AEROFLOT GROUP
ANNUAL REPORT 2016
CONTENTS 1. Aeroflot Group profile
1.1. Aeroflot Group`s Airlines ..................................................................................................
1.2. 2016 Results .......................................................................................................................
1.3. Operating and Financial Highlights ...................................................................................
1.4. Investment Case .................................................................................................................
1.5. Key Events .........................................................................................................................
1.6. Industry Recognition and Awards ......................................................................................
2. Strategic Report ............................................................................................................. 2.1. Chairman`s Statement ........................................................................................................
2.2. Chief Executive Officer`s Statement..................................................................................
2.3. Market Overview................................................................................................................
2.4. Strategy Overview ..............................................................................................................
2.5. Business Model ..................................................................................................................
3. Business Overview 3.1. Operating Results ...............................................................................................................
3.2. Route Network ...................................................................................................................
3.3. Aircraft Fleet ......................................................................................................................
3.4. Sales and Distribution ........................................................................................................
3.5. Aircraft Maintenance and Repair Stations .........................................................................
3.6. Flight Safety and Aviation Security ...................................................................................
3.7. Customer Service and Brand Management ........................................................................
3.8. Information Technology and Innovation............................................................................
3.9. Procurement .......................................................................................................................
4. Corporate Social Responsibility 4.1. HR Policy ...........................................................................................................................
4.2. Charity and Community Initiatives ....................................................................................
4.3. Environmental Protection Programme ...............................................................................
5. Financial Review .....................................................................................................................
6. Corporate Governance 6.1. Coprorate Governance System ...........................................................................................
6.2. Risk Management ...............................................................................................................
6.3. Investor Relations, Equity and Debt ..................................................................................
7. Appendixes 7.1. IFRS Consolidated Financial Statements
7.2. Entities in which PJSC Aeroflot Holds Shares or Interest
7.3. Interested party transactions ...............................................................................................
7.4. Execution of Presidential and Governmental Instructions .................................................
7.5. Complance with the Corporate Governance Code .............................................................
7.6. Information about the programme for Disposal of non-core assets
7.7. Energy Consumption by Aeroflot Group Airlines in 2016 ................................................
7.8. Aeroflot Group Operating Data .........................................................................................
7.9. Glossary ..............................................................................................................................
7.10. Contact Information ...........................................................................................................
ABOUT THE REPORT
This 2016 Annual Report (the “Report”) has been prepared by Public Joint Stock Company
Aeroflot – Russian Airlines (“PJSC Aeroflot”, “Aeroflot airline”, or the “Company”).
“Aeroflot Group” or the “Group” refer to PJSC Aeroflot and its subsidiaries.
Other annual reports of the Company are available on its website in the Shareholders and
Investors section at http://ir.aeroflot.com/shareholders-and-investors/.
This Report discloses information on the implementation of the Group’s long-term and medium-
term strategy in 2016, presents the Group’s operating and financial results, and describes the
Group’s corporate governance system. This Report has a particular focus on the Group’s
corporate social responsibility activities.
This Report has been prepared based on PJSC Aeroflot’s management reports and in line with
PJSC Aeroflot’s consolidated IFRS financial statements for 2016. It also incorporates elements of
the GRI G4 Sustainability Reporting Guidelines.
PJSC Aeroflot’s consolidated IFRS financial statements for 2016 were audited by
AO PricewaterhouseCoopers Audit.
This Report has been prepared based on the information available to the Company and the Group
as at the time when this Report was prepared, including information obtained from third parties.
The Company reasonably believes that this information is complete and accurate as at the
publication date of this Report; however, it does not make any representation or warranty that this
information will not be updated, revised, or otherwise amended in the future.
This Report includes estimates or forward-looking statements related to operating, financial,
economic, social and other measures that can be used to assess the performance of PJSC Aeroflot
and Aeroflot Group. The Company does not make any representation or warranty that the results
anticipated by such forward-looking statements will be achieved. The Company shall not be
liable to any individual or legal entity for any loss or damage which may arise from their reliance
on such forward-looking statements.
AEROFLOT GROUP PROFILE
1.1. Aeroflot Group Airlines
Aeroflot Group is Russia’s largest airline group and one of Europe’s leading passenger airlines.
Description
Share of the
Group’s passenger
traffic
Operating performance in
2016
Aircraft fleet as at
31 December 2016 Scheduled routes in 2016
Aeroflot is Russia’s biggest carrier, leader of
the Russian civil aviation industry, and one
of the oldest airlines in the world. Aeroflot is
based in Moscow at Sheremetyevo Airport.
Passengers carried:
29.0 million PAX
Passenger turnover:
82.7 billion RPK
Available seat-kilometres:
101.8 billion ASK
Passenger load factor: 81.3%
SSJ100 – 30
Airbus A320/321 – 102
Boeing 737 – 20
Airbus A330 – 22
Boeing 777 – 15
Total: 189 aircraft
Domestic – 46
International – 87
Total: 133 scheduled routes
Rossiya is one of Russia’s largest carriers
and the market leader in the North-West of
the country. Based in Saint Petersburg, the
company also operates flights from Vnukovo
airport in Moscow and has branches in
Moscow, Rostov-on-Don, and Orenburg. In
addition to its scheduled flights, Rossiya
operates charter flights.
Passengers carried: 8.8 million PAX
Passenger turnover:
20.5 billion RPK
Available seat-kilometres:
25.2 billion ASK
Passenger load factor: 81.2%
Airbus A319/320 – 31
Boeing 747 – 17
Boeing 747 – 7
Boeing 777 – 6
An-148 – 6 (subleased)
Total: 67 aircraft
Domestic – 68
International – 44
Total: 112 scheduled routes
Aurora is the Group’s carrier in the Russian
Far East. It is based at Vladivostok, Yuzhno-
Sakhalinsk and Khabarovsk airports and
operates flights between major cities in the
Far East and Siberia, regional flights and
flights on the most popular routes.
Passengers carried: 1.4 million PAX
Passenger turnover: 2.2 billion RPK
Available seat-kilometres:
3.0 billion ASK
Passenger load factor: 73.0%
Airbus A319 – 10
DHC 6-400 – 2
DHC 8-200 – 2
DHC 8-300 – 4
DHC 8-402 – 5
An-24 – 1 (subleased)
Total: 24 aircraft
Domestic – 17
Local – 18
International – 16
Total: 51 scheduled routes
Pobeda is the Group’s low-cost carrier,
launched to further increase social mobility.
Pobeda is based at Vnukovo airport in
Moscow.
Passengers carried: 4.3 million PAX
Passenger turnover: 6.7 billion RPK
Available seat-kilometres:
7.6 billion ASK
Passenger load factor: 88.3%
Boeing 737 – 12
Total: 12 aircraft
Domestic – 59
International – 13
Total: 72 scheduled routes
66.7%
20.3%
3.2%
9.9%
2016 Results
In 2016, Aeroflot Group achieved high operating and financial results despite the challenging
situation in the passenger transportation market. The Group strengthened its market position thanks
to its effective strategy, which is well adapted to external requirements and is founded on having a
presence in different market segments, and also to digitalisation and focus on financial discipline.
Staying on a
growth track
42.3%
share of the Russian
air transportation
market
43.4 million
passengers carried in
2016
10.3%
Passenger traffic
increase in 2016
+14.1%
international
passenger traffic
increase
+7.6%
domestic passenger
traffic increase
42.1%
share of international
passenger traffic
81.5% passenger load factor
3,2 p.p.
passenger load
factor increase
Connecting cities
and continents
326
scheduled routes
Flights to 51
countries
153 unique destinations
in the summer schedule
144 in the winter
schedule
Aeroflot is a
member of the
SkyTeam global
alliance
292
aircraft in the fleet
(as at 31 December
2016)
30 aircraft – net
increase in the fleet 4.2 years average age of Aeroflot
airline fleet
6.5 years average age of
Aeroflot Group fleet
Delivering the
best offers
4 stars in the
Skytrax rating –
Aeroflot airline
Aeroflot is the Best
Airline in Eastern
Europe according to
Skytrax World
Airline Awards
37 long-haul aircraft
have Wi-Fi access
points
72%
Aeroflot airline’s
Net Promoter Score
Ensuring
sustainable
development
36.6 thousand
people employed by
the Group
companies (as at
31 December 2016)
Responsible approach
to employees: social
support, non-state
pension coverage
Over 6.9 thousand free
tickets issued as part of
the Mercy Miles project
Support for
Russian sports,
culture, and
cinema
Improving
corporate
governance
7+
corporate
governance rating
assigned by the
Russian Institute of
Directors
3 independent
directors on the Board
of Directors
Compliance with the
key requirements of the
Corporate Governance
Code
40.3% free float
Enhancing
financial stability
RUB 495.9 billion
revenue (+19.4%)
RUB 137.6 billion EBITDAR, 27.7%
EBITDAR margin
RUB 38.8 billion net
income
Net debt decreased
by RUB 91 billion
Operating and Financial Highlights
Passenger traffic, million PAX
Пассажиропоток Passenger traffic
Темп роста Growth rate
Passenger load factor
Процент занятости
кресел
Passenger load factor
Изменение занятости
кресел (п.п.)
Passenger load factor
change (p.p.)
Passenger turnover, billion RPK
Пассажиропоток Passenger turnover
Темп роста Growth rate
Available seat-kilometres, billion ASK
Предельный
пассажирооборот
Available seat-
kilometres
Темп роста Growth rate
Revenue, RUB billion
Выручка Revenue
Темп роста Growth rate
EBITDAR, RUB billion, and EBITDAR margin, %
EBITDAR EBITDAR
Рентабельность
EBITDAR
EBITDAR margin
27,5 31,4 34,7 39,4 43,4
67,6%
14,3% 10,7% 13,4% 10,3%
2012 2013 2014 2015 2016
Пассажиропоток Темп роста
78,1% 78,2% 77,8% 78,3% 81,5%
1,3
0,1 (0,4)
0,5
3,2
2012 2013 2014 2015 2016
Процент занятости креселИзменение занятости кресел (п.п.)
74,6 85,3 90,1 97,6 112,1
61,9%
14,3% 5,6% 8,4% 14,8%
2012 2013 2014 2015 2016
Пассажирооборот Темп роста
95,6 109,1 115,8 124,7 137,6
59,3%
14,1% 6,2% 7,7% 10,3%
2012 2013 2014 2015 2016
Предельный пассажирооборот Темп роста
253,0 291,0 319,8
415,2 495,9
60,1%
15,0% 9,9%29,8% 19,4%
2012 2013 2014 2015 2016
Выручка Темп роста
38,5 51,0 48,7
103,1
137,6
15,2% 17,5% 15,2%24,8% 27,7%
2012 2013 2014 2015 2016
EBITDAR Рентабельность EBITDAR
EBITDA, RUB billion, and EBITDA margin, %
Net profit, RUB billion1
EBITDAR EBITDAR
Рентабельность
EBITDAR
EBITDAR margin
Чистая прибыль / убыток Reported net
profit/loss
Скорректированная
чистая прибыль
Adjusted net profit
Investment Case
Aeroflot Group
Leader of the Russian air transportation market
Young and efficient aircraft fleet
Business highly adaptable to macroeconomic environment
Stable operational growth and improving financial results
The Group’s strength Description & objective 2016 results
Business diversification based on
a multi-brand strategy
Diversification of the
Group’s activity by
segment to maximise
flexibility in any economic
environment
Integration of regional companies (Donavia and
Orenair) to create a single regional carrier in the
mid-market price segment, Rossiya airline.
Further development of Pobeda airline. In 2016,
Pobeda carried 4.3 million passengers.
Presence in attractive market
segments
Expansion in profitable
segments and in markets
with the long-term potential
Flights to new destinations in Kazakhstan
launched in 2015 (about 0.5 million passengers
carried).
The frequency of flights to London increased
(from 21 to 35 flights per week).
Aeroflot airline’s passenger traffic on
international routes increased by 10.6%.
Standardised high-quality
product
Ensuring consistently high
product quality to attract
and retain passengers
Aeroflot was awarded 4-Star Airline status and
recognised as the Best Airline in Eastern Europe
for the fifth time by Skytrax World Airline
Awards.
1 Adjusted net profit for 2014 and 2015 excludes result from derivatives, reserves, and other one-off effects.
20,9 31,8 24,8
58,7
78,0
8,2% 10,9% 7,8% 14,1% 15,7%
2012 2013 2014 2015 2016
EBITDA Рентабельность EBITDA
5,2 7,3
(17,1)
(6,5)
38,8
10,8
30,9
2012 2013 2014 2015 2016
Чистая прибыль / убыток Скорректированная чистая прибыль
The Group’s strength Description & objective 2016 results
Balanced route network built
around the hub at Sheremetyevo
airport
Diversification of
destinations to optimise
presence in regions with
different demand patterns
and network development
to promote synergies
The Group continued to improve route network
quality: scheduled flights frequency grew by
4.8%, driving better flight connectivity.
Route network expansion promotes transit traffic
growth, including in the international transit
segment: Aeroflot airline carried
3.7 million passengers in the segment.
Efficient financial
management and consistent
cost control
Cost optimisation to ensure
competitive edge RASK growth (+10.3%) outpacing CASK
growth (+5.7%).
Key Events
Developing a multi-brand platform
28 March. The new combined Rossiya airline, formed from the integration of the Group’s three
regional carriers (Rossiya, Donavia, and Orenair), launched flight operations.
31 December. Pobeda airline’s passenger turnover reached 4.3 million in 2015 (+38.7% y-o-y). For more details see the Strategy section.
Improving the fare system
28 January. Aeroflot airline reduced fares for its own and subsidiaries’ outbound flights under its
commercial management by 10%.
1 November. Aeroflot airline introduced an improved fare structure. The difference between fare
categories was reduced significantly in the new flexible fare line, making extra services and
privileges more affordable for passengers. For more details see the Sales Development section.
Fleet development 25 August. PJSC Aeroflot and United Aircraft Corporation announced the completion of the firm
contract for the delivery of 30 Sukhoi Superjet 100 aircraft. In 2017 and 2018, the Company
expects to receive 20 more SSJ100 aircraft.
23 September. During the year, the Company worked to accept aircraft previously operated by
Transaero: a total of 12 Boeing 747 and Boeing 777 were accepted, as well as
6 Airbus A320Family aircraft from the bid book. For more details see the Aircraft Fleet section.
Route network development 1 June. Aeroflot launched scheduled flights to Valencia and Alicante (Spain) and to Lyon (France).
30 October. Aeroflot launched domestic flights on the new domestic route from Moscow to
Syktyvkar. For more details see the Route Network section.
Increasing social mobility 11 January and 28 September Russian President V. Putin held working meetings with Aeroflot’s
CEO Vitaly Saveliev. They discussed the airline’s results and future plans, the situation in the air
transportation market, including Transaero crisis resolution, the low-cost carrier development, and
the flat fare programme aimed at improving transport connection with Russia’s remote regions and
increasing mobility across Russia. For more details see the Corporate Social Responsibility section.
Developing the IT infrastructure 29 March. Aeroflot launched its own online lost baggage tracking service based on the World
Tracer international tracking system and enabling users to obtain information about the status of the
missing baggage.
28 June. Aeroflot switched to the Aeroflot Bonus loyalty programme management system based on
the innovative Oracle Siebel Loyalty Management platform.
18 August. Aeroflot airline and SAP completed the transition to the SAP HANA ERP platform to
increase business process productivity.
19 September. Aeroflot and Technoserv IT company completed a new data centre based on
Hewlett Packard Enterprise equipment. The project increased the capacity of the Company’s main
data centre by 2.5 times. For more details see the Information Technology section.
Passenger service and new technologies 1 July. Aeroflot lifted the restriction on the use of mobile phones and tablets during take-off and
landing.
19 July. Aeroflot started cooperation with TripAdvisor. As an electronic feedback platform for air
passengers, TripAdvisor enables Aeroflot to improve customer feedback handling and customer
service.
1 September. Aeroflot reduced the cost of the Internet on-board (in-flight Wi-Fi) service and
introduced a time-based rate. Internet connection is available on-board all the airline’s wide-body
aircraft.
6 October. Aeroflot provided access to Apple Pay for its passengers. Apple Pay is a simple and
secure payment tool which completely transforms the mobile payment segment, offering speed and
convenience. For more details see the Information Technology section.
Developing corporate governance, investor relations and increasing transparency 31 March. Aeroflot launched an updated version of its website for shareholders and investors. The
completely new IR section will offer information and resources for the investment community in a
modern, convenient, and user-friendly format.
8 July. Aeroflot was assigned a 7+ corporate governance rating by the Russian Institute of
Directors, based on the monitoring results.
18 October. Aeroflot held the Capital Markets Day, a meeting between the Company’s top
managers and leading Russian and foreign investors and analysts. For more details see the Corporate Governance section.
Supporting sports 24 May. Aeroflot acted as the official carrier of Russia’s national basketball teams.
28 July. Aeroflot’s SU7150 special flight delivered Russia’s Olympic team from Moscow's
Sheremetyevo airport to Rio de Janeiro (Brazil), that hosted 2016 Summer Olympic Games. For more details see the Brand and Service Quality section.
1.6. Industry Recognition and Awards
Awards
Aeroflot airline was awarded four stars (out of five) by Skytrax (a global consulting company
considered the world’s most influential assessor of airline and airport service quality) for its high-
quality service and was recognised as the Best Airline in Eastern Europe by Skytrax World Airline
Awards for the fifth time.
For the fourth time in a row, Aeroflot won the Condé Nast Traveller Readers’ Choice Award as the
Best Russian Airline.
Aeroflot won the Readers’ Choice prize at Air Transport News Awards 2016. The airline’s CEO
Vitaly Saveliev was named Leader of the Year.
Aeroflot Group companies won in a number of categories of the Wings of Russia national airline
award. Aeroflot was recognized as the Russian Airline of the Year — People’s Choice and won in
the International Carriage category.
Once again, Aeroflot won the prestigious international Randstad Award as the most attractive
Russian employer in the Transport and Logistics category.
Aeroflot won the Best.ru/Company of the Year national business award in the Transport category.
Aeroflot airline’s in-flight entertainment system interface won silver at the International Design
Awards in the Multimedia / Interface Design category.
Aeroflot won the prestigious travel award, Business Traveller Russia and CIS, in the Best European
Airline, Best Business Class on Medium-Haul Flights, and Best Airline in Russia and CIS
categories.
Aeroflot won the prestigious SAP Value Award in the IT sector, in the Expanding Horizons
category, for the transition to a new level of business transformation.
Aeroflot received the independent award Innovation Time 2016 in the Transport and Mechanical
Engineering category.
Ratings
Aeroflot received the top rating (seven out of seven stars) as the safest airline in the world. The
rating is compiled by Airlineratings.com, an independent rating website, on a regular basis.
In the rating compiled by the international analytical portal anna.aero, Aeroflot Group was rated
among top 20 global carriers by the number of new destinations, and among top 3 by new routes
with the most frequent flights. Pobeda airline was rated No. 7 globally by the number of new routes
launched.
According to Routehappy, a search engine for comfortable flights, Aeroflot is among the top 10
airlines globally in terms of on-board Wi-Fi Internet access for passengers on long-haul flights.
Aeroflot was rated eighth in the Top 10 Airlines in the World 2016 rating compiled by TripAdvisor
based on passenger reviews.
Aeroflot came second among the world’s best airlines and remains the best air carrier in Russia
according to National Geographic Traveler.
The low-cost carrier Pobeda was rated the third best Russian airline by National Geographic.
STRATEGIC REPORT
2.1. Chairman's Statement
Dear Shareholders,
In 2016 Aeroflot once again convincingly proved its place as the flagship Russian airline and a
strategically important company in the Russian aviation sector. To a great extent, our airline forms
the architecture of our industry, bringing it dynamism and stability, both of which are especially
important in challenging times for the economy.
In the period from 2009 to 2016 Aeroflot Group’s passenger volumes have quadrupled, passenger
load factor has grown by 11.3 percentage points and revenue has risen nearly fivefold. Meanwhile,
industry experts have recognized the achievements of the management team led by Aeroflot’s Chief
Executive Officer Vitaly Saveliev. As the Centre for Aviation (CAPA) has highlighted, thanks to
the efforts of top management, the Group’s structure has changed beyond recognition, transforming
from a model of non-integrated subsidiary airlines into a streamlined, results-oriented multi-brand
strategy focused on different market segments.
Aeroflot carries out a number of multifaceted duties in its role as a national carrier. Last year, the
airline did much more than simply deliver profitability. By staying commercially successful,
Russia’s leading air carrier continued to effectively execute tasks of State importance, which were
extremely meaningful for the socio-economic development of the country and strengthening of its
position in the world in a challenging geopolitical environment.
We have made noticeable progress in our key strategic initiative to improve access to air
transportation and increase overall mobility of the Russian population. Aeroflot has made a unique
contribution to the improvement of transportation links between the remote regions and central part
of Russia. The Company has extended its flat tariff programme through 2017-2018, while at the
same time expanding it to include the Moscow-Magadan-Moscow route. Aeroflot’s budget airline
Pobeda offers unprecedented low rates, which makes travel possible even for individuals with
modest income. Twelve percent of Pobeda’s passengers are using the airline for their first ever
flight. Additionally, every year during Victory Day celebrations Aeroflot carries out a broad
programme of free flights for veterans.
Today, having completed its integration, Aeroflot Group is the benchmark for the Russian air
transportation industry, leading by example in best business practices, innovative decisions and
implementation of advanced corporate standards while remaining a socially responsibly company.
Impressive progress has been made in implementing the steps laid out in the roadmap for enhancing
corporate governance at Aeroflot. A large part of the sections and key principles of the Corporate
Governance Code has already been implemented. Aeroflot Group has also updated the section of its
Risk Management Policy related to preventing and countering corruption.
Another noteworthy trend is that Aeroflot has significantly strengthened its role in formulating
government policy as it relates to civil aviation. At the initiative of our Company, a number of
legislative changes were introduced to benefit the entire industry, and in particular low-cost travel.
Among the most important developments was the introduction of non-refundable tariffs. Now, the
process of adopting stricter legal measures in relation to rowdy passengers is no longer at a
standstill. This is important as such passengers present a serious nuisance to the airline and a real
threat to flight safety. Aeroflot has been successful in improving the organisation of air travel and
ground infrastructure, and remains in continuous dialogue with its home airport Sheremetevo on
such matters.
Aeroflot is strategically important for Russia not only as its largest air carrier, but also in that it is
the main consumer of innovative products produced by the domestic aviation industry.
Furthermore, with the aim of supporting and improving the State preparatory system for flight
personnel, we maintain direct contact with civil flight schools. In 2016, our Company signed an
agreement with the Krasnokutsk Flight School to place its top graduates in jobs within Aeroflot.
Our efforts are met with understanding and constructive responses from government leaders. This is
evidenced by the two in-depth meetings that were held in 2016 between Aeroflot’s CEO and
Russian President Vladimir Putin.
In 2017, we see signs that the Russian aviation industry has passed the low point of the crisis. The
prospects of a recovery in growth are evident thanks to the revived economy, the development of
domestic tourism and the revival of some popular foreign tourist destinations.
The economic environment is becoming more favourable, but it would be wrong to take this as a
guarantee of automatic success. There is a window of opportunity before us and we must act
efficiently and without delay to make the most of it.
I am confident that these opportunities will not be missed. The foundation of this confidence is our
track record of team work, creative approach to business, close interaction with the State, as well as
our success in 2016.
I am counting on Aeroflot making significant progress by 2018 toward our goal of becoming one of
the largest global airlines, strengthening our position as a strategic asset for Russia and reaching
new heights in the interests of our shareholders and for the good of our great country.
Kirill Androsov
Chairman of the Board of Directors PJSC Aeroflot
2.2. Chief Executive Officer’s Statement
Dear Shareholders,
For Aeroflot, 2016 was a year of breakthrough achievements across a number of areas. And it is
particularly notable that these results were achieved despite a negative backdrop for the Russian air
travel market as well as the economy as a whole.
The key achievement of the year was completion of the formation of Aeroflot Group, which today
is the largest aviation holding in Eastern Europe and serves all the main market segments. Aeroflot,
our parent company and the Group’s premium carrier, has truly entered the ranks of the elite of
global aviation. The airline’s biggest breakthrough accomplishment in 2016 was achieving a Four
Star quality and service ranking from British consultancy Skytrax, the leading benchmark for
quality in our industry. The Aeroflot product was recognised as fully in line with the very best
European carriers. And in 2016 the Aeroflot brand was recognised as the strongest brand of any
airline globally according to Brand Finance, the world’s leading independent branded business
valuation and strategy consultancy.
Our low-cost carrier, Pobeda, has completely changed the landscape for budget air travel in Russia.
In 2016 Pobeda increased passenger traffic nearly 40% and took top place globally in a number of
international rankings, including for growth rate of low-cost carriers, average passenger load factor
and profit per aircraft. Pobeda’s greatest achievement, however, is that it has made air travel
infinitely more accessible for the Russian population.
We fully rolled out our mid-tier subsidiary, Rossiya. Regional carrier Aurora is successfully serving
the Russian Far East market. And we achieved new passenger traffic records. Aeroflot Group
carried a total of 43.4 million passengers in 2016, a year-on-year increase of 10.3%. Aeroflot airline
served 29 million passengers, representing year-on-year growth of 11%. These achievements were
all despite the Russian air travel market shrinking by 4.1% on the year. Aeroflot Group revenue
passenger kilometres increased by 14.8% and available seat kilometres increased by 10.3%. The
passenger load factor increased by 3.2 percentage points (p.p.) to 81.5%, directly supporting
profitability.
Our financial performance also set new records. Aeroflot Group’s revenue under IFRS increased by
19.4% versus 2015 to RUB 495.9 billion. EBITDAR totalled RUB 137.6 billion, an increase of
33.4%. The EBITDAR margin improved by 2.9 p.p. to 27.7%. EBITDA increased by a third to
reach RUB 78.0 billion. Operating profit increased by 43.4% to 63.3% and net profit was RUB 38.8
billion versus a loss in 2015. Aeroflot’s share price rose 172.5% over the course of 2016. The
company’s market capitalisation was $2.8 billion as of 30 December 2016, higher than some of the
large European airline groups.
Alongside strong operating performance, other key factors that drove financial success were strict
cost control and improvements in efficiency of business processes as a result of implementation of
digital technologies. These initiatives allow Aeroflot to offer some of the most competitive airfares
of any airline globally. According to a ranking by Australia-based analytical agency Rome2rio,
Aeroflot’s economy class fares were among the five lowest of airlines globally in 2016, and we had
the lowest fares among legacy carriers.
In 2016 Aeroflot placed fourth globally in a ranking of digitalisation at airlines carried out by
consultancy Bain & Company, and Aeroflot’s website ranked as the number one online store in
Russia. We have digitised nearly 100% of our business processes, we’re continuously improving
our mobile apps as one of the most effective tools to engage with customers, and we launched a
major initiative to leverage Big Data. All of Aeroflot’s wide-body aircraft are WiFi-enabled, with
plans to expand that service to the entire fleet with the exception of regional jets.
Aeroflot’s fleet is state of the art. The average aircraft age is 4.2 years, making it the youngest of
any airline globally with a fleet of at least 100 aircraft. Our fleet strategy includes increasing the
proportion of domestically manufactured aircraft by taking delivery of 50 Sukhoi Superjet 100s and
50 MC-21 aircraft.
All of these achievements are not just our success. They represent the success of our country. It’s
irrefutable that Aeroflot Group has become a significant contributor to Russia’s socio-economic
development, strengthening Russia’s position globally and indeed improving the quality of life for
the Russian population.
With your support Aeroflot plans to reach new heights. We see potential to accelerate growth at
Aeroflot Group, particularly by boosting international transit traffic at Aeroflot airline and
continuing to grow low-cost carrier Pobeda.
I am confident that we have all the resources at our disposal – both material and immaterial – to
continue to grow the company step by step in a way that benefits all shareholders, including our
largest shareholder, the Russian state and the Russian people.
Vitaly Saveliev
Chief Executive Officer
PJSC Aeroflot
2.3. Market Overview
Airline Industry Trends
Global airline industry
2016 was a successful year for the global aviation industry, with passenger turnover increasing by
5.9% y-o-y, according to IATA. Scheduled passenger traffic grew by 5.7% to 3.8 billion
passengers. Worldwide, the passenger load factor was pre-estimated at 80.2%, down 0.2 percentage
points (p.p.) y-o-y.
In 2016, the Middle East delivered the highest growth rates with the passenger turnover up
10.8% y-o-y.
Asia Pacific ranked second in terms of growth, with passenger turnover growing by 8.9%.
Passenger turnover in Europe grew by 3.8%. The European market was mainly driven by growing
international traffic. This trend was the result of a 3.8% increase in capacity, a reduction in yields
due to the expansion of the low-cost segment, and falling fuel prices.
The North American market saw a 3.2% increase in passenger turnover, driven by the steady
economic growth in the USA and an upward trend in domestic flights.
IATA reported a fall of 2.4% y-o-y in industry-wide revenue to USD 701 billion. Traditionally,
passenger flights account for the bulk of the industry’s revenue, their share standing at 71.9%. The
decline in revenue was due to falling fuel prices, which enabled carriers to reduce yields without
affecting margins.
IATA pre-estimated the 2016 industry’s net income at USD 35.6 billion, a ten-year high.
Scheduled passenger traffic in the global market,
billion PAX
Sources: IATA (estimate)
Passenger turnover and available seat-kilometre growth
in the global market
Sources: IATA (estimate)
Количество пассажиров Passenger numbers Темп роста Growth rate Пассажирооборот Passenger turnover Предельный пассажирооборот Available seat-kilometres Здесь и далее заменить запятые на точки Note: immaterial deviations in numbers in the charts and tables subtotals of the Annual Report are due to rounding
3,0 3,2 3,3 3,63,8
4,7%5,1%
5,6%
7,2%
5,7%
2012 2013 2014 2015 2016
Количество пассажиров Темп роста*
5,3% 5,2%
5,7%
7,4%
5,9%
4,0%
4,8%
5,5%
6,7%
6,2%
2012 2013 2014 2015 2016
Пассажирооборот
Предельный пассажирооборот
Russian airline industry2
In 2016, the total size of the Russian market, including foreign carriers, shrank by 4.1% y-o-y to
102.8 million passengers (PAX). In particular, Russian airlines carried a total of 88.6 million
passengers, down 3.8% y-o-y. Russian air carriers’ passenger turnover was down by 5.0% to
215.6 billion passenger-kilometres (RPK). At the same time, the capacity reduced by 6.6% to
265.8 billion available seat-kilometres (ASK), driving an increase of 1.4 p.p. in the passenger load
factor for Russian airlines to 81.1%.
In the reporting period, the market continued to be affected by reduced consumer purchasing power
due to the weakening national currency, restrictions on flights to Turkey, Egypt, and Ukraine
introduced in late 2015, and the resulting weaker sales in the outbound travel market. These factors
were behind the decline in the leisure segment serviced primarily by charter airlines. According to
Transport Clearing House (TCH), in 2016, charter passenger traffic fell by 27.0% y-o-y, including a
39.8% reduction in international charter flights. As a result, the total passenger traffic on
international flights (including foreign carriers) decreased by 15.1% y-o-y to 46.4 million
passengers in 2016.
The domestic segment maintained its strong operating performance: the total number of passengers
increased by 7.3% y-o-y to 56.4 million passengers due to the development of domestic tourism
driven, among other factors, by shifts in outbound tourism flows. The average passenger load factor
for domestic flights was 79.5%, up 2.9 p.p. y-o-y.
Passenger traffic, million PAX (including foreign
carriers)
Sources: Transport Clearing House, Federal Air
Transport Agency (Rosaviatsia).
Passenger traffic, million PAX (excluding foreign carriers)
Source: Federal Air Transport Agency.
2 In this section of the Annual report Russian market is discussed in line with statistics disclosed by market regulators (only for Russian
airlines), analytical adjustments based on TCH data (for foreign carriers) and company’s estimates (for international transit). Operating results
of the Russian market if not stated otherwise or implied by the context are generated by all flights originating or terminating in Russia and
serviced by Russian and Foreign carriers. Given that Russian carriers present statistics to the regulator with international transit passengers carried on respective flights accounted for in their operating results, market numbers for “Russian carriers excluding foreign carriers” include
also international transit passengers (non-Russian O&D). For the same reason non-Russian O&D is included in the “Russian market including
foreign carriers”. For analytical purposes international transit is presented separately in respective part of the section.
56,2 64,4 65,5 54,7 46,4
35,439,2 46,3
52,6 56,4
91,6103,7
111,8 107,2 102,8
14,5% 13,1%
7,8%
-4,1% -4,1%
2012 2013 2014 2015 2016
МВЛ ВВЛ Темп роста*
38,6 45,3 46,9 39,5 32,2
35,439,2 46,3 52,6 56,4
74,084,6
93,2 92,1 88,6
15,5% 14,2%10,2%
-1,2%-3,8%
2012 2013 2014 2015 2016
МВЛ ВВЛ Темп роста*
Passenger turnover, billion RPK (excluding foreign
carriers)
Source: Federal Air Transport Agency.
Available seat-kilometres, billion ASK (excluding foreign
carriers)
Source: Federal Air Transport Agency.
МВЛ International flights
ВВЛ Domestic flights
Темп роста Growth rate
Passenger load factor, % (excluding foreign carriers)
Sources: Transport Clearing House, Federal Air Transport Agency.
МВЛ International flights
ВВЛ Domestic flights
Всего All flights
Throughout 2016, the passenger traffic in the Russian market was shrinking; however, in Q4, this
decline was halted and passenger traffic grew by 10.6% y-o-y. A change in the trend was due to a
low comparison base effect, the reduced impact of negative factors affecting the airline industry
(including stabilised exchange rates) and adjusted industry yields, all of which (including the
foreign exchange rate effect) led to lower rouble-denominated prices for passengers.
Aeroflot Group acts as a key contributor to the growth in the Russian air transportation market
ensuring transport accessibility and mobility of the population. Aeroflot Group’s gain in passenger
traffic excluded, the market demonstrated a 12.5% decline y-o-y.
124,3 147,3 152,6 127,6 111,5
71,577,9 88,9
99,2 104,1
195,8225,2 241,4 226,8 215,6
17,4% 15,0%
7,2%
-6,0% -5,0%
2012 2013 2014 2015 2016
МВЛ ВВЛ Темп роста*
152,0 179,4 186,3 155,2 134,8
97,9103,8 116,3
129,6131,0
250,0283,2 302,5 284,6 265,8
15,8% 13,3%
6,8%
-5,9% -6,6%
2012 2013 2014 2015 2016
МВЛ ВВЛ Темп роста*
81,8% 82,1% 81,9% 82,2% 82,7%
73,0%
75,0%76,4% 76,6%
79,5%78,3%
79,5% 79,8% 79,7%
81,1%
2012 2013 2014 2015 2016
МВЛ ВВЛ Всего
Passenger traffic growth* in 2016: Russian vs foreign carriers
I квартал Q1
II квартал Q2
III квартал Q3
IV квартал Q4
Российские авиакомпании Russian carriers
Российский рынок (с учетом иностранных
авиакомпаний)
Russian market (including foreign carriers)
Иностранные авиакомпании Foreign carriers
Sources: Transport Clearing House, Federal Air Transport Agency.
Passenger traffic growth* in 2016: Aeroflot Group vs Russian market
Группа «Аэрофлот» Aeroflot Group
Российский рынок без учета Группы «Аэрофлот» Russian market excluding Aeroflot Group
I квартал Q1
II квартал Q2
III квартал Q3
IV квартал Q4
Sources: Transport Clearing House, Federal Air Transport Agency.
-2,8%
-11,0%
-8,4%
12,5%
-3,8%
-3,9%
-11,6%
-7,2%
10,6%
-4,1%
-10,7%
-15,3%
0,5%
-0,2%
-6,1%
I квартал II квартал III квартал IV квартал 2016
Российские авиакомпании Российский рынок
(с учетом иностранных авиакомпаний)
Иностранные авиакомпании
13,6 %
7,7 % 7,6 %
13,6 %10,3 %
-15,6%
-22,0%
-14,4%
8,4%
-12,5%
I квартал II квартал III квартал IV квартал 2016
Группа «Аэрофлот» Российский рынок без учета Группы «Аэрофлот»
Aeroflot Group’s market share evolution by Russian passenger traffic in 2016
+7,3 п. п. +7.3 p.p. +7.3 p.p.
+7,7 п. п. +7.7 p.p.
+5,2 п. п. +5.2 p.p.
+1,1 п. п. +1.1 p.p.
+5,6 п. п. +5.6 p.p.
Доля Группы «Аэрофлот» Aeroflot Group’s share Aeroflot Group’s share
Прирост доли* Share growth* Share growth*
I квартал Q1
II квартал Q2
III квартал Q3
IV квартал Q4
Sources: Transport Clearing House, Federal Air Transport Agency.
*Y-o-y change.
The Russian airline industry is highly consolidated with five largest players accounting for 70.4%
of the total passenger traffic. Aeroflot Group’s leadership in the market remains undisputed. In
2016, Aeroflot Group had 42.3% of the total Russian market by passenger traffic (including foreign
carriers) as compared to 36.7% in 2015. Aeroflot Group’s market share grew throughout the
reporting period, with the biggest gains posted in Q1 and Q2.
Aeroflot Group’s market share growth was ensured by its effective business model and strategy,
which helped the Group build resilience to external economic and market factors. The Group’s
share growth is also associated with the redistribution of Transaero’s market share among key
players (Transaero ceased its operations in October 2015) and the shrinking presence of foreign
carriers in the Russian market. Enhanced international transit operations, primarily between Europe
and Asia, also contributed to the increased market share of Aeroflot Group among airlines that
service the Russian market. Excluding international transit traffic, Aeroflot Group’s “net” market
share was 40.0% in 2016. The “net” market figures provide for a more accurate representation of
the Group’s Russian market share, since passengers flying between Europe and Asia and making
connections in Moscow by definition are not originating or terminating their trips in Russian cities.
Aeroflot Group’s closest competitors are S7 Group (12.8%), UTair Group (6.8%), and Ural Airlines
(6.3%). Foreign carriers’ share in the Russian was 13.9%.
47,3%42,6%
38,0%44,0% 42,3%
I квартал II квартал III квартал IV квартал 2016
Доля Группы «Аэрофлот» Прирост доли*
+ 7,3 п.п.+ 7,7 п.п.
+ 5,2 п.п.+ 1,1 п.п. + 5,6 п.п.
Key Russian airline industry players by total passenger
traffic
Sources: Transport Clearing House, Federal Air Transport
Agency.
Evolution of key players’ market shares and
consolidation of the passenger transportation
segment
Группа «Аэрофлот» Aeroflot Group
Группа S7 S7 Group
Группа «ЮТэйр» UTair Group
Уральские авиалинии Ural Airlines
Другие российские авиакомпании Other Russian carriers
Иностранные авиакомпании Foreign carriers
Топ-5 авиационных групп Top 5 carriers
Aeroflot Group’s market share evolution by Russian passenger traffic (including foreign carriers)
2012 2013 2014 2015 2016
International traffic 28.4% 27.0% 26.1% 29.3% 39.4%
Domestic traffic 32.6% 36.1% 38.0% 44.6% 44.6%
Total 30.0% 30.5% 31.0% 36.8% 42.3%
Aeroflot Group’s market share evolution by passenger traffic in the “net” market
2012 2013 2014 2015 2016
International traffic 25.7% 24.1% 22.6% 24.1% 33.9%
Domestic traffic 32.6% 36.1% 38.0% 44.6% 44.6%
Total 28.4% 28.8% 29.1% 34.5% 40.0%
*“Net” market means the passenger traffic including foreign carriers but excluding connecting passengers on
international flights, which are not relevant for the Russian O&Ds.
Air cargo market
According to IATA, in 2016, the global air cargo market volume was estimated at 53.9 million
tonnes (up 3.2% y-o-y). Global cargo turnover increased by 3.4%. The industry’s cargo revenue fell
by 9.4% to USD 47.8 billion. The decrease in aviation fuel prices enabled a reduction in yields
without affecting margins.
In 2016, the Russian air cargo market (including foreign carriers) fell by 7.4% y-o-y to 1.0 million
tonnes. International cargo traffic reduced by 11.1% to 779.4 thousand tonnes, which is about
74.2% of the total cargo traffic in the Russian market. Domestic cargo traffic was up 5.3% to
271.6 thousand tonnes.
As at year-end, Volga-Dnepr Group remained the undisputed market leader by cargo traffic in
Russia (50.8%). Aeroflot Group came second with 19.4%. Top 5 players account for 78.7% of the
total cargo traffic.
42,3%
12,8%6,8%
6,3%
18,0%
13,9%
Группа «Аэрофлот»
Группа S7
Группа «ЮТэйр»
«Уральские авиалинии»
Другие российские
авиакомпании
Иностранные
авиакомпании
63,0% 64,0% 64,9% 69,2% 70,4%
17,8% 17,6% 18,4% 16,7% 15,8%
19,2% 18,4% 16,7% 14,1% 13,9%
2012 2013 2014 2015 2016
Иностраные авиакомпании
Другие российские авиакомпании
Топ-5 авиационных групп
Russian air cargo market volume, thousand tonnes
(including foreign carriers)
МВЛ International routes
ВВЛ Domestic routes
Темп роста Growth rate
1 076,4 1,076.4
1 092,1 1,092.1
1 121,0 1,134.9
1 051,1 1,051.1
Sources: Transport Clearing House, Federal Air
Transport Agency.
Russian air cargo market by volume in 2016
Группа компаний «Волга-
Днепр»
Volga-Dnepr Group
Группа «Аэрофлот» Aeroflot Group
Группа S7 S7 Group
Группа «ЮТэйр» UTair Group
Другие авиакомпании Other Russian
carriers
Иностранные авиакомпании Foreign carriers
Sources: Transport Clearing House, Federal Air
Transport Agency.
761,7 775,3 820,4 877,0 779,4
314,7 316,8 300,6 257,9271,6
1 076,4 1 092,1 1 121,0 1 134,91 051,1
0,7% 1,5% 2,6% 1,2%
-7,4%
2012 2013 2014 2015 2016
МВЛ ВВЛ Темп роста*
50,8%
19,4%
4,8%2,4%
15,5%
7,1%
Группа компаний
«Волга-Днепр»
Группа «Аэрофлот»
Группа S7
Группа «ЮТэйр»
Другие
авиакомпании
Иностранные
авиакомпании
2.4. Strategy Overview
Aeroflot Group’s strategic goal is to strengthen leadership in the global airline industry by seizing
opportunities in the Russian and international air transportation markets.
Aeroflot Group Development Strategy 2025 was approved by PJSC Aeroflot’s Board of Directors
and defines the key focus areas and long-term growth targets.
To implement Aeroflot Group’s long-term strategy, the Company has developed a medium-term
strategic plan defining the key focus areas, operational and financial targets supporting strategic
goals. The medium-term strategy is reviewed and updated on an annual basis.
In line with the medium-term development strategy and pursuant to the directives of the Russian
Government, Aeroflot Group has developed and updates annually its Long-Term Development
Programme, which covers management-related activities, goals, and KPIs. The Group’s
consolidated IFRS budget and KPIs for the budget year are developed in line with the targets of the
medium-term strategy of Aeroflot Group and its Long-Term Development Programme.
Parameter Medium-term strategy Long-term strategy
Period 2017–2021 Up to 2025
Key areas
Pillars of Aeroflot Group’s growth strategy
Growth taking in the account the infrastructure
constraints
Pillars of the fleet development strategy
Principles of route network expansion
The Group’s updated goals up to 2021
Selection of the Group’s growth
scenario
Selection of the “global player” strategy
Strategy elements:
– Marketing strategy
– Network strategy
– Fleet strategy
Identification of constraints and risk
assessment
Strategic goals
A set of operational and financial targets for
2017–2021, in line with the Group’s long-term
goals
Long-term passenger traffic and
revenue targets benchmarked against
global peers
The date of approval by
the Board of Directors 13 July 2011 (Minutes No. 1) 24 November 2016 (Minutes No. 6)
Aeroflot Group’s strategic goals for 2025
2025 goals Status
Join the Top 5 European airlines by passenger traffic and
revenue
Ranked 7th by passenger traffic and 7th by revenue3
Join the Top 20 global players by passenger traffic and
revenue
Ranked 24th by passenger traffic and 23rd by revenue1
Carry over 70 million passengers, including at least
30 million within Russia
43.4 million passengers in total, including 25.2 million
within Russia
Increase passenger traffic via the main hub in Moscow,
with the share of transfer passengers reaching at least 32%
Aeroflot’s share of transfer passengers is 42.1%
Ensure strong presence in the market The Group is present in all price segments across all
geographies
Sources: Airline Business, ATW, Flight Global, the Company’s estimates.
Analysis of Aeroflot Group’s growth trends and changes in external business environment during
2016 suggests that the Group is well-positioned to achieve all goals set in its Strategy 2025.
However, the Group’s performance against these goals may be affected by significant fluctuations
of FX rates and the continued process of international market consolidation.
3As at the publication date of this Annual Report – data for 2015 (published in 2016).
Key initiatives and work streams underpinning long-term strategy implementation
Strategic priorities Marketing priorities Financial priorities
Develop the multi-brand platform to
strengthen positioning and synergy
across the Group
Customer experience strategy
designed to ensure service standards
as part of the Group’s marketing
strategy
Investment strategy aimed at
achieving the Group’s strategic goals
in the medium and long term
Promote transit traffic via
Sheremetyevo airport (including
international traffic)
Deploy technology and innovation to
ensure the Group’s fundamental
advantages
Improve labour productivity
Enhance the network development
strategy to reinforce the key
principles of route network expansion
for the Group’s airlines
Cut costs to ensure the Group’s
financial stability in the medium and
long term
Enhance the fleet development
strategy to deliver Aeroflot Group’s
growth in line with the approved
route network expansion principles
Boost the Group’s ancillary revenue
Impact of risks on the Group’s strategy
The following types of risks are seen as the key potential risks that may affect the Group’s
development strategy: risk of changes in the external business environment;
risk arising from infrastructure constraints;
macroeconomic risks.
To mitigate the key risks, the medium-term strategy of the Group provides for the following
initiatives: development of a high-performing hub at Sheremetyevo to promote international transfer traffic and increase
fleet flexibility;
growth planning and control at each of Aeroflot Group’s companies to maintain manageable growth and the
market share;
monitoring the progress of infrastructure development and new facilities construction at Moscow
Sheremetyevo airport;
flexible development of Aeroflot and Pobeda airlines;
diversification of revenue streams by currency and geography.
Strategy implementation and adjustment results
In 2016, Aeroflot Group made significant progress towards achieving its long-term goals, primarily,
through continued route network enhancement by frequency and connectivity, supported by
consistent efforts to improve the hub at Moscow Sheremetyevo airport. Measures were taken to
reduce CASK, optimise the fleet and boost sales efficiency. Pobeda, Aeroflot’s low-cost carrier, is
making good headway, having carried 4.3 million passengers in 2016. In 2016, we completed the
transformation of regional airlines to set up Rossiya Airlines, a united regional carrier.
Aeroflot Group’s progress in achieving 2025 strategic goals
2012 2014 2016 2025 target
Revenue, RUB billion 253.0 319.8 495.9 Top 5 and Top 20
Passenger traffic, million PAX 27.5 34.7 43.4 Top 5 and Top 20,
>70 million
Domestic passenger traffic, million PAX 11.5 17.6 25.2 >30 million
Aeroflot’s share of transit passengers, % 32.7 39.2 42.1 Over 32
In 2016, the Russian airline industry performed as projected, with no structural shifts; therefore, no
significant adjustments or dramatic changes to the development strategy were needed. The action
plans outlined in previously approved strategies proved effective. Based on the current market
environment, the Company made decisions to accelerate Aeroflot Group’s growth via its parent
company Aeroflot, including through active promotion of international transfer traffic and the low-
cost carrier Pobeda. We updated a number of targets, including those set for passenger traffic: in
2021, Aeroflot Group plans to carry 66 million passengers, including 41.8 million passengers to be
carried by Aeroflot airline. According to our estimates, by this year, the Group’s fleet will comprise
380 aircraft. The fleet enhancement strategy provides for increasing the share of Russian aircraft
through execution of contracts for 50 Sukhoi Superjet 100 and 50 МС-21 aircraft.
Multi-brand platform
Aeroflot Group’s strategy is based on a multi-brand platform, with each of the Group’s airlines
targeting a dedicated market segment. The multi-brand platform enables the Group to maximise its
market penetration across price segments and geographies.
Aeroflot airline focuses on addressing the needs of the premium passenger segment by offering
best-in-class services, a high frequency route network with extensive flight geography, access to the
route network of partners from the SkyTeam Alliance, convenient connecting flights for
international transit passengers, and a modern aircraft fleet.
Rossiya and Aurora airlines target the mid-market price segment and operate regional and inter-
regional flights. They focus on the relevant geographical areas with higher price sensitivity by
primarily offering their passengers flights from the base regions with lower flight frequency.
Rossiya airline also operates in the leisure (charter) segment. In 2016, the Company successfully
implemented its decision made in late 2015 to establish a united regional carrier, Rossiya Airlines,
by combining airlines of JSC Rossiya Airlines, JSC Orenair, and JSC Donavia.
Pobeda airline targets the low-cost segment. Domestic flights from Moscow to Russia’s regions,
along with additional inter-regional flights within Russia, make up the bulk of the airline’s route
network, which is designed to improve links between Russian regions. The airline also expands the
international route network.
Aeroflot Group’s multi-brand platform
2015
Positioning Premium product
Mid-price
regional
product
Charter product Low-cost product Regional product for Far
East
2016
Positioning Premium product Regional and charter products in the mid-price
segment Low-cost product
Regional product for Far
East
Type of flights Scheduled flights Scheduled and charter flights Scheduled flights Scheduled flights
Business model
– Hub and spoke model
– Transit passenger traffic on domestic
and international routes
– High frequency of flights
– Economy and business class
– Point-to-point flights within Russia
– Limited connectivity
– Popular international destinations
– Charter flights to the most popular leisure
destinations
– Economy and business class
– Point-to-point flights via
Moscow
– Point-to-point flights between
regions
– High passenger load factor and
fleet utilisation
– Economy class
– Passenger flights in the Far
East
– Local flights to remote
destinations within the region
– Economy and business class
Flight range Unlimited Unlimited Up to 3–4 hours Short- and medium-haul flights
Aircraft fleet – Narrow-body aircraft
– Wide-body aircraft
– Narrow-body aircraft
– Wide-body aircraft – Narrow-body aircraft – Narrow-body aircraft
Target group
– Business tourism
– Visiting friends and relatives
– Leisure
– Visiting friends and relatives
– Leisure
– Business
– Leisure
– Visiting friends and relatives
– Visiting friends and relatives
– Business
Base airport Moscow (Sheremetyevo)
– Moscow (Vnukovo)
– Saint Petersburg (Pulkovo)
– Airports in Orenburg and Rostov-on-Don
Moscow (Vnukovo)
Airports in Russia’s regions
– Vladivostok
– Khabarovsk
– Yuzhno-Sakhalinsk
Share of
international
passengers in the
airline’s passenger
traffic
~50%
(extensive geography)
~20%–30%
(mainly within the CIS)
~10%
~20% (Asia Pacific)
Long-term development programme and progress report
Long-Term Aeroflot Group Development Programme 2015–2020 (the Programme) was
designed in accordance with Decree of President of the Russian Federation No. Pr-3086 dated
27 December 2013, and approved by PJSC Aeroflot’s Board of Directors on 2 December 2014
(Minutes No. 8). On 27 January 2016, the Strategy Committee of PJSC Aeroflot’s Board of
Directors approved proposed amendments (Minutes No. 1) to the Long-Term Aeroflot Group
Development Programme 2015–2020.
In 2016, the Long-Term Aeroflot Group Development Programme 2016–2021 was updated to
reflect the key amendments to Aeroflot Group’s strategy for 2017–2021. This involved the
review of the Programme’s key initiatives to support the strategy implementation4. We updated
the Programme’s KPI framework to adjust the set and weighting of KPIs. A dedicated section on
Ensuring Priority Funding for the Social and Economic Development of the Russian Far East
was added in line with Russian Government Directive No. 4531p-P13 dated 28 June 2016.
In 2016, the Long-Term Aeroflot Group Development Programme 2016–2021 and its key
implementation initiatives were updated to reflect the key amendments to Aeroflot Group’s
strategy for 2017–2021. We also updated the Programme’s KPI framework to adjust the set and
weighting of KPIs. A dedicated section on Ensuring Priority Funding for the Social and
Economic Development of the Russian Far East was added, in line with Russian Government
Directive No. 4531p-P13 dated 28 June 2016.
The progress on PJSC Aeroflot’s Long-Term Development Programme for 2016 was audited by
the Company’s external auditor, AO BDO Unicon.
The independent audit was followed by an opinion on the information prepared to reflect the
progress on the Programme’s initiatives from 1 December to 31 December 2016, on the actual
2016 KPI values and achievement of target KPIs, in all material respects, against the criteria set
out in the Programme, on the relevance, in all material respects, of clarifications made by
PJSC Aeroflot’s management on discrepancies between the Group’s actual KPIs and the
Programme’s targets, and on spending the relevant 2016 budgets in line with their intended
purpose. The auditor’s opinion was issued on 31 March 2017 under No. 1744-BDO-17.
Overall, the Programme planning and implementation are in line with the principles set out in the
Programme Development Guidelines, the KPI Guidelines, and other directives and instructions
of the Russian Government and the Federal Agency for State Property Management.
In 2017, the Regulations on Updating and Managing the Implementation of Aeroflot Group’s
Long-Term Development Programme were approved to improve updating, reporting, and auditor
communication processes. These Regulations were developed to comply with the auditor’s
recommendation following the 2015 Programme results audit.
The Programme’s key goal is to ensure the Group’s long-term sustainable development,
strengthen its competitive position, create and develop a competitive edge, and improve
performance and financial stability.
Key initiatives to support the implementation of the Long-Term Development Programme in
2016:
reduce operating expenses and increase labour productivity;
improve the procurement process;
implement the investment programme;
implement Aeroflot Group’s Innovative Development Programme;
expand the route network;
4 The Resolution of the Board of Directors dated 8 September 2016 (Minutes No. 2); the Resolution of the
Board of Directors dated 24 November 2016 (Minutes No. 6); the Resolution of the Board of Directors dated
22 December 2016 (Minutes No. 7).
enhance the aircraft fleet;
expand the production capacity;
develop and adopt mandatory internal documents to improve corporate governance;
ensure adequate talent pipeline;
implement Aeroflot Group’s marketing strategy.
The Programme’s key objectives are to:
develop action plans to ensure achievement of the Group’s strategic growth targets;
identify areas and initiatives to improve the Group’s competitive edge and performance;
analyse risks to and opportunities for achieving the strategic targets and implementing
Programme initiatives.
The Programme details strategic areas for the Group’s development and includes a list of key
initiatives and action plans ensuring implementation of the strategy in the medium and long term.
The Programme complements and expands the key strategic initiatives set out in the Aeroflot
Group Development Strategy 2021.
Development programmes
The Group is implementing its strategy through a number of programmes designed to ensure
long-term growth and profitable growth. Key programmes underpinning PJSC Aeroflot’s growth
and development strategy:
Investment Programme,
Cost Cutting Programme,
Innovative Development Programme,
Management Incentive Programme,
Corporate Governance Improvement Programme.
Investment Programme 2017 was adopted by PJSC Aeroflot’s Board of Directors on
24 November 2016 (Minutes No. 6). It is designed to address the air carrier’s strategic objectives
and ensure the development of its business units. Planned investments in property, plant and
equipment and financial investments in software for 2017 are primarily designed to:
ensure maintenance and repair operations (procure tools and equipment to ensure maintenance
for all types of aircraft, and invest in hangar facility development);
ensure ground handling at the airport (procure equipment and custom machinery for aircraft
ground handling);
develop a training platform (upgrade the FFS A320 flight simulator and purchase the
TSFT SSJ100 trainer);
ensure high-quality passenger experience (procure uniforms for front line staff, equip aircraft
with WiFEC, replace business class seats onboard Airbus A330 aircraft);
upgrade aircraft (continue the project to integrate electronic devices for pre-flight and in-flight
management of air navigation information on Airbus A320 family aircraft (Electronic Flight
Bag – EFB), provide wheelchairs onboard Boeing 777, Boeing 737, and Airbus A320 aircraft);
build new facilities (continue the construction of a new hangar for aircraft servicing and build a
central power distribution station to expand the capacity of PJSC Aeroflot’s power grid);
develop the IT infrastructure (maintain existing and develop new information systems, procure
communication, telephone and computer equipment, update the situation centre);
invest in R&D projects under the Innovative Development Programme;
provide software solutions (develop the SAP system, maintain and develop the Company’s
website, commercial, operations-related, office, and other systems);
provide other types of investment in property, plant and equipment (deliver on fire safety
initiatives, procure workwear, ensure seamless operation of a number of business units).
Cost Cutting Programme was implemented in 2016 pursuant to Russian Government Directive
No. 4750p-P13 dated 4 July 2016 and the Resolution of the Board of Directors of PJSC Aeroflot
dated 25 August 2016 (Minutes No. 1), to achieve the KPI of reducing operating expenses
(costs) by at least 10% in the reporting period. The updated Programme was approved by the
Resolution of PJSC Aeroflot’s Management Board dated 17 October 2016 (Minutes No. 26). To
improve the Group’s operational efficiency, the Programme provided for low-cost/quick-win
initiatives. The Programme was implemented in full. With the cost reduction target of
RUB 12.1 billion, the actual cost savings amounted to RUB 14.3 billion.
Innovative Development Programme 2020 was adopted by PJSC Aeroflot’s Board of Directors
on 24 June 2011 (Minutes No. 16) and by the working group on Private-Public Partnership in
Innovation under the Government Commission on High Technologies and Innovation on 28 June
2011. The Programme defines the key focus areas of the Company’s innovative development.
For more details on the Programme see the Innovation and Information Technology section of
this Annual Report.
Management Incentive Programme was approved by the Board of Directors of PJSC Aeroflot on
25 September 2014 (Minutes No. 5) and amended by the Resolution of the Board of Directors of
PJSC Aeroflot on 2 December 2014 (Minutes No. 8). The Programme covers PJSC Aeroflot
employees whose remuneration is KPI-based. The remuneration is paid at the end of the year for
meeting the net profit target and depends on the amount allocated by PJSC Aeroflot’s General
Meeting of Shareholders for this purpose out of the total net profit. The Programme sets the
maximum remuneration pool which is subsequently distributed among the employees based on
their individual contribution to the year-end financial results. For more details on the
Management Incentive Programme see the Corporate Governance section of this Annual Report.
Corporate Governance Improvement Programme is linked to the implementation of the
Corporate Governance Code as approved by the Board of Directors of the Bank of Russia on
21 March 2014. For more details see the Corporate Governance section of this Annual Report.
2.5. Business Model
OUR MISSION
We work to ensure that our
customers can quickly and
comfortably travel great distances, and thus be mobile,
meet more often, work
successfully, and see the
world in all its diversity.
We give our customers a
choice through an extensive
route network and different
carriers operating within our Group, from low-cost to
premium class airlines.
OUR STRATEGIC GOALS
– Join the Top 20 and the Top 5
global players by passenger
traffic and revenue
– Carry over 70 million
passengers, including at least
30 million within Russia
– Increase passenger traffic via
the main hub in Moscow, with
the share of transit passengers
reaching at least 32%
– Ensure strong presence in the
market
OUR LONG-TERM STRATEGY
Aeroflot Group’s strategic goal is to strengthen
leadership in the global airline industry by seizing opportunities in the Russian and international air
transportation markets.
ASSET BASE
43.4 million PAX
Aeroflot Group’s
passenger traffic
in 2016
RUB 495.9 billion
Aeroflot Group’s
revenue in 2016
Value
creation
SkyTeam
partners
Internal cost streams
– Maintenance and repair
– Staff
– General and
administrative
– Other
Counterparties
– Fueling facilities
– Airports
– Service providers
– Maintenance and repair
Trade payables, finance lease
payments, and other operating
expenses and accruals
Leasing
companies
RUB 78.0 billion
Aeroflot Group’s
EBITDA in 2016
RUB 38.8 billion
Aeroflot Group’s
net profit in 2016
BUSINESS SEGMENTS
Premium
segment
Mid-price
segment
regional
basic
Low-cost
segment
66.7%
Aeroflot
20.2%
Rossiya
3.2%
Aurora
9.9%
Pobeda
Route
network
326
scheduled
routes
51 countries
Aircraft fleet 292 aircraft 4.2 years average
age of Aeroflot
airline fleet
In-house
maintenance and
repair facility
8 hangars to maintain Aeroflot’s
own and third-party aircraft
Well-established
brand and leader
in the Russian
market
5.1 million
participants in
the loyalty
programme
40.0% share in
the “net” Russian
air transportation
market
Highly skilled
personnel
36.6 thousand
employees Training platform
and simulation centre
Medical centre
3. BUSINESS OVERVIEW
3.1. Operating Results
Aeroflot Group: total
Item 2012 2013 2014 2015 2016
Passenger traffic, million PAX 27.5 31.4 34.7 39.4 43.4
change, % 67.6 14.3 10.7 13.4 10.3
Passenger turnover, billion RPK 74.6 85.3 90.1 97.6 112.1
change, % 61.9 14.3 5.6 8.4 14.8
Available seat-kilometres, billion ASK 95.6 109.1 115.8 124.7 137.7
change, % 59.3 14.1 6.2 7.7 10.4
Passenger load factor, % 78.1 78.2 77.8 78.3 81.4
change, p.p. 1.3 0.1 (0.4) 0.5 3.1
Cargo and mail carried, thousand tonnes 223.8 204.6 166.3 156.3 205.8
change, % 32.8 (8.6) (18.7) (6.0) 31.6
Revenue tonne-kilometres, billion TKM 7.9 8.7 8.8 9.5 11.0
change, % 56.3 9.3 1.9 7.0 16.5
Flights, thousand 241.8 264.9 286.7 323.8 331.9
change, % 18.1 9.5 8.2 13.0 2.5
Stage length, km 2,716 2,717 2,593 2,479 2,581
change, % (3.4) 0.0 (4.5) (4.4) 4.1
Aeroflot Group: domestic flights
Item 2012 2013 2014 2015 2016
Passenger traffic, million PAX 11.5 14.0 17.6 23.4 25.1 change, % 65.3 21.6 26.0 32.5 7.6
Passenger turnover, billion RPK 24.3 29.2 35.0 44.7 48.7
change, % 57.0 19.8 19.9 27.8 8.9 Available seat-kilometres, billion ASK 31.7 37.6 43.6 56.3 58.3
change, % 59.2 18.2 16.2 29.0 3.7 Passenger load factor, % 76.7 77.7 80.2 79.4 83.5
change, p.p. (1.0) 1.0 2.5 (0.8) 4.1
Cargo and mail carried, thousand tonnes 70.7 82.8 82.0 79.1 107.8 change, % 50.4 17.1 (0.9) (3.4) 36.2
Revenue tonne-kilometres, billion TKM 2.5 3.0 3.5 4.3 4.8 change, % 55.0 19.2 17.4 24.5 11.9
Flights, thousand 112.7 127.8 151.0 195.0 196.0 change, % 19.2 13.4 18.2 29.2 0.5
Stage length, km 2,115 2,083 1,982 1,912 1,935
change, % (5.0) (1.5) (4.8) (3.5) 1.2
Aeroflot Group: international flights
Item 2012 2013 2014 2015 2016
Passenger traffic, million PAX 16.0 17.4 17.1 16.0 18.3 change, % 69.3 8.9 (1.7) (6.2) 14.1
Passenger turnover, billion RPK 50.3 56.1 55.1 52.9 63.4 change, % 64.4 11.6 (1.8) (3.9) 19.8
Available seat-kilometres, billion ASK 63.9 71.5 72.2 68.5 79.4
change, % 59.4 12.0 1.0 (5.2) 15.8 Passenger load factor, % 78.7 78.4 76.3 77.3 80.0
change, p.p. 2.4 (0.3) (2.1) 1.0 2.7 Cargo and mail carried, thousand tonnes 153.1 121.8 84.3 77.2 98.0
change, % 26.1 (20.5) (30.8) (8.5) 27.0 Revenue tonne-kilometres, billion TKM 5.4 5.7 5.3 5.2 6.2
change, % 56.9 4.9 (6.1) (4.3) 20.3
Flights, thousand 129.1 137.1 135.7 128.8 135.9 change, % 17.1 6.2 (1.0) (5.1) 5.5
Stage length, km 3,150 3,226 3,223 3,304 3,468 change, % (2.9) 2.4 (0.1) 2.5 5.0
Aeroflot Group
In 2016, Aeroflot Group significantly improved its operational performance on key metrics,
despite an overall decline in the Russian air transportation market.
During the year, Aeroflot Group carried a total of 43.4 million passengers (up 10.3% y-o-y)
making 331,853 scheduled and charter flights. The Group’s turnover grew 14.8% to 112.1 billion
revenue passenger-kilometres (RPK). On the back of 10.4% capacity growth to 137.7 billion
available seat-kilometres (ASK) passenger load factor increased by 3.1 p.p. to 81.4%.
Aeroflot Group’s passenger traffic, million PAX
Domestic flights
International flights
Passenger load factor
Aeroflot Group’s passenger turnover, billion RPK,
and passenger load factor
Aeroflot Group’s operational performance by region (scheduled and charter flights)
Region
Passenger traffic,
million PAX
Passenger turnover,
billion RPK
Available seat-kilometres,
billion ASK Passenger load factor, %
2015 2016
change,
%
2015 2016 change
, % 2015 2016
change,
% 2015 2016
change,
p.p.
Russia 23.3 24.7 6.0 44.6 47.9 7.4 56.1 57.5 2.4 79.5 83.4 3.9
Europe 7.9 9.0 13.9 17.5 20.1 14.9 23.6 26.5 12.4 74.0 75.6 1.6
Asia 2.7 3.1 14.5 17.5 19.8 13.1 22.3 24.8 11.4 78.7 79.9 1.2
CIS 2.5 2.4 (4.4) 4.7 5.4 14.6 6.1 6.6 8.2 77.7 82.2 4.5
Middle East 1.6 1.5 (7.7) 4.7 4.6 (2.4) 6.2 6.0 (4.5) 76.0 77.7 1.7
Americas 0.8 0.9 15.2 6.8 7.9 16.0 8.2 9.3 12.7 82.5 84.9 2.4
Total scheduled
flights 38.9 41.7 7.1 95.9 105.7 10.3 122.6 130.6 6.6 78.2 80.9 2.7
Charter flights 0.5 1.8 245.2 1.7 6.4 265.1 2.2 7.0 223.8 80.8 91.1 10.3
Total passenger
flights 39.4 43.4 10.3 97.6 112.1 14.8 124.7 137.7 10.4 78.3 81.4 3.1
Domestic flights
In the reporting year, Aeroflot Group’s total domestic passenger traffic (including scheduled and
charter flights) increased by 7.6% y-o-y to 25.1 million passengers. Domestic flights accounted
for 57.9% of the total carried passengers.
Domestic passenger turnover grew 8.9% to 48.7 billion RPK, with capacity growing by 3.7% to
58.3 billion ASK. The passenger load factor was 83.5%, up 4.1 p.p. y-o-y.
Such performance improvements were associated with persistently strong demand for domestic
services (including domestic tourism), which allowed the Group to increase its flight frequency
16,0 17,4 17,1 16,0 18,3
11,5 14,0 17,6 23,425,1
27,531,4
34,739,4
43,4
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
50,3 56,1 55,1 52,9 63,4
24,329,2 35,0 44,7
48,774,685,3 90,1
97,6112,1
78,1% 78,2% 77,8% 78,3%81,5%
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
Занятость кресел
on the most popular routes and to launch new routes. A 40.8% share of total growth in domestic
passenger traffic of the Group was driven by Pobeda airline.
Aeroflot Group’s 2016 passenger traffic breakdown
by airline
Aeroflot Group’s 2016 passenger traffic breakdown
by destination
Aeroflot
Rossiya
Pobeda
Aurora
Domestic flights
International flights
International flights
In the reporting year, Aeroflot Group’s international passenger traffic increased by 14.1% y-o-y
to 18.3 million passengers. International flights accounted for 42.1% of the total carried
passengers.
Passenger turnover grew 19.8% to 63.4 billion RPK, with capacity growing by 15.8% to
79.4 billion ASK. The passenger load factor was 80.0%, up 2.7 p.p. y-o-y.
Macroeconomic stabilisation, higher flight frequency, the launch of new flights based on obtained
permits to operate to international destinations, the development of Pobeda’s international
network, and the re-launch of Rossiya’s charter programme had a positive effect on the
performance in the international segment.
Scheduled passenger traffic on European routes (the Group’s second largest business segment)
grew by 13.9% to 9.0 million passengers, driven by the higher frequency of flights to most
popular destinations based on obtained permits (London, Rome, Milan), and by the newly
launched flights to new destinations (Valencia, Alicante, Lyon). Another factor contributing to
the passenger traffic growth on European routes was the reduction in the frequencies of services
operated by foreign carriers to Russia.
Aeroflot Group continued to focus on Asian destinations, where the number of passengers carried
on scheduled flights grew by 14.5% to 3.1 million passengers. Another major contributing factor
was stronger passenger traffic from destinations in China, driven, among other factors, by the
higher frequency of flights to Beijing.
In 2016, traffic to the CIS and the Middle East was impacted by the ban on flights to Ukraine,
suspension of flights to Egypt and reduced frequency of flights to Turkey (due to overall declines
in demand and restrictions on charter flights) in Q4 2015. The number of passengers carried on
scheduled flights within the CIS decreased by 4.4%. At the same time, the results of operations in
the CIS region were supported by the launch of new flights to six destinations in Kazakhstan and
higher demand for leisure flights to Georgia, Azerbaijan, and Armenia. Scheduled passenger
traffic in the Middle East decreased by 7.7% to 1.5 million passengers. The higher frequency of
flights to Tel-Aviv (a market with significant potential for leisure and transit traffic) helped
partially offset the decline in passenger traffic to Istanbul and Antalya.
66,7%
20,2%
9,9%
3,2%
Аэрофлот
Россия
Победа
Аврора
42,1%
57,9%
Международные
перевозки
Внутренние
перевозки
The number of passengers carried on scheduled flights to North and Central America increased
by 15.2% to 0.9 million passengers, due to increased frequency of flights to Cuba and a higher
demand for flights to the USA, driven, among other things, by transit passenger traffic.
Aeroflot Airline
In 2016, Aeroflot airline carried a total of 29.0 million passengers, up 11.0% y-o-y. The airline’s
passenger turnover grew 11.6% to 82.7 billion RPK, with capacity growing by 8.9% to
101.8 billion ASK. The passenger load factor was 81.3%, up 2.0 p.p. y-o-y.
Aeroflot airline’s passenger traffic, million PAX
Domestic flights
International flights
Passenger load factor
Aeroflot airline’s passenger turnover, billion RPK,
and passenger load factor
Aeroflot airline’s 2016 passenger traffic breakdown by destination
Domestic flights
International flights
10,7 12,3 12,5 13,4 14,9
7,08,6 11,1 12,7 14,117,7
20,923,6
26,129,0
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
34,9 40,6 42,7 46,8 53,315,6
19,6 24,4 27,329,450,5
60,2 67,1 74,182,7
77,9%78,8%
78,2%79,3%
81,3%
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
Занятость кресел
51,3%
48,7%Международные
перевозки
Внутренние
перевозки
Aeroflot airline’s operating performance by region (scheduled and charter flights)
Region
Passenger traffic,
million PAX
Passenger turnover,
billion RPK
Available seat-kilometres,
billion ASK
Passenger load factor, %
2015 2016 change,
% 2015 2016
change,
% 2015 2016
change,
% 2015 2016
change,
p.p.
Russia 12.7 14.1 11.3 27.3 29.4 7.4 33.3 34.4 3.3 82.2 85.4 3.2
Europe 7.0 7.7 10.5 15.4 17.3 11.8 20.9 22.9 9.6 74.0 75.4 1.4
Asia 2.5 2.8 12.8 17.2 19.3 12.7 21.6 24.1 11.4 79.3 80.2 0.9
CIS 1.9 2.1 14.1 3.3 4.7 39.8 4.2 5.7 33.9 79.0 82.5 3.5
Middle East 1.4 1.4 (0.3) 4.0 4.1 3.5 5.2 5.4 3.1 77.1 77.4 0.3
Americas 0.8 0.9 15.7 6.8 7.9 16.0 8.2 9.3 12.7 82.5 84.9 2.4
Total scheduled
flights 26.1 29.0 11.0 74.1 82.7 11.6 93.4 101.7 8.8 79.3 81.3 2.0
Charter flights 0.01 0.01 – 0.01 0.03 – 0.03 0.08 – – – –
Total passenger
flights 26.1 29.0 11.0 74.1 82.7 11.6 93.5 101.8 8.9 79.3 81.3 2.0
Domestic flights
In 2016, the total number of passengers carried by Aeroflot airline on domestic routes increased
by 11.4% y-o-y to 14.1 million. Passenger turnover grew 7.4% to 29.4 billion RPK, with capacity
growing by 3.3% to 34.4 billion ASK. The passenger load factor increased by 3.2 p.p. to 85.4%.
Domestic flights accounted for 48.7% of Aeroflot airline’s total passenger traffic.
International flights
In 2016, the total number of passengers carried by Aeroflot airline on international routes
increased by 10.6% y-o-y to 14.9 million. Passenger turnover grew 14.0% to 53.3 billion RPK,
with capacity growing by 11.9% to 67.4 billion ASK. The passenger load factor increased by
1.5 p.p. to 79.2%. International flights accounted for 51.3% of Aeroflot airline’s total passenger
traffic.
Aeroflot airline’s operating results by region are explained by the factors affecting the Group’s
overall performance mentioned above.
Subsidiary Airlines
In the reporting year, the total passenger traffic of subsidiary airlines (Rossiya, Pobeda, Aurora)
was 14.5 million passengers, accounting for 33.3% of the total number of passengers carried by
Aeroflot Group in 2016.
The growth in subsidiaries’ passenger traffic is primarily driven by the development of
Pobeda airline. Subsidiaries are focused on domestic routes, which account for 76.4% of their
total passenger traffic. The share of international traffic is 23.6%, with more than half of it
generated by Rossiya airline.
Subsidiaries’ passenger traffic*, million PAX
Subsidiaries’ 2016 passenger traffic breakdown*
Domestic flights
International flights
Rossiya
Pobeda
Aurora
Orenair
Donavia
Subsidiaries’ passenger traffic*, million PAX
Subsidiaries’ 2016 passenger traffic breakdown*
Domestic flights
International flights
Rossiya
Pobeda
Aurora
Orenair
Donavia
*Data on Rossiya airline for 2016 includes flights of Orenair and Donavia prior to their integration into
Rossiya airline.
4,2 4,6 5,2 4,8
8,83,2 3,1 3,0 2,8
1,0 1,41,7
1,51,4
1,41,1
1,1 1,4
0,1 3,14,3
9,810,5
11,2
13,314,5
2012 2013 2014 2015 2016
Россия
Оренбургские авиалинии
Донавиа
Аврора
Победа
Международные
перевозки
23,6%
Внутренние
перевозки
76,4%
18,1%
3,3%2,2%
42,7%
26,4%
7,3%
Россия
Победа
Аврора
4,2 4,6 5,2 4,8
8,83,2 3,1 3,0 2,8
1,0 1,41,7
1,51,4
1,41,1
1,1 1,4
0,1 3,14,3
9,810,5
11,2
13,314,5
2012 2013 2014 2015 2016
Россия
Оренбургские авиалинии
Донавиа
Аврора
Победа
Международные
перевозки
23,6%
Внутренние
перевозки
76,4%
18,1%
3,3%2,2%
42,7%
26,4%
7,3%
Россия
Победа
Аврора
Cargo and Mail Operations
Aeroflot Group does not have dedicated cargo fleet and exploits belly cargo model for cargo and
mail transportation. In 2016, Aeroflot Group carried 205.8 thousand tonnes of cargo and mail,
up 31.6% y-o-y.
In the reporting period, the cargo/mail tonne-kilometres (TKM) increased by 16.5% to
11.0 billion, while the revenue load factor went up by 3.0 p.p. to 65.7%.
The growth in cargo and mail operations is associated with the expansion of the wide-body
aircraft fleet, including Transaero’s Boeing 747 and Boeing 777 aircraft added to the Group’s
fleet.
In 2016, Aeroflot airline carried 175.5 thousand tonnes of cargo and mail, up 29.9% y-o-y. The
cargo/mail tonne-kilometres increased by 13.2% to 8.3 billion, while the revenue load factor
grew by 2.7 p.p. y-o-y to 65.0%. Aeroflot Group’s cargo and mail operations,
thousand tonnes
Domestic flights
International flights
Revenue load factor
Aeroflot Group’s revenue tonne-kilometres,
billion TKM, and revenue load factor
Aeroflot airline’s cargo and mail operations,
thousand tonnes
Aeroflot airline’s revenue tonne-kilometres,
billion TKM, and revenue load factor
153,1121,8
84,3 77,198,0
70,782,8
82,0 79,2
107,8
223,8204,6
166,3 156,3
205,8
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
5,4 5,7 5,3 5,1 6,2
2,5 3,0 3,5 4,34,8
7,98,7 8,8
9,511,0
65,2% 64,7% 63,8% 62,7%65,7%
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
Коммерческая загрузка
147,7118,0
81,5 74,696,1
46,258,5
63,8 60,5
79,4
193,9176,5
145,3135,1
175,5
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
4,1 4,3 4,2 4,6 5,3
1,6 2,0 2,52,7
3,05,76,3
6,77,3
8,3
63,8% 64,4% 63,1% 62,3% 65,0%
2012 2013 2014 2015 2016
Внутренние перевозки
Международные перевозки
Коммерческая загрузка
3.2. Route Network
Route Network Development Strategy
Aeroflot Group implements a strategy of balanced route network development based on a multi-
brand model ensuring maximum coverage of the air transportation market and the Group’s
presence in various price segments across different regions. The route network management
strategy relies on increasing frequency of flights to most popular destinations and improving
flight connections by adopting a wave system structure in flight schedules at its main hub,
Moscow Sheremetyevo airport, which enhances customer experience. Flights to new destinations
are launched based on the analysis of demand, competition, and potential efficiency of new
routes, both in terms of direct passenger traffic and contribution to the route network synergy.
Aeroflot Group pays particular attention to making socially important destinations accessible for
its customers.
Aeroflot Group Route Network Development5
In 2016, Aeroflot Group’s network comprised 326 scheduled routes to 51 countries, including 47
unique routes operated by the low-cost carrier Pobeda. Excluding the low-cost segment, the
Group’s airlines operated scheduled flights on 279 routes.
Regional developments imply a growth in the number of both scheduled (up 13.8% to 140) and
charter (up 7.1% to 60) domestic routes. The number of international scheduled routes declined
during the year by 13.1% to 139, with charter routes down by 10.8% to 116. The decline was due
to the optimisation of route networks carried out by the subsidiaries in 2015, and the launch of
Rossiya airline, a new integrated carrier.
In 2016, the total number of routes decreased by 6.5% to 377, primarily at the expense of charter
segment driven by lower demand for tourist flights.
Number of Aeroflot Group’s routes
2015 2016 Change, %
Sch. Chart. Total Sch. Chart. Total Sch. Chart. Total
International 160 130 260 139 116 214 (13.1) (10.8) (17.7)
Domestic 123 56 143 140 60 163 13.8 7.1 14.0
Medium-haul 249 170 356 253 161 341 1.6 (5.3) (4.2)
Long-haul 34 16 47 26 15 36 (23.5) (6.3) (23.4)
Total 283 186 403 279 176 377 (1.4) (5.4) (6.5)
During 2016, Aeroflot Group’s airlines launched scheduled flights to 28 new destinations,
including 19 domestic and 9 international.
Airline Destination Destination
Aeroflot
Moscow Alicante
Moscow Lyon
Moscow Syktyvkar
Moscow Valencia
Kazan Frankfurt
Rossiya
Anapa Krasnoyarsk
Sochi Nizhny Novgorod
Sochi Krasnoyarsk
5 Due to the separate status of the low-cost segment, the data on Aeroflot Group’s route network presented in
this section of the Annual Report includes the routes of Aeroflot airline and subsidiaries excluding Pobeda,
unless otherwise stated.
Airline Destination Destination
Sochi Orenburg
Sochi Tyumen
Nizhny Novgorod Simferopol
St Petersburg Heraklion
St Petersburg Rimini
Moscow Goa
Moscow Paphos
Moscow Rimini
Omsk Simferopol
Yekaterinburg Anapa
Aurora
Amgu Kavalerovo
Blagoveshchensk Neryungri
Dalnegorsk Kavalerovo
Khabarovsk Shakhtersk
Khabarovsk Neryungri
Khabarovsk Nogliki
Yuzhno-Sakhalinsk Blagoveshchensk
Yuzhno-Sakhalinsk Petropavlovsk-Kamchatsky
Vladivostok Blagoveshchensk
Vladivostok Preobrazheniye
* Highlighted in blue are own flights of subsidiary airlines.
At the same time, in 2016, nine scheduled routes were discontinued as part of the network
restructuring effort prompted by the launch of Rossiya airline.
Destination Destination
Krasnodar Sochi
Krasnodar Yerevan
Mineralnye Vody Yerevan
Mineralnye Vody Tashkent
Rostov-on-Don Yerevan
Rostov-on-Don Istanbul
Rostov-on-Don Tashkent
St Petersburg Urgench
Krasnodar Yekaterinburg
Aeroflot Group’s scheduled routes
(2016 vs 2015)
Aeroflot Group’s scheduled flights by region
(2016 vs 2015)
International
Domestic
Medium-haul
Long-haul
Total
Russia
Europe
CIS
Asia
Middle East
Americas
Total
In 2016, the number of Aeroflot Group’s scheduled flights grew 1.8% y-o-y. Asia and North
America reported the highest growth (+20.9% and +8.5%, respectively), driven by higher
demand on these routes and weaker competition. The number of scheduled flights to Europe grew
by 5.7 % in response to additional market opportunities in the region. The number of flights to
the Middle East in 2016 was almost flat year-on-year, due to the falling demand for certain
leisure destinations. The decline in number of flights to CIS countries was mainly due to the
network optimisation efforts by subsidiaries, and discontinued services to Kiev and Odessa in
Ukraine since late 2015.
Average weekly frequency of Aeroflot Group’s flights
Scheduled flights
International scheduled flights
-1,4%
-23,5%
1,6%
-13,1%
13,8%
Итого
Дальнемагистральные
Среднемагистральные
Международные
Внутренние
1,8%
8,5%
0,9%
20,9%
-18,6%
5,7%
1,5%
Итого
Америка
Бл. и Ср. Восток
Азия
СНГ
Европа
Россия
11,8
9,1
13,5
6,4
11,8
0,8
12,4
10,0
15,0
7,9
12,9
1,6
Регулярные Международные
регулярные
Внутренние
регулярные
Дальнемагистральные
регулярные
Среднемагистральные
регулярные
Чартерные
2015 2016
+ 4,8%
+ 11,0%
+ 10,1%
+ 23,6%
+ 9,5%
>2,0x
Domestic scheduled flights
Long-haul scheduled flights
Medium-haul scheduled flights
Charter flights
In 2016, Aeroflot Group continued increasing the frequency of service to the most popular and
lucrative destinations. The average weekly frequency of scheduled flights grew by 4.8% y-o-y
(from 11.8 to 12.4). This figure has grown 10.1% (from 9.1 to 10.0) for international scheduled
destinations and 11.0% (from 13.5 to 15.0) for domestic flights.
In planning its flight schedule, Aeroflot Group focuses on:
improving the accessibility of Russia’s regions;
improving customer experience of direct (non-stop) flights;
optimising targeted connections on intercontinental (Asia – Europe, North America – Middle
East), and interregional routes (Far East / Urals – Centre / South);
maintaining and further developing the hub structure at Sheremetyevo airport;
growing the market share on existing routes (large markets) and launching new destinations in
prospective markets with high transfer traffic potential.
Aeroflot Airline’s Route Network Development
In 2016, Aeroflot airline’s route network covered 133 scheduled routes to 50 countries. The
number of both domestic and international scheduled routes stayed flat year-on-year. The total
number of routes serviced by Aeroflot airline (including charter) grew 5.0% y-o-y to 147.
Number of Aeroflot airline’s routes
2015 2016 Change, %
Sch. Chart. Total Sch. Chart. Total Sch. Chart. Total
International 87 12 92 87 20 99 – 66.7 7.6
Domestic 46 9 48 46 13 48 – 44.4 –
Medium-haul 107 21 114 108 30 119 0.9 42.9 4.4
Long-haul 26 – 26 25 3 28 (3.8) – 7.7
Total 133 21 140 133 33 147 – 57.1 5.0
Aeroflot continued expanding its network by launching five new scheduled routes, including four
international (from Moscow to Alicante, Valencia, and Lyon, and from Kazan to Frankfurt) and
one domestic (from Moscow to Syktyvkar).
Russia
Europe
CIS
Asia
Middle East
Americas
Total
Aeroflot airline’s scheduled flights by region
(2016 vs 2015)
6,0%
8,5%
-1,0%
16,3%
-2,3%
6,9%
6,6%
Итого
Америка
Бл. и Ср. Восток
Азия
СНГ
Европа
Россия
In 2016, the total number of Aeroflot airline’s scheduled flights grew by 6.0% y-o-y due to the
increase in capacity on the most popular routes and the changes in the route network mentioned
above. This growth was mainly driven by an increase in flights on domestic and European routes
by 6.6% and 6.9%, respectively. It was also supported by a 16.3% increase in flights to Asian
countries. The result saw the connectivity ratio for Aeroflot airline’s own flights improve from
16.0 in 2015 to 19.1 in 2016.
Average weekly frequency of Aeroflot airline’s flights
Scheduled flights
International scheduled flights
Domestic scheduled flights
Long-haul scheduled flights
Medium-haul scheduled flights
Charter flights
The average weekly frequency of scheduled flights grew by 0.4%, from 16.1 to 16.2 flights per
route per week.
Subsidiary Airlines’ Route Network Development
Rossiya Airline
In response to recent market shifts and pursuant to the relevant resolution by its Board of
Directors, PJSC Aeroflot has established Rossiya airline, an integrated regional carrier, to
consolidate the operations of JSC Rossiya Airline, JSC Orenair, and JSC Donavia. The new
carrier started its operations on 28 March 2016.
The route network of the integrated carrier has been overhauled to improve operational and
financial efficiency and to account for the addition of the long-haul aircraft previously operated
by Transaero.
In 2016, Rossiya airline operated scheduled services on 112 routes (68 domestic and
44 international), including 85 routes under commercial management of PJSC Aeroflot.
Plans for the carrier’s network expansion provide for further development of the regional
Northwestern transport hub at Pulkovo airport (Saint Petersburg), and for services from
Moscow’s Vnukovo airport. Flights from Vnukovo cover destinations in Russia’s Far East and
targeted domestic connection airports, as well as Nice and Paris (Orly) in France.
Aurora Airline
Aurora is focused on securing transport accessibility and accommodating the demand for flights
in the Russian Far East and to major cities in Siberia: Irkutsk, Krasnoyarsk, Novosibirsk, and
16,1
12,4
22,9
6,9
18,4
0,40
16,2
12,5
23,1
7,4
18,3
0,43
Регулярные Международные
регулярные
Внутренние
регулярные
Дальнемагистральные
регулярные
Среднемагистральные
регулярные
Чартерные
2015 2016
+ 0,4%
+ 1,0%
+ 0,4%
+ 7,1%
- 0,8%
+ 7,5%
Yakutsk. Aurora also operates international services from Khabarovsk, Vladivostok, and
Yuzhno-Sakhalinsk to the Republic of Korea, China, and Japan.
In 2016, Aurora airline operated scheduled services on 51 routes in 4 countries (38 domestic and
13 international routes).
In the reporting year, the airline strengthened its position in the region’s international air
transportation market. Aurora remains the only carrier operating flights from Vladivostok and
Yuzhno-Sakhalinsk to Harbin, China, from Vladivostok to Busan in the Republic of Korea and
Dalian in China, and from Khabarovsk to Krasnoyarsk.
To attract transit passengers and offer them a smooth travel experience, the airline increased
flight frequency on the routes connecting the major hubs in Khabarovsk and Vladivostok, and
also adjusted certain flight schedules. The frequencies of services from Khabarovsk and
Vladivostok to Seoul, the Republic of Korea, and Petropavlovsk-Kamchatsky, and from
Vladivostok to Beijing, China, have been increased in response to surging demand.
In 2016, Aurora also enhanced its offering across a number of destinations through a codeshare
agreement with S7 Airlines, which came into force during the reporting year. The agreement
covers flights from Vladivostok to Hong Kong, Beijing, Tokyo, and Yuzhno-Sakhalinsk; and
from Khabarovsk to Beijing. Dash-8 Q400 aircraft were partially involved to support the turnover
of Airbus A319 aircraft and to improve passenger load factors on short-haul flights.
Aeroflot Group continues to integrate Aurora’s own domestic local routes into the Group’s
network to improve travel experience and accessibility for passengers flying to/from destinations
in the Russian Far East from/to other domestic and international destinations.
No. Route Type
1 DR Yuzhno-Sakhalinsk – Okha
2 DR Yuzhno-Sakhalinsk – Kurilsk
3 DR Yuzhno-Sakhalinsk – Yuzhno-Kurilsk
4 DR Yuzhno-Sakhalinsk – Shakhtersk
5 DR Terney – Amgu
6 DR Terney – Svetlaya
7 DR Terney – Yedinka
8 DR Vladivostok – Kavalerovo
9 DR Vladivostok – Plastun
10 DR Vladivostok – Terney
11 DR Vladivostok – Dalnerechensk
12 DR Vladivostok – Dalnegorsk
13 DR Khabarovsk – Kavalerovo
14 DR Khabarovsk – Okha
15 DR Khabarovsk – Nogliki
16 DR Khabarovsk – Shakhtersk
17 DR Khabarovsk – Neryungri
18 DR Vladivostok – Preobrazheniye
Note: A local route means a route between a major city (regional capital) and a smaller district centre within
the same region.
Highlighted in blue are new services launched during 2016.
1 DR Khabarovsk – Blagoveshchensk
2 DR Yuzhno-Sakhalinsk – Blagoveshchensk
3 DR Yuzhno-Sakhalinsk – Petropavlovsk-Kamchatsky
4 DR Vladivostok – Blagoveshchensk
1 IR Yuzhno-Sakhalinsk – Tokyo (Narita)
2 IR Yuzhno-Sakhalinsk – Sapporo
3 IR Yuzhno-Sakhalinsk – Harbin
Pobeda Airline
In 2016, Pobeda airline operated flights on 72 routes, including seasonal routes from Russian
regions to the Black Sea resorts in Sochi and Anapa. During the year, Pobeda operated 47 unique
routes which have not been serviced by any other airline within the Group.
In the reporting period, Pobeda was rapidly expanding its network, launching not only direct
flights between Moscow and other Russian regions, but also interregional routes that directly
connect large regional centres, specifically Yekaterinburg with Krasnoyarsk and Novosibirsk,
Saint Petersburg with Yekaterinburg, Makhachkala, and Krasnodar, etc. Its schedule not only
aims to boost direct passenger traffic, e.g. between Novosibirsk and Yekaterinburg,
Yekaterinburg and Saint Petersburg, but also intends to offer an attractive alternative to transit
passengers who need to travel between Novosibirsk and Saint Petersburg.
The company continued to add new international destinations. In addition to the flights to
Milan (Bergamo) and Bratislava launched in 2015, new destinations were added in 2016
including Cologne, Memmingen, Girona, Larnaca, Paphos, Tivat, Pisa, and Gyumri. A number of
international flights include an option of a group transfer to city centre, including Milan,
Florence, Zurich, Barcelona, Yerevan, and others).
Pobeda has also launched services on Rostov – Baku, Rostov – Tbilisi, and Samara – Almaty
routes.
Transit Passenger Traffic
The extensive route network of Aeroflot Group not only provides passengers with the benefits of
flying point-to-point, but also offers travelling options with connections at Moscow’s
Sheremetyevo airport, its main hub, and in base airports of regional airlines. From the business
perspective, transit passenger traffic falls into three groups: domestic transit, transit between
Russia and other countries, and international transit. The bulk of the Group’s transit passenger
traffic is handled by Aeroflot airline, which takes advantage of Russia’s beneficial geographical
position to pick up transit passenger traffic between Europe and Asia and from other transit
markets.
In 2016, total transit traffic on Aeroflot airline’s flights rose 5.5% y-o-y to c. 12.0 million
passengers. Passengers in transit accounted for 42.1% of Aeroflot airline’s total passenger traffic
in 2016 (44.2% in 2015). The share of transit passenger traffic declined as a result of higher
demand for point-to-point flights. In 2016, with an increase in the overall passenger traffic and a
higher passenger load factor, there was a shift in passenger traffic towards direct flights,
indicating improved network efficiency across Aeroflot Group.
The increase in the transit passenger traffic was mainly driven by the growth in transit passenger
traffic between Russia and other countries, reaching 16.9% of Aeroflot airline’s total passenger
traffic. The share of international transit traffic was 13.1%. Although the share of this segment
declined year-on-year, its passenger traffic grew 3.5% in absolute terms. International transit has
the highest impact, since it provides the company with an opportunity to capture more value from
international markets and global passenger flows.
Aeroflot continued its focus on boosting Moscow’s profile as an attractive transit hub by
increasing the frequencies of services, maintaining a wave system structure in flight schedule and
improving connectivity. Tactical moves made by Aeroflot in 2016 to enhance its value
proposition for transit passengers include changes in the flight schedule from Moscow to
Cuba (morning departure from Sheremetyevo and morning arrival, which has fundamentally
changed the connection pattern by providing convenient connections to all flights of the
European morning arrival wave, as well as Delhi and destinations in China). Additionally, in
2016 Aeroflot added a second daily flight from Moscow to Delhi and back to ensure two-way
connections for all popular routes that might include this flight (Europe and Americas). During
the year, Aeroflot introduced 14 additional weekly flights to London (two additional daily flights)
to improve the route’s connectivity with the Asian market. The company continues expanding its
network in Kazakhstan, a market with a strong potential for transfer traffic. Aeroflot is also
consistent in its efforts to increase the frequencies and capacity on high-margin routes with a high
share of transfer traffic (Spain, Israel, France, Italy, Vietnam, India, and Thailand).
Aeroflot airline’s key international transit routes in 2016 included New York – Tel Aviv,
Yerevan – Los Angeles, Bangkok – Tel Aviv, Hanoi – Prague, Shanghai – Tel Aviv, Berlin –
Hanoi, Delhi – Tel Aviv, Barcelona – Seoul, Barcelona – Tokyo, and Madrid – Seoul.
Share of transit passengers in Aeroflot airline’s total passenger traffic
Russia – Other Countries
International
Domestic
Obtaining approvals and operating permits to increase the frequencies of services and
launch new flights
In 2016, the Federal Air Transport Agency issued the following operating permits to companies
of Aeroflot Group that are under commercial management of PJSC Aeroflot.
Aeroflot Airline:
Four new permits to operate international scheduled passenger services from Moscow to Lisbon,
Kyzylorda, and Kostanay, and from Kazan to Frankfurt am Main;
Ten additional permits to increase the frequencies of international scheduled passenger services
from Moscow to Aktobe, Bologna, Vienna, Yerevan, Chisinau, Lyon, Malaga, Paris, and Beijing;
Three new permits to operate international non-scheduled (charter) passenger services from
Moscow to Grenoble, Chambery and Varadero.
Rossiya Airline:
One new permit to operate international scheduled passenger service from Moscow to Yerevan;
Three additional permits to increase the frequencies of international scheduled passenger services
from Moscow to Tenerife and from Saint Petersburg to Baku and Urgench;
One new permit to operate international non-scheduled (charter) passenger service from Moscow
to Punta Cana.
Aurora Airline:
Four new permits to operate international scheduled passenger services from Vladivostok to
Jiamusi and Yanji; and from Khabarovsk to Sanya and Jiamusi;
One additional permit to increase the frequency of international scheduled passenger service from
Yuzhno-Sakhalinsk to Sapporo.
There have also been certain changes within the Group. With the Group’s regional airlines now
integrated into Rossiya airline, all operating permits held by Donavia (for 16 routes) and
Orenair (for 41 routes) were transferred to the consolidated carrier, with effect from 27 March
2016. Aeroflot airline’s permit to operate a scheduled service between Moscow and Karlovy
Vary was transferred to Pobeda airline. Rossiya airline’s permit to operate scheduled flights
between Moscow and Rimini (one weekly frequency) was transferred to Pobeda airline as part of
15,0% 16,0% 16,7% 16,7% 16,9%
10,6%11,6% 11,8% 14,0% 13,1%
7,1%7,9%
10,7%
13,5%12,1%
2012 2013 2014 2015 2016
Россия - Зарубежье Международный Внутренний
32,7%35,5%
39,2%
44,2%42,1%
the effort to reallocate the flight frequencies between the services operated between Moscow and
Rimini and between Moscow and Bergamo.
Permits were renewed for Aeroflot airline (for 20 routes) and Rossiya airline (for 17 routes) to
operate services on Transaero’s routes until the end of the IATA Winter 16/17 Season, with an
extension option (a total of 36 routes). In order to streamline the use of operating permits held by
Aeroflot airline and Rossiya airline, a number of permits inherited from Transaero have been
waived.
With support from the Russian Ministry of Transport, a number of scheduled designations were
secured from the Russian Ministry of Foreign Affairs on the following routes:
Aeroflot: Kazan – Frankfurt am Main;
Rossiya: Krasnodar – Yerevan, Mineralnye Vody – Yerevan, Mineralnye Vody – Tashkent,
Moscow – Varadero, Rostov-on-Don – Yerevan, Rostov-on-Don – Istanbul, Rostov-on-Don –
Tashkent, Rostov-on-Don – Tel Aviv, Saint Petersburg – Beijing, Sochi – Yerevan, and Sochi –
Istanbul;
Aurora: Vladivostok – Sapporo, Khabarovsk – Niigata, Vladivostok – Jiamusi, and Khabarovsk –
Jiamusi;
Pobeda: Rostov-on-Don – Baku, and Rostov-on-Don – Tbilisi.
International Cooperation
Codeshare agreements
Aeroflot actively cooperates with other carriers under codeshare agreements. These arrangements
enable the Group to build its presence in promising markets, gain a foothold in the markets where
restrictions apply, expand the route network coverage, and more efficiently use own fleet.
In 2016, the number of marketing flights operated by Aeroflot airline grew from 299 to 320.
Agreements for joint free-sale flight operation signed with S7, Finnair and Cubana de Aviacion,
and with Aurora Airlines, a subsidiary of Aeroflot (codeshare flights on a free-sale basis) entered
into force. Joint flights with Air Malta were resumed on the Malta – Moscow – Malta route.
In 2016, Aeroflot had 29 codeshare agreements with foreign and Russian airlines, including:
19 agreements under which Aeroflot airline acted both as a partner operator and a marketing
operator: Air France, KLM, Alitalia, Finnair, Czech Airlines, LOT-Polish Airlines, Bulgaria Air,
Korean Air, Air Serbia, MIAT, airBaltic, Air Europa, Garuda Indonesia, Icelandair, Kenya
Airways, Saudi Arabian Airlines, China Eastern Airlines, China Southern Airlines, and Siberia
Airlines PJSC;
Four agreements under which Aeroflot airline acted as a partner operator only: Cubana de
Aviacion, Iran Air, Tarom, and Middle East Airlines;
Five agreements under which Aeroflot airline acted only as a marketing operator, selling partner
flights under its code: Adria Airways, Air Malta, Bangkok Airways, Royal Air Maroc, and
Aurora airline (codeshare flights on a free-sale basis);
Two agreements with Aeroflot Group’s airlines under commercial management arrangements for
operation of joint flights: with Rossiya and Aurora.
Commercial management of the flights operated by subsidiary airlines under codeshare
agreements enables Aeroflot to implement its model of integrated centralised management in
such strategic areas as sales, revenue management, route network and fleet planning.
Interline agreements
As at the end of 2016, Aeroflot airline had interline agreements with 145 carriers, including two
subsidiary airlines, five other Russian carriers, and six airlines based in the CIS.
Membership in the SkyTeam Alliance
In 2016, SkyTeam Alliance had 20 members, including Aeroflot, Aerolineas Argentinas,
Aeromexico, Air Europa, Air France, KLM, Alitalia, China Airlines, China Eastern, China
Southern, Czech Airlines, Delta Air Lines, Kenya Airways, Korean Air, Middle East Airlines,
Saudi Arabian Airlines, TAROM, Vietnam Airlines, Xiamen Airlines, and Garuda Indonesia.
Membership of the SkyTeam Alliance enables Aeroflot to expand its route network while
offering its customers access to the global alliance’s unique product, and providing Aeroflot
Bonus members with an opportunity to enjoy the privileges on the flights of other members of the
SkyTeam Alliance.
In 2016, the Alliance’s aggregate route network comprised 1,062 destinations in 177 countries.
SkyTeam’s members were making a total of 17,343 flights on a daily basis.
In 2016, under SkyTeam-based cooperative arrangements, Aeroflot serviced 810 thousand
passengers and 331 thousand tonnes of cargoes, sold 386 flight segments as part of SkyTeam’s
fare products, and issued 6,825 tickets under three corporate contracts. Over 538 million bonus
miles were awarded to participants of Aeroflot Bonus programme on flights operated by
SkyTeam partners.
3.3. Aircraft Fleet
Fleet Development Strategy
Aeroflot Group operates a balanced in terms of aircraft types and modifications fleet and keeps
on enhancing it in line with its multi-brand strategy. Over the last years, the Group has invested
much effort in optimisation and upgrade of the fleet to improve the efficiency of the Group’s
operations and cost control. In 2012–2016, the types of aircraft in operation reduced from 14 to 8.
Aeroflot Group’s aircraft fleet evolution
2012 2016
Narrow-body (regional)
SSJ100
An-148
An-12
An-24
DHC-8-200/300
SSJ100
DHC-8-200/300/400
DHC-6-400
Narrow-body (medium-haul) Airbus A319/320/321
Boeing 737 (Classic)
Boeing 737 (NG)
Airbus A319/320/321
Boeing 737 (NG)
Wide-body
Airbus A330
Boeing 767
Boeing 777
Il-96
Tu-204
MD-11F
Airbus A330
Boeing 747
Boeing 777
14 types 8 types
Note: Data exclude aircraft that were out of operation by the Group’s airlines and/or subleased to third parties (Mi-
8, Yak-40, Tu-154 in 2012; An-148 and An-24 in 2016).
As a result of active fleet upgrades from 2012 to 2016, the average age of aircraft in operation
dropped from 8.8 to 6.5 years for Aeroflot Group and from 5.2 to 4.2 years for Aeroflot airline
(as at the year-end). Aeroflot airline’s fleet is one of the youngest in the world.
Aeroflot Group’s fleet as at the year-end, number of
aircraft
Airline subsidiaries
Aeroflot airline
Aeroflot Group
Note: Including subleased aircraft.
Average age of aircraft fleet in operation, years
Aeroflot Group’s aircraft fleet was built and is grown in line with specific business models and
route networks of each airline.
Aeroflot airline’s fleet comprises several types of aircraft produced by major manufacturers and
focuses on addressing the needs of both the premium and mass-market segments. Aircraft offer
two to three travel classes to serve passengers in flight.
Rossiya airline operates Airbus and Boeing narrow-body aircraft primarily on scheduled routes,
while its Boeing wide-body aircraft are operated primarily on leisure markets (to destinations
served by the charter programme and resorts of the Black Sea) and flights to the cities in the Far
East.
Aurora airline operates Airbus A319 narrow-body aircraft on scheduled routes and turboprops for
local flights.
The aircraft fleet of the low-cost carrier Pobeda comprises one aircraft type, Boeing 737-800,
with a single-class cabin configuration.
Airline Manufacturer Types Models
Narrow-body Wide-body
5
Airbus A320 (Family)
Boeing 737 NG
SSJ100
Airbus A330
Boeing 777
4 Airbus A320 (Family)
Boeing 737 NG
Boeing 747
Boeing 777
3
DHC-6-400
DHC-8-200/300/400
Airbus A319
1 Boeing 737 NG
Aeroflot Group’s Aircraft Fleet
As at 31 December 2016, Aeroflot Group had 292 aircraft: 50 regional aircraft (including
Bombardier DHC-8 and Viking DHC-6 turboprops, SSJ100 jets, as well as An-148 and An-24
aircraft that were out of operation and subleased), 192 narrow-body aircraft for medium-haul
flights (Airbus А320 Family and Boeing 737 Family), and 50 wide-body long-haul aircraft
(Airbus А330s, Boeing 767s and Boeing 777s).
In 2016, following the active route network expansion and the launch of new routes and flights,
the Group focused on expanding its aircraft fleet. During the year, 53 aircraft were added to the
Group’s fleet. The Group together with lessors conducted pre-delivery checks in order to phase-in
128 143 155 170 189
105 96 106 92103
233 239261 262
292
2012 2013 2014 2015 2016
Дочерние авиакомпании
Авиакомпания «Аэрофлот»
8,87,7
7,06,4 6,5
5,2 5,24,1 4,4 4,2
2012 2013 2014 2015 2016
Группа «Аэрофлот»
Авиакомпания «Аэрофлот»
12 aircraft previously operated by Transaero (seven Boeing 747 and five Boeing 777 aircraft),
and also phased in five Airbus A321s ordered by Transaero. Following expiry of the lease period
in 2016 and in line with the Group’s fleet optimisation, 23 airliners were phased out. Thus, in
2016, the net increase in Aeroflot Group’s fleet amounted to 30 aircraft. Aeroflot Group’s fleet by type of aircraft
Aeroflot Group’s fleet by type of ownership
Narrow-body (regional)
Narrow-body (medium-haul)
Wide-body
Operating lease
Owned
Finance lease
Aeroflot Group’s aircraft fleet
Type of aircraft
Aircraft
fleet as at
31 Decem
ber 2015
Change Aircraft
fleet as at
31 Decem-
ber 2016
Owned Operati
ng lease
Finance
lease during 2016
phased
in
phased
out
An-148 6 – – 6 – – 6
An-24 1 – – 1 1 – –
DHC 6-400 2 – – 2 – 2 –
DHC 8-200 2 – – 2 – 2 –
DHC 8-300 4 – – 4 1 3 –
DHC 8-402 3 2 – 5 5 – –
SSJ100 24 6 – 30 – 30 –
Narrow-body (regional) 42 8 – 50 7 37 6
Airbus А319 40 1 (5) 36 – 27 9
Airbus А320 70 9 (4) 75 – 75 –
Airbus А321 26 12 (6) 32 – 17 15
Boeing 737-500 3 – (3) – – – –
Boeing 737-800 42 9 (2) 49 – 49 –
Narrow-body (medium-
haul) 181 31 (20) 192
– 168 24
Airbus A330-200 5 – – 5 – 5 –
Airbus A330-300 17 – – 17 – 9 8
Boeing 767 1 – (1) – – – –
Boeing 777-200ER 3 – (2) 1 – 1 –
Boeing 777-300ER 13 7 – 20 – 10 10
Boeing 747-400 – 7 – 7 – 7 –
Wide-body 39 14 (3) 50 – 32 18
Total 262 53 (23) 292 7 237 48
Note: As at 31 December 2016, six Аn-148s and one An-24 were out of operation.
17,1%
65,8%
17,1%Узкофюзеляжные
(региональные)
Узкофюзеляжные
(среднемагистральные)
Широкофюзеляжные
16,4%
2,4%
81,2%
Финансовый
лизинг
Собственность
Операционный
лизинг
Aeroflot Airline’s Aircraft Fleet
As at 31 December 2016, Aeroflot airline had 189 aircraft including 30 regional narrow-body
aircraft, 122 narrow-body medium-haul aircraft, and 37 wide-body aircraft.
In 2016, the Company’s fleet was expanded to include new SSJ100, Airbus A320, Airbus A321,
Boeing 737-800, and Boeing 777-300ER aircraft. Airbus A319 aircraft were phased out. The net
fleet increase amounted to 19 aircraft. Aeroflot airline’s fleet by type of aircraft
Aeroflot airline’s fleet by type of ownership
Narrow-body (regional)
Narrow-body (medium-haul)
Wide-body
Operating lease
Finance lease
Aeroflot airline’s aircraft fleet
Type of aircraft
Aircraft fleet
as at
31 December
2015
Aircraft fleet
as at
31 December
2016
Change
SSJ100 24 30 6
DHC 8-400 3 – (3)
Narrow-body (regional) 27 30 3
Airbus A319 5 – (5)
Airbus A320 63 70 7
Airbus A321 26 32 6
Boeing 737 14 20 6
Narrow-body (medium-haul) 108 122 14
Airbus A330 22 22 –
Boeing 777 13 15 2
Wide-body 35 37 2
Total 170 189 19
Note: DHC 8-400 regional aircraft were purchased in 2015 and recorded as an asset of PJSC Aeroflot prior to
being transferred to Aurora airline in 2016.
Subsidiaries’ Aircraft Fleet
Subsidiaries’ aircraft fleet composition was transformed as a result of the set-up of the united
regional carrier Rossiya Airlines and the arrival of ex-Transaero aircraft from leasing companies.
Aurora airline continued to enhance its fleet to operate local flights. Pobeda airline’s fleet
remained unchanged.
15,9%
64,5%
19,6%Узкофюзеляжные
(региональные)
Узкофюзеляжные
(среднемагистральные)
Широкофюзеляжные
17,5%
82,5%
Финансовый
лизинг
Операционн
ый лизинг
Subsidiaries’ aircraft fleet
Type of aircraft
Aircraft fleet
as at
31 December
2015
Aircraft fleet
as at
31 December
2016
Change
An-148 6 6 –
Airbus A319 26 26 –
Airbus A320 7 5 (2)
Boeing 767 1 – (1)
Boeing 737 16 17 1
Boeing 747 – 7 7
Boeing 777 3 6 3
Rossiya airline 59 67 8
An-24 1 1 –
Airbus A319 9 10 1
Boeing 737 3 – (3)
DHC (6 and 8) 8 13 5
Aurora airline 21 24 3
Boeing 737 12 12 –
Pobeda airline 12 12 –
Total 92 103 11
Note: For data comparability purposes, Rossiya airline’s fleet in 2015 also includes the aircraft of Donavia and
Orenair airlines. Six aircraft owned by Rossiya were out of operation and were (are being) leased out.
Flight Hours
Despite the dramatic fleet expansion (+30 aircraft), Aeroflot Group throughout the year
maintained high fleet utilisation rates. In 2016, Aeroflot Group’s flight hours increased by
6.1% y-o-y to 911.8 thousand hours. Aeroflot airline posted a 7.5% increase in flight hours to
639.5 thousand following the expansion of its operations.
In 2016, Aeroflot Group’s flight hours per aircraft in operation per day averaged 9.4, down
1.1% y-o-y. Immaterial decline was driven by substantial fleet enhancement in 2H 2016, which
requires certain time to ramp-up utilisation. Aeroflot airline’s average flight hours per aircraft in
operation per day was 9.9 hours and was affected by increased share of narrow-body aircraft.
Flight hours, thousand hours
Average flight hours per aircraft in operation per day
Note: The number of aircraft in operation in the reporting
year is calculated as the average of the number of aircraft
as at the start and the end of the period.
Airline subsidiaries
Aeroflot airline
Aeroflot Group
460,7 509,1 554,7 594,9 639,5
259,9267,2 260,7 264,7
272,3720,6
776,3 815,4 859,6911,8
2012 2013 2014 2015 2016
Дочерние авиакомпании
Авиакомпания «Аэрофлот»
6,1%5,4%5,0%
7,7%
9,19,4 9,3
9,5 9,4
10,810,5 10,5 10,3
9,9
2012 2013 2014 2015 2016
Группа «Аэрофлот»
Авиакомпания «Аэрофлот»
Fuel Efficiency
High fuel efficiency is an important benefit of the young aircraft fleet. Fuel costs account for a
major part of an airline’s expenses. Their share in Aeroflot Group’s 2016 operating costs
amounted to 23.5%. New airliners feature various technical solutions, which enable a reduction in
fuel and other operating costs, including optimisation of maintenance costs. Specifically, since
2014 Aeroflot has been operating the most advanced Airbus A320 family aircraft equipped with
sharklets that reduce lift-induced drag and improve aero-dynamics at the wingtips. As a result
aircraft deliver a 3%–4% reduction in fuel consumption (according to Airbus), increased flight
range, and improved takeoff performance. As at the end of 2016, 38 aircraft in the Group’s fleet
were equipped with sharklets.
Operating a young aircraft fleet also helps reduce the environmental footprint and slash harmful
CO2 and NOx emissions to the atmosphere. For more details on the fleet fuel efficiency see the
Environmental Impact and Performance section. Specific fuel consumption in Aeroflot Group
Specific fuel consumption in Aeroflot airline
g/ASK
g/TKM
In 2016, specific fuel consumption across Aeroflot Group decreased by 18.1 grammes (or
5.9%) y-o-y to 286.4 grammes per tonne-kilometre (TKM). Specific fuel consumption at
Aeroflot airline decreased by 12.9 grammes (or 4.3%) to 286.3 g/TKM. Moderate improvement
is also posted on a gramme per available seat-kilometre (ASK) basis.
26,1
24,8
23,523,1 22,9
315,0 312,6308,2
304,5
286,4
2012 2013 2014 2015 2016
г/ккм г/ткм
26,9
25,5
23,623,3 23,2
308,4 307,0
301,6 299,2
286,3
2012 2013 2014 2015 2016
г/ккм г/ткм
3.4. Sales and Distribution
Aeroflot Group6 sells tickets in Russia and abroad through a variety of channels, including the
official Aeroflot website where passengers can buy tickets both for Aeroflot airline’s flights and
the flights of its subsidiaries under commercial management. To ensure a uniform offering of
online services, subsidiary websites have been deep-linked with Aeroflot airline’s platform for
online sales. Pobeda airline sells tickets independently through their own website and online
booking systems.
In the report period (2016), the Group continued to streamline the structure and increase
efficiency of its ticket sales. Growth in online sales is a common trend in the airline industry,
driven by more accessible and easy-to-use web apps and the growing number of digital devices
(laptops, tablets, and smartphones).
In 2016, online sales grew to 29.2% of Aeroflot Group’s revenue, while agents accounted for the
largest share (63.3%). Sales offices and the call centre accounted for 6.3% and 1.2%,
respectively.
Breakdown of Aeroflot Group’s revenue
Aeroflot Group’s sales by channel
Call centre
Aeroflot website sales
International Sales
Sales in Russia
Own sales offices
Authorised agents
Sales in Russia
In Russia, sales are carried out through authorised agents (under direct agency agreements),
neutral sales systems (Transport Clearing House (TCH) and BSP Russia), own sales offices,
Aeroflot airline’s website, and the call centre.
In 2016, the share of neutral agents in the total sales grew up to 71.7% y-o-y. Streamlined agency
fee costs and a partial migration of sales online drove sales through authorised agents down to
16.7%. Sales through own sales offices accounted for 11.6%.
In 2016, we launched a new incentive programme for agents in Russia, which helped cut our
agency fee costs in Russia by more than two times.
6 In this section of the Annual Report the Group’s sales include revenue of Aeroflot airline and subsidiary flights
under 100% commercial management.
44,8% 39,3%
29,8%30,3%
24,0% 29,2%
1,4% 1,2%
2015 2016
Колл-центр
Интернет-продажи
Продажи за рубежом
Продажи на территории России
67,1% 63,3%
24,0% 29,2%
7,5% 6,3%1,4% 1,2%
2015 2016
Колл-центр
Офисы собственных продаж
Интернет-продажи
Агентские продажи
Split by region, Moscow (60.4%), St Petersburg and the Russian Far East accounted for the
largest share in Aeroflot Group’s sales in 2016. Breakdown of Aeroflot Group’s domestic revenue
Breakdown of Aeroflot Group’s domestic revenue
(excluding Moscow)
Agents and own sales offices in Moscow
Agents and representative offices in regions
St Petersburg
Vladivostok
Yuzhno-Sakhalinsk
Khabarovsk
Novosibirsk
Kaliningrad
Other cities
Aeroflot Group’s domestic sales by channel
Own sales offices
Authorised agents
Neutral sales systems
International Sales:
International ticket sales of the Aeroflot Group are carried out through the network of agents
within BSP and ARC settlement systems, authorised agents (under direct agency agreements),
sales offices, Aeroflot airline’s website, and the call centre.
In 2016, sales through the network of agents in neutral sales system (BSP, ARC, TCH) accounted
for 87.4%. Sales through authorised agents totalled 6.7%, and sales through own offices
accounted for 5.9%.
60,4%
39,6%
Москва (агенты +
собственные офисы
продаж)
Регионы (агенты +
представительства)
30,4%
11,8%
7,2%
5,3%4,5%
4,3%
36,5%
Санкт-Петербург
Владивосток
Хабаровск
Южно-Сахалинск
Калининград
Новосибирск
Другие города
64,4% 71,7%
24,1% 16,7%
11,5% 11,6%
2015 2016
Офисы собственных продаж
Официальные агенты
Нейтральные системы продаж
Throughout the year, Aeroflot Group has introduced several initiatives aimed at strengthening
relations with the international agency network by optimising agency terms, offering special rates
to sales agents, and leading joint marketing campaigns.
In 2016, the highest international sales were generated in Europe (46.1%). Aeroflot Group’s international sales by channel
Breakdown of Aeroflot Group’s revenue from
international sales in 2016
Authorised agents
Own sales offices
Neutral sales systems
Europe
Asia
America
CIS
Middle East
Corporate Sales Aeroflot Group is actively enhancing its corporate sales. Aeroflot’s corporate customers include a
variety of fuel and energy, finance, pharmaceutical, retail, food, and construction companies. Our
well-balanced mix of industries ensures sustainability of the corporate sales segment.
Aeroflot Group’s corporate sales priorities include:
global companies maintaining representative offices or business projects in Russia or the CIS;
major international or regional Russian companies;
state-funded institutions.
Aeroflot’s sales force meet with key market players, identify opportunities, work out partnership
terms and conditions, and sign contracts with promising companies.
Pricing Policy
Aeroflot’s pricing strategy primarily seeks to develop and maintain a sophisticated schedule of
fares and fare rules, serving as a sales management tool to maximise revenue. The pricing policy
takes into account both the price factor and the load factor, which is supposed to ensure profitable
operations throughout the network. Aeroflot’s pricing policy is tailored to the chosen market and
Aeroflot’s positioning objectives. Fares are based on changes in competition on the market;
demand fluctuations; seasonal changes in capacity driven by flight frequencies, type of aircraft
operated on the route and quality of connections; FX fluctuations; fuel prices; political and
economic environment. Aeroflot’s fare schedule and fare rules are designed to encourage the use
of all fare groups taking into consideration passenger segments.
Our Sabre and Sabre-based IT tools enable maximization of revenue and include a number of
software packages providing for seat inventory and pricing management.
2016 saw carriers actively migrating from a simple fare schedule to fare brands, i.e. the model
that uses 3–4 fare groups differentiated not only by fare rules but also by the set of value-added
services and privileges. Starting from November 2016, Aeroflot has applied a fully branded fare
84,8%87,4%
8,4%6,7%
6,8% 5,9%
2015 2016
Офисы собственных продаж
Официальные агенты
Нейтральные системы продаж
46,1%
25,7%
11,7%
9,4%7,0%
Европа
Азия
Америка
СНГ
Ближний и
Средний Восток
schedule offering two fare groups in the Business and Comfort Classes (Classic and Flex) and
four fare groups in the Economy Class (Promo, Saver, Classic, Flex). Price differences between
the fare groups were reduced to provide free access to value-added services and privileges.
3.5. Aircraft Maintenance and Repair Stations
Aeroflot Group has an efficient aircraft maintenance, repair and overhaul (MRO) system that
enables to service the fleet of Aeroflot airline and subsidiaries as well as provide services to third
party customers. MRO operations focus on keeping the fleet in good condition, and ensuring high
reliability, flight safety and on-time performance.
The maintenance and repair policy of Aeroflot Group’s airlines provides for strict compliance
with the requirements of countries of registration, maintenance programmes and aircraft lease
agreements. It is focused on enhancing capacity and technical competencies, rolling out cutting
edge technological solutions, and employee training and development, while constantly
improving performance.
Each of the Group’s companies has departments responsible for airworthiness and maintenance
of operated aircraft. The airlines also cooperate with one another under signed agreements.
Aeroflot Group has in place a strategic programme to centralise maintenance of aircraft and
aircraft components. The centralisation provides for separating base and line maintenance.
In late 2015, as part of its strategy, the Group established LLC A-Technics, its new aircraft
maintenance and repair subsidiary, based at Vnukovo airport and in Orenburg. In 2016, the
company was certified by EASA and launched its operations. Aeroflot Group’s MRO facilities
487 employees
Hangars Headcount (2016) Amount of work
> 3,500 employees > 3,350,000 man-hours
361 employees
Yuzhno-Sakhalinsk
Vladivostok
2,060 employees
138 employees 469 employees
Wide-body hangar Narrow-body hangar
Note: Aurora’s hangar in Yuzhno-Sakhalinsk is designed for repair and maintenance of turboprops only.
Orenburg
Moscow
St. Petersburg
Maintenance facilities at airports and types of maintenance
Airport and location Company Line maintenance Base maintenance
Sheremetyevo
airport (Moscow) Aeroflot
Airbus A330, А320 Family,
Boeing 777, Boeing 737-
800 NG, and Sukhoi
Superjet RRJ-95
А320 Family, A330,
Boeing 737-800 NG, and
Sukhoi Superjet RRJ-95
Vnukovo airport (Moscow) A-Technics Boeing 737, Boeing 747,
Boeing 777
Boeing 737, Boeing 747,
Boeing 777
Pulkovo
airport (Saint Petersburg) Rossiya Airbus A320 Family Airbus A320 Family
Orenburg
airport (Orenburg) A-Technics Boeing 737 Boeing 737
Vladivostok
airport (Vladivostok) Aurora
DHC-6-400, DHC-8-200/300,
and А319 N/A
Yuzhno-Sakhalinsk
airport (Yuzhno-
Sakhalinsk)
Aurora DHC-6-400, DHC-8-200/300
and А319 N/A
As at the end of 2016, PJSC Aeroflot included the following divisions related to aircraft
maintenance and repair:
Repair and maintenance divisions at PJSC Aeroflot
Aircraft Maintenance
Department Airworthiness Department Quality Assurance Department
Maintenance of aircraft of
Aeroflot and other Group
airlines.
Maintains airworthiness of aircraft operated
by Aeroflot airline, manages technical
condition of the fleet throughout the entire
aircraft life cycle, develops and implements
PJSC Aeroflot’s strategy and policy
covering aircraft operation.
Develops a quality management
system for aircraft maintenance
and airworthiness.
PJSC Aeroflot holds and maintains certificates issued by European, Bermudian, and Russian
aviation authorities for maintaining airworthiness of the following types of aircraft and
components:
A320 Family (line maintenance, A-check, C-check, 6YE check);
B-737 (line maintenance, base maintenance);
A330 (line maintenance, A-check, C-check);
B-777 (line maintenance);
RRJ-95B (line maintenance, base maintenance).
In 2016, Aeroflot provided aircraft maintenance and repair services to 26 airlines, and provided
technical assistance to 46 airport operators and aircraft maintenance companies.
Aeroflot Group partners with leading maintenance and repair market players, which enables it to
keep the fleet in good condition and optimise costs. The Group’s partners are: Volga Dnepr
Technics Moscow (line maintenance, Boeing 737-800NG), STARCO (Airbus A330), Boeing
Shanghai (Boeing 777), and S7 Engineering (Airbus A320 and Boeing 737-800NG).
Aeroflot Group continues cooperate with Lufthansa Technik AG for have maintenance of
Group’s aircraft.
In 2016, the Group approved its MRO Strategy until 2021, to increase insourced and decrease
outsourced services, and to centralise its repair and maintenance operations. In particular, the
Strategy provides for:
constructing Hangar 4 at Sheremetyevo airport to perform base maintenance of Boeing 777-
300ERs;
introducing new types of maintenance and repair operations;
carrying out C-checks of frames and further expanding the range of services offered by A-
Technics;
developing component repair capacities and expertise;
creating a single Big Data analytics facility driven by predictive maintenance principles;
setting up a targeted framework of providers of maintenance stations.
Take-offs serviced at Sheremetyevo airport,
thousand
Labour intensity per flight hour of Aeroflot airline
aircraft, man-hour
3.6. Flight Safety and Aviation Security
Flight safety and aviation security have always been a top priority for Aeroflot Group. The Group
airlines have an integrated management system for flight safety and aviation security to ensure
compliance with IOSA international standards and the Federal Aviation Rules of the Russian
Federation.
Flight Safety
The Company regularly performs risk analysis and successfully passes audits for compliance with
Russian and international safety regulations. The safety level of Aeroflot flights in 2016 was
99.975%, exceeding the 99.957% target set for the reporting period and staying comfortably
within the 99.900%–100% top range. Flight safety level of Aeroflot airline, %
SAFA ratio of Aeroflot airline
74,083,7
91,8103,2
109,5
2012 2013 2014 2015 2016
3,032,65
2,44 2,39 2,36
2012 2013 2014 2015 2016
99,965
99,961
99,972
99,978
99,975
2012 2013 2014 2015 2016
0,750,85
0,64
0,21
0,45
2012 2013 2014 2015 2016
Граница «черного списка» SAFA Ratio >2
Blacklist line
SAFA Ratio >2
In 2016, the airline was audited for compliance with IOSA’s ORG (SMS) section and ISAGO’s
ORM-HS (SMS) section. Following the audit, a Corrective and Preventive Action Plan was
developed.
In line with the external audit plan, 2016 saw regular inspections of airport refuelling facilities by
the IATA Fuel Quality Pool (IFQP).
In 2016, as part of the Safety Assessment of Foreign Aircraft (SAFA) Programme, the European
Civil Aviation Conference (ECAC) state inspectors carried out scheduled inspections of Aeroflot
airline’s aircraft. For fleet safety inspections, the SAFA Programme has set up a safety ratio with
the standard value of ≤ 2. In 2016, Aeroflot airline’s aircraft demonstrated a strong SAFA safety
ratio of 0.45. The Company’s aircraft were recognised to be in full compliance with all the
applicable safety regulations.
In 2016, Aeroflot continued to develop its IT infrastructure supporting the flight safety
management system. The Company’s intranet website features a voluntary reporting system for
flight safety issues encouraging active employee involvement. The airline also continued to
develop its Air Accident Database, which helps to identify and minimise safety risks.
Aviation and Transportation Security
Aeroflot cooperates closely with airport security services, airlines, and law enforcement
authorities to implement an action plan to maintain a high level of aviation and transportation
security, passenger and staff safety.
In 2016, the Company continued to successfully operate its Automated Aviation Security
Management System (AA SEMS), introduced in 2015. This system helps assess the actual status
of the security system and monitor its compliance with standards provided for by the airline’s
Security Programme, recommended ICAO and IATA standards, and laws of destination airport
countries.
PJSC Aeroflot passes regular audits for compliance with international safety regulations. In 2016,
it successfully passed an audit for compliance with the US Transportation Security
Administration requirements and the АСС3 (Air Cargo or Mail Carrier operating into the Union
from a Third Country Airport) validation procedure carried out by an EU validator. Following the
audit, the EU validator noted Aeroflot’s high level of all stages of cargo and mail handling
operations and the unique and content-rich nature of the new Aeroflot – Russian Airlines АСС3
Security Programme.
In 2016, Aeroflot airline’s experts were actively involved in improving the Russian aviation and
transportation security legislation. As proposed by PJSC Aeroflot, the Russian Ministry of
Transport amended its regulations covering transfer baggage, cargo and mail safety in Russian
airports. As part of a working group set up by the Russian Ministry of Transport, the Company’s
representatives contributed to the development of a new version of the Ministry’s decree on the
procedure for air carriage of weapons. Aeroflot also continued to collaborate with its SkyTeam
partners on aviation security matters. In June 2016, Aeroflot specialists attended a scheduled
meeting of SkyTeam Aviation Security Functional Experts (ASFE).
Canine Team
In 2016, the Company continued to develop its canine service. Aeroflot’s integrated canine
service is a biotech-based security solution, which ensures consistent and regular inspections of
the airline’s infrastructure and vehicles. The Company’s ensures olfactory monitoring of
Sheremetyevo airport facilities to detect explosives and explosive devices. Aeroflot’s experience
of using specially-trained dogs as extra safety measures is completely unique in many respects
and is of interest to the entire air transportation industry.
Interaction with Subsidiary Airlines
Aeroflot Group companies maintain an ongoing security information sharing. As part of its multi-
brand strategy, the Group will seek further integration of its subsidiary airlines in this area. In
particular, the Group plans to create a shared information space to monitor the progress of
aviation security efforts, and trace the security status across its base airports and route network.
All necessary information will be available from the planned information system, which will be
as sophisticated as the one currently used by PJSC Aeroflot.
3.7. Customer Service and Brand Management
Customer Service and Brand Management
In 2016, the Company continued to consistently improve service quality and promote the
Aeroflot brand in the Russian and global markets. In the reporting period, Aeroflot launched a
series of advertising and marketing campaigns, ran programmes to boost demand for and provide
informational support to new domestic and international services, and delivered a number of
media projects involving a variety of promotional channels and tools. Important brand building
tools include service quality improvement, the loyalty programme and sponsorship programmes.
In 2016, Aeroflot became the first Russian company to be awarded 4-Star Airline status by
Skytrax for quality of customer service, and for the fifth time won the SkyTrax World Airline
Award as the Best Airline in Eastern Europe (the airline also won the award in 2011, 2013, 2014,
and 2015).
According to Brand Finance research, Aeroflot is the strongest brand among the world’s largest
airlines. The brand strength indicator relies on marketing research data along with benchmarking
of financial results and measurements of overall potential versus peers. Our extraordinary brand
strength provides a compelling indication of its sustainability and growth outlook, and testifies to
the success of the Company’s marketing efforts. The Aeroflot brand was valued at
USD 1.27 billion as at 31 December 2016, placing it among Top 30 airlines by value.
During 2016, we rolled out a number of advertising campaigns in more than 30 countries,
including the EU, USA, Japan, India, CIS countries and etc. These campaigns were designed to
improve sales of direct flights to Moscow, connecting flights between Europe and Asia,
connecting flights to Russian destinations, as well as promote individual services and options. In
2016, the Company placed particular focus on raising the brand profile in our priority Asian
markets, including China and South Korea, to boost demand for connecting flights between Asia
to Europe. In addition, we took efforts to promote the Group’s products and services among the
professional community.
In 2016, Aeroflot airline took part in the Moscow International Festival “Circle of Light”,
organised and ran a successful New Year Travel light show in major Russian cities
(Saint Petersburg, Novosibirsk, Yekaterinburg, Kazan, and Samara) and in Astana, Kazakhstan.
As part of activities to establish a united regional carrier under the Rossiya brand, we undertook a
rebranding exercise to build on the valuable legacy of the previous logo and add some new,
modern attributes. The launch of the new airline brand was supported by an advertising campaign
in Russia in TV, outdoor, press, and web advertising channels.
Improving Customer Experience Aeroflot Group continuously strives to improve customer experience as a strong competitive
advantage to secure its leadership in the future. In 2016, the Group’s companies continued to
improve their products and services focusing on a wider use of information technologies.
Key Achievements in Customer Experience in 2016
In-flight services
carry-on electronic devices are now permitted for use in Flight Mode during the entire
flight when flying with the Group’s airlines;
menus for all travel classes were improved, including based on the results of a
crowdsourcing-based poll;
Asian national cuisine dish sets were included on the in-flight menus on flights to China,
Korea, Thailand, Vietnam, and Japan;
new (halal) meals were introduced;
amenity kits on flights lasting more than three hours were expanded and upgraded;
selection of printed matter in English was expanded on a number of routes;
in-flight magazine for children, “Aeroflot. The Young Traveller” was introduced.
Online services
a new fare schedule was launched on the Company’s website, mobile website and mobile
apps;
first wave of the E-Commerce Platform project was launched, its functionality including
purchasing of health and flight insurance policies, Aeroexpress tickets and car rent;
delayed baggage tracing service was launched, enabling passengers to trace lost baggage
online through the World Tracer system;
open for Check-in service was launched to inform passengers via text messages that their
flight is open for online check-in on the Company’s website www.aeroflot.ru;
international and national passports can now be scanned at the time of ticket purchase
using a mobile app on iOS (including iPad) or Android platforms;
Aeroflot website is now available in eight foreign languages (English, German, French,
Italian, Spanish, Chinese, Korean, and Japanese);
online sales of government-sponsored / subsidised transport services were launched;
all Aeroflot website sections are now accessible to customers with disabilities;
Rossiya airline’s new website was launched;
updated English version of Aurora airline’s website was launched.
Contact Centre services
additional Contact Centre platform was launched in Volgograd;
Web Callback service was introduced in the eight languages used on the Company’s
website www.aeroflot.ru;
Short Number *555 service was launched for calls to the Contact Centre, enabling
customers to obtain full information about the Company’s products and services, as well
as book and purchase air tickets. The number is toll free and available for calls throughout
Russia for customers of the Big 3 mobile operators – Beeline, MegaFon, and MTS;
an extra line was launched for calls from a toll free number in Korea in the Korean
language.
Airport services
coverage and stability of free Wi-Fi service (125 Wi-Fi access points, with a speed of up
to 100 Mbps) was improved, and additional panel charges for electronic devices were
installed at Sheremetyevo airport;
new electronic scales for hand luggage were installed at boarding gates.
Aeroflot Bonus
Aeroflot Bonus is the largest frequent flyer programme in Russia, CIS and Eastern Europe. In
2016, the number of programme members increased by 15% y-o-y to 5.9 million people, with a
frequent Aeroflot Bonus flyer (defined as a passenger who travelled within 24 months) averaging
6.2 flights.
Aeroflot Bonus offers its members an opportunity to earn free miles when flying with Aeroflot
Group and SkyTeam Alliance or using partner services around the globe.
Aeroflot Bonus members, million Aeroflot Bonus partners
Airlines
Banks
Hotels
Car rentals
Car dealers
Restaurants
Appliances and electronics
Food and beverages
Fashion and accessories
Health and beauty
In 2016, 48 new partners joined the programme. The total number of Aeroflot Bonus partners
reached 97, of which 78 are not involved in the aviation business. The partners include airlines,
banks, hotels, and restaurants.
During the year, we implemented a number of initiatives to improve customer service, namely:
added online mile earning function available to Aeroflot Bonus members;
piloted mile redemptions for travel class upgrades on one-way routes;
launched a Feedback service available from personal accounts of Aeroflot Bonus members with
an extended functionality to view previous requests and track processing time and status;
provided broader opportunities for members to earn and use bonus miles to pay for goods, work
or services of partners not involved in the aviation business and significantly expanded the range
of goods and services offered in our Rewards Catalogue on www.rewards.aeroflot.ru, which can
be paid for with miles.
Corporate Sponsorship
PJSC Aeroflot continues its traditional sponsorship support to multiple sports, culture, business
and other social projects, initiatives, and organisations.
Aeroflot’s sponsorship efforts are focused on:
promoting Russian sports and providing support to Russian sports organisations;
supporting cultural organisations in their efforts to promote Russian culture abroad.
In 2016, PJSC Aeroflot allocated a total of RUB 2.1 billion for sponsorship support (2015:
RUB 1.9 billion).
3,4
4,04,6
5,1
5,9
2012 2013 2014 2015 2016
Breakdown of PJSC Aeroflot’s spending
on sponsorship programmes, 2016
Football-related projects
Other sports initiatives
Cultural projects
Cultural projects
In 2016, the Company continued to support ROSKINO film production company in holding
events to promote Russian cinema at international film festivals in Berlin, Cannes, Venice,
Toronto, London, and Los Angeles. Aeroflot provided support to a number of cultural initiatives
run by the Centre of Film Festivals and International Programmes, which, during the year, held a
series of Russian cinema and art festivals in Venice, Rome, Milan, Nice, and Cannes. As part of
the Russian Cinema Year, the Company named some of its new aircraft after prominent Russian
film directors.
In the reporting year, Aeroflot partnered with THREE T PRODUCTIONS to release a remake of
legendary Soviet movie “Flight Crew”, with KVN competition series, and was a partner for the
Golden Mask, National Theatre Award and Performing Arts Festival, and The Golden
Gramophone, Russian national music award.
In 2016, Aeroflot became a General Partner of the 6th Moscow International Festival “Circle of
Light”, Grebnoy Kanal site. The spectacular multimedia show with the largest ever video
projection as the central attraction, took the viewers on a virtual tour of Russian cities.
Aeroflot and its subsidiaries have a strong track record of running awareness-raising campaigns
to draw public attention to the importance of conservation of the Amur tiger and Far Eastern
leopard. The company partnered with the Amur Tiger Centre to create animal images to be used
for livery design for some of Rossiya airline’s aircraft. In addition, in late 2016, Aeroflot
launched its in-flight magazine for children, “Aeroflot. The Young Traveller”, featuring the
Amur tiger and Far Eastern leopard as its main characters. The magazine aims to both entertain
children during the flight and promote a responsible attitude towards Nature among the younger
generation.
Support for sports
Traditionally, sports have been placed high on the airline’s sponsorship agenda. Aeroflot actively
promotes its own sport teams and supports the world’s largest international sports events.
In 2016, the Company continued to provide sponsorship support to CSKA Professional Football
Club, with which it has a long-standing partnership. Through a wide range of marketing and
advertising tools, Aeroflot has access to a multi-million audience of football fans.
To raise the levels of brand recognition and boost Aeroflot’s profile as a premium carrier in the
global market, in 2013 the airline entered into a partnership agreement with Manchester United
FC. In 2016, Aeroflot held a number of marketing events, including a sponsored match and
training session for its partners at Old Trafford Stadium in Manchester, UK, an online project
with Ctrip, China’s largest tourist agency, and an online GeoQuest. The events sought to increase
12,5%
63,8%
23,7% Проекты в сфере культуры
Футбольные проекты
Прочие спортивные проекты
awareness of the Aeroflot brand in the Company’s key markets, promote the airline’s route
network linking Asia and Europe, and enhance the brand loyalty among the target groups.
Aeroflot airline has been a General Partner of the Olympic and Paralympic Committees of Russia
since 2010. In 2016, it continued providing support to the committees in its role as the carrier of
their delegations.
As a partner of the Russian Volleyball Federation and the Russian Football Union, Aeroflot
provides support for the participation of Russian national teams in international competitions. In
2016, the Company’s sports sponsorship portfolio grew substantially as it launched partnerships
with the Russian Basketball Federation, Russian Cycling Federation, and the Russian Federation
of Acrobatic Rock’n’Roll. In addition, we resumed partnership with the Russian Golf
Association, thus securing access to the closed community of golf lovers.
In conjunction with the Russian Chess Federation and the Association of Chess Federations, the
Company held Aeroflot OPEN 2016 international chess tournament, which over the years of its
existence has gained immense popularity among international chess players.
In 2016, Aeroflot also provided support to Otradnoe show jumping club, which hosted a Show
Jumping World Cup stage.
Marketing Research
In 2016, we conducted a number of marketing surveys, including:
assessment of the Net Promoter Score (NPS) with Bain & Company. NPS has demonstrated an
upward trend year after year. In 2016, NPS remained strong at 72%.
Aeroflot airline’s NPS index
survey of compliance with customer service standards carried out in association with Romir
Monitoring Standard as mystery passenger audit. Over the past two years, the project’s results
have shown a sustainably high level of compliance at 93%;
assessment of compliance with international customer service standards based on the airline star
rating from SkyTrax, UK’s independent rating agency. Following flight audits by SkyTrax
experts, Aeroflot airline was awarded a 4-Star Airline status, achieving the levels of the world’s
top airlines;
assessment of customer satisfaction with Aeroflot airline’s products on the markets of Europe,
Middle East, and Asia in cooperation with IATA in its Airs@t customer satisfaction survey, as
well as in joint SkyTeam Customer Experience Research project covering all member airlines.
As part of the efforts to update Aeroflot’s marketing strategy for the Russian and CIS markets,
we ran a major questionnaire survey, carried out passenger segmentation, analysed consumer
trends, analysed competition, and polled over 10,000 current and potential customers. The survey
results were used as inputs to develop a set of marketing initiatives. The Aeroflot brand
performance in the Russian market improved year-on-year across key metrics: passenger
retention and repurchase intention are the highest across the peer group. The Aeroflot brand
stands out for its high score on willingness to recommend and shows the highest score on the
service performance expectations metric.
In the reporting year, we surveyed the perceptions of and attitudes to key elements of Aeroflot
airline’s image among our target customer audience in China (respondents were shown a video
56% 58% 67%
72% 72%
2012 2013 2014 2015 2016
ad, the logo, and the slogan). The results were used to inform a communications strategy for this
market.
The Company also led a major marketing study to research the brand health in China, South
Korea, Germany, Italy, and the UK.
3.8. Information Technology and Innovation
Innovation-Driven Development
As the industry’s leader in Russia and a major European airline, Aeroflot seeks to set standards in
technological advancement and innovation. The Company is focused on continuously driving
innovations across its operations.
Innovative Development Programme 2020 (the “Programme”), approved by Aeroflot’s Board of
Directors on 24 June 2011 (Minutes No. 16) and by the working group on Private-Public
Partnership in Innovation under the Government Commission on High Technologies and
Innovation on 28 June 2011, defines the key focus areas of the Company’s innovative
development. In 2016, the Programme was updated and extended to 2025.
The Programme’s goals and KPIs reflect long-term development vision for the Russian and
international air transport industries, as well as the innovative profile of Aeroflot and its
subsidiaries, and the goals and KPIs of the Long-Term Development Programme, Strategy and
Investment Programme of the Company.
Summary of Aeroflot Group’s Innovative Development Programme
Programme’s
purpose
support the implementation of Aeroflot Group’s strategy and gain
technology leadership in the global aviation industry
Key focal areas
improve flight safety
build an integrated security and anti-terrorist system
improve operational efficiency and promote resource saving
automate operating processes
Key Performance
Indicators (KPIs)
reduced costs of product with improved marketability
energy savings
reduce environmental footprint
increased labour productivity
Key initiatives
introduce new types of aircraft
deliver reliable, punctual, accessible, high-quality air services
increase labour productivity
improve operational performance
drive energy efficiency and reduce the environmental footprint
increase the share of Russian-made innovative products used in our
operations
harmonise the route network of Aeroflot Group
expand the application of innovative solutions
Operational and management performance projects account for the bulk of our R&D costs. In
pursuing its Innovative Development Programme, Aeroflot engages third parties, including
universities and SMEs, development centres and technology platforms.
R&D costs by segment
R&D costs by researcher
Operations
Management
In-flight service
Commerce
Safety and security
Environment and energy saving
Universities
Research organisations
SMEs
Key innovative projects in operations in 2016
New data centre
Aeroflot and IT company Technoserv completed a new data
centre based on equipment supplied by Hewlett Packard
Enterprise. The new backup DC boosted the capacity of the
Company’s primary data centre by two and a half times to
c. 110 racks. The Company’s data centres accommodate
hardware and software platforms (computing resources, data
storage systems) to support the operation of all corporate
IT systems, including data storage, processing and transfer.
Expansion of data centre capacity will enable the Company to
introduce and roll-out new IT solutions and services to support
our rapidly growing business, larger fleet and higher traffic.
Development and deployment
of a pilot version of an
integrated information
security system at Aeroflot
Aeroflot is focused on the development and trial deployment of
a pilot version of an integrated information security system to
structure, streamline, and automate its processes and
procedures. This solution provides anti-virus protection and
protection against data leaks, prevents DDOS attacks and
supports risk management.
Construction of a new
advanced hangar facility
The new hangar facility for repair and maintenance of
Boeing 777 type aircraft is completely unique for Russia. Once
completed, it will streamline maintenance processes and
improve efficiency by reducing open-air maintenance of
Boeing 777 type aircraft.
Development and launch of
domestic multi-purpose de-
icing fluid
The Company is involved in an R&D project to develop a de-
icing fluid, implemented by Kazan National Research
Technological University. The research project aims to reduce
30%
32%
16%
10%
9% 3%
производственная деятельность
управление
сервис на борту
коммерческая деятельность
безопасность
экология и энергосбережение
37%
5%
58%
высшие учебные заведения
научные организации
малые и средние
инновационные предприятия
reliance on imported de-icing fluids. Among other priorities,
the researchers focus on making the product environmentally
safe.
Development of a pilot
hardware and software
package for measurement and
integral analysis of a sniffer
dog’s physiological responses
to objectivise dog inspection
results
The solution will be used by the canine service to improve
security and prevent emergencies. It will serve to maximise
efficient interaction between the security system’s biological
and technical components in detecting various substances.
Introduction of remote work
management
The Company has designed a methodology to remotely
organise and administer activities of Aeroflot’s staff. Remote
management of certain tasks will decrease our operating
expenses and increase staff mobility.
Information Technology
In 2016, Aeroflot continued implementing a broad range of programmes to roll out advanced
IT solutions across all areas of its activities. Digitalisation drives wider application of advanced
digital technologies and, as such, has become a key avenue of development for the entire Group.
IT projects are pursued as part of Aeroflot’s Innovative Development Programme, which
provides for building a shared information space across the Group through a number of
initiatives, including:
unification and integration of IT systems across the Group’s airlines;
roll-out of uniform operations-related IT solutions;
automation of route network and fleet management;
development of a single ticket sales system for all flights operated by the Group airlines;
development of a single system for aviation fuel procurement;
roll-out of effective IT solutions to support in-flight and airport passenger service.
Key IT projects in 2016 Website and mobile applications
Further enhancement of the mobile
application for passengers
In 2016, Aeroflot continued to further enhance its proprietary mobile
application for passengers, seeking to provide an even better user experience.
E.g. the Company added a feature that scans and saves travelling passport data
in the app. It also added functionality to save personal data of travel
companions for easier booking, purchases via Apple Pay, and push
notifications updating passengers on their flights. The application also
generates tailored offers for passengers using iBeacons to boost sales.
Website enhancement to assist air
travellers with disabilities
Aeroflot’s website has been enhanced to make it accessible to disabled
travellers in line with the requirements of the United States Department of
Transportation.
Region-specific website
customisation
The website customisation function offers users a localised version depending
on the country of login to make it more user-friendly.
Modification of the Content
Management System (CMS)
CMS modification aims to expand content customisation capabilities and
speed up the updating of websites in different languages.
New booking system
As part of our project to shift to a new pricing policy, we have introduced a
new booking system to automate sales in online channels. The new online
booking system is designed to enable passengers to book air tickets via the
airline’s primary and mobile websites. The system is a 100% proprietary
solution, interfaced with Sabre via web services. With this system in place, the
Company can now quickly and more flexibly adapt and respond to user
requirements.
Fraud monitoring module
A new system designed to create and manage rules and filters of the fraud
monitoring module within the payment gateway enables more effective checks
of suspicious activity related to online sales of air tickets.
Information security
Development of a personal data In order to protect personal data in accordance with applicable laws, Aeroflot
protection system for the
Company’s website and
Sabre IX platform
has put in place a project to simulate information security threats to users of
Aeroflot.ru website and Sabre IX. Measures to address existing IT threats to
these systems were developed, and Aeroflot intends to subsequently extend
them to other systems of the Group. The project is scheduled for completion
by late 2017.
Safe Key
The Safe Key protocol will enable Aeroflot to accept payments made with
American Express cards via its official website more securely. As a result, the
Group will reduce its financial losses caused by fraudulent online purchases of
air tickets.
Improved sales process
Building an integrated airline
retailing environment under the
NDC programme
Aeroflot has started building an integrated air retailing environment in
accordance with IATA’s NDC (New Distribution Capability) standards. The
concept of unified distribution environment is driven by an innovative
approach to adopting common standards of access to the airline’s systems via
all potential retailing channels. The airline will be able to identify the end
buyer that has requested the product and generate a tailored personalised offer,
which will dramatically improve loyalty among agencies and passengers. The
project is scheduled for completion by late 2017.
Big data enabled dynamic
segmentation
In 2016, we designed and launched a big data enabled dynamic segmentation
IT system. The new system uses data processing, machine learning and
simulation to boost the inflow of customers.
In-flight innovation
Internet On-Board project
In 2016, we launched in-flight Wi-Fi service on two new Boeing 777s.
Software was upgraded on twenty-two A330s. New time-based tariffs and no-
voice GSM services are now offered on all of Aeroflot’s wide-body aircraft.
SITA CrewTablet mobile app for
flight attendants
In 2016, Aeroflot continued to implement a project to equip flight attendants
with CrewTablet tablet-based applications. This mobile application designed
by SITA enables crew members to use their tablets to quickly and easily
access all passenger and operational data to enhance in-flight services to
customers. Another 700 tablets were distributed under the programme in
2016.
Company management
Manager Dashboard
Manager Dashboard is a unique patented IT system developed by Aeroflot for
desktop PCs and tablets to track consolidated data from all operational and
commercial systems operated by the airline.
The solution provides the management with online access to up-to-date
information on any out of the 427 indicators used to give a snapshot view of
the airline’s business activity.
3.9. Procurement
Procurement activities at Aeroflot Group comply with Federal Law No. 223-FZ On Procurement
of Goods, Works, and Services by Certain Legal Entities dated 18 July 2011, PJSC Aeroflot’s
Regulations on Procurement of Goods, Works, and Services, relevant policies of Aeroflot’s
subsidiaries, and other procurement-related regulations adopted by the Russian Government.
Procurement needs of subsidiaries are met both through a consolidated procurement process by
Aeroflot, and individual subsidiary procedures.
Procurement transparency, no discrimination and unreasonable restrictions, and ability to procure
from a wide pool of quality bidders are top priorities for the Group in its strive to maximise
procurement efficiency and reduce costs.
The procurement process in Aeroflot and its subsidiaries is organised in line with the best
practices, including online bidding. In 2016, the value of Aeroflot’s competitive procurements in
electronic format accounted for 56.36% (50.45% in 2015) of the total, in line with the
requirements of the Federal Agency for State Property Management (Instruction No. GN-13/1206
dated 21 January 2011). For Aeroflot Group, this share totalled 56.31%.
Each bidding procedure averaged at 3.3 bids (+1.1 y-o-y) from potential contractors. This
testifies to complete transparency and competitive nature of Aeroflot’s procurement process, and
a growing interest of potential suppliers.
In 2016, competitive procurements saved RUB 1,732 million for Aeroflot and RUB 2,186 million
for the Group.
Item Aeroflot Aeroflot Group
Competitive procurements in electronic format (by value) 56.36% 56.31%
Single source procurements 63.91% 53.44%
Procurements from SMEs 64.96% 59.27%
Average number of bidders 3.30 2.36
Savings through competitive procurements, RUB million 1,732 2,186
Savings through competitive procurement, % 1.25% 0.82%
Fuel Procurement
In 2016, all fuel supply contracts were signed by Aeroflot based on results of bidding processes
won by tenderers who could offer the best financial terms and guarantee required reliability,
including flight safety assurance.
Transparent competitive procedures and formula-based pricing optimise fuel costs, which has
always been a major expense item for the Company. Fuel pricing formulas are devised in the
bidding process. In 2016, the share of fuel procured by Aeroflot Group at formula-based prices in
Russia reached 90%.
Pursuant to the order of the Deputy Prime Minister and paragraph 3 of Meeting Minutes No. IS-
P9-25pr dated 21 November 2011, Aeroflot focuses on direct cooperation with vertically
integrated oil producers through contracts with their subsidiaries specialising in aircraft fuel sales
to avoid an unjustified rise in fuel prices or an artificial supply shortage.
At the Group level, fuel procurement terms are determined by agency agreements. When making
a consolidated order covering the demand of all the Group’s companies, Aeroflot initiates bidding
processes to select suppliers of fuel and related aircraft services.
Aeroflot settles accounts for supplied fuel and aircraft storage and refuelling directly with
counterparties, and supervises separate accounting for transactions with consignees, which allows
to promptly charge controlled entities for the costs incurred.
These arrangements cover virtually the entire fuel needs of subsidiary airlines, excluding a small
number of Russian airports (less than 3%), which are not contracted or alternate airports, as well
as airports where fuel procurement is part of integrated ground handling agreements.
Optimisation of fuel procurement at Aeroflot is supervised by the Fuel Commission.
Procurement from Small and Medium-Sized Enterprises
In 2016, Company’s initiatives to support small business substantially increased supplies from
small and medium-sized enterprises (SMEs). The number of contracts concluded by Aeroflot
with SMEs increased by 85.4% y-o-y, or more than fourfold by value. Aeroflot’s procurements
from SMEs accounted for 64.96% of the Company’s procurement volume. For Aeroflot Group,
this share was 59.27%.
According to Resolution of the Russian Government No. 1352 dated 11 December 2014, annual
procurements from SMEs shall not be less than 18% of the aggregate annual volume of contracts
concluded by customers as a result of the procurement process. Procurement data both for
Aeroflot and the entire Group for 2016 reflect Aeroflot’s focus on SMEs as priority suppliers
(subject to specific business profiles).
In 2016, Aeroflot signed an agreement with JSC RSMB Corporation promoting cooperation of
the parties to ensure access for SMEs to procurements of goods, works, and services. A
representative of JSC RSMB Corporation is a member of the Advisory Board in charge of
independent audit of Aeroflot’s procurement efficiency.
In the reporting year, the Company implemented a number of initiatives to ensure accurate
reporting on procurements from SMEs, including optimisation of the list of procurement codes,
updating SAP data to verify counterparties’ SME status, in line with the Unified Register of
Small and Medium-Sized Business Entities effective from 1 August 2016.
The Group is committed to continue supporting SMEs by facilitating their access to corporate
tenders, in accordance with the specifics of SME participation in procurements and the specifics
of civil aviation.
Advisory Board in Charge of Independent Audit of Procurement Efficiency
In its pursuit of procurement transparency, Aeroflot has in place the Advisory Board in charge of
independent audit of procurement efficiency. The Advisory Board includes representatives of
public organisations, academic and industry scientists, and well-known procurement experts.
The Advisory Board:
is responsible for auditing Aeroflot’s procurement operations;
monitors implementation by Aeroflot of measures enhancing access of small and medium-sized
businesses to corporate tenders;
improves efficiency of applied advanced technologies, ensures transparency, and enhances fair
competition in Aeroflot’s procurement processes.
The Advisory Board operates under an action plan approved for each calendar year. Proceedings
of the Advisory Board are published on Aeroflot’s website at:
http://www.aeroflot.ru/cms/content/soveshchatelnyi-organ.
CORPORATE SOCIAL RESPONSIBILITY
Aeroflot Group conducts its business in a sustainable way, seeking to safeguard the interests of
passengers, employees, shareholders, investors, and other stakeholders. We take a tailored
approach to every target stakeholder group, having developed and implemented group-specific
tools of communication, feedback and engagement.
Aeroflot complies with all applicable HR, health, safety and environmental protection legislation,
striving to meet the highest global standards for corporate social responsibility. As it closely links
its performance with Russia’s overall social and economic development, Aeroflot Group pursues
multiple projects promoting culture and sports, providing support for vulnerable groups, and
preserving the environment.
In 2014, we established PJSC Aeroflot’s Public Council, a consultative and advisory body
consisting of prominent public figures and helping the Company to formulate its policy on key
sustainability issues with due regard for the needs and interests of society. The Public Council
comprises 25 prominent figures of Russian culture, education, healthcare, sports, mass media,
business, industry associations, civil society organisations and human rights groups. The Public
Council members participate to its activities on a pro-bono basis.
The main purpose of the Council is to help PJSC Aeroflot to formulate its position on key aspects
of the Russian airline industry’s development and make recommendations to the Government on
regulation and development of the industry.
The Council held two meetings in 2016, discussing a number of topics, including:
PJSC Aeroflot’s performance, including outcomes of the project to establish a regional carrier
operating under the Rossiya brand;
maintaining and developing a pipeline of talent for the airline industry across the Company’s
geography of operations;
overall social and economic development agenda for the regions in which the Company operates;
the Company’s treatment of disruptive passengers.
4.1. HR Policy
Principles and Areas of the HR Policy Aeroflot Group’s HR policy is designed to attract the best industry talent and ensure their
professional development. The Group has built up and is continuously developing a relationship
framework promoting generation of economic efficiency gains across all business lines. HR
management involves a wide range of programmes helping each employee reach their full
potential, including training, incentive and social support programmes.
In 2016, for the second year in a row, PJSC Aeroflot was named the Best Employer in Transport
and Logistics in Russia by the jury of the prestigious international Randstad Award.
Priority areas of HR policy:
identify and attract candidates to support the current and future business needs;
match the staffing needs of business units with candidates who have the required profession,
specialisation and qualification;
build up the talent pool in line with the Group’s strategic development goals;
retain qualified and highly skilled employees;
conduct employee certifications;
foster and maintain high levels of employee loyalty;
promptly resolve issues at all stages of the HR management process.
Employees of the HR Department of PJSC Aeroflot (the parent company) interact closely with
HR functions of subsidiary airlines across a number of areas, including alignment of
organisational and staff structures, implementation of a single organisational structure, and
deployment of single standards modelled after Aeroflot’s HR function.
In their approach to human rights, Aeroflot Group companies are guided by both Russian and
international laws. Aeroflot Group does not tolerate any form of discrimination or harassment,
with anti-discrimination provisions included in key internal regulations. Aeroflot fully embraces
difference by valuing diversity in race, religion, physical ability, etc. among its employees. No
instances of discrimination or human rights violation were recorded in Aeroflot Group during the
reporting period. The Company has never used and does not tolerate child, compulsory or forced
labour.
Aeroflot Group’s headcount, thousand people
PJSC Aeroflot’s headcount, thousand people
Aeroflot Group’s personnel breakdown by
category, 2016
*Includes pilots-in-command, co-pilots, and other
flight crew members (flight engineers, pilot
instructors, and others).
Aeroflot Group’s personnel breakdown by company,
2016
**JSC Orenair, JSC Donavia, JSC Sherotel,
LLC Aeroflot-Finance.
28,8 30,5 32,2 34,036,6
2012 2013 2014 2015 2016
16,417,9 19,0
20,4 21,6
2012 2013 2014 2015 2016
28,1%
17,9%
12,0%
10,2%
4,9%
14,8%
12,0%
Бортпроводники
Аэропортовые службы
(обслуживание в порту)Персонал технического
обслуживания и ремонтаЛетный состав*
Продажа билетов, услуг и
рекламаПрочий персонал
авиакомпанийПрочий персонал
неавиационных компаний
59,0%19,2%
11,4%
5,7%
1,7%1,5%
1,4%ПАО "Аэрофлот"
АО "Авиакомпания "Россия"
ЗАО "Аэромар"
АО "Авиакомпания "Аврора"
ООО "Авиакомпания
"Победа"ООО "А - Техникс"
Другие компании**
PJSC Aeroflot’s personnel breakdown by
category, 2016
Note: headcount and personnel breakdown as at the year end.
Прочий персонал неавиационных компаний Other personnel of non-airline subsidiaries
Летный состав* Cockpit crew*
Бортпроводники Cabin crew
Персонал технического обслуживания и ремонта MRO staff
Продажа билетов, услуг и реклама Ticket sales and distribution
Аэропортовые службы (обслуживание в порту) Airport services
Прочий персонал авиакомпаний Other personnel of airline subsidiaries
Прочий персонал Other personnel
ПАО «Аэрофлот» PJSC Aeroflot
АО «Авиакомпания «Россия» JSC Rossiya Airlines
ЗАО Аэромар CJSC Aeromar
АО «Авиакомпания «Аврора» JSC Aurora Airlines
ООО «Авиакомпания «Победа» LLC Pobeda Airlines
ООО «А-Техникс» LLC A-Technics
Другие компании** Other companies**
Headcount statistics
As at 31 December 2016, the total headcount of Aeroflot Group was 36,556 employees
(34,031 employees as at 31 December 2015). A growth of 7.4% in the reporting period was
driven by the fleet expansion and implementation of a programme to provide employment to ex-
Transaero airline’s employees – the Group’s companies employed circa 4,300 people.
As at 31 December 2016, the headcount of PJSC Aeroflot was 21,554 employees (20,404 as at
31 December 2015).
Aeroflot is committed to equal opportunity for men and women. Women account for 50.7% of
Aeroflot Group’s total headcount. Specifically, PJSC Aeroflot employs 10,823 women, including
flight attendants, office and maintenance service employees, as well as pilots. As of the end of
2016 21 female pilots were employed by the PJSC Aeroflot, while the total number for the Group
is 23 (vs. 14 and 18 as of the end of 2015 respectively). About 35% of PJSC Aeroflot’s managers
(division head level and higher) are women.
Group also employs foreign pilots to offset pressure on the labour market. As at 31 December
2016, there were 41 non-resident pilots on PJSC Aeroflot’s headcount. Personnel turnover at
PJSC Aeroflot in 2016 was 7.5% (6.7% in 2015).
32,1%
22,7%11,4%
10,9%
7,0%
15,8%
Бортпроводники
Аэропортовые службы
(обслуживание в порту)
Персонал технического
обслуживания и ремонта
Летный состав*
Продажа билетов, услуг
и реклама
Прочий персонал
Gender breakdown of Aeroflot Group’s personnel,
2016
Aeroflot Group’s personnel breakdown by age, 2016
Мужчины Men
Женщины Women
До 29 лет Under 29 years
30—39 лет 30–39 years
40—49 лет 40–49 years
Старше 50 лет 50+ years
PJSC Aeroflot’s personnel breakdown by years
with the Company, 2016
До 1 года Up to 1 year
1—4 года 1–4
5—9 лет 5–9
10—14 лет 10–14
15—19 лет 15–19
20—24 года 20–24
25—29 лет 25–29
30 лет и более 30+
Corporate Culture and Values
Aeroflot has its own distinctive corporate culture, representing a unique combination of
philosophy, values, beliefs, standards, and behaviours that unite Aeroflot Group and are shared
by all employees. Corporate culture supports our business strategy and underpins all
HR management processes.
49,3%50,7%
Мужчины
Женщины
29,1%
27,3%
20,9%
22,7%
до 29 лет
30 – 39 лет
40 – 49 лет
старше 50 лет
11%
35%
20%
8%
8%
8%
5%5% до 1 года
1 – 4 года
5 – 9 лет
10 – 14 лет
15 – 19 лет
20 – 24 лет
25 – 29 лет
30 лет и более
CUSTOMER TRUST
Each airline of our Group guarantees its customers
faultless safety and high quality service at all stages of
air travel.
We strive to exceed the expectations of our customers
and do everything possible to ensure that our customers
come back again and again.
We work hard every day to ensure the highest safety
level.
TEAMWORK
We are a closely-knit team of professionals who cannot
imagine living without the sky.
We are always open to innovation, initiatives and new
knowledge in order to develop and move forward.
We respect our colleagues and are ready to engage in
constructive dialogue in order to achieve results.
We provide a stable work environment with equal
opportunities for learning and personal growth.
RESULTS FOR SHAREHOLDERS
Our goals are to achieve sustainable and dynamic
growth, increase the company’s value and provide stable
income to our shareholders.
We are committed to high standards of corporate
governance and business ethics.
We are a company with transparent reporting and we are
always open to our partners and shareholders.
SOCIAL RESPONSIBILITY
We care about the environment and continuously
improve energy and environmental efficiency, using a
modern and young fleet of aircraft and the most
advanced technology.
We are fully aware of our responsibility to society and
actively participate in socially important and charitable
projects.
We participate actively in the development of the
Russian air transport network and create new jobs in the
regions.
We support and actively participate in the development
of the Russian aircraft manufacturing industry.
Corporate communications
Aeroflot publishes a monthly company newspaper covering, on a regular basis, the most
prominent and exciting corporate events. The My Aeroflot newspaper is a key internal
communication tool, reflecting our engaging corporate culture.
One of the 2016 highlights was the launch of our renewed intranet portal. The renewed intranet is
based on the advanced MS SharePoint platform. The new intranet offers mobile access, a major
improvement over the previous version.
Personnel Training and Development Aeroflot delivers staff training and professional development to ensure that its employees
maintain and develop high specialist skills in line with current requirements of international
standards and the Federal Aviation Rules. In 2016, PJSC Aeroflot arranged for training for almost
30 thousand employees both in-house and externally, across a range of training, retraining,
professional development, and certification programmes.
Employees enrolled in training programmes,
thousand people
Сторонние учебные заведения External training
Департамент подготовки авиационного
персонала
Programmes offered by the Department for
Aviation Personnel Training
Авиашкола Аэрофлота Aeroflot Aviation School’s programmes
Note. Some employees completed more
than one training programme.
In 2016, the Department for Aviation Personnel Training delivered training to nearly
6,000 employees from across engineering, flight operations and ground operations, with students
attending instruction courses in new aircraft types, flight simulator training and other courses. In
2016, over 4,000 employees completed training courses at external educational institutions under
compulsory operations personnel training and other training programmes.
In 2016, Aeroflot was assigned the status of ACCA Approved Employer, confirming compliance
with high standards of training and professional development of finance employees.
Aeroflot Aviation School’s programmes
Aeroflot Aviation School, Aeroflot’s in-house educational institution, is a reliable provider of
vocational training services for airlines, airports, and other companies and entities in the Russian
civil aviation industry. For many years, the School has successfully collaborated with leading
international industry organisations and has accreditations with ICAO, IATA, TCH, Sabre,
Amadeus, SITA, and other industry bodies and organisations; the Aviation School is also
certified for compliance with ISO 9001-2011.
In 2016, the Aviation School trained more than 19 thousand students – employees of the
Company.
Retraining and professional development courses mainly focus on:
ground handling and ground service operations,
flight attendant training,
pilot retraining on new aircraft types,
aviation security,
regulations for hazardous cargo transportation,
foreign languages, etc.
12,317,9
14,1 13,919,2
6,7
5,28,0 11,2
6,03,6
5,84,2
3,3 4,422,6
28,926,3
28,4 29,6
2012 2013 2014 2015 2016
Сторонние учебные заведения
Департамент подготовки авиационного персонала
Авиашкола Аэрофлота
Training platform
As from the end of 2006, the Company uses its own training platform providing training for
cockpit and cabin crew of Aeroflot, subsidiary or third-party airlines in passenger rescue
procedures in case of emergencies on board an aircraft, emergency landing or ditching.
The training platform currently offers 11 types of simulators and mock-ups for emergency
response training, a simulator for real firefighting on board an aircraft, a mezzanine area with
Airbus A320, Boeing 767, and Boeing 737 aircraft stairs to practise emergency evacuation
procedures, and a 24 by 22 metres training swimming pool. In 2016, almost 28 thousand aviation
specialists were trained at the training platform.
Students trained at the
training platform, thousand people
Best in Trade professional skills competition
In 2016, PJSC Aeroflot re-launched the Best in Trade professional skills competition to identify
and reward the best employees and ensure their professional development. The competition was
held in nine professions that are key to Aeroflot: passenger service agent, flight attendant, senior
flight attendant, pilot-in-command, co-pilot, pilot instructor, air ticket sales agent, aircraft
technician, aircraft mechanic, and aircraft mechanic for aircraft frames and engines.
The competition tasks challenged participants to show both theoretical knowledge and practical
skills, demonstrated on simulators and in situations as close to real life as possible. A total of five
business units took part in the competition, and 27 winners were named the best in their trade.
The competitions was widely covered in corporate media and Aeroflot’s official channels on
social networks.
Collaboration with technical schools and universities
For many years, PJSC Aeroflot has been developing successful partnerships with leading industry
technical schools and universities, in particular, by organising internships for students. Based on
the results of such internships, talented young specialists are offered employment opportunities
with the Company. Since 2013, PJSC Aeroflot has been involved in targeted training programme
at the following industry universities:
Saint Petersburg State University of Civil Aviation,
Ulyanovsk Civil Aviation Institute,
Moscow State Technical University of Civil Aviation.
Over this period, 206 students signed educational contracts for targeted training. The first
students enrolled in the programme will graduate in 2017.
18 19,3
21,6 24,1
27,9
0
5
10
15
20
25
30
2012 2013 2014 2015 2016
In addition to the targeted training programme, PJSC Aeroflot cooperates with seven civil
aviation technical schools and universities under the Personal Scholarship project. Mutual
cooperation agreements have been signed with Ulyanovsk Civil Aviation Institute,
Saint Petersburg State University of Civil Aviation, Buguruslan, Sasovo, and Krasny Kut Civil
Aviation Schools, as well as Egorievsk and Kirsanov Civil Aviation Technical Colleges. For the
2016–2017 academic year, 50 personal scholarships of RUB 10 thousand per month have been
allocated. As at 31 December 2016, PJSC Aeroflot employed 63 graduates who received the
scholarship as students.
In 2016, Aeroflot signed an agreement on guaranteed employment of top-grade graduates with
Krasny Kut Civil Aviation School (a branch of Ulyanovsk Civil Aviation Institute). There are
plans to amend the training programme to provide targeted training for students in the types of
aircraft operated by Aeroflot.
Employee Incentive System
PJSC Aeroflot offers competitive remuneration package comprising salary and performance
bonuses. The Company’s remuneration system takes into account position grades, business unit
performance, regional labour market specifics, as well as each employee’s personal contribution.
The Company’s senior management performance assessment is based on key performance
indicators approved by the Board of Directors.
Non-financial motivation tools are widely used in the Company to help recognise employees’
contribution to the Group’s operations and reward high performance.
In 2016, over 1,300 employees of PJSC Aeroflot were recognised with corporate awards,
including three employees awarded the Aeroflot Excellence badge of honour, 523 employees
awarded Certificate of Honour of PJSC Aeroflot, and 99 employees awarded the Operational
Excellence in Aeroflot badge. 57 employees of the Flight Operations Department were awarded
distinctions For Incident-Free Flight Hours.
More than 70 employees received government awards, as well as industry awards of the Russian
Ministry of Transport and other agencies.
Best performers in the Group’s subsidiaries were also celebrated with corporate awards, industry
awards of the Russian Ministry of Transport, and with regional and municipal awards.
Talent Pool
In 2016, to strengthen its talent capabilities and meet PJSC Aeroflot’s need for qualified
personnel to fill vacant and new positions, the Company continued leveraging its management
talent pools at different levels, targeting level 1, 2, and 3 management positions.
In 2016, the lists of employees included in the talent pools were updated and their total number
reached 288. A talent pool for senior management positions was created, its participants passed
an independent assessment, and their key areas of development were identified.
Candidates to management talent pools are selected in accordance with the selection criteria set
forth in the Regulations, focusing on:
higher education in line with the profile of the target position;
at least two years’ employment with the Company;
high level of expertise;
strong performance in the area of expertise;
personal and business potential required for further professional development and career
advancement.
Social Programmes for Company Employees Aeroflot has in place a comprehensive incentive system comprising a wide range of social
programmes that help create a comfortable environment encouraging employees’ professional
and personal development. The Company’s social policy is based on applicable local internal
regulations, including PJSC Aeroflot’s Collective Agreement.
Occupational pension scheme
The Company runs a pension scheme based on joint participation of the employer and the
employee. In 2016, personal contributions of the scheme participants were matched by those of
the airline at the rate of 20%; the corporate programme covered 5,800 employees.
The special Golden Anchor pension plan is in place for pilots-in-command. The airline awards
annual bonuses to the scheme participants’, contributed into personal accounts in the corporate
pension fund.
Upon retirement, the airline complements the state-funded pension of an employee participating
in the private pension scheme with a corporate pension. As at 31 December 2016, corporate
pensions were paid to 4,300 former employees.
The Company runs its private pension scheme in parallel with an incentive scheme to provide
mandatory pension insurance through co-financed contributions to the cumulative part of the
state-paid pensions.
Resort therapy programme for employees and their families
Aeroflot runs a resort therapy programme to improve the health of its employees and their
families. In 2016, 2,300 employees were sent to health resorts. More than 400 children of the
Company’s employees spent time in the Vita children’s holiday camp in Anapa. A health
rehabilitation programme for 450 pilots and flight attendants was set up at health resorts in the
Czech Republic.
Resort therapy programmes are financed using voluntary health insurance coverage and funds
from the budget of the Social Insurance Fund of the Russian Federation. Average employees’
share of contribution does not exceed 10% of the total treatment cost. Employees exposed to
harmful working conditions receive health resort treatment free of charge.
Sports events
The Company regularly organises sports events and celebrations. In 2016, Aeroflot’s sports teams
successfully competed in futsal, volleyball, and table tennis tournaments held as part of the
industry Spartakiad to celebrate the Civil Aviation Day; an ice hockey exhibition game with
Finnair airline’s team; the Crimean Autumn ice hockey tournament for amateurs teams; futsal
and volleyball tournaments for the Aviation Industry Cup; a football exhibition game with the
Administration of the Khimki Urban District. In addition, corporate volleyball and swimming
contests were held.
To improve health and promote wellbeing among the Company’s employees, fitness club
memberships were offered throughout the year.
Housing programme for Aeroflot airline’s crew
In 2016, 47 Aeroflot’s pilots continued to participate in a housing programme, with the Company
subsidising interest payments on employees’ mortgage loans.
Corporate housing
During the year, the airline’s key employees from the regions were provided with company-
owned housing close to Sheremetyevo airport, with 1,500 employees on average benefiting from
the free lease arrangements.
Company vehicles and corporate parking programmes
Company vehicles are used to transport Aeroflot’s employees to work at the Company’s offices
located near Sheremetyevo airport and back. In 2016, around 3,400 people benefited from
company vehicle transportation on a daily basis. An average of 2,200 corporate parking places
were provided to PJSC Aeroflot’s employees every day.
Financial assistance to current and former employees
In 2016, PJSC Aeroflot’s Social Policy Commission provided financial support to 183 current
and former employees in difficult circumstances.
Daycare spending compensation programme for employees’ kids
During 2016, over 1,800 employees of the Company were provided with daycare spending
compensation benefits for their children.
Medical centre
Aeroflot has set up its own medical centre providing healthcare services to current employees and
their families, as well as retired employees of PJSC Aeroflot, including aeromedical assessment
and rehabilitation of cockpit and cabin crew, and pre-flight medical examinations. The medical
centre also participates in the Company’s social programme as regards arranging resort therapy
for employees. In 2016, the medical centre’s polyclinic reported a total of 230 thousand visits.
Number of people registered with the medical centre for healthcare services
Работники ПАО «Аэрофлот» Employees of PJSC Aeroflot
Члены семей Family members
Пенсионеры ПАО «Аэрофлот» Retired employees of PJSC Aeroflot
Коммерческие пациенты Private patients
Staff travel benefits
Aeroflot offers special terms for employees travelling on flights operated by the airline. In
addition, starting from 2006, PJSC Aeroflot has been a member of ZED/MIBA FORUM, a non-
profit organisation uniting over 230 member airlines and regulating the offering of special terms
for employee personal and duty travel.
In 2016, Aeroflot airline renewed its agreements on employees’ personal and business travel with
Air France, Adria Airways, and airBaltic, and reactivated its ZED agreement with Aeromexico;
an agreement on employee travel with Lufthansa came into force. As at the end of 2016, PJSC
Aeroflot cooperated with 60 airlines under employee interline travel agreements, including with
SkyTeam Alliance member airlines.
Throughout 2016, about 15,700 employees of PJSC Aeroflot and their families got tickets for
partners’ flights under agreements on employee personal and duty travel.
Occupational Health and Safety
PJSC Aeroflot’s occupational health and safety system is designed to eliminate occupational
injuries and diseases, promote safe behaviours, develop hazard avoidance skills, and continuously
improve working conditions. PJSC Aeroflot has a certificate confirming its compliance with
regulatory occupational safety requirements. Health and safety aspects are included in the
Collective Agreement.
In 2016, PJSC Aeroflot’s key health and safety performance indicators did not exceed industry
averages for relevant types of business activity7. During the reporting year, there were
19 accidents of varying severity, including two serious accidents. Human factor played a
significant part in all the accidents.
Number of injuries per 1,000 employees of
PJSC Aeroflot, people Lost time incident rate (per injured person) in
PJSC Aeroflot
*Mean value of key indicators by type of business activity.
In 2016, we continued consistent efforts to ensure safe working conditions, with special attention
paid to health and safety training, monitoring the state of health and safety performance and
preventing occupational injuries and diseases. Induction training was provided to 2,000 new
employees. Health and safety trainings run by an accredited training organisation covered
1,600 managers and specialists of business units; and 473 managers and specialists on business
units’ commissions were trained and tested in health and safety.
To prevent occupational diseases, 16,700 people passed regular medical examinations.
As at the end of 2016, in accordance with Federal Law No. 426-FZ On Special Assessment of
Working Conditions, PJSC Aeroflot carried out a special assessment of 5,835 workplaces, of
which 4,249 were found to have acceptable working conditions, and 1,586 were recognised as
having harmful working conditions. Workplaces with harmful working conditions accounted for
27% of the total number of workplaces subject to special assessment of working conditions in
2016. A premium of 4% to 24% to the salary is set for employees exposed to harmful working
conditions.
7 In accordance with Resolution of the Social Insurance Fund of the Russian Federation No. 72 On Approval of
Values for Key Indicators by Type of Business Activity for 2016 dated 26 May 2015.
1,65 1,56
1,15 1,03 0,99
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
2012
2013
2014
2015
2016
22,2
29,73
46,6
21,2
36,9
0
10
20
30
40
50
2012
2013
2014
2015
2016
5
0
.
0
9
*
Number of workplaces subject to special
assessment of working conditions
4.2. Charity and Community Initiatives
Aeroflot Group strives to contribute to society, focusing mostly on support for vulnerable social
groups. Aeroflot supports charities and a vast number of socially important initiatives.
The Company sees support for children and war veterans as priorities for its charitable efforts. In
the reporting period, Aeroflot also ran a number of projects to support and contribute to the
country’s social and economic development.
Charity Programmes
Helping Children
Miles of Mercy programme
The Miles of Mercy programme, launched in 2008, enables the Aeroflot Bonus programme
participants to contribute the bonus miles they earn to charity organisations such as the Give Life
charitable fund, the Life Line fund, the Russian Assistance Fund operated by Kommersant
Publishing House, and Vladimir Spivakov International Charity Foundation. The miles are
converted into tickets for children with serious illnesses and talented children. In 2016, a total of
6,917 tickets and 141,283,961 bonus miles were donated to support the activities of charitable
organisations. Since the start of the programme, almost 1 million miles were donated and about
30,000 free tickets issued. In the reporting year, Aeroflot simplified the Miles of Mercy donation
procedure: minimum transfer was decreased to 100 miles, with required minimum balance on a
personal account reduced from 5,000 to 3,000 miles.
Tickets issued under the
Miles of Mercy programme
4 415
5 615 5 835
0
2 000
4 000
6 000
8 000
2014
2015
2016
10,501
4,983 5,730
6,829 6,917
2012 2013 2014 2015 2016
Train of Hope In 2016, Aeroflot airline, for the tenth time, took part in the national charity programme, Train of
Hope, organised by Radio Russia as part of its Child’s Question social project. The Programme
helped to adopt about 3,500 orphans. In 2016, nine children found a new family through the Train
of Hope Programme. Aeroflot issued 30 free tickets to provide free transportation to adopters
travelling from Moscow to Chelyabinsk and back.
Support for children’s homes
During 2016, the Company supported two children’s homes: the Pokrov Children’s Home in the
Vladimir Region and the St. Sergius Boarding School in the Sergiev Posad District of the
Moscow Region. In particular, the Company took children to a summer recreation camp,
purchased seasonal clothes and footwear, and financed renovation at the Pokrov Children’s
Home. The Boarding school students saw a performance from a visiting music band consisting of
flight attendants and volunteer employees, had a tour of Aeroflot’s simulator complex and
benefited from a charity craft fair we helped set up for them. A total of RUB 5.9 million were
spent on charitable support for children’s homes in 2016.
Support for children with disabilities
For three years now, Aeroflot has been supporting the Galchonok Charity Foundation for children
with organic disorders of the central nervous system. In 2016, the Company became a general
partner of Galafest inclusive charity family festival which supports social integration of children
with organic CNS disorders. The event was attended by about 7,000 people.
The Company and the Foundation jointly produced unique New Year souvenirs hand-painted by
the Foundation’s beneficiaries. The Foundation spent the funds it received to pay for
rehabilitation courses and devices, as well as to support its inclusive education project for
impaired children.
Targeted aid to children Aeroflot annually provides targeted assistance to a variety of organisations. In 2016, Aeroflot
continued to support the student Aviation Olympiad held by the Moscow comprehensive school
with primary pilot training (a non-governmental educational institution). The Company provided
support for a New Year gala held in Chelyabinsk for orphaned children and children from low-
income or large families.
Aeroflot also supported for the sixth National Festival “The Future of Russia” for talented
orphaned children across Russia, held by “The Future” Centre of Spiritual and Moral Unity, by
providing free air tickets to children and accompanying persons. In 2016, Aeroflot provided
financial support to Aviator aviation-themed children’s club.
Support for Great Patriotic War (WWII) Veterans
Annual Great Victory Day campaign In 2016, as part of celebrations of the 71th anniversary of Victory Day, Aeroflot held its annual
campaign, launched in 2001, to carry veterans of the Great Patriotic War (WWII), prisoners of
Nazi concentration camps, and survivors of the Siege of Leningrad. Rossiya, part of
Aeroflot Group, was also involved in the campaign. Heroes of the Soviet Union, Full Cavaliers of
the Order of Glory and accompanying persons were provided with business class tickets.
Depending on the load factors and availability of seats, Aeroflot Group’s airlines made travel
class upgrades for other campaign participants and provided access to business class lounges at
airports.
Free tickets were provided to over 10,000 veterans and accompanying persons.
Charitable support to WWII veterans from among retired Aeroflot employees
Aeroflot provides monthly food packages to WWII veterans from among retired Aeroflot
employees. In 2016, about 1,600 food packages were provided, worth a total of RUB 7.7 million.
Targeted aid to veterans
In 2016, Aeroflot continued to provide individual targeted aid, including RUB 1.3 million worth of financial support for veterans in need, to mark Victory Day;
financial support for WWII veterans with serious health conditions;
seven meetings for WWII veterans to celebrate various holidays;
financial support for the Veteran Club of Top Managers of the Civil Aviation Industry (“Opyt Club”, a
non-profit partnership).
Charitable Activities of Subsidiaries
The Group’s subsidiaries strive to contribute to charity campaigns initiated by PJSC Aeroflot and
provide targeted aid in the regions in which they operate. The Group’s companies make a special
focus on veteran support through dedicated campaigns and events held to celebrate Victory Day.
In 2016, the companies continued with their own support programmes for vulnerable groups and
local communities. In particular, Aeromar traditionally donated about RUB 700,000 to a church
in Khimki.
Contribution to Social and Economic Development of Russia
In addition to charity and sponsorship projects, Aeroflot pursues a number of other programmes
and is involved in initiatives aimed to support and contribute to the country’s social and
economic development.
Improving the accessibility of Russia’s regions
Aeroflot is committed to supporting the government-sponsored programme of maintaining airline
passenger service between the Far East and European Russia, and flights to Kaliningrad and
Simferopol, which ensures transport accessibility of these remote Russian regions.
In addition, Aeroflot has extended its “flat” fare programme into 2017–2018 and included the
Moscow–Magadan–Moscow flight within its scope. “Flat” fares currently apply also to flights to
Vladivostok, Yuzhno-Sakhalinsk, Khabarovsk, Petropavlosk-Kamchatsky, Kaliningrad, and
Simferopol.
To maintain transport accessibility of the Far East, the Company increased capacity on these
routes and introduced additional flights. In 2016, the fares were adjusted for inflation; however,
they are still lower than the costs of flights.
Support of passenger in need
In December 2015, Aeroflot launched a programme to support passengers in urgent need to get to
their destinations fast due to force majeure circumstances. The programme covers higher-demand
domestic flights where the least expensive economy booking classes are sold out.
Employment of Transaero employees by Aeroflot Group
After Transaero discontinued its operations, Aeroflot management resolved to provide
employment to Transaero’s employees, with 4,300 people filling positions in PJSC Aeroflot and
its subsidiaries.
4.3. Environmental Protection Programme
Aeroflot is committed to environmental protection, environmental safety, and sustainable use of
natural resources. The Company’s management is responsible for compliance with laws and other
requirements applicable to environmental aspects of Aeroflot’s operations.
Governed by the precautionary principle, PJSC Aeroflot seeks to prevent any potential
environmental harm even where there is no definitive science to prove that any particular activity
is harmful to the environment. The Company strives to preserve natural resources and, therefore,
carries out environmental risk assessments and implements a number of environmental activities
to prevent or minimise adverse environmental impacts.
PJSC Aeroflot’s environmental policy is aimed at improving the energy efficiency and
environmental performance of its operations related to air transportation of passengers, baggage,
cargo, and mail. The key focus of this policy is on improving fuel efficiency of the Group’s
aircraft fleet, which helps reduce its environmental footprint while at the same time cutting fuel
costs, a major contributor to overall operating expenses.
To achieve its environmental policy objectives, PJSC Aeroflot:
maintains an environmental management system;
monitors and analyses its operations and operational processes to identify new opportunities to
improve environmental performance;
improves energy efficiency of its operations;
manages waste with a focus on recycling as the most effective method of waste disposal;
upgrades its aircraft fleet;
optimises the route network and rolls out new piloting techniques to reduce noise pollution and
cut emissions from aircraft engines;
selects suppliers based on their environmental performance;
raises environmental awareness and promotes waste efficiency among employees. Total environmental protection costs, RUB thousand
2014 2015 2016
11,964 16,072 8,475
Quality Management System
PJSC Aeroflot has in place an integrated management system, the efficiency and effectiveness of
which is regularly confirmed by independent external auditors.
The core integration platform for the Company’s management framework is its quality
management system (“QMS”), which for many years has successfully passed certification audits
under ISO 9001 (Quality Management Systems) and registrations under IATA’s industry
programmes (IOSA – Operational Safety Audit, ISAGO – Safety Audit for Ground Operations).
Aeroflot Group’s efforts to improve its QMS are aligned with activities to further improve the
assessment framework for KPI-based evaluation of performance and progress on the
implementation of internal and external QMS standards applied both by IATA and SkyTeam, and
Aeroflot Group. In particular, all our subsidiaries successfully pass regular IATA – IOSA
operational safety audits and demonstrate strong safety and quality levels.
PJSC Aeroflot is committed to further develop and improve its QMS through driving innovation
in management, improvement and optimisation of internal processes.
In 2016, as part of supervision of Aeroflot Group airlines’ preparations for IOSA compliance
certification audits, PJSC Aeroflot’s experts provided advisory support and auditing services to
Aurora airline. Non-compliances revealed by the audit were promptly remedied, allowing the
airline to successfully pass the independent IOSA certification audit.
To minimise vendor inspection costs across the route network, PJSC Aeroflot maintains
membership of the following IATA pools: IFQP (IATA Fuel Quality Pool),
DAQCP (De-Icing/Anti-Icing Quality Control Pool), and
ISAGO (IATA Safety Audit for Ground Operations Pool).
As part of the activities carried by the above pools, during the year, the airline’s employees
conducted a number of vendor audits and follow-up assessments to verify the completeness and
adequacy of corrective actions, thus ensuring supplier operations monitoring across the route
network. The Company’s relevant committees and business units have developed and are
implementing risk mitigation actions to address all identified risks.
In 2016, PJSC Aeroflot’s integrated environmental management system successfully passed an
external compliance audit. The audit was carried out by TÜV SÜD Russia, a branch of the
world’s leading certification agency, and looked at compliance with ISO 9001:2008 (Quality
Management Systems) and ISO 14001:2004 (Environmental Management Systems). The purpose
of such comprehensive audits is to obtain independent assurance of compliance and an objective
assessment of the efficiency and effectiveness of actual integration of the airline’s Quality
Management and Environmental Management Systems within its unified corporate governance
structure.
The compliance audit revealed no instances of non-compliance and confirmed that
PJSC Aeroflot’s integrated management system met the international standards ISO 9001 and
ISO 14001. The auditor also made recommendations and highlighted areas to improve the
management systems, which the airline will take into account in its future operations.
Fuel Efficiency
During 2016, to mitigate environmental impacts and achieve other objectives, the Group’s
airlines continued implementing existing programmes to improve fuel efficiency and shift to
more advanced aircraft.
Fuel-efficiency initiatives at Group airlines focus on:
analysis of route options to select the best flight routes between destination and departure
airports;
optimisation of fuel consumption during ignition and taxiing;
use of optimal approach and landing procedures;
minimising the variance between the projected and actual revenue loads in departure airports;
centre-of-gravity control;
optimal use of airborne auxiliary power;
use of ground systems for pre-flight air conditioning of aircraft cockpit and cabins;
improving aircraft aerodynamics through quality, full aircraft surface washing;
improving aircraft engine efficiency through gas/air duct cleaning;
reducing fuel consumption through monitoring and reduction of water supplies on-board; use of
updated weight estimates for kitchen equipment and in-flight meals.
Over the past five years, specific fuel consumption across Aeroflot Group decreased by 9.1% to
286.4 grammes per tonne-kilometre (TKM) in 2016.
Throughout 2016, efforts were taken to implement the roll-out plan for a fuel and lubricant cost
reduction system covering the fleets of special-purpose vehicles operated by PJSC Aeroflot and
its subsidiary airlines.
For energy consumption by Aeroflot Group airlines in 2016 see Appendix to this Annual Report.
Air Quality Initiatives
Aeroflot Group has in place a СО2-emissions monitoring and measuring system to ensure
compliance with Russian and European requirements for monitoring, reporting and verification of
greenhouse gas (GHG) emissions. This system is in particular used at Aeroflot and Rossiya
airlines.
СО2 emissions are fully monitored and recorded throughout the route network in line with the
methodology adopted by the EU Emissions Trading System (EU ETS) and the national system
for monitoring, reporting and verification of GHG emissions.
The Company takes efforts to reduce СО2 emissions under its Fuel Efficiency Programme and the
Energy Saving and Environmental Performance Programme until 2020. PJSC Aeroflot direct GHG emissions, tonnes СО2
2014 2015 2016
6,387,498.2 6,871,735.4 7,442,391.6
Aeroflot airline’s entire fleet complies with ICAO standards for noise levels and atmospheric
pollution.
To reduce the environmental impact of ground vehicles the Group’s airlines carry out regular
fine-tuning of instrumental controls and fuel system to ensure compliance with permitted toxicity
and smoke levels.
As part of the Carbon Offset Programme, PJSC Aeroflot has introduced an Online СО2
Emissions Calculator developed in line with the best industry practices and using ICAO and
IATA methodologies.
The Online СО2 Emissions Calculator is currently available on Aeroflot’s official website to give
passengers an idea of their individual carbon footprint for the journey as they select their flight.
Going forward, this environmental initiative will give passengers an opportunity to offset their
carbon footprint by donating to green projects focused on reducing GHG emissions (tree planting,
protection of forests against bark beetles, clean energy initiatives, clean-ups of water bodies, etc.).
In 2016, the Company took part in testing DAO IPCI platform, designed with support from
Microsoft. The platform records green projects, commitments and reductions and is based on
smart contracts and blockchain technology, giving each passenger a chance to offset his/her
carbon footprint as per the Online СО2 Emissions Calculator.
Water Resource Management
In the reporting year, PJSC Aeroflot set up a framework to monitor the quantity and quality of
waste water discharged by Melkisarovo office building treatment facilities. A total of 316 treated
waste water samples were tested. The results suggest that all relevant standards are met.
The water protection and water resource management activities to monitor the morphometric
characteristics of the Klyazma River enabled the Company to successfully secure a relevant
official Decision to Grant a Water Body for Use and obtain a Permit for Wastewater Discharges.
Water consumption by PJSC Aeroflot, thousand cubic metres
2015 2016
Total: 22.0 24.1
from public water supply network 22.0 24.1
Total water discharge by PJSC Aeroflot, thousand cubic metres
2015 2016
Total: 19.4 19.3
including: treated water (surface drains from the
site of the office building complex, facilities
and structures)
2.2 1.2
passed to other companies for treatment
(sewage) 17.1 18.1
Reduced Generation and Disposal of Production and Consumption Waste
Consistent efforts to reduce production and consumption waste disposed to landfills and grow the
share of recycled waste sent for disposal to specialist recyclers are among PJSC Aeroflot’s
environmental priorities. In 2016, 73.3% of the total waste generated by PJSC Aeroflot were
recycled.
Throughout 2016, PJSC Aeroflot regularly inspected waste storage sites and maintained monthly
records of generation and movement of production and consumption waste across its business
units.
Total waste of PJSC Aeroflot by hazard class, tonnes
2015 2016
Total: 21,385.9 23,127.5
including: hazard class 1 2.2 3.9
hazard class 2 1.4 4.8
hazard class 3 2,448.5 2,508.3
hazard class 4 18,528.3 19,918.5
hazard class 5 405.5 692.0
Total waste of PJSC Aeroflot by disposal method, tonnes
2015 2016
Recycled (transferred for recycling) 2,066.6 250.6
Landfilled 7,138.4 6,164.0 Other disposal method (transferred for
neutralisation) 12,180.9 16,713.0
PJSC Aeroflot collects and recycles de-icing fluid used for treatment of own aircraft and aircraft
operated by other airlines.
Environmental Fees
In accordance with the applicable environmental laws, PJSC Aeroflot pays fees for negative
environmental impacts from its business operations.
Environmental fees totalled RUB 3.6 million in 2016.
Total environmental fees paid by PJSC Aeroflot, RUB million
2012 2013 2014 2015 2016
2.1 5.1 6.7 6.8 3.6
No fines or non-monetary penalties for non-compliance with the applicable environmental laws
were imposed on the Company in 2016.
FINANCIAL REVIEW
Financial Highlights for 2016
Key figures of profit and loss statement, RUB million, unless otherwise stated
Item 2015 2016 Change
Revenue 415,173 495,880 19.4%
EBITDAR8 103,118 137,567 33.4%
EBITDAR margin 24.8% 27.7% 2.9 p.p.
EBITDA1 58,703 78,004 32.9%
EBITDA margin 14.1% 15.7% 1.6 p.p.
Operating profit 44,107 63,254 43.4%
Operating profit margin 10.6% 12.8% 2.2 p.p.
Profit / (loss) for the period (6,494) 38,826 –
Net profit margin – 7.8% –
In 2016, Aeroflot Group significantly improved its financial performance, driven by solid
operating results, which determined both expansion of business volumes and improvement of
margins. The volume factor is associated with the growth in passenger traffic and passenger
turnover by 10.3% and 14.8%, respectively. A 3.2 p.p. growth in the passenger load factor to
81.5% was one of the key drivers behind higher margins since it helped earn extra revenues
without increasing fixed and semi-fixed costs.
Other factors boosting performance were a proactive approach to network and revenue
management and a net positive FX effect on revenue and costs. As a result, EBITDA and
EBITDAR increased by 1.6 p.p. and 2.9 p.p. y-o-y to 15.7% and 27.7%, respectively.
The above factors as well as no extra costs included in the 2016 consolidated statement of profit
and loss due to commitments to transport Transaero’s passengers (in 2015, the total expensed
costs amounted to RUB 16,811 million) supported net profit growth, to reach
RUB 38,826 million in 2016.
Traffic and other revenue
Revenue, RUB million, unless otherwise stated
2015 2016 Change
Revenue from passenger flights 349,574 421,377 20.5%
including scheduled flights 343,428 403,760 17.6%
charter flights 6,146 17,617 х2.9
Revenue from cargo 9,631 12,589 30.7%
Total traffic revenue 359,205 433,966 20.8%
Other revenue 55,968 61,914 10.6%
including revenue from airline agreements 31,596 35,923 13.7%
revenue from partners under the frequent flyer programme 10,275 11,846 15.3%
other revenue 14,097 14,145 0.3%
Total revenue 415,173 495,880 19.4%
Note: immaterial deviations in numbers in the charts and tables subtotals of the Annual Report are due to rounding.
8 EBITDAR = EBITDA + operating lease expenses. EBITDA = operating profit + depreciation and
amortisation + customs duties.
In 2016, Aeroflot Group’s revenue increased by 19.4% y-o-y to RUB 495,880 million.
Revenue from scheduled passenger flights increased by 17.6% to RUB 403,760 million, driven
by a 10.3% y-o-y increase in the Group’s passenger traffic in 2016 and the year-average Rouble
exchange rate movements leading to a growth in revenue from international services denominated
in foreign currencies.
Revenue from charter flights rose almost threefold to RUB 17,617 million, supported, among
other things, by the growth in this segment following the launch of Rossiya airline’s charter
programme.
Revenue from cargo increased by 30.7% y-o-y to RUB 12,589 million on the back of additions of
long-haul aircraft to the Group’s fleet and a 31.6% growth in the cargo and mail volumes.
Other revenue was up 10.6% y-o-y and stood at RUB 61,914 million, primarily due to an increase
in revenue from airline agreements denominated in foreign currency following the depreciation of
the Russian currency and higher revenue from banks under the Aeroflot Bonus programme.
Revenue breakdown, 2016
Чартерные перевозки Charter flights
Грузовые перевозки Cargo
Прочая выручка Other revenue
Регулярные перевозки Scheduled flights
Программа «Аэрофлот Бонус» Aeroflot Bonus
Соглашения с авиакомпаниями Airline agreements
81,4%
3,6%
2,5%
7,2%2,4%
2,9%
Регулярные перевозки Чартерные перевозки
Грузовые перевозки Соглашения с авиакомпаниями
Программа «Аэрофлот Бонус» Прочая выручка
Revenue growth decomposition, RUB million
Выручка 12М 2015 года Revenue 12M 2015
Регулярные перевозки Scheduled flights
Чартерные перевозки Charter flights
Грузовые перевозки Cargo
Прочая выручка Other revenue
Выручка 12М 2016 года Revenue 12M 2016
Yields
In 2016, scheduled flight yields increased by 6.6%, including yields on international destinations
(by 6.3%) and on domestic destinations (by 6,5%). International yield growth primarily resulted
from the foreign exchange effect as all fare groups (for outbound and inbound flights and for
international transit) are denominated in foreign currencies. Despite the gradual appreciation of
the Russian rouble throughout 2016, the average RUB/EUR exchange rate, which directly
impacts the y-o-y change in yields, increased by 9,5% (RUB 67.78 per EUR in 2015,
RUB 74.23 per EUR in 2016).
The upward trend in domestic yields was driven by the higher demand for domestic flights, which
enabled the Company to raise the passenger load factor by 4.1 p.p. to 83.5% with no additional
promotion. Moreover, in 1H 2016 domestic yields were supported by the lower VAT rate, which
was reduced from 18% to 10% in mid-2015.
In addition to market factors, the Group’s development also led to structural changes in revenue
contributions from airlines. In particular, Rossiya airline increased its share of “long-haul” flights
with lower yields. The low-cost carrier Pobeda is also actively expanding its operations.
Scheduled flight yields, RUB
415 173
60 332 11 4712 958 5 946
495 880
Выручка 12М 2015 года
Регулярные перевозки
Чартерные перевозки
Грузовые перевозки Прочая выручка Выручка 12М 2016 года
3,263,86 3,583,47
4,11 3,82
Доходне ставки на ВВЛ Доходне ставки на МВЛ Доходне ставки по сети
Доходные ставки на ВВП Domestic yields
Доходные ставки на МВЛ International yields
Доходные ставки по сети Total yields
Рост Growth
Operating Costs
Operating costs, RUB million, unless otherwise stated
2015 2016 Change
Aircraft, traffic and passenger servicing 75,186 87,227 16.0%
% of revenue 18.1% 17.6% (0.5 p.p.)
Staff 55,619 64,682 16.3%
% of revenue 13.4% 13.0% (0.4 p.p.)
Operating lease 44,415 59,563 34.1%
% of revenue 10.7% 12.0% 1.3 p.p.
Aircraft maintenance 32,042 38,236 19.3%
% of revenue 7.7% 7.7% 0.0 p.p.
Sales and marketing, administration and general expenses 26,084 30,294 16.1%
% of revenue 6.3% 6.1% (0.2 p.p.)
Depreciation, amortisation, and customs duties 14,596 14,750 1.1%
% of revenue 3.5% 3.0% (0.5 p.p.)
Communication expenses 12,890 14,697 14.0%
% of revenue 3.1% 3.0% (0.1 p.p.)
Other expenses 15,852 21,595 36.2%
% of revenue 3.8% 4.4% 0.5 p.p.
Operating costs, excluding aircraft fuel 276,684 331,044 19.6%
% of revenue 66.6% 66.8% 0.2 p.p.
Aircraft fuel 94,382 101,582 7.6%
% of revenue 22.7% 20.5% (2.2 p.p.)
Total operating costs 371,066 432,626 16.6%
% of revenue 89.4% 87.2% (2.2 p.p.)
Operating costs breakdown, 2016
Расходы на авиационное топливо Aircraft fuel
Обслуживание воздушных судов и пассажиров Aircraft, traffic and passenger servicing
Расходы на оплату труда Staff
Расходы по операционной аренде Operating lease
Теххническое обслуживание воздушных судов Aircraft maintenance
Коммерческие, общехозяйственные и
административные расходы
Sales and marketing, administration and general expenses
Амортизация и таможенные пошлины Depreciation, amortisation, and customs duties
Услуги связи Communication expenses
Прочие расходы нетто Other expenses, net
In 2016, aircraft fuel costs increased by 7.6% y-o-y to RUB 101,582 million. Despite the growth
in traffic and higher flight hours, aircraft fuel costs were almost flat due to lower average fuel
prices denominated in roubles for the same period and initiatives implemented by the Group to
boost its fuel efficiency, which improved the Group’s specific fuel consumption rates.
Operating costs less aircraft fuel increased by 19.6% y-o-y to RUB 331,044 million.
The cost of aircraft, traffic and passenger servicing stood at RUB 87,227 million, up 16.0% y-o-y.
Excluding the foreign exchange impact, these costs went up by 13.6%, driven by the Group’s
expansion and higher traffic. This cost item was also impacted by higher fares of some Russian
airports.
Staff costs went up by 16.3% y-o-y to RUB 64,682 million, mainly due to indexation of salaries
of eligible employee categories in early 2016 and the employment of over 4,000 of Transaero
staff.
Operating lease expenses stood at RUB 59,563 million, a 34.1% increase y-o-y, primarily driven
by the effect of the Rouble exchange movements (this item is almost entirely denominated in
foreign currency). Excluding the foreign exchange impact, these costs went up by 24.2%. Other
factors contributing to operating lease expenses included fleet expansion (the net increase in the
Group’s leased fleet was 37 aircraft, or 18.5% growth y-o-y) and a higher average LIBOR 3M
rate in the reporting period (0.74 against 0.3 in 2015).
Aircraft maintenance costs increased by 19.3% y-o-y to RUB 38,236 million. Excluding the
foreign exchange impact, these costs went up by 13.6%, due to growth in flight hours and higher
additional costs on preparing aircraft to be phased out.
Sales and marketing, administration and general expenses gained 16.1% y-o-y and reached
RUB 30,294 million, driven by higher sales and marketing expenses pegged to foreign currencies
and the IT infrastructure enhancement. Excluding the foreign exchange impact, these expenses
went up by 11.2%.
23,5%
20,2%
15,0%
13,8%
8,8%
7,0%
3,4%3,4%
5,0% Расходы на авиационное топливо
Обслуживание воздушных судов и пассажиров
Расходы на оплату труда
Расходы по операционной аренде
Техническое обслуживание воздушных судов
Коммерческие, общехозяйственные и административные расходыАмортизация и таможенные пошлины
Услуги связи
Прочие расходы
Depreciation, amortisation and customs duties increased by 1.1% y-o-y to RUB 14,750 million.
Communication expenses went up by 14.0% y-o-y and amounted to RUB 14,697 million as a
result of higher rouble equivalent of global distribution systems expenses denominated in foreign
currency.
Other expenses increased by 36.2% y-o-y to RUB 21,595 million due to allocations to provisions
for overdue accounts receivable and for aircraft maintenance.
As a result of the above factors, Aeroflot Group posted an operating profit of RUB 63,254 million
(12.8% of revenue) for 2016. EBITDAR amounted to RUB 137,567 million, with a 2.9 p.p.
increase in margin to 27.7%. EBITDA amounted to RUB 78,004 million, with a 1.6 p.p. increase
in margin to 15.7%.
Revenue and Cost per Available Seat-Kilometre
Effective management of the route network, capacity and revenue, and tight cost control provided
for Aeroflot Group’s RASK growth rate outstripping the CASK growth rate. In 2016, the
scheduled RASK was RUB 3.09 per seat-kilometre, up 10.3% y-o-y, while CASK amounted to
RUB 3.14, up 5.7% y-o-y.
Scheduled flights RASK, RUB Total RASK, RUB CASK, RUB
+10.3% +8.2% +5.7%
EBITDA and EBITDAR
In 2016, Aeroflot Group’s EBITDA amounted to RUB 78,004 million, with EBITDA margin
growing to 15.7% (14.1% in 2015). EBITDAR for 2016 was RUB 137,567 million, with
EBITDAR margin reaching 27.7% (24.8% in 2015). Margins were driven by revenue growth
outstripping cost inflation as a result of the aforementioned factors.
EBITDAR, RUB million, and EBITDAR margin, %
EBITDA, RUB million, and EBITDA margin, %
2,80 3,09
2015 2016
3,33 3,60
2015 2016
2,97 3,14
2015 2016
103 118
137 56724,8%
27,7%
2015 2016
EBITDAR Рентабельность по EBITDAR
58 703
78 004
14,1%
15,7%
2015 2016
EBITDA Рентабельность по EBITDA
EBITDAR EBITDAR
Рентабельность по EBITDAR EBITDAR margin
EBITDA EBITDA
Рентабельность по EBITDA EBITDA margin
Finance Income and Costs
Non-operating profit and loss, RUB million, unless otherwise stated
2015 2016 Change
Operating profit 44,107 63,254 43.4%
Loss from sale and impairment of investments, net (9,159) (2,935) (68.0%)
Finance income 15,811 19,802 (25.2%)
Finance costs (28,556) (9,443) (66.9%)
Hedging result (23,746) (12,310) (48.2%)
Share of results of associates (17) 12 –
Result from disposal of subsidiaries – (5,099) –
Profit/(loss) before income tax (1,560) 53,281 –
Income tax expense (4,934) (14,455) х2.9
Profit/(loss) for the period (6,494) 38,826 –
Finance income for 2016 increased by 25.2% y-o-y to RUB 19,802 million, mainly due to the
foreign exchange gain primarily coming from the return of aircraft pre-delivery payments .
Finance costs decreased by 66.9% y-o-y to RUB 9,443 million, primarily due to the recognition
of loss on derivative financial instruments following transactions execution in 2015 and rouble
appreciation throughout 2016.
The hedging result of RUB 12,310 million is attributable to settlements under financial
instruments recognised in equity, as well as to the effect of revenue hedging with liabilities in
USD (finance lease).
As a result of the effect of the above operational and non-operational factors on revenue and
costs, Aeroflot Group posted a net profit of RUB 38,826 million for 2016.
Cash Flows
Condensed consolidated statement of cash flows, RUB million, unless otherwise stated
2015 2016 Change, %
(Loss)/profit before income tax (1,560) 53,281 –
Depreciation and amortisation 13,306 13,395 0.7
Change in provisions 10,353 8,845 (14.6)
Foreign exchange loss/(gain) 849 (15,597) –
(Gain)/loss on change in fair value of derivative financial
instruments (11,885) 53 –
Realised loss on hedging 23,746 12,310 (48.2)
Interest expense 7,737 8,907 15.1
Loss on derivative financial instruments, net 19,803 – –
Loss on sale of investments and accrual of provision for
impairment of investments and loans issued 9,159 8,034 (12.3)
Gain on recovery of VAT (8,021) – –
Other adjustments 800 (3,425) –
Working capital changes and income tax paid/refunded 5,377 (9,091) –
Net cash flows from operating activities 69,664 76,712 10.1
Purchases of property, plant and equipment and intangible assets (9,196) (10,222) 11.2
2015 2016 Change, %
Proceeds from sale of assets held for sale – 6,471 –
Purchases of investments and deposits placement (20,393) (10,435) (48.8)
Proceeds from sale of investments and deposits return 6,405 9,840 53.6
Proceeds from acquisition/sale of a subsidiary, net – 9 –
Prepayments/return of prepayments for aircraft, net (14,880) 10,556 –
Other (706) 1,047 –
Net cash (used in)/from investing activities (38,770) 7,266 –
Free cash flow 30,894 83,978 171.8
Proceeds from loans and borrowings 73,331 30,885 (57.9)
Repayment of loans and borrowings (36,267) (72,991) 101.3
Repayment of the principal of financial lease liabilities (19,455) (27,024) 38.9
Interest paid (5,914) (6,954) 17.6
Dividends paid (88) (49) (44.3)
Proceeds from settlement of derivative financial instruments, net (39,682) (4,362) (89.0)
Net cash used in / from financing activities (28,075) (80,495) 186.7
Effect of exchange rate fluctuations 1,327 (2,700)
Net increase/(decrease) in cash and cash equivalents 4,146 783 (81.1)
Cash and cash equivalents at the beginning of the year 26,547 30,693 15.6
Cash and cash equivalents at the end of the year 30,693 31,476 2.6
Cash flows from operating activities
In 2016, net cash flows from operating activities reached RUB 76,712 million
(RUB 69,664 million in 2015), with profit before income tax amounting to RUB 53,281 million
(loss of RUB 1,560 million in 2015). Key non-cash adjustments made to income before income
tax to arrive to net cash flows from operating activities for 2016 were related to:
changes in provisions in the amount of RUB 8,845 million (RUB 10,353 million in 2015), mainly
attributed to accrual of the provision for scheduled maintenance and repair of aircraft, and the
provision for doubtful accounts;
hedging result in the amount of RUB 12,310 million (RUB 23,746 million in 2015) attributable to
the effect of revenue hedging with liabilities in foreign currency in the amount of
RUB 8,316 million and realised loss on hedging derivative instruments subject to hedge
accounting in the amount of RUB 3,994 million;
loss on sale of investments and accrual of provision for impairment of investments and loans
issued, in the amount of RUB 8,034 million, mainly attributed to disposal of
JSC Vladivostok Air, CJSC Aeroflot-Cargo and impairment of long-term financial investments in
JSC Sheremetyevo International Airport;
foreign exchange gain in the amount of RUB 15,597 million (loss of RUB 849 million in 2015);
depreciation and amortisation of RUB 13,395 million (RUB 13,306 million in 2015).
Working capital
In 2016, working capital change was RUB 3,663 million, mainly impacted by an increase in
accounts receivable and prepayments by RUB 6,915 million (RUB 2,251 million in 2015) in line
with the revenue growth by 19.4% in 2016.
Cash flows from operating activities were largely affected by an increase in accounts payable and
accrued liabilities, in line with the growth in operating costs by 16.6% in 2016.
Free cash flow
In 2016, free cash flow totalled RUB 83,978 million, up by RUB 53,084 million, or 171.8% y-o-
y, which was driven by the increase in net cash flows from investing activities by
RUB 46,036 million, and the increase in net cash flows from operating activities by
RUB 7,048 million.
Key drivers of y-o-y change in net cash flows used in investing activities were:
placement of deposits totalling RUB 10,435 million (RUB 11,741 million in 2015);
return of deposits totalling RUB 9,840 million, primarily to Pobeda and Aurora airlines, due to
maturing (RUB 6,375 million in 2015);
prepayments of RUB 18,806 million (RUB 22,708 million in 2015) for 22 Airbus A350 aircraft
expected to be delivered in 2018–2023, and Airbus A320/A321 aircraft expected to be delivered
in 2017–2018, and return of prepayments of RUB 29,362 million (RUB 7,828 million in 2015)
for Boeing 777, Airbus A320/321, and SSJ100;
purchases of property, plant and equipment and intangible assets, totalling RUB 10,222 million
(RUB 9,196 million in 2015);
proceeds from sale of assets held for sale, totalling RUB 6,471 million.
In 2016, the internal-financing ratio (net cash flows from operating activities to capital
expenditure) stood at 2,092.0% (813.1% in 2015).
Cash and cash equivalents grew by RUB 783 million (2.6% y-o-y) to RUB 31,476 million,
driven, among other factors, by the effect of exchange rate fluctuations in the amount of
RUB 2,700 million (RUB 1,327 million in 2015).
Net capital expenditure, cash flows from operating
activities, depreciation and amortisation, RUB million
Cash flows from operating activities and free cash
flow, RUB million
Капитальные затраты, нетто Net capital expenditure
Чистая сумма денежных средств от
операционной деятельности
Net cash flows from operating activities
Амортизация Depreciation and amortisation
Свободный денежный поток Free cash flow
Capital Expenditure
In 2016, purchases of property, plant and equipment primarily included two DHC-8 aircraft to
Aurora Airlines purchased for RUB 2,807 million, and equipment acquired by PJSC Aeroflot
under finance lease for RUB 2,156 million.
3 667 8 568
76 712
69 664
13 395 13 306
20162015
Капитальные затраты, нетто
Чистая сумма денежных средств от операционной
деятельности Амортизация
76 712
69 664
83 978
30 894
20162015
Чистая сумма денежных средств от
операционной деятельности
Свободный денежный поток
Purchases of intangible assets in 2016 mainly included SAP development software, as well as
other software solutions and licences for office and other IT systems.
Net capital expenditure, RUB million, unless otherwise stated
31 December
2015
31 December
2016 Change, %
Purchases of property, plant and equipment and intangible
assets (9,196) (10,222) (11.2)
Purchases of investments (5) – –
Proceeds from sale of assets held for sale – 6,471 –
Proceeds from sale of property, plant and equipment 603 84 (86.1)
Gain on disposal of investments 30 – –
Net capital expenditure (8,568) (3,667) (57.2)
Purchases of property, plant and equipment and intangible assets, RUB million
Приобретение основных средств Purchases of property, plant and equipment
Приобретение нематериальных активов Purchases of intangible assets
9 488 9,488
Non-current assets
In 2016, non-current assets decreased by 7.0% and reached RUB 169,161 million. The change
was mainly attributable to reduction in deferred tax assets by RUB 9,380 million, primarily
resulting from the decrease in finance lease liabilities backed by the rouble appreciation and
repayment of liabilities.
In addition, the change in non-current assets was influenced by lower prepayments for aircraft in
2016 as delivery time got closer, and reclassification of prepayments to current assets. Net change
in prepayments for aircraft amounted to RUB 7,461 million.
9 488
734
Приобретение основных
средств
Приобретение
нематериальных активов
Change in prepayments for aircraft (non-current portion), RUB million
Внесение авансов Advances paid
Переход долгосрочной части в
краткосрочную
Non-current prepayments reclassified to
current prepayments
Change in prepayments for aircraft (current portion), RUB million
Внесение авансов Advances paid
Переход долгосрочной части в
краткосрочную
Non-current prepayments reclassified to
current prepayments
Возврат авансов Advances returned
Изменение курса валют Exchange rate differences
Current assets
Current assets decreased by 2.4% and reached RUB 130,146 million, primarily driven by disposal
of assets held for sale, following the sale of six Airbus A321, one Airbus A320 and two
Airbus A319 aircraft with the total residual value of RUB 4,504 million.
Equity
In 2016, equity, including non-controlling interest, grew by RUB 76,889 million to
RUB 40,769 million.
The key driver behind this change was the decrease in the hedging reserve of
RUB 30,533 million, which comprised revaluation of derivatives confirmed to be effective under
IAS 39 and revaluation of finance lease liabilities. Another contributor to the gain was retained
earnings, which primarily went up due to the profit of RUB 37,443 million earned in 2016 and
35 291
27 830
18 631 (26 092)
31.12.2015 Внесение авансов Переход
долгосрочной
части в
краткосрочную
31.12.2016
attributable to the shareholders of the Company. For more details on share capital see Note 32 to
the 2016 consolidated financial statements (Appendix to this Annual Report).
Current liabilities
In 2016, total current liabilities decreased by 32.2% y-o-y (by RUB 57,356 million), primarily
driven by a reduction of RUB 44,776 million in short-term loans and borrowings and the current
portion of long-term loans and borrowings. The decrease was also attributed to a
RUB 7,371 million reduction in liabilities related to assets held for sale, a RUB 4,883 million
decrease in accounts payable and accrued liabilities, a RUB 2,215 million decrease in provisions
for liabilities, a RUB 3,911 million decrease in finance lease liabilities, and a RUB 4,853 million
decrease in derivative financial instruments. Unearned traffic revenue grew by
RUB 10,353 million, and deferred revenue related to frequent flyer programme by
RUB 300 million.
Non-current liabilities
In 2016, non-current liabilities decreased by 20.4%, and reached RUB 137,813 million. The key
drivers behind this decrease were finance lease liabilities, which went down by
RUB 37,877 million due to the rouble appreciation in 2016, and the reclassification of finance
lease liabilities from non-current to current liabilities.
Debt and Liquidity
Debt, RUB million, unless otherwise stated
31.12.2015 31.12.2016 Change
Loans and borrowings 68,460 20,367 (70.2%)
Finance lease 164,524 122,736 (25.4%)
Pension liabilities 745 805 8.1%
Total debt 233,729 143,908 (38.4%)
Cash, cash equivalents and short-term investments 36,610 37,795 3.2%
Net debt 197,119 106,113 (46.2%)
Net debt / EBITDA ratio 3.4x 1.37х –
As at 31 December 2016, total debt reduced by 38.4% y-o-y, to RUB 143,908 million, primarily
driven by scheduled and early repayments of loans and borrowings, revaluation of finance lease
liabilities following the y-o-y change in the RUB/USD exchange rate as at 31 December 2016,
and the reduction of number of aircraft under finance lease agreements by nine aircraft (by
15.8% y-o-y).
Aeroflot Group’s loans and borrowings were both fixed-rate and variable-rate and were mainly
used to finance the working capital. The shares of foreign currency and rouble-denominated
liabilities in the loan portfolio are 23.9% and 76.1%, respectively. The share of foreign currency
loans decreased due to the effect from revaluation of loans backed by the rouble appreciation
throughout 2016, and repayments of more expensive borrowings ahead of schedule.
Finance lease liabilities are entirely denominated in foreign currencies; however, 46.4% of
liabilities under finance lease agreements mature as late as 2021 and further.
As at 31 December 2016, Aeroflot Group had RUB 89,247 million undrawn credit lines from
major Russian and international banks.
Breakdown of loans and borrowings by currency as
at 31 December 2016
Net Debt / EBITDA ratio
Note: Excluding operating lease capitalisation
Рубли Russian rouble
Доллары США US dollar
Евро Euro
Finance lease repayment schedule, RUB million
31 декабря 2015 31 December 2015
31 декабря 2016 31 December 2016
Breakdown of total debt as at 31 December 2016
Краткосрочные
обязательства
Current liabilities
Долгосрочные
обязательства
Non-current liabilities
Loan portfolio
Bank Currency
Short-term loans and borrowings and
current portion of long-term loans
and borrowings
Long-term
loans and
borrowings
Sberbank of Russia RUB 4,831 7,863
VTB Bank EUR 4,478 –
Sovcombank RUB – 2,800
Other USD – 395
Total 9,309 11,058
76%
2%
22%
Рубли Доллары США Евро
3,4
1,4
31 декабря 2015 31 декабря 2016
15 59318 032 16 364 15 857
56 890
2017 2018 2019 2020 2021+
31,5%17,3%
68,5%82,7%
2015 2016
Долгосрочные обязательства
Краткосрочные обязательства
CORPORATE GOVERNANCE
6.1. Corporate Governance System
Aeroflot Group’s structure
as at 31 December 2016
PJSC Aeroflot
Airlines Other subsidiaries
JSC Rossiya Airlines 75% – 1
share CJSC Aeromar 51%
LLC Pobeda Airlines 100% LLC Aeroflot-Finance 99.99%
JSC Aurora Airlines 51% JSC Sherotel 100%
JSC Orenair 100% LLC A-Technics 100%
JSC Donavia 100% Aeroflot Aviation School 100%
Note: PJSC Aeroflot holds a stake in A-Technics via Aeroflot-Finance.
PJSC Aeroflot also holds 45.0% in JSC AeroMASH – AS, 8.96% in JSC Sheremetyevo International Airport, 3.85%
in PJSC Transport Clearing House, and 49.0% in TRANSNAUTIC Aero GmbH (in liquidation).
Corporate Governance System
In line with top standards and requirements, PJSC Aeroflot’s corporate governance system aims
to implement the principles of transparency and accessibility of information about the Company
and ensure equitable treatment of minority and majority shareholders.
As part of its efforts to improve corporate governance, in 2013, PJSC Aeroflot started
implementing the roadmap on introduction of recommendations of nonprofit partnership Russian
Institute of Directors, in 2015 the Company started implementing the recommendations of the
Corporate Governance Code, as approved by the Board of Directors of the Bank of Russia on
21 March 2014.
On 19 March 2015, PJSC Aeroflot’s Board of Directors approved the Action Plan (Roadmap) to
improve corporate governance practices at PJSC Aeroflot. In 2016, we continued to implement
recommendations of the Corporate Governance Code and approved the Corporate Conduct Code
of PJSC Aeroflot, the Regulations on the Executive Secretary of the Board of Directors and the
Board of Directors Office of PJSC Aeroflot, amended the Regulations on the Personnel and
Remuneration Committee, and took major efforts to enhance Aeroflot Group’s integrated risk
management system.
PJSC Aeroflot also contributes greatly to the improvement of the corporate governance
regulation framework through involvement in dedicated working groups and round table
discussions. Compliance with the Russian Corporate Governance Code
Code section Principles recommended
by the Code Complied with
Not fully
complied with
Not complied
with
Shareholder Rights 13 11 1* 1
Board of Directors 36 29 6 1
Corporate Secretary 2 2 – –
Remuneration System 10 9 1 –
Risk Management System 6 6 – –
Information Disclosure 7 7 – –
Material Corporate Actions 5 4 1 –
Total 79 68 9 2
*Non-compliance relates to quasi treasury shares.
Note: Statistics are based on the Corporate Governance Code Compliance Report (Appendix to this Annual Report).
PJSC Aeroflot’s Corporate Governance Structure
Corporate governance is exercised by PJSC Aeroflot’s governance and supervisory bodies,
including the General Meeting of Shareholders, the Board of Directors, the Management Board,
the CEO, and the Revision Committee.
The responsibilities of PJSC Aeroflot’s corporate secretary are vested with the Executive
Secretary of the Board of Directors, also holding the position of Director of PJSC Aeroflot’s
Corporate Governance Department. For two consecutive years (2015 and 2016), the Director of
Aeroflot’s Corporate Governance Department – was recognised as one of the best corporate
governance directors by the Independent Directors Association (IDA).
PJSC Aeroflot’s financial and business activities are audited by an external auditor in accordance
with both the Russian Accounting Standards (RAS) and the International Financial Reporting
Standards (IFRS), as well as by the Internal Audit Department functionally reporting to the Audit
Committee of the Board of Directors of PJSC Aeroflot.
Key documents ensuring protection of PJSC Aeroflot shareholder rights include: Articles of
Association of PJSC Aeroflot, Regulations on the General Meeting of Shareholders of
PJSC Aeroflot, Regulations on the Board of Directors of PJSC Aeroflot, Regulations on the
Management Board of PJSC Aeroflot, Regulations on the Revision Committee of PJSC Aeroflot,
Regulations on the Corporate Information Policy of PJSC Aeroflot, Dividend Policy of
PJSC Aeroflot, and Corporate Conduct Code of PJSC Aeroflot. In addition, the Company is
developing the Corporate Governance Code of PJSC Aeroflot, which provides for high quality
corporate governance standards at PJSC Aeroflot.
PJSC Aeroflot controls interests in (holds shares in the charter capital of) a number of
subsidiaries, including airlines, where PJSC Aeroflot also ensures compliance with the top
standards of corporate governance by development and implementation of Group-wide policies
and principles. On top of that, the Company developed and put in place a cross-functional
governance system for its aviation subsidiaries.
To ensure supervision over financial and business activities of its subsidiary airlines, the Group
enabled each of them to have a dedicated revision committee made up of PJSC Aeroflot’s
representatives. In addition to revision committee inspections, the airlines are subject to
inspections by an auditor approved pursuant to the relevant bidding procedures.
In accordance with the applicable laws and their articles of association, each subsidiary airline
developed and adopted dedicated internal documents stipulating the responsibilities of its
governing bodies.
Superior expertise of PJSC Aeroflot’s management team has been widely acclaimed in the
business community.
General Meeting of Shareholders
The General Meeting of Shareholders is the Company’s supreme governing body. The respective
scope of authority and procedures for convening, holding and summarising Annual General
Meetings of Shareholders (AGMs) are set forth in the Company’s Articles of Association and
General Meeting
of Shareholders Board of Directors
CEO
Management Board
Management Board
External auditor
Revision Committee Internal Audit
Department
Personnel and
Remuneration Committee
Audit Committee
Strategy Committee
Committee for Finance
and Investments
Committee for
Innovative
Development
Regulations on the General Meeting of Shareholders. The Company holds its AGMs in June
every year.
In 2016, PJSC Aeroflot convened the Annual General Meeting of Shareholders in Moscow on
27 June (Minutes No. 38 dated 30 June 2016). The meeting was attended by holders of 71.27%
of PJSC Aeroflot’s total voting stock.
The Annual General Meeting of Shareholders approved the Company’s Annual Report, 2015
financial statements (including the profit and loss statement), the Board’s recommendations on
the distribution of the net profit for FY2015, and the remunerations of the members of the Board
of Directors and the Revision Committee, as recommended by the Board of Directors. The
Company also approved a number of related-party transactions.
The Meeting approved a new composition of the Board of Directors and the Revision
Committee, and the Company’s auditor for 2016 annual accounting (financial) statements
(selected pursuant to the relevant bidding procedures). It also adopted new versions of
PJSC Aeroflot’s Articles of Association, Regulations on the General Meeting of Shareholders,
Regulations on the Board of Directors, and Regulations on the Management Board.
The Annual General Meeting of Shareholders resolved not to announce or pay out dividends on
PJSC Aeroflot’s shares for FY2015, since Aeroflot Group reported no net profit for that year.
This resolution took into account the recommendations of PJSC Aeroflot’s Board of Directors
and was passed in line with the Company’s Dividend Policy, which stipulates that Aeroflot
Group’s net profit (under IFRS) forms the base for calculating dividends.
The Extraordinary General Meeting (EGM) of Shareholders held on 26 December 2016
(Minutes No. 39 dated 27 December 2016) was attended by holders of 67.81% of
PJSC Aeroflot’s total voting stock.
The EGM approved the related-party transaction (several associated transactions) related to
assignment of the right to acquire 22 Boeing 787 aircraft.
Board of Directors
PJSC Aeroflot’s Board of Directors has overall authority over the Company. The Board of
Directors is responsible for the Company’s operations, excluding matters within the authority of
PJSC Aeroflot’s General Meeting of Shareholders, Management Board, and Chief Executive
Officer. The procedures for convening and holding the Board meetings, along with other Board
activities, are stipulated by the Regulations on the Company’s Board of Directors in line with the
Federal Law On Joint-Stock Companies.
The Board’s key focus areas include the Company’s long-term sustainable development,
effective oversight of its executive bodies, uncompromising observance and protection of
shareholder rights and their legitimate interests.
The main objectives of the Board of Directors are to:
define the core areas of business for the Company (including subsidiary airlines) to increase its
operating profit;
operate for the benefit of shareholders, supervise the implementation of corporate initiatives;
supervise the activities of the Management Board and Chief Executive Officer;
present resolutions on matters within the authority of the General Meeting of Shareholders for
approval by shareholders;
discuss and approve business plans;
determine the procedure for distributing profit and covering for loss;
develop the Company’s dividend policy, work out proposals on the amount of dividends on the
Company’s shares and dividend payout procedure, and present them for approval by the General
Meeting of Shareholders;
approve and monitor performance of the annual budget;
discuss and pre-approve draft annual reports, annual accounting statements and profit and loss
accounts;
analyse audit reports and opinions of the Revision Committee, and present documents featuring
the results of such audits for consideration by the Company’s shareholders;
present proposals to the General Meeting of Shareholders on the appointment of the Company’s
auditor;
determine the policy on issuing the Company’s securities;
approve the Company’s special registrar and the terms and conditions of the contract therewith,
as well as the contract termination.
In line with the action plan for the Board of Directors, the Board meetings are held at least once
a month. The action plan for the Board of Directors is approved at the end of the year preceding
the year covered in the plan. As a rule, the action plan includes essential matters concerning the
Company’s operations (strategy, finance, budget and risks, human resources, etc.), which are to
be discussed in line with the strategic and business planning cycle. Proposals made by members
of the Board of Directors and the Company’s management are factored in. Extraordinary
meetings may be convened to make decisions on urgent matters.
The agenda of the Board of Directors’ meetings must include items proposed for discussion by
shareholders who in aggregate hold at least 2% of shares, members of the Board of Directors, the
Revision Committee and the Management Board, and by the CEO.
All items on the agenda of the Board of Directors’ meetings are generally previewed by
dedicated committees to enable a more detailed discussion and prepare recommendations for
voting to the Board of Directors.
The Board of Directors’ meetings held in absentia consider matters on which members of the
Board of Directors do not have any material comments, as well as matters of procedure.
However, a matter may be moved to the agenda of a meeting held in person upon request of two
members of the Board of Directors.
Chairman of the Board of Directors
is responsible for the general stewardship of the Board of Directors, convenes and chairs
meetings, arranges for keeping the minutes of meetings, chairs the General Meeting of
Shareholders;
helps ensure the timely provision to members of the Board of Directors of all the information
required to pass resolutions and vote on agenda items;
ensures productive discussion of agenda items involving non-executive and independent
directors;
controls the execution of resolutions passed by the Board of Directors and the General Meeting
of Shareholders.
Independent directors and their role
Independent directors promote opinions and judgements unaffected by relations with the
Company’s shareholders or executive bodies, as well as decision-making which benefits
different groups of stakeholders.
The presence of independent directors enhances corporate governance in the Company.
Independent members of the Board of Directors are actively involved in the activities of the
Board committees. In accordance with the requirements of the Moscow Exchange, independent
directors head the Board of Directors’ Audit Committee and Personnel and Remuneration
Committee. The majority of members of the Board of Directors’ Committees are also
independent directors, which helps achieve a balanced and independent position on agenda
items.
Membership of the Board of Directors
As at 31 December 2016, PJSC Aeroflot’s Board of Directors was comprised of the Chairman
(non-executive director), one executive director, seven non-executive directors (including the
Chairman), and three independent directors.
PJSC Aeroflot’s Board of Directors is largely independent of the Company’s management: the
only executive director on the Board is Vitaly Saveliev, the Chief Executive Officer and
Chairman of PJSC Aeroflot’s Management Board.
Members of the Board of Directors efficiently performed their functions and tasks
notwithstanding their service on boards of directors at other companies.
The Chairman and members of the Board of Directors, except for Vitaly Saveliev, held no stake
in PJSC Aeroflot during the reporting year. In the reporting year, no members of the Company’s
Board of Directors purchased or disposed of their shares in the Company.
In 2016, no claims were filed against members of the Board of Directors.
Membership of the Board of Directors as at 31 December 2016
Kirill
Androsov
Chairman of the Board of Directors
Born on 13 June 1972 in Murmansk. In 1994, graduated with honours from St Petersburg
Maritime Engineering University (School of Engineering and Economics). In 2000, presented his
thesis to and was awarded a PhD degree at St Petersburg State University of Economics and
Finance. From 2003 to 2005, received training at Chicago University Business School (Executive
MBA). From 2000 to 2004, First Deputy CEO at LENENERGO; from 2004 to 2005, Director of
the Department for Government Regulation of Tariffs and Infrastructural Reforms at the Ministry
of Economic Development and Trade of the Russian Federation; since November 2005, Deputy
Minister for Economic Development and Trade of the Russian Federation. From April 2008 to
April 2010, Deputy Head of the Executive Office of the Government of the Russian Federation.
Since 2010, Managing Partner at Altera Capital. Member of boards of directors at
Otkritie Holding, Russian Machines, Altera Investment Fund, Ruspetro plc, RUSNANO
Management Company.
At different periods, served on boards of directors at RAO UES of Russia, Rosneft,
Zarubezhneft, VTB, Svyazinvest, All-Russian Exhibition Centre (VVC), Channel One Russia.
Since 2011, member of the Public Council under the Federal Tax Service of Russia; since 2012,
professor at the Higher School of Economics. Member of the Civic Chamber of the Russian
Federation and member of the Public Council under the Ministry of Energy of Russia.
Currently, holds the position of the Managing Director at Altera Investment Fund SICAV-SIF.
Does not own PJSC Aeroflot’s shares.
Mikhail
Alekseev
Member of the Board of Directors, member of the Strategy Committee
Born on 4 January 1964 in Moscow. In 1986, graduated with honours from Moscow Finance
University (Finance Academy under the Government of the Russian Federation) with a degree in
Finance and Credit. In 1992, presented his thesis and was awarded a Doctor of Economics
degree. From 1989 to 1991, Senior Expert, Lead Expert, Department Head, Deputy Head of the
Main Directorate at the USSR Ministry of Finance. In 1992, joined the Management Board at
Mezhkombank. In 1995, left for ONEXIM Bank as Deputy Chairman of the Board of Directors.
From 1999 to 2006, Senior Vice-President and Deputy Chairman of the Management Board at
Rosbank.
From 2006 to 2008, President and Chairman of the Management Board at Rosprombank.
Since 2008, Chairman of the Management Board at UniCreditBank.
Does not own PJSC Aeroflot’s shares.
Igor
Kamenskoy
Independent member of the Board of Directors, Head of the Personnel and Remuneration
Committee, member of the Audit Committee
Born on 25 January 1968 in Kiev. In 1993, graduated from Moscow State Pedagogical Institute
with a degree in Russian Language and Literature. From 1992 to 1998, Vice-President at
Soyuzcontract. In 1999, Vice-President at Rosbank. From 2000 to 2002, Advisor to the Chairman
of the State Duma. From 2002 to 2009, member of the Council of the Federation, Deputy
Chairman of the Council of the Federation Committee. From 2009 to 2015, Chairman of the
Board of Directors at Renaissance Capital.
Currently, holds the position of the Managing Director at Renaissance Broker.
Does not own PJSC Aeroflot’s shares.
Aleksey
Germanovich
Independent member of the Board of Directors, member of the Personnel and Remuneration
Committee and the Strategy Committee
Born on 19 July 1977 in Moscow. In 1998, graduated from the Department of Economics, and in
2002, from the Department of Journalism at Lomonosov Moscow State University; in 2008,
graduated from Cranfield University, UK (Executive MBA). From 2002 to 2009, Deputy CEO at
Severstal Group; from 2009 to 2012, director at Moscow SKOLKOVO Management School;
from 2012 to 2014, Director, member of the Executive Board and advisor to the Russian Direct
Investment Fund. Currently, independent director on boards of directors at Unipro (formerly,
E.On Russia), Bank St Petersburg, and Ameriabank (Armenia). At different periods, served on
boards of directors at a variety of Russian transport companies, such as Siberia Airlines, Irkutsk
International Airport, Rossiya State Transport Company, SG-Trans, etc. For the past four years,
was named among Russia’s 50 best independent directors in the rating compiled by the Russian
Union of Industrialists and Entrepreneurs with PwC and the IDA. Member of the Board at
Endowment Asset Маnagement Fund “Development of Saint Petersburg State University”,
Chairman of the Corporate Governance Committee at the Expert and Advisory Council of the
Federal Agency for State Property Management.
Does not own PJSC Aeroflot’s shares.
Roman
Pakhomov
Member of the Board of Directors, Head of the Strategy Committee, member of the Audit
Committee, and the Personnel and Remuneration Committee
Born on 4 March 1971 in Havana (Cuba). Graduated from Makarov State Marine Academy. He
holds MBA degree from the Graduate School of International Business at the Russian
Presidential Academy of National Economy and Public Administration (Moscow) and a degree
from Kingston University (UK). Started his career at Northern Shipping Company. From 1996 to
1998, Senior Expert for corporate customers at Inkombank. From 1998 to 1999, Deputy
Chairman of the Management Board at Maritime Bank. From 1999 to 2004, CEO at IC Center
Capital. From 2004 to 2008, Deputy CEO and CEO at VIM-avia. From 2008 to 2009, Executive
Director at Atlant Soyuz Airlines. From 2009 to 2010, CEO at Rossiya State Transport Company,
Advisor to Deputy CEO at ROSTEC Corporation.
Since September 2010, CEO at Aviacapital-Service.
Does not own PJSC Aeroflot’s shares.
Dmitry Peskov Member of the Board of Directors, member of the Personnel and Remuneration Committee, and
the Strategy Committee
Born on 26 December 1975 in Voronezh. Graduated from Voronezh State University in 1998. In
1999, obtained a Master’s degree in Political Studies from Moscow School of Social and
Economic Sciences and the University of Manchester. Since 2000, has led the strategy
development exercise, chaired the Internet Policy Centre and overseen the establishment of the
Russian International Studies Association at Moscow State Institute of International Relations
(MGIMO University). Last position held — Deputy Scientific Vice-President, Innovation
Director. Since 2009, Head of Strategic Initiatives at All-Russian Exhibition Centre (VVC).
Since 2011, Director of Young Professionals at the Agency for Strategic Initiatives. Member of
the Government Expert Council, member of the Board of Directors at RVC.
Does not own PJSC Aeroflot’s shares.
Vitaly Saveliev Member of the Board of Directors, CEO, Chairman of the Management Board
Born on 18 January 1954 in Tashkent. In 1977, graduated from the Department of Mechanics and
Engineering at Leningrad Polytechnic Institute with a Mechanical Engineer degree (Construction
and Road Machinery and Equipment); in 1986, graduated from Leningrad Institute of
Engineering and Economics. Since 1987, Deputy Head of Civil Engineering at
Glavleningradinzhstroi. Since December 1988, CEO at US-Soviet Union joint venture
DialogInvest (Leningrad office). In 1989, co-founder and member of the Board of Directors at
Dialogue Bank. From 1990 to 1993, CEO at the US-Soviet Union joint venture DialogInvest;
from 1993 to 1995, Chairman of the Management Board at Rossiya Bank; since November 1995,
Chairman of the Management Board at Menatep Saint Petersburg; since September 2001, Deputy
Chairman of the Management Board at Gazprom; from 2002 to 2004, Vice-President at GROS
United Company, Financial and IT Advisor to the CEO at Svyazinvest; from 2004 to 2007,
Deputy Minister for Economic Development and Trade of the Russian Federation. From 2007 to
April 2009, First Vice-President and Head of Telecom Assets at Sistema Financial Corporation.
Has held his current role since 10 April 2009.
Holds 0.121% of PJSC Aeroflot’s share capital.
Dmitry
Saprykin
Member of the Board of Directors, member of the Strategy Committee
Born in 1974 in Moscow. In 1996, graduated from Moscow State Law Academy with a degree in
Law. PhD in Law (2000). In 2001, graduated from Cornell Law School. From 1996 to 1998,
Chief Legal Adviser at Bank Menatep. From 2001 to 2004, Division Head and Director of M&A
and Capital Markets Department at MTS. From 2004 to 2006, Deputy CEO for Corporate Affairs
and Finance at SkyLink; from 2006 to 2007, CEO at Moscow Cellular Communications; from
2007 to 2009, Director of Transaction Support, Deputy Head of the Legal Division at Sistema
Financial Corporation. From July 2009 to July 2013, Deputy CEO for Legal and Property Issues
at PJSC Aeroflot. From July 2013 to November 2015, Deputy CEO for Sales and Property Issues
at PJSC Aeroflot. Since November 2015, CEO at Rossiya Airlines.
Does not own PJSC Aeroflot’s shares.
Vasiliy Sidorov Independent member of the Board of Directors, Head of the Audit Committee, member of the
Personnel and Remuneration Committee, and the Strategy Committee
Born on 2 February 1971 in Athens (Greece). In 1993, graduated from Moscow State Institute of
International Relations (MGIMO University) with a degree in International Public Law, and from
Wharton Business School of the University of Pennsylvania with a degree in Finance. From 1997
to 2000, Deputy CEO at Svyazinvest. From 2000 to 2003, First Vice-President at Sistema
Telecom. From 2003 to 2006, President at MTS. From 2006 to 2010, co-owner of Telecom
Express Group. Since 2010, Managing Partner at Euroatlantic Investments Ltd. Since June 2012,
members of the Board of Directors at Russian Railways. Since 2012, CEO at the Agency for
Recapitalisation of Infrastructure and Long-Term Assets.
Does not own PJSC Aeroflot’s shares.
Yury Slyusar Member of the Board of Directors, member of the Strategy Committee
Born on 20 July 1974 in Rostov-on-Don. In 1996, graduated from Lomonosov Moscow State
University with a degree in Law. In 2003, completed a post-graduate programme at the Academy
of National Economy under the Government of the Russian Federation. PhD in Economics. Until
2003, worked with various business entities. Since 2003, Commercial Director at Rostvertol
(Rostov-on-Don). In 2009, was appointed Assistant to the Minister of Industry and Trade of the
Russian Federation. In 2010, Director of the Aviation Industry Department at the Ministry of
Industry and Trade of the Russian Federation. In 2012, was appointed Deputy Minister of
Industry and Trade of the Russian Federation. Since January 2015, President at United Aircraft
Corporation.
Does not own PJSC Aeroflot’s shares.
Sergey
Chemezov
Member of the Board of Directors
Born on 20 August 1952 in Cheremkhovo (Irkutsk Region). Graduated from Irkutsk Institute of
National Economy, completed Advanced Courses at the Military Academy of the General Staff
of the Russian Armed Forces. Doctor of Economics, Professor, full member of the Academy of
Military Science. Started his career at Irkutsk Scientific and Research Institute for Rare and Non-
Ferrous Metals. Since 1980, worked at the Luch Research-Industrial Association. From 1983 to
1988, served as Head of the Luch Association representative office in East Germany. From 1988
to 1996, Deputy CEO at Sovintersport. From 1996 to 1999, Head of Foreign Economic Relations
at the Administrative Office of the Russian President. From 1999 to 2001, CEO at Promexport.
Since February 2001, First Deputy CEO at Rosoboronexport. From 2004 to 2007, CEO at
Rosoboronexport. Since December 2007, CEO at ROSTEC Corporation (a state corporation set
up to further the development, manufacture and export of hi-tech industrial products). Member of
the Bureau of the Supreme Council of United Russia Party. Chairman of the public organisation
“Russian Engineering Union”. President of the Russian Union of Engineering Employers. Head
of the Department of Military and Engineering Cooperation and High-Tech at Moscow State
Institute of International Relations (MGIMO University). Chairman of boards of directors at
Rosoboronexport, VSMPO-AVISMA Corporation, Kamaz, and Uralkali. Member of boards of
directors at United Aircraft Corporation, International Financial Club, and Alliance Rostec
AUTO BV Joint Venture. Member of supervisory boards at Rostec State Corporation, United
Rocket and Space Corporation, and Roscosmos. Mr Chemezov has received high government
awards and won a large number of other prestigious awards.
Does not own PJSC Aeroflot’s shares.
Executive Secretary of the Board of Directors
Aleksey Melekhin
Born in 1977. In 2001, graduated from Institute of Economics and Entrepreneurship. Obtained
his PhD degree from the Russian Presidential Academy of National Economy and Public
Administration. Mr Melekhin joined PJSC Aeroflot in 1998. He held a number of positions from
legal counsel to regulations drafting and alignment team of the Company’s Administration to
Corporate Governance Department Director.
He is currently responsible for the administrative and information support of the Company’s
Board of Directors and General Meeting of Shareholders, and supervises compliance by the
Company’s bodies and officers with corporate governance rules and procedures set forth by the
laws of the Russian Federation, the Company’s Articles of Association, and internal documents.
Does not own PJSC Aeroflot’s shares.
Changes in the membership of the Board of Directors in 2016
Marlen Manasov – stepped down from the Board of Directors as from 27 June 2016 by
resolution of the Annual General Meeting of Shareholders (Minutes No. 38 dated 30 June 2016).
Aleksey Germanovich – elected to the Board of Directors as from 27 June 2016 by resolution of
the Annual General Meeting of Shareholders (Minutes No. 38 dated 30 June 2016).
There were no other changes in the membership of PJSC Aeroflot’s Board of Directors in 2016.
Other members of the Board of Directors were re-elected at the 2016 AGM.
Board of Directors’ Performance Report for 2016
In 2016, PJSC Aeroflot’s Board of Directors held 18 meetings, including 9 meetings in person
and 9 meetings in absentia. The said meetings addressed over 180 items and passed over 440
resolutions on matters of the Board.
In its resolutions, the Board of Directors covers a number of priority areas to:
ensure flight safety and frequency;
determine Aeroflot Group’s strategy and identify priority lines of business;
build and maintain effective corporate controls and risk management;
map out a development strategy for Aeroflot Group’s aircraft fleet and route network;
improve the aircraft fleet composition through additions and aircraft mix optimisation;
improve operating, financial and marketing practices and methods through upgrades, innovation,
and implementation of best practices from global peers;
improve the performance of Aeroflot’s branches and representative offices both domestically and
internationally;
enforce higher standards for airport and inflight passenger services, expand the service mix and
improve customer experience;
promote cooperation with SkyTeam partners, use the membership to expand the Company’s
route network and boost the international flight performance;
promote strategic partnerships with airlines;
improve operational performance of subsidiaries and streamline the non-core asset structure to
cut unnecessary spending and increase investment returns;
develop and upgrade information technologies;
ensure information transparency (including investor relations and procurement);
develop and improve corporate policies.
Directors’ attendance at Board meetings in 2016
Board member Status Board of
Directors
Audit
Committee
Personnel and
Remuneration
Committee
Strategy
Committee
Kirill Androsov Chairman of the
Board of Directors 18(9)/18
Mikhail Alexeev Non-Executive
Director 18(12)/18 6(2)/6 7(4)/7
Aleksey
Germanovich* Independent Director 8(4)/8 3/3 3/3 3/3
Igor Kamenskoy Independent Director 18(10)/18 9(2)/9 6(1)/6 3/3
Marlen Manasov** Independent Director 10(5)/10 3(1)/3 4/4
Roman Pakhomov Non-Executive
Director 18(9)/18 9(1)/9 6(1)/6 7/7
Dmitry Peskov Non-Executive
Director 18(12)/18 5(1)/6 6(1)/7
Vitaly Saveliev Executive Director 18(9)/18
Dmitry Saprykin Non-Executive
Director 18(9)/18 6(3)/7
Vasiliy Sidorov Independent Director 18(9)/18 9/9 6(1)/6 7/7
Yury Slyusar Non-Executive
Director 18(13)/18 6(6)/7
Sergey Chemezov Non-Executive
Director 17(12)/18
Data format: the number of meetings attended by the member of the Board of Directors / the total number of
meetings held in 2016. Attendance through written opinions or questionnaires (for meetings held in absentia) is
shown in brackets.
*Member of the Board of Directors as from the Annual General Meeting of Shareholders held on 27 June 2016.
**Member of the Board of Directors up to the Annual General Meeting of Shareholders held on 27 June 2016.
Number of meetings held by the Board of Directors
Очные In person
Заочные In absentia
Matters discussed by the Board of Directors
Стратегия и инвестиции Strategy and investments
Бюджетное планирование и финансирование Budget planning and funding
Другие вопросы Other
Корпоративное управление Corporate Governance
Сделки с заинтересованностью Related-party transactions
Key matters discussed by the Board of Directors in 2016 Strategic management
and investment
activities
progress in implementation of Aeroflot Group’s Strategy;
Aeroflot Group’s Long-Term Development Programme update;
Aeroflot Group’s IT Strategy;
Aeroflot Group’s Investment Programme;
Aeroflot Group’s Innovative Development Programme;
PJSC Aeroflot’s branches and representative offices;
progress in implementation of PJSC Aeroflot’s marketing strategy.
119
79 9
311
9
119
14
20
16
2018
2012 2013 2014 2015 2016
Очные Заочные
7,0%
3,3%
5,0%
5,6%
9,3%
17,8%
15,7%
21,0%
18,0%
21,9%
11,9%
7,2%
5,0%
10,6%
7,9%
15,8%
30,1%
37,1%
32,9%
37,1%
47,5%
43,7%
31,9%
32,9%
23,8%
2012
2013
2014
2015
2016
Стратегия и инвестиции
Корпоративное управление
Бюджетное планирование и финансирование
Сделки с заинтересованностью
Другие вопросы
Budget planning and
funding
performance of Aeroflot Group’s consolidated budget KPIs;
PJSC Aeroflot’s budget for 2017;
PJSC Aeroflot’s budget for 2015;
annual accounting statements, including the Company’s income statement for the fiscal
year 2015;
opinions of PJSC Aeroflot’s auditors (under RAS and IFRS) for the fiscal year 2015;
materials and opinions of the Revision Committee and the Audit Committee of the Board
of Directors for the fiscal year 2015;
Aeroflot Group’s operational KPIs forecast for 2017;
distribution of the Company’s profit and loss for the fiscal year 2015;
Corporate Governance Dividend Policy of PJSC Aeroflot;
implementation of the Corporate Governance Code;
supervision of corporate governance practices;
KPIs for 2017;
incentive programme at PJSC Aeroflot;
remuneration payable to members of PJSC Aeroflot’s Board of Directors and Revision
Committee;
preparation for the next Annual General Meeting of Shareholders of PJSC Aeroflot;
PJSC Aeroflot’s internal documents;
shareholder and investor relations.
Related-party
transactions
approval of a number of PJSC Aeroflot’s related-party transactions.
Other flight safety at PJSC Aeroflot in 2015;
outcomes of Transaero bailout;
aircraft lease transactions;
enhancement of service offerings within Aeroflot Group;
procurement at PJSC Aeroflot.
Committees of the Board of Directors
To improve the effectiveness of resolutions passed by the Board of Directors, ensure more
detailed preliminary discussions of most important matters and prepare relevant
recommendations, PJSC Aeroflot has three dedicated Committees of the Board of Directors:
Audit Committee,
Personnel and Remuneration Committee, and
Strategy Committee.
The Board of Directors’ Committees are elected by the Board of Directors and act in compliance
with relevant Committee Regulations approved by the Company’s Board of Directors. The
Committees act as per the Board’s resolutions and action plans based on the Board’s action plan.
In 2016, the Board of Directors’ Committees held a total of 22 meetings, addressing matters
related to the operations of Aeroflot Group and submitting detailed recommendations and
proposals to the Company’s Board of Directors and Management Board.
Audit Committee’s Performance Report
The Audit Committee supervises the Company’s financial and business operations to protect
shareholder interests and ensure the growth of the Company’s assets. Coordinating with the
Company’s executive bodies, the Revision Committee, and the Internal Audit Department, the
Audit Committee prepares and submits for consideration by the Board of Directors
recommendations and proposals on matters of the Board.
In 2016, the Audit Committee held a total of nine meetings (in person). The Committee’s
meeting agendas were compiled in line with the Committee’s action plan approved by the first
post-election meeting, and reflected the instructions of the Board of Directors.
Key matters discussed in 2016:
performance of Aeroflot Group’s consolidated budget KPIs;
Aeroflot Group’s and PJSC Aeroflot’s budgets;
initiatives to reduce Aeroflot Group’s operating expenses;
financial hedging;
extending and restructuring of loans;
controls and risk management;
improvement of internal audit at Aeroflot Group;
auditor’s reports on the financial and business audit results;
reports on audits conducted by the Internal Audit Department;
reports on the results of analysis of the companies’ debt to PJSC Aeroflot;
PJSC Aeroflot’s key financial and business audit areas;
procurement;
aircraft sale transactions;
dividend policy;
shareholder and investor relations;
PJSC Aeroflot’s internal documents, including Operational Quality Guidelines of PJSC Aeroflot;
Aeroflot Group’s Risk Register; Aeroflot Group’s Risk Map; Aeroflot Group’s Investment
Programme; the Regulations on Procurement of Goods, Works, and Services; the Regulations on
the Internal Audit Department.
Changes in the membership of the Audit Committee in 2016
Committee membership
from January to June 2016
Committee membership
from September to December 2016
Vasiliy Sidorov – independent member of the Board
of Directors, Head of the Committee
Vasiliy Sidorov – independent member of the Board of
Directors, Head of the Committee
Igor Kamenskoy – independent member of the Board
of Directors
Aleksey Germanovich – independent member of the
Board of Directors
Roman Pakhomov – member of the Board of
Directors
Igor Kamenskoy – independent member of the Board
of Directors
Roman Pakhomov – member of the Board of Directors
Elected by resolution of the Board of Directors on
3 September 2015
Elected by resolution of the Board of Directors on
8 September 2016
Personnel and Remuneration Committee’s Performance Report
Personnel and Remuneration Committee promotes the development of the HR policy, supervises
matters concerning the Company’s organisational structure, selection and assessment of persons
appointed to the Company’s governing bodies, their remuneration, and the remuneration system.
In 2016, the Personnel and Remuneration Committee held a total of six meetings, including one
meeting held in absentia. The Committee’s meeting agendas were compiled in line with the
Committee’s action plan approved by the first post-election meeting, and reflected the
instructions of the Board of Directors.
Key matters discussed in 2016:
remunerations of members of the Board of Directors and the Revision Committee;
profile of the PJSC Aeroflot’s long-term incentive programme;
CEO and management KPIs;
Aeroflot Group’s Long-Term Development Programme KPIs;
assessment of the Board of Directors;
candidates and proposals on the members of the Board of Directors representing the interests of
the Russian Federation at PJSC Aeroflot’s Board of Directors in the corporate year 2017–2018;
the Company’s organisational structure;
PJSC Aeroflot’s internal documents, including The Regulations on PJSC Aeroflot’s Key
Performance Indicators; the Regulations on the Long-Term Incentive Programme; the
Regulations on Remuneration of Employees of PJSC Aeroflot out of the Net Profit for the Year;
the Policy on Exercising the Rights to PJSC Aeroflot’s Phantom Shares; the Regulations on the
Executive Secretary of the Board of Directors and the Board of Directors Office of
PJSC Aeroflot, the new version of the Regulations on the Personnel and Remuneration
Committee.
Changes in the membership of the Personnel and Remuneration Committee in 2016
Committee membership
from January to June 2016
Committee membership
from September to December 2016*
Igor Kamenskoy – independent member of the Board
of Directors, Head of the Committee
Igor Kamenskoy – independent member of the Board of
Directors, Head of the Committee
Mikhail Alekseev – member of the Board of Directors Mikhail Alekseev – member of the Board of Directors
Marlen Manasov – independent member of the Board
of Directors
Aleksey Germanovich – independent member of the
Board of Directors
Vasiliy Sidorov – independent member of the Board
of Directors
Vasiliy Sidorov – independent member of the Board of
Directors
Roman Pakhomov – member of the Board of
Directors Roman Pakhomov – member of the Board of Directors
Dmitry Peskov – member of the Board of Directors Dmitry Peskov – member of the Board of Directors
Elected by resolution of the Board of Directors on
3 September 2015
Elected by resolution of the Board of Directors on
8 September 2016
*By Resolution of the Board of Directors dated 22 December 2016 (Minutes No. 7), Mikhail Alekseev was removed
from the Personnel and Remuneration Committee (with his consent).
In December 2016, the number of members of the Personnel and Remuneration Committed was
reduced from six to five members to comply with the recommendations of the Corporate
Governance Code and the Rules of the Moscow Stock Exchange on the undisputed majority of
independent directors on the Committee.
Strategy Committee’s Performance Report
The Strategy Committee was set up to prepare recommendations and proposals to the Board of
Directors, enhancing the Company’s performance and improving its long-term strategy.
In 2016, the Strategy Committee held a total of seven meetings (in person). The Committee’s
meeting agendas were compiled in line with the Committee’s action plan approved by the first
post-election meeting, and reflected the instructions of the Board of Directors.
Key matters discussed in 2016:
implementation of Aeroflot Group’s Strategy;
implementation of Aeroflot Group’s marketing strategy;
Aeroflot Group’s Long-Term Development Programme update;
audit the interim results of Aeroflot Group’s Long-Term Development Programme;
strategic partnerships with airlines;
Aeroflot Group’s IT Strategy;
enhancement of Aeroflot Group’s subsidiary airlines;
enhancement of maintenance and repair operators within Aeroflot Group;
results of PJSC Aeroflot’s Innovative Development Programme;
aircraft fleet expansion.
Changes in the membership of the Strategy Committee in 2016
Committee membership
from January to June 2016
Committee membership
from September to December 2016
Roman Pakhomov – member of the Board of
Directors, Head of the Committee
Roman Pakhomov – member of the Board of Directors,
Head of the Committee
Mikhail Alekseev – member of the Board of Directors Mikhail Alekseev – member of the Board of Directors
Marlen Manasov – independent member of the Board
of Directors
Aleksey Germanovich – independent member of the
Board of Directors
Dmitry Peskov – member of the Board of Directors Igor Kamenskoy – independent member of the Board of
Directors, Head of the Committee
Dmitry Saprykin – member of the Board of Directors Dmitry Peskov – member of the Board of Directors
Vasiliy Sidorov – independent member of the Board
of Directors Dmitry Saprykin – member of the Board of Directors
Yury Slyusar – member of the Board of Directors Vasiliy Sidorov – independent member of the Board of
Directors
Giorgio Callegari – member of the Management
Board, Deputy CEO for Strategy and Alliances Yury Slyusar – member of the Board of Directors
Shamil Kurmashov – member of the Management
Board, Deputy CEO for Commerce and Finance
Giorgio Callegari – member of the Management Board,
Deputy CEO for Strategy and Alliances
Shamil Kurmashov – member of the Management
Board, Deputy CEO for Commerce and Finance
Elected by resolution of the Board of Directors on
3 September 2015
Elected by resolution of the Board of Directors on
8 September 2016
Management Board
PJSC Aeroflot’s sole executive body, the CEO, and collective executive body, the Management
Board, are charged with running the Company’s ongoing operations. The executive bodies report
directly to the Board of Directors and the General Meeting of Shareholders. The CEO also acts
as the Chairman of the Management Board. The Board of Directors is authorised to appoint
members of the Management Board, and remove them from office before the end of their term.
The Management Board acts in compliance with PJSC Aeroflot’s Articles of Association and
Regulations on the Management Board as approved by the General Meeting of Shareholders of
PJSC Aeroflot.
In the reporting period, members of the Management Board has no transactions with
PJSC Aeroflot’s shares.
Membership of the Management Board as at 31 December 2016
Vitaly Saveliev Chairman of the Management Board, CEO
Born in 1954. Graduated from Kalinin Leningrad Polytechnic Institute and Togliatti Leningrad
Institute of Engineering and Economics. PhD in Economics.
From 1990 to 1993, CEO at the US-Soviet Union joint venture DialogInvest.
From 1993 to 1995, Chairman of the Management Board at Rossiya Bank.
From 1995 to 2001, Chairman of the Management Board at Menatep Saint Petersburg.
From 2001 to 2002, Deputy Chairman of the Management Board at Gazprom.
From 2002 to 2004, Vice-President at GROS United Company, Financial and IT Advisor to CEO
at Svyazinvest.
From 2004 to 2007, Deputy Minister of Economic Development and Trade of the Russian
Federation.
From 2007 to 2009, First Vice-President and Head of Telecom Asset Development at Sistema
Telecom, First Vice-President and Head of Telecom Assets at Sistema Financial Corporation.
Since 2009, CEO, Chairman of the Management Board at PJSC Aeroflot.
Holds 0.121% of PJSC Aeroflot’s share capital.
Vladimir
Antonov
First Deputy CEO for Aviation Safety
Born in 1953. Graduated from Moscow Railway Engineering Institute.
From 1977 to 1995, served in the armed forces.
From 1995 to 2011, Deputy CEO for Economic and Aviation Safety, Deputy CEO for Aviation
Safety, Deputy CEO for Aviation and Operating Safety, and First Deputy CEO for Operations at
PJSC Aeroflot.
Since 2011, First Deputy CEO for Aviation Safety at PJSC Aeroflot.
Holds 0.000425% of PJSC Aeroflot’s share capital.
Vasily Avilov Deputy CEO for Administrative Management
Born in 1954. Graduated from Dzerzhinsky Higher Naval Engineering College.
From 1997 to 2013, Head of Administration, Director of the Department of General Affairs,
Deputy CEO – Executive Director at PJSC Aeroflot.
Since 2013, Deputy CEO for Administrative Management at PJSC Aeroflot.
Holds 0.0000002% of PJSC Aeroflot’s share capital.
Vladimir
Alexandrov
Deputy CEO for Legal and Property Matters
Born in 1984. In 2005, graduated from Kutafin Moscow State Law University; in 2016,
graduated from the Russian Presidential Academy of National Economy and Public
Administration (RANEPA).
Held senior positions at the Prosecutor General’s Office of the Russian Federation and the
Investigative Committee of the Russian Federation.
From 2013 to 2015, Deputy Head of the Legal Support Section of the Legal Department, Deputy
Director of Legal Department, Advisor to CEO for government relations.
In August 2015, he was appointed Legal Department Director at PJSC Aeroflot.
Since 1 July 2016, Deputy CEO for Legal and Property Matters at PJSC Aeroflot. Awarded a
Certificate of Gratitude from the Minister of Transport of the Russian Federation.
Does not own PJSC Aeroflot’s shares.
Kirill
Bogdanov
Deputy CEO for IT
Born in 1963. Graduated from Kalinin Leningrad Polytechnic Institute.
From 2002 to 2004, Advisor to Vice-President at United Company GROS.
From 2004 to 2007, Executive Director at RAMAX International.
From 2007 to 2009, Director of Development and Control at Telecom Assets at Sistema Financial
Corporation.
Since 2009, Deputy Head of IT at PJSC Aeroflot, Advisor to the CEO, Deputy CEO for IT.
Does not own PJSC Aeroflot’s shares.
Vadim
Zingman
Deputy CEO for Customer Service
Born in 1970. Graduated from St Petersburg University of Economics and Finance. PhD in
Economics.
From 2001 to 2008, Deputy Director of the Department for Government Regulation of Foreign
Trade at the Ministry of Economic Development and Trade of the Russian Federation.
From 2008 to 2009, Director of Government Relations at Sistema Financial Corporation.
From 2009 to 2012, Advisor to the CEO, Deputy CEO for Customer Relations and Deputy CEO
for Operations and Quality Management at PJSC Aeroflot.
Since 2012, Deputy CEO for Customer Service at PJSC Aeroflot.
Does not own PJSC Aeroflot’s shares.
Giorgio
Callegari
Deputy CEO for Strategy and Alliances
Born in 1959. Graduated from Turin Polytechnic University (Italy).
From 1986 to 1989, VP of Sales, member of the Board of Directors and the Executive Committee
at Malan Viaggi.
From 1990 to 2011, Sales Manager, Vice-President for Sales, Vice-President for Business
Development, Vice-President for Alliances, Business Development and International Relations,
Executive Vice-President for Alliances and Strategies at Alitalia.
Since 2011, Deputy CEO for Strategy and Alliances at PJSC Aeroflot.
Does not own PJSC Aeroflot’s shares.
Shamil
Kurmashov
Deputy CEO for Commerce and Finance
Born in 1978. Graduated from Moscow State Institute of International Relations (MGIMO
University). PhD in Economics.
From 2004 to 2007, Deputy CEO for Finance and Investment at Sistema Telecom.
From 2007 to 2009, Director of Investments, Deputy Head of the Finance and Investment
Division at Sistema Financial Corporation.
From 2009 to 2013, Advisor to the CEO, Deputy CEO for Finance and Investment and Deputy
CEO for Commerce and Finance at PJSC Aeroflot.
From 2013 to 2016, Deputy CEO for Finance and Network and Revenue Management at
PJSC Aeroflot.
Since 2016, Deputy CEO for Commerce and Finance at PJSC Aeroflot.
Does not own PJSC Aeroflot’s shares.
Georgy
Matveev
Director of Flight Safety Management
Born in 1953. Graduated from the Academy of Civil Aviation. PhD in Technical Science.
From 2001 to 2012, Deputy Chief Flight Safety Inspector and Deputy Director of Flight Safety
Management at PJSC Aeroflot.
Since 2012, Director of Flight Safety Management at PJSC Aeroflot.
Does not own PJSC Aeroflot’s shares.
Igor Parakhin Deputy CEO and Technical Director
Born in 1961. Graduated from Moscow Institute of Civil Aviation Engineers.
From 2001 to 2011, Head of Programme, Deputy Director of the Aviabusiness Higher
Commercial School.
Since 2011, Acting Technical Director, Technical Director, Deputy CEO and Technical Director
at PJSC Aeroflot.
Holds 0.000007% of PJSC Aeroflot’s share capital.
Igor Chalik Deputy CEO and Commander of Flight Operations
Born in 1957. Graduated from Aktyubinsk Higher School of Civil Aviation.
From 2003 to 2008, Commander of the A320 Air Squadron at PJSC Aeroflot.
From 2008 to 2010, Commander of the A330 Air Squadron at PJSC Aeroflot.
Since 2011, Deputy CEO and Commander of Flight Operations at PJSC Aeroflot.
Recipient of the honorary title of the Honoured Pilot of the Russian Federation, the Medal of
Nesterov, and awards of government agencies.
Holds 0.000117% of PJSC Aeroflot’s share capital.
Changes in the membership of the Management Board in 2016
As from 24 June 2016, Vladimir Alexandrov, Deputy CEO for Legal and Property Matters, was
appointed to PJSC Aeroflot’s Management Board. As from the same date, Nikolay Altukhov,
Deputy CEO for Sales and Property Management, stepped down from PJSC Aeroflot’s
Management Board.
Management Board’s Performance Report for 2016
In 2016, the Management Board of PJSC Aeroflot held a total of 35 meetings, including
5 meetings in absentia.
Key matters discussed in 2016:
flight safety;
implementation of Aeroflot Group’s Strategy;
Aeroflot Group’s Long-Term Development Programme update;
route network development, to factor in handling capacity limits at the South Terminal Complex
(STC);
performance of Aeroflot Group’s consolidated budget KPIs;
review of reporting documents (annual accounting statements including PJSC Aeroflot’s income
statement for the fiscal year 2015, annual report);
opinions of PJSC Aeroflot’s auditors (under RAS and IFRS) for the fiscal year 2016;
Aeroflot Group’s operational KPIs forecast;
Aeroflot Group’s Investment Programme;
PJSC Aeroflot’s incentive programme;
outcomes of Transaero bailout;
changes in trade receivables and performance of its reduction measures;
results of the airline’s quality audit by SkyTrax and initiatives to improve PJSC Aeroflot’s
service offering;
PJSC Aeroflot’s credit and documentary credit facilities;
results of PJSC Aeroflot’s Innovative Development Programme;
Aeroflot Bonus performance;
opening and closing of representative offices;
results of the assessment of Aeroflot Group’s Net Promoter Score (based on the NPS study);
procurement at PJSC Aeroflot;
PJSC Aeroflot’s cooperation with aviation schools;
shareholder and investor relations;
charity projects for children’s homes;
sponsorship initiatives;
provision of free flights to citizens eligible for such support under the applicable laws of the
Russian Federation;
enhancement of Aeroflot Group’s IT;
roadmap for anti-corruption risk management and internal control processes.
Committees
In pursuit of recommendations and proposals aiming to boost the Company’s business
efficiency, PJSC Aeroflot set up the Committee for Finance and Investments and the Committee
for Innovative Development.
Committee for Finance and Investments
The Committee for Finance and Investments is a permanent collective advisory body of
PJSC Aeroflot. In its operation, the Committee is guided by the applicable laws of the Russian
Federation, resolutions of PJSC Aeroflot’s Board of Directors, other regulations, rules and
procedures of the Company, and the Regulations on the Committee for Finance and Investments.
The Committee is charged, among other things, with monitoring progress on the Company’s
ongoing investment projects, providing expert reviews of any such projects, passing resolutions
on suspension of investment projects, determining their efficiency assessment criteria and
drafting proposals on Aeroflot Group’s financial, economic, and marketing policies.
In 2016, the Committee for Finance and Investments held a total of 20 meetings.
Membership of the Committee for Innovative Development as at 31 December 2016
Shamil Kurmashov – Deputy CEO for Commerce and Finance, Chairman of the Committee
Vadim Zingman – Deputy CEO for Customer Service
Giorgio Callegari – Deputy CEO for Strategy and Alliances
Svetlana Arkhipova – Director of the Department for Financial Planning and Analysis
Ilya Alexandrovsky – Director of the Sales Department
Alexander Noskov – Director of the Economic Security Department
Andrey Chikhanchin – Director of the Corporate Finance Department
Evgeny Zenchenko – Director of the Corporate Strategy Department
Dmitry Galkin – Advisor to the Deputy CEO for Commerce and Finance
Andrey Polozov-
Yablonsky
– Advisor to the CEO, Director on Innovations
Committee for Innovative Development
The Committee for Innovative Development is a permanent collective advisory body of
PJSC Aeroflot’s Management Board. It was set up to provide recommendations and proposals
for the Management Board to boost the Company’s business efficiency.
In its operation, the Committee is guided by the laws of the Russian Federation, resolutions of
PJSC Aeroflot’s Board of Directors and Management Board, other regulations, rules and
procedures of the Company, and the Regulations on the Committee for Innovative Development.
The Committee is charged with reviewing innovative projects and providing assessment of their
efficiency, monitoring progress on the ongoing innovative projects, passing resolutions on
project suspension, setting out requirements for the design and quality of innovative
development materials submitted to the Management Board, and recommending projects for
implementation.
In 2016, the Committee for Innovative Development held a total of two meetings.
Membership of the Committee for Innovative Development as at 31 December 2016
Vadim Zingman – Deputy CEO for Customer Service, Chairman of the Committee
Andrey Polozov-
Yablonsky
– Advisor to the CEO, Director on Innovations, Deputy Chairman of the Committee
Sergey Krylov – Director of the IT Project Department
Alexey Korenevsky – Deputy Director for Flight Training and Training Methodology of the Flight Operations
Department
Azat Zaripov – Deputy Director of the Aviation Security Department
Dmitry Saksonov – Head of Strategic Projects Coordination at the Corporate Strategy Department
Ekaterina Kryshkina – Advisor to the Deputy CEO for Commerce and Finance
Alexander Fadeev – Advisor to the Deputy CEO and Technical Director
Remuneration for members of the Board of Directors and the management
The Company has in place a structured remuneration system for members of the governing
bodies designed to link the amount of bonus payments to the achievement of short-term targets,
and align the interests of the Company’s management and its shareholders. Short-term incentive
is provided in the form of cash bonuses, while long-term incentive implies payments based on
share capitalisation benchmarked against different indicators.
Remuneration for members of the Board of Directors
Guidelines for Board remuneration calculation and payouts are set forth in the Regulations on
Remuneration and Compensation Payments to the Members of the Board of Directors of
PJSC Aeroflot, in line with the Federal Law On Joint-Stock Companies, other applicable laws of
the Russian Federation and the Company’s internal documents. These Regulations were
approved by PJSC Aeroflot’s AGM on 27 June 2016. One of the key amendments was the
adoption of the July to June corporate year, in line with the Board of Directors’ election cycle.
The Board remuneration framework comprises fixed and variable components. The size of the
fixed component depends on involvement of members of PJSC Aeroflot’s Board of Directors in
its activities and includes the fixed base pay and additional payments for discharging extra duties
The variable remuneration component is directly linked to the Company’s market capitalisation
growth on the Moscow Exchange as benchmarked against MICEX Index and market prices of
shares issued by international carriers.
The Long-Term Incentive Programme for 1 January 2016 – 30 June 2019 was approved in 2016
to replace the previous Stock Option Plan for 2013–2015. The total pool of the long-term
incentive programme for Board members is equivalent to 0.5% of PJSC Aeroflot’s market
capitalisation growth over the lifetime of the Long-Term Incentive Programme. The 2016–2019
Long-Term Incentive Programme draws heavily on the following underlying metrics:
PJSC Aeroflot’s market capitalisation growth in the relevant year (maximum weight of 1/3),
PJSC Aeroflot’s rank in the Top 5 market capitalisation growth peer chart in the relevant year
(maximum weight of 1/3),
PJSC Aeroflot’s market capitalisation performance against MICEX Index (maximum weight of
1/3).
50% of the remuneration amount accrued for the relevant corporate year is paid out to the
members of the Board of Directors simultaneously with the principle remuneration for the
relevant year. 50% of the remuneration amount accrued for the relevant year is not paid out, but
set aside until the end of the Stock Option Plan lifetime (June 2019), added together and paid as
a lump sum upon resolution of the General Meeting of the Company’s Shareholders, subject to
the end capitalisation of at least RUB 100 billion. Calculations use the high water mark principle
for capitalisation values, i.e. if capitalisation goes below the high water mark in the current
interim period, the capitalisation growth base for the next interim period shall be the peak
capitalisation value that was reached in the past period.
Management remuneration
The remuneration system designed for the management and the other staff enables the Company
to engage and retain highly qualified professionals. Remuneration for management is comprised
of the fixed component (official salary) and the variable component (current bonuses and long-
term incentives).
Current bonuses depend on the Group-wide performance and are calculated in accordance with
the Company’s KPI-Based Employee Bonus System. The KPI-Based Employee Bonus System is
defined by the Regulations on Bonus Payments to the Managers and Specialists of
PJSC Aeroflot (approved on 2 February 2011 and amended on 22 December 2016). The
Regulations stipulate that the bonus component of the management compensation amount shall
depend on their quarterly and annual performance against the KPIs approved for the relevant
reporting period.
To provide for long-term incentives for PJSC Aeroflot’s management, the Long-Term Incentive
Programme for 1 January 2016 to 30 June 2019 was approved by the Board of Directors on
26 May 2016 and updated by resolution of the Board of Directors of PJSC Aeroflot on
2 February 2017. The Programme covered the CEO, members of the Management Board,
department heads, Chief Accountant and other employees of the Company, on the CEO’s
resolution. The total pool of the Long-Term Management Incentive Programme is equivalent to
3.0% of PJSC Aeroflot’s market capitalisation growth over the lifetime of the Long-Term
Incentive Programme. The 2016–2019 Long-Term Management Incentive Programme draws
heavily on the following underlying metrics:
PJSC Aeroflot’s market capitalisation growth in each relevant interim period;
PJSC Aeroflot’s rank in the Top 5 market capitalisation growth peer chart in each relevant
interim period;
customer satisfaction (NPS, Net Promoter Score) with PJSC Aeroflot’s offering in each relevant
interim period;
achievement of the capitalisation target following the Long-Term Incentive Programme.
Remuneration under the Programme is paid based on the same principles as for the long-term
incentive programme for members of the Board of Directors (50% of the remuneration amount is
paid out on an annual basis, and the remaining 50% are set aside until the end of the
Programme).
KPI system
The list and weights of KPIs for the CEO of PJSC Aeroflot for 2016, which form part of the
corporate KPI framework, were approved by the Board of Directors of PJSC Aeroflot on
29 October 2015 (Minutes No. 5) and were updated by the Resolutions of the Board of Directors
of PJSC Aeroflot dated 28 April 2016 (Minutes No. 15) and dated 8 September 2016
(Minutes No. 2). The 2016 KPI targets for the CEO of PJSC Aeroflot were approved by the
Board of Directors of PJSC Aeroflot on 24 December 2015 (Minutes No. 9) and updated for
2H 2016 by the Resolution of the Board of Directors of PJSC Aeroflot dated 27 October 2016
(Minutes No. 4).
From 2015 onward, the scope of the CEO’s KPI list (with KPI weights and targets) is fully in
line with the KPIs of our Long-Term Development Programme and extended to include all
members of the PJSC Aeroflot’s Management Board to provide incentives for the management
to pursue Group-wide corporate objectives and improve the Group’s overall performance. The
KPIs for other employees of PJSC Aeroflot were approved by the CEO’s Order No. 459 dated
30 December 2015 and updated for 2H 2016 by Order No. 439 dated 23 December 2016.
In pursuance of federal executive authorities’ instructions and taking into account the air
transportation market environment, in 2016, adjustments/updates were made to:
Aeroflot Group’s budget for 2016;
the list, weights and targets of the KPIs within Aeroflot Group’s Long-Term Development
Programme, and the 2016 KPIs for PJSC Aeroflot’s CEO.
Pursuant to the directives of the Russian Government, PJSC Aeroflot’s KPI system embraces
financial, economic and industry specific indicators, coupled with bonus disqualification
indicators, including:
mandatory financial and economic KPIs – Total Shareholder Return (TSR) (for Aeroflot Group)
and ROIC (for Aeroflot Group) – in line with the KPI Guidelines (Letter of the Federal Agency
for State Property Management No. OD-11/22160 dated 26 May 2014);
Overall Productivity KPI (Aeroflot Group) – in line with the Russian Government’s Directive
No. 6362p-P13 dated 24 October 2013;
Share of Supplies from Small and Medium-Sized Businesses, Efficient Energy Use, and
Environmental Friendliness KPIs were incorporated into Aeroflot’s KPI System and KPI lists for
relevant department heads – in line with the Russian Government’s Directive No. 6362p-P13
dated 24 October 2013;
Integrated Innovation Key Performance Indicator (IIKPI) (for Aeroflot Group) – in line with
Letter of the Deputy Minister of Economic Development of the Russian Federation No. 3142-
OF/D06 dated 24 February 2012 and the Russian Government’s Directive No. 1472p-P13 dated
3 March 2016;
Investment Programme Efficiency KPI (for Aeroflot Group) – in line with Directive of the
Federal Agency for State Property Management No. PF-11/35029 dated 14 August 2014;
KPI used to cancel the management’s bonus (disqualification indicator) – PJSC Aeroflot’s Flight
Safety;
CASK Reduction KPI – in line with the Russian Government’s Directive No. 2303p-P13 dated
16 April 2015 and Directive No. 4750p-P13 dated 4 July 2016;
Share of State-Subsidised Funding in Total Funding Secured KPI – in line with paragraph 2 of
Instruction of the Russian Prime Minister Dmitry Medvedev No. AD- P36-4617 dated 11 July
2015 on including the indicator showing investment capital raised in the private equity market.
The list and weights of KPIs for the CEO of PJSC Aeroflot for 2016 were approved by the
Company’s Board of Directors on 29 October 2015 (Minutes No. 5) and were updated by the
Resolutions of the Board of Directors dated 28 April 2016 (Minutes No. 15) and dated
8 September 2016 (Minutes No. 2). The 2016 KPI targets for the CEO of PJSC Aeroflot were
approved by the Board of Directors of PJSC Aeroflot on 24 December 2015 (Minutes No. 9) and
updated for 2H 2016 by the Resolution of the Board of Directors of PJSC Aeroflot dated
27 October 2016 (Minutes No. 4).
Target KPIs for PJSC Aeroflot’s CEO for 2016*
KPI* Unit
2015 2016
Reasons for inconsistencies (2016A vs 2016P)
Weight Plan Actual Performance
to plan Weight Plan Actual
Performance to
plan
Financial and economic (a total of 7 KPIs, weight of 60%)
Total Shareholder Return (TSR) % 5.0% 0.0% 68.9% 1,478.0% 10.0% 89.7% 176% 196.2%
Performance of Aeroflot Group’s shares above the
market driven by strong results exceeding investor
expectations
Return on Invested Capital
(ROIC) % 15.0% 15.7% 18.5% 117.8% 20.0% 17.3% 21.1% 122.0% Performance above target net profit
Long-Term Debt / EBITDAR – 5.0% 2.3 1.7 126.1% 5.0% 1.3 1.0 123.1% Early repayment of loans and higher operating profit
Innovative Development
Programmes’ Efficiency
renamed to
Integrated Innovation Key
Performance Indicator (IIKPI)
% 5.0% 80% 95% 118.8% 10.0% 80% 96% 119.7%
Praise by the Interdepartmental Committee for
Technological Development of the Presidium of the
Council under the Russian Federation President for high
quality development/implementation of PJSC Aeroflot’s
Innovative Development Programme
Investment Programme
Efficiency – 5.0% 3.8 8.7 228.9% 5.0% 6.05 10.22 168.9%
2017 EBITDA growth in line with the forecast due to,
among other things, high returns on the 2016 investment
projects and lower capex
CASK Reduction % N/A 5.0% 2.0% 2.0% 100.0%**
Share of State-Subsidised
Funding in Total Funding
Secured
% N/A 5.0% 0% 0% 100.0%
Industry-specific indicators, including the bonus non-payment (disqualification) indicator (a total of four KPIs, weight of 40%)
Punctuality % 15.0% 87.0% 91.4% 105.1% 5.0% 86.0% 89.2% 103.7%
Aeroflot Group’s initiatives to improve punctuality of
aircraft departures/arrivals from/to base/non-base
airports
PJSC Aeroflot’s Flight Safety % 20.0% 99.957% 99.978% 104.9% 15.0% 99.957% 99.975% 104.2% Effective flight safety management
Passenger Load Factor % 10.0% 77.1% 78.3% 101.6% 10.0% 81.1% 81.5 100.5%
Higher utilisation of aircraft fleet capacity due to
redistribution of leisure passenger flows to domestic
destinations and higher demand for domestic services
KPI* Unit
2015 2016
Reasons for inconsistencies (2016A vs 2016P)
Weight Plan Actual Performance
to plan Weight Plan Actual
Performance to
plan
Overall Productivity
million
ASK
per
person
15.0% 4.066 4.060 99.8% 10.0% 3.951*** 4.010 101.5%
Higher productivity levels across Aeroflot Group
supported by budget-controlled growth of work loads
and headcount growth optimisation
**2015 and 2016 KPIs are calculated for Aeroflot Group, except for PJSC Aeroflot’s Flight Safety KPI.
** The cost-cutting instruction of the Board of Directors of PJSC Aeroflot for 2016, dated 25 August 2016, and issued in pursuance of Russian Government Directive No. 4750p-P13
dated 4 July 2016, was deemed actually implemented by resolution of the Board of Directors of PJSC Aeroflot.
*** Overall Productivity KPI target does not provide for higher productivity due to the social commitment to take on former Transaero employees. Excluding Transaero staff, the
overall productivity growth will stand at 7%.
In 2016, the actual KPI values of PJSC Aeroflot’s CEO exceeded targets as a result of
implementation of initiatives to reduce costs and enhance overall productivity, as well as efficient
operational management.
The list and weights of KPIs for the CEO of PJSC Aeroflot were approved by the Board of
Directors of PJSC Aeroflot on 24 November 2016 (Minutes No. 9), and the KPI targets for the
CEO of PJSC Aeroflot were approved by the Board of Directors of PJSC Aeroflot on
22 December 2016 (Minutes No. 7).
Target KPIs for PJSC Aeroflot’s CEO for 2017
KPI* Weight Unit Plan
Total Shareholder Return (TSR) 10.0% % 13.5%**
Return on Invested Capital (ROIC) 20.0% % 14.9%
Long-Term Debt / EBITDAR 5.0% – 0.93
Integrated Innovation Key Performance Indicator (IIKPI) 10.0% % 80%
Investment Programme Efficiency 5.0% – 5.22
CASK 5.0% cent per
ASK 4.9***
Share of State-Subsidised Funding in Total Funding Secured 5.0% % 0%
Punctuality 5.0% % 87.0%
PJSC Aeroflot’s Flight Safety 15.0% % 99.957%
Passenger Load Factor 10.0% % 80.0%
Overall Productivity**** 10.0%
million
ASK
per person
4.235
*All KPIs calculated for Aeroflot Group except for PJSC Aeroflot’s Flight Safety.
**The target value assumes 50% of the net profit for 2016 distributed as dividends.
***The target value of 4.9 cent per ASK (the lowest value achieved by Aeroflot Group) is determined in line with
Guidelines for Cost Saving Estimates issued by Federal Agency for State Property Management (Order No. 90 dated
10 March 2016).
****The Overall Productivity target (for Aeroflot Group) is proposed to be +5% of the estimated actual value for
2016, in line with instructions issued by federal executive authorities. The Group’s approved 2017 consolidated
budget for Aeroflot Group provides for more aggressive growth in overall productivity, at about 7%.
The 2017 KPIs for PJSC Aeroflot’s CEO reflecting PJSC Aeroflot’s KPI system were amended
versus 2016 to replace the CASK Reduction KPI (for Aeroflot Group) with the CASK KPI (for
Aeroflot Group). Aeroflot Group optimised its operations to achieve the Group’s CASK target
and provide for average annual cost savings of 10% since 2011. Aeroflot Group ranks first among
peers by cost savings.
Remuneration for the Board of Directors and the Management Board in 2016
The Annual General Meeting of Shareholders held on 27 June 2016 resolved to pay members of
PJSC Aeroflot’s Board of Directors the total remuneration of RUB 44,876,254 for 2015, with
additional RUB 24,744,515 paid under the Stock Option Plan (in 2015, the remuneration
amounted to RUB 23,603,280 with no payments under the Stock Option Plan). In 2015,
PJSC Aeroflot’s market capitalisation grew by 68.9% (following the calculation method
applicable for the Plan) and ranked first among peers by growth rate. The upward trend continued
in 2016, with capitalisation growing by 172.5% – the highest growth among airlines used as
benchmarks for the incentive programme.
Remuneration for members of PJSC Aeroflot’s Board of Directors paid in 2016
Member of the Board of Directors Remuneration, RUB Remuneration under the Stock
Option Plan, RUB
Kirill Androsov 4,698,178 3,432,907
Mikhail Alekseev 3,958,785 2,492,174
Igor Kogan 3,123,482 1,429,412
Igor Kamenskoy 4,428,482 3,089,771
Marlen Manasov 3,958,785 2,492,173
Roman Pakhomov 4,453,482 3,121,579
Dmitry Peskov 3,958,785 2,492,174
Vitaly Saveliev 3,618,907 –
Dmitry Saprykin 3,808,785 –
Vasiliy Sidorov 4,249,798 2,862,430
Yury Slyusar 910,000 1,157,798
Sergey Chemezov 3,708,785 2,174,097
Total 44,876,254 24,744,515
The total remuneration accrued to members of PJSC Aeroflot’s Management Board for 2016
stood at RUB 598,825,846 (RUB 362,594,270 in 2015).
Remuneration for members of PJSC Aeroflot’s Management Board accrued in 2016
Remuneration type Amount, RUB
Salary and additional compensations 365,181,962
Bonuses 233,643,884
Total 598,825,846
Directors and Officers Liability Insurance
As part of its efforts to provide insurance protection, PJSC Aeroflot has signed an agreement for
liability insurance of the Company’s directors and officers, as well as representatives of
PJSC Aeroflot on governing bodies of its subsidiaries, providing for reimbursement for loss
caused to third parties, arising from claims filed by third parties against the insured due to their
wrongful acts committed in their management roles. A securities claim filed against the Company
also constitutes an insured event.
The amount of cover is USD 100 million per claim and in total. The insurance period is one year.
The total insurance premium is USD 99,000.
Regulation of possible conflicts of interest within PJSC Aeroflot’s governing bodies
Conflicts of interest at PJSC Aeroflot are regulated by the following documents:
Corporate Conduct Code of PJSC Aeroflot;
Procedure for reporting to the employer on personal interest that leads or may lead to a conflict of
interest;
Aeroflot Group’s Anti-Corruption Policy.
Internal Control and Audit
Aeroflot Group has in place a centralised internal audit function, headed by the Director of the
Internal Audit Department who functionally reports to the Board of Directors of PJSC Aeroflot
and to the Audit Committee of the Board of Directors.
Depending on the scale of their business and related risks, the Company’s controlled entities
arrange for internal audit to be conducted by either PJSC Aeroflot’s Internal Audit Department or
the internal audit unit or permanent internal auditor of their own. Heads of such units and internal
auditors of controlled entities functionally report to the Director of the Internal Audit Department
of PJSC Aeroflot.
The internal control systems are designed to maximise the Aeroflot Group’s transparency,
economic efficiency, and compliance with the applicable laws.
Audit Committee and its role
The Board of Directors of PJSC Aeroflot approves internal documents regulating its general
policy on risk management and internal controls and establishes principles of and approaches to
the risk management and internal control system within PJSC Aeroflot.
The Audit Committee of PJSC Aeroflot’s Board of Directors enhances supervision over financial
and business operations to optimise capex, protect shareholder interests, and ensure the growth of
PJSC Aeroflot’s assets.
Coordinating with the PJSC Aeroflot’s executive bodies, the Revision Committee and the
Internal Audit Department, the Audit Committee prepares and submits for consideration by the
Board of Directors recommendations and proposals to:
develop and provide for the implementation of the financial and business plan;
establish and provide for compliance with effective internal controls;
provide for effective and transparent governance at PJSC Aeroflot, including prevention and
termination of abuse by executive bodies and officers;
prevent, identify, and limit conditions giving rise to financial and operating risks;
provide for reliability of financial data used or disclosed by PJSC Aeroflot;
recommendations and proposals on other matters, as resolved by the Board of Directors of
PJSC Aeroflot.
Matters concerning assessment of risk management and internal controls based on the reports by
the Company’s Internal Audit Department are regularly discussed by the Audit Committee of the
Board of Directors. When conducting audits, the Internal Audit Department draws conclusions on
the performance of the risk management and internal controls for each audited entity. To further
improve risk management across key business processes within PJSC Aeroflot, the Audit
Committee of the Board of Directors also receives regular reports on the Company’s key risks.
PJSC Aeroflot has in place a practice of confidential reporting to the Board of Directors (the
Internal Audit Department), its corporate Hotline. The Hotline functions on the principles of
confidentiality and anonymity. All received reports are reviewed by the Internal Audit
Department.
Results of internal and external audit assessment by the Audit Committee for 2016
In 2016, the Audit Committee of the Company’s Board of Directors reviewed, on a quarterly
basis, the day-to-day operations of the Internal Audit Department and the results of conducted
audits. The 2016 action plan of the Internal Audit Department was approved by the Audit
Committee. The Director of the Internal Audit Department held regular meetings with the Audit
Committee. The Committee reviewed, approved, and gave a positive assessment of the Internal
Audit Department’s performance in 2016.
In 2016, the Company also performed internal assessment of its internal audit function quality,
supported by PricewaterhouseCoopers.
The Audit Committee reviews, on an annual basis, the results of external audit of
PJSC Aeroflot’s accounting (financial) statements prepared under the RAS, and, on a quarterly
basis, of the consolidated financial statements prepared under the IFRS. Opinions issued by
external auditors in 2016 received a positive assessment by the Audit Committee.
Internal Audit Department
The Internal Audit Department is established by the Resolution of the Board of Directors of
PJSC Aeroflot dated 1 July 2009 (Minutes No. 2). In its operation, the Department is guided by
the International Standards for the Professional Practice of Internal Auditing and the underlying
principles of independence, objectivity, proficiency, and professional care. The Director of the
Internal Audit Department functionally reports to the Board of Directors of PJSC Aeroflot and to
the Audit Committee of the Board of Directors.
The purpose of the Internal Audit Department is to support: economic efficiency and solid
performance of PJSC Aeroflot; achievement of financial and operational KPIs; protection of
assets; fair disclosures of the Company’s financial and operational data; compliance with the
applicable laws.
The Internal Audit Department strives to assist PJSC Aeroflot in achieving its strategic goals
through applying a holistic consistent approach to assessment and improvement of risk
management, internal control, and corporate governance processes.
In 2016, the Board of Directors of PJSC Aeroflot approved a new version of the Regulations on
the Internal Audit Department, developed together with the Audit Committee of the Board of
Directors and CJSC PricewaterhouseCoopers Audit. These Regulations are in line with the
requirements set out in the Guidelines of the Federal Agency for State Property Management, the
International Standards for the Professional Practice of Internal Auditing, the Code of Ethics for
Internal Auditors, and the Corporate Governance Code approved by the Board of Directors of the
Bank of Russia on 21 March 2014.
In the reporting period, the Internal Audit Department conducted a total of 60 audits of the
Company’s units and subsidiaries to identify potential risks and assess efficiency in
PJSC Aeroflot’s key business lines and processes. Audit findings enabled the management to
come up with proposals on further improvements in the Company’s key operations, with the
majority of them successfully implemented by the management.
The Internal Audit Department regularly reports to the Audit Committee of PJSC Aeroflot’s
Board of Directors on its progress in the implementation of the annual action plan, audits made,
and application of the Department’s recommendations.
Revision Committee
The Revision Committee supervises PJSC Aeroflot’s financial and business operations to provide
reasonable assurances of the Company’s business fully meeting the interests of its shareholders
and requirements set forth in the applicable laws of the Russian Federation. In its operation, the
Revision Committee is guided by the PJSC Aeroflot’s Articles of Association and the
Regulations on the Revision Committee.
As prescribed by the respective Regulations, the Revision Committee checked for accuracy the
information contained in the RAS-based annual financial statements for 2016, including the
Income Statement and other documents submitted to the General Meeting of Shareholders for
review. The Committee benchmarked the metrics of the Company’s financial and business
operations in 2012–2016 and their compliance with the applicable laws in 2016.
Based on these audits, the Revision Committee prepared and approved a relevant report
containing the balance sheet and financial performance assessment results. The Committee’s
report reflects changes in the balance sheet structure and key change drivers, assessing a wide
range of the Company’s financial and business operations, including risk management and
internal controls, and compliance. The conducted audits and checks enabled the Committee to
provide recommendations meant to improve the Company’s performance and thereby increase
earnings and cut costs.
In its report, the Revision Committee passed a positive opinion on the accuracy of the Company’s
financial statements citing no material grounds to disprove the information provided in the
Balance Sheet and Income Statement of PJSC Aeroflot as at 31 December 2016. The report also
provides the Committee’s recommendations on the Company’s financial and business
performance.
The General Meeting of Shareholders of 27 June 2016 (Minutes No. 38 dated 30 June 2015)
elected members of PJSC Aeroflot’s Revision Committee as follows:
Igor Belikov – Head of the Russian Institute of Directors;
Marina Mikhina – Advisor to the Head of the Federal Agency for State Property Management;
Ekaterina Nikitina – Advisor to the President of Oil Transporting Joint-Stock Company
Transneft;
Sergey Ubugunov – Head of Division at the Ministry of Transport of the Russian Federation;
Vasily Shipilov – Deputy Head of Division at the Ministry of Economic Development of the
Russian Federation.
The General Meeting of Shareholders also resolved to pay members of the Revision Committee
the total remuneration of RUB 2,441,574.
Remuneration for members of PJSC Aeroflot’s Revision Committee in 2016
Member of the Revision Committee Remuneration, RUB
Igor Belikov 912,984
Marina Mikhina 115,638
Ekaterina Nikitina 706,476
Alexei Shchepin 706,476
Pavel Fradkov –
Total 2,441,574
External audit
Each year, PJSC Aeroflot engages external auditors to conduct independent assessment of its
accounting (financial) statements. External auditors are engaged through public tenders which
ensure unbiased selection of the successful bidder based on auditing experience, the proposed
audit scope and timeline, and the track record in the Company’s industry. The audit firm, which
won the public tender for conducting annual audit of the Company’s accounting (financial)
statements, is recommended by the Board of Directors for approval by the annual General
Meeting of Shareholders in accordance with the applicable laws.
The annual General Meeting of Shareholders approved AO BDO Unicon (Minutes No. 38 dated
30 June 2016) as the Company’s external auditors to provide independent review of
PJSC Aeroflot’s 2016 accounting statements prepared under the Russian Accounting Standards
(RAS).
The total fees paid to AO BDO Unicon for its audit and non-audit services in 2016 amounted to
RUB 8,853 thousand (including VAT); in 2016, AO BDO Unicon also received payment of
RUB 2,625 thousand for non-audit services provided in 2015. The key scope of services rendered
under the 2016 contract included audit of interim and annual statements, development of
regulations, preparation of reporting recommendations, and tax advisory services.
The AGM approved JSC PricewaterhouseCoopers Audit (Minutes No. 38 dated 30 June 2016) as
the auditor of the Company’s consolidated financial statements for 2016 prepared under the
International Financial Reporting Standards (IFRS).
The total fees paid to PricewaterhouseCoopers International Limited for audit, audit-related, and
other services for 2016 amounted to RUB 93,518 thousand (excluding VAT). The key scope of
services rendered under the 2016 contract included general review of the IFRS interim and
condensed consolidated financial statements for 6M and 9M 2016, audit of the IFRS consolidated
financial statements for 2016, services on developing the segmentation of PJSC Aeroflot target
customers, and services on standardisation and automation of the Company’s business processes.
Anti-Corruption Policy
Aeroflot Group openly states its rejection of unfair and illegal business practices and takes
additional voluntary anticorruption commitments recommended by international and Russian
laws.
Aeroflot is currently working on the implementation of corporate anti-corruption programmes.
The Company operates on the basis of public anti-corruption principles and measures, transparent
and open procurement processes, and rejection of illicit benefits, creates effective feedback
channels, and fights corruption by sharing information. In 2015, PJSC Aeroflot signed up to the
Anti-Corruption Charter of the Russian Business.
On 21 December 2015, the Company’s Board of Directors (Minutes No. 8) approved
Aeroflot Group’s Anti-Corruption Policy designed to create a uniform approach to adhering to
Federal Law No. 273-FZ On Countering Corruption dated 25 December 2008, which provides for
development and adoption of measures to prevent and counter corruption.
PJSC Aeroflot has in place a procedure for reporting on corrupt practices or conflicts of interest.
The Company also has a roadmap for anti-corruption risk management and internal control
processes at PJSC Aeroflot, approved by its Board of Directors. We are also working to integrate
the Guidelines on anti-corruption risk management and internal controls in partially state-owned
joint-stock companies, approved by Order of the Federal Agency for State Property Management
No. 80 dated 2 March 2016.
From August to September 2016, the Internal Audit Department conducted audit (assessment) of
the performance of the Company’s anti-corruption risk management and internal controls,
followed by development and implementation of measures to further enhance these processes.
As part of the effort to integrate the Guidelines on anti-corruption risk management and internal
controls in partially state-owned joint-stock companies, approved by Order of the Federal Agency
for State Property Management No. 80 dated 2 March 2016, the Company introduced the role of
Deputy Director of the Economic Security Department responsible for compliance management.
In 2016, we developed and introduced a number of anti-corruption executive documents and
regulations, as well as updated the existing regulations, in particular:
updated the Corporate Conduct Code of PJSC Aeroflot;
developed the procedure for reporting by PJSC Aeroflot’s employees on gifts received at
hospitality events, during business trips, and at other formal events attended by them as part of
their roles or duties, handing such gifts over, evaluating, disposing of (purchasing), and crediting
the resulting proceeds from disposal (purchase);
set up a committee to receive and evaluate gifts given to PJSC Aeroflot’s employees;
developed a standard Anti-Corruption Clause to be incorporated into contracts and agreements
with PJSC Aeroflot’s counterparties, and introduced its application procedure.
PJSC Aeroflot set up a dedicated incident reporting channel – [email protected], which is
described on the Company’s website. The Company guarantees confidentiality when receiving
and reviewing incident reports and no negative consequences for individuals who raised their
concerns in good faith.
Information Disclosure
To enhance its corporate transparency and equity story, the Company strives to ensure timely
disclosure of complete and accurate material information on its operations. The Company is
guided in its information disclosure by requirements and recommendations of federal laws, the
Bank of Russia, Russian and foreign trading hubs where the Company’s securities are listed, as
well as corporate documents such as the Regulations on the Corporate Information Policy and the
Regulations on Providing Access to Insider Information.
The main objectives of PJSC Aeroflot’s corporate information policy are to:
ensure compliance with the Russian law and regulatory requirements of the securities market;
enhance information transparency and confidence in communications with the Company’s
shareholders, security holders, investors, creditors, and other stakeholders, and ensure protection
of their rights and their legitimate interests;
focus on fully meeting the demand of shareholders, investors, professional security traders, and
other stakeholders for fair disclosures of the corporate and business information;
secure shareholders’ rights to receive material information required to exercise their corporate
governance rights;
maintain professional and trust-based relationships of the Company with mass media providing
for free information sharing without prejudice to the rights and legitimate interests of
shareholders, investors, and other parties;
protect insider information.
Information on PJSC Aeroflot is promptly communicated to the widest possible audience through
publication of such messages, press and news releases in the news feed updated in real time on
PJSC Aeroflot’s disclosure page (http://disclosure.skrin.ru/disclosure/7712040126), and in the
section of PJSC Aeroflot’s official website for shareholders and investors (http://ir.aeroflot.ru).
For more details on information disclosure see the Investor Relations section.
6.2. Risk Management
Risk Management System
Aeroflot Group’s risk management policy implies building a comprehensive system that helps us
promptly identify risks, assess their materiality, and take measures to minimise both the
likelihood of risks being realised and losses they can lead to.
In 2015, PJSC Aeroflot’s Board of Directors approved the Regulations on Aeroflot Group’s Risk
Management System. The document lays down the fundamentals of a unified risk assessment and
management methodology: goals, tasks, principles of organisation and operation of the corporate
risk management system (CRMS), and approaches to the distribution of rights, obligations and
responsibilities of participants of the risk management system at PJSC Aeroflot and its
subsidiaries.
Risk management is applied across all management levels and functional and project areas. The
respective functions are distributed among the Board of Directors, the Audit Committee of the
Board of Directors, the Management Board, and business units of PJSC Aeroflot. A standalone
unit (Risk Management Office) has been set up in the Company to:
generally coordinate risk management processes;
develop guidelines to govern risk management processes;
arrange personnel training in risk management and internal control;
review the risk portfolio and develop proposals on response strategy and reallocation of resources
to manage respective risks;
prepare consolidated risks reports;
perform day-to-day monitoring of the risk management process in the Company’s business units
and in its controlled entities, as prescribed;
prepare information and inform the Board of Directors and executive bodies as to the efficiency
of the risk management process.
In 2016, PJSC Aeroflot’s Board of Directors approved Aeroflot Group’s Risk Register and Risk
Map. PJSC Aeroflot’s business units made comprehensive efforts to identify and assess risks and
developed a draft Risk Management Standard implementing the concept of a unified risk
management and internal control methodology.
Control over PJSC Aeroflot’s financial and business activities is exercised by the Audit
Committee of the Board of Directors, Revision Committee, Internal Audit Department, Risk
Management Office, Financial Risk Management Office of the Corporate Finance Department.
An independent auditor is engaged to audit PJSC Aeroflot’s accounting statements prepared
under the Russian Accounting Standards (RAS) and the International Financial Reporting
Standards (IFRS).
Officers responsible for interaction with PJSC Aeroflot on the implementation of the corporate
risk management system have been designated in subsidiaries, with subsidiaries taking measures
to identify and assess risks.
Risk Management Flow Chart
General Meeting of Shareholders tier
- making decisions on matters of the General Meeting of Shareholders.
Board of Directors tier
- determining key parameters of the CRMS (goals, tasks, operating principles, architecture, risk
appetite, etc.);
- managing risks within the authority of the Board of Directors;
- making decisions on providing necessary resources to CRMS participants;
- assessing CRMS performance;
- reviewing the risk map.
Management tier
- operational management and monitoring of CRMS;
Deputy CEO for Commerce and
Finance
General Meeting of
Shareholders
Board of Directors
CEO
Audit Committee of the Board of Directors
Management Board
Management Board
Risk Management
Office Property Management Department
Internal Audit Department PJSC Aeroflot’s Subsidiaries
Business Units
Executive management
(Deputy CEOs)
General Meeting of Shareholders tier
Board of Directors tier
Management tier
Line
manageme
nt tier
- making decisions on management of risks within the authority of CRMS participants at - the
executive management level;
- making decisions on allocation of resources among CRMS participants;
- making decisions on identifying instruments and parameters for financial risk hedges.
Line management tier:
- executing, following up, and continuously improving risk management procedures;
- making decisions on management of risks within the authority of line management.
To further improve risk management across key business processes within Aeroflot Group, the
CEO, the Audit Committee, and the Board of Directors regularly receive reports on the
Company’s key risks, including a report on the actual realisation of financial risks (market and
credit risks), submitted by the Audit Committee on a monthly basis. In addition, at least once a
month the Management Board receives a report on the steps taken to mitigate identified risks
relating to flight safety, based on the results of the implementation of the flight safety
management system.
First Deputy CEO for Aviation Safety also receives a quarterly review of the results of
monitoring and assessment of potential unlawful interference in the Company’s operations
across the route network, and the risk matrix for the airline’s network for the next quarter. This
information is also presented to members of the Management Board who have authorised
access to confidential information.
Risk Management Structure
Risks and Risk Management Measures No. Risk Description (rationale) Measures
Financial risks
1
Currency and
commodity price
risk
Currency risk is the risk of incurring
losses from potential adverse
fluctuations of exchange rates.
Commodity price risk is the risk of
incurring losses from potential adverse
changes in prices of commodities
purchased.
Aeroflot Group has a policy aimed at balancing
receivables and liabilities across each currency.
In light of the limits of operational (or natural)
hedging, we consider financial hedging options:
to balance out the income structure and the cost
structure we may use derivatives on oil and on
FX rates.
See below a detailed overview of the impact the
realised risk may have on the Group.
Risk identification
• Definitions and descriptions of risk elements (including sources, events, causes, and implications).
Risk assessment
• Analysing risk, its implications, and forms of impact on achievement of Aeroflot Group’s goals.
Development, implementation, and follow-up of risk management
• Developing, implementing, and following up risk management measures to achieve the goals of the Group and the risk management system, and linking risks to applicable risk appetite levels.
Monitoring
• Supervising the identification, assessment, implementation, and follow-up of risk management activities.
No. Risk Description (rationale) Measures
2 Interest rate risk Risk of incurring losses from potential
fluctuations in market interest rates.
We regularly analyze and implement, as
necessary, measures to hedge interest rate risk.
See below an overview of the impact the
realised risk may have on the Group.
3 Credit risk
Risk of incurring losses from a
potential failure by a counterparty to
meet its contractual obligations to
Aeroflot Group companies.
A systemic approach including:
internal credit ratings assigned to agents
marketing passenger flights in Russia;
financial coverage calculated for sales of
passenger and cargo flights;
credit risk limits assigned to credit institutions.
4 Liquidity risk
Risk of incurring losses from inability
of the company to fully meet its
obligations as they fall due.
To mitigate liquidity risk, finance units
carefully plan cash inflows and outflows to
identify and promptly eliminate potential gaps
by raising short-term loans from credit
institutions, analyse and follow up the execution
of the Cash Flow Budget, monitor identification
of foreign exchange proceeds, monitor
compliance with payment deadlines, etc.
5 Tax risks
Risks of incurring losses from possible
misinterpretation of laws with respect
to financial and business activities
resulting in financial uncertainties of
such activities after tax.
To mitigate the implications and/or the
likelihood of these risks being realised, changes
in Russian tax laws are monitored, tax systems
in foreign jurisdictions and agreements signed
by the companies are reviewed, etc.
6 Capital markets
access risks
Risks of incurring losses from the
Group’s inability to raise debt for its
financial and business activities on
acceptable terms.
To mitigate the implications and/or the
likelihood of these risks being realised, the
market situation is monitored, a competitive
environment for credit institutions is set up, and
measures to enhance the Group’s equity story
and upgrade and/or maintain our credit rating
are taken.
7 Other financial
risks
Other risks that may affect financial
performance.
To mitigate the implications and/or the
likelihood of these risks being realised, the
market environment is analysed, the terms of
service offered by financial institutions are
monitored, payments for outstanding invoices
are followed up, etc.
Business risks
8 Strategic risks
Risks of incurring losses from errors
(flaws) made when making decisions
on the Group’s business and growth
strategy.
To mitigate the implications and/or the
likelihood of these risks being realised, the
market situation is monitored, market players
and analysts are consulted, judgements and
opinions by leading global experts are used,
necessity to upgrade the fleet is analysed, and
specialised business units are involved in
strategic planning.
9 Route network
planning risks
Risks of incurring losses from wrong
decisions made when planning the
route network.
To mitigate this risk such methods as requesting
slots in advance when interacting with airports,
providing standby aircraft, forecasting
constraints, monitoring flight loads and the
market situation are applied.
No. Risk Description (rationale) Measures
10 Service quality
risks
Risks of incurring losses from
potential refusal by consumers to buy
goods or services of the Group’s
companies as a result of products and
services offered by the companies
failing to meet the quality
requirements of consumers.
To mitigate the implications and/or the
likelihood of these risks being realised, a
process to obtain feedback from customers
through a number of channels and ensure
timely, full consideration of all incoming
communications and complaints has been put in
place. The demand for services offered by
Aeroflot Group is also tracked, and measures to
enhance service quality, improve consumer
loyalty and experience, and monitor employee
compliance with regulations are taken.
11 Reputational
risks
Risks that an organisation would incur
losses as a result of negative
perceptions of the organisation’s
image by customers, counterparties,
shareholders (participants), business
partners, regulators, and others.
To mitigate the implications and/or the
likelihood of these risks being realised,
procedures to monitor compliance with process
flows and regulations are set up; the
information environment around
Aeroflot Group is continuously monitored and
analysed; and communications with NGOs are
maintained.
Operational risks (core business)
12 Aviation security
risks
Risks of incurring losses from
unlawful interference with aviation
activities.
To mitigate the implications and/or the
likelihood of these risks being realised, the
situation is monitored and analysed and
remedial measures to ensure safety at the base
airport and destination airports are taken,
airports are audited on a regular basis, the level
of aviation security at destination airports and
compliance with regulations are monitored,
independent experts are engaged, and the state
of external and internal access control systems
is monitored on a 24/7 basis.
13 Flight safety
risks
Forecast likelihood and severity of
implications of one or several threats
being realised with respect to: aviation
activities related to aircraft operation
or directly supporting such operation
(flight and ground, commercial and
technical).
To mitigate the implications and/or the
likelihood of these risks being realised, aircraft
condition, aircraft maintenance, and the
operation of the corporate healthcare unit in
terms of medical examination of flight crew are
monitored, medical equipment is replaced;
operations and operating processes are
continuously monitored.
14
Other
operational risks
(core and non-
core business)
Operational risks (core business) are
risks of losses that are explicitly due
and directly related to air
transportation of passengers, baggage,
cargoes, and mail.
Operational risks (non-core business)
are risks of losses that are due, but not
directly related, to air transportation of
passengers, baggage, cargoes, and
mail.
To mitigate the implications and/or the
likelihood of these risks being realised, aircraft
maintenance processes are monitored and
coordinated in line with existing process flows
for pre-flight management by the Group’s
business units and third parties, existing
technologies are improved, as well as processes
for personnel selection, training, and provision
with advanced equipment and special
machinery; other necessary procedures are put
in place. Key operational risks of the Group are
insured.
Operational risks of support activities and other risks
No. Risk Description (rationale) Measures
15 IT risks
Risks of incurring losses from the use
of information technologies by the
company.
To mitigate the implications and/or the
likelihood of these risks being realised, relations
with IT vendors and developers have been
established, channel redundancy and data
backup procedures are implemented, skilled
personnel is recruited and trained, and the
causes of IT failures are investigated.
16 HR risks
A group of risks that arise from, or
affect, the Group’s personnel (or an
individual employee), including the
lack of required/appropriate number of
employees as determined based on the
current and forward-looking business
plans and existing business processes.
HR risks may be viewed as any action
or omission by personnel (human
resources).
To mitigate the implications and/or the
likelihood of these risks being realised, an
effective recruitment process has been put in
place, training and professional development
courses for employees are organised. Also, staff
pay levels are monitored in order to remain in
line with the market, and a range of social
benefits and guarantees is offered to employees.
To mitigate the implications and/or the
likelihood of corruption-related HR risks being
realised, compliance with anti-corruption
procedures and their conformity to anti-
corruption (corruption prevention) laws are
monitored, and safe, confidential and easy-to-
use whistle-blowing procedure to report
violations of the law or internal procedures has
been put in place.
17 Legal risks
Risks of incurring losses from failure
to comply with laws; non-conformity
of internal local regulations to laws;
delays in bringing local regulations in
compliance with laws; default on
agreements; risks connected with
inconsistency or ambiguity of
legislation or changes in laws that may
adversely affect financial and business
activities of Aeroflot Group.
To mitigate the implications and/or the
likelihood of these risks being realised, a system
for timely communication of legislative changes
to the Group’s business units has been put in
place, and contracts are reviewed for
compliance with applicable legislative
requirements.
18 Process risks
Risks of incurring losses from errors
in internal processes of
Aeroflot Group.
To mitigate the implications and/or the
likelihood of these risks being realised, business
processes are analysed and improved,
compliance with regulatory requirements is
monitored, and personnel is provided with
training.
19
Risks of quality
of purchased
spare parts,
units,
components, and
materials
Risks of losses due to quality and
authenticity (originality) of spare parts
and units purchased by
Aeroflot Group, as well as
components and materials to support
its core business.
To mitigate the implications and/or the
likelihood of these risks being realised, quality
of supplies and suppliers’ operations is
monitored and analysed, and procurement and
supplier selection procedures are improved.
20
Economic and
information
security risks
Risks of losses related to changes in
the corporate internal and external
environment that may lead to the
relevant item losing its economic
value.
To mitigate the implications and/or the
likelihood of these risks being realised, an
effective system to monitor, identify, localise
and prevent threats and vulnerabilities has been
put in place, and steps are taken on an ongoing
basis to monitor employee compliance with
economic and information security
requirements, and to identify and prevent
offences.
No. Risk Description (rationale) Measures
21
Legal risks of
corporate
executive bodies
Risks of losses related to potential
civil or administrative prosecution of
individuals that act as sole executive
bodies or are members of collective
executive bodies for action or
omission committed by them when
managing the Company.
Aeroflot Group has launched a number of
insurance programmes covering a broad range
of operational risks of support operations,
including motor insurance, comprehensive civil
liability insurance, hazardous industrial
facilities insurance, liability insurance for
temporary storage owners, liability insurance
for the Board of Directors and the Management
Board, and property insurance.
22
Risks of impact
by external
(uncontrollable)
factors
Risks of losses that have external
(beyond control of the company)
causes and are inherent to any type of
activities (natural risks (natural
hazards), risks of man-made disasters,
etc.).
To mitigate the implications and/or the
likelihood of these risks being realised,
necessary response measures, including flight
suspension, route changes, extra measures to
increase flight safety and to ensure aviation
security are taken, and sanitary and
epidemiological control is enhanced.
23 Investment
(project) risks
Risks of incurring potential
unexpected losses from investment
uncertainties.
To mitigate the implications and/or the
likelihood of these risks being realised, a due
diligence procedure has been set up, progress of
project implementation is monitored, results are
assessed, budget performance is monitored, etc.
24 Occupational
safety risks
Risks of incurring losses from factors
related to the Group’s financial and
business activities which may damage
the health and life of employees at
workplaces.
To mitigate the implications and/or the
likelihood of these risks being realised, working
conditions are improved and environmental
management guidelines have been drafted in
line with the requirements of ISO 14000 and
approved. The fleet is upgraded by adding last
generation aircraft that offer enhanced fuel
efficiency and lower harmful emissions,
requirements of Directive 2008/101/EC are
implemented, and other measures are taken.
25 Other
operational risks Other operational risks.
To mitigate the implications and/or the
likelihood of these risks being realised, the
operation of systems is monitored, measures to
enhance efficiency and control performance are
taken, relations with aviation authorities are
maintained, and the reporting system is
improved.
Impact of Key Financial Risks Realised in 2016
Aeroflot Group’s key financial risks depend on the market environment and are primarily
represented by currency, price, and interest rate components. Factors that influence the
Company’s operations comprise currency exchange rates (EUR/RUB, USD/RUB, EUR/USD),
fuel prices, and interest rates (mainly LIBOR).
Effect of changes in FX rates and other macroeconomic factors on EBITDA of Aeroflot Group, RUB million
Эффект на выручку Effect on revenue
Курсовой эффект FX effect
Эффект на расходы Effect on costs
EBITDA 12M2015 EBITDA 12M 2015
Фактор объема Volume factor
Прочие факторы Other factors
Ценовой фактор Price factor
Курсовой эффект на выручку FX effect on revenue
Курсовой эффект на расходы FX effect on costs
Расходы на топливо* Fuel costs*
Расходы на персонал* Staff costs*
Расходы на обслуживание пассажиров и
ВС в аэропортах и на трассе*
Passenger services and aircraft servicing
costs in airports and in-flight*
Расходы по операционной аренде* Operating lease costs*
Техническое обслуживание и ремонт* Maintenance and repair*
Административные и маркетинговые
расходы*
Administrative and marketing costs*
Прочие расходы* Other costs*
EBITDA 12M2016 EBITDA 12M 2016
Единоразовые эффекты** One-off effects**
Скорректированная EBITDA 12M2016 Adjusted EBITDA 12M 2016
Significant changes in the above risk factors had a major impact on the Group’s performance in
2016. This was mainly due to sharp changes in currency exchange rates and fuel prices, as well as
highly volatile foreign exchange and commodity markets. The market risk management system
primarily aims to minimise the Group’s exposure to the above factors.
In particular, in 2016, the Russian rouble appreciated against the US dollar by 15.1% y-o-y (as at
31 December). Growth against the euro was even stronger, with the rouble gaining 17.9% over
the same period. The euro also depreciated by 3.2% against the US dollar. The latter trend has
negative implications for the Group, as its US dollar-denominated costs outpace the euro-
denominated revenue.
Global oil prices grew strongly in 2016, with the price of Brent crude going up 52.2%. The
negative impact of these changes on fuel prices in rouble terms was offset by the positive trend in
the rouble exchange rate.
Currency and Price Risks
Aeroflot Group’s exposure to currency risk results from the vast share of the Company’s income
and expenses being affected by changes in the EUR/RUB and USD/RUB exchange rates.
The Group receives revenue from ticket sales, and tickets for most international flights are priced
in euros;
costs of fuel, lease payments, and maintenance (key foreign currency expenses) are denominated
in USD and EUR.
Динамика курсов EUR/RUB,
USD/RUB
EUR/RUB and USD/RUB
exchange rates
Янв 2016 Jan 2016
Фев 2016 Feb 2016
Мар 2016 Mar 2016
Апр 2016 Apr 2016
Май 2016 May 2016
Июн 2016 Jun 2016
Июл 2016 Jul 2016
Авг 2016 Aug 2016
Сен 2016 Sep 2016
Окт 2016 Oct 2016
Ноя 2016 Nov 2016
Дек 2016 Dec 2016
Источник: Bloomberg. Source: Bloomberg.
Our currency risk management primarily focuses on reducing the Group’s exposure to currency
risk factors. Aeroflot Group pursues a policy of balancing proceeds and liabilities in each
currency and also uses currency hedges. In 2016, just one cross-currency hedge was in place;
however, it had a zero financial effect at the end of the year due to market conditions. On top of
that, Aeroflot Group is exposed to currency risk from revaluation of assets and liabilities in USD
and EUR. The Group does not hedge this risk, as it does not affect its actual cash flows.
Динамика BRENT и
USD/RUB
Brent crude price and
USD/RUB rate Янв 2016 Jan 2016
Фев 2016 Feb 2016
Мар 2016 Mar 2016
Апр 2016 Apr 2016
Май 2016 May 2016
Июн 2016 Jun 2016
Июл 2016 Jul 2016
Авг 2016 Aug 2016
Сен 2016 Sep 2016
Окт 2016 Oct 2016
Ноя 2016 Nov 2016
Дек 2016 Dec 2016
Источник: Bloomberg. Source: Bloomberg.
Aeroflot Group’s price risk arises from fuel purchase contracts, as the contractual pricing formula
is linked to global oil prices. The Group traditionally uses hedging instruments to manage price
risks. In 2016, no such transactions were executed, and no risks for 2017 were hedged as at
31 December 2016. In 2017, risks may be hedged during the year based on regular risk
assessment and testing of potential hedges using the Financial Hedging Methodology.
Interest Rate Risk
The Group’s exposure to interest rate risk results from changes in interest rates in the money
market, which affects the borrowing costs of the Group. Specifically, costs under lease
agreements of Aeroflot Group are linked to USD LIBOR 6M and 3M market interest rates. In
2016, the former rate went up from 0.6117% to 0.9979%, while the latter increased from
0.8423% to 1.3177% y-o-y (as at 31 December).
Динамика ставок Libor 6m/3m Libor 6M/3M rates Источник: Bloomberg. Source: Bloomberg.
Янв 2016 Jan 2016
Фев 2016 Feb 2016
Мар 2016 Mar 2016
Апр 2016 Apr 2016
Май 2016 May 2016
Июн 2016 Jun 2016
Июл 2016 Jul 2016
Авг 2016 Aug 2016
Сен 2016 Sep 2016
Окт 2016 Oct 2016
Ноя 2016 Nov 2016
Дек 2016 Dec 2016
Interest rate swaps are a common instrument to mitigate interest rate risk. According to a hedging
report prepared by the Group’s advisor, this risk factor has a relatively low materiality for the
Group, and converting the floating rates into fixed is not considered at the moment.
Insurance against Operational Risks
Aeroflot Group uses insurance as an effective tool to manage risks. Aeroflot Group’s underlying
approach is to take out, whenever practically possible, full coverage for all types of insured risks.
The Group’s key operational risks are insured, with coverage for aviation risks, such as aircraft
destruction, disappearance or damage, and risks of liability related to the property and health of
third parties to whom the Company provides transportation services, accounting for 65% of the
total insurance costs.
The Group also uses various insurance programmes covering a wide range of non-aviation
operational risks of support operations, including motor insurance (compulsory motor third party
liability, motor hull insurance), comprehensive civil liability insurance, and hazardous industrial
facilities insurance.
In 2016, all insurance contracts were renewed as scheduled. Subsidiary airlines of PJSC Aeroflot
were included in consolidated reinsurance coverage, which helped reduce the insurance rates.
Stabilisation of the global aviation insurance market has also contributed to the rate reduction.
Insurance rates declined on average by 20%. Thus, despite the growing fleet value, the overall
aviation risk insurance premium decreased versus the previous insurance period.
Outlook and Plans for 2017
Risk management development plans include improvements to the corporate risk management
system both for individual and unit risks, as well as across Aeroflot Group in general.
In February 2017, PJSC Aeroflot’s CEO approved the schedule of actions to improve
CRMS performance in 2017, comprising the following actions:
approving and adopting Aeroflot Group’s Risk Management Standard implementing the concept
of a unified risk management methodology;
training the Company’s and subsidiaries’ staff in risk management and internal control;
updating the risk register and risk map, including analysis of identified risks.
6.3. Investor Relations, Equity and Debt
Share Capital
PJSC Aeroflot’s charter capital as at 31 December 2016 was RUB 1,110,616,299, consisting of
1,110,616,299 ordinary registered uncertificated shares with a par value of RUB 1 each. The
Company did not issue preferred shares.
State registration numbers of PJSC Aeroflot ordinary share issues are 73-1 p-5142 (dated 22 June
1995) and 1-02-00010-A (dated 1 February 1999). The issues were merged by Decree No. 04-
168/r of the Federal Securities Commission dated 23 January 2004, following which the issues of
PJSC Aeroflot ordinary shares were assigned state registration number 1-01-00010-A, dated
23 January 2004.
In addition to outstanding shares, the Company has the right to issue a further 250 million
ordinary registered shares (authorised shares). No additional shares were issued in 2016.
The total number of PJSC Aeroflot’s shareholders as at 31 December 2016 was 11,377, compared
to 10,534 as at 31 December 2015, comprising mostly individuals.
PJSC Aeroflot’s register of shareholders is kept by JSC Independent Registrar Company (License
No. 045-13954-000001, issued by the Bank of Russia). The register holder’s details are provided
in the Contacts section at the end of this Annual Report.
Физические лица Individuals
Институциональные инвесторы Institutional investors
Квазиказначейские акции Phantom shares
Менеджмент Management
ГК «Ростех» Rostec Corporation
Российская Федерация Russian Federation
Note. Free-float represents shares not owned by the state or stated-owned companies, and not directly owned the
Company, the Group’s subsidiaries or the Company management.
Российская Федерация
51,2%
ГК «Ростех»
3,5%Менеджмент
0,1%
Квазиказначейские
акции
4,8%
Институциональные
инвесторы
34,8%
Физические лица
5,6%
Акции в свободном
обращении
40,3%
Free float –
40.3%
Information on the key shareholders of PJSC Aeroflot
Holder Status*
As at
31 December 2015
As at
31 December 2016 Change of
stake
in share
capital, p.p. Number of
shares
Stake in
share capital,
%
Number of
shares
Stake
in share
capital, %
Legal entities 1,041,161,081 93.75 1,048,923,212 94.45 +0.70
including:
Russian Federation
(represented by the
Federal Agency for
State Property
Management)
O 568,335,339 51.17 568,335,339 51.17 –
CJSC National
Settlement
Depository
N 379,700,230 34.19 387,462,361 34.89 +0.70
LLC Aeroflot-
Finance** O 53,716,189 4.84 53,716,189 4.84 –
LLC RT-Business
Development O 16,720,724 1.51 16,720,724 1.51 –
LLC Aviacapital-
Service*** O 22,688,599 2.04 22,688,599 2.04 –
Individuals**** O 69,455,218 6.25 61,693,087 5.55 (0.70)
* O means “owner”, N means “nominee”.
** LLC Aeroflot-Finance’s stake includes the stake held by nominees, with the number of phantom shares unchanged
since 2014.
*** LLC Aeroflot-Finance’s stake includes the stake held by nominees
**** Including the management and members of the Board of Directors.
Shares
PJSC Aeroflot shares and depositary receipts are traded on the stock market. The Company’s
ordinary shares are traded on the Russian market, and global depositary receipts (GDRs) and
American depositary receipts (ADRs) are traded on foreign markets.
Shares of PJSC Aeroflot are traded on the Moscow Exchange, where as at 31 December 2016
they were included in the Level 1 Quotation List (AFLT: MOEX). Securities transactions are
subject to the T+2 trading mode. PJSC Aeroflot shares are included in the main Russian stock
indexes: MICEX Index, MICEX BMI (broad market), MICEX TRN (transport companies), and
RTSI.
Aeroflot share price performance vs MICEX
Index, 2016
Aeroflot share price performance vs Bloomberg
Airlines Index, 2016
Январь January
Февраль February
Март March
Апрель April
Май May
Июнь June
Июль July
Август August
Сентябрь September
Октябрь October
Ноябрь November
Декабрь December
Аэрофлот Aeroflot
Индекс ММВБ MICEX Index
PJSC Aeroflot share price and trading volumes, 2016
Average daily trading volumes on the
Moscow Exchange
Note. The average daily trading volume was
calculated based on the closing price (historical
data were re-calculated retrospectively based on
the closing prices of a specific period)
172,5%
26,8%
Дек
абр
ь
Ян
вар
ь
Фев
рал
ь
Мар
т
Ап
рел
ь
Май
Ию
нь
Ию
ль
Авгу
ст
Сен
тяб
рь
Октя
бр
ь
Но
яб
рь
Дек
абр
ь
Аэрофлот Индекс ММВБ
172,5%
-8,7%
-26,5%
Дек
абр
ь
Ян
вар
ь
Фев
рал
ь
Мар
т
Ап
рел
ь
Май
Ию
нь
Ию
ль
Авгу
ст
Сен
тяб
рь
Октя
бр
ь
Но
яб
рь
Дек
абр
ь
Аэрофлот
0,0
20,0
40,0
60,0
80,0
100,0
120,0
140,0
160,0
0,0
100,0
200,0
300,0
400,0
500,0
600,0
700,0
Объем торгов, млн руб. Аэрофлот, руб.
1 527 2 235
5 079 4 911 4 193
70
130
264 209
383
2012 2013 2014 2015 2016
Среднедневной объем, тыс. шт. Среднедневной объем, млн руб.
Объем торгов, млн руб. Trading volume, RUB million
Аэрофлот, руб. Aeroflot, RUB
Среднедневной объем, тыс. шт. ADTV, thousand shares
Среднедневной объем, млн руб. ADTV, RUB million
Январь January
Февраль February
Март March
Апрель April
Май May
Июнь June
Июль July
Август August
Сентябрь September
Октябрь October
Ноябрь November
Декабрь December
Aeroflot share price highs and lows, RUB
Price per Aeroflot share
2012 2013 2014 2015 2016
First trading day, RUB 50.9 46.2 83.2 33.2 56.2
High, RUB 55.5 85.1 88.0 61.0 158.4
Low, RUB 38.8 46.2 29.9 32.5 50.4
Last trading day, RUB 44.9 83.8 32.2 56.1 152.9
As at 31 December 2016, the Company’s market capitalisation was RUB 169.8 billion, up
172.5% y-o-y.
In the year to date, PJSC Aeroflot share price has been outperforming both Russia’s Micex Index
and the global market’s Bloomberg Airlines Index. The spectacular growth in Aeroflot’s market
cap was fuelled mostly by strong 1H and 9M performance driven by solid operational results and
the rouble’s appreciation against major global currencies.
Despite local currency appreciation in emerging markets (particularly, the Brazilian real and the
South African rand), which bolstered the share prices of airlines in a number of emerging
markets, some markets have remained volatile, which put the emerging markets’ airlines on a
downward trajectory. Moreover, the share prices of European airlines came under additional
pressure from the Brexit process, dramatic developments in a number of European cities, and
strike actions by staff in certain airlines.
50,9 46,2
83,2
33,2
56,2
44,9
83,8
32,2
56,1
152,9
2012 2013 2014 2015 2016
Analyst recommendations
Date Recommendations
Bloomberg
consensus forecast,
RUB
Target price
range, RUB
Number of
analysts
31 Dec
2016
158.0 121.0–184.0 12
31 Dec
2015
66.9 26.4–81.0 13
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продавать Sell
пересмотр Revision
GDR and ADR Programmes
Outside Russia, PJSC Aeroflot shares are traded as global depositary receipts (GDRs) at the over-
the-counter section of the Frankfurt Stock Exchange and as American depositary receipts (ADRs)
on the US over-the-counter market. One GDR/ADR represents 5 ordinary shares. Deutsche Bank
Trust Company Americas acts as the depository bank, and LLC Deutsche Bank is the custodian.
A total of 14,430,910 shares were converted into GDRs as at 31 December 2016, representing
1.3% of the charter capital. As at 31 December 2016, the price of one depositary receipt stood at
EUR 11.6, up 240.2% during the year.
PJSC Aeroflot GDR programme
Programme type Sponsored Level-1 GDRs under Regulation S and Rule 144A
Ratio (shares: GDR) 5:1
Ticker AETG
ISIN US69343R1014, US69343R2004
PJSC Aeroflot Level-1 ADR programme
Programme type Sponsored Level-1 ADRs
Ratio (shares: ADR) 5:1
Ticker AERZY
ISIN US69343R3093
Corporate Bonds
In 2016, PJSC Aeroflot fully repaid its BO-03 exchange-traded bond, traded on the Moscow
Exchange. A total of 5,000,000 bonds were repaid on 31 March 2016.
Coupon on PJSC Aeroflot’s bonds in the reporting year was paid in full and in due time:
31 March 2016: BO-03 bond payments of RUB 206,950,000 for the sixth coupon period.
No new debt was issued in 2016.
Credit Ratings
PJSC Aeroflot has a credit rating from Fitch Ratings. In March 2016, the rating agency affirmed
the Company’s local and foreign currency long-term issuer default rating at “B+”, outlook Stable.
75% 17% 8%
62% 23% 15%
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Dividend Policy
Dividend Policy is a key element of the corporate governance framework and a key measure of a
company’s performance in upholding the rights of its investors.
PJSC Aeroflot has in place the Regulations on the Dividend Policy, which seek to maximise the
transparency of procedures used to determine the amount of dividends and pay them out to the
benefit of shareholders and investors. The Regulations determine the approach used by the Board
of Directors to make recommendations for the General Meeting of Shareholders on profit
distribution, including dividend payout.
The key principles of PJSC Aeroflot’s dividend policy are as follows:
Aeroflot Group’s consolidated net profit under the International Financial Reporting Standards
(IFRS) forms the base for calculating dividends.
The amount of dividend is calculated using a tailored system of ratio indicators which factors in
the results of the reporting year, Aeroflot Group’s debt ratio and mid-term financial plan.
The target level of dividend pay-outs is set at 25% of Aeroflot Group’s IFRS net profit.
The Annual General Meeting of Shareholders held on 27 June 2016 resolved not to declare or pay
out dividends on PJSC Aeroflot shares for the fiscal year 2015.
PJSC Aeroflot’s dividend history
2011 2012 2013 2014 2015
Dividend per share, RUB 1.81 1.16 2.50 – –
Total dividends,
RUB thousand 2,000,018 1,292,313 2,774,195 – –
Total amount actually paid,
RUB thousand 1,999,927 1,292,149 2,773,621 – –
Dividend payout ratio, % 19.2 26.0 25.0 – –
Accounting standards used to
calculate the net profit RAS RAS RAS IFRS IFRS
Form and other terms of
payment for declared
dividends
In cash In cash In cash – –
Investor Relations
The Company is particularly focused on relations with both existing and prospective investors. In
its interactions with investors, PJSC Aeroflot is committed to providing objective, reliable and
consistent information about its activities and complies with current disclosure standards, seeking
to increase information transparency as much as practically possible.
The Company maintains a continued dialogue with shareholders and investors to ensure that
securities market participants get complete information about its activities. The Company timely
discloses material information on its operations as press releases and material facts via authorised
disclosure platforms in full compliance with Russian laws. The Company regularly discloses
information in its IFRS and RAS financial statements, and in its investor presentations.
PJSC Aeroflot targets investors via the following channels:
Conference calls with the Company’s management for investors.
Regular meetings with investors and shareholders.
Participation in all major conferences hosted by brokerage houses.
Site visits to the Company’s facilities.
Dedicated events for investors and shareholders, with presentations by the Company’s
management (Capital Markets Days).
In October 2016, the Company hosted its annual Capital Markets Day, with presentations given
by the Company’s top management. The event was attended by over 60 investors, with 30 more
investors linked up via a video webcast, specifically set up for those who could not attend in
person.
Presentations by the management were followed by site visits: a tour of PJSC Aeroflot’s Flight
Crew Training Centre at Sheremetyevo airport and maintenance hangars where aircraft are
serviced, as well as visits to the Hub Control Centre and Operational Control Centre, the units
responsible for direct support of the Company’s operations.
Meetings with PJSC Aeroflot’s investors,
shareholders, and other stakeholders
Geography of investment funds with
shareholdings in PJSC Aeroflot, 2016
Азия Asia
Россия Russia
Ближний Восток Middle East
США и Канада US and Canada
Европа Europe
Великобритания UK
In 2016, the Company’s investor relations were recognised by a number of awards.
Investor Relations
Aeroflot’s IR team received Grand Prix for Best Overall Investor Relations, Small Cap, from
IR Magazine Russia & CIS and for the third year in a row was named the best in the transport
sector. Aeroflot’s IR team was also placed high in the overall rankings for Russian IR teams and
rankings of the European IR teams in the transport sector, compiled by Extel based on the
independent 2016 Russia Investor Relations Survey.
Annual Report and IR website awards
Aeroflot’s Annual Report 2015 was named the winner in the Best Annual Report in the
Consumer Sector category and received an award in the Best Annual Report of the Company
with the Market Capitalisation of RUB 40 Billion to RUB 200 Billion category of the Annual
Report Competition hosted by the Moscow Exchange.
166 205
296
2014 2015 2016
Россия
25,6%
Азия
1,6%
Великоб
ритания
26,8%
Европа
29,3%
США и
Канада
15,9%
Ближний
Восток
0,8%
Aeroflot’s Annual Report 2015 also received the highest award, a platinum medal award, in the
Transportation & Logistics Industry category and placed in the top 10 of the best annual reports
by Russian companies at the 2015 Vision Awards, hosted by the League of American
Communications Professionals (LACP).
Aeroflot’s IR website was announced the winner of the Investor Relations Standard of Excellence
award at the WebAwards 2016 Competition hosted by the Web Marketing Association, and was
also named the best corporate IR website in the transport sector in the corporate IR website
competition held by Russia’s Financial Communications and Investor Relations Alliance (ARFI).
Aeroflot was shortlisted for the Best Use of Digital Communications – International award
(IR website, top 3) and the Best Annual Report – International award (top 3) in the IR Society
2016 Best Practice Awards (UK).
APPENDIXES
7.1. IFRS Consolidated Financial Statements
PJSC AEROFLOT
Statement of management’s responsibilities for the preparation
and approval of the Consolidated Financial Statements
as at and for the year ended 31 December 2016
The following statement, which should be read in conjunction with the independent auditor’s
responsibilities, as stated in the independent auditor’s report set out below, is intended to distinguish
between the respective responsibilities of management and the independent auditors in relation to the
Consolidated Financial Statements of Public Joint Stock Company Aeroflot - Russian Airlines and its
subsidiaries (the "Group").
Management is responsible for the preparation of Consolidated Financial Statements that present fairly
the consolidated financial position of the Group as at 31 December 2016, and the financial results of its
operations, cash flows and changes in equity for the year then ended, in compliance with International
Financial Reporting Standards (“IFRS”).
In preparing the consolidated financial statements, management is responsible for:
selecting suitable accounting principles and applying them consistently;
making judgements and estimates that are reasonable and prudent;
stating whether International Financial Reporting Standards (IFRS) have been complied with, subject
to any material departures that are properly disclosed and explained in the notes to Consolidated
Financial Statements; and
preparing the Consolidated Financial Statements on a going concern basis, unless it is inappropriate to
presume that the Group will continue in business for the foreseeable future.
Management is also responsible for:
designing, implementing and maintaining an effective system of internal controls, throughout the
Group;
maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial
position of the Group, and the financial results of its operations and cash flows and which enable them
to ensure that the Consolidated Financial Statements of the Group are prepared in accordance with
IFRS;
maintaining statutory accounting records in compliance with local legislation and accounting standards
in the relevant jurisdictions in which the Group operates;
taking such steps as are reasonably available to them to safeguard the Group’s assets; and
preventing and detecting fraud and other irregularities.
The Consolidated Financial Statements of the Group as at and for the year ended 31 December 2016
(set out on pages 1-72) were approved on 28 February 2017 and signed on behalf of management by:
_________________________________ __________________________________
V.G. Saveliev Sh.R. Kurmashov
General Director Deputy General Director
for Commerce and Finance
PJSC AEROFLOT
Consolidated Statement of Profit and Loss
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
1
Note 2016 2015
Traffic revenue 5 433,966 359,205
Other revenue 6 61,914 55,968
Revenue 495,880 415,173
Operating costs, excluding staff costs and depreciation
and amortisation 7 (354,022) (304,214)
Staff costs 8 (64,682) (55,619)
Depreciation and amortisation 19, 22 (13,395) (13,306)
Other operating (expenses)/income, net 9 (527) 2,073
Operating costs (432,626) (371,066)
Operating profit 63,254 44,107
Loss from sale and impairment of investments, net 16 (2,935) (9,159)
Finance income 10 19,802 15,811
Finance costs 10 (9,443) (28,556)
Realised hedging result 10 (12,310) (23,746)
Share of results of associates 12 (17)
Result from disposal of subsidiaries 21 (5,099) -
Profit/(loss) before income tax 53,281 (1,560)
Income tax expense 11 (14,455) (4,934)
PROFIT/(LOSS) FOR THE YEAR 38,826 (6,494)
Profit/(loss) for the year attributable to:
Shareholders of the Company 37,443 (5,829)
Non-controlling interest 1,383 (665)
PROFIT/(LOSS) FOR THE YEAR 38,826 (6,494)
Profit/(loss) per share – basic and diluted (in Roubles per
share) 35.4 (5.5)
Weighted average number of shares outstanding
(millions) 1,056.9 1,056.9
Approved on 28 February 2017 and signed on behalf of management
_________________________________ __________________________________
V.G. Saveliev Sh.R. Kurmashov
General Director Deputy General Director
for Commerce and Finance
The consolidated statement of profit and loss should be read in conjunction with the notes set out on pages 7 to 72
which are forming part of the consolidated financial statements
PJSC AEROFLOT
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
2
Note 2016 2015
Profit/(loss) for the year
38,826 (6,494)
Other comprehensive income/(loss):
Items that may be reclassified subsequently to profit or loss:
Profit from the change in fair value of hedging derivative financial
instruments 24 4,485 12,810
Effect from hedging revenue with foreign currency liabilities 28 33,773 (32,911)
Deferred tax related to the effect on cash flow hedging instruments recognized in other comprehensive income 11 (7,725) 4,038
Other comprehensive income/(loss) for the year 30,533 (16,063)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 69,359 (22,557)
Total comprehensive income/(loss) attributable to:
Shareholders of the Company 67,976 (21,892)
Non-controlling interest 1,383 (665)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 69,359 (22,557)
The consolidated statement of comprehensive income should be read in conjunction with the notes set out on pages
7 to 72 which are forming part of the consolidated financial statements
PJSC AEROFLOT
Consolidated Statement of Financial Position
as at 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
Note
31 December
2016
31 December
2015
ASSETS
Current assets
Cash and cash equivalents 12 31,476 30,693
Short-term financial investments 16 6,319 5,917
Accounts receivable and prepayments 14 78,172 76,317
Current income tax prepayment 2,679 2,489
Aircraft lease security deposits 13 320 2,658
Expendable spare parts and inventories 15 10,040 7,447
Derivative financial instruments 24 - 53 Assets classified as held for sale 20 1,140 7,732 -
Total current assets 130,146 133,306
Non-current assets Deferred tax assets 11 12,252 21,632
Investments in associates 98 109
Long-term financial investments 16 3,306 6,118
Aircraft lease security deposits 13 2,181 2,132
Other non-current assets 17 10,112 2,762
Prepayments for aircraft 18 27,830 35,291
Property, plant and equipment 19 104,897 104,494
Intangible assets 22 1,825 2,690
Goodwill 23 6,660 6,660
Total non-current assets 169,161 181,888
TOTAL ASSETS 299,307 315,194
LIABILITIES AND EQUITY
Current liabilities Derivative financial instruments 24 - 4,853
Accounts payable and accrued liabilities 25 49,868 54,751
Unearned traffic revenue 39,044 28,691
Deferred revenue related to the frequent flyer programme 26 1,607 1,307
Provisions for liabilities 27 5,304 7,519
Finance lease liabilities 28 15,593 19,504
Short-term loans and borrowings and current portion of long-term loans
and borrowings 29 9,309 54,085
Liabilities related to assets, classified as held for sale 20 - 7,371 -
Total current liabilities 120,725 178,081
Non-current liabilities Long-term loans and borrowings 29 11,058 14,375
Finance lease liabilities 28 107,143 145,020
Provisions for liabilities 27 10,791 6,917
Deferred tax liabilities 11 39 170
Deferred revenue related to the frequent flyer programme 26 3,623 2,941
Other non-current liabilities 30 5,159 3,810
Total non-current liabilities 137,813 173,233
TOTAL LIABILITIES 258,538 351,314
Equity Share capital 32 1,359 1,359
Treasury shares reserve (3,571) (3,571)
Accumulated profit on disposal of treasury shares 1,659 1,659
Investment revaluation reserve (5) (5)
Hedge reserve 24, 28 (34,187) (64,720)
Retained earnings 77,198 39,755
Equity attributable to shareholders of the Company 42,453 (25,523)
Non-controlling interest (1,684) (10,597)
TOTAL EQUITY 40,769 (36,120)
TOTAL LIABILITIES AND EQUITY 299,307 315,194
The consolidated statement of financial position should be read in conjunction with the notes set out on pages 7 to 72
which are forming part of the consolidated financial statements
PJSC AEROFLOT
Consolidated Statement of Cash Flows
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
Note 2016 2015
Cash flows from operating activities:
Profit/(loss) before income tax 53,281 (1,560)
Adjustments for:
Depreciation and amortisation 19, 22 13,395 13,306
Change in impairment provision for accounts receivable and
prepayments 9 2,217 6,449
Loss on doubtful accounts write-off 9 4 246
Change in impairment provision for obsolete expendable spare parts and
inventory 216 276
Change in provision for impairment of property, plant and equipment 19 (36) 400
Loss on disposal of property, plant and equipment 885 272
Loss on disposal of subsidiaries 21 5,099 -
Accrual of provision for impairment of investments 2,935 9,159
Loss/(gain) on change in the fair value of derivative financial
instruments 10 53 (11,885)
Realised hedging result 10 12,310 23,746
Change in provisions for liabilities 27 6,628 4,433
Interest expense 10 8,907 7,737
Foreign exchange (gain)/loss 10 (15,597) 849
Gain on recovery of VAT 9 - (8,021)
Other operating income, net (2,148) (816)
Other finance expenses/(income), net 447 (36)
Gain on disposal of assets classified as held for sale 9 (2,784) -
Loss on derivative financial instruments, net 10 - 19,803
Dividend income (29) (89)
Total operating cash flows before working capital changes 85,783 64,269
Change in accounts receivable and prepayments (6,915) (2,251)
Change in expendable spare parts and inventories (2,809) (1,216)
Change in accounts payable and accrued liabilities 13,387 14,705
Total operating cash flows after working capital changes 89,446 75,507
Change in restricted cash 12 20 18
Income tax paid (13,943) (6,041)
Income tax refunded 1,189 180
Net cash flows from operating activities 76,712 69,664
The consolidated statement of cash flows should be read in conjunction with the notes set out on pages 7 to 72
which are forming part of the consolidated financial statements
PJSC AEROFLOT
Consolidated Statement of Cash Flows
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
Note 2016 2015
Cash flows from investing activities:
Deposits placement (10,435) (11,741)
Deposits return 9,840 6,375
Proceeds from sale of investments - 30
Purchases of investments and loans issued - (8,652)
Proceeds from sale of subsidiary 9 -
Proceeds from sale of property, plant and equipment 84 603
Purchases of property, plant and equipment and intangible assets 19,22 (10,222) (9,196)
Proceeds from sale of assets, classified as held for sale 6,471 -
Dividends received 62 74
Prepayments for aircraft 18 (18,806) (22,708)
Return of prepayments for aircraft 18 29,362 7,828
Payment of operating lease security deposits 13 (2,504) (1,995)
Return of operating lease security deposits 13 3,405 612
Net cash flows from/(used in) investing activities 7,266 (38,770)
Cash flows from financing activities:
Proceeds from loans and borrowings 29 30,885 73,331
Repayment of loans and borrowings 29 (72,991) (36,267)
Repayment of the principal element of finance lease liabilities 28 (27,024) (19,455)
Interest paid (6,954) (5,914)
Dividends paid (49) (88)
Payments for settlement of derivative financial instruments, net 24 (4,362) (39,682)
Net cash used in financing activities (80,495) (28,075)
Effect of exchange rate fluctuations on cash and cash equivalents (2,700) 1,327
Net increase in cash and cash equivalents 783 4,146
Cash and cash equivalents at the beginning of the year 12 30,693 26,547
Cash and cash equivalents at the end of the year 12 31,476 30,693
Non-cash transactions as part of the investing activities:
Property, plant and equipment acquired under finance leases 2,170 1,781
The consolidated statement of cash flows should be read in conjunction with the notes set out on pages 7 to 72
which are forming part of the consolidated financial statements
PJSC AEROFLOT
Consolidated Statement of Changes in Equity
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
Equity attributable to shareholders of the Company
Note
Share
capital
Accumulated profit on
disposal of treasury
shares less treasury
shares reserve
Investment
revaluation
reserve
Hedge
reserve
Retained
earnings Total
Non-controlling
interest
Total
equity
1 January 2015 1,359 (1,912) (5) (48,657) 45,584 (3,631) (9,874) (13,505)
Loss for the year - - - - (5,829) (5,829) (665) (6,494)
Loss from the change in fair value
of derivative financial instruments
net of related deferred tax 24,28 - - - (16,063) - (16,063) - (16,063)
Total other comprehensive loss - - - - - (16,063) - (16,063)
Total comprehensive loss - - - - - (21,892) (665) (22,557)
Dividends declared - - - - - - (58) (58)
31 December 2015 1,359 (1,912) (5) (64,720) 39,755 (25,523) (10,597) (36,120)
1 January 2016 1,359 (1,912) (5) (64,720) 39,755 (25,523) (10,597) (36,120)
Profit for the year - - - - 37,443 37,443 1,383 38,826
Profit from the change in fair value of derivative financial
instruments and the effect from
hedging, net of deferred tax 24,28 - - - 30,533 - 30,533 - 30,533
Total other comprehensive
income - - - - - 30,533 - 30,533
Total comprehensive income - - - - - 67,976 1,383 69,359
Disposal of subsidiary 21 - - - 7,579 7,579
Dividends declared - - - - - - (49) (49)
31 December 2016 1,359 (1,912) (5) (34,187) 77,198 42,453 (1,684) 40,769
The consolidated statement of changes in equity should be read in conjunction with the notes set out on pages 7 to 72 which are forming part of the consolidated financial statements
PJSC AEROFLOT
Notes to the Consolidated Financial Statements
for the year ended 31 December 2016
(All amounts in millions of Russian Roubles, unless otherwise stated)
NATURE OF THE BUSINESS
Aeroflot-Russian Airlines (the “Company” or “Aeroflot”) was formed as an open joint stock company in accordance with a Russian Federation Government decree issued in 1992 (hereinafter, the “1992 Decree”). The 1992 Decree conferred all the rights and obligations of Aeroflot-Soviet Airlines and its structural units upon the Company, including inter-governmental bilateral agreements and agreements signed with foreign airlines and civil aviation enterprises. Under Russian Federation Presidential Decree No. 1009 of 4 August 2004, the Company was included in the official List of Strategic Entities and Strategic Joint Stock Companies.
On 1 July 2015, Open Joint Stock Company Aeroflot-Russian Airlines changed its official corporate name to Public Joint Stock Company Aeroflot-Russian Airlines (PJSC Aeroflot) in compliance with legislative changes.
The Company’s principal activities are the provision of passenger and cargo air transportation services, both domestically and internationally, and other aviation services from Moscow Sheremetyevo Airport. The Company and its subsidiaries (the “Group”) are also involved in airline catering and hotel operations. Associated entities mainly comprise aviation security services and other ancillary services.
During the year the Group disposed of ОJSC Vladivostok Avia and СJSC Aeroflot-Cargo as a result of their liquidation in May and September 2016, respectively (Note 21).
As at 31 December 2016 and 2015, the Government of the Russian Federation (the “RF”), as represented by the Federal Agency for Management of State Property, owned a 51.17% stake in the Company. The Company’s headquarters are located at 10 Arbat Street, Moscow, 119002, RF.
The principal subsidiaries are:
Company name Registered address Principal activity 31 December 2016 31 December 2015
JSC Rossiya airlines
(“AK Rossiya”) St. Petersburg, RF Airline
75% minus one
share
75% minus one
share
LLC Pobeda Airlines
(“Pobeda”) Moscow, RF Airline 100.00% 100.00%
JSC Aurora Airlines
(“AK Aurora”) Yuzhno-Sakhalinsk, RF Airline 51.00% 51.00%
LLC Aeroflot-Finance
(“Aeroflot-Finance”) Moscow, RF Finance services 100.00% 100.00%
CJSC Aeromar Moscow Region, RF Catering 51.00% 51.00%
JSC Sherotel Moscow Region, RF Hotel 100.00% 100.00%
LLC A-Technics Moscow, RF Technical
maintenance 100.00% 100.00%
JSC Orenburg airlines
(“Orenair”) Orenburg, RF Airline 100.00% 100.00%
JSC Donavia
(“Donavia”)
Rostov-on-Don,
RF Airline 100.00% 100.00%
OJSC Vladivostok Avia
(“Vladavia”) Primorsk Region, RF Airline - 26.60%
CJSC Aeroflot-Cargo Moscow, RF Cargo transportation
services - 100.00%
NATURE OF THE BUSINESS (CONTINUED)
The Group’s major associate is:
Company name
Registered address
Principal activity
31 December 2016
31 December 2015
JSC AeroMASH–AB
(“AeroMASH–AB”)
Moscow Region,
RF
Aviation
security 45.00% 45.00%
NATURE OF THE BUSINESS (CONTINUED)
The table below provides information on the Group’s aircraft fleet as at 31 December 2016 (number of aircraft):
TYPE OF AIRCRAFT OWNERSHIP PSJC AEROFLOT JSC AK ROSSIYA JSC AK AURORA LLC POBEDA
GROUP
TOTAL
An-24 Owned - - 1 - 1
DHC 8-Q300 Owned - - 1 - 1
DHC 8-Q402 Owned - - 5 - 5
Total owned aircraft - - 7 - 7
Airbus A319 Finance lease - 9 - - 9
Airbus A321 Finance lease 15 - - - 15
Airbus A330 Finance lease 8 - - - 8
Boeing B777 Finance lease 10 - - - 10
An-148 Finance lease - 6 - - 6
Total aircraft under finance leases 33 15 - - 48
SSJ 100 Operating lease 30 - - - 30
Airbus A319 Operating lease - 17 10 - 27
Airbus A320 Operating lease 70 5 - - 75
Airbus A321 Operating lease 17 - - - 17
Airbus A330 Operating lease 14 - - - 14
Boeing B737 Operating lease 20 17 - 12 49
Boeing B747 Operating lease - 7 - - 7
Boeing B777 Operating lease 5 6 - - 11
DHC 8-Q200 Operating lease - - 2 - 2
DHC 8-Q300 Operating lease - - 3 - 3
DHC 6-400 Operating lease - - 2 - 2
Total aircraft under operating leases 156 52 17 12 237
Total fleet 189 67 24 12 292
As at 31 December 2016, 2 An-148 aircraft were under maintenance for delivery to sub-lessees, 3 An-148 aircraft and one An-24 aircraft were leased out, one
An-148 aircraft was not operating and will not be leased out, 2 DHC 8-Q402 aircraft were undergoing pre-operating maintenance and one B-737 aircraft was not
operating due to maintenance for delivery to leasing company.
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The consolidated financial statements of the Group have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) and in accordance with the Federal Law No. 208 – FZ “On
consolidated financial reporting” dated 27 July 2010. The consolidated financial statements are presented
in millions of Russian Roubles (“RUB million”), except where specifically noted otherwise.
These consolidated financial statements have been prepared on the historical cost convention except for
financial instruments which are initially recognised at fair value, financial assets available for sale and
financial instruments measured at fair value through profit or loss, as well as derivative financial instruments
to which specific hedge accounting rules are applicable. The principal accounting policies applied in the
preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all the periods presented in these consolidated financial statements, unless otherwise
stated.
All significant subsidiaries directly or indirectly controlled by the Group are included in these consolidated
financial statements. A list of the Group’s principal subsidiaries is set out in Note 1.
Going concern
Management prepared these consolidated financial statements on a going concern basis. In making this
judgement management considered the Group’s financial position, current intentions, profitability of
operations and access to financial resources, and analysed the impact of the situation in the financial
markets on the operations of the Group.
Functional and presentation currency
The functional currency of the Company and its subsidiaries is the Russian Rouble (“RUB” or “rouble”), the
presentation currency of the Group’s consolidated financial statements is the Russian Rouble as well.
Consolidation
Subsidiaries represent investees, including structured entities, which the Group controls, as the Group:
has the powers to control significant operations which has a considerable impact on the investee’s income,
runs the risks related to variable income from its involvement with investee or is entitled to such income,
and
is able to use its powers with regard to the investee in order to influence the amount of its income.
The existence and effect of substantive rights, including substantive potential voting rights, are considered
when assessing whether the Group has power over another entity. For a right to be substantive, the holder
must have practical ability to exercise that right when decisions about the direction of the relevant
activities of the investee need to be made. The Group may have power over an investee even when it holds
less than majority of voting power in an investee. In such a case, the
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Consolidation (continued)
Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote
holders to determine if it has de-facto power over the investee.
Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities
or apply only in exceptional circumstances, do not prevent the Group from controlling an investee.
Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date)
and are deconsolidated from the date on which control ceases.
Subsidiaries are included in the consolidated financial statements at the acquisition method. Identifiable
assets acquired and liabilities and contingent liabilities received in a business combination are measured at
their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.
Goodwill is measured through the deduction of net assets of the acquired entity from the total of the
following amounts: consideration transferred for the acquired entity, non-controlling share in the acquiree
and fair value of the existing equity interest in the acquiree held immediately by the Group before the
acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after
management reassesses whether it identified all the assets acquired and all liabilities and contingent
liabilities assumed and reviews appropriateness of their measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity
instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from
contingent consideration arrangements but excludes acquisition related costs such as advisory, legal,
valuation and similar professional services. Transaction costs related to the acquisition and incurred for
issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt as part of
the business combination are deducted from the carrying amount of the debt and all other transaction costs
associated with the acquisition are expensed.
The Group measures non-controlling interest that represents the ownership interest and entitles the holder
to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either
at:
а) fair value, or
b) in proportion to the non-controlling share in the net assets of the acquiree.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated, unless the cost cannot be recovered. The Company and
its subsidiaries use uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to
interests which are not owned, directly or indirectly, by the Company. Non-controlling interest forms a
separate component of the Group’s equity.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Purchases of non-controlling interests
The Group applies the economic entity model to account for transactions with owners of non-controlling
interest. Any difference between the purchase consideration and the carrying amount of non-controlling
interest acquired is recorded as a capital transaction directly in equity. The Group recognises the
difference between sales consideration and carrying amount of non-controlling interest sold as a capital
transaction in the consolidated statement of changes in equity.
Investments in associates
Associates are entities over which the Group has significant influence (directly or indirectly), but not
control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights.
Investments in associates are accounted for using the equity method of accounting and are initially
recognised at cost. The carrying amount of associates includes goodwill identified on acquisition less
accumulated impairment losses, if any. Dividends received from associates reduce the carrying value of
the investment in associates. Other post-acquisition changes in the Group’s share of net assets of an
associate are recognised as follows:
the Group’s share of profits or losses of associates is included in the consolidated statement of profit and
loss for the year as a share of financial results of equity accounted investments,
the Group’s share in other comprehensive income is recorded as a separate line item in other
comprehensive income,
all other changes in the Group’s share of the carrying value of net assets of the associates are recorded in
the consolidated statement of profit and loss within the share of financial results of equity accounted
investments.
However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the associate’s assets.
Disposals of subsidiaries or associates
When the Group ceases to have control or significant influence, any retained interest in the entity is
remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value
is the initial carrying amount for the purposes of subsequent accounting for the retained interest in an
associate or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity, are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are recycled to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income is reclassified to
profit or loss where appropriate.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Goodwill
Goodwill is carried at cost less accumulated impairment losses, if any. The Group performs goodwill
impairment testing at least on an annual basis and whenever there are indications that goodwill may be
impaired. The carrying value of goodwill is compared to the recoverable amount, which is the higher of
value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an
expense and is not subsequently reversed. Goodwill is allocated to the cash generating units (namely, the
Group’s subsidiaries or business units). These units represent the lowest level at which the Group monitors
goodwill and are not larger than an operating segment.
Gains or losses on disposal of an operation within a cash generating unit to which goodwill has been
allocated include the carrying amount of goodwill associated with the disposed operation, generally
measured on the basis of the relative values of the disposed operation and the portion of the cash-
generating unit which is retained.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currency are translated into each entity’s functional
currency at the official exchange rate of the Central Bank of the Russian Federation (“CBRF”) at the
respective end of the reporting period. Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of transactions in foreign currency and from the translation of monetary assets and liabilities
denominated in foreign currency into each entity’s functional currency at year-end official exchange rates
of the CBRF are recognised in the consolidated statement of profit and loss for the year within finance
income or costs except for foreign exchange differences arising on translation of hedge financial
instruments. Foreign exchange differences on hedge instruments are recognised in other comprehensive
income.
Translation at year-end rates does not apply to non-monetary items in the consolidated statement of
financial position that are measured at historical cost. Non-monetary items measured at fair value in a
foreign currency, including equity investments, are translated using the exchange rates at the date when
the fair value was determined. Effects of exchange rate changes on non-monetary items measured at fair
value in a foreign currency are recorded as part of the fair value gain or loss.
The table below presents the US dollar (USD) / Russian rouble (RUB) and euro (EUR) / RUB exchange
rates that were used for translating transaction amounts and monetary assets and liabilities into foreign
currencies: Official exchange rates
RUB / USD 1.00 RUB / EUR 1.00
Average rate for 2016 67.03 74.23
31 December 2016 60.66 63.81
Average rate for 2015 60.96 67.78
31 December 2015 72.88 79.70
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net of sales related taxes.
Passenger revenue: Ticket sales are reported as traffic revenue when the transportation service has been
provided. The value of tickets sold and still valid but not used by the reporting date is reported in the
Group’s consolidated statement of financial position in a separate line item (unearned traffic revenue)
within current liabilities. This item is reduced either when the Group completes the transportation service
or when the passenger requests a refund. Sales representing the value of tickets that have been issued, but
which will never be used, are recognised as traffic revenue at the reporting date based on an analysis of
historical patterns of actual income from unused tickets. Commissions, which are payable to the sales
agents are recognised as sales and marketing expenses within operating costs in the consolidated statement
of profit and loss in the period of ticket sale by agents.
Passenger revenue includes revenue from code-share agreements with certain other airlines as per which the
Group and other airlines sell seats for each other’s flights (“code-share agreements”). Revenue from the sale
of code-share seats on other airlines is recorded at the moment of the transportation service provision and is
accounted for net in Group’s passenger revenue in the consolidated statement of profit and loss. Revenue
from the sale of code-share seats on Group’s flights by other airlines are recorded at the moment of the
transportation service provision and is fully accounted for in the Group’s traffic revenue in the consolidated
statement of profit and loss.
Cargo revenue: The Group’s cargo transport services are recognised as revenue when the air
transportation is provided. The value of cargo transport services sold but not yet provided is reported in
the Group’s consolidated statement of financial position in a separate line item (unearned traffic revenue)
within current liabilities.
Catering: Revenue is recognised when meal packages are delivered to the aircraft, as this is the date when
the risks and rewards of ownership are transferred to customers.
Other revenue: Revenue from bilateral airline agreements is recognised when earned with reference to the
terms of each agreement. Hotel accommodation revenue is recognised when the services are provided.
Revenues from sales of goods are recognised at the point of transfer of risks and rewards of ownership of
the goods, normally when the goods are shipped to the customer. If the Group agrees to transport goods to
a specified location, revenue is recognised when the goods are passed to the customer at the destination
point. Revenues from sale of services are recognised in the period in which the services were rendered.
Segment information
The Group determines and presents operating segments based on the information that internally is
provided to the General Director of the Group, who is the Group's chief operating decision maker.
Segments whose revenue, financial result or assets are not less than ten percent or more of all the
segments are reported separately.
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Intangible assets
The Group’s intangible assets other than goodwill have definite useful lives and primarily include
capitalised computer software with the useful life of 5 years. Intangible assets are amortised using the
straight-line method over their useful lives. Acquired licenses for computer software are capitalised on the
basis of the costs incurred to acquire and bring them to use. If impaired, the carrying amount of intangible
assets is written down to the higher of value in use and fair value less costs of disposal.
Property, plant and equipment
Property, plant and equipment are reported at cost, less accumulated depreciation and impairment losses
(where appropriate). Depreciation is calculated in order to allocate the cost (less estimated residual value
where applicable) over the remaining useful lives of the assets.
Fleet
Owned aircraft and engines: Owned fleet consists of foreign-made aircraft, engines are both Russian and
foreign-made. The full list of aircraft is presented in Note 1.
Finance leased aircraft and engines: Where assets are financed through finance leases, under which
substantially all the risks and rewards of ownership are transferred to the Group, the assets are treated as if
they had been purchased outright.
Capitalised costs on regular maintenance works and repairs of aircraft operated under finance lease:
Expenditure incurred on modernisation and improvements projects that are significant in size (mainly
aircraft modifications involving installation of replacement parts) are capitalised. The carrying amount of
those parts that are replaced is derecognised from the Group’s consolidated statement of financial position
and included in operating costs in the Group’s consolidated statement of profit and loss. Capitalised costs of
aircraft checks and major modernisation and improvements projects are depreciated on a straight-line basis
to the projected date of the next check or based on estimates of their useful lives. Ordinary repair and
maintenance costs of aircraft are expensed as incurred and included in operating costs (aircraft maintenance)
in the Group’s consolidated statement of profit and loss.
Depreciation of fleet: The Group depreciates fleet assets owned or held under finance leases on a straight-
line basis to the end of their estimated useful life or lease term, if it is shorter. The airframe, engines and
interior of aircraft are depreciated separately over their respective estimated useful lives.
The Group’s fleet and other property, plant and equipment have the following useful lives:
Airframes of aircraft 20-32 years
Engines 8-10 years
Interiors 5 years
Buildings 15-50 years
Facilities and transport vehicles 3-5 years
Other non-current assets 1-5 years
Capitalised leasehold improvements: Capitalised costs that relate to the rented fleet are depreciated over the
shorter of: their useful lives and the lease term.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Property, plant and equipment (continued)
Land, buildings and other plant and equipment
Property, plant and equipment is stated at the historical US Dollar cost recalculated at the exchange rate on
1 January 2007, the date of the change of the functional currency of the Company and its major
subsidiaries from the US Dollar to the Russian Rouble or at the historical cost if property, plant and
equipment was acquired after specified date. Depreciation is accrued based on the straight-line method on
all property, plant and equipment based upon their expected useful lives or, in the case of leasehold
properties, over the duration of the leases or useful life if it is shorter. The useful lives of the Group’s
property, plant and equipment range from 1 to 50 years. Land is not depreciated.
Construction in progress
Construction in progress represents costs related to construction of property, plant and equipment,
including corresponding variable out-of-pocket expenses directly attributable to the cost of construction,
as well the acquisition cost of other assets that require assembly or any other preparation. The carrying
value of construction in progress is regularly analysed for the potential accrual of the impairment
provision.
Gain or loss on disposal of property, plant and equipment
The gain or loss arising on the disposal of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the Group’s consolidated statement of
profit and loss within operating costs.
Finance lease
Where the Group is a lessee in a lease which transferred substantially all the risks and rewards incidental to
ownership to the Group, the assets leased are capitalised in property, plant and equipment at the
commencement of the lease at the lower of: the fair value of the leased assets and the present value of the
minimum lease payments.
Each lease payment is allocated between the outstanding liability and finance charges so as to achieve a
constant rate on the finance balance outstanding. Corresponding lease liabilities net of future interest
expenses are recorded as a separate line item (finance lease liabilities) within current and non-current
liabilities in the Group’s consolidated statement of financial position. Interest expenses within lease
payments are charged to profit or loss over the lease terms using the effective interest method. The assets
acquired under finance leases are depreciated over their useful life or the shorter lease term, if the Group is
not reasonably certain that it will obtain ownership by the end of the lease term.
Customs duties, legal fees and other initial direct costs increase the total amount recorded in assets in the
Group’s consolidated statement of financial position. The interest component of lease payments included in
financial costs in the Group’s consolidated statement of profit and loss.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Non-current assets classified as held for sale
Non-current assets and disposal groups (which may include both non-current and current assets) are
classified in the consolidated statement of financial position as ‘non-current assets held for sale’ if their
carrying amount will be recovered principally through a sale transaction (including loss of control of a
subsidiary holding the assets) within twelve months after the reporting period. Assets are reclassified
when all of the following conditions are met: (a) the assets are available for immediate sale in their present
condition; (b) the Group’s management approved and initiated an active programme to locate a buyer; (c)
the assets are actively marketed for sale at a reasonable price; (d) the sale is expected within one year; and
(e) it is unlikely that significant changes to the plan to sell will be made or that the plan will be withdrawn.
Non-current assets or disposal groups classified as held for sale in the current period’s consolidated
statement of financial position are not reclassified or re-presented in the comparative consolidated
statement of financial position to reflect the classification at the end of the current period.
A disposal group is a group of assets (current or non-current) to be disposed of, by sale or otherwise,
together as a group in a single transaction, and liabilities directly associated with those assets that will be
transferred in the transaction. Goodwill is included if the disposal group includes an operation within a
cash-generating unit to which goodwill has been allocated on acquisition. Non-current assets are assets
that include amounts expected to be recovered or collected more than twelve months after the reporting
period. If reclassification is required, both the current and non-current portions of an asset are reclassified.
Held for sale disposal groups as a whole are measured at the lower of their carrying amount and fair value
less costs to sell. Held for sale property, plant and equipment are not depreciated or amortised.
Liabilities directly associated with the disposal group that will be transferred in the disposal transaction
are reclassified and presented separately in the consolidated statement of financial position.
Capitalisation of borrowing costs
Borrowing costs including interest accrued, foreign exchange difference and other costs directly
attributable to the acquisition, construction or production of assets that are not carried at fair value and that
necessarily take a substantial time to get ready for intended use or sale (the "qualifying assets") are
capitalised as part of the costs of those assets, if the commencement date for capitalisation is on or after 1
January 2009. The Group considers prepayments for aircraft as the qualifying asset with regard to which
borrowing costs are capitalised.
The capitalisation starts when the Group:
(а) bears expenses related to the qualifying asset;
(b) bears borrowing costs; and
(c) takes measures to get the asset ready for intended use or sale.
Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their
use or sale.
The Group capitalises borrowing costs related to capital expenditure made on qualifying assets.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Capitalisation of borrowing costs (continued)
Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average
interest cost is applied to the expenditures on the qualifying assets), except to the extent that funds are
borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing
costs incurred less any investment income on the temporary investment of those borrowings are
capitalised.
Impairment of property, plant and equipment
At each reporting date the management reviews its property, plant and equipment to determine whether there is any indication of impairment of those assets. If any such indication exists, the recoverable amount of the asset is estimated by management as the higher of: an asset’s fair value less costs of disposal and its value in use. The carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recorded within operating costs in the Group’s consolidated statement of profit and loss for the year. An impairment loss recognised for an asset in prior years is reversed where appropriate if there has been a change in the estimates used to determine the asset’s value in use or fair value less of disposal to sell.
Operating leases
Where the Group is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments are charged to profit or loss for the year on a straight-line basis over the lease term. The lease term is the non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.
Related direct expenses including custom duties for imported leased aircraft are recognised within non-current assets at the time of the aircraft transfer and amortised using a straight-line method over the term of lease agreement. Amortisation charges are recognised within operating costs. In compliance with the customs legislation of the Russian Federation, the Group pays customs duties in instalments, and therefore customs duties payment obligations are initially recognised at amortised cost.
The operating lease agreements include requirements to perform regular repairs and maintenance works during the lease term. Accordingly, the Group accrues a provision in the amount of discounted expenses needed to perform regular repairs and maintenance works. The estimated expenses are based on the most reliable data available at the time of such estimation. The provisions of the operating lease agreements, age and condition of the aircraft and engines, market value of fixtures, key parts and components subject to replacement and the cost of required work are taken into account. The provision is recorded at the discounted value.
The costs of regular repairs and maintenance works performed for aircraft held under finance lease are capitalized and amortized over the shorter of (i) the scheduled usage period to the next major inspection event or (ii) the remaining life of the asset or (iii) remaining lease term.
Aircraft lease security deposits
Aircraft lease security deposits represent amounts paid to the lessors of aircraft in accordance with the provisions of operating lease agreements. These security deposits are returned to the Group at the end of the lease period. Security deposits related to lease agreements are presented separately in the consolidated statement of financial position (aircraft lease security deposits) and recorded at amortised cost.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Classification of financial assets
Financial assets have the following categories: а) loans and receivables, b) financial assets available for
sale, and c) financial assets measured at fair value through profit or loss, which are recognised in this
category from the date of the initial recognition.
Loans and receivables are unquoted on active market non-derivative financial assets with fixed or
determinable payments other than those that the Group intends to sell in the near term.
Derivative financial instruments, including currency and interest rate options, fuel options, and currency
and interest rate swaps are carried at their fair value. All derivative instruments are carried as assets when
fair value is positive and as liabilities when fair value is negative. Changes in the fair value of derivative
instruments are included in profit or loss for the year, except for instruments subject to special hedge
accounting rules, whose fair value changes are recorded in other comprehensive income.
All other financial assets are included in the available-for-sale category, which includes investment
securities which the Group intends to hold for an indefinite period of time and which may be sold in
response to needs for liquidity or changes in interest rates, exchange rates or equity prices.
Classification of financial liabilities
Financial liabilities have the following measurement categories: a) held for trading, which also includes
financial derivatives, and (b) other financial liabilities. Liabilities held for trading are carried at fair value
with changes in value recognised in profit or loss for the year (as finance income or finance costs) in the
period in which they arise. Other financial liabilities are carried at amortised cost.
Financial instruments – key measurement terms
Depending on their classification, financial instruments are carried at fair value, cost or amortised cost, as
described below.
Fair value – is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The best evidence of fair value is price
in an active market. An active market is one in which transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing basis.
Fair value of financial instruments traded in an active market is measured as the product of the quoted
price for the individual asset or liability and the quantity held by the entity.
A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active
market is measured at the fair value of a group of financial assets and financial liabilities on the basis of
the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or
paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction
between market participants at the measurement date. This is applicable for assets
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Financial instruments – key measurement terms (continued)
carried at fair value on a recurring basis if: (a) the Group manages the group of financial assets and
financial liabilities on the basis of the Company’s net exposure to a particular market risk (or risks) or to
the credit risk of a particular counterparty in accordance with the Group’s documented risk management
or investment strategy; (b) the Group provides information on that basis about the group of assets and
liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the
Group’s exposure to a particular market risk (or risks) arising from the financial assets and financial
liabilities is substantially the same.
Valuation techniques such as discounted cash flow models or models based on recent arm’s length
transactions or consideration of financial data of the investees are used to measure fair value of certain
financial instruments for which external market pricing information is not available.
Financial instrument measured at fair value are analysed by levels of the fair value hierarchy as follows:
level 1 are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities,
level 2 measurements are valuations techniques with all material inputs observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and
level 3 measurements, which are valuations not based on solely observable market data (that is, the
measurement requires significant unobservable inputs).
Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the
reporting period.
Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to
acquire an asset at the time of its acquisition and includes transaction costs. Measurement at cost is only
applicable to investments in equity instruments that do not have a quoted market price and whose fair
value cannot be reliably measured and derivatives that are linked to, and must be settled by, delivery of
such unquoted equity instruments.
Amortised cost is the amount at which the financial instrument was recognised at initial recognition less
any principal repayments, minus or plus accrued interest, and for financial assets - less any write-down
(direct or through the valuation provision account) for incurred impairment losses. Accrued interest
includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to
maturity amount using the effective interest method. Accrued interest income and accrued interest
expense, including both accrued coupon and amortised discount or premium (including fees deferred at
origination, if any), are not presented separately and are included in the carrying values of related items in
the consolidated statement of financial position.
The effective interest method is a method of allocating interest income or interest expense over the relevant
period so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
(excluding future credit losses) through the expected life of the financial instrument or a shorter period, if
appropriate, to the net carrying amount of the financial instrument. The effective interest rate discounts
cash flows of variable interest instruments to the next interest
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Financial instruments – key measurement terms (continued)
repricing date, except for the premium or discount which reflects the credit spread over the floating rate
specified in the instrument, or other variables that are not reset to market rates. Such premiums or
discounts are amortised over the whole expected life of the instrument. The present value calculation
includes all fees paid or received between parties to the contract that are an integral part of the effective
interest rate.
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of
a financial instrument. An incremental cost is one that would not have been incurred if the transaction had
not taken place. Transaction costs include fees and commissions paid to agents and advisors, levies by
regulatory agencies and securities exchanges, and transfer taxes and duties imposed on property transfer.
Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or
holding costs.
Initial recognition of financial instruments
Derivative financial instruments, including financial instruments subject to special hedge accounting rules,
are initially recognised at fair value. All other financial instruments are initially recorded at fair value plus
transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss
on initial recognition is only recorded if there is a difference between fair value and transaction price
which can be evidenced by other observable current market transactions in the same instrument or by a
valuation technique whose inputs include only data from observable markets.
All purchases and sales of financial assets that require delivery within the time frame established by
regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is
the date on which the Group commits to deliver a financial asset. All other purchases are recognised when
the Company/Group becomes a party to the contractual provisions of the instrument.
Derecognition of financial assets and liabilities
The Group derecognises financial assets when:
(а) the assets are redeemed or the rights to cash flows from the assets expired, or
(b) the Group has transferred the rights to the cash flows from financial assets or entered into a transfer
agreement, while:
(i) also transferring all substantial risks and rewards of ownership of the assets, or
(ii) neither transferring nor retaining all substantial risks and rewards of ownership but losing control
over such assets.
Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to
an unrelated third party without needing to impose additional restrictions on the sale.
The Group removes a financial liability (or a part of a financial liability) from its consolidated statement
of financial position when, and only when, it is extinguished - i.e. when the obligation specified in the
contract is discharged or cancelled or expires. The difference between the carrying amount of a financial
liability (or part of a financial liability) extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is be recognised in profit or loss.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position
only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to
either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set
off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following
circumstances: (i) in the normal course of business, (ii) in the event of default and (iii) in the event of
insolvency or bankruptcy.
Financial instruments and hedge accounting
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as hedges for a highly probable forecast transaction (cash flow hedge).
The group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 24. The fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in hedging reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated statement of profit and loss as a separate line below operating result of the Group.
Amounts accumulated in equity are reclassified to profit or loss (as profit or loss from financing activities) in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory), the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statement of profit and loss within gains and losses from financing activities as a separate line.
Hedging result in the consolidated statement of profit and loss is composed of change in fair value of hedging derivatives (use of hedging results) and the reverse effect on hedging risks impact of relevant hedging transactions recognized in operating activity.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Available-for-sale investments
Available for sale investments are carried at fair value. Interest income on available-for-sale debt
securities is calculated using the effective interest method and recognised in profit or loss for the year as
finance income. Dividends on available-for-sale equity instruments are recognised in profit or loss for the
year as finance income when the Group’s right to receive payment is established and it is probable that the
dividends will be collected. All other elements of changes in the fair value are recognised in other
comprehensive income until the investment is derecognised or impaired at which time the cumulative gain
or loss is reclassified from other comprehensive income to finance income in profit or loss for the year.
Impairment losses are recognised in profit or loss for the year when incurred as a result of one or more
events (“loss events”) that occurred after the initial recognition of available-for-sale investments.
A significant or prolonged decline in the fair value of an equity security below its cost is an indicator that
it is impaired. The cumulative impairment loss – measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that asset previously recognised in profit or loss – is
reclassified from other comprehensive income to finance costs in profit or loss for the year.
Impairment losses on equity instruments are not reversed and any subsequent gains are recognised in other
comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as
available for sale increases and the increase can be objectively related to an event occurring after the
impairment loss was recognised in profit or loss, the impairment loss is reversed through current period’s
profit or loss.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and short-term highly liquid
investments (including bank deposits) with contractual maturities of ninety days or less, earning interest
income. Cash and cash equivalents are carried at amortised cost using the effective interest method.
Restricted balances are excluded from cash and cash equivalents for the purposes of the consolidated
statement of cash flows. Balances restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period are included in other non-current assets in the Group’s consolidated
statement of financial position.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables are individually recognised at fair value, and are
subsequently measured at amortised cost using the effective interest rate method. Doubtful accounts
receivable balances are assessed individually and any impairment losses are included in other operating
costs in the Group’s consolidated statement of profit and loss.
2.BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Impairment of financial assets carried at amortised cost
Impairment losses are recognised in profit or loss when incurred as a result of one or more events (“loss
events”) that occurred after the initial recognition of the financial asset and which have an impact on the
amount or timing of the estimated future cash flows of the financial asset or group of financial assets that
can be reliably estimated. The primary factors that the Group considers in determining whether a financial
asset is impaired are its overdue status and realisability of related collateral, if any.
Impairment losses are always recognised through an allowance account to write down the asset’s carrying
amount to the present value of expected cash flows (which exclude future credit losses that have not been
incurred) discounted at the original effective interest rate of the asset. The calculation of the present value
of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result
from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as an improvement in the
debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance
account through profit or loss for the year.
Uncollectible assets are written off against the related impairment loss provision after all the necessary
procedures to recover the asset have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off are credited to impairment loss account within
the profit or loss for the year.
If the terms of an impaired financial asset held at amortised cost are renegotiated or otherwise modified
because of financial difficulties of the counterparty, impairment is measured using the original effective
interest rate before the modification of terms. The renegotiated asset is then derecognised and a new asset
is recognised at its fair value only if the risks and rewards of the asset substantially changed. This is
normally evidenced by a substantial difference between the present values of the original cash flows and
the new expected cash flows.
Prepayments
In these consolidated financial statements, prepayments are carried at cost less provision for impairment.
A prepayment is classified as non-current when the goods or services relating to the prepayment are
expected to be obtained after one year, or when the prepayment relates to an asset which will itself be
classified as non-current upon initial recognition. Prepayments to acquire assets are included to the
carrying amount of the asset once the Group has obtained control of the asset and it is probable that future
economic benefits associated with the asset will flow to the Group. Other prepayments are written off to
profit or loss when the services relating to the prepayments are received. If there is an indication that the
assets, goods or services relating to a prepayment will not be received, the carrying value of the
prepayment is written down accordingly and a corresponding impairment loss is recognised in the Group’s
consolidated statement of profit and loss for the year.
2.BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Trade and other payables
Trade payables are accrued when the counterparty performs its obligations under the contract and are
carried at amortised cost using the effective interest method.
Loans and borrowings
Loans and borrowings are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method.
Short-term loans and borrowings comprise:
interest bearing loans and borrowings with a term shorter than one year;
current portion of long-term loans and borrowings.
Long-term loans and borrowings include liabilities with the maturity exceeding one year.
Expendable spare parts and inventories
Inventories, including aircraft expendable spare parts, are valued at cost or net realisable value, whichever
is lower. The costs are determined as the actual acquisition cost of spare parts for aircraft maintenance and
as the cost of other inventories on the first-in, first- out (“FIFO”) basis. The Group writes off the full
amount of obsolete inventories which the Group does not plan to continue using in its operations.
Value added taxes
Value added tax (“VAT”) related to sales of goods or provision of services is recorded as a liability to the
tax authorities on an accruals basis. Domestic flights in general are subject to VAT at 10% (before 1 July
2015 – 18%) and international flights are subject to VAT at 0%. Input VAT invoiced by domestic
suppliers as well as VAT paid in respect of imported leased aircraft and spare parts may be recovered,
subject to certain restrictions, against output VAT. The recovery of input VAT is typically delayed by up
to six months and sometimes longer due to compulsory tax audit requirements and other administrative
matters. Input VAT claimed for recovery as at the date of the consolidated statement of financial position
is presented net of the output VAT liability. Recoverable input VAT that is not claimed for recovery in the
current period is recorded in the consolidated statement of financial position as VAT receivable. VAT
receivable that is not expected to be recovered within the twelve months from the reporting date is
classified as a non-current asset. Where provision has been made for uncollectible receivables, the bad
debt expense is recorded at the gross amount of the account receivable, including VAT.
2.BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Frequent flyer programme
Since 1999 the Group operates a frequent flyer programme referred to as Aeroflot-Bonus. Subject to the
programme’s terms and conditions, the miles earned entitle members to a number of benefits such as free
flights, flight class upgrades and redeem miles for special awards from programme partners. In accordance
with IFRIC 13 Customer Loyalty Programmes, accumulated but as yet unused bonus miles are deferred
using the deferred revenue method to the extent that they are likely to be used. The fair value of miles
accumulated on the Group’s own flights is recognised under current and non-current deferred revenue
related to frequent flyer programme (Note 26) within current and non-current liabilities, respectively, in the
Group’s consolidated statement of financial position. The fair value of miles accumulated by Aeroflot-Bonus
participants for using services provided by the partners of the programme, as well as the fair value of promo
miles, is recognised as other current and non-current liabilities related to frequent flyer programme (Notes 25
and 30) in accounts payable, accrued liabilities and other non-current liabilities, respectively, in the Group’s
consolidated statement of financial position. Revenue is recognised upon the provision of services to
Aeroflot-Bonus members.
Employee benefits
Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid
annual leave and sick leave, bonuses, and non-monetary benefits (such as health services and etc.) are
accrued in the year in which the associated services are rendered by the employees of the Group.
Provisions for liabilities
Provisions for liabilities are recognised if, and only if, the Group has a present obligation (legal or
constructive) as a result of a past event, and it is probable (i.e. more likely than not) that an outflow of
resources embodying economic benefits will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate (Note 27). Where the effect of the time value of money is significant,
the amount of a provision is stated at the present value of the expenditures required to settle the obligation.
Income tax
Income taxes have been provided for in the consolidated financial statements in accordance with
legislation using tax rates and legislative regulations enacted or substantively enacted at the end of the
reporting period. Income tax expense/benefit comprises current and deferred tax and is recognised in the
consolidated statement of profit and loss for the year, unless it should be recorded within other
comprehensive income or directly in equity since it relates to transactions which are also recognised
within other comprehensive income or directly in equity in this or any other period.
Current tax is the amount expected to be paid to or recovered from budget in respect of taxable profits or
losses for the current and prior periods. Taxable profits or losses are based on estimates if the consolidated
financial statements are authorised prior to filing relevant tax returns. Other tax expenses, except from the
income tax, are recorded within other operating costs in the Group’s consolidated statement of profit and
loss.
2.BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income tax (continued)
Deferred income tax is provided using the balance sheet liability method for tax losses carried forward and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for consolidated financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences arising on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill, and subsequently for goodwill which is not deductible for tax purposes. Deferred tax assets and liabilities are measured at tax rates enacted or substantively enacted at the end of the reporting period which are expected to apply to the period when the temporary differences will reverse or the tax losses carried forward will be utilised.
Deferred tax assets for deductible temporary differences and tax losses carried forward are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax assets and liabilities are netted only within the individual companies of the Group.
The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains upon their disposal. The Group does not recognise deferred tax liabilities on such temporary differences except to the extent that Management expects the temporary differences to reverse in the foreseeable future.
Uncertain income tax positions
The Group’s uncertain tax positions are reassessed by management at the end of each reporting period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period, and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than income tax are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period.
Pensions
The Group makes certain payments to employees on retirement. These obligations represent obligations under a defined benefit pension plan. For such plans the pension accounting costs are assessed using the projected unit credit method. Under this method the cost of providing pensions is charged to the consolidated statement of profit and loss in order to spread the regular cost over the service lives of employees. Actuarial gains and losses are recognised in other comprehensive income immediately. The pension liability for non-retired employees is calculated based on a minimum annual pension payment and do not include increases, if any, to be made by management in the future. Where such post-employment employee benefits fall due more than twelve months after the reporting date they are discounted using a discount rate determined by reference to the government bond yields at the reporting date.
2.BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pensions (continued)
The Group also participates in a defined contribution plan, under which the Group has committed to making
additional contributions as a percentage (20% in 2016) of the contribution made by employees choosing to
participate in the plan. Contributions made by the Group on defined contribution plans are charged to
expenses when incurred. Contributions are also made to the Government Pension fund at the statutory rates
in force during the year. Such contributions are expensed as incurred.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of
consideration received over the par value of shares issued is recorded as share premium in equity.
Share-based compensation
The title to future equity compensations (shares or share options) to employees for the provided services is
measured at fair value of these instruments at the date of the transfer and is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees unconditionally become
entitled to these awards.
The amount recognised as an expense is adjusted to reflect the number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that meet the related service and non-market
performance conditions at the vesting date. The effect of revisiting initial estimates, if any, is recognised in
profit or loss with a corresponding adjustment to equity.
Services, including employee services received in exchange for cash-settled share-based payments, are
recognised at the fair value of the liability incurred and are expensed when consumed or capitalised as assets,
which are depreciated or amortised. The liability is re-measured at each balance sheet date to its fair value,
with all changes recognised immediately in profit or loss.
Treasury shares purchased
Where the Company or its subsidiaries purchase the Company’s equity instruments, the consideration paid,
including any directly attributable incremental costs, net of income taxes, is deducted from equity
attributable to the Company’s owners until the equity instruments are cancelled, reissued or disposed of. The
Company’s shares, which are held as treasury stock or belong to the Company’s subsidiaries, are reflected as
a reduction of the Group’s equity.
The sale or re-issue of such shares does not impact net profit for the current year and is recognised as a
change in the shareholders’ equity of the Group. Where such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable incremental transaction costs and the related income
tax effects, is included in equity attributable to the Company’s shareholders.
Dividend distributions and payments by the Company are recorded net of the dividends related to treasury
shares.
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Dividends
Dividends are recorded as a liability and deducted from equity in the period in which they are declared and
approved by the shareholders in the General Shareholders’ Meeting.
Earnings/loss per share
Earnings per share are determined by dividing the profit or loss attributable to the Company’s shareholders
by the weighted average number of participating shares outstanding during the reporting year. The
calculation of diluted earnings per share includes shares planned to be used in the option programme when
the average market price of ordinary shares for the period exceeds the exercise price of the options.
3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the amounts recognised in the consolidated financial
statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and
judgements are continually evaluated and are based on management’s experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving estimations, in the process of
applying the accounting policies. Judgements that have the most significant effect on the amounts recognised
in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying
amount of assets and liabilities within the next financial year include:
Useful lives and residual value of property, plant and equipment
The assessment of the useful lives of property, plant and equipment and their residual value are matters of
management judgement based on the use of similar assets in prior periods. To determine the useful lives
and residual value of property, plant and equipment, management considers the following factors: nature
of the expected use, estimated technical obsolescence and physical wear. A change in each of the above
conditions or estimates may require the adjustment of future depreciation expenses.
Value of tickets which were sold, but will not be used
Sales representing the value of tickets that have been issued, but which will never be used, are recognised
as traffic revenue at the reporting date based on an analysis of historical income from unused tickets. The
assessment of the probability that the tickets will not be used is a matter of management judgement. A
change in these estimates may require the adjustment to the revenue amount in the consolidated statement
of profit and loss (Note 5) and to the unearned traffic revenue in the consolidated statement of financial
position.
3.CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES (CONTINUED)
Frequent flyer programme
At the reporting date, the Group estimates and recognises the liability pertaining to air miles earned by
Aeroflot Bonus programme (Note 2) members. The estimate has been made based on the statistical
information available to the Group and reflects the expected air mile utilisation pattern after the reporting
date multiplied by their assessed fair value. The assessment of the fair value of a bonus mile, as well as the
management’s expectations regarding the amount of miles to be used by Aeroflot Bonus members, are a
matter of management judgement. A change in these estimates may require the adjustment of deferred
revenue, other current and non-current liabilities related to frequent flyer programme in the consolidated
statement of financial position (Note 26) and adjustment to revenue in the consolidated statement of profit
and loss (Note 5).
Compliance with tax legislation
Compliance with tax legislation, particularly in the Russian Federation, is subject to a significant degree of
interpretation and can be routinely challenged by the tax authorities. The management records a provision in
respect of its best estimate of likely additional tax payments and related penalties which may be payable if
the Group’s tax compliance is challenged by the relevant tax authorities (Note 41).
Classification of a lease agreement as operating and finance lease
Management applies professional judgement with regard to the classification of aircraft lease agreements
as operating and finance lease agreements in order to determine whether all significant risks and rewards
related to the ownership of an asset are transferred to the Group in accordance with the agreement and
which risks and rewards are significant. A change in these estimates may require a different approach to
aircraft accounting.
Estimated impairment of goodwill
The Group tests goodwill for impairment at least annually. The recoverable amount of each cash generating
unit was determined based on value-in-use calculations. These calculations require the use of estimates as
further detailed in Note 23.
Deferred tax asset recognition
The recognised deferred tax asset represents income taxes recoverable through future deductions from
income tax expense and is recorded in the consolidated statement of financial position. Deferred income tax
assets are recognised to the extent that realisation of the related tax benefit is probable. The future taxable
profits and the amount of tax benefits that are probable in the future are based on the medium term business
plan prepared by management and extrapolated results thereafter. The business plan is based on management
expectations that are believed to be reasonable under the circumstances.
4.ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
New standards and interpretations effective from 1 January 2016
The following amended standards became effective from 1 January 2016, but did not have any material
impact on the Group.
IFRS 14, Regulatory deferral accounts (issued in January 2014 and effective for annual periods
4.ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
(CONTINUED)
beginning on or after 1 January 2016).
Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11 (issued on 6
May 2014 and effective for the periods beginning on or after 1 January 2016).
Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and
IAS 38 (issued on 12 May 2014 and effective for the periods beginning on or after 1 January 2016).
Equity Method in Separate Financial Statements - Amendments to IAS 27 (issued on 12 August 2014
and effective for annual periods beginning 1 January 2016).
Annual Improvements to IFRSs 2014 (issued on 25 September 2014 and effective for annual periods
beginning on or after 1 January 2016).
Disclosure Initiative Amendments to IAS 1 (issued in December 2014 and effective for annual periods on
or after 1 January 2016).
Investment Entities: Applying the Consolidation Exception Amendment to IFRS 10, IFRS 12 and IAS
28 (issued in December 2014 and effective for annual periods on or after 1 January 2016).
New Accounting standards and Pronouncements
Certain new standards and interpretations have been issued that are mandatory for the annual periods
beginning on or after 1 January 2017 or later, and which the Group has not early adopted:
IFRS 9 “Financial Instruments: Classification and Measurement” (issued in July 2014 and effective for
annual periods beginning on or after 1 January 2018). The Group is currently assessing the impact of the
new standard on its financial statements;
IFRS 15 “Revenue from contracts with customers” (issued on 28 May 2014, effective for annual periods
beginning on or after 1 January 2018). The Group is currently assessing the impact of the new standard on
its financial statements;
IFRS 16 “Leases” (issued on 13 January 2016 and effective for annual periods beginning on or after 1
January 2019). The standard was not approved for use in RF, the Group is currently assessing the impact
of the new standard on its financial statements;
Disclosure Initiative - Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods
beginning on or after 1 January 2017). The Group is currently assessing the impact of the amendment on
its financial statements;
Amendments to IAS 15 “Revenue from contracts with customers” (issued on 12 April and effective for
annual periods beginning on or after 1 January 2018). The Group is currently assessing the impact of the
new standard on its financial statements;
The following other new pronouncements are not expected to have any material impact on the Group
when adopted:
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to
IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after
the date of approval by IASB);
4.ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS
(CONTINUED)
Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12 (issued on 19
January 2016 and effective for annual periods beginning on or after 1 January 2017).
Amendments to IFRS 2 "Share-based payments" (issued on 20 June 2016 and effective for annual
periods on or after 1 January 2018);
IFRS 9 “Financial Instruments” and IFRS 4 “Insurance contracts” - Amendments to IFRS 4 (issued
on 12 September 2016 and effective depending on the chosen approach: for annual periods on or after 1
January 2018 (organizations that have chosen deferral approach) and for annual periods since the
organization has first begun to apply IFRS 9 (organizations that have chosen overlay approach).
Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual
periods beginning on or after 1 January 2017 for amendments to IFRS 12, and on or after 1 January 2018
for amendments to IFRS 1 and IAS 28).
IFRIC 22 - Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016
and effective for annual periods beginning on or after 1 January 2018).
Transfers of Investment Property - Amendments to IAS 40 (issued on 8 December 2016 and effective for
annual periods beginning on or after 1 January 2018).
5.TRAFFIC REVENUE
2016 2015
Scheduled passenger flights 403,760 343,428
Charter passenger flights 17,617 6,146
Cargo flights 12,589 9,631
Total traffic revenue 433,966 359,205
6.OTHER REVENUE
2016 2015
Airline agreements revenue 35,923 31,596
Revenue from partners under the frequent flyer programme 11,846 10,275
Refuelling services 2,515 2,535
In-flight catering services 1,429 1,434
Sales of duty free goods 1,349 1,162
Ground handling and maintenance 1,382 1,118
Hotel revenue 491 463
Other revenue 6,979 7,385
Total other revenue 61,914 55,968
7.OPERATING COSTS LESS STAFF COSTS AND DEPRECIATION AND
AMORTISATION
2016 2015
Aircraft and traffic servicing 70,908 63,408
Operating lease expenses 59,563 44,415
Aircraft maintenance 38,236 32,042
Sales and marketing expenses 13,887 13,568
Communication expenses 14,697 12,890
Administration and general expenses 16,407 12,516
Passenger services 16,319 11,778
Expenses for in-flight catering 8,714 7,766
Insurance expenses 2,059 1,941
Custom duties 1,355 1,290
Cost of duty-free goods sold 732 599
Other expenses 9,563 7,619
Operating costs less aircraft fuel, staff costs and depreciation and
amortisation 252,440 209,832
Aircraft fuel 101,582 94,382
Total operating costs less staff costs and depreciation and
amortisation 354,022 304,214
8.STAFF COSTS
2016 2015
Wages and salaries 50,885 44,001
Pension costs 10,577 8,829
Social security costs 3,220 2,789
Total staff costs 64,682 55,619
Pension costs include:
compulsory payments to the RF Pension Fund;
contributions to a non-governmental pension fund under a defined contribution pension plan under which
the Group makes additional pension contributions as a fixed percentage (20% for 12 months of 2016; 20%
for 12 months of 2015) of the transfers made personally by employees participating in the programme; and
an increase in the net present value of the future benefits which the Group expects to pay to its employees
upon their retirement under defined benefit pension plans.
2016 2015
Payments to the RF Pension Fund 10,574 8,843
Defined benefit pension plan 3 (14)
Total pension costs 10,577 8,829
9.OTHER OPERATING EXPENSES AND INCOME, NET
2016 2015
Reimbursement of fuel excise tax 5,972 4,658
Gain on disposal of assets classified as held for sale 2,784 -
Fines and penalties received from suppliers 753 614
Insurance compensation received 297 513
Gain on accounts payable write-off 34 164
Charge of impairment provision for doubtful accounts receivable
(Note 14) (2,217) (6,449)
Accrual of provision for Group liabilities (Note 27) (6,628) (4,433)
Loss on fixed assets disposal and impairment on fixed assets (849) (672)
Loss on accounts receivable write-off (4) (246)
Other expenses and income, net (669) (97)
Reversal of VAT recoverable - 8,021
Total other operating (expenses)/income, net (527) 2,073
10.FINANCE INCOME AND COSTS
2016 2015
Finance income:
Gain on change in fair value of derivative financial instruments not
subject to hedge accounting (Note 24) - 11,885
Interest income on deposits and security deposits 4,169 3,723
Gain on foreign exchange, net 15,597 -
Other finance income 36 203
Total finance income 19,802 15,811
2016 2015
Finance costs:
Realised loss on derivative financial instruments not subject to
hedge accounting (Note 24) - (19,803)
Interest expense (8,907) (7,737)
Foreign exchange loss, net - (849)
Loss on change in fair value of derivative financial
instruments not subject to hedge accounting (Note 24) (53) -
Other finance costs (483) (167)
Total finance costs (9,443) (28,556)
2016 2015
Realised hedging result:
Realised loss on hedging derivative instruments (Note 24) (3,994) (18,654)
Ineffective portion of fuel hedging (Note 24) - 1,187
Effect of revenue hedging with liabilities in foreign
currency (Note 28) (8,316) (6,279)
Total hedging result (12,310) (23,746)
11.INCOME TAX
2016 2015
Current income tax charge for the year 12,931 3,951
Deferred income tax expense 1,524 983
Total income tax expense 14,455 4,934
Reconciliation of the income tax estimated based on the applicable tax rate to the income tax is presented
below:
2016 2015
Profit/(loss) before income tax 53,281 (1,560)
Tax rate applicable in accordance with Russian legislation 20% 20%
Income tax at tax rate in accordance with Russian legislation (10,656) 312
Tax effect of items which are not deductible or assessable for taxation
purposes:
Non-taxable income 1,076 1,790
Non-deductible expenses (5,042) (5,295)
Unrecognised current year tax losses (1,514) (587)
Recognition of previously unrecognised tax losses 1,263 490
Prior years income tax adjustments 418 (1,644)
Total income tax (14,455) (4,934)
11. INCOME TAX (CONTINUED)
31
December
2016
Changes for
the year
31
December
2015
Changes for
the year
31 December
2014
Tax effect of temporary
differences:
Tax losses carried forward 143 70 73 (944) 1,017
Long-term financial investments 259 58 201 176 25
Accounts receivable 13 (570) 583 716 (133)
Property, plant and equipment and
finance lease liabilities 8,444 (7,694) 16,138 6,205 9,933
Accounts payable 4,894 882 4,012 1,803 2,209
Derivative financial instruments - (960) 960 (5,157) 6,117
Deferred tax assets before tax
set off 13,753 21,967 19,168
Tax set off (1,501) (335) (628)
Deferred tax assets after tax set
off 12,252 21,632 18,540
Property, plant and equipment (39) 78 (117) (25) (92)
Customs duties related to the
imported aircraft under operating
leases (211) 124 (335) 126 (461)
Long-term financial investments (25) (15) (10) 5 (15)
Accounts receivable (1,240) (1,239) (1) 163 (164)
Accounts payable (25) 17 (42) (13) (29)
Deferred tax liabilities before
tax set off (1,540) (505) (761) Tax set off 1,501 335 628
Deferred tax liabilities after tax
set off (39) (170) (133)
Movements for the year, net (9,249) 3,055
Deferred tax expense/(income)
recognised directly in other
comprehensive income 7,725
(4,038)
Deferred income tax expense
for the year (1,524)
(983)
11.INCOME TAX (CONTINUED)
As at 31 December 2016 the Group recognised deferred tax assets from tax losses of subsidiaries in the
amount of RUB 143 million.
In the reporting period, the Group did not recognise deferred tax assets from tax losses of its subsidiaries
in the amount of RUB 1,514 million (as at 31 December 2015: RUB 587 million ), as Group’s
management doesn’t expect that taxable profit will be available against which the deductible temporary
difference, related to received tax losses, can be utilized.
Starting from 1 January 2017, the limitation on carry-forward of losses for a 10-year period will be
revoked in principle (which means that losses incurred since 2007 will be carried forward until fully
recognised). Limitations for the recognition of losses carried forward for the period from 2017 to 2020
have been also introduced. In accordance with the new rules, the amount of recognized loss carry forwards
can’t exceed 50% of the tax base of relevant year. These changes will not have material impact for the
Group's consolidated financial statements.
12.CASH AND CASH EQUIVALENTS
31 December
2016
31 December
2016
Bank deposits denominated in roubles with maturity of less than 90 days 23,444 17,205
Cash on hand and bank accounts denominated in roubles 4,639 8,517
Cash on hand and bank accounts denominated in US Dollars 2,293 2,167
Cash on hand and bank accounts denominated in other currencies 418 1,793
Cash on hand and bank accounts denominated in Euro 317 449
Cash in transit 365 562
Total cash and cash equivalents 31,476 30,693
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets are disclosed in
Note 36. More than 35% of the Group’s funds are held in 2 highly reliable state-controlled Russian banks
– PJSC VTB Bank with long-term credit rating BB+ from S&P rating agency and PJSC Sberbank
(hereinafter “Sberbank RF”) with long-term credit rating BBB- from Fitch Ratings agency as at
31 December 2016 (as at 31 December 2015 Group’s funds were held in “Sberbank RF” with long-term
credit rating BBB from Fitch Ratings agency).
As at 31 December 2016 the Group had restricted cash of RUB 148 million (31 December 2015: RUB 168
million) recorded within other non-current assets in the Group’s consolidated statement of financial
position.
13.AIRCRAFT LEASE SECURITY DEPOSITS
A security deposit is held with the lessor to secure the lessee’s fulfilment of its obligations in full, on a
timely basis and in good faith. The security deposit is transferred to the lessor by instalments or in a single
instalment. The security deposit is usually equal to three monthly lease payments. The lessee has the right
to replace the security deposit, in full or in part, with a letter of credit. The security deposit can be offset
against the last lease payment or any payment if there is any non-fulfilment of obligations by the lessee.
The security deposit is returned subsequent to the lease agreement’s termination/cancellation or return of
the aircraft immediately after the date of lease termination and fulfilment by the lessee of its obligations.
The security deposits under aircraft lease agreements are recorded at amortised cost using an average
market yield from 1.9% to 12.6% p.a. in 2016 (2015: from 3.7% to 13.5% p.a.).
13. AIRCRAFT LEASE SECURITY DEPOSITS (CONTINUED)
Aircraft lease
security
deposits
1 January 2015 2,431
Payment of security deposits 1,995
Amortisation charge for the year 346
Repaid of security deposits during the year (696)
Foreign exchange difference 973
Deposits write-off (216)
Reclassification to assets, classified as held for sale (43)
31 December 2015 4,790
Payment of security deposits 2,504
Amortisation charge for the year 380
Repaid of security deposits during the year (3,405)
Set off against accounts payable (983)
Foreign exchange difference (886)
Reclassification to assets, classified as held for sale 20
Other 81
31 December 2016 2,501
31 December
2016
31 December
2015
Current portion of security deposits 320 2,658
Non-current portion of security deposits 2,181 2,132
Total aircraft lease security deposits 2,501 4,790
Analysis of aircraft lease security deposits by their credit quality is presented below:
31 December
2016
31 December
2015
Major international lease companies 2,477 4,766
Russian lease companies 24 24
Total aircraft lease security deposits 2,501 4,790
14.ACCOUNTS RECEIVABLE AND PREPAYMENTS
31 December
2016
31 December
2015
Trade accounts receivable 31,329 34,275
Other financial receivables 8,517 8,056
Less: impairment provision (12,342) (10,609)
Total financial receivables 27,504 31,722
Prepayments to suppliers 10,504 8,784
VAT and other taxes recoverable 10,905 17,225
Prepayments for delivery of aircraft 26,341 16,734
Deferred customs duties related to the imported aircraft under
operating leases, current portion 579 705
Other receivables 2,339 1,147
Accounts receivable and prepayments 78,172 76,317
As at 31 December 2016 the Group recognised impairment provision for financial receivables from OJSC
Transaero Airlines for passengers transportation, refuelling services, ground handling, aircraft and traffic
servicing of RUB 7,286 million (31 December 2015: RUB 6,403 million).
Accounts receivable and prepayments include prepayments for acquisition of aircraft to be delivered
within 12 months after the reporting date. Change on the prepayments for aircraft line item are due to the
approaching aircraft delivery dates as well as the refund of prepayments related to the delivery of aircraft
in the current period.
Deferred customs duties of RUB 579 million as at 31 December 2016 (31 December 2015: RUB 705
million) relate to the current portion of paid customs duties related to imported aircraft under operating
leases. These customs duties are recognised within operating costs in the Group’s consolidated statement
of profit and loss over the term of the operating lease. The non-current portion of the deferred customs
duties is disclosed in Note 17.
Financial receivables are analysed by currencies in Note 36.
As at 31 December 2016 and 31 December 2015, sufficient impairment provision was made against
accounts receivable and prepayments.
As at 31 December 2016 and 31 December 2015, the current part of prepayments for aircraft include
advance payments for the acquisition of the following aircraft:
31 December 2016 31 December 2015
Expected lease
type Type of aircraft
Number of
aircraft,
units
Expected
delivery date
Number of
aircraft,
units
Expected
delivery date
Undetermined Boeing B-787 22 2017 2 2016
Operating lease Boeing В-777 1 2017 2 2016
Operating lease Airbus A-320 11 2017 9 2016
Operating lease Airbus A-321 8 2017 7 2016
14. ACCOUNTS RECEIVABLE AND PREPAYMENTS (CONTINUED)
At the extraordinary meeting of shareholders of PJSC Aeroflot in December 2016 the transaction on
assignment of rights in respect of the purchase of 22 Boeing B787 aircraft was approved. As at
31 December 2016 the deal was in negotiation process.
The movements in impairment provision for accounts receivable and prepayments are as follows:
Impairment
provision
1 January 2015 4,532
Increase in impairment provision 7,471
Provision used (344)
Provision released (1,022)
Disposal of the subsidiaries (28)
31 December 2015 10,609
Increase in impairment provision 4,040
Provision used (484)
Provision released (1,823)
31 December 2016 12,342
Financial receivables are analysed by credit quality in Note 36.
15.EXPENDABLE SPARE PARTS AND INVENTORIES
31 December
2016 31 December
2015
Expendable spare parts 7,633 5,757 Fuel 855 341 Other inventories 2,720 2,301
Total expendable spare parts and inventories, gross 11,208 8,399 Less: written-off obsolete expendable spare parts and inventories (1,168) (952)
Total expendable spare parts and inventories 10,040 7,447
16.FINANCIAL INVESTMENTS
31 December
2016 31 December
2015
Available-for-sale investments: Available-for-sale securities 3,252 6,062 SITA Investment Certificates 52 56
Total available-for-sale investments 3,304 6,118
Other long-term investments Other 2 -
Total long-term financial investments 3,306 6,118
Available-for-sale securities are mainly represented by the initial cost of the Group’s investment in JSC MASH, a state-related company engaged in servicing of aircraft, passengers and handling cargo of Russian and foreign airlines, and providing non-aviation services to entities operating in Sheremetyevo airport and adjacent area.
16.FINANCIAL INVESTMENTS (CONTINUED)
The RF, as represented by the Federal Agency for Management of State Property owns over 80% of the
entity’s shares (Note 38).
Due to the market quotes absence the Group's investments in JSC MASH are measured at historical cost less accumulated impairment losses. As a result of the update of macroeconomic and financial indicators, the Group revised the recoverable amount of its long-term financial investment in JSC MASH and recognised an impairment loss in the amount of RUB 2,810 million during 2016.
The following factors had the most significant impact on the assessment of recoverable amount of this investment:
(а) the weighted average cost of capital was revised from 12.0% to 16.7% based on public capital markets data, data about peer companies and the actual cost of capital of JSC MASH determined based on the effective rate in financial statements;
(b) update of forecasts for macro assumptions based on an Economist Intelligence Unit forecast;
(с) update of passenger traffic growth rates based on the independent Airbus Global Market Forecast 2016-2035; passenger traffic growth rates decreased on average by 0.3 percentage points (pp).
The Group performed a sensitivity analysis of key assumptions used in the financial model of JSC MASH.
An increase in the weighted average cost of capital for JSC MASH by 2.5 pp results in an impairment of investments by RUB 3,929 million. Decrease in the weighted average cost of capital for JSC MASH by 2.5 pp results in an impairment of investments by RUB 1,159 million.
An increase in passenger traffic growth rates by 1 pp results in an impairment of investments by RUB 1,323 million. A decrease in passenger traffic growth rates by 1 pp results in an impairment of investments by RUB 4,129 million.
As at 31 December 2016 the investments in JSC MASH are recognised in the consolidated statement of financial position at their initial cost of RUB 3,203 million (31 December 2015: RUB 6,013 million).
31 December
2016 31 December
2015
Other short-term financial investments: Loans issued and promissory notes of third parties 9,458 9,335 Deposits placed in banks for more than 90 days 6,319 5,917 Other short-term investments 5 5
Total other short-term financial investments (before impairment provision) 15,782 15,257
Less: provision for impairment of short-term financial investments (9,463) (9,340)
Total short-term financial investments 6,319 5,917
The provision for impairment is related primarily to provision for impairment of loans granted by Group companies to OJSC Transaero Airlines recognized during 2015.
As at 31 December 2016, deposits with maturity for more than 90 days are placed in the largest Russian commercial banks with long-term credit rating not lower than B1 according to Moody’s credit rating agency.
17.OTHER NON-CURRENT ASSETS
31 December
2016
31 December
2015
Deferred customs duties related to the imported aircraft under
operating leases, non-current portion 559 1,119
Prepaid expenses for operating lease transactions 5,697 -
Other non-current assets 3,856 1,643
Total other non-current assets 10,112 2,762
During 2016, the Group has made RUB 5,697 million payments for 14 aircraft as part of the initial
payments under the operating lease agreements that have been recognized as other non-current assets as at
31 December 2016. The carrying value of these non-current assets should be allocated to operating lease
expenses over the term of the operating lease agreements.
18.PREPAYMENTS FOR AIRCRAFT
As at 31 December 2016 and 31 December 2015 non-current portion of prepayments for aircraft were
RUB 27,830 million and RUB 35,291 million, respectively. Change of non-current portion of
prepayments is due to approaching the contractual period of delivery and payment of new non-current
prepayments to suppliers.
Prepayments for aircraft with a delivery date less than 12 months to reporting date are disclosed inside of
accounts receivable (Note 14).
As at 31 December 2016 and 31 December 2015 non-current prepayments include advance payments for
the acquisition of the following aircraft:
31 December 2016 31 December 2015
Expected lease
type Aircraft type
Number of
aircraft,
units
Expected
delivery
date
Number of
aircraft,
units
Expected
delivery date
Undetermined Boeing B787 - - 20 2017-2019
Operating lease Airbus А350 22 2018-2023 22 2018-2023
Operating lease Boeing В777 - - 1 2017
Operating lease Airbus A320 10 2018 21 2017-2018
Undetermined Airbus A321 4 2018 12 2017-2018
19.PROPERTY, PLANT AND EQUIPMENT
Owned
aircraft and
engines
Leased aircraft
and engines
Land and
buildings
Transport,
equipment and
other assets
Construction
in progress Total
Cost
1 January 2015 6,930 126,724 11,718 16,939 1,519 163,830
Additions (i) 1,588 - 78 3,895 3,389 8,950
Capitalised expenditures - 991 - - 816 1,807
Disposals (4,075) (477) (1,422) (977) 4 (6,947)
Transfers to assets,
classified as held for sale
(note 20) (33) (20,601) - (3) - (20,637)
Transfers 84 140 71 562 (857) -
31 December 2015 4,494 106,777 10,445 20,416 4,871 147,003
Additions (ii) 2,134 32 26 3,603 4,138 9,933
Capitalised expenditures - 1,810 - - 632 2,442
Disposals (988) - (392) (1,141) (3) (2,524)
Transfers from assets,
classified as held for sale
(note 20) - 3,613 - - - 3,613
Transfers to assets,
classified as held for sale
(note 20) - (366) - - (223) (589)
Transfers (iii) 2,507 1,076 52 1,059 (4,694) -
31 December 2016 8,147 112,942 10,131 23,937 4,721 159,878
Accumulated
depreciation
1 January 2015 (4,110) (30,469) (4,627) (8,507) (73) (47,786)
Charge for the year (614) (9,259) (406) (2,132) - (12,411)
(Accrual)/release of
impairment provision 131 - (567) 36 - (400)
Disposals 3,666 477 842 768 - 5,753
18 12,317 - - - 12,335
31 December 2015 (909) (26,934) (4,758) (9,835) (73) (42,509)
Charge for the year/ (762) (8,761) (355) (2,569) - (12,447)
release of impairment
provision 25 - - 11 - 36
Disposals 135 - 143 722 - 1,000
Transfers from assets,
classified as held for
sale (note 20) - (1,338) - - - (1,338)
Transfers to assets,
classified as held for
sale (note 20) - 277 - - - 277
31 December 2016 (1,511) (36,756) (4,970) (11,671) (73) (54,981)
Carrying amount
31 December 2015 3,585 79,843 5,687 10,581 4,798 104,494
31 December 2016 6,636 76,186 5,161 12,266 4,648 104,897
During 2015, additions mainly related to the purchase of 3 DHC-8 aircraft being under pre-operating maintenance.
During 2016, additions mainly related to the purchase of 2 DHC-8 aircraft for JCS Aurora and purchase of
equipment under finance leases.
During 2016, transfers primarily related to 3 DHC-8 aircraft.
19.PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Capitalised borrowing costs for 12 months 2016 amounted to RUB 632 million (2015: RUB 976 million).
Capitalisation rate of interest expenses for the period was 3.2% p.a. (2015: 3.2% p.a.).
As at 31 December 2016 there were no property and land (including tenancy) (31 December 2015: RUB
711 million), which were pledged to third and related parties as a security for the Group’s loans and
borrowings (Note 29).
As at 31 December 2016 the cost of fully depreciated property, plant and equipment was
RUB 6,990 million (31 December 2015: RUB 8,170 million).
20.ASSETS CLASSIFIED AS HELD FOR SALE
By decision of the Group’s management, as at 31 December 2016, 2 Airbus A321 operated under finance
lease agreements were targeted for disposal, therefore at the end of the reporting period these assets and
related liabilities were classified as held for sale.
As at 31 December 2016 the amount of net assets held for sale amounted to RUB 1,140 million.
Initial cost of
fixed assets
Accumulated
depreciation
Aircraft lease
security deposits
Total
assets
Total
liabilities
1 January 2016 18,539 (10,850) 43 7,732 (7,371)
Additions 589 (277) - 312 -
Disposals (12,466) 7,880 (2) (4,588) 4,702
Transfers to PP&E (3,613) 1,338 (41) (2,316) 2,669
31 December 2016 3,049 (1,909) - 1,140 -
Initial cost of
fixed assets
Accumulated
depreciation
Aircraft lease
security deposits
Total
assets
Total
liabilities
1 January 2015 - - - - -
Additions 20,637 (12,335) 43 8,345 (7,517)
Disposals (2,098) 1,485 - (613) 146
31 December 2015 18,539 (10,850) 43 7,732 (7,371)
As at 31 December 2016, 2 aircraft of type An-148 were leased out, 4 aircraft of type An-148 were under
maintenance for delivery to sub-lessees, therefore these aircraft were reclassified from assets held for sale
to property, plant and equipment (Note 19).
During 12 months 2016, 2 Airbus A319 aircraft, 1 Airbus A320 and 6 Airbus A321 were disposed. Profit
from disposal amounted to RUB 2,784 million.
By decision of the Group’s management, as at 31 December 2015 some of the aircraft operated under
finance lease agreements were taken out of service and were undergoing redelivery maintenance.
21.DISPOSAL OF SUBSIDIARIES
On 17 May 2016, the Group disposed of ОJSC Vladivostok Avia as a result of liquidation. A loss from the
disposal in the amount of RUB 5,726 million was recognised in profit and loss for 12 months of 2016.
OJSC Vladivostok Avia did not conduct any significant operating activities in 2016.
21.DISPOSAL OF SUBSIDIARIES (CONTINUED)
On 14 July 2016, the Group sold ALT Rejsebureau A/S. A loss from the sale in the amount of
RUB 12 million was recognised in profit and loss for 12 months of 2016.
On 6 September 2016, the Group disposed of СJSC Aeroflot-Cargo as a result of liquidation. A profit
from the disposal in the amount of RUB 639 million was recognised in profit and loss for 12 months 2016.
СJSC Aeroflot-Cargo did not conduct any significant operating activities in 2016.
Profit/loss on disposal of subsidiaries СJSC Aeroflot-Cargo and ОJSC Vladivostok Avia includes the
following components:
СJSC
Aeroflot-Cargo
ОJSC
Vladivostok
Avia
Negative net assets of disposed company 5,219 10,236
Non-controlling interest share in negative net assets - 7,579
Group's share in negative net assets of disposed company 5,219 2,747
Intragroup liabilities, including:
Accounts payable from disposed subsidiary to the Group (4,483) (7,028)
Loan issued by the Group to disposed subsidiary (97) (1,445)
Profit/(loss) from disposal of subsidiaries 639 (5,726)
22.INTANGIBLE ASSETS
Software Licences
Investments in
software and
R&D
Trademark
and client
base
Other
Total
Cost
1 January 2015 2,266 134 1,184 1,686
2
5,272 Additions 785 - 49 - 37 871 Disposals (25) - (32) - - (57)
31 December 2015 3,026 134 1,201 1,686 39 6,086
Additions 131 - 133 - 3 267 Disposals (317) - (142) (56) (6) (521)
31 December 2016 2,840 134 1,192 1,630 36 5,832
Accumulated amortisation
1 January 2015 (1,572) (89) - (848)
(1)
(2,510) Charge for the year (762) - - (133) - (895) Disposals 9 - - - - 9
31 December 2015 (2,325) (89) - (981) (1) (3,396)
Charge for the year (714) - - (229) (5) (948) Disposals 260 - - 71 6 337
31 December 2016 (2,779) (89) - (1,139) - (4,007)
Carrying amount
31 December 2015 701 45 1,201 705 38 2,690
31 December 2016 61 45 1,192 491 36 1,825
23.GOODWILL
For the purposes of impairment testing, goodwill is allocated between the cash generating units (the
“CGUs”), i.e. the Group subsidiaries that represent the lowest level within the Group at which the
goodwill is monitored for internal management purposes and are not larger than an operating segment of
the Group.
On 1 October 2015, the Board of Directors has made a decision to setup the united company AK
“Rossiya”. As at 31 December 2015, the goodwill impairment test was based on the following business-
units: business-unit “Sever” (head office in Saint-Petesburg, based on “AK “Rossiya”), business-unit
“Moskva” (branch in Moscow, based on “Orenair”), business-unit “Yug” (branch in Rostov-on-Don,
based on OJSC “Donavia”), and business-unit “Charter” (based on Transaero’s fleet and on a part of
Orenair’s fleet). The total carrying amount of AK Rossiya’s goodwill was attributed to business-unit
“Sever”, the carrying amount of Orenair’s goodwill was reallocated among business-units “Sever” and
“Moskva”.
The aggregate carrying amount of goodwill, allocated to the Group entities as at 31 December 2015 is
presented in the table below:
CGU name 31 December 2015
Business-unit “Sever” 5,657
Business-unit “Moskva” 845
AK Aurora 158
Total 6,660
As part of the impairment test of goodwill as at 31 December 2016, the carrying value of business-units’
“Sever” and “Moskva” goodwill business was allocated to United “AK “Rossiya”.
During 2016 there was a transition to the Group's new operating structure that includes the transfer of all
assets belonging to the business-units “Sever”, “Moskva”, “Yug”, “Charter” into United “AK “Rossiya”.
Due to the completion of junction of all business-units into a single structure the United “AK “Rossiya” is
considered as a single GGU the goodwill has been allocated to.
The aggregate carrying amount of goodwill, allocated to the Groups’ business-units as at 31 December
2016 is presented in the table below:
CGU name 31 December 2016
AK Rossiya 6,502
AK Aurora 158
Total 6,660
The recoverable value of CGU was calculated on the basis of value in use, which was determined by
discounting the future cash flows to be generated as a result of the entity's operations.
Key assumptions against which the recoverable amounts are estimated concerned the discount rate, the
rate of return and the terminal growth rate for the calculation of the terminal value.
AK Rossiya
The discount rate is based on weighted average cost of capital (WACC) and amounts to 15.8% p.a.
(31 December 2015: 14.5% p.a. for 2015) for the forecaster period.
23.GOODWILL (CONTINUED)
The growth rate for the terminal value calculation was set at the level of Russia's GDP long-term growth
rate of 1.5% p.a. (2015: 1.5% p.a.).
The budget for 2017 of “AK Rossiya” was adopted as a basis to forecasting the cash flows.
The Group's management has performed a sensitivity analysis of the goodwill impairment test results to
changes in yields as the most sensitive indicator. In case of decrease of this rate by 11% even though all
other variables held constant, the Group would recognised an impairment of CGU’s goodwill in the full
amount.
24.DERIVATIVE FINANCIAL INSTRUMENTS
The Group analyses and assesses the fair value of derivative financial instruments on a regular basis for
the purposes of consolidated financial statements or when so requested by management. Changes in the
fair value of derivative financial instruments are determined using Levels 2 and 3 inputs:
Derivative financial
instruments
2016 2015
1 January (4,800) (30,586) Level 3 derivative financial instruments that are not subject to special hedge accounting rules Change in fair value for the period (53) (7,918) Settlements during the period (Note 10) - 19,803 Level 3 derivative financial instruments that are subject to special hedge accounting rules Change in fair value for the period - (4,703) Additions for the period - Settlements during the period (Note 10) - 18,654 Level 2 derivative financial instruments that are subject to special hedge accounting rules Change in fair value for the period 859 (50) Settlements during the period (Note 10) 3,994 -
31 December - (4,800) Representing: Assets - 53 Liabilities - (4,853)
31 December - (4,800)
For risk management purposes the Group uses the following derivative financial instruments:
(а) Cross-currency interest rate swaps with a fixed interest rate
In early 2016, the Group closed cross-currency interest rate swap agreements upon their maturity. For
these instruments, the Group applied a cash flow hedge accounting model according to
IAS 39, “Financial Instruments: Recognition and Measurement”.
Until the expiration, the Group recognised a profit of RUB 491 million from revaluation of these derivative financial instruments within other comprehensive income together with a corresponding deferred income tax of RUB 98 million. As a result of the termination of this transaction, accumulated loss of RUB 3,994 million was recognised within hedging results.
24.DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
During 12 months 2015, a profit of RUB 47 million from the change in fair value of similar financial
instruments was recognised in other comprehensive income together with a corresponding deferred
income tax of RUB 10 million.
(b) Fuel options
During 12 months 2016, the Group did not conclude any new fuel option agreements. As at 31 December
2015, all previously concluded fuel option agreements had matured and were closed.
For 12 months 2015, the increase in fair value of fuel options amounted to RUB 10,542 million and was
reported as a part of profit or loss. Gains from changes in the fair value of option agreements to which hedge
accounting was applied for 12 months 2015 amounted to RUB 12,763 million and were reported in other
comprehensive income together with corresponding deferred tax of RUB 2,552 million.
The ineffective part of RUB 1,187 million was recognised within profit or loss. For 12 months 2015, realised
losses on fuel options amounting to RUB 18,654 million was recognised in profit and loss.
(c) Currency options
As at 31 December 2016, all currency option agreements were matured. As at 31 December 2015 there
was one currency option contract with a fair value of RUB 53 million. Hedge accounting was not applied
to this financial instrument.
During 12 months 2016, a loss on the change in fair value of currency option transactions amounting to
RUB 53 million was recognised in profit or loss (12 months 2015: profit of RUB 1,343 million). For the
year ended 31 December 2015, the loss on the currency and fuel options to which hedge accounting is not
applied was RUB 19,803 million.
Valuation principles for currency and fuel options
Valuation of future fuel and currency options cash flows are carried as assets when their fair value is
positive and as liabilities when their fair value is negative. Changes in the fair value of derivative financial
instruments are included in profit or loss for the reporting period if hedge accounting is not applied.
If hedge accounting is applied, the effective portion is accounted within hedge reserve with subsequent
reclassification to profit or loss in the same periods when the hedged item affects profit or loss.
Level 3 market inputs were used to assess the fair value of the instrument and the Monte-Carlo method
was applied. The following inputs were used to assess the fair value of the options:
spot price for basic asset oil available in information systems as at the valuation date;
forecast price for Brent crude oil or forecasting exchange rate determined based on data provided by
analysts for the term of the option;
volatility calculated based on historical closing prices for the underlying asset; and
the relevant currency market rate (MosPrime LIBOR, EURIBOR, etc.).
25.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
31 December 2016 31 December 2015
Accounts payable 23,659 29,466
Other financial payables 6,972 9,327
Total financial payables 30,631 38,793
Staff related liabilities 11,929 8,378
VAT payable on imported leased aircraft - 265
Advances received (other than unearned traffic revenue) 1,147 1,502
Other taxes payable 2,865 2,667
Other current liabilities related to the frequent flyer programme
(Note 26) 2,518
2,572
Income tax payable - 30
Other payables 778 544
Total accounts payable and accrued liabilities 49,868 54,751
As at 31 December 2016, staff related liabilities primarily include salaries payable, as well as social
contribution liabilities of RUB 9,106 million (31 December 2015: RUB 5,596 million) and the unused
vacation accrual of RUB 2,750 million (31 December 2015: RUB 2,696 million).
Financial payables are analysed by currency in Note 36.
26.DEFERRED REVENUE AND OTHER LIABILITIES RELATED TO THE
FREQUENT FLYER PROGRAMME
Deferred revenue and other liabilities related to the frequent flyer programme (Aeroflot Bonus
programme) as at 31 December 2016 and 31 December 2015 represented the number of bonus miles
earned when flying on the Group flights, but unused by the Aeroflot Bonus programme members and the
number of promo-miles and bonus miles earned by programme members for using programme partners’
services, respectively; they are estimated at fair value. Deferred revenue and other accrued liabilities
related to the frequent flyer programme also include liabilities under the Company’s discount programme
as at 31 December 2015, which represent the fair value of coupons for a discount on the repeated purchase
of tickets at Aeroflot’s web-site. There were no liabilities related to coupons for a discount on the purchase
of tickets as at 31 December 2016.
31 December
2016
31 December
2015
Deferred revenue related to the frequent flyer programme, current 1,607 1,307
Deferred revenue related to the frequent flyer programme, non-current 3,623 2,941
Other current liabilities related to the frequent flyer programme (Note 25) 2,518 2,572
Other non-current liabilities related to the frequent flyer programme (Note
30) 2,580 2,779
Total deferred revenue and other liabilities related to the frequent flyer
programme 10,328 9,599
27.PROVISIONS FOR LIABILITIES
Litigations Tax risks
Regular
repairs and
maintenance
works Total
provisions
1 January 2015 1,372 - 5,822 7,194
Charge of provision for the year 2,438 53 3,117 5,608
Use of provision for the year (169) - - (169)
Release of provision for the year (49) - (1,126) (1,175)
Unwinding of the discount - - 777 777
Loss on foreign exchange, net 70 - 2,241 2,311
Other changes - - (110) (110)
31 December 2015 3,662 53 10,721 14,436
Charge the provision for the year 2,291 57 6,150 8,498
Use of provision for the year (1,615) (53) (1,757) (3,425)
(981) - (889) (1,870)
Unwinding of discounting - - 1,562 1,562
Gain on foreign exchange , net (286) - (2,277) (2,563)
Other changes (543) - - (543)
31 December 2016 2,528 57 13,510 16,095
31 December
2016 31 December
2015
Current liabilities 5,304 7,519
Non-current liabilities 10,791 6,917
Total provisions 16,095 14,436
Litigations
The Group is a defendant in legal claims of a different nature. Provisions for liabilities represent
management’s best estimate of probable losses on existing and potential lawsuits (Note 41).
Tax risks
The Group makes a provision for contingent liabilities, including fines and penalties based on the best
management’s estimate of the amount of additional taxes that may be required to be paid (Note 41).
Regular repairs and maintenance works
As at 31 December 2016, the Group made a provision of RUB 13,510 million (31 December 2015: RUB
10,721 million) for regular repairs and maintenance works of aircraft used under operating lease terms.
28.FINANCE LEASE LIABILITIES
The Group leases aircraft from third and related parties under finance lease agreements (Note 38). The list
of aircraft that the Group have operated under finance lease agreements as at 31 December 2016 is
disclosed in Note 1.
31 December
2016
31 December
2015
Total outstanding payments on finance lease contracts 137,395 184,730
Future finance lease interest expense (14,659) (20,206)
Total finance lease liabilities 122,736 164,524
Including:
Current finance lease liabilities 15,593 19,504
Non-current finance lease liabilities 107,143 145,020
Total finance lease liabilities 122,736 164,524
31 December 2016 31 December 2015
Due for repayment: Principal
Future
interest
expense
Total
payments Principal
Future
interest
expense
Total
payments
On demand or within 1 year 15,593 3,662 19,255 19,504 4,337 23,841
Later than 1 year and not
later than 5 years 65,792 8,912 74,704 78,536 11,927 90,463
Later than 5 years 41,351 2,085 43,436 66,484 3,942 70,426
Total 122,736 14,659 137,395 164,524 20,206 184,730
As at 31 December 2016 interest payable amounted to RUB 80 million (31 December 2015: RUB 424
million) was included in accounts payable and accrued liabilities.
The effective interest rate for finance lease during 2016 was 2.9% p.a. (in 2015: 2.8% p.a.). Fair value of
finance lease liabilities approximate their carrying value.
The Group hedges foreign currency risk arising on a portion of the future revenue stream denominated in
US dollars with the finance lease liabilities denominated in the same currency. The Group applies cash
flow hedge accounting model to this hedging relationship, in accordance with IAS 39. As at 31 December
2016, finance lease liabilities including those related to assets, classified as held for sale in the amount of
RUB 116,219 million denominated in US dollars were designated as a hedging instrument for highly
probable revenue forecasted for the period of 2016 – 2026 in the same amount. The Group expects that
this hedging relationship will be highly effective since the future cash outflows on the finance lease
liabilities match the future cash inflows on the revenue being hedged. At 31 December 2016, accumulated
foreign currency loss of RUB 42,734 million (before deferred income tax) on the finance lease liabilities,
representing an effective portion of the hedge, was recognised in the hedge reserve in the equity (31
December 2015: RUB 76,507 million). The loss reclassified from the hedging reserve to profit or loss in
2016 was RUB 8,316 million (in 2015: RUB 6,279 million) (Note 10).
In 2016 interest expense on finance leases was RUB 4,070 million (2015: RUB 4,076 million).
Leased aircraft and engines with the carrying amount disclosed in Note 19 are effectively pledged for
finance lease liabilities as the rights to the leased asset revert to the lessor in the event of default.
29.LOANS AND BORROWINGS
31 December
2016
31 December
2015
Short-term bank loans, bonds and other borrowings:
Short-term bank loans in euro 4,478 - Short-term loans in Russian roubles 113 - Short-term loans in US dollars - 31,550
Current portion of loans and borrowings in Russian roubles 4,718 3,190 Current portion of long-term loans in US dollars - 14,242 Current portion of bonds in Russian roubles - 5,103
Total short-term loans and borrowings 9,309 54,085
Long-term bank loans, bonds and other borrowings:
Long-term loans in Russian roubles 12,581 17,565 Long-term loans and borrowings in US dollars 395 14,242 Long-term bonds in Russian roubles 2,800 5,103 Less: Current portion of long-term bank loans in Russian roubles (4,718) (3,190) Current portion of loans and borrowings in US dollars - (14,242) Current portion of bonds in Russian roubles - (5,103)
Total long-term loans and borrowings 11,058 14,375
Main changes in loans and borrowings during the reporting period:
The Group has opened a long-term non-revolving credit line with PJSC “Sberbank” (floating interest rate) in the amount of RUB 12,581 million. As at 31 December 2016 the outstanding amount including interest accrued was RUB 12,694 million. As at 31 December 2015 the outstanding amount was RUB 12,581 million. The loan is unsecured and issued for the period up to December 2018.
The Group has opened a credit line with PJSC Sovcombank (floating interest rate) in the amount of USD 6,000 million, which can be obtained in Roubles, Euro or US Dollar. As at 31 December 2016, the outstanding amount was RUB 2,800 million (as at 31 December 2015 the outstanding amount was null). The loan is unsecured and issued for the period up to November 2021.
The Group has opened a credit line with PJSC Bank VTB (floating interest rate) in the amount of USD 250 million, which can be obtained in Roubles, Euro or US Dollar. As at 31 December 2016 the outstanding amount of the loan was EUR 70 million, which is equal to RUB 4,478 million including interest (as at 31 December 2015 the outstanding amount was RUB 3,657 million). The credit line is unsecured and issued for the period up to October 2018.
The Group has opened a line of credit with JSC Alfa-Bank in the amount of RUB 4,100 million, which can be obtained in Roubles, Euro or US Dollar. As at 31 December 2016 the outstanding amount of the loan was null. The credit line is unsecured and issued for the period up to January 2020.
29.LOANS AND BORROWINGS (CONTINUED)
Main changes in loans and borrowings during reporting period (continued)
The Group has opened long-term revolving line of credit with PJSC AKB Sviaz-Bank in the amount of RUB 9,500 million, which can be obtained in Roubles, Euro or US Dollar. As at 31 December 2015 the outstanding amount was USD 129 million, which was equal to RUB 9,386 million. The loan was unsecured. As аt 31 December 2016, the loan was repaid in full.
The Group has received a loan from PJSC Moscow Credit Bank in the amount of USD 100 million. As at 31 December 2015 the outstanding amount was USD 100 million, which was equal to RUB 7,304 million (including interest accrued). The loan was unsecured and issued for the period up to December 2016. As аt 31 December 2016 the loan was repaid in full.
The Group has received unsecured loan from PJSC Rosbank in the amount of USD 60 million, which can be obtained in Roubles, US Dollar or Euro. As at 31 December 2015 the outstanding amount was RUB 4,378 million (including interest accrued). As аt 31 December 2016 the loan was repaid in full.
The Group has opened a credit line with PJSC Sovcombank in the amount of USD 100 million. As at 31 December 2015 the outstanding amount was RUB 7,288 million. The loan is unsecured and issued for the period up to October 2016. As аt 31 December 2016, the loan was repaid in full.
The Group has opened a credit line with Bank VTB (Austria) in the amount of USD 150 million. As at 31 December 2015 the outstanding amount including interest was RUB 10,996 million. The loan is unsecured and issued for the period up to October 2016. As аt 31 December 2016, the loan was repaid in full.
As at 31 December 2016 there were no secured loans or borrowings. As at 31 December 2015 bank loans in the amount of RUB 1,940 million were secured by property, land (Note 19).
As at 31 December 2016 and 31 December 2015, the fair values of loans and borrowings were not materially different from their carrying amounts.
Bond issue
As at 31 December 2015 the Group had bonds issued (BO-03 series) with notional amount of RUB 5,000 million and interest coupon rate of 8.3% p.a. and issued for the period up to March 2016. As at 31 December 2015 effective yield to maturity for these bonds was 10.99% p.a. As аt 31 December 2016, the bonds were repaid in full.
Undrawn facilities
As at 31 December 2016 the Group was able to raise RUB 89,247 million in cash (31 December 2015: RUB 36,840 million) available under existing credit lines granted to the Group by various lending institutions.
30.OTHER NON-CURRENT LIABILITIES
31 December
2016
31 December
2015
Other non-current liabilities related to the frequent flyer programme
(Note 26) 2,580 2,779
Defined benefit pension obligation, non-current portion 805 745
Other non-current liabilities 1,774 286
Total other non-current liabilities 5,159 3,810
31.NON-CONTROLLING INTEREST
The following table provides information about the subsidiary – AK Rossiya with non-controlling interest
that is material to the Group:
2016 2015
Portion of non-controlling interest’s voting rights held 25% plus 1
share
25% plus 1
share
Profit/(loss) attributable to non-controlling interest for the year 948 (828)
Accumulated losses attributable to non-controlling interests in
subsidiary (3,689)
(4,637)
The summarised financial information of AK Rossiya is presented below:
31 December
2016
31 December
2015
Current assets 12,589 6,843 Non-current assets 13,149 9,363 Current liabilities 17,442 15,298 Non-current liabilities 23,051 19,454
2016 2015
Revenue 73,193 38,771 Profit/(loss) for the year 3,790 (3,312) Comprehensive income/(expense) for the year 3,790 (3,312)
As at 31 December 2016 and 2015 there are no significant restrictions in getting access to the subsidiary’s
assets or using them for settling the subsidiary’s obligations.
32.SHARE CAPITAL
As at 31 December 2016 and 31 December 2015 share capital was equal to RUB 1,359 million.
Number of ordinary
shares authorised and
issued (shares)
Number of
treasury shares
(shares)
Number of ordinary
shares outstanding
(shares)
31 December 2015 1,110,616,299 (53,716,189) 1,056,900,110 31 December 2016 1,110,616,299 (53,716,189) 1,056,900,110
All issued shares are fully paid. The total number of unissued ordinary shares is 250,000,000 shares (31 December 2015: 250,000,000 shares) with a par value of RUB 1 per share (31 December 2015: RUB 1 per share).
As at 31 December 2016 and 31 December 2015, treasury shares in amount of 53,716,189 shares were
held by subsidiary of the Group LLC Aeroflot Finance.
These ordinary shares carry voting rights in the same proportion as other ordinary shares. Voting rights of ordinary shares of the Company held by the Group’s entities are effectively controlled by management of the Group.
The Company’s shares are listed on the Moscow Exchange; as at 31 December 2016 and 31 December 2015, they were traded at RUB 152.96 per share and RUB 56.10 per share, respectively.
The Company launched Global Depositary Receipts (GDRs) programme in December 2000. From January 2014 one GDR equates 5 ordinary shares. As at 31 December 2016 and 31 December 2015 the GDRs were traded on the Frankfurt stock exchange at EUR 11.6 per GDR and EUR 3.41 per GDR, respectively.
33.DIVIDENDS
At the annual shareholders’ meeting held on 27 June 2016 it was resolved not to declare and pay dividends
for 2015.
At the annual shareholders’ meeting held on 22 June 2015 it was resolved not to declare and pay dividends
for 2014.
34.OPERATING SEGMENTS
The Group has a number of operating segments, but none of them, except for “Passenger Traffic”, meet
the quantitative threshold for determining reportable segment. Flight routes information was aggregated in
“Passenger Traffic” segment as passenger flight services on different routes have similar economic
characteristics and meet aggregation criteria.
The passenger traffic operational performance is measured based on internal management reports which
are reviewed by the Group’s General Director. Passenger traffic revenue by flight routes is allocated based
on the geographic destinations of flights. Passenger traffic revenue by flight routes is used to measure
performance as the Group believes that such information is the most material in evaluating the results.
Segment information is presented based on financial information prepared in accordance with IFRS. Sales
between segments are carried out on an arm’s length basis and eliminated for consolidation.
Group assets are located mainly in Russian Federation.
34. OPERATING SEGMENTS (CONTINUED)
Passenger
traffic Other
Inter-segment sales
elimination Total Group
2016
External sales 492,455 3,425 - 495,880
Inter-segment sales - 15,953 (15,953) -
Total revenue 492,455 19,378 (15,953) 495,880
Operating profit 62,207 980 67 63,254
Loss from sale and impairment
of investments, net (2 935)
Finance income 19,802
Finance costs (9,443)
Hedging result (12,310)
Share in financial results of associated
companies 12
Result from disposal of subsidiaries (5,099)
Profit before income tax 53,281
Income tax (14,455)
Net profit for the year 38,826
31 December 2016
Segment assets* 288,553 9,221 (13,495) 284,279
Investments in associates - 98 - 98
Unallocated assets 14,930
Total assets 299,307
Segment liabilities* 257,270 5,647 (4,419) 258,498
Unallocated liabilities 40
Total liabilities 258,538
2016
Capital expenditures and purchase of
PP&E (Note 19) 11,823 552 - 12,375
Depreciation (Notes 19) 12,109 338 - 12,447
* Segments’ assets and liabilities include assets classified as held for sale and liabilities related to assets
held for sale (Note 20).
34. OPERATING SEGMENTS (CONTINUED)
Passenger
traffic Other
Inter-segment
sales elimination Total Group
2015
External sales 412,174 2,999 - 415,173
Inter-segment sales - 13,588 (13,588) -
Total revenue 412,174 16,587 (13,588) 415,173
Operating profit 42,953 1,196 (42) 44,107
Loss on sale and impairment of
investments, net (9,159)
Finance income 15,811
Finance costs (28,556)
Hedging result (23,746)
Share of results of associates (17)
Loss before income tax (1,560)
Income tax (4,934)
Loss for the year (6,494)
31 December 2015
Segment assets* 295,141 9,523 (13,698) 290,966
Investments in associates - 109 - 109
Unallocated assets 24,119
Total assets 315,194
Segment liabilities* 351,056 5,269 (5,211) 351,114
Unallocated liabilities 200
Total liabilities 351,314
2015
Capital expenditures and purchase of
PP&E (Note 19) 10,349 408 - 10,757
Depreciation (Note 19) 12,127 284 - 12,411
* Segments’ assets and liabilities include assets classified as held for sale and liabilities related to assets
held for sale (Note 20).
Expenses of the Group mainly relate to scheduled passenger flights services.
34.OPERATING SEGMENTS (CONTINUED)
2016 2015
Scheduled passenger revenue:
International flights from the RF to:
CIS 10,446 10,098
Europe 53,244 42,563
Middle East and Africa 9,772 8,992
Asia 32,923 26,651
North America 13,144 9,934
Total scheduled passenger revenue from flights from the RF 119,529 98,238
International flights to the RF from:
CIS 10,835 9,480
Europe 53,355 42,615
Middle East and Africa 9,665 9,366
Asia 30,695 28,289
North America 13,245 9,907
Total scheduled passenger revenue from flights to the RF 117,795 99,657
Domestic scheduled passengers flights 166,227 145,378
Other international scheduled passengers flights 209 155
Total scheduled passenger traffic revenue 403,760 343,428
35.PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT
CATEGORY
Financial assets and liabilities are classified by measurement categories as at 31 December 2016 as
follows:
Assets Note
Loans and
receivables
Available-for-sale
financial assets
Assets at fair
value through
profit or loss Total
Cash and cash
equivalents 12 31,476 - - 31,476
Short-term financial
investments 6,318 1 - 6,319
Financial receivables 14 27,504 - - 27,504
Aircraft lease security
deposits 13 2,501 - - 2,501
Derivative financial
instruments 16 - 3,306 - 3,306
Other non-current assets 148 - - 148
Total financial assets 67,947 3,307 - 71,254
Note
Liabilities at fair
value through
profit or loss
Derivative financial
instruments (hedging)
Other financial
liabilities Total
Financial payables 25 - - 30,631 30,631
Finance lease liabilities 28 - - 122,736 122,736
Loans and borrowings 29 - - 20,367 20,367
Total financial
liabilities - -
173,734 173,734
35.PRESENTATION OF FINANCIAL INSTRUMENTS BY MEASUREMENT
CATEGORY (CONTINUED)
Financial assets and liabilities are classified by measurement categories as at 31 December 2015 as
follows:
Note
Loans and
receivables
Available-for-sale
financial assets
Assets at fair
value
through
profit or loss Total
Cash and cash equivalents
12 30,693 - - 30,693
Short-term financial
investments
5,916 1 - 5,917
Financial receivables 14 31,722 - - 31,722
Aircraft lease security
deposits
13 4,790 - - 4,790
Derivative financial
instruments
24 - - 53 53
Long-term financial
investments
16 - 6,118 - 6,118
Other non-current assets 168 - - 168
Total financial assets 73,289 6,119 53 79,461
Note
Liabilities at fair
value through
profit or loss
Derivative financial
instruments
(hedging)
Other financial
liabilities Total
Derivative financial
instruments 24 - 4,853
- 4,853
Financial payables 25 - - 38,793 38,793
Finance lease liabilities 28 - - 164,524 164,524
Loans and borrowings 29 68,460 68,460
Liabilities for guarantees
issued 27 - -
1,517 1,517
Total financial liabilities - 4,853 273,294 278,147
36.RISKS CONNECTED WITH FINANCIAL INSTRUMENTS
The Group manages risks related to financial instruments, which include market risk (currency risk,
interest rate risk and aircraft fuel price risk), credit risk, liquidity risk and capital management risk.
Liquidity risk
The Group is exposed to liquidity risk, i.e. the risk that the Group will not be able to meet its financial
obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
financial conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group utilises a detailed budgeting and cash forecasting process to ensure its liquidity is maintained at
appropriate level.
The following are the Group’s financial liabilities as at 31 December 2016 and 31 December 2015 by
contractual maturity (based on the remaining period from the reporting date to the contractual settlement
date). The amounts in the table are contractual undiscounted cash flows (including future interest
payments) as at respective reporting dates:
Average interest rate
31 December 2016
Contractual
rate, p.a.
Effective
rate, p.a.
0–12
months
1–2
years
2–5
years
Over 5
years Total
Loans and borrowings in
foreign currency 3.4% 3.4%
4,584 - - 446 5,030
Loans and borrowings in
roubles 11.7% 11.7%
6,085 8,814 3,501 - 18,400
Finance lease liabilities 2.9% 2.9% 19,255 20,998 53,706 43,436 137,395
Financial payables 30,631 - - - 30,631
Liabilities for guarantees
issued
1,225 - - - 1,225
Total future payments,
including future interest
payments
61,780 29,812 57,207 43,882 192,681
Average interest rate
31 December 2015
Contractual
rate
Effective
rate
0–12
months
1–2
years
2–5
years
Over 5
years Total
Loans and borrowings in
foreign currency 5.5% 5.5%
47,456 - - - 47,456
Loans and borrowings in
roubles 13.4% 13.4%
5,345 9,393 6,953 - 21,691
Bonds denominated in roubles 8.3% 8.3% 5,206 - - - 5,206
Finance lease liabilities 2.7% 2.8% 23,841 24,235 66,228 70,426 184,730
Financial payables 38,793 - - - 38,793
Derivative financial
instruments
4,761 - - - 4,761
Liabilities for guarantees
issued
2,144 - - - 2,144
Total future payments,
including future interest
payments
127,546 33,628 73,181 70,426 304,781
36. RISKS CONNECTED WITH FINANCIAL INSTRUMENTS (CONTINUED)
Currency risk
The Group is exposed to currency risk in relation to revenue as well as purchases and borrowings that are denominated in a currency other than rouble. The currencies in which these transactions are primarily denominated are Euro and US Dollar. The Groups analyses the exchange rate trends on a regular basis.
The Group uses long-term lease liabilities nominated in US Dollars as hedging instrument for risk of change in US Dollar exchange rate in relation to revenue (Note 28).
The Group’s exposure to foreign currency risk was as follows based on notional amounts of financial instruments:
31 December 2016 31 December 2015
In millions of Russian Roubles
Note US Dollar Euro
Other currency Total US Dollar Euro
Other currency Total
Cash and cash equivalents
12 2,293 317 418 3,028 2,167 449 1,793 4,409
Financial receivables 17,915 3,653 3,575 25,143 18,560 4,062 4,502 27,124 Aircraft lease security deposits
2,179 - - 2,179 4,504 - - 4,504
Derivative financial instruments
24 - - - - 53 - - 53
Other assets 83 62 3 148 94 71 3 168
Total assets 22,470 4,032 3,996 30,498 25,378 4,582 6,298 36,258
Financial payables 12,348 5,110 2,558 20,016 13,691 5,419 2,071 21,181 Finance lease liabilities 28 120,254 - - 120,254 164,519 - - 164,519 Short-term loans and borrowings and current portion of long-term loans and borrowings
29
- 4,478 - 4,478 45,792 - - 45,792 Long-term loans and borrowings
29 395 - - 395 - - - -
Derivative financial instruments 24 - - - - - 4,853 - 4,853
Total liabilities 132,997 9,588 2,558 145,143 224,002 10,272 2,071 236,345
Total assets/ (liabilities), net
(110,527) (5,556) 1,438 (114,645) (198,624) (5,690) 4,227 (200,087)
Strengthening or weakening of listed below currencies against rouble as at 31 December 2016 and
31 December 2015, would change profit after tax by the amounts shown below. This analysis assumes that
all other variables, in particular interest rates, remain constant:
36. RISKS CONNECTED WITH FINANCIAL INSTRUMENTS (CONTINUED)
Currency risk (continued)
31 December 2016 31 December 2015
Percent of
change in rate of
currency versus
rouble
Effect on profit
after tax
((increase)/
decrease)
Percent of
change in rate of
currency versus
rouble
Effect on loss after
tax ((increase)/
decrease)
Increase in the rate of currency
versus rouble:
US Dollar 20% 1,556 50% (13,642)
Euro 20% (889) 50% (335)
Other currencies 20% 230 50% 1,691
Decrease in the rate of currency
versus rouble:
US Dollar 20% (1,556) 50% 13,642
Euro 20% 889 50% 335
Other currencies 20% (230) 50% (1,691)
As at 31 December 2016 the increase in the US dollar rate against rouble by 20% would have led to a
reduction in the amount of the Group's equity by RUB 17,684 million. The change of other currencies
would have no material impact on equity. As at 31 December 2015 the increase in the US dollar rate
against rouble by 50% would have led to a reduction in the amount of the Group's equity by RUB 79,450
million. The change of other currencies would have no material impact on equity.
Interest rate risk
The Group is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its
financial results and cash flows. Changes in interest rates impact primarily change in cost of borrowings
(fixed interest rate borrowings) or future cash flows (variable interest rate borrowings). At the time of
raising new borrowings as well as finance lease management uses judgment to decide whether it believes
which (fixed or variable) interest rate would be more favourable to the Group over the expected period
until maturity.
As at 31 December 2016 and 31 December 2015, the interest rate profiles of the Group’s interest-bearing
financial instruments were: Carrying amount
31 December
2016 31 December
2015
Fixed rate financial instruments:
Financial assets 30,127 17,767
Financial liabilities (19,098) (34,266)
Total fixed rate financial instruments 11,029 (16,499)
Variable rate financial instruments:
Total variable rate financial liabilities (123,679) (198,137)
As at 31 December 2016 and 31 December 2015 the Group had loans and finance lease with variable
interest rates. If the variable part of interest rates as at 31 December 2016 and 31 December 2015 were
20bps higher or lower than the actual variable part of interest rates for the year, with all other variables
held constant, financial result and equity would not have changed significantly (2015: would not have
changed significantly).
36. RISKS CONNECTED WITH FINANCIAL INSTRUMENTS (CONTINUED)
Aircraft fuel price risk
The results of the Group’s operations are significantly impacted by changes in the price of aircraft fuel. In 2012, 2013 and 2014 the Group entered into agreements with a number of Russian banks to hedge a portion of its fuel costs from potential future price increases.
Given as at 31 December 2016 and 31 December 2015 the deals were matured, change in value of
underlying asset as at the reporting date would not have any significant impact of financial results and
equity of the Group. In case as at 31 December 2016 and 31 December 2015 price for Brent crude oil was
50% higher or lower than its actual price, with all other variables remaining constant (including forecast of
crude oil price), the effect on the Group’s financial result and equity would not be materially different.
Capital management risk
The Group manages its capital to ensure its ability to continue as a going concern while maximizing the return to the Company’s shareholders through the optimization of the Group’s debt to equity ratio.
The Group manages its capital in comparison with rivals in the airline industry on the basis of the following ratios:
net debt to total capital,
total debt to EBITDA,
net debt to EBITDA.
Total debt consists of short-term and long-term loans and borrowings (including the current portion), finance lease liabilities, customs duties payable on imported leased aircraft and defined benefit pension obligation.
Net debt is defined as total debt less cash, cash equivalents and short-term financial investments.
Total capital consists of equity attributable to the Company’s shareholders and net debt.
EBITDA is calculated as operating profit before depreciation, amortization and custom duties expenses.
36. RISKS CONNECTED WITH FINANCIAL INSTRUMENTS (CONTINUED)
Capital management risk (continued)
The ratios are as follows:
As at and for the
year ended
31 December 2016
As at and for the
year ended
31 December 2015
Total debt 143,908 233,729
Cash and cash equivalents and short-term financial investments (37,795) (36,610)
Net debt 106,113 197,119
Equity attributable to shareholders of the Company 42,453 (25,523)
Total capital 148,566 171,596
EBITDA 78,004 58,703 Net debt/Total capital 0.7 1.1
Total debt/EBITDA 1.8 4.0
Net debt/EBITDA 1.4 3.4
These ratios are analysed by Group’s management over time without any limitations.
There were no changes in the Group’s approach to capital management in 2016 and 2015.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements in 2016 and 2015, except for minimal share capital according to the legislation.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s
cash and cash equivalents, financial receivables and investments in securities.
The Group conducts transactions with the following major types of counterparties:
The Group has credit risk associated with travel agents and industry organisations. A significant share of
the Group’s sales is made via travel agencies. Due to the fact that receivables from travel agents are
diversified the overall credit risk related to travel agencies is assessed by management as low.
Receivables from other airlines and agencies are carried out through the IATA clearing house. Regular
settlements ensure that the exposure to credit risk is mitigated to the greatest extent possible.
Management actively monitors its investing performance and in accordance to current policy investing
only in liquid securities with high credit ratings. Management does not expect any counterparty to fail to
meet its obligations.
As at 31 December 2016 the total amount of investments into securities was RUB 3,252 million
(31 December 2015: RUB 6,062 million), major part of financial receivables amounted to
RUB 19,054 million relates to receivables regulated by clearing house (31 December 2015: RUB 15,079
million).
36. RISKS CONNECTED WITH FINANCIAL INSTRUMENTS (CONTINUED)
Credit risk (continued)
The maximum exposure to the credit risk net of impairment provision is set out in the table below:
31 December
2016 31 December
2015
Cash and cash equivalents (excluding petty cash) (Note 12) 31,387 30,626 Financial receivables (Note 14) 27,504 31,722 Short-term financial investments (Note 16) 6,319 5,917 Long-term financial investments (Note 16) 3,306 6,118 Aircraft lease security deposits (Note 13) 2,501 4,790 Other non-current assets 148 168
Total financial assets exposed to credit risk 71,165 79,341
Analysis by credit quality of financial receivables is as follows:
31 December
2016
31 December
2015
Past due impaired receivables - less than 45 days overdue 89 110 - 46 days to 90 days overdue 75 1,212 - 91 days to 2 years overdue 7,995 4,895 - more than 2 years overdue 4,183 4,393
Total impaired receivables 12,342 10,610
31 December
2016 31 December
2015
Past due but not impaired - less than 90 days overdue 33 30 - 91 days to 2 years overdue - -
Total past due but not impaired receivables 33 30
Credit risk concentration
As at 31 December 2016 and 31 December 2015 a large portion of the cash and cash equivalents was placed in two banks, which causes the credit risk concentration for the Group (Note 12).
37. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount at which a financial instrument can be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The best evidence of the fair value is an active quoted market price of a financial instrument.
The estimated fair values of financial instruments have been determined by the Group using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value. Management uses all available market information in estimating the fair value of financial instruments.
Financial instruments carried at fair value.
This category includes only derivative financial instruments disclosed in Note 24.
37. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets carried at amortised cost.
The fair value of instruments with a floating interest rate is normally equal to their carrying value. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received discounted at current interest rates effective on debt capital markets for new instruments with similar credit risk and remaining maturity. Discount rates used depend on the credit risk of the counterparty. Carrying amounts of financial receivables (Note 14), lease security deposits (Note 13) and deposits for more than 90 days (Note 13), other financial assets and loans issued (Note 16) approximate their fair values, which belong to Level 2 in the fair value hierarchy. Cash and cash equivalents (with exception for cash on hand) belong to level 2 and are carried at amortised cost which is approximately equal to their fair value.
Liabilities carried at amortised cost.
The fair value of financial instruments is measured based on the current market quotes, if any. The
estimated fair value of unquoted fixed interest rate instruments with stated maturity was estimated based
on expected cash flows discounted at current interest rates for new instruments with similar credit risk and
remaining maturity. As at 31 December 2016 and 31 December 2015, the fair values of financial payables
(Note 25), finance lease liabilities (Note 28), loans, borrowings and bonds (Note 29) were not materially
different from their carrying amounts. The fair values of financial payables, finance lease liabilities and
loans and borrowings are categorised as Levels 2, while bonds are categorised as Level 1 in the fair value
hierarchy.
38. RELATED PARTY TRANSACTIONS
Parties are generally considered to be related if they are under common control or if one party has the
ability to control the other party or can exercise significant influence or joint control over the other party
in making financial and operational decisions. In considering each possible related party relationship
attention is directed to the economic substance of the relationship, not merely the legal form.
As at 31 December 2016 and 31 December 2015, the outstanding balances with related parties and income
and expense items with related parties for the years ended 31 December 2016 and 31 December 2015 are
disclosed below:
Associates
As at 31 December 2016 and 31 December 2015, the outstanding balances with associates and income and
expense items with associates for the years ended 31 December 2016 and 31 December 2015 are as
follows:
31 December
2016
31 December
2015
Assets
Accounts receivable 25 1
Liabilities
Accounts payable and accrued liabilities 120 111
The amounts outstanding to and from related parties will be settled mainly in cash.
2016 2015
Transactions
Sales to associates 7 25
Purchase from associates 1,564 1,469
Purchases from associates consist primarily of aviation security services.
38. RELATED-PARTY TRANSACTIONS (CONTINUED)
Government-related entities
As at 31 December 2016 and 31 December 2015, the Government of the RF represented by the Federal
Agency for Management of State Property owned 51.17% of the Company. The Group operates in an
economic environment where the entities are directly or indirectly controlled by the Government of the RF
through its government authorities, agencies, associations and other organizations, collectively referred to
as government-related entities.
The Group decided to apply the exemption from disclosure of individually insignificant transactions and
balances with the state and its related parties because the Russian government has control, joint control or
significant influence over such parties.
The Group has transactions with government-related entities, including but not limited to the following
transactions:
banking services,
transactions with derivative financial instruments,
investments in JSC MASH,
finance and operating lease,
guarantees on liabilities,
purchase of aircraft fuel
purchase of air navigation and airport services, and
Government subsidies including those provided for compensating the losses from passenger flights under
two government programmes, i.e. flights to and from European Russia for inhabitants of Kaliningrad
region and Far East.
Outstanding balances of derivative financial instruments and cash at settlement and currency accounts in
government-related banks are as follows:
31 December
2016
31 December
2015
Assets
Cash and cash equivalents 13,048 8,060
Derivative financial instruments - 53
38. RELATED-PARTY TRANSACTIONS (CONTINUED)
Government-related entities (continued)
The amounts of the Group’s finance lease liabilities are disclosed in Note 28. The share of liabilities to the
government-related entities is approximately 71% for finance lease (31 December 2015: 70%). The share
of the government-related entities in the amount of the future minimum lease payments under non-
cancellable operating leases agreements (note 39) is approximately 39% (31 December 2015: 38%). The
share of interest expenses on finance lease is approximately 86% and 32% for operating lease expenses
(2015: 84% and 28%, respectively).
For the year ended 31 December 2016 the share of the Group’s transactions with government-related
entities was more than 20% of operating costs, and less than 3% of revenue (2015: about 19% and less
than 3%, respectively). These expenses primarily include supplies of fuel by government-related entities,
costs of air navigation and aircraft maintenance services in the government-related airports and also costs
of operating lease for government-related lessors.
As at 31 December 2016 the Group issued guarantees for the amount of RUB 1,225 million to a
government-related entity to secure obligations under tender procedures (31 December 2015: RUB 627
million).
As at 31 December 2016 the government or government-related entities owned non-controlling interest of
particular subsidiaries of the Group amounted to RUB 3,523 million (31 December 2015: RUB 4,623
million).
Transactions with the state also include taxes, levies and customs duties settlements and charges which are
disclosed in Notes 7, 8, 9, 11, 14, 17, 25.
Compensation of key management personnel
The remuneration of key management personnel (the members of the Board of Directors and the
Management Committee as well as key managers of flight and ground personnel who have significant power
and responsibilities on key control and planning decisions of the Group), including salary and bonuses as
well as other compensation, amounted to RUB 1,478 million (2015: RUB 748 million).
These remunerations are mainly represented by short-term payments. Such amounts are stated before
personal income tax but exclude mandatory insurance contributions to non-budgetary funds. According to
Russian legislation, the Group makes contributions to the Russian State pension fund as part of compulsory
social insurance contributions for all its employees, including key management personnel.
Bonus programmes based on the Company’s capitalisation
In 2013, the Group approved bonus programmes for the Group’s key management personnel and members
of the Company’s Board of Directors. These programmes run for three years and are exercised in three
tranches of cash payments. The amounts of payments depend both on the absolute increase in the
Company’s capitalisation and the Company’s capitalisation growth rates against its peers based on the
results of the reporting year. The fair value of the liabilities under the bonus programmes was determined
based on the Company’s capitalisation growth in 2016 and, as at 31 December 2016, were recognised in
accounts payable and accrued liabilities line item.
After the programmes approved in 2013 had expired, in 2016 the Group approved new bonus programmes
for its key management personnel and members of the Company's Board of Directors. These programmes
run for 3.5 years and are to be exercised in four tranches of cash payments.
38. RELATED-PARTY TRANSACTIONS (CONTINUED)
Bonus programmes based on the Company’s capitalisation (continued)
The amounts of payments depend on the level of increase in the Company's capitalisation, its
capitalisation growth rates against peers, and the MICEX index (in relation to members of the Company's
Board of Directors) or a client satisfaction index (in relation to the Group's key management personnel)
based on the results of each reporting period and the attainment of objectives for the Company's
capitalisation at the termination of the programmes. The fair value of the liabilities under the bonus
programmes as of 31 December 2016 was determined based on the expected payment amount for the
reporting period from 1 January 2016 until 31 December 2016 and the amount of payments deferred until
the end of the programmes.
In 2016, expenses related to the bonus programmes were RUB 1,142 million and were recorded within
staff costs and other financial costs in the Group’s consolidated statement of profit and loss (2015: RUB
205 million). As at 31 December 2016, outstanding liability under these plans was RUB 1,594 million (as
at 31 December 2015 it was RUB 452 million).
Cross shareholding
As at 31 December 2016 and 31 December 2015, Aeroflot-Finance, 100%-owned subsidiary of the Group,
owned 53,716,189 ordinary shares of the Company (Note 32).
39. COMMITMENTS UNDER OPERATING LEASES
Future minimum lease payments under non-cancellable aircraft and other operating lease agreements with
third and related parties (Note 38) are as follows:
31 December 2016 31 December 2015
On demand or within 1 year 58,191 57,356
Later than 1 year and not later than 5 years 218,479 202,376
Later than 5 years 239,224 219,353
Total operating lease commitments 515,894 479,085
The amounts above represent base rentals payable and exclude maintenance fees payable to the lessor,
based on actual flight hours, and other variable costs.
The aircraft that the Group has operated under operating lease agreements as at 31 December 2016 are
listed in Note 1. The Group received aircraft under operating lease agreements for the term of 1 to 16
years. The agreements are extendable.
The Group entered into a number of agreements with Russian banks under which the banks guarantee the
payment of the Group’s liabilities under existing aircraft lease agreements.
40. CAPITAL COMMITMENTS
As at 31 December 2016, the Group entered into agreements on acquisition of property, plant and
equipment with third parties for the total of RUB 418,671 million (31 December 2015: RUB 866,439
million). These commitments mainly relate to 1 Boeing B777 (31 December 2015: 3), 22 Boeing B787
(31 December 2015: 22), 22 Airbus A350 (31 December 2015: 22) and 33 Airbus A320/321 (31
December 2015: 49) aircraft. The Group plans to use the mentioned aircraft under operating or finance
lease agreements, thus does not expect cash outflow under the corresponding agreements.
41. CONTINGENCIES
Operating Environment of the Group
The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly
sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are
subject to frequent changes and varying interpretations. During 2016 the Russian economy was negatively
impacted by low oil prices, ongoing political tension in the region and continuing international sanctions
against certain Russian companies and individuals, all of which contributed to the country’s economic
recession characterised by a decline in gross domestic product. The financial markets continue to be
volatile and are characterised by frequent significant price movements and increased trading spreads.
Russia’s credit rating was downgraded to below investment grade. This operating environment has a
significant impact on the Group’s operations and financial position. Management is taking necessary
measures to ensure sustainability of the Group’s operations. However, the future effects of the current
economic situation are difficult to predict and management’s current expectations and estimates could
differ from actual results.
The Group continues to monitor the situation and executes set of measures to minimize influence of
possible risks on operating activity of the Group and its financial position.
The Group’s operations are primarily located in the RF. Consequently, the Group is exposed to the risk of
the economic and financial markets of the RF which display characteristics of an emerging market. The
legal and tax frameworks continue development, but are subject to varying interpretations and frequent
changes which together with other legal and fiscal impediments contribute to the challenges faced by
entities operating in the RF. These consolidated financial statements reflect assessment of the Group’s
management of the impact of the Russian business environment on the operations and the financial
position of the Group. The future business situation may differ from management’s current expectations.
Tax contingencies
The taxation system in the RF continues to evolve and is characterised by frequent changes in legislation,
official pronouncements and court decisions, which are sometimes fuzzy and contradictory and subject to
varying interpretation by different tax authorities. Taxes are subject to audit and investigation by a number
of authorities, which have the authority to impose severe fines and penalties charges. A tax year remains
open for review by the tax authorities during the three subsequent calendar years; however, under certain
circumstances a tax year may remain open longer. Recent events within the RF suggest that the tax
authorities are taking a more tough stance in their interpretation and enforcement of tax legislation.
These circumstances may create tax risks in the RF that are substantially more significant than in other countries. The Group’s management believes that it has provided adequately for tax liabilities in these consolidated financial statements based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of these provisions by the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
Since 1 July 2015, the Russian Government has decided to decrease VAT on domestic passenger and luggage carriage by air to 10% for two years. This is aimed at improving the financial and economic position of the airlines providing domestic services.
41. CONTINGENCIES (CONTINUED)
Tax contingencies (continued)
In accordance with amendments to the Russian Tax Code made in 2015, excise duties charged on the aviation fuel obtained by the Group’s airlines are subject to deduction using the following special coefficients: 1.84 for 2016, 2 for 2015.
Since 1 January 2015, the Russian Tax Code has been supplemented with the framework of beneficial ownership to the income paid from the RF (beneficial ownership framework) for the purposes of applying tax benefits under the Double Tax Treaties (DTT). Given the ambiguity of the new rules application procedure and absence of any practice to that effect, it is impossible to reliably assess the potential outcome of any disputes with tax authorities over compliance with the beneficial ownership confirmation requirements, however they may have a significant impact on the Group.
The Russian transfer pricing legislation is to a large extent aligned with the international transfer pricing
principles developed by the Organisation for Economic Cooperation and Development (OECD). This
legislation provides the possibility for tax authorities to make transfer pricing adjustments and impose
additional tax liabilities in respect of controlled transactions (transactions with related parties and some
types of transactions with unrelated parties), provided that the transaction price is not arm’s length.
Management has implemented internal controls to be in compliance with this transfer pricing legislation.
Tax liabilities arising from transactions between companies are determined using actual transaction prices.
It is possible, with the evolution of the interpretation of the transfer pricing rules, that such transfer prices
could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be
significant to the financial position and/or the overall operations of the Group.
Changes in tax legislation or its enforcement in relation to such issues as transfer pricing may lead to an
increase in the Group’s effective income tax rate.
In addition to the above matters, as at 31 December 2016 and 31 December 2015 management estimates
that the Group has no possible obligations from exposure to other than remote tax risks. The risks
represent estimates arising from uncertainties in the interpretation of Russian tax legislation and related
requirements for documentation. Management will vigorously defend the Group’s positions and
interpretations that were applied in calculating taxes recognised in these consolidated financial statements,
if these are challenged by the tax authorities.
Insurance
The Group maintains insurance in accordance with the legislation. In addition, the Group insures risks
under various voluntary insurance programs, including management’s liability, Group’s liability and risks
of loss of aircraft under operating and finance lease.
Litigations
During the reporting period the Group was involved (both as a plaintiff and a defendant) in a number of
court proceedings arising in the ordinary course of business. Management believes that there are no
current court proceedings or other claims outstanding which could have a material effect on the results of
operations and financial position of the Group.
42. SUBSEQUENT EVENTS
In January 2017, PJSC Aeroflot has filed lawsuits on bankruptcy of its subsidiaries Orenair and Donavia.
As a result, in February 2017 the Arbitration Courts introduced the monitoring process in regard to the
stated companies, whereby the Group expects their subsequent receivership. The Group is currently
assessing the impact of these facts on its consolidated financial statements.
7.2. Entities in which PJSC Aeroflot Holds Shares or Interest
as at 31 December 2016
Full and
abbreviated name Stake Purpose Form
Amount,
RUB
Core operations as
defined in the
Articles of
Association
Revenue in 2016,
RUB thousand
Profit (loss)
under RAS
in 2016,
RUB thousa
nd
Dividend
s
received
in 2015*,
RUB
Joint Stock
Company
Rossiya Airlines,
JSC Rossiya
Airlines
75% (less
1 share)
Consolidate airlines to
establish a strong
national carrier based
on PJSC Aeroflot, by
implementing the best
corporate governance
standards
shares 689,173
Domestic and
international air
carriage of passengers,
baggage, cargo and
mail, and provision of
aviation services,
including services for
passengers and
baggage
73,188,954 904,499 –
Joint Stock
Company
Aurora Airlines,
JSC Aurora Airlines
51.0132
Consolidate airlines to
establish a strong
national carrier based
on PJSC Aeroflot, by
implementing the best
corporate governance
standards
shares 24,293
Domestic and
international
commercial air
carriage of passengers
and cargo, and other
aviation services
16,621,530 317,704 –
Joint Stock
Company
Orenburg Airlines,
JSC Orenair
100
Consolidate airlines to
establish a strong
national carrier based
on PJSC Aeroflot, by
implementing the best
corporate governance
standards
shares 665,503,000
Domestic and
international
commercial flights
6,067,955 (7,715,065) –
Full and
abbreviated name Stake Purpose Form
Amount,
RUB
Core operations as
defined in the
Articles of
Association
Revenue in 2016,
RUB thousand
Profit (loss)
under RAS
in 2016,
RUB thousa
nd
Dividend
s
received
in 2015*,
RUB
Joint Stock
Company
DONAVIA,
JSC DONAVIA
100
Consolidate airlines to
establish a strong
national carrier based
on PJSC Aeroflot, by
implementing the best
corporate governance
standards
shares 328,863,260
Domestic and
international
commercial flights
2,143,232 (867,729) –
Limited Liability
Company
Pobeda Airlines,
LLC Pobeda
Airlines
100
Consolidate airlines to
establish a strong
national carrier based
on PJSC Aeroflot, by
implementing the best
corporate governance
standards
interest 1,200,000,000
Domestic and
international
commercial air
carriage of passengers,
baggage, cargo and
mail, in line with the
Air Code and other
civil aviation laws and
regulations of the
Russian Federation,
the Company’s
internal regulations,
and duly issued airline
licences
18,698,512 3,332,022 –
Joint Stock
Company Sherotel,
JSC Sherotel
100
Provide hotel
accommodations for
PJSC Aeroflot’s
crews, premises for
lease, passenger
services in business
lounges, implement
investment projects
shares 882,812,538.6
3
Hotel accommodation
services and services
in luxury lounges at
airports
1 989 482 446 828 –
Limited Liability
Company Aeroflot-
Finance,
LLC Aeroflot–
Finance
99.9999 Implement investment
projects
stake
in share
capital
5,729,228,886 Implementation of
financial projects – 5,158,040 –
Full and
abbreviated name Stake Purpose Form
Amount,
RUB
Core operations as
defined in the
Articles of
Association
Revenue in 2016,
RUB thousand
Profit (loss)
under RAS
in 2016,
RUB thousa
nd
Dividend
s
received
in 2015*,
RUB
Limited Liability
Company A-
Technics, LLC A-
Technics
Founded
by
LLC Aerof
lot-Finance
Provide maintenance
and maintain
airworthiness for
Aeroflot Group’s
aircraft
Maintenance and
repair of Russian and
foreign-made aircraft 489 993 -276 340 –
Closed Joint Stock
Company Aeromar,
CJSC Aeromar
51
Provide in-flight
catering services for
PJSC Aeroflot’s
flights
shares 28,050
Production and supply
of food for in-flight
catering, in-flight
shopping service,
aircraft cleaning and
outfitting
15 930 596 873,841 –
Limited Liability
Company
Transnautic
Aero GmbH
49 Implement investment
projects
stake in
share
capital
105,154
Cargo flight sales
agent, the company
went out of business
–
Joint Stock
Company
AeroMASH–
Aviation Security,
JSC AeroMASH–
Aviation Security
45
Provide aviation
security services for
passengers and aircraft
shares 45,000 Aviation security
services at airports 2 972 830 52 021 18 792
Joint Stock
Company
International airport
Sheremetyevo,
JSC MASh
8.96 Implement investment
projects shares 2,259,687,350 Airport operations 25 181 634 15 523 780 –
Full and
abbreviated name Stake Purpose Form
Amount,
RUB
Core operations as
defined in the
Articles of
Association
Revenue in 2016,
RUB thousand
Profit (loss)
under RAS
in 2016,
RUB thousa
nd
Dividend
s
received
in 2015*,
RUB
Public Joint Stock
Company Transport
Clearing House,
JSC TCH
3.85 Implement investment
projects shares 50,000
Flight sales settlement
services 1 747 798 578 731 22 132
Private Vocational
Education
Institution Aeroflot
Aviation School,
Aeroflot Aviation
School
Founded
by
PJSC Aero
flot
Provide professional
training and
professional
development training
for Aeroflot Group’s
employees
Founder’
s
contribut
ion
–
Training services
including those for
flight attendants 366 094 14 663 N/A
* Net of VAT (13%)
7.3. Interested Party Transactions
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
1 PJSC Sberbank
(lender)
Suretyship
Agreement
No. 22.5/2016-
0353 dated
21 April 2016
under which
PJSC Aeroflot
undertakes to
OJSC Sberbank to
secure all the
obligations of
Joint-Stock
Company Aurora
Airlines under
Overdraft Loan
Agreement
No. 600160008
dated 21 April
2016
RUB 686,900,00
0
From 21 April
2016 until the
parties have fully
performed their
obligations under
the Loan
Agreement, but not
more than
four years from the
date when the
Suretyship
Agreement is
signed
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Dmitry Saprykin, member of
the Board of Directors, is a
member of the Board of
Directors of JSC Aurora
Airlines
The Company is a person
controlling the legal entity
which is the beneficiary of
the transaction;
Members of the governing
bodies of a party to the
transaction are members of
the governing bodies of the
legal entity which is the
beneficiary of the
transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
2 JSC Aurora
Airlines
(borrower)
Suretyship
Agreement
No. 22.5/2016-
0353 dated
21 April 2016
under which
JSC Aurora
Airlines undertakes
to pay to
PJSC Aeroflot the
fee for the
suretyship provided
under Agreement
Fee:
1.21% per annum
Accrued on the
amount of the
actual
outstanding
balance of the
loan
From 21 April
2016 until the
parties have fully
performed their
obligations
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Dmitry Saprykin, member of
the Board of Directors, is a
member of the Board of
Directors of JSC Aurora
Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
No. 22.5/2016-
0353 dated
21 April 2016
3 JSC Aurora
Airlines (principal)
Agency agreement
for fuel supply
1.5% of the cost
of loaded fuel
1 January 2016 –
31 December 2016
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
4 JSC Aurora
Airlines (buyer)
Sale and purchase
of the
Elephant Beta de-
icer (factory
number
1206 YV2JHCOA2
6A621241, engine
number
D9123349A2L,
garage No. 8, E-13,
year of
manufacture: 2006,
country of
manufacture:
Denmark)
RUB 43,112,34
4
4 March 2016 –
31 December 2016
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
5 JSC Aurora
Airlines (airline)
Sale by
PJSC Aeroflot of
cargo and post
transportation on
JSC Aurora
Airlines’ flights in
the HZ5400–
HZ5799 flight
range under the
RUB 53,100,00
0
(commission
fee: 15%)
1 January 2016 –
31 December 2016
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a position
in the governing bodies of
the legal entity which is a
party to the transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
interline agreement JSC Aurora Airlines;
6 JSC Aurora
Airlines
(contractor)
Technical support
for PJSC Aeroflot’s
aircraft
maintenance in
Magadan
Up to
RUB 11,000,00
0
11 July 2016 –
28 March 2021
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 16
dated 29 April 2016
7 JSC Aurora
Airlines (partner
operator)
Commercial
management by
PJSC Aeroflot of
the load of a
number of
JSC Aurora
Airlines’ flights
(including pricing
and sale of tickets
for these flights) in
the SU5400–
SU5799 flight
range under the
code-sharing
agreement (code
share / blocked
space) based on the
commuter
(regional)
transportation
model.
RUB 16,200,00
0,000
1 November
2015 – 31 October
2016
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of the
Annual General
Meeting of
Shareholders of
PJSC Aeroflot No. 37
dated 22 June 2015
8 JSC Aurora
Airlines (partner
operator)
Commercial
management by
PJSC Aeroflot of
the load of a
number of
RUB 16,000,00
0,000
1 November
2016 – 31 October
2017
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
Minutes of the
Annual General
Meeting of
Shareholders of
PJSC Aeroflot No. 38
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
JSC Aurora
Airlines’ flights
(including pricing
and sale of tickets
for these flights) in
the SU5400–
SU5799 flight
range under the
code-sharing
agreement (code
share / blocked
space) based on the
commuter
(regional)
transportation
model.
position in the governing
bodies of the legal entity
which is a party to the
transaction
dated 27 June 2016
9 JSC Donavia
(borrower)
Provision of a part
of the loan under
Agreement No. Z1-
2016 dated 1 April
2016
RUB 595,674,85
5.18
13 April 2016 –
21 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
10 JSC Donavia
(borrower)
Provision of a part
of the loan under
Agreement No. Z1-
2016 dated 1 April
2016
RUB 114,648,99
5.43
25 April 2016 –
21 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to,
beneficiary of,
intermediary or
representative in the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
11 JSC Donavia
(borrower)
Provision of a part
of the loan under
Agreement No. Z1-
2016 dated 1 April
2016
RUB 233,042,92
0.05
04 May 2016 –
21 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
12 PJSC Sberbank
(lender)
Suretyship
Agreement No. 29-
15/1/627p1 dated
18 February 2016
under which
PJSC Aeroflot
undertakes to
OJSC Sberbank to
secure all the
obligations of
JSC Donavia under
Overdraft Loan
Agreement No. 29-
15/1/627 dated
18 February 2016
RUB 572,500,00
0
18 February 2016 –
28 June 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is the beneficiary of
the transaction;
The person holds a
position in the governing
bodies of the legal entity
which is the beneficiary of
the transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
13 JSC Donavia
(borrower)
Suretyship
Agreement dated
18 February 2016
under which
JSC Donavia
undertakes to pay
to PJSC Aeroflot
the fee for the
suretyship provided
under Agreement
No. 29-15/1/627p1
dated 18 February
Fee:
1.1% per annum
Accrued on the
amount of the
actual
outstanding
balance of the
loan
18 February 2016 –
28 June 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
2016.
14 JSC Donavia
(principal)
Agency agreement
for fuel supply
1.5% of the cost
of loaded fuel
1 January 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
15 JSC Donavia
(airline)
Sale by
PJSC Aeroflot of
cargo and post
transportation on
JSC Donavia’s
flights in the 5000–
5399 flight range
under the interline
agreement
RUB 9,900,000
(commission
fee: 15%)
1 January 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
16 JSC Donavia
(seller)
Property purchase
and sale
RUB 213,430,04
2.35
15 July 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
17 JSC Donavia
(transferor)
Agreement on the
transfer of rights
and obligations
under the lease
agreement (for real
estate assets)
RUB 3,316,939.8
8
31 August 2016 –
25 June 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
18 JSC Orenair
(principal)
Agency agreement
for fuel supply
1.5% of the cost
of loaded fuel
1 January 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
19 JSC Orenair
(borrower)
Provision of a part
of the loan under
Agreement No. Z5-
2015 dated
29 December 2015
RUB 579,709,77
0.13
25 February 2016 –
8 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 7 dated
26 November 2015
20 JSC Orenair
(borrower)
Provision of a part
of the loan under
Agreement No. Z5-
2015 dated
29 December 2015
RUB 380,967,92
8.43
25 March 2016 –
16 August 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 7 dated
26 November 2015
21 JSC Orenair
(airline)
Sale by
PJSC Aeroflot of
cargo and post
transportation on
JSC Orenair’s
flights in the 5800–
5913 flight range
under the interline
agreement
RUB 12,300,000
(commission fee:
15%)
1 January 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
22 JSC Orenair Provision of a part RUB 390,496,3 5 April 2016 – Vadim Zingman, member of The Company is a person Minutes of Meeting
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
(borrower) of the loan under
Agreement No. Z6-
2016 dated 4 April
2016
75.48 8 February 2017 PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
of the Board of
Directors No. 14
dated 31 March 2016
23 JSC Orenair
(borrower)
Provision of a part
of the loan under
Agreement No. Z6-
2016 dated 4 April
2016
RUB 453,069,10
5.07
19 April 2016 –
8 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
24 JSC Orenair
(borrower)
Provision of a part
of the loan under
Agreement No. Z6-
2016 dated 4 April
2016
RUB 132,851,35
6.85
28 April 2016 –
8 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
25 JSC Orenair
(borrower)
Provision of a part
of the loan under
Agreement No. Z6-
2016 dated 4 April
2016
RUB 727,432,40
9.56
4 May 2016 –
8 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
26 JSC Orenair
(borrower)
Provision of a part
of the loan under
RUB 475,084,95
7.62
4 May 2016 –
8 February 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
The Company is a person
controlling the legal entity
Minutes of Meeting
of the Board of
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
Agreement No. Z6-
2016 dated 4 April
2016
Board, is a member of the
Board of Directors of
JSC Orenair
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Directors No. 14
dated 31 March 2016
27 JSC Orenair
(seller)
Purchase of real
estate from
JSC Orenair
RUB 184,336,74
7.41
2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
28 JSC Orenair
(seller)
Purchase of a DF-
404 tractor
RUB 673,471.05 2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
29 JSC Orenair
(seller)
Purchase of a
L2H1N1
freight/passenger
van
RUB 678,300 2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
30 JSC Orenair
(seller)
Purchase of a
GENIE Z45/25 self
propelled boom lift
RUB 3,766,653.4
5
2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
The Company is a person
controlling the legal entity
which is a party to the
Minutes of Meeting
of the Board of
Directors No. 1 dated
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
Board of Directors of
JSC Orenair
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
25 August 2016
31 JSC Orenair
(seller)
Purchase of a
HYUNDAI 15BT-
7 electric forklift
truck
RUB 1,720,295.8
5
2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
32 JSC Orenair
(seller)
Purchase of a
HYUNDAI 30G-
7M wheel-mounted
forklift
RUB 1,147,514.5
5
2 December 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
33 JSC Orenair
(seller)
Property sale and
purchase
RUB 220,739,40
0.00
9 August 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
34 JSC Orenair
(seller)
Property sale and
purchase
RUB 69,814,911.
60
2 December 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
The Company is a person
controlling the legal entity
which is a party to the
transaction;
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
JSC Orenair The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
35 JSC Orenair
(seller)
Property sale and
purchase
RUB 4,626,300 9 August 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
36 JSC Orenair
(seller)
Property sale and
purchase
RUB 1,865,850 9 August 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
37 JSC Orenair
(seller)
Property sale and
purchase
RUB 32,782,050 9 August 2016 –
31 December 2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Orenair
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 18
dated 26 May 2016
38 LLC Pobeda
Airlines (customer)
Provision of paid
services related to
flight crew
simulator training
on FFS B-737NG
RUB 11,264,280 28 December
2015 –
31 December 2016
The majority of members of
PJSC Aeroflot’s Management
Board are members of the
Board of Directors of
LLC Pobeda Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
Materials for relevant
corporate approval
are being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
flight simulators by
the Customer’s
instructors
position in the governing
bodies of the legal entity
which is a party to the
transaction
39 LLC Pobeda
Airlines (principal)
Agency agreement
for fuel supply
1.5% of the cost
of loaded fuel
1 January 2016 –
31 December 2016
The majority of members of
PJSC Aeroflot’s Management
Board are members of the
Board of Directors of
LLC Pobeda Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
40 JSC Rossiya
Airlines (principal)
Agency services
related to customs
clearance
RUB 1,350,000 1 April 2016 –
1 April 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 17
dated 30 April 2014
41 JSC Rossiya
Airlines (partner)
Commercial
management by
PJSC Aeroflot of
the load of a
number of
JSC Rossiya
Airlines’ flights
(including pricing
and sale of tickets
for these flights) in
the SU5950–
SU6999 flight
range under the
code-sharing
RUB 47,000,00
0,000
1 November
2015 – 31 October
2016
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of the
Annual General
Meeting of
Shareholders of
PJSC Aeroflot No. 37
dated 22 June 2015
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
agreement (code
share / blocked
space) based on the
commuter
(regional)
transportation
model
42 PJSC Sberbank
(lender)
Suretyship
Agreement
No. 0162/001/16-P
dated 17 March
2016 under which
PJSC Aeroflot
undertakes to
OJSC Sberbank to
secure all the
obligations of
JSC Rossiya
Airlines under
Overdraft Loan
Agreement
No. 0162/001/16
dated 17 March
2016
RUB 915,900,00
0
From 17 March
2016 until the
parties have fully
performed their
obligations under
the Loan
Agreement, but not
more than
four years from the
date when the
Suretyship
Agreement is
signed
Shamil Kurmashov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of JSC Rossiya
Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines;
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is the beneficiary of
the transaction;
The person holds a
position in the governing
bodies of the legal entity
which is the beneficiary of
the transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
43 JSC Rossiya
Airlines
(borrower)
Suretyship
Agreement dated
17 March 2016
under which
JSC Rossiya
Airlines undertakes
to pay to
PJSC Aeroflot the
fee for the
suretyship provided
under Agreement
No. 0162/001/16-P
dated 17 March
Fee:
1.39% per annum
Accrued on the
amount of the
actual
outstanding
balance of the
loan
From 17 March
2016 until the
parties have fully
and properly
performed their
obligations
Shamil Kurmashov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of JSC Rossiya
Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines;
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
2016 Directors, is the CEO of
JSC Rossiya Airlines
44 JSC Rossiya
Airlines (principal)
Agency agreement
for fuel supply
1.5% of the cost
of loaded fuel
1 January 2016 –
31 December 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
45 JSC Rossiya
Airlines (airline)
Sale by
PJSC Aeroflot of
post and cargo
transportation on
JSC Rossiya
Airlines’ flights in
the FV5950–
FV6999 flight
range under the
interline agreement
RUB 60,000,000 1 January 2016 –
31 December 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
46 JSC Rossiya
Airlines (airline)
Sale by
PJSC Aeroflot of
cargo and post
transportation on
JSC Rossiya
Airlines’ flights in
the FV5950–
FV6999 flight
range under the
interline agreement
RUB 119,000,0
00
(commission
fee: 15%)
(including the
previously
approved
amount of
RUB 60,000,00
0)
1 January 2016 –
31 December 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of PJSC Aeroflot’s
Board of Directors
No. 3 dated
7 October 2016
(amendment to the
transaction with a
price of
RUB 60,000,000
approved by Minutes
of Meeting of
Meeting of
PJSC Aeroflot’s
Board of Directors
No. 13 dated
29 February 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
47 PJSC Sberbank
(lender)
Pledge of goods in
circulation to
secure the
obligations of
JSC Rossiya
Airlines under
Agreement
No. 0162-1-
102616-Z dated
27 May 2016
RUB 459,576,00
0
27 May 2016 –
25 August 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is the beneficiary of
the transaction;
The person holds a
position in the governing
bodies of the legal entity
which is the beneficiary of
the transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
48 JSC Rossiya
Airlines
(borrower)
Pledge of goods in
circulation to
secure the
obligations of
JSC Rossiya
Airlines under
Agreement w/n
dated 22 June 2016
RUB 1,052,197.2
7
22 June 2016 –
25 August 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 14
dated 31 March 2016
49 JSC Rossiya
Airlines (partner)
Commercial
management by
PJSC Aeroflot of
the load of a
number of
JSC Rossiya
Airlines’ flights
(including pricing
and sale of tickets
for these flights) in
the SU5950–
SU6999 flight
range under the
code-sharing
agreement (code
share / blocked
space) based on the
commuter
RUB 65,000,00
0,000
1 November
2016 – 31 October
2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of the
Annual General
Meeting of
Shareholders of
PJSC Aeroflot No. 38
dated 27 June 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
(regional)
transportation
model
50 CJSC Aeromar
(lessee)
Commercial
premises lease
RUB 184,452.29 From 2 June 2016
for a term of
11 months (with
automatic
extension)
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
51 CJSC Aeromar
(sublessor)
Commercial
premises sublease
USD 15,125.13
From 1 March
2016 for 11 months
(with automatic
extension)
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
52 CJSC Aeromar
(sublessee)
Commercial
premises sublease
USD 46,788.10 From 1 January
2016 for 11 months
(with automatic
extension)
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
53 CJSC Aeromar
(sublessee)
Reduction of the
area subleased
under the
commercial
USD 11,574.77 From 1 September
2016 for 11 months
(with automatic
extension)
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
The Company is a person
controlling the legal entity
which is a party to the
transaction;
Materials for relevant
corporate approval
are being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
premises sublease
agreement
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
54 CJSC Aeromar
(contractor)
Purchase of
services related to
the provision of in-
flight meals,
related goods and
service equipment
during flights
RUB 11,810,00
3,424
1 July 2016 –
30 June 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 17
dated 23 May 2016
55 CJSC Aeromar
(contractor)
Purchase of aircraft
interior cleaning
and equipment
services for
PJSC Aeroflot and
partner airlines
RUB 2,137,803,
872
3 July 2016 –
2 July 2017
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
CJSC Aeromar;
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of CJSC Aeromar
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 19
dated 24 June 2016
56 PJSC Sberbank
(lender)
Suretyship
Agreement
No. 2581 dated
22 July 2016 under
which
PJSC Aeroflot
undertakes to
OJSC Sberbank to
secure all the
obligations of
JSC Sherotel under
RUB 114,500,00
0
From 22 July 2016
until the parties
have fully
performed their
obligations under
the Loan
Agreement, but not
more than
four years from the
date when the
Suretyship
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is the beneficiary of
the transaction;
The person holds a
position in the governing
bodies of the legal entity
which is the beneficiary of
the transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
Overdraft Loan
Agreement
No. 2581 dated
22 July 2016
Agreement is
signed
57 JSC Sherotel
(borrower)
Suretyship
Agreement dated
22 July 2016 under
which JSC Sherotel
undertakes to pay
to PJSC Aeroflot
the fee for the
suretyship provided
under Agreement
No. 2581 dated
22 July 2016.
Fee:
1.16% per annum
Accrued on the
amount of the
actual
outstanding
balance of the
loan
From 22 July 2016
until the parties
have fully and
properly performed
their obligations
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 2 dated
3 September 2015
58 JSC Sherotel
(contractor)
Services for
passengers in
luxury lounges at
Sheremetyevo and
Pulkovo airports
RUB 900,000,00
0
1 January 2016 –
31 December 2016
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 6 dated
20 November 2015
59 JSC Sherotel
(lessee)
Commercial
premises lease
RUB 139,318.62 From 1 August
2016 for 11 months
(with automatic
extension)
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
60 JSC Sherotel
(contractor)
Agreement dated
30 December 2016
RUB 189,391,20
0
1 January 2017 –
31 December 2017
Vladimir Alexandrov, member
of PJSC Aeroflot’s
The Company is a person
controlling the legal entity
Minutes of Meeting
of the Board of
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
on services related
to the provision of
hotel
accommodation for
PJSC Aeroflot’s
key specialists
Management Board, is a
member of the Board of
Directors of JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Directors No. 13
dated 19 April 2017
61 JSC Sherotel
(contractor)
Agreement dated
30 December 2016
on services related
to the provision of
hotel
accommodation for
PJSC Aeroflot’s
crew
RUB 117,380,51
1.37
1 January 2017 –
31 December 2017
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 19 April 2017
62 JSC Sherotel
(contractor)
Agreement dated
30 December 2016
on services related
to the provision of
hotel
accommodation for
foreign pilots-in-
command
RUB 33,879,300.
04
1 January 2017 –
31 December 2017
Vladimir Alexandrov, member
of PJSC Aeroflot’s
Management Board, is a
member of the Board of
Directors of JSC Sherotel;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Sherotel
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 19 April 2017
63 Aeroflot Aviation
School (contractor)
Training under
further education
programmes
Framework
agreement (up to
RUB 300.00 milli
on)
21 March 2016 –
31 December 2016
Igor Chalik, member of
PJSC Aeroflot’s Management
Board, is a member of the
governing body of Aeroflot
Aviation School
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 19
dated 24 June 2016
64 Aeroflot Aviation
School (lessee)
Enlargement of the
area leased under
the commercial
RUB 2,158,465.8
8
From 1 May 2016
for a term of
11 months (with
Igor Chalik, member of
PJSC Aeroflot’s Management
Board, is a member of the
The person holds a
position in the governing
bodies of the legal entity
Materials for relevant
corporate approval
are being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
premises lease
agreement
automatic
extension)
governing body of Aeroflot
Aviation School
which is a party to the
transaction
65 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 37,996,009.
18
3 March 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
66 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 16,837,344.
80
14 March 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
67 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 36,972,479.
78
21 March 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
68 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 36,235,831.
64
8 April 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
transaction
69 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 32,967,801.
76
15 April 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
70 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 27,490,461.
40
22 April2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
71 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 2,355,805.2
1
29 April 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
72 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 41,448,607.
68
10 May 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
73 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T1-
2016 dated
16 February 2016
RUB 46,070,555.
91
16 May 2016 –
14 February 2019
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 10
dated 28 January
2016
74 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 33,620,419.
17
25 May 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
75 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 27,607,144.
96
15 June 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
76 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 43,414,577.
71
24 June 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
77 LLC A-Technics Provision of a part RUB 27,526,853. 28 June 2016 – Vladimir Antonov, Shamil The Company is a person Minutes of Meeting
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
(borrower) of the loan under
Agreement No. T2-
2016 dated 13 May
2016
98 15 May 2021 Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
of the Board of
Directors No. 12
dated 22 February
2016
78 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 141,193,26
3.17
12 July 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
79 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 24,264,189.
65
15 July 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
80 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 53,097,938.
54
22 July 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
81 LLC A-Technics
(borrower)
Provision of a part
of the loan under
RUB 30,655,696.
47
28 July 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
The Company is a person
controlling the legal entity
Minutes of Meeting
of the Board of
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
Agreement No. T2-
2016 dated 13 May
2016
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Directors No. 12
dated 22 February
2016
82 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 9,015,036.1
1
14 September
2016 – 15 May
2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
83 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 28,487,689.
19
14 October 2016 –
15 May 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
84 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
2016 dated 13 May
2016
RUB 20,865,450.
01
14 December
2016 – 15 May
2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 12
dated 22 February
2016
85 LLC A-Technics
(borrower)
Provision of a part
of the loan under
Agreement No. T2-
RUB 64,006,740.
13
27 December
2016 – 15 May
2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
The Company is a person
controlling the legal entity
which is a party to the
Minutes of Meeting
of the Board of
Directors No. 12
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
2016 dated 13 May
2016
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
dated 22 February
2016
86 LLC A-Technics
(contractor)
Technical support
of aircraft
maintenance
RUB 3,000,000 22 January 2016 –
31 December 2018
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
2016
87 LLC A-Technics
(lessee)
Property lease RUB 13,577,080 30 December
2016 –
30 November 2017
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
88 LLC A-Technics
(principal)
Agency services
related to customs
clearance
1.5% of
expenses
recorded by
PJSC Aeroflot,
net of
VAT (18%)
12 August 2016 –
31 December 2016
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 19
dated 24 June 2016
89 LLC A-Technics
(buyer)
Purchase and sale
of aviation and
maintenance assets
RUB 30,000,00
0
25 March 2016 –
31 December 2016
(with automatic
extension)
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Nikolay Altukhov,
members of PJSC Aeroflot’s
The Company is a person
controlling the legal entity
which is a party to the
transaction;
Minutes of Meeting
of the Board of
Directors No. 13
dated 19 April 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
Management Board, are
members of the Board of
Directors of LLC A-Technics
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
90 LLC A-Technics
(contractor)
Aircraft
maintenance
Framework
agreement (up
to
RUB 2,000,000,
000)
29 August 2016 –
30 June 2021
Vladimir Antonov, Shamil
Kurmashov, Igor Parakhin,
and Vladimir Alexandrov,
members of PJSC Aeroflot’s
Management Board, are
members of the Board of
Directors of LLC A-Technics
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Minutes of Meeting
of the Board of
Directors No. 1 dated
25 August 2016
91 AlfaStrakhavonie
PLC (insurer)
PJSC Aeroflot’s
directors, officers,
and corporate
liability insurance
Insurance
premium:
USD 99,000
16 July 2016 –
15 July 2017
Members of PJSC Aeroflot’s
Board of Directors
Members of
PJSC Aeroflot’s Board of
Directors are the
beneficiaries of the
transaction
Minutes of the
Annual General
Meeting of
Shareholders of
PJSC Aeroflot No. 38
dated 27 June 2016
92 JSC AeroMar-DV
(supplier,
contractor)
Provision of in-
fight meals and
services
RUB 250,372,45
9.75
1 January 2016 –
31 December 2016
PJSC Aeroflot The Company is a person
controlling the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
93 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 4,320.43 1 April 2016 –
30 September 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
94 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 114,672.59 1 March 2016 –
30 September 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
95 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 2,554.37 1 January 2016 –
31 August 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
96 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 80,211.07 17 April 2016 –
16 March 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
97 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 106,990.77 1 July 2016 –
31 May 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
98 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 10,683.90 27 July 2016 –
30 November 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
99 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 141,934 1 June 2016 –
31 October 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
100 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate under the
commercial
premises lease
agreement
USD 7,813,319.9
0
1 January 2016 –
31 December 2034
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
101 JSC Sheremetyevo
International
Airport (lessor)
Fixing of USD
exchange rate
RUB 89,738,316.
64
1 January 2016 –
31 March 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
102 JSC Sheremetyevo
International
Airport (lessor)
Fixing of USD
exchange rate
RUB 89,738,316.
64
1 April 2016 –
30 June 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
103 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 3,211.59 2 April 2016 –
1 March 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
104 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 24,278.09 20 March 2016 –
19 February 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
105 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate and fixing of
USD exchange rate
under the
commercial
premises lease
agreement
USD 15,717.06 10 July 2016 –
20 November 2018
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
106 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate and fixing of
USD exchange rate
under the
commercial
premises lease
USD 12,687.08 1 January 2016 –
21 January 2019
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
agreement
107 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate and fixing of
USD exchange rate
under the
commercial
premises lease
agreement
USD 18,898.88 1 March 2016 –
2 June 2018
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval are
being prepared
108 JSC Sheremetyevo
International
Airport (lessor)
Indexation of lease
rate and fixing of
USD exchange rate
under the
commercial
premises lease
agreement
USD 7,598.96 1 January 2016 –
22 December 2018
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
109 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 55,388.53 1 June 2016 –
30 April 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
110 JSC Sheremetyevo
International
Airport (lessor)
Commercial
premises lease
USD 36,084.27 26 April 2016 –
25 March 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
111 JSC Sheremetyevo
International
Airport (lessor)
Extension of the
commercial
premises lease
agreement and
indexation of lease
rate
USD 24,008.75 1 June 2016 –
30 April 2017
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
112 JSC Sheremetyevo
International
Airport (lessor)
Change of the
subleased land plot
area and sublease
rate
RUB 1,254,537.3
4
15 January 2016 –
31 December 2050
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
Minutes of Meeting
of the Board of
Directors No. 13
dated 29 February
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
JSC Sheremetyevo
International Airport
transaction 2016
113 JSC Sheremetyevo
International
Airport (lessor)
Commercial
premises lease
RUB 132,301,70
8.56
8 April 2016 –
7 April 2021
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
114 JSC Sheremetyevo
International
Airport (lessor)
Fixing of USD
exchange rate
RUB 678,057.08 10 February 2016 –
30 September 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
115 JSC Sheremetyevo
International
Airport (lessor)
Fixing of USD
exchange rate
under short-term
lease agreements
– 1 January 2016 –
31 March2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
116 JSC Sheremetyevo
International
Airport (lessor)
Fixing of USD
exchange rate
under short-term
lease agreements
– 1 April 2016 –
30 June 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
117 JSC Sheremetyevo
International
Airport (lessor)
Provision of access
to the airport’s
cable infrastructure
Monthly service
price:
RUB 5,156.60
(incl. VAT)
16 November
2016 –
31 December 2016
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is a member of the
Board of Directors of
JSC Sheremetyevo
International Airport
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Materials for relevant
corporate approval
are being prepared
118 Non-profit
partnership
Russian Institute of
Directors
(contractor)
Services related to
monitoring of the
corporate
governance
practice at
RUB 1,000,000,
excl.
VAT (18%)
From 21 March
2016 for 12 months
Igor Belikov, Chairman of
PJSC Aeroflot’s Revision
Committee, is the Head of the
Russian Institute of Directors
The person entitled to give
binding instructions to the
company holds a position
in the governing bodies of
the legal entity which is a
Minutes of Meeting
of the Board of
Directors No. 16
dated 29 April 2016
No.
Counterparty
Subject matter of
the transaction
Price Period Interested parties
Basis of interest
Governing body
that passed the
resolution
PJSC Aeroflot and
information
support
party to the transaction
119 JSC Donavia
(major tax payer 2),
Federal Tax
Service of Russia
Agreement dated
21 July 2016 on
establishing the
pricing procedure
and applying
pricing methods in
a Controlled Code-
Sharing
Transaction for
taxation purposes
– 1 January 2015 –
31 December 2015
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Donavia
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Not subject to
corporate approval
120 JSC Rossiya
Airlines (major tax
payer 2), Federal
Tax Service of
Russia
Agreement dated
14 September 2016
on establishing the
pricing procedure
and applying
pricing methods in
a Controlled Code-
Sharing
Transaction for
taxation purposes
– 1 January 2015 –
31 December 2015
Dmitry Saprykin, member of
PJSC Aeroflot’s Board of
Directors, is the CEO of
JSC Rossiya Airlines;
Vadim Zingman, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Rossiya Airlines
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Not subject to
corporate approval
121
JSC Aurora
Airlines (major tax
payer 2), Federal
Tax Service of
Russia
Agreement dated
14 September 2016
on establishing the
pricing procedure
and applying
pricing methods in
a Controlled Code-
Sharing
Transaction for
taxation purposes
– 1 January 2015 –
31 December 2015
Vladimir Antonov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
Nikolay Altukhov, member of
PJSC Aeroflot’s Management
Board, is a member of the
Board of Directors of
JSC Aurora Airlines;
The Company is a person
controlling the legal entity
which is a party to the
transaction;
The person holds a
position in the governing
bodies of the legal entity
which is a party to the
transaction
Not subject to
corporate approval
7.4. Execution of Presidential and Governmental Instructions
No. Document type, date and
number
Summary Execution status
1 2 3 4
1 Ensuring the transparency of financial and business activities
(Federal Law No. 273-FZ On Countering Corruption dated 25 December 2008, Decree of the President of the Russian Federation No. 309 On Measures to Implement
Certain Provisions of the Federal Law On Countering Corruption dated 2 April 2013, Decree of the President of the Russian Federation No. 460 On Approval of the
Form of Statement to Inform on Income, Expenses, Property and Property-Related Obligations and Amendments to Certain Acts of the President of the Russian
Federation dated 23 June 2014, Decree of the President of the Russian Federation No. 147 On National Anti-Corruption Plan for 2016–2017 dated 1 April 2016)
1.1 Decree of the President of the
Russian Federation No. 147 On
the National Anti-Corruption
Plan for 2016–2017 dated
1 April 2016
Clause 2 of the Decree.
Amend anti-corruption plans so as to
achieve actual results in corruption
prevention and the mitigation and/or
remediation of corruption offences
and to establish control over the
execution of initiatives stipulated by
such plans by 15 May 2016.
Clause 4 of the Decree.
Report on the execution of clause 2 of
the Decree by 20 May 2016.
Clause 5 of the Plan.
Continue to form the negative attitude
of employees to corruption.
Clause 8 of the Plan.
Improve the efficiency of anti-
corruption initiatives in entities.
Clause 15 of the Plan.
Make provision to consider the state
of anti-corruption efforts at the
meetings (sessions) of relevant panels
and take specific actions to improve
such efforts.
Clause 17 of the Plan.
a) conduct professional development
training for employees who are in
charge of countering corruption at
state-owned enterprises (companies)
in line with educational programmes
Execution is in progress.
A roadmap establishing processes for risk management and internal control aimed at corruption
prevention and countering at PJSC Aeroflot was approved by PJSC Aeroflot’s Board of
Directors on 28 April 2016.
To implement the roadmap:
according to Order No. 143 dated 6 May 2016, PJSC Aeroflot introduced the role of Deputy
Director of the Economic Security Department performing the duties of Compliance Manager at
the Company, developed and approved plans of business units for the development/update of
operating documents in terms of organising a risk management and internal control system aimed
at corruption prevention and countering;
on 5 October 2016, the Company approved the programme for the development, implementation
and ensuring efficiency of initiatives aimed at corruption prevention and countering at
PJSC Aeroflot, which includes anti-corruption actions implemented by PJSC Aeroflot on an
ongoing basis.
From August to September 2016, the Internal Audit Department conducted the first audit
(assessment) of the performance of the Company’s risk management and internal controls aimed
at corruption prevention and countering as prescribed in clause 5.3 of the Guidelines. The audit
helped develop and implement initiatives for further improvement of risk management and
internal controls.
Pursuant to sub-clause a, clause 17 of the National Anti-Corruption Plan for 2016–2017, in
November 2016 employees of the Economic Security Department completed the following
professional development training courses carried out by Private Education Institution of
Additional Professional Education Rosatom Institute for Global Nuclear Safety and Security:
Anti-Corruption Efforts in State-Owned Enterprises (Companies) and Compliance of Employees
at State-Owned Enterprises (Companies) with the Restrictions, Bans and Liabilities Established
to Counter Corruption. Training of PJSC Aeroflot’s employees in corruption prevention and
countering is scheduled for 2017.
In 2015–2016, PJSC Aeroflot developed and adopted a number of executive documents and
internal regulations aimed at corruption prevention and countering, and updated the current
No. Document type, date and
number
Summary Execution status
1 2 3 4
approved by the Presidential
Administration of the Russian
Federation;
b) monitor the implementation of anti-
corruption initiatives in subsidiaries.
regulations as follows:
developed and executed JSC Aeroflot’s Anti-Corruption Plan for 2015 approved by Order No. 54
dated 11 February 2015;
developed Aeroflot Group’s Anti-Corruption Policy approved by PJSC Aeroflot’s Board of
Directors on 21 December 2015;
developed the Regulations on the Hotline for Confidential Reports to the Board of Directors
(Audit Committee of the Board of Directors) approved by PJSC Aeroflot’s Board of Directors on
21 December 2015;
updated PJSC Aeroflot’s Corporate Conduct Code approved by PJSC Aeroflot’s Board of
Directors on 28 January 2016;
developed the procedure for notifying management of attempts to engage employees in
corruption approved by Order No. 218 dated 2 July 2015;
developed and approved by Order No. 236 dated 17 July 2015 the list of positions held by
employees which may be filled temporary at PJSC Aeroflot in line with employment contracts
and are subject to bans, restrictions and liabilities set forth by the Federal Law On Countering
Corruption and other federal laws;
developed the procedure for notifying the employee of any personal interest which leads of may
lead to conflict of interest approved by Order No. 250 dated 31 July 2015;
developed the procedure for notification by PJSC Aeroflot’s employees of receipt of gifts in
connection with hospitality events, business trips and other official events, in which they
participate by virtue of their official position or duties, and for handing over, valuation and
buyout of gifts and crediting proceeds from the sale (buyout) approved by Order No. 78 dated
17 March 2016;
established a dedicated commission to accept and evaluate gifts received by PJSC Aeroflot’s
employees; the members of the commission were approved by Order No. 146 dated 12 May
2016;
developed a standard anti-corruption clause incorporated in contracts and agreements to be made
with PJSC Aeroflot’s counterparties; the clause was approved by Directive of Deputy CEO for
Legal and Property Issues No. 229/U dated 18 October 2016.
To include the provisions aimed at corruption prevention and countering, PJSC Aeroflot
amended the following regulations:
Regulations on Internal Audit at Aeroflot Group approved by PJSC Aeroflot’s Board of
Directors on 1 October 2015;
Regulations on Aeroflot Group’s Risk Management System approved by PJSC Aeroflot’s Board
of Directors on 26 November 2015;
Aeroflot’s Regulations on the Procurement of Goods, Works and Services approved by
PJSC Aeroflot’s Board of Directors on 29 April 2016;
1.2 Instruction of Russian Prime
Minister Dmitry Medvedev
No. DM-P17-2666 dated 5 May
2016
(our reference number: 3512,
date: 6 May 2016)
Ensure the implementation of the
National Anti-Corruption Plan for
2016–2017 approved by Decree of the
President of the Russian Federation
No. 147 dated 1 April 2016 and
submit appropriate proposals or draft
reports:
under clauses 2 and 4 of the Decree:
as regards the amendment of anti-
corruption plans
by 15 May 2016;
as regards the submission of reports
on implementing initiatives stipulated
by anti-corruption plans
each quarter starting from 1 October
2016;
under clause 5 and sub-clause b,
clause 6 of the National Plan
by 1 November 2016 and by
1 November 2017;
under paragraph 8 of the National Plan
by 1 July 2016;
under paragraph 15 of the National
Plan
by 1 September 2016;
under paragraph 17 of the National
Plan
by 1 June 2016 and by 1 April 2017.
1.3 Instruction of the Federal
Agency for State Property
Management No. OD-02/13028
On Preparing the Roadmap
Develop and submit for approval by the
Board of Directors the roadmap
establishing processes for risk
management and internal control aimed
No. Document type, date and
number
Summary Execution status
1 2 3 4
Establishing Processes for Risk
Management and Internal
Control Aimed at Corruption
Prevention and Countering
Subject to the Guidelines on
Risk Management and Internal
Control Aimed at Corruption
Prevention and Countering in
Joint-Stock Companies Partially
Owned by the Russian
Federation approved by Order of
the Federal Agency for State
Property Management No. 80
dated 2 March 2016, dated
4 April 2016.
(our reference number: 1994,
date: 16 March 2016)
at corruption prevention and countering
by 1 May 2016.
Key initiatives taken to establish
processes for risk management and
internal control aimed at corruption
prevention and countering and to
update/develop and approve the
Company’s regulations shall be
completed by 1 October 2016.
Regulations on Raising and Using Charity Funds approved by PJSC Aeroflot’s Board of
Directors on 28 January 2016;
Regulations on Raising and Using Funds for Sponsorship Support approved by PJSC Aeroflot’s
Board of Directors on 28 January 2016;
Regulations on the Economic Security Department approved on 2 August 2016;
Company’s Standard STO DOU 07 Documentation Support. Procedure for Preparation,
Conclusion, Amendment, Execution and Termination of PJSC Aeroflot’s Agreements approved
by Order No. 422 dated 8 December 2015.
In addition, provisions requiring compliance with executive documents and internal regulations
aimed at corruption prevention and countering are included in the regulations on business units
and in the job descriptions of employees of PJSC Aeroflot.
The above regulations of PJSC Aeroflot establish, inter alia, the following key pillars, rules and
requirements aimed at corruption prevention and countering:
PJSC Aeroflot fosters a culture of zero tolerance to corruption in its any forms and
manifestations including when interacting with business partners, representatives of authorities,
political parties, and other parties;
any PJSC Aeroflot’s employee, irrespective of a position he/she holds, must notify
PJSC Aeroflot’s CEO in writing on any attempts to engage him/her in corruption;
PJSC Aeroflot’s employees must not accept any gifts, personal gifts of money, tickets for
entertainment or sports events, paid services for leisure, etc. in the execution of their duties;
if a conflict of interest arises or may arise, PJSC Aeroflot’s employee must notify his/her
immediate supervisor of such situation to find together an optimum solution without harming the
interest of either party;
PJSC Aeroflot’s employees strictly adhere to the applicable anti-corruption laws.
As part of the current efforts aimed at corruption prevention and countering, PJSC Aeroflot
implements the following initiatives:
the Company’s intranet website hosts and updates the Anti-Corruption Policy section dedicated
to corruption countering;
PJSC Aeroflot’s employees are trained to comply with PJSC Aeroflot’s Corporate Conduct
Code;
all communications coming from Aeroflot Group’s employees, customers, business partners and
other parties through the Hotline for Confidential Reports to the Board of Directors (Audit
Committee of the Board of Directors) are considered;
PJSC Aeroflot’s regulations and their drafts are examined for corruption potential to eliminate
such potential using the methods approved by Resolution of the Russian Government No. 96 On
Examination of Laws and Regulations and Their Drafts for Corruption Potential dated
26 February 2010;
1.4 Instruction of the Government
Office of the Russian Federation
No. P17-42687 dated 25 August
2015
(our reference number: 6502,
date: 29 August 2016)
Report to the Government of the
Russian Federation on additional
initiatives taken to improve anti-
corruption efforts in entities subject to
Information on Initiatives to Improve
the Performance of Anti-Corruption
Efforts Taken by Entities Founded to
Deliver the Objectives Set for the
Government of the Russian Federation
which was developed in line with
clause 8 of the National Anti-
Corruption Plan for 2016–2017, by
1 July 2017.
No. Document type, date and
number
Summary Execution status
1 2 3 4
PJSC Aeroflot implements the process of a business identifying and verifying the identity of its
business partners, competitors, and customers;
PJSC Aeroflot collects full information from its counterparties about the ownership structure,
executive bodies and beneficiaries (including ultimate beneficiaries) of counterparties and
submits the information to the competent government authorities;
the standard anti-corruption clause is incorporated in contracts and agreements to be made with
PJSC Aeroflot’s counterparties;
PJSC Aeroflot examines draft contracts and agreements with Russian and foreign counterparties;
the Company oversees the application of legal sanctions for non-compliance with the bans,
restrictions and requirements set forth to counter corruption;
the Company regularly controls accounts, availability and accuracy of primary accounting
records;
PJSC Aeroflot audits the financial and business operations of its business units, branch and
representative offices, and subsidiaries;
PJSC Aeroflot interacts with law enforcement authorities and other government authorities to
ensure corruption countering across the Company.
Information about the execution of instructions was sent to the Government Office of the Russian
Federation and the Ministry of Transport of the Russian Federation within prescribed timelines.
1.5 Article 92 of Federal Law
No. 208-FZ On Joint-Stock
Companies dated 26 December
1995.
Chapter VIII of Decree of the
Federal Financial Market
Service of Russia No. 11-46/pz-
n On Approval of the
Regulations on Information
Disclosure by Securities Issuers
dated 4 October 2011.
Decree of the Ministry of
Economic Development of the
Russian Federation No. 208 On
Approval of Information
Disclosure by State-Owned
Joint-Stock Companies and by
State (Municipal) Unitary
Enterprises dated 11 May 2011
Disclose information to the extent and
in the manner specified by the federal
executive authority for the securities
market.
Joint-stock companies included in the
projected privatisation plan are obliged
to disclose information.
Execution is in progress.
Regulations on information exchange through the interdepartmental portal for state property
management were approved by the Board of Directors on 4 April 2012 (Minutes No. 11).
Reports on shareholder and investor relations are submitted to the Board of Directors on a
quarterly basis.
The company fully complies with the requirements to disclose information set out in Russian
laws. In particular, all information is disclosed on the webpage and in the news feed of
PJSC Aeroflot.
Procedure for submission and disclosure of information on material facts about the Company and
the Company’s insider information was approved by Order No. 80 dated 5 March 2015.
No. Document type, date and
number
Summary Execution status
1 2 3 4
1.6 Paragraph 7, clause 2 of minutes
of a meeting held at the office of
First Deputy Prime Minister of
the Russian Federation
Igor Shuvalov No. ISH-P13-98pr
dated 3 October 2013
Publish resolutions of boards of
directors that are not treated as
commercially sensitive information.
The Instruction is executed in line with applicable Russian laws regulating information
disclosure.
The minutes of the Board of Directors are posted in the Company’s account on the
interdepartmental portal for state property management.
1.7 Instruction of the Government
Office of the Russian Federation
No. P17-3337 dated 27 January
2016
(our reference number: 6502,
date: 29 August 2016)
On submission of information on
personal income, expenses, property
and property-related obligations, and
spouse’s and minor children’s income,
expenses, property and property-related
obligations for 2015 by 10 January
2016
Information was submitted within prescribed timelines.
2 On Peculiarities of Participation of Small and Medium-Sized Enterprises in the Procurement of Goods, Works and Services by Certain Types of Legal Entities
(Decree of the President of the Russian Federation No. 287 On Measures to Further Develop Small and Medium-Sized Businesses dated 5 June 2015, Resolution of
the Government of the Russian Federation No. 1352 dated 11 December 2014)
2.1 Decree of the Government of the
Russian Federation No. 2258-r
dated 6 October 2015,
Resolution of the Government of
the Russian Federation No. 1169
dated 29 October 2015
On assessment of draft plans for
procurement of goods, works, services;
draft plans for procurement of
innovative and hi-tech products,
pharmaceutical products; draft
amendments to these plans, prior to
approval, for their compliance with
Russian laws providing for SMEs
participation in procurement and the
requirements of JSC Russian Small and
Medium Business Corporation
(JSC RSMB Corporation)
Execution is in progress.
PJSC Aeroflot’s draft procurement plan for purchases of goods, works and services in 2016
No. 2150141859 was published in the unified information system on 30 December 2015 (notice
No. P2150141859001). According to findings of JSC RSMB Corporation No. OZS-31/2015
dated 30 December 2015, the plan complies with Russian laws.
All amendments to the plan were also published in the unified information system in due time
and their compliance with Russian laws was approved by JSC RSMB Corporation.
3 On procurement
3.1
Paragraph 2 of the List of
Instructions issued by the
Government of the Russian
Federation No. DM-P9-8413
dated 12 December 2015 on
procurement regulation and the
development of relevant
Instructions:
1) Develop and adopt procurement
regulations for purchases of goods,
works and services by 30 April 2016.
Procurement regulations shall specify
limit prices for listed goods, works and
services and/or requirements for their
The list of certain goods, works and services which shall comply with the requirements set out
for their usability and other characteristics was approved by CEO’s Order No. 296 dated
23 August 2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
procurement regulations for
purchases of goods, works and
services
Directives of the Government of
the Russian Federation
No. 2793p-P13 dated 19 April
2016 (our reference number:
3773, date: 17 May 2016)
quantity, usability and other
characteristics. The regulations shall
focus on meeting the needs of
customers without fostering purchases
of goods, works and services with
undesirable properties;
2) publish purchase regulations on
websites of joint-stock companies on
the Internet by 30 April 2016;
3) starting from 1 May 2016, ensure
mandatory application of procurement
regulations when planning business
activities;
4) starting from 2017, conduct annual
monitoring (on a year-on-year basis) of
procurement performance in joint-stock
companies, including adherence to the
requirements of the approved
procurement plan and relevant
regulations for purchases of goods,
works and services for the needs of
joint-stock companies, as well as
fitness of the goods, works and services
purchased by joint-stock companies for
purposes of their business defined in
the articles of association;
5) annually adjust (update)
procurement regulations for purchases
of goods, works and services for the
needs of joint-stock companies.
Implement these requirements across
subsidiaries and affiliates.
The list was published on PJSC Aeroflot’s website on the Internet (Documents subsection, Sales
and Procurement section)
Execution is in progress.
Execution is scheduled from 2017.
Execution is scheduled for 2017.
3.2 Directives of the Government of
the Russian Federation
No. 6558p-P13 On Amendments
to the Company’s Procurement
Policy for Purchases of
Instructions:
amend the procurement policy to give
priority to purchases of innovative
building materials made in Russia;
amend the procurement policy to
The matter was considered at the meeting of PJSC Aeroflot’s Board of Directors on 17 October
2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
Innovative Building Materials
dated 5 September 2016
(our reference number: 6855,
date: 12 September 2016)
provide an opportunity to enter long-
term contracts with Russian
manufacturers of building materials for
supply of innovative building materials
with guaranteed supply volumes in the
future and with the manufacturers that
have duly entered special investment
agreements to launch production of
these products;
implement the provisions of theses
directives across subsidiaries of joint-
stock companies.
3.3 Directives of the Government of
the Russian Federation
No. 7704p-P13 On Expanding
the Use of Factoring when
Executing Agreements for the
Supply of Goods (Agreements
for Works, Service Agreements)
dated 11 October 2016
(our reference number: 7711,
date: 17 October 2016)
Amend the Company’s purchase
regulations to establish procedures for
sale of receivables (factoring) when
executing agreements (for works or
services) made between the Company
and small and medium-sized businesses
based on purchases made using
methods specified in the procurement
regulations excluding tenders as
defined in Russian civil laws.
Execution is in progress.
The matter was considered at the meeting of PJSC Aeroflot’s Board of Directors on 27 October
2016.
PJSC Aeroflot’s Management Board was instructed to develop and submit draft amendments to
the Regulations on the Procurement of Goods, Works and Services to the Board of Directors.
3.4 Directives of the Government of
the Russian Federation
No. 1659p-P13 dated 15 March
2016
(our reference number: 2408,
date: 29 March 2016)
Approve the procedure for accounting
of investment projects that shall set out
rules for compiling, maintaining and
amending the list of investment
projects subject to the Rules for
Selecting Investment Projects to be
Included in the Investment Register
and for Maintenance of such
Investment Register which were
approved by Resolution of the
Government of the Russian Federation
No. 1516 dated 30 December 2015.
Execution is completed.
The matter was considered at the meeting of the Board of Directors on 31 March 2016.
PJSC Aeroflot’s Investment Programme does not include any capital expenditure projects that
may be included in the investment register according to specified criteria as prescribed by
Resolution of the Government of the Russian Federation No. 1516 dated 30 December 2015.
Information was sent to the Ministry of Economic Development of the Russian Federation
(our reference number of the outgoing document: 04-541, date: 11 May 2016).
4 On long-term planning
4.1
List of Instructions of the
President of the Russian
Instructions:
develop and approve the long-term
Instruction has been executed.
Aeroflot Group’s Development Strategy 2025 (Long-Term Development Programme) was
No. Document type, date and
number
Summary Execution status
1 2 3 4
Federation No. Pr-3086 dated
27 December 2013
Instruction of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. 4955p-P13 dated 17 July
2014
development programme (LTDP);
audit the implementation of the LTDP
and approve a relevant audit standard;
amend the regulations on the
remuneration of the sole executive
body.
approved by the Board of Directors on 2 December 2014 (Minutes No. 8);
The audit standard and the terms of reference for auditing the implementation of
Aeroflot Group’s LTDP were developed and approved by the Board of Directors on 29 January
2015 (Minutes No. 10).
The report on the implementation of Aeroflot Group’s Long-Term Development Programme and
achievement of approved key performance indicators for 2015 was approved by the Board of
Directors on 28 April 2016.
The Company conducted the audit of the implementation of the Long-Term Development
Programme for 2015 and the Board of Directors considered the report on 28 April 2016.
5 On developing (updating) innovative development programmes
(Procedure for updating (developing) innovative development programmes of state-owned companies in 2015–2016 was approved by Prime Minister of the Russian
Federation Dmitry Medvedev (Instruction No. DM-P36-7563 dated 7 November 2015), guidelines on adjusting innovative development programmes were approved
by Deputy Prime Minister of the Russian Federation Arkady Dvorkovich (Instruction No. AD-P36-621 dated 9 February 2016)
5.1 Minutes of the Meeting of the
Presidium of the Presidential
Council of the Russian
Federation on Economic
Modernisation and Innovative
Development of Russia No. 2
dated 17 April 2015 (sub-
clause a), clause 2, section II)
(our reference number: 3907,
date: 14 May 2015)
On the need to update (develop) and
approve innovative development
programmes subject to the Guidelines
(Appendix 1 to the Minutes)
Execution is completed.
The Board of Directors approved the Regulations on Procedures for Development and
Implementation of the Innovative Development Programme on 26 November 2015.
Aeroflot Group developed Innovative Development Programme 2025, obtained its approval from
federal executive authorities, the Interdepartmental Committee for Technological Development
at the Presidium of the Presidential Council of the Russian Federation on Economic
Modernisation and Innovative Development of Russia as specified in the Regulations. The Board
of Directors approved the Programme on 25 August 2016.
The report on the implementation of PJSC Aeroflot’s Innovative Development Programme in
2015 was approved by the Board of Directors on 29 April 2016 and submitted to federal
executive bodies in line with the Regulations.
On 8 August 2016, the Board of Directors made a decision to set a weight of 10% for the
integrated KPI reflecting innovative performance in 2016.
Key performance indicators for PJSC Aeroflot’s employees for 2016 were updated (Order
No. 439 dated 23 December 2016).
5.2 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. 1471p-P13 dated 3 March
2016
(our reference number: 1936,
date: 15 March 2016)
Instructions:
approve the innovative development
programme developed (updated) in line
with the guidelines approved by
Instruction No. DM-P36-7563 and the
Regulations approved by Instruction
No. DM-P36-7563;
annually report on the implementation
of innovative development
programmes to federal executive
bodies in line with the Regulations.
5.3 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
starting from 2016, include the
integrated key performance indicator
(integrated KPI) reflecting innovation
No. Document type, date and
number
Summary Execution status
1 2 3 4
No. 1472p-P13 dated 3 March
2016
(our reference number: 1938,
date: 18 March 2016)
performance in the list of key
performance indicators within long-
term development programmes and in
the list of key performance indicators
for the senior management, and take
this integrated KPI into account when
calculating the amount of incentive
remuneration for the Company’s
management including the Company’s
sole executive body.
5.4 Instruction of Deputy Prime
Minister of the Russian
Federation Arkady Dvorkovich
No. AD-P13-4521 dated 29 July
2016
(our reference number: 5761,
date: 1 August 2016)
Directive of Deputy Prime
Minister of the Russian
Federation Arkady Dvorkovich
No. 9650p-P13 dated
16 December 2016
(our reference number: 9651,
date: 27 December 2016)
establish a minimum weight of 10% for
the integrated KPI reflecting
PJSC Aeroflot’s innovation
performance in 2016, as defined by
Directives of the Government of the
Russian Federation No. 1472p-P13
dated 3 March 2016.
6 On improving the performance of stated-owned companies
(List of Instructions of the President of the Russian Federation No. Pr-3013 dated 27 December 2014, Instructions of the Government of the Russian Federation
No. ISH-P13-1818 dated 23 April 2015 and No. ISH-P13-4148 dated 24 June 2015)
6.1 The Instruction of the Ministry
of Economic Development of the
Russian Federation dated
15 January 2016
(our reference number: 242,
date: 18 January 2016)
On supervising the execution of the
Instruction of the President of the
Russian Federation by the Control
Directorate of the President of the
Russian Federation and on submitting
information about execution by
20 January 2016.
Execution is completed.
Information was submitted on 20 January 2016.
6.2 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
Instructions:
1. approve the sponsorship and charity
budget and the regulations on raising
Execution is completed.
Charitable donations are included in the budget.
No. Document type, date and
number
Summary Execution status
1 2 3 4
No. 5024p-P13 dated 31 July
2015
(our reference number: 96/KI,
date: 24 August 2015)
and using funds for sponsorship
support and charity within ten days
after approval of the guidelines on
developing the regulations on raising
and using funds for sponsorship
support and charity by the Ministry of
Economic Development of the Russian
Federation.
2. amend the content of the Company’s
annual report to add information about
the areas and amounts of sponsorship
support and about charitable donations
provided by the Company, the
Company’s subsidiaries and affiliates
in the reporting period (starting from
the reporting for corporate year 2015–
2016).
3. on a quarterly basis, submit reports
of the Company, the Company’s
subsidiaries and affiliated on using the
funds for sponsorship support through
the interdepartmental portal for state
property management on the Internet
(not later than on the 15th day of the
first month following the reporting
quarter, starting from the reporting for
Q4 2015).
The Regulations on Raising and Using Charity Funds and Regulations on Raising and Using
Funds for Sponsorship Support were approved by the Board of Directors on 28 January 2016.
Execution is completed.
Execution is in progress.
6.3 Instruction of Deputy Prime
Minister of the Russian
Federation No. AD-P36-4292
dated 20 July 2016
(our reference number: 5579,
date: 25 July 2016)
boards of directors shall approve the
plans stipulating consideration of the
following matters at the meetings of
the boards of directors (after
preliminary consideration by the
personnel and remuneration
committee and the investment
Execution is in progress.
These matters were included in the action plan of the Board of Directors for July 2016–
June 2017 and are considered [based on the results of the reporting period].
No. Document type, date and
number
Summary Execution status
1 2 3 4
committee, starting from the next
reporting period in 2016): quarterly reporting on the
implementation of the LTDP and
achievement of KPIs;
assessment of expected KPIs, analysis
of reasons for difference between
actual and target KPIs;
adoption of a remedial plan in case of
significant difference between actual
and target KPIs;
approval of the amount of quarterly and
annual remuneration based on KPI
achievement
by 31 August 2016.
6.4 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. 2007p-P13 dated 6 April
2015
(our reference number: 2720,
date: 7 April 2015)
Include in the annual report the
following information:
1. availability of the joint-stock
company’s development strategy;
2. availability of the joint-stock
company’s long-term development
programme;
3. year-on-year changes in the
development strategy and LTDP;
4. availability of the joint-stock
company’s other (including investment,
innovation, etc.) programmes focused
on the implementation of the
development strategy and LTDP;
5. availability of the joint-stock
company’s approved programme for
disposal of non-core assets;
6. availability of the auditor’s opinion
about the implementation of the joint-
stock company’s LTDP, date and
number of the opinion, the auditor’s
key findings;
Execution is completed.
JSC Aeroflot’s Annual Report for 2015 was prepared taken into account the directives that were
subject to execution, adopted by the Board of Directors on 28 April 2016 (Minutes No. 15) and
approved by the General Meeting of Shareholders on 27 June 2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
7. availability of the joint-stock
company’s approved KPI framework;
8. summary of the joint-stock
company’s risks and risk management
activities;
9. description of principles and
approaches to the risk management and
internal control system, information
about internal audit functions.
II. Approve the annual report provided
that it has been prepared based on
audited financial statements for the
reporting and preceding years.
III. The annual report shall include
information about major internal
regulations that are used for the
preparation of the current annual report
including key internal regulations
governing internal audit functions and
the matters related to the operations of
the risk management and internal
control system (RMICS).
7 On reduction of operating expenses
(Clause 5 of List of Instructions of the President of the Russian Federation No. Pr-1474 dated 05 July 2013, sub-clause 5, clause 1 of List of Instructions of the
President of the Russian Federation No. Pr-2821 dated 5 December 2014; clause 5 of Instruction of the President of the Russian Federation No. DM-P13-9024 dated
8 December 2014)
7.1 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. 4750p-P13 dated 04 July
2016
(our reference number: 5378,
date: 15 July 2016)
On making decisions providing for the
following:
development (update) by companies
and their subsidiaries (if any), within
one month, of a set of measures (list of
measures) as part of the long-term
development programme aimed at
achieving the KPI of reducing
operating expenses (costs) by at least
10% (percent) in 2016 taking into
account the need to implement the
Execution is completed:
Aeroflot Group updated its programme for operating expenses reduction in 2016 which was
approved by the Management Board on 17 October 2016.
The report on the implementation of the set of measures to reduce operating expenses is
submitted for the approval by the Board of Directors and submitted to the industry federal
executive authority (Rosimushchestvo) on a quarterly basis.
No. Document type, date and
number
Summary Execution status
1 2 3 4
initiatives specified in the Directives of
the Government of the Russian
Federation No. 2303-p-P13 dated
16 April 2015;
consideration of management reports
on the implementation of the set of
measures (list of measures) to reduce
operating expenses (costs) at meetings
of the boards of directors (supervisory
boards) on a quarterly basis;
submission of companies’ reports on
the implementation of the set of
measures (list of measures) to reduce
operating expenses (costs) considered
and approved by the board of directors
(supervisory boards) to industry federal
executive authorities on quarterly basis.
8 On disposal of non-core assets
8.1 Directives of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. 4863p-P13 dated 7 July
2016
(our reference number: 5398,
date: 18 July 2016)
Guidelines on identification and
disposal of non-core assets
approved by Instruction of the
Government of the Russian
Federation No. ISH-P13-4065
dated 7 July 2016 (the
Guidelines)
(our reference number: 5644,
date: 26 July 2016)
Instructions:
develop and update the joint-stock
company’s programme for disposal of
non-core assets (the programme) in line
with the Guidelines by 19 August
2016;
develop the joint-stock company’s
register of non-core assets comprising
all the joint-stock company’s identified
non-core assets as specified by the
Guidelines by 19 August 2016;
prior to approval by the board of
directors (supervisory board), submit
the draft programme (amendments to
the programme) and the draft register
of non-core assets to the Federal
Agency for State Property Management
by 22 August 2016;
approve the programme (amendments
Execution is in progress.
The updated Programme for Disposal of Non-Core Assets of PJSC Aeroflot, the Register of
Non-Core Assets of PJSC Aeroflot (Appendix 1 to the Programme), the Action Plan for Disposal
of Non-Core Assets (Appendix 2 to the Programme) were approved by the Board of Directors on
17 October 2016.
PJSC Aeroflot’s subsidiaries carry out stock-taking of the assets to check their role in the running
of the business in line with the Guidelines. These actions are scheduled for completion in
Q1 2017.
Information on non-core assets disposal is published regularly through the interdepartmental
portal for state property management.
No. Document type, date and
number
Summary Execution status
1 2 3 4
to the programme) and the register of
non-core assets by 15 September 2016;
approve the annual plan for the
implementation of the programme for
disposal of the joint-stock company’s
non-core assets with its details broken
down by quarter and publish the plan
on the interdepartmental portal for state
property management;
consider the joint-stock company’s
reports on the implementation of the
programmes at the meetings of the
board of directors (supervisory board)
on a quarterly basis and publish the
relevant materials signed by the joint-
stock company’s authorized person on
the interdepartmental portal for state
property management;
timely publish all the necessary well-
developed information on disposal of
non-core assets as specified by the
Federal Agency for State Property
Management on the interdepartmental
portal for state property management;
implement the provisions of theses
directives across subsidiaries of joint-
stock companies.
9 On managing intellectual property rights
(Instruction of First Deputy Prime Minister of the Russian Federation Igor Shuvalov No. ISH-P8-800 dated 4 February 2014)
9.1 Recommendations of the Federal
Agency for State Property
Management on intellectual
property rights (IPR)
management in entities dated
13 March 2014
Develop and approve the basic
regulations on IPR management and
the action plan to implement the
regulations taking into account
recommendations of the Federal
Agency for State Property Management
and the company’s innovative
Execution is in progress.
The regulations on IPR management (RI-GD-224) was approved by Order No. 263 dated 29 July
2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
development programme.
10 On purchasing Russian-made competitive software
(List of Instructions of the President of the Russian Federation following the meeting of the Presidium of the State Council of the Russian Federation No. Pr-2654GS
dated 25 November 2015, Instruction of Deputy Prime Minister of the Russian Federation No. AD-P9-69 dated 14 January 2016)
10.1 Directives of the Government of
the Russian Federation
No. 4972p-P13 dated 11 July
2016
(our reference number: 5553,
date: 25 July 2016)
Instructions:
1. Amend the regulations on the joint-
stock company’s procurement
processes so as to ensure the following:
1.1 Procurement requirements and
other local regulations, which are
subject to approval when making any
purchases of the computer and database
software available, irrespective of a
type of agreement, on physical media
and/or in electronic form through
communications channels and of the
right to use the software, including
temporary use, shall provide for
submission of bids offering only such
software which is included in the
unified register of Russian computer
and database software that was created
in line with Article 12.1 of Federal Law No. 149-FZ On Information, Information Technology and Information Protection (the register)
dated 27 July 2006, except in the
following cases:
a) the register does not include data on
software which belongs to the same
class of software as the software
offered for purchase;
b) the software, which is included in
the register and belongs to the same
class of software as the software
offered for purchase, is uncompetitive
Execution is completed.
The requirements were included in PJSC Aeroflot’s Regulations on Procurement of Goods,
Works and Services (RI-GD-148E) approved by the Board of Directors on 17 October 2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
(its functions, specifications and/or
performance characteristics do not
meet the requirements set out by a
customer for the software offered for
purchase).
1.2. If a purchase is subject to the
above exceptions, publish information
on each such purchase with a rationale
explaining inability to comply with
restrictions imposed on foreign-made
software on the joint-stock company’s
website in a dedicated procurement
section within seven calendar days
after publication of information on
procurement on the joint-stock
company’s website or dedicated
websites on the Internet used by the
joint-stock company for procurement
(the bidding platforms).
2. Implement the above approach
across subsidiaries, which directly
and/or indirectly controlled by the
joint-stock company by more than 50%
in total. 11 On ensuring priority funding for the social and economic development of the Russian Far East
11.1 Instruction of Russian Prime
Minister Dmitry Medvedev
No. DM-P16-6658 dated
30 September 2015
(our reference number: 7929,
date: 2 October 2015)
On executing the List of Instructions of
the President of the Russian Federation
Vladimir Putin (the List) following the
Eastern Economic Forum:
under sub-clause c), clause 1 of the List
“c) expand the list of Far Eastern
investment projects”:
a) as regards the selection of
investment projects, execute by
18 January 2016;
under sub-clause g), the third paragraph
of the List “ensure priority funding for
Execution is in progress.
Information on expanding the list of Far Eastern investment projects was sent to the Ministry of
Finance of the Russian Federation and the Ministry for the Development of the Russian Far East
(our reference number of the outgoing document: GD-1407, date: 19 October 2015).
No. Document type, date and
number
Summary Execution status
1 2 3 4
the social and economic development
of the Russian Far East for
development institutions and state-
owned companies and their investment
projects”:
amend development plans and
investment programmes of entities so
as to add dedicated sections (dedicated
measures) to them.
Information on ensuring priority funding for the social and economic development of the Russian
Far East was submitted to the Ministry for the Development of the Russian Far East (our
reference number of the outgoing document: 407-469, date: 25 December 2015).
On PJSC Aeroflot’s commitment to supporting the government-sponsored programme of
maintaining airline passenger service between the Far East and European Russia and to the
programmes of local flights within the Far Eastern Federal District (our reference number of an
outgoing document: 407-52, date: 26 February 2016).
Aeroflot Group’s Long-Term Development Programme for 2016–2021 was added with a
dedicated section on Ensuring Priority Funding for the Social and Economic Development of the
Russian Far East and amendments were approved by the Board of Directors on 24 November
2016.
Execution is completed.
All aircraft supplied under prior years’ agreements signed between PJSC Aeroflot and Sberbank
Leasing, VEB-LEASING and VTB Leasing to improve transport accessibility were phased in.
11.2 Directives of the Government of
the Russian Federation
No. 4531p-P13 dated 28 June
2016
(our reference number: 5176,
date: 7 July 2016)
Instructions:
amend development plans including
long-term development programmes,
strategies and investment programmes
of the company (the strategic
documents) so as to add to them
dedicated sections (dedicated
measures) ensuring priority funding
(development of such measures, if
necessary) for the social and economic
development of the Russian Far East;
align strategic documents with state
programmes of the Russian Federation
(in line with the appended list).
11.3 List of Instructions of the
President of the Russian
Federation following the
meeting of the President of the
Russian Federation
Vladimir Putin with the
members of the Government of
the Russian Federation No. Pr-
1658 dated 10 August 2016
(our reference number: 6431,
date: 25 August 2016)
Instruction of Russian Prime
Minister Dmitry Medvedev
No. DM-P16-5208 dated
2. The Government of the Russian
Federation, in conjunction with
PJSC Aeroflot, Sberbank of Russia,
VTB Bank, Rossiya Airlines and
Vnesheconombank, shall phase in
long-haul aircraft supplied under prior
years’ agreements to improve transport
accessibility constituent entities of the
Far Eastern Federal District
by 1 December 2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
31 August 2016
(our reference number: 6617,
date: 1 September 2016)
12 On creating a barrier-free environment for disabled people
(Federal Law No. 419-FZ On Amendments to Certain Laws of the Russian Federation Aimed at Social Protection of Disabled People Following Ratification of the
Convention on the Rights of Persons with Disabilities dated 1 December 2014, Resolution of the Government of the Russian Federation No. 599 On Procedures and
Timelines for Development of Measures to Improve Indicators Reflecting Accessibility of Facilities and Services for Disabled People in Specified Areas of Activity by
Federal Executive Authorities, Executive Authorities of Constituent Entities of the Russian Federation and Local Authorities dated 17 September 2015, Resolution of
the Government of the Russian Federation No. 1297 On Approval of the Russian State Accessible Environment Programme 2010–2020 dated 1 December 2015,
Decree of the Ministry of Transport of the Russian Federation No. 24 On Approval of the Procedure for Provision of Services for Disabled People in Airports and
Aircraft dated 15 February 2016)
12.1 Instruction of the Ministry of
Labour and Social Protection
No. 13-6/10/V-2014 dated
28 March 2016
(our reference number: 5527,
date: 9 July 2015)
Adopt decisions providing for the
following:
definition of corporate standards (rules)
ensuring accessibility of the entity’s
facilities and services for disabled
people;
certification of facilities and services
and subsequent approval of plans for
step-by-step bringing their accessibility
in line with applicable laws;
training (briefings) of relevant
employees in ensuring accessibility of
the entity’s facilities and services for
disabled people;
annual (starting from 2017) allocation
of funds from the entity’s budget and
provision of other material resources to
fulfil the above obligations.
Submit information on adopted
decisions by 1 August 2016.
Execution is in progress.
Deputy CEO for Customer Service coordinates the implementation of the Company’s
management decisions aimed at compliance with laws.
Based on the Procedure for Provision of Services for Disabled People in Airports and Aircraft
approved by Decree of the Ministry of Transport of the Russian Federation No. 24 dated
15 February 2016 and Federal Law No. 419-FZ dated 1 December 2014, PJSC Aeroflot
approved the revised version of its Standard of Services for Disabled Passengers, updated
internal regulations of business units governing the provision of services for disabled passengers
in line with the Company’s Standard.
The Company checked its operations and infrastructure for compliance with applicable laws and
other regulations of the Russian Federation adopted following ratification of the Convention on
the Rights of Persons with Disabilities, approved the forward-looking Action Plan for Ensuring
Accessibility of PJSC Aeroflot’s Services for Disabled People (the Action Plan).
In line with the Action Plan, PJSC Aeroflot:
stopped phasing in of facilities, equipment and vehicles which are not fully adapted for use by
disabled people from 1 July 2016;
entered an agreement to inspect PJSC Aeroflot’s own sales offices and develop recommendations
on improving their accessibility for disabled people in line with Article 15 of Federal Law
No. 181-FZ dated 24 November 1995;
carried out an assessment the aircraft fleet’s accessibility for disabled passengers;
completed the internal audit of compliance with the Company’s Standard of Services for
Disabled Passengers.
All flight-related passenger services of PJSC Aeroflot are also available for disabled passengers.
To avoid discrimination on the grounds of disability, services designed for such passengers are
provided only upon their consent or demand:
12.2 Instruction of the Ministry of
Labour and Social Protection of
the Russian Federation No. 113-
6/10/V-5159 dated 26 July 2016,
Minutes of the Meeting led by
Develop roadmaps to improve
accessibility of facilities and services
for disabled people using the
recommendations developed by the
Ministry of Labour and Social
No. Document type, date and
number
Summary Execution status
1 2 3 4
the Minister of Labour and
Social Protection of the Russian
Federation Maxim Topilin
No. 1/13/23b dated 15 July 2016
(our reference number: 5821,
date: 2 August 2016)
Protection of the Russian Federation by
30 December 2016.
Inform the Ministry of Labour and
Social Protection of the Russian
Federation on the execution of the
recorded resolution by 30 December
2016.
Sales offices, the Contact Centre available by phone and the Company’s website offer the
possibility to order services simultaneously with the purchase of tickets. PJSC Aeroflot is taking
efforts to redesign all sections of the website for use by web surfers with sight disabilities in
conjunction with Lab.Ag, a digital company with a strong track record in making websites
accessible for visually impaired people. The service is available if the computer of a disabled
person has special software. The content of the Passengers with Disabilities webpage was
updated and the page is available after two clicks upon entering the website;
When reserving airline tickets, passengers may order transportation of wheelchairs or another
mobility aids, request stretchers to carry them and an escort to guide them through airports;
a wheelchair of a disabled person can be transported free of charge (on its own initiative,
PJSC Aeroflot offers a possibility to transport an additional wheelchair free of charge);
information about escort service ordered by the passenger to guide him/her from check-in to a
seat in a passenger cabin is communicated to the airport’s handling company;
the Company offers self service check-in (via the website, through the mobile application, at the
airport’s self-service check-in kiosks);
disabled passengers may choose seats in the passenger cabin subject to the availability of
preferred seating arrangement at the time of check-in (except for seats by emergency exits);
disabled may use their own manual wheelchairs before boarding and after leaving an aircraft at a
destination airport;
passengers with sight disabilities are offered information brochures in Russian and English
translated into Braille onboard all the Company’s aircraft to be aware of in-flight services and
flight safety instructions;
the Company’s employees, who perform passenger service duties on board aircraft, completed
training to practice communication and interaction skills, in accordance with the characteristics
of different types of disability. To develop guidance materials, PJSC Aeroflot took into account
lessons learned from transportation of disabled passengers during 2014 Winter Paralympics,
consulted with the Perspektiva Regional Disability Non-Governmental Organisation and disabled
passengers, the Company’s frequent flyers.
The forward-looking Action Plan outlines the airline’s objectives aimed at improvement of
accessibility targets and includes the following initiatives:
upgrade sales offices to ensure accessibility for customers with all forms of disability;
equip the entire aircraft fleet with onboard wheelchairs by the end of 2017;
starting from 2018, upgrade modular lavatory systems for B 737 to provide enough space to
carry a stretcher with a passenger;
complete redesign of all sections of the website (including its mobile version) for use by
passengers with sight disabilities;
optimise website functionality for ordering of all services immediately when booking a flight;
12.3 Minutes of the Meeting led by
the Deputy Minister of Transport
of the Russian Federation
Alexey Tsydenov No. ATS-109
dated 9 August 2016
(our reference number: 6719,
date: 6 September 2016)
Recommend business entities
providing transport services to execute
the following by 1 December 2016:
1. Confer functions on one of the
deputy chief officers of the entity
(company) and one of the business
units in relation to the development and
implementation of internal
management decisions to comply with
applicable laws requiring accessibility
of transport infrastructure facilities,
vehicles and the entity’s/company’s
transport services for disabled people.
2. Adopt internal regulations to
establish procedures for ensuring
accessibility of transport infrastructure
facilities, vehicles and transport
services for disabled people.
3. Arrange for training and retraining
(professional development) of
employees (instructors) at entities
(companies) by educational institutions
for transport across the professional
development programmes developed
by the Industry Resource Training and
Methodology Centre of Transport
Accessibility for Disabled Persons at
the Institute of International Transport
Communications of Moscow State
No. Document type, date and
number
Summary Execution status
1 2 3 4
University of Railway Engineering
(MIIT).
4. Issue the entity’s/company’s
executive document implementing
initiatives to stop, starting from 1 June
2016, phasing in of facilities,
equipment and vehicles (upon
construction, overhaul, upgrade,
purchase) which are not fully adapted
for use by disabled people in line with
Rules SP-59.13330.2012.
5. Develop and approve corporate
plans for step-by-step improvement of
indicators reflecting accessibility for
disabled people in relation of existing
facilities used to provide services for
disabled people, as well as for
simultaneous creation of suitably
adjusted conditions (until overhaul or
upgrade are completed) for them to
provide services in line with the rule of
Part 4, Article 15 of Federal Law
No. 181-FZ On Social Protection of
Disabled People in the Russian
Federation dated 24 November 1995.
launch a web chat service to communicate in real time with hearing impaired persons when they
book flights and order services;
starting from January 2017, incorporate into the in-flight entertainment programme movies with
special subtitles for hearing impaired passengers and movies with audio descriptions for visually
impaired passengers (two movies in Russian and two movies in English).
The Company’s budget provides financing for all targets.
Voluntary certification, selection of a voluntary certification system included in the unified
register and subsequent publication of results on the Company’s website and their media
coverage are subject to consideration after the delivery of targets set out in the forward-looking
Action Plan. A certification body for voluntary certification shall be selected on a tender basis in
line with Federal Law No. 223-FZ On Procurement of Goods, Works and Services by Certain
Legal Entities dated 18 July 2011.
Information on execution of the instructions was submitted to the Ministry of Labour and Social
Protection and the Ministry of Transport of the Russian Federation.
The practice of creating an accessible environment for disabled persons in PJSC Aeroflot was
approved by Minutes of the Meeting led by the Deputy Minister of Transport of the Russian
Federation Alexey Tsydenov No. ATS-109 dated 9 August 2016; information of PJSC Aeroflot
was published on the website of the Ministry of Transport of the Russian Federation in the
Accessible Environment for Disabled Persons subsection as best practice to share positive
experience and cover efficient performance.
13 On implementing occupational standards in PJSC Aeroflot
13.1 Directives of the Government of
the Russian Federation
No. 5119p-P13 dated 14 July
2016
(our reference number: 5555,
date: 25 July 2016)
Implement occupational standards in
joint-stock companies subject to
Federal Law No. 122-FZ On
Amendments to the Labour Code of the
Russian Federation dated 2 May 2015
and Articles 11 and 73 of the Federal
Law On Education in the Russian
Federation through the approval and
implementation of relevant plans, and
make provision for considering the
performance of the implementation of
Execution is in progress.
The matter was considered at the meeting of the Board of Directors on 25 August 2016.
The Management Board was instructed to arrange for the implementation of standards and
inform the Board of Directors on performance at least each half year.
The action plan to implement occupational standards in PJSC Aeroflot was approved by the
Management Board on 9 December 2016.
To prepare reports and inform the Board of Directors, PJSC Aeroflot established a dedicated task
force to implement occupational standards (Order No. 434 dated 22 December 2016).
The Board of Directors took note of the reports on the implementation of occupational standards
in PJSC Aeroflot on 23 December 2016.
No. Document type, date and
number
Summary Execution status
1 2 3 4
occupational standards when assessing
and rewarding joint-stock companies’
HR management.
Request to convene meetings of boards
of directors (supervisory boards) of
joint-stock companies at least each half
year and include the implementation of
occupational standards in joint-stock
companies in agendas.
14 Special instructions of the Government of the Russian Federation
14.1 Instruction of the Government
Office of the Russian Federation
No. P9-1310 dated 15 January
2016
(our reference number: 260,
date: 18 January 2016)
I hereby request to consider and submit
a unified stance of PJSC Aeroflot’s
federal executive authorities on an
investment project proposed by
Mukharbek Aushev to establish a
company for maintenance and repair of
aircraft and aircraft components
(Technic ONE) in a port special
economic zone in the Ulyanovsk
Region.
Execution is completed:
The answer was submitted to the Ministry of Transport of the Russian Federation
(our reference number of the outgoing document: 01-79, date: 20 January 2016).
Execution is completed.
The answer was submitted to the Ministry of Transport of the Russian Federation
(our reference number of the outgoing document: GD-761, date: 20 June 2016).
14.2 Instruction of Deputy Prime
Minister of the Russian
Federation Arkady Dvorkovich
No. AD-P9-3134 dated 27 May
2016
(our reference number: 4109,
date: 30 May 2016)
Carry out a detailed assessment of the
investment project to establish a
company for maintenance and repair of
aircraft proposed by Technic ONE in
terms of its efficiency and report on
insights
by 1 July 2016.
14.3 Instruction of First Deputy Prime
Minister of the Russian
Federation Igor Shuvalov
No. ISH-P9-2000 dated 8 April
2016
(our reference number: 2837,
date: 12 April 2016)
Consider entering an agreement for use
of Vnukovo airport between Airport
Vnukovo and PJSC Aeroflot’s
subsidiaries and submit proposals by
20 April 2016.
Execution is completed.
Proposals were submitted to the Ministry of Transport of the Russian Federation
(our reference number of the outgoing document: GD-443, date: 20 April 2016).
14.4 Instruction of Deputy Prime
Minister of the Russian
Federation Arkady Dvorkovich
I hereby request to submit, in
conjunction with PJSC Aeroflot,
coordinated proposals for the strategy
Execution is in progress.
Proposals were submitted to the Ministry of Transport of the Russian Federation
(our reference number of the outgoing document: GD-535, date: 6 May 2016).
No. Document type, date and
number
Summary Execution status
1 2 3 4
No. AD-P9-2231 dated 14 April
2016
(our reference number: 3055,
date: 20 April 2016)
of the united carrier Rossiya as part of
PJSC Aeroflot’s long-term programme
ensuring robust growth of Pulkovo
airport and Russian regional airports.
A task force led by the Deputy Minister of Transport of the Russian Federation Valery Okulov
works on the Instruction.
14.5 Instruction of the President of
the Russian Federation
Vladimir Putin No. Pr-1692
dated 25 August 2016 in
response to a request by the
Rostov Region Governor
Instruction of Rosaviatsia
No. AS 1.01-3053 dated
31 August 2016 (our reference
number: 6614, date: 1 September
2016)
The Ministry of Transport of the
Russian Federation
I hereby request to consider and
support the creation of conditions for
successful operation of the airport.
Report on execution
by 25 March 2016.
Instruct PJSC Aeroflot to establish a
full-fledged branch of the Company on
the premises of a new airport complex
in which the branch shall base at least
ten aircraft and restore the previously
operated route network for flights from
Rostov-on-Don.
Execution is in progress.
The Instruction is executed by a joint task force made up of the representatives from
PJSC Aeroflot and the Government of the Rostov Region.
14.6 Minutes of the Meeting held by
Deputy Prime Minister of the
Russian Federation
Arkady Dvorkovich No. AD-P9-
65pr dated 29 April 2016
(our reference number: 3875,
date: 20 May 2016)
3. Considering the held discussion, the
Federal Antimonopoly Service of the
Russian Federation, Ministry of
Transport of the Russian Federation,
Ministry of Economic Development of
the Russian Federation, in conjunction
with PJSC Aeroflot and Airports of
Regions Management Company, shall
pass a balanced decision on tariffs to
ensure operation of Nizhny Novgorod
International Airport including
performance of its loan obligations.
Report on the results
by 29 June 2016.
4. Recommend PJSC Aeroflot and
Airports of Regions Management
Company to examine proposals for
changes in the network of the airport in
PJSC Aeroflot’s stance was submitted to the Federal Antimonopoly Service of the Russian
Federation
(our reference number of the outgoing document: 402-237, date: 30 May 2016).
Execution is completed.
PJSC Aeroflot’s proposals were submitted to Airports of Regions Management Company
(our reference number of the outgoing document: GD-762, date: 20 June 2016).
No. Document type, date and
number
Summary Execution status
1 2 3 4
Nizhny Novgorod to increase the
number of passengers flying directly to
destinations (without connections in
airports of Ukraine International
Airlines).
5. Recommend PJSC Aeroflot to
submit to the Ministry of Transport of
the Russian Federation the following
data for 2015–2016 broken down by
month:
the actual efficient cost for flights of
Aeroflot Group to/from the airport in
Nizhny Novgorod;
data on transfer traffic to/from the
airport in Nizhny Novgorod via
Sheremetyevo airport with key routes
and the average efficient cost of direct
flights to final destinations
by 25 May 2016.
Execution is in progress.
Data are submitted to the Ministry of Transport of the Russian Federation on a monthly basis.
7.5. COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
No. Principles of corporate governance Criteria for assessing compliance with the principle of corporate governance
Status of
compliance
with the
principle of
corporate
governance
Explanations for
deviations from
criteria for assessing
compliance with the
principle of corporate
governance
1.1. The company should ensure fair and equal treatment of all its shareholders in the course of exercise by them of their right to participate in management of the company
1.1.1. The company should create for its shareholders
the best possible conditions for participation in
its general meetings, developing informed
positions on items on the agenda of the general
meeting, coordinating their actions, and give
them opportunities to express their opinions on
the matters under consideration.
1. The internal document of the company governing proceedings at the general
meetings, approved by the general meeting of shareholders, is publicly available.
2. The company provides an easy way to communicate with the company, such as a
“hotline”, e-mail or an online forum, allowing shareholders to express their opinions
and raise questions relating to the agenda in preparing for a general meeting. These
actions were taken by the company before each general meeting held during the
reporting period.
Observed
1.1.2. The procedure for giving notice of a general
meeting and providing materials for it should
enable the shareholders to prepare properly for
participation in the meeting.
1. A notice of a general shareholders meeting is posted (published) on the website no
later than 30 days before the date of the general meeting.
2. The notice of a meeting states the venue of the meeting and documents required for
admission to the premises.
3. The shareholders were provided with access to information about persons who
proposed items for the agenda and nominated candidates to the board of directors and
the audit commission of the company.
Observed
1.1.3. During the preparation for and holding of the
general meeting, the shareholders should be able
to freely and timely obtain information about the
meeting and its materials, to pose questions to
the executive bodies and members of the board
of directors and communicate with each other.
1. In the reporting period, the shareholders had the opportunity to ask questions to
members of the executive bodies and the board of directors before and during the
annual general meeting.
2. Positions of the board of directors (including dissenting opinions recorded in the
minutes) on each item on the agenda of general meetings held during the reporting
period were set out in the materials for the general shareholders meeting.
3. The company provided access to the list of persons entitled to participate in a general
meeting to the shareholders who have this right starting from the date when the
company received it in the case of all general meetings held during the reporting
period.
Observed
1.1.4. There should be no unjustified difficulties
preventing shareholders from exercising their
right to demand that a general meeting be
convened, nominate candidates to the governing
bodies and submit proposals on its agenda.
1. In the reporting period, shareholders were able to propose items to be included in the
agenda of the annual general meeting during a period of at least 60 days from the end
of the respective calendar year,
2. In the reporting period, the company did not refuse to include proposals on the
agenda or proposed candidates to the company’s bodies due to typos and other
insignificant flaws in shareholder proposals.
Observed
Shareholders in 2016,
will provide for a
longer period (up to 80
days).
1.1.5. Each shareholder should be able to freely
exercise his/her right to vote in a straightforward
and convenient way.
An internal document (internal policy) of the company contains provisions pursuant to
which each participant of the general meeting may request a copy of the ballot filled
out thereby, certified by the counting commission, until the end of the meeting.
Observed
1.1.6. Procedures for holding a general meeting set by
the company should provide equal opportunity
to all persons present at the meeting to express
their opinions and ask questions that might be
on interest to them.
1. A sufficient time was provided for reports on the agenda and its discussion at all
general shareholders meetings held in person (joint presence of shareholders) during
the reporting period.
2. Candidates to the company’s governing and controlling bodies were available to
answer questions from shareholders at the meeting at which their candidatures were put
to the vote.
3. When making decisions related to the preparation and holding of general
shareholders meetings during the reporting period, the board of directors considered the
use of telecommunications facilities to provide the shareholders with remote access to
their general meetings.
Observed
1.2. Shareholders should be given equal and fair opportunities to participate in the profits of the company by means of receiving dividends.
1.2.1. The company should develop and put in place a
transparent and clear mechanism for
determining the amount of dividends and their
payment.
1. The company has developed a dividend policy which has been approved by the
board of directors and disclosed.
2. If the company’s dividend policy uses indicators from financial statements to
determine the dividend amount, the respective provisions of the dividend policy take
into account consolidated financial statements indicators.
Observed
1.2.2. The company should not make a decision on the
payment of dividends, if such decision, without
formally violating limits set by law, is
unjustified from the economic point of view and
might lead to false assumptions about the
company’s activities.
The dividend policy of the company clearly indicates financial/economic circumstances
in which the company should not pay dividends.
Observed
1.2.3. The company should not allow the deterioration
of the dividend rights of its existing
shareholders.
In the reporting period, the company did not take any action leading to the deterioration
of dividend rights of its existing shareholders.
Observed
1.2.4. The company should strive to rule out any ways
through which its shareholders can obtain any
profit (gain) at the expense of the company other
than dividends and liquidation value.
In order to rule out any ways through which shareholders can obtain any profit (gain) at
the expense of the company other than dividends and liquidation value, internal
documents of the company establish control mechanisms ensuring that any persons
affiliated (associated) with its major shareholders (individuals who have the right to
dispose of the votes attached to voting shares) are identified in a timely manner as well
as the procedure for approval of transactions therewith in instances where such
transactions are not formally recognized under the law as interested party transactions.
Partially
observed
Actually observed, but
not formally codified
in internal documents.
1.3. The corporate governance system and practices should ensure equal terms and conditions for all shareholders owning shares of the same class (category), including
minority and foreign shareholders, as well their equal treatment by the company.
1.3.1. The company should create conditions which
would enable its governing bodies and
controlling persons to treat each shareholder
fairly, in particular, which would rule out the
possibility of any abuse of minority shareholders
by major shareholders.
During the reporting period, procedures for managing potential conflicts of interest of
major shareholders were efficient and the board or directors paid due attention to the
conflicts between shareholders, if any.
Observed
1.3.2. The company should not perform any acts
which will or might result in artificial
redistribution of corporate control.
There are no quasi-treasury shares or they were not voted during the reporting period. Not observed In accordance with the
regulations on the
procedure for
exercising rights
attached to quasi-
treasury shares of
PJSC Aeroflot
approved by the Board
of Directors on 28
January 2016, the
Board of Directors of
PJSC Aeroflot, which
consists of
representatives of
majority and minority
shareholders and
foreign investors,
provides control over
the exercise of rights
attached to quasi-
treasury shares.
1.4. Shareholders should be provided with reliable and effective means of recording their rights in shares as well as with the opportunity to freely dispose of their shares in a
non-onerous manner.
1.4.1. Shareholders should be provided with reliable
and effective means of recording their rights in
shares as well as with the opportunity to freely
dispose of their shares in a non-onerous manner.
The quality and reliability of the work carried out by the company’s registrar in
keeping the register of securities owners meet the needs of the company and its
shareholders.
Observed
2.1. The board of directors should be in charge of strategic management of the company, determine major principles of and approaches to creation of a risk management and
internal control system, monitor the activity of the company’s executive bodies, and carry out other key functions.
2.1.1. The board of directors should be responsible for
decisions to appoint and remove executive
bodies, including in connection with their failure
to properly perform their duties. The board of
directors should also carry out supervision to
ensure that the company’s executive bodies act
in accordance with the approved development
strategy and main business goals of the
company.
1. The board of directors has the powers set forth in the charter to appoint and remove
members of executive bodies and determine the terms and conditions of contracts with
them.
2. The board of directors reviewed the report(s) of the sole executive body and
members of the collegial executive body on the implementation of the company’s
strategy.
Observed
2.1.2. The board of directors should establish basic
long-term targets of the company’s activity,
evaluate and approve its key performance
indicators and principal business goals, as well
as evaluate and approve its strategy and business
plans in respect of its principal areas of
operations.
Items discussed at the board of directors during the reporting period included the
progress in the implementation and updating of the strategy, approval of the company’s
financial and business plan (budget), as well as criteria and indicators (including
intermediate indicators) of implementation of the strategy and business plans of the
company.
Observed
2.1.3. The board of directors should determine the
principles of and approaches to creation of a risk
management and internal control system in the
company.
1. The board of directors determined the principles of and approaches to creation of a
risk management and internal control system in the company.
2. The board of directors evaluated the company’s risk management and internal
control system during the reporting period.
Observed
2.1.4. The board of directors should determine the
company’s policy on remuneration and/or
reimbursement (compensation) of expenses for
members of the board of directors and executive
bodies and other key managers of the company.
1. The company has developed and implemented a policy on remuneration and/or
reimbursement (compensation) of expenses for members of the board of directors and
executive bodies and other key managers of the company, which was approved by the
board of directors.
2. Matters related to this policy were considered at the board of directors meetings held
during the reporting period.
Observed
2.1.5. The board of directors should play a key role in
prevention, detection and resolution of internal
conflicts between the company’s bodies,
shareholders and employees.
1. The board of directors plays a key role in prevention, detection and resolution of
internal conflicts.
2. The company has established a system designed to identify transactions involving a
conflict of interest and a system of measures aimed at resolving such conflicts.
Observed
2.1.6. The board of directors should play a key role in
procuring that the company is transparent,
discloses information in full and in due time,
and provides its shareholders with unhindered
access to its documents.
1. The board of directors approved the regulations on information policy.
2. The company designated persons responsible for implementation of the information
policy.
Observed
2.1.7. The board of directors should monitor the
company’s corporate governance practices and
play a key role in its material corporate events.
The board of directors reviewed the company’s corporate governance practices during
the reporting period.
Observed
2.2. The board of directors should be accountable to the company’s shareholders.
2.2.1. Information about the board of directors’ work
should be disclosed and provided to the
shareholders.
1. The annual report of the company for the reporting period includes information on
attendance of meetings of the board of directors and committees by individual
directors.
2. The annual report contains information on principal results of evaluation of the work
of the board of directors which was performed during the reporting period.
Partially observ
ed
Information on
attendance of meetings
of the Board of
Directors and its
committees is provided
in the Annual Report
for the reporting
period.
No assessment of the
Board of Directors’
performance was run
in the reporting period
2.2.2. The chairman of the board of directors must be
available to communicate with the company’s
shareholders.
The company employs a transparent procedure enabling its shareholders to pose
questions to the chairman of the board of directors and express their positions on them.
Observed
2.3. The board of directors should be an effective and professional governing body, which is able to exercise objective independent judgments and make decisions in the best
interests of the company and its shareholders.
2.3.1. Only persons with impeccable business and
personal reputation as well as knowledge, skills
and experience necessary to make decisions that
fall within the competence of the board of
directors and are required for the effective
performance of its functions should be elected to
the board of directors.
1. The procedure for evaluating the performance of the board of directors adopted in
the company includes, but is not limited to, an assessment of the professional
qualifications of the board members.
2. In the reporting period, the board of directors (or its nominating committee)
evaluated candidates to the board of directors to determine whether they have the
necessary experience, knowledge and business reputation, whether there was any
conflict of interest, etc.
Observed
2.3.2. Members of the company’s board of directors
should be elected through a transparent
procedure enabling the shareholders to obtain
information about candidates sufficient for them
to get an idea of their personal and professional
qualities.
In the case of each general shareholders meeting with an agenda including the election
of the board of directors held during the reporting period, the company presented to the
shareholders biographical details of all candidates to the board of directors, the results
of evaluation of the candidates by the board of directors (or its nominating committee),
information on whether the candidates meet the independence criteria in accordance
with recommendations 102 - 107 of the Code, and the written consent of the candidates
to be elected to the board of directors.
Observed
2.3.3. The composition of the board of directors
should be balanced, in particular, in terms of
qualifications, experience, knowledge and
business skills of its members. The board of
directors should enjoy the confidence of the
shareholders.
As part of the procedure for evaluating the work of the board of directors during the
reporting period, the board of directors reviewed its own needs in terms of professional
qualifications, experience and business skills.
Observed
2.3.4. The membership of the board of directors
should enable the board to organise its activities
in a most efficient way, in particular, to form
committees of the board of directors, as well to
enable substantial minority shareholders of the
company to elect a candidate to the board of
directors for whom they would vote.
As part of the procedure for evaluating the work of the board of directors during the
reporting period, the board of directors considered whether the number of members of
the board of directors met the needs of the company and the interests of its
shareholders.
Observed
2.4. The board of directors should include a sufficient number of independent directors.
2.4.1. An independent director should be a person who
has sufficient professional skills, experience and
independence to have his/her own position, is
able to make objective and bona fide judgments,
free from the influence of the executive bodies,
any individual group of shareholders or other
stakeholders. It should be noted that, under
normal circumstances, a candidate (or an elected
member of the board of directors) may not be
deemed to be independent, if he/she is
associated with the company, its substantial
shareholder, material counterparty, competitor,
or the government.
During the reporting period, all independent members of the board of directors met all
the criteria of independence set out in recommendations 102-107 of the Code or were
determined to be independent by decision of the board of directors.
Observed
2.4.2. Candidates to the board of directors should be
evaluated to determine whether they meet the
criteria of independence, with a review to
determine whether or not independent board
members meet the independence criteria
conducted on a regular basis. When carrying out
such evaluation, substance shall take precedence
over form.
1. During the reporting period, the board of directors (or its nominating committee)
formed an opinion on the independence of each candidate to the board of directors and
submitted the relevant report to the shareholders.
2. The board of directors (or its nominating committee) reviewed the independence of
the current board members specified as independent directors in the company’s annual
report at least once during the reporting period.
3. The company has developed procedures determining which actions a board member
is required to undertake in the event that he/she ceases to be independent, including an
obligation to notify the board of directors to this effect in a timely manner.
Observed
2.4.3. Independent directors should account for at least
one-third of all directors elected to the board of
directors.
Independent directors account for at least one- third of the total number of the board
members.
Observed
2.4.4. Independent directors should play a key role in
preventing internal conflicts in the company and
its performance of material corporate actions.
Independent directors (who have no conflict of interest) carry out a preliminary
evaluation of the company’s material corporate actions that could involve conflicts of
interest and the results of this evaluation are presented to the board of directors.
Observed Materials corporate
actions are considered by
the Audit Committee of
the Board of Directors
prior to their execution. A
majority of the
Committee members are
independent directors.
2.5. The chairman of the board of directors should help it carry out the functions assigned to the board in a most efficient manner.
2.5.1. The chairman of the board of directors should be
an independent director or the senior
independent director among the company’s
independent directors should be identified who
would coordinate work of the independent
directors and liaise with the chairman of the
board of directors.
1. The chairman of the board of directors is an independent director or the senior
independent director among the independent directors is identified.
2. The role, rights and duties of the chairman of the board of directors (and, if
applicable, the senior independent director) are properly defined in the company’s
internal documents.
Not observed Given the balanced
composition of the Board
of Directors, the quality
of preliminary
consideration of matters
submitted to the board of
directors (including at the
level of committees with
the participation of
independent directors)
and high activity of
independent directors, it
appears that this
recommendation does not
need to be implemented.
2.5.2. The chairman of the board of directors should
ensure that the board meetings are held in a
constructive atmosphere and that any items on
the meeting agenda are discussed freely. The
chairman should also monitor fulfilment of
decisions made by the board of directors.
The performance of the chairman of the board of directors was evaluated as part of the
procedure for evaluating the performance of the board of directors in the reporting period.
Observed
2.5.3. The chairman of the board of directors should
take the necessary measures to provide the
board members in a timely manner with
information required to make decision on
issues on the agenda.
The duty of the chairman of the board of directors to take measures to ensure that
materials relating to the agenda of the board meeting are provided to the board members
in a timely manner is set forth in the company’s internal documents.
Observed
2.6. Members of the board of directors should act in good faith and reasonably in the best interests of the company and its shareholders, being sufficiently informed, with due
care and diligence.
2.6.1. Board members should make decisions
considering all available information, with no
conflict of interest, treating all shareholders
equally, and in the context of normal business
risks.
1. The company’s internal documents establish that a member of the board of directors
shall notify the board of directors if he/she has a conflict of interest relating to any item
on the agenda of the meeting of the board of directors or its committee before discussion
of such item is commenced.
2. The company’s internal documents provide that a board member shall abstain from
voting on any issues in respect of which he/she has a conflict of interest.
3. The company has established a procedure enabling board members to receive, at the
expense of the company, professional advice on issues within their competence.
Observed
2.6.2. Rights and duties of board members should be
clearly stated and documented in the
company’s internal documents.
The company has adopted and published an internal document that clearly defines the
rights and duties of board members.
Observed
2.6.3. Board members should have sufficient time to
perform their duties.
1. Individual attendance of meetings of the board of directors and committee and the
time devoted to preparation for meetings was taken into account as part of the
procedure for evaluating the board of directors in the reporting period.
2. In accordance with the company’s internal documents, board members are required
to notify the board of directors of their intention to take a position in governing bodies
of other entities (other than entities controlled by or affiliated with the company), as
well as of such appointment.
Partially obse
rved
No assessment of the
Board of Directors’
performance was run in
the reporting period.
However, individual
attendance of meetings of
the Board of Directors is
factored in remunerations
of members of the Board
of Directors.
The recommendation is
otherwise observed.
2.6.4. All board members should have equal
opportunity to access the company’s documents
and information. Newly elected board members
should be provided with sufficient information
about the company and the work of its board of
directors as soon as practicable.
1. In accordance with the company’s internal documents, board members have the right
to access the company’s documents and make inquiries concerning the company and
entities under its control, and the executive bodies of the company are required to
provide such information and documents.
2. The company has a formalised introductory course programme for newly elected
board members.
Observed
2.7. Meetings of the board of directors, preparation for them, and participation of board members therein should ensure efficient work of the board.
2.7.1. Meetings of the board of directors should be
held as needed, having regard to the scope of the
company’s activities and the goals set by the
company for a specific period.
The board of directors held at least six meetings during the reporting year. Observed
2.7.2. The company’s internal documents should
establish a procedure for preparing for and
holding board meetings that enables the board
members to prepare properly for such meetings.
The company has approved an internal document establishing the procedure for
preparing for and holding board meetings which, inter alia, provides that a notice of a
meeting shall be given, as a rule, at least 5 days before the date of the meeting.
Observed
2.7.3. The form of a meeting of the board of directors
should be determined with due regard to the
importance of the issues on the agenda. The
most important issues should be decided at
meetings held in person.
The company’s charter or internal documents provide that the most important issues
(according to the list provided in recommendation 168 of the Code) shall be decided at
meetings held in person.
Observed
2.7.4. Decisions on the most important issues relating
to the company’s activities should be made at a
meeting of the board by a qualified majority
vote or by a majority vote of all elected board
members.
The company’s charter provides that decisions on the most important issues outlined in
recommendation 170 of the Code shall be made at a meeting of the board by a qualified
majority of at least three-fourths or a majority of all elected board members.
Observed
2.8. The board of directors should form committees for preliminary consideration of the most important issues relating to the company’s activities.
2.8.1. An audit committee comprised of independent
directors should be formed for preliminary
consideration of matters related to control over
the company’s financial and economic activities.
1. The board of directors has formed an audit committee composed entirely of
independent directors.
2. The company’s internal documents define the tasks of the audit committee,
including, but not limited to, those set out in recommendation 172 of the Code.
3. At least one member of the audit committee who is an independent director has
experience and knowledge of preparing, analysing, assessing and auditing accounting
(financial) statements.
4. Meetings of the audit committee were held at least once per quarter during the
reporting period.
Partially
observed
The Chairman of the
Audit Committee is an
independent director. A
majority of the
Committee members are
independent directors.
The recommendations
are otherwise observed.
2.8.2. A remuneration committee consisting of
independent directors and chaired by an
independent director other than the chairman of
the board of director should be formed for
preliminary consideration of matters related to
the development of efficient and transparent
remuneration practices.
1. The board of directors has formed a remuneration committee composed entirely of
independent directors.
2. The chairman of the remuneration committee is an independent director other than
the chairman of the board of directors.
3. The company’s internal documents define the tasks of the remuneration committee,
including, but not limited to, those set out in recommendation 180 of the Code.
Partially
observed
PJSC Aeroflot set up its
Personnel and
Remuneration
Committee, primarily
comprised of
independent directors.
The recommendations
are otherwise observed.
2.8.3. A nominating (appointments, human resources)
committee with a majority of its members being
independent directors should be formed for
preliminary consideration of matters relating to
human resources planning (succession
planning), professional composition and
efficiency of the board of directors.
1. The board of directors has formed a nominating committee with a majority of its
members being independent directors (or its functions specified in recommendation
186 of the Code are delegated to another committee).
2. The company’s internal documents define the tasks of the nominating committee (or
a relevant committee with combined functions), including, but not limited to, those set
out in recommendation 186 of the Code.
Observed
2.8.4. Taking into account the company’s scope of
activities and related risk level, the board of
directors should make sure that the composition
of its committees is fully aligned to the
company’s goals. Additional committees
(strategy committee, corporate governance
committee, ethics committee, risk management
committee, budget committee, health, safety and
environment committee, etc.) should be either
set up or not deemed necessary.
In the reporting period, the company’s board of directors reviewed the composition of
its committees for alignment with the tasks of the board and the company’s
goals. Additional committees have either been set up or not deemed necessary.
Observed
2.8.5. The composition of the committees should be
determined in such a way that it would allow a
comprehensive discussion of issues being
considered on a preliminary basis with due
regard for differing opinions.
1. The committees of the board of directors are headed by independent directors.
2. Internal documents (policies) of the company include provisions whereby persons
who are not members of the audit committee, the nominating committee and the
remuneration committee may attend their meetings only at the invitation of their
chairmen.
Observed
2.8.7. Chairmen of the committees should inform the
board of directors and its chairman of the work
of their committees on a regular basis.
During the reporting period, chairmen of the committees reported on the work of their
committees to the board of directors on a regular basis.
Observed
2.9. The board of directors should ensure that the quality of its work and that of its committees and members is assessed.
2.9.1. Assessment of the quality of the board’s work
should be aimed at defining how efficiently the
board of directors, its committees and members
work and whether their work meets the
requirements of company development,
revitalizing the work of the board and
identifying areas where it might be improved.
1. Self-assessment or external evaluation of the board’s work conducted in the
reporting period included evaluation of the work of the committees, individual
members of the board and the board of directors as a whole.
2. The results of self-assessment or external evaluation of the board of directors
conducted during the reporting period were discussed at a meeting of the board of
directors held in person.
Not observed Relevant practice is to be
introduced.
2.9.2. The work of the board of directors, its
committees and board members should be
assessed on a regular basis, at least once a
year. A third-party organisation (consultant)
should be retained to carry out an independent
assessment of the quality of the board’s work at
least once every three years.
The company retained a third-party organisation (consultant) to carry out an
independent assessment of the quality of the board’s work at least once during the past
three financial years.
Not observed Relevant practice is to be
introduced.
3.1. The company’s corporate secretary should be responsible for efficient day-day relations with its shareholders, coordination of the company’s actions to protect the rights
and interests of its shareholders, and supporting the work of its board of directors.
3.1.1. The corporate secretary should have knowledge,
experience, and qualifications sufficient for
performance of his/her duties, as well as an
impeccable reputation and should enjoy the trust
of the shareholders.
1. The company has adopted and disclosed an internal document - regulations on the
corporate secretary.
2. The company’s website and annual report provide biographical details of the
corporate secretary with the same level of detail as for members of the board of
directors and executive managers of the company.
Observed
3.1.2. The corporate secretary should be sufficiently
independent of the company’s executive bodies
and have the powers and resources required to
perform his/her tasks.
The board of directors approves the appointment/removal of and additional
remuneration payable to the corporate secretary.
Observed
4.1. The level of remuneration paid by the company should be sufficient to attract, motivate and retain persons with the necessary skills and qualifications. The remuneration
of members of the board of directors, the executive bodies and other key managers of the company should be paid in accordance with the remuneration policy adopted in
the company.
4.1.1. The level of remuneration paid by the company
to members of the board of directors, executive
bodies and other key manager should be
sufficient to motivate them to work efficiently
and enable the company to attract and retain
knowledgeable and skilled specialists. The
company should avoid setting the level of
remuneration any higher than necessary, or
creating an unjustifiably wide gap between the
levels of remuneration paid to the above persons
and other employees of the company.
The company has adopted an internal document(s) - the remuneration policy (policies)
for members of the board of directors, executive bodies and other key manager, which
clearly define(s) approaches to remuneration for these persons.
Observed
4.1.2. The company’s remuneration policy should be
developed by the remuneration committee and
approved by the board of directors. The board of
directors, with the support of its remuneration
committee, should monitor introduction and
implementation of the remuneration policy in
the company and if necessary review and amend
the same.
During the reporting period, the remuneration committee reviewed the remuneration
policy (policies) and its implementation practices and, where necessary, made
appropriate recommendations to the board of directors.
Observed
4.1.3. The company’s remuneration policy should contain
transparent mechanisms to determine the amount of
remuneration for members of the board of directors, the
executive bodies and other key managers of the company, as
well as to regulate all types of payments, benefits and
privileges provided to the above persons.
The company’s remuneration policy (policies) contains (contain)
transparent mechanisms to determine the amount of remuneration for
members of the board of directors, the executive bodies and other key
managers of the company, as well as to regulate all types of payments,
benefits and privileges provided to the above persons.
Observed
4.1.4. The company should develop a policy on reimbursement
(compensation) of expenses containing a list of
reimbursable expenses and specifying service levels to
which members of the board of directors, the executive
bodies and other key managers of the company may be
entitled. Such policy can form part of the company’s
remuneration policy.
The remuneration policy (policies) or other internal documents of the
company establishes (establish) the rules for reimbursing expenses to
members of the board of directors, executive bodies and other key
managers of the company.
Observed
4.2. The system of remuneration for board members should ensure that the financial interests of the directors are aligned with the long-term financial interests of
shareholders.
4.2.1. The company should pay a fixed annual fee to members of
the board of directors.
The company should not pay a fee for attending individual
meetings of the board of directors or its committees.
The company should not use any form of short-term
incentives or additional financial incentives for members of
the board of directors.
A fixed annual fee was the only form of monetary remuneration of the
board members for their work on the board during the reporting period.
Observed In addition to the fixed
remuneration
component, members of
the Company’s Board of
Directors are also paid a
variable remuneration
component, calculated
based on
PJSC Aeroflot’s
capitalization values,
also matching long-term
interests of
PJSC Aeroflot’s
shareholders.
4.2.2. Long-term ownership of shares in the company should
contribute most to aligning financial interests of board
members with the long-term interests of
shareholders. However, the company should not make the
right to dispose of shares dependent on the achievement of
certain performance indicators, and board members should
not take part in option programmes.
If the company’s remuneration policy (policies) being its internal
document(s) provides (provide) for allotment of company shares to
members of the board of directors, clear rules regarding ownership of
shares by board members, aimed at promoting long-term ownership of such
shares are established and disclosed.
Observed
4.2.3. The company should not provide any additional
payment or compensation in the event of early
dismissal of board members in connection with
a change of control over the company or other
circumstances.
The company does not provide any additional payment or compensation in the event of
early dismissal of board members in connection with a change of control over the
company or other circumstances.
Observed
4.3. The system of remuneration for members of the executive bodies and other key managers of the company should provide that their remuneration is dependent on the
company’s performance results and their personal contributions to the achievement thereof.
4.3.1. Remuneration for members of the executive
bodies and other key managers of the company
should be set so as to ensure a reasonable and
justified ratio between its fixed and variable
portions that is dependent on the company’s
performance results and their personal
(individual) contributions to the end result.
1. During the reporting period, the amount of variable portion of remuneration for
members of the executive bodies and other key managers of the company was
determined using annual performance indicators approved by the board of directors.
2. During the latest evaluation of the remuneration system for members of the
executive bodies and other key managers of the company, the board of directors (the
remuneration committee) made sure that the company used an effective ratio between
the fixed and variable portions of remuneration.
3. The company has in place a procedure ensuring that any bonuses wrongfully
obtained by members of executive bodies and other key managers are repaid to the
company.
Observed
4.3.2. The company should introduce a long-term
incentive programme for members of the
executive bodies and other key managers of the
company involving its shares (or options or
other derivative financial instruments, the
underlying asset for which are the company’s
shares).
1. The Company has introduced a long-term incentive programme for members of the
executive bodies and other key managers of the company involving the company’s
shares (financial instruments based on the company’s shares).
2. The long-term incentive programme for members of the executive bodies and other
key managers of the company provides that the right to dispose of shares and other
financial instruments used in the programme shall arise no earlier than three years from
the date when such shares were provided. In addition, the right to dispose of the same is
made conditional on the achievement by the company of certain performance
indicators.
Observed
4.3.3. The amount of severance pay (golden parachute)
payable by the company to members of
executive bodies or other key managers in the
event of early termination at the initiative of the
company, provided that there have been no bad
faith actions on their part, should not exceed
twice the value of the fixed portion of the annual
remuneration.
The amount of severance pay (golden parachute) paid by the company during the
reporting period in the event of early termination of members of executive bodies or
other key managers at the initiative of the company, provided that there have been not
bad faith action on their part, did not exceed twice the value of the fixed portion of the
annual remuneration.
Observed
5.1. The Company should create an efficient risk management and internal control system designed to provide reasonable assurance that the company’s goals will be achieved.
5.1.1. The board of directors should determine the
principles of and approaches to organising the
risk management and internal control system in
the company.
The functions of various management bodies and divisions of the company within the
risk management and internal control system are clearly defined in the company’s
internal documents/ relevant policy approved by the board of directors.
Observed
5.1.2. The company’s executive bodies should ensure
the establishment and continuing operation of an
efficient risk management and internal control
system in the company.
The company’s executive bodies ensured the distribution of functions and authority in
risk management and internal control between managers (heads) of divisions and
departments accountable to them.
Observed
5.1.3. The company’s risk management and internal
control system should give an objective, fair and
clear view of the current state and future
prospects of the company and ensure integrity
and transparency of its accounts and reports, and
reasonableness and acceptability of risks being
assumed by the company.
1. The company has approved an anti- corruption policy.
2. The company has organised an easy way to inform the board of directors or its audit
committee of any breaches of legislation, internal procedures and the ethics code of the
company.
Observed
5.1.4 The board of directors should take the necessary
measures to ensure that the existing risk
management and internal control system of the
company is consistent with the principles and
approaches to its organisation defined by the
board of directors and that it operates efficiently.
During the reporting period, the board of directors or its audit committee evaluated the
efficiency of the risk management and internal control system of the company.
Information about the main results of this evaluation is included in the company’s
annual report.
Observed
5.2. The company should organise internal audits for regular independent evaluation of the reliability and efficiency of its risk management and internal control system and
corporate governance practices.
5.2.1. The company should create a separate structural
division or retain an independent third-party
organisation to carry out internal audits.
The internal audit division should have separate
lines of functional and administrative
reporting. Functionally, the internal audit
division should report to the board of directors.
1. To carry out internal audits, the company has created a separate structural division,
which functionally reports to the board of directors or its audit committee, or retained
an independent third-party organisation with the same line of reporting.
Observed
5.2.2. The internal audit division should evaluate the
efficiency of the internal control system, the risk
management system and the corporate
governance system.
The company should apply generally accepted
standards of internal auditing.
1. The efficiency of the internal control and risk management system was evaluated as
part of internal audit conducted during the reporting period.
2. The company applies generally accepted approaches to internal control and risk
management.
Observed
6.1. The company and its activities should be transparent to its shareholders, investors, and other stakeholders.
6.1.1. The company should develop and implement an
information policy ensuring the efficient
exchange of information by the company, its
shareholders, investors, and other stakeholders.
1. The board of directors has approved the company's information policy, which was
developed by taking into account recommendations of the Code.
2. The board of directors (or one of its committees) considered matters related to the
company’s compliance with its information policy at least once during the reporting
period.
Observed
6.1.2. The company should disclose information on its
corporate governance system and practices,
including detailed information on compliance
with the principles and recommendations of the
Code.
1. The company discloses information on its corporate governance system and the
general principles of corporate governance applied in the company, in particular, on the
company’s web-site.
2. The company discloses information on the composition of its executive bodies and
board of directors, independence of the board members and their membership in
committees of the board of directors (as defined in the Code).
3. If there is a person that controls the company, the company publishes a
memorandum setting out the plans of the controlling person in respect of corporate
governance in the company.
Observed
6.2. The company should disclose full, up-to-date and reliable information about the company in good time to enable its shareholders and investors to make informed
decisions.
6.2.1. The company should disclose information in
accordance with the principles of regularity,
consistency and timeliness, as well as
accessibility, reliability, completeness and
comparability.
1. The company’s information policy defines approaches and criteria for identifying
information that may have a significant impact on the valuation of the company and the
value of its securities and on procedures ensuring the timely disclosure of such
information.
2. If the company’s securities are traded on foreign organised markets, disclosure of
material information in the Russian Federation and in such markets is synchronous and
equivalent during the year.
3. If foreign shareholders hold a substantial number of company shares, disclosures
during the reporting year were made not only in Russian, but also in one of the most
common foreign languages.
Observed
6.2.2. The company should avoid using a formalistic
approach to information disclosure and disclose
material information about its activities even if
disclosure of such information is not required by
legislation.
1. During the reporting period, the company disclosed the annual and semi-annual
financial statements prepared under IFRS. The annual report of the company for the
reporting period included the annual financial statements prepared under IFRS,
together with the auditor’s report.
2. The company discloses full information on the company’s capital structure in the
annual report and on the company’s website in accordance with recommendation 290
of the Code.
Observed
6.2.3. The annual report, as one of the most important
tools of information exchange with shareholders
and other stakeholders, should contain
information making it possible to assess the
company’s performance results for the year.
1. The company’s annual report contains information on the key aspects of the its
operating activities and financial results.
2. The company’s annual report contains information about the environmental and
social aspects of the company’s activities.
Observed
6.3. The company should provide information and documents requested by its shareholders in accordance with the principle of equal and unhindered accessibility.
6.3.1. The company should provide information and
documents requested by its shareholders in
accordance with the principle of equal and
unhindered accessibility.
The company’s information policy provides a non-burdensome procedure for giving its
shareholders access to information, including information about legal entities
controlled by the company, at the request of shareholders.
Observed
6.3.2. When providing information to its shareholders,
the company should maintain a reasonable
balance between the interests of individual
shareholders and its own interests, mindful of its
interest in keeping important business
information that may have a material impact on
its competitiveness confidential.
1. During the reporting period, the company did not refuse shareholder requests for
information or such refusals were justified.
2. In cases determined by the company’s information policy, shareholders are notified
of the confidential nature of information and assume an obligation to keep it
confidential.
Observed
7.1. Any actions that will or may materially affect the company’s share capital structure and its financial position and, accordingly, the position of its shareholders (“material
corporate actions”) should be taken on fair terms ensuring that the rights and interests of the shareholders as well as other stakeholders are observed.
7.1.1. Material corporate actions are deemed to include
reorganisation of the company, acquisition of 30
or more percent of its voting shares (takeover),
making major transactions by the company,
increasing or reducing its share capital, listing
and delisting of its shares, as well as other
actions which might result in material changes
in the rights of shareholders or infringements of
their interests. The company’s charter should
contain a list of (criteria for identifying)
transactions or other actions that constitute
material corporate actions and provide that
decisions on such actions shall fall within the
competence of the board of directors.
1. The company’s charter contains a list of transactions or other actions that constitute
material corporate actions and the criteria for identifying them. Decisions on material
corporate actions fall within the competence of the board of directors. In cases where
the law expressly places these corporate actions within the competence of the general
shareholders meeting, the board of directors provides appropriate recommendations to
the shareholders.
2. According to the company’s charter, material corporate actions include
reorganisation of the company, acquisition of 30 or more percent of its voting shares
(takeover), making major transactions by the company, increasing or reducing its share
capital, and listing and delisting of its shares.
Observed
7.1.2. The board of directors should play a key role in
passing resolutions or making recommendations
relating to material corporate actions, relying on
opinions of the company’s independent
directors.
The company has in place a procedure whereby independent directors can
communicate their opinions on material corporate actions before their approval.
Observed
7.1.3. When taking material corporate actions which
would affect rights and legitimate interests of
shareholders, equal terms and conditions should
be ensured for all shareholders; if statutory
mechanisms designed to protect shareholder
rights prove insufficient, additional measures
should be taken to protect the rights and
legitimate interests of the company’s
shareholders. In such instances, the company
should not only seek to comply with the formal
requirements of law, but should also the guided
by the principles of corporate governance set out
in the Code.
1. Taking into account specific features of the company’s operations, its charter sets
lower criteria for recognizing the company’s transactions as material corporate actions
than the minimum criteria set by law.
2. During the reporting period, all material corporate actions passed an approval
process before their execution.
Observed
7.2. The company should have in place a procedure for taking material corporate actions that enables its shareholders to receive full information about such actions in due
time and influence them, and that also guarantees that the shareholder rights are observed and duly protected in the course of taking such actions.
7.2.1 Information about material corporate actions
should be disclosed together with explanations
concerning reasons for, conditions and
consequences of such actions.
During the reporting period, the company disclosed information about its material
corporate actions in due time and in detail, including the reasons for and the timing of
such actions.
Observed
7.2.2 Rules and procedures in relation to material
corporate actions taken by the company should
be set out in its internal documents.
1. The company’s internal documents provide a procedure for retaining an independent
appraiser to value assets being disposed of or acquired under a major transaction or an
interested party transaction.
2. The company’s internal documents provide a procedure for retaining an independent
appraiser to estimate the acquisition and redemption value of company shares.
3. The company’s internal documents provide for an expanded list of grounds on which
members of the board of directors and other persons referred to in respective laws are
deemed to be interested parties in transactions of the company.
Partially
observed
No internal documents
are in place; however,
relevant procedures are
put into practice.
7.6. INFORMATION ABOUT THE PROGRAMME FOR DISPOSAL
OF NON-CORE ASSETS
The non-core assets owned by PJSC Aeroflot include property and property rights, which are
outside its flight services, but may be closely related to the development of Aeroflot’s end
product. The Programme for Non-Core Assets Disposal of PJSC Aeroflot (version No. 6) was
approved by PJSC Aeroflot’s Board of Directors on 17 October 2016 (Minutes No. 3). The
Programme provides for disposal of nine non-core assets (shares, stakes in the share capital of
business entities, real estate). PJSC Aeroflot’s Board of Directors resolved to retain three assets
and to exclude another three assets from the Non-Core Asset Register following their
reclassification as core assets. The Programme also contains criteria for classification of assets as
non-core, the non-core asset register, information on encumbrances, book and market value,
approach to selecting assets for disposal, as well as disposal methods, procedures and timescales.
The Company’s approach to technological (non-core) assets that have a significant impact on the
core business of PJSC Aeroflot:
compare benefits from these assets (discounts, reduction in prices and rates,
improvement of PJSC Aeroflot’s product quality) with the cost of ownership;
monitor the effectiveness of corporate control.
Assets are sold if ownership is found to be ineffective and the corporate control – insufficient.
Technological assets that have a low impact on the core business of PJSC Aeroflot are evaluated
in terms of the cost of, and the need for, ownership, based on non-production criteria
(achievement of non-commercial objectives, type of business, goodwill, etc.). These assets are
disposed of if the effect of ownership is insignificant.
Real estate assets are analysed to determine their highest and best use for the airline’s operational
and commercial activities.
Details on disposal of PJSC Aeroflot’s non-core assets under the Programme for Non-Core Asset
Disposal in 2016 are shown in the tables below.
Disposal of PJSC Aeroflot’s non-core assets in 2016
N
o. Asset
Inventory
number
Asset balance sheet
item containing the
asset as at the
reporting date prior
its disposal
Accounting items
(analytics included)
containing asset
disposal income and
expense
Book value of
the asset,
RUB thousan
d
Actual cost of
disposal,
RUB thousand
Actual cost of
disposal vs book
value,
RUB thousand
Reason for
discrepancies
1
Joint-stock company
with limited liability
ALT Reiseburo A/S
(N/A) 1,150 1,150 452.92 9,209.00 8,756.08
Market value (cost
of disposal) of the
asset is higher than
its book value
TOTAL 452.92 9,209.00 8,756.08
2016 contracts to purchase/sell securities/interest in non-core entities
Initiatives to increase/decrease the
stake in the share capital of
subsidiaries and affiliates
Change in the stake in the share capital
of subsidiaries and affiliates (amount
of decrease (-) / increase (+), %)
Reference to the resolution that introduced
the change Benefit
Joint-stock company with limited
liability ALT Reiseburo A/S –100
The Programme for Non-Core Assets Disposal
of PJSC Aeroflot approved by PJSC Aeroflot’s
Board of Directors on 28 May 2015; the
Resolution of PJSC Aeroflot’s Board of
Directors dated 26 November 2015
According to independent assessment, the
stake was sold for RUB 9.209 million, i.e.
above its market value (RUB 8.756 million)
7.7. ENERGY CONSUMPTION BY AEROFLOT GROUP AIRLINES
IN 2016
Aeroflot
Description
Actual consumption
in physical terms in RUB’000 (net of
VAT)
Jet fuel, total, tonne 2,365,190 71,841,801
Heat energy*, Gcal 41,006 61,175
Electric power*, kWh 29,700,180 108,992
Vehicle fuel, total, litre 5,197,268 171,813
Aviation lubricants oil, litre 257,567 174,731
* Excluding representative offices and branches.
Rossiya
Description
Actual consumption
in physical terms in RUB’000 (net of
VAT)
Jet fuel, total, tonne 527,089 16,673,649
Heat energy, Gcal 9,420 16,615
Electric power, kWh 5,284,186 26,313
Vehicle fuel, total, litre 242,001 7,284
Aviation lubricants oil, litre 6,064 7,053
Pobeda*
Description
Actual consumption
in physical terms in RUB’000 (net of
VAT)
Jet fuel, total, tonne 137,880 4,018,145
Vehicle fuel, total, litre 6,322 244
* Heat and electricity consumption is not metered by the Company since it operates from leased office
premises.
Aurora
Description
Actual consumption
in physical terms in RUB’000 (net of
VAT)
Jet fuel, total, tonne 80,259 2,661,203
Heat energy, Gcal 6,228 11,438
Electric power, kWh 2,059,635 10,704
Vehicle fuel, total, litre 428,000 15,732
Aviation lubricants oil, litre 16,735 15,274
7.8. AEROFLOT GROUP OPERATING DATA
Aeroflot airline
Indicator 2012 2013 2014 2015 2016
Passenger traffic, thousand PAX 17,656.1 20,902.4 23,610.0 26.111.7 28,977.9
International Routes 10,707.2 12,294.5 12,468.2 13,445.4 14,873.7
Domestic Routes 6,948,9 8,607.9 11,141.8 12,666.3 14,104.2
Passenger turnover, million RPK 50,532.5 60,226.3 67,121.7 74,115.9 82,693.3
International Routes 34,953.9 40,614.4 42,676.5 46,774.4 53,339.0
Domestic Routes 15,578.6 19,611.9 24,445.2 27,341.5 29,354.3
Available seat-kilometres, million
ASK 64,880.0 76,444.8 85,822.1 93,471.1
101,757.
9
International Routes 45,585.5 52,392.4 56,206.9 60,209.1 67,387.0
Domestic Routes 19,294.5 24,052.4 29,615.2 33,262.0 34,370.9
Passenger load factor, % 77.9 78.8 78.2 79.3 81.3
International Routes 76.7 77.5 75.9 77.7 79.2
Domestic Routes 80.7 81.5 82.5 82.2 85.4
Cargo and mail carried, thousand
tonnes 193.9 176.5 145.3 135.1 175.5
International Routes 147,7 118.0 81.5 74.6 96.1
Domestic Routes 46,2 58.5 63.8 60.5 79,4
Revenue tonne-kilometres, million
TKM 5,669.2 6,339.9 6,722.7 7,291.0 8,253.1
International Routes 4,054.4 4,306.9 4,236.8 4,571.1 5,264.6
Domestic Routes 1,614.8 2,033.0 2,485.9 2,719.9 2,988.5
Available tonne-kilometres, million
TKM 8,881.1 9,848.7 10,660.0 11,706.1 12,694.6
International Routes 6,455.5 6,821.1 6,983.1 7,548.6 8,412.0
Domestic Routes 2,425.6 3,027.6 3,676.9 4,157.5 4,282.6
Revenue load factor, % 63.8 64.4 63.1 62.3 65.0
International Routes 62.8 63.1 60.7 60.6 62.6
Domestic Routes 66.6 67.1 67.6 65.4 69.8
Revenue flights 149,590 167,071 183,645 206,228 218,734
International Routes 89,506 98,084 97,668 104,336 110,149
Domestic Routes 60,084 68,987 85,977 101,892 108,585
Flight hours, hours 460,734 509,058 554,659 594,863 639,524
Rossiya airline
Indicator 2012 2013 2014 2015 2016
Passenger traffic, thousand PAX 4,208.9 4,590.1 5,191.8 4,751.6 8,099,5
International Routes 2,130.2 2,113.5 1,914.7 1,459.5 2,430,2
Domestic Routes 2,078.7 2,476.6 3,277.1 3,292.1 5,669,3
Passenger turnover, million RPK 8,760.9 9,186.3 10,147.4 8,695.0 18,719,6
International Routes 5,738.4 5,579.4 4,867.2 3,453.8 7,557,9
Domestic Routes 3,022.5 3,606.9 5,280.2 5,241.2 11,161,7
Available seat-kilometres, million
ASK 11,304.7 12,031.9 13,414.3 11,483.8 22,921,2
International Routes 7,123.9 7,164.3 6,652.1 4,606.3 8,763,1
Domestic Routes 4,180.8 4,867.6 6,762.2 6,877.5 14,158,1
Passenger load factor, % 77.5 76.3 75.6 75.7 81.7
International Routes 80.6 77.9 73.2 75.0 86.2
Domestic Routes 72.3 74.1 78.1 76.2 78.8
Cargo and mail carried,
thousand tonnes 9.9 10.2 9.6 8.9 21.4
International Routes 2.1 2.2 1.5 1.5 1.3
Domestic Routes 7.8 8.0 8.1 7.4 20.1
Revenue tonne-kilometres,
million TKM 810.3 848.0 934.1 802.4 1,775.6
International Routes 522.2 508.5 442.2 315.0 683.6
Domestic Routes 288.1 339.5 491.9 487.4 1,092.0
Available tonne-kilometres,
million TKM 1,239.0 1,325.3 1,478.8 1,267.0 2,657.2
International Routes 786.1 788.1 726.6 500.4 954.1
Domestic Routes 452.9 537.2 752.2 766.6 1,703.2
Revenue load factor, % 65.4 64.0 63.2 63.3 66.8
International Routes 66.4 64.5 60.9 62.9 71.7
Domestic Routes 63.6 63.2 65.4 63.6 64.1
Revenue flights 43,636 46,416 50,975 45,761 62,534
International Routes 17,042 17,472 17,955 13,772 17,250
Domestic Routes 26,594 28,944 33,020 31,989 45,284
Flight hours, hours 107,698 112,277 124,927 107,904 164,282
Rossiya airline (proforma)
2015 2016
Passenger traffic, thousand PAX 9,066.9 8,800.3
International Routes 2,342.1 2,627.1
Domestic Routes 6,724.7 6,173.2
Passenger turnover, million RPK 16,982.1 20,482.3
International Routes 5,795.4 8,552.8
Domestic Routes 11,186.7 11,929.5
Available seat-kilometres, million ASK 22,913.9 25,245.4
International Routes 7,615.0 9,892.2
Domestic Routes 15,298.9 15,353.2
Passenger load factor, % 74.1 81.1
International Routes 76.1 86.5
Domestic Routes 73.1 77.7
Cargo and mail carried, thousand tonnes 14.6 22.7
International Routes 2.1 1.5
Domestic Routes 12.5 21.2
Revenue tonne-kilometres, million TKM 1,558.3 1,936.2
International Routes 526.6 773.4
Domestic Routes 1,031.7 1,162.8
Available tonne-kilometres, million TKM 2,478.5 2,917.0
International Routes 826.2 1,097.2
Domestic Routes 1,652.3 1,819.8
Revenue load factor, % 62.9 66.4
International Routes 63.7 70.5
Domestic Routes 62.4 63.9
Revenue flights 82,106 68,590
International Routes 20,778 18,511
Domestic Routes 61,328 50,079
Flight hours, hours 190,446 178,969
Note: consolidated data for Rossiya, Donavia and Orenair airlines
Pobeda airline
Indicator 2014 2015 2016
Passenger traffic, thousand PAX 107.4 3,0897 4,285.9
International Routes - 6.2 473.6
Domestic Routes 107.4 3,083.5 3,812.3
Passenger turnover, million RPK 134.0 4,668.4 6,712.9
International Routes - 12.3 1,050.5
Domestic Routes 134.0 4,656.1 5,662.4
Available seat-kilometres, million ASK 171.8 5,746.3 7,605.5
International Routes - 17.8 1,334.0
Domestic Routes 171.8 5,728.5 6,271.5
Passenger load factor, % 78.0 81.2 88.3
International Routes - 68.8 78.8
Domestic Routes 78.0 81.3 90.3
Cargo and mail carried, thousand tonnes 0.5 0.3 0.3
International Routes - - -
Domestic Routes 0.5 0.3 0.3
Revenue tonne-kilometres, million TKM 12.6 420.7 604.6
International Routes - 1.1 94.5
Domestic Routes 12.6 419.6 510.1
Available tonne-kilometres, million TKM 17.6 601.0 800.3
International Routes - 1.9 140.5
Domestic Routes 17.6 599.1 659.8
Revenue load factor, % 71.6 70.0 75.6
International Routes - 58.2 67.3
Domestic Routes 71.6 70.0 77.3
Revenue flights 735.0 20,057 25,668
International Routes - 48.0 3,208
Domestic Routes 735.0 20,009 22,460
Flight hours, hours 1,476 41 016 53,892
Aurora airline
Indicator 2012 2013 2014 2015 2016
Passenger traffic, thousand
PAX 1,427.5 1,403.6 1,055.2 1,124.8 1,376.2
International Routes 321.4 303.9 213,0 234.7 314.4
Domestic Routes 1,106.1 1,099.7 842,2 890.1 1,061.8
Passenger turnover, million
RPK 3,384.9 2,875.8 1,753.1 1,869.7 2,221.8
International Routes 610.9 551.2 333.4 370.6 490.1
Domestic Routes 2,774.0 2,324.6 1,419.7 1,499.1 1,731.7
Available seat-kilometres,
million ASK 5,075.3 4,173.6 2,337.9 2,609.8 3,045.2
International Routes 1,000.0 948.3 485.6 647.7 721.1
Domestic Routes 4,075.3 3,225.3 1,852.3 1,962.1 2,324.1
Passenger load factor, % 66.7 68.9 75.0 71.6 73.0
International Routes 61.1 58.1 68.7 57.2 68.0
Domestic Routes 68.1 72.1 76.6 76.4 74.5
Cargo and mail carried,
thousand tonnes 12.4 10.4 6.2 6.2 7.2
International Routes 2.8 1.1 0.5 0.4 0.4
Domestic Routes 9.6 9.3 5.7 5.8 6.8
Revenue tonne-kilometres,
million TKM 339.7 283.0 170.0 180.3 213.8
International Routes 60.3 51.6 30.8 34.0 44.8
Domestic Routes 279.4 231.4 139.2 146.3 169.0
Available tonne-kilometres,
million TKM 557.3 465.0 252.9 287.3 335.1
International Routes 108.1 103.6 53.5 75.4 84.4
Domestic Routes 449.2 361.4 199.4 211.9 250.7
Revenue load factor, % 61.0 60.9 67.2 62.8 63.8
International Routes 55.8 49.8 57.6 45.1 53.0
Domestic Routes 62.2 64.0 69.8 69.1 67.4
Revenue flights 16,415 16,176 12,801 15,441 18,861
International Routes 4,272 4,256 2,852 3,617 4,032
Domestic Routes 12,143 11,920 9,949 11,824 14,829
Flight hours, hours 47,631 42,875 28,695 33,281 39,390
7.9. GLOSSARY
Aviation terminology
Low-Cost Carrier (LCC) – an airline that offers lower fares than traditional airlines,
reflecting limited service provision, while also charging additional fees for on-board and
airport services.
Routes – domestic routes, international routes.
Code Sharing – agreement on joint commercial operation of a flight by two or more
airlines, one of which acts as the operator (operates the flight in addition to selling tickets),
while the others act as marketing partners (selling tickets only).
Network Carrier – an airline that, unlike low-cost carriers, offers a wide variety of services
through one or more hubs with connecting flights.
Maintenance, Repair, and Overhaul (MRO) – Technical maintenance, ongoing repairs,
and major renovations to aircraft.
TCH – Transport Clearing House.
Hub – a hub airport is a central connection point for many different flights: passengers and
goods are transported from their departure point to a hub, from which they are carried to
their final destination on another plane with other passengers and goods from other parts of
the world.
BSP/ARC (Billing and Settlement Plan / Airline Reporting Corporation) – settlement
systems between agents and airlines, organised by IATA, that facilitate and simplify air
transportation sales on neutral forms (not owned by any airline) thereby offering airlines the
opportunity to expand their market presence, minimise financial risks and reduce expenses
incurred through the maintenance of sales systems. ARC is an analogous system operated in
the United States.
IATA (International Air Transportation Association) – IATA, founded in 1945, is the
prime vehicle for inter-airline cooperation in promoting safe, reliable, secure, and
economical air services – for the benefit of the world’s consumers.
ICAO (International Civil Aviation Organization) – an international civil aviation body
established following the signing of the Chicago Convention on International Civil Aviation
in 1944. It is a specialized UN agency responsible for developing international standards,
recommended practices and regulations regarding the technical, economic, and legal aspects
of international civil aviation.
IOSA (International Operational Safety Audit) – The IATA IOSA program is an
internationally recognized and accepted evaluation system designed to assess a company’s:
organization and operational management, flight operations, engineering and technical
maintenance of aircraft, ground service for aircraft, the operational control systems
including maintenance management and flight scheduling, on-board service, aviation safety,
and provisions for transporting cargo and hazardous cargo.
ISO – The International Organization for Standardization.
Operational terminology
Passenger traffic (PAX) – the number of passengers carried by an airline:
• Direct PAX – passengers flying directly between their origin and destination.
• Transit PAX – passengers flying with a stop-over in a hub airport on their way from
origin to destination.
Passenger-Kilometres/Tonne-Kilometres – metrics used in the aviation industry to
measure operating performance:
• Available Seat-Kilometres (ASK) – a measure of an airline’s carrying capacity offered
for the market, derived from multiplying the available seats on any given aircraft by the
number of kilometres flown on a given flight. ASK is measured in seat-kilometres;
• Revenue Passenger-Kilometres (RPK) – a measure of available capacity actually used,
calculated by multiplying the number of paying passengers on any given flight by the
distance travelled. RPK is measured in passenger-kilometres;
• Available Tonne-Kilometres (ATK) – a measure of an airline’s total capacity (both
passenger and cargo), calculated by multiplying the capacity in number of tonnes available
for the transportation of passengers and cargo by the distance flown. ATK is measured in
tonne-kilometres;
• Revenue Tonne-Kilometres (TKМ) – a measure of an airline’s cargo and passenger
carriage capacity utilisation, calculated by multiplying of tonne of freight (passengers,
calculated at 90 Kg per passenger) by the distance flown. RTK is measured in tonne-
kilometres.
Passenger Load Factor (PLF) – a measure for an airline’s capacity utilisation, defined as
the ratio between RPK and ASK.
Revenue Load Factor – the ratio between the number of tonne kilometres and the available
tonne kilometres.
Origin and Departure points (O&D) – locations between which passengers are
transported. This term is used in measuring
the quantitative indicators of various markets, as defined by arrival and departure points,
irrespective of whether direct or transit traffic is involved.
Financial terminology
Unit revenue and cost – key performance measures in the aviation industry, defined as
revenue or cost for ASK or RPK:
• Yield – the ratio between passenger revenue and revenue passenger-kilometres;
• Revenue per Available Seat-Kilometre (RASK) – the ratio between revenue (either
passenger revenue or total revenue) and available seat-kilometres;
• Cost per Available Seat-Kilometre (CASK) – the ratio between operating expenses
and available seat-kilometres.
Total Shareholder Return (TSR) – measures the return on investment for shareholders,
taking into account the share price appreciation and dividends paid.
EBITDA – earnings before interest, taxes, depreciation, and amortization. Aeroflot includes
customs duties in this indicator.
EBITDAR – earnings before interest, taxes, depreciation, amortization, and operating lease
expenses (rent costs). Aeroflot includes customs duties in this indicator.
7.10. CONTACT INFORMATION
Full name: Public Joint Stock Company “Aeroflot – Russian Airlines”
Abbreviated name: PJSC Aeroflot
Certificate of registration in the Unified State Register of Legal Entities:
issued by the Moscow Department of the Russian Ministry of Taxes and Levies on 2 August 2002,
No. 1027700092661
Taxpayer Identification Number: 7712040126
Location: 10 Arbat Str., Moscow, Russian Federation
Postal address: 10 Arbat Str., Moscow, 119002, Russian Federation
For Russian retail shareholders:
Corporate Governance Department
Tel./fax: +7 (495) 258-0684
E-mail: [email protected]
For investors:
Investor Relations
Tel./fax: +7 (495) 258-06-86, (499) 500-69-63/fax
E-mail: [email protected]
Press Service:
Tel.: +7 (499) 500-7387, (495) 752-9071
Fax: +7 (495) 753-8639
E-mail: [email protected]
Registrar:
SC “Independent Registrar Company”
Building 5Б, 18, Stromynka Street, Moscow, 107076
Tel. +7 (495) 926-8160
Fax: +7 (495) 926-8178
E-mail: [email protected]
Sheremetyevo Branch of the Registrar:
Location: Aeroflot Aviation Personnel Training Department,
Building 6, Terminal B, Sheremetyevo Airport, Khimki,
Moscow Region
Tel./fax: +7 (495) 578-3680
Opening hours for share operations:
Monday-Thursday: 9:30 to 16:00, break from 13:00 to 13:30;
Friday: 9:30 to 14:30, without break
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