Aeroflot market share now over 50% but 'not a monopolist'

Aeroflot market share now over 50% but 'not a monopolist'
Aeroflot is prospering as Russians holiday in the country's regions.
By bne IntelliNews March 1, 2016

Russian state-owned national carrier Aeroflot's market share topped 50%  but the Federal Anti-monopoly Service (FAS) says that is not a problem, reports Vedomosti.

Under Russian rules, any company that gains more than 20% market share has to apply to FAS for approval to enjoy what are considered monopolistic powers on the market.

Aeroflot saw its market share jump last year following the bankruptcy of Transaero, one of Russia's first commercial airlines to launch in the early 90s. Aeroflot took over many of the airlines routes and will probably get more assets as the company is liquidated.

"The fact that Aeroflot’s share has exceeded 50% is not serious,"  the head of the Federal Antimonopoly Service Igor Artemyev said in comments reported by TASS. "The situation is considered as temporary," he added.

The Federal Air Transport Agency reassigned more than 50 of Transaero's routes to Aeroflot but only for one year. "We do not consider it eternal," Artemyev said, adding that "54% is not 74%".

FAS said it will take no action for the meantime other than monitor Aeroflot's prices more closely. If FAS notices unjustified increases in prices for the tickets, it will raise the issue not only on prices but also on the structural reform of the company, Artemyev warned.

Despite the collapse in Russia's tourism business, Aeroflot is flourishing. Aeroflot passenger turnover increases 11.6% y/y in January despite the almost same sized contraction for the sector as a whole, which saw turnover decrease by 11.9% in January

The crisis is seeing Aeroflot consolidate its hold over the business, especially on domestic routes where passenger turnover increased 19.1% y/y in January compared with a 3.4% increase for the sector as  a whole.

International routes did less well but were still growing by 2.7% in January against a -21.7% collapse for the sector on the back of the deep devaluation of the ruble.

Russians have turned inward for their holidays and the rapid development of Aeroflot's low cost carrier Pobeda ('Victory') are the key growth drivers for the company. Passenger load factor improved 1.6 ppts to 74.1%, which reflects well on the company's operating efficiency. Aeroflot reported solid operating data, although the incorporation of Transaero will provide a high base for future growth, reports Sberbank CIB.

 

Aeroflot - KEY METRICS

 

2014

2015E

2016E

2017E

Financials, $ mln

 

 

 

Revenues

8,284

6,359

6,633

7,055

EBITDA 643

563

168

651

503

EBITDA margin

8%

3%

10%

7%

Net income

-$401.00

-512

202

149

EPS (adj), cents

-37.92

48.43

19.1

14.09

Div/share, $

0

0

0

0

Valuation, Gearing and Yield

 

 

 

 

EV/EBITDA

5.2

21.8

4.9

5.7

P/E

neg

neg

3.3

4.5

P/CF

0.7

1.2

0.9

1.1

Net debt/EBITDA

4.1

17.2

3.7

4.2

Dividend yield

0.00%

0.00%

0.00%

0.00%

Growth

 

 

 

 

Revenues

-9%

-23%

4%

6%

EBITDA

-36%

-74%

289%

-23%

EPS (adj)

0%

0%

0%

-26%

Main Shareholders

 

 

 

Russian Federation

51.20%

 

 

 

Rostec

3.60%

 

 

 

Treasury shares

5.10%

 

 

 

Free float

40.20%

 

 

 

Website

http://www.aeroflot.ru

 

 

 

 

Aeroflot IFRS results, R bln

 

9m15

9m14

y-o-y

9m15E

A/E

9m15C

A/C

3Q15

3Q14

y-o-

Revenues

309.5

236.7

30.80%

295.9

4.60%

299.5

3.30%

133

96.4

38.00%

Operating expenses

-272.7

-223

22.30%

-277.9

-1.90%

-

-

-102.1

-81.4

25.50%

Operating income

36.8

13.7

169.40%

18.1

103.90%

-

-

30.9

15

105.60%

EBITDA

47.8

23.6

103.10%

29.3

63.50%

36.9

29.80%

34.5

18.5

86.40%

EBITDA margin

15.50%

10.00%

 

9.90%

-

12.30%

-

26.00%

19.20%

-

EBITDAR

79.2

40.2

97.10%

60.5

31.00%

-

-

45.9

23.5

95.30%

EBITDAR margin

25.60%

17.00%

 

20.40%

-

-

-

34.50%

24.40%

-

Net income before minorities

1.8

-3.6

n/m

-3.6

n/m

-

-

5.4

-1.7

n/m

Adjusted net income*

27.8

12.9

115.80%

-

-

-

-

24.4

12.5

95.00%

Note: Adjusted for FX revaluation, losses on derivatives and one-offs.

 

 

 

 

 

Source: Company, Interfax, Sberbank CIB Investment Research

 

 

 

 

 

 

 

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