Aeroflot expects group profit decrease by end of year 2018

Russia's largest aircraft carrier Aeroflot expects company profit to decrease by end of 2018, the Chairman of the company Supervisory Board Mikhail Poluboyarinov told reporters on the sidelines of the Eastern Economic Forum on Tuesday.

"We expect to change the budget by the end of the year in the direction of lower profitability. Right now, they are looking to see what additional costs will be. You can ask Victor Saveliev on this issue, but as the Board of Directors, we have looked at the strategy several times. There is no miracle, nowhere for it to come from. So, we need room for maneuver," he said.

"At present, according to the financial results, Aeroflot has enough serious losses from the cost of kerosene, they have to be compensated in some way," Poluboyarinov said.

According to him, this is the reason why the airline has to develop new revenue routes, for example, to India and China.

Earlier this year, Aeroflot reported net loses under International Financial Reporting Standards (IFRS, which soared 2.2-fold in Q1 2018 year-on-year to 11.54 bln rubles ($11.5 bln).

Revenue rose by 8.6% in the period to 111.94 bln rubles ($1.7 bln); operating loss went up 2.3-fold to 11.57 bln rubles ($185 mln), loss before tax increased 2.1-fold to 13.73 bln rubles ($219 mln).

"The first three months are traditionally weak for the Russian aviation market. This is due to a number of factors, primarily seasonality of demand, as fewer passengers fly during this period. Thus, despite continued growth of the air transportation market, the number of passengers carried in Q1 2018 was 9% lower than in Q4 2017, which can also be considered as a low season for the industry, and 38% lower than the high season of Q3 2017," Aeroflot Deputy CEO for Commerce and Finance Shamil Kurmashov said.

"An increase in leasing expenses due to significant fleet expansion, as well as our initiatives to improve working conditions and increase salaries for cabin crew, led to a decrease in the overall financial result compared to the same period last year. The net loss amounted to 11.5 billion rubles; we plan to compensate for this during the coming quarters," he said.

The loses can also be attributed to rising fuel costs. According to Transport Minister Yevgeny Dietrich, the growth of jet fuel for the first half of the year was 18-20%. In general, by the end of the year, the Ministry of Transport expects a 30% rise in fuel prices.

Aeroflot group includes Aeroflot, Rossiya, Pobeda and Aurora airlines. The controlling stake in Aeroflot (51.2%) belongs to the state represented by the Federal Property Management Agency, Rostec Holding owns 3.5% of shares, institutional investors - 39.6%.

The 4th Eastern Economic Forum is under way in Vladivostok, September 11-13. TASS is the general information partner, the official photo-agency and the moderator of the EEF-2018.