AK&M gets the scoop again

Published: 4/26/2000

Despite the efforts of Aeroflot, it appears that the airline"s 1999 results have been released by the financial information agency AK&M, without the permission of the airline, which refuses to comment. The figures, which are rarely contradicted by the official release, show a growth in sales of 115% in rubles and –15% in dollars on overall passenger volume growth of 3.5% in 1999. Reflecting the changing passenger mix of the airline as they begin to substantively develop their domestic business with its associated ruble revenues and where prices have still to return to precrisis levels. The slow recovery of passenger volumes on their high margin international routes appears to have also impacted the sales figure. Traditionally the fourth quarter is one of the least attractive for the Russia"s airlines, it appears however, that Aeroflot sales decline at the nine month stage of 0.2% compared with 15% at the full year reflects a deterioration in their dollar paying international passengers above the level that would be normally expected for the period. The airline"s operating cost fell substantially in dollars during the period by 19%, although the figure appears to be somewhat distorted by the fact that the company has for the first time separated selling and general and administrative expenses from the overall operating figure and therefore flattered the decline, without giving comparable selling and G&A expenses for 1998. The level of decline in operating expenses is however, fairly impressive given the rise in fuel prices during 1999, but given that that dollar revenues generally exceed expenses, the airline received a substantial one off benefit from the weak ruble and it seems likely that payroll costs particularly were kept below pre-crisis level. Given the losses at the nine months stage the declines in operating and net profit, down by –98% and –81% respectively, are not a surprise. The positive pre-tax level of 1.15bn rubles up by 8% on 1998 and down by only –58% in dollars probably, in the absence of comment, is likely to be attributable to the airline"s currency gains and contributions from other areas of business such as duty free and hotels Overall the top line figure should not particularly surprise anyone given the data available on international passengers in 1999.How much credence will be given to the detail of these RAS figures when the IAS figures are known to be available, is another matter. The leaked IAS figure for 1998 for Aeroflot showed losses at the net level of $184.8m after an operating loss of $6.2m, significantly below the operating profit of $78.0m and adjusted net profit of $30.5 m shown under RAS. It seems likely that given the enthusiasm of Aeroflot to court foreign investors during a recent investor road show to London ahead of an expected ADR issue, that we may see more transparency in the future. In the past however, the desire to raise funds has not always been a precursor to more information, although this time it seems likely that the international investment community may not be a willing to provide funding without the provision of more consistent information whether elements within the company like it or not.

Article ID: 1563