Message from the Chief Executive Officer
Dear shareholders!
Vitaly Saveliev
Chief Executive Officer
PJSC Aeroflot
In 2018, Aeroflot celebrated its 95th anniversary. We did so as a leading global airline – shortly before the anniversary, Aeroflot was named among the world's 20 largest airline groups by passenger traffic by two authoritative global aviation publications, Air Transport World and Flight Airline Business.
In 2018, we strengthened our position as one of the leading airlines on the international market. Aeroflot was once again named the world's strongest airline brand by Brand Finance. And we also confirmed our prestigious Skytrax 4-Star Airline Rating and Five Star Global Airline status in APEX's Official Airline Ratings.
During the year we implemented a number of initiatives to enhance customer service. They include the introduction of a streaming entertainment system on 26 Airbus A320 family aircraft, updates to our mobile app and improvement of our onboard catering. We started operating domestic flights from the new terminal B at our Sheremetyevo hub. Widebody Boeing 777-300 aircraft were upgraded to improve service quality and cost efficiency.
Our efforts have been recognised by both passengers and industry experts. We have received over 50 accolades and been rated highly in authoritative industry ratings. Aeroflot won two categories at the prestigious Skytrax World Airline Awards – Best Airline in Eastern Europe and Best Premium Economy Onboard Catering – as well as key categories at the World Travel Awards – Europe’s Leading Airline Brand and World's Best Business Class. In 2018, Aeroflot was for the first time named Best Airline in Eastern Europe at the Business Traveller Awards, and its customer service was recognised to be the best among Russian brands according to KPMG.
Throughout the year we continued to increase our operational efficiency. As a result, Aeroflot significantly strengthened its position among the most punctual airlines. In 2018, 82.98% of Aeroflot flights operated according to schedule. According to authoritative UK aviation publication FlightGlobal, Aeroflot was the world's fifth most punctual airline and second in Europe. Punctuality makes trips more comfortable for our passengers and allows us to avoid additional costs, which directly impact our finances.
Our operating results reflect our efforts to grow and develop the company further. In 2018, the airlines of Aeroflot Group carried 55.7 million passengers, up 11.1% year-on-year. Aeroflot, our flagship airline, carried 35.8 million passengers, an 8.9% increase year-on-year. We achieved a number of the goals of our Strategy-2025 well ahead of schedule, and having reassessed our capabilities we have now set ourselves new even more ambitious goals.
In 2018, the Board of Directors approved the Group’s new Growth Strategy through 2023, with the title “100 Million Passengers by Our 100th Anniversary” (or “100 by 100”). The Group is now targeting 90-100 million passengers in 2023, when Aeroflot will celebrate its centenary. The strategy calls for the Group's low-cost carrier Pobeda to be a key growth driver. By 2023, Pobeda is expected to carry 25-30 million passengers annually. In the next five years we plan to further develop our Europe-Asia transit service via Moscow. Aeroflot has indisputable competitive advantages in the Europe-Asia transit segment and offers flights up to three hours shorter than peers on these routes. By 2023, we plan to increase our international transit traffic to 10-15 million and strengthen Moscow's status as a global transport hub. Aeroflot Group will open regional hubs across Russia – in Sochi, Ekaterinburg and Novosibirsk, as well as an international hub in Krasnoyarsk. This will help increase connectivity between Russian regions and will support their economic development.
To fulfil these goals Aeroflot needs a modern and reliable fleet. By 2026, Aeroflot Group plans to operate 200 Russian-built Superjet 100 and MC-21 aircraft. Another area of focus is the digitalisation of the Group's airlines. Aeroflot currently ranks fourth globally in US-based consultancy Bain & Co.’s ranking of digitalisation of airlines. We are implementing major digital projects, including Big Data projects, working with AI technology and expanding our onboard internet programme.
Aeroflot believes that technology is an important tool that will help the Group to enhance customer service and improve cost-effectiveness, and will contribute to a more stable financial position even in a challenging market environment. Digitalisation coupled with an effective cost optimisation programme allowed Aeroflot Group to deliver positive FY 2018 results despite unprecedented fuel price growth and ruble depreciation. The Group's posted IFRS net income of RUB 5.7 billion. Aeroflot has once again demonstrated its ability to deliver growth even in a challenging market environment.
We are optimistic about our future and expect our operational development to have an impact on our financial results. According to the updated Strategy, by 2023, Aeroflot Group's revenue will reach RUB 1.3 trillion, compared to RUB 0.6 trillion in 2018. Together with revenue growth we focus on operating margins. Overall, we can say that one of the key goals of our strategy is to increase shareholder value.
Achieving strategic goals means entering a qualitatively new stage of development and further strengthening the Group's position in the global aviation market. Aeroflot can achieve historic passenger traffic records and give a new impetus to our century-old brand.
Aeroflot Group develops together with the country. We continue to focus on promoting sustainable business practices through our commitment to ESG standards. We support socio-economic growth and technological development and set the pace for the whole industry. Aeroflot plans to continue to deliver on its most important mission: to provide Russian citizens with a modern and reliable fleet. The interests of Russia and its citizens remain Aeroflot's key guidance.
