Aeroflot offers to make loans available to airlines at preferential rates

MOSCOW. Oct 31 (Interfax) - Aeroflot proposed creating a mechanism for lending to airlines at preferential rates, taking into account the low margins of their business.

"Without going into details, we have very low margins in air transportation. It has been like that historically, so we propose to consider the possibility of creating a mechanism for lending to airlines at preferential rates," Aeroflot Deputy General Director for Corporate Governance Mikhail Fedosov said at a round table in the Federation Council on support measures for state corporations and companies with state participation.

Aeroflot's current bank and bond debt is about 111 billion rubles, he said. The average rate for the entire portfolio is 9%.

"We understand that given the current levels of interest rates, taking into account the peculiarities of the latest changes in the key rate, we, unfortunately, will be forced to replace loans with new ones which must be repaid at significantly higher rates," Fedosov said.

There is an observable growth trend in all of Aeroflot's major spending items, including aircraft leasing and airport tariffs, he said. However, jet fuel prices have risen especially sharply.

"The most important challenge for us today is probably the high cost of aviation kerosene. It is partially smoothed out by the fuel damper mechanism, but we must understand that current prices are at the level of about 70,000; this is the average for this year, and at the moment it costs about 82,000 rubles per tonne of kerosene. While the historical prices with which we flew before 2019-2020 are 40,000 rubles per tonne, that is, an approximately twofold increase. It should be noted that the share of costs for fuel and lubricants for the airline is about 35%," Fedosov said.