1

Financial results of JSC “Aeroflot” as of 2003Financial results of JSC “Aeroflot” as of 2003In accordance with IAS In accordance with IAS

Deputy General Director for finance and planningDeputy General Director for finance and planningMikhail I.PoluboyarinovMikhail I.Poluboyarinov

2

Market environmentMarket environment

Passengers transported by Russian airlines

29,5

26,5

20

22

24

26

28

30

2002 2003

11%

Russian airline industry growth in 2000-2003

60,56 64,7170,9

29,526,5225,07

0

10

20

30

40

50

60

70

80

2001 2002 2003

RPK bn.Pax mm.

3

Competitive positionCompetitive positionAeroflot position in Russian Civil Aviation

(by RPK)32,6%

31,3%

27,3%25,6%

0%

5%

10%

15%

20%

25%

30%

35%

2000 2001 2002 2003

Share of Aeroflot 2003 (passengers transported on domestic routs)

2,9% 3,0%

7,3%

10,0%11,6%

7,2%

5,0%

0%

2%

4%

6%

8%

10%

12%

14%

Aerof

lotSib

ir

Pulkov

o

Krasa

irUta

irUra

l

Domod

edov

o airl

ines

Share of Aeroflot 2003(passengers transported in international routs)

0,5% 2,8% 2,0%5,00%

11,7%

33,5%

4,9%9,5%

0%5%

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

4

Major directions of activity in 2003Major directions of activity in 2003

•Network optimization

- Company continued to develop it’s rout network according to the network optimization program started in the year 2000 and impact of SARS and Iraq war. The priority was given to the routs with a high profitability.

•Raising of fleet usage effectiveness

- The Company decreased usage of fuel ineffective aircrafts such as: Il 76, Il 86, Il 62

•Foreign made fleet replacement program

- Aeroflot started to realize foreign made fleet replacement program. The program envisages replacement of 27 foreign made aircrafts of the Company on the 27 new foreign made aircrafts. The program is essential for rout network development and operating costs optimization.

The Company operated in anti crises management regime in the first half 2003 because of SARS and Iraq war.

5

Efficiency increase in 200Efficiency increase in 20033

6

Network optimisationNetwork optimisation

Europe40%

America10%

Asia20%

Africa&Middle East4%

CIS, Baltic and Russia26%

•Concentration of capacities on high-yield routes

•Providing high yield routes with competitive planes

•Improvement of connectivity

(Network connectivity was increased from 10,% in 2002 to 14% in 2003)

•Closure of loss making / marginally unprofitable routes

•SARS and Iraq war caused reduction on 7,6% of Aeroflot passenger turnover in Southeast Asia and on 7,1% in Asia.

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 quality

Network structure by revenue

Revenue rate and load factor

65,7 65,8 68,4 69,4

6,85,5 5,9 6,4

0

20

40

60

80

2000 2001 2002 2003

Revenue rate per RPK Passenger load factor

7

FleetFleet  2003   owned leased total +/- to 2002

Passenger aircraftShort – haul aircraft        - Tu-134 12 1 13 -2

Medium – haul aircraft        

- Тu-154M 20   20  - IL-86 14   14  - B-737   6 6 -4

-A-310   5 5 -6

- A-320   4 4 +4

- A-319   5 5 +5

Long – haul aircraft        

- IL-96 6   6  - IL - 62 1   1 -9

- B-777   2 2  - B-767   5 5 +1

Total passenger aircraft 53 28 81 -11

Cargo aircraft- IL-76 4   4 -6

- DC -10   4 4 +2

Total cargo aircraft 4 4 8 -4

TOTAL 57 32 89 -15

8

Fleet changes in 2003Fleet changes in 2003

The fleet of Aeroflot was consist of 104 aircraft (including 72 owned and 32 leased) at the beginning of 2003         9 aircraft Il – 62, 6 aircraft Il – 76 were released during the year.        2 aircrafts Tu – 134 were drawn back to the Company “Komiinteravia” in accordance with the end of duration of the contract.        4 aircraft B-737 and 6 aircraft A-310 were put out of operation in accordance with the fleet restricting program.         2 cargo aircrafts DC-10 were received to operating lease.         1 aircraft B-767 was received to operating lease, 4 aircraft A-319 to financial lease, 1 aircraft А -319 to operating lease and 4 aircraft A 320 to operating lease in accordance with fleet restricting program.

The fleet of Aeroflot aircraft was consist of 89 aircraft (including 57-owned, 32-leased) to the end of 2003

9

Fleet utilisationFleet utilisation

21,5

13,610,9

0

6,4

50,2

6,7

2,2 1,92,0

23,0

40,0

9,7

38,8

16,0

20,4

34,5

20,5

5,7 3,94,1

26,0

44,3

2,3

39,1

9,9

35,8

17,4

9,8

19,123

1,9

24,2

33,532,6

0

10

20

30

40

50

60

Il96 B767 B737 B777 A310 Il62 Il86 Tu154 Tu134 Il76 DC10 A-319 A-320

thou

sand

FH

2001 2002 2003

•Passenger aircraft flight hours increased on 1,0% in 2003 beside 2002 and cargo aircrafts flight hours increased on 7,1% beside 2002.•

10

Operating profit and net profit dynamicsOperating profit and net profit dynamics

126,4

158,8

40,182,1

7,3-6,2

126,7

-59,6

-210,9

89,3

20,18,6

-250

-200

-150

-100

-50

0

50

100

150

200

1998 1999 2000 2001 2002 2003

USD

, mill

ion

Operating profit Net profit

11

Operating Operating rresults 200esults 20033

12

Main operating figuresMain operating figures

Passenger turnover

18939,317644,7

18202,6

14163,713828,3

15107,3

4038,93816,43832,0

02000400060008000

100001200014000160001800020000

2001 2002 2003

RP

K m

ln

TotalIntern.Domest.

Ton-km turnover

2258,62152,5

2252,7

1805,11737,21822,1

447,6415,3436,5

0

500

1000

1500

2000

2500

2001 2002 2003

RT

K m

ln

TotalIntern.Domest.

Mail and cargo traffic

87,093,7 95,7

14,7 16,2 18,5

101,7109,9

114,2

0

20

40

60

80

100

120

2001 2002 2003

thou

sand

ton

s

TotalIntern.Domest.

Passenger traffic

5832,15489,6

5843,5

4129,83886,54206,6

1713,71603,11625,5

0

1000

2000

3000

4000

5000

6000

7000

2001 2002 2003

PA

X t

hous

and

TotalIntern.Domest.

13

Load factors and fuel consumptionLoad factors and fuel consumption

Passenger load factor

64,2

67,3 67,9

72,7 72,7

74,9

65,8

68,469,4

58

60

62

64

66

68

70

72

74

76

2001 2002 2003

%

TotalInt.Domestic

Commercial load factor

51,555,4 55,4

63,2 60,764,6

57,056,453,5

0

10

20

30

40

50

60

70

2001 2002 2003

%

TotalInt.Domestic

Specific fuel consumption

567,0

492,0479,0

420

440

460

480

500

520

540

560

580

2001 2002 2003

gram

m/t

on-k

ilom

eter

14

Dynamic of fuel prices in 2003Dynamic of fuel prices in 2003

320,84

316,15301,95

298,52

296,45

292,54

292,61

290,22

299,02

302,52

276,23

266,07

230

240

250

260

270

280

290

300

310

320

330

Weighted average fuel price for Aeroflot in USD exluding VAT

Weighted average fuel price for Aeroflot during 2003 increased by 20,6% beside 2002.

15

2002003 3 Financial Financial resultsresults

16

Consolidated Income statementConsolidated Income statement

31.12.03 (USD million)

31.12.02 (USD million)

Revenue 1 716,0 1563,0

Operating costs 1 589,6 1404,2

Operating income 126,4 158,8

Income before taxation and minority interest

158,0 132,9

Income after taxation 126,7 91,3

Minority interest - 2,0

Net income 126,7 89,3

Earnings per share $0,114 $0,080

17

Consolidated Balance sheetConsolidated Balance sheet 31.12.03

(USD million) 31.12.02

(USD million)

Current assets 398,5 320,4

Deferred tax assets and Non – current assets

668,8 565,0

Total assets 1 067,3 885,4

Current liabilities 564,9 461,9

Deferred tax liabilities and Non – current liabilities

215,5 250,8

Minority interest 5,7 7,9

Shareholders equity 281,2 164,8

Total liabilities and shareholders equity

1 067,3 885,4

18

Revenue and traffic revenueRevenue and traffic revenue

Revenue 2001-2003

1558,0 1563,0

1 716,0

1450

1500

1550

1600

1650

1700

1750

2001 2002 2003

USD

mil

lion

Traffic revenue 2001-2003

1221,11244,3

1369,0

1100

1150

1200

1250

1300

1350

1400

2001 2002 2003

USD

mil

lion

Passenger traffic revebue 2001-2003

1115,7 1120,5

1241,8

104010601080110011201140116011801200122012401260

2001 2002 2003

USD

mil

lion

19

Revenue ratesRevenue ratesRevenue \ passenger

205,6194,4187,5 214,1

243,1234,6214,9213,6

144,1135,3130,2118,2

0

50

100

150

200

250

300

2000 2001 2002 2003Pas

seng

er r

even

ue/ T

raff

ic

Total Int. Domestic

Passenger yield

5,6 6,06,6 7,0

4,95,5 5,7

6,16,8

5,5 5,96,4

0

1

2

3

4

5

6

7

8

2000 2001 2002 2003

Pas

seng

er r

even

ue /

RP

K

Total Int. Domestic

54,758,6 61,7

51,254,5 56,9

60,857,8

54,1

0

10

20

30

40

50

60

70

2001 2002 2003

Total Int. Domestic

RTK yield

20

Traffic revenue structure Traffic revenue structure

2003 USD million

2002 USD million

% to 2002

Scheduled flights

Passengers 1 228,9 1092,9 112,4

Cargo 97,6 97,8 99,8

Charter flights

Passenger 12,9 27,6 46,7

Cargo 29,6 26,0 113,8

Total 1 369,0 1244,3 110,0

21

Traffic revenue structure by regionTraffic revenue structure by region

2003 2002

USD million USD million

Europe 563,1 456,5 123,3

Asia 220,9 218,2 101,2

North America 109,9 102,9 106,8

Russia 244,9 216,9 112,9

Other regions 82,5 78,3 105,3

Other international traffic 7,6 20,1 37,8

% to 2002

22

Operating costs and costs of productionOperating costs and costs of production

Operating costs

1517,0

1404,2

1589,6

1300

1350

1400

1450

1500

1550

1600

1650

2001 2002 2003

USD

mil

lion

Production costs of 1 tkm

65,9

63,8

72,2

58

60

62

64

66

68

70

72

74

2001 2002 2003

USc

13%

13%

23

Operating costs Operating costs

1255,2Total

71,2Other expenses

(0,2)(Decrease) increase in provision for bad and doubtful receivables

39,2Communication expenses

34,8Third-party passenger services

8,6Operating taxes

71,9Administration and general expenses

133,0Operating lease expenses

111,0Sales and marketing

162,4Maintenance

294,0Aircraft and traffic servicing

327,8Aircraft fuel

(USD million)

% to 200220022003

(USD million)

274,7

244,8

109,7

103,2

104,2

69,5

30,6

32,5

35,3

6,2

Fines and penalties 1,5 16,4

54,7

1081,8

119,3

120,0

148,0

107,5

127,6

103,4

28,1

107,0

111,0

9,1

130,1

116,0

24

Key figures 200Key figures 20033 EBITDAR

268

2200

185

901

351

0

500

1000

1500

2000

2500

Finnair NorthwestAirlines

Aeroflot LanChile British Airways

USD

mill

ion

Net profit / Loss

119

-773

89

-196

72

293126,7 111,0

248,0

-18

-412

-1000

-800

-600

-400

-200

0

200

400

EBITDA

17181373

275

928661

268420 314398

81218

0200400600800

100012001400160018002000

USD

mill

ion

25

SStrategic focustrategic focus

• To join Sky team global alliance

• To increase market share on profitable routs

• To improve operating and financial results

• To increase quality of services

• To provide better brand recognition

• To reach leading role in Russian airline industry consolidation

• To build strategy-focused organisation

• Strategic projects:

– New terminal

– Group restructuring

The work which was done in 2003 became a base for the beginning of renewed strategy development conception realization - the strategy of forward – looking growth as by operating measures so by financial measures.