Aeroflot - Marching Towards The World Aviation Elite

Aeroflot - Russian Airlines is a leading air carrier in Russian Federation and all post-Soviet airspace as well as one of the most dynamic airlines in Europe. We fly passengers and cargo to 88 destinations in 42 countries around the world. Aeroflot, with its history dating back to the dawn of civil aviation in the Soviet Union in 1923, is one of the world’s longest established carriers. But nevertheless, despite its venerable age, the company continues to show strong results. Quickly shedding the image of cold soviet style airline, within the last five years Aeroflot boosted its annual after tax profits by more than 21 times - from $ 6.1 million in 1999 to $ 128.3 million in 2003. By 2003 its results put Aeroflot among the 15 top world airlines in terms of net profit. Under the new market oriented management, the company capitalisation doubled last year.

Today the Russian domestic air transportation market is developing very dynamically, growing by 10 to 11 per cent annually within the last three years alone. Therefore Aeroflot’s intermediate term plans are based on boosting its activities in the Russian home market. By 2010 the company intends to increase its share in this market to above 20 per cent. In addition to Russia and the CIS - the main “battlefield” for Aeroflot is still the international market where its prime targets are Western Europe, South East Asia, the Far East and North America. During the last three years Aeroflot was busy reforming its network, including cutting unprofitable routes. As a result, the geography of the flights became more compact, but the network is better controlled and much more efficient.

Aeroflot Bonus is the largest Frequent flyer programme in Russia. There are over 200,000 active members in the programme, 20,000 of which live in the United States and Canada. By participating in the programme and accumulating bonus points, passengers can purchase preferential tickets, receive free tickets, upgrade and receive discounts for Aeroflot Bonus partner companies. As from September 01, 2003 Aeroflot has launched a new reward programme for young passengers from two 2 to twelve years old - “Aeroflot Bonus” Junior.

Purchasing tickets with special child discount members will get points as grown-ups Aeroflot Bonus basic card will be automatically issued and delivered to member reached 12 years of age.

When Aeroflot finally joins the Sky Team global alliance (the procedure began on May 24, 2004 in Moscow when a MoU was signed), the Aeroflot Bonus programme will be integrated into the frequent flyer programmes of the other Sky Team members (Delta Airlines, Air France, Korean Air, Aero Mexico, Al Italia, CSA - Czech Airlines). This will give Aeroflot Bonus members even more privileges and opportunities.

Improving The Image

The airline has also boosted its image with radical improvements in quality and redesigning of the whole look of the company. A brand new concept of premium class in-flight service was introduced on flights to New York, Los Angeles, Tokyo, Vienna, Zurich, Munich, Brussels, Geneva, Helsinki and Hong Kong. By the end of 2005, it will cover all routes. This project is accompanied by an intensive cabin crew retraining programme.

Joining The Alliance

In May 2004 Aeroflot and Air France signed an MoU to pave the way for the Russian Flag-carrier to join the SkyTeam alliance. Aeroflot will become a full member most probably in 2005 — the first Russian airline to enter a global alliance. Invitation from the SkyTeam is a recognition of the Russian flag carrier’s high standards and represents graphic evidence of its success.

HUB in Moscow

Aeroflot believes its further and successful development depends on having a modern hub linking Europe and Asia. The airline believes its future is in transit traffic and convenient connections, considering Moscow as a strategically promising hub for the markets of Russia, the CIS, Europe and America as well as Far East and Southeast Asia. The airline has plans to participate in the reconstruction and expansion of Sheremeteyevo airport - still its main operational base. Aeroflot’s strategic goal is to construct the new terminal and increase its business activity at Sheremetyevo. After Aeroflot becomes a full member of SkyTeam, the volume of traffic at Sheremetyevo can be increased dramatically, to up to 22 million passengers a year. Aeroflot is presently planning the opening of a new terminal Terminal 3 in 2007.

Cargo

Aeroflot has four DC-10-40F freighters. These aircraft make scheduled flights between Oslo, Hahn, Tokyo, Seoul, Beijing, Shanghal, Hong Kong and Helsinki, Aeroflot’s favourable position between the Far East and Western Europe helps to reduce costs and offer competitive prices. The carrier also has a time advantage on the Europe/Asia route as most carriers fly around Russia to avoid overflight fees. Last year the airline carried 114,000 tons of cargo, up 4 per cent from 2002. Within the first six months of 2004, freight flown by Aeroflot increased by 30.3 per cent, in comparison to the previous year. The carrier expects to double cargo revenues within the next three years. There are plans to upgrade its freighter fleet with MD-11s, increasing the number of freighters to six.

Air Fleet

The company’s air fleet consists of 92 aircraft (owned and leased), including the latest models of Airbus and Boeing jets. As a result of a two year long air fleet restructuring, by the end of 2004 Aeroflot’s foreign fleet will include two Boeing 777-200ERs, seven 767-300ERs while eighteen Airbus A319/320/321 will replace less effective A310-300s. Aeroflot still uses over 20 home-built TU-154Ms that were re-engineered in order to meet all international standards on noise and emission. In January 2004, Aeroflot signed a leasing contract for six more 11-96 aircraft to add to the existing six. By 2007 Aeroflot needs to acquire up to 29 additional modern medium-haul aircraft. Shortly, Aeroflot intends to open a tender for acquisition of 50 short-range aircraft.

History

Shortly after the end of the Russian Civil War in 1921, the new government established the Chief Administration of the Civil Air Fleet to oversee budding air transport projects. One of its first acts was to help found Deutsch-Russiche Luftverkehrs (Deruluft), a joint venture created to provide service from Russia to the West. Domestic aviation began around the same time, when Dobrolet aviation began around the same time, when Dobrolet was formed in 1923 to provide service between Moscow and Nizhni Novgorod. Dobrole expanded throughout Russia and initiated international service to Mongolia and Afghanistan. Derulfut, however, controlled access to the West when it started regular service between Moscow and Konigsberg in 1927. A consolidation campaign started in 1928, culminating in the creation of Aeroflot in 1932 to oversee all Soviet civil aviation. When the agreement between Russia and Germany ended in 1937 and tensions between the two mounted, Aeroflot took over Deruluft’s Western routes. It had become the world’s largest airline by the end of the 1930s.

Aeroflot’s operations, as well as its role n Soviet society, expanded rapidly beyond passengers and cargo transport. After Hitler invaded Russia in 1941, Aeroflot operated as an arm of the military for the rest of WWII. In 1945 Aeroflot began linkng major Soviet cities by air and building airports.

The airline also served as a symbol of Soviet Achievement during the Cold War. In 1956, it introduced the world’s first commercial jet airline service, with flights from Moscow to Irkutsk in Siberia. In the late 1950s, the world’s largest aircraft TU-114, equipped with more efficient turbo-prop engines, underwent rigorous testing and was launched into operation by Aerofolot. During the 1960s race to develop a supersonic airliner, Aeroflot managed to build and fly its own supersonic jet, the TU-144, in 1968, two months ahead of the Concorde. In January 1971, the Aeroflot Central Administration of International Air Traffic was established within the framework of the International Airline Transportation Administration, and became the industry’s sole enterprise authorised to operate international flights. Abroad the airline was known as “Aeroflot - Soviet Airlines”.

By the 1980s, Aeroflot was offering passenger service to every continent. As the political and economic situation in the USSR worsened at the end of the decade, Aeroflot reorganised itself again, giving more autonomy to its territorial divisions.

In 1992 it was divided into more than 300 regional airlines, and international routes operated separately as Aeroflot Russian International Airlines (ARIA). Two years later Aeroflot was registered as a joint stock company, and the government sold off 49 per cent of its stake to Aeroflot employees.