Message from the General Director

Message from the General Director

Dear Shareholders, Partners and Colleagues,

Quality, speed and affordability of transport services have always been the key indicators for FPC to measure its performance and differentiate against competition. The initiatives we implemented in 2015 have confirmed that we stay true to these core values. The Company’s results have provided a solid foundation to support further growth and pursue ambitious projects as we seek to better serve our passengers. This was made possible by high levels of cooperation, alignment, and teamwork across FPC’s entire team.

Despite the fact that the political and economic environment over recent years has differed from the assumptions on which FPC Development Strategy was based, the management decisions taken by FPC management have ensured the successful achievement of break-even level in 2015. The Company generated RUB 181.2 billion in revenue and RUB 141 million in net profit. More importantly, in 2015, FPC carried 91.3 million passengers.

The 70th anniversary of the Victory in the Great Patriotic War Day (WWII) was a milestone event in 2015, with nationwide celebrations. The Company was actively involved in a range of activities organised to mark the event, with long-distance trains carrying more than 6,000 war veterans free of charge over the May holidays, and special Trains of Memory running across the railway network. We will continue to focus on support for war veterans in the year ahead.

During the reporting year, we made a significant progress in upgrading our rolling stock, including trains running on international routes, spending RUB 16.5 billion, or 92.4% of the total capex, towards that goal. We have also significantly expanded the geography of double-decker train operations, launching four new routes — from Moscow to Saint Petersburg, Kazan, Voronezh, and Samara. Regional train services have also been enhanced as part of our “Daytime Express” Programme. In June 2015, we launched Strizh high-speed trains, significantly improving transport services between Moscow and cities in the Volga region.

I am pleased to note that our customers have highly appreciated the quality of these new services — in 2015, about 1.5 million passengers enjoyed the comfort of a double-decker journey, and over 600,000 passengers were carried by Strizh high-speed trains. Overall, in 2015, day trains carried about 8.2 million passengers, a 40% increase year-on-year.

In 2016, we will continue our efforts to replace and upgrade the rolling stock, focusing on more comfortable carriages and enhanced customer experience, and paying close attention to ensuring a barrier-free environment for passengers with reduced mobility. We will also launch new routes serviced by double-decker trains, growing our fleet of double-deckers by 70.

In 2015, passengers were offered new multimodal routes and made our car transportation service using the Company’s car carriers even more convenient to use.

To increase affordability of rail transport services and attract more passengers we employed a range of marketing tools. FPC was for the first time authorised to use flexible ticketing for third-class and common carriages. In 2015, over 2.3 million people benefited from this attractive offer. In 2016, we expect to cover 95% of the deregulated domestic segment with the dynamic pricing system as more train services will be included into the programme scope.

RZD Bonus Loyalty Programme achieved the milestone of 1.5 million cardholders; a corporate loyalty programme was launched; and the Student Card project was developed. Tellingly, in 2015, RZD Bonus was recognised as the Best Loyalty Programme by a Transportation Company. We expect RZD Bonus Loyalty Programme to reach 2.2 million cardholders by the end of the year.

In 2015, online sales channels accounted for 33% of total ticket sales. Going forward, we expect the numbers of customers using this service to increase significantly — we forecast the share of online sales to grow to 45% by the year-end.

RZD Holding has declared 2016 the Year of the Passenger, which testifies to the particular focus made on passenger services. A wide range of initiatives have been approved, with FPC taking the lead on almost half of them. The Company has many new, ambitious goals to pursue as it seeks to further improve the quality and affordability of its services to passengers.

I am confident that 2016 will be another year of dynamic growth for the Company, with enhanced efforts to roll out advanced technologies, innovative approaches, and best management practices.

Petr Ivanov