Turismo
Air France-KLM results FY 2020
The Covid-19 crisis severely impacted the Full Year 2020 results:
OUTLOOK
After a positive Christmas traffic in Domestic France and to the Caribbean and Indian Ocean, travel restrictions were tightened in France, the Netherlands and worldwide, having a negative impact on the traffic of the Group in the first quarter of 2021.
Due to the lockdown and travel restrictions still in place, the Group anticipates a challenging First quarter 2021, with a lower EBITDA compared to the Fourth Quarter 2020.
There is limited visibility on the demand recovery curve as customer booking behavior is much more short-term oriented and also highly dependent on the imposed travel restrictions, on both the Long Haul and Medium Haul network.
In this context the Group expects capacity in Available Seat kilometers circa index 40 for Air France-KLM in the First quarter 2021 compared to 2019 for the Network passenger activity due to negative environment.
The Group will progressively ramp up capacity towards summer 2021 and expects recovery in the second and third quarter 2021 thanks to the vaccine deployment.
The Air France-KLM Group continues to work on quasi-equity and equity solutions in order to strengthen balance sheet and expects progress in the following weeks. Discussions are continuing with the European Comission within the “Temporary Framework” (TF).
The Board of Directors of Air France-KLM, chaired by Ms. Anne-Marie Couderc, met on 17 February 2021 to approve the financial statements for the Full Year 2020. Group CEO Mr. Benjamin Smith said:
“2020 tested the Air France-KLM Group with the most severe crisis ever experienced by the air transport industry. I would like to thank our employees for their dedication and tremendous flexibility during this period, which has allowed us to remain resilient despite an unprecedented drop in traffic. Since the very beginning of the crisis, we set the highest standards of health and safety for our customers and our employees, all while being able to seize Cargo opportunities and continuously adapting our flight schedules in the face of ever-changing travel restrictions.
Thanks to the French- and Dutch state support and this agile way of working, we were able to drastically reduce our costs, protect our cash, and continue the execution of major transformation plans within our airlines, involving the efforts of all employees. In the coming months, we will continue to strengthen the Group's core, improving its economic and environmental performance, so that Air France-KLM will be in a position to fully leverage all opportunities when the industry starts to recover. We begin 2021 looking forward that this year will see an upturn in traffic as soon as vaccination is deployed on a large scale and borders once again reopen. Our customers look forward to being able to travel again and their attachment to Air France, KLM, and Transavia has grown stronger during this crisis.”
Business review
Network: In this very challenging 2020, Air France and KLM actively managed capacity with most of the flight incrementally cash positive thanks to the Cargo activity
Full Year 2020 revenues decreased by 60.3% at constant currency to 9.2 billion euros. The operating result amounted to -3.7 billion euros, a 4.5 billion euros decrease at constant currency compared to last year. Measures were strengthened to preserve cash, including reduction of investments, cost savings measures, negotiations with supplier on payment terms, staff reductions and wage support measures.
Passenger network: Ensure health safety on board and adapt network to cope with border restrictions
The passenger network activity in the fourth quarter was, as anticipated, strongly reduced at 46% of last year's level. The tightening of travel restrictions, border closures and absence of corporate travel delayed the expected traffic recovery. October and November were weak in term of traffic compared to a stronger December, thanks to Christmas traffic increase in Domestic France and to Caribbean and Indian Ocean.
2020 was an unprecedented year for the airline industry and Air France-KLM with: a good start in January and February; a worldwide lockdown with repatriation flights during the second quarter followed by hopes of a resumption of traffic during summer and a last quarter marked by increased travel restrictions and some traffic during Christmas.
The Full year 2020 capacity was severely impacted by the Covid-19 crisis, at 46% of last year's level while the traffic decreased by 69%, mainly due to travel restrictions in place.
The Group had an agile capacity management and was able to ramp-up capacity during summer and Christmas periods with resilient performance on low border restrictions routes (French Domestic, Caribbean & Indian Ocean and Africa & Middle East). The balanced network of Air France and KLM spread over the different regions of the world was a strong asset during the Covid-19 crisis, which partly explained why the Group operates more capacity than competitors. The strategy was to operate incremental cash positive flights and several routes were taking advantage of the strong worldwide cargo demand thanks to industry under capacity.
During 2020, the Group accelerated the phase-out of different aircraft to cope with the lower demand in the following years (Airbus 380, Airbus 340, Boeing 747, Canadair Jet and Embraer 145).
Air France-KLM Group continues to implement the highest safety standards for its customers and employees to counter virus transmission risks. Both Air France and KLM achieved 4 stars in the Skytrax “Covid-19 Airline Safety Rating”, one of highest score.
Cargo: Strong steering unit revenue in a context of industry under capacity
Global air cargo capacity was at the end of the Fourth quarter 2020 approximately 20% lower than 2019. Tightening of supply and demand levels increased yields by significant amount over the past months.
December was the eighth consecutive month of gradual air cargo market improvements and Air France-KLM's Cargo activity continued to strongly perform with a unit revenue at constant currency up 116.1% in the Fourth quarter 2020.
The 2020 Cargo capacity of the Group has been down 30.7%, primarily driven by the reduction in belly capacity of passenger aircraft, partly offset by the increase of the full freighters' capacity and mini cargo flights (passenger aircraft with only belly capacity commercialized). The yield and load factors were strongly up, resulting in a unit revenue increase of 76.8% at constant currency, thanks to the gap between industry capacity and demand. The Group benefited from a full freighter fleet of six aircraft and a passenger long-haul fleet well suited for the cargo activity (Boeing 777, Boeing 787, and Airbus 350).
On the demand side, world-wide air freight volumes are down due to Covid-19 crisis but are expecting to recover consistently with trade growth and industrial production. The supply-demand gap of the past months is foreseen to narrow once industry capacity supply will increase which depends on the passenger traffic recovery. Air France-KLM is ready to transport the Covid-19 vaccines worldwide and has already delivered them to several destinations successfully. The volumes will gradually increase during the first half of 2021.
Transavia: Well positioned for the recovery with a first step on the French domestic market
The Fourth quarter operating result ended -65 million euros lower compared to last year at an operational loss of -93 million euros, as a result of the Covid-19 crisis and tightened border restrictions in Europe and North Africa.
Full year 2020 activity levels were close to 40% of last year's level, with a unit revenue down -17.4% compared to 2019. Load factors at 73.8% were impacted by travel restrictions imposed.
During 2020, Transavia operated more than 150 repatriation flights from Europe and North Africa enabling 28,000 passengers to be brought back before temporarily immobilizing its entire fleet. In June, Transavia gradually resumed flights by constantly adapting operations to Covid-19 rules and has enabled many travelers to enjoy leisure destination during summer. However, the resurgence of Covid-19 and border restrictions have slowed down Transavia in the traffic recovery during the fourth quarter 2020. Strict cash preservation measures are still in place including reduction of investments, cost savings measures, negotiations with supplier on payment terms and wage support measures.
Several CLA agreements have been reached in both Transavia Netherlands and France about labor conditions and restructuring measures. Transavia France started French domestic operations during the fourth quarter 2020 from Paris Orly and regional airports.
Transavia plan to grow is still valid, well positioned to capture the leisure traffic recovery foreseen in the coming months and a major opportunity for the Group's competitiveness gain.
Maintenance: Activity severely impacted by the decrease of airline's activities
The Fourth quarter operating result stood at -177 million euros, a decrease of 267 million euros, highly impacted by the Covid-19 crisis. Maintenance continued to sign new contracts in the fourth quarter and are included in the order book at year end.
During 2020, external revenues declined by 41.6% and the decreased in Air France-KLM Group airlines activities impacted the total revenues. Operating costs have been reduced by a lower maintenance activity level, staff reductions, wage support measures for employees and other initiated cost savings measures. Operating results stood at -543 million euros, down 803 million euros compared to last year.
Covid-19 generated around 320 million euros exceptional items, of which 120 million of doubtful receivable, 110 million euros provision on asset value and 90 million euros regarding contracts review.
The Maintenance order book is assessed to 9.1 billion dollars at 31 December 2020, a decrease of 2.4 billion dollars compared to 31 December 2019, explained by the Covid-19 crisis. The Maintenance business is carefully managing agreements with clients on payment terms.
Air France-KLM maintenance activity is well positioned on new generation aircraft maintenance and foresees solid opportunities for the future.
Air France-KLM Group: Financial metrics severely impacted by Covid-19, a decrease of €5.8bn in EBITDA mitigated by cost control
In Full Year 2020, the Air France-KLM Group posted an operating result of -4.5 billion euros, down by 5.7 billion euros compared to last year.
Net income amounted to -7.1 billion euros in the Full Year 2020, a decrease of 7.4 billion euros compared to last year, of which exceptional accounting items due to Covid-19:
Since the beginning of the crisis, Air France, KLM and Transavia proceeded 2.3 billion euros of refunds to customers, with 0.8 billion euros during the fourth quarter 2020.
The Full year 2020 unit cost increased by 36.9%, primarily caused by Covid-19 related capacity reductions
Group net employee costs were down 35% in 2020 compared to last year, supported by staff reductions, partial activity implementation at Air France and compensated staff cost by the NOW mechanism at KLM and no profit sharing provisions to be made at both airlines. The average number of FTEs (Full Time Equivalent) stood at 76,900 in December 2020, down 8,700 compared to December 2019.
Net debt up 4.9 billion euros
* 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 after deducting the repayment of lease debt.
The Group generated adjusted operating free cash flow in Full Year 2020 of -5.7 billion euros, a decrease of 5.3 billion euros compared to last year, mainly explained by a net cash flow from operating activities decline of 6.7 billion euros, partly offset by a reduction in net investments of 1.4 billion euros.
Strong focus on working capital management in all businesses has led to a positive change of +165 million euros in 2020, thanks to tax & social charges deferrals, negotiations with suppliers and vouchers policy which compensated the refunds process and the low inflow of bookings.
Both airlines results negatively impacted in 2020
OUTLOOK
After a positive Christmas traffic in Domestic France and to the Caribbean and Indian Ocean, travel restrictions were tightened in France, the Netherlands and worldwide, having a negative impact on the traffic of the Group in the first quarter of 2021.
There is limited visibility on the demand recovery curve as customer booking behavior is much more short-term oriented and also highly dependent on the imposed travel restrictions, on both the Long Haul and Medium Haul network.
The Group will progressively ramp up capacity towards summer 2021 and expects recovery in the second and third quarter 2021 thanks to the vaccine deployment.
For the time being, KLM is not able to execute passenger flights between the Netherlands and South Africa, South America and the UK while France banned all non-essential travel from and to France. Instead of gradually increasing capacity during the First Quarter, the capacity had to be reduced.
In this context the Group expects:
·Capacity in Available Seat kilometers circa index 40 for Air France-KLM in the First quarter 2021 compared to 2019 for the Network passenger activity due to negative environment.
Given the under capacity in the Cargo industry, strong steering options for the First quarter 2021 remain available, although future performance is pending passenger industry recovery.
Due to the lockdown and travel restrictions still in place, The Group anticipates a challenging First quarter 2021, with a lower EBITDA compared to the Fourth Quarter 2020.
At 31 December 2020, the Group has a solid 9.8 billion euros of liquidity and credit lines at disposal.
The Group foresees liquidity requirements in 2021 with:
Guidance : Air France-KLM Group medium term operating margin objective unchanged but delayed
The Group accelerates its transformation initiatives and confirms its medium-term financial ambition. The Group continues to balance its medium-term focus on managing liquidity with the long-term focus on achieving increased competitiveness. To do this, the Group continues to optimize, fleet, labour, network and costs.
The Covid-19 crisis is showing an unprecedented impact on traffic. In order to anticipate on this decline in traffic. The Group estimates the number of aircraft in 2022 to be 7% below the number of aircraft in 2019. The Group expects capacity in ASK back to the 2019 levels only in 2024.
By the end of 2020 the Group managed to decrease the number of FTE already by 10% compared to December 2019. In the coming years the number of FTE will further decrease by circa 6,000 FTE. The reduction in FTE, amongst other key transformation initiatives, will drive the unit cost down 8% to 10% once capacity is back at 2019 level.
The Group's medium-term financial ambition is maintained with an Adjusted Operating Free Cash Flow expected to be positive again in 2023. The Operating Margin mid-cycle objective is still estimated at 7% to 8%.
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The audit procedures for the consolidated accounts have taken place. Despite uncertainties, the Board of Directors considered appropriate to prepare the financial statements for the year ended December 31, 2020 on the basis of the going concern principle.
For further information, please refer to Note 2 of the consolidated financial statements.
The certification report will be published following the completion of the procedures necessary for the filing of the Universal Registration Document.
The results presentation is available at www.airfranceklm.com on 18 February 2021 from 7:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Gagey (CFO) will be held on 18 February 2021 at 08.30 CET.
To connect to the conference call, please dial:
France: Local +33 (0)1 76 77 22 57
Netherlands: Local +31 (0)20 703 8261
UK: Local +44 (0)330 336 9411
US: Local +1 720-543-0206
Confirmation code: 7443591
Investor Relations Press
Olivier Gall Antoine Madre
+33 1 49 89 52 59 +33 1 49 89 52 60 +33 1 41 56 56 00
olgall@airfranceklm.com anmadre@airfranceklm.com
Income Statement
2019 results restated (with a similar impact in both years) for limited life parts componentization accounting change.
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 Jan until 31 december 2020
Key Performance Indicators
Restated net result, group share
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 31 December 2020
FOURTH QUARTER 2020 TRAFFIC
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
Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
The definition of ROCE has been revised to take into account the seasonal effects of the activity.
Attachment
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