IAS Financial results 2002 Efficiency increase in 2002 Major directions of activity in 2002
•Still network optimization - In 2002 Company continued to develop it’s rout network and the priority was given to the routs with a high profitability •Raising of fleet usage effectiveness - In 2002 the Company substantially decreased usage of fuel ineffective aircrafts such as: Il 76, Il 86, Il 62 •Foreign made fleet replacement program - In 2002 it was taken decision on replacement of 27 foreign made aircrafts of the Company on the 27 new foreign made aircrafts with aim to optimize operating costs. MarketMarket environmentenvironment
Russian airline industry growth in 1999-2002 •Shortage of adequate capacity 64,71 70 60,56 6,9% •Noise & emission restrictions introduced by 60 53,42 53,41 European countries 50 5,8% RPK bn. •Strict regulation 40 Pax mm. 25,07 26,52 •Still high degree of fragmentation 30 21,47 21,83 •Low purchasing power – low yield – major 20 constraint 10 •Higher growth rates in the charter segment 0 1999 2000 2001 2002
Market growth by segments, 2002
30% 23,9% 25% 20% 15% 6,8% 10% 3,9% 5% 0% -5% Int.regular Int.chart. Domest.reg. Domest.chart. -10% -6,1% CompetitiveCompetitive positionposition
Aeroflot position in Russian Civil Aviation
70% • Still an ultimate leader in the industry 58,6% 60% 54,4% 51,6% • Recent decrease of the market share is due to: 50% 42,9% International – radical reduction of old Soviet-built aircraft 40% Domestic capacities 30,7% 32,6% 31,3% Total 30% 27,3% – concentration of the market growth in the 20% non-core segment 10,3% 12,2% 12,3% 11,8% 10% 0% 1999 2000 2001 2002
Share of Aeroflot 2002 (International) Share of Aeroflot 2002 (Domestic)
50% 42,90% 16% 13,5% 45% 14% 11,7% 40% 12% 8,5% 35% 8,3% 10% 30% 6,2% 25% 8% 20% 6% 15% 9,60% 7,10% 4% 10% 3,4% 2,9% 5% 2% 0% 0% Aeroflot Sibir Pulkovo Krasair Ural Aeroflot Sibir Krasair Domo-dedovo Utair NetworkNetwork optimisationoptimisation Network structure by revenue Network quality Domestic 18% 160 SU DL UA BA AA 1999 AF 2002 LH 120 2005 Eur ope Other International 38% 6% 80 JL SQ AY CIS&Baltic OS SN 5% 40 SX LO
Africa&Middle East MA 4% "Width" (Quantity of routes) 0 3,6 6,9 10,4 0 1020304050 "Depth" (Average weekly frequency) Asia America 18% 11% Revenue rate and load factor •Concentration of capacities on high-yield routes 80 65,8 68,4 •Providing high yield routes with competitive planes 70 65,7 3,9% 60 •Improvement of connectivity 50 40 (over 2001 connectivity was increased from 11,3% to 14%) 30 20 5,5 5,9 8,5% 6,4 •Closure of loss making / marginally profitable routes 10 0 2000 2001 2002
Revenue rate per RPK Passenger load factor FleetFleet utilisationutilisation
50 44,3 45 39,1 40,0 38,8 40 34,5 35,8 35
30 26,0 20,4 23,0 25 17,4 20,5 21,5
20 15,8
thousand FH 13,6 15 9,7 9,9 10,9
10 5,7 2,3 4,1 3,9 5 2,0 0 Il96 B767 B737 B777 A310 Il62 Il86 Tu154 Tu134 Il76 DC10
•Gross utilisation of B767, B737, B777, A310, DC10 in 2002 increased on 3,8% beside 2001 •Gross utilisation of Il96, Tu134, Tu 154 in 2002 increased on 11,2% beside 2001 •Gross utilisation of Il62, Il76, Il86 in 2002 declined on 73,8% beside 2001 WesternWestern fleetfleet restructuringrestructuring
Primary objectives: •Ensure significant cost savings and increased operational efficiency through higher fleet commonality •Incorporate high degree of fleet planning and fleet management flexibility •Achieve high asset liquidity and broad choice of long-term financing sources
B777-200ER (2) B767-300ER 1 type of LH B767-300ER (4) (operating leases) aircraft (9)
А320 family 1 type of MH A310-300 (11) (10 operating aircraft (18) leases, 8 B737- 400 (10) finance leases)
27 aircraft 27 aircraft RussianRussian andand cargocargo fleetfleet restructuringrestructuring
Medium-term target - provide further commonality of the whole fleet
Il96-300(6) 1 type of LH aircraft Il62 (10) 6 Il96 + 6 on order
Il86 (14) 1 type of MH aircraft 20 Tu154M Tu154M (20) 1 type of SH aircraft 11 Tu134M Tu134 (15) 65 aircraft 52 aircraft
Il76(10) 1 type of freighter 4 DC10F DC10F(2) OperatingOperating profitprofit andand netnet profitprofit dynamicsdynamics
200 158,8 150 100 82,1 89,3 40,1 50 20,1 0 -6,2 7,3 8,6 -50 1998 1999 2000 2001 2002 -59,6
-100USD mln -150 -200 -250 -210,9
Operating profit Net profit Operating Results 2002 MainMain operatingoperating figuresfigures
Total Total Passenger turnover Intern. Ton-km turnover Intern. Domest. Domest. 18939,3 17434,2 -6,8% 17644,7 2240,8 2258,6 2152,5 20000 2500 -4,7% 18000 14068,1 15107,3 1872,2 13828,3 1822,1 1737,2 16000 2000 14000 12000 1500 10000 8000 3832,0 3816,4 1000 RPK mln 3366,1 mln RTK 436,5 415,3 6000 368,6 4000 500 2000 0 0 2000 2001 2002 2000 2001 2002 Total Total Passenger traffic Intern. Mail and cargo traffic Intern. Domest. Domest. 107,5 109,9 7000 120 101,7 8,1% 5832,1 -5,9% 5489,6 5100,9 95,4 93,7 6000 100 87,0 5000 4206,6 3704,6 3886,5 80 4000 60 3000 1396,3 1625,5 1603,1 40 2000 thousand tons thousand PAX thousand thousand PAX 12,1 14,7 16,2 1000 20 0 0 2000 2001 2002 2000 2001 2002 LoadLoad factorsfactors andand fuelfuel consumptionconsumption
Passenger load factor Commercial load factor Всего 72,7 72,7 72,7 Всего 74 МВЛ 65,2 63,2 70 56,4 60,7 МВЛ 72 ВВЛ 54,5 53,5 55,5 68,4 60 52,6 51,5 70 ВВЛ 67,3 50 68 65,7 65,8 40 % 66 64,2 64,2 % 64 30 62 20 60 10 58 0 2000 2001 2002 2000 2001 2002
Specific fuel consumption
567,0 580 558,0 560 1% of passenger load factor increase - 540 USD16,5 mln of additional revenue 520
ткм 492,0 / 1% of commercial load factor increase - 500 гм 480 USD27 mln of additional revenue 460 440 2000 2001 2002 Financial Results 2002 ProfitProfit andand lossloss statementstatement
31.12.01 31.12.02 (USD mln) (USD mln) Revenue 1 558,0 1563,0
Operatig costs 1 517,9 1404,2
Operating profit 40,1 158,8
Profit before taxes an 10,7 132,9 minority interest Profit after taxes 21,8 91,3
Minority interest 1,7 2,0
Net profit 20,1 89,3
Net profit per share $0,018 $0,080 RevenueRevenue andand traffictraffic revenuerevenue
Revenue in 2000-2002 Traffic revenue in 2000-2002
1600 1558,0 1563,0 1300 1244,3 0,3% 1221,0 1,9% 1550 1250 1200 1500 1150 1450 1406,9 1074,0 1100 1400 USD million USD million USD 1050 1350 1000 1300 950 2000 2001 2002 2000 2001 2002
Passenger revenue in 2000-2002
1120,5 1150 1115,7 0,4 1100
1050
1000 956,4
950 USD million USD 900
850 2000 2001 2002 TrafficTraffic revenuerevenue byby sectorsector
2001 2002 % to 2001 (USD mln) (USD mln) Scheduled flights Passengers 1 071,1 1092,9 102,0%
Cargo 74,5 97,8 131,3%
Charter flights
Passengers 44,6 27,6 61,9%
Cargo 30,9 26,0 84,1%
Total 1 221,1 1 244,3 101,9% PassengerPassenger traffictraffic revenuerevenue byby regionregion
2001 2002 % to 2001 (USD mln) (USD mln) Europe 432,1 456,5 105,6%
Asia 218,0 218,2 100,0%
North America 98,3 102,9 104,7
Russia 211,7 216,9 102,5
Other 90,8 78,3 64,6%
Other 20,2 20,1 99,5% international flights CargoCargo traffictraffic revenuerevenue byby regionregion
2001 2002 % to 2001 (USD mln) (USD mln) Europe 16,3 28,6 175,5%
Asia 23,7 31,9 134,6%
North America 6,3 9,8 155,6%
Russia 12,2 9,6 78,7%
Other 4,9 7,9 161,2%
Other 11,1 10,0 90,1% international flights RevenueRevenue ratesrates
Total Revenue rate per 1 passenger Total Revenue rate per RPK Intern. Intern. Domest. Domest. 6,4 205,6 234,6 7 6,6 250 213,6 214,9 5,9 194,4 5,5 6,0 187,5 6 5,6 5,5 5,7 200 4,9 5 130,2 135,3 150 118,2 4 3 100 2 50 1 Passenger revenue/RPK Passenger Passenger revenue./traffic Passenger 0 0 2000 2001 2002 2000 2001 2002
Revenue rate per 1 passenger increased on 5,8% beside 2001 Revenue rate per 1 RPK increased on 8,5% beside 2001 on international routs - on 9,2%, on international routs - on 10,0%, on domestic routs - on 3,9%. on domestic routs - on 3,6%. OperatingOperating costscosts
2001 2002 % to 2001 (USD mln) ( USD mln) Fuel 358,7 274,7 76,6 Aircraft and traffic servicing 259,3 244,8 94,4 Maintenance 112,5 109,7 97,5 Sales and marketing 110,7 103,2 93,2
Operating lease expenses 99,5 104,2 104,7 Administration and general expenses 83,2 69,5 83,5 Operating taxes 56,9 30,6 53,8 Third – party passenger services 41,5 32,5 78,3
Communication expenses 35,9 35,3 98,3 Increase in (release of) provision for bad 5,6 6,2 110,7 and doubtful accounts Penalties - 16,4 - Other expenses 54,5 54,7 100,4 Total 1218,3 1081,8 88,8 OperatingOperating costscosts structurestructure
2001 2002 Fuel 29,4 25,4 Aircraft and traffic servicing 21,3 22,6 Maintenance 9,2 10,2 Sales and marketing 9,1 9,5 Operating lease expenses 8,2 9,6 Administration and general expenses 6,8 6,4 Operating taxes 4,7 2,8 Third – party passenger services 3,4 3,0 Communication expenses 2,9 3,3 Increase in (release of) provision for bad and doubtful accounts 0,5 0,6 Penalties - 1,5 Other expenses 4,5 5,1 Total 100 100 KeyKey factorsfactors ofof operatingoperating profitprofit changechange Third party passenger servicing Fairs costs decrease Operating increase profit 2002 Salary Operating Fuel costs increase 200 profit 2001 decrease 159 150 Sales and 96 84 Mainten marketing 100 ance costs decrease costs 40 decrease -73 50
USD mln -18 14 14 3 8 9 5 0 -3 -20 -50 Aircraft and Aircraft traffic servicing costs and traf. decrease -100 serv. costs decrease Depreciation increase Traffic decrease Decrease of other revenue Other decreased costs Administration and general expenses decrease OperatingOperating costscosts andand productionproduction costcost
Operating costs
1550 1517,0 1500 -7,4% 1450 1404,2 1400 1324,0 1350 USD mln 1300 1250 1200 2000 2001 2002
Production cost of 1 tkm
67,2 68 -3,0% 65,2 66 64 62 59,1 USc 60 58 56 54 2000 2001 2002 OperatingOperating activityactivity resultsresults
80 68,9 72,6 70 62,8 67,2 65,2 59,1 60 50 40 30
20 In 4,5 times 7,4 10 3,7 1,7 0 2000 2001 2002
Revenue rate for 1 ton-km Production cost of 1 ton-km Operating result BalanceBalance sheetssheets
31.12.01 31.12.02 Change to 2001 (U S D m l n ) (U S D m l n ) Current assets 292,6 320,4 27,8
Long – term assets 819,6 565,0 -254,6
Total assets 1 112,2 885,4 -226,8
Short – term liabilities 562,6 461,9 -100,7
Long – term liabilities 464,3 250,8 -213,5
Minority interest 7,6 7,9 0,3
Shareholders’ equity 77,7 164,8 87,1
Total liabilities and 1 112,2 885,4 -226,8 Shareholders equity CashCash flowsflows
EBITDAR Capex
370,0 400 35 28,8 27,2 350 288,0 30 21,9 300 244,0 25 250 20 200 15
150 mln USD USD mln 10 100 5 50 0 0 2000 2001 2002 2000 2001 2002
Net CF
400 341,2 350 300 261,1 250 216,8 200 150 USD mln USD 100 50 0 2000 2001 2002 CapitalCapital StructureStructure Debt composition
800 707 700 729 700 602 602 600 441 435 500 391 400 339 300 200 65 131 110 113 82 4677 100 9 333 0 1998 1999 2000 2001 2002 ST debt LT debt LT leases Off BS debt
Debt/EBITDAR
6 5,04 4,67 4,93 5 4,10 4 2,56 3
2
1
0 1998 1999 2000 2001 2002 Long-Long-termterm strategicstrategic focusfocus
• Profitable market growth • Increase of operating and financial effectiveness • Product upgrade and brand development • Leadership in national industry consolidation • Building strategy-focused organisation • World alliance membership • Strategic projects: –New hub – Group restructuring