Russia’s Aeroflot Group reported a RUB5.7 billion ($82 million) net profit for 2018, down 75% from RUB23 billion in 2017—a decline the group attributed to higher fuel prices and foreign exchange losses.

“The most significant factor affecting the group’s financial results for 2018 was the unprecedentedly fast increase in the average cost of jet fuel, as well as depreciation of the ruble. Across the group, jet fuel prices increased by 36%, which at the group’s consumption volumes led to additional cost of RUB48 billion. The depreciation of the ruble created additional pressure on the financial results, given that almost half of the company’s costs are FX [foreign exchange]-denominated,” Aeroflot deputy CEO Andrey Chikhanchin said in a statement.

The company posted a net loss for the fourth quarter (4Q) of RUB16.8 billion, compared to a RUB4.09 billion loss in the year-ago period.

“High fuel prices and excess capacity in the market persisted during the low season in 4Q. The correction in oil prices was reflected in jet fuel prices only in December, but had a limited effect, while average jet fuel prices remained above the levels of the previous year. Currency pressures on operating costs in 4Q did not weaken, but rather strengthened,” Chikhanchin said.

Aeroflot carried 55.7 million passengers in 2018, up 11.1% year-over-year (YOY). Revenue grew 14.8% YOY to RUB611.6 billion, compared to RUB532.9 billion in 2017. Passenger traffic revenue rose 16.6% to RUB534.3 billion, and cargo flight revenue was up 14.4% to 18.9 billion. But the group’s total operating costs increased 20.2% to RUB591.9 billion, including fuel costs of RUB181.9 billion, up 48.2%.

The group launched an optimization program to improve operational efficiency and reduce costs.

“The program focused on active capacity and revenue management in addition to direct cost reduction, and has already delivered results: excluding fuel, CASK for the full year increased by just 0.8%, despite increasing currency pressures on FX-denominated cost lines. We were thus able to limit increases in total unit costs, including fuel, to 9.2%. In a climate in which domestic consumers are being conservative with their travel spending, we were able to generate RASK growth of 4.9% while maintaining load factor levels,” the group said.

Aeroflot Group includes Moscow Sheremetyevo-based Aeroflot Airline, St. Petersburg-based Rossiya Airlines, Moscow Vnukovo-based LCC Pobeda Airlines and Russian Far East-based Aurora Airline.

Polina Montag-Girmes,