Turismo
AIR FRANCE - KLM :First Half 2017 Results
The Board of Directors of Air France-KLM, chaired by Jean-Marc Janaillac, met on 27 July 2017 to approve the accounts for the First Half 2017.
Jean-Marc Janaillac made the following comments: "In a context of solid traffic growth and enhanced unit revenue trend, Air France-KLM delivered improved operating income and operating free cash flow. Over the period, the Group continued to execute on its strategic priorities of growing revenues and improve competitiveness. The agreement reached with Air France pilots in July allows the Group to launch the creation of Joon in line with the original schedule. I am also very pleased with the strengthening of our network of alliances: the combination between our North-Atlantic alliance with Delta and Delta and Virgin Atlantic joint-venture, and the reinforcement of our partnership with China Eastern position Air France-KLM as the European pillar of the leading global airline network. These are important milestones showing that Air France-KLM is on the right path to achieve Trust Together's strategic objectives."
As announced at the Full Year 2016 results presentation, the busines segment Network consists now of both the Passenger network and Cargo business. The combined operating result amounted to 309 million euros during the First Half 2017, an improvement of 200 million euros at constant currency, driven by a solid traffic and unit revenue performance in the Passenger network.
The Second Quarter confirms the improvement of the Passenger unit revenue performance in both Air France and KLM, up 1.5% at constant currency. On long haul, there was strong premium class performance with unit revenues up by 4.4% at constant currency and economy class up by 2.2%. The improvement was driven mainly by the strong recovery in Asia, with unit revenue up 8.6% at constant currency and Latin America, up 13.6% at constant currency.
During the Second Quarter, the improvement in the Cargo performance was driven by a 2.7% increase in traffic resulting in a 0.7pt increase in load factor. The trend in unit revenue, down 1.3% during the Second Quarter, continued to improve compared to previous quarters, confirming the gradual turnaround.
Over the period, the Maintenance order book increased to a record high 9.7 billion dollars, reaching its target of growing the order book by 10% in 2017. The increase was driven by both the Engine and the Component order books.
Strong capacity growth (+13.7%) in combination with an increase in load factor (+1.5pts) and an 11.0% rise in unit revenue led to the strong positive Second Quarter result. The result was strengthened by the decrease in unit costs, down 4.2% at constant currency and fuel. The Group is expecting a positive result in 2017 for Transavia.
.
The Second Quarter operating result improved by 179 million euros of which the increase in capacity translated into a positive 13 million euros contribution. The other items contributing are, at constant currency, the positive trend in group unit revenues resulting in an increase of 100 million euros, whereas the decrease in fuel price including hedge results contributed 74 million euros. Currencies had a negative impact on the operating result of 32 million euros.
Adjusted for the interest portion of operating leases (1/3 of annual operating lease expenses), the operating margin stood at 8.9% versus 6.5% at 30 June 2016.
During the First Half, the unit cost was down 1.0% with capacity up by 3.8%. The Second Quarter unit cost per EASK was down by 0.3%, on a constant currency, fuel price and pension-related expense basis, against a capacity increase measured in EASK of 4.7%.
The results of the cost saving measures and initiatives were partly offset by higher flight variable costs related to the increasing load factor. The higher load factor compared to last year translated into a 0.3% increase in unit costs during the Second Quarter and 0.2% over the First Half 2017.
In addition to the increase in costs related to the higher load factor, profit-sharing increased during the First Half 2017 due to the timing of the recording of these expenses. This resulted in an increase of 0.6% in the Second Quarter and 0.2% in the First Half 2017.
Second Quarter productivity, measured in EASK per FTE, increased by 5.6% while capacity increased by 4.7%. The average number of staff decreased by 700 FTEs including an increase in Cabin crews by 600 FTEs linked to the increase in capacity. Due to seasonality and timing effects, net employee costs increased by 1.9% and the profit sharing expense increased by 36 million euros. For the Full Year 2017, the increase in the employee costs is expected to be less than 1.0% compared to the previous year.
The Half Year fuel bill amounted to 2,280 million euros, stable compared to previous year.
'
The net debt at 30 June 2017 amounted to 2,956 million euros, down 699 million euros compared to 31 December 2016. The reduction in net debt was supported by the improvement in both EBITDA and working capital. Operating free cash flow was positive at 668 million euros up by 295 million euros compared to 30 June 2016. The adjusted net debt decreased by 454 million euros to 10,712 million euros.
The net cost of debt amounted to 113 million euros during the First Half 2017, down 21 million euros compared to last year, a continuation of the downward trend observed in recent years. The liquidity situation further improved by an increase in the net cash on balance sheet of 580 million euros to 4.9 billion euros.
The global context remains highly uncertain regarding the geopolitical environment in which we operate and regarding fuel prices.
Long haul forward bookings for the coming four months are currently above previous year level. Based on the current outlook, the variation in unit revenue at constant currency is expected to be slightly up compared to last year for the Second Half 2017 .
To regain the offensive in long-haul and to improve the performance in medium-haul, the Group is maintaining its targeted growth for the passenger group (Air France, KLM and Transavia) of between 3.0% and 3.5% measured in ASKs for Full Year 2017.
To improve its competitiveness, the Group is pursuing and amplifying the initiatives already under way in terms of unit cost reduction. Despite the negative effects of the increased load factor and profit sharing on the unit cost evolution, the Group is expecting for 2017 a unit cost reduction between 1.0% and 1.5% at constant currency, fuel price and pension related expenses.
Based on the forward curve of 14 July 2017, the second half 2017 fuel bill is expected to decrease by 100 million euros compared to 2016 .
Regarding the balance sheet, the Group is maintaining strict capex discipline, targeting positive free cash flow before disposals. The 2017 investment plan stands at between 1.7 billion euros and 2.2 billion euros and is expected to be at the high end of the range.
The Group is pursuing a further reduction in net debt, targeting an adjusted net debt to EBITDAR below 2.5x mid cycle by the end of 2020. The adjusted net debt to EBITDAR ratio is expected to improve at 31 December 2017 compared to the previous year
*****
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 28 July 2017 from 7:15 am CET.
An analysts' meeting will be hosted by Mr Janaillac (CEO) and Mr Gagey (CFO) on 28 July 2017 at 8:00am CET at the Pullman Paris Tour Eiffel hotel, 18, avenue de Suffren, Paris (15 arrondissement).
A live broadcast of the analysts' meeting will be available at www.airfranceklm.com (password: AFKL) and by conference call.
To connect to the conference call, please dial:
Confirmation Code: 2565420
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti