Aeroflot Group reported a 2017 net income of RUB23 billion ($399 million), down 41% from RUB38.8 billion for 2016, which the Russian flag carrier attributed to higher oil prices and foreign exchange losses.

Revenue for the year grew 7.5% year-over-year (YOY) to RUB532.9 billion. Operating profit decreased 36.1% YOY to RUB40.4 billion.  

“Higher oil prices and the change in ruble and currency correlation pattern rate put pressure on fuel costs, a key expense item accounting for 24.9% of operating costs,” Aeroflot deputy CEO Shamil Kurmashov said.

Aircraft fuel costs grew 20.8% to RUB122.7 million.

“Given the impact of FX [foreign exchange] swings and higher fuel prices—as well as the lack of the material currency differences on returns of pre-payments for aircraft that affected the 2016 results—the financial result for 2017 was lower, reflecting the normalization of profitability,” Kurmashov added.

Aeroflot Group’s airlines carried 50.1 million passengers in 2017, up 15.4% YOY. “The group continued its sustainable growth on domestic and international routes. The group utilized its significant capacity additions—up 14.2% YOY—efficiently, resulting in an increased load factor of 82.8%, 1.4 points higher than in 2016,” Aeroflot said in a statement.

The group includes Moscow Sheremetyevo-based Aeroflot Airline, St. Petersburg-based Rossiya Airlines, LCC Pobeda Airlines and Russian Far East-based Aurora Airlines.

Revenue from scheduled passenger flights increased 6% YOY to RUB427.5 million. Revenue growth was affected by a decrease in yields, primarily on international routes, because of the strengthening of the ruble. Revenue from charter flights increased 75.2% to RUB30.9 million, attributed, among other factors, to the growth of Rossiya Airlines’ charter program. Cargo revenue rose 31.3% YOY to RUB16.5 million as the group added new widebody aircraft, cargo and mail volumes, which grew 32.8%.

Staff expenses also increased 28% YOY to RUB82.8 million.

Aircraft maintenance costs fell 4.7% YOY to RUB 36.4 million, as they were significantly impacted by the strengthening of the ruble, as well as by development of A-Technics, Aeroflot’s maintenance subsidiary, resulting in increasing volumes of in-house maintenance.

Total operating costs, less aircraft fuel, increased 11.7% to RUB369.8 million.

Polina Montag-Girmes