Turismo
Fourth quarter 2021 results
Fourth quarter:
Full year:
In 2021, Air France-KLM continued to be flexible and agile in order to provide the right offer to its customers. The tremendous transformation and restructuring efforts performed during the Covid crisis paved the way to a sustained position as a European avaiation leader. The Group was able to close 2021 with a positive EBITDA at 745 million euros, up 2,440 million euros compared to last year with a first semester impacted by lockdowns in France and the Netherlands, and worldwide travel restrictions in place. The recovery was visible since June which continued in the second semester and thanks to less tight travel restrictions the Group was able to capture the recovery in a profitable way. Net debt ended at 8.2 billion euros, a decrease of 2.8 billion euros compared to end of 2020 thanks to the first set of capital strengthening measures.
OUTLOOK
After a good start of the Fourth quarter and the reopening of the United States early November, the rise of the Omicron variant hampered in December the continuous increase in load factors for the Medium haul and Domestic traffic. Due to high infection rates in France and the Netherlands, some flights had to be canceled in January.
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 73% to 78% in the First quarter of 2022 compared to the First quarter of 2019.
For FY 2022 no guidance will be provided yet due to uncertainty concerning the sanitary situation and reopening of Japan and China.
As of December 31 2021, the Group has a sufficient 10.2 billion euros of liquidity and credit lines at disposal.
Mid 2021, Air France-KLM initiated the first step of its recapitalization plan to strengthen its balance sheet which had been impacted by Covid-19, raising a total of circa 4 billion euros, including the completion of a 1 billion euro capital increase and the conversion of the 3 billion euros French State loan into 3 perpetual bonds in April 2021. In line with market practice for perpetual bonds, Air France-KLM intends to pay discretionary coupons in alignment with point 77 bis of the European Commission's Covid-19 Temporary Framework.
In addition, Air France-KLM implemented several refinancing measures to improve its senior debt profile, notably with 800 million euros of dual tranche senior bonds issued late in July 2021. Part of the proceeds were allocated to repay 500 million euros of the 4 billion euros French State guaranteed loan (“PGE”). The maturity profile of the PGE was also spread over three installments (800m/1.3bn/1.3bn euros) and extended to May 2025 for the last installment.
Finally, Air France-KLM also set up an EMTN (Euro Medium Term Notes) programme, and obtained a solicited ESG rating from Standard & Poor's to pursue its forthcoming refinancing strategy and reaffirm its strategic ESG ambitions in the mid to long term.
Air France-KLM now plans to start a new step of equity strengthening measures, which could consist in:
Air France-KLM intends to remain flexible on the transaction structures, as well as on the sequencing and the sizing of each instrument depending on market conditions.
Existing reference shareholders are supportive of these equity strengthening measures; some of them will consider participating, amongst which the French State and the Dutch State on a pro rata and in-kind basis, through partial offset of their respective outstanding support.
Air France-KLM is committed to repaying the States aids as soon as practicable to be relieved from the set of operational and strategic constraints of the European Commission's Temporary Framework.
Some of these measures are subject to the approval of the European Commission as well as legal and regulatory approvals.
In total, these equity and quasi-equity issuances could represent up to 4.0 billion euros.
This new step in the recapitalization plan measures intends to further restore the equity position, and aims to reach a targeted Net debt / EBITDA ratio between 2.0x and 2.5x by 2023 (excluding the Dutch shareholder loan which is currently accounted as debt), depending notably on the sizing of the contemplated measures.
The Board of Directors of Air France-KLM, chaired by Mrs Anne-Marie Couderc, met on February 16, 2022 to approve the financial statements for the full year of 2021. Group CEO Mr. Benjamin Smith said:
“ The fourth quarter 2021 marked a turning point for Air France-KLM. For the first time since the beginning of the pandemic, the Group posted better than pre- covid results, with a positive operating result. While the end of the quarter saw the return of travel restrictions along with the Omicron variant, the overall performance reflects both the pent-up demand for travel and the outcome of our transformation efforts. The crisis is not over yet, but this makes us optimistic for the future, as we accelerate said efforts to improve our performance from both an economical and environmental standpoint. The investments in fleet renewal across all of the Group's airlines – including the joint order for 100 Airbus A320neo family aircraft with acquisition rights for an additional 60 aircraft and the LOI for 4 Airbus A350F Full Freighter aircraft - embody this goal and emphasize our dedication to preparing for the future today. I would like to thank our customers for their trust, and our employees for their unyielding commitment to the Group throughout another challenging yet rewarding year.”
B usiness r eview
Network: Positive Operating result in the fourth quarter
Fourth quarter 2021 revenues increased by 112.0% at constant currency to 4,242 million euros. The operating result was positive and amounted to 146 million euros, a 1,032 million euros increase at constant currency compared to last year.
Passenger network : Strong long haul performance , l ockdown impact visible in December for Medium haul and Domestic
Fourth quarter 2021, capacity in Available Seat Kilometers (ASK) was 53% higher than last year and at 72% of 2019 Fourth quarter level. Thanks to the Group's balanced network and the reopening of the Canada and the United States, the passenger network was in the middle of the Group's guidance provided during the Third quarter 2021 results presentation.
The unit revenue per ASK on all routes, except for Central and South America, was below 2019 levels in the Fourth quarter, driven by lower load factors. Yields on total long haul level was above Fourth quarter 2019 levels, intra Europe yields were close to the Fourth quarter 2019 level while Domestic France yields ended below Fourth quarter of 2019 level, resulting in a better yield compared to the Fourth quarter for the entire passenger network activity.
During the Fourth quarter, Air France added one Airbus 350-900 and five Airbus A220-300 to its fleet while Air France phased out one Airbus A320, three Airbus A318, four Canadair Jet 700 and four Embraer 145. KLM phased out one Boeing B737-700 and 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.
In 2021, Air France-KLM passenger activity was able to operate around 60% of 2019 capacity, with the first half of 2021 more impacted by travel restrictions. Short and medium-haul, African and Caribbean & Indian Ocean routes were the best performers.
Cargo: Strong fourth quarter yields resulting in higher unit revenue
Compared to the fourth quarter 2020, capacity increased by 10.5% in Available Ton Kilometers, mainly due to the increase in belly capacity, while traffic decreased by 3.8% resulting in a decrease of load factor by 9.6 points. Thanks to an increase in yield, which compensated the reduction in load factor, the unit revenue per ATK at constant currency improved by 5.0%.
Cargo capacity in the Fourth quarter is still 16% below the capacity in the Fourth quarter of 2019 while the demand remains high, resulting in total revenues that are 82% higher than in the Fourth quarter of 2019. This increase in revenues is mainly driven by a higher yield and 5 points higher load factor contributed as well.
In 2021, the cargo activity continued to post very strong performances with a 25.8% unit revenue increase at constant currency versus last year. Yields were continuously on a steep upward trend.
Strong demand is expected in Q1 2022 as global trade is booming, sea freight faces bottleneck, and the belly capacities are still constrained overall.
Transavia: Cap acity close to pre-crisis level with a load factor of 80%
The Fourth quarter of 2021 had started well with encouraging load factors but December was impacted by the closure of the border of Morocco and imposed travel restrictions in several countries due to the rise of the Omicron variant. Despite these factors, capacity in the fourth quarter was close to the level of the Fourth quarter of 2019 and unit revenue even above Fourth quarter 2019 mainly driven by a strong yield improvement.
Compared to last year, the capacity in the Fourth quarter increased by 202.4% while traffic increased by 287.9% and the number of passengers increased even more, by 316.8%. The Operating result was negative at 37 million euros, although improved by 56 million euros compared to the Fourth quarter of 2020.
In the first half year of 2021, activity levels were quite low compared to 2020. The strong recovery of leisure traffic started in the second half of the year resulting in an increase of 51% in ASK's and an average load factor of 74.7% for the Full year 2021. Combined with a yield increase of 14% compared to 2020, the unit revenue per ASK rose by 14.6%. The Operating loss stood at 150 million euros for the full year 2021, which is an improvement of 149 million euros compared to 2020.
Maintenance business : O peratin g result positive for the Fourth quarter and Full Year 2021
The Fourth quarter operating result stood at 69 million euros, an increase of 246 million euros at constant currency versus the Fourth quarter 2020. Although the Fourth quarter 2020 result was heavily impacted by one off bookings related to the Covid-19 crisis, the improvement of the operating results is explained as well by less underactivity, cost control, savings and operational improvement.
Total revenues increased by 32.1% in the Fourth quarter while third party revenues decreased by 8.0% due to the use of green time by external customers in order to avoid shop visits. The increase in internal revenues is consistant with the activity increase of the Air France-KLM airlines compared to the Fourth quarter 2020.
Full year 2021 total revenues are close to Full year 2020 levels while the operating result increased by 651 million euros at a constant currency, resulting in an operating margin of 3.1%. The results of full year 2020 were heavily impacted by one-off bookings related to the Covid-19 crisis when the year 2021 has shown a better result driven by cost control, savings and operational improvement.
Air France-KLM Group: Operating result above Q4 2019
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
In the Fourth quarter 2021, the Air France-KLM Group posted a positive operating result of 178 million euros, up by 1,319 million euros at a constant currency compared to last year, and was driven by an increase of capacity and unit cost reduction. In parallel, the increase of load factor generated an increase of the unit revenue.
Net income amounted to -127 million euros in the Fourth quarter 2021, an increase of 874 million euros compared to last year.
Full year 2021 showed a positive EBITDA of 745 million euros, coming from a positive second half of the year while the first half of the year was still impacted by severe travel restrictions due to the Covid-19 crisis.
Group Unit Cost down versus Q4 2019 despite 26% less capacity
Unit cost were down compared to the Fourth quarter 2019 despite the group capacity was 26% below the same quarter in 2019.
On a constant currency and fuel price basis, unit costs were down 19.1% in the Fourth quarter 2021 compared to the same quarter last year.
The reduction in salary cost compared to the Fourth quarter 2019 was mainly driven by a reduction in Full time employee (FTE), and supported by lower average salary cost and by government support on wages as well.
Fourth quarter : Adjusted Operating Free cash flow positive , for the third quarter in a row
* 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 Fourth quarter 2021 of 225 million euros, an increase of 2,340 million euros compared to last year, mainly driven by a positive EBITDA of 827 million euros.
Q 4 : Positive operating result for both airlines
Guidance: Air France-KLM Group medium term operating margin objective unchanged
The Group continues its swift and quick transformation initiatives and confirms its medium-term financial ambition with the long-term focus of achieving increased competitiveness. To do this, the Group continues to optimize fleet, workforce, network, costs and reinforce its sustainability efforts.
The Group expects capacity in Available Seat Kilometers back to the 2019 levels in 2024.
Air France (excluding Transavia France subsidiary) decreased the number of FTE by 7,800 at the end of 2021 compared to December 2019. The voluntary departure plan continues at Air France (excluding Transavia France), and an additional 700 FTE will leave the company in 2022. KLM finalized the FTE reduction by the end of 2021 resulting in 5.500 less FTE.
Operating cost has been reduced in 2021, with 800 million euros structural benefits for KLM and 1.0 billion structural benefits for Air France by the end of 2021. Air France estimates to reach by the end of 2022 1.4 billion euros structural benefits versus 2019.
The reduction in FTE, amongst other key transformation initiatives, will drive the unit cost down 4% to 6% at constant fuel price when capacity are back to 2019 level.
The Group's medium-term financial ambition is maintained with an Operating Margin objective reconfirmed at 7% to 8% in 2024. The Adjusted Operating Free Cash Flow excluding exceptionals is expected positive in 2023. Exceptionals include the payment of the cargo claim and the deferrals of social charges accumulated during the Covid 19 period.
The Net debt/EBITDA target ratio of circa 3x in 2023 will be lowered to between 2x and 2.5x depending on the second step of recapitalization sizing.
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The results presentation is available at www.airfranceklm.com on from 8:15 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 70 730 3 39
Netherlands: Local +31 (0)20 703 8218
UK: Local +44 (0)330 336 9601
US: Local +1 720-452-7989
Confirmation code: 9020512
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
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Consolidated Balance Sheet
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Statement of Consolidated Cash Flows from 1 January until 31 December 2021
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Return on capital employed (ROCE)
Net debt
Adjusted operating free cash flow
Operating cash burn
* 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
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 3 1 December 202 1
FOURTH 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 fourth 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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