WOOD Flash – Aeroflot: 1Q21 – cash burn down, to fly 130% of 2019 capacity in 3Q, possible pressure ahead on yields

Aeroflot managed to reduce the cash burn to around RUB 6bn per month during 1Q21, on our estimates, significantly below the RUB 12-13bn per month consumed during 4Q20. This seems to have been driven by a combination of a fairly resilient yield environment, strong domestic demand, an increase in bookings at the onset of the spring and a small PDP inflow. For the summer, it seems that the restrictions on international travel are likely to keep the international capacity growth in check. Management believes that demand will shift to the destinations that are open, and expects to deploy around 30% higher capacity domestically than it did in 2019. Management hopes that it will be possible to maintain the cash burn at mid-single digit RUB bn levels per month even during 2Q and 3Q21E. That said, it cautioned against excessive optimism, highlighting that the announcements from other market players seem to point to around 30% growth in capacity, relative to the 3Q19 levels. This could put the yields under pressure. Following the capital increase in the autumn, Aeroflot maintains a significant liquidity buffer, with RUB 78bn of cash and an additional RUB 143bn of available credit lines. This is sufficient to cover around 18 months of very limited flying, on our estimates. To boost the liquidity further, to boost the cash reserves ahead of the reopening of the international segment, the company is looking to place 5Y bonds, citing the favourable market conditions.