Aeroflot increased revenue and traffic in the third quarter
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Aeroflot airline increased its revenue in January-September by 42%, to 357 billion rubles, which, however, is 15% lower than the same period in pre-crisis 2019. At the end of the year, Aeroflot, as analysts expect, will be able to continue its revenue recovery due to an increase in the international geography of flights and higher ticket prices. But the carrier, like the group as a whole, is unlikely to reach the 2019 figures, experts believe, who do not expect net profit from Aeroflot at the end of the year. A separate problem may be refinancing the company’s debt given the increase in the key rate: Aeroflot has already proposed that the state subsidize loans to airlines, but analysts doubt that such an idea will be supported.
Aeroflot in January-September increased revenue by 42%, to 357 billion rubles, follows from its reporting according to RBSU (.pfd). The carrier explained this by the resumption of international flights to available destinations and an increase in the domestic flight program. In 2019, the carrier’s revenue for January-September was 15% higher – 422 billion rubles.
The company posted a net loss for the third quarter, down 42% year-on-year. However, Aeroflot traditionally adjusts the indicator taking into account changes associated with the transition to a new lease accounting standard from 2022 (FSBU 25/2018) – without the transition to this standard, the company would have received 17.6 billion rubles. net profit versus RUB 5.8 billion. a year earlier. For January-September, Aeroflot’s net loss amounted to 94.6 billion rubles. (compared to a profit of 58.4 billion rubles a year earlier), without taking into account the impact of the new standard, it would have amounted to 16 billion rubles. This may indicate a transfer of leasing payments by 110 billion rubles, which were not taken into account in previous interpretations of rental expenses in reporting until 2022, believes Igor Smirnov, director of corporate ratings at Expert RA.
One of Kommersant’s sources in the expert community even suggests that without taking into account the new standard, rental accounting and the “huge reserve,” Aeroflot could demonstrate up to 20 billion rubles. net profit.
As Kommersant wrote, analysts noted that in 2023 Aeroflot could reserve about 35 billion rubles. for leasing payments to Western owners of their aircraft (see “Kommersant” dated August 2). Another almost 30 billion, Kommersant’s interlocutor adds, amounted to “the reserve for doubtful debts in terms of long-term debt.”
At the end of the year, Aeroflot can show about 465–475 billion rubles. revenue. For the group (including Pobeda and Rossiya), this figure may be in the range of 525–575 billion rubles, suggests Alexander Gushchin, director of the ACRA corporate ratings group. At the end of 2019, the revenue of Aeroflot airline amounted to 551 billion rubles, and in the “post-pandemic” 2021 – 378 billion rubles. Similar dynamics, he said, are likely for the market as a whole. According to the Federal Air Transport Agency, air transportation grew by 12.3% in January-September, to 81 million people.
Sergei Alexandrovsky, head of Aeroflot, September 14:
“We plan to finish the third quarter with a strong operating profit.”
Based on the results of the fourth quarter, Alexander Gushchin does not expect fundamental improvements in terms of finances and traffic growth, but a favorable forecast for annual passenger traffic and a gradual increase in ticket prices allows us to speak of a smooth increase in revenue in relation to 2022. Aeroflot’s receipt of net profit at the end of the year is extremely unlikely, says Igor Smirnov: “Increasing costs for jet fuel are working against air carriers.”
Another problem may be refinancing loans, taking into account the increase in the key rate to 15%. On October 31, Aeroflot Deputy Head Mikhail Fedosov proposed creating a mechanism for lending to airlines at preferential rates due to the low margins of air travel. He indicated that the company’s bonded loans amount to about 11 billion rubles, the average rate for the entire portfolio is at 9%, and now the carrier will be forced to replace the loan for repayment “at significantly higher rates.”
It is difficult to imagine such a type of activity, the profitability of which would cover the current cost of loans taking into account the growth of the key rate, notes Andrey Kramarenko, an expert at the Institute of Transport Economics at the Higher School of Economics. But, he believes, although the margins of airlines have traditionally been considered not too high, now, given the large number of companies requesting benefits, “air carriers will probably be considered last in this queue.” The expert recalls that at the end of 2022, the aviation industry received almost 90 billion rubles. net profit. This year, despite the winding down of large-scale government support measures, carriers are supported by fairly profitable international flights, as well as increased flights within the country by those passengers who previously spent their holidays abroad. “Of course, airlines’ maintenance costs will continue to grow, and demand for flights will shrink,” he states, noting, however, that the Ministry of Finance is unlikely to agree to help airlines in advance.
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