Aeroflot: COVID-19 had significant impact on airline’s financial results
Aeroflot announces Q2 and 6M 2020 RAS financial results
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Russian PJSC Aeroflot today announces its financial results for the second quarter (Q2) and six months (6M) ending 30 June 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
|Q2 2019||Q2 2020||Change||6M 2019||6M 2020||Change|
|Cost of sales||136,316||54,312||(60.2%)||269,355||177,576||(34.1%)|
Comments on Q2 and 6M 2020 RAS financial results
- The spread of the novel coronavirus (COVID-19) has had an unprecedented impact on the global aviation industry. Almost complete halting of all international flights at the end of March 2020 as well as restrictions introduced on domestic flights led to a drastic decrease in passenger numbers in Q2 and 6M 2020, and had a significant impact on PJSC Aeroflot’s financial
- The deterioration in operating results is due to the significant impact of travel restrictions and quarantine-related measures both in the international and domestic segments. In Q2 2020, passenger turnover decreased by 92.1% year-on-year, following the almost complete halting of international flights (with the exception of repatriation flights) and a significant reduction in domestic flights due to quarantine-related travel restrictions in certain regions of Russia. As a result, in 6M 2020, passenger turnover declined by 56.7% year-on-year. The management’s decision to decrease capacity by 47.8% had a positive impact on
- The reduction in passenger turnover led to a decrease in revenue; in 6M 2020, the revenue amounted to RUB 121,704 million, down 9% year-on-year. Despite a positive yield trend (+2.1% year-on-year), a 13.2 p.p. decrease in capacity led to a 15.2% decrease in RASK year-on-year. At the same time, part of the wide-body fleet was repurposed to carry cargo, leading to a 40%+ revenue increase in this segment and supporting the financial result of the current reporting period.
- In 6M 2020, the cost of sales totaled RUB 177,576 million, down 34.1% year-on-year. This was due to a decrease in operational volumes as well as due to the implementation of large-scale cost optimization measures introduced by the
- The decrease in capacity led to a reduction in variable costs dependent on operational volumes. Individual cost items that decreased included fuel, airport servicing expenses, and in-flight passenger servicing costs. Operational fixed costs also decreased due to the implementation of additional cost optimization measures. Leasing costs decreased year-on-year due to the decommissioning from the fleet of five aircraft leased by PJSC Due to the increased focus on passenger safety and mitigation of the spread of the coronavirus, the Company continued to allocate additional funds for enhanced pre-flight and aircraft disinfection procedures.
- The implementation of measures to optimise operational and non-operational costs, including management remuneration, general business expenses, consulting and marketing costs as well as
booking system costs as a result of lower number of bookings, led to an overall reduction in SG&A of 36.1% in 6M 2020.
- The decrease in demand for air transportation that began in Q1 and peaked in Q2 has had a significant impact on the financial result for 6M 2020. Cost-optimization measures aimed at reducing the net loss, which amounted to RUB 3 billion in 6M 2020, have mitigated the negative impact but could not fully compensate for it.
- Despite the challenging situation that the aviation industry is facing, we are observing a gradual recovery of domestic flights. To support this positive trend, management plans to continue the implementation of strict cost-optimisation measures and is in constant dialogue with partners to improve terms and conditions in order to preserve jobs and Company’s business and weather the current global