Case Study

by Sofya Shuster
19th International WU Summer University 2008
Organizational Behavior

Aeroflot Russian Airlines JSC

Analysis of the environment:

The financial results of 2007 indicate that the global airline industry has finally recovered from
the crisis that followed in the wake of the terrorist attacks on September 11, 2001.
In 2006, the total loss of airline companies registered in the IATA, which account for 94% of
regular passenger traffic, dropped to USD 500 million (while this figure was 6 billion in 2005).
According to IATA estimates, in 2007, airline companies earned USD 5,6 billion. It was the first
profitable year for world airline industry since 2000. The significant improvement of the
situation is due in part to the improved operating efficiency of airlines and the growth in
passenger demand.

The growth of total passenger traffic in 2006 totaled 5,9%, it is increased to 7,5% in 2007; cargo
traffic jumped by 4.3% in 2007 against 4,6% of growth in 2006. The seat occupancy rate grew
by 1,1%, reaching 77,1%.
The highest rates of grows showed the Middle East companies - the growth of total passenger
traffic in 2007 totaled 18,1%); In the countries of Latin America this rate set up 8,4%; in Africa
– 8%; in Asia – 7,3%; in Europe – 6%. The last is North America, with 5,7% of the growth of
passengers traffic.

The vitality of the airline industry continues to be jeopardized by the high price of jet fuel. In
2003, the total cost of jet fuel for airlines equaled USD 44 billion, while in 2006, this number
jumped to around USD 115 billion. Jet fuel for direct operational costs in 2006 represented 26%
of the total expenditures, as compared to 14% in 2003. The predicted decreasing of the economic
growth rate can exert a negative influence as well. According to the IATA forecast, the net profit
of the companies is expected to decrease to USD 4,5 billion.

The experts of the IATA consider that the American airlines will sustain the most losses. The
main reason is that 35% of their aircraft fleet is completed with out-of-date models which need
more fuels than more modern models. It is expected that the profits of the European and Asian
companies will drop as well. The profits of the Middle East companies will stay static as their
geographic location allows them to enlarge actively their route network. According to forecasts,
the only region, which will show earning growth in 2008, is Latin America. Africa is staying on
running losses.

In 2007, Russian airlines carried 45 million people (an 18,6% growth from 2006). The executed
passenger turnover increased by 18,2% and totaled 111 billion pkmh.

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The strongest international player on the Russian airline market is the German carrier Lufthansa.
In 2006, the company announced that they would increase their passenger traffic to Russia and
CIS countries up to 1,3 million people (a 20% growth). Lufthansa has a wide-reaching network
of routes in the Russian regions, providing service to Nizhniy Novgorod, Perm, Rostov-on-Don,
Samara, St. Petersburg, Ufa and Yekaterinburg. In 2006, Lufthansa carried more than 5,8
thousand flights to Russia, including 2,6 thousand flights to Moscow.

Likewise, British Airways increased their available seats to Moscow by over 30%, while Air
China and China Eastern Airlines raised this figure by 78%. In addition, Austrian Air increased
service to Moscow by 20%, as did the low cost airlines Germania and Germanwings, who raised
this figure by 43%. Furthermore, in 2006, Singapore Airlines, one of the world’s biggest airlines,
started offering service to Russia.

The main challenges for the sector are1:

 High oil prices, which result in dramatic growth of prices for jet fuel; in Russia the
problem is aggravated by fuel-supply monopolies at airports, so that jet fuel in Russia
costs above the world average (the cost of jet fuel represents 40–50% of the total
operational expenses for the majority of Russian airlines, while the worldwide average is
25% (for Aeroflot, this figure is 35,7%));
 Fuel-inefficient aircraft, mainly Soviet-designed, and duty and VAT barriers to purchase
of more fuel-efficient foreign aircraft
 The sector remains fragmented, and Russian airlines look tiny compared with global
majors; this might become a major challenge in conditions of market liberalization and
WTO accession.

Nevertheless, the domestic passenger traffic market still possesses major potential for growth,
the realization of which is one of the priority tasks for Russia’s civil aviation industry. In order to
ensure their competitive edge and impede the expansion of international carriers on the market,
Russian airlines must implement a series of complicated measures, such as modernization their
fleets with more fuel-efficient planes and installing the latest technologies for passengers and
cargo service, both of which can help to cut expenses. There is also an acute need for the
complete modernization of ground infrastructure at Russian airports, as well as more efficient
use of Russian airspace.

The key growth drivers for the Russian airline sector are2:
 Increasing demand for air transportation services, due to overall growth of the Russian
economy
 Current consolidation of the air transportation market
 Fleet renovation by the leading companies, replacing outdated Soviet planes with more
fuel-efficient aircraft
 Expected government support for the Russian airline industry, particularly for regional
air transport. This has already been seen in government backing for the RRJ (Russian
Regional Jet) project.

The main events of the last year are the latest period of fast growing fuel prices and starting sales
of e-tickets by Russian airlines.

In light of the growing price of jet fuel (the rate of growth in 2007 totaled 30%), leading Russian
airlines have speed up the pace at which they are replacing outdated and fuel-inefficient aircraft.
1
Oleg Sudakov “Russian Airline Sector: Ready for Take-off”
2
Oleg Sudakov “Russian Airline Sector: Ready for Take-off”

2
Due to the lack of a more competitive offer from domestic aircraft manufactures, Russian
airlines supplemented foreign-made long-haul 105 passenger planes into their fleets in 2007. At
the end of year, the total number of foreign-made long-haul passenger planes possessed by the
24 airlines of Russia reached 264 units, of which 58 belong to Aeroflot.

From June 1, 2008 all the airlines included into the IATA are to turn into the electronic system of
registration and sales of tickets for international flights. Otherwise the international lines for
them will be close in fact.
There is 30% of the passenger traffic for electronic sale today. The e-ticket segment comes to
83% in Europe and to 90% in USA, while The in Russia it makes up just 10% of the whole sales
volume.

Out of the five leading Russian airlines in terms of passenger traffic, the largest growth in total
passenger volume was demonstrated by Transaero (51,7%), VIM-AVIA (46,8%) and Atlant-
Soyuz (38,3%). In 2007, Transaero intensively developed their international service (54,4%
growth), VIM-AVIA also increased their regular international service. The achievements of
Atlant-Soyuz are mostly based on non-regular flights.
In 2007, companies included in the AiRUnion alliance experienced cutting-down the total
volume of passenger traffic (-7,8%), including domestic traffic (-17,3%).

Regulation on the airlines market:

International aviation services are usually governed by bilateral air-transport service agreements
that are negotiated between two countries. Traditionally, bilateral agreements specify how many
airlines from each country may operate, what routes may be flown, which cities may be served,
how many times per week an airline may operate, how prices may be determined, and whether or
not an airline can pick up passengers and/or cargo in that country and transport it to a third
country.3

“Open Skies” - a bilateral or multilateral Air Transport Agreement (also sometimes called a Air
Service Agreement) is an agreement which two or more nations sign to allow civil aviation
between their territories. The agreements reduce government interference in airline business
decisions and allow airlines to offer more affordable, convenient and plentiful service for
consumers.

“Open Skies” such an agreement allows an airline signatory unlimited access to points in each
partner’s country and unlimited access to intermediate and beyond points. Airlines are free to
make their own market decisions on routes, capacity and pricing. Moreover, “Open Skies”
agreements have liberalized conditions for passenger, all-cargo and charter operations, as well as
for cooperative marketing agreements.4
These agreements have been very successful in increasing international trade and tourism,
improving industry productivity and facilitating economic growth.

Frequent Flyer Loyalty Programs

Deregulation also sparked marketing innovations, the most noteworthy being frequent flyer
loyalty programs, which reward customer loyalty with tickets, cabin upgrades, priority check-in,
priority boarding, lounge access and other benefits. Most airlines have such a program and the
essential elements are the same. Once customers enroll, they can earn points for the number of
miles flown or the number of trips taken on the sponsoring carrier or its partners. These points
are then redeemed for rewards that include tickets and upgrades.
3
The Airline Handbook, 2007, The Air Transport Association of America http://www.airlines.org/
4
The Airline Handbook, 2007, The Air Transport Association of America http://www.airlines.org/

3
A more recent development has been the growth of partnership marketing arrangements tied to
frequent flyer loyalty programs. Because of their extensive membership rolls, frequent flyer
programs are very attractive to non-airline companies who are willing to pay for the privilege of
participating in them as marketing partners. In addition, the airline benefits as its loyalty program
becomes more attractive through its relationship with partners: it is now possible to earn frequent
flyer points by purchasing non-airline goods and services and redeem points for non-airline
products. Typically, a partner company will pay the host airline one to two cents per mile earned
when a frequent flyer member uses the partner’s goods or services, but such arrangements vary
by airline and partner.

Frequent flyer programs are now integral to an airline’s product offering, complementing
convenient schedules, price, safety and customer service. Alliances have increased the popularity
of such loyalty programs by extending reciprocal benefits to customers of member airlines. 5

Code Sharing
Another innovation has been the development of code-sharing agreements. Code-sharing
agreements allow two (or more) airlines to offer a broader array of services to their customers
than they could individually. These marketing arrangements enable an airline to issue tickets on
a flight operated by another airline as if it were its own, including the use of its own two-letter
code for that flight. These arrangements allow airlines to market expanded networks for their
passengers at minimal expense.
Code-sharing agreements often link each airline’s marketing and frequent flyer programs and
facilitate convenient connections between the code-sharing partner carriers. Code sharing with
foreign carriers allows airlines to expand their global network reach through the services
operated by their partners.

In addition to code sharing, several groups of airlines have formed global alliances, such as
SkyTeam (Aeroflot) oneworld and Star Alliance, which compete against each other for
international passengers. Each alliance consists of several carriers, including some that may fly
under the same flag; that not only share codes on one another’s flights and link frequent flyer
programs, but also offer consumers benefits such as common airport terminal and lounge
facilities and coordinated flight schedules. In addition to expanded networks, participating
airlines benefit from reduced costs through the sharing of staff, facilities, sales offices and
ancillary services.

Analysis of the company:

• Aeroflot Russian Airlines JSC (RTS: AFLT) is Russia’s national airline and is based in
Moscow at the Sheremetyevo Airport.

• Valery Okulov is the Chairman and CEO of Aeroflot

• Aeroflot is a stock company; it is traded on the Moscow Stock Exchange and its majority
shareholder is the Russian Federation which holds 51% in stock. 49% are held by various
legal and private persons as well as employees of Aeroflot.

• The airline owns two subsidies: “Aeroflot Don” (Rostov-on-Don) and “Aeroflot Nord”

• (Arkhangelsk). It is intended to found a new subsidy in the Far East. Previously the cargo
branch was hived off into its own company “Aeroflot Cargo”.
5
The Airline Handbook, 2007, The Air Transport Association of America http://www.airlines.org/

4
 • Aeroflot is the largest employer in the Russian Federation. Its staff consists of 14 and a
half thousand people including about 2 thousand flight specialists. Aeroflot conducts
socially responsible policy in respect of its staff ensuring decent salary complemented by
significant social benefits. Aeroflot realizes programs for socially vulnerable citizens,
WWII veterans and kids with disabilities in cooperation with recognised social
organizations.

• Aeroflot flies to 96 destinations in 49 countries worldwide and operates 302 flights daily.
The company holds a 45% market share of regular international flights in Russia. With its
subsidiaries, it carried an estimated 10,2 million passengers during 2007, accounting for
25,5 per cent of the domestic market, making it Russia’s largest airline.

• In 2007 net profits amounted US$313.1 million (21,4% of growth) and revenues
amounted US$3,8 billion (27,7% of growth).

Revenues and net incomes of Aeroflot, 2002-20076

$million
4000

3500

3807.8
3000

2982.7
2500
2526.3
2158.8

2000
1716

313.4
258.1
189.8

1500
172.1
1563

126.7
89.3

1000
500

0
2004

2006
2002

2003

2005

2007

year

revenue net income

• Dividends History:

Dividend 199 199 199 200 200 200 200 200

period 6 7 1998 9 0 1 2 2003 4 5 2006
Dividend per
0,436
one share 0 2,78 0,0082 0,01 0,03 0,06 0,29 0,70 0,82 1,287
9
(US cents)

• Aeroflot is listed among the 25 world’s leading airlines according to the financial indices.

• Aeroflot is the first Russian airline company to enter the global alliance. Since 14th
April, 2006 –Aeroflot is the tenth member of the global alliance SkyTeam. By joining the
SkyTeam Alliance, Aeroflot is able to offer its passengers a range of new destinations to
choose from. The SkyTeam Alliance including Aeroflot offers flights to 841 destinations
in 162 countries worldwide. To provide further destinations and services Aeroflot is
cooperating with 33 more international and Russian airlines on the basis of Codeshare.

6
Figures come from Consolidated Financial Statements 2002-2007

5
 • Aeroflot’s fleet ranks among the youngest in Europe. Currently it consists of 88
airplanes. Since October 2003, Aeroflot passengers have the opportunity to enjoy the new
aircraft types of Airbus 319/320/321 and B767. The spacious design of the cabins
featuring ergonomic leather seats and lie flat beds for long distance flights as well as a
varied entertainment program ensure a comfortable and pleasant flight for our
passengers. At the end of 2008 Aeroflot will introduce a new aircraft type Airbus A330
on its long-haul routes. The purchase of Sukhoy Superjet-100 is also intended, which
meets all requirements for guaranteeing a safe and enjoyable flight. The new regional jet
is positioned on the world market and offers a modern and future-oriented passenger
service. From 2014 onwards, the delivery of 22 Airbus A350 and 22 Boeing B787
Dreamliner will commence.
• Aeroflot meets international standards of safety (with its index of flight safety 99.936 per
cent). After the completion of the IOSA audit Aeroflot was the first Russian carrier to be
included in the IOSA operators Registry.

• Aeroflot is planning to introduce its own modern terminal “Sheremetyevo-3” in March

2009, which is intended for all flights of Aeroflot and SkyTeam. The new terminal with a
capacity of between 9 and 12 mio passengers, created with the latest technologies, will
ensure passenger service at the level of the leading international airports, provide
convenient connection of flights and will attract transit flows.

The strategy of Aeroflot focuses on creating a company of the highest international standard
based on the best traditions of Russia’s civil aviation that is a formidable competitor on the
global aviation market. One of Aeroflot’s main priorities is to realize the transit potential of
Russia, as is defined in the Transport Development Strategy of Russia until 2020.
To achieve this goal Aeroflot strives:
 To strengthen its leading position in Russia’s civil aviation market
 To provide passenger transportation to most large cities in the world. For this purpose
Aeroflot intends to establish its own system of routes both convenient for passengers and
cost efficient as well as to cooperate with airline partner-companies
 To provide passengers with stable service quality on the level of its competitors or even
higher
 To reach the level of production and economic indicators of the members of the
Association of European Airline Companies
 To establish an effective system of relations and cooperation inside Aeroflot and to
international airlines and associations

According to the approved company strategy, the fundamental areas for development in 2007
were as follows:
 an intensive growth of passenger traffic, the development of a passenger network of
flights within Russia, and the establishment of regional bases;
 consolidation of the Russian airline industry;
 the modernization and further unification of the aircraft fleet;
 the completion of construction and opening of the Sheremetyevo-3 airport terminal
complex;
 improvement in the quality of products to a level that corresponds to the leading Western
European services;
 the cost optimization and the promotion of effective business functions;
 the immediate installation of a system for web-reservations and internet sales with e-
tickets;

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  an improved system of effective corporate management, as indicated by key performance
indicator.

As of the end of 2007, Aeroflot was a member of 27 commercial and non-commercial

organizations. Overall, the year 2007 is characterized by the growth of the net assets of the
majority of Aeroflot Group enterprises, particularly OJSC Terminal (builder of the
Sheremetyevo-3 airport terminal complex).
The most important strategic goals for cooperation Aeroflot with its subsidiary companies is the
collective effort to develop air traffic in Russia. The strategy for cooperation with subsidiary
companies is aimed at the following:
 increasing the capitalization of the group;
 decreasing certain expenditures;
 increasing return on investment.

Principle Subsidiaries of Aeroflot Group and the Nature of Their Business

Airlines
OJSC Aeroflot-Don (passenger traffic)
CJSC Aeroflot-Nord (passenger traffic)
CJSC Aeroflot-Cargo (cargo traffic)
CJSC Aeroflot-Plus (business traffic)

Providers of air and ground-based services rendered to passengers

OJSC Terminal (Sheremetyevo-3)
CJSC Aeromar (catering)
LL C Airport Moscow (cargo handling)
CJSC AeroMASH (aviation security)
CJSC TZK Sheremetyevo (fuel trading company)
CJSC Aerofirst (duty free retail)
CJSC Sherotel (hotel)
CJSC ZAO DATE (business-class facility)
Transnautic Aero GMBH (cargo agent)

Financial, telecommunications, logistics, and personnel training providers for Aeroflot

OJSC Moscow Insurance Company (insurance)
Non-state pension fund Social Partner (pensions)
Aviabusiness (flight crew training)
LL C Avia-leasing (leasing company)
S.I.T. A. (telecommunications provider)
CJSC TKP (clearing)
LL C EMS Garantpost (express mail)

The development strategy for the Aeroflot Group in the upcoming year mainly entails
developing the market of domestic passenger traffic and attracting a greater flow of transfer
passengers.
In 2006, Aeroflot’s Board of Directors approved a project to consolidate the various enterprises
of Russian civil aviation. The first stage of the project is to integrate the airlines of the Far
Eastern Federal Region in order to make them into one big competitive airline. The project is
scheduled to be completed by 2009.

7

Merger of Airlines of the
Far East Region on the
Basis of Aeroflot
OJSC Dalavia
OJSC Vladivostok Avia
OJSC Sakhalin Airlines

To increase the authorized capital stock of JSC Aeroflot

Mechanism of
Consolidation
Exchange of state funds of the airlines of the Far East for
newly issued shares of Aeroflot

To increase the availability of air transport for the

population

To create a competitive transportation hub in the Far East

and to attract international transit traffic

To ensure effective air transport communications in the

Project goals region, the employment of highly-qualified staff, and the
protection of the social stability in the region

To increase the tax returns into the budget on all levels

To simplify the management of government assets and

increase their value

Takeovers and Mergers

Aeroflot has become also a player on international airlines market takeovers. Mikhail
Poluboyarinov, CEO of Aeroflot Russian Airlines stated that the company still intends to bid in a
privatization tender for JAT, however he added that rising fuel prices have made the potential
acquisition less attractive. Mikhail Poluboyarinov stated that JAT would take about five years to
recovery financially due to the high cost of jet fuel. He also confirmed that Aeroflot was
preparing for a tender for CSA. He added that the company is waiting for the Czech government
to announce the tender for CSA. He also indicated that Aeroflot is preparing a plan for a
potential bid for Austrian Airlines Group. 7

Aeroflot earlier took part in a tender to buy the Italian government's 49.9% stake in cash-
strapped Alitalia8, but the Alitalia management considered a bid by Air France-KLM more
attractive. Buy out talks were later stopped after a deadlock with trade unions. Aeroflot said it
had no plans to resume negotiations, but made a u-turn after Vladimir Putin, the then-president
of Russia, met with Italian prime minister-elect Silvio Berlusconi in Sardinia in April.

Now, Aeroflot is unlikely to buy the government’s stake, Aeroflot's director said on Friday.
Valery Okulov said Aeroflot did not have the figures required to assess Alitalia's current
financial state and a final decision would depend on the terms and conditions for the sale
approved by the Italian government. 9
7
Aeroflot To Bid For JAT And Austrian Airlines; Awaits CSA Tender
06/19/2008 Business Week
8
Alitalia's losses in 2006 were 380 million euros ($604 million). The strategic investor picked by the Italian
authorities will have to implement a rescue plan to save the loss-making carrier.

9
MOSCOW, May 30 (RIA Novosti – www.rian.ru)

8
Corporate governance
Governing bodies:

Shareholders’
meeting Audit
Committee
Revision
Committee
Board Strategy
of Directors Committee

Personnel and
Incentives Committee
Internal General Executive
Auditing Service Director Board

The higher body of the Company shall be the General Meeting of shareholders. The Company
shall be responsible to hold annual General Meetings of shareholders every year. The annual
General Meeting of shareholders shall be held not earlier than three months and not later than
six months after the end of the financial year end. The Annual General Meeting of the
shareholders shall resolve the issues of election of the Board of Directors, Auditing
Commission of the Company, approval of the Statutory Auditor of the Company, review
submitted annual reports and annual accounting reports of the Company and other documents
delivered by the Board of Directors of the Company.

The Board of Directors shall be responsible for the overall management of the Company
activities except for the issues that are within the terms of reference competence of the General
Meeting of shareholders. The terms of reference of the Board of Directors shall include
resolving of issues of overall management of the Company activities except the issues that
come within the terms of reference of the General Meeting of the shareholders.

The management of the current activities of the Company shall be carried out by the sole
executive body of the Company, i.e. by the General Director, and by Collective executive body,
i.e. by the Executive Board. The Executive Bodies shall be accountable to the Board of
Directors and to the General Meeting of Shareholders. The General Director shall have also the
functions of the Chairman of the Executive Board. The Executive Board of the Company shall
be formed and its powers shall be terminated before the term by the decision of the Board of
Directors of the Company.

Analysis of the historical and cultural aspects

Aeroflot is one of the oldest airline companies and one of the most known commercial brands in
the world. The company was founded in 1923.

The Joint Stock Company «Aeroflot - Russian Airlines», formerly named the Joint Stock
Company «Aeroflot - Russian International Airlines», established in 1992 as a result of
reorganization of the «Aeroflot - Soviet Airlines», the Administration of the International Air
Communications of the Civil Aviation named after Order of the Red Banner, International
Commercial Administration of the Civil Aviation, the Sheremetyevo Aviation and Technical
Enterprise, the Center of International Payment Transactions of the Civil Aviation, Inter-
Regional Agency of Air Services «Rossia», according to the rights and commitments of the
international agreements of the Russian Federation and former USSR on air communication with
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foreign countries as well as to the contracts and agreements with the above foreign airlines, firms
and companies.

The Joint Stock Company is a commercial establishment and in its activities, it follows the Civil
Code of the Russian Federation, the Air Code of the Russian Federation, the Federal law «On
Joint-Stock Stock Companies» and other legal acts of the Russian Federation.

As Aeroflot is main national Russian airline, all of Aeroflot’s employees very much value the
good traditions of Russian hospitality. Their standards of service are based on sincerity and
friendliness as natural components of the Russian soul. Reliability and high quality ensure
unforgettable travel experiences for their passengers. They always try to lend a sympathetic ear
to their passengers, thanks to their suggestions Aeroflot constantly improve their service. They
care for those who fly.
IATA organizes the research “SkyTeam Onboard Survey” focused on studying customers’
satisfaction of European (“Survey of Flights in Europe” research) and Asian (“Global Airlines
Performance: Asia” research) traffics.

Aeroflot’s position in the rating “SkyTeam Onboard Survey”:

Survey of Flights in Global Airlines

Europe Performance: Asia
Business-class Econom-class Business-class Econom-class
8th position
Aeroflot's position 7th position among 13 16th position
(changing in comparison among 13 airlines airlines (+1 among 16 16th position
to 2006) (+1 position) position) airlines among 16 airlines
Malaysia
Airlines, Singapore
Finnair, Singapore Airlines, Malaysia
Austrian, Czech Austrian, Czech Airlines, Virgin Airlines, Korean
Marker leaders Airlines, Malev Airlines Atlantic Air

The research has shown that Aeroflot demonstrate a good competitive position on the European
market of passenger traffic but it has to hardly work on improving the onboard survey on Asian
directions.

Today’s aviation market offers a large selection of airlines to passengers. For that reason
Aeroflot is highly appreciative of its passengers’ loyalty. The culture of mutual respect is
fundamental to the company’s successful activity and the well-being of their employees as well
as of their families.

A personnel is the key asset of the company. Aeroflot goal in the sphere of personnel
management is to provide its employees with attractive opportunities of professional
development and competitive wages, to provide social protection of the employees, to attract
highly skilled people with the potential of professional growth to work in the company. The
point they find also very important is the establishment of the system of efficiency rates that
allow measuring contribution of each department and person separately to the achievement of the
company’s strategic goals, linkage of the system of remuneration of labour and the strategy
realization.

Aeroflot has own air crew center is the educational complex of Aeroflot – Russian Airlines
intended for training aviation experts, who are engaged in conducting flights, ensuring on-land
services to passengers, aircraft maintenance and other activities of the company both on
domestic and international flights.

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The following tasks were implemented in 2006 to develop Aeroflot’s corporate philosophy:
 a work group was created, comprising of consultants, SkyTeam ‘ambassadors’, brand
supervisors as well as the people in charge of implementing the Care Quality
Management and Training Program;
 a platform for discussing the corporate philosophy within the company was created on
the basis of the Aeroflot Corporate Club;
 training in the corporate philosophy was provided for employees from 11 divisions (more
than 140 people), as well as for the company’s senior staff;
 a corporate film, conveying the value of the Aeroflot brand, was produced.

The company’s upcoming plans for the development of the corporate philosophy include:
 the publication of a dictionary of aviation terms and information materials for new and
existing company employees;
 improvement on the system of personnel incentives and certifications;
 the inclusion into the professional training programs of personnel who work directly with
the corporate philosophy.

Aeroflot takes an active role in its community through ongoing support of charitable
organisations and community events. Aeroflot is actively involved with a variety of social
initiatives, including:

 Comrades-in-Arms Reunion Program which facilitates air travel for war veterans
during the annual Victory Day celebrations in May
 Children’s Hearts, a foundation that helps make necessary health services accessible
for children with congenital heart disease
 Downside Up, a society dedicated to improving the quality of life for children with
Down syndrome
 Kid save International, an organization which encourages families to adopt older
children from orphanages in Russia and Eastern Europe
 Russia’s Ministry for Extraordinary Situations (EMERCOM). Aeroflot works closely
with the Russian government to provide aid and evacuation services to people
affected by conflict or natural disasters.
 Support of the Art and Culture (Aeroflot has focused on promulgating Russian
classical arts in both Russia and abroad by supporting major performing and fine art
events )
 Sports Support Program (The Company acts as both the organizer and financial
sponsor of the Aeroflot Open International Chess Tournament; it traditionally acts as
a part of the Olympics Committee of the Russian Foundation; The Company pays
particular attention to supporting children and youth sports, as well as helping
handicapped athletes)
 Program in Support of Science and Education (Aeroflot assumes all the costs for the
transport of gold and silver graduates from schools all across Russia to Moscow for
exams and interviews to enter higher education institutions in the Russian capital)

In 2006, the Aeroflot brand received the Grand Prize in the nomination of New Image t the
Brand of the Year/EFFIE Competition, becoming the first Russian airline to receive such a high
rating. In addition, Aeroflot was named “Superbrand-2006” in the categories of business-to-

11
business (B2B) and business-to-consumer (B2C). This award, which is granted by independent
experts from the Superbrands International, recognizes the results of the airline’s notable
performance and aggressive branding campaign in consumer and inter-corporate business in
Russia.

Aeroflot’s work was also commended during the competition for Company of the Year, which
has an excellent reputation in Russian business circles. The airline won the award for
transportation services and received the title of “Best Airline of 2006”. Furthermore, the
organizers of the international tourism exhibit, “Relaxation 2006”, presented Aeroflot with an
award in recognition of its “Reliable and stable work.”

Final thoughts

The description I have given provides a lot of information about Aeroflot. I tried to describe
Aeroflot from different aspects to give an adequate picture of my case. The disadvantage of my
work consists in the used informational sources: most of information comes from sources
provided the company itself. Therefore, the description can be more positive than it could be if
detached informational sources had been used.
In general, I find my work satisfactory.

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Information sources:
1. Annual Reports 2006, 2007
2. Consolidated Financial Statements 2002-2007
3. Internal Documents of the Company ( Articles of JSC Aeroflot,
Aeroflot JSC Code of Corporate Conduct)
4. Official site of the Company: www.aeroflot.ru
5. Analyst’s report (Oleg Sudakov “Russian Airline Sector:
Ready for Take-off” )
6. The Airline Handbook, 2007, The Air Transport Association of
America http://www.airlines.org/
7. Business Week (“Aeroflot To Bid For JAT And Austrian
Airlines; Awaits CSA Tender”, 06/19/2008)
8. RIA Novosti – www.rian.ru

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