Page 136 - RusRPTMar21

9.2.3 Aviation corporate news
Aeroflot’s PAX traffic for January was down 60.5% y/y to 1.04mn, while Rossiya’s PAX traffic was down 28.5% y/y to 0.4mn. Pobeda’s PAX traffic for the month remained at the previous year’s level of 0.93mn. By combining the results for Aeroflot, Rossiya and Pobeda, we get a proxy for Aeroflot Group’s performance. According to this proxy, Aeroflot Group’s PAX traffic was down approximately 42.5% y/y to 2.4mn in January, which is weaker than the general performance of Russian carriers (-38.2% y/y to 5.5mn). Despite the weakness, the overall market and Aeroflot Group both saw PAX traffic recover for the second month in a row after November 2020 saw the deepest decline since July 2020. RPK for the market was down 53.2% y/y to 11.2mn RPK.
Aeroflot strategy to kick in within a couple of months. Aeroflot is to maintain under its new management the strategy approved by its BoD in the middle of last year. The active stage will start in May, when Pobeda, which currently flies from Vnukovo, starts code sharing flights with Aeroflot from Sheremetyevo Airport, becoming a feeder for Aeroflot longhaul routes. We maintain our positive view of the stock. Our unchanged 12mo TP of RUB 90 implies an ETR of 29% and a Buy.
· “We expect the full recovery of the Russian airlines market in 2022,” said the new CEO, Mikhail Poluboyarinov, in an interview to RBC. This statement was in line with the Ministry of Transport’s and our expectations. We see 2021F traffic 16% below the 2019 level, with 2022F growing 9%.
· “The company’s liquidity is sufficient to cover all current liabilities”. We estimate that the company’s cash of RUB 91bn as of YE20 enough to survive the cash burn in 2021. We also expect it to refinance RUB 42bn of shortterm liabilities with a 5year, statebacked loan from Sberbank.
· “Pobeda might grow to 84 aircraft through intraGroup B737 transfers, without new purchases. The issue with recertification of the B737 MAX is not an obstacle for the next 2 3 years.” We add that there is a possibility that the Group will cancel its B737 MAX booking and order the A320/A321 neo aircraft instead.
· “We are not considering an IPO of Pobeda anymore”. In August 2019, thenCEO Vitaly Saveliev, mentioned the possible sale of a 25% stake with a valuation of the whole company at some USD 1bn. An IPO of the lowcoster would likely to draw liquidity away from Aeroflot, rather than bringing in new investors, in our view.
· "The emergence of a new lowcoster flying in the southern regions
136 RUSSIA Country Report March 2021 www.intellinews.com