Aeroflot slashes subsidiaries' losses

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Aeroflot Group has managed to cut the full-year net losses from its smaller subsidiary airlines by more than 40%, as the Russian flag-carrier claims good progress on integrating the operations.

It says the net loss for the divisions fell to $105 million in 2013, down from $187 million, under international finance standards.

Vladivostok Avia accounted for the largest loss, $63 million, with another $21 million at Rossiya and $17 million at Orenair.

But Aeroflot chief financial officer Kurmashov Shamil, speaking as the airline detailed its full-year results, said “significant steps” had been achieved in integration, including reductions in headcount.

Assets from Vladivostok Avia and the Sakhalin-based carrier SAT are being merged into the new operator Aurora Airlines, which Aeroflot expects will carrier 2.4 million passengers by 2018.

Aeroflot says the transformation will continue with further optimisation of the fleet.

Rossiya has been tied more closely to Aeroflot’s network, while revenue management and aircraft acquisition processes are being refined.

Orenair is set to undergo a long-haul fleet expansion, having been brought fully into the group.

This year Aeroflot is intending to launch is wholly-owned low-cost subsidiary Dobrolet. The carrier says it is working closely with government authorities to ensure that the model can succeed in Russia.

“[We] view the low-cost carrier market as a significant source of future growth and an opportunity to expand [our] business with negligible cannibalisation,” it adds.

Aeroflot Group’s full-year net income rose by 42% to $203 million after revenue increased by 15% to $9.1 billion.

Chief executive Vitaly Saveliev says the “continued successful integration” of the subsidiaries, as well as improved cost structures and strong productivity, contributed to the results.

Operating costs, excluding fuel, were up by 10% to $4.1 billion while fuel costs rose by 11% to nearly $2.5 billion.