Turismo
Results as at 30 September 2019
31 October 2019
THIRD QUARTER 2019
OUTLOOK 2019
“Air France-KLM Group's performance in the third quarter showed resilience amid geopolitical uncertainties and softening macro-economic environment.” said Benjamin Smith, CEO of Air France-KLM Group. “Operationally, we achieved a solid performance during the Summer peak travel period. Air France and KLM ranked in the top European legacy carriers in terms of punctuality. Based on long-haul forward bookings on average ahead of last year and renewed commitment to a strict cost discipline, we are confident that we can deliver on our annual objectives of reduced unit cost and stable leverage ratio. All the Group's employees are mobilized to ensure the success of our strategic ambitions, which we will further outline on the occasion of the upcoming Investor Day next week.”
Third quarter 2019 business review
Network: Softer Passenger demand, Cargo industry still under pressure
Third quarter 2019 revenues decreased by -0.7% at constant currency to 6.5 billion euros, mostly impacted by cargo industry pressure. The operating result amounted to 649 million euros, a 180 million euro decrease at constant currency compared to last year, mainly explained by rise of fuel expenses besides revenue pressure.
Passenger network: French domestic unit revenue lifted by capacity reduction, and Long-Haul impacted by trading environment and a high year on year comparison base
Third quarter 2019 capacity increased moderately by 1.6%, mainly driven by the South American, North Atlantic and Asian networks, with respective growth of 4.2%, 4.1% and 3.0%.
The medium-haul hubs showed a resilient performance despite a strong capacity increase. French domestic network posted unit revenue up 4.0%, lifted by capacity reductions in the route network.
Cargo network: Unit revenue still impacted by a challenging airfreight market
Airfreight capacity is for another quarter significantly higher than the demand development, putting pressure on load factor and yield.
The demand is suffering from weakness in global trade, resulting in unit revenue down -13.1% at constant currency. The Group's Cargo strategy is focused on maintaining and increasing load factors where possible and taking a pro-active approach to new revenue opportunities.
Transavia: High capacity growth and positive unit revenue
Strong capacity growth of 7.9% in the third quarter 2019. The third quarter operating margin stands at a level of 25.3%, with an absolute operating result of 173 million euros, 5 million euros down compared to last year. The unit revenue was up by 3.0% compared to last year, supported by a strong demand throughout the network and a good ancillary revenue performance. Unit cost in the third quarter at +8.4% compared to last year, +6.0% at constant fuel and currency, explained by temporary increased fleet- and non-performance expenditures.
Maintenance: Strong third-party revenue growth and operating result stable
Maintenance revenues increased compared to last year with third-party revenues up by 11.0% and 7.2% at constant currency, a continuation of the growth trend underpinned by the inflow of new contracts.
The Maintenance order book stood at 11.5 billion dollars at 30 September 2019, stable compared to 31 December 2018.
The operating margin expressed as a percentage of total revenues stood at 6.4%, a decrease of 0.8 point impacted by airlines bankruptcies.
Air France-KLM Group: Operating result at 900 million euros with revenues up 2% and fuel expenses up 135 million euros
In the third quarter 2019, the Air France-KLM Group posted an operating result of 900 million euros, down by 165 million euros compared to last year, impacted by trading environment and fuel bill increase.
Net income amounted for 366 million euros in the third quarter 2019, a decrease of 420 million euros compared to last year, including non-operating cost impact related to Airbus A380 phase-out of 100 million euros and effects on currency hedge portfolio related to a stronger US dollar and Japanese Yen.
The fuel bill including hedging amounted to 1,512 million euros for the third quarter 2019, up 135 million euros. This increase is mainly explained by a hedging loss of 50 million euros in this quarter compared to a hedging gain of 100 million euros last year, and a negative currency effect on the fuel bill of 48 million euros due to a stronger dollar.
Currencies had a positive 92 million euro impact on revenues and a negative 20 million euro effect on costs (ex-fuel) including currency hedging.
Third quarter 2019 unit cost at +0.4%, annual unit cost result on track for full year guidance
On a constant currency and fuel price basis, unit costs were up +0.4% in the third quarter 2019. The Group had a ramp up of Pilots hiring over the past 12 months, supporting the 2020 capacity growth plan.
Group net employee costs were up 5.0% in the quarter compared to last year, explained by additional hires in response to the capacity growth and the impact of wage agreement implementation for Air France and KLM staff. The average number of FTEs (Full-time equivalent) in the third quarter 2019 increased by 1,600 compared to last year, including an additional 600 Pilots and 850 Cabin Crew. However, productivity measured in ASK per FTE increased by 0.4% in the third quarter 2019.
Net debt down, leverage ratio stable, on track for full year guidance at/below 1.5x
* Sum 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 with deduction of the repayment of lease debt.
A lease debt reduction of 247 million euros and an adjusted operating free cash flow negative at -235 million euros
The Group generated a negative adjusted operating free cash flow of -235 million euros, a decrease of 221 million euros compared to last year, explained by higher capex in the third quarter 2019.
The year-to-date lease debt amounted for 4,399 million euros, down by 136 million euros compared to the end of 2018.
Leverage on track with full year guidance at/below 1.5x
The Group reduced its net debt to 5,911 million euros at 30 September 2019 compared to 6,164 million euros at 31 December 2018, this 253 million euro reduction is driven by the repayment of lease debt.
The net debt/EBITDA ratio stood at 1.5x at 30 September 2019, a stable situation, explained by the reduction in net debt and EBITDA.
Air France and KLM both impacted by lower unit revenues and rise in fuel costs
Outlook
The global economic and geopolitical context remains uncertain and the Group operates in a highly competitive marketplace.
Based on the current data for the Passenger network:
Capacity growth update:
Full year guidance update:
*****
The results presentation is available at www.airfranceklm.com on 31 October 2019 from 7:15 am CET.
A conference call hosted by Mr. Gagey (CFO) will be held on 31 October 2019 at 08.30.
To connect to the conference call, please dial:
France: Local +33 (0)1 70 72 25 50
Netherlands: Local +31 (0) 20 703 8211
UK: Local +44 (0)330 336 9126
US: Local +1 720 543 0214
Confirmation code: 9498209
To listen to the audio-replay of the conference call, please dial:
Investor Relations Press
Olivier Gall Wouter van Beek
+33 1 49 89 52 59 +33 1 49 89 52 60 +33 1 41 56 56 00
olgall@airfranceklm.com Wouter-van.Beek@airfranceklm.com
Income Statement
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 January until 30 September 2019
Key Performance Indicators
EBITDA
Restated net result, group share
Return on capital employed (ROCE)
Net debt
Adjusted operating free cash flow
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 2019
Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
To align with industry practice, as of 2019 the EASK metric will no longer be used.
The new Unit Cost definition will be: Net cost per Available Seat Kilometer at constant fuel and currency. The impact of this change for the unit cost is -0.1pt for 2019
Based on the forward curves of 25 October 2019 average Brent price of USD 64, average jet fuel price of USD 683 per ton including into plane costs. Assuming exchange rate of EUR/USD of 1.12 in 2019
The ROCE definition has been updated within the framework of IFRS 16 implementation. The asset value linked to the aircraft lease contracts now corresponds to the net book value of the right-of-use asset of all the lease contracts. Moreover, the “operating result, adjusted for operating leases” no longer existing having been replaced by “income from current operations” which, thanks to IFRS 16 implementation, no longer includes the financial cost of lease contracts. Finally, the Group now uses a normative income tax rate, calculated according to the tax rates applied in France and in the Netherlands.
Attachment
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