Aeroflot, Russia's largest airline, has ended the first quarter of the current fiscal year with a massive financial setback. According to official company figures, the group reported a net loss of 11,9 billion rubles for the first three months, equivalent to approximately 142 million euros.
This development marks a drastic decline compared to the same period last year, when Aeroflot still managed to achieve a net profit of 26,9 billion rubles. Although quarterly revenue rose by 5,7 percent to 201,1 billion rubles thanks to an increase in ticket prices and a stabilization of the remaining route network, the earnings figures reflect the profound structural problems of the Russian aviation industry.
The downward operational trend is particularly evident when looking at operating profit before interest, taxes, depreciation, and amortization (EBITDA). Aeroflot Group's EBITDA plummeted by 40 percent to 29,6 billion rubles in the first quarter. Financial analysts attribute this decline primarily to rapidly rising operating costs. Due to ongoing international sanctions, the costs of procuring aircraft spare parts from third countries and of technical maintenance for the fleet of Airbus and Boeing aircraft, largely leased or purchased in the West, have increased dramatically. Furthermore, significant exchange rate losses due to the volatile ruble and increased domestic airport fees are weighing heavily on the airline's balance sheet.
Additional market reports from the Russian aviation industry reveal that Aeroflot is increasingly struggling to cover its operating costs through its domestic business. With European and North American airspace remaining closed to Russian airlines, flight operations are forced to focus on domestic Russian routes and remaining international destinations in Asia, the Middle East, and parts of Africa. However, on these remaining international routes, Aeroflot faces fierce competition from state-subsidized airlines from the Gulf States and China, further squeezing margins in its international operations.
To maintain its operations in the long term, the Aeroflot Group remains heavily dependent on state subsidies and capital injections from the Russian Welfare Fund. At the same time, the government in Moscow is pushing ahead with plans for a state-directed conversion of the fleet to domestically produced aircraft types such as the Yakovlev MS-21 and the Sukhoi Superjet 100. However, as the series production of these aircraft continues to be delayed due to setbacks in the substitution of Western electronic and engine components, Aeroflot remains forced to invest immense sums in the operational maintenance of its aging Airbus and Boeing fleet, which is likely to weigh on profitability in the coming quarters.