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Air France - KLM Third Quarter 2021 results
Third quarter:
OUTLOOK
After the announcement in September of the reopening of the United States for European citizens, bookings came quickly for November and even more for Christmas holiday. The reopening of Canada in early September was another important milestone for the recovery of the Group, as well as the reopening of Singapore as from October.
In this context, the Group expects capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at index in the range of 70% to 75% in the Fourth quarter 2021 compared to 2019. EBITDA is expected to be positive in the Fourth quarter 2021 and slightly positive in Full Year 2021.
Due to the uncertainty regarding the reopening of the majority of the Asian countries, no capacity guidance will be provided for 2022.
Air France-KLM is considering the next steps of recapitalization measures to strengthen balance sheet. The reprofiling of the French Bank Loan “PGE”, the EMTN program (Euro Medium Term Note) which is now ready for use, and the finalization of a S&P solicited ESG rating tool, will be part of the liability management actions.
On the equity side, discussions are ongoing on KLM recapitalization measures on current shareholder loan and also on further capital strengthening measures for Air France-KLM. These could include instruments such as a Rights Issue and Quasi equity instruments.
The Board of Directors of Air France-KLM, chaired by Mrs Anne-Marie Couderc, met on October 28, 2021 to approve the financial statements for the first nine months of 2021. Group CEO Mr. Benjamin Smith said:
“ The Air France-KLM group had a good summer season thanks to the reopening of many countries. I would like to thank our employees who have enabled our customers to return to the skies in the best possible sanitary conditions. For the first time since the beginning of this Covid-19 crisis, the Q3 results show a positive operating
result which encourages us to continue our efforts. The Covid-19
crisis is not yet over. Important continents such as Asia remain mainly closed and business travel is slowly recovering. This is why we must remain very agile and continue our transformation with the objective of improving both our economic and environmental performance. In this respect, t he Air France-KLM Group has com m itted to setting
greenhouse gas emission reduction targets in line with the Paris agreements and based on scientific data (through the science-based targets initiative). This new commitment comes in addition to our goal of zero net emissions by 2050 ” .
B usiness r eview
Network: Recovery continued throughout the summer peak
Third quarter 2021 revenues increased by 89.8% at constant currency to 3,791 million euros. The operating result was close to break-even and amounted to -13 million euros, a 968 million euros increase at constant currency compared to last year.
Passenger network : A ll indicators showing positive results in the Third quarter
Third quarter 2021, the capacity in Available Seat Kilometers in the Third quarter was 63.7% higher than last year, however at 66% of 2019 Third quarter levels. Thanks to the Group's balanced network, less travel restrictions, for instance the reopening of Canada in September and the continuation of strong Cargo performance, the passenger network was in the upper limit of the Group's guidance provided during the Second quarter 2021 results presentation.
On most routes, the Group observed a decrease in unit revenue versus 2019 mainly due to lower load factors, while yields are close to 2019 levels for the entire passenger activity.
During the Third quarter, Air France added one Airbus 350-900 to the fleet and received its first Airbus A220-300, KLM phased out two B737-700 and HOP decreased its aircraft in operation with two Canadair Jet 1000 and one Canadair Jet 700.
Cargo: High yield compensating the lower load factor in the Third quarter due to increase in capacity
Compared to the third quarter in 2020, capacity increased by 20.3% in Available Ton Kilometers and traffic increased by 8.9%. Additional belly capacity to leisure destinations could not be filled completely resulting in a reduction in load factor by 6.5 points. Thanks to an increase in yield, which compensated the reduction in load factor, the unit revenue per ATK at constant currency improved by 2.9%.
Cargo capacity this quarter is still 20% below the capacity in the Third quarter of 2019 while the demand remains high resulting in high revenues.
Strong demand is expected on Q4 as global trade is booming, sea freight faces bottleneck, and the belly capacities are still constrained overall.
The Sustainable Aviation Fuel (SAF) Cargo program welcomed 25 partners already, showing the sustainable commitment of Air France-KLM Cargo and its partners.
Transavia: Reaching close to 80% load factor in the Third quarter with strong capacity development
The third quarter of 2021 showed a strong recovery in demand for leisure traffic in Europe, both from the Netherlands as well as France. With activity levels back to around 85% of the regular production, Transavia realized an Operating Profit of €105mln, with a healthy COI margin of 20,2%, moving towards Q3 2019 level of 26%.
Compared to last year, the capacity increased by 56.3% while traffic increased by 90.2% and the number of passengers more than doubled at an increase of 110.8%.
Transavia was able to continuously adjust and redesign the network to accommodate high leisure demand from both the Netherlands and France, with an increase of capacity to Greece, Spain and Portugal.
In the first nine months of 2021, the number of aircraft of Transavia France increased by ten as part of the growth strategy for Transavia France and will reach 61 aircraft in Summer 2022.
Maintenance business : O peratin g result positive for the Third quarter 2021
The Third quarter operating result stood at 29 million euros, an increase of 76 million euros at constant currency versus the Third quarter 2020.
The operating result increase in the Third quarter is mainly explained by less underactivity, costs control, savings and operational improvement.
Total revenues increased by 14.2% in the Third quarter while third party revenues remained stable and internal revenues increased by 24%. This increase in internal revenues is aligned with the activity increase of the Air France-KLM airlines compared to the third quarter 2020. Both internal and third party engines revenues are impacted by green time usage. Nevertheless, some recovery signs are there and E&M business should increase its external activity over the coming months.
Air France-KLM Group: Positive Operating result in the Third quarter for the first time since the start of the Covid-19 crisis
In the Third quarter 2021, the Air France-KLM Group posted a positive operating result of 132 million euros, up by 1,178 million euros compared to last year driven by an increase of capacity leading to a reduction in unit cost. In parallel increase of load factor generated an increase of the unit revenue.
Net income amounted to -192 million euros in the Third quarter 2021, an increase of 1,473 million euros compared to last year. Last year Third quarter was heavily impacted by the recording of exceptional accounting items due to Covid-19 (mainly due to restructuring costs provision for Air France staff, HOP staff and Air France-KLM international commercial staff, but as well due to fleet impairment and fuel over hedge).
Third quarter 202 1 unit cost de creased by 24 %, thanks to an increase of capacity and FTE reductions
On a constant currency and fuel price basis, unit costs were down 24.4% in the third quarter 2021 compared to the same quarter last year.
All cost items increased in the Third quarter 2021 compared to last year due to an increase in capacity of 62.5%.
Group net employee cost were up 8.7% due to less government support driven by higher activity, and partly compensated by FTE reductions.
Third quarter : Adjusted Operating Free cash flow positive driven by Cash Flow from Operations
* S um of 'Purchase of property, plant and equipment and intangible assets' and 'Proceeds on disposal of property, plant and equipment and intangible assets' as presented in the consolidated cash flow statement .
** The “Adjusted operating free cash flow ” is operating free cash flow after deducting the repayment of lease debt.
The Group generated adjusted operating free cash flow in the Third quarter 2021 of 278 million euros, an increase of 1,498 million euros compared to last year, mainly driven by a positive EBITDA of 796 million euros.
Q 3 : Both airlines performing significantly better than last year
OUTLOOK
After the announcement in September of the reopening of the United States for European citizens, bookings came quickly for November and even more for Christmas holiday. The reopening of Canada early September was another important milestone for the recovery of the Group, as well as the reopening of Singapore as from October.
In this context, the Group expects capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at an index in the range of 70% to 75% in the Fourth quarter 2021 compared to 2019.
Due to the uncertainty of the reopening of the majority of the Asian countries no capacity guidance will be provided for 2022.
As of September 30 2021, the Group has 10.4 billion euros of liquidity and credit lines at disposal. This level can be considered sufficient, given the continuation of recovery throughout the summer. Cash requirements for 2021, will include:
Air France-KLM is considering the next steps of recapitalization measures to strengthen balance sheet. The reprofiling of the French Bank Loan “PGE”, the EMTN program (Euro Medium Term Note) which is now ready for use, and the finalization of a S&P solicited ESG rating tool, will be part of the liability management actions.
On the equity side, discussions are ongoing on KLM recapitalization measures on current shareholder loan and also on further capital strengthening measures for Air France-KLM. These could include instruments such as a Rights Issue and Quasi equity instruments.
Air France-KLM receives a proactive and voluntary ESG Evaluation by Standard and Poor's
Sustainability is a key element of the Group's recovery strategy and an integral part of its structural transformation plan. Air France-KLM wants to lead the way towards responsible and sustainable aviation.
To this end, the Group has set itself ambitious targets to reduce its environmental footprint, deepen its social and societal contribution and set an example in terms of corporate governance.
To objectivize its ESG profile and enhance its strategy and practice, Air France-KLM proactively sought an independent ESG rating from Standard and Poor's.
This makes Air France-KLM the first airline Group to be evaluated by a solicited ESG rating.
S&P Global Ratings has assigned Air France-KLM an ESG Evaluation of 64/100.
With this rating, Air France-KLM compares well with the airline industry in terms of the management of its significant exposure to environmental challenges. S&P noted that the Group is adequately prepared to manage ESG related risks facing airlines over the near-to-medium term.
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The results presentation is available at www.airfranceklm.com on from 7:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on at 08.30 CET.
To connect to the conference call, please dial:
France: Local +33 (0)1 76 77 25 07
Netherlands: Local +31 (0)20 703 8259
UK: Local +44 (0)330 336 9434
US: Local +1 323-794-2597
Confirmation code: 2229449
Investor Relations Press
Olivier Gall Michiel Klinkers
+33 1 49 89 52 59 +33 1 49 89 52 60 +33 1 41 56 56 00
olgall@airfranceklm.com Michiel.klinkers@airfranceklm.com
Income Statement
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 January until 30 September 2021
Return on capital employed (ROCE)
Net debt
Adjusted operating free cash flow
Operating cash burn
Unit cost: net cost per ASK
* The capacity produced by the transportation activities is combined by adding the capacity of the Passenger network (in ASK) to that of Transavia (in ASK).
Group results
Air France Group
NB: Sum of individual airline results does not add up to Air France-KLM total due to intercompany eliminations at Group level
Group fleet at 30 September 202 1
THIRD QUARTER 2021 TRAF F IC
Passenger network activity*
* Air France and KLM
Transavia activity
Total group passenger activity**
** Air France, KLM and Transavia
Cargo activity
Air France activity
KLM activity
1 The third quarter 2020 was highly impacted by worldwide travel restrictions
2 Passenger unit revenue is the aggregate of Passenger network
and Transavia unit revenues, change at constant currency
3 See appendix for the calculation of the net debt
Attachment
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