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Edited Transcript of AFLT.MZ earnings conference call or presentation 30-Aug-19 9:00am GMT

Half Year 2019 Aeroflot-Rossiyskiye Avialinii PAO Earnings Call (IFRS)

Moscow Sep 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Aeroflot-Rossiyskiye Avialinii PAO earnings conference call or presentation Friday, August 30, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andrey Chikhanchin

Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board

* Andrey Napolnov

Public Joint Stock Company Aeroflot - Russian Airlines - Head of IR

* Andrey Panov

Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO for Strategy & Marketing

* Artem Glaznev

Public Joint Stock Company Aeroflot - Russian Airlines - Head of IFRS Reporting

* Ivan Batanov

Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management

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Conference Call Participants

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* Aleksey Ryabushko

Sberbank CIB Investment Research - Junior Analyst

* Igor Goncharov

Gazprombank (Joint Stock Company), Research Division - Analyst

* Ivan Postevoy

VTB Capital, Research Division - Equities Analyst

* Matvey Tayts

Sova Capital Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to Aeroflot Group's 6 Months 2019 IFRS Financial Results Conference Call. I will now hand over to your host, Mr. Andrey Napolnov, Head of IR. Sir, please go ahead.

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Andrey Napolnov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of IR [2]

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Good afternoon, ladies and gentlemen, and thank you for joining us on the call. We will discuss 6 months and Q2 2019 financial results. Today, we have following speakers on the call: Deputy CEO of Commerce and Finance, Andrey Chikhanchin; Deputy CEO of Strategic Service and Marketing, Andrey Panov; Director of Revenue Management Department and Network Planning, Ivan Batanov; Head of IFRS, Artem Glaznev; and myself.

I'd like, as usual, to draw your attention to the press release -- to the fact that press release and IFRS statements are available at our website in the Investor Relations section. And before we start, again, I'd like to draw your attention to the disclaimer statement that some information on the call may contain forward-looking statements and actual results may differ materially from those expressed or implied in the statements made during the conference call due to known and unknown facts and events.

We'll begin our presentation with key semiannual highlights to be discussed in detail during the presentation. First of all, operational growth has been quite strong with capacity and passenger number increase of 14.9% and 13.4%, respectively. High pace of Q1 2019 growth has started to normalize according to our plan and announced guidance in Q2. Both (inaudible) and high-capacity expansion proved that market has been digesting our expansion threat to this year. And at the same time, World Cup base effects, currency trends and competition on international rules have defined Q2 results and may have some impact going forward.

To discuss these operational trends, I'd like to pass the floor to Andrey Panov, Deputy CEO of Strategy, Sales and Marketing.

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Andrey Panov, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO for Strategy & Marketing [3]

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Hello, everyone. I will spend several minutes on the market update and the overall situation with our competition. The Russian market continued to grow at quite aggressive rate. 9% -- almost 9% growth of just half of the year is above our 6% to 7% expectations for the overall year. And we understand that, with current trends, it looks like that this growth will continue approximately 8%, 9%, maybe 10%. We will see. Both domestic and international segments, both high single-digit growth, and we don't see any material differences in growth trends between Q1 and Q2. However, some important aspects of the growth have changed and we would like to draw your attention to that.

First of all, what we see is the different dynamics between Russian carriers and foreign carriers. Actually, our foreign carriers, we saw it in the first quarter, but now it really looks quite significant. Foreign carriers started to reduce capacity and lost 9% of combined traffic and 2.5 percentage points of market share. We see that mostly, let's say, Western competition decreased their capacity serious. And Asian airlines are growing their presence on the Russian market. We see that in June, carriers -- foreign carriers reduced traffic by over 20%. Of course, we understand that this is a result of like the fact that previous year we had the World Cup, but still, it's really significant. So in general, in our opinion, the situation is that foreign carriers could not compete with Russian Airlines based on cost base of Russian Airlines and the prices and fares which they can afford. So while it's worse to domestic carriers despite very rational approach, the domestic markets have accelerated their growth on international routes with the traffic rights received during the last 12 months, which resulted in the overcapacity, in our opinion, in the segment on some selected routes.

What we also see that there is some acceleration in regional expansion if -- like we can name 7 where expansion there happened with (inaudible) outpaced expansion in Domodedovo. And Ural Airlines, which focused on Zhukovsky and Yekaterinburg airports. UTair returned to the growth mostly in non-CRO segment.

So in January, full group was growing above the markets in H1. And by the end of Q2, above the market growth was secured primarily by Pobeda. Like we -- when we calculate the share of Aeroflot group, we now see it at 40.3% based on peer-only markets.

So let's go to the next slide. Once again, we have seen actually the growth in all our key brands. Aeroflot passenger growth was approximately 10%, Pobeda 45%. Aurora, more or less stable, plus 2%. And the Rossiya Airlines, plus 7%. So like, it's obvious that most growth we got from Aeroflot and for the other -- and like next years, we can predict that Pobeda will bring us the most passengers.

Aeroflot Airline concentrated growth on international routes, including Europe to Asia transfer. I will speak a bit later about it. And the Pobeda passenger growth came in from domestic market. What is important also, Rossiya airlines scheduled network was moved to Sheremetyevo airport from Vnukovo, and this -- like because of this continue to show improved efficiency and connectivity to larger airport network, which translated to better results.

So let's go to the next slide. Now I'll speak about our transit flows. As you maybe remember in the strategy, we have quite ambitious targets for international transit, and we want group to have 10 million to 15 million passengers in 2023. So a number of international to international transit PAX in H1 increased by 21%, quite impressive, I think, on the back of continuing further connectivity improvement. Thanks to transfer of scheduled flights of Sheremetyevo airport in Moscow on top of 2.5 million transit passengers of Aeroflot Airline, more than 100,000 additional transit international passengers we'll generate by this year.

And the biggest contribution in our network, Rossiya showed in domestic segment generated almost 400,000 additional PAX on top of Aeroflot's 1.8 million PAX. Actually, we expect that consolidation of scheduled flights of [Sheremetyevo] will continue to yield higher PLF and boost connectivity of the group route network, reflecting positively on our finance results.

And a bit about Pobeda. So during the last 12 months, airline received the 10 aircraft, increasing total fleet to 30 planes, and it obviously allowed the airline to grow quite fast. So it's plus 45% and 4.5 million passengers in the first half of the year. Network of other airlines in summer season comprises over 100 routes and half of them are unique for the group, which is also quite important for us. Next year, we are planning to launch a new pilot project. We hope that we will be able to do it. And we think about deploying some of new Pobeda aircraft in Sheremetyevo to connect with the network of Aeroflot. Pobeda will not leave Vnukovo. We speak only about like -- about pilots, and we think that it could bring some synergies when we established coaching between Aeroflot and Pobeda from Sheremetyevo. I think that Pobeda, with its CASK and RASK, is a perfect -- affordable product for some markets.

Of course, we have some changes for Pobeda where (inaudible) industry. I'm talking about 737 MAX. We hope that this aircraft will start flying. And still, I mean we are considering various options for future development of the fleet at the LCCs, other companies of the group, also great aircraft that are currently used by Pobeda.

So this is about market update. And now Ivan Batanov will continue with network and schedule overview.

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [4]

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Thank you. And let me start with the network -- group network update. In 2019, we have continued to improve network quality by focusing on frequencies and connectivity and expanding to the new markets with high point to point and transfer potential. Total number of the group's flights expanded by 9.6% in 6 months 2019 year-over-year basis with Asia, Middle East and Africa being the 2 most fastest-growing regions, supported by additional destinations open and flight frequency increases.

Accelerated growth in number of flights and tourists is explained by new destination to Colombo and Denpasar as well as higher frequencies to Seoul versus summer season year before.

Middle East and Africa regions expanded on the back of growing frequency between Moscow and Dubai, Kaliningrad and Istanbul. North and Central America has seen low flight frequency between Moscow and New York, 2 flights per day in last winter season versus 3 flights per day in winter 2017. And in summer '19, schedules have 3 frequencies between Moscow and New York, and we are going to keep this frequency for the future.

High average scheduled flight frequency per route, expansion was mostly driven by domestic segment, about plus 16%, with a new destination in southern part of Russia launched last autumn as well as higher frequency on the number of existing routes. Overall response from the route network is aimed to supporting how international to international transit [travelers].

Now let's move on to the unit revenues. 2.2% increase in first half of the year on group yields was driven by domestic segment while internationally have been slightly down on second quarter trends, where international yields declined by 3.7% during the recent quarter. What are the main key -- or what are the key factors that impacted second quarter yield earnings? First of all, fuel, which has a huge impact that provided the most of the damage to yields increase at 6.1%. And positive contributor to selected international routes where we adjusted to surcharge.

Fuel surcharges was for the first time introduced on CIS segment, resulting in 4% increase in yields for the segment in rubles. Another round of fuel surcharge increases effective from July 2019 and (inaudible) mainly the CIS segments.

Pressure from -- second factor is a pressure from increased competition for us (inaudible) in international routes including indirect competition through the (inaudible) segments where we have limited presence as a group. This competition is quite visible in (inaudible) routes, and I wouldn't say that we are significantly impacted by soft trends in intra-European routes, maybe to some extent indirectly (inaudible) but I would not exaggerate importance of this factor. But competition from domestic on European routes is definitely noticeable.

Our yields for Europe are down by around 5% in rubles, which also includes currency factor as rubles strengthened 2% versus euro.

Exchange rate dynamics. As I have mentioned, euro was 2% versus rubles -- versus ruble, which is positive for demand but affects our yields reported in rubles, transfer yields and inbound traffic. In one other structures, we have also actively developed ancillaries and growth focus trends with implication for the sales mix. And last but not least, abnormally high base because of the World Cup 2018.

Basic effect is well illustrated by the following slides on a year-over-year monthly yield growth of Aeroflot airline. In June 2018, the yields rose by 17%, driven by 23% increase in international and 8% domestic yields, well above low single-digit domestic yield and mid- to high single-digit international yield growth before.

With this high base of June '18, we managed to post 5.8% yield decrease in June 2019, driven by an 11% decline in international yields and moderate deceleration of domestic yield growth.

June was the group's phase of the World Cup. That is why the effect is so pronounced. It partially relinquished in the first half of July, mostly international segment, due to the scheduled championship, but to a less extent, around June, according to our estimates. Just to remind you that July 2018 year-over-year yield was up by 8%, driven by 15% increase from international segment.

And let me pass the floor to Andrey Chikhanchin.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [5]

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Thank you, Ivan. Hello to everyone. [What is the] Aeroflot Group's fleet breakdown. As of June, the team's group had 365 aircraft and the fleet deployed in operation by the airlines of the group. Even though the fleet is not increasing year-to-date, the average fleet size is up by almost 20 aircraft versus the fleet we operated in 2018. We do not have any sizable addition to aircraft fleet in 2019. But as a focus on increasing flight hours for the existing aircraft, which contributes to higher efficiency of the fleet.

Next slide, you see the expansion strategy in 6 months. The group has been expanding its capacity by 9 aircraft including 2 wide-bodies and 7 narrow-bodies in medium-haul segment. In second quarter, however, our capacity has decreased by 6 aircraft including scheduled phaseout of 7 aircraft of 320 family Airbus. In the second half of the year, we expect net increase in our fleet by 5 narrow-bodies as well as the phaseout of 3 wide-bodies.

With respect to the MAXs, which are currently grounded by the regulators, we expect joint solution of Boeing and regulators and are ready to introduce MAX in our fleet only when it's safety -- when its safety is confirmed. Three Airbus 330 aircraft will be leave -- leaving the fleet in the very end of the current year, followed by phaseout of 4 additional A330 in 2020, according to our schedule. Airbus 330 will be replaced by brand-new Airbus 350 aircraft. We expect 11 aircraft to enter the fleet next year.

Now let's move to consolidated financial results for 6 months and second quarter of current year. 2019 began with over 10% increase in fuel price, material ruble depreciation versus dollars and euro, which results in soft first quarter results. At the same time, despite competition headwinds, we have been successful at increasing the yields. As we move through second quarter, we have seen a number of changes in the macro trends. First, most important, jet price has been gradually improving. Ruble appreciated versus the dollar was still 4.5% weaker in the second quarter and 10% weaker in 6 months year-on-year. Euro-dollar trends result in pressure both of revenue and costs. As for euro, continues to trade at 1.12. On the top of that, we faced extreme headwinds in June as we had to deliver on the back of the group's stage of World Cup, which was in previous year. Additional pressure came from closure of Pakistan skies. And I should mention that we present restated numbers for 6 months 2018 under IFRS 16, and we would like to highlight that the rest of net income is the result of currency effect on capitalized operationally -- operating lease. We apply hedge accounting for lease previously classified as operating since 1st of January 2019 and absorbed all currency effect in equity and like we do for finance lease since 2014.

On the next slide, we can see that the group's revenue grew by 17.2% during 6 months and amounted to RUB 311 billion, led by expansion of scheduled operations, which generated additional revenue of RUB 39 billion. We have been able to realize positive currency effect of RUB 11 billion due to weaker currency and RUB 3 billion on pricing due to increase of fares and fuel surcharges. Additional contribution to revenue was generated by an ancillary revenue product, which shown positive reception of our passengers such as upgrade to business class and comfort class, seat selection for our low booking classes, and we see further respective from -- with our extra baggage fares.

On the next slide, we can see operation costs. As we mentioned, the transition growth in operation expenses in 6 months is mainly driven by 15% increase in capacity. Fuel remained one of the key contributions to operation expenses growth, mainly due to volume growth as well as further ruble devaluation. FX trend is also an explanation to the key alliance with fixed components. In addition to the volume and the FX factors, a number of key P&L lines have been affected by accounting and operational factors such as aircraft. And passenger servicing costs was additionally inflated by the increased higher fares in domestic regional airports. Second is the lease, amortization, maintenance and other lines have been affected by IFRS 16, which we detailed, discussed on a special call several months ago. And the other important factors influence operation expenses have been mentioned earlier with additional costs stemming from flying around India and Pakistan conflict zone in 6 months 2019.

Second quarter growth in ASK amounted to 13%, so the 15% increase in operational expenses is mostly linked to volume factors with additional inference from the same factors as described for 6-month dynamics. Going forward, the group's management remains and [apologist] of strict control -- cost control measures as pressure from fuel price still persists, and it is important to become even more cost efficient to protect their margins.

Let's talk about group unit costs. We may conclude that the cost increased by 4% in 6 months and just by 2% in second quarter. Around 50%, of course, are denominated in hard currencies, mostly in dollars, which gained about 10% in 6 months and 4% in the second quarter. On top of that, we have seen continuation in growth of fares in the regional airports, increase in LIBOR by 0.5 percentage point in 6 months and other minor factors. It was mentioned that in Q2 the spread between CASK and RASK significantly narrowed as total CASK grew by 1.9% and blended RASK decreased by 0.1%. It means that 2.0 percentage point spread. This compares with 8.9 percentage point CASK/RASK spread in Q4 2018.

Fuel price remains elevated for most of 6 months 2019 but by May reached the levels of 2018. And as this year, from the chart on the slide, the lines have crossed. In June 2019, we have benefit from 7% year-on-year decline in fuel price, and the trend continued in July. At the same time, I would like to highlight once again that in June and July, we faced high base effect of FIFA, which means that there's benefit of the cost side, but we have tough comps on the revenue side.

We have hedge instrument for 70% consumption of [5 for] stand-alone for second half of 2019. We believe we secured attractive levels at a very attractive price. Introduction of the damper mechanism is, for sure, a positive development for airlines. But in other words, it's better to have it and place it now. At the same time, the levels approved are relevant mostly to the worst-case scenario. It's our opinion. The question of protecting the margin up to the damper level remains important for airlines of the group.

Next slide is EBITDA evolution. In 6 months, we generated RUB 68 billion EBITDA, which was up by 15.5% year-on-year. Key drivers of changes in EBITDA are as follows: positive volume and price effect on revenue amount to RUB 35 billion, which outpaced growth in cost by RUB 30 billion, which implies that volume growth was not dilutive for our business and operations level; positive net FX effect on revenue and cost in the amount of RUB 4 billion resulting from weaker rubles versus dollar and euro.

A very important slide to talk about. Pobeda financial result, it's additional information to what Andrey Panov mentioned about the operation results of Pobeda. It's active expansion of Pobeda in 6 months 2019. An additional of 47% of ASK did not dilute RASK, which grew by an impressive 6.5% year-on-year and 92.5% load factors. Operation growth of Pobeda worked to increase operation profit by 44% in second quarter to RUB 1.4 billion.

I would like to remind that the net income contains FX revaluation of lease portfolio in the amount of RUB 2.9 billion for first half of 2019. In the future, these adjustments will be made on a company basis to make bottom line figures representative.

Leverage and liquidity. Net debt as of 30 of June 2019 decreased by 12%. Percent is on -- I would mention that this percent is on a comparable basis on the back of revaluation of lease liabilities due to ruble appreciation during 6 months 2019 and growth in cash position.

And the last one slide is the adoption of IFRS 16. It's lease liabilities revaluation. And I would like to pass the floor to Artem Glaznev, our Head of IFRS Division.

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Artem Glaznev, Public Joint Stock Company Aeroflot - Russian Airlines - Head of IFRS Reporting [6]

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Hello, everybody. Aeroflot has adopted IFRS 16 starting from 1st January 2019 using the fully retrospective approach. And as a result of that, 2018 figures were restated. Before that, hedge accounting is applied to finance lease only liabilities from 30 September 2014.

IFRS 9 prohibits the retrospective adoption of RET rules. And therefore, the requirements of this standard and the transition to IFRS 16 were applied prospectively from 1st January 2019. If the group reflected the hedge accounting of lease liability in respect of liabilities recognized as a result of applying IFRS 16 from 1st January 2018, then the positive effect of the financial results for the 6 months ended 30 June 2018 will be -- have amounted about RUB 28 billion, reducing the loss for the period to RUB 2.9 billion.

The graph on the slide is explained. In 6 months, ruble devaluation of 9% versus U.S. dollar since the beginning of the year result in RUB 28 billion paper loss on FX.

That's all about IFRS 16 and hedge accounting.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Matvey Tayts, Sova Capital.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [2]

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So my first question is about the other operating income, which increased quite substantially in second quarter. First one, so can you please just suggest if we'll have a similar dynamic in the second half of the year comparing to what you have in the first half?

So the second one is about the RPK yield. So it -- why wasn't that good? So can you please repeat your statements regarding the RPK yields in July, so what you've seen so far? So just to have an idea of where the RPK yields for the third quarter will be like for international and domestic lines, if it's possible.

And also, my last one is about the third runway, which will be launched in Sheremetyevo. Can you please explain how it will impact your plans and how it will contribute to your growth?

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [3]

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Thank you for your questions. Let's start from the other operation incomes. There's some figures, one of the most -- the biggest one is excise reimbursement. It's regulation figures, which we received during the years from 2015. I think the biggest part of the other expenses also, like I mentioned, some income from selling our assets and some adjustments in maintenance reserves. So it's nothing unpredictable and nothing unusual.

If we are talking about Sheremetyevo and the third runway, of course, it's in line with our strategy. So we are -- as you know, our aim is to have our 90 million to our 100 million passenger to 2023. So this third runway will help us to improve our operation in our domestic hub in Moscow.

And about RPK, I will pass the floor to Ivan.

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [4]

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Yes. Let me comment on the -- your question with regard to the yields for third quarter, what we've seen so far. So we've already notified the market that this year, we will feel the base effect of World Cup that was hosted by Russia last year. Most of the championship impact relates to June as the group stages the championship, but July is also affected. It means that our July yields are not strong enough mainly due to the performance of international yields. In July last year, we posted over 8% growth backed by 12% increase in international segments year-over-year.

Base effect is shareable. So base effect is expected by 3.4% year-over-year decline in Europe. Currency shifts that affect yields reported in rubles, and as a result, we still declined in international yields used for July but moderate yields for June. That will offset ongoing positive trends in domestic yields, which are back to the average growth we posted before. And the result in slides we show you, you'll all have seen low single-digit yield for the scheduled operations.

If we will see -- look at the August yield trends, they are better than in July. And our very preliminary indication is 2.2% -- from 2% to 3% increase year-over-year.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [5]

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Okay. 2%, 3% increase in ruble terms, is that correct?

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [6]

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That's right.

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Operator [7]

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Our next question comes from Aleksey Ryabushko, Sberbank CIB.

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Aleksey Ryabushko, Sberbank CIB Investment Research - Junior Analyst [8]

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Yes. A couple of questions from me. First, regarding your seat load factors. Since the start of the year, we have been seeing a steady decline in year-over-year terms. So maybe you can comment on what we should expect from the second half of the year. Should we project the same decline in seat load factors year-over-year or not or maybe they should even increase?

And the second question regarding your fleet expansion plans, in particular SSJs and MC-21s. As far as I understand, you have reached principal agreement to order more planes but have not signed the hard contracts. Can you please maybe elaborate on the process, at what stage you are now or maybe when should we expect the signature of these contracts?

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [9]

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So let me first comment on the load factors. It's important to notice that according to the 2019 budget, group overall capacity will increase up to 9 to 10 -- from 9% to 10% in terms of base case. It means that a slight decline in load factor, which we've mentioned so far, is something that is -- we consider okay due to the competition that we can see in international market and the obviously excess capacities. Aeroflot several time commented that we definitely can see overcapacity on the international market. But full year terms, we expect the load factor to become -- is expected at the level of 82%.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [10]

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And I will ask -- I will answer about fleet. As Sergey and (inaudible), yes, you are right, we have a preliminary contract for 100 SSJ. So we have now lots of discussion about this contract, but I think that we are on a final wave. So -- and to the end of the year, we are ready to receive 10 aircraft. So now we're in the process of receiving all corporate decisions, and now it's time for make some corporate procedure.

And about (inaudible), again, yes, we have a hard contract, but it's -- maybe you read it in the news, so there's some movement from 2020 to 2021 of the first aircraft receiving. So we are still in this contract and waiting for this aircraft.

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Aleksey Ryabushko, Sberbank CIB Investment Research - Junior Analyst [11]

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Yes. Just to clarify on -- regarding SSJs, as far as I understand, you expect some corporate actions until the end of the year.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [12]

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Yes.

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Aleksey Ryabushko, Sberbank CIB Investment Research - Junior Analyst [13]

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And regarding MC-21s, sorry, I was talking about extra 35 planes that will probably (inaudible) corporation expected you to sign in Q -- first Q '20, if I'm not mistaken, so extra 35 and not the 50 that you have already, of course, signed.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [14]

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Yes, that's -- I understand. Yes, it's extra 35 aircraft, and we have also preliminary -- it's like a memorandum of understanding of receiving these aircraft, yes. And we're still in the process of negotiation for these 35 aircraft.

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Operator [15]

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(Operator Instructions) We have a question from Mr. Ivan from VTB Capital.

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Ivan Postevoy, VTB Capital, Research Division - Equities Analyst [16]

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Yes. I have 3 questions. First one, we see that maintenance grew by 30% in second quarter and by 50% in first quarter. So which dynamic should we expect for the rest of the year?

The second question about the staff cost line. It grew only by 11% versus the 6% growth in the first quarter. Don't you see that there is a shortage of pilots in the industry? And don't you think that there will be positive growth in this cost line?

And the last question regarding Pobeda codesharing. Don't you think that there will be airports complaining on this given the recent claims on Pobeda and Aeroflot?

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [17]

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Okay. Let's start from the maintenance. So the main factors which influenced for change is volume, of course. It's more than 20%, which is a big portion of 38%. And the second big factor is FX. So it's not something extraordinary. It's only -- it compares with our growth and with FX factors. So it's -- I think it's a little bit at the same level on the next period. So -- and if you are talking about staff cost, there was input of reducing of bonuses, which was canceled in Q1. So in this case, it's not a very high growth in this line of our P&L.

And about codesharing, I will pass the question to Andrey Panov.

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Andrey Panov, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO for Strategy & Marketing [18]

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Yes. So of course, we cannot comment on like any government or FAAT claims to us. But what we think that if we implement codesharing of Pobeda and Aeroflot, by doing this, we will increase opportunities to people of Russian Federation to travel in the country. And I don't think that it's something wrong in terms of what we are doing.

Once again, actually, in that, it will go on the pilot project. I mean like we will do some codesharing because anyway we have some basis where Pobeda and other airlines are flying now, for instance, in St. Petersburg. Regarding Moscow, I mean we will see like what will happen in next year or later, especially because of the question of a new market, which Pobeda will need to have to increase the operations next year.

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Operator [19]

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(Operator Instructions) We have a question from Igor Goncharov, Gazprombank.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Analyst [20]

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Yes. On the fuel costs, you've shown on the slides that they declined in the -- in July, year-on-year decline in the level of fuel cost in ruble terms. Can you comment on how the trend continues into August?

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [21]

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Okay. Thank you for your question. Yes, the trend is the same as in July. It's maybe a bit more decline, so it's about maybe...

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [22]

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High single digit.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [23]

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It's high single digit.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Analyst [24]

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High single-digit decline in August, is that correct?

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [25]

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Yes, yes.

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Ivan Batanov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of Revenue Management [26]

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Yes, yes.

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Andrey Chikhanchin, Public Joint Stock Company Aeroflot - Russian Airlines - Deputy CEO of Commerce & Finance and Member of Management Board [27]

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Yes, you are right.

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Operator [28]

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(Operator Instructions) We have no other questions. Dear speakers, back to you for the conclusion.

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Andrey Napolnov, Public Joint Stock Company Aeroflot - Russian Airlines - Head of IR [29]

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Okay. Thank you very much for the call. So if you have any follow-up questions, we'll be happy to answer, and see you next time in the next call. And have a good day. Thank you.

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Operator [30]

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Ladies and gentlemen, this concludes our conference call. Thank you for participating. You may now disconnect.