Aeroflot in line for possible privatization

TL;DR: After years of notoriety, Aeroflot is showing signs of improving air safety and service quality.

CNN reported on 2 February that Aeroflot is one of seven state-controlled Russian companies that President Vladimir Putin may privatize this year. Formed in 1992, Aeroflot Group operates Russia’s flag carrier (Aeroflot) and flies to 141 destinations in 54 countries (as of 2104) including the US, a potentially large market. The Group has a fleet of 261, of which 150 are operated by Aeroflot airline, according to the corporate website. The Group is 51.57% owned by the Russian Federation (as of 2014). How much of the Russian government’s share Mr. Putin is willing to sell to private investors is still unknown.

ESG Spotlight: Air Safety and Service Quality

What makes Aeroflot a company of interest is its history of notoriety in the airline industry. For many years, Aeroflot has been associated with a poor safety record and poor service quality. But not anymore. Third-party information suggest that the company has improved safety records and made a turnaround on service quality:

  • Customer reviews of Aeroflot flights have largely been positive, such as reviews in Airline RatingsAirline Quality and TripAdvisor. But note some negative reviews have also been posted on Consumer Affairs as well.
  • There has been a decline in safety incidents involving Aeroflot planes in the 2000s. The Aviation Safety Network, an air safety tracking website, recorded four incidents since 2000, compared to seven in the 1990s. Wikipedia records significantly more incidents in the previous decade. Jacdec, an aviation information provider, ranked Aeroflot 36th out of 50 airlines assessed for safety in 2016, higher than Italian carrier Alitalia (38th), Air France (40th) and American Airlines (41st).

These indicate that the company’s investments in fleet modernization and improving customer service appear to have paid off. The company’s website still looks dated, but this is consistent with the general trend in the airline industry. Overall, Aeroflot looks like it has quietly hurdled its way out of a poor track record, and while it is far from becoming a Cathay Pacific or a Singapore Airlines, it is gradually becoming a viable option for travelers.

A snapshot of the company’s financials is captured here.

 

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