia was limited to passenger aircraft and totalled International routes Domestic routes 29,100 tons, or 24.9% more than in 2004. Domestic cargo turnover was 114.6 million ton kilometers, which was 14.8% more than in 2004. The weigh load factor was 62.2% (0.2 p.p. lower than in 2004) 36 Cargo turnover (millions) Cargo flights and route network The Company's cargo aircraft carried 67,800 tons of freight in 2005, which was 2001 559.3 16% more than 58,500 tons in 2004. Total flight hours were 15,140 (14% more than 2002 567.7 13,276 hours in 2004). Cargo turnover was 517.5 million ton kilometers, up 14.4% 2003 619.5 from 452.5 million ton kilometers in 2004. 2004 858.2 Revenue from carrying on cargo aircraft was USD 248.1 million, which was 25,7% more than USD 197.4 million in 2004. 2005 877.1 Efficiency of operations by DC-10-40s rose in 2005: their flight hours increased by 14% and traffic volumes by 15.9%, while revenues grew by 32%. Aeroflot's DC-10-40s are deployed on the Company's traditional cargo routes between Europe and Asia. Carrying by DC-10-40s is on a point-to-point basis, i.e. without any use of the passenger network. Average daily flying per aircraft rose from 9.1 hours in 2004 to 10.4 hours in 2005. The route network was modernized in 2005 in order to reduce costs and increase volume and revenues from cargo traffic. The Company continues to develop its representative office for cargo at Hahn in Germany. The office works with Company partners in many European countries (France, Germany, Italy, Austria, Denmark, etc.), securing loads for Company aircraft operating from Hahn airport, and plays the role of a European hub for Aeroflot, con- centrating air freight imports and exports. There is a well-developed system for road delivery to final consumers of goods flown by Aeroflot to Hahn. New flights from Helsinki to Sheremetyevo are also an important part of this delivery system. Business in 2005

Cargo traffic on passenger aircraft In 2005 Aeroflot carried 78,500 tons of cargo on passenger aircraft (including transfer), down by 12.1% from 83,300 tons in 2004. Passenger aircraft carried 4,500 tons of post in 2005, up by 22% from 3,700 tons in 2004. The amount of free capacities for cargo on passenger flights declined by 4.1% in 2005, leading to 12.1% reduction in overall volumes of cargo on passenger flights, of which 8.2% was reduction of direct sales.

Improvement of the tariff and sales system Aeroflot worked hard in 2005 to develop direct relations with the biggest international logistics and delivery firms, including Shenker, Nippon Express, Panalpina and Danzas. Sale of capacities in cargo and passenger aircraft on a wholesale basis was widely practised by Aeroflot in 2005 and proved highly effective, increasing average load and making sales more profitable. A new system was put in place for protecting against financial risks in freight carrying. This reduced financial risks for Aeroflot and increased levels of confidence among partners. The Company also improved its sales system through agreements with foreign airlines: such agreements were reached with Royal Jordanian and Avianka, allowing significant expansion of the geography of cargo deliveries. Agreements with airlines in the SkyTeam alliance (Air France, Korean Air and others) were extended in 2005. The fuel component in cargo tariffs was increased by 30% on average during the year in order to compensate rise in fuel prices.

New products The Company developed new technologies for express cargo deliveries in 2005 with appropriate document support. These new services were aimed at increasing profitability and quality of cargo delivery, and at meeting increasingly stringent customer requirements. Express cargoes are delivered in a fixed period of time, which can be agreed between the sender and the carrier. The cargo is given handling priority to minimize the time needed for ground operations when it is dispatched and received.

SITA Super Cargo (automated cargo handling) The SITA Super Cargo (SSC) automated cargo handling system, installed by Aeroflot in 2004, makes it possible to track progress 37 of cargoes through the delivery system in real time. The following steps were taken to develop the system further in 2005: • 34 Aeroflot representative offices were connected to SSC via terminal access; • procedures were devised for Aeroflot carrying at airports, which do not cater for the SSC system; • an agreement was signed with the system provider, SITA, for further provision of a statistics and automated accounting system (Report Manager), which will be added to the handling system. This will allow Aeroflot to make best use of the system by allowing customers to make cargo bookings, and will help to increase profitability of Aeroflot cargo operations; • work was carried out on a new web site for the Company's cargo department, including technologies that allow booking of cargo services and input by customers of essential information directly into the SSC. Aeroflot annual report 2005

Cooperation with other air companies

Aeroflot's cooperation with other airlines in 2005 helped the Company to strengthen its presence on promising markets, to expand its route network, to gain a presence on markets with limited access and to make best use of its fleet. In the course of 2005 Aeroflot signed codesharing agreements with Korean Air, Air Malta, Alitalia, and Dalavia. Cooperation with JAT was resumed from November last year. At the start of 2006 Aeroflot had codesharing agreements with 27 Russian and foreign airlines, including: • 12 agreements, in which Aeroflot is both an operating partner and marketing partner (with CSA, LOT, Air France, Маlev, Finnair, Austrian, Bulgaria Air, Cyprus Airways, Korean Air, Аlitalia, JAT and Air Baltic); • 5 agreements, in which Aeroflot is an operating partner only (with Таrom, Сubana, Iran Air, Cathay Pacific, Air India); • 10 agreements, in which Aeroflot is only a marketing partner (with Slovak Airlines, Аdria Airways, Royal Jordanian, Estonian Air, Lithuanian Airlines, Aeroflot-Don, Aeroflot-Nord, Air Malta, Belavia, and Dalavia).

Aeroflot made 29,002 flights in 2005 under codesharing agreements (up from 19,386 in 2004), and carried 682,700 passengers (414,700 in 2004). The Company had 193 interline agreements with other airlines at the end of 2005, including 9 with Russian and 12 with CIS airlines. Cooperation with Aeroflot enables other Russian airlines to make occasional use of Aeroflot's “flag-carrier” status, using Aeroflot's name and commercial rights to deal with operating issues and issues of international law. Five airlines worked with Global market shares of international airline alliances 38 Aeroflot on this basis in 2005: Pulkovo, GTK Rossiya, 223 LO, 224 LO, and VASO.

18% Joining the SkyTeam alliance One World 37% Current levels of competition between international airlines are unprecedented in the Other carriers industry's history, and an important aspect of industry competition today is control of more than 70% of the global passenger market by three airline alliances: SkyTeam, Star Alliance and One World. Following addition of three new members in 2005, SkyTeam emerged as the leading and most rapidly developing international airline alliance. It includes such companies as Air France, KLM, Alitalia, Delta, Continental Airlines, Korean Air, AeroMexico, Czech Airlines and Northwest Airlines. The SkyTeam route network offers 19% SkyTeam 15,207 daily flights to 684 destinations in 133 countries. 26% StarAlliance Membership of SkyTeam will offer Aeroflot many advantages in the current competitive environment, improving the Company's strategic position as a provider of global transit services. Specifically, membership of SkyTeam will: • create the best-possible conditions for Russian citizens to move around the world and enjoy high levels of service thanks to the combined efforts of Aeroflot and its alliance partners; • give Aeroflot passengers access to the loyalty schemes of other SkyTeam airlines, ensure uniform service quality for first- and business-class passengers of all alliance members, and allow passengers to register for journeys, which are divided between several SkyTeam airlines, in a single operation; • ensure uniform standards of service; • make Aeroflot more competitive on the global air carrying market; • help to increase Aeroflot's traffic volumes and profitability. Business in 2005

Following signing of the agreement on Aeroflot's commitment to SkyTeam membership (September 24, 2004), the Company has taken various steps to meet requirements of the alliance. By the end of 2005 Aeroflot had • signed codesharing agreements with all member airlines of the alliance, as well as agreements on frequent flyer programs and on use of VIP and business lounges; • been successfully audited by IOSA.

In December 2005 Aeroflot inaugurated special training for personnel, who work directly with passengers (front-line personnel), using SkyTeam's “Ambassador” program. Aeroflot has carried out training of 75% of its front-line personnel, meeting SkyTeam requirements. Aeroflot has successfully completed adaptation of its procedures and processes to match those of SkyTeam in the following spheres: • Branding; • Timetable coordination; • Code sharing; • Marketing, advertising and distribution; • Frequent flyer programs; • Use of VIP and business lounges; • Airport services (including transfers); • Sales; • Ground and in-flight product; • Joint development of product; • Cargo business; • Joint procurement; • Support services; • Personnel training; • IT systems; • Harmonizing standards/quality guarantees; 39 • Technical services.

The final stage in confirmation that SkyTeam requirements have been met will be a commercial audit, which is planned for spring 2006. SkyTeam representatives will assess work of Aeroflot's front-line with respect to: flight reservations; services to transit passengers; baggage handling; standards of in-flight and airport service; and knowledge of English. Following this audit the SkyTeam executive will make a decision on Aeroflot's inclusion in the alliance. Aeroflot annual report 2005

Сonstruction of the new terminal complex, Sheremetyevo-3

Construction and operation of Sheremetyevo-3, the new terminal complex at Moscow's Sheremetyevo Airport, is the main task of Aeroflot's 100% subsidiary, Terminal. This work is now in hand. Work on the new terminal began in July 2005 and is due for completion in November 2007.

The project consists of: • a terminal building, capable of serving 9 million passengers per year; • a multi-storey car park to accommodate 2,800 cars and an open car park to accommodate 700 cars; • internal and external engineering networks; • a road approach system, including ramps and roadways; • platform and taxiways for 32 aircraft .

The main designer for Sheremetyevo-3 is Ae roports de Paris Inge nierie, which has unique international experience in design of passenger terminals. Design of the platform and external engineering networks will be the responsibility of Aeroproyekt, a leading Russian designer of aviation facilities with 70-year experience. The tendering competition to select a general contractor for Sheremetyevo-3 was completed on June 18, 2005. In an initial stage 38 major Russian and international construction companies, identified from open sources, were invited to tender. The selection criteria were: construction cost; completion time; financing schedule; technical quality; and security and environmental policies. The final choice was the Turkish company, ENKA. In order to maximize revenues from the project in Russia, the contract was signed with ENKA's fully-owned Russian subsidiary, ENMAR. The tendering competition to select a general contractor was organized by Bovis Lend Lease, which has responsibility for management and placement of orders in the Sheremetyevo-3 construction project. The competition was carried out using procedures from best international practice, which ensured an objective and transparent choice. On December 30, 2005, Aeroflot and Terminal signed a memorandum of mutual understanding with Vneshtorgbank, Vnesheconombank and Sheremetyevo International Airport, providing for participation of the latter three parties in the project 40 through acquisition of a part of Aeroflot's shares in Terminal. The document sets out decision-making procedures and mechanisms for cooperation between the shareholders, main conditions of participation in the project and organization of financing. Construction work is now in progress and is being carried out on a 65-hectare plot located 400 meters west of the existing Sheremetyevo-2 terminal, close to the Sheremetyevo-2 passenger gallery. Construction of the new terminal is also tied into a unified transport plan for road and rail connections between Sheremetyevo Airport and central Moscow. By the end of 2007 passengers will have the benefit of a new, modern terminal complex to European standards, offering convenient connections between international and domestic Russian flights. A well-designed parking system and proper system of road connections will enable dependable and convenient travel in and out of Moscow by taxi and pubic transport, helping to improve the quality of service to passengers. The main customers of Sheremetyevo-3 will be Aeroflot and its partners in the SkyTeam alliance. Construction of the new terminal will enable Aeroflot to realize its full-hub model, creating the main air transport junction in Russia, the CIS and Eastern Europe. Sheremetyevo-3 will offer the best available airline connections between Europe and the Far East, and between Europe and Asia. Business in 2005

Business of Aeroflot subsidiaries

Aeroflot has stakes in 29 companies, which make up Aeroflot Group. The criterion for selection of companies, in which Aeroflot retains or buys stakes (or for setting up new companies), is relevance of these companies to Aeroflot's main business, i.e. passenger carrying and service to passengers.

Main Aeroflot subsidiaries and associate companies OJSC Aeroflot-Don (51%) — airline subsidiary based in Rostov-on-Don.

CJSC Aeroflot-Nord (51%) — airline subsidiary, based in Arkhangelsk.

CJSC Aeroflot-Plus (100%) — services to business and VIP passengers.

OJSC Terminal (100%) — organization and financing of construction of Sheremetyevo 3 terminal complex and subsequent operating of the new terminal.

CJSC Aeromar (51%) — provision of in-flight catering for airlines.

CJSC Aerofirst (33,3%) — duty-free retail trading at Sheremetyevo Airport and in-flight duty-free sales.

CJSC TZK-Sheremetyevo (31%) — jet fuel deliveries and aircraft refuelling. The company is the only provider of these services at Sheremetyevo Airport.

CJSC Sherotel (100%) — Four-star hotel at Sheremetyevo Airport, managed by the French company, Accor.

CJSC AeroMASH-Flight Security (45%) — pre-flight inspection of aircraft, passengers, airliner crew members, cabin crew, hand luggage, hold luggage, cargo and mail at Sheremetyevo Airport.

Aeroport Moskau Ltd. (50%) — ground handling of cargoes at Sheremetyevo Airport. 41 OJSC Moscow Insurance Company (100%) — insurance for companies in Aeroflot Group.

CJSC Deit (50%) — Travel agent (sells tickets and tour packages and manages the business lounge at Sheremetyevo-2).

Aviabusiness School (100%) — trains airline personnel for work at Aeroflot representative offices abroad.

Social Partner (non-state pension fund) — provides non-state pension services.

Priorities and main events in management of subsidiaries and associates Aeroflot's priorities in management of its subsidiaries and associates are: • improving efficiency, managing the value chain of key subsidiaries; • further optimization of Group structure; • creation and/or purchase of new companies in the air carrying and passenger service business; • addressing strategic tasks of raising capitalization and increasing revenues from subsidiaries; • creation of a group of companies in aviation and closely related spheres.

Aeroflot continued its work on sale of non-core assets in 2005. Nine companies were sold during the year, bringing revenue of USD 1.8 million. Group structure is now close to optimal and any further development will involve creation or purchase of new assets. Aeroflot approved a strategy in 2005, setting out guidelines for management of subsidiaries. As in previous years, Aeroflot worked hard to achieve a balance of interests between interests of the Company and interests of its subsidiaries. Particular attention was paid to the price/quality ratio of services, provided to Aeroflot by its subsidiaries, and reduction of business and corporate risks, associated with Aeroflot's stakes and its role in subsidiaries.

Air traffic Subsidiaries providing air carrying services are Aeroflot-Don, Aeroflot-Nord and Aeroflot-Plus. The main volume of services is provided by Aeroflot-Don and Aeroflot-Nord. Aeroflot annual report 2005

Aeroflot-Nord carried 806,000 passengers in 2005, of which 76,300 on international routs and 729,700 on domestic routs. Principal company routes included: Arkhangelsk-Moscow; Moscow-St.Petersburg; Moscow-Simferopol; Moscow-Samara; Moscow-Ekaterinburg; Moscow-Chelyabinsk, and others. The flight network, offered by Aeroflot-Don did not change significantly in 2005, and included the following main routes: Rostov- on-Don-Moscow; Moscow-Murmansk; Moscow-Sochi; Moscow-Dnepropetrovsk; Rostov-on-Don-Frankfurt; Rostov-on-Don- Tashent, and others. The company carried 596,300 passengers in the course of the year, of which 178,500 on international flights and 417,800 on domestic flights. Aeroflot-Plus offers VIP charter flights. Revenue from this segment in 2005 was USD 2.506 billion, which is 17.4% more than in 2004. Operating costs increased by 17.7% to USD 2.285 million. As a result operating profit increased by 14.4% to USD 220.6 million.

In-flight catering The Aeroflot subsidiary, Aeromar, specializes in preparation and sale of in-flight meals for airlines. LSG Sky Chefs, the global leader in airline catering, is an Aeromar stake holder. Aeromar controls 90% of the market for in-flight meals at Sheremetyevo Airport. Aeromar made 9.3 million in-flight meals during 2005, which is 1% less than in 2004, and served 54,495 flights (1.4% more than the year before). Revenue in 2005 from in-flight catering was USD 54.7 million, which is 5.8% more than in 2004. Operating costs declined by 8% to USD 46 million. Operating profit was USD 8.7 million compared with USD 1.7 million in 2004.

Hotel Operations Novotel-Sheremetyevo-2, the hotel owned by CJSC Sherotel and managed by the French firm Accor, kept its leadership of the Moscow hotel market in 2005 with 93.74% occupancy rate. The biggest share in profits from room rental at the hotel is from individuals (27%), followed by non-Aeroflot air crew (24%), Aeroflot air crew (16%), tour groups (12%), corporate customers (11%), seminars (6%), tourist agencies (2%), and delayed flights and transit (1%). Revenue from hotel business in 2005 was USD 19.2 million, which is 9.7% more than in 2004. Operating profit of USD 10.3 mil- 42 lion in 2005 was 80.1% higher than in 2004. The improved results were due to better revenue management and tighter cost control. Work was carried out in 2005 to rebuild and modernize Novotel-Sheremetyevo-2 in order to maintain high-quality hotel services, matching international standards. The work included: • further modernization of the Fidelio Front Office system, which increased the hotel's booking capacities; • renovation of all the hotel's conference halls; • installation of an air conditioning system to replace the air cooling apparatus; • equipment modernization in the hotel laundry; • start of work to replace magnetic locks on doors of hotel rooms (the new system will use the latest technology and new software).

Capital expenditures in 2005 on modernization and equipment replacement totalled USD 922,800. CJSC Sherotel took second place in 2005 in the hotel category of a competition, held by the Governor of Moscow Region, to find the best tourist industry organizations in the Region. The company was also the winner in the service and hotel business category of a competition, held by the Russian Government, to find Russian organizations with the most efficient social policy.

Plans for 2006 Aeroflot will set up and launch operations by a cargo airline subsidiary in 2006, as well as developing its business in the VIP transport segment. Future development of Aeroflot Group will involve creation (or purchase) of new regional air carriers, as well as improvement of quantitative and qualitative indicators, shown by current Aeroflot subsidiaries and associate companies. Business in 2005

Aircraft fleet Fleet development strategy The Aeroflot Executive Board has reviewed and approved a strategic development plan for the Company's aircraft fleet up to 2010, targeting implementation of the strategic development concept, adopted by the Aeroflot BoD in March 2000, and incor- porating goals for the period up to 2010 approved by the BoD in December 2003. The fleet development plan takes account of the following factors, which have major importance for future development of the aircraft fleet: • limited aircraft handling capacity at Aeroflot's main airport (Sheremetyevo) and future commissioning of a third terminal at Sheremetyevo; • growth of fuel prices.

The approved program for development of the Aeroflot aircraft fleet up to 2010 envisages: • growth of the number of aircraft in the Company fleet to 115 by 2010, with equal development of long-haul, medium-haul and short-haul carrying capacity; • gradual replacement of outdated aircraft (Tu-134s, Il-86s, Tu-154s, etc.) by up-to-date and efficient aircraft.

The development plan for the aircraft fleet, set out in the program, will increase passenger traffic volume by 70% in 2010 compared with 2005 and increase passenger turnover by more than 75% (representing average annual growth rates of 11% and 12% respectively).

Fleet development in 2005

Fleet structure at the end of 2005 Type of aircraft Ownership Aeroflot — Russian Aeroflot-Don Aeroflot-Nord Group total Airlines (aircraft) (aircraft) (aircraft) (aircraft) Ilyushin Il-96-300 Owned 6 – – 6 43 Ilyushin Il-62M Owned 1 – – 1 Ilyushin Il-86 Owned 9 – – 9 Tupolev Tu-154 Owned 25 9 1 35 Tupolev Tu-134 Owned 12 2 8 22 Antonov An-24 Owned – – 3 3 Antonov An-26 Owned – – 1 1 Airbus A-319 Finance lease 4 – – 4 Airbus A-320 Finance lease 1 – – 1 Airbus A-321 Finance lease 3 – – 3 Tupolev Tu-134 Operating lease 2 – 3 5 Tupolev Tu-154 Operating lease 2 – – 2 Ilyushin Il-62M Operating lease 1 – – 1 Antonov An-24 Operating lease – – 1 1 Antonov An-26 Operating lease – – 1 1 Airbus A-319 Operating lease 4 – – 4 Airbus A-320 Operating lease 6 – – 6 Boeing 767-36 NER Operating lease 9 – – 9 McDonnell Douglas DC10-40F Operating lease 4 – – 4 89 11 18 118

At the beginning of 2005 the Aeroflot fleet consisted of 87 planes, of which 53 were owned and 34 were leased. The net result of withdrawal and commissioning of aircraft in the course of the year was a net decline of fleet size by two planes.

Withdrawals were as follows: • four Il-86s were written off; • two В737s and one А310 were returned due to lease expiry in the framework of fleet restructuring;

Additions were as follows: • three В767s as part of restructuring of Aeroflot's foreign aircraft fleet; • one new Tu-154M was bought; • one Tu-134 with business-lounge interior was leased from Stroitransgaz. Aeroflot annual report 2005

On some routes Aeroflot continued to operate aircraft belonging to other airlines using the Company's own commercial codes. Such arrangements were in force in 2005 with GTK Rossiya (on Il-62, Tu-154, Tu-134, Tu-214 and Yak-40 planes) and Aviaenergo (on Tu-154 planes). During the Il-96-300 flight stoppage, Aeroflot also used Il-62s provided by Aviaenergo, Tu-154s and Il-86s from Continental Airlines, and Il-86s provided by VASO. As of January 1, 2006 the Aeroflot fleet consisted of 89 aircraft, of which 53 were owned and 36 were leased. In July 2005 the Company began work on choice of a future long-haul aircraft model, since planes in the B767 family will be ageing by 2010–2012 and remaining planes on the market will be heavily depreciated. The choice is likely to be between B787–8/9 models and A350–800/900s. Also in 2005 Aeroflot completed its choice of a future regional aircraft. Russian-made RRJ–75/95 models (the Russian Regional Jet) were selected as most appropriate, and an agreement was signed on December 7, 2005, between Aeroflot and the RRJ manufacturer, Sukhoi Civil Aircraft, on delivery of 30 RRJ–75/95s in the period from 2008 to 2011.

Plans for 2006 Aeroflot plans a major increase in the number of up-to-date and efficient foreign-made aircraft in its fleet during 2006. Expected new additions are two or three long-haul B767s, three A320s and four A321s. The newly acquired A320s will replace Tu-154 aircraft on some European routes, where environmental rules make it impossible to continue using Tu-154s. The new B767s will compensate and increase capacities lost due to withdrawal of B777 aircraft. IT development

Installation of new computer systems and technologies, and automation of business processes are vital for successful development on the highly competitive air carrying market. Aeroflot is currently reorganizing its business management in order to improve efficiency. A key part of this reorganization is installation of the Sabre Airline Solutions family of products, which will help the Company to make the best decisions in order to increase operating profit. By choosing programs and instruments from the product range of a single company, Aeroflot has ensured their compatibility and ease of integration into a single automated system for managing passenger transport while min- 44 imizing costs. As part of this modernization Aeroflot transferred in March 2005 from the Gabriel booking system to the new Sabre automated seat resource management system, which has broader functional capabilities. Changeover to the new booking system is already delivering significant savings in air transport sales, and offers a stepping stone to the next stage in up-to-date electronic technologies, such as Internet sales, e-ticketing, and self-service booking and registration Successful changeover to Sabre software has allowed introduction of an Internet booking system. Work to implement the first stage of this project was carried out at the end of 2005, when it became possible to book Aeroflot tickets through the Internet for delivery to passengers or pick-up in Aeroflot's own offices. Aeroflot has now started work on changeover to e-ticketing in order to meet IATA and SkyTeam requirements on e-ticketing introduction, and also to achieve cost savings. E-ticketing functions have been successfully tested, internal documents have been prepared governing e-ticket designs, passenger registration, Aeroflot sales office accounting and accounting of revenues from e- tickets. Testing proved full readiness of Aeroflot for introduction of e-tickets and the only remaining task is to change some provisions of Russian law, which do not allow for e-ticketing systems. In December 2005 Aeroflot launched information and self-service booking kiosks at its own sales offices. Customers can use convenient graphic interfaces at the kiosks to study Aeroflot timetables and ticket prices, and to make their booking. A significant amount of work was done in 2005 to improve Company IT systems to make them comply with main requirements of the SkyTeam alliance. Problems with integration of Aeroflot IT systems and systems of the Company's alliance partners were overcome in 2005. In June 2005 Aeroflot began installation of an automated production management system. This involves a sub-program for estab- lishing automated operating management and a number of other related projects in various segments of Aeroflot's business. The infrastructure for a Centralized Data Bank was established in 2005 and work began on transfer of data from various sources to the Bank The Data Bank will make it much easier to obtain essential, up-to-date information on all aspects of Aeroflot business, simplifying decision-making processes in the Company. Aeroflot has installed IBM's WebSphere system for corporate software integration in order to create a single IT space throughout the Company. WebSphere enables the Company to integrate all of its IT systems into a unified and efficient whole. By creating a single catalogue of network resources and a central system to manage access rights to Company information resources, Aeroflot has successfully enabled accounting and control of all its network resources and ensured security in work with Microsoft. In order to support reliable functioning of the Company's Moscow offices and other business operations in Moscow, Aeroflot worked with Synterra to put in place a back-up wireless telecommunications system using WiMax technology. Business in 2005

Quality management

In 2005 Aeroflot continued its work on installation of a quality management system in the cargo carrying department and sub-divisions of the Company's marketing segment, which sell air tickets and develop new services. All operating divisions of Aeroflot underwent international quality audits in 2005, confirming validity of certificates (issued by TUV CERT) proving compliance with ISO 9001–2000 requirements. Following inspection of main Aeroflot facilities, Russia's Federal Service for Transport Supervision recommended all Russian airlines, which operate international flights, to follow Aeroflot's positive example of adherence to international certification schemes. Use of international certification by all Aeroflot divisions enables the Company to react quickly and flexibly to changes in Russian and international requirements for airlines, improves company operations and helps Aeroflot to cooperate successfully with partners on the domestic and international market. Prior work to obtain international certifications were of great assistance to Aeroflot in successfully passing its audit of compliance with IOSA standards. Aeroflot began work in 2005 to install risk management methods that allow analysis and modelling of risks, which affect the Company's main priority — safe flying, — as well as helping in proper analysis of business results and monitoring of strategy implementation. Aeroflot will extend international quality certification inside the Company during 2006 in order to ensure that all aspects of the business are compliant with ISO 9001–2001 (GOST R ISO 9001–2001).

45 Risk Management

48 Sector risks

49 Financial risks

49 Insurance programs

49 Flight safety risk management Seoul Aeroflot annual report 2005

Risk Management

In October 2005 Aeroflot was pronounced the winner in a competition to find the best risk management system in Russian industrial companies, and was awarded a diploma by PricewaterhouseCoopers in recognition of its risk management achievements. The competition was held as part of the international forum “Risk management in Russia”, organised by Expert Rating Agency and Expert magazine with support from the Russian society for risk management, RusRisk. This was the first such contest held in Russia. Aeroflot's efforts to apply best practice in risk management were recognized and valued by international and Russian consulting companies. As a participant of the Russian and international air carrying industry, Aeroflot is subject to characteristic industry risks. Prominent risks in 2005 were: a particularly high level of competition; price increases for resources and services consumed by airlines; rise of ticket prices; and seasonality of the business. Aeroflot has always been particularly attentive to financial risk management. The Company is careful to ensure aircraft hull insurance , civil liability, insurance of employees and their families, and insurance of Aeroflot property in Russia and abroad. The Company also makes every effort to minimize risks pertaining to flight safety, and pays careful attention to operational safety of aircraft, personnel qualifications, and quality management and control systems. Sector risks

On the one hand the competitive environment on the Russian airline market is becoming more favourable for Aeroflot due to reduction in numbers of Russian carriers, but, on the other hand, competitive pressure from international airlines is becoming tougher as foreign 48 carriers step up their business on the Russian market. Aeroflot aims to maintain its competitive edge by service quality, maintenance of a broad and efficient route network, cooperation with reliable partners and agents, and a rebranding program. Increasing cost of resources and services used by airlines is primarily due to higher prices for natural monopoly services: jet fuel providers, aircraft repairers, air navigation systems, and airports. These are all essential components in the cost of providing an airline service. Growth of spending by Aeroflot on its fleet renovation program is inevitable. On the one hand, this will lead to growth of depreciation expenses and the Company debt burden (in the form of lending payments). But, on the other hand, it will significantly reduce the fuel cost component and relative maintenance costs. Increase of air ticket prices is directly linked to the level of competition in the sector and increase of carrying costs, which force Aeroflot to raise the fuel, airport and air navigation component of its prices. The seasonal character of airline business is due to dependence between the time of year and the amount of holidays and vacations of potential passengers. The high seasons for airlines coincide with the summer and winter holiday periods. Aeroflot does as much as it can to adapt its route network to seasonal market trends and supplements its efforts with a flexible tariff policy. Risk Management

Financial risks

Liquidity, currency and interest rate risks are most relevant to airlines as regards the ratio between currencies used for company accounting purposes, between payment/revenue currencies, between currencies, in which cash moves between company bank accounts, and between currencies, in which sales are made and in which bills are presented. Risks are inevitable in view of the large number of Aeroflot representative offices abroad. The Company has been able to achieve a balance in its currency position thanks to design and application of a methodology for calculating that position and thanks to introduction of an exchange rate within the company for ticket sales inside Russia. Assessment of risks due to exchange rate fluctuations and formation of plans to hedge fuel price developments are part of Aeroflot's budgetary process. In order to reduce credit risk in organization of passenger ticket sales and risk of non-fulfilment of transactional obligations to the Company by debtors/counterparties Aeroflot has set minimum deposits for ticket blanks, uses standardized bank guarantees, and sets different limits for different credit organizations as regards bank guarantees issued to customers of those banks who are ticket agents for Aeroflot. Transfer to the Sabre ticket booking and sales system will do much to reduce such risk, as will design and application of new non-paper technologies for ticket sales. Aeroflot is maintaining its efforts to properly assign responsibility and obligations between the Company and partner airlines as regards accident and third-party risk insurance. These efforts should reduce likelihood of non-fulfilment or inadequate fulfilment of obligations under bilateral commercial agreements with partner airlines. In 2005 Aeroflot designed and approved standard rules for hull liability insurance in Group subsidiaries in order to protect Aeroflot interests against risks of damage to aircraft and any incurring of passenger, third-party or baggage/cargo-liability in the course of regular flight operations. Insurance programs

Insurance is a risk management tool, by which Aeroflot can obtain external financing for part of its risks. There is a complex system of insurance coverage, which can be divided into two components: aviation and non-aviation. Aviation insurance includes various programs: aircraft hull insurance; aircraft third party; and passenger, cargo, and mail liability. These types of insurance are a way for the airline to minimize its risks, but they are also required by civil aviation authorities, Aeroflot partners and counterparties in Russia and abroad. Aeroflot's positioning on the international aviation insurance market and creation of a positive Company image have ensured steady lowering of Aeroflot's hull and liability insurance premiums. 49 Reduction of premiums by policy periods* Policy period 2005–2006 2004–2005 Insurance type compared with 2004–2005 compared with 2003–2004 Hull insurance for western built aircraft –21.7 % –24.8 % (including Il-96s and components) Aircraft third party, passenger, –0.9 % –11.5 % cargo, and mail liability

* The Aeroflot policy period starts on July 2 and lasts one year.

Non-aviation insurance includes medical insurance for Aeroflot employees and their families, professional disablement insurance in respect of flight crew and technical maintenance staff, airline property insurance in Russia and abroad, etc. Aeroflot obtains insurance on a competitive basis, achieving an efficient balance between price and quality of its insurance coverage. Flight safety risk management

Aeroflot underwent an IOSA audit in 2005 ahead of its planned accession to the SkyTeam alliance in 2006. In connection with these developments the Company began work in 2005 on design and implementation of a risk management program for flight safety. A risk matrix was designed, risks were categorized according to the Company sub-divisions, which they concern, and a cooperation procedure between Company sub-divisions to ensure flight safety was put in place. IOSA representatives gave a positive assessment of the results of these efforts. Moreover, the positive experience of Aeroflot's IOSA audit has been recommended by the Russian Air Transport Operators Association as an example to other Russian airlines, which are IATA members. Personnel and Social Responsibility

52 Personnel

54 Charity activities

55 Environment Amsterdam Aeroflot annual report 2005

Personnel and Social Responsibility

Personnel

Personnel management Building an efficient system of relationships between people within the Company is an essential condition for achievement of Aeroflot's main strategic goal of creating a world-class airline based on the best traditions of Russian civil aviation.

Aeroflot's personnel policy aims to ensure that corporate and organizational structure matches Company strategy. The policy contributes to productivity, creation of a personnel management system with strong corporate culture, increase of mutual responsibility of employer and employee, support for initiative at all levels, and encouragement of technical and organizational innovation inside the Company.

Efforts in personnel management during 2005 aimed to implement a policy, which emphasizes: • encouraging efficiency in the workplace — improvements to the wage and incentive system; attestation of jobs by labour conditions; analysis of work processes and losses of work time in Company sub-divisions and among specific employee categories; drafting of labour regulations; • personnel training аnd development — improvement of the system for personnel selection and placement; professional training programs for flight and technical staff, cabin crew, and ground control personnel; programs to improve the level of service provided by the Company; programs to raise qualification and certification levels of personnel; • efficient social protection for employees — based on the Collective Agreement for 2005–2008 with bilateral monitoring of implementation by workforce and management representatives; 52 The Collective Agreement enshrines a wide range of guarantees and benefits for Aeroflot employees, including non-state pension provisions, compulsory and voluntary medical insurance for Aeroflot employees and pensioners, and health and recreation provisions. A Commission for resolution of labour and social issues has responsibility for making improvements to the Collective Agreement, interpreting the Agreement and clarifying application in specific cases.

Courses of treatment at resorts and sanatoria as well as housing programs for Aeroflot employees are dealt with under programs implemented by specially created commissions and committees within the Company. Personnel and Social Responsibility

Aeroflot personnel

Average headcount 2005 2004 % Airline 17,064 16,808 101.5 Including JSC Aeroflot 14,871 14,737 100.9 OJSC Aeroflot-Don 1,137 1,157 98.3 CJSC Aeroflot-Nord 1,056 914 115.4 Catering 1,060 1,204 88.0 Hotel 323 328 98.5 Others 62 53 116.9 Total 18,509 18,393 100.6

Average monthly wage of employees in Aeroflot's core business during 12 months of 2005 was 30,123 roubles, which was 18.5% higher than in 2004.

Professional training and development of personnel Aeroflot carried out professional training and development programs in 2005 for its flight and technical staff, cabin crew, and ground crew, as well as offering programs to raise levels of qualifications and certification of Company personnel. Training and improvement of qualifications inside the Company is carried out at the Aeroflot Training Center for Aviation Personnel (TCAP). The TCAP organized and held 1,017 training events in 2005, of which 193 for flight personnel, 93 for engineers and technical staff, 332 for cabin crew, and 166 for ground crew. A total of 12,527 Company employees underwent training and improvement of their qualifications, and 1,537 took courses in foreign languages. Aeroflot personnel also attended training and raised their qualification levels at various civil aviation institutes during 2005. The Centre for Further Training of Air Transport Personnel at the Moscow Civil Aviation Institute provided its services to 63 members of Aeroflot staff, 50 Aeroflot representatives attended the Institute for Senior Staff and Specialists at the St Petersburg Civil Aviation Institute, and 14 ground control staff attended the Centre for Air Transport Personnel Training. As part of changeover in 2005 to the Sabre booking and sales system, 379 Company employees (including 82 local-hire staff from the Company's foreign representative offices) completed a course of training in use of the Sabre system at the Airline Business School in Moscow. In preparation for Aeroflot's accession to the SkyTeam alliance 30 company flight staff and two members of staff from the flight control center completed a Dispatch Resource Management course at Jeppsen GmbH, and 60 Aeroflot staff completed a program, provided by ARIKA Consulting Company under the title “Working efficiently with customers, resolving conflict situations”. 53 In order to achieve further improvement of the Company's quality control systems, 26 members of staff were sent to attend the licensed course QM TUV-SERT, provided by Certification Network MC GmbH. IATA study courses were organized for 13 Aeroflot staff members at the Center for Modern Technologies and Standards in Aviation (Moscow branch of the IATA Studies Center). The Air Business Academy provided training to 55 Aeroflot managers and specialists in 2005. In total during 2005 about 3,000 Company employees underwent training and improved their qualifications at 60 different institutions.

Social programs Aeroflot's social programs were highly commended at the 5th All-Russian Competition for Efficient Corporate Social Policy, held on the initiative of the Russian Ministry for Economic Development and Trade. Aeroflot took first prize among 60 companies in the part of the Competition to find “Best Implementation of Social Programs”. The prize was awarded in recognition of the large package of services and benefits for Company employees and their families, which is included in Aeroflot's social program. Social support by the Company for its personnel took the following forms in 2005: • periods at sanatoria and rest breaks for staff members and their families; • housing programs; • state and non-state pension schemes; • company cars and car parking; • canteen provision; • recreational events and sport events; • registration of Company employees in the compulsory pension insurance system; • work with retired former employees of the Company.

More than 2,500 Company employees used sanatoria facilities and took rest breaks in 2005, and prophylactic treatment was provided for 168 employees. Aeroflot annual report 2005

Aeroflot arranged stays at children's camps with special health facilities for 815 children of Company employees during the summer and winter holidays in 2005. The Company provided special-purpose interest-free loans with total value of 7 million roubles to 67 employees in 2005 (of whom 11 used the money to improve their housing conditions). The Aeroflot corporate pension plan, implemented through a non-state pension fund, Social Partner, was made use of by 7,192 company employees and 2,880 Company pensioners as of December 31, 2005. The average monthly non-state pension received through the plan in 2005 was 785 roubles. Charity activities

The recognition accorded to Aeroflot's high levels of social responsibility at the 5th All-Russian Competition for efficient corporate social policy also reflects the Company's efforts, as a responsible corporate citizen, to go beyond the requirements of its own employees, and to help other people in need. The Company continued to implement a number of socially-oriented programs in 2005, as follows:

Moscow-Kaliningrad Air Bridge The aim of this program is to create an “air bridge” between Kaliningrad region and the rest of Russia (the Batlic region of Kaliningrad has been an enclave, without land connection to Russia, since break-up of the USSR). The program helps to ensure respect for the right of every Russian citizen to freedom of movement. Aeroflot provides transport to and from Kaliningrad at affordable prices for needy passengers as part of the program.

Support to vulnerable social groups Comrades in Arms Free seats on regular Aeroflot flights to any destination in the Russian Federation, CIS, Baltics and Europe (except Malta, Cyprus, or Turkey) for veterans of World War II. From 2005 this service is fully available to WWII veterans and invalids, living in the CIS and Baltic countries. In five years of the program Aeroflot has carried more than 20,000 people to reunions with wartime comrades, including 5,500 in 2005 alone.

Helping sick children and invalids In 2005 Aeroflot took part in a program to support non-relative bone marrow transplants to children with oncological conditions. Aeroflot provided tickets to Europe with 90% discount for purposes of obtaining and transporting bone marrow to be used for treatment of children with severe leukaemia, and also transported sick children and accompanying adults for operations and treatment in the USA. 54 Aeroflot worked with the Bakulev Scientific Center for Cardio-Vascular Surgery and the Children's Hearts Charity to launch the “Wings of Hope” program, which provides help to children in Russian regions suffering from cardio-vascular diseases. The program aims to provide high-quality diagnostic and medical assistance to such children. Aeroflot carried specialists of the Russian-UK charity, Downside Up, to various destinations in Russia. The charity helps to dis- seminate the latest support techniques for families bringing up children with Down's syndrome. Charity staff held seminars and practical conferences to help train specialists and parents in the latest approaches to social integration of children with learning difficulties.

Culture Aeroflot has had an association with the Moscow Conservatory since 2002. Company support has enabled Conservatory musicians to participate in prestigious international competitions, festivals and symposia. The Company has provided transport for Conservatory musicians to destinations in Europe and the USA. The Company is particularly keen to support various festivals of Russian culture abroad. Aeroflot organized transport to London for participants of the festival entitled “Russian Winter on Trafalgar Square”, which presented Russia's rich cultural heritage and the country's artistic and scientific achievements to a foreign audience. Aeroflot sponsored the program “New songs about what's most important” on Russian TV Channel 1. The program is a well-established “brand” on Russian TV with a long history and hallmark style, presenting performances by Russia's best-loved musical stars Aeroflot enabled a group of young musicians, “The Bell”, to represent the Society of Former Russian Prisoners of Mauthausen Concentration Camp at an international gathering to commemorate the 60th anniversary of the camp's liberation. Aeroflot was also a sponsor of the 20th International Ballet and Choreography Competition, the 6th Chekhov International Theatre Festival, and the 4th Moscow International Festival of Circus Art. A major exhibition of Russian art, called simply “Russia!”, opened at the Solomon Guggenheim Museum in New York with support from Aeroflot. A total 250 art works from the Tretyakov Gallery, Russian Museum, Hermitage, the Kremlin Museum, Historical Museum and Russian provincial museums were transported to New York for the exhibition. The Company provided its services on several occasions for Russian cinema festivals in New York and Paris as well as supporting the TEFI Russian TV awards event. Personnel and Social Responsibility

Sport The 5th Aeroflot Open International Chess Tournament was held in 2005. The Tournament has made its mark as a major event in the chess calendar in the five years since its inauguration. Participants last year were 630 chess players from 58 countries, including 130 international grand masters. Not every major international chess tournament can boast such a large and illustri- ous attendance, and the Aeroflot Open drew much attention in 2005. Aeroflot is a regular partner of the Russian Olympic Committee. In 2005 Aeroflot extended its assistance to the Russian Football Union, carrying the Russian national team and national youth team to national and international competitions.

Education and science Aeroflot kept up its tradition, begun five years ago, of carrying gold and silver medallist graduates from schools all over Russia to Moscow for exams and interviews to enter higher education institutions in the Russian capital. Aeroflot was the official carrier for the 2nd Russo-Chinese-Kazakh Forum in Beijing. The point of the Forum is to extend cooperation between the three countries in energy supplies, to help analyze Russian and foreign energy markets, to address transport and logistics issues, and to design new approaches to security in international business operations. Environment

As the largest air carrier in Russia Aeroflot is aware of its responsibility and role in helping to protect the natural environment. Aeroflot maintained its strict observance of laws to protect the environment in Russia and in countries, to which the Company operates routes. Aeroflot regularly checks and supervises its observance of environmental norms in operations with aircraft and ground equipment, including monitoring of harmful atmospheric emissions, noise pollution, smoke levels, and carbon dioxide and hydrocar- bon content in combustion gases. Aeroflot has measures in place to prevent pollution of soil and water at locations, where it carries out operations, and the Company carries out control and monitoring of temporary waste accumulation and storage connected with its operations. Aeroflot carried out work in 2005 to update its documentation governing permissible emission limits and governing accumulation and location of waste from production and consumption activities by the Company. Checks of harmful atmospheric emissions from stationary sources were also carried out last year.

55 Shareholders and Investors

58 Share capital

59 Securities

61 Dividend history

61 Important events since December 31, 2005 Rome Aeroflot annual report 2005

Shareholders and Investors

Share capital

Aeroflot share capital remained unchanged through 2005 at 1,110,616,299 roubles divided into 1,110,616,299 common shares with par value of 1 rouble. Aeroflot had 11,469 shareholders as of December 30, 2005.

Share capital structure (largest Aeroflot shareholders as of December 30, 2005) Shareholders Status Total number Stake in share of shares capital, % 34 legal persons, including: 1,018,712,441 91.72 Russian Federation (through Owner 568,335,339 51.17 the Federal Agency for Management of Federal Property Sberbank (commercial bank), OJSC Nominee 277,654,076 25.00 Depositary-Clearing Company Nominee 56,763,656 5.11 National Depositary Center Nominee 50,852,670 4.58 (non-profit partnership) ING Bank (Eurasia), CJSC Nominee 32,575,302 2.93 J.P. Morgan Bank International, LLC Nominee 13,712,930 1.23 National Reserve Bank Nominee 12,165,174 1.10 Deutsche Bank, LLC Nominee 2,633,400 0.24 Rosbank, OJSC Nominee 1,474,218 0.13 Citibank, CJSC Nominee 1,242,500 0.11 11,435 individuals 91,903,858 8.28

58 Shareholders and Investors

Securities

Information about securities State registration number, Sort, Category, Number of shares Par value of date of registration type outstanding shares, roubles 73-1 p-5142, Common, registered, 3,164,149 1 June 22, 1995 non-documentary 1-02-00010-А Common, registered, 1,107,452,1501 April 4, 1999 non-documentary 1-01-00010-А Common, registered, 1,110,616,299 1 January 23, 2004 non-documentary (these share issues were combined)

The main exchanges, at which Aeroflot shares trade, are: • The Russian Trading System (RTS), where Aeroflot shares have the trading code AFLT (Internet address is www.rts.ru); • Moscow Interbank Currency Exchange (MICEX, Internet address is www.micex.ru).

Main share indicators 2005 2004 2003 2002 2001 Share price* (USD) Max. 1.73 1.23 0.69 0.42 0.40 Min. 1.13 0.69 0.33 0.27 0.19 P/E 8.3 7.9 6.0 4.3 19.7 Share price/net income per share Max. 9.1 6.2 5.9 4.6 9.9 Min. 5.9 2.5 2.8 2.9 4.6 Market capitalization (USD millions**) 1566 1368.3 766.3 383.2 395.4

* On the MICEX. ** The Russian Central Bank rate at the end of the period is used.

Aeroflot market capitalization (USD millions) 59 2001 395 2002 383 2003 766 2004 1,368 2005 1,566 Aeroflot annual report 2005

Aeroflot share price trends on the RTS compared with the XAL, BWAIRL and BEUAIRL indexes (in USD for Aeroflot, with the other indexes made comparable)

1.70

1.52

1.34

1.16

0.98

0.80 January February March April May June July August September October November December

Aeroflot price on the RTS, USD

BEUAIRL BWAIRL XAL

BWAIRL — Bloomberg index of leading international airlines BEUAIRL — Bloomberg index of leading European airlines XAL — US airline stock index

Weekly trading in Aeroflot shares on the RTS and MICEX (USD millions)

4 RTS volumes MICEX volumes

2 60

0 1/9/05 2/6/05 3/6/05 4/3/05 5/1/05 5/8/05 6/5/05 7/3/05 8/7/05 9/4/05 1/16/05 1/23/05 1/30/05 2/13/05 2/20/05 2/27/05 3/13/05 3/20/05 3/27/05 4/10/05 4/17/05 4/24/05 5/15/05 5/22/05 5/29/05 6/12/05 6/19/05 6/26/05 7/10/05 7/17/05 7/24/05 7/31/05 8/14/05 8/21/05 8/28/05 9/11/05 9/18/05 9/25/05 10/2/05 10/9/05 11/6/05 12/4/05 10/16/05 10/23/05 12/31/05 10/30/05 11/13/05 11/20/05 11/27/05 12/11/05 12/18/05 12/25/05

Average weekly trading volumes of Company shares in 2005 were USD 518,500 on the MICEX and USD 120,600 on the RTS. Total volumes of trading in shares of Aeroflot on the RTS and MICEX during 2005 were USD 6.269 million and USD 26.96 million respectively.

Aeroflot signed a depositary agreement with Bankers Trust Company in December 2000, launching an issue of Level-1 Global Depositary Receipts (GDRs) based on Company shares. One GDR represents 100 underlying shares. The GDR program was carried out in accordance with Rule 144A and Regulation S. The GDRs are traded over-the-counter on American and European stock markets. In 2001 the GDRs were listed on the Vienna Stock Exchange (NEWEX). After closure of the NEWEX, trading in the instruments transferred to the third section of the Frankfurt Stock Exchange.

GDR trading details : GDR 144A CUSIP NUMBER: 007771108 ISIN NUMBER: US0077711085

Reg S CUSIP NUMBER: 007771207 ISIN NUMBER: US0077712075 Shareholders and Investors

Dividend history

Accrued dividends on ordinary shares Dividend period Total accrued Number of shares Dividend per amount, USD at cut-off date share, US cents 1999 441,339.37 1,110,616,299 0.040 2000 1,183,184.98 1,110,616,299 0.107 2001 2,210,914.99 1,110,616,299 0.199 2002 10,133,210.02 1,110,460,578* 0.913 2003 16,476,837.00 1,110,616,299 1.5 2004 28,016,858.70 1,110,579,386** 2.5

* As of the ex-dividend date 155,721 shares were on the issuer’s client account and dividends on these shares were not accrued. ** As of the ex-dividend date 36,913 shares were on the issuer’s client account and dividends on these shares were not accrued.

Dividend per share (US cents)

2001 0.199 2002 0.913 2003 1.5 2004 2.5

Important events since December 31, 2005 January Aeroflot carried the Russian Olympic team and members of the Russian official delegation to the Winter Olympics in Turin (Italy).

February Aeroflot specialists carried out “heavy” servicing of B767 aircraft at the Company's technical center. This was the first time that heavy servicing of B767s had been carried out in Russia. 61 March Aeroflot successfully passed a commercial audit, confirming Company compliance with requirements of SkyTeam.

April On April 10 Aeroflot held an EGM by postal vote, which approved two interested party transactions: sale of 25% plus 1 share in the Company subsidiary, Terminal, to Sheremetyevo International Airport; sale of 25% plus 1 share in Terminal to Vneshtorgbank; and sale of 20% minus 2 shares in Terminal to Vnesheconombank.

On April 14 an official ceremony was held to mark Aeroflot's accession to the SkyTeam international airline alliance. Heads of SkyTeam airlines and members of the Russian government took part in the ceremony. Membership of SkyTeam will improve Aeroflot's operating efficiency and raise passenger service quality.

May On May 16 Aeroflot held an EGM by postal vote to approve a transaction with interest, by which the Company acquires 30 new regional passengers jets (the RRJ model) from Sukhoi Civil Aviation.

June On June 17 Aeroflot held its AGM Financial Report

64 Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended December 31, 2005

65 Financial results

70 Independent auditors’ report

71 Consolidated statement of income

72 Consolidated balance sheet

73 Consolidated statement of cash flows

75 Consolidated statement of changes in shareholders’ equity

76 Notes to the consolidated financial statements Saint Petersburg Aeroflot annual report 2005

Financial Report

Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended December 31, 2005

The following statement, which should be read in conjunction with the independent auditors' responsibilities stated in the independent auditors' report set out on page 70, is made with a view to distinguishing the respective responsibilities of management and those of the independent auditors in relation to the consolidated financial statements of Open Joint Stock Company “Aeroflot — Russian Airlines” and its subsidiaries (the “Group”).

Management is responsible for the preparation of the consolidated financial statements that present fairly the consolidated financial position of the Group as of December 31, 2005, and the consolidated results of its operations, cash flows and changes in shareholders' equity for the year then ended, in compliance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for: • Selecting suitable accounting principles and applying them consistently; • Making judgments and estimates that are reasonable and prudent; • Stating whether IFRS have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and • Preparing the consolidated financial statements on a going concern basis, unless it is inap- propriate to presume that the Group will continue in business for the foreseeable future.

Management is also responsible for: • Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Group; • Maintaining proper accounting records that disclose, with reasonable accuracy at any time, 64 the financial position of the Group, and which enable them to ensure that the consolidated financial statements of the Group comply with IFRS; • Maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions in which the Group operates; • Taking such steps as are reasonably available to them to safeguard the assets of the Group; and • Preventing and detecting fraud and other irregularities.

The consolidated financial statements for the year ended December 31, 2005 were approved on May 24, 2006 by:

General Director V. M. Okulov

Deputy General Director M. I. Poluboyarinov Finance and Planning Financial Report

Financial results

Revenues of Aeroflot in 2005 under International Financial Reporting Standards (IFRS) were USD 2,539.6 million, representing an increase of 17.6% compared with 2004. Operating costs rose by 17.2% compared with 2004 to USD 2,297.5 million in 2005. Operating income was USD 242.1 million, which is 21.8% more than in 2004. Non-operating income was USD 62.2 million in 2005. Income before taxation grew by 20.6% compared with 2005 to USD 278.8 million. Net income of the Group increased by 10.3% to USD 189.8 million.

Headline financial results (USD millions) 2005 2004 % Revenue 2,539.6 2,158.8 117.6 Operating costs (2,297.5) (1,960.0)* 117.2 Operating income 242.1 198.8* 121.8 Non-operating income (loss), net 62.2 24.1* 258.1 Income before taxation and minority interest 278.8 231.1* 120.6 Taxation (89.0) (59.0)* Minority interest (5.6) (1.9) Net Income 189.8 172.1 110.3

* Financial statements for the year ended December 31, 2004, have been restated to bring them in line with presentation of 2005 results. The restate- ments do not affect retained earnings.

Revenue components Passenger yield (US cents/RTK) Aeroflot generated 72.1% of revenue in 2005 from passenger traffic, 9.8% from cargo and mail traffic, 14.1% from commercial agreements with foreign 5.9 2001 airlines on joint route operations, and 4% from other business.. 4.9 2002 6.4 Passenger traffic revenue 5.1 Passenger traffic revenue rose by 19.1% in 2005 to USD 1,831.2 million. 6.9 2003 International passenger traffic generated USD 1,335.6 million (10.7% more 5.4 than in 2004) and accounted for 73% of total passenger revenues. The growth 2004 7.3 was due to increase of passenger traffic volumes and higher passenger yield. 6.4 Passenger traffic revenues from domestic flight increased by 49.2% to USD 2005 8.2 495.6 million. The growth was achieved thanks to higher passenger yield. 8 Revenue per passenger on regular routes increased in 2005 for all major country destinations (+33.3% for Russia, +19.3% for CIS and Baltics, +9.1% for Europe, +4.7% for Japan, +7.3% for South East Asia, +8.6% for America, 65 +13.7% for Africa, +19.8% for the Middle East). This effect was supported by introduction of a fuel component in ticket prices to cover extra costs due to higher fuel prices.

Cargo revenue Cargo yield (US cents/CTK) Revenue from cargo and mail increased by 25.7% in 2005 to USD 248.1 million, mainly due to increase by 1.4 times in traffic volumes on cargo planes. 2001 18.8 Most of cargo revenue (78.6%) was from carrying on international routes. 2002 21.8 Growth was due to higher rates charged. 2003 20.5

2004 23 2005 28.3 Aeroflot annual report 2005

Revenue from agreements with airlines Revenue from commercial agreements with foreign airlines on joint operation of routes totalled USD 357 million, which is 3.9% more than in 2004. The revenue increase was due to increase in flight frequency and carrying volumes.

Other revenue Revenue from other activity includes revenue from ground services at Sheremetyevo airport, from refuelling aircraft of other airlines, from leasing buildings, from placement of information and advertising materials, commission from duty-free sales on board aircraft, and other services. Revenue in 2005 from other business totalled USD 103.3 million, representing an increase of 29.4% from 2004.

Revenue (USD millions) 2005 2004 % Passenger revenue 1,831.2 1,538.1 119.1 incl. international* 1,335.6 1,206.0 110.7 domestic 495.6 332.1 149.2 Cargo revenue 248.1 197.4 125.7 Airline revenue agreements 357.0 343.5 103.9 Other revenue 103.3 79.8 129.4 Total revenue 2,539.6 2,158.8 117.6

* All charter passengers are included in the international segment.

Unit costs (US cents/RTK) Operating costs Aeroflot's operating costs in 2005 were USD 2,297.5 million, which is 17.2% 2001 53.4 11.8 65.2 more than in 2004. Operating costs are dominated by three groups of expenses, which are: 2002 51 12.4 63.4 • fuel (32.3%);

2003 54.8 13.6 68.4 • aircraft servicing (15.1%); –4.9% 30.1% 2% • payroll (14.9%); 2004 52.1 17.7 69.8 • technical servicing (8.8%). 2.9% 44% 13.3%

2005 53.6 25.5 79.1 The biggest impact on change in the structure of costs in 2005 was from growth aircraft fuel of energy prices, of prices for airport and air navigation services, and from increase in flight hours. other expenses Spending by Aeroflot Group on jet fuel increased by 49.4% in 2005 due to rapid growth of fuel prices worldwide. Growth of prices in regions, to which Aeroflot 66 flies, was 44% on average. Operating costs breakdown, 2005 Spending on maintenance of aircraft and aircraft engines rose by 11.7% in 2005 compared with 2004 due to higher prices for spare parts and materials and to 16.3% increase of flying hours. Growth of prices for airport and air nav- 3.3% 1.8% Passenger services Communication expenses igation services (including flight security expenses) also led to higher costs. 4% 1.8% Growth of payroll by 13.8% was due to change in the Company's salary system, Administration and Other expenses aimed at creating better incentives for flight and cabin crew. It was also due general expenses 32.3% to increase of flying hours and need to use reserve crews during suspension of 5.6% Aircraft fuel Operating lease expenses Il-96 flights in the period from August 22 until October 4. 6.2% Significant increase in revenue from sales of air carrying services was Sales and marketing inevitably accompanied by major increase of Company expenses associated 8.8% with sale and marketing of carrying services. These expenses rose by 13.6%. Maintenance Increase of other Company expenses and overheads by 3.7% was mainly due to increase in spending on maintenance of the Company's operating infrastructure, and higher prices for fuel, other inputs and raw materials, and monopolis-

14.9% 15.1% tic service providers. Staff costs Aircraft and traficc servicing Financial Report

Measures by Company management made it possible to keep all other expenses associated with operations and maintenance of Company operating capacities at the same level as in previous years.

Operating costs (USD millions) 2005 2004 % Aircraft fuel 741.2 496.1 149.4 Aircraft and traffic servicing 346.4 310.0 111.7 Staff costs 342.3 300.9 113.8 Maintenance 202.4 203.7 99.4 Sales and marketing 142.4 125.3 113.6 Operating lease expenses 128.5 127.6 100.7 Administration and general expenses 92.6 94.8 97.7 Depreciation 80.0 94.0 85.1 Communication expenses 41.8 34.2 122.2 Other expenses* 179.9 173.4 103.7 Total operating costs 2,297.5 1,960.0 117.2

* Other expenses include: passenger services; insurance expenses; operating taxes; and increase in contingency provisions. These expenses were reduced by taxes refunded due to court decisions, reversal of provision for tax penalties; recovery of receivables previously provided for by debt provisions; and refunding of fines and penalties.

Non-operating income (loss) Non-operating income in 2005 was USD 62.2 million, which is USD 38.1 million more than in 2004. Increase of non-operating income consisted mainly of: USD 29.7 million profit, which arose due to changes made in compliance with clarifications from the Ministry of Finance concerning reflection in accounts of VAT charged on revenue from cargo carrying in 2003, 2004 and the first half of 2003; and USD 8.6 million profit, which arose due to cancellation of tax fines and penalties for the period 1997-2001 (mainly referring to income tax).

Non operating income (loss) (USD millions) 2005 2004 Interest expense (25.3) (12) Interest income 6.9 3.2 Share of income in associated undertakings 5.7 3.5 Foreign exchange and translation gain, net 12.8 13.5 Non-operating income, net 62.2 24.1 Total 62.3 32.3

Capital expenditures 67 Capital expenditures in 2005 totalled USD 204.1 million. The biggest items in capex were construction of buildings and facilities (36.4%), acquisition and modernization of aircraft (35.1%), acquisition of vehicles, IT equipment, and other operating and commercial inventory (28.47%). Investable funds for expansion and modernization of the aircraft fleet were capitalized in 2005. Aeroflot bought a “Water-Land” trainer for emergency rescue training of flight and cabin crew in 2005 in order to set up the Company's own training base in compliance with the European JAP OPS standards and ICAO recommendations. Work was also carried out to modernize trainers already owned by the Company. As part of the Company's flight security effort, Aeroflot replaced depreciated equipment for ground servicing of aircraft at Shermetyevo Airport (Elephant and VTS machines, lifts, etc), and machinery used for technical servicing of aircraft. Aeroflot made investments in development of corporate IT in the course of the year (acquisition and modernization of comput- ing and business equipment) in order to raise the overall level of automation in the Company and keep IT provision up to date. The largest share of construction spending last year was on the new terminal complex (Sheremetyevo-3), a new storage facility, an office building, and reconstruction of the hangar at the Company's Technical Center. The most significant item among other expenses was acquisition of new uniform, special clothing, catering equipment, etc. Aeroflot annual report 2005

Borrowings Structure of the Company's credit portfolio changed significantly in 2005. The share of long-term borrowings was increased due to new credit facilities to finance construction of the new terminal, Sheremetyevo-3. The share of long-term facilities in overall borrowing was 43%, and the average maturity of Company debt in years doubled by comparison with 2004. Use of several tranches of long-term borrowing to finance construction of Sheremetyevo-3 enables placement of free cash on deposit, return from which exceeded the current sum of debt servicing costs. There was an increase in the average weighted cost of borrowing in 2005 for objective reasons (significant increase of LIBOR rates, which are the benchmark for interest rates on loans). However, Aeroflot took steps to reduce debt servicing expenses by reducing bank margins on credit facilities. Reduction of the average weighted bank margin from 2.74% in 2004 to 2.33% in 2005 was achieved through detailed analysis of the current state of the corporate debt market and a determined stance in negotiations with lender banks on credit terms. Aeroflot took a three-year USD 150 million long-term syndicated credit at LIBOR+2.25% in 2005. The credit organizers were WestLB AG, ABN AMRO, Socie´te´ Ge´ne´rale, and CALYON. A long-term unsecured credit of USD 30 million was obtained from ZAO WestBL Vostok for two and a half years at LIBOR+1.9%. The bank margin of 1.9% is exceptionally low for this type of credit. Agreement in principle was reached with Sberbank on credit limits, giving Aeroflot access to unsecured revolving credit facilities (aircraft were previously used as a pledge). The Company has designed and implemented a scheme for obtaining credit in non-resident banks, using transit cash flows from sales on accounts of Aeroflot representative offices abroad. This offers credit facilities with longer maturity and lower interest rates than are available on the Russian financial market.

Cash flows (USD millions) 2005 2004 Net cash provided by operating activities 211.9 159.5 Net cash used in investing activities (190.6) (75.6) Net cash used in financing activities 23.3 (71.7) Net increase in cash and cash equivalents 44.6 12.3 Effect of exchange rate change (0.2) 0.7 Cash and cash equivalents at the end of the year 109.6 65.2

Short-term and long-term loans (USD millions) 2005 2004 Short-term loans 100.9 78.4 Loans and credit lines in USD 60.6 37.9 Loans and credit lines in Russian roubles 40.3 40.5 Long-term loans in USD 76.0 16.2 68 Financial Report

Segment information

Financial data (USD millions) Year ended December 31 2005 2004 % Airline: External sales 2,497.5 2,131.6 117.2 Inter-segment sales 8.5 2.3 369.6 Total revenue 2,506.0 2,133.9 117.4 Operating costs (2,285.4) (1,941.1) 117.7 Operating income 220.6 192.8 114.4 Catering: External sales 26.9 14.6 184.2 Inter-segment sales 27.8 37.1 74.9 Total revenue 54.7 51.7 105.8 Operating costs (46.0) (50.0) 92.0 Operating income 8.7 1.7 511.7 Hotels: External sales 14.2 12.5 113.6 Inter-segment sales 5.1 5.1 - Total revenue 19.3 17.6 109.7 Operating costs (9.0) (11.9) 75.6 Operating income 10.3 5.7 180.7 Other businesses: External sales 1.0 0.1 1000.0 Inter-segment sales 1.1 - 110.0 Total revenue 2.1 0.1 2100.0 Operating costs (0.4) (1.5) Operating income 2.5 (1.4) Intracompany eliminations: Inter-segment sales (42.5) (44.5) 95.5 Operating costs 42.5 44.5 95.5 Consolidated: Total revenue 2,539.6 2,158.8 117.6 Operating costs (2,297.5) (1,960.0) 117.2 Operating income 242.1 198.8 121.8

69 Aeroflot annual report 2005

Independent auditors’ report

To the Shareholders of Open Joint Stock Company “Aeroflot — Russian Airlines”:

We have audited the accompanying consolidated balance sheet of Open Joint Stock Company “Aeroflot — Russian Airlines” and its subsidiaries (the “Group”) as of December 31, 2005 and the related consolidated statements of income, cash flows and changes in shareholders' equity for the year then ended. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and per- form the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2005 and the consolidated results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards.

May 24, 2006

70 Financial Report

OJSC “AEROFLOT — RUSSIAN AIRLINES”

CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2005

(Amounts in millions of US Dollars, except shares and earnings-per-share amounts)

Notes 2005 2004 Traffic revenue 7 2,079.3 1,735.5 Other revenue 8 460.3 423.3 Revenue 2,539.6 2,158.8 Operating costs 9 (1,875.2) (1,565.1) Staff costs 10 (342.3) (300.9) Depreciation 20 (80.0) (94.0) Operating costs (2,297.5) (1,960.0) Operating income 242.1 198.8 Interest expense 11 (25.3) (12.0) Interest income 6.9 3.2 Share of income in associated undertakings 18 5.7 3.5 Foreign exchange and translation (loss)/gain, net (12.8) 13.5 Non-operating income, net 12 62.2 24.1 Income before taxation 278.8 231.1 Taxation 13 (89.0) (59.0) Net income 189.8 172.1 Attributable to: Equity holders of the parent 184.2 170.2 Minority interest 5.6 1.9 189.8 172.1 Earnings per share, basic and diluted (US Dollars) 0.179 0.159 Weighted average number of shares outstanding (millions) 27 1,060 1,085

* The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is presented on page 70.

71 Aeroflot annual report 2005

OJSC “AEROFLOT — RUSSIAN AIRLINES”

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2005

(Amounts in millions of US Dollars)

Notes 2005 2004 ASSETS Current assets Cash and cash equivalents 14 101.1 65.2 Short-term aircraft lease deposits 4.3 6.4 Short-term investments 15 30.5 20.6 Accounts receivable and prepayments, net 16 568.1 448.3 Expendable spare parts and inventories 17 61.4 64.5 Assets of a disposal group classified as held for sale 34 83.2 – 848.6 605.0 Non-current assets Equity accounted investments, net 18 14.0 10.2 Long-term investments, net 19 16.8 20.4 Aircraft lease deposits 4.4 – Deferred tax assets 13 5.0 6.4 Other non-current assets 6.7 3.3 Property, plant and equipment 20 726.7 717.4 773.6 757.7 TOTAL ASSETS 1,622.2 1,362.7

LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued liabilities 21 325.8 302.0 Unearned transportation revenue 99.6 98.6 Short-term borrowings 24 100.9 78.4 Provisions 22 7.2 – Current portion of finance lease payable 26 26.1 53.0 Liabilities associated with assets of a disposal group classified as held for sale 34 9.4 – 569.0 532.0 Non-current liabilities Long-term borrowings 25 76.0 16.2 72 Finance lease payable 26 281.3 304.3 Provisions 22 81.4 67.3 Deferred tax liabilities 13 36.5 8.2 Other non-current liabilities 23 10.5 23.2 485.7 419.2 Capital and reserves Share capital 27 51.6 51.6 Treasury stock 27 (32.9) (35.4) Revaluation reserve 8.8 12.0 Translation reserve 0.3 1.2 Retained earnings 28 530.8 373.5 Equity attributable to equity holders of the parent 558.6 402.9 Minority interest 8.9 8.6 567.5 411.5 TOTAL LIABILITIES AND EQUITY 1,622.2 1,362.7

* The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is presented on page 70. Financial Report

OJSC “AEROFLOT — RUSSIAN AIRLINES”

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2005

(Amounts in millions of US Dollars)

2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Income before taxation 278.8 231.1 Adjustments to reconcile income before taxation to net cash provided by operating activities: Depreciation of property, plant and equipment (Note 20) 80.0 94.0 Gain on disposal of property, plant and equipment (Note 9) (3.4) (6.6) Income on acquisition of subsidiary (Note 33) – (5.7) Increase (decrease) in interest accrued 2.3 (3.1) Share of income in associated undertakings (Note 18) (5.7) (3.5) Loss on impairment of property, plant and equipment (Note 9) 5.5 12.7 Increase in tax and legal provisions (Note 9) 21.3 37.6 (Decrease) increase in accounts receivable and other assets impairments (6.5) 9.1 Gain from restructuring and settlement of tax penalties (Note 12) (8.6) – Other non-cash income, net (3.8) (2.5) Operating profit before working capital changes 359.9 363.1 Increase in accounts receivable (120.1) (149.0) Decrease (increase) in inventory 2.9 (19.3) Increase in accounts payable and accrued liabilities 6.8 1.9 Increase in unearned transportation revenue 1.0 28.9 Decrease in other taxes payable (13.1) (1.5) 237.4 224.1 Income tax paid (25.5) (64.5) Net cash provided by operating activities 211.9 159.6 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment and intangible assets (182.5) (104.5) Proceeds from sale of property, plant and equipment 1.1 10.0 (Investments in) refund of aircraft lease deposits (4.9) 7.6 Purchases of investments (36.2) (18.6) Proceeds from sale of investments 30.1 1.5 73 Acquisition of subsidiary – (3.2) Refund of prepayments made for aircraft – 28.0 Dividends received 1.8 3.6 Net cash used in investing activities (190.6) (75.6)

* The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is presented on page 70. Aeroflot annual report 2005

OJSC “AEROFLOT — RUSSIAN AIRLINES”

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2005 (Continued)

(Amounts in millions of US Dollars)

2005 2004 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of capital element of finance lease (25.9) (38.3) Dividends paid (31.5) (16.2) Purchases of treasury stock (1.9) (35.2) Sale of treasury stock 3.5 – Issue of shares to minority shareholders – 1.3 Proceeds from borrowings, net 82.4 16.5 Restricted cash movements (3.3) 0.2 Net cash provided by (used in) financing activities 23.3 (71.7) Net increase in cash and cash equivalents 44.6 12.3 Cash and cash equivalents at the beginning of the year (Note 14) 65.2 52.2 Effect of exchange rate change (0.2) 0.7 Cash and cash equivalents at the end of the year (Note 14) 109.6 65.2 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid (25.6) (11.2) Interest received 8.8 4.3 NON-CASH INVESTING AND FINANCING ACTIVITIES: Property, plant and equipment acquired under finance lease 2.8 204.0 Gain from early termination of finance lease 7.5 –

* The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is presented on page 70.

74 Financial Report

OJSC “AEROFLOT — RUSSIAN AIRLINES”

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2005

(Amounts in millions of US Dollars)

Share Treasury Revaluation Translation Retained Attributable Minority Total capital stock reserve reserve earnings to equity interest holders of the parent As of December 31, 2003 51.6 (0.5) – 0.3 229.8 281.2 5.7 286.9 Effect of adoption of new accounting – – 10.1 – (10.1) – – – standards (Note 4) As restated 51.6 (0.5) 10.1 0.3 219.7 281.2 5.7 286.9 Net income – – – – 170.2 170.2 1.9 172.1 Purchase of treasury stock – (34.9) – – – (34.9) – (34.9) Minority interest on acquisition – – – – – – 1.3 1.3 of subsidiary Gains on investments available-for-sale – – 1.9 – – 1.9 – 1.9 Foreign currency translation for the year – – – 0.9 – 0.9 0.4 1.3 Dividends (Note 28) – – – – (16.4) (16.4) (0.7) (17.1) As of December 31, 2004 51.6 (35.4) 12.0 1.2 373.5 402.9 8.6 411.5 Net income – – – – 184.2 184.2 5.6 189.8 Sale of treasury stock – 0.6 – – – 0.6 – 0.6 Purchase of treasury stock – (1.9) – – – (1.9) – (1.9) Gain on disposal of treasury stock – 2.9 – – – 2.9 – 2.9 Loss on investments available-for-sale – – (3.2) – – (3.2) – (3.2) Foreign currency translation for the year – 0.9 – (0.9) – – (0.6) (0.6) Dividends (Note 28) – – – – (26.9) (26.9) (4.7) (31.6) As of December 31, 2005 51.6 (32.9) 8.8 0.3 530.8 558.6 8.9 567.5

* The accompanying notes form an integral part of these consolidated financial statements. The Independent Auditors’ Report is presented on page 70.

75 Aeroflot annual report 2005

OJSC “AEROFLOT — RUSSIAN AIRLINES”

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005

(Amounts in millions of US Dollars)

1. NATURE OF THE BUSINESS OJSC “Aeroflot — Russian Airlines” (the “Company”) was formed as a joint stock company following a government decree in 1992. The 1992 decree conferred all the rights and obligations of “Aeroflot Soviet Airlines” and its structural units, excluding its operations in Russia and Sheremetyevo Airport, upon the Company, including inter-governmental bilateral agreements and agreements signed with foreign airlines and enterprises in the field of civil aviation. The principal activity of the Company is the provision of passenger and cargo air transportation services, both domestically and internationally, and other aviation services from its base at Moscow Sheremetyevo Airport. The Company and its subsidiaries (the “Group”) also conduct activities comprising airline catering, operation of a hotel, and provision of insurance services. Associated undertakings mainly comprise cargo-handling services, fuelling services and duty-free retail businesses. As of December 31, 2005 and 2004, the Government of the Russian Federation owned 51% of the Company. The Company's headquarters are located in Moscow at 37 Leningradsky Prospect.

The principal subsidiary undertakings are:

Company name Place of Activity Percentage Percentage incorporation held as of held as of and operation December 31, 2005 December 31, 2004 CJSC “Sherotel” Moscow region Hotel 100.0% 100.0% OJSC “Terminal” Moscow region Project 100.0% 100.0% Sheremetyevo-3 CJSC “Aeroflot Plus” Moscow region Airline 100.0% 100.0% OJSC “Insurance company “Moscow” Moscow Insurance services 100.0% 98.7% CJSC “Aeromar” Moscow region Catering 51.0% 51.0% OJSC “Aeroflot-Don” Rostov-on-Don Airline 51.0% 51.0% CJSC “Aeroflot-Nord” Arkhangelsk Airline 51.0% 51.0%

The significant entities in which the Group holds more than 20% but less than 50% of equity are:

Company name Place of Activity Percentage Percentage 76 incorporation held as of held as of and operation December 31, 2005 December 31, 2004 LLC “Airport Moscow” Moscow region Cargo handling 50.0% 50.0% CJSC “Aerofirst” Moscow region Trading 33.3% 33.3% CJSC “TZK Sheremetyevo” Moscow region Fuel trading 31.0% 31.0% company CJSC “AeroMASH – AB” Moscow region Aviation security 45.0% 45.0%

All the companies listed above are incorporated in the Russian Federation. Financial Report

The table below provides information on the Group's aircraft fleet as of December 31, 2005:

Type of aircraft Ownership Aeroflot – Russian Aeroflot-Don Aeroflot-Nord Group total Airlines (number) (number) (number) (number) Ilyushin Il-96-300 Owned 6 – – 6 Ilyushin Il-62M Owned 1 – – 1 Ilyushin Il-86 Owned 9 – – 9 Tupolev Tu-154 Owned 25 9 1 35 Tupolev Tu-134 Owned 12 2 8 22 Antonov An-24 Owned – – 3 3 Antonov An-26 Owned – – 1 1 Airbus A-319 Finance lease 4 – – 4 Airbus A-320 Finance lease 1 – – 1 Airbus A-321 Finance lease 3 – – 3 Tupolev Tu-134 Operating lease 2 – – 2 Tupolev Tu-154 Operating lease 2 – 3 5 Ilyushin Il-62M Operating lease 1 – – 1 Antonov An-24 Operating lease – – 1 1 Antonov An-26 Operating lease – – 1 1 Airbus A-319 Operating lease 4 – – 4 Airbus A-320 Operating lease 6 – – 6 Boeing 767-36 NER Operating lease 9 – – 9 McDonnell Douglas DC10-40F Operating lease 4 – – 4 89 11 18 118

2. THE RUSSIAN ENVIRONMENT AND ECONOMIC CONDITIONS Currency exchange and control — The Russian ruble is the national currency of the Russian Federation, however, foreign currencies, in particular the US dollar (“USD”), play a significant role in the underlying economics of many business transactions in Russia and it is a functional currency of the Company. Following the 1998 economic crisis, the Russian ruble's value fell significantly against the USD, falling from a pre-crisis rate of approximately 6 Russian rubles to 1 USD, to 27 Russian rubles to 1 USD by the end of 1999. During 2005 and 2004, the Russian ruble's value fluctuated between a low of 27.46 and a high of 29.45 to 1 USD. During 2005, the Russian ruble has depreciated against the US Dollar. As of May 24, 2006 the exchange rate is 26.99 Russian rubles to 1 USD.

The following table summarizes the exchange rate of the Russian ruble to 1 US Dollar:

Exchange rate 31 December 2005 28.78 77 Average rate for 2005 28.29 31 December 2004 27.75 Average rate for 2004 28.81 31 December 2003 29.45

The Group's principal currency exchange risks relate to its ability to recover investments in non monetary assets, specifically property, plant and equipment, as well as exposure to currency exchange losses on monetary assets and liabilities linked to currencies other than the functional currency of the Group's companies. Currency regulations imposed by Russian law place certain limitations on the conversion of Russian rubles into foreign currencies and establish requirements for conversion of foreign currency sales to Russian rubles. Aeroflot annual report 2005

Inflation — The Russian economy has been characterized by relatively high rates of inflation. The following table summarizes the annual rate of inflation for the past three years:

For the years ended December 31, Annual inflation 2005 10.9% 2004 11.7% 2003 12.0%

The Company's principal inflation rate risk relates to the Company's ability to raise tariffs for tickets sold in Russia in line with the growth in operating expenses expressed in Russian rubles caused by inflation.

3. PRESENTATION OF FINANCIAL STATEMENTS Basis of presentation — The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The consolidated financial statements are presented in millions of US Dollars, except where it specifically noted otherwise. All significant subsidiaries directly or indirectly controlled by the Company are included in the consolidated financial statements. A listing of the Group's principal subsidiary undertakings is set out in Note 1. The Group maintains its accounting records in Russian rubles and in accordance with Russian accounting legislation and regulations. The accompanying consolidated financial statements are based on the underlying accounting records, appropriately adjusted and reclassified for fair presentation in accordance with the standards prescribed by the International Accounting Standards Board.

Functional and presentation currency — The functional and presentation currency of the Company is US Dollars. Transactions and balances not already measured in US Dollars have been remeasured to US Dollars in accordance with International Accounting Standard (“IAS”) 21 “The Effect of Changes in Foreign Exchange Rates”. The Russian ruble is not a freely convertible currency outside the Russian Federation and accordingly any conversion of Russian ruble amounts to US Dollars should not be considered as a representation that Russian ruble amounts have been, could be or will be in the future, converted into US dollars at the exchange rate shown or at any other exchange rate. The assets and liabilities, both monetary and non-monetary, of the subsidiaries of the Company with functional currencies other than US dollar have been translated at the closing rate at the date of each balance sheet presented; income and expense items for all periods presented have been translated at the exchange rates existing at the dates of the transactions or a rate that approximates the actual exchange rates. All exchange differences resulting from translation have been classified as equity and transferred to the Group's translation reserve.

78 Financial Report

4. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND OTHER CHANGES IN ACCOUNTING POLICIES The following new or revised standards and interpretations issued by International Accounting Standards Board became effective for the Group's 2005 annual financial statements: • IAS 1 (revised) “Presentation of Financial Statements” • IAS 2 (revised) “Inventories” • IAS 8 (revised) “Accounting Policies, Changes in Accounting Estimates and Errors” • IAS 10 (revised) “Events after the Balance Sheet Date” • IAS 16 (revised) “Property, Plant and Equipment” • IAS 17 (revised) “Leases” • IAS 21 (revised) “Effect of Changes in Foreign Exchange Rates” • IAS 24 (revised) “Related Party Disclosures” • IAS 27 (revised) “Consolidated and Separate Financial Statements” • IAS 28 (revised) “Investments in Associates” • IAS 31 (revised) “Interests in Joint Ventures” • IAS 32 (revised) “Financial Instruments: Disclosure and presentation” • IAS 33 (revised) “Earnings per Share” • IAS 36 (revised) “Impairment of Assets” • IAS 38 (revised) “Intangible Assets” • IAS 39 (revised) “Financial Instruments: Recognition and Measurement” • IAS 40 (revised) “Investment Property” • IFRS 2 “Share-based Payments” • IFRS 3 “Business Combinations” • IFRS 4 “Insurance Contracts” • IFRS 5 “Non-current Assets Held for Sale” • IFRIC 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities” • IFRIC 2 “Members' Shares in Co-operative Entities and Similar Instruments”

IAS 27 (revised) “Consolidated and Separate Financial Statements” — This requires minority interests in equity of subsidiaries to be presented on the balance sheet within equity, but separate from shareholders' equity; and profit for the year allocated between minority interest and equity holders of the parent company. Accordingly, the Group's prior year financial statements were restated to reflect the new presentation of minority interests. Before the adoption of IAS 27 (revised) minority interests were deducted in arriving at the Group's net income and presented as a separate line on the balance sheet between liabilities and shareholders' equity.

IAS 39 (revised) “Financial Instruments: Recognition and Measurement” — IAS 39 (revised) eliminated the option to recognize in income statement gains and losses from remeasurement to fair value of available-for-sale financial assets. Such gains and losses are now recognized in equity until the related asset is sold or otherwise disposed of. As a result of this change in accounting policy the net profit for the year ended December 31, 2005 has been increased by USD 3.2 million and the opening balance of 79 retained earnings as of January 1, 2004 decreased by USD 10.1 million. The effect on basic and diluted earnings per share for the year ended December 31, 2005 is an increase of USD 0.003 per share. The effect on basic and diluted earnings per share for the year ended December 31, 2004 was insignificant. Following the adoption of IAS 1 (revised) and public comments by the International Financial Reporting Interpretations Council (“IFRIC”) the Group changed its classification of certain items of income and expense such as gains/losses from disposal and impairment of property, plant and equipment and other similar items. Such items are now included in arriving at the Group's operating result. Comparative information has been restated to comply with current year's presentation. Except for the presentational changes described above, the adoption of the new or revised standards and interpretations has not resulted in significant changes to the Group's accounting policies. Certain additional disclosures were provided by the Group as required by the new standards. Aeroflot annual report 2005

At the date of authorization of these financial statements, the following new standards and interpretations were in issue but not yet effective: • IFRS 6 “Exploration for and Evaluation of Mineral Resources” • IFRS 7 “Financial Instruments: Disclosures” • IAS 39 Amendments: “The Fair Value Option”, “Hedges of Forecast Intragroup Transactions”, “Financial Guarantee Contracts” • IAS 19 (revised) “Employee Benefits” • IFRS 4 Amendment “Financial Guarantee Contracts” • IFRIC 4 “Determining whether an Arrangement contains a Lease” • IFRIC 5 “Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds” • IFRIC 6 “Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment” • IFRIC 7 “Applying the Restatement Approach under IAS 29” • IFRIC 8 “Scope of IFRS 2” • IFRIC 9 “Reassessment of Embedded Derivatives”

The Group's management anticipates that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The Group has changed its accounting policy in respect of borrowing costs as described below.

Borrowing costs — Before 2005 the Group capitalized the borrowing costs that were directly attributable to the acquisition, construction or production of a qualifying asset, as part of the cost of that asset. During 2005 the Group changed its accounting policy in respect of the recognition of borrowing costs. From 2005 all borrowing costs are recognized as an expense in the period in which they are incurred. Management believes that this treatment will result in a less judgmental treatment and a more transparent presentation of the Group's finance costs. Had the Group continued to apply the previous accounting policy the borrowing costs of approximately USD 5.6 million would be capitalized as part of capital expenditure within property, plant and equipment and the basic and diluted earnings per share would increase by USD 0.005 per share. The impact on amounts reported in the prior years is not material.

5. PRINCIPAL ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.

Consolidation — The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared through December 31 each year. Subsidiaries comprise entities in which the Company, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over their operations. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date on which effective control is obtained by the Group and are no longer consolidated from the date of disposal or loss of control. All intra-group transactions, balances and unrealized surpluses and deficits on transactions between Group companies are elim- 80 inated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. The interest of minority shareholders is stated at the minority's proportion of the fair values of the assets and liabilities recognized. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations — The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”, which are recognized and measured at fair value less costs to sell. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. Financial Report

Investments in associates — Associates in which the Group has significant influence but not a controlling interest are accounted for using the equity method of accounting. Significant influence is usually demonstrated by the Group's owning, directly or indirectly, between 20 percent and 50 percent of the voting share capital or by exerting significant influence through other means. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post- acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. The Group's share of the net income or losses of associates is included in the consolidated income statement. An assessment of investments in associates is performed when there is an indication that the asset has been impaired or that the impairment losses recognized in prior years no longer exist. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are not recognized. Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. A listing of the Group's principal associated undertakings is shown in Note 1.

Foreign currency translation — Transactions in currencies other than the functional currency are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies at the balance sheet date are translated into the functional currency at the year-end exchange rate. Exchange differences arising from such translation are included into the consolidated income statement.

Non-current assets and disposal groups held for sale — Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Any liabilities related to non-current assets to be sold are also presented on a separate line in liabilities on the balance sheet. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets' previous carrying amount and fair value less costs to sell.

Revenues recognition — Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes. Passenger revenue: Ticket sales are reported as traffic revenue when the transportation service has been provided. The value of tickets sold and still valid but not used by the balance sheet date is reported as unearned transportation revenue. This item is reduced either when the Group completes the transportation service or when the passenger requests a refund. Sales representing the value of tickets that have been issued, but which will never be used, are recognized as operating income at the date the tickets are issued based on analysis of historic patterns of actual sales data. Commissions which are payable to the sales agents are recognized as the commercial and marketing expenses at the same time as revenue from the air transportation to which they refer to. Passenger revenue includes revenue from code-share agreements with certain other airlines. Under these agreements, the Group sells seats on these airlines' flights and those other airlines sell seats on the Group's flights. Revenue from the sale of 81 code-share seats on other airlines are recorded net in Group's passenger revenue in the consolidated income statement. The revenue from other airlines' sale of code-share seats on our flights is recorded in passenger revenue in the Group's consolidated income statement. Cargo revenue: Group's cargo transport services are recognized as revenue when the air transportation is provided. Cargo sales for which transportation service has not yet been provided are shown as unearned transportation revenue. Catering revenue: Revenues are recognized when meal package are delivered to the aircraft, as this is the date when the risks and rewards of ownership are transferred to the customers. Other revenue: Sales of hotel accommodation are recognized when the services are provided. Sales of goods and other services are recognized as revenue when the goods are delivered or the service carried out. Aeroflot annual report 2005

Segment reporting — For the purposes of segment disclosure the Group has identified the following segments: (a) Business segments The principal business segments are airline operations, airline catering, hotel operations and other. Business segment assets comprise all assets used directly in the business area's operations. Equity shares in affiliated companies, however, are presented separately. Business segment liabilities and provisions comprise all commitments that are directly attributable to the business segment's operations. (b) Geographic segments The operations of all segments are based in the Russian Federation. With respect to scheduled passenger and cargo activities, the following geographic analysis is provided: (i) Geographic analysis of revenue from flights — The analysis of revenue from scheduled flights is based upon the geographic location of the place of flight origin; (ii) Geographic analysis of net assets — The major revenue-earning assets of the Company are comprised of its aircraft fleet. Since the Company's aircraft fleet is employed flexibly across its worldwide route network, there is no suitable basis for allocating such assets and liabilities to geographic segments.

Property, plant and equipment — Property, plant and equipment are stated at cost, or appraised value, as described below. Depreciation is calculated in order to amortize the cost or appraised value (less estimated salvage value where applicable) over the remaining useful lives of the assets. (a) Fleet (i) Owned aircraft and engines — Aircraft and engines owned by the Group as of December 31, 1995 were stated at depreciated replacement cost based upon external valuations denominated in US Dollars. Subsequent purchases are recorded at cost. Airclaims, an international firm of aircraft appraisers, conducted the valuation. The Group has chosen not to revalue these assets subsequent to 1995. (ii) Finance leased aircraft and engines — Where assets are financed through finance leases, under which substantially all the risks and rewards of ownership are transferred to the Group, the assets are treated as if they had been purchased outright. The Group recognizes finance leases as assets and liabilities in the balance sheet as amounts equal at the incep- tion of the lease to the fair value of the leased property or, if lower, at the present value of the minimum lease payments. The corresponding obligation, reduced by the capital portion of lease payments made, is included in payables. Legal fees deferred over the lease term of finance leased asset. The interest element of lease payments made is included in interest expense in the income statement. (iii) Capitalized maintenance costs — The valuation of aircraft and engines as of December 31, 1995 reflected their maintenance condition, as measured on the basis of previous expenditure on major overhauls and estimated usage since the previous major overhaul. Expenditure of modernization and improvements projects that are significant in size (mainly aircraft modifications involving installation of replacement parts) subsequently are separately capitalized in the balance sheet. The carrying amount of those parts that are replaced is derecognized from the balance sheet and included in gain or loss on disposals of property, plan and equipment in the Group's consolidated income statement. Capitalized costs of aircraft checks and major modernization and improvements projects are depreciated on a straight-line basis to the projected date of the next check or based on estimates of their useful lives. Ordinary repair and maintenance costs are 82 expensed as incurred. (iv) Depreciation — The Group depreciates fleet assets owned or held under finance leases on a straight-line basis to the end of their estimated useful life. Salvage value for the foreign fleet is estimated as 5% of historic cost, while salvage value for Russian aircraft is zero. Engines are depreciated on a straight-line basis to the end of the useful life of the related type of aircraft. Operating lives for the Russian fleet range from 11 to 25 years; for the foreign fleet 16 to 20 years. These lives are reviewed periodically. (v) Capitalized leasehold improvements — capitalized costs that relate to the rented fleet are depreciated over the shorter of their useful life and the lease term. (b) Land and buildings, plant and equipment Property, plant and equipment are stated at historical US Dollar cost. Provision is made for the depreciation of property, plant and equipment based upon expected useful lives or, in the case of leasehold properties, over the duration of the leases using a straight-line basis. These useful lives range from 10 to 20 years. Land areas are not depreciated. (c) Capital expenditure Capital expenditures comprise costs directly related to the construction of property, plant and equipment including an appropriate allocation of directly attributable variable overheads that are incurred in construction as well as costs of purchase of other assets that require installation or preparation for their use. Depreciation of these assets, on the same basis as for other property assets, commences when the assets are put into operation. Capital expenditures are reviewed regularly to determine whether its carrying value is fairly stated and whether appropriate provision for impairment is made. (d) The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the consolidated income statement Financial Report

Impairment of non-current assets — At each balance sheet date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years.

Lease deposits — Lease deposits represent amounts paid to the lessors of foreign aircraft, which are held as security deposits by lessors in accordance with the provisions of finance and operating lease agreements; these deposits are returned back to the Group at the end of the lease period. A part of these deposits is interest-free. Interest-free deposits have been recorded at amortized cost using an average market yield of 6.3% percent.

Operating leases — Payments under operating leases are charged to the consolidated income statement in equal annual install- ments over the period of the lease.

Financial instruments — Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, marketable securities, investments, derivative financial instruments, trade and other accounts receivable, trade and other accounts payables, borrowings and notes payable. The accounting policies on recognition and measurement of these items are disclosed below in this Note. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, and gains and losses relating to a financial instrument classified as a liability are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously. The result from the realization of the financial instruments is determined based on the FIFO method. (a) Credit risks The sale of passenger and freight transportation is largely processed through agencies that are normally linked to country- specific clearing systems for the settlement of passenger and freight sales. Clearing centers check individual agents operating outside of the Russian Federation. Individual agents operating within the Russian Federation are checked in-house. Receivables and liabilities between major airlines, unless otherwise stipulated in the respective agreements, are settled on a bilateral basis or by settlement through a clearinghouse of the International Air Transport Association (IATA). 83 (b) Fair value The fair value of financial instruments is determined by reference to various market information and other valuation methods as considered appropriate. At the balance-sheet date, the fair values of the financial instruments held by the Group did not materially differ from their recorded book values. (c) Foreign exchange risk The significant portion of the Group's sales and purchases are denominated in US Dollars and hence the foreign exchange risk to the Group is minimized. The majority of borrowings are denominated in US Dollars, thus further reducing foreign currency exposure in US Dollar terms. In 2005 the Group did not manage foreign exchange risk through the use of hedging instruments but rather aimed to broadly match its assets and liabilities in the different currencies to limit exposure. The Group constantly monitors changes in foreign exchange rates to minimize the level of foreign currency exposure and to identify need for hedging activities. (d) Interest rate risk The Group's main exposure to interest-rate risk is from its finance lease liabilities and short-term borrowings. In 2005 the Group did not use financial hedging instruments to hedge its exposure to the changes in interest rates, as they are not generally available on the Russian market. The Group constantly monitors changes in interest rates to minimize the level of its exposure and to identify need for hedging activities. Aeroflot annual report 2005

Cash and cash equivalents — Cash and cash equivalents consist of cash on hand, balances with banks and short-term interest- bearing accounts which are used in the day-to-day financing of the Group's airline activities.

Investments — The Group's financial assets have been classified according to IAS 39 (amended 2004) “Financial Instruments: Recognition and Measurement” into the following categories: trading securities, held-to-maturity investments, loans and other receivables, and available-for-sale investments. Investments with fixed or determinable payments and fixed maturity, which the Group has the positive intent and ability to hold to maturity, other than loans and receivables, are classified as held-to-maturity investments. Derivative financial instruments and investments acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading. All other investments, other than loans and receivables, are classified as available-for-sale. Investments are recognized and derecognized on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs.

Held-to-maturity investments are financial assets excluding derivative contracts which mature on a specified date and which a company has the firm intent and ability to hold to maturity. They are valued at allocated acquisition cost and they are included in long-term assets. Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for- sale, and are measured at subsequent reporting dates at fair value. Investments in equity instruments of other companies that do not have a quoted market price are stated at cost less impairment loss, as it is not practicable to determine the fair value of such investments. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in the profit or loss for the period. Impairment losses recognized in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognized in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. Results of Group's operations can be significantly impacted by changes in the price of aircraft fuel. The Group periodically purchases derivatives such as jet fuel options in order to hedge its exposure from future price fluctuations in jet fuel. The Group does not use derivatives instruments for speculative purposes. Derivative instruments are accounted for as held for trading with related gains or losses from remeasurement to fair value included in the current period consolidated income statement as other non- operating gains or losses. The Group assesses on each closing date whether there is any objective evidence that the value of a financial asset item or group of items has been impaired. If there is objective evidence that an impairment loss has arisen for loans and other receivables entered at allocated acquisition cost in the balance sheet or for held-to-maturity investments, the size of the loss is determined as the difference of the book value of the asset item and the present value of expected future cash flows of the said financial asset item discounted at the original effective interest rate. The loss is recognized in the consolidated income statement.

84 Treasury shares — The Company's shares, which are held in treasury stock or belong to the Company's subsidiaries, are reflected as a reduction of the Group's shareholders' equity. The disposal of such shares does not impact net income of the current year and is recognized as a change in shareholders' equity of the Group. Dividends distributions by the Company are recorded net of the dividends related to treasury shares.

Loans and receivables — Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at initial recognition at fair value, and are subsequently measured at amortized cost using the effective interest rate method. Because the expected term of an account receivable is short, the value is typically stated at the nominal amount without discounting, which corresponds with fair value. Uncertain accounts receivable are assessed individually and any impairment losses are stated in non-operating expenses.

Accounts payables — Trade payables are initially measured at fair value, and are subsequently measured at amortized cost, because the expected term of accounts payable is short, the value is stated at the nominal amount without discounting, which corresponds with fair value.

Short-term borrowings — Short-term borrowings comprise the short-term portion of interest-bearing long-term borrowings, i.e. the portion of the loans that is amortized in the coming year, as well as other current interest-bearing liabilities with a term shorter than on year. These liabilities are measured at amortized cost and reported on the settlement date. Financial Report

Long-term borrowings — Long-term borrowings, i.e., liabilities with a term longer than one year, consist of interest-bearing loans are initially measured at fair value, and are subsequently measured at amortized cost, using the effective interest rate method, as of the settlement date.

Expendable spare parts and inventories — Inventories, including aircraft expendables, are valued at cost as determined by the “first-in, first-out” method (“FIFO”) or net realizable value, whichever is lower. Inventories are reported net of provisions for slow- moving or obsolete items.

Value added taxes — Value added taxes (“VAT”) related to sales are payable to the tax authorities when tickets are sold. Input VAT is reclaimable against output VAT upon payment for purchases. The tax authorities permit the settlement of VAT on a net basis. Output VAT payable and input VAT related to purchase transactions which have not been settled at the balance sheet date are recognized in the balance sheet on a gross basis. Where provision has been made against debtors deemed to be uncollectible, a bad debt expense is recorded for the gross amount of the debtor, including VAT.

Frequent flyer program — The Company records an estimated liability for the incremental cost associated with providing free transportation under the “Aeroflot Bonus” program (see also Note 21) when a free air ticket or upgrade of service class are earned. Principal incremental costs include aircraft fuel costs and third-party passenger services (such as catering services and airport charges). The liability is included in accounts payable and accrued liabilities, and is adjusted periodically based on awards earned, awards redeemed and changes to the “Aeroflot Bonus” program. The costs are included in sales and marketing expenses in the consolidated income statement.

Borrowing costs — All borrowing costs are recognized as an expense in the period in which they are incurred.

Provisions — Provisions are recognized when, and only when, the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is significant, the amount of a provision is the present value of the expenditures required to settle the obligation.

Income tax — The nominal income tax rate for industrial enterprises in Russia in 2005 and 2004 was 24%. The nominal tax rate is subject to regional reductions by up to 4%. The average nominal tax rate of the Group was lower than 24% as the tax rate applicable to different entities within the Group varied from 20% to 24%.

Deferred income taxes — Deferred tax assets and liabilities are calculated in respect of temporary differences in accordance with IAS 12 “Income Taxes”. IAS 12 requires the use of the balance-sheet liability method for financial reporting and accounting for deferred income taxes. Deferred income taxes are provided for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recorded only to the extent that it is probable that taxable profit will 85 be available against which the deductible temporary differences can be utilized. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its tax assets and liabilities on a net basis. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply during the period when the asset is to be realized or the liability settled, based on tax rates that have been enacted or substantively enacted as at the balance-sheet date. As of December 31, 2005 and 2004 deferred tax assets and liabilities have been measured based on tax rates applicable to the Group's companies range from 20% to 24%. It is charged or credited to the consolidated income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Employee benefits — The Company makes certain payments to employees on retirement, or when they otherwise leave the employment of the Company. These obligations, which are unfunded, represent obligations under a defined benefit pension plan. For such plans, the pension accounting costs are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the income statement in order to spread the regular cost over the average service lives of employees. Actuarial gains and losses are recognized in the income statement immediately. The pension payments may be increased upon the retirement of an employee based on the decision of management. The pension liability for non-retired employees is calculated based on a minimum annual pension payment and do not include increases, if any, to be made by management in the future. Where such post-employment employee benefits fall due more than 12 months after the balance sheet date, they are discounted using a discount rate determined by reference to the average market yields at the balance sheet date. Aeroflot annual report 2005

The Company also participates in a defined contribution plan, under which the Company has committed to contribute a certain percentage (15% to 20% in 2005) of the contribution made by employees choosing to participate in the plan. Contributions made by the Company on defined contribution plans are charged to expenses when incurred. Contributions are additionally made to the Government's Pension fund at the statutory rates in force during the year. Such contributions expensed as incurred.

Dividends — Dividends are recognized at the date they are declared by the shareholders at a general meeting. Retained earnings legally distributable by the Company are based on the amounts available for distribution in accordance with applicable legislation and reflected in the statutory financial statements. These amounts may differ significantly from the amounts calculated on the basis of IFRS.

Earnings per share — Earnings per share are calculated by dividing the income for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. The Group does not have any poten- tially dilutive equity instruments.

Contingencies — Contingent liabilities are not recognized in the financial statements unless they arise as a result of a business combination. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable.

6. SIGNIFICANT ESTIMATES The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Provisions — Provisions are made when any probable and quantifiable risk of loss attributable to disputes is judged to exist.

Depreciable lives of property, plant and equipment — In reporting intangible assets and tangible fixed assets, an assessment is made of the useful economic life and an assessment is made at least once a year to determine whether impairment exists.

Defined benefit pensions costs — Reporting of costs for defined benefit pensions are based on actuarial estimates derived from assumptions about the discount rate, expected return on managed assets, future pay increases and inflation.

Compliance with tax legislation — As discussed further in Note 35 compliance with tax legislation, particularly in the Russian Federation, is subject to significant degree of interpretation and can be routinely challenged by the tax authorities. The management records a provision in respect of its best estimate of likely additional tax payments and related penalties which may be payable if the Group's tax compliance is challenged by the relevant tax authorities.

7. TRAFFIC REVENUE

86 By sector 2005 2004 Scheduled flights: Passengers 1,815.9 1,523.2 Cargo 155.5 134.5 Charter flights: Passengers 15.3 14.9 Cargo 92.6 62.9 2,079.3 1,735.5 Financial Report

8. OTHER REVENUE

2005 2004 Airline revenue agreements 357.0 343.5 Ground handling and maintenance 22.7 18.1 Catering services 26.9 14.6 Hotel revenue 14.2 12.5 Refueling services 21.2 17.3 Other revenue 18.3 17.3 460.3 423.3

Airline revenue agreements primarily represent revenue from pooling, code-sharing and bilateral air service agreements.

9. OPERATING COSTS

2005 2004 Aircraft fuel 741.2 496.1 Aircraft and traffic servicing 346.4 310.0 Maintenance 202.4 203.7 Sales and marketing 142.4 125.3 Operating lease expenses 128.5 127.6 Administration and general expenses 92.6 94.8 Passenger services 75.0 52.8 Communication expenses 41.8 34.2 Insurance expenses 22.3 27.0 Increase in provisions (Note 22) 21.3 37.6 Operating taxes 17.4 24.7 Increase of provision for impairment of fixed assets (Note 20) 5.5 12.7 Other expenses 41.8 47.5 Operating expenses, subtotal 1,878.6 1,594.0 Gain on disposal of property, plant and equipment, net (3.4) (6.6) Taxes refunded under court decision (i) – (22.3) Operating income, subtotal (3.4) (28.9) Total operating costs, net 1,875.2 1,565.1

(i) Taxes refunded under a court decision in 2004 comprise a road users tax refund for the years 1998–2000.

87 Aeroflot annual report 2005

10. STAFF COSTS

2005 2004 Wages and salaries 291.8 251.8 Social security costs 14.1 13.0 Pension costs (i) 36.4 36.1 342.3 300.9

The Company continued its participation in a non-government pension fund to provide additional pensions to certain of its employees upon their retirement. The pension fund requires contributions from both employees and the Company, and is a defined contribution pension plan for the employer.

Furthermore, the Company makes payments, upon retirement, to employees participating in the plan with one or more years' service. These obligations, which are unfunded, represent obligations under a defined benefit pension plan.

Pension costs include compulsory payments to the Pension fund of the Russian Federation (“RF”), contributions to a non-government pension fund and an increase in the net present value of the future benefits the Company expects to pay to its employees upon their retirement under a defined benefit pension plan, as follows:

2005 2004 Payments to the Pension Fund of the RF 34.4 33.3 Defined benefit pension plan 1.7 2.5 Defined contribution pension plan 0.3 0.3 36.4 36.1

11. INTEREST EXPENSE

2005 2004 Finance leases 13.8 6.7 Short-term and long-term borrowings 11.5 5.3 25.3 12.0

88 Financial Report

12. NON-OPERATING INCOME, NET

2005 2004 Recovery of VAT paid in prior years (i) 29.0 – Fines and penalties received from suppliers 11.9 6.0 Gain on derivatives (ii) 11.1 – Restructuring and settlement of tax penalties (iii) 8.6 – Insurance compensation 3.4 4.2 Gain (loss) from disposal of investments, net 3.7 (1.6) Discounts received (0.2) 4.8 Negative goodwill on acquisition (Note 33) – 5.7 Reversal of payables no longer due – 2.8 Increase of provision for long-term investments (iv) – (5.6) Other (loss) income, net (5.3) 7.8 62.2 24.1

(i) In 2005 the Company recorded a gain from recovery of VAT paid in prior years in the amount of USD 29.0 million relating to change in accounting for VAT on export cargo transportation services provided in 2003, 2004 and in the first half of 2005 based on adjusted tax returns for the respective previous periods filed with the tax authorities. (ii) In 2005 the Company purchased two jet fuel options to hedge its exposure to changes of aircraft fuel prices. The gain from exercise of these options accounted to USD 11.1 million during the year. The Company did not own any derivatives as of December 31, 2005. (iii) Restructuring and settlement of tax penalties amounting to USD 8.6 million represents a waver received in respect of tax penalties relating to payments of income tax which were accrued for the period from 1997 to 2001. (iv) In 2004 the Company accrued 100% impairment reserve for a carrying value of investments in associates LLC “Aeroimp” and CJSC “TZK” due to discontinuation of their operations.

89 Aeroflot annual report 2005

13. TAXATION

2005 2004 Current income tax charge (58.4) (71.5) Deferred income tax (expense) benefit (30.6) 12.5 (89.0) (59.0)

Income before taxation for financial reporting purposes is reconciled to taxation as follows:

2005 2004 Income before taxation 278.8 231.1 Theoretical tax at statutory rate (24%) (66.9) (55.5) Tax effect of items which are not deductible or assessable for taxation purposes: Effect of lower tax rates applied 8.9 8.7 Non-deductible expenses (29.5) (17.8) Non-taxable income 8.3 4.6 Deferred tax charged to equity (0.9) 0.6 Other permanent differences 1.1 (2.0) Prior period current tax adjustments (10.0) – Effect of change in calculation of prior year deferred tax – 2.4 Taxation (89.0) (59.0)

Differences between IFRS and Russian statutory taxation regulations give rise to certain temporary differences between the carrying values of certain assets and liabilities for financial reporting purposes and their values for profits tax purposes. The tax effect of the movement on these temporary differences is recorded at the tax rates applicable to the Group's companies and range from 20% to 24% for the years ended December 31, 2005 and 2004.

2005 Movement 2004 Movement Effect of 2003 for year for year acquisition (Note 33) Tax effects of temporary differences: Property, plant and equipment 1.9 (1.2) 3.1 1.0 – 2.1 Borrowings 3.1 – 3.1 (1.6) – 4.7 Accounts payable – (0.2) 0.2 0.2 – – Deferred tax assets, net 5.0 6.4 6.8 Property, plant and equipment (36.1) (9.8) (26.3) 3.7 (2.3) (27.7) Long-term investments (13.6) 0.3 (13.9) – – (13.9) 90 Accounts receivable (0.9) 1.9 (2.8) (0.3) – (2.5) Accounts payable 14.1 (0.7) 14.8 5.6 – 9.2 Deferred revenue – (20.0) 20.0 3.3 – 16.7 Deferred tax liabilities, net (36.5) (8.2) (18.2) (29.7) 11.9 (2.3) Financial Report

14. CASH AND CASH EQUIVALENTS

2005 2004 Ruble denominated bank accounts 34.3 31.0 Bank accounts denominated in USD 17.4 9.2 Bank accounts denominated in Euros 3.4 5.4 Bank accounts denominated in other currencies 5.7 7.9 Bank deposits 43.8 10.1 Cash in transit and other 5.0 1.6 109.6 65.2 Cash and cash equivalents classified within assets of disposal group (8.5) – 101.1 65.2

Bank deposits are comprised primarily of term deposits with original maturities less than 90 days. As of December 31, 2005 short-term bank deposit balances denominated in US Dollars bore interest between 4.25 and 6.5 percent per annum. RUR balances have been invested at interest rates between 4.5 and 8.0 percent per annum. In 2004 the Company placed cash in a short- term bank deposit at the interest rate of 7.25 percent per annum.

15. SHORT-TERM INVESTMENTS

2005 2004 Available-for-sale investments Corporate and government bonds 2.2 4.0 Corporate shares 3.2 0.3 5.4 4.3 Other short-term investments Promissory notes from third parties 3.3 3.8 Bank deposits with original maturities exceeding 90 days 21.7 12.4 Other short-term investments 0.1 0.1 25.1 16.3 30.5 20.6

Corporate and government bonds represent bonds denominated in Russian rubles issued by the Government of the Russian Federation and major Russian companies with maturity dates from 2006 to 2014 and yield to maturity of 5.82-9.05 percent as of December 31, 2005. Corporate shares are liquid publicly traded shares of Russian companies. In the consolidated financial statements of the Group investments in bonds and shares are reflected at period-end market value based on last traded prices obtained from the Moscow Interbank Currency Exchange (“MICEX”). The effective interest rate on bank deposits with original maturities exceeding 90 days as of December 31, 2005 and 2004 was 91 6.5 percent per annum for US dollars denominated deposits. Deposits denominated in Russian roubles have been invested at average interest rates of 7.5 and 6.5 percent per annum as of December 31, 2005 and 2004, respectively.

16. ACCOUNTS RECEIVABLE AND PREPAYMENTS, NET

2005 2004 Trade receivables 232.7 203.7 Prepayments and accrued income 49.0 60.2 Other receivables 14.5 9.3 Provision for bad and doubtful accounts (18.3) (32.7) 278.5 240.5 Income tax prepaid 4.8 6.6 VAT and other taxes recoverable, other than income tax 285.4 201.2 568.1 448.3 Aeroflot annual report 2005

17. EXPENDABLE SPARE PARTS AND INVENTORIES

2005 2004 Expendable spare parts 25.6 27.3 Fuel 18.0 20.3 Other inventory 17.8 16.9 61.4 64.5

18. EQUITY ACCOUNTED INVESTMENTS, NET

2005 2004 Voting power Carrying value Voting power Carrying value CJSC “Aerofirst” 33.3% 4.4 33.3% 5.4 CJSC “TZK Sheremetyevo” 31% 3.5 31% 1.3 CJSC “AeroMASH — AB” 45% 1.1 45% – CJSC “TZK” 31% 0.1 31% 1.3 LLC “Aeroimp” 25% 3.5 25% 5.3 LLC “Airport Moscow” 50% 2.9 50% 1.2 OJSC Severleasing 25.5% 0.9 25.5% 0.9 Other Various 1.2 Various 1.4 Less accumulated impairment (3.6) (6.6) 14.0 10.2

2005 2004 Cost of investment in associates, net of accumulated impairment 9.6 9.6 Share of post-acquisition profit, net of dividend received 4.4 0.6 14.0 10.2

Summarized financial information in respect of the Group's affiliates accounted by using equity method based on their respective financial statements prepared for the years ended December 31, 2005 and 2005 is set out below:

2005 2004 Total assets 100.6 94.9 Total liabilities (52.2) (52.0) Net assets 48.4 42.9 Group's share of associates' net assets 17.6 16.8 92 Impairment provision (3.6) (6.6) 14.0 10.2 Revenue 578.8 322.0 Income for the year 11.7 13.4 Group's share of associates' income for the year 5.7 3.5

19. LONG-TERM INVESTMENTS, NET

2005 2004 Available-for-sale investments SITA Investment Certificates 0.8 1.0 Corporate shares (France Telecom) 12.8 17.1 Mutual investment funds 1.9 0.9 15.5 19.0 Other long-term investments Loans and promissory notes from related parties 0.4 – Loans and promissory notes from third parties 0.6 0.4 Other 0.3 1.0 1.3 1.4 16.8 20.4 Financial Report

20. PROPERTY, PLANT AND EQUIPMENT

Owned aircraft Leased aircraft Land and Plant, equipment Capital expen Total and engines and engines buildings and other diture (i), (vi) Cost December 31, 2003 465.9 487.7 168.3 179.8 36.4 1,338.1 Foreign currency translation 1.3 0.1 0.6 0.8 – 2.8 Acquisition of net assets 8.9 2.6 2.6 1.5 – 15.6 of OJSC “Arkhangelskie Avialinii” Additions 32.4 204.0 7.5 7.5 31.4 282.8 Capitalized costs 18.0 2.3 – – 5.6 25.9 Transfers – – 0.4 11.8 (12.2) – Disposals (43.9) (249.9) (0.2) (12.2) (6.9) (313.1) December 31, 2004 482.6 446.8 179.2 189.2 54.3 1,352.1 Foreign currency translation (0.8) (0.1) (0.4) (0.5) (1.4) (3.2) Additions (ii) 29.3 1.5 3.3 16.9 112.3 163.3 Capitalized costs (iv) 24.0 16.8 – – – 40.8 Transfers (iv) 10.5 5.2 – 3.6 (19.3) – Disposals (iii) (53.6) (80.7) (0.3) (13.9) (11.0) (159.5) Reclassified as held for sale (i) – – – – (67.6) (67.6) December 31, 2005 492.0 389.5 181.8 195.3 67.3 1,325.9 Accumulated Depreciation and Impairment December 31, 2003 (352.6) (228.1) (52.2) (122.4) – (755.3) Foreign currency translation (0.6) – (0.2) (0.5) – (1.3) Impairment for the year (v) (1.1) – – (11.6) – (12.7) Charge for the year (43.7) (26.7) (8.2) (15.4) – (94.0) Disposals 34.9 184.3 0.1 9.3 – 228.6 December 31, 2004 (363.1) (70.5) (60.5) (140.6) – (634.7) Foreign currency translation 0.2 – 0.1 0.4 – 0.7 Impairment for the year (v) (4.9) – – 0.5 (1.1) (5.5) Charge for the year (35.7) (22.2) (9.1) (13.0) – (80.0) Disposals (iii) 49.3 60.3 0.1 10.6 – 120.3 December 31, 2005 (354.2) (32.4) (69.4) (142.1) (1.1) (599.2) Net Book Value December 31, 2004 119.5 376.3 118.7 48.6 54.3 717.4 December 31, 2005 137.8 357.1 112.4 53.2 66.2 726.7

As of December 31, 2005 and 2004, fixed assets, principally Russian aircraft and engines, with a net book value of USD 8.3 million and USD 24.2 million, respectively, were pledged as collateral under loan agreements (Notes 24 and 25). 93 (i) Assets under construction include capital expenditures made by the Company on the construction of the new Sheremetyevo-3 terminal. Capital expenditures as of December 31, 2005 and 2004 amount to USD 67.6 million and USD 17.9 million, respectively, and mainly relate to pre-constructions studies and construction-site preparation work. Following the decision to dispose of 70% in the equity of OJSC Terminal during 2005 the assets and liabilities of this subsidiary and other assets related to the construction of the new terminal were reclassified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. (ii) In 2005 the Group put into operation three Tupolev Tu-154 aircraft. Two of the above mentioned aircraft were acquired in 2004 and as of December 31, 2004 have been included in capital expenditures in the amount of USD 7.5 million. (iii) In 2005 the Company returned to a lessor one Airbus A-310 aircraft, which was subject to finance leases. Gain from early termination of finance lease contract was recorded in the consolidated income statement in amount of USD 7.5 million. In the second half of 2005 the Company's subsidiary, OJSC “Aeroflot-Don, sold two Antonov An-12 aircraft. Aeroflot annual report 2005

(iv) Of the total costs of USD 24.0 million capitalized during 2005 in respect of owned aircraft and engines USD 20.7 million related to regular checks and modernization of engines and USD 3.3 million related to the aircraft overhauls. Transfers from capital expenditure account primarily relate to replacements of rotables. Additions to leased aircraft and engines represent leasehold improvements relating to Boeing 767-300 aircraft held under operating leases. In 2005 the Company has continued the program of modernization of the interiors of these aircraft and finished the modernization of seven aircraft. Total capitalized expenses incurred as a result of this modernization as of December 31, 2005 amounted to USD 24.3 million, including USD 7.5 million capitalized in 2004 and partly shown as transfer from capital expenditure. (v) As of December 31, 2004 the Group reviewed the carrying amounts of its fixed assets to determine whether there is any indication that those assets had suffered an impairment loss. As a result the Group recognized an impairment loss of USD 12.7 million in 2004. Also additional amount of impairment loss of USD 5.5 million was recognized in 2005. (vi) In 2005 the Company made prepayment for delivery of seven Airbus A-321 aircraft, which will be acquired by the Company on finance leases terms in the amount of USD 34.9 million recorded in capital expenditures as of December 31, 2005. Delivery of first of the aircraft is expected in the fourth quarter of 2006.

21. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

2005 2004 Trade payables and accruals 179.1 168.8 Income tax payable 42.0 19.0 Wages and social contributions payable 40.4 44.7 Other payables 16.6 21.0 Advances received 11.3 6.4 Taxes payable (other than income tax) 9.6 12.9 Merchandise credits (ii) 8.5 2.3 Frequent flyer program liability (i) 7.8 7.7 Accrued expenses 5.8 14.8 Dividends payable 2.7 2.8 Notes payable 2.0 1.6 325.8 302.0

(i) The Group introduced the “Aeroflot Bonus” frequent flyer program in 1999. As of December 31, 2005 and 2004 approximately 442 thousand and 326 thousand passengers, respectively, participated in the program. Frequent flyer program liability as of December 31, 2005 and 2004 represents incremental costs, which are included in sales and marketing expenses, associated with providing free transportation under “Aeroflot Bonus” program.

94 Financial Report

22. PROVISIONS

2005 2004 Beginning of the year 67.3 29.5 Additional provision in the year 42.9 45.2 Utilization of provision – (0.7) Release of provision (21.6) (6.7) End of the year 88.6 67.3 Analyzed as: Current liabilities 7.2 – Non-current liabilities 81.4 67.3 88.6 67.3

The Group is a defendant in various legal actions. Provisions represent management's best estimate of the Group's probable losses relating to various actual and potential legal claims. The Company is a defendant in a claim by the owner of a cargo plane which crashed in Italy in October 1996, whilst on charter to the Group. The basis of the claim concerns liability for the loss of the aircraft and the responsibilities of the parties at the time of the crash. According to a report prepared by Airclaims, compensation relating to crashed aircraft ranges from USD 11.8 million to USD 15.3 million. Management had made their best assessment of the likely outcome associated with this issue and recorded a provision amounting to USD 12.0 million as of December 31, 2003. In April 2005 the Arbitration court has decided in favor of the claimant regarding compensation and awarded damages amounting to USD 35.0 million, accordingly the reserve was increased to USD 35.0 million. The provision amounted USD 35.0 million has been included in consolidated financial statements as of December 31, 2005 and 2004. Currently, there is uncertainty regarding final resolution. At the present time execution of the court decision is suspended and the Company has filed an appeal. Final adjustments (if any) to this uncertainty will be made in the financial statements when the outcome of the issue is known. In 2001 Federal Unitary Entity, Goscorporation OVD claimed the agreement with Federal Aviation Service on application of a 50 percent discount in 1997–1998 to be void, as this contradicted Russian legislation and invoiced the Company for approximately USD 7.2 million for underpaid amounts relating to 1997–1998 and interest accrued as of December 31, 2004. This amount is included in provisions as of December 31, 2005 and 2004 in full and is presented as a current liability as of December 31, 2005.

23. OTHER NON-CURRENT LIABILITIES

2005 2004 Defined benefit pension obligation — non-current portion 10.5 12.7 Other non-current liabilities – 10.5 10.5 23.2

24. SHORT-TERM BORROWINGS 95

2005 2004 Loans and credit lines in USD West LB AG (Germany) (i) 60.2 10.0 Sberbank of the Russian Federation (ii) – 27.0 Amsterdam Trading Bank — current portion (Note 25) 0.4 0.9 Loans in Russian rubles Vneshtorgbank (iii) – 31.9 Transkreditbank (iii) 39.4 5.4 Other short-term bank loans 0.9 3.2 100.9 78.4

(i) The balance as of December 31, 2005 represented short-term portion of a credit line amounting to USD 60.2 million and bears interest of LIBOR + 2.3 percent per annum. The effective average interest rate for 2005 was 5.7 percent per annum. (ii) The credit line granted by the Sberbank of the Russian Federation amounting to USD 27 million. The credit was obtained to finance its current activities and bears interest of LIBOR + 3.5 percent per annum. Fixed assets with a net book value of USD 9.6 million are pledged as a collateral under this loan agreement. The effective average interest rate for 2005 was 6.0 percent per annum. During 2005 the loan was repaid in full. (iii) The amounts represent the net balance due under a series of short-term security sale and repurchase agreements bearing interest rates of between 7 and 9 per cent. Aeroflot annual report 2005

25. LONG-TERM BORROWINGS

2005 2004 Loans in USD West LB Vostok (i) 30.0 – West LB AG (Germany) (ii) 30.0 – Amsterdam trading Bank (iii) 8.0 8.0 Amsterdam trading Bank (iv) 2.6 3.0 Accor 2.5 2.4 Other long-term bank loans 2.9 2.8 76.0 16.2

(i) The balance as of December 31, 2005 consists of a credit line amounting to USD 30.0 million and bears interest of LIBOR +1.9 percent per annum. The effective average interest rate for 2005 was 6.05 percent per annum. The loan is due to be repaid by April 2007. (ii) The balance as of December 31, 2005 represented long-term portion of a credit line amounting to USD 30.0 million and bears interest of LIBOR +2.3 percent per annum. The effective average interest rate for 2005 was 5.7 percent per annum. The loan was due to be repaid by December 2007. As described in Note 36 to these financial statements this loan was fully repaid by the Company in May 2006. (iii) The loan amounting to USD 8 million bears interest of 8.5 percent per annum and is payable by December 1, 2009. The loan was obtained by the Company to finance the purchase of property, plant and equipment with a net book value of USD 5.2 million which were pledged as collateral under this agreement. The effective average interest rate for 2005 was 8.5 percent per annum. (iv) Long-term portion of the loan amounting to USD 2.5 million is payable by June 8, 2009 and bears interest of 8.0 percent per annum. The loan was obtained by the Company to finance the purchase of fixed assets. Fixed assets with a net book value of USD 3.1 million are pledged as collateral under this agreement. The effective average interest rate for 2005 was 8.0 percent per annum.

2005 2004 The borrowings are repayable as follows: On demand or within one year 100.9 78.4 In the second year 60.0 – In the third year –– In the fourth year 10.6 11.1 In the fifth year –– After five years 5.4 5.1 Total 176.9 94.6 96 Less: amounts due to settlement within 12 months (100.9) (78.4) Amounts due for settlement after 12 months 76.0 16.2 Financial Report

26. FINANCE LEASES PAYABLE The Group leases aircraft under finance lease agreements. Leased assets are listed in Note 1 above.

2005 2004 Total outstanding payments 350.1 407.8 Finance charge (42.7) (50.5) Principal outstanding 307.4 357.3 Representing: Short-term lease payable 26.1 53.0 Long-term lease payable 281.3 304.3 Due for repayment (principal and finance charge): 2005 – 60.5 2006 33.6 31.3 2007 31.3 30.9 2008 31.6 31.5 2009 32.2 32.2 2010 32.9 32.9 After 2010 188.5 188.5 350.1 407.8

Interest unpaid as of December 31, 2005 and 2004 was approximately USD 1.1 million and USD 1.3 million, respectively, and has been included in accrued expenses. In 2005 and 2004 the effective interest rate on these leases approximated 4.1 and 2.7 percent per annum, respectively. In 2004 the Company obtained one Airbus A-320 aircraft and three Airbus A-321 aircraft under finance leases, that are reflected in short-term and long-term lease liabilities in the amounts of USD 12.3 million and USD 175.8 million, respectively. In 2005 the Company returned to a lessor one Airbus A-310 which resulted in termination of a related finance lease agreement. At the date of termination the net book value of this aircraft was USD 19.4 million. The short-term finance lease liability decreased by USD 26.8 million, thus producing a gain of USD 7.5 million included in gain on disposal of property, plant and equipment. The Company's aircraft leases are subject to both positive and negative covenants. In accordance with those covenants, the Company maintains insurance coverage for its leased aircraft.

27. SHARE CAPITAL

Number of shares Number of shares Number of shares authorised and issued in treasury stock outstanding Ordinary shares of one Russian ruble each: As of December 31, 2004 1,110,616,299 (51,321,913) 1,059,294,386 As of December 31, 2005 1,110,616,299 (50,198,379) 1,060,417,920 97

Ordinary shareholders are allowed one vote per share. In 2003 one of the subsidiaries of the Group acquired 10,000 of the Company's shares, which were resold in 2004. During 2004 the Group increased the number of the Company's shares held by the Group by 51,311,913, including 36,913 its own shares acquired by the Company itself. During 2005 the number of treasury shares held by the Group decreased by 1,123,534. The Company's shares are listed on the Russian Trade System (“RTS”) and MICEX and as of May 24, 2006 were traded at RUR 45.26 per share. The Company launched a Level 1 Global Depositary Receipts (GDR) program in December 2000. The Company signed a depositary agreement with Deutsche Bank Group, allowing the Company's shareholders to swap their shares for GDR's, which trade over-the-counter on US and European markets. The swap ratio was established at 100 shares per GDR. Per depositary agreement the total volume of GDR of the Company cannot exceed 20 percent of the Company's share capital. In 2001, the Company's GDR's were listed on the NEWEX (New Europe Exchange) stock exchange in Vienna and after closing of this exchange the GDR's were transferred to the third segment of the stock exchange in Frankfurt. The Company's GDR's were traded at USD 140 as of May 24, 2006. Aeroflot annual report 2005

28. RETAINED EARNINGS The statutory accounting reports of the Group companies are the basis for profit distribution and other appropriations. For the years ended December 31, 2005 and 2004, the statutory profits of the Company, as reported in the published annual statutory financial statements, were 6,032 million Russian rubles and 6,330 million Russian rubles, respectively. For the years ended December 31, 2005 and 2004 the shareholders of the Company approved dividends totaling 777.4 million and 485.3 million Russian rubles, respectively (USD 28.0 million and USD 16.4 million at 2005 and 2004 year-end exchange rates, respectively). In respect of 2005, the Board of Directors recommended to approve dividends of RUR 0.82 per share (approximately 3 cents per share) which will be paid to shareholders between June 19 and August 16, 2006. This dividend is subject to approval by shareholders at the annual shareholders' meeting and has not been recognized as a liability in these financial statements.

29. SEGMENT INFORMATION The Group is organized into three main segments: • Airline — domestic and international passenger and cargo air transport and other airline services; • Catering — the preparation of food and beverages for air travel; • Hotels — the operation of hotels.

All operations are based in the Russian Federation; therefore no geographical segment information is disclosed.

Details of the geographical breakdown of revenues from scheduled passenger and cargo airline activities are as follows:

By region 2005 2004 a) Scheduled passenger revenue International flights from Moscow to: Europe 376.8 335.0 Asia 171.5 135.6 North America 68.8 67.8 Other 13.6 49.3 International flights to Moscow from: Europe 383.3 342.4 Asia 182.4 142.2 North America 66.0 65.3 Other 12.7 49.5 Other international flights 45.2 4.0 Domestic flights 495.6 332.1 1,815.9 1,523.2 b) Scheduled cargo revenue International flights from Moscow to: 98 Europe 10.0 8.5 Asia 5.3 3.0 North America 4.7 4.7 Other 0.1 2.2 International flights to Moscow from: Europe 27.7 29.6 Asia 54.4 38.2 North America 6.8 6.1 Other 0.2 6.2 Other international flights 13.1 18.7 Domestic flights 33.2 17.3 155.5 134.5 Financial Report

Reporting format — business segments

Year ended December 31, 2005 Airline Catering Hotels Other Eliminations Total Group External sales 2,497.5 26.9 14.2 1.0 – 2,539.6 Inter-segment sales 8.5 27.8 5.1 1.1 (42.5) – Total revenue 2,506.0 54.7 19.3 2.1 (42.5) 2,539.6 Operating profit 220.6 8.7 10.3 2.5 – 242.1 Interest expense (22.9) (0.1) (3.1) (2.3) 3.1 (25.3) Interest income 9.0 – 0.1 0.9 (3.1) 6.9 Share of income in associates 5.7 – – – – 5.7 Foreign exchange and translation (loss) income, net (12.6) 0.5 (0.8) 0.1 – (12.8) Non-operating income (loss), net 69.8 (3.0) 0.1 (4.7) – 62.2 Income before taxation 269.6 6.1 6.6 (3.5) – 278.8 Taxation (85.0) (2.7) (1.1) (0.2) – (89.0) Net income 184.6 3.4 5.5 (3.7) – 189.8 Segment assets 1,664.2 19.4 29.7 117.5 (213.0) 1,617.8 Associates 4.4 – – – – 4.4 Consolidated total assets 1,622.2 Segment liabilities 990.5 17.7 79.3 141.4 (174.2) 1,054.7 Capital expenditure 144.2 1.0 0.9 58.0 – 204.1 Depreciation 75.6 1.0 3.4 – – 80.0

Year ended December 31, 2004 Airline Catering Hotels Other Eliminations Total Group External sales 2,131.6 14.6 12.5 0.1 – 2,158.8 Inter-segment sales 2.3 37.1 5.1 – (44.5) – Total revenue 2,133.9 51.7 17.6 0.1 (44.5) 2,158.8 Operating profit 192.8 1.7 5.7 (1.4) – 198.8 Interest expense (9.3) (0.1) (1.9) (2.4) 1.7 (12.0) Interest income 3.9 – – 1.0 (1.7) 3.2 Share of income in associates 3.5 – – – – 3.5 Foreign exchange and translation income (loss), net 15.1 (0.2) (1.3) (0.1) – 13.5 Non-operating income (loss), net 19.9 (1.8) 0.6 5.4 – 24.1 Income before taxation 225.9 (0.4) 3.1 2.5 – 231.1 Taxation (56.7) (1.4) (0.8) (0.1) – (59.0) Net income 169.2 (1.8) 2.3 2.4 – 172.1 Segment assets 1,411.1 22.0 32.9 24.7 (128.6) 1,362.1 Associates 0.6 – – – – 0.6 Consolidated total assets 1,362.7 99 Segment liabilities 889.2 18.7 82.8 52.0 (91.5) 951.2 Capital expenditure 323.0 0.5 0.6 0.2 – 324.3 Depreciation 89.6 1.3 3.1 – – 94.0 Aeroflot annual report 2005

30. RELATED PARTY TRANSACTIONS The ultimate controlling party of the Company is the government of the Russian Federation and all companies controlled by the government Russian Federation are treated as related parties of the Group for the purpose of these consolidated financial statements.

The financial statements of the Group include the following balances and transaction with related parties:

2005 2004 Cash balances 28.0 0.7 Amounts receivable 28.4 34.2 Amounts payable and other liabilities 63.9 65.4 Sales 77.7 53.2 Purchases 550.3 262.4 Dividend income received 0.6 0.5

The summary of balances and charges relating to the taxes due to the government of the Russian Federation for the years ended December 31, 2005 and 2004 is presented below:

2005 2004 Account receivable from tax authorities 188.1 188.0 Account payable to tax authorities 51.6 31.9 Income and other tax expenses 396.9 313.5

The amounts outstanding to and from related parties are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognized in the period for bad or doubtful debts in respect of the amounts owed by related parties.

The remuneration of directors and other members of key management during the year was as follows:

2005 2004 Salary and other short-term benefits 0.7 0.5

100 Financial Report

31. COMMITMENTS UNDER OPERATING LEASES Future minimum lease payments under non-cancelable aircraft and other operating leases are as follows:

2005 2004 2005 – 98.5 2006 114.1 78.9 2007 125.5 42.4 2008 106.9 39.3 2009 101.8 37.7 2010 94.3 32.4 after 2010 287.1 90.9 Total minimum payments 829.7 420.1

The table above includes five Airbus A-320 and two Boeing-767 aircraft the lease agreements for which were entered into in 2005 but which will be delivered to the Company during 2006–2007. The amounts above represent base rent. Maintenance fees to be paid to the lessor based on actual flight hours are not included in the table. In accordance with the operating lease agreements for the Airbus A-319 and A-320 aircraft, lease payments are not fixed and should be revised by the lessor periodically. As of December 31, 2005 and 2004 lease commitments were calculated using base rent which was effective in 2005 and 2004, respectively. For details of the fleet subject to operating leases refer to Note 1. In 2005 the Company renegotiated the base rent payable on certain aircraft operating leases as well as adjusting the delivery schedule for aircraft under fleet restructuring program. This resulted in changes to future minimum lease payments under non- cancelable operating leases as of December 31, 2005 as compared to those as of December 31, 2004.

32. CAPITAL COMMITMENTS The Group's capital commitments related to acquisition of property, plant and equipment as of December 31, 2005 amounted to approximately USD 1,410 million. These commitments relate to purchases of thirty Russian Regional Jet aircraft, seven new A321-200 aircraft, contracts for modernization of interiors of leased Boeing 767-300 aircraft as well as contracts related to construction of Sheremetyevo-3 terminal. The assets and liabilities of OJSC Terminal, the legal party to construction contracts relating to Sheremetyevo-3 terminal, are classified as disposal group in these consolidated financial statements due to planned disposal of 70% interest in this entity (see Note 34).

33. ACQUISITION OF OJSC “ARKHANGELSKIE AVIALINII” In October 2004 a 51% owned subsidiary of the Group, CJSC “Aeroflot-Nord”, acquired net assets of OJSC “Arkhangelskie Avialinii” for a total cash consideration of approximately USD 2.7 million. Fair value of the identified assets and liabilities of OJSC “Arkhangelskie Avialinii” at the date of acquisition and the resulting negative difference on acquisition has been determined as follows: 101 Investments 0.9 Trade receivables 3.9 Other receivables 0.1 Inventories 0.8 Property, plant and equipment 15.6 Total assets 21.3 Trade payables 5.5 Other payables and accruals 2.7 Loans payable 2.5 Deferred tax liability 2.2 Total liabilities 12.9 Net assets acquired 8.4 Negative difference on acquisition (5.7) Satisfied by cash paid 2.7

This acquisition was accounted using the purchase method in accordance with IFRS 3 “Business Combinations”. Fair value of the acquired property, plant and equipment was determined based on results of an independent valuation by professional appraisers. It has not been practicable to determine the carrying amounts of the acquired assets and liabilities in accordance with IFRS immediately before the acquisition as the selling entity did not prepare financial statements that comply with IFRS. Aeroflot annual report 2005

The excess of the net fair value of assets acquired over the consideration paid is recognized in the income statement in other non- operating income. The acquired business contributed USD 11.4 million to the Group's revenue and USD 2.5 million to the Group's consolidated income during the three month period ended December 31, 2004. It has not been practicable to determine the effect of this acquisition on the consolidated revenue and net profit for the whole year as if the acquisition date had been the beginning of 2004 due to the differences in accounting policies used in respect of the acquired business before and after the acquisition.

34. DISPOSAL OF GROUP CLASSIFIED AS HELD FOR SALE On 30 December 2005, the Company entered into a preliminary agreement to sell 70% of its shares in OJSC Terminal as follows: 25% plus one share to International Airport Sheremetyevo; 25% plus one share to Vneshtorgbank; and 20% minus two shares to Vneshekonombank. The government of the Russian Federation is a controlling shareholder in all of the entities that are parties to this agreement. The assets and liabilities of OJSC Terminal and other capitalized costs relating to the construction of the Sheremetyevo-3 terminal, which are expected to be sold within twelve months, have been classified as a disposal group held for sale and are presented separately in the balance sheet. These assets and liabilities are included in the Group's other activities for segment reporting purposes (see Note 29). The proceeds of disposal are expected to exceed the net carrying amount of the relevant assets and liabilities and, accordingly, no impairment loss has been recognized on the classification of these operations as held for sale. The major classes of assets and liabilities comprising the disposal group classified as held for sale as of December 31, 2005 are as follows:

Cash and cash equivalents 8.5 VAT and other taxes recoverable 6.2 Prepayments 0.6 Inventories 0.3 Property, plant and equipment 67.6 Assets of a disposal group classified as held for sale 83.2 Trade payables and accruals (7.4) Other non-current liabilities (2.0) Liabilities associated with assets of a disposal group classified as held for sale (9.4) Net assets of disposal group 73.8

35. CONTINGENT LIABILITIES Political environment — The government of the Russian Federation continues to reform the business and commercial infrastructure in its transition to a market economy. As a result laws and regulations affecting businesses continue to change rapidly. These changes are characterized by poor drafting, different interpretations and arbitrary application by the authorities.

Taxation — Russian tax legislation is subject to varying interpretations and constant changes. Furthermore, the interpretation of the tax legislation by the tax authorities, as applied to the transactions and activity of the Group, may not coincide with that of 102 management. As a result, the tax authorities could challenge transactions and the Group could be assessed additional taxes, penalties and interest, which could be significant. Periods remain open to review by the tax authorities for three years. The Group's management believes that it has adequately provided for tax liabilities in the consolidated financial statements, however the risk remains that the relevant authorities could take up differing positions with regard to interpretative issues, and the effect could be significant.

Currency control — The Group operates in approximately 50 countries, as well as in Russia, through its representative offices. Given the Group's significant foreign currency revenues and obligations, it is exposed to the risk of non-compliance with Russian currency control legislation. Management believes that the Group generally complies with currency control regulations and that no contingent provisions are necessary in the consolidated financial statements. Financial Report

Legal claims (i) Former members of the Group's management and two Swiss non-bank financial companies that provided treasury and financial services to the Group, are currently under investigation by the Swiss and Russian authorities for potential mis- conduct related to funds managed under treasury and financial services agreements, which were entered into by the former management of the Group.

The Group is not named in the investigation. In management's opinion, the Group does not have any potential exposure related to the treasury and financial services agreements, or any of the allegations currently subject to investigation. The accompanying consolidated financial statements do not include provision for any amounts that might result from the investigations. Such amounts, if any, will be reported when they become known and estimable.

36. SUBSEQUENT EVENTS SkyTeam — Aeroflot as of April 14, 2006 officially became the tenth member in the SkyTeam alliance. SkyTeam is the global airline alliance partnering Aeromexico, Air France, Alitalia, Continental Airlines, CSA — Czech Airlines, Delta Airlines, KLM — Royal Dutch Airlines, Korean Air, Northwest Airlines. Aeroflot became the first Russian carrier to become part of a global airline alliance. As part of its membership, Aeroflot passengers will be able to accrue and redeem frequent flyer miles interchangeably on any of the nine other SkyTeam member airlines. In turn, SkyTeam passengers on flights operated by Aeroflot can earn miles in their preferred frequent flyer program.

Electronic ticketing — As part of its agreement with SkyTeam alliance Aeroflot will be required to introduce e-ticketing on all of its flights. Introduction of e-ticketing would allow the Company to achieve savings, while also increasing convenience for its customers. Under the current Russian legislation, tickets for passenger air carriage can only be issued in documentary form. The Ministry of transportation of the Russian Federation signed an Order on May 6, 2006 which would allow the usage and regulate electronic ticketing in the civil aviation. To become effective this document is yet to be officially registered by the Ministry of Justice of the Russian Federation.

Terminal — In April 2006 Aeroflot's shareholders approved the offer to sell 70% of the ordinary shares in equity of OJSC Terminal to parties related by common ownership as follows: to International Airport Sheremetyevo 9,490,001 shares at the price of 108 rubles per share (25% plus one share), to Vneshtorgbank 9,490,001 shares at the price of 108 rubles per share (25% plus one share), and to Vneshekonombank 7,591,998 shares at the price of 102 rubles per share (20% minus two share). The Company expects to realize a significant gain on disposal of these shares. The sale is expected to be finalized by July 1, 2006.

Russian Regional Jet (“RRJ”) — Aeroflot's shareholders have also approved the purchase of 30 RRJ planes from CJSC Sukhoi Civil Aircraft, a subsidiary of the Sukhoi state holding and a related party. The total value of the related contract is included in the amount of capital commitments in Note 32. Deliveries are scheduled to begin in November 2008.

Airbus A321-200 — During 2005 the Company agreed to acquire seven new A321-200 aircraft from Airbus S.A.S. subject to the Board approval. In March 2006 the Company's Board of Directors approved the amended total purchase price. The total value of the related capital commitments, net of advance payments made, is included in Note 32. Deliveries are scheduled to begin in 103 the last quarter of 2006 and be completed by the end of 2007. As of December 31, 2005 the Group made an advance payment of approximately USD 34.9 million presented within capital expenditures in the Group's consolidated financial statements. During the first quarter of 2006 the Group obtained a loan of USD 50.1 million from Natexis Transport Finance and Calyon to finance the advance payments under Airbus contract. The loan bears interest rate equal to LIBOR plus 1.75% and is to be repaid as the planes are delivered.

New shares — The Board of Directors of the Company proposed a decision to authorize an issue of 250 million of additional ordinary shares of the Company. This decision will require approval by the shareholders at the annual general shareholders' meeting to be held in June 2006.

Repayment of loan — On May 24, 2006 the Company repaid the full outstanding amount of the syndicated loan from WestLB AG and other international lending institutions including its long term portion. As of December 31, 2005 the Company had a liability of USD 30.0 million and USD 60.2 million recorded as a long term and short-term borrowings, respectively. Aeroflot annual report 2005

Appendixes

Main terms of interested party transaction

In compliance with the Federal Law on Joint Stock Companies an extraordinary general meeting of shareholders on September 19, 2005, approved a major interested party transaction, by which Aeroflot acquired six IL-96-300 aircraft on financial leasing terms from the company Ilyushin Finance Co on the following terms: • financial lease of the aircraft is for a period of 15 years; • the monthly leasing payment is USD 319,000 excluding VAT (basic leasing payment), with addition of subsidies from the federal budget, counter claims on Ilyushin Finance Co for repayment of borrowings, and additional payments provided for by the agreement; monthly payments for technical service of the aircraft are: a) USD 220 per flight hour (excluding VAT) for component repairs; b) USD 93 per flight hour per engine (including VAT) for engine repairs; c) USD 106 per flight hour (including VAT) for repairs to the airframe (F4). • total leasing payments per aircraft in the transaction are USD 57,420,000 not including VAT (basic leasing payment), with addition of subsidies from the federal budget, counter claims on Ilyushin Finance Co for repayment of borrowings, and additional payments provided for by the agreement; • Aeroflot provides a loan to Ilyushin Finance Co for construction of six Il-96-300 aircraft. The loan consists of USD 2,750,000 per aircraft and total sum of the loan is USD 16,500,000; • purchase price per aircraft is USD 39,000,000 (excluding VAT).

104 Appendixes

Glossary of terms and abbreviations

AEA — Association of European Airlines. Aeroflot Bonus — frequent flyer program. Aircraft departures — the number of landings or flight stages flown. Aircraft hours flown — the total number of revenue hours flown “block-to-block”. “Block-to-block“ time is defined as the total number of hours (and minutes) measured from the time the aircraft moves from the loading point until it stops at the unload- ing point. Aircraft kilometers flown — the sum of distances flown by all revenue flights. Available seat kilometers (ASKs) — the total number of seats available for the transportation of revenue passengers multiplied by the number of kilometers which those seats are flown. Available ton kilometers (ATKs) — the total number of metric tons available for the transportation of passengers and cargo multiplied by the number of kilometers which this capacity is flown. Average stage distance — aircraft kilometers flown divided by the number of revenue landings. ATC — Aviation Technical Center. BSP — Billing and Settlement Plan (clearing center for payments between agents and airlines). Cargo tons carried — all cargo (freight and mail) counted on a point-to-point basis (in metric tons) covered by air waybills for which remuneration is received. Cargo ton kilometers (CTKs) — one ton of revenue cargo transported one kilometer. CTK's are computed by multiplying metric tons of cargo by the kilometers they are flown. ECAC — European Civil Aviation Conference. FSTS — Russian Federal Service for Transport Supervision. Group — JSC Aeroflot and its subsidiaries. IATA — International Air Transport Association. IOSA — IATA Operational Safety Audit. ISO — International Organization for Standardization (organization based in Geneva, Switzerland, bringing together national standardization institutes of 157 countries to set common international standards in all spheres of industry). LIBOR — London Interbank Offered Rate (the rate at which banks borrow money from each other on the London interbank market). Market capitalization — total market value of the company's shares. Marketing flights — flights where Aeroflot acts as marketing partner. Passengers carried — a passenger for whose transportation air carrier receives commercial remuneration. Passenger load factor — revenue passenger kilometers expressed as a percentage of available seat kilometers. p.p. — percentage points. Revenue passenger kilometers (RPKs) — one fare-paying passenger transported one kilometer. RPK's are computed by multiplying the number of passengers by the kilometers they are flown. Revenue ton kilometers (RTKs) — one ton of revenue traffic (passengers, baggage, and cargo) transported one kilometer. Revenue ton kilometers are computed by multiplying metric tons of revenue traffic by the kilometers which this traffic is flown. RF — Russian Federation. RTS — Russian Trading System. RUR — Russian roubles. TCAP — Training Center for Aviation Personnel. 105 Utilization — average hours flown (“block-to-block” basis) per aircraft per day. VAT — value added tax. Weight load factor — Revenue ton kilometers expressed as a percentage of available ton kilometers. Aeroflot annual report 2005

Operational statistics Aeroflot 1995 1996 1997 1998 Aircraft kilometers flown thousands International routes 148,716.2 144,801.1 135,568.9 147,823.0 Domestic routes 464.0 6,780.3 12,014.7 25,758.1 Total 149,180.2 151,581.4 147,583.6 173,581.1

Aircraft departures International routes 48,383 47,670 45,649 49,265 Domestic routes 223 2,274 3,608 10,160 Total 48,606 49,944 49,257 59,425

Aircraft hours flown International routes 188,514 184,176 174,140 188,100 Domestic routes 627 8,547 15,260 33,619 Total 189,141 192,723 189,400 221,719

Passengers carried thousands International routes 3,489.6 3,738.8 3,693.4 3,738.0 Domestic routes 3.7 73.8 210.7 712.7 Total 3,493.3 3,812.6 3,904.1 4,450.7

Freight and mail tons carried thousands International routes 69.8 80.8 84.9 78.1 Domestic routes 0.7 9.3 7.3 6.5 Total 70.5 90.1 92.2 84.6

Available seat kilometers millions International routes 23,640.1 23,419.4 22,584.3 25,119.3 Domestic routes 41.5 616.8 1,427.8 3,321.7 Total 23,681.6 24,036.2 24,012.1 28,441.0

Revenue passenger kilometers millions International routes 13,940.2 14,352.1 13,717.8 14,260.9 Domestic routes 9.5 281.1 893.1 2,188.2 Total 13,949.7 14,633.2 14,610.9 16,449.1

Passenger load factor % International routes 59.0 61.3 60.7 56.8 Domestic routes 22.9 45.6 62.6 65.9 Total 58.9 60.9 60.8 57.8

106 Cargo ton kilometers millions International routes 497.6 491.5 503.1 473.3 Domestic routes 1.4 48.1 42.2 39.7 Total 499.0 539.6 545.3 513.0

Revenue ton kilometers millions International routes 1,752.2 1,783.2 1,737.7 1,756.8 Domestic routes 2.3 73.4 122.6 236.6 Total 1,754.5 1,856.6 1,860.3 1,993.4

Available ton kilometers millions International routes 3,562.3 3,676.8 3,460.1 3,717.3 Domestic routes 9.8 175.9 260.3 485.4 Total 3,572.1 3,852.7 3,720.4 4,202.7

Weight load factor % International routes 49.2 48.5 50.2 47.3 Domestic routes 23.5 41.7 47.1 48.7 Total 49.1 48.2 50.0 47.4 Appendixes

1999 2000 2001 2002 2003 2004 2005

137,185.6 133,287.6 135,608.8 121,925.0 124,421.9 138,982.4 147,689.8 32,887.0 37,074.7 42,230.4 39,752.0 40,537.7 41,343.6 45,378..9 170,072.6 170,362.2 177,839.2 161,677.0 164,959.6 180,326.0 193,068.7

45,474 44,275 45,777 41,952 42,282 46,261 49,786 14,703 17,878 21,541 20,985 21,617 21,771 23,461 60,177 62,153 67,318 62,937 63,899 68,032 73,247

174,059 169,421 172,596 154,360 156,670 175,973 187,266 43,730 49,983 57,639 54,643 54,845 56,102 61,085 217,789 219,404 230,235 209,003 211,515 232,075 248,351

3,440.2 3,704.6 4,205.1 3,885.4 4,129.8 4,647.6 4,649.7 1,169.1 1,396.3 1,625.5 1,603.9 1,713.8 1,942.5 2,016.8 4,609.3 5,100.9 5,830.6 5,489.3 5,843.5 6,590.1 6,666.5

80.0 95.4 86.8 93.4 95.7 124.9 121.8 9.5 12.0 14.8 16.2 18.5 20.6 23.6 89.5 107.4 101.6 109.6 114.2 145.5 145.4

23,366.1 21,917.7 23,522.6 20,551 20,848.0 23,728.1 23,255.7 4,273.1 4,632.9 5,273.5 5,251.5 5,393.1 6,253.5 6,721.7 27,639.2 26,550.6 28,796.1 25,802.5 26,241.1 29,981.6 29,977.4

13,240.8 14,068.1 15,110.4 13,826.3 14,163.7 16,171.5 15,897.7 3,164.6 3,366.1 3,833.0 3,818.9 4,038.9 4,476.7 4,797.1 16,405.4 17,434.2 18,943.4 17,645.2 18,202.6 20,648.2 20,694.8

56.7 64.2 64.2 67.3 67.9 68.2 68.4 74.1 72.7 72.7 72.7 74.9 71.6 71.4 59.4 65.7 65.8 68.4 69.4 68.9 69.0

107 530.8 606.0 462.1 491.3 530.3 757.1 761.3 53.7 65.7 91.8 71.8 84.1 95.6 107.3 584.5 671.7 554.0 563.0 614.4 852.7 868.6

1,722.5 1,872.2 1,822.2 1,735.6 1,805.0 2,212.5 2,192.1 338.5 368.6 436.7 415.6 447.7 498,5 539.0 2061 2,240.8 2,258.9 2,151.1 2,252.7 2,711.0 2,731.1

3,479.0 3,493.8 3,534.5 3,130.1 3,258.8 3,869.4 3,849.4 581.1 619.6 690.7 684.1 692.3 792,9 859.9 4,060.1 4,113.4 4,225.2 3,814.2 3,951.1 4,662.3 4,709.3

49.5 53.6 51.6 55.4 55.4 57.2 56.9 58.3 59.5 63.2 60.8 64.7 62.9 62.7 50.8 54.5 53.5 56.4 57.0 58.1 58.0 Aeroflot annual report 2005

Operational statistics Aeroflot-Don 2000* 2001 2002 2003 2004 2005 Aircraft kilometers flown thousands International routes 1,630.2 2,485.1 2,623.0 3,011.1 4,192.3 3,581.0 Domestic routes 4,509.8 7,718.5 6,503.2 7,648.1 8,279.6 7,851.7 Total 6,140.0 10,203.6 9,126.5 10,659.2 12,471.9 11,432.7

Aircraft departures International routes 855 1,276 1,373 1,833 2,622 2,268 Domestic routes 3,008 5,079 5,235 6,012 6,018 5,675 Total 3,863 6,355 6,608 7,845 8,640 7,943

Aircraft hours flown International routes 2,160 3,239 3,336 3,939 5,568 4,640 Domestic routes 6,097 10,523 9,208 10,661 11,179 10,513 Total 8,257 13,762 12,544 14,600 16,747 15,153

Passengers carried thousands International routes 63.2 86.5 103.1 129.9 173.4 180.1 Domestic routes 199.8 313.5 324.3 376.9 414.7 419.5 Total 263.0 400.0 427.4 506.8 588.1 599.6

Freight and mail tons carried thousands International routes 0.4 0.3 0.6 0.6 0.6 0.5 Domestic routes 1.4 1.9 1.8 2.0 2.1 2.1 Total 1.8 2.2 2.4 2.6 2.7 2.6

Available seat kilometers millions International routes 189.4 276.9 352.7 382.1 513.3 492.1 Domestic routes 582.1 812.3 674.3 901.9 1,090.1 1,098.2 Total 771.5 1,089.2 1,027.0 1,284.0 1,603.4 1,590.3

Revenue passenger kilometers millions International routes 122.9 171.1 201.1 216.6 286.9 305.7 Domestic routes 374.6 527.4 447.2 527.4 595.7 606.5 Total 497.5 698.5 648.3 744.0 882.6 912.2

Passenger load factor % International routes 64.9 61.7 57.0 56.6 55.8 62.1 Domestic routes 64.4 65.0 66.3 58.5 54.6 55.2 Total 64.5 64.1 63.1 57.9 55.0 57.4

Cargo ton kilometers millions 108 International routes 0.8 0.6 1.2 1.3 1.3 1.0 Domestic routes 3.9 4.7 3.4 3.8 3.7 3.9 Total 4.7 5.3 4.6 5.1 5.0 4.9

Revenue ton kilometers millions International routes 11.9 16.0 19.3 20.8 27.0 28.5 Domestic routes 37.6 52.1 43.7 51.2 57.3 58.5 Total 49.5 68.1 63.0 72.0 84.3 87.0

Available ton kilometers millions International routes 17.7 27.4 34.3 37.8 52.4 50.0 Domestic routes 53.7 83.1 70.5 90.5 104.3 105.8 Total 71.4 110.5 104.8 128.3 156.7 155.8

Weight load factor % International routes 67.2 58.3 56.2 54.7 52.0 57.0 Domestic routes 70.0 62.8 61.8 56.6 55.0 55.3 Total 69.3 61.7 60.0 56.0 54.0 55.8

* As of the date when the company joined the Group (April 13, 2000). Appendixes

Operational statistics Aeroflot-Nord 2004* 2005 Aircraft kilometers flown thousands International routes 255.1 2,039.0 Domestic routes 1,790.4 14,719.6 Total 2,045.5 16,758.6

Aircraft departures International routes 188 1,384 Domestic routes 1,727.0 13,891 Total 1,915 15,275

Aircraft hours flown International routes 596 3,852 Domestic routes 3,489 26,864 Total 4,085 30,716

PasseFngers carried thousands International routes 9.4 76,3 Domestic routes 87.3 729.6 Total 96.7 805.9

Freight and mail tons carried thousands International routes 0.1 128 Domestic routes 0.6 3,425 Total 0.7 3,553

Available seat kilometers millions International routes 16.3 169 Domestic routes 132.2 1,168.7 Total 148.5 1,337.7

Revenue passenger kilometers millions International routes 11.1 116 Domestic routes 87.5 791.2 Total 98.6 907.2

Passenger load factor % International routes 67.9 68.6 Domestic routes 66.2 67.7 Total 66.4 67.8

Cargo ton kilometers millions International routes 0.1 0.2 109 Domestic routes 0.5 3.4 Total 0.6 3.6

Available ton kilometers millions International routes 1.5 16.1 Domestic routes 12.8 115.0 Total 14.3 131.1

Revenue ton kilometers millions International routes 1.1 10.6 Domestic routes 8.4 74.6 Total 9.5 85.2

Weight load factor % International routes 73.3 65.8 Domestic routes 65.6 64.8 Total 66.4 65.0

* As of the date when the Company joined the Group (October 8, 2004). Aeroflot annual report 2005

Aeroflot Group representative offices JSC Aeroflot

Country/City Code Telephone Fax Address RUSSIA

MOSCOW (495) 2235555 4, Frunzenskaya Embankment 7, Korovy Val Street 19, Yeniseyskaya Street 20/1, Petrovka Street 37/19, Pyatnitskaya Street 3, Kuznetsky Most Street 24, Bolshaya Yakimanka 8/1, Bolshaya Dmitrovka «Sheremetyevo-1» «Sheremetyevo-2» ANAPA (86133) 32255 31566 170, Krymskaya Street, 353440 ARKHANGELSK (8182) 288082 651455 88, Naberezhnaya Severnoy Dviny ASTRAKHAN (8512) 390907 319907 3, Gubernator A. Guzhvin Prospect BARNAUL (3852) 360908 398811 8A, Dmitrov Street CHELYABINSK (7-3512) 370231 370917 90, Svobody Street EKATERINBURG (343) 2612104 2165732 56, Belinsky Street GSP-209, 620219 IRKUTSK (3952) 255780 211331 Of. 107, 27, S. Razin Street, 664000 KALININGRAD (0112) 954612, 916455 956454 4, Pobedy Square, 236000 KEMEROVO (3842) 314294 349451 Airport (international terminal) KHABAROVSK (4212) 327592, 306337 306337 50, Pushkin Street, 680000 KRASNODAR (861) 2100017 2100092 43, Krasnaya Street, 350000 MINERALNYE VODY (87922) 68744, 69920 68170 75, Marx Prospect, 357202 MURMANSK (8152) 440120, 428019 428019 7, Volodarskogo Street, 183038 NIZHNEVARTOVSK (3466) 243232 245555 11, Omskaya Street, 628606 NIZHNIY NOVGOROD (8312) 345822, 394265 344188 6, Gorky Square, 603950 NORILSK (3919) 460769, 461206 460769 Of. 167, 17, Lenin Prospect, 663300 NOVOSIBIRSK (3832) 233270, 176950 179698 28, Krasny Prospect, 630091 OMSK (3812) 251322, 254536 247955 14, Ordzhonikidze Street, 644099 PERM (3422) 203004 349535 21, Popov Street, 614600 PETROPAVLOVSK-K. (4152) 111830, 111786 111722 7A, Zvezdnaya Street, Elizovo, 684010 ROSTOV-ON-DON (8632) 527407, 527687 527407 270/1, Sholokhov Prospect, 344066 SAMARA (8462) 760277, 760279 760280 141, Leninskaya Street, 443041 SOCHI (8622) 645647, 645646 645675 61А, Rose Street, 354000 ST.-PETERSBURG (812) 3273872, 5712362 3273870 1/43, Rubenstein Street TYUMEN (3452) 499871, 499872 395165 84/1, Malygina Street, 625026 VLADIVOSTOK (4232) 205235 209041 143, Svetlanovskaya Street, 690053 VOLGOGRAD (8442) 385479 385480 15, Lenin Prospect, 400131 UFA (3472) 516343, 516343 516343 5/3, Lenin Street, 450000

110 Country/City Code Telephone Fax Address ANGOLA Luanda (244-2) 430682 430599 Rua Coroner Aires de Ornelas №1-A/В-r/c, Luanda, Angola ARMENIA Yerevan (3741) 532131, 223580 538107 12, Amiryan Street, Yerevan, 375002 AUSTRALIA Sydney (61-2) 92622233 92621821 National Mutual Building, 24th Level, 44 Market Street, NSW, 2000 Sydney AUSTRIA Viena (43-1) 5121501, 5121502 512150178 10, Parkring, 1010 Wien AZERBAIJAN Baku (994-12) 4981166 4981166 34, Khagani Street, Baku, 370000 BELARUS Minsk (375-17) 2272887 2066895 25, J. Kupala Street, Minsk, 220030 BELGIUM Brussels (32-2) 5136066, 5136538 5122961 58, Rue des Colonies, 1000 Brussells BULGARIA Sofia (359-2) 9434489, 9434572 9461703 23, Oborishte Street, 1504 Sofia CANADA Toronto (1-416) 6421653 6421658 1, Queen Street East, Suite 1908, P.O. Box 61, Toronto, Ontario, M5C2C5 Appendixes

CHINA Beijing (86-10) 65002412 65941869 Hotel “Jinglun”, N3, Jianguomenwai Street, Beijing, China, 100020 Hong Kong (852) 25372611 25372614 Room 2705, 27 Floor, Tower Two, Lippo Centre, 89 Queensway, Hong Kong Sanghai (86-21) 62798033 62798035 Suite 203A, Shanghai Centre, 1376, Nanjingxilu, Shanghai, China, 200040 CROATIA Zagreb (385-1) 4872055/076 4872051 13, Varsˇavska, 10000 Zagreb CUBA Havana (53-7) 2043200, 2043759, 2045593 5ta ave., Esq.76, Edif. Barcelona, Ofis 208, 2045591 Miramar Playa, La Habana Cuba CYPRUS Larnaca (357-24) 643221 643220 Airport Nicosia (357-22) 669071, 677072 678484 32, B&C, Homer Avenue, P.O. Box 22039, 1097 Nicosia CZECH REPUBLIC Prague (420-2) 24812682, 24814984 24812683 5, Truhla´rska´, 11000 Praha 1 DENMARK Copenhagen (45) 33126338 3311217 1/3, Vester Farimagsgade, DK-1606 Copenhagen EGYPT Cairo (20-2) 3900429, 3937409 3900407 18, El Boustan Street, Commercial Center, Cairo FINLAND Helsinki (358-9) 663203 661021 5, Mannerheimintie, FIN — 00100, Helsinki FRANCE Nice (33-4) 93214482 93214544 Ae´roport Coˆte d'Azur, Terminal 1, 06281 Nice Cedex Paris (33-1) 42254381, 42253192 42560480 33, Avenue des Champs Elyse´es, 75008 GERMANY Berlin (49-30) 2269810 22698136 51, Unter den Linden, 10117 Berlin Du¨sseldorf (49-211) 8644300 320928 26, Berliner Allee, 40212 Du¨sseldorf Frankfurt/ M (49-69) 27300612, 27300615 27300629 41, Wilhelm-Leuschner Strasse, 60329 Frankfurt am Main Hamburg (49-40) 3742886, 3742885 3742888 60, Admiralita¨tstrasse, 20459 Hamburg Hahn (49-6543) 508600, 508601 508606 Gebaude 850, D-55483 Flughafen Hahn Munich (49-89) 288261 2805366 2, Isartorplatz, 80331 Mu¨nchen GEORGIA Tbilisi (995-32) 943896, 372111 373796 76/1, David Agmashenebeli Street 380002, Tbilisi GREECE Athens (30-210) 3220986, 3221022, 3236375 14, Xenofontos, GR-10557 Athens 3236392 HUNGARY Budapest (36-1) 3185892, 3185955 3171734 4, Va´ciutca, 1052 Budapest V. INDIA Delhi (91-11) 23312843, 23723245, Ground Floor, Tolstoy House, 15-17, 23313785 23316414 Tolstoy st. Marg, 110001 New Delhi Mumbai (91-22) 22025780, 22821682, 2871942 Room 18-B, 1-st Floor, Nariman Bhavan, 22821476 Block 111, Nariman Point, Mumbai 400021 IRAN Tehran (98-21) 8910888 8808672 23, Ostad Nejatollahi Street, Tehran IRELAND Dublin (353-1) 8446166 8446353 Link Building, Level 2, Airport, Dublin 111 ITALY Milan (39-02) 66986985, 66986987, 66984632 19, Via Vittor Pisani 20124 Milano 66987538 Rome (39-06) 420385 42904923 76, Via Bissolati, 00187 Roma Venice (39-041) 2698484, 2698488 2698447 Aeroport Marco Polo, Tessera, Venezia Luigi Broglio street 8, 30030 JAPAN Tokyo (81-3) 55328781 55328821/22 Toranomon Kotohira Tower 16F, 1–2–8 Toranomon, Minato-ku, Tokyo Japan 105-0001 KAZAKHSTAN Almaty (327-2) 915597 915416 42, Begalina Street, 50010 Almaty KYRGYZSTAN Bishkek (996-312) 620973, 620979 620975 121, Moskovskaya, 720040 Bishkek DEM. PEOPLES REPUBLIC OF KOREA Pyongyang (850-2) 3817309 3817296 11-Dong, Munsu-3 Dong, Taedonggang District, Pyongyang REPUBLIC OF KOREA Seoul (82-2) 5693271, 5693272, 5693276, RM 404, City Air Terminal Building, 159-6, 5693273 5510327 Samsung-Dong, Kangnam-ku, Seoul Aeroflot annual report 2005

LATVIA Riga (371) 7780770, 7780772 7780771 LV-1010, Riga, Gertrudes IELA 10/12 Office-18, Latvia LEBANON Beirut (961-1) 739596 739597 Verdun Str., Selim Saab Bld. 2-Floor LITHUANIA Vilnius (370) 52124189 52124189 8/2, Pylimo Street, 2001 Vilnius MALAYSIA Kuala Lumpur (60-3) 2141600 21416946 LOT2.33, 2nd floor, Bangunan AngKasa Raya, Jalan Ampang,, 50450 Kuala Lumpur MONGOLIA Ulaan Baatar (976-11) 320720 323321 15, Seul Street, Ulaan Baatar NETHERLANDS Amsterdam (31-20) 6245715, 6270561 6259161 26–3, Weteringschans, 1017 SG, Amsterdam NORWAY Oslo (47) 23356210 22332880 6, O/ vre Slottsgt, 0157 Oslo PANAMA Panama (507) 2250497, 2250587 2250622 Unicentro Bella Vista, Avenue Justo Arosemena y Calle 42, P.O. Box 2642, Balboa Ancon, Panama PERU Lima (51-1) 4448716, 2410648 2411695 Jr. Martir Olaya 201, of. 340-350, Miraflores, Lima POLAND Warszawa (48-22) 6281710, 6211611 6282557 29, Alleje Jerozolimskie, 00-508 Warszawa ROMANIA Bucurest (40-21) 3150314, 2128684 3125152 29, sector 1 , Strada Biserica Amzei, Bucuresti SLOVAKIA Bratislava (421-2) 43426896 43337581 Aeroport M.P. Shtefanika, Bratislava, 82311, Slovak Republic SERBIA AND MONTENEGRO Belgrade (381-11) 3286071, 3286064 3286083 11000, Kneza Mihajlova, 30, Belgrade SPAIN Barcelona (34-93) 4305880, 4308741 4199551 41, Calle Mallorca, 08029 Barcelona Madrid (34-91) 4313706, 4314107 4318098 Of. 3A, 52, Paseo de la Castellana, 28046, Madrid SWEDEN Stockholm (46-8) 50565300, 50565320 217185 31, Sveava¨gen, 2 tr, Box 3075, 10361 Stockholm SWITZERLAND Gene´ve (41-22) 9092770 7388312 16, Place Cornavin, 1201 Gene´ve Zu¨rich (41-43) 3446200, 3446202 3446216 41, Talacker, 8001 Zu¨rich SYRIA Damascus (963-11) 2317956 2317952 29, May Street, Damascus THAILAND Bangkok (66-2) 2510617, 2510618 2553138 Mezzanine Floor, Regent House, 183, Rajdamri Road, 10330 Bangkok TURKEY Antalya (90-242) 3303106 3303477 Antalya International Airport Blocka A//№241 Istanbul (90-212) 2966725, 2966726, 2966737 Turkey, Istanbul, Elmadag, Cumhuriyet Cad №26 B 2966728 U.A. EMIRATES Dubai (971-4) 2222245 2227771 U.A.E., Dubai, P.O. Box 1020, Al Maktoum Street, al Mazroei Bldg. Deira, Dubai UKRAINE Dnepropetrovsk (380-56) 7784938 7784937 72-A, Karl Marx Prospect, Dnepropetrovsk Kiev (380-44) 2358487 2454881 112-A, Saksagansky Street, 252032 Kiev Simferopol (380-652) 511523 511517 2a, Pavlenko Street, 95006 Simferopol 112 UNITED KINGDOM London (44-20) 73552233 73552323 70, Piccadilly, London, W1V 9HH USA Los Angeles (1-310) 2815305, 2815306, 2815308 9100, Wilshire Blvd.,616, Suite 175, 2815307 90212 Beverly Hills, California New York (1-212) 9442300 9445200, 3918577 10 Rockerfeller Plaza, suite 1015 New York San Francisco (1-415) 4342300 4034033 120 Montgomery Street, Suite 1400, San Francisco, CA 94104 Seattle (1-206) 4641005 4640452 1411, 4th Avenue, Suite 420, 98101 Seattle, Washington Washington (1-202), (1-888) 6864949 3474305 1634, Eye Street, N.W., Suite 200, 20006 Washington, D.C. UZBEKISTAN Tashkent (998-71) 12000555, 1200556 1448472 1-A Kodyri Street, 700128, Tashkent VIETNAM Hanoi (84-04) 7718742, 7718718 7718522 Daeha Business center, 360 Kim Ma, str, Ba Dinh distr., Hanoi Appendixes

OJSC Aeroflot-Don

Country/City Code Telephone Fax Address

RUSSIA Moscow (495) 4367753, 4367691 4367691 Of. 238, Airways Terminal, Vnukovo Airport, Room 2.167, 2314723 Sheremetyevo-1 (Arrivals) Murmansk (8152) 428019, 281241 Nerungri (41147) 32444 6, Lenin Street, Nerungri, Republic of Sakha, 678960 Rostov-on-Don (863) 2767222 Of. 6, Air Terminal Building St.-Petersburg (812) 723-8620 1238620 Room 3090, 3rd floor, 18/4, Pulkovo-1 Terminal Sochi (8622) 692228 Of. 223, Sochi Airport TURKEY Istambul (90-212) 6389106, 6389107 6389112 291/293, Ordu Gaddesi Laleli Is Merkezi, Istanbul UKRAINE Dnepropetrovsk (38-056) 7784938 7784937 72A, Karl Marx Street, Dnepropetrovsk UZBEKISTAN Tashkent (99871) 1521836 83a, Nukusskaya Street, Mirabadsky District, Tashkent, 700015

CJSC Aeroflot-Nord

Country/City Code Telephone Fax Address

RUSSIA Arkhangelsk (8182) 631323, 218797 Air Terminal Building, Arkhangelsk Airport Moscow (495) 2313215, 1304754 Ticket window 14, Sheremetyevo-1 St.-Petersburg (812) 1035375, 1238776, 1238776 Of. 3088, Pulkovo-1 Terminal 151 Moskovsky Prospekt 3807636 Murmansk (8152) 449644 30, Polyarnikh Zor Street Belgorod (0722) 341300 166, Bogdana Khmelnitskogo Street Kirovsk (81531) 541111, 50005 13, Yubileinaya Street Naryan-Mar (81853) 43838, 44999 25, Smidovitch Street Monchegorsk (81536) 76161 25B, Komsomolskaya Street Mezen (81848) 91945, 43199, Mezen Air Terminal Leshukonskoye Air Terminal 31665 Sochi (8622) 442989 Sochi Air Terminal NORWAY Tromso (81047) 95143587 Tromso Air Terminal

113 Route network of the Aeroflot Group including marketing flights

Amderma-2 Murmansk

Solovki Mezen Narya Kuopio Arkhangel'sk Leshukonsko Saint Petersburg

Copenhagen London Seattle Berlin Moscow U Frankfurt/M Samara Prague Luxembourg Volgograd Toronto Paris Vienna Rostov-on-Don Astrakhan NORTH New York Varna Forli Belgrade Washington Tbilisi AMERICA Rome Gyumri Baku Los Angeles Bodrum Yerevan Athens Dalaman Pafos Beirut Teher Larnaca Damask Tel Aviv Amman Cairo Havana Sharm el Sheikh

Duba Hurgada

Tromso Murmansk Naryan-Mar Apatity

Pechora Rovaniemi Arkhangel'sk Lulea

EUROPE Kotlas Petrozavodsk

Helsinki Oslo Saint Petersburg Stockholm Tallinn Moscow Nizhny Novgorod Riga Luanda Copenhagen Vilnius Samara Kaliningrad Hamburg 114 London Amsterdam Minsk Belgorod

Dusseldorf Berlin Hahn Warsaw Brussels Karlovy Vary Volgograd Kiev Frankfurt/M Prague Paris Vienna Bratislava Dnepropetrovsk Rostov-on-Don Munich Geneva Zurich Budapest Ljubljana Krasnodar Mineralnye Simferopol Zagreb Vody Anapa Milan Venice Belgrade Bucharest Sochi Nice Sofia Madrid Barcelona Rome Istambul

Ankara

Antalya Athens Malta Larnaca Beirut Damask

Data as of May 01.2005 Amderma Norilsk an-Mar Novy Urengoy ASIA Usinsk oe Surgut Nizhnevartovsk Perm Tyumen Neryungri Ekaterinburg Kemerovo Novosibirsk Ufa Chelyabinsk Omsk Irkutsk Petropavlovsk-Kamchatsky Barnaul Ulaan Baatar Khabarovsk n

Bishkek Vladivostok Tashkent Beijing Seoul ran Tokyo

Shanghai Delhi Sharjah Karachi ai Hong Kong Hanoi Mumbai

Bangkok actual performanceinthe futurecoulddifferfromforecastsrepresented inthisreport. as fluctuatingdemandforairtransportation,price changes,implementationofnewtechnologies,changesinlegalenvironment, This annualreportfromrealdatacontainsopinions, assumptionsandforecastsofthecompany’smanagementbasedoncurrentlya Notice offuturedevelopment of theRussianFederation(August4,2004). Aeroflot isincludedintheListofStrategicEnterprisesand JointStockCompanies,approvedbyDecree№1009ofthe Telephone: Address: License Auditors: Telephone: Address: Auditing license Auditors: Telephone: Address: Share register: E-mail: Telephone: Open line: On-line booking: Telephone: Telephone: Telephone: Information andbookingcenter(24hours): E-mail: Telephone: Press center: www.aeroflotbonus.ru Telephone: Aeroflot Bonusprogram: E-mail: Telephone /fax: Shareholders andinvestors: Contact telephonesande-mail: Postal address: Legal address: Date ofstateregistration: Short name: Full name General Information [email protected] [email protected] [email protected] № Е000548(June25,2002),grantedbytheMinistryofFinance Office 701,Entrance3,12KrasnopresnenskayaNaberezhnaya,123610, Moscow. 4/7 UlitsaVozdvizhenka(MokhovayaBusinessCenter),125009,Moscow. 6 UlitsaVeresaeva, 121357,Moscow JCHLBVneshaudit CJSC Deloitte&Touche CIS CJSC : JointStockCompanyAeroflot—RussianAirlines (495) 967-0495, (495) 787-06-00, (495) 440-31-04 (495) 223-5555 8-800-333-5555 (otherRussiancities,freeofchargefromfixedandmobilenumbers) (812) 718-5555(St.Petersburg) (495) 223-5555(Moscow) (495) 752-9071 (495) 723-8260 JSC Aeroflot Building 9,37Leningradskyprospect,125167,Moscow JCNationalRegistry Company CJSC Building 9,37Leningradskyprospect,125167,Moscow (495) 258-06-86,258-06-84/ № E002417grantedbyOrder255oftheMinistryFinanceonNovember6,2002,foraperiodfiveyears www.aeroflot.ru, [email protected] June 21,1994 fax: fax: ; (495) 967-0497 (495) 787-06-01 fax, 258-06-50/ fax fluctuations inexchangerates,tonamebutafew, thecompany’s vailable information.Duetochangesinexternal factors,such President