Turismo
Second QUARTER 2022
Second quarter :
Mr. Benjamin Smith, Group CEO, said:
“ The strong recovery we see this summer is putting the entire aviation industry to the test. While Air France-KLM had prepared for close to pre-pandemic demand levels, our airlines are not immune to the major operational challenges taking place around the world. Customer satisfaction is at the top of our priorities and we know we have not fully been able to deliver the quality of service that has come to be expected from us. I would like to thank our customers for their trust and patience. I would also like to express my gratitude towards our employees for their unwavering commitment, even in difficult situations. It is thanks to their dedication and sense of collective responsibility that we are able to post better-than-expected revenues and results this quarter. Going forward we will continue to implement our strategy in order to further transform our organization. We aim to increase our resilience to the changes of our environment while continuing to accelerate our efforts to make our Group and aviation as a whole more sustainable.”
Outlook :
Context:
Air France and KLM are among the most active airlines to accommodate the travel recovery, with a second quarter capacity for Network passenger activity at an index of 82%. Despite the summer growth anticipation efforts since January, operational difficulties arose in Europe and the United States, mainly due to labour shortages at airports.
Air France and KLM are doing their utmost to mitigate these challenges and has prioritised safeguarding the trust of our customers. For this quarter, it resulted into 70 million euros additional compensation costs.
Capacity
In this recovery context, the Group expects the capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at an index of:
All indices compared to the respective period of 2019.
The capacity for Transavia in Available Seat Kilometers is expected at an index above 100 for the full year and in the third and fourth quarter 2022 compared to 2019.
Yield
The yield environment should remain high for the rest of 2022 with a strong summer demand resulting in yield levels above 2019.
Expected o perating result
Cash
As of June 30 2022, the Group has a strong 11.9 billion euros of liquidity and credit lines at disposal.
Full year 2022 Net Capex spending is estimated at circa 2.5 billion euros, which is 80% fleet & fleet related and 20% IT & Ground related.
Air France-KLM made major steps to pave the financial trajectory
The restoration of negative equity will be done through net profit generation and quasi/equity projects.
A ir France-KLM Group : Second quarter o perating margin at 2019 level despite the steep increase of fuel cost
In the Second quarter 2022, the Air France-KLM Group posted a positive operating result of 386 million euros, up by 1,145 million euros at a constant currency compared to last year, and was driven by an increase of capacity. In parallel, the increase of load factor and yield generated an increase of the unit revenue.
Net income amounted to 324 million euros in the Second quarter 2022, an increase of 1.8 billion euros compared to last year. The recognition of tax assets at KLM group for an amount of around 300 million euros supported the positive net income generation.
In a challenging cost environment, transformation programs contain the unit cost up 2.4% with 15% capacity below 2019.
The unit cost is up 2.4% at a constant fuel price and constant currency versus the Second quarter 2019, with a capacity down by 15%. The ongoing transformation programs enable Air France-KLM to limit the impact of increasing costs such as airport and ATC charges, and the KLM Collective Labour Agreement (CLA) delayed implementation.
Compared to June 2019, the number of Full Time Equivalents (FTE's) of Air France excluding Transavia reduced by 16% and by 13% for KLM.
Staff costs decreased in the Second quarter by 11% compared to the same quarter in 2019 thanks to FTE reduction and the French government support on wages. Corrected for government support on wages, staff costs decreased by 9%.
B usiness r eview
Network: Significant improvement in operating result
Second quarter 2022 revenues increased by 137.4% at constant currency to 5,753 million euros. The operating result amounted to 352 million euros, a 1,013 million euros increase at constant currency compared to last year.
Passenger network :
Double-digit yield increase on most regions and on both
economy and premium cabins
Second quarter 2022, capacity in Available Seat Kilometers (ASK) was 69.4% higher than last year and at 82% of 2019 Second quarter level which was in the middle of the Group's guidance provided during the First quarter 2022 results presentation.
In response to the rise in fuel prices and other external costs, the Group proceeded to different fare increases during the first half of the year across all long-haul flights. The amount of the increase varies according to destination and class of travel, and applies to flights operated by Air France and KLM. Additionally, the spike in travel demand, the strong performance in Premium cabins, and the solid corporate traffic recovery have all led to a yield above the 2019 level in the second quarter.
The Second quarter result is driven by a strong performance of the entire network:
During the Second quarter, Air France added three Airbus 350-900 and two Airbus A220-300. One B777-200, one Airbus 320, three Airbus 319, two Embraer 170 and five Canadair Jet 1000 were phased out. KLM phased in three Embraer 195 E2. The Group will continue to introduce new generation aircraft to its fleet in order to improve its economic and environmental performance.
Cargo: S trong yield increase mitigates traffic impact on Asia trade lanes
Compared to the Second quarter 2021, cargo capacity strongly increased by 27.4% in Available Ton Kilometers, mainly due to the increase in worldwide belly capacity, except for Asia. This limited belly capacity to Asia affected the overall traffic which resulted in a traffic decrease of 17.2% and contributed to an overall decrease in load factor by 27.9 points. Yields, however, remain at a consistently high level (+17.4% vs. 2021), leading to a total Second quarter revenue performance at last year's level.
When compared to the pre-COVID year 2019, cargo capacity in the Second quarter was still 8% below 2019. However, due to exceptional yield performance – driven by high demand – total revenues in the Second quarter of 2022 were 76% higher than 2019.
In May, Air France-KLM announced its entry into a strategic partnership with CMA-CGM Air Cargo (CCAC). The partnership agreement is currently being worked out and expected to be finalized before the end of 2022.
In June, Air France-KLM Cargo won the Air Cargo Industry Achievement Award for their pioneering work in the development and distribution of sustainable aviation fuel and the fast expansion of its leading SAF program.
Transavia: Cap acity above pre-crisis level with a load factor of 8 5 %
In the Second quarter of 2022, the demand recovery in leisure traffic in Europe and North Africa continued. Compared to last year, the capacity in the Second quarter increased by 221.9%, traffic increased by 358.2%, and the number of passengers increased by 346.8%. Last year, Second quarter was heavily impacted by travel restrictions in Europe and North Africa.
The Operating result was slightly negative at -18 million euros, although improved by 80 million euros compared to the Second quarter of 2021.
Capacity in the Second quarter was above the level of the Second quarter of 2019 and unit revenue even above the Second quarter 2019 mainly driven by a strong yield improvement.
The fleet of Transavia is approaching 100 aircraft, to further capture the strong demand of leisure traffic in Europe.
Maintenance business : O peratin g margin above 2019 level
The Second quarter operating result stood at 57 million euros, an increase of 61 million euros at constant currency versus the Second quarter 2021 thanks to a higher activity and an operational improvement.
Total revenues increased by 34.1% in the Second quarter while third party revenues increased by 35.1%, showing a strong recovery. The increase in internal revenues is consistent with the activity increase of the Air France-KLM airlines compared to the Second quarter 2021.
The operating margin stood at 6.3%, which is 6.7 points higher than the operating results in the Second quarter 2021. The half year margin amounts to 5.8%, which is at the level of the pre-covid period when excluding the states support.
During the second quarter, Air France-KLM and Apollo Global Management announced the signing of a definitive agreement for Apollo managed funds and entities to make a 500 million euros investment in to an ad hoc operating affiliate of Air France that will own a pool of spare engines dedicated to the airline's Engineering and Maintenance activities.
Second quarter : Positive EBITDA and strong ticket sales reinforces the a djusted operating free cash flow and supports net debt reduction by 2.2 billion euros
* 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 an adjusted operating free cash flow in the Second quarter 2022 of 1,532 million euros, an increase of 1,322 million euros compared to last year, mainly driven by a positive change in working capital of 1,510 million euros. This was the fifth quarter in a row that the adjusted operating free cash flow was positive.
Both airlines able to reach positive operating margin
******
The external auditors carried out limited review procedures. Their limited review report was issued following the Board meeting.
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 am CET.
To connect to the conference call, please dial:
France: Local +33 (0)1 76 77 28 19
Netherlands: Local +31 (0)20 703 8218
UK: Local +44 (0)330 165 4012
US: Local +1 323-701-0160
Confirmation code: 1131773
Income Statement
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 January until 3 0 June 2022
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Return on capital employed (ROCE)
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Net debt
Adjusted operating free cash flow
Bridge from EBITDA to Financial capacity
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Unit cost: net cost per ASK
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
(1) The capacity produced by the transportation activities is combined by adding the capacity of the Passenger network (in ASK) to that of Transavia (in ASK).
Group results
Air France Group
KLM Group
NB: Sum of individual airline results does not add up to Air France-KLM total due to intercompany eliminations at Group level
Group fleet at 30 June 202 2
SECOND QUARTER 2022 TRAF F IC
Passenger network activity*
* Air France and KLM
Transavia activity
Total group passenger activity**
** Air France, KLM and Transavia
Cargo activity
A ir France activity
KLM activity
1 Change versus 31 Dec 2021
Attachment
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