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Coprorate Governance System

Aeroflot Group’s structure
AS AT 31 DECEMBER 2016

Aeroflot Group’s structure<br /><span>AS AT 31 DECEMBER 2016</span>

In line with top standards and requirements, PJSC Aeroflot’s corporate governance system aims to implement the principles of transparency and accessibility of information about the Company and ensure equitable treatment of minority and majority shareholders.

As part of its efforts to improve corporate governance, in 2013, PJSC Aeroflot started implementing the roadmap on introduction of recommendations of nonprofit partnership Russian Institute of Directors, in 2015 the Company started implementing the recommendations of the Corporate Governance Code, as approved by the Board of Directors of the Bank of Russia on 21 March 2014.

On 19 March 2015, PJSC Aeroflot’s Board of Directors approved the Action Plan (Roadmap) to improve corporate governance practices at PJSC Aeroflot. In 2016, we continued to implement recommendations of the Corporate Governance Code and approved the Corporate Conduct Code of PJSC Aeroflot, the Regulations on the Executive Secretary of the Board of Directors and the Board of Directors Office of PJSC Aeroflot, amended the Regulations on the Personnel and Remuneration Committee, and took major efforts to enhance Aeroflot Group’s integrated risk management system.

PJSC Aeroflot also contributes greatly to the improvement of the corporate governance regulation framework through involvement in dedicated working groups and round table discussions.

Corporate governance is exercised by PJSC Aeroflot’s governance and supervisory bodies, including the General Meeting of Shareholders, the Board of Directors, the Management Board, the CEO, and the Revision Committee.

The responsibilities of PJSC Aeroflot’s corporate secretary are vested with the Executive Secretary of the Board of Directors, also holding the position of Director of PJSC Aeroflot’s Corporate Governance Department. For two consecutive years (2015 and 2016), tthe Director of Aeroflot’s Corporate Governance Department – was recognised as one of the best corporate governance directors by the Independent Directors Association (IDA).

PJSC Aeroflot’s financial and business activities are audited by an external auditor in accordance with both the Russian Accounting Standards (RAS) and the International Financial Reporting Standards (IFRS), as well as by the Internal Audit Department functionally reporting to the Audit Committee of the Board of Directors of PJSC Aeroflot.

Compliance with the Russian Corporate Governance Code

Code section Principles recommended by the Code Complied with Not fully complied with Not complied with
Shareholder Rights 13 11 1* 1
Board of Directors 36 29 6 1
Corporate Secretary 2 2 - -
Remuneration System 10 9 1 -
Risk Management System 6 6 - -
Information Disclosure 7 7 - -
Material Corporate Actions 5 4 1 -
TOTAL 79 68 9 2
* As at the publication date of this Annual Report – data for 2015 (published in 2016).
< Note. Statistics are based on the Corporate Governance Code Compliance Report (Appendix to this Annual Report).

PJSC Aeroflot’s Corporate Governance Structure

PJSC Aeroflot’s Corporate Governance Structure

Key documents ensuring protection of PJSC Aeroflot shareholder rights include:

  • Articles of Association,
  • Regulations on the General Meeting of Shareholders,
  • Regulations on the Board of Directors,
  • Regulations on the Management Board,
  • Regulations on the Revision Committee,
  • Regulations on the Corporate Information Policy,
  • Dividend Policy,
  • Corporate Conduct Code.

In addition, the Company is developing the Corporate Governance Code of PJSC Aeroflot, which provides for high quality corporate governance standards at PJSC Aeroflot.

PJSC Aeroflot controls interests in (holds shares in the charter capital of) a number of subsidiaries, including airlines, where PJSC Aeroflot also ensures compliance with the top standards of corporate governance by development and implementation of Group-wide policies and principles. On top of that, the Company developed and put in place a cross-functional governance system for its aviation subsidiaries.

To ensure supervision over financial and business activities of its subsidiary airlines, the Group enabled each of them to have a dedicated revision committee made up of PJSC Aeroflot’s representatives. In addition to revision committee inspections, the airlines are subject to inspections by an auditor approved pursuant to the relevant bidding procedures.

In accordance with the applicable laws and their articles of association, each subsidiary airline developed and adopted dedicated internal documents stipulating the responsibilities of its governing bodies.

Superior expertise of PJSC Aeroflot’s management team has been widely acclaimed in the business community.

General Meeting of Shareholders

The General Meeting of Shareholders is the Company’s supreme governing body. The respective scope of authority and procedures for convening, holding and summarising Annual General Meetings of Shareholders (AGMs) are set forth in the Company’s Articles of Association and Regulations on the General Meeting of Shareholders. The Company holds its AGMs in June every year.

In 2016, PJSC Aeroflot convened the Annual General Meeting of Shareholders in Moscow on 27 June (Minutes No. 38 dated 30 June 2016). The meeting was attended by holders of 71.27% of PJSC Aeroflot’s share capital.

The Annual General Meeting of Shareholders approved the Company’s Annual Report, 2015 financial statements (including the profit and loss statement), the Board’s recommendations on the distribution of the net profit for FY2015, and the remunerations of the members of the Board of Directors and the Revision Committee, as recommended by the Board of Directors. The Company also approved a number of related-party transactions.

The Meeting approved a new composition of the Board of Directors and the Revision Committee, and the Company’s auditor for 2016 annual accounting (financial) statements (selected pursuant to the relevant bidding procedures). It also adopted new versions of PJSC Aeroflot’s Articles of Association, Regulations on the General Meeting of Shareholders, Regulations on the Board of Directors, and Regulations on the Management Board.

The Annual General Meeting of Shareholders resolved not to announce or pay out dividends on PJSC Aeroflot’s shares for FY2015, since Aeroflot Group reported no net profit for that year. This resolution took into account the recommendations of PJSC Aeroflot’s Board of Directors and was passed in line with the Company’s Dividend Policy, which stipulates that Aeroflot Group’s net profit (under IFRS) forms the base for calculating dividends.

The Extraordinary General Meeting (EGM) of Shareholders held on 26 December 2016 (Minutes No. 39 dated 27 December 2016) was attended by holders of 67.81% of PJSC Aeroflot’s share capital.

The EGM approved the related-party transaction (several associated transactions) related to assignment of the right to acquire 22 Boeing 787 aircraft.

Board of Directors

PJSC Aeroflot’s Board of Directors has overall supervising authority over the Company. The Board of Directors is responsible for the Company’s operations, excluding matters within the authority of PJSC Aeroflot’s General Meeting of Shareholders, Management Board, and Chief Executive Officer. The procedures for convening and holding the Board meetings, along with other Board activities, are stipulated by the Regulations on the Company’s Board of Directors in line with the Federal Law On Joint-Stock Companies.

The Board’s key focus areas include the Company’s long-term sustainable development, effective oversight of its executive bodies, uncompromising observance and protection of shareholder rights and their legitimate interests.

The main objectives of the Board of Directors are to:

  • define the core areas of business for the Company (including subsidiary airlines) to increase its operating profit;
  • operate for the benefit of shareholders, supervise the implementation of corporate initiatives;
  • supervise the activities of the Management Board and Chief Executive Officer;
  • present resolutions on matters within the authority of the General Meeting of Shareholders for approval by shareholders;
  • discuss and approve business plans;
  • determine the procedure for distributing profit and covering for loss;
  • develop the Company’s dividend policy, work out proposals on the amount of dividends on the Company’s shares and dividend payout procedure, and present them for approval by the General Meeting of Shareholders;
  • approve and monitor performance of the annual budget;
  • discuss and pre-approve draft annual reports, annual accounting statements and profit and loss accounts;
  • analyse audit reports and opinions of the Revision Committee, and present documents featuring the results of such audits for consideration by the Company’s shareholders;
  • present proposals to the General Meeting of Shareholders on the appointment of the Company’s auditor;
  • determine the policy on issuing the Company’s securities;
  • approve the Company’s special registrar and the terms and conditions of the contract therewith, as well as the contract termination.

In line with the action plan for the Board of Directors, the Board meetings are held at least once a month. The action plan for the Board of Directors is approved at the end of the year preceding the year covered in the plan. As a rule, the action plan includes essential matters concerning the Company’s operations (strategy, finance, budget and risks, human resources, etc.), which are to be discussed in line with the strategic and business planning cycle. Proposals made by members of the Board of Directors and the Company’s management are factored in. Extraordinary meetings may be convened to make decisions on urgent matters.

The agenda of the Board of Directors’ meetings must include items proposed for discussion by shareholders who in aggregate hold at least 2% of shares, members of the Board of Directors, the Revision Committee and the Management Board, and by the CEO.

All items on the agenda of the Board of Directors’ meetings are generally previewed by dedicated committees to enable a more detailed discussion and prepare recommendations for voting to the Board of Directors.

The Board of Directors’ meetings held in absentia consider matters on which members of the Board of Directors do not have any material comments, as well as matters of procedure. However, a matter may be moved to the agenda of a meeting held in person upon request of two members of the Board of Directors.

Chairman of the Board of Directors

  • is responsible for the general stewardship of the Board of Directors, convenes and chairs meetings, arranges for keeping the minutes of meetings, chairs the General Meeting of Shareholders;
  • helps ensure the timely provision to members of the Board of Directors of all the information required to pass resolutions and vote on agenda items;
  • ensures productive discussion of agenda items involving non-executive and independent directors;
  • controls the execution of resolutions passed by the Board of Directors and the General Meeting of Shareholders.

Independent directors and their role

Independent directors promote opinions and judgements unaffected by relations with the Company’s shareholders or executive bodies, as well as decision-making which benefits different groups of stakeholders.

The presence of independent directors enhances corporate governance in the Company. Independent members of the Board of Directors are actively involved in the activities of the Board committees. In accordance with the requirements of the Moscow Exchange, independent directors head the Board of Directors’ Audit Committee and Personnel and Remuneration Committee. The majority of members of the Board of Directors’ Committees are also independent directors, which helps achieve a balanced and independent position on agenda items.

Membership of the Board of Directors

As at 31 December 2016, PJSC Aeroflot’s Board of Directors was comprised of the Chairman (non-executive director), one executive director, seven non-executive directors (including the Chairman), and three independent directors.

PJSC Aeroflot’s Board of Directors is largely independent of the Company’s management: the only executive director on the Board is Vitaly Saveliev, the Chief Executive Officer and Chairman of PJSC Aeroflot’s Management Board.

Members of the Board of Directors efficiently performed their functions and tasks notwithstanding their service on boards of directors at other companies.

The Chairman and members of the Board of Directors, except for Vitaly Saveliev, held no stake in PJSC Aeroflot during the reporting year. In the reporting year, no members of the Company’s Board of Directors purchased or disposed of their shares in the Company.

In 2016, no claims were filed against members of the Board of Directors.

Membership of the Board of Directors as at 31 December 2016

Kirill Androsov
Chairman of the Board of Directors

Born on 13 June 1972. In 1994, graduated with honours from St Petersburg Maritime Engineering University (School of Engineering and Economics). In 2000, presented his thesis to and was awarded a PhD degree at St Petersburg State University of Economics and Finance. From 2003 to 2005, received training at Chicago University Business School (Executive MBA). From 2000 to 2004, First Deputy CEO at LENENERGO; from 2004 to 2005, Director of the Department for Government Regulation of Tariffs and Infrastructural Reforms at the Ministry of Economic Development and Trade of the Russian Federation; since November 2005, Deputy Minister for Economic Development and Trade of the Russian Federation. From April 2008 to April 2010, Deputy Head of the Executive Office of the Government of the Russian Federation.
Since 2010, Managing Partner at Altera Capital. Member of boards of directors at Otkritie Holding, Russian Machines, Altera Investment Fund, Ruspetro plc, RUSNANO Management Company. At different periods, served on boards of directors at RAO UES of Russia, Rosneft, Zarubezhneft, VTB, Svyazinvest, All-Russian Exhibition Centre (VVC), Channel One Russia. Since 2011, member of the Public Council under the Federal Tax Service of Russia; since 2012, professor at the Higher School of Economics. Member of the Civic Chamber of the Russian Federation and member of the Public Council under the Ministry of Energy of Russia.
Currently, holds the position of the Managing Director at Altera Investment Fund SICAV-SIF.

Does not own PJSC Aeroflot’s shares.

Mikhail Alekseev
Member of the Board of Directors, member of the Strategy Committee

Born on 4 January 1964. In 1986, graduated with honours from Moscow Finance University (Finance Academy under the Government of the Russian Federation) with a degree in Finance and Credit. In 1992, presented his thesis and was awarded a Doctor of Economics degree. From 1989 to 1991, Senior Expert, Lead Expert, Department Head, Deputy Head of the Main Directorate at the USSR Ministry of Finance. In 1992, joined the Management Board at Mezhkombank. In 1995, left for ONEXIM Bank as Deputy Chairman of the Board of Directors. From 1999 to 2006, Senior Vice-President and Deputy Chairman of the Management Board at Rosbank.
From 2006 to 2008, President and Chairman of the Management Board at Rosprombank.
Since 2008, Chairman of the Management Board at UniCreditBank.

Does not own PJSC Aeroflot’s shares.

Igor Kamenskoy
Independent member of the Board of Directors, Head of the Personnel and Remuneration Committee, member of the Audit Committee

Born on 25 January 1968. In 1993, graduated from Moscow State Pedagogical Institute with a degree in Russian Language and Literature. From 1992 to 1998, Vice-President at Soyuzcontract. In 1999, Vice-President at Rosbank. From 2000 to 2002, Advisor to the Chairman of the State Duma. From 2002 to 2009, member of the Council of the Federation, Deputy Chairman of the Council of the Federation Committee. From 2009 to 2015, Chairman of the Board of Directors at Renaissance Capital. Currently, holds the position of the Managing Director at Renaissance Broker.

Does not own PJSC Aeroflot’s shares.

Aleksey Germanovich
Independent member of the Board of Directors, member of the Personnel and Remuneration Committee and the Strategy Committee

Born on 19 July 1977. In 1998, graduated from the Department of Economics, and in 2002, from the Department of Journalism at Lomonosov Moscow State University; in 2008, graduated from Cranfield University, UK (Executive MBA). From 2002 to 2009, Deputy CEO at Severstal Group; from 2009 to 2012, director at Moscow SKOLKOVO Management School; from 2012 to 2014, Director, member of the Executive Board and advisor to the Russian Direct Investment Fund. Currently, independent director on boards of directors at Unipro (formerly, E.On Russia), Bank St Petersburg, and Ameriabank (Armenia). At different periods, served on boards of directors at a variety of Russian transport companies, such as Siberia Airlines, Irkutsk International Airport, Rossiya State Transport Company, SG-Trans, etc. For the past four years, was named among Russia’s 50 best independent directors in the rating compiled by the Russian Union of Industrialists and Entrepreneurs with PwC and the IDA. Member of the Board at Endowment Asset Маnagement Fund “Development of Saint Petersburg State University”, Chairman of the Corporate Governance Committee at the Expert and Advisory Council of the Federal Agency for State Property Management.

Does not own PJSC Aeroflot’s shares.

Roman Pakhomov
Member of the Board of Directors, Head of the Strategy Committee, member of the Audit Committee, and the Personnel and Remuneration Committee

Born on 4 March 1971. Graduated from Makarov State Marine Academy. He holds MBA degree from the Graduate School of International Business at the Russian Presidential Academy of National Economy and Public Administration (Moscow) and a degree from Kingston University (UK). Started his career at Northern Shipping Company. From 1996 to 1998, Senior Expert for corporate customers at Inkombank. From 1998 to 1999, Deputy Chairman of the Management Board at Maritime Bank. From 1999 to 2004, CEO at IC Center Capital. From 2004 to 2008, Deputy CEO and CEO at VIM-avia. From 2008 to 2009, Executive Director at Atlant Soyuz Airlines. From 2009 to 2010, CEO at Rossiya State Transport Company, Advisor to Deputy CEO at ROSTEC Corporation. Since September 2010, CEO at Aviacapital-Service.

Does not own PJSC Aeroflot’s shares.

Dmitry Peskov
Member of the Board of Directors, member of the Personnel and Remuneration Committee, and the Strategy Committee

Born on 26 December 1975. Graduated from Voronezh State University in 1998. In 1999, obtained a Master’s degree in Political Studies from Moscow School of Social and Economic Sciences and the University of Manchester. Since 2000, has led the strategy development exercise, chaired the Internet Policy Centre and overseen the establishment of the Russian International Studies Association at Moscow State Institute of International Relations (MGIMO University). Last position held — Deputy Scientific Vice-President, Innovation Director. Since 2009, Head of Strategic Initiatives at All-Russian Exhibition Centre (VVC). Since 2011, Director of Young Professionals at the Agency for Strategic Initiatives. Member of the Government Expert Council, member of the Board of Directors at RVC.

Does not own PJSC Aeroflot’s shares.

Vitaly Saveliev
Member of the Board of Directors, CEO, Chairman of the Management Board

Born on 18 January 1954. In 1977, graduated from the Department of Mechanics and Engineering at Leningrad Polytechnic Institute with a Mechanical Engineer degree (Construction and Road Machinery and Equipment); in 1986, graduated from Leningrad Institute of Engineering and Economics. Since 1987, Deputy Head of Civil Engineering at Glavleningradinzhstroi. Since December 1988, CEO at US-Soviet Union joint venture DialogInvest (Leningrad office). In 1989, co-founder and member of the Board of Directors at Dialogue Bank. From 1990 to 1993, CEO at the US-Soviet Union joint venture DialogInvest; from 1993 to 1995, Chairman of the Management Board at Rossiya Bank; since November 1995, Chairman of the Management Board at Menatep Saint Petersburg; since September 2001, Deputy Chairman of the Management Board at Gazprom; from 2002 to 2004, Vice-President at GROS United Company, Financial and IT Advisor to the CEO at Svyazinvest; from 2004 to 2007, Deputy Minister for Economic Development and Trade of the Russian Federation. From 2007 to April 2009, First Vice-President and Head of Telecom Assets at Sistema Financial Corporation. Has held his current role since 10 April 2009.

Holds 0.121% of PJSC Aeroflot’s share capital.

Dmitry Saprykin
Member of the Board of Directors, member of the Strategy Committee

Born in 1974. In 1996, graduated from Moscow State Law Academy with a degree in Law. PhD in Law (2000). In 2001, graduated from Cornell Law School. From 1996 to 1998, Chief Legal Adviser at Bank Menatep. From 2001 to 2004, Division Head and Director of M&A and Capital Markets Department at MTS. From 2004 to 2006, Deputy CEO for Corporate Affairs and Finance at SkyLink; from 2006 to 2007, CEO at Moscow Cellular Communications; from 2007 to 2009, Director of Transaction Support, Deputy Head of the Legal Division at Sistema Financial Corporation. From July 2009 to July 2013, Deputy CEO for Legal and Property Issues at PJSC Aeroflot. From July 2013 to November 2015, Deputy CEO for Sales and Property Issues at PJSC Aeroflot. Since November 2015, CEO at Rossiya Airlines.

Does not own PJSC Aeroflot’s shares.

Vasiliy Sidorov
Independent member of the Board of Directors, Head of the Audit Committee, member of the Personnel and Remuneration Committee, and the Strategy Committee

Born on 2 February 1971. In 1993, graduated from Moscow State Institute of International Relations (MGIMO University) with a degree in International Public Law, and from Wharton Business School of the University of Pennsylvania with a degree in Finance. From 1997 to 2000, Deputy CEO at Svyazinvest. From 2000 to 2003, First Vice-President at Sistema Telecom. From 2003 to 2006, President at MTS. From 2006 to 2010, co-owner of Telecom Express Group. Since 2010, Managing Partner at Euroatlantic Investments Ltd. Since June 2012, members of the Board of Directors at Russian Railways. Since 2012, CEO at the Agency for Recapitalisation of Infrastructure and Long- Term Assets.

Does not own PJSC Aeroflot’s shares.

Yury Slyusar
Member of the Board of Directors, member of the Strategy Committee

Born on 20 July 1974. In 1996, graduated from Lomonosov Moscow State University with a degree in Law. In 2003, completed a post-graduate programme at the Academy of National Economy under the Government of the Russian Federation. PhD in Economics. Until 2003, worked with various business entities. Since 2003, Commercial Director at Rostvertol (Rostov-on-Don). In 2009, was appointed Assistant to the Minister of Industry and Trade of the Russian Federation. In 2010, Director of the Aviation Industry Department at the Ministry of Industry and Trade of the Russian Federation. In 2012, was appointed Deputy Minister of Industry and Trade of the Russian Federation. Since January 2015, President at United Aircraft Corporation.

Does not own PJSC Aeroflot’s shares.

Sergey Chemezov
Member of the Board of Directors

Born on 20 August 1952. Graduated from Irkutsk Institute of National Economy, completed Advanced Courses at the Military Academy of the General Staff of the Russian Armed Forces. Doctor of Economics, Professor, full member of the Academy of Military Science. Started his career at Irkutsk Scientific and Research Institute for Rare and Non-Ferrous Metals. Since 1980, worked at the Luch Research-Industrial Association. From 1983 to 1988, served as Head of the Luch Association representative office in East Germany. From 1988 to 1996, Deputy CEO at Sovintersport. From 1996 to 1999, Head of Foreign Economic Relations at the Administrative Office of the Russian President. From 1999 to 2001, CEO at Promexport. Since February 2001, First Deputy CEO at Rosoboronexport. From 2004 to 2007, CEO at Rosoboronexport. Since December 2007, CEO at ROSTEC Corporation (a state corporation set up to further the development, manufacture and export of hi-tech industrial products). Member of the Bureau of the Supreme Council of United Russia Party. Chairman of the public organisation “Russian Engineering Union”. President of the Russian Union of Engineering Employers. Head of the Department of Military and Engineering Cooperation and High-Tech at Moscow State Institute of International Relations (MGIMO University). Chairman of boards of directors at Rosoboronexport, VSMPO-AVISMA Corporation, Kamaz, and Uralkali. Member of boards of directors at United Aircraft Corporation, International Financial Club, and Alliance Rostec AUTO BV Joint Venture. Member of supervisory boards at Rostec State Corporation, United Rocket and Space Corporation, and Roscosmos. Mr Chemezov has received high government awards and won a large number of other prestigious awards.

Does not own PJSC Aeroflot’s shares.

Executive Secretary of the Board of Directors

Aleksey Melekhin

Born in 1977. In 2001, graduated from Institute of Economics and Entrepreneurship. Obtained his PhD degree from the Russian Presidential Academy of National Economy and Public Administration. Mr Melekhin joined PJSC Aeroflot in 1998. He held a number of positions from legal counsel.
He is currently responsible for the administrative and information support of the Company’s Board of Directors and General Meeting of Shareholders, and supervises compliance by the Company’s bodies and officers with corporate governance rules and procedures set forth by the laws of the Russian Federation, the Company’s Articles of Association, and internal documents.

Does not own PJSC Aeroflot’s shares.

Changes in the membership of the Board of Directors in 2016

  • Marlen Manasov – stepped down from the Board of Directors as from 27 June 2016 by resolution of the Annual General Meeting of Shareholders (Minutes No. 38 dated 30 June 2016).
  • Aleksey Germanovich – elected to the Board of Directors as from 27 June 2016 by resolution of the Annual General Meeting of Shareholders (Minutes No. 38 dated 30 June 2016).

There were no other changes in the membership of PJSC Aeroflot’s Board of Directors in 2016. Other members of the Board of Directors were re-elected at the 2016 AGM.

Board of Directors’ Performance Report for 2016

In 2016, PJSC Aeroflot’s Board of Directors held 18 meetings, including 9 meetings in person and 9 meetings in absentia. The said meetings addressed over 180 items and passed over 440 resolutions on matters of the Board.

In its resolutions, the Board of Directors covers a number of priority areas and promotes following business targets:

  • ensure flight safety and on-time performance;
  • determine Aeroflot Group’s strategy and identify priority lines of business;
  • build and maintain effective corporate controls and risk management;
  • map out a development strategy for Aeroflot Group’s aircraft fleet and route network;
  • improve the aircraft fleet composition through additions and aircraft mix optimisation;
  • improve operating, financial and marketing practices and methods through upgrades, innovation, and implementation of best practices from global peers;
  • improve the performance of Aeroflot’s branches and representative offices both domestically and internationally;
  • enforce higher standards for airport and in-flight passenger services, expand the service mix and improve customer experience;
  • promote cooperation with SkyTeam partners, use the membership to expand the Company’s route network and boost the international flight performance;
  • promote strategic partnerships with airlines;
  • improve operational performance of subsidiaries and streamline the non-core asset structure to cut unnecessary spending and increase returns on investments;
  • develop and upgrade information technologies;
  • ensure information transparency (including investor relations and procurement);
  • develop and improve corporate policies.

Directors’ attendance at Board meetings in 2016

Board member Status Board of Directors Audit Committee Personnel and Remuneration Committee Strategy Committee
Kirill Androsov Chairman of the Board of Directors 18(9)/18      
Mikhail Alekseev Non-Executive Director 18(12)/18   6(2)/6 7(4)/7
Aleksey Germanovich* Independent Director 8(4)/8 3/3 3/3 3/3
Igor Kamenskoy Independent Director 18(10)/18 9(2)/9 6(1)/6 3/3
Marlen Manasov** Independent Director 10(5)/10   3(1)/3 4/4
Roman Pakhomov Non-Executive Director 18(9)/18 9(1)/9 6(1)/6 7/7
Dmitry Peskov Non-Executive Director 18(12)/18   5(1)/6 6(1)/7
Vitaly Saveliev Executive Director 18(9)/18      
Dmitry Saprykin Non-Executive Director 18(9)/18     6(3)/7
Vasiliy Sidorov Independent Director 18(9)/18 9/9 6(1)/6 7/7
Yury Slyusar Non-Executive Director 18(13)/18     6(6)/7
Sergey Chemezov Non-Executive Director 17(12)/18      
Note. Data format: the number of meetings attended by the member of the Board of Directors / the total number of meetings held in 2016. Attendance through written opinions or questionnaires (for meetings held in absentia) is shown in brackets..
* Member of the Board of Directors as from the Annual General Meeting of Shareholders held on 27 June 2016.
** Member of the Board of Directors up to the Annual General Meeting of Shareholders held on 27 June 2016.

Number of meetings held by the Board of Directors

Matters discussed by the Board of Directors

Key matters discussed by the Board of Directors in 2016

Strategic management and investment activities
  • progress in implementation of Aeroflot Group’s Strategy;
  • Aeroflot Group’s Long-Term Development Programme update;
  • Aeroflot Group’s IT Strategy;
  • Aeroflot Group’s Investment Programme;
  • Aeroflot Group’s Innovative Development Programme;
  • PJSC Aeroflot’s branches and representative offices;
  • progress in implementation of PJSC Aeroflot’s marketing strategy
Budget planning and funding
  • performance of Aeroflot Group’s consolidated budget KPIs;
  • PJSC Aeroflot’s budget for 2017;
  • PJSC Aeroflot’s budget for 2015;
  • annual accounting statements, including the Company’s income statement for the fiscal year 2015;
  • opinions of PJSC Aeroflot’s auditors (under RAS and IFRS) for the fiscal year 2015;
  • materials and opinions of the Revision Committee and the Audit Committee of the Board of Directors for the fiscal year 2015;
  • Aeroflot Group’s operational KPIs forecast for 2017;
  • distribution of the Company’s profit and loss for the fiscal year 2015;
Corporate Governance
  • dividend policy of PJSC Aeroflot;
  • implementation of the Corporate Governance Code;
  • supervision of corporate governance practices;
  • KPIs for 2017;
  • incentive programme at PJSC Aeroflot;
  • remuneration payable to members of PJSC Aeroflot’s Board of Directors and Revision Committee;
  • preparation for the next Annual General Meeting of Shareholders of PJSC Aeroflot;
  • PJSC Aeroflot’s internal documents;
  • shareholder and investor relations.
Related-party transactions
  • approval of PJSC Aeroflot’s related-party transactions.
Other
  • flight safety at Aeroflot airline;
  • outcomes of Transaero bailout;
  • aircraft lease transactions;
  • enhancement of service offerings within Aeroflot Group;
  • procurement at PJSC Aeroflot.

Committees of the Board of Directors

To improve the effectiveness of resolutions passed by the Board of Directors, ensure more detailed preliminary discussions of most important matters and prepare relevant recommendations, PJSC Aeroflot has three dedicated Committees of the Board of Directors:

  • Audit Committee,
  • Personnel and Remuneration Committee, and
  • Strategy Committee.

The Board of Directors’ Committees are elected by the Board of Directors and act in compliance with relevant Committee Regulations approved by the Company’s Board of Directors. The Committees act as per the Board’s resolutions and action plans based on the Board’s action plan.

In 2016, the Board of Directors’ Committees held a total of 22 meetings, addressing matters related to the operations of Aeroflot Group and submitting detailed recommendations and proposals to the Company’s Board of Directors and Management Board.

Audit Committee

The Audit Committee supervises the Company’s financial and business operations to protect shareholder interests and ensure the growth of the Company’s assets. Coordinating with the Company’s executive bodies, the Revision Committee, and the Internal Audit Department, the Audit Committee prepares and submits for consideration by the Board of Directors recommendations and proposals on matters of the Board.

In 2016, the Audit Committee held a total of nine meetings (in person). The Committee’s meeting agendas were compiled in line with the Committee’s activities plan approved by the first post-election meeting, and reflected the instructions of the Board of Directors.

Key matters discussed in 2016:

  • performance of Aeroflot Group’s consolidated budget KPIs;
  • Aeroflot Group’s and PJSC Aeroflot’s budgets;
  • initiatives to reduce Aeroflot Group’s operating expenses;
  • financial hedging;
  • extending and restructuring of loans;
  • controls and risk management;
  • improvement of internal audit at Aeroflot Group;
  • auditor’s reports on the financial and business audit results;
  • reports on audits conducted by the Internal Audit Department;
  • reports on the results of analysis of the companies’ debt to PJSC Aeroflot;
  • PJSC Aeroflot’s key financial and business audit areas;
  • procurement;
  • aircraft acquisition;
  • dividend policy;
  • investor relations;
  • PJSC Aeroflot’s internal documents, including Operational Quality Guidelines of PJSC Aeroflot; Aeroflot Group’s Risk Register; Aeroflot Group’s Risk Map; Aeroflot Group’s Investment Programme; the Regulations on Procurement of Goods, Works, and Services; the Regulations on the Internal Audit Department.

Changes in the membership of the Audit Committee in 2016

Committee membership from January to June 2016 Committee membership from September to December 2016
  • Vasiliy Sidorov – independent member of the Board of Directors, Head of the Committee
  • Igor Kamenskoy – independent member of the Board of Directors
  • Roman Pakhomov – member of the Board of Directors
  • Vasiliy Sidorov – independent member of the Board of Directors, Head of the Committee
  • Aleksey Germanovich – independent member of the Board of Directors
  • Igor Kamenskoy – independent member of the Board of Directors
  • Roman Pakhomov – member of the Board of Directors
Elected by resolution of the Board of Directors on 3 September 2015 Elected by resolution of the Board of Directors on 8 September 2016

Personnel and Remuneration Committee

Personnel and Remuneration Committee promotes the development of the HR policy, supervises matters concerning the Company’s organisational structure, selection and assessment of persons appointed to the Company’s governing bodies, their remuneration, and the remuneration system. In 2016, the Personnel and Remuneration Committee held a total of six meetings, including one meeting held in absentia. The Committee’s meeting agendas were compiled in line with the Committee’s action plan approved by the first post-election meeting, and reflected the instructions of the Board of Directors.

Key matters discussed in 2016:

  • remunerations of members of the Board of Directors and the Revision Committee;
  • long-term incentive programme;
  • CEO and management KPIs;
  • Aeroflot Group’s Long-Term Development Programme KPIs;
  • assessment of the Board of Directors;
  • candidates and proposals on the members of the Board of Directors representing the interests of the Russian Federation at PJSC Aeroflot’s Board of Directors in the corporate year 2017–2018;
  • the Company’s organisational structure;
  • PJSC Aeroflot’s internal documents, including the Regulations on PJSC Aeroflot’s Key Performance Indicators; the Regulations on the Long-Term Incentive Programme; the Regulations on Remuneration of Employees of PJSC Aeroflot out of the Net Profit for the Year; the Policy on Exercising the Rights to PJSC Aeroflot’s Phantom Shares; the Regulations on the Executive Secretary of the Board of Directors and the Board of Directors Office of PJSC Aeroflot, the new version of the Regulations on the Personnel and Remuneration Committee.

Changes in the membership of the Personnel and Remuneration Committee in 2016

Committee membership from January to June 2016 Committee membership from September to December 2016*
  • Igor Kamenskoy – independent member of the Board of Directors, Head of the Committee
  • Mikhail Alekseev – member of the Board of Directors
  • Marlen Manasov – independent member of the Board of Directors
  • Vasiliy Sidorov – independent member of the Board of Directors
  • Roman Pakhomov – member of the Board of Directors
  • Dmitry Peskov – member of the Board of Directors
  • Igor Kamenskoy – independent member of the Board of Directors, Head of the Committee
  • Mikhail Alekseev – member of the Board of Directors
  • Aleksey Germanovich – independent member of the Board of Directors
  • Vasiliy Sidorov – independent member of the Board of Directors
  • Roman Pakhomov – member of the Board of Directors
  • Dmitry Peskov – member of the Board of Directors
Elected by resolution of the Board of Directors on 3 September 2015 Elected by resolution of the Board of Directors on 8 September 2016
* By Resolution of the Board of Directors dated 22 December 2016 (Minutes No. 7), Mikhail Alekseev was removed from the Personnel and Remuneration Committee (with his consent).

In December 2016, the number of members of the Personnel and Remuneration Committed was reduced from six to five members to comply with the recommendations of the Corporate Governance Code and the Rules of the Moscow Stock Exchange on the undisputed majority of independent directors on the Committee.

Strategy Committee

The Strategy Committee was set up to prepare recommendations and proposals to the Board of Directors, enhancing the Company’s performance and improving its long-term strategy.

In 2016, the Strategy Committee held a total of seven meetings (in person). The Committee’s meeting agendas were compiled in line with the Committee’s action plan approved by the first post-election meeting, and reflected the instructions of the Board of Directors.

Key matters discussed in 2016:

  • implementation of Aeroflot Group’s Strategy;
  • implementation of Aeroflot Group’s marketing strategy;
  • Aeroflot Group’s Long-Term Development Programme update;
  • audit the interim results of Aeroflot Group’s Long- Term Development Programme;
  • strategic partnerships with airlines;
  • Aeroflot Group’s IT Strategy;
  • enhancement of Aeroflot Group’s subsidiary airlines;
  • enhancement of maintenance and repair operators within Aeroflot Group;
  • results of PJSC Aeroflot’s Innovative Development Programme;
  • aircraft fleet expansion.

Changes in the membership of the Strategy Committee in 2016

Committee membership from January to June 2016 Committee membership from September to December 2016
  • Roman Pakhomov – member of the Board of Directors, Head of the Committee
  • Mikhail Alekseev – member of the Board of Directors
  • Aleksey Germanovich – independent member of the Board of Directors
  • Igor Kamenskoy – independent member of the Board of Directors, Head of the Committee
  • Dmitry Peskov – member of the Board of Directors
  • Dmitry Saprykin – member of the Board of Directors
  • Vasiliy Sidorov – independent member of the Board of Directors
  • Yury Slyusar – member of the Board of Directors
  • Giorgio Callegari – member of the Management Board, Deputy CEO for Strategy and Alliances
  • Shamil Kurmashov – member of the Management Board, Deputy CEO for Commerce and Finance
  • Roman Pakhomov – member of the Board of Directors, Head of the Committee
  • Mikhail Alekseev – member of the Board of Directors
  • Aleksey Germanovich – independent member of the Board of Directors
  • Igor Kamenskoy – independent member of the Board of Directors, Head of the Committee
  • Dmitry Peskov – member of the Board of Directors
  • Dmitry Saprykin – member of the Board of Directors
  • Vasiliy Sidorov – independent member of the Board of Directors
  • Yury Slyusar – member of the Board of Directors
  • Giorgio Callegari – member of the Management Board, Deputy CEO for Strategy and Alliances
  • Shamil Kurmashov – member of the Management Board, Deputy CEO for Commerce and Finance
Elected by resolution of the Board of Directors on 3 September 2015 Elected by resolution of the Board of Directors on 8 September 2016

Management Board

PJSC Aeroflot’s sole executive body, the CEO, and collective executive body, the Management Board, are charged with running the Company’s ongoing operations. The executive bodies report directly to the Board of Directors and the General Meeting of Shareholders. The CEO also acts as the Chairman of the Management Board. The Board of Directors is authorised to appoint members of the Management Board, and remove them from office before the end of their term. The Management Board acts in compliance with PJSC Aeroflot’s Articles of Association and Regulations on the Management Board as approved by the General Meeting of Shareholders of PJSC Aeroflot.

In the reporting period, members of the Management Board had no transactions with PJSC Aeroflot’s shares.

Membership of the Management Board as at 31 December 2016

Vitaly Saveliev
Chairman of the Management Board, CEO

Born on 18 January 1954 in Tashkent. In 1977, graduated from the Department of Mechanics and Engineering at Leningrad Polytechnic Institute with a Mechanical Engineer degree (Construction and Road Machinery and Equipment); in 1986, graduated from Leningrad Institute of Engineering and Economics. Since 1987, Deputy Head of Civil Engineering at Glavleningradinzhstroi. Since December 1988, CEO at US-Soviet Union joint venture DialogInvest (Leningrad office). In 1989, co-founder and member of the Board of Directors at Dialogue Bank. From 1990 to 1993, CEO at the US-Soviet Union joint venture DialogInvest; from 1993 to 1995, Chairman of the Management Board at Rossiya Bank; since November 1995, Chairman of the Management Board at Menatep Saint Petersburg; since September 2001, Deputy Chairman of the Management Board at Gazprom; from 2002 to 2004, Vice-President at GROS United Company, Financial and IT Advisor to the CEO at Svyazinvest; from 2004 to 2007, Deputy Minister for Economic Development and Trade of the Russian Federation. From 2007 to April 2009, First Vice-President and Head of Telecom Assets at Sistema Financial Corporation. Has held his current role since 10 April 2009.

Holds 0.121% of PJSC Aeroflot’s share capital.

Vladimir Antonov
First Deputy CEO for Aviation Safety

Born in 1953. Graduated from Moscow Railway Engineering Institute.
From 1977 to 1995, served in the armed forces.
From 1995 to 2011, Deputy CEO for Economic and Aviation Safety, Deputy CEO for Aviation Safety, Deputy CEO for Aviation and Operating Safety, and First Deputy CEO for Operations at PJSC Aeroflot.
Since 2011, First Deputy CEO for Aviation Safety at PJSC Aeroflot.

Holds 0.000425% of PJSC Aeroflot’s share capital.

Vasily Avilov
Deputy CEO for Administrative Management

Born in 1954. Graduated from Dzerzhinsky Higher Naval Engineering College.
From 1997 to 2013, Head of Administration, Director of the Department of General Affairs, Deputy CEO – Executive Director at PJSC Aeroflot.
Since 2013, Deputy CEO for Administrative Management at PJSC Aeroflot.

Holds 0.0000002% of PJSC Aeroflot’s share capital.

Vladimir Alexandrov
Deputy CEO for Legal and Property Matters

Born in 1984. In 2005, graduated from Kutafin Moscow State Law University; in 2016, graduated from the Russian Presidential Academy of National Economy and Public Administration (RANEPA).
Held senior positions at the Prosecutor General’s Office of the Russian Federation and the Investigative Committee of the Russian Federation.
From 2013 to 2015, Deputy Head of the Legal Support Section of the Legal Department, Deputy Director of Legal Department, Advisor to the CEO for government relations.
In August 2015, he was appointed Legal Department Director at PJSC Aeroflot.
Since 1 July 2016, Deputy CEO for Legal and Property Matters at PJSC Aeroflot.

Does not own PJSC Aeroflot’s shares.

Kirill Bogdanov
Deputy CEO for IT
Born in 1963. Graduated from Kalinin Leningrad Polytechnic Institute.
From 2002 to 2004, Advisor to the Vice-President at United Company GROS.
From 2004 to 2007, Executive Director at RAMAX International.
From 2007 to 2009, Director of Development and Control at Telecom Assets at Sistema Financial Corporation.
Since 2009, Deputy Head of IT at PJSC Aeroflot, Advisor to the CEO, Deputy CEO for IT.

Does not own PJSC Aeroflot’s shares.

Vadim Zingman
Deputy CEO for Customer Service

Born in 1970. Graduated from St Petersburg University of Economics and Finance. PhD in Economics.
From 2001 to 2008, Deputy Director of the Department for Government Regulation of Foreign Trade at the Ministry of Economic Development and Trade of the Russian Federation.
From 2008 to 2009, Director of Government Relations at Sistema Financial Corporation.
From 2009 to 2012, Advisor to the CEO, Deputy CEO for Customer Relations and Deputy CEO for Operations and Quality Management at PJSC Aeroflot.
Since 2012, Deputy CEO for Customer Service at PJSC Aeroflot.

Does not own PJSC Aeroflot’s shares.

Giorgio Callegari
Deputy CEO for Strategy and Alliances

Born in 1959. Graduated from Turin Polytechnic University (Italy). From 1986 to 1989, VP of Sales, member of the Board of Directors and the Executive Committee at Malan Viaggi.
From 1990 to 2011, Sales Manager, Vice-President for Sales, Vice-President for Business Development, Vice-President for Alliances, Business Development and International Relations, Executive Vice-President for Alliances and Strategies at Alitalia.
Since 2011, Deputy CEO for Strategy and Alliances at PJSC Aeroflot.

Does not own PJSC Aeroflot’s shares.

Shamil Kurmashov
Deputy CEO for Commerce and Finance

Born in 1978. Graduated from Moscow State Institute of International Relations (MGIMO University). PhD in Economics.
From 2004 to 2007, Deputy CEO for Finance and Investment at Sistema Telecom.
From 2007 to 2009, Director of Investments, Deputy Head of the Finance and Investment Division at Sistema Financial Corporation.
From 2009 to 2013, Advisor to the CEO, Deputy CEO for Finance and Investment and Deputy CEO for Commerce and Finance at PJSC Aeroflot.
From 2013 to 2016, Deputy CEO for Finance and Network and Revenue Management at PJSC Aeroflot.
Since 2016, Deputy CEO for Commerce and Finance at PJSC Aeroflot.

Does not own PJSC Aeroflot’s shares.

Georgy Matveev
Director of Flight Safety Management

Born in 1953. Graduated from the Academy of Civil Aviation. PhD in Technical Science.
From 2001 to 2012, Deputy Chief Flight Safety Inspector and Deputy Director of Flight Safety Management at PJSC Aeroflot.
Since 2012, Director of Flight Safety Management at PJSC Aeroflot.

Does not own PJSC Aeroflot’s shares.

Igor Parakhin
Deputy CEO and Technical Director

Born in 1961. Graduated from Moscow Institute of Civil Aviation Engineers.
From 2001 to 2011, Head of Programme, Deputy Director of the Aviabusiness Higher Commercial School.
Since 2011, Acting Technical Director, Technical Director, Deputy CEO and Technical Director at PJSC Aeroflot.

Holds 0.000007% of PJSC Aeroflot’s share capital.

Igor Chalik
Deputy CEO and Commander of Flight Operations

Born in 1957. Graduated from Aktyubinsk Higher School of Civil Aviation.
From 2003 to 2008, Commander of the A320 Air Squadron at PJSC Aeroflot.
From 2008 to 2010, Commander of the A330 Air Squadron at PJSC Aeroflot.
Since 2011, Deputy CEO and Commander of Flight Operations at PJSC Aeroflot.
Recipient of the honorary title of the Honoured Pilot of the Russian Federation, the Medal of Nesterov, and awards of government agencies.

Holds 0.000117% of PJSC Aeroflot’s share capital..

Changes in the membership of the Management Board in 2016

As from 24 June 2016, Vladimir Alexandrov, Deputy CEO for Legal and Property Matters, was appointed to PJSC Aeroflot’s Management Board. As from the same date, Nikolay Altukhov, Deputy CEO for Sales and Property Management, stepped down from PJSC Aeroflot’s Management Board.

Management Board’s Report for 2016

In 2016, the Management Board of PJSC Aeroflot held a total of 35 meetings, including 5 meetings in absentia.

Key matters discussed in 2016:

  • flight safety;
  • implementation of Aeroflot Group’s Strategy;
  • Aeroflot Group’s Long-Term Development Programme update;
  • route network development, to factor in handling capacity limits at the South Terminal Complex (STC);
  • performance of Aeroflot Group’s consolidated budget KPIs;
  • review of reporting documents (annual accounting statements including PJSC Aeroflot’s income statement for the fiscal year 2015, annual report);
  • opinions of PJSC Aeroflot’s auditors (under RAS and IFRS) for the fiscal year 2016;
  • Aeroflot Group’s operational KPIs forecast;
  • Aeroflot Group’s Investment Programme;
  • PJSC Aeroflot’s incentive programme;
  • outcomes of Transaero bailout;
  • changes in trade receivables and performance of reduction measures;
  • results of the airline’s quality audit by SkyTrax and initiatives to improve PJSC Aeroflot’s service offering;
  • PJSC Aeroflot’s credit and documentary credit facilities;
  • results of PJSC Aeroflot’s Innovative Development Programme;
  • Aeroflot Bonus FFP;
  • opening and closing of representative offices;
  • results of the assessment of Aeroflot Group’s Net Promoter Score;
  • procurement at PJSC Aeroflot;
  • PJSC Aeroflot’s cooperation with aviation schools;
  • investor relations;
  • charity projects for children’s homes;
  • sponsorship initiatives;
  • provision of free flights to citizens eligible for such support under the applicable laws of the Russian Federation;
  • enhancement of Aeroflot Group’s IT;
  • roadmap for anti-corruption risk
  • management and internal control processes.

Committees

In pursuit of recommendations and proposals aiming to boost the Company’s business efficiency, PJSC Aeroflot set up the Committee for Finance and Investments and the Committee for Innovative Development.

Committee for Finance and Investments

The Committee for Finance and Investments is a permanent collective advisory body of PJSC Aeroflot. In its operation, the Committee is guided by the applicable laws of the Russian Federation, resolutions of PJSC Aeroflot’s Board of Directors, other regulations, rules and procedures of the Company, and the Regulations on the Committee for Finance and Investments.

The Committee is charged, among other things, with monitoring progress on the Company’s ongoing investment projects, providing expert reviews of any such projects, passing resolutions on suspension of investment projects, determining their efficiency assessment criteria and drafting proposals on Aeroflot Group’s financial, economic, and marketing policies.

In 2016, the Committee for Finance and Investments held a total of 20 meetings.

Membership of the Committee for Finance and Investments as at 31 December 2016

Shamil Kurmashov Deputy CEO for Commerce and Finance, Chairman of the Committee
Vadim Zingman Deputy CEO for Customer Service
Giorgio Callegari Deputy CEO for Strategy and Alliances
Svetlana Arkhipova Director of the Department for Financial Planning and Analysis
Ilya Alexandrovsky Director of the Sales Department
Alexander Noskov Director of the Economic Security Department
Andrey Chikhanchin Director of the Corporate Finance Department
Evgeny Zenchenko Director of the Corporate Strategy Department
Dmitry Galkin Advisor to the Deputy CEO for Commerce and Finance
Andrey Polozov-Yablonsky Advisor to the CEO, Director on Innovations

Committee for Innovative Development

The Committee for Innovative Development is a permanent collective advisory body of PJSC Aeroflot’s Management Board. It was set up to provide recommendations and proposals for the Management Board to boost the Company’s business efficiency.

In its operation, the Committee is guided by the laws of the Russian Federation, resolutions of PJSC Aeroflot’s Board of Directors and Management Board, other regulations, rules and procedures of the Company, and the Regulations on the Committee for Innovative Development.

The Committee is charged with reviewing innovative projects and providing assessment of their efficiency, monitoring progress on the ongoing innovative projects, passing resolutions on project suspension, setting out requirements for the design and quality of innovative development materials submitted to the Management Board, and recommending projects for implementation.

In 2016, the Committee for Innovative Development held a total of two meetings.

Membership of the Committee for Innovative Development as at 31 December 2016

Vadim Zingman Deputy CEO for Customer Service, Chairman of the Committee
Andrey Polozov-Yablonsky Advisor to the CEO, Director on Innovations, Deputy Chairman of the Committee
Sergey Krylov Director of the IT Projects Department
Aleksey Korenevsky Deputy Director for Flight Training and Training Methodology of the Flight Operations Department
Azat Zaripov Deputy Director of the Aviation Security Department
Dmitry Saksonov Head of Strategic Projects Coordination at the Corporate Strategy Department
Ekaterina Kryshkina Advisor to the Deputy CEO for Commerce and Finance
Alexander Fadeev Advisor to the Deputy CEO and Technical Director

Remuneration for members of the Board of Directors and the management

The Company has in place a structured remuneration system for members of the governing bodies designed to link the amount of bonus payments to the achievement of short-term targets, and align the interests of the Company’s management and its shareholders. Short-term incentive is provided in the form of cash bonuses, while long-term incentive implies payments based on share capitalisation benchmarked against different indicators.

Remuneration for members of the Board of Directors

Guidelines for Board remuneration calculation and payouts are set forth in the Regulations on Remuneration and Compensation Payments to the Members of the Board of Directors of PJSC Aeroflot, in line with the Federal Law On Joint-Stock Companies, other applicable laws of the Russian Federation and the Company’s internal documents. These Regulations were approved by PJSC Aeroflot’s AGM on 27 June 2016. One of the key amendments was the adoption of the July to June corporate year, in line with the Board of Directors’ election cycle. The Board remuneration framework comprises fixed and variable components. The size of the fixed component depends on involvement of members of PJSC Aeroflot’s Board of Directors in its activities and includes the fixed base pay and additional payments for discharging extra duties. The variable remuneration component is directly linked to the Company’s market capitalisation growth on the Moscow Exchange as benchmarked against MICEX Index and market prices of shares issued by foreign carriers.

The Long-Term Incentive Programme for 1 January 2016 – 30 June 2019 was approved in 2016 to replace the previous Stock Option Plan for 2013–2015. The total pool of the long-term incentive programme for Board members is equivalent to 0.5% of PJSC Aeroflot’s market capitalisation growth over the lifetime of the Long-Term Incentive Programme. The 2016–2019 Long-Term Incentive Programme draws heavily on the following underlying metrics:

  • PJSC Aeroflot’s market capitalisation growth in the relevant year (maximum weight of 1/3);
  • PJSC Aeroflot’s ranking among five airline peers based on market capitalisation change in the relevant year (maximum weight of 1/3);
  • PJSC Aeroflot’s market capitalisation performance against MICEX Index (maximum weight of 1/3).

50% of the remuneration amount accrued for the relevant corporate year is paid out to the members of the Board of Directors simultaneously with the principle remuneration for the relevant year. 50% of the remuneration amount accrued for the relevant year is not paid out, but set aside until the end of the LTP (June 2019), added together and paid as a lump sum upon resolution of the General Meeting of the Company’s Shareholders, subject to the capitalisation of at least RUB 100 billion. Calculations incorporate the high water mark principle, i.e. if capitalisation goes below the high water mark in the current interim period, the capitalisation growth base for the next interim period shall be the peak capitalisation value that was reached in the past period.

Management remuneration

The remuneration system designed for the management and the other staff enables the Company to engage and retain highly qualified professionals. Remuneration for management is comprised of the fixed component (official salary) and the variable component (current bonuses and long-term incentives).

Current bonuses depend on the Group-wide performance and are calculated in accordance with the Company’s KPI-Based Employee Bonus System. The KPI-Based Employee Bonus System is defined by the Regulations on Bonus Payments to the Managers and Specialists of PJSC Aeroflot (approved on 2 February 2011 and amended on 22 December 2016). The Regulations stipulate that the bonus component of the management compensation amount shall depend on their quarterly and annual performance against the KPIs approved for the relevant reporting period.

To provide for long-term incentives for PJSC Aeroflot’s management, the Long-Term Incentive Programme for 1 January 2016 to 30 June 2019 was approved by the Board of Directors on 26 May 2016 and updated by resolution of the Board of Directors of PJSC Aeroflot on 2 February 2017. The Programme covered the CEO, members of the Management Board, department heads, Chief Accountant and other employees of the Company, on the CEO’s resolution. The total pool of the Long-Term Management Incentive Programme is equivalent to 3.0% of PJSC Aeroflot’s market capitalisation growth over the lifetime of the Long-Term Incentive Programme. The 2016–2019 Long-Term Management Incentive Programme draws heavily on the following underlying metrics:

  • PJSC Aeroflot’s market capitalisation growth in each relevant interim period;
  • PJSC Aeroflot’s ranking among five airline peers based on market capitalisation change in each relevant interim period;
  • customer satisfaction (Net Promoter Score) with Aeroflot airline's offering in each relevant interim period;
  • achievement of the capitalisation target following the Long-Term Incentive Programme.

Remuneration under the Programme is paid based on the same principles as for the long-term incentive programme for members of the Board of Directors (50% of the remuneration amount is paid out on an annual basis, and the remaining 50% are set aside until the end of the Programme).

KPI system

The list and weights of KPIs for the CEO of PJSC Aeroflot for 2016, which form part of the corporate KPI framework, were approved by the Board of Directors of PJSC Aeroflot on 29 October 2015 (Minutes No. 5) and were updated by the Resolutions of the Board of Directors of PJSC Aeroflot dated 28 April 2016 (Minutes No. 15) and dated 8 September 2016 (Minutes No. 2). The 2016 KPI targets for the CEO of PJSC Aeroflot were approved by the Board of Directors of PJSC Aeroflot on 24 December 2015 (Minutes No. 9) and updated for 2H 2016 by the Resolution of the Board of Directors of PJSC Aeroflot dated 27 October 2016 (Minutes No. 4).

From 2015 onward, the scope of the CEO’s KPI list (with KPI weights and targets) is fully in line with the KPIs of our Long-Term Development Programme and extended to include all members of the PJSC Aeroflot’s Management Board to provide incentives for the management to pursue Groupwide corporate objectives and improve the Group’s overall performance. The KPIs for other employees of PJSC Aeroflot were approved by the CEO on 30 December 2015 and updated for H2 2016 on 23 December 2016.

In pursuance of federal executive authorities’ instructions and taking into account the air transportation market environment, in 2016 following adjustments were made to:

  • Aeroflot Group’s budget for 2016;
  • the list, weights and targets of the KPIs within Aeroflot Group’s Long-Term Development Programme, and the 2016 KPIs for PJSC Aeroflot’s CEO.

Pursuant to the directives of the Russian Government, PJSC Aeroflot’s KPI system embraces financial, economic and industry specific indicators, coupled with bonus disqualification indicators, including:

  • mandatory financial KPIs – Total Shareholder Return (TSR) and ROIC for Aeroflot Group – in line with the KPI Guidelines (Letter of the Federal Agency for State Property Management No. OD-11/22160 dated 26 May 2014);
  • Overall Productivity KPI (Aeroflot Group) – in line with the Russian Government’s Directive No. 6362p-P13 dated 24 October 2013;
  • Share of Supplies from Small and Medium- Sized Businesses, Efficient Energy Use, and Environmental Friendliness KPIs were incorporated into Aeroflot’s KPI System and KPI lists for relevant department heads – in line with the Russian Government’s Directive No. 6362p-P13 dated 24 October 2013;
  • Integrated Innovation Key Performance Indicator (IIKPI) (for Aeroflot Group) – in line with Letter of the Deputy Minister of Economic Development of the Russian Federation No. 3142-OF/D06 dated 24 February 2012 and the Russian Government’s Directive No. 1472p-P13 dated 3 March 2016;
  • Investment Programme Efficiency KPI (for Aeroflot Group) – in line with Directive of the Federal Agency for State Property Management No. PF-11/35029 dated 14 August 2014;
  • KPI used to cancel the management’s bonus (disqualification indicator) – PJSC Aeroflot’s Flight Safety;
  • CASK Reduction KPI – in line with the Russian Government’s Directive No. 2303p-P13 dated 16 April 2015 and Directive No. 4750p-P13 dated 4 July 2016;
  • Share of State-Subsidised Funding in Total Funding Secured KPI – in line with paragraph 2 of Instruction of the Russian Prime Minister Dmitry Medvedev No. AD- P36-4617 dated 11 July 2015 on including the indicator showing investment capital raised in the private equity market.
The list and weights of KPIs for the CEO of PJSC Aeroflot for 2016 were approved by the Company’s Board of Directors on 29 October 2015 (Minutes No. 5) and were updated by the Resolutions of the Board of Directors dated 28 April 2016 (Minutes No. 15) and dated 8 September 2016 (Minutes No. 2). The 2016 KPI targets for the CEO of PJSC Aeroflot were approved by the Board of Directors of PJSC Aeroflot on 24 December 2015 (Minutes No. 9) and updated for 2H 2016 by the Resolution of the Board of Directors of PJSC Aeroflot dated 27 October 2016 (Minutes No. 4).

Target KPIs for PJSC Aeroflot’s CEO for 2016

KPI* Unit 2015 2016Reasons for inconsistencies (2016A vs 2016P)
Weight Plan Actual Performance to plan Weight PlanActualPerformance to plan
Financial and economic (a total of 7 KPIs, weight of 60%)
Total Shareholder Return (TSR) % 5.0% 0.0% 68.9% 1,478.0% 10.0% 89.7% 176% 196.2% Performance of Aeroflot Group’s shares above the market driven by strong results exceeding investor expectations
Return on Invested Capital (ROIC) % 15.0% 15.7% 18.5% 117.8% 20.0% 17.3% 21.1% 122.0% Performance above target net profit
Long-Term Debt / EBITDAR - 5.0% 2.3 1.7 126.1% 5.0% 1.3 1.0 123.1% Early repayment of loans and higher operating profit
Innovative Development Programmes’ Efficiency renamed to Integrated Innovation Key Performance Indicator % 5.0% 80% 95% 118.8% 10.0% 80% 96% 119.7% Praise by the Interdepartmental Committee for Technological Development of the Presidium of the Council under the Russian Federation President for high quality development/ implementation of PJSC Aeroflot’s Innovative Development Programme
Investment Programme Efficiency - 5.0% 3.8 8.7 228.9% 5.0% 6.05 10.22 168.9% 2017 EBITDA growth in line with the forecast due to, among other things, high returns on the 2016 investment projects and lower capex
CASK Reduction % N/A 5.0% 2.0%2.0%100.0%**
Share of State-Subsidised Funding in Total Funding Secured % N/A 5.0% 0%0%100.0%
Industry-specific indicators, including the bonus non-payment (disqualification) indicator (a total of four KPIs, weight of 40%)
Punctuality % 15.0% 87.0% 91.4% 105.1% 5.0% 86.0% 89.2% 103.7% Aeroflot Group’s initiatives to improve punctuality of aircraft departures/ arrivals from/to base/non-base airports
PJSC Aeroflot’s Flight Safety % 20.0% 99.957% 99.978% 104.9% 15.0% 99.957% 99.975% 104.2% Effective flight safety management
Passenger Load Factor % 10.0% 77.1% 78.3% 101.6% 10.0% 81.1% 81.5 100.5% Higher utilisation of aircraft fleet capacity due to redistribution of leisure passenger flows to domestic destinations and higher demand for domestic services
Overall Productivity mn ASK per emp. 15.0% 4.066 4.060 99.8% 10.0% .951*** 4.010 101.5% Higher productivity levels across Aeroflot Group supported by budgetcontrolled growth of work loads and headcount growth optimisation
* 2015 and 2016 KPIs are calculated for Aeroflot Group, except for PJSC Aeroflot’s Flight Safety KPI
** The cost-cutting instruction of the Board of Directors of PJSC Aeroflot for 2016, dated 25 August 2016, and issued in pursuance of the Russian Government’s Directive No. 4750p-P13 dated 4 July 2016, was deemed actually implemented by resolution of the Board of Directors of PJSC Aeroflot.
*** Overall Productivity KPI target does not provide for higher productivity due to the social commitment to take on former Transaero employees. Excluding Transaero staff, the overall productivity growth will stand at 7%.
* 2015 and 2016 KPIs are calculated for Aeroflot Group, except for PJSC Aeroflot’s Flight Safety KPI
** The cost-cutting instruction of the Board of Directors of PJSC Aeroflot for 2016, dated 25 August 2016, and issued in pursuance of the Russian Government’s Directive No. 4750p-P13 dated 4 July 2016, was deemed actually implemented by resolution of the Board of Directors of PJSC Aeroflot.
*** Overall Productivity KPI target does not provide for higher productivity due to the social commitment to take on former Transaero employees. Excluding Transaero staff, the overall productivity growth will stand at 7%.

In 2016, the actual KPI values of PJSC Aeroflot’s CEO exceeded targets as a result of implementation of initiatives to reduce costs and enhance overall productivity, as well as efficient operational management.

The list and weights of KPIs for the CEO of PJSC Aeroflot were approved by the Board of Directors of PJSC Aeroflot on 24 November 2016, and the KPI targets for the CEO of PJSC Aeroflot were approved by the Board of Directors of PJSC Aeroflot on 22 December 2016.

Target KPIs for PJSC Aeroflot’s CEO for 2017

KPI* Weight Unit Plan
Total Shareholder Return (TSR) 10.0% % 13.5%**
Return on Invested Capital (ROIC) 20.0% % 14.9%
Long-Term Debt / EBITDAR 5.0% - 0.93
Integrated Innovation Key Performance Indicator (IIKPI) 10.0% % 80 %
Integrated Innovation Key Performance Indicator (IIKPI) 5.0% - 5.22
CASK 5.0% cent per ASK 4.9***
Share of State-Subsidised Funding in Total Funding Secured 5.0% % 0%
Punctuality 5.0% % 87.0%
PJSC Aeroflot’s Flight Safety 15.0% % 99.957%
Passenger Load Factor 10.0% % 80.0%
Overall Productivity**** 10.0% mn ASK per emp. 4.235
*All KPIs calculated for Aeroflot Group except for PJSC Aeroflot’s Flight Safety.
**The target value assumes 50% of the net profit for 2016 distributed as dividends.
***The target value of 4.9 cent per ASK (the lowest value achieved by Aeroflot Group) is determined in line with the Guidelines for Cost Saving Estimates issued by Federal Agency for State Property Management (Order No. 90 dated 10 March 2016).
****The Overall Productivity target (for Aeroflot Group) is proposed to be +5% of the estimated actual value for 2016, in line with instructions issued by federal executive authorities. The Group’s approved 2017 consolidated budget for Aeroflot Group provides for more aggressive growth in overall productivity, at about 7%.
* All KPIs calculated for Aeroflot Group except for PJSC Aeroflot’s Flight Safety.
** The target value assumes 50% of the net profit for 2016 distributed as dividends.
*** The target value of 4.9 cent per ASK (the lowest value achieved by Aeroflot Group) is determined in line with the Guidelines for Cost Saving Estimates issued by Federal Agency for State Property Management (Order No. 90 dated 10 March 2016).
**** The Overall Productivity target (for Aeroflot Group) is proposed to be +5% of the estimated actual value for 2016, in line with instructions issued by federal executive authorities. The Group’s approved 2017 consolidated budget for Aeroflot Group provides for more aggressive growth in overall productivity, at about 7%.

The 2017 KPIs for PJSC Aeroflot’s CEO reflecting PJSC Aeroflot’s KPI system were amended versus 2016 to replace the CASK Reduction KPI (for Aeroflot Group) with the CASK KPI (for Aeroflot Group). Aeroflot Group optimised its operations to achieve the Group’s CASK target and provide for average annual cost savings of 10% since 2011. Aeroflot Group ranks first among peers by cost savings.

Remuneration for the Board of Directors and the Management Board in 2016

The Annual General Meeting of Shareholders held on 27 June 2016 resolved to pay members of PJSC Aeroflot’s Board of Directors the total remuneration of RUB 44,876,254 for 2015, with additional RUB 24,744,515 paid under the Stock Option Plan (in 2015, the remuneration amounted to RUB 23,603,280 with no payments under the Stock Option Plan). In 2015, PJSC Aeroflot’s market capitalisation grew by 68.9% (following the calculation method applicable for the Plan) and ranked first among peers by growth rate. The upward trend continued in 2016, with capitalisation growing by 172.5% – the highest growth among airlines used as benchmarks for the incentive programme.

The total remuneration accrued to members of PJSC Aeroflot’s Management Board for 2016 stood at RUB 598,825,846 (RUB 362,594,270 in 2015).

Remuneration for members of PJSC Aeroflot’s Board of Directors paid in 2016

Member of the Board of Directors Remuneration, RUB Remuneration under the Stock Option Plan, RUB
Kirill Androsov 4,698,178 3,432,907
Mikhail Alekseev 3,958,785 2,492,174
Igor Kogan 3,123,482 1,429,412
Igor Kamenskoy 4,428,482 3,089,771
Marlen Manasov 3,958,785 2,492,173
Roman Pakhomov 4,453,482 3,121,579
Dmitry Peskov 3,958,785 2,492,174
Vitaly Saveliev 3,618,907 -
Dmitry Saprykin 3,808,785 -
Vasiliy Sidorov 4,249,798 2,862,430
Yury Slyusar 910,000 1,157,798
Sergey Chemezov 3,708,785 2,174,097
TOTAL 44,876,254 24,744,515

Remuneration for members of PJSC Aeroflot’s Management Board paid in 2016

Remuneration type Amount, RUB
Salary and additional compensations 365,181,962
Bonuses 233,643,884
TOTAL 598,825,846

Directors and Officers Liability Insurance

As part of its efforts to provide insurance protection, PJSC Aeroflot has signed an agreement for liability insurance of the Company’s directors and officers, as well as representatives of PJSC Aeroflot on governing bodies of its subsidiaries, providing for reimbursement for loss caused to third parties, arising from claims filed by third parties against the insured due to their wrongful acts committed in their management roles. A securities claim filed against the Company also constitutes an insured event. The amount of cover is USD 100 million per claim and in total. The insurance period is one year. The total insurance premium is USD 99,000.

Regulation of possible conflicts of interest within PJSC Aeroflot’s governing bodies

Conflicts of interest at PJSC Aeroflot are regulated by the following documents:

  • Corporate Conduct Code of PJSC Aeroflot;
  • Procedure for reporting to the employer on personal interest that leads or may lead to a conflict of interest;
  • Aeroflot Group’s Anti-Corruption Policy.

Internal Control and Audit

Aeroflot Group has in place a centralised internal audit function, headed by the Director of the Internal Audit Department who functionally reports to the Board of Directors of PJSC Aeroflot and to the Audit Committee of the Board of Directors. Depending on the scale of their business and related risks, the Company’s controlled entities arrange for internal audit to be conducted by either PJSC Aeroflot’s Internal Audit Department or the internal audit unit or permanent internal auditor of their own. Heads of such units and internal auditors of controlled entities functionally report to the Direct or of the Internal Audit Department of PJSC Aeroflot.

The internal control systems are designed to maximise the Aeroflot Group’s transparency, economic efficiency, and compliance with the applicable laws.

Audit Committee and its role

The Board of Directors of PJSC Aeroflot approves internal documents regulating its general policy on risk management and internal controls and establishes principles of and approaches to the risk management and internal control system within PJSC Aeroflot.

The Audit Committee of PJSC Aeroflot’s Board of Directors enhances supervision over financial and business operations to optimise capex, protect shareholder interests, and ensure the growth of PJSC Aeroflot’s assets.

Coordinating with the PJSC Aeroflot’s executive bodies, the Revision Committee and the Internal Audit Department, the Audit Committee prepares and submits for consideration by the Board of Directors recommendations and proposals to:

  • develop and provide for the implementation of the business plan;
  • establish and provide for compliance with effective internal controls;
  • provide for effective and transparent governance at PJSC Aeroflot, including prevention and termination of abuse by executive bodies and officers;
  • prevent, identify, and limit conditions giving rise to financial and operating risks;
  • provide for reliability of financial data used or disclosed by PJSC Aeroflot;
  • recommendations and proposals on other matters, as resolved by the Board of Directors of PJSC Aeroflot.

Matters concerning assessment of risk management and internal controls based on the reports by the Company’s Internal Audit Department are regularly discussed by the Audit Committee of the Board of Directors. When conducting audits, the Internal Audit Department draws conclusions on the performance of the risk management and internal controls for each audited entity. To further improve risk management across key business processes within PJSC Aeroflot, the Audit Committee of the Board of Directors also receives regular reports on the Company’s key risks.

PJSC Aeroflot has in place a practice of confidential reporting to the Board of Directors (the Internal Audit Department), its corporate Hotline. The Hotline functions on the principles of confidentiality and anonymity. All received reports are reviewed by the Internal Audit Department.

Results of internal and external audit assessment by the Audit Committee for 2016

In 2016, the Audit Committee of the Company’s Board of Directors reviewed, on a quarterly basis, the day-to-day operations of the Internal Audit Department and the results of conducted audits. The 2016 action plan of the Internal Audit Department was approved by the Audit Committee. The Director of the Internal Audit Department held regular meetings with the Audit Committee. The Committee reviewed, approved, and gave a positive assessment of the Internal Audit Department’s performance in 2016.

In 2016, the Company also performed internal assessment of its internal audit function quality, supported by PricewaterhouseCoopers.

The Audit Committee reviews, on an annual basis, the results of external audit of PJSC Aeroflot’s accounting (financial) statements prepared under the RAS, and, on a quarterly basis, of the consolidated financial statements prepared under the IFRS. Opinions issued by external auditors in 2016 received a positive assessment by the Audit Committee.

Internal Audit Department

The Internal Audit Department is established by the Resolution of the Board of Directors of PJSC Aeroflot dated 1 July 2009. In its operation, the Department is guided by the International Standards for the Professional Practice of Internal Auditing and the underlying principles of independence, objectivity, proficiency, and professional care. The Director of the Internal Audit Department functionally reports to the Board of Directors of PJSC Aeroflot and to the Audit Committee of the Board of Directors.

The purpose of the Internal Audit Department is to support: economic efficiency and solid performance of PJSC Aeroflot; achievement of financial and operational KPIs; protection of assets; fair disclosures of the Company’s financial and operational data; compliance with the applicable laws.

The Internal Audit Department strives to assist PJSC Aeroflot in achieving its strategic goals through applying a holistic consistent approach to assessment and improvement of risk management, internal control, and corporate governance processes.

In 2016, the Board of Directors of PJSC Aeroflot approved a new version of the Regulations on the Internal Audit Department, developed together with the Audit Committee of the Board of Directors and CJSC PricewaterhouseCoopers Audit. These Regulations are in line with the requirements set out in the Guidelines of the Federal Agency for State Property Management, the International Standards for the Professional Practice of Internal Auditing, the Code of Ethics for Internal Auditors, and the Corporate Governance Code approved by the Board of Directors of the Bank of Russia on 21 March 2014.

In the reporting period, the Internal Audit Department conducted a total of 60 audits of the Company’s units and subsidiaries to identify potential risks and assess efficiency in PJSC Aeroflot’s key business lines and processes. Audit findings enabled the management to come up with proposals on further improvements in the Company’s key operations, with the majority of them successfully implemented by the management.

The Internal Audit Department regularly reports to the Audit Committee of PJSC Aeroflot’s Board of Directors on its progress in the implementation of the annual action plan, audits made, and application of the Department’s recommendations.

Revision Committee

The Revision Committee supervises PJSC Aeroflot’s financial and business operations to provide reasonable assurances of the Company’s business fully meeting the interests of its shareholders and requirements set forth in the applicable laws of the Russian Federation. In its operation, the Revision Committee is guided by PJSC Aeroflot’s Articles of Association and the Regulations on the Revision Committee.

As prescribed by the respective Regulations, the Revision Committee checked for accuracy the information contained in the RAS-based annual financial statements for 2016, including the Income Statement and other documents submitted to the General Meeting of Shareholders for review. The Committee benchmarked the metrics of the Company’s financial and business operations in 2012–2016 and their compliance with the applicable laws in 2016.

Based on these audits, the Revision Committee prepared and approved a relevant report containing the balance sheet and financial performance assessment results. The Committee’s report reflects changes in the balance sheet structure and key change drivers, assessing a wide range of the Company’s financial and business operations, including risk management and internal controls, and compliance. The conducted audits and checks enabled the Committee to provide recommendations meant to improve the Company’s performance and thereby increase earnings and cut costs.

In its report, the Revision Committee passed a positive opinion on the accuracy of the Company’s financial statements citing no material grounds to disprove the information provided in the Balance Sheet and Income Statement of PJSC Aeroflot as at 31 December 2016. The report also provides the Committee’s recommendations on the Company’s financial and business performance.

The General Meeting of Shareholders of 27 June 2016 (Minutes No. 38 dated 30 June 2016) elected members of PJSC Aeroflot’s Revision Committee as follows:

  • Igor Belikov – Head of the Russian Institute of Directors;
  • Marina Mikhina – Advisor to the Head of the Federal Agency for State Property Management;
  • Ekaterina Nikitina – Advisor to the President of Oil Transporting Joint-Stock Company Transneft;
  • Sergey Ubugunov – Head of Division at the Ministry of Transport of the Russian Federation;
  • Vasily Shipilov – Deputy Head of Division at the Ministry of Economic Development of the Russian Federation.

The General Meeting of Shareholders also resolved to pay members of the Revision Committee the total remuneration of RUB 2,441,574.

Remuneration for members of PJSC Aeroflot’s Revision Committee paid in 2016

Member of the Revision Committee Remuneration, RUB
Igor Belikov 912,984
Marina Mikhina 115,638
Ekaterina Nikitina 706,476
Alexei Shchepin 706,476
Pavel Fradkov -
TOTAL 2,441,574

External audit

Each year, PJSC Aeroflot engages external auditors to conduct independent assessment of its financial statements. External auditors are engaged through public tenders which ensure unbiased selection of the successful bidder based on auditing experience, the proposed audit scope and timeline, and the track record in the Company’s industry. The audit firm, which won the public tender for conducting annual audit of the Company’s accounting (financial) statements, is recommended by the Board of Directors for approval by the Annual General Meeting of Shareholders in accordance with the applicable laws.

The Annual General Meeting of Shareholders approved AO BDO Unicon (Minutes No. 38 dated 30 June 2016) as the Company’s external auditors to provide independent review of PJSC Aeroflot’s 2016 accounting statements prepared under the Russian Accounting Standards (RAS).

The total fees paid to AO BDO Unicon for its audit and non-audit services in 2016 amounted to RUB 8,853 thousand (including VAT); in 2016, AO BDO Unicon also received payment of RUB 2,625 thousand for non-audit services provided in 2015. The key scope of services rendered under the 2016 contract included audit of interim and annual statements, development of regulations, preparation of reporting recommendations, and tax advisory services.

The AGM approved JSC PricewaterhouseCoopers Audit (Minutes No. 38 dated 30 June 2016) as the auditor of the Company’s consolidated financial statements for 2016 prepared under the International Financial Reporting Standards (IFRS).

The total fees paid to PricewaterhouseCoopers International Limited for audit, audit-related, and other services for 2016 amounted to RUB 93,518 thousand (excluding VAT). The key scope of services rendered under the 2016 contract included general review of the IFRS interim and condensed consolidated financial statements for 6M and 9M 2016, audit of the IFRS consolidated financial statements for 2016, services on developing the segmentation of PJSC Aeroflot's target customers, and services on standardisation and automation of the Company’s business processes.

Anti-Corruption Policy

Aeroflot Group openly states its rejection of unfair and illegal business practices and takes additional voluntary anticorruption commitments recommended by international and Russian laws.

Aeroflot is currently working on the implementation of corporate anti-corruption programmes. The Company operates on the basis of public anticorruption principles and measures, transparent and open procurement processes, and rejection of illicit benefits, creates effective feedback channels, and fights corruption by sharing information. In 2015, PJSC Aeroflot signed up to the Anti-Corruption Charter of the Russian Business.

On 21 December 2015, the Company’s Board of Directors (Minutes No. 8) approved Aeroflot Group’s Anti-Corruption Policy designed to create a uniform approach to adhering to Federal Law No. 273-FZ On Countering Corruption dated 25 December 2008, which provides for development and adoption of measures to prevent and counter corruption.

PJSC Aeroflot has in place a procedure for reporting on corrupt practices or conflicts of interest.

The Company also has a roadmap for anti-corruption risk management and internal control processes at PJSC Aeroflot, approved by its Board of Directors. We are also working to integrate the Guidelines on anti-corruption risk management and internal controls in partially state-owned joint-stock companies, approved by the Federal Agency for State Property Management 2 March 2016.

From August to September 2016, the Internal Audit Department conducted audit (assessment) of the performance of the Company’s anti-corruption risk management and internal controls, followed by development and implementation of measures to further enhance these processes.

As part of the effort to integrate the Guidelines on anti-corruption risk management and internal controls in partially state-owned joint-stock companies, approved by the Federal Agency for State Property Management on 2 March 2016, the Company introduced the role of Deputy Director of the Economic Security Department responsible for compliance management.

In 2016, we developed and introduced a number of anti-corruption executive documents and regulations, as well as updated the existing regulations, in particular:

  • updated the Corporate Conduct Code of PJSC Aeroflot;
  • developed the procedure for reporting by PJSC Aeroflot’s employees on gifts received at hospitality events, during business trips, and at other formal events attended by them as part of their roles or duties, handing such gifts over, evaluating, disposing of (purchasing), and crediting the resulting proceeds from disposal (purchase);
  • set up a committee to receive and evaluate gifts given to PJSC Aeroflot’s employees;
  • developed a standard Anti-Corruption Clause to be incorporated into contracts and agreements with PJSC Aeroflot’s counterparties, and introduced its application procedure.

PJSC Aeroflot set up a dedicated incident reporting channel – okb@aeroflot.ru, which is described on the Company’s website. The Company guarantees confidentiality when receiving and reviewing incident reports and no negative consequences for individuals who raised their concerns in good faith.

Information Disclosure

To enhance its corporate transparency and equity story, the Company strives to ensure timely disclosure of complete and accurate material information on its operations. The Company is guided in its information disclosure by requirements and recommendations of federal laws, the Bank of Russia, Russian and foreign trading hubs where the Company’s securities are listed, as well as corporate documents such as the Regulations on the Corporate Information Policy and the Regulations on Providing Access to Insider Information.

The main objectives of PJSC Aeroflot’s corporate information policy are to:

  • ensure compliance with the Russian law and regulatory requirements of the securities market;
  • enhance information transparency and confidence in communications with the Company’s shareholders, security holders, investors, creditors, and other stakeholders, and ensure protection of their rights and their legitimate interests;
  • focus on fully meeting the demand of shareholders, investors, professional security traders, and other stakeholders for fair disclosures of the corporate and business information;
  • secure shareholders’ rights to receive material information required to exercise their corporate governance rights;
  • maintain professional and trust-based relationships of the Company with mass media providing for free information sharing without prejudice to the rights and legitimate interests of shareholders, investors, and other parties;
  • protect insider information.

Information on PJSC Aeroflot is promptly communicated to the widest possible audience through publication of such messages, press and news releases in the news feed updated in real time on PJSC Aeroflot’s disclosure page (http://disclosure. skrin.ru/disclosure/7712040126) and in the IR section of Aeroflot's website (http://ir.aeroflot.com).

For more details on information disclosure see the Investor Relations section.