IAS Financial results 2002IAS Financial results 2002

Efficiency increase in 2002Efficiency increase in 2002

Major directions of activity in 2002

•Still network optimization

- In 2002 Company continued to develop it’s rout network and the priority was given to the routs with a high profitability

•Raising of fleet usage effectiveness

- In 2002 the Company substantially decreased usage of fuel ineffective aircrafts such as: Il 76, Il 86, Il 62

•Foreign made fleet replacement program

- In 2002 it was taken decision on replacement of 27 foreign made aircrafts of the Company on the 27 new foreign made aircrafts with aim to optimize operating costs.

Market environmentMarket environment

Russian airline industry growth in 1999-2002

64,71

53,42 53,41

60,56

26,5225,0721,8321,47

0

10

20

30

40

50

60

70

1999 2000 2001 2002

RPK bn.Pax mm.

Market growth by segments, 2002

3,9%

23,9%

6,8%

-6,1%-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Int.regular Int.chart. Domest.reg. Domest.chart.

•Shortage of adequate capacity•Noise & emission restrictions introduced by European countries•Strict regulation•Still high degree of fragmentation•Low purchasing power – low yield – major constraint•Higher growth rates in the charter segment

6,9%

5,8%

Competitive positionCompetitive positionAeroflot position in Russian Civil Aviation

10,3% 12,2% 12,3% 11,8%

30,7% 32,6% 31,3%27,3%

42,9%

58,6%54,4% 51,6%

0%

10%

20%

30%

40%

50%

60%

70%

1999 2000 2001 2002

InternationalDomesticTotal

• Still an ultimate leader in the industry

• Recent decrease of the market share is due to:

– radical reduction of old Soviet-built aircraft capacities

– concentration of the market growth in the non-core segment

Share of Aeroflot 2002 (International)

7,10%9,60%

42,90%

2,9%3,4%

0%5%

10%15%20%25%30%35%40%45%50%

Aeroflot Sibir Pulkovo Krasair Ural

Share of Aeroflot 2002 (Domestic)

8,5%

13,5%11,7%

6,2%8,3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Aeroflot Sibir Krasair Domo-dedovo Utair

Network optimisationNetwork optimisation

Europe38%

America11%

Asia18%

Africa&Middle East4%

CIS&Baltic5%

Other International6%

Domestic18%

•Concentration of capacities on high-yield routes

•Providing high yield routes with competitive planes

•Improvement of connectivity

(over 2001 connectivity was increased from 11,3% to 14%)

•Closure of loss making / marginally profitable routes

LH

AABAUA

AF

DL

AY

LO

MA

SQSN

JL

OS

SX

20022005

1999

0

40

80

120

160

0 10 20 30 40 50"Depth" (Average weekly frequency)

"W

idth

" (

Qua

ntit

y of

rou

tes) SU

3,6 6,9 10,4

Network qualityNetwork structure by revenue

Revenue rate and load factor

65,7 65,8 68,4

5,5 5,9 6,4

01020304050607080

2000 2001 2002

Revenue rate per RPK Passenger load factor

3,9%

8,5%

Fleet utilisationFleet utilisation

21,5

13,610,9

2,0

20,5

5,7

23,0

40,0

9,7

38,8

15,8

20,4

34,5

3,94,1

26,0

44,3

2,3

39,1

9,9

35,8

17,4

0

5

10

15

20

25

30

35

40

45

50

Il96 B767 B737 B777 A310 Il62 Il86 Tu154 Tu134 Il76 DC10

thou

sand

FH

•Gross utilisation of B767, B737, B777, A310, DC10 in 2002 increased on 3,8% beside 2001•Gross utilisation of Il96, Tu134, Tu 154 in 2002 increased on 11,2% beside 2001•Gross utilisation of Il62, Il76, Il86 in 2002 declined on 73,8% beside 2001

Western fleet restructuringWestern fleet restructuring

B777-200ER (2)

B767-300ER (4)

A310-300 (11)

B737- 400 (10)

B767-300ER (operating leases)

А320 family (10 operating

leases, 8 finance leases)

1 type of LH aircraft (9)

1 type of MH aircraft (18)

27 aircraft 27 aircraft

Primary objectives:

•Ensure significant cost savings and increased operational efficiency through higher fleet commonality

•Incorporate high degree of fleet planning and fleet management flexibility

•Achieve high asset liquidity and broad choice of long-term financing sources

Russian and cargo fleet restructuringRussian and cargo fleet restructuring

Il96-300(6)

Il62 (10)

Il86 (14)

Tu154M (20)

Tu134 (15)

Medium-term target - provide further commonality of the whole fleet

Il76(10)

DC10F(2)

1 type of LH aircraft 6 Il96 + 6 on order

1 type of MH aircraft 20 Tu154M

1 type of SH aircraft 11 Tu134M

65 aircraft 52 aircraft

1 type of freighter4 DC10F

Operating profit and net profit dynamics Operating profit and net profit dynamics

158,8

40,182,1

7,3-6,2

-59,6

-210,9

89,3

20,18,6

-250

-200

-150

-100

-50

0

50

100

150

200

1998 1999 2000 2001 2002

USD

mln

Operating profit Net profit

Operating Results 2002Operating Results 2002

Main operating figuresMain operating figures

Passenger turnover

17434,218939,3

17644,7

13828,315107,314068,1

3816,43832,03366,1

02000400060008000

100001200014000160001800020000

2000 2001 2002

RP

K m

ln

TotalIntern.Domest.

Ton-km turnover

2240,8 2258,6 2152,5

1737,21822,11872,2

415,3436,5368,6

0

500

1000

1500

2000

2500

2000 2001 2002

RT

K m

ln

TotalIntern.Domest.

Mail and cargo traffic

95,487,0

93,7

12,1 14,7 16,2

107,5101,7

109,9

0

20

40

60

80

100

120

2000 2001 2002

thou

sand

ton

s

TotalIntern.Domest.

Passenger traffic

5100,95832,1 5489,6

3886,54206,63704,6

1603,11625,51396,3

0

1000

2000

3000

4000

5000

6000

7000

2000 2001 2002

PA

X t

hous

and

TotalIntern.Domest.

-6,8%

-5,9%

-4,7%

8,1%

Load factors and fuel consumptionLoad factors and fuel consumption

Passenger load factor

64,2 64,2

67,3

72,7 72,7 72,7

65,7 65,8

68,4

58

60

62

64

66

68

70

72

74

2000 2001 2002

%

ВсегоМВЛВВЛ

Commercial load factor

52,6 51,555,5

65,2 63,2 60,756,453,554,5

0

10

20

30

40

50

60

70

2000 2001 2002

%

ВсегоМВЛВВЛ

Specific fuel consumption

558,0567,0

492,0

440

460

480

500

520

540

560

580

2000 2001 2002

гм/т

км

1% of passenger load factor increase - USD16,5 mln of additional revenue

1% of commercial load factor increase - USD27 mln of additional revenue

Financial Results 2002Financial Results 2002

Profit and loss statementProfit and loss statement

31.12.01(USD mln)

31.12.02(USD mln)

Revenue 1 558,0 1563,0

Operatig costs 1 517,9 1404,2

Operating profit 40,1 158,8

Profit before taxes anminority interest

10,7 132,9

Profit after taxes 21,8 91,3

Minority interest 1,7 2,0

Net profit 20,1 89,3

Net profit per share $0,018 $0,080

Revenue and traffic revenue Revenue and traffic revenue

Revenue in 2000-2002

1406,9

1558,0 1563,0

1300

1350

1400

1450

1500

1550

1600

2000 2001 2002

USD

mil

lion

Traffic revenue in 2000-2002

1074,0

1221,01244,3

950

1000

1050

1100

1150

1200

1250

1300

2000 2001 2002

USD

mil

lion

Passenger revenue in 2000-2002

956,4

1115,7 1120,5

850

900

950

1000

1050

1100

1150

2000 2001 2002

USD

mil

lion

0,3% 1,9%

0,4

Traffic revenue by sector Traffic revenue by sector

2001(USD mln)

2002(USD mln)

% to 2001

Scheduledflights

Passengers 1 071,1 1092,9 102,0%

Cargo 74,5 97,8 131,3%

Charter flights

Passengers 44,6 27,6 61,9%

Cargo 30,9 26,0 84,1%

Total 1 221,1 1 244,3 101,9%

Passenger traffic revenue by region Passenger traffic revenue by region

2001(USD mln)

2002(USD mln)

% to 2001

Europe 432,1 456,5 105,6%

Asia 218,0 218,2 100,0%

North America 98,3 102,9 104,7

Russia 211,7 216,9 102,5

Other 90,8 78,3 64,6%

Otherinternationalflights

20,2 20,1 99,5%

Cargo traffic revenue by region Cargo traffic revenue by region

2001(USD mln)

2002(USD mln)

% to 2001

Europe 16,3 28,6 175,5%

Asia 23,7 31,9 134,6%

North America 6,3 9,8 155,6%

Russia 12,2 9,6 78,7%

Other 4,9 7,9 161,2%

Otherinternationalflights

11,1 10,0 90,1%

Revenue ratesRevenue rates

Revenue rate per 1 passenger

205,6194,4187,5

234,6214,9213,6

135,3130,2118,2

0

50

100

150

200

250

2000 2001 2002

Pas

seng

er r

even

ue./t

raffi

c

TotalIntern.Domest.

Revenue rate per RPK

5,66,0

6,6

4,95,5 5,75,5 5,9

6,4

0

1

2

3

4

5

6

7

2000 2001 2002

Pas

seng

er r

even

ue/R

PK

TotalIntern.Domest.

Revenue rate per 1 passenger increased on 5,8% beside 2001on international routs - on 9,2%,on domestic routs - on 3,9%.

Revenue rate per 1 RPK increased on 8,5% beside 2001on international routs - on 10,0%,on domestic routs - on 3,6%.

Operating costsOperating costs

1218,3Total

54,5Other expenses

5,6Increase in (release of) provision for bad and doubtful accounts

35,9Communication expenses

41,5Third – party passenger services

56,9Operating taxes

83,2Administration and general expenses

99,5Operating lease expenses

110,7Sales and marketing

112,5Maintenance

259,3Aircraft and traffic servicing

358,7Fuel

(USD mln)

% to 200120022001

( USD mln)

274,7

244,8

109,7

103,2

104,2

69,5

30,6

32,5

35,3

6,2

Penalties - 16,4

54,7

1081,8

76,6

94,4

97,5

93,2

104,7

83,5

53,8

78,3

98,3

110,7

-

100,4

88,8

Operating costs structureOperating costs structure

100 Total

4,5Other expenses

0,5Increase in (release of) provision for bad and doubtful accounts

2,9Communication expenses

3,4Third – party passenger services

4,7Operating taxes

6,8Administration and general expenses

8,2Operating lease expenses

9,1Sales and marketing

9,2Maintenance

21,3Aircraft and traffic servicing

29,4Fuel

20022001

25,422,6

Penalties

10,2 9,5 9,6 6,4 2,8

3,03,3

0,6

- 1,55,1

100

Key factors of operating profit changeKey factors of operating profit change

143 8 14 9 5

-20-3

96

-7340

84

-18

159

-100

-50

0

50

100

150

200

US

D m

ln

Operating profit2001

Traffic decrease

Fairs increase

Decrease of other revenue

Fuel costs decrease

Aircraft and traffic servicing costs decrease

Maintenance costs decrease

Sales and marketing costs decrease

Third party passenger servicing costs decrease

Salary increase

Operating profit 2002

Administration and general expenses decrease

Depreciation increase

Other decreased costs

Aircraft and traf. serv. costs decrease

Operating costs and production costOperating costs and production cost

Operating costs

1324,0

1517,0

1404,2

1200

1250

1300

1350

1400

1450

1500

1550

2000 2001 2002

USD

mln

Production cost of 1 tkm

59,1

67,2

65,2

54

56

58

60

62

64

66

68

2000 2001 2002

USc

-7,4%

-3,0%

Operating activity resultsOperating activity results

59,167,2 65,2

3,7 1,77,4

62,868,9 72,6

0

10

20

30

40

50

60

70

80

2000 2001 2002

Revenue rate for 1 ton-km Production cost of 1 ton-km Operating result

In 4,5 times

Balance sheetsBalance sheets 31.12.01

(USD mln)31.12.02

(USD mln)Change to 2001

Current assets 292,6 320,4 27,8

Long – term assets 819,6 565,0 -254,6

Total assets 1 112,2 885,4 -226,8

Short – term liabilities 562,6 461,9 -100,7

Long – term liabilities 464,3 250,8 -213,5

Minority interest 7,6 7,9 0,3

Shareholders’ equity 77,7 164,8 87,1

Total liabilities andShareholders equity

1 112,2 885,4 -226,8

Cash flowsCash flows

EBITDAR

288,0

244,0

370,0

0

50

100

150

200

250

300

350

400

2000 2001 2002

USD

mln

Capex

28,827,2

21,9

0

5

10

15

20

25

30

35

2000 2001 2002

USD

mln

Net CF

261,1

216,8

341,2

0

50

100

150

200

250

300

350

400

2000 2001 2002

USD

mln

Capital StructureCapital Structure

Debt/EBITDAR

4,10

5,044,67

2,56

4,93

0

1

2

3

4

5

6

1998 1999 2000 2001 2002

Debt composition

82 773 3 3

441 435 391339

113

602 602707 700 729

65469

110131

0

100

200

300

400

500

600

700

800

1998 1999 2000 2001 2002

ST debt LT debt LT leases Off BS debt

Long-term strategic focusLong-term strategic focus

• Profitable market growth

• Increase of operating and financial effectiveness

• Product upgrade and brand development

• Leadership in national industry consolidation

• Building strategy-focused organisation

• World alliance membership

• Strategic projects:

– New hub

– Group restructuring