Commercial Aviation

The board of directors of JSC “Aeroflot”

aviation_newsOn the 25th of July the first meeting of JSC “Aeroflot” Board of Directors new composition, elected at the Annual General Meeting of Shareholders on June 24, 2013 was held. The meeting began with re-election of Kirill Androsov as the Chairman of the Board of Directors.

The Board of Directors was joined by prominent entrepreneurs, banking society representatives, aviation and high tech experts, who traditionally make a substantial contribution to development of Aeroflot as the leading Russian airline and the global carrier.

At the same time the trend to renew the Board membership was maintained, which contributes to higher creative potential, effectiveness and openness of the Board of Directors performance, flexibility and high response speed on social and economic demands of the country and external challenges.

Members and management of the permanent committees of the Board of Directors were elected at the meeting. Igor Lozhevsky was elected head of the Audit Committee; Alexey Germanovitch –head of the Personnel and Remuneration Committee; Roman Pakhomov – head of the Strategy Committee.

The question on the Board of Directors work process organization was considered at the meeting. The plan of its activities was confirmed for the period from July 2013 to June 2014 (main questions).

The Board of Directors approved the new organization structure of JSC “Aeroflot” in order to secure further optimization of commercial activities and unification of support functions under centralized management.

The Board of Directors considered the results of Aeroflot Group consolidated budget execution in the first quarter of 2013. In the reporting period Aeroflot strengthened its leadership in the industry. Growth rates of Aeroflot Group operating indicators considerably outperformed growth rates of European carriers. Having carried 6.1 mln passengers the Group brought its market share in Russian Civil Aviation to 39% in terms of passenger traffic, leaving the nearest Russian competitors far behind. Also strong financial performance was shown. The key financial indicators of JSC “Aeroflot” in the first three months of 2013 outperformed planned indicators. At the same time results of Aeroflot Group in terms of passenger traffic and revenue were 3% lower than the planned indicators due to the impact of operating indicators of some subsidiaries.

Question on creation of a low cost carrier as part of Aeroflot Group strategy execution was considered at the meeting. On the basis of high demand of this carriage model in Russia the Board of Directors considered creation of a low cost carrier with 100% share of JSC “Aeroflot” viable. The base product of the low cost carrier would be maximally different from Aeroflot product. Efficiency of the business-model including exclusion of certain services which many passengers consider insignificant would allow a 20%-40% discount compared to the traditional carriers and even pricing competition with the railroad transportation. Upon favorable conditions the low cost carrier subsidiary could start its operations in 2014. In the first two years it would develop the most profitable routes in the European part of Russia, gradually broadening the area of operations both in Russian regions and abroad (including the CIS countries). Simple and independent organization structure is anticipated in order to provide necessary response speed in quickly changing market conditions.

Having considered the question on cargo carriages, the Board of Directors considered inefficient further utilization of Company’s cargo aircraft due to loss-making of cargo services.

The Board of Directors decided to approve sponsorship of the professional basketball club Brooklyn Nets for the season of 2013/2014. The Board assumes that sponsorship of one of the most well-known US sports clubs would allow to strengthen the image of the airline and would promote its penetration into the US market by means of popular American brand, higher loyalty towards Aeroflot brand and higher number of potential customers among numerous fans of basketball.

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