ANNUAL REPORT ANNUAL REPORT AEROFLOT Worldreginfo - 77Dd38c8-9D2d-4Fba-835E-165E40057a5e Key Figures *

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ANNUAL REPORT ANNUAL REPORT AEROFLOT Worldreginfo - 77Dd38c8-9D2d-4Fba-835E-165E40057a5e Key Figures * AEROFLOT ANNUAL REPORT 2008 ANNUAL REPORT WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e KEy FigURES * Operating perfOrmance 2008 2007 change Passengers carried, millions 11.6 10.2 + 13.7% Cargo and mail carried, thousand tonnes 159.2 153.7 + 3.6% Revenue passenger kilometers, billion RPK 31.2 27.9 + 11.8% Revenue tonne kilometers, billion RTK 3.6 3.4 + 5.9% Passenger load factor, % 70.9 70.2 + 0.7pt Cargo load factor, % 57.9 57.9 – Average personnel 21,070 20,114 + 4.8% financial perfOrmance 2008 2007 change Traffic revenue, USD millions 3,948.7 3,165.4 + 24.8% Total revenue, USD millions 4,613.8 3,807.8 + 21.2% Operating income, USD millions 338.5 578.0 – 41.4% Net income, USD millions 37.0 313.4 – 88.2% Shareholders’ equity (as of December 31), USD millions 945.0 1,112.2 – 15.0% Capital expenditures, USD millions 610.0 555.4 + 9.8% capital market indicatOrs 2008 2007 change Earnings per share, US cents 5.2 28.8 – 81.9% Market capitalization at the end of the year, USD 1.1 4.1 – 73.2% billions P/E ratio 29.7 13.1 + 127% * Consolidated key figures of JSC Aeroflot and its subsidiaries WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e st PLACE among Russian airlines on both domestic and international routes OPERATES ROUTES with average frequency of 9.1 flights per week per route MILLION passengers were carried in 2008 The fleet numbers AIRCRAFT, mainly uptodate and financially efficient airliners GROWTH OF CARRYING ON INTERNAL ROUTES in 2008 was MORE THAN MILLION electronic tickets were sold in 2008 RANKED European airlines IN THE TOP for service quality WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e ThE Company iN BRiEF Aeroflot is the biggest airline in Russia and the Aeroflot is a member of the SkyTeam global airline al- CiS. The Company carried 9.3 million passen- liance. The alliance has a combined route network of gers in 2008 (11.6 million including subsidiaries). 905 destinations in 169 countries, offering passengers Passenger turnover of Aeroflot represents about almost unlimited possibilities for worldwide travel. a quarter of total passenger turnover of all Rus- sian air carriers. Aeroflot is based at Sheremetyevo international Airport in Moscow. Opening of the Company’s own Aeroflot is one of the longest established airlines terminal — Sheremetyevo-3 — is scheduled in 2009. in the world. The Company’s 85th anniversary, cel- The terminal will serve all routes of Aeroflot and its ebrated on February 9, 2008, was also the 85th partners in the SkyTeam alliance. anniversary of Russian civil aviation. Aeroflot’s strategy is to build an airline of interna- Aeroflot has its own flights to 99 destinations in tional standing, geared to achievement of the high- 49 countries. The aircraft fleet of Aeroflot group est international standards. consisted of 148 airliners at the beginning of 2009. The average flight safety level for Aeroflot Aeroflot is among companies included in the List in 2008 matches indicators for leading interna- of Strategic Enterprises and Joint-Stock Companies, tional air carriers. approved by decree of the President of the Russian Federation (August 4, 2004). WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e gy rated g ELOPMENT v E trate CONTENTS iNTE D S 2 the cOmpany in Brief 4 the rOute netwOrk EW OF R TRANSPORT i vi ER E A v h 6 address By the chairman Of the BOard Of directOrs O T MARKET 8 address By the chief executive Officer main achievements in 2008 12 ONS 14 main events since decemBer 31, 2008 i perat 16 Chapter 1. integrated develOpment strategy: O prOgress in 2008 and tasks fOr 2009 Overview Of the air transpOrt market 23 Chapter 2. SK Ri EMENT OperatiOns 31 Chapter 3. AND g SKS ANA risks and risk management 44 Chapter 4. Ri M 51 Chapter 5. sOcial develOpment cOrpOrate gOvernance and securities 58 Chapter 6. financial repOrting 75 Chapter 7. AL i ELOPMENT v E OC S D appendixes 120 ES i T i ECUR S ERNANCE v orporate C gO AND g N AL i i NANC EPORT Fi R WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e ROUTE NETWORK Aeroflot’s own flights Norilsk Nizhnevartovsk Surgut Tyumen Magadan Oslo Helsinki Novosibirsk Stockholm St.�Petersburg Riga Perm Copenhagen Kaliningrad MOSCOW Hamburg Ufa Ekaterinburg Kemerovo Dusseldorf Berlin Warsaw Chelyabinsk Omsk Petropavlovsk�Kamchatsky London Amsterdam Hannover Kiev Samara Krasnoyarsk New York Brussels Karlovy Vary Frankfurt/M Prague Vienna Barnaul Irkutsk Khabarovsk Paris Bratislava Volgograd Washington Munich Budapest Ulan Batar Los Angeles Zurich Zagreb Bucharest Krasnodar Yuzhno�Sakhalinsk Geneva Belgrade Anapa Astrakhan Nice Venice Sofia Sochi Vladivostok Barcelona Milan Slpit Mineralnye Vody Rome Simferopol Bishkek Havana Madrid Istanbul Baku Athens Yerevan Tashkent Beijing Маlaga Antalya Teheran Iraklion Larnaca Seoul Tokyo Beirut Damascus Shanghai Cairo Eilat Delhi Dubai Hanoi Hong Kong Bangkok Aeroflot marketing flights: › Moscow—Naryan�Mar › St.Petersburg—Berlin › Prague—Cork › Moscow—Amman › St.Petersburg—Hamburg › Prague—Kosice › Moscow—Arkhangelsk › St.Petersburg—Hannover › Prague—Manchester › Moscow—Arkhangelsk—Naryan�Mar › St.Petersburg—Dusseldorf › Prague—Ostrava › Moscow—Belgorod › St.Petersburg—Minsk › Prague—Skopje Luanda › Moscow—Bratislava › St.Petersburg—Munich › Prague—Toronto › Moscow—Kazan › St.Petersburg—Frankfurt › Prague—Edinburgh › Moscow—Ljubljana › Rostov—Dubai › Madrid—Vigo › Moscow—Magnitogorsk › Rostov—Dusseldorf › Madrid—Minorca › Moscow—Malta › Rostov—St.Petersburg › Madrid—Palma de Mallorca › Moscow—Minsk › Rostov—Tashkent › Madrid—Tenerife › Moscow—Murmansk › Rostov—Frankfurt › Madrid—Fortaventura › Moscow—Novokuznetsk › Samara—Prague › Barcelona—Minorca › Moscow—Palanga › Prague—Bratislava › Barcelona—Palma de Mallorca › Moscow—Rostov › Prague—Brno › Barcelona—Tenerife › Moscow—Syktyvkar › Prague—Dublin › Moscow—Talin › Prague—Zilina WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e 6 AEROFLOT 2008 ADDRESS By ThE ChAiRMAN OF ThE BOARD OF DiRECTORS WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e 7 Dear Colleagues, JSC Aeroflot-Russian Airlines is the backbone of All this goes to show that Russia’s leading airline is Russian aviation and the vanguard of sector de- operating successfully in a highly competitive envi- velopment. The Company accounts for a quarter of ronment, meeting the challenges of the market, and passenger carrying by Russian airlines. Aeroflot is making best use of its strengths. Aeroflot has many a responsible corporate citizen with long and deep- notable achievements to its name in the recent past: rooted traditions of social responsibility, and has acquiring and commissioning new A330 long-haul traditionally been the main tax payer in the Russian aircraft, full implementation of electronic ticket tech- civil aviation sector. nology, rapid development of internet sales, and im- provement of service standards. however, there can Expansion of the business of Aeroflot group in 2009 be no doubt that the main challenge is yet to come. amply confirmed the group’s role as civil aviation standard bearer. Passenger numbers increased by The global crisis, which began in 2008, may last for 13.7%, revenue was USD 4,613.8 million and the several years, and adjustments to Company strat- group Aeroflot achieved net profit of USD 37.0 mil- egy will be required. it will be particularly important lion. Aeroflot group remains the biggest tax payer to ensure that operational and strategic planning in the Russian air transport sector: payments by takes full account of new market factors. Aeroflot alone to all levels of the Russian budget in 2008 totalled USD 325.5 million, which is 60% all The Russian government is aware of the problems, taxes paid by industry operators. which the sector now faces, and is taking timely ac- tion to help address them. A number of measures Results in 2009 justified the Company’s commit- to stimulate the development of air transport have ment to prioritizing development of domestic car- been approved and are being implemented. rying, and Aeroflot is consistently implementing its main strategic goal of building a world-class airline, however, the challenge is not just to weather the based on the best traditions of Russian civil aviation. storm. The crisis does not entail a halt to Company New, modern aircraft are being added to the Com- development. On the contrary, it offers an opportu- pany fleet, the latest technologies are being installed nity to find new ways of working, to optimize current throughout the business (from flight operations approaches, to raise efficiency and to occupy new and air crew training to the system of ticket sales), niches, which have been left vacant by the effects of and the Company is reinforcing its status as a fully- the crisis. Aeroflot’s customers and shareholders, and fledged participant in the international air transport Russian society as a whole have the right to expect market, helped by the advantages associated with that that Company will make the best of all these op- membership of the SkyTeam global alliance. portunities in order to secure maximum advantage. Minister of Transport igor Levitin WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e 8 AEROFLOT 2008 ADDRESS By ThE ChiEF ExECUTivE OFFiCER WorldReginfo - 77dd38c8-9d2d-4fba-835e-165e40057a5e 9 Dear Shareholders, Partners and Colleagues, the airline industry was put to a severe test in and cost reduction enabled the group to complete 2008. despite rapid growth of costs and the 2008 with net profit of USD 37 million. beginning of a recession, aeroflot proved its ability to react flexibly to market challenges, The Company kept its absolute leadership among consistently implement strategic programs Russian airlines on the international market for and ensure a high standard of service to pas- regular carrying (Aeroflot accounted for 42.4% of sengers. all passengers carried on international routes), and significantly increased its presence on the domestic The Russian air transport market felt the impact of market (from 13.6% to 16.1% by passenger turno- high prices for fuel and associated financial difficul- ver and from 11.6% to 13.7% by passenger num- ties from the start of 2008.
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