Turismo
AIR FRANCE - KLM : FULL YEAR 2018 RESULTS
The Board of Directors of Air France-KLM, chaired by Anne-Marie Couderc, met on 19 February 2019 to approve the financial statements for the Full Year 2018.
"With the largest long-haul network operating out of Europe, the Air France-KLM Group has reached an important milestone by carrying more than 100 million passengers in 2018", commented Benjamin Smith, CEO of Air France-KLM. "The strong performance of our front-line teams and continued cost control helped partly offset the impact of strikes at Air France in the first half of the year, as well as significant fuel headwinds. In the past five months, we have made significant progress in reinforcing the trust and dialogue with our employees in both Air France and KLM, allowing for a shared strategic approach to accelerate the Group's profitable development. I am particularly pleased that yesterday we reached the last step in this phase, the majority of Air France pilots having approved the proposed categorical agreement. We have also strengthened our offer by simplifying our brand portfolio and initiating an improvement in our network and fleet management. These first achievements pave the way for our ambition to regain a leading position in Europe and worldwide."
Full Year 2018 combined Passenger and Cargo revenues increased by 4.1% at constant currency to 22.9 billion euros driven by capacity growth and positive unit revenues. The operating result amounted to 994 million euros, a 382 million euros decrease at constant currency compared to last year, mostly due to the strikes in the 2018 first half and to the fuel increase.
Full Year 2018 capacity increased by 2.1%, mainly driven by the South American, North Atlantic and Asian networks with respective growth of 8.6%, 3.0% and 2.1%.
The long-haul network delivered a solid performance with an increased load factor and a unit revenue up 1.2%. The additional capacity has been well absorbed by the robustness of demand and thanks to the strong performance of the commercial teams.
The medium-haul network delivered a unit revenue increase of 1.5% for Full Year 2018: the unit revenue was up 2.8% on the medium-haul hub network, and down 2.6% on the point-to-point network mainly due to the competitive pressure from rail.
In a context of stable Cargo network capacity, revenues grew by 6.4% at constant currency thanks to a strong unit revenue performance. The trading environment proved better than expected particularly over the summer period, and the Asian and American networks made a strong contribution to the results. Higher yields in both full freighters and bellies resulted in an overall unit revenue increase of 5.2% at constant currency for Full Year 2018.
Transavia carried 15.8 million passengers in Full Year 2018, an increase of 7.1% compared to last year.
Full year 2018 saw the launch of several new routes and a strong capacity growth of 8.4%, with an acceleration in the fourth quarter to 14.4%. Unit revenues increased by 3.6% compared to last year.
The Full Year 2018 operating result stood at 139 million euros, an improvement of 21 million euros compared to last year and the best result since the launch of the Transavia businesses. The Transavia France performance stood out with capacity growth of more than 20% and an operating margin of 9.1%, a year-on-year improvement of 1.0 point.
Maintenance revenues increased compared to last year with third-party revenues up by 11.0% at constant currency due to the inflow of new contracts. The Maintenance order book stood at 11.4 billion dollars at the end of the 2018, an increase of 0.6 billion dollars compared to the end of 2017, driven by the signature of several new NextGen Components and Engine contracts.
The operating margin expressed as a percentage of total revenues stood at 4.5%, a decrease of 1.4 points at constant currency compared to last year, partly explained by one-offs and competitive pressure for the component business.
In 2018, the Air France-KLM Group posted an operating result of 1,332 million euros, down 591 million euros compared to last year, including a negative impact of 355 million euros from the Air France strikes in the first half.
The rise in the Group's unit revenues contributed positively to the operating result for 353 million euros excluding currency effects, and absorbed more than half of the significantly higher fuel bill compared to last year.
The fuel bill including hedging amounted to 4,958 million euros for Full Year 2018, up 451 million euros and 665 million euros at constant currency, due to the increase in the fuel price. The fuel hedges resulted in a gain of 649 million euros.
Currencies had a negative 623 million euro impact on revenues and a positive 440 million euro effect on costs including currency hedging. The net impact of currencies thus amounted to a negative 183 million euros for Full Year 2018.
On a constant currency, fuel price and pension-related expense basis, unit costs were down -0.9% in the fourth quarter 2018, despite a 50 million euro impact from the Air France annual wage agreement, fully booked in the fourth quarter.
For the Full Year 2018, the unit cost was up 0.6%, consistent with the Full Year target range of 0 to +1%, and down -0.2% excluding the impact of the strikes.
Productivity measured in EASK per FTE increased by 2.2% in the fourth quarter 2018 while capacity increased by 3.7%.
Full Year 2018 productivity, measured in EASK per FTE, increased by 1.0% while capacity increased by 2.4%. Compared to last year, the average number of FTEs increased by 1,200 including +250 Pilots and +450 Cabin Crew in response to the capacity growth. Ground Staff increased by 500 FTEs, mainly driven by the IT Innovation department, third-party activities in E&M and the Customer Centres.
Net employee costs were up 1.8% in 2018 compared to last year, mainly due to the impact of the wage agreements for Air France and KLM staff.
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The Group generated positive adjusted operating free cash flow of 115 million euros in 2018, a reduction of 562 million euros compared to 2018. This decrease compared to last year mainly resulted from the strike impact and a net 187 million euro increase in investments.
The Group reduced its net debt to 6,164 million euros at 31 December 2018 versus 6,359 million euros at 31 December 2017, despite the negative impact of the repurchase of 197 million euros of hybrid notes in September 2018. This 195 million euro reduction was driven by operating free cash flow generation and the repayment of lease debt.
The net debt/EBITDA ratio stood at 1.5x at 31 December 2018, a slight increase of 0.13 pt compared to 31 December 2017 due to the decrease in EBITDA.
The global context remains uncertain given the current geopolitical environment and fuel price trends.
In 2019, the Air France-KLM Group plans to selectively grow capacity for the Passenger network by 2% to 3% compared to 2018. Transavia will continue to grow at a sustained pace of 9% to 11%.
The Group will continue to work on yield improvement within the context of an anticipated fuel bill increase. Based on the current data for the Passenger network:
The Group will pursue initiatives to reduce unit costs , with a targeted reduction for 2019 of between -1% to 0% at constant currency and fuel price.
The Full Year 2019 fuel bill is expected to increase by 650 million euros compared to 2018 to 5.6 billion euros , based on the forward curve of 15 February 2019.
The Group's capital expenditures are planned at the level of 3.2 billion euros for the year 2019 and the Group is targeting a Net debt/EBITDA ratio below 1.5x.
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The audit procedures for the consolidated accounts have taken place. The certification report will be published following the completion of the procedures necessary for the filing of the Registration Document.
The results presentation is available at on 20 February 2019 from 7:15 am CET.
An Analysts' Meeting hosted by Mr Smith (CEO) and Mr Gagey (CFO) will be held at 08.30 CET on 20 February 2019 at the Pullman Paris Tour Eiffel hotel, 18, avenue de Suffren (75015 Paris).
A live webcast of the Analysts' Meeting will also be available on the website (password AFKL).
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 +1 720-543-0214
Confirmation code: 5711960
To listen to the audio-replay of the conference call, please dial:
Confirmation code: 5711960
+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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