AF Air FranceKLM

May 5, 2023

FIRST QUARTER 2023

• Strong demand with 19.7m passengers onboard, up 35% versus 2022
• Group revenues at €6.3bn, an improvement of €1.9bn (+42%) compared to last year thanks to continuous strong market demand

• Group unit cost1 per ASK stable at +0.7% versus 2022
• Operating result at -€0.3bn with operating margin at -4.8%, above 2022 level (-7.9%)
• Positive Adjusted operating free cash flow at €0.7bn and solid cash at hand at €9.7bn
• Net debt down by €0.9bn euros, compared to end of 2022
• Continued deleveraging: Net debt/EBITDA ratio at 1.5x versus 1.8x end of 2022

Commenting on the results, Mr. Benjamin Smith, Group CEO, said:” In the first quarter, Air France-KLM further capitalized on the recovery momentum in the airline industry. I’d like to thank all my colleagues who have worked tirelessly throughout the quater to ensure we continue on our path to sustained profitability. The Group continued to show strong revenue growth as well as robust cash flow generation thanks to the very encouraging summer ticket sales. This is paving the way for a busy holiday season across our global network, which all of our teams are actively gearing upfor. I am also pleased that we have now fully repaid all State aid, which releases us from the associated restrictions and gives us back our full strategic autonomy. We now stand on our own feet. Looking ahead, we remain focused on further strengthening our balance sheet and delivering the transformation efforts that will enable us to continue to improve our competitiveness while accelerating our decarbonization efforts.“

Operating result improved by revenue growth

In Q1 2023, revenues were up 40.6% against a constant currency compared to Q1 2022, mainly driven by a higher capacity and a higher passenger load factor. Operating result improved compared to last year by €44 million. The operating margin improved against a constant currency by 3.4 points to -4.8%. Last year, the operating result benefitted from a €210 million furlough contribution. Corrected for this furlough contribution, the improvement of the operating result amounted to €254 million. The adjusted operating free cash flow amounted to €683 million, an improvement of €53 million compared to last year, driven by strong summer ticket sales. The net debt ended at €5.5 billion, down €0.9 billion compared to year end 2022.

In the first quarter 2023, Air France-KLM welcomed 19.7 million passengers which is 35.3% above the previous year. As capacity increased by 19.8% and traffic grew by 38.9%, the load factor increased by 11.8 points compared to last year. Group passenger unit revenue per ASK increased by 35.3% against a constant currency compared to last year. This increase was driven by both load factor and yield.

Group unit cost per ASK at constant fuel and constant currency is up 5.2% versus last year due to €210 million euro furlough contribution last year and inflationnary pressure on costs in 2023. The inflation started last year after the outbreak of the Ukraine war and is seen in several cost categories such as staff costs, handling costs and general expenses. Corrected for last year’s furlough contribution, the Group unit cost per ASK against a constant currency and constant fuel price increased slightly by 0.7%.

Air France-KLM is now relieved from Covid-19 State aid support and related restrictions

• In January 2023, Air France-KLM issued Sustainability-linked Bonds for a total aggregate amount of €1.0 billion.
• In March 2023, the Group fully redeemed the outstanding €2.5 billion bank loan guaranteed by the French State (PGE) by using the proceeds of the Sustainability-linked Bonds and €1.5 billion liquidity.
• Also in March 2023, Air France-KLM repaid and refinanced €300 million of the €600 million outstanding perpetual hybrid bonds held by the French State.
• In April 2023, Air France-KLM and Air France combined and KLM implemented two new Sustainability Linked Revolving Credit Facilities (RCF) for a total amount of €2.2 billion.
• This new RCF for KLM replaced both the remaining direct loan granted to KLM by the Dutch State and the credit facility guaranteed by the Dutch State, both of which were cancelled by KLM. Pursuant to this cancellation, conditions attached to this aid no longer apply.
  • On April 19th, 2023, Air France-KLM has fully repaid, the €300 million remaining French State hybrid perpetual bonds and paid the required compensation of the French State for the shares subscribed in April 2021 without change required of the capital ownership. The Group has therefore refinanced €407 million with a new issuance of hybrid perpetual bonds with the French State, without any restrictions attached, resulting in a full exit of the French Recapitalization State Aid under the EU Covid-19 Temporary Framework.

As announced during the Full Year 2022 results presentation, Air France-KLM intends to restore its balance sheet, aside from net profit generation, by means of non dilutive initiatives such as quasi-equity financing instruments (similarly to the one raised by Air France on a pool of spare engines in July 2022), and/or straight hybrid bonds.Air France-KLM announced yesterday that it was entering into exclusive discussions with Apollo Global Management for a €500 million quasi equity financing into an affiliate owning Engineering and Maintenance (MRO) assets. This transaction would mark a further step towards the reinforcement of the Group’s equity. Meanwhile, the Group received several non-binding offers on quasi equity financing supported by the Loyalty Program. Discussions are still ongoing with potential investors. 

2023 OUTLOOK

CapacityThe Group expects the capacity in Available Seat Kilometers for Air France-KLM Group including Transavia at an index of:

• 90%-95% for the second quarter of 2023
• circa 95% for the third quarter of 2023
• above 95% for the fourth quarter of 2023
• circa 95% for the full year 2023

Transavia will contribute to this growth and expects to be at circa 135% for the Full Year 2023.All indices compared to the respective period of 2019.

Unit costThe Group expects for full year 2023 a stable unit cost, against a constant fuel price, constant currency and excluding furlough contribution, compared to FY 2022.

Capital expenditures (Capex)Full year 2023 Net Capex spending is estimated at 3.0 billion euros.

BUSINESS REVIEW

Network: Significant improvement in revenues and operating result

Compared to the first quarter 2022, total revenues increased by 41.9% at constant currency to €5,575 million. The operating result improved by €160 million and amounted to -€149 million. The increase in revenues was driven by the network passenger business while the Cargo revenues declined compared to an exceptionally strong first quarter last year.

Strong yields and load factors on our diversified network

First quarter 2023 capacity in Available Seat Kilometers (ASK) was 17.9% higher than last year and at 89% of 2019 first quarter level, which is at the same level as the Group’s outlook provided during the Full Year 2022 results presentation, circa 90% versus 2019.

Unit revenue per ASK increased by 38.3% at a constant currency thanks to strong demand which resulted in an increase in load factor of 11.5 points and a yield increase of 21% compared to last year.

During the first quarter we observed the following trends per area compared to the first quarter last year:

• North Atlantic: Demand recovery continued to be driven by point of origin North America with a positive impact on yield. Corporate traffic recovery maintained at index ~75/80 vs pre-Covid levels and premium cabins load factor performing well.
• Latin America: Strong performance with on average a further 33% increase compared to Q1 2022. Load factor stood at 90% supporting the high unit revenue levels.
• Asia & Middle East: The performance benefited from additional capacity with the reopening of China (Beijing & Hong Kong). Good performance with strong yields mainly for Greater China, Japan and Korea driven by the premium cabins. Compared to last year, the yield increase is more limited than in the other areas due to exceptional high yields in Asia last year as a result of very limited capacity.
• Caribbean & Indian Ocean: Capacity has been reduced compared to last year which was already above pre-Covid level. Yield environment was positive given the year over year increase of 27%.
• Africa: Strong performance in line with the previous quarter, driven by West and Central Africa for Air France and by East & South Africa for KLM. Yields were maintained at good levels, mainly thanks to the performance in premium cabins by West and Central Africa.
• Short and Medium-haul: Better yield trends and higher load factor partly offset for KLM and fully for Air France the revenue loss linked to capacity decrease.

Compared to the end of 2022 the Group added one B787-10, five B737-800, five A220-300 and one Embraer 195-E2. The following aircraft left the fleet, two B737-700, one A321, two A319 and one CRJ-1000, as a result the fleet increased by six aircraft.

In 2023 and beyond the Group will continue to invest in new generation aircraft in order to improve its economic and environmental performance. During the second half of 2023, the first Airbus A320neo/A321neo will be delivered.

Cargo: Revenues and unit revenues down compared to an exceptionally strong first quarter last year

Due to the resumption of passenger travel, belly capacity improved and resulted in an increase in Available Ton Kilometers of 10.7% versus the first quarter of 2022. After the first quarter last year the demand for air cargo decreased due to slower growth of global trade and the partial rebound of sea freight. The first quarter last year still showed an exceptionally strong demand and therefore traffic decreased year over year by 11.8%. The yield declined as well resulting in a decrease in unit revenue per Available Ton Kilometer of almost 35% against a constant currency. Total revenues dropped by 26.4% against a constant currency versus the same quarter last year.

At the beginning of April, Air France-KLM and CMA CGM announced the effective launch of the long-term strategic air cargo partnership they made public in May 2022. This partnership will have an initial duration of 10 years and will see Air France-KLM Martinair Cargo and CMA CGM Air Cargo combine their complementary cargo networks, full freighter capacity and dedicated services to build an even more compelling offering thanks to their unrivalled knowhow and global footprint.

Transavia: Significant increase in capacity and traffic

Compared to the first quarter 2022, the demand in leisure traffic in Europe and North Africa continued to grow. The capacity increased by 38.5%, traffic increased by 63%, and the number of passengers increased by 49.7% resulting in a load factor 13.7 points above 2022. As the flown capacity in the first quarter last year was rather limited due to the impact of Omicron virus, the routes that were operated showed outstanding yields. Therefore the yield decreased year over year, although the unit revenue per ASK increased thanks to the higher load factor.

The operating result stood at -€172 million and decreased by €80 million compared to the same quarter last year. This decrease was caused by higher costs, mainly related to a higher fuel price, an increase in handling costs and partly due to the furlough contribution last year. The operating result was also impacted by Air Traffic Control strikes in France and grounded aircraft in the Netherlands.

The fleet of Transavia reached 104 aircraft by the end of the quarter.

Maintenance business: Operating result slightly positive

The Maintenance operating result stood at €15 million, a decrease of €32 million against a constant currency caused by increase in costs. The main cost categories increased relatively more than the revenue increase. Revenue growth was hampered by supply chain disruption, in particular on the GE90 engine. Staff costs increased mainly due to the furlough contribution last year.

Total revenues increased by 11.4% compared with the same quarter last year while third party revenues increased by 24.4% and 16.9% at constant currency, showing a strong recovery.

The operating margin stood at 1.7%, which is 3.9 point at constant currency lower than the operating margin in the first quarter 2022.

Adjusted operating free cash flow at €0.7 billion leading to a Net debt/EBITDA ratio at 1.5x

The Group generated an adjusted operating free cash flow in the first quarter of €0.7 billion driven by strong summer sales, which is €53 million higher than last year.

Acceleration in revenue generation for both airlines

Air France Group

KLM Group

NB: Sum of individual airline results does not add up to Air France-KLM total due to intercompany eliminations at Group level

******

The results presentation is available at www.airfranceklm.com on May 5, 2023 from 7:00 am CET.

A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on May 5, 2023, at 08.15 am CET.

To connect to the conference call, please dial:          

• France: Local +33 (0)1 70 72 25 50
• Netherlands: Local +31 (0) 20 703 8211
• UK: Local +44 (0)330 165 3655
• US: Local +1 323-994-2093

Confirmation code: 9880361

Income Statement

* Restated figures as the expense corresponding to the obligation to surrender quotas of the period have been integrated in “Carbon emission” coming from “Other income and expense”

Consolidated Balance Sheet

* Free CO2 quotas allocated by the State and the ones purchased on the market recognized as “intangible assets” are now disclosed in the line “other assets”Statement of Consolidated Cash Flows from 1 January until 31 March

* Restated figures include the change in accounting policy regarding CO2 quotas moving from “net cash flow used in investing activities” towards “net cash flow from operating activities”Return on capital employed (ROCE)

* Restated figures include the change in accounting principles for CO2 quotas

Net debt

Adjusted operating free cash flow

* Restated figures include the change in accounting policy regarding CO2 quotas moving from “net cash flow used in investing activities” towards “net cash flow from operating activities”

Bridge from EBITDA to Financial capacity

Unit cost: net cost per ASK

(1) The capacity produced by the transportation activities is combined by adding the capacity of the Passenger network (in ASK) to that of Transavia (in ASK).

Group fleet at 31 March 2023

FIRST QUARTER 2023 TRAFFIC

Passenger network activity*

* Air France and KLM

Transavia activity        

Total group passenger activity**

** Air France, KLM and Transavia

Cargo activity

Air France activity

KLM activity

1 Against a constant currency and constant fuel price and excluding furlough2 Change versus 31 Dec 2022

Attachment

• AFKL_Q1_2023_Results_Press_release

Air FranceKLM (EU:AF)
Graphique Historique de l'Action
De Août 2023 à Sept 2023

Air FranceKLM (EU:AF)
Graphique Historique de l'Action
De Sept 2022 à Sept 2023