Turismo
AIR FRANCE - KLM : FIRST QUARTER 2018 RESULTS
Strong ongoing demand in the first quarter 2018:
However, Air France strikes have weighed on the economic performance of the Group:
The Group financial structure has been further improved:
The demand remains well oriented in a favourable business environment:
Some guidance elements have been adjusted to take into account the Air France strike impact of at least 300 million euros on the operating result, and the macroeconomic context:
As a consequence, full year 2018 operating result is expected to be notably below 2017 .
The Group is targeting to further reduce its net debt compared to 31 December 20171.
Since January 1, 2018, Air France-KLM Group applies the three following new standards:
Consolidated financial statements
All the changes shown in this press release are based on 2017 restated financial statements.
There has been a positive business environment in the first quarter of 2018, with strong ongoing demand. The Group has increased its Network capacity by 2.8% compared to last year, slightly lower than planned mainly as a result of three days of strikes at Air France. Despite this unfavourable event, the network revenues grew by +4.5% compared to last year at constant currency, which enabled to partly offsett the strike and fuel cost negative impacts. The combined Passenger and Cargo operating result amounted to -86 million euros for first quarter 2018, including around 75 million euros of negative strike impact, a decrease of 97 million euros compared to last year at constant currency.
The number of passengers carried in the first quarter of 2018 grew by 4.4% to 19.3 million and unit revenue increased by 1.0% at constant currency.
The long-haul network benefitted from a dynamic demand resulting in an unit revenue increase of 1.9% at constant currency. This good performance was driven by the North America, Latin America and Asia networks, with unit revenue increases of respectively 4.9%, 6.2% and 2.4% at constant currency.
The medium-haul network was more mixed: the unit revenue was up 2.3% at constant currency for medium-haul hubs, but down -8.9% on the point-to-point network in France, mainly due to the new TGV competition on Bordeaux and Britanny.
The Cargo business has continued its turnaround in the first quarter of 2018, with a market demand remaining strong, especially on outbound Europe and inbound Asia.
Capacity grew by 0.6% and, despite a load factor slightly decreasing, the unit revenue increased by 7.3% at constant currency.
Transavia carried 2.7 million passengers in the first quarter 2018, an increase of 11.3% compared to last year. Capacity of Transavia France was strongly up by 25.0%, while capacity of Transavia Holland was up 2.2%. Transavia benefitted from shift of Easter leisure peak traffic from the month of April to March: in total the traffic growth was 16.0%, increasing the load factor by 4.6 pt compared to last year. The unit revenue was clearly up with 8.4% compared to last year.
The first quarter 2018 operating result stood at -58 million euros, an improvement of 7 million euros compared to last year.
The Maintenance revenues increased in the first quarter 2018 compared to last year, with third-party revenues up by 17.2% at constant currency, driven by both engines and components activities. The operating margin expressed as a percentage of total revenues stood at 2.5%, a decrease of 1.7 points at constant currency, but stable excluding an exceptional effect related to the early termination of a components contract.
The Maintenance order book further increased to 10.8 billion dollars at end of the first quarter 2018, an increase of 0.4 billion dollars compared to end of 2017.
In first quarter 2018, the Air France-KLM Group realized an operating result of -118 million euros, down by 85 million euros compared to last year. This decrease is mainly explained by the strikes at Air France with a negative impact of around 75 million euros and by the fuel price increase.
Unit revenue contributed positively with 91 million euros and unit cost showed a negative effect of 106 million euros, both including strike related effects.
The fuel bill amounted to 1,058 million euros, down 61 million euros, but up 83 million euros at constant currency due to the increase in jet fuel price including hedging.
Currencies had a negative 224 million euros impact on revenues versus first quarter 2017, due to the strengthening of the euro against other currencies. The positive impact on costs reached 245 million euros, including a tailwind from currency hedging. In the first quarter 2018, the net impact of currencies thus amounted to a positive 20 million euros.
On a constant currency, fuel price and pension-related expense basis, the unit cost was up +2.1% in the first quarter 2018, of which +1.7% was resulting from the strikes at Air France and +0.4% from a one-off item.
Productivity, measured in EASK per FTE, increased by 2.1% with a capacity increase of 3.3%. The average number of staff increased by 900 FTEs including +100 FTEs in Pilots and +1100 FTEs in Cabin crew relating to the capacity increase. Ground staff were reduced by -300 FTEs.
Net employee costs in the first quarter 2018 were up 1.9% compared to last year, including a profit sharing component for KLM. Excluding this effect, the net employee costs were up 0.6%.
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The Group has generated an adjusted operating free cash flow of 142 million euros in the first quarter 2018, compared to 324 million euros in the first quarter 2017. The change in working capital amounted to 807 million euros, an increase by 125 million euros compared to last year, and net investments amounted to 913 million euros, an increase of 288 million euros.
At 31 March 2018, net debt had been further reduced to 6,282 million euros versus 6,567 million euros at 31 December 2017, an improvement of 329 million euros generated by the operating free cash flow and the net reduction of lease debt.
The net debt / EBITDA ratio decreased from 1.4x at 31 December 2017 to 1.3x at 31 March 2018.
First Quarter 2018 operating income was down by -121 million euros at Air France due to strike and competitive pressure in the domestic market.
KLM operating income improved by 32 million euros benefitting from a robust demand environment.
The global context remains uncertain given the current geopolitical environment, labour wage inflation pressure, strengthening of the euro compared to other currencies and rising fuel price trends.
Demand and revenue environement:
Some guidance elements have been adjusted to take into account the Air France strike impact of at least 300 million euros on the operating result, and the macroeconomic context:
As a consequence, the full year 2018 operating result is expected to be notably below 2017.
Capex plan and net debt target:
Due to the strike impacts on the 2018 Air France results, the management will carefully continue to manage the financial structure of the Group and its growth plan.
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The First Quarter 2017 accounts are not audited by the Statutory Auditors.
The results presentation is available at on 4 May 2018 from 7:15 am CET.
A conference call hosted by Mr Gagey (CFO) will be held on May 4 2018 at 08.15.
To connect to the conference call, please dial:
Confirmation code: 9332673
+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
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