Aeroflot Group · 2025 Strategic Objectives Top-five European airline by revenue and passenger...

Aeroflot Group

Investor presentation

November 2014

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1

This document has been prepared by JSC “Aeroflot” (the “Company”). By attending the meeting where the presentation is made, or by reading the presentation

slides, you agree to the following.

This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to

purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its presentation or distribution form the

basis of, or be relied on in connection with, any contract or investment decision.

No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. No

representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to

the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents.

This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regarding

the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity,

prospects, growth, strategies, and the market in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties

because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking

statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity and the development

of the market in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this

document. The Company does not undertake any obligation to review or confirm expectations or estimates or to update any forward-looking statements to

reflect events that occur or circumstances that arise after the date of this presentation.

Disclaimer

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COMPANY OVERVIEW

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3

31%

International airlines

17% 12%

9%

9%

Other 22%

Aeroflot at a Glance – #1 Russian Carrier with a Global Network

Russian flagship carrier and market leader with a global network of

237 regular routes in 53 countries as of 30 June 2014

– LTM PAX of 33m for 1H 2014

– Fleet of 251 aircraft as of 1H 2014

– Operates c.26,000 flights per month

Main hub in Moscow (SVO), with secondary bases in St. Petersburg,

Vladivostok, Rostov-on-Don and Sochi

Premium network carrier with service quality recognized by numerous

international awards

Multi-brand product offering to capture customers in every market

segment

Impressive growth and profitability over the last three years

Shares traded on MICEX (Ticker: AFLT) and GDRs traded over-the-

counter on the Frankfurt Stock Exchange (Ticker: AETG)

Key Metrics

Aeroflot Shareholding Structure Russian Aviation Market7

Source: Company data 1 SLF – Seat Load Factor; 2 RPK = Revenue Passenger Kilometres; 3 Yield = PAX Traffic Revenue / RPK; 4 Adj. EBITDAR = EBITDA + operating lease expenses, adjusted for non-recurring

expenses; 5 Net Debt = borrowings + finance lease liabilities + pension liabilities + custom duties – cash and short-term investments; 6 Adj. Net Debt = Net Debt + capitalised operating leases (x7

LTM operating lease expense); 7 Including domestic and international traffic

Aeroflot Today

PAX (m, 1H 2014)

50.2 m

# 1

RUBm, Unless

Otherwise Stated FY 2012 FY 2013 Change 1H 2013 1H 2014 Change

PAX (m) 28 31 14.2% 14 16 9.9%

Revenue 253,039 290,956 15.0% 128,180 140,281 9.4%

SLF1 78.1% 78.2% 0.1p.p 76.2% 75.7% (0.5p.p)

RPK2 (m pkm) 74,617 85,273 14.3% 39,272 40,927 4.2%

Yield3 (RUB/pkm) 2.81 2.91 3.6% 2.76 2.88 4.3%

Adj. EBITDAR4 40,844 53,976 32.2% 19,967 18,754 (6.1%)

Margin (%) 16.1% 18.6% 2.5p.p 15.6% 13.4% (2.2p.p)

Net Debt5 60,575 64,403 – 67,687 75,929 –

Adj. Net Debt6 183,988 198,643 – 196,792 228,189 –

Adj. Net Debt/ LTM

Adj. EBITDAR 4.5x 3.7x (0.8x) 4.4x 4.3x (0.1x)

(as of 31 Dec. 2013)

Russian Federation 51.2%

Rostec 3.6%

Treasury Shares 4.5%

Private Individuals 6.5%

Free Float 34.3%

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Key Pillars of Aeroflot’s Corporate Strategy

2025 Strategic Objectives

Top-five European airline by revenue and passenger traffic

Top-20 global airline by revenue and passenger traffic

Total annual passenger traffic of more than 70m passengers, including 30m on the Russian market

Increased share of transit passengers through Aeroflot’s major hub in Moscow

Increased market share and growth based on implementation of multi-brand strategy

Delivering continued profitability and sustainable returns to shareholders

Multi-brand

Strategy

1

Global

Network

2

Strategic

Partnerships

3

Continuous

Operational

Improvement

4

Infrastructure

Expansion

5

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Aeroflot – #1 Russian Carrier with a Global Network

1 Without code sharing and including Russia

#1 airline in one of the fastest growing global markets with leading positions on both domestic and international routes

Global network with 141 destinations in 54 countries1

serviced by the youngest fleet in Europe

Multi-brand offering to reach the broadest customer spectrum across geographies

Superior product and customer experience

Efficient operating model underpinned by effective yield and cost management

Experienced management team and international standards of corporate governance

1

2

3

4

5

6

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#1 Airline in One of the Fastest Growing Global Markets with Leading Positions on Both Domestic and International Routes

20%

28% 27% 28% 26% 21%

33% 35% 36%

38%

2011 2012 2013 1H13 1H14

Source: TCH, Aeroflot 1 According to the Ministry of Transportation decree Crimea destinations are accounted as domestic for Russia starting from 1st April 2014

Russian Aviation Market Exhibits Significant

Growth

Aeroflot is Well Positioned to Increase Market

Share

PAX (m) CAGR

’11-13

Δ y-o-y Market Share (% of PAX)

32.7 35.4 39.2

17.3 20.2

47.3

56.2

64.4

28.7 30.0

80.0

91.8

103.6

45.9 50.2

2011 2012 2013 1H 2013 1H 2014

CAGR: 13.8% 9.1%

16.7%

9.5%

4.5%

16.8%

PAX (m) CAGR

’11-13

Δ y-o-y

7.0 11.5 14.0

6.2 7.7

9.4

16.0 17.4

8.0 7.9

16.4

27.5 31.4

14.2 15.6

2011 2012 2013 1H 2013 1H 2014

CAGR: 38.4% 9.9%

36.1%

41.4% (1.3%)

24.2%

International routes

Domestic routes

1

9.4 16.0

17.4

8.0 7.9 7.0

11.5 14.0

6.2 7.7

2011 2012 2013 1H13 1H14

PAX (m)

1

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7

6.4%

5.9% 5.8%

5.2%

4.0%

3.5%

Middle East Russia andCIS

Asia Pacific LatinAmerica

Europe NorthAmerica

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

3.2

2.6

1.5

0.7

EU-27

#1 Airline in One of the Fastest Growing Global Markets with Leading Positions on Both Domestic and International Routes

Source: Airbus Global Market Forecast 2013-2032, Global Insight 1 UK and EU-27 data is as of 2011, US data is as of 2012, Russia data is as of 2013

…with Significant Catch-Up Growth Potential

Russia/CIS to Remain One of the Fastest

Growing Global Aviation Markets…

RPK Growth (CAGR 2013-2032F)

Passengers per Capita1

Passengers per Capita vs. GDP per Capita ($)1

Passenger

per

Capita

GDP per Capita ($)

10

1

Denmark

Norway

Switzerland

China

Brazil

Romania

Austria

Germany

UK

Netherlands

France Italy

Spain

Greece

Portugal

Bulgaria

Croatia

Malaysia

Thailand

UAE

Finland

Russia

Global = 4.7%

1

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8

Los Angeles

Havana Punta Cana

New York

Washington

Düsseldorf Hannover

Kaliningrad

Kiev

Rostov-on-Don Krasnodar Anapa

Gelendzhik Sochi Mineralnye Vody

Astrakhan

Volgograd

Erevan Baku Teheran

Dubai

Damascus

Beirut Tel Aviv Cairo

Male

Delhi

Ho Chi Min

Bangkok

Hanoi Hong Kong

Guangzhou

Shanghai

Seoul Weihai

Beijing Dalian

Vladivostok

Harbin

Tokyo

Yuzhno-Sakhalinsk Shakhtyorsk

Okha

Khabarovsk Blagoveshchensk

Petropavlovsk-

Kamchatski

Magadan

Yakutsk

Irkutsk

Krasnoyarsk

Novy Urengoy

Surgut Nizhnevartovsk

Kemerovo Novosibirsk

Abakan Barnaul Pavlodar

Omsk

Karaganda Astana Ust-Kamenogorsk

Ürümqi Almaty Bishkek

Osch

Tashkent

Khujand Kulyab Dushanbe Samarkand Qarshi

Buhara

Urgench

Arkhangelsk

Murmansk

Saint-Petersburg

Moscow

Syktyvkar

Perm Tumen

Ekaterinburg Chelyabinsk

Samara Orenburg

Orsk

Ufa Kazan

Ulan Bator

Miami

Aeroflot routes

Rossiya routes

Donavia routes

Aurora routes

Magnitogorsk

Novokuznetsk Tomsk

Kharkov

Toronto

Fergana Namangan Navoi

Rhodos

Chita Ulan-Ude

8.0

0.8

6.0

10.0

7.8

5.0

9.0

0.3

7.0

11.0

8.8

5.3

Scheduled Charter InternationalScheduled

DomesticScheduled

Medium-haul Long-haul

1H 2013 1H 2014

Change 1H’14 vs. 1H’13

Average Flight Frequency per Route of Aeroflot JSC

91%

6% 3%

Scheduled Charter Cargo

39%

28%

14%

7%

13%

Global Network with 141 Destinations in 54 Countries1

Broad Geographic Network Focused on Scheduled Service and Increased Frequencies

Source: Company data 1 As of 30 June 2014

Traffic Revenue Breakdown (1H 2014)

Scheduled Traffic Revenue Breakdown (1H 2014)

39%

28%

14%

7%

13%

Russia Europe Asia North and Central America Other

39%

28%

14%

7%

13%


39%

28%

14%

7%

13%


39%

28%

14%

7%

13%


39%

28%

14%

7%

13%


Increasing Frequencies on All Scheduled Routes

12.5% (62.5%) 16.7% 10.0% 12.8% 6.0%

2

Malaga

Madrid

Las Palmas

Tenerife

Barcelona

Geneva Milan

Venice

Rimini

Rome

Split

Dubrovnik Tivat

Pula

Innsbruck Salzburg

Ljubljana Zagreb

Belgrade

Budapest

Athens

Sofia

Bucharest

Burgas

Varna

Istanbul

Heraklion

Antalya

Larnaca

Tel Aviv

Erevan Gyumri

Baku

Sochi Gelendzhik

Krasnodar Stavropol

Mineralnye Vody Anapa

Simferopol Odessa

Dnepropetrovsk

Donetsk Rostov-on-Don

Volgograd

Kiev

Samara

Nizhnekamsk

Kazan Nizhni Novgorod Moscow

Minsk

Warsaw

Kaliningrad

Riga

Saint Petersburg Helsinki

Tallin

Stockholm Oslo

Copenhagen

London

Paris

Brussels

Zurich

Munich Karlovy Vary Prague

Dresden

Berlin

Frankfurt

Düsseldorf

Amsterdam

Hannover

Hamburg

Bologna

Stuttgart

Thessaloniki

Vilnius

Vienna

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9

8.3% 7.8%

7.2% 6.8% 6.5%

6.1% 6.1% 5.8% 5.1% 4.9%

Mid

dle

East

Ch

ina

India

nsu

bco

ntin

en

t

Advnaced

Asia

Em

erg

ing

Asia

Ce

ntr

al E

uro

pe

CIS

We

ste

rnE

uro

pe

US

Sou

th A

me

rica

Uniquely Positioned to Capture Growing Traffic to / from Asia

Delhi Beijing Hong Kong Seoul Tokyo

Flight from Milan

Direct 10.5h 11.5h 12.0h

Via Moscow 10.5h 12.0h 14.0h 13.0h 14.0h

Via Istanbul 10.0h -0.5h 13.0h +1.0h 13.5h -0.5h 14.0h +1.0h 15.5h +1.5h

Via Dubai 10.5h 14.5h +2.5h 14.5h +0.5h 14.5h +1.5h 17.0h +3.0h

Flight from Paris

Direct 8.0h 10.0h 12.0h 11.0h 12.0h

Via Moscow 11.0h 12.5h 14.5h 13.5h 14.5h



Flight from Frankfurt

Direct 7.5h 9.5h 11.0h 10.5h 11.5h

Via Moscow 10.5h 11.5h 14.0h 13.0h 14.0h



Via Paris 10.5h 12.5h +1.0h 14.0h 13.0h 14.0h

Traffic Growth to / from Asia to Be an Important

Growth Opportunity for the Russian Market

Shortest Flying Time Between European and

Asian Destinations…

…Allows Aeroflot to Selectively Capture this

Growth

Source: Company data, IMF, Eurostat, RITA, Russian State Statistics Service, Rosaviatsia, Airbus Global Market Forecast 2014-2033

PAX (m) to / from Asia

Well Positioned to Capture Select Profitable

Transit Flows on Key Global Routes

Forecast Passenger Traffic Flows to/from Russia – CAGR 2013-2033E

Milan

Moscow

Mumbai

Beijing

ShanghaiNew York

Dusseldorf

Shortest geographic distance for selected key routes

1.4

2.2 2.4

2011 2012 2013

CAGR: 29.4%

30.0%

32.6%

35.0%

33.4%

37.2%

2011 2012 2013 1H 2013 1H 2014

CAGR: 8.0% 11.4%

Share of Transit of JSC Aeroflot in Sheremetyevo

2

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Modern, Efficient Fleet – the Youngest in Europe

Source: Airfleets, company data 1 Aeroflot excluding subsidiary airlines

Aeroflot Operates the Youngest Fleet in the Industry Ongoing Fleet Modernization…

…Enhances Utilisation and Increases Efficiency1

Flight Hours (th) Fuel Consumption

(gr per ASK)

Fuel Consumption

(gr per TKM)

Average Fleet Age of Selected Airlines (2013)1

Passenger Fleet Structure: Aeroflot1

4.0

4.9

6.3

6.4

6.7

7.2

7.6

8.5

9.2

10.5

10.5

11.2

11.8

13.1

13.5

13.7

16.9

Lan Airlines

China Southern

China Eastern

Turkish

TAM

Singapore

IAG

Qantas

KLM

Air France

ANA

Lufthansa

BA

AA

United

Delta

109 125 139 152

5.7 5.6 5.4

4.0

2011 2012 2013 1H 2014

Fleet Average Age

461

776

2011 2013

330

317

2011 2013

28

25

2011 2013

29.7% (2.0%) (5.5%)

2

x.x% CAGR

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Multi-brand Offering to Reach the Broadest Customer Spectrum Across Geographies

Source: Company data

Note: All data as of 1H 2014, except for Pobeda (as of 29 Oct. 2014)

Brand

Flagship carrier

Premium product

High income, middle class, leisure

segment

Focus on direct and transit routes

via St. Petersburg hub

Middle class segment

Short- and medium-haul direct

domestic routes in the South of

Russia


The Far East airline flying on short-

and medium-haul direct international

and domestic routes


Predominantly charter operations

Leisure segment

Short and medium-haul

Point-to-point budget passenger

carrier

Moscow

(Sheremetyevo)

Saint-Petersburg

(Pulkovo)

Rostov-on-Don,

Krasnodar, Sochi,

Mineralnye Vody

Vladivostok,

Khabarovsk,

Yuzhno-

Sakhalinsk

Orenburg,

Moscow

(Domodedovo)

Moscow

(Vnukovo)

130

72

28

24

8

155

37

11

20

25

4

Ticket sales starting in

November

First flight is scheduled

on 17 Nov. 2014

70%

14%

5%

3%

8%

Not

applicable

Network/

Scheduled

Business Model

Focus

Airports

PAX Traffic

Contribution

Regular

Routes Fleet Size

Regional

Charter

Low Cost

(Pobeda)

3

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Superior Product and Customer Experience

Pre-flight Experience Ground Experience Inflight Experience Frequent Flyer

Programme


30 36

47

62

2010 2011 2012 2013

Booking / Payment / Changes and

Amendments

Wide implementation of online

services

– Desktop / mobile websites,

mobile applications

– Multinational call-centre

– Customer offices

Ancillary services

Fast and streamlined processes:

– Check-ins (airport and online)

– Lounge

– Boarding

– Information

– Transit

– Disembarkation / Luggage

Seat quality and design

Outstanding flight experience

around a wide-selection of high-

quality food & beverages, inflight

connectivity and entertainment

across all classes

Marketing campaigns to boost

traffic, joint promotions with

partners

Recent developments: SMS

notifications, ability to upgrade

class for bonus miles, purchasing

tickets for bonus miles via mobile

application, etc.

2014 initiatives: platinum level

introduction (concierge service)

Desktop Site Visitors per Annum (m) Programme Participants (‘000)

Wide presence of

registration kiosks Priority check-in

Business class lounge

Boarding

Baggage drop-off

№ 1

2013

Conde Nast Traveller

Best Russian Airline

№ 1

2014

Skytrax World Airline Awards

Best Airline in Eastern Europe

№ 1

2013

Brand Awards

Best Company for Business

Travellers

B777

Economy class

Comfort seats with

increased row space

Full flatbed seats

Business class Desktop Website Mobile applications

2,724 4,002

2011 2013

CAGR: 21%

4

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Effective Yield Management

Yield (RUB/RPK)


RASK (RUB)

Rapid Traffic Growth on the

Back of Network Expansion…

…Combined with Effective

Yield Management…

…Translated into Solid

Revenue Growth

Moderate growth of ASK for 1H 2014

vs. 1H 2013 impacted by restructuring

of fleet at subsidiaries level

Substantial expansion of RPK with

2011-2013 CAGR of 36.0%

Total yield increased by 4.3% in RUB

terms, which was a combination of

decreasing yields on domestic market

and improving yields on international

market

Increased RASK by 3.3% in RUB terms

as a result of improved commercial

performance

2.67

2.81

2.91

2.76

2.88

2011 2012 2013 1H 2013 1H 2014

2.06

2.21

2.26

2.11

2.18

2011 2012 2013 1H 2013 1H 2014

CAGR: 4.4% 4.3% CAGR: 4.7% 3.3%

46.1

74.6 85.3

39.3 40.9

2011 2012 2013 1H 2013 1H 2014

CAGR: 36.0%

4.2%

RPK

60.0

95.6 109.1

51.5 54.1

2011 2012 2013 1H 2013 1H 2014

CAGR: 34.8%

5.0%

ASK RASK (RUB/ASK)

5

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28

26

25 25

24

2011 2012 2013 1H 2013 1H 2014

Continued Focus on Tight Cost Control and Efficiency 5

969

1,139 1,244

469 496

2011 2012 2013 1H 2013 1H 2014

Fuel Consumption per ASK Labour Productivity Effective Maintenance

3.5 3.6 3.2 3.3

2.7 2.7

A320F B767

2011 2012 2013

(23.0%) (23.2%)

(4.0%)

gr/ASK PAX Traffic / Avg. Headcount Maintenance Man-Hour / Flight Hour Ratio (for Aeroflot JSC)

CAGR: (5.5%)

5.8%

CAGR: 13.3%

Fuel Hedging

67% 70% 70%

2013¹ 2014E 2015E

Share of Fuel Consumption Hedged

Source: Company data 1 At the beginning of 2014

60.3%

5.4%

32.1%

2.2%

Revenue Structure (Before Hedging) Revenue Structure (After Hedging) Cost Structure

RUB EUR USD Other

29.6%

48.9%

19.4%2.1%

55.2%

13.8%

28.9%

2.1%

Currency Hedging1

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Experienced Management Team and International Standards of Corporate Governance

Source: Company data 1 In accordance with the definition of independence as per Russian corporate law and code of corporate conduct

Executive Directors

Vitaly Saveliev

Dmitriy Saprykin

Independent Directors1

Marlen Manasov

Igor Kamenskoy

Roman Pakhomov

Non-Executive Directors

Kirill Androsov

Mikhail Alekseev

Dmitry Peskov

Igor Kogan

Vasiliy Sidorov

Sergey Chemezov

Board of Directors Management Board

Name / Position Biography

Vitaly Saveliev

CEO

CEO of Aeroflot Since April 2009

Previously – First Vice-President in

AFK Sistema

Dmitry Saprykin

Deputy General

Director – Sales and

Property Issues

Director

Joined Aeroflot in 2009

Previously – Deputy Head of the

legal department in AFK Sistema

Shamil Kurmashov

Deputy General

Director – Finance

and Network &

Revenue

Management


In 2007-2009 – Director of the

Investment Department – Deputy

Head of the complex finance and

investment in AFK Sistema

Giorgio Callegari

Deputy General

Director for Strategy

and Alliances


Previously – Executive Vice

President for Alliances and

Strategies in Alitalia

Vadim Zingman

Deputy General

Director – Customer

Service Director


Previously – Director of the

Department for Relations with public

authorities

Audit Committee

HR and

Compensation

Committee

Strategy

Committee

Board of Directors (11 Directors)

Chaired by Igor

Kogan

Chaired by Igor

Kamenskoy

Chaired by

Roman

Pakhomov

6

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Pobeda – Aeroflot’s New Low Cost Carrier


Corporate Structure

Stand-alone 100% subsidiary

Lean organisational structure

Clear governance relationship between the

subsidiary and parent company

Management Team

Strong and experienced management team

led by Vladimir Gorbunov who has

significant experience in the Russian airline

industry

Product Offering

A typical LCC offering to attract price

sensitive customers

Substantially different from Aeroflot’s

product proposition

Ticket Pricing Discount

20-40% discount compared to fares of

“traditional” carriers

Majority of tickets are non-refundable

Sales of tickets via direct or online

channels

Aircraft Type

Standardized modern fleet of new Boeing

737-800 NG

Simple cabin with increased density of

seats (189 per aircraft)

Fleet Size

4 aircraft in place in 2014

Expanding to 37 aircraft by 2018

Routes Network

8 routes in Russia in 2014

Expanding to 47 routes by 2018

Expansion to CIS and international markets

from 2016

Passenger Traffic

10m passengers by 2018 Company

Overview

Fleet Network

and Market

Product

and Prices

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17

Pobeda – Aeroflot’s New Low Cost Carrier (cont’d)

Overview of Pobeda Project

Status

Oct. 2013: launched under Dobrolet name

– 67.8 ths PAX carried by August 2014

– Flights suspended in August 2014 due to EU sanctions after

55 days of operations

Sep. 2014: new legal entity launched to run LCC business

Oct. 2014: official press release on launch of the LCC carrier

under “Pobeda” brand

Nov. 2014:

– Ticket sales starting in November

– First flight is scheduled on 17 Nov. 2014

Business

model

A typical LCC offering to attract price sensitive customers

Substantially different from Aeroflot’s product proposition:

– Food and drinks are not included in ticket price

– Extra fees for non-carry on baggage

– 20-40% discount compared to fares of “traditional” carriers

– Majority of tickets are non-refundable

Sales of tickets via direct or online channels

2018

Targets

c. 10m passengers

Expanding to 37 aircraft

Expanding to 47 routes

Expansion to CIS and international markets

Significant Growth Potential of LCC (short-,

medium-haul in Russia)

LCC Penetration (%)

8 Target Destinations by YE’2014

Surgut

MoscowPerm

Tumen

Ekaterinburg

Samara

Kazan

BelgorodVolgograd

38%

30% 27%

17%

9%

n.m.1

Europe NorthAmerica

SouthAmerica

Asia Africa Russia

Network Regional

Focus airports VKO (Moscow)

Destinations 8

Avg.

Frequency /

Destination

7 flights per week

Fleet 4 Boeing 737-800 NG

(189 seats per aircraft)

- planned frequency per week for 2014

14

14

7 14

7

7

7

7

#

Source: Company data 1 No LCC carrier is operating in the domestic Russian market currently, EasyJet and WizzAir are operating on a small number of international routes with negligible market share

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OPERATING PERFORMANCE AND FLEET

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27.4

40.8

54.0

20.0 18.8

2011 2012 2013 1H 2013 1H 2014

Operating Performance Overview


Revenue (RUB bn)

Adj.EBITDAR (RUB bn) and

Adj.EBITDAR Margin

Operating Free Cash Flow

(RUB bn) and Margin

Strong revenue growth on the back of

increasing RASK and yields and

expanding passenger traffic

Significant profitability increase in 2011-

2013 as result of operating leverage and

improvement in profitability of key

subsidiary airlines

Lower EBITDAR 1H 2014 numbers as

result of RUB depreciation impact on

costs and non-recurring expenses

Improved cash flow generation due to

higher profitability in 2011-2013 and

unrealized transportation revenue (cash

sales) in 1H 2014

158.0

253.0

291.0

128.2 140.3

2011 2012 2013 1H 2013 1H 2014(1.9)

18.2

25.1

22.1

26.5

2012 2013 1H 2013 1H 2014

2011

CAGR: 30.3%

9.4%

Margin

17.3% 16.1% 18.6% 15.6% 13.4%

Margin

(1.2%) 7.2% 8.6% 17.2% 18.9%

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YTD KPIs Speak to the Resilience of Aeroflot’s Business Model

Aeroflot Group Passenger Traffic (m PAX) Monthly Passenger Turnover (m RPK)

6.2 7.7

8.0 7.9

14.1 15.7

1H 2013 1H 2014

Domestic Routes International Routes

Aeroflot Overall

Market Share¹ 31% 31%

International¹

Domestic¹

28% 26%

36% 38% 0

2,000

4,000

6,000

8,000

10,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2013 2014

Aug-2014 9,836

% Δ vs. Aug-2013 7.6%

% Δ vs. Jul-2014 0.8%

% Δ 8M 2014 vs. 8M 2013 5.6%

10.8%

Monthly Seat Load Factor (%) Yield and RASK (Blended)

60%

65%

70%

75%

80%

85%

90%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2013 2014

Aug-2014 86.7%

% Δ vs. Aug-2013 1.0 p.p.

% Δ vs. Jul-2014 0.1 p.p.

% Δ 8M 2014 vs. 8M 2013 0.1 p.p.

2.76 2.88

1H 2013 1H 2014

2.92 2.91 2.99 2.85

International Domestic

Yield: PAX Revenue / RPK

(RUB / RPK)

4.3%

2.11 2.18

1H 2013 1H 2014

RASK: PAX Revenue / ASK

(RUB / ASK)

Yield (RUB / RPK)1,2

2.19 2.19 2.21 2.21

International Domestic

RASK (RUB / ASK)1,2

1H 2013 1H 2014

Source: Company data 1 For scheduled flights of Aeroflot Group (excluding charter flights) 2 Data presented based on management accounting

3.3%

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Aeroflot Fleet Overview

Type1 Aeroflot Subsidiaries Total Owned Financial Lease Operating Lease

Lo

ng

-ha

ul

Boeing B-767 2 3 5 - - 5

Airbus A-330 22 - 22 - 8 14

Tu-204 - 2 2 - 2 -

Boeing B-777 10 3 13 - 10 3

Ilyushin Il-96-3002 6 - 6 6 - -

McDonnell Douglas MD-11 3 - 3 - - 3

Total 43 8 51 6 20 25

Me

diu

m-h

au

l

Airbus A-319 8 31 39 - 13 26

Airbus A-320 64 13 77 - 1 76

Airbus A-321 26 - 26 - 21 5

Boeing B-737 5 30 35 - 2 33

Total 103 74 177 - 37 140

Sh

ort

-ha

ul DHC 8 Series 200 - 3 3 - - 3

DHC 8 Series 300 - 4 4 - - 4

Antonov An-148 - 6 6 - 6 -

SSJ-100 9 1 10 - - 10

Total 9 14 23 - 6 17

Total fleet3 155 96 251 6 63 182

Source: Company data 1 As of 30-Jun-2014 2 Aircraft not in operation – to be phased out in 2014 3 Excluding 4 Mi-8 helicopters and 1 An-24 aircraft

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6M 2014 FINANCIAL RESULTS

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Key Financial Results of Aeroflot Group

• Revenue growth driven by expanding passenger traffic

• Declining EBITDAR and net income as a result of RUB depreciation impact on costs and non-recurring expenses

• Higher cash flow generation due to growth of unrealized transportation revenue (cash sales)

1 EBITDAR = EBITDA + operating lease expenses;

² Operating Free Cash Flow = net cash flow from operations - net capex on tangible and intangible assets + net pre-delivery payments for aircraft.

³ Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) (RUB1,817m), provision for pre-term return of MD-11 (RUB874m), gain on pre-term return of TU-204

(RUB594m (RUB411m for Net Income))

RUBm 6M 2013 6M 2014

6M 2014 (ex. non-

recurring expenses³)

Revenue

EBITDAR¹

Net Income / (loss)

Operating Free Cash Flow²

128,180

-

140,281

+9% growth

140,281

+9% growth

18,754

13% margin

375

0% margin

26,476

+20% growth

16,657

12% margin

19,967

16% margin

(1,905)

neg. margin

45

0% margin

26,476

+20% growth

22,096

–

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128,180 140,281

10,791

10,084 (9,383)

609

6M 2013 Volume Currency Pricing Other 6M 2014

Revenue Analysis

Revenue growth was a result of traffic volume growth, as currency effect was offset by softer fares on the

back of macroeconomic headwinds and intensified market competition

Net positive impact of 701m

RU

Bm

9%

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6M 2014,

RUBm 6М 2013

6М 2014

(excl. currency and

non-recurring

expenses)2,3

6M 2014

Y-o-y Change

(excl. currency and

non-recurring

expenses)

Y-o-y Change

Fuel 36,942 39,256 40,236 6.3% 8.9%

Opex (ex. Fuel) 86,057 95,516 101,429 11.0% 17.9%

Aircraft, Traffic and Passenger

Servicing 24,239 26,604 27,714 9.8% 14.3%

Staff 21,357 24,304 24,304 13.8% 13.8%

SG&A1 9,039 8,974 8,974 (0.7)% (0.7)%

Maintenance 8,675 8,582 9,268 (1.1)% 6.8%

Operating Lease 9,053 10,313 11,627 13.9% 28.4%

D&A and custom duties 5,733 6,414 6,414 11.9% 11.9%

Other Expenses² 7,961 10,325 13,128 29.7% 64.9%

Total Opex 122,999 134,772 141,665 9.6% 15.2%

6.5%

6.3%

28.4%

Cost Analysis

Operating costs impacted by non-recurring events and rouble depreciation which mostly affected cost of operating

lease, maintenance and aircraft, traffic and passenger servicing costs

17.2%

1 Includes sales and marketing expenses and administration and general expenses.

2 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS) (RUB1,817m), provision for pre-term return of MD-11 (RUB874m), gain on pre-term

return of TU-204 (RUB594m)

3 Currency impact on both fuel cost for operations and resale to third parties with latter accounted as other expenses

8.2%

19.6%

9.9 %

3.9%

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7.70

(0.08)

0.03

(0.18)

(0.05)

(0.05)

0.05

(0.02) (0.02)

7.38

0.11 7.49

CA

SK

6M

201

3

Δ in

Sta

ff (

ex.

SB

C¹)

Δ in

SB

C¹

Δ in

Fu

el²

Δ in

M

ain

ten

an

ce

Δ in

A

ir, T

raff

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ea

se

Δ in

D

&A

an

d C

D³

Δ in

O

the

r co

sts⁴

(ex.

NR

E⁵)

CA

SK

6M

20

14

(ex.

NR

E⁵)

NR

E⁵

CA

SK

6M

20

14

Group Unit Costs

Cost Per ASK ($ cents)

Cost per ASK declined by 2.7% positively impacted by decline of staff, fuel, maintenance and air, traffic and PAX costs and negatively by introduction of share-based compensation programme, operating lease and non-recurring expenses, including provisions for doubtful accounts receivable from tour operators

1 Share-based compensation 2 Refers to both fuel costs for operations and resale of fuel to third parties accounted as other expenses 3 Customs duties 4 Other costs include SG&A and other expenses 5 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204 Note: Costs and expenses converted at 31.02 and 34.98 RUB per $ for H1 2013 and H1 2014 respectively

(4.2)%

1.5%

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27

6M 2013 6M 2014

$915/ton

(c.RUB28,300/ton)

$900/ton

(c.RUB31,500/ton)

201 198

6M 2013 6M 2014

Managing Fuel Costs

Fuel Consumption per ATK (gr/ATK)

Fuel Consumption per ASK (gr/ASK)

Average Fuel Price ($/ton)

Aeroflot is achieving efficiency gains in fuel costs as new aircraft are put into operation, while old and less fuel-efficient ones are in the process of phase out

• Continuous fuel supply optimisation

– 5-year supply contract at Sheremetyevo and 1-year supply contracts

in 29 regional airports across Russia

• Majority of fuel purchased in Russia (83%) and almost all fuel at

international airports supplied at formula-linked price

– Jet fuel price = NW Europe (FOB Rotterdam) price x Discount x FX

rate1 x 1.182 + Storage/Fuelling/Supply fees (if any of these

applicable)

• Average fuel purchase price of $900/ton (c.RUB31,500/ton3) in H1

2014 vs $915/ton (RUB28,300/ton4) in H1 2013 (1.7% y-o-y decrease

in USD terms)

25 24

6M 2013 6M 2014

(4.0)%

(1.5)%

1 USD/RUB exchange rate as per the Central Bank of Russia 2 Assuming 18% VAT rate 3 Based on average H1 2013 exchange rate of 31.02 RUB/USD 4 Based on average H1 2014 exchange rate of 34.98 RUB/USD

(1.7)%

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28

3,603 3,734

6M 2013 6M 2014

469 496

6M 2013 6M 2014

1.30 1.30

6M 2013 6M 2014

RPK / Avg. Headcount

(m pkm per employee)

Headcount Overview and Labour Productivity

Traffic Revenue / Avg. Headcount

(RUB ‘000 per employee)

PAX Traffic / Avg. Headcount

(passengers per employee)

H1 2013 H1 2014 Y-o-y Change

Aeroflot JSC 16,083 17,321 7.7%

Aeromar 2,865 3,225 12.6%

Subsidiary Airlines 8,742 8,677 (0.7)%

Other1 2,435 2,376 (2.4)%

Total 30,125 31,599 4.9%

Sizeable improvement in labour productivity has resulted in increasing traffic revenue and PAX traffic per employee

Airlines Labour Productivity2

(0)% 6% 4%

1 Other includes AeroMASH AB, Aeroflot Riga, Sherotel and Aeroflot-Finance. 2 Based on Aeroflot JSC and subsidiary airlines average headcount.

Headcount

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29

Adjusted Operating and Net Income Analysis

6M Adjusted Operating Income Build-Up (RUBm)

Aeroflot Group remained profitable on operating and net income basis adjusted for non-recurring provisions

(1,384)

1,817

874

(594)

713

Operating Income 6M 2014 Provision on accounts receivablein relation to doubtful debtors

(Ideal-tur and PGS)

Provision for pre-term return ofMD-11

Gain on pre-term return of TU-204

Adjusted Operating Income 6M2014

6M Adjusted Net Income Build-Up (RUBm)

(1,905)

1,817

874

(411)

375

Net Income 6M 2014 Provision on accounts receivablein relation to doubtful debtors

(Ideal-tur and PGS)

Provision for pre-term return ofMD-11

Gain on pre-term return of TU-204

Adjusted Net Income 6M 2014

232

235

240

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135

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Arial

22

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30

5,181

10,791609

(9,383)

10,084

(4,796)

(2,730)

(2,947)

(2,365)(1,260) (681)

(1,790 )

713

(2,097) (1,384)

Op

era

tin

g I

nco

me

6M

201

3

Vo

lum

e

Oth

er

Pri

cin

g

FX

be

ne

fit

FX

dra

g

Fu

el*

Sta

ff

Air

cra

ft, T

raffic

an

d P

AX

*

Op

era

tin

g L

ease

s*

D&

A a

nd C

D**

Oth

er

op

ex*

**

Ad

juste

d O

pera

ting

Inco

me

6M

201

4

NR

E**

**

Op

era

tin

g I

nco

me

6M

201

4

Group Operating Income Analysis

6M Operating Income Evolution, y-o-y basis (RUBm)

* Excluding currency impact

** Custom Duties

*** Other operating expenses include SG&A, maintenance costs, other operating expenses (excluding currency effect and non-recurring expenses; including leased aircraft return provision)

**** Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204

Revenue growth driven by higher passenger volumes offset by increased costs due to FX movement and non-

recurring provisions

Total revenue change of 12,101m

Total recurring expenses change of 16,569m

232

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Arial

22

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31

1,835

(708)

(527)

163

(3,143)

407 52267

(251)(1,905)

2,280 375

(293)

Ae

roflo

t JS

C

Ro

ssiy

a A

irlin

es

Vla

div

osto

k A

ir

Do

navia

Ore

nair

Au

rora

Sh

ero

tel

Ae

rom

ar

Oth

ers

(inclu

din

g m

inori

ty)

Gro

up N

et

Inco

me

H1

20

14 N

RE

¹

Ad

juste

d G

roup

Ne

t In

com

e H

1 2

01

4

Ad

juste

d G

roup

Ne

t In

com

e H

1

201

3²

Group Net Income

Continuing restructuring of subsidiaries combined with non-recurring expenses contributed to negative reported net

income for the period

Aeroflot Group Net Income (RUBm)

Total net loss of subsidiary airlines of 3,808m

1 Non-recurring expenses include provision on accounts receivable in relation to doubtful debtors (Ideal-tur and PGS), provision for pre-term return of MD-11 and gain on pre-term return of TU-204 2 Net income for 6M 2013 adjusted for non-recurring gain on disposal of Aerofirst (RUB338m)

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32

30-Jun-2013 30-Jun-2014 Change

Borrowings 13,638 14,403 5.6%

Finance Lease

Liabilities 76,389 97,308 27.4%

Pension Liabilities 722 735 1.8%

Customs Duties 402 300 (25.4)%

Total Debt 91,151 112,746 23.7%

Cash and Short Term

Investments 23,464 36,817 56.9%

Net Debt 67,687 75,929 12.2%

Leverage and Liquidity

Debt (RUBm)

5,588 10,434 10,629 10,330

60,327

H2 2014 2015 2016 2017 2018+

Finance Lease Repayment Schedule (RUBm)2

Borrowings Structure by

Currency

91%

9%

• Manageable debt level

• Cash position of RUB 36,817m and undrawn credit lines of RUB19,817m

3.8 x

2.6 x

4.3 x

30-Jun-2013 31-Dec-2013 30-Jun-2014

Total Debt / LTM EBITDA¹

Finance Lease Structure by

Currency 3%

97%

88% 12% RUB USD

1 Total debt does not include capitalised operating lease expenses 2 Future payments in dollars converted into roubles at exchange rate of 33.6306 RUB per USD

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33

(1,205)

5,586

2,244

(1,361)

1,766 7,030

19,673 26,703

(2,396)

2,169 26,476

22,096

Profit BeforeIncome Tax

D&A InterestExpense

UnrealizedNet FX Loss

Other Adj.before

WorkingCapital

Changes

Cash Flowsfrom

OperatingActivities

beforeWorkingCapital

Changes

WorkingCapital

Changesand Income

Tax

NetCash Flows

fromOperatingActivities

NetCapital

Expenditures

NetPre-deliveryPayments

for Aircrafts

FreeCash Flow6M 2014

FreeCash Flow6M 2013

Operating Free Cash Flow

Substantial cash flow generation over the last 6 months and ahead of summer season

6M 2014 Operating Free Cash Flow (RUBm)

19.8%

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34

APPENDIX

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35

A Modern Global Airline with a Rich 90-Year Heritage

Phase III

(2007 – 2011)

2009: Restructuring

programme – new corporate

structure and management

team (CEO Vitaly Saveliev)

2009: Further fleet

modernisation (+24 new

aircraft)

2010-2011: New modern

terminals D & E put into

operation at Russia’s main

airport (+25 gates and 17m

passenger capacity),

Aeroflot’s hub

Phase I

(1923 – 1991)

1923: Russian civil aviation

industry and Aeroflot’s

predecessor established

1980s: Flights to all

continents; passenger annual

traffic of 120m

1991: Reorganised as Joint

Stock Company

Phase II

(1992 – 2006)

1992: Start of fleet

modernisation first Airbus and

Boeing 767 delivered

2000: Listed on Moscow

Exchange

2006: Joined SkyTeam

alliance

Phase IV

(2011 onwards)

2011: Acquired domestic

regional carriers Rossiya,

Vladivostok Air, Sakhalinskie

Aviatrassy, Orenair from

Rostec. Integration begins

(including Donavia)

2013 – 2014: Regional airline

integration ongoing. Creating

Aurora Airlines, a Russian Far

East carrier (merging Vladavia

and SAT)

2014: Sochi 2014 Olympics

official airline

2014: Launch of Low Cost

Carrier


http://static1.wikia.nocookie.net/__cb20100507093230/logopedia/images/a/a1/Aeroflot_logo.svg

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36

Envisioned Aeroflot Network by 2018

St. Petersburg

Moscow

Rostov

Krasnodar

Sochi

Vladivostok

Khabarovsk

HUB Moscow Sheremetyevo (SVO)

Parameters 6 bank hub

Group focus airports:

Pulkovo (LED) > 170 flights per day

Krasnodar (KRR) up to 10 flights per day

Rostov-on Don (ROV) up to 20 flights per day

Sochi Intl. (AER) up to 5 flights per day

Khabarovsk Novy (KHV) > 70 flights per day

Vladivostok Intl. (VVO) > 50 flights per day

Network International &

Mainline domestic

Hub SVO

Destinations 129

Avg. Frequency

/ Destination 17 flights per week

Fleet 160

Network Domestic, Regional

Focus airport LED

Destinations Up to 70

Avg. Frequency


Fleet 43

Network Regional

Focus airports VVO, KHV, UUS

Destinations > 100 (incl. legs)

Avg. Frequency


Fleet 40

Network Regional

Focus airports ROV, KRR, AER, MRV

Destinations > 30

Avg. Frequency


Fleet 10

Network Touristic destinations

(non-scheduled)

Focus airports -

Destinations -

Avg. Frequency

/ Destination -

Fleet 30

2018 Network Objectives 2018 Hub and Focus Airports


http://en.wikipedia.org/wiki/File:Aeroflot_Logo_en.svg

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37

Sheremetyevo Expansion to Support Future Growth

Sheremetyevo is expected to become one of the leading

airports in Europe as a result of the implementation of a

two-stage expansion programme

Stage 1 to be completed by 2017

– Third runaway construction (length: 3,200 metres,

width: 60 metres; able to host all types of aircraft)

– First stage of North Terminal reconstruction and

opening of underground tunnel connecting North and

South terminals

– Airport capacity to grow up to 42m PAX p.a.

Northern Terminal complex capacity to reach 32m

PAX p.a. upon first stage completion

Stage 2 to be completed by 2030

– Further development of the second landing area

– New terminal facilities with capacity of 64m PAX p.a.

– Total cargo traffic of up to 1,115m tons

Overview Sheremetyevo Site Layout

2.2%

North Terminal

Complex

South Terminal

Complex

Aircraft

Maintenance

To Moscow (link

with Non-stop

High speed

Railway Moscow -

S.Peterburg)

Sheremetyevsky

highway

Vehicle

Maintenance

Compound

Pier 1

Pier 2

Multilevel Car

Park

Terminal

D Terminal

E Terminal F

Terminal

G International

Highway

Hotel

<<Novotel>>

Hotel

Sheremetyevo

Airport – Hotel

Railway

Station

To Moscow T

o M

osco

w

Cargo

Terminal

Runway 3

Runway 2

Runway 1

To Belorussky

Station (to

Moscow Centre)

Cargo Complex

Terminal

A

Business

Park

Terminal

C

Terminal

B

Multilevel

Car Park

Railway

Station Airport Administration

Offices

Conference Centre/Hotel

Interterminal

Tunnel


232

235

240

182

196

204

135

157

179

0

112

192

59

100

135

0

176

80

Arial

22

44

66

38

Aeroflot vs European Network Carriers

Advantage

Financial performance

Best-in-class growth and profitability

Lower growth and profitability

Cost position

Superior cost position supported by a young and efficient fleet, high labour productivity and high utilisation rates

Uncompetitive, high cost base and lower labour productivity

Fleet age Average age: 4 years2

Average age: 11 years3

Domestic market growth opportunity

Significant growth potential in the Russian aviation market and powerful growth drivers (e.g., increasing penetration of air travel, large population, GDP/capita growth, expanding middle class, attractive domestic pricing, etc.)

Limited structural growth prospects in mature markets

Threat from LCCs

Limited LCC penetration which only applies to select international routes

Aeroflot is the first airline in Russia to launch an LCC-like carrier (ongoing project)

LCCs are a grave threat to the short- and medium-haul businesses of network carriers

LCCs, including large well-established players like Ryanair and easyJet, account for c. 1/3 of intra-European market

Regulatory environment

Restrictive environment limits new entrants/competition, supporting and protecting Aeroflot’s competitive position, particularly in the lucrative domestic market

Deregulated aviation market resulting in intense competition and structural overcapacity

Labour

No history of strikes or labour disruptions

Successfully concluded negotiations to extend the current collective bargaining agreement until 2017

Ongoing labour discord and regular threat of strikes

Recent strikes at Air-France KLM and Lufthansa, some of the worst in their recent history

Government support

Majority (51%) state-owned

Implicit state support and “back-stop”

Minority state-owned (Air France-KLM) or nil state ownership (IAG, Lufthansa)

Primary government focus on labour/employment issues

59.9% 15.0% 9.4%

2012A 2013A 1H 2014

16.1% 18.6% 13.4%

2012A 2013A 1H 2014

1.4% 1.7% 0.9%

2012A 2013A 1H 2014

10.4% 11.0% 8.5%

2012A 2013A 1H 2014

Source: Company information, equity research, FactSet as of October 30, 2014

Note: Aeroflot forecasts based on market consensus 1Average of Air France-KLM, IAG and Lufthansa; 2 Excluding subsidiary airlines; 3 Average of latest reported fleet figure by each airline

Revenue growth (y/y) Revenue growth (y/y)1 EBITDAR margin EBITDAR margin1

CASK 2013A (ex-fuel & total; $ cents) CASK 2013A (ex-fuel & total; $ cents)1

5.5 2013A 8.3 2013A7.8 12.2

http://www.lufthansagroup.com/en.html

232

235

240

182

196

204

135

157

179

0

112

192

59

100

135

0

176

80

Arial

22

44

66

39

Address: Midland Plaza, Arbat St. 10, 119002 Moscow, Russia

Tel: +7 (495) 258-06-86

E-mail: [email protected]

Web: www.aeroflot.ru

Investor Relations Contacts

Andrey Napolnov, CFA

Head of Investor Relations

Aeroflot – Russian Airlines

Tel: +7 (495) 258-06-86


[email protected]

Nikolay Domrachev

Senior IR manager

Aeroflot – Russian Airlines

Tel: +7 (495) 258-06-86


mailto:[email protected]

http://www.aeroflot.ru/





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