Air France-KLM SA (AFRAF) Q4 2022 Earnings Call Transcript

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Air France-KLM SA (OTCPK:AFRAF) Q4 2022 Earnings Conference Call February 17, 2023 2:30 AM ET

Company Participants

Benjamin Smith - CEO

Steven Zaat - CFO

Marjan Rintel - CEO, KLM

Anne Rigail - CEO, Air France

Conference Call Participants

Jarrod Castle - UBS

Ruxandra Haradau-Doser - Kepler Cheuvreux

Satish Sivakumar - Citigroup

Jaime Rowbotham - Deutsche Bank

Alexander Irving - Bernstein

Stephen Furlong - Davy

James Hollins - BNP Paribas

Sumit Mehrotra - Societe Generale

Harry Gowers - JPMorgan

Johannes Braun - Stifel Europe

Achal Kumar - HSBC


Good morning, and invited to nan Air France-KLM Conference Call. Today's convention is being recorded.

At this time, I would for illustration to move nan telephone complete to Ben Smith, CEO; and Stevens Zaat, CFO. Please spell ahead, sir.

Benjamin Smith

Good morning, and convey you for joining america for this position of nan Air France-KLM results for nan afloat twelvemonth of 2022. I americium present pinch our CFO, Steven Zaat; CEO of KLM, Marjan Rintel; and our CEO of Air France, Anne Rigail. They are fresh to return your questions astatine nan extremity of this presentation.

I'll commencement by presenting nan highlights of nan year, past I will springiness nan level to Steven for a elaborate position of our results and nan outlook for nan twelvemonth to come. Then we'll beryllium unfastened to reply your questions.

First and foremost, I'd for illustration to definitive my acknowledgment and congratulations to each our colleagues crossed each of our airlines and business units. Their committedness has made nan capacity of this twelvemonth genuinely remarkable.

Before driving into nan Group's performance, let's commencement by looking astatine nan large image of nan hose manufacture astatine a macro level. The chart connected Slide 3 shows nan improvement of Air France-KLM's capacity since January 2020 compared to that of our main competitors IAG and Lufthansa Group arsenic good arsenic nan world average.

Air France-KLM has led nan capacity restoration faster and stronger than its competitors and this has been imaginable because we person amended anticipated nan betterment successful aerial recreation and we were good prepared for nan return of our customers.

Despite volatile marketplace conditions, successive waves of COVID-19 variants and exceptional geopolitical conditions, we've gradually and steadily accrued our capacity to champion accommodate a surging demand. As I mentioned before, this request has put nan full hose manufacture nether unit causing galore tensions successful nan worth concatenation for cardinal manufacture players and airdrome work providers successful particular, past summer.

Despite these operational difficulties crossed our world network, we stayed very adjacent to our customers, anticipated disruptions arsenic overmuch arsenic we could and were capable to limit nan number of precocious cancellation.

Turning connected now to Page 4. In summation to being 1 of nan astir move hose groups successful nan betterment period, we person besides worked difficult connected our profitability to effort and span nan spread pinch our competitors. The chart connected this descent shows that backmost successful 2019, we were almost 2x little profitable than our European peers, but besides than nan mean of nan world hose industry.

But nan situation has reshuffled nan cards and nan latest IATA forecast show a awesome woody of disparities successful nan betterment crossed nan manufacture pinch North American and European carriers astatine nan forefront of nan betterment led by a move environment.

Even much importantly during this period, Air France-KLM managed to adjacent its profitability spread pinch its European peers generating a 2022 EBIT separator adjacent to our competitors according to nan forecast. This promising capacity is fundamentally nan consequence of nan heavy translator we person been implementing passim each our airlines and businesses complete nan past fewer years.

On to Slide 5, each successful all, Air France-KLM delivered a very beardown group of results successful 2022, making it a caller reference twelvemonth for our group. We person welcomed almost doubly arsenic galore passengers successful 2022 arsenic successful 2021, 83 cardinal passengers had almost doubled our gross compared to past year, each nan measurement up to €26 cardinal This exceptional commercialized momentum coupled pinch beardown costs subject and nan gains generated by our translator scheme enabled america to grounds an operating consequence of €1.2 cardinal supra its 2019 level earlier that pandemic.

Our beardown operational capacity and a coagulated rate travel procreation allowed america to station a affirmative nett consequence of much than €700 cardinal which will lend to nan further strengthening our equilibrium sheet. We've besides reduced our nett indebtedness by €1.9 cardinal bringing our nett indebtedness to EBITDA ratio to 1.8% -- sorry, 1.8x, while our rate position remains very coagulated pinch €10.5 cardinal rate astatine hand.

Moving connected now to Slide 6. I'd for illustration to springiness you an update now connected our rider web this year. The betterment of aerial recreation request is reflected successful our indicators, which are a very affirmative trajectory passim nan twelvemonth for nan Group's load factors which were supra 2019 levels successful our premium cabin.

Q4, though our wide firm postulation is astatine an index, 62 versus Q4 2019, it has proven to beryllium resilient connected our agelong haul markets aliases continues to recover. Also, and observed successful nan past fewer months, precocious output leisure request remained beardown and contributed successful our beardown premium compartment load factors.

Meanwhile, nan capacity acceleration tin beryllium recovered crossed each levers wrong nan Group specified arsenic first revenues from partnerships person accrued by 1.6 points compared to what it was successful 2019. Second, ancillary revenues person gone up by 7% compared to 2019 levels now astatine €800 cardinal and overmuch person been achieved acknowledgment to a very elastic and reactive web and resources allocation strategies that were put successful spot passim nan year.

Slide 7, to conclude, let's now return a look astatine nan achievements of our activities beyond our rider networks. Transavia continued to build connected its momentum pinch capacity good supra 2019 levels pinch nan fleet approaching 100 craft and much than 40 caller destinations compared to 2019, Transavia now has a existent captious wide and a powerful web pinch further imaginable to unfold. The wide financial trajectory is successful statement pinch nan roadmap pinch an improving operating consequence aft a awesome shape of beardown maturation investment, which we will continue.

On nan cargo, successful 2022, we proceed to renew our afloat freighter fleet pinch a patient bid for 8 caller Airbus A350 afloat freighter aircraft. We will besides creation a strategical business -- we've besides already signed a strategical business pinch CMA CGM to fortify and grow our cargo offering.

Our attraction business portion delivered a coagulated capacity pinch revenues expanding by 28% and producing a higher operating margin. Air France-KLM's engineering and attraction signed a CFM branded work statement for LEAP 1A and LEAP1B motor providing nan Group pinch nan afloat scope of LEAP maintenance, repair and overhaul services for operators worldwide. This statement reinforces nan Group's position arsenic a world starring motor MRO provider.

I'd for illustration now to manus complete nan level to Steven who will return america done successful much item our financial results for 2022.

Steven Zaat

Thank you, Ben. Good morning, everybody. Thanks for taking nan time.

As you tin imagine, I'm very satisfied pinch nan results which we announced today. When I started successful this position successful July 2021, location was a very mini ray astatine nan extremity of nan tunnel. We closed 2021 pinch a amended position and we were talking really astir a ray astatine nan extremity of nan tunnel. And erstwhile we started 2022, we started successful a rather difficult situation but still covering nan spot of warfare successful Ukraine and an lipid value supra $125 per barrel.

So I'm very happy that we tin opportunity now that 2022 ends amended than wherever we ended earlier nan pandemic. The afloat twelvemonth is amended than 2019 -- past 4th is amended than 2019. And past but not least, and I will locomotion you done it, we are aiming to get retired of each nan authorities assistance regimes successful nan adjacent quarter.

So let's commencement connected Page 9, wherever we will spell done nan results for nan 4th quarter. So nan astir singular portion of nan Q4 is really nan apical and nan bottom. If you look astatine nan apical line, you spot that nan revenues accrued by €2.3 cardinal compared to 2021, 50% coming from nan capacity summation and 50% coming from nan log facet increase. And what is singular is that we are already supra to 2019 levels contempt nan truth that we had 11% little capacity successful nan 4th quarter.

Then we were, of course, tremendously deed by nan substance bill. It went up pinch much than €1.1 billion. If you return a look astatine it, astir €700 cardinal is related to nan value effect, nan pitchy substance value accrued importantly since Ukrainian warfare and now really coming backmost astatine little levels, but we are still not astatine nan levels of 2021. We were benefiting pinch an hedge effect of €80 cardinal pinch each successful all, we had a terrible effect connected our substance bill.

Then connected nan net cost, that is an summation of €500 million. If you - first of each we had still large furlough schemes successful spot successful 2021. So if you comparison pome complete apple, you will person to return retired €155 million, we get €159 cardinal of furlough schemes successful 2021 and we had only €4 cardinal successful this quarter.

So that brings -- actually, if you return that out, past location is really €350 cardinal to explain. There is - we person 2,200 FTEs summation particularly connected nan KLM side, wherever we accrued connected nan crushed to ramp up for nan activity and wherever we accrued besides nan compartment staff. On apical of it, we had nan CLA increase. So successful total, that was €160 cardinal of which €50 cardinal is one-time costs astatine nan Air France side. So €160 cardinal coming really from nan CLA increases. And past of course, we accrued our activity which brings astir €100 cardinal successful summation of salaries.

So that explains really nan summation of nan salary, but chiefly coming really from nan furlough strategy truthful operating results amended than 2019, not amended than 2021 because we're still benefiting from a beardown furlough scheme. Then if you spell to nan bottommost statement and you look astatine nan nett income, you spot that we person a affirmative nett income of €500 cardinal portion is coming from nan operating consequence and nan portion is besides coming that we are now signaling our taxation assets that successful full has an effect of €200 cardinal we did it now connected nan Air France and connected nan KLM side.

So nan taxation assets loss, which we had, successful nan past, we commencement to admit afloat astatine KLM and we commencement partially connected Air France. There's still €3 billion, which we didn't afloat admit yet. And past connected top, we had a rate effect successful nan 3rd quarter. Actually, there's now affirmative tailwind coming from nan rate results related to nan equilibrium sheet, which is an magnitude of €300 million. So that explains while we person a publication of €500 cardinal to our equity to further reconstruct nan equity position of our group.

If we past spell to Page 10 past you'll spot that we had still a very move business climate. So successful total, our yields, accrued by much than 20% premium is already successful load facet up compared to 2019. We were a spot worried erstwhile we entered Q4 connected November because that's usually really a firm period and nan firm postulation is not afloat back, but you spot that we tin reconstruct it pinch aliases lesser moreover successful these months complete November truthful much than 20% much than 20% summation complete our full network.

If you spell to nan agelong haul, we are moreover astatine 29% still very beardown results on, let's say, nan West broadside of this world, but besides successful Europe and Transavia, which moreover accrued nan capacity by 42% we were capable to scope almost 20% output increase. So a very move situation of people still, a little capacity into Asia. We are astatine minus 44%, but pinch nan output up 41% and besides here, load assemblage getting person and person to nan 2019 level.

If we past spell to - airlines let's first commencement pinch Air France. Air France had a very beardown consequence really they person now a separator of 3.2%, they are profitable, which was not nan lawsuit successful 2019 erstwhile I was myself CFO complete there. So we person an summation of separator of 3.7% afloat driven by nan very beardown translator astatine nan Air France side.

At nan KLM side, nan image is simply a spot different. Let's opportunity there's a breakeven results that we are still hampered by, let's opportunity nan business astir Schiphol. So successful total, we are doing amended than 2019, Air France is taking a measurement guardant successful their results and KLM had to return it a spot of a measurement back, but we expect that to travel backmost successful nan twelvemonth to come.

Let's past return a look astatine nan afloat twelvemonth results. If you return nan afloat twelvemonth results, we ended nan afloat twelvemonth pinch a €1.2 cardinal operating results, which is again amended than what we had successful 2019 and of course, importantly amended than what we had successful 2021, a €12 cardinal summation successful revenues which is, let's say, for €6 cardinal to explicate by nan capacity increase. We accrued nan capacity year-over-year is 44% and €8.7 cardinal related to nan load facet successful case. So nan planes are fuller driving up besides our output and nan capacity will summation truthful each successful each that contributes importantly to our revenues.

Again nan substance measure €4.5 cardinal higher, of which €3.4 cardinal really is coming from nan pitchy substance price. We had a pitchy substance value of astir €60 cardinal successful 2021 and we are now supra $1,000 per metric ton successful 2021. So 83% up we had a hedges successful spot which brought astatine nan extremity €900 cardinal a question, truthful that helped, but we were important by this summation of craft fuel. But nan bully news is we could compensate it afloat by our revenues. So an operating results of €1.2 cardinal and nett income of €700 cardinal really securing further nan restoration of our equity.

Then if we return a deeper dive per business truthful let's first spell to nan network, our rider business, very beardown performance. We accrued nan capacity adjacent to 40% compared to 2021 portion revenues of nan singular 56% of which 75% is really coming from nan load facet and 25% of that summation is related to a output so. And load facet increase, output summation and a capacity summation drives up that we are much than doubled really our revenues.

On nan cargo side, nan image is simply a spot different. So connected nan cargo side, we accrued capacity, but we accrued nan capacity to let's opportunity much cargo instantly destinations. So that is really successful nan belly of our rider planes that is nan biggest portion of our capacity. And what you spot really is that nan load facet is past dropping because of course, you cannot afloat capable those, cargo capacity onboard. So if you look astatine nan minus 19.5% minus 20% rounded. Actually, that is each coming from nan load facet driblet successful nan belly. The output is still up compared to 2021 if you look astatine nan afloat twelvemonth results.

Then connected Transavia, a steep summation of capacity 86% pinch besides attraction pinch nan portion gross successful lawsuit of 20% bringing our results astatine minus €100 cardinal which is simply a €50 cardinal amended than what we did successful 2021. We request to ramp up further our capacity and it takes immoderate clip that we spot nan afloat profitability of those caller routes to beryllium installed. But each successful all, we improved our results complete location pinch €50 million.

And past but not slightest my beloved attraction babe they are really astatine nan separator of 4.5% this twelvemonth successful 2019, we were astatine 5.5% truthful we're getting adjacent to nan separator successful this business. And really for nan - years to come, we request to summation further and to reconstruct our bid book to make judge that we have, let's opportunity and a beardown operating publication from our attraction activity. So each successful all, each business is restoring and important restoration astatine our rider business activity, which is nan main activity of nan group.

Then quickly connected nan portion cost, truthful we accrued portion costs pinch 2% but we still person 15% little capacity compared to 2019. There are CLA effects astatine Air France and KLM, but airdrome charges went up much than 20% astatine Schiphol. So contempt each nan ostentation and contempt nan truth that we person 15% little capacity, nan portion costs accrued only with, let's say, adjacent to 2%. Staff still - nan unit measure is down pinch 10% minus 60% astatine Air France successful position of FTEs and still minus 9% astatine KLM contempt nan truth that we now person to ramp up our activity besides there, truthful beardown translator successful spot astatine nan moment.

Then - and that is moreover if I would person said astatine nan opening of nan twelvemonth besides your free rate travel prediction, it would not person been €1.9 billion. So we person seen a beardown summation successful our EBITDA and past of course, we spot besides that nan alteration successful moving superior contributed for €2 billion, €1 cardinal coming from nan income tickets, we accrued capacity, we accrued nan load facet and we accrued nan prices. So that brings to a stronger publication successful our moving superior related to nan tickets. And €1 cardinal is really related to nan truth that erstwhile you turn your activity, past you besides turn your supplier bills.

So it is almost €2 cardinal of free rate flow. We usage our indebtedness to €6.3 cardinal which is very adjacent to wherever we ended 2019. And what is nan very bully news pinch nan summation besides of EBITDA you spot now that we person a nett indebtedness EBITDA of 1.8. And arsenic you know, our guidance was really that we will spell from 2 to 2.5 successful 2023. So we are 1 twelvemonth earlier, but we moreover hit our ain target. So, very bully results connected nan nett indebtedness EBITDA target.

Then let's locomotion you done connected Page 17, what we each did successful position of repaying nan liquidity support of nan state. Actually, we did it successful a very short play of 13 months. It started successful December 2021. We redeemed €500 cardinal of nan perpetual, which was €4 cardinal which was opinionated retired astatine that moment. We did a correct rumor of €2.3 cardinal which we utilized €1.6 cardinal to salary backmost French authorities connected nan perpetual hybrid and KLM afloat redeemed nan €900 cardinal which was outstanding to nan authorities indebtedness and RCF they person drawn. So, KLM was afloat free retired of immoderate loans astatine that moment.

Then successful July 2022, we signed woody pinch Apollo, we received €500 cardinal which we besides utilized to salary backmost our hybrid instruments. And past successful November, we paid payback €1 cardinal connected nan treasury and we redeemed €300 cardinal by putting successful hybrid convertible successful nan marketplace successfully and we usage it to salary further backmost nan hybrid instruments. So if you each count it together successful 13 months, we paid backmost almost €5 cardinal successful let's say, it is impressive.

But nan bully news is and past we spell to Page 18, location is much to come. So - and we did a successful sustaining billing enslaved rumor successful January. We sewage €1 cardinal that was 2.7 times it was overwritten. This €1 cardinal arsenic we indicated, we will usage to payback portion of nan treasury and we will usage €1.5 cardinal of nan Air France equity - sorry, of nan Air France rate to salary backmost nan remaining portion of nan treasury. So nan afloat treasury of €4 cardinal is repaid successful March 2023.

Then we will commencement to motorboat a caller sustainable nexus RCF some connected Air France and Air France KLM mixed and KLM. This is very important because it will merchandise KLM from nan model statement truthful that we person besides that down america and we are aiming really to recognize that successful April 2023. And we proceed to activity connected nan equity restoration. We are moving really astatine 2 projects astatine nan infinitesimal 1 related to nan loyalty programme and 1 related to nan MRO assets. So still, we did a batch successful 2022, but location is still much to travel successful 2023.

So if you past spell to Page 19, location you spot really an overview wherever we extremity successful April wherever we are exiting really each nan existent authorities support. So let's first commencement astatine nan authorities astatine nan Air France broadside successful which we had - wherever we were successful nan EU impermanent framework. So location was a full of €3.6 billion, €3 cardinal chiefly converted really nan nonstop indebtedness into a hybrid and €600 cardinal related to nan superior summation of nan French state. So we paid backmost of that already €2.4 cardinal truthful location is €1.2 cardinal go, €600 cardinal connected these hybrids.

As nan announcement of yesterday, you heard that location is simply a caller model connected which we applied for and this model is really without immoderate statement. So what we will do, we will salary successful March 2023, we will beryllium starring €300 cardinal of nan French State perpetual loans to nan French State and we will switch it and refinance it by a caller hybrid pinch nan aforesaid conditions. We will - are past astatine nan 75% redemption threshold.

So we are released from nan banks related to indebtedness threshold. So we are capable really to beryllium released besides for nan M&A band. And we will do nan adjacent scope successful April, nan different €300 cardinal truthful we person to repay past afloat nan hybrid and we will really settee each our last obligations astatine that moment. So we are afloat exiting nan existent authorities export related to nan French State successful a caller 1 wherever location are nary strings attached.

On nan treasury arsenic already explained, we went from €4 cardinal to €2.5 cardinal successful December and we will salary backmost this afloat magnitude successful nan coming period. So we are exiting besides that one. And past but not least, we are moving connected nan commercialized RCF arsenic already explained. So erstwhile KLM has signed that, we are besides released we will switch nan existent Dutch authorities installation pinch nan banks and nan Dutch authorities and we will switch it by commercialized SAF, which will beryllium sustainable linked for illustration we did really for nan bond. So we are executing Air France successful Netherlands each our authorities assistance support.

Let's past spell to nan outlook, truthful nan volition is really to that we will further summation our capacity successful 2023 and that we will scope starring 2019 levels by nan extremity of nan year. So if you look astatine our network, our let's opportunity rider web excluding Transavia, we will ramp up from Q1 90% up to 95% successful nan 2nd 4th and connected Transavia, we are already astatine 114% compared to 2019 and we will extremity up that from 135% to let's opportunity complete 135% successful nan 2nd half. So we will scope adjacent to for nan afloat twelvemonth 95% to 100% of nan 2019 levels.

On Page 22, you'll find really that nan existent booking situation is still very strong. You'll spot that nan load factors are very adjacent to nan 1 arsenic of 2019. On nan agelong haul, nan short and mean haul, but besides connected Transavia. And besides connected Q2, you spot that we cognize that nan booking shape is simply a small spot slower since COVID, but still you spot we are very adjacent to really nan 2019 levels. We had of course, already nan afloat load factors of January and besides of nan first 2 weeks of February. And you'll spot that load facet is very adjacent to nan 2019 levels, positive it goes hand-in-hand pinch a output supra 20%. So still a very beardown and move situation successful position of load facet and successful position of output successful this wintertime quarter.

On Page 23, you will find really our substance measure based connected let's opportunity nan guardant curve of past Friday. As you tin see, we person already hedges successful spot of 50% nan existent hedge portfolio is, let's say, much aliases little breakeven is we person a mini antagonistic consequence because of people we already implemented hedges for this twelvemonth astatine nan opening of 2022. And what you spot is that nan substance value successful nan marketplace is slow decreasing to levels beneath [$1,000] payroll, but that's nan existent guardant price. But you spot besides that successful Q1, we are already beneath nan afloat twelvemonth 2020 to pitchy substance price.

Then connected nan outlook, arsenic we are turning nan page and we get person to nan 2019 levels. We really don't guideline anymore connected nan profit. I deliberation it's to insecure for nan moment. Of course, we cognize nan fuel, we springiness you nan substance bill, we springiness you nan capacity and we will springiness you besides nan portion costs nan portion costs will beryllium stable, if you're excluding nan furlough, truthful you tin do - each nan analysts tin do their ain math. And we will person a CapEx arsenic earlier indicated of astir €3 billion. So pinch that, pinch nan fuel, pinch nan capacity and knowing that, let's say, nan booking dynamics are very strong, you tin do your ain math. But for nan moment, we sewage backmost to what we did successful 2019. We are not going to guideline for a afloat twelvemonth result, because location is still a agelong clip to go.

For nan midterm, we update our midterm outlook. First, nan capacity and that is staying location because we are still connected nan way to reconstruct our capacity backmost to nan 2019 level. So from 2024, we are backmost connected those levels. We will alteration nan portion costs compared to 2020 pinch 1% to 4%. If you -- let's say, if you look astatine nan portion costs meaning it's our accustomed portion costs meaning that we will exclude for nan emanation trading strategy cost. As you know, nan emanation trading strategy has been changed successful Europe, truthful really cipher will cognize what will beryllium nan result aliases really connected our pricing of this emanation trading right, which we person to come, because we don't get immoderate free rides anymore astir apt astatine nan extremity of 2026.

Then we will support our indebtedness EBITDA ratio astatine nan existent level, truthful betwixt 1.5% and 2% and we support nan guidance that we will person a affirmative operating free rate flow. If you exclude nan exceptionals, we still person to salary backmost nan societal charges successful France and we still person to salary backmost nan costs taxes successful nan Netherlands and we still person a cargo declare to pay. But if you conscionable look operational result, we person a affirmative free rate travel successful nan years to come.

That was it from my side. I manus it complete to our group CEO, Ben Smith.

Benjamin Smith

Okay, thanks, Stephen.

So moving now to Page 27 successful 2022, we person continued our translator efforts passim nan group moving towards securing our spot arsenic a leader successful sustainable aviation while ever offering nan champion acquisition to our customers. And of course, these efforts started pinch nan renewal of our fleet betwixt 2019 and 2022, we person added 50 caller craft offering up to 25% simplification successful c emissions compared to nan erstwhile procreation and reducing further our sound footprint.

As you tin see, caller procreation craft now represents 16% of our fleet compared to only 5% successful 2019 and increasing arsenic we scheme to execute 40% successful 2025 and up to 64% successful 2028. These caller craft connection state-of-the-art cabins pinch enhanced comfortableness and onboard experience.

Moving connected now to nan adjacent slide, successful summation to our fleet renewal, we will proceed to put successful our cabins for an enhanced and further harmonized acquisition crossed nan Group. Looking astatine our agelong haul business cabins, astatine Air France's nan caller business people spot was launched successful January and beryllium disposable connected selected Boeing 777-300 and Airbus A350-900 aircraft. At KLM, we are installing nonstop our business people seats connected each KLM 777s harmonizing nan business merchandise that's already onboard nan KLM 787 fleet.

We're besides investing successful our mid compartment merchandise now offering premium comfortableness astatine KLM, which is being progressively introduced and we are installing enhanced seats successful our premium system cabins astatine Air France. Our flagship Air France La Première work offered onboard prime craft will beryllium further enhanced opening successful mid-2024.

Moving now connected to Slide 29. In summation to fleet and cabins, we are making investments done each stages of nan customer journey. Onboard acquisition will beryllium upgraded pinch nan preamble of a communal WiFi portal arsenic good arsenic a caller inflight intermezo connection by nan extremity of nan year. On nan ground, further customer enhancing benefits and services are being introduced astatine Paris, [Boise] and Amsterdam, Schiphol and astatine Paris each nan airports.

On Slide 30, I'm highly proud to denote that each these efforts person been recognized by our customers. Both our main airlines person moved up respective ranks successful nan Skytrax's world rankings this twelvemonth compared to 2018. Air France has moved up 17 positions and has now classed number 8 Best Airline successful nan world and KLM has moved up 2 positions. Skytrax besides awarded Air France Best Airline successful Western Europe for nan 2nd twelvemonth running. In addition, Air France KLM is nan only Group pinch 2 hose certified 5 prima by Apex. I'd for illustration to definitive my gratitude to each our colleagues crossed each our airlines and business units without whom these achievements would not person been possible.

Moving now to Slide 31. Before concluding this presentation, I'd for illustration to attraction for conscionable a fewer moments connected nan cardinal milestones that our group has achieved connected a way to sustainable excellence. As you cognize our CO2 emissions simplification targets person been validated by [CVTI], which intends that they are successful statement pinch nan Paris agreement.

In summation to fleet renewal, we person secured agelong word SAF agreements for 3% retired of our 10% nonsubjective for 2030. We've besides issued sustainability linked bonds for an magnitude of €1 cardinal conditioned connected our 2025 and 2030 CO2 simplification targets.

This cognition is simply a premier successful Europe for nan aviation manufacture and links nan company's financial trajectory pinch its biology objectives. It is an further milestone successful Air France-KLM's ambition to execute its decarbonization targets.

Finally, we proceed our efforts to amended aerial and train connectivity pinch a afloat seamless integer offering for some ways of carrier and much intermodal connections to make transfers easier for everyone walking connected our airlines. These milestones are each actual steps that style our roadworthy to sustainability. I want to reiterate our afloat committedness to being a pioneer of a much sustainable aviation.

Moving connected to nan adjacent slide. To conclude, we person turned nan page of COVID pinch landmark results and achievements successful 2022. We've knowledgeable an exceptional rebound successful our activity driven by each our airlines and businesses pinch a historical 2022 afloat twelvemonth operating separator supra our 2019 reference.

We've completed awesome financial operations to some reconstruct equity and consolidate our equilibrium sheet. The successful execution of these transactions reflects nan assurance of investors and shareholders successful our profitability prospects and successful our expertise to further exit from nan authorities assistance support and deleverage.

Over nan past 2 years, we've redeemed much than €4.9 cardinal of authorities aid. On nan business front, we person signed landmark deals pinch awesome business players specified arsenic CMA CGM, our expertise to motion this type of statement arsenic a testament to nan value of our assets, our expertise and our group and our existent committedness mixed committedness to CMA CGM to beryllium afloat participants successful nan French economy.

The coming twelvemonth will beryllium a pivotal 1 for our Group arsenic we intend to afloat exit from each types of authorities support and from nan EU impermanent model constraints by April 2023. We will regain our afloat financial elasticity and strategical autonomy. We will proceed our efforts to reconstruct our equity and fortify our equilibrium expanse utilizing respective levers including non-dilutive measures.

Building connected our beardown commercialized momentum, we will proceed ramping up capacity, which are expected to scope their pre-crisis level by nan extremity of 2023. The continued implementation of our soul translator should alteration america to summation further operational ratio and make important costs savings and yet to make our statement much competitory successful statement pinch our best-in-class peers.

Last but not least, we are firmly committed to nan actual implantation of our decarbonization roadmap. We person designed a accordant attack pinch nan extremity of CO2 emissions simplification based connected 3 main pillars: fleet renewal, sustainable aviation fuels, and operational measures.

So, convey you. And we are now disposable to reply your questions. As a reminder, Marjan Rintel, Anne Rigail, and Steven Zaat are each present pinch maine to reply immoderate questions you whitethorn person connected our 2 airlines and nan remainder of our awesome business units. Thank you.

Question-and-Answer Session


[Operator Instructions] Our first quest coming comes from Jarrod Castle of UBS. Please spell ahead.

Jarrod Castle

Thank you, and bully morning, everyone. Three from me. Firstly, do you person immoderate comments connected April aliases summertime bookings, I cognize it's sometime away, but willing successful pricing trends, particularly successful nan discourse of nan capacity versus Q4?

Secondly, conscionable connected M&A, immoderate comments there? You were talking a spot successful Q4 astir TAP, truthful conscionable an update connected really you're reasoning astir M&A. And past conscionable lastly, fantabulous advancement successful position of repaying authorities debt, et cetera. But wherever do things guidelines now connected nan shareholders' shortage successful Air France? Thanks.

Benjamin Smith

Thanks, Jarrod. So summertime trends early trends for nan opening of our summertime play look very good. We're rather pleased pinch what we spot and we're particularly pleased pinch nan reopening, nan accelerated reopening of China. So yes, we're cautiously optimistic and pleased pinch what we spot arsenic of today.

On nan M&A front, we're - arsenic we said, each of nan releases we put retired today, we are really pleased that nan constraints person been removed truthful that we tin discuss pinch I'd opportunity assurance and much legitimacy pinch immoderate of nan opportunities that whitethorn coming themselves.

So arsenic you know, location are a fewer independent airlines successful Europe that could beryllium willing successful either person practice aliases possibly a outright sale. I did mention successful nan past that TAP is of liking to america strategically for illustration nan guidelines successful Lisbon and we for illustration their position successful nan Brazilian market. So that is of interest, but thing to study further than that.

And Steven tin return your 3rd mobility here.

Steven Zaat

Yes. We don't disclose nan stock of nan shortage - nan equity shortage connected Air France. What is - you've seen we are now astatine €2.5 cardinal antagonistic equity. So we are restoring our equity and nan bully news is that nan Code of Commerce which was really related to French GAAP equity. And arsenic you know, we person a affirmative French GAAP equity astatine Air France KLM. We had a antagonistic 1 connected Air France but location is nary consequence of immoderate dissolution anymore, that went aliases anymore, it needs still to go successful nan cult of commerce, but it went done parliament and done nan Senate.

So we hold erstwhile it is afloat implemented connected nan Code of Commerce and it's conscionable let's opportunity an soul spread measurement to reconstruct nan French GAAP equity, but location will beryllium nary ineligible regularisation successful position of dissolution aliases immoderate benignant of risk.

Jarrod Castle

Thanks. And sorry, tin you springiness immoderate denotation of pricing trends successful Q1 versus Q4 akin levels? Or tin you springiness immoderate color?

Benjamin Smith

So far, it's pursuing nan trends we've been seeing. We don't spot immoderate awesome change. The fares that are astatine nan marketplace are rather reasonable. We don't spot immoderate irrational pricing successful our main markets arsenic of now.

Jarrod Castle

Great. Okay. Very clear. Thanks very much.

Benjamin Smith

Thanks, Jarrod.


Our adjacent mobility comes from Ruxandra Haradau-Doser of Kepler Cheuvreux. Please spell ahead.

Ruxandra Haradau-Doser

Yes, bully morning. Congratulations connected nan awesome Skytrax capacity and nan betterment of rider restitution levels. Could you please talk besides astir really nan restitution levels of labor astatine Air France and KLM compared to French and Dutch companies successful general?

Second, we are a fewer weeks up of nan Eastern holidays. So could you please talk astir operations astatine Amsterdam Airport? If I retrieve correctly cargo load factors astatine KLM decreased past twelvemonth owed to nan operational problems astatine nan airport. Shall we expect immoderate betterment for this year?

Then 2 questions for Steven, please. How should we deliberation astir liking costs this twelvemonth arsenic you are replacing authorities support pinch different types of financing. And to which grade does your mean word guidance relationship for planting unit into pitchy fuel? Is it successful statement pinch nan quota projected by nan EU Commission starting pinch 2025? Thank you very much.

Benjamin Smith

Okay. Thanks, Ruxandra. Marjan will return your -- nan first portion of -- your first question.

Marjan Rintel

Yes. So nan first mobility astir EPS, COVID deed is difficult and it was very difficult and we had difficult years for each nan KLM employees. As you know, we had a difficult summertime past summertime owed to each nan operational disturbances. So EPS is rather low.

But luckily, we spot it's rising again from 11% to astir 35% and we are rather affirmative that because of nan unchangeable cognition and we prosecute 500 other labor wrong KLM astatine crushed that it will beryllium backmost to normal levels. The first question.

The 2nd mobility is we expect betterment successful our capacity because we hired each nan group nan airports are hiring people. We expect to beryllium backmost astatine 100% and astatine nan extremity of 2023. And backmost successful nan summertime astatine 95%. And therefore, we will person each nan flights backmost successful place. We will not artifact seats anymore arsenic little arsenic imaginable and location will beryllium room for cargo arsenic well.

Anne Rigail

Regarding EPS successful Air France, we had a measurement each week. As Marjan mentioned for KLM, we had a batch of unit connected nan cognition past year, but we saw a batch of engagement successful people. We're really enthusiastic to invited again our customers connected board. What we person seen lately is that nan EPS is recovering because we've seen that nan business is coming backmost And we activity a batch connected each nan moving conditions. We person answered to nan ostentation taxable besides successful nan autumn.

So - and we person resumed, arsenic Marjan mentioned for KLM, nan hirings successful each nan operations, pilots and mechanics arsenic of 2021, but besides successful our compartment crew, successful our position astatine nan hub. So we are very happy to invited young energies and it's really expanding EPS.

Steven Zaat

Yes, hullo Ruxandra. Let's first commencement connected nan liking cost. So nan liking costs will beryllium - conscionable if you look astatine nan operational leases, which we besides return nan liking costs and nan normal financial liking costs successful IFRS. They will beryllium beneath nan 2022 levels, of course, pinch now each nan repayments which we are doing.

If you mention to nan hybrids, truthful which we will switch connected nan Air France side, truthful this, let's say, nan €600 cardinal we will do that astatine nan aforesaid conditions. So there's nary summation successful that consciousness successful our liking course. And depending connected softness successful our guidance, yes, we return that afloat into account.

Ruxandra Haradau-Doser

Thank you very much.


Our adjacent mobility coming comes from Satish Sivakumar of Citigroup.

Satish Sivakumar

Thank you again. So I've sewage 3 questions here. So connected nan firm postulation side, obviously, you've fixed colour of nan group level. Can you stock immoderate colour again? What are you seeing successful position of trends connected mean and agelong haul? And pinch Asia coming backmost wherever you've really seen much momentum successful firm traffic? And nan 2nd 1 is really astir nan €300 cardinal French State perpetual bonds, is it adjacent to deliberation that nan hybrid instruments that you would apt to switch will beryllium astatine a akin coupon complaint astir 7% to 7.25% aliases it will beryllium somewhat lower? Any colour connected that?

And nan 3rd 1 is really astir nan MRO. Given nan contracts are for illustration ostentation linked, is it adjacent to deliberation nan pricing will beryllium up aliases connected mid-single digit percentage? And besides wrong MRO, what is your backlog successful position of nan bid book? Historically you utilized to springiness nan bid book versus erstwhile quarter? Any colour connected that will beryllium adjuvant too. Thank you.

Benjamin Smith

Okay. Thanks, Satish. On nan firm traffic, agelong haul is starring nan betterment versus short haul and mean haul. But arsenic we've said successful erstwhile calls, nan accrued level of premium leisure is really outstanding and that tin continues. And our La Première business people premium system and now we're seeing premium comfortableness astatine KLM, we're really pleased pinch nan request - beardown request for those services contempt not being rather backmost up to 100% betterment connected nan axenic business traffic.

And I wasn't rather clear nan bid book aliases nan -- are you talking astir airplanes aliases you're talking astir MRO?

Satish Sivakumar

MRO really because you utilized to springiness for illustration nan statement backlog aliases nan bid book, really it has focused quarter-on-quarter. Any colour connected that? And besides nan -- what -- aliases should we deliberation astir nan MRO pricing?

Steven Zaat

Yes, Satish. Good morning. If we spell to nan bid book, you spot that we are restoring now our bid book. And possibly we will bring that besides back, let's say, successful our presentations, which we are usually doing connected nan MRO.

So we are restoring this part. So particularly connected nan motor side, there's a batch of demand, but besides connected nan components we spot - connected nan caller technology, a batch of request successful nan marketplace and we closed immoderate agreements. So I tin springiness you much colour during nan year.

If you look astatine nan pricing, you spot that nan pricing, we tin walk through, let's say, nan MRO pricing. So location is simply a tightness successful capacity, which is of people favorable for our MRO business. It is much important now besides that we get nan proviso concatenation connected bid truthful that we person -- that we tin make much revenues by doing much shop visits successful our motor shop successful Amsterdam and successful Paris. So -- but nan pricing connected nan MRO broadside is rather good. It is now more, let's say, nan transportation which is becoming a much important part.

And connected nan hybrid, arsenic conscionable already said to Ruxandra, we person precisely nan aforesaid pricing arsenic we had connected nan existent hybrid. So nary alteration successful that one.

Satish Sivakumar

Thank you.


Our adjacent mobility coming comes from Jaime Rowbotham of Deutsche Bank. Please spell ahead.

Jaime Rowbotham

Good morning, guys. Thanks for taking my questions. I person three. First one, I'm afraid, goes backmost to nan output question. So web yields were 22% supra pre-crisis successful Q4. Having been 24% supra successful Q3. You've said you still spot a robust situation going into 2023. Do you deliberation it would make consciousness for america to deliberation astir further narrowing of nan output premium successful Q1, for example, followed by a return to possibly wider premiums again arsenic we move towards highest summer?

And 2nd question, intelligibly astir things look very, very good group now to move successful nan correct guidance for nan group successful 2023. The objection astir apt wrong it is cargo. Have you done immoderate study to see what mightiness beryllium nan profit headwind from little aerial cargo volumes and yields successful 2023 year-on- year? And finally, conscionable a explanation truthful and - of nan update connected Air France antagonistic equity complying nether French GAAP pinch nan rules, truthful nan alteration is not giving French companies much clip to comply. I deliberation you said it conscionable removes nan request to person affirmative equity altogether? Perhaps you could conscionable clarify. Thanks.

Benjamin Smith

Okay, bully greeting Jamie. On our outlook for output short and mean haul versus agelong haul. I mean since nan opening of nan crisis, we've seen nan booking curves particularly connected short and mean haul to person evolved to nan constituent wherever group are booking overmuch person in. So to springiness a forecast retired to what we expect Q2 aliases Q3, not successful a position to do that for illustration we whitethorn person been successful erstwhile years.

Long haul, arsenic I already mentioned, were cautiously optimistic. We'll proceed to spot affirmative - betterment versus erstwhile years. But I deliberation 1 point I should I should constituent retired is astatine Schiphol, contempt each of these problems, capacity is very tight. So nan output benefits evidently trickle down to us. And past we had a very fierce transatlantic competitor successful 2019 called Norwegian. As you know, we've had - and they had, I believe, 8 787s based astatine CDG.

We now person 1 formation operated by North that is flying to North America. So - pinch that hose now not successful spot and location was different debased costs bearer called XL Airways, nan XL Airways that were flying to immoderate of nan biggest measurement markets successful nan French overseas territories. So that's a batch of debased costs capacity, agelong haul, debased capacity that is now retired of - successful Paris. So that we're seeing particularly connected nan markets wherever they were operating already coming a affirmative output environment? And past for your 2nd mobility there, possibly Steven tin reply that one.

Steven Zaat

Yes if you - let's spell to your mobility connected nan cargo. So connected nan cargo, we person seen now, of course, a stabilization of nan load factors pinch much belly capacity successful it, truthful that has an effect successful 2022, but that will stabilize astatine this moment, a small spot difficult to opportunity what it will beryllium precisely successful nan twelvemonth between, if you talk astir yields, astir minus 15% to minus 25% we return that into information really for what we expect for nan twelvemonth to comment, we'll not enactment astatine nan 2022 levels, that is for sure, but it is still much double than 2019.

And so, we still person a very beardown cargo publication connected our P&L. And connected nan French GAAP side, conscionable to travel backmost connected it, this - it went done Parliament and nan Senate. So location is nary consequence anymore for a, dissolution and actually, we person now for 2 years, you person to talk it, let's say, successful nan shareholders meeting, but it is only connected nan Air France broadside so, we person an soul discussion, really we will reconstruct that. So nan dissolution consequence is wholly gone, which is very bully news, of course, for us.

Jaime Rowbotham

Thanks guys.


Our adjacent mobility comes from Alex Irving of Bernstein. Please spell ahead.

Alexander Irving

Hi, bully morning. Three from maine please. So first of all, connected firm travel, connected your Slide 6, you've seen this rather slow betterment successful postulation successful Q4 and alternatively 2019 levels. But really do you spot your firm trends evolving successful 2023 and what does that look for illustration truthful acold successful nan first half of Q1, please? Secondly, connected portion costs, truthful you're targeting your portion costs level connected 2022 astatine changeless substance and rate and ex deferral effects.

But fixed that location is restoring capacity by different astir 10 percent points. Should location not beryllium a simplification successful your portion costs and what's much than against you to forestall that from happening? And past finally, tin I prime up connected your income channels, please? You mentioned an summation of 10 percent points successful nan stock of formation segments sold done nonstop online channels.

Is that conscionable a business to leisure operation displacement aliases is location a much imperishable change, say, successful really firm covers it booking and really worldly is nan imaginable simplification successful your mean distribution costs and authorities effects? Thank you.

Benjamin Smith

Okay. All correct and really we're going to person you to spell from waste to buy. So let's commencement here. 2023, nan firm postulation what we're seeing is successful France, I mean, I'll beryllium realistic here. We're seeing a displacement to train, which is not new. Especially connected flights aliases connected routes wherever location is simply a train action connected formation segments of little than little than hr 15. So I would say, Marseille, wherever there's a bully train action of 3 hours.

Although, we'd already stopped each of our flights from - nan flights to CDG are still successful place. So home France, firm postulation is not backmost to wherever it was and we're seeing a shift. However, successful 2019, nan home marketplace was our biggest money losing market. So we made a important translator successful domestic. This is having a affirmative effect connected portion cost. We've halved nan size of our location bearer op.

We removed op each operations retired of Orly and each those slots are now being utilized by Transavia, overmuch little portion costs than nan 50 to 100 spot location craft that we had operating successful location before. Predominantly connected debased costs - sorry, connected short haul home flying. So we're successful a large modulation mode pinch Transavia. We're really pleased pinch nan thought aliases nan truth that we person 50% of nan slots astatine Orly. It is very adjacent successful airdrome to Central Paris.

It's going to beryllium connected soon to nan Line 14 metro wherever we deliberation nan operation of nan portion costs of Transavia pinch our position astatine Orly, pinch nan benefits that we could connection to - successful a meaningful ray measurement to immoderate customers, our yielding customers astatine Transavia. We deliberation nan operation of those 3 should alteration america to return only aft many, galore years of losses to profit.

Transition though pinch nan growth, maintaining nan slots, bringing successful nan caller craft type, of course, it's a large modulation period, but I don't deliberation there's different bearer that sewage that opportunity astatine a adjacent successful airdrome that is saturated. So we're ace happy astir that portion cost, nan translator astatine some Air France and KLM, successful particular, pinch nan fleet simplification benefits of pulling nan A380s retired of nan Air France fleet.

We've been capable to do that connected a imperishable ground dissimilar immoderate of our competitors, because of precocious deliveries of illustration 777-9s. We person not been limited connected that airplane. So replaced each of those airplanes overmuch much substance businesslike A350s. We've done a batch of compartment activity to little nan portion costs by having much optimized cabins successful immoderate cases - we've decreased nan compartment portion costs by up to 9% that's without doing immoderate activity aliases having to make immoderate alteration to national contracts.

And we've sewage overmuch much businesslike I would opportunity activity rules pinch immoderate of our activity units specified arsenic our pilots. And I'm really pleased to opportunity that nan aviator narration astatine Air France is highly positive. As you know, that is key, for astir airlines and you person a affirmative narration pinch your pilots you tin put successful translator projects that usually would not beryllium available. At KLM, nan narration pinch pilots took a beating passim nan pandemic. And I tin opportunity it's moving successful nan correct direction.

I judge we tin get that narration to a amended spot, moreover amended to guarantee that nan portion costs of KLM, are capable to alteration arsenic well. Of course, arsenic we get backmost to afloat capacity, we'll spot further portion costs reduction. But overall, I deliberation erstwhile you look astatine nan portion costs that Air France had earlier nan pandemic, what these translator fleet simplification and improved activity rules - person really helped america connected that front.

So - I can't beryllium much pleased pinch really that's moving out. On income channels, this is not new. I mean, we've been moving for complete a decade for illustration astir different airlines to displacement arsenic overmuch of our postulation online arsenic possible. And each nan - we don't person - for illustration we've sewage immoderate marque caller projects that's going on. It's conscionable a big, large push to pull our customers direct. Of course, we person done Flying Blue.

We've - sewage a awesome expertise to usage nan information - customer information that we person to penetrate straight offers that we're not offering via different channels. And pinch nan easiness of each nan features we're putting connected our app, much and much of our customers are getting comfortable making bookings changes connected - our applications, either connected their mobile phones aliases online. So thing caller conscionable nan continued push and we're seeing marked difference.

I deliberation possibly group had clip passim nan pandemic to really fig retired different ways to bargain tickets. They had clip to fig things retired - connected nan IT broadside - a small spot of joke location but no, this is not new. But I deliberation nan large - point that we're hoping you attraction connected is we expect nan portion costs to proceed to outperform those of our main competitors.

Alexander Irving

Thank you very much.


We will now move to a mobility from Stephen Furlong of Davy. Please spell ahead.

Stephen Furlong

Hi and hello. And truthful 2 questions possibly this is 1 for Ben aliases so Anne. I retrieve backmost successful November of 2019 pinch a batch of nan restructuring aliases planned restructuring to beryllium done that you were benignant of focused connected rebalancing nan Paris web distant from benignant of non-premium connecting postulation and much to seizure nan premium postulation retired of Paris. And location was immoderate - this gave you much elasticity pinch ASK growth, et cetera. Maybe conscionable Ben aliases Anne talk astir that?

And past nan 2nd thing, it's for Steven. Just possibly to maine conscionable connected afloat get it. Well done connected nan liquidity position, nan leverage position I'll get that. So I was conscionable wondering and I heard your comments astir nan French GAAP. Why do you still request to do different benignant of quasi equity financial I cognize you person support for it for illustration nan loyalty programme MRO fixed wherever nan liquidity position is and fixed wherever nan leverage position and fixed your comments connected French GAAP? Thanks a lot.

Benjamin Smith

Okay. On nan network, historically, nan exemplary we've had successful spot astatine KLM has worked highly good pinch immoderate of these changes that are being put successful spot by nan Dutch state. We're of course, seeing if we request to germinate that model. But nan guidelines exemplary we person astatine KLM is very coagulated results person ever been very bully and we afloat expect if basal to accommodate to nan caller environment, but nan guidelines exemplary is nan correct 1 for KLM.

We are up gauging connected our mean haul fleet astatine KLM. We've sewage nan Embraer 195 E2s which offering worldly summation nan number of seats that provender our agelong haul network. We person nan Airbus A321neos, which are replacing - yet our full fleet of 737 NGs, but of people nan 321neo is simply a larger framework than nan 737, 800, 900 and Neo people 700. So successful nan Netherlands, I would opportunity we're happy pinch nan model.

In Paris, truthful you asked specifically astir CDG, but only we are focusing connected trying to get arsenic overmuch O&D postulation connected Transavia successful nan mean haul arsenic imaginable and leverage our position there. And saying that, we ne'er had a large relationship installation aliases a relationship cognition astatine Orly and that will stay nan case. At CDG, nan slope building that is - nan slope building options that are unfastened to america successful CDG are limited.

We've sewage - we person inbound greeting flights from North America, from astir of our South American cognition from Africa and now coming backmost from Asia. So it puts an tremendous unit connected our cognition astatine CDG early successful nan greeting correct done nan midmorning and past those flights feeding nan remainder of Europe put a large unit connected that, truthful to optimize our European web akin to what our different European competitors request to do is simply a challenge.

And of course, what goes astir pinch that is - we require more, infrastructure successful nan greeting play much greater strain connected our labor and a much difficult - relationship process successful a installation that was not designed specifically for connections. So that's 1 of nan reasons we are looking astatine how, tin we amended optimize nan acquisition for customers astatine CDG. And besides erstwhile you bring successful an A380, nan size of that A380 pinch nan objection of peak, highest periods successful bid capable that plane, you request a batch of connections.

So operationally, it's costly to run a large hub successful CDG pinch a batch of relationship customers. That being said, we still do transportation a ample number of customers 50% successful 2019 and we expect to spell down a small bit, but not successful a very ample way. We only person 48% of nan section Paris marketplace which is it's proven to beryllium highly strong. And we for illustration to alteration nan equilibrium - arsenic astir of you know. We travel our manufacture section O&D flights are usually - they supply much profit, because you don't person - double return off, double landing and you don't person this large costs that we person to transportation customers astatine CDG.

And pinch nan large catchment area of Paris, dissimilar Frankfurt, dissimilar Munich, dissimilar Zurich, we person this pat of aliases this excavation of customers that we judge we tin amended penetrate and get a larger marketplace stock pinch nan - removal of our A380s. I deliberation nan equilibrium of really galore customers person to link versus section is simply a small easier to manage. And erstwhile you look astatine nan equilibrium of premium seats versus nan economy, we tin overmuch amended attraction connected what makes money for us.

So what does that each mean? You will spot america trim nan number of connecting customers attraction connected higher yielding customers and because of nan unsocial Paris market. We've been capable to pull not only business customers, but thing very unsocial successful what's - it's gone up successful a very large measurement is nan premium leisure, which we've been seeing, which we've seen travel backmost successful numbers overmuch supra what we saw successful 2019.

Steven Zaat

And coming backmost connected nan equity side. So we are not doing this, projects for French GAAP equity because hybrids are not equity connected nan French GAAP. So that is not nan logic that we are - doing it. We are still, arsenic you will see, we still person a antagonistic equity of €2.5 cardinal and we want to get, let's say, we want to repair that whole. But truthful it's much from a group level position than it is from a circumstantial French GAAP regulation.

Stephen Furlong

Understood, convey you.


We will now return a mobility from James Hollins of BNP Paribas.

James Hollins

Yes hi, team. Good morning. Few from maine first one, I'm nary uncertainty that you're highly stupid, but what is nan mechanics of nan €0.6 cardinal of nan French authorities stock ownership being removed? Are you conscionable trading them? Secondly Ben, you've been successful nan media talking astir nan Schiphol imperishable formation cuts being put successful place, for illustration it's guaranteed. Is it guaranteed and is location still immoderate speech location and what's your strategy if that comes in? And nan 3rd one, that - nan Dutch and French costs support, are we still looking astatine €2.5 cardinal to beryllium paid back? And what's your timing connected imaginable for doing that? I cognize you dainty arsenic exceptional, but immoderate update would beryllium great? Thanks.

Steven Zaat

Hi James, truthful I will return nan first mobility and nan 3rd question. So nan €0.6 cardinal that is taken into relationship to specify nan state-guaranteed. So pinch these caller measures, location is really - arsenic we mentioned, there's nary request to alteration nan superior structure. So there's - that doesn't effect really nan French superior - nan French authorities superior summation successful our capital. So it's up to them what to do, but location are nary regulations astir it that they should spell backmost to immoderate level.

And past connected your mobility astir nan societal charges and connected nan costs tax, truthful we commencement to salary costs taxation astatine KLM that arsenic we started successful October 2022 and we had 5 years to salary backmost really from that infinitesimal nan €1.5 cardinal which is there. And past connected nan Air France side, it was €1 cardinal wherever we already started successful January to payback nan societal charging and we besides had 5 years complete there. So it is dispersed complete 5 years really to salary that each back.

Benjamin Smith

Good morning, James. So really are we going to person you to move up waste arsenic good only nan few. So Amsterdam, arsenic I mentioned, nan Amsterdam hub is still very strong. The ostentation successful nan Netherlands has been 1 - of nan highest. As Marjan mentioned, we've mislaid a batch of labor who had appeared, but we've been successful hiring a batch backmost and nan aforesaid pinch Schiphol but location was a lag to that.

But from really we're going to negociate it, what's our strategy to debar nan determination that was taken by nan Dutch state, reducing nan number of movements astatine Amsterdam. The main extremity of that determination is connected reducing noise. So our position is location are different ways to trim noise, caller aircraft, nan caller craft that we person connected bid - not needfully taken into relationship erstwhile this determination was made.

So it's nan opening of our strategy. We person Delta Airlines, our large partner successful nan United States, which is helping america arsenic good moreover that - nan Dutch authorities has taken - location are arguments that it does not comply pinch nan bilateral that's successful spot betwixt nan Netherlands and authorities and whether nan determination tin beryllium upheld done it. So we are pushing connected each fronts. It is rather early truthful acold for this summer. This simplification successful slots will not beryllium affecting nan number of flights we wish to run our full fleet will beryllium afloat operating this summer.

No effect connected what we had planned to run for summertime fleet. I'd opportunity Marjan do you person immoderate further comments?

Marjan Rintel

No, location is complaint successful nan statement pinch nan Dutch authorities we effort to attraction not connected simplification of movements, but connected CO2 simplification and sound reduction. As Ben already mentioned, 1 of nan initiatives is we bought 4 freight airplanes and we'll region nan 747 instantly simplification is 40% CO2 50% sound and that has a awesome added value. So we show location are alternatives and that we tin scope much CO2 and sound simplification by investing successful fleet.

And adjacent to this, we deliberation nan shape should attraction arsenic good connected creating a azygous European Sky, which will present a 10% CO2 simplification arsenic good and that could beryllium great. So location are different ways to scope these goals and we are very committed to this.

Benjamin Smith

I deliberation I'll conscionable adhd thing other present arsenic well. This determination had a awesome governmental push down it. And I deliberation nan - now that we're capable to astatine slightest amended heard successful this sum connected really this determination whitethorn not person been aliases really nan nonsubjective of reducing sound and CO2 via reducing slots whitethorn not beryllium nan only aliases nan champion measurement to execute those goals.

And besides to amended equilibrium disconnected nan benefits that Schiphol provides to nan Netherlands that has not been up until now, portion of nan statement galore of nan companies that dangle connected each nan links that KLM provides astir nan world and acknowledgment to nan size of nan hub. These could beryllium put astatine risk, if location was an effect to KLM's expertise to run to each these cities is now starting to beryllium discussed successful nan larger media.

And this is - I deliberation this is going to thief america because KLM is simply a immense assets, successful nan Netherlands taken 50, 60 years to build up, large logic why Amsterdam is charismatic to galore world companies to guidelines their European operations. It is simply a immense plus provides an tremendous financial and economical use to nan country. And this statement is now coming retired media. And I deliberation - that alone, which is not - being pushed by us, but being pushed by our customers, will thief alteration nan narrative.

James Hollins

Okay. Thanks for nan thoughts.


Our adjacent mobility comes from Sumit Mehrotra of Societe Generale. Please spell ahead.

Sumit Mehrotra

Thank you. Good morning. First mobility would beryllium connected your moving superior outlook. Do you spot immoderate script of outflows astatine immoderate constituent successful time, I mean, we are astatine very precocious levels. You see, you're sitting astatine €3.7 cardinal successful tickets and €2.4 cardinal astatine payables connected nan equilibrium sheet. Something is going to blink eventually. So, yes, I would for illustration to know, Steven, what's your return connected this moving superior scenario, immoderate constituent of time. Secondly connected Transavia of €100 cardinal of nonaccomplishment successful nan 4th quarter, a spot of a disappointment, what has had small backmost really is Orly - constituent costs stickiness? Let's cognize a small spot much astir what could beryllium amended astatine Transavia. Lastly, backmost to Slide 19, pursuing from James' question, americium I correct successful interpreting that nan €600 cardinal of French authorities liking moving retired of this floor plan has sewage to do pinch it's not getting categorized arsenic a caller impermanent model aliases what is it? Why does it spell down to zero here? Thank you.

Steven Zaat

Let maine commencement - hullo Sumit. Let maine commencement pinch nan moving capital. So location are respective elements. So connected nan payable side, successful general, there's thing changing isolated from of people that we salary backmost societal charges and we salary backmost nan costs tax, but we are still expanding capacity. So nan summation successful capacity will besides - we will besides use from that connected nan moving capital. So really it precisely equilibrium out? I don't know, but let's opportunity it should beryllium much aliases little successful sync pinch each other.

Then connected nan - yes, truthful possibly coming backmost connected your - nan €600 cardinal question, arsenic you called. So arsenic you said, you said it very well, it is not categorized anymore arsenic authorities aid. So that is - I deliberation nan bully news, but it doesn't mean that nan French authorities will alteration their superior structure. So nan superior structure, there's nary request to alteration it astatine this moment. So it's wiped out, but without immoderate alteration needed successful nan superior building arsenic it's written down successful nan past sentence.

Benjamin Smith

And connected Transavia, Holland is performing arsenic planned. Transavia France arsenic I concisely mentioned connected 1 of nan different answers to 1 of nan questions. We've had not thing - that we primitively we're expecting is simply a sharper diminution successful nan number of customers flying connected home France. And because we want to support each of our slots astatine Orly, we've had to run much services than expected connected home France whitethorn go little profitable. They're becoming money losing.

So nan modulation of utilizing those slots to mean haul routes successful Europe it's not going arsenic accelerated arsenic planned, aliases arsenic imaginable and needing to screen those unprofitable flights successful home France, while we person not sewage nan afloat Transavia fleet successful place, because we are - we can't present galore planes - arsenic good pinch pilots and pinch nan maintenance, pinch training, pinch each of that, we'd for illustration to spell faster, but I deliberation we're going arsenic accelerated arsenic we perfectly can.

So - conscionable to springiness you an example, arsenic I said, we've exited each of our location aircraft, nan routes that - nan slots that they were - occupying are now being utilized by Transavia, immoderate of them. And there's this lag successful timing to moving immoderate of that capacity disconnected of home onto European flights. So that is 1 of nan large reasons why nan results of Transavia are not astatine nan levels that we're expecting.

But midterm, we're still very confident, arsenic I mentioned, that nan exemplary of Transavia is going to clasp conscionable to get done this modulation period. And so, we don't expect immoderate alteration to nan exemplary aliases nan midterm strategy of Transavia.

Sumit Mehrotra

Thank you.


Our adjacent mobility coming comes from Harry Gowers of JPMorgan.

Harry Gowers

Yes, bully morning. Thanks for taking nan time. I've sewage a couple. And nan first 1 would conscionable beryllium connected Asia and Middle East capacity. I deliberation it was still down 40% successful nan quarter. So really do you deliberation that's going to create complete nan people of nan year? And request coming retired of Asia? Second one, yes. Second 1 was conscionable nan quasi equity measures still to travel arsenic well. So tin you conscionable corroborate what amount you would expect to embark connected this year? And nan 3rd one, conscionable connected nan operating separator target, 7% to 8% mid-term. Obviously, you've fixed america nan portion costs alteration that you expect. But do you person a portion gross level supra '19 aliases '22 astir successful mind to scope that point? Thanks.

Benjamin Smith

Okay. So acknowledgment Harry. For nan request Asia and Middle East, we're seeing Middle East numbers almost backmost to 2019, truthful very strong. Asia, we're very happy to spot nan accelerated reopening of China. We weren't expecting it to beryllium announced successful nan measurement which was announced. We're putting successful capacity rather quickly. We weren't expecting to allocate a number of nan magnitude of capacity that we are now readying to allocate. We are moving immoderate little performing flights immoderate of nan capacity that was operating connected nan different way complete to Asia.

So it is bully news for america successful Q3. We'll person nonstop -- regular nonstop from some airlines and immoderate of nan routes. In immoderate cases, precocious wave play services to Asia. So Beijing, Shanghai wherever we had minimal capacity complete nan past 3 years. As an example, Air France will beryllium offering regular flights to some KLM, almost regular Hong Kong, regular by Hong Kong, by Air France, each play by KLM Japan wherever nan postulation is astir apt 60% -- sorry, nan capacity is 60% to 70% wherever it was.

Where we're seeing thing really affirmative is India. Our postulation to India is very beardown and this is acknowledgment to nan inability of North American carriers to alert nonstop because of nan Russian overflight ban. So we're enjoying a precocious request situation for our services to India. I'm rather pleased pinch that.

And past 1 past point connected nan Middle East, we've seen 1 of nan carriers importantly reduced their offering to Europe. And we've seen nan different 2 Gulf carriers, their capacity is rather stable. So nan request situation aliases nan capacity situation successful to and from Europe and nan Middle East is comparatively unchangeable successful immoderate cases really little than what we saw successful 2019.

Steven Zaat

And past connected nan quasi equity, we don't disclose immoderate amount because we are conscionable -- we person nan projects running. We are going to trial nan marketplace and it each depends connected nan pricing. So that is very important. There is nary rush. So we are looking astatine nan pricing initiative. We've seen nan woody we did pinch Apollo, we had rather a bully pricing connected those kinds of setups.

The past mobility I didn't get [Harry], truthful if you tin repetition it because I understand nan portion cost, but do you want nan guidance successful nan mid-term connected nan portion revenues?

Harry Gowers

Yes. On nan level that you mightiness person successful mind successful position of nan building blocks to get there?

Steven Zaat

No. But let's opportunity that each depends, of course, connected nan substance development, et cetera. What we spot connected nan mid-term location will beryllium still, let's say, a simplification of supply. So I deliberation nan proviso successful position of capacity is not coming backmost from each nan carriers, you spot that location are still difficulties to present for definite planes to present nan planes. So we still expect that has restricted capacity from nan proviso side, which is of people bully for our portion revenues.

Harry Gowers

Okay. Thank you very much.


Our adjacent mobility coming comes from Johannes Braun of Stifel Europe.

Johannes Braun

Good morning. Thanks for taking my questions. I person two. First one, conscionable coming backmost connected nan China reopening. Can you really remark really quickly you will ramp up capacities pinch China? So wherever do we stand? Currently, I guess, it was 2019 and wherever will beryllium by nan summertime end? Also, really does nan truth that you person to circumvent nan Russian airspace connected nan measurement to China, power your readying here?

And past secondly, conscionable realized that you're now targeting 1 constituent - sorry, 1% to 4% portion costs simplification successful your midterm outlook. How does that comparison to nan 4.6 - sorry, 4% to 6% simplification if you guided earlier. Is nan caller target conscionable a reflection of, I guess, wide costs inflation? Or is location thing other you should see here.

Benjamin Smith

Okay. So China, first of all, nan accrued - nan inability to overfly Russia, of course, has an effect connected nan long of our flights. So location takes up to 3 hours longer. However, location are immoderate benefits. The charges that we utilized to salary to nan Russian authorities for overflight were highly expensive. So today, nan profitability and nan capacity of our flights to China has been rather coagulated contempt nan truth we person to alert astir Russia.

We had passim nan pandemic very constricted services to nan flights a week from Air France and 4 flights a week from KLM. And for unit reasons, we weren't overnighting our unit successful either city, Beijing aliases Shanghai, and we had removed each services to secondary China, very costly operations having nan unit layover successful different Asian metropolis and run circle type trips.

So arsenic I said, we're going to beryllium backmost to regular aliases adjacent regular connected nan main trunk routes to China ramping up complete nan adjacent - done to Q2. And we will person our astir businesslike craft connected there. And pinch nan -- different truth that we're not now paying, we will not beryllium paying nan Russia overflight charges and nan inability for our main competitors to ramp up successful a measurement that's faster than america because of deficiency of aircraft. We consciousness that nan - our results for Asia partially optimistic they should beryllium bully and request that we're seeing truthful acold is strong.

We're hoping for thing akin to what we saw successful nan Transatlantic, which is simply a really, really immense pent-up request consequence to travel. So we'll spot really that goes. But very optimistic for China particularly for this summer.

Steven Zaat

Yes, Johannes. First of all, it's bully that we person clear now nan equity business for you. That is bully to know. Coming backmost connected your mobility connected nan portion cost. So actually, we don't alteration our plans connected transformation. We support ongoing connected nan ambitions which we person disclosed earlier connected nan midterm, of course, nan 4% to 6% was earlier nan Ukraine war. So location is, of course, ostentation coming in, but we will offset that pinch our translator scheme and besides pinch each nan caller fleet which we are introducing. So connected nan scheme itself, connected nan costs side, which we, let's say, straight tin influence, has thing changed. We support nan ambition which we person already disclosed earlier.

And Marjan, possibly you tin springiness immoderate colour connected this transformation.

Marjan Rintel

Yes. On nan translator plan, if we comparison our costs to 2019, we tin spot that our translator scheme has already delivered €930 cardinal of costs decrease. We are successful nan mediate of this transportation scheme because we've extended it owed to nan COVID situation to 2026. So we person still a batch to deliver, but we person a batch of plans that are identified and we proceed pinch nan aforesaid energy. And of course, arsenic Steven said, it's wholly mandatory astatine slightest to offset nan proviso costs and nan ostentation cost, but we person to do more.

Anne Rigail

As to start, nan simplification of capacity complete nan past 9 months didn't thief successful nan portion cost. So soon we summation our capacity, it will thief nan portion costs arsenic well. Of course, nan ostentation and nan labour marketplace is rather difficult successful nan Netherlands. We hired a batch of group basal to connection a unchangeable merchandise for our customers. We built a afloat translator scheme for nan adjacent 5 years pinch precocious ambitions and we really attraction connected structural costs simplification that is needed to do each nan investments successful caller fleet and sustainability.

Johannes Braun

Thanks, guys.


Our adjacent mobility comes from Achal Kumar of HSBC.

Achal Kumar

Hi. Good morning, guys. Thanks for taking my questions. So first of all, going backmost to Asia, broadly. So you mentioned that, of course, nan formation magnitude has accrued by a fewer hours. Don't - I mean, truthful do you spot nan - do you deliberation - are you capable to support nan profitability versus 2019, particularly connected Asian flights. You pointed retired nan Russian airspace was very expensive, but past of course, formation magnitude increased, formation magnitude and accrued request of nan unit would person benignant of much than offset that. But is it nan beardown yields which are helping you to support nan profitability? So overall, really nan equation looks like? And past do you - don't you spot immoderate imaginable consequence losing nan business to your Chinese counterparts who will person nonstop entree to Russian airspace, truthful they tin alert much, overmuch shorter? So that is my first question.

Secondly, connected your speech mobility pinch Air France crew, who sent you a announcement astir nan onslaught -- imaginable strike. So really are you doing there? And do you spot immoderate consequence of strikes? And could you besides update connected thing other you are facing successful position of your unions? So that is my 2nd question.

Third 1 astir nan substance hedging. I mean, of course, you mentioned that nan substance prices coming down. So do you person immoderate change? I mean, do you spot immoderate alteration successful nan substance hedging policy? Are you benignant of taking a break astatine nan moment? Or are you still continuing to summation your hedging levels?

And yet connected IATA moving -- perchance moving retired of Sky team, do you spot immoderate effect from that fixed that Lufthansa is going to drawback IATA soon and that will move retired of Sky team. So do you spot immoderate impact? So those are my questions. Thank you.

Benjamin Smith

Okay. Achal, let's spot if we tin reply your questions. So Asia, fantabulous question. I can't - I mean, I was shocked erstwhile I saw nan flight, astir of them successful a chaotic 1 earlier we caput this prohibition connected Russian overflight, nan charges that we were incurring were conscionable astronomical to nan constituent that nan truth that we weren't paying them were much than offsetting nan accrued costs that we had to incur because of nan lengthier flights. So we did get nan alleviation we required from immoderate of our formation crews to beryllium capable to alert longer. So there's nary tech stops that are required.

We spot nan expertise of our competitors to adhd backmost capacity is limited. We're not - what we're seeing successful nan - and what's loaded successful nan strategy is capacity by our competitors is little than I would person expected. So I deliberation it will beryllium a very tight capacity environment.

The truth that Chinese carriers coming do not look for illustration they're going to person an rumor flying complete Russia. I find nan customers that KLM, our main predominant and loyal customers astatine KLM and Air France really person a beardown penchant to alert connected KLM and Air France and nan predominant buyers who are astir profitable customers, we don't spot a -- which we didn't spot passim nan past fewer months connected nan non-China routes. We didn't look to suffer those successful a large way. So that's not a interest arsenic of yet.

Strikes successful France, not new. Air France has to negociate done strikes astir its full history. I deliberation if you look astatine really we've managed nan past 4 years, we've not had a worldly onslaught astatine Air France, but this is not easy. We person a large squad astatine Air France who really improved connection and built upgrade relationships pinch nan awesome unions we person constructive unions astatine each awesome activity groups correct now. Of course, this is simply a - we've sewage galore that person - are portion of nationalist unions, which are not ever easy to manage.

Air France provides a awesome level to make a batch of noise. But if you look astatine really Air France has fared complete nan past twelvemonth pinch each nan different carrier companies having awesome shutdowns, I deliberation will hands successful beforehand of me. I deliberation nan Air France squad congratulated and person shown an astonishing resilience against immoderate large pressures. So arsenic of today, rather pleased pinch nan measurement nan Air France labor person shown responsibility.

As I said successful France, nan authorities labor person to onslaught are rather unsocial relationships pinch unions. The - arsenic you said, they're rather bully and there's nan unemployment authorities that nan French State is overhauling, truthful that puts unit connected us. But we've been done a lot, you cognize 4 years 2014 to 2018, Air France mislaid €900 cardinal because of strikes, €900 cardinal betwixt 2018 and coming that's almost been wholly eliminated.

So a batch of effort. The large portion of nan labor that person asked, they want to support their institution and they're becoming much and much responsible. So cautiously optimistic that that inclination tin continue. But it's not - a batch of activity that goes into that.

On nan substance front, I'll fto Steven reply that. I'll conscionable possibly reply your past mobility earlier going to nan fuel. So nan truth that arsenic of now that we do not foresee strengthening our relationship, our commercialized narration pinch IATA. In immoderate cases, it whitethorn really beryllium - benefits will beryllium decreasing and we whitethorn beryllium moving isolated from IATA. We've managed to get further slots for some KLM and Air France astatine Milan, Linate Airport. And this was 1 of nan main objectives of ours to strengthening our narration pinch IATA.

So that being said, we are rather pleased pinch nan truth of we had managed to beryllium capable to do that. What we were amazed is nan unions successful IATA go very, very local. They're looking for snapback. They're looking to nan return to wages and moving conditions that are akin to what Alitalia had because galore of nan labor did travel from Alitalia.

And that is not thing that we would -- we've sewage nan bandwidth to manage. We person capable to negociate successful our 2 different airlines erstwhile it comes to labour relations. So pinch nan use of what IATA and its existent form, its offering versus immoderate of nan risks and nan truth that we've gained entree to nan main marketplace we were looking to further grow our presence, we consciousness beautiful bully that we tin proceed accessing nan Italian marketplace successful a beardown way.

Steven Zaat

Yes, Achal. Coming backmost connected nan substance hedging. Now we proceed nan existent policy. So 70% successful nan 4th we unrecorded past we will -- erstwhile we commencement nan quarter, we person 55% building up to 70% and nan 4th aft we spell from 40% to 50% size, and successful nan 4th fourth we spell from 25% to 40%.

The use is, of course, that we tin -- fixing it now astatine little prices, because nan marketplace is successful backwardation. So pinch these hedges, we tin hole a little value really for nan future. But we are conscionable protecting our exposure. So we're not going to alteration each clip our hedge argumentation related to nan substance price. We are protecting our exposure. We're conscionable much connected nan short word because we waste nan tickets and truthful we person an IR, let's say, hedge complaint successful nan 4th to travel than let's opportunity complete nan past 2 quarters of nan year.

I deliberation we will extremity this session, sorry.

Marjan Rintel

Maybe to springiness immoderate illustration connected your mobility connected nan societal -- connected nan Air France part. We person imperishable discussions pinch our unions, and I deliberation that we spot immoderate spot successful nan discussions. Of course, to instrumentality nan translator scheme that I mentioned, and you mentioned it, we are adjusting our compartment unit ratio. Regarding our compartment configurations, we person taken a batch of clip to talk and explicate it to our compartment unit to set nan service, to activity connected it.

We person a batch of processes connected nan crushed that we are besides adjusting. And of course, we do it pinch discussions pinch each nan unit and nan unions. We besides talk a batch of activity pinch our pilots fixed that we had - we request a batch of flexibility. It was a lawsuit successful summertime '22. It's a lawsuit for summertime '23 fixed nan precocious transportation of immoderate aircraft, fixed nan ramp up successful nan training. We really request a batch of flexibility.

So we will very bully discussions connected it. So I must opportunity it's permanent. Of course, nan French societal discourse is not ever helping, but we are really going guardant and it helps america to instrumentality nan translator scheme that I mentioned.

Achal Kumar

Thank you.

Steven Zaat

Sorry, I want to make a closing remark because - too each nan bully news, we person a flimsy antagonistic news is that really Frederic Kahane will time off our Investor Relations department. He will enactment successful nan company. He will lead our strategical projects. So he will still beryllium very adjacent to america and he will beryllium replaced by Michiel Klinkers arsenic CPIR. We each cognize really - successful your day-to-day relationship pinch analysts.

So convey you very much. We will spell now to nan property and we are happy that we could reply each your questions.


This concludes today's call. Thank you for your participation. You whitethorn now disconnect.

Editor: Naga

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