Page 83 - RusRPTJune18

Eastern funds (12.5%).
Russian national air carrier Aeroflot Group reported 7.2% year-on-year growth in passenger turnover in January-April 2018 to 15.2mn passengers, out of which flagship carrier Aeroflot saw a passenger turnover increase of 6% to 10.2mn people. In April alone, the Group carried 4.2mn people, up 8.8% y/y, while Aeroflot airline carried 2.8mn people, up by 7.5% y/y. The turnover numbers recovered from weak reading seen in January-February , which was attributed to bad weather conditions in major airports and intensifying competition, particularly on international flights. Most recently Aeroflot’s CEO Vitaly Saveliev told Interfax at the SkyService forum in Moscow that the company's Board of Directors is targeting a 50% dividend payout and will vote on the proposal on May 29 . In the interim, the company awaits the government directive that will instruct its representatives on the board on how to vote on the measure. A payout of 50% of IFRS net income implies dividends of RUB11.4bn or cRUB10.3/sh (yield of c7.4%). “Although the news is in line with our expectations, we believe the additional step towards confirmation of dividend levels will offer support for shares. Otherwise, the next catalyst is the first quarter of 2018 IFRS (30 May), which is likely to reflect seasonal weakness and high fuel prices,” BSC Global Markets said in a note on May 15.
Aeroflot has released its March operating results. For March , Aeroflot Group reported an overall passenger turnover (as measured by RPK) increase of 7.5% y/y, with both international and domestic flights showing similar y/y growth. It carried 7.6% more overall passengers than a year before. Compared with 2m18 (6.4%), that marked an acceleration, as the company took delivery of six planes, which led to a 7.1% y/y increase in the group's ASK. As expected, growth was higher for the group than Aeroflot standalone (total RPK up 5.3%, passengers up 6.5%), as low-cost Pobeda (total RPK up 55.4%, passengers up 46.2%) saw rapid expansion, while Rossiya's performance (total RPK up 0.8%, passengers down 6.8%) was affected by optimization of cross-country traffic to the Far East.
Aeroflot has released weak the first quarter of 2018 RAS results which, as expected, were poorer than a year ago. Average yield growth of just 5% y/y was not able to offset the 17% y/y increase in fuel prices, the additional costs related to the harsh weather conditions in Moscow during the first two months of this year, and the deferred inflation of rouble costs. As a result, the company’s operating loss expanded to RUB 8.3bn in the first quarter of 2018 (from RUB 0.6bn in 1Q17). We estimate the the first quarter of 2018 RAS EBITDA at negative RUB 7.7bn, which would mean an EBITDA loss of some RUB 9bn at the group level. This supports our expectations of weak the first quarter of 2018 IFRS results, scheduled for release on 30 May. Our 12-month Target Price of RUB 170 implies an ETR of 25%; Hold reiterated.
Revenue and yields: single-digit growth . Aeroflot’s RAS sales increased 7% y/y to RUB 94bn on 5% growth in RPK and a 4.5% gain in rouble yields. The latter grew faster than the benign Russian CPI y/y growth of 2.2% during the first quarter of 2018 , but was still low in the current environment for Aeroflot. The company provided no breakdown between international and domestic revenues, but assuming that most international flight ticket prices are linked to the euro, the 10% rouble depreciation against the euro could imply a y/y drop in hard currency prices on international routes. That, in turn, might flag competition with foreign rivals investing in prices.
83 RUSSIA Country Report June 2018 www.intellinews.com