Turismo
AIR FRANCE - KLM : RESULTS AS AT 30 JUNE 2018
Air France-KLM leveraged the solid ongoing demand to generate revenues up +4.0% at constant currency:
The Group delivered an operating result at a similar level to last year before the impact of Air France strikes:
The net debt1 has been further reduced by 315 million euros compared to 31 December 2017, and the net debt/EBITDA1 ratio is stable at 1.4x on 30 June 2018 compared to 31 December 2017.
The Group will continue to work on yield improvement in the context of an increased fuel bill:
Unit cost target is maintained at between 0% and +1.0% at constant currency, fuel and pension charges, including strike-related costs and the associated capacity adjustments incurred in the first half of 2018.
Despite the strike impact of 335 million euros in the first half that will weigh on the full year operating result, the Group is targeting a net debt reduction compared to 31 December 20171.
In the second quarter 2018, as a result of twelve days of strikes at Air France, capacity decreased by -0.2%. However, thanks to a positive business environment, the Group managed +2.7% growth in network revenues at constant currency compared to last year. The driver for this growth was a strong unit revenue performance in both Passenger and Cargo, partly offsetting the negative impact from fuel costs.
The combined Passenger and Cargo operating result amounted to 236 million euros for the second quarter 2018, a decrease of 188 million euros compared to last year at constant currency.
The Air France pilot strike had a -2.5% negative impact on second quarter 2018 capacity, resulting in stable capacity and passenger numbers, the latter standing at 21.9 million.
Strong ongoing demand made it possible to increase unit revenues at constant currency, partially compensating the higher fuel bill: the overall unit revenue per Available Seat Kilometer increased by 1.6%.
In particular, the medium-haul network unit revenue performance was stronger than in the previous quarters, with an increase of 4.3% at constant currency. On the medium-haul hub network, the unit revenue was up 5.0% at constant currency, with both hubs contributing positively to the performance. On the point-to-point network in France, capacity was reduced substantially by 7.8% compared to last year in response to the increased TGV competition, and the unit revenue was up 2.9% at constant currency.
The long-haul network again benefitted from a dynamic demand environment in the Group's core markets, resulting in a unit revenue increase of 0.9% at constant currency. In line with the first quarter 2018, both the North American and Latin American networks were positively oriented with unit revenue increases of respectively +3.6% and +2.7% at constant currency. The Asian network's unit revenue decreased by -1.9% at constant currency, mostly owing to the ramp up of additional capacity on Indian subcontinent routes and more volatile demand from other Asian points of sale.
Capacity decreased by 2.5% in the second quarter 2018 compared to last year, following the replacement at KLM of three 747 Combi aircraft by 787s and some flight cancellations due to the Air France strikes.
The Cargo business continued its turnaround in the second quarter 2018, with market demand remaining strong, especially on the Americas and Asia. The overall unit revenue increased by 6.3% at constant currency.
Transavia carried 4.6 million passengers in the second quarter 2018, an increase of 5.2% compared to last year. Transavia France's capacity saw strong growth of +19.4%, while Transavia Netherlands capacity was slightly down at -1.4%. Despite the negative effect of the shift in Easter peak leisure traffic from the month of April to March, traffic grew by 8.3%, increasing the load factor by 1.8 pt compared to last year. The unit revenue was up by 4.5% compared to last year.
The second quarter 2018 operating result stood at 61 million euros, an improvement of 17 million euros compared to last year with both Transavia France and Transavia Netherlands delivering a positive and improving operating result.
Maintenance revenues increased in the second quarter 2018 compared to last year, with third-party revenues up by 15.8% at constant currency, driven by a strong performance from the Engine activity. The operating margin expressed as a percentage of total revenues stood at 4.6%, a decrease of 0.6 points at constant currency.
The Maintenance order book stood at 10.5 billion dollars at the end of the second quarter 2018, a decrease of 0.3 billion dollars compared to the end of 2017, caused by the withdrawal of Alitalia contracts from the order book and partially offset by new Component and Engine contracts.
In the second quarter 2018, the Air France-KLM Group realized an operating result of 345 million euros, down by 241 million euros compared to last year.
This decrease is mainly explained by the strikes at Air France with a negative impact of around 260 million euros, the fuel price increase and currency headwinds having been partly offset by higher unit revenues.
Unit revenue contributed positively with 121 million euros and unit cost showed a negative effect of 129 million euros, both including strike-related effects.
The fuel bill including fuel hedging amounted to 1,184 million euros, up 24 million euros, and up 160 million euros at constant currency, due to the increase in the jet fuel price. The positive fuel hedge result realized in second quarter 2018 stood at 212 million euros.
Currencies had a negative 259 million euro impact on revenues compared to last year. The positive impact on costs reached 189 million euros, including a tailwind from currency hedging. In the second quarter 2018, the net impact of currencies thus amounted to a negative 70 million euros.
On a constant currency, fuel price and pension-related expense basis, the unit cost was up +2.4% in the second quarter 2018, of which +3.1% resulting from the strikes at Air France.
Lower-than-planned capacity growth affected productivity in second quarter 2018: with a capacity increase limited to 0.4%, productivity decreased by -1.1% measured in EASK.
The average number of staff increased by 1,250 FTEs including +150 FTEs in Pilots and +400 FTEs in Cabin crew driven by flight crew hiring ahead of the ramp-up of H2 2018 capacity growth. Ground staff increased by 700 FTEs, of which +460 FTEs at KLM.
Net employee costs in the first quarter 2018 were up 2.0% compared to last year.
'
The Group generated an adjusted operating free cash flow of 141 million euros in the first half 2018, a reduction of 517 million euros compared to last year. The decline resulted from the strike impact and a net 222 million euro increase in investments.
At 30 June 2018, net debt had been further reduced to 6,256 million euros versus 6,571 million euros at 31 December 2017, an improvement of 315 million euros driven by operating free cash flow and the repayment of lease debt.
The net debt/EBITDA ratio remained stable at 1.4x at 30 June 2018 compared to 31 December 2017.
Air France Second Quarter 2018 operating income was down by -231 million euros due to strikes. KLM operating income was almost stable compared to last year.
The global context remains uncertain given the current geopolitical environment, labour wage inflation pressure and rising fuel price trends.
As a consequence, the following guidance elements have been adjusted for full year 2018:
Demand remains positively oriented within a positive business environment:
The Group maintains unchanged the following guidance elements for full year 2018:
The management will maintain prudent steering of the Group's financial structure and growth plan.
During the first semester, Air France-KLM continued to strengthen its airlines partnerships, supporting its strategy to grow profitably and offer its customers an unrivalled commercial proposition.
Besides, the group is in discussions with Air Europa, aiming at a joint-venture cooperation between Europe and Central/South America, strengthening joint position on this network.
*****
Limited review procedures were carried out by the external auditors. Their limited review report was issued following the Board meeting.
The results presentation is available at on 1 August 2018 from 7:15 am CET.
A conference call hosted by Mr. Frédéric Gagey (CEO) will be held on 1 August 2018 at 8.30 am CET.
To connect to the conference call, please dial:
Confirmation code: 5576681
+33 1 49 89 52 59 +33 1 49 89 52 60 +33 1 41 56 56 00
madepeslouan@airfranceklm.com Wouter-van.Beek@airfranceklm.com
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti