Виталий Савельев

Dear Shareholders,

Aeroflot celebrated its 90th birthday in 2013 and once again confirmed its status as the undisputed leader of Russia’s air transport industry. We set a new record by transporting more than 20.9 million passengers, while the number of passengers carried by all of the airlines in Aeroflot Group was about 31.4 million. Aeroflot Group holds a 37% share of the Russian air transport market, and one in three passenger air tickets purchased for Russian flights in 2013 was for an Aeroflot flight.

Aeroflot’s results in 2013 confirm its position as one of the fastest growing airlines in Europe. Passenger turnover increased by 19.2%, while our European competitors showed average growth rates of just 2.7%. The passenger load factor of JSC Aeroflot in 2013 was 78.8% and passenger turnover was 60.2 billion PKM. Aeroflot Group passenger turnover increased by 14.3% to 85.3 billion PKM, putting the Group among the top five airlines in Europe and top 20 worldwide. At 78.2%, the load factor of Aeroflot Group is also among the best in Europe.

We view our key business priorities as increasing people’s mobility, operating safe flights and continually improving our product quality.

Aeroflot is among the safest airlines in the world. Measured by the SAFA coefficient, the generally recognised indicator for flight safety worldwide, Aeroflot is the best operator in Russia with performance that ranks alongside the world’s leading airlines. Aeroflot’s flight safety level in 2013 was assessed at 99.961%, which is in the top bracket. Aeroflot successfully underwent its fifth audit by the International Air Transport Association (IATA) for compliance with the IOSA standard in 2013.

Aeroflot operates one of the youngest aircraft fleets in Europe. As of 31 December 2013, the fleet consisted of 143 modern airliners, with an average age of 5.5 years. New additions to the fleet in 2013 were eight Airbus A320s, five Airbus A321s, three Boeing 737-800s and four Boeing 777-300ERs. The Company also acquired four Sukhoi Superjet 100s in expanded configuration to replace aircraft previously acquired in ‘light’ configuration. Aeroflot is the largest operator of new Russian-made civil aircraft. A further 20 SSJ100s will be added to the fleet by the end of 2015 and the Company is considering the purchase of about 150 Russian-made airliners in total, including 50 Yak-242 aircraft. As of 31 December 2013, the fleet of Aeroflot Group totalled 239 aircraft.

We continued to upgrade the route network in 2013. The Company’s network consists of 156 destinations in 56 countries, while the route network of Aeroflot Group includes 293 regular destinations in 65 countries.

Aeroflot’s priority continues to be improvement of service quality and development in the premium market segment. In 2013 Aeroflot was voted Best Airline in Eastern Europe by Skytrax for the second time, and entered the world top 10 for in-flight service quality based on an IATA study. The airline won more than 40 prestigious awards and high placement in many reputable industry rankings in the course of 2013. We have expanded the number of aircraft offering in-flight Internet access, as well as improving flight menus and entertainment systems. A multilingual group has been set up to service transit passengers at Sheremetyevo Airport. Internet sales have become an important channel for ticket sales: Aeroflot was among the biggest online retailers on the Runet in 2013, with online sales increased by 29% to RUB 37.5 billion.

Main strategic projects in 2013 were the launch of Aurora Airlines, a new unified operator serving the Russian Far East, and of the low-cost carrier, Dobrolet. The new budget airline is expected to make its first flight in summer 2014, when amendments to Russian legislation will bring the business environment for a low-cost carrier in Russia into line with that for Western carriers. Aurora and Dobrolet both have major infrastructure and social missions, since they will do much to enhance transport services between Russian regions.

Aeroflot’s main social projects in 2013 were our involvement in the 27th World Student Games in Kazan, the 22nd Winter Olympics and 11th Winter Paralympics in Sochi, and the launch of the charity campaign, ‘A Heart Has Two Wings’. We greatly expanded our flight schedule on the Moscow-Kazan and Moscow-Sochi routes to serve the Student Games, Olympics and Paralympics, and we also offered a special fare, ‘the Olympics for 5,000’, which made travel to the Olympics affordable for Russians on relatively low incomes. The charity programme ‘A Heart Has Two Wings’ provides transport to enable the treatment of seriously ill children who live in remote regions of Russia. More than 400 children benefited from the scheme in its first few months of operation.

Aeroflot reported strong financial indicatorsfor the third consecutive year. The main positive result in 2013 was Aeroflot’s subsidiaries breaking even at the operating level. IFRS consolidated revenue in 2013 increased by 15.0% compared with 2012 to RUB 290,955.8 million (USD 9,135.7 million). Net income increased by 41.9% to RUB 7,334.7 million (USD 230.3 million). Aeroflot’s market capitalisation increased by 85.5% (73.3% in dollar terms) to reach RUB 93.37 billion (USD 2.86 billion) by the end of the year. These financial results demonstrate Aeroflot’s competitiveness, and put the Company among the most successful non-resource companies in Russia. They also show how the efficiency of Company subsidiaries has increased in the process of integration with Aeroflot Group.

In 2013 we took a major step towards achieving our principal strategic goal of creating Russia’s strongest airline holding, capable of competing on equal terms with leading global airlines. We expect Aeroflot Group to be among the top five European and top 20 airlines worldwide by traffic and revenue by 2025. Our results in 2013 show that these ambitious targets are realistic.

Chief Executive Officer
JSC Aeroflot
Vitaly Saveliev
Vitaly Saveliev