Running Head: AEROFLOT – RUSSIAN AIRLINES 1

Aeroflot – Russian Airlines

Jacob Morgan

Oklahoma State University

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Aeroflot – Russian Airlines

Aeroflot Russian Airlines, known as Аэрофлот Российские Авиалинии in Russian, is

the flag carrier and is also the largest airline operator in the Russian Federation. Voted Eastern

Europe’s number 1 airline in 2019, Aeroflot is in one of the top 20 airline groups in the world in

terms of passengers. Aeroflot is part of the Public Joint Stock Company Aeroflot Group

commonly known as PJSC Aeroflot. Aeroflot prides themselves as being one of the oldest

airlines in the world, yet operates one of the youngest fleets in the world with an average aircraft

age of 4.2 years. Aeroflot’s fleet consists of 253 aircraft ranging from long haul wide-bodies to

regional narrow-bodies. In an effort to modernize and improve their fleet, Aeroflot minimized

from 11 different aircraft types in 2014 to just 8 by 2018. Aeroflot recently added 50 Sukhoi

Superjet 100-95 regional jets to their fleet in an effort to support modern day Russian aircraft

manufacturers. They have an additional 100 SSJ100s on order along with 50 orders for the new

mid-range Irkut MC-21 aircraft. The MC-21 is Russia’s latest mid-range aircraft and Aeroflot’s

order, which is expected to be delivered starting in 2020, will make them the largest commercial

operator of Russian aircraft in the world. In addition to the Superjet, Aeroflot operates mid-

range Airbus A320s and A321s as well as Boeing 737-800s. Aeroflot’s wide-body fleet consists

of Airbus A330s and Boeing 777s along with future orders for 22 Airbus A350s that are in the

works for early 2020.

Aeroflot Russian Airlines is the largest carrier in the Russian Federation. Along with the

other airlines in the PJSC Group, they account for over 40% of the air travel market in Russia.

Aeroflot operates 163 scheduled routes in 56 countries, 63 of which are domestic routes within

Russia. Utilizing a hub and spoke system, Aeroflot bases its operations out of its only hub at

Moscow’s Sheremetyevo International Airport. Aeroflot plans to establish a second hub in the
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Siberian city of Krasnoyarsk as well as open new regional bases in three different cities across

Russia. The PJSC Aeroflot Group operates four different airlines, giving its customers more

choices of destinations than just those offered by Aeroflot. The PJSC group is comprised of

Aeroflot Russian Airlines, Rossiya Airlines, Pobeda Airlines, and Aurora. These four airline

companies work together using the integration strategy to make the Aeroflot Group successful.

Rossiya Airlines is 75% owned by Aeroflot and is one of Russia’s largest airlines based out of

Saint Petersburg’s Pulkovo International Airport. Rossiya accounts for about 20% of the air

passenger traffic for the Aeroflot Group. Pobeda Airlines LLC is the leading low-cost carrier in

the Russian Federation with its hub at Moscow’s Vnukovo International Airport and is wholly

owned by Aeroflot. Accounting for 13% of the PJSC Group’s PAX service, Pobeda focuses on

short to mid-range flights both domestically and internationally by using a point to point based

strategy. This cuts down on the number of connections, therefore cutting down on flight costs.

The last carrier in the Aeroflot Group is Aurora. Aurora is the largest regional carrier in the

Russian Far East and is owned 51% by Aeroflot. Based at Yuzhno-Sakhalinsk Airport, Aurora

operates between key cities in the Far East and Siberia. Specializing in more local flights to rural

destinations, Aurora accounts for only 3% of the airline group’s passenger traffic. Aeroflot

Russian Airlines is responsible for the remaining 64% of flights operated by the group. The

Aeroflot Group is continuing to add new destinations and on average expands the number of

scheduled flights by 12% each year. Not only does Aeroflot offer their customers extended

service through their subsidiaries, they have also been a key member of the SkyTeam Alliance

since they joined in 2006. By joining SkyTeam, Aeroflot affectively entered the global market

through the alliance with other airlines using the strategic partner approach. In 2018 alone,

Aeroflot carried over 545 thousand passengers under codeshare agreements with other alliance
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members. In addition, roughly 313 thousand of Aeroflot’s own customers were serviced on

flights by its SkyTeam partner carriers.

PJSC Aeroflot is the largest employer in the Russian aviation industry, employing over

41,100 people. Aeroflot Airlines employs 24.3 thousand of those and won the Randstad Award

as the most attractive employer in terms of employee satisfaction and benefits in the Russian

transport category for the fourth time in 2018. Gender equality in the workforce is a major focus

for Aeroflot; employing slightly more women than men and encouraging women to pursue

careers in all positions including pilots and cockpit crew members. Important employees of the

Aeroflot Group include the Chairman of the Board of Directors and the CEO. Evgeny Ditrich

has served as the Chairman of the Board of Directors since 2018 and also holds the title of

Minister of Transport of the Russian Federation. The CEO of Aeroflot, Vitaly Saveliev, has

been in office since April of 2009. In a vote by the Board of Directors, Saveliev’s term as CEO

was recently extended until 2023. The structure of Aeroflot’s governance system is broken into

two branches; the Board of the Directors and the Management Board. Vitaly Saveliev, as CEO,

also holds the position of Chairman of the Management Board. These two branches, along with

a handful of committees, convene to govern the PJSC Group.

In 2018, the Aeroflot Group flew 55.7 million passengers, more than 5 times the number

of passengers they carried in 2009. Aeroflot Airlines itself flew 35.8 million of the 55.7 in 2018

which averages out to be about 98,000 passengers daily. Aeroflot Airlines was awarded the title

of Number 1 in punctuality out of the world’s top 20 largest airlines by both Flightstats and the

OAG. Aeroflot’s on time performance is at a record high at 89.8% of flights operating on

schedule. They are also the only Russian and largest European airline to receive a 5-star

punctuality rating from the OAG. Not only is Aeroflot’s service superior to its competition, they
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have built a brand that is recognizable and undeniably Russian. As mentioned previously,

Aeroflot is over 95 years old and has since secured the colors of the Russian Federation’s flag in

its modern liveries. A white, blue, and red Russian flag is painted favorably on their fleet’s

vertical stabilizers, creating an iconic and memorable look. Not only is the country’s flag part of

the livery, Aeroflot also has their anglicised name “Aeroflot” painted on one side of the aircraft

while the other side has the word “Аэрофлот” in Russian. By incorporating the Cyrillic

alphabet into their aircraft livery, they are once again creating a memorable look that is

recognizable across the globe. Leading brand strategy consultancy, Brand Finance, has named

Aeroflot the world’s strongest airline brand in 2018. In addition to a 4-star rating from Skytrax,

Aeroflot was named Europe’s leading airline brand at the European World Travel Awards.

Financially, Aeroflot and the PJSC Group are doing well. In 2018, the PSJC Group had

revenue of 611.6 billion Rubles which is approximately 9.5 billion US Dollars, an increase of

about 14.8 percent in revenue growth compared to the previous year. Aeroflot’s Revenue

Passenger Kilometers in 2018 increased from the year prior to 97.9 billion or about 60.8 billion

Revenue Passenger Miles. Along with RPM, Aeroflot’s Available Seat Kilometers also

increased from 2017 to 2018. ASK in 2018 was 121.7 billion or about 75.6 billion Available

Seat Miles. Aeroflot’s profit margin in 2018 was 3.2% despite a decrease in the total profit

recorded from 2017. Through extensive optimisation programs, Aeroflot was able to accumulate

a profit of RUB 5.7 billion or about USD 89.3 million despite record highs in jet fuel prices

which increased operating costs. Even with a lower profit margin than previous years, the

Aeroflot Group successfully decreased their overall debt of 104.8 billion rubles to 97.6 billion

over the course of 2018. By disposing 12 aircraft and transferring several other aircraft to assets

held for sale, Aeroflot obtained their impressive 6.8% decrease in overall debt. This is a prime
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example of Aeroflot’s effective use of inventory management to trigger cost reductions to offset

the impact of overstocking and increasing operating costs.

The Aeroflot Group has an extensive aircraft maintenance, repair, and overhaul (MRO)

system. Aeroflot owns maintenance stations throughout Russia; a key logistical method insuring

the right maintenance at the right time by always having a hangar within reasonable distance

anywhere in the country. Maintenance hangars across Russia include 4 hangars for both wide

body and narrow body aircraft in Moscow, 2 hangars for both wide and narrow body aircraft in

Saint Petersburg, 1 hangar for narrow body aircraft in Orenburg in Russia’s southern region, and

2 hangars for narrow body aircraft in 2 cities in the Russian Far East. Aeroflot uses the “make”

in-house supply strategy by owning and preforming their own maintenance and repair stations.

This way, Aeroflot can insure a quality management system for aircraft maintenance and

airworthiness. The maintenance sector of Aeroflot’s supply chain ensures high reliability, flight

safety, and on-time performance.

Aeroflot Airlines’ future is bright as they continue to modernise, improve, and expand

their presence domestically and abroad. Forecasting using the qualitative and time series

methods has helped the Aeroflot Group set goals in place to formulate their Aeroflot Group

Development Strategy 2023. Goals for 2023 include, carry a combined 90-100 million

passengers, increase international transit traffic to 10-15 million passengers, increase their fleet

of Russian built aircraft, grow their subsidiary airline traffic and expand their footprint, and the

integration of leading-edge digital technology including artificial intelligence. Aeroflot and the

PJSC Group have positioned themselves to continue to be a leader in the global airline market

and strives to seize opportunities to improve social mobility and air transport accessibility across

Russia and the rest of the world.

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References

Annual Report 2018 [PDF file]. (2019). Retrieved from

https://ir.aeroflot.com/fileadmin/user_upload/files/eng/companys_reporting/annual_report

s/aeroflot_ar18_eng.pdf

Company News [Webpage]. (2019). Retrieved from https://www.aeroflot.ru/ru-en/news

Investor Fact Sheet [PDF file]. (2019). Retrieved from

https://ir.aeroflot.com/fileadmin/user_upload/files/eng/Aeroflot_Investor_Fact_Sheet_EN

G_September_2019.pdf

Shareholders and Investors [Webpage]. (2019). Retrieved from

https://ir.aeroflot.com/shareholders-and-investors/