Aeroflot: Passenger traffic being restored in financially prudent manner
PJSC Aeroflot (Aeroflot) today announces its financial results for the third quarter (Q3) and nine months (9M) ending 30 September 2020 in accordance with Russian Accounting Standards (RAS). RAS results are presented on a non-consolidated basis.
Key results in accordance with RAS, RUB million
|Q3 2019||Q3 2020||Change||9M 2019||9M 2020||Change|
|Cost of sales||143,016||75,648||(47.1)%||412,372||253,224||(38.6)%|
Andrey Chikhanchin, PJSC Aeroflot Deputy CEO for Commerce and Finance, said:
“In Q3 2020 Aeroflot Group carried 10.1 million passengers, 3.8 million of whom flew with Aeroflot airline. Taking into consideration all the operational and economic challenges currently facing the aviation sector, our gradual restoration of passenger traffic, driven primarily by the domestic market, is being achieved in a financially prudent manner. Firstly, the passenger load factor continued to trend upwards. Secondly, despite market headwinds, we were able to sustain Aeroflot airline yields at levels comparable to the previous year.
“Thanks to the growth of passenger numbers in the third quarter, PJSC Aeroflot increased revenue quarter-on-quarter by RUB 34.4 billion, while cost of sales increased by RUB 21.3 billion. As a result, the gross loss declined by RUB 13.1 billion. These metrics clearly support our balanced approach to restoring capacities, striking a balance between passenger numbers and our financial results, as well as the results of numerous optimisation initiatives and strict cost control.”
Comments on Q3 and 9M 2020 RAS financial results
- The spread of the novel coronavirus (COVID-19) has had an unprecedented impact on the global aviation industry. After a significant reduction in passenger numbers in Q2, operating metrics for Q3 recovered somewhat thanks to the restoration of domestic flights and the restart of some international routes. According to IATA, the Russian domestic market was the only major market worldwide where operating volumes were fully restored as early as August; the market has continued to outstrip other markets in terms of its speed of recovery.
- As a result of the recovery of flights on the domestic market in Q3, passenger traffic grew more than 4x quarter-on-quarter, cutting the overall decrease year-on-year from 90.6% in Q2 to 64.2% in Q3 and consequently 59.1% for 9M.
- Revenue for 9M 2020 was RUB 176,950 million, a decrease of 58.1% year-on-year. Revenue in Q3 increased by more than 2.5x quarter-on-quarter, to RUB 55,246 million. Lower load factors put pressure on RASK despite comparable level of yields (+0.8% in 9M year-on-year; +1.2% in Q3 year-on-year). Moreover, some widebody aircraft continued to operate cargo flights from Q2; as a result, revenue in this segment grew by more than 30% in 9M, further supporting the financial result for the period.
- Cost of sales in 9M 2020 was RUB 253,224 million, 38.6% lower than in the year-ago period. The decrease in costs was due to the reduction in operational volumes as well as extensive cost-optimisation initiatives launched by management.
- The reduction in capacities led to a decrease in variable costs related to operating volumes. Individual cost items that have decreased include jet fuel, aircraft servicing expenses, and in-flight passenger servicing costs. Operational fixed costs also decreased due to the implementation of additional cost optimisation measures. Leasing costs decreased year-on-year due to the decommissioning from the fleet of five aircraft leased by PJSC Aeroflot. Due to the increased focus on passenger safety and mitigation of the spread of the coronavirus, the Company has continued to allocate additional funds for enhanced pre-flight and aircraft disinfection procedures.
- As a result of optimisation measures, the Company achieved a total reduction of 38.6% in SG&A for 9M 2020 year-on-year, including administrative staff costs, general operating costs, consulting and marketing fees and booking system costs, as a result of lower booking volumes.
- The net loss for 9M 2020 was RUB 65.6 billion, primarily due to the virtual standstill of the fleet and operational activity in Q2. Thanks to optimisation initiatives and the restoration of capacities in strict lockstep with economic efficiency, the net loss for Q3 was reduced to RUB 23.3 billion, against RUB 26.2 billion in Q2.