Turismo
Air France-KLM First Quarter 2021 results
6 May 2021
Over the first three months of the year, the Group continued to be negatively impacted by travel restrictions as the whole industry:
OUTLOOK
Due to the stricter lockdown in France until, at least beginning of May, continuation of the lockdown in the Netherlands and travel restrictions worldwide still in place, the Group anticipates the beginning of the second quarter to be similar to the first quarter whereby the customer booking behaviour is still short-term oriented.
The key to reduce travel restrictions and reopen borders is a rapid roll-out of wide-scale vaccination. In the US, domestic demand is recovering rapidly due to the speed of the vaccination process.
In this context, the Group expects capacity in Available Seat kilometers circa index 50% for Air France-KLM in the Second quarter 2021 compared to 2019 for the Network passenger activity.
During the second half of the second quarter the Group will progressively ramp up capacity given the vaccination deployment in Europe.
For the Third quarter the Group foresees a capacity in Available Seat kilometers index in the range of 55% to 65% compared to 2019 for the Network passenger activity thanks to estimated higher demand.
The Air France-KLM Group continues to work to strengthen its balance sheet. Additional measures of equity and quasi-equity instruments are currently under consideration. Extraordinary resolutions will be presented at the next Annual General Meeting, aiming to give the Board of Directors great flexibility to restore equity.
The Board of Directors of Air France-KLM, chaired by Ms. Anne-Marie Couderc, met on May 5, 2021 to approve the financial statements for the First quarter 2021. Group CEO Mr. Benjamin Smith said:
“A year into the COVID crisis, lockdown measures and travel restrictions in our home markets and around the world continue to strongly impact the Group's activity. In this ever-challenging environment, the Group has nevertheless shown its resilience, maintaining a strict control of its capacity and costs” said Benjamin Smith, CEO of Air France – KLM. “The success of the first set of capital-strengthening measures completed in April, allows us to look forward to the summer season with greater confidence, hoping that the progress of the vaccination roll-out worldwide and the implementation of travel passes will allow borders to reopen and traffic to recover. In the meantime, we have accelerated the implementation of our transformation plan to build a solid post-crisis model. This includes the execution of our voluntary departure plans, which are progressing as expected. In the coming months, we will continue our strict cost control approach while reinforcing our sustainability commitments, in line with our ambitious environmental roadmap."
Business review
Network: Passenger traffic still suffering from travel restrictions, partly compensated by strong Cargo performance
First quarter 2021 revenues decreased by 55.5% at constant currency to 1.9 billion euros. The operating result amounted to -1.1 billion euros, a 350 million euros decrease at constant currency compared to last year. Ongoing focus on cash flow by continuing the deferral of payments, cost savings measures, negotiations with suppliers on payment terms, staff reductions and partial activity schemes.
Passenger network: Recovery in Q1 hampered by tough travel restrictions worldwide, with North America, Latin America and Asia as the most impacted areas
Last year March the Group was already heavily impacted by the Covid-19 crisis. The passenger network activity in the First quarter was reduced at 54% of last year's level while the number of passengers decreased by 72%. Compared with the First quarter of 2019 the Available Seat Kilometers were at index 48%. Thanks to the Group's balanced network and strong Cargo business the passenger network activity level was above the estimated capacity level guided during the Fourth quarter 2020 results presentation and the Group operated more capacity than their competitors.
During the First quarter, the Group added two Embraer 195 E2 to the fleet and welcomed as well one Airbus 350-900 and two Boeing 777-300. With these investments the Group continue to build an efficient fleet and shows its sustainable commitment.
Cargo: Strong performance, with continuation of capacity shortage
Limited air cargo capacity together with high demand resulted in the First quarter again in a high loadfactor and high yield in the cargo industry. Despite a reduction in capacity of -15.8%, primarily driven by the reduction in belly capacity of passenger aircraft, the Group was able to increase the transported Tons and showed unit revenue per ATK up 131.7% against constant currency versus last year.
Since the start of the Covid-19 vaccin transportation, Air France-KLM Cargo has transported millions Covid-19 vaccines to more than 30 destinations worldwide. During the coming months the Group estimates a steady increase in the number of vaccine shipments.
Transavia : Operating result –12 0 million euros as impacted by Covid-19 crisis
The First quarter operating result ended -38 million euros lower compared to last year at an operational loss of -120 million euros, as a result of the ongoing Covid-19 crisis with strict border restrictions in Europe and North Africa.
First quarter activity level was only around 20% of last year's production, with a unit revenue down -21.6% compared to 2020. Load factor at 57.6% was impacted by travel restrictions imposed. The production level of Transavia France was slightly higher at and index of 26 compared to 2020, thanks to the start of domestic routes.
Transavia plan to grow is still valid, well positioned to capture the leisure traffic recovery foreseen in the coming months towards the end of the summer, being a major opportunity for the Group's competitiveness gain. The adding of eight Boeing 737-800 aircraft to Transavia France fleet in the first quarter is part of this plan.
Maintenance : Op era ting result stabilizing
The First quarter operating result stood at -8 million euros, a decrease of 5 million euros, against a constant currency an increase of 9 million euros.
During the First quarter 2021, third-party revenues declined by 47.5%. This decrease is explained not only by the COVID crisis starting mid-March 2020, but also by the work made by the Maintenance business to reduce the airlines costs for example through use of greentime to avoid engine shop visits as much as possible. Despite this drop in external revenues the operating margin stabilized versus the First quarter 2020.
Salary cost decreased thanks to partial activity schemes and a sharp drop in other cost was visibile during the First quarter versus Last year due to a reduced number of shop visits of Air France-KLM Group airlines.
Air France-KLM Group: EBITDA decreased by €0.6bn while revenues down €2.9bn in Q1
In the First quarter 2021, the Air France-KLM Group posted an operating result of -627 million euros, down by 566 million euros compared to last year.
Net income amounted to -1.5 billion euros in the First quarter 2021, an increase of 320 million euros compared to last year. The net income result is mainly driven by the operational result and the cost of financial debt.
The net income of the first quarter 2020 included Covid-19 related over hedging -455 million euros, release of deferred tax assets -173 million euros and impairment of Boeing 747 aircraft -21 million euros.
The F irst quarter 2021 unit cost increased by 20 . 7 %, primarily caused by Covid-19 related capacity reduction s
Group net employee costs were down 39% in the first quarter of 2021 compared to last year, supported by staff reductions and partial activity schemes. The average number of FTEs (Full Time Equivalent) stood at 76,500 in March 2021, down 400 FTE compared to December 2020.
Wor king capital slightly negative, n et debt increased by €1.5bn
* 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 First quarter 2021 of -1.3 billion euros, a decrease of 519 million euros compared to last year. Mainly explained by a net cash flow from operating activities decline of 1.2 billion euros, partly offset by a reduction in net investments of 612 million euros.
Deferred state tax liabilities and employee related liabilities in combination with continuing focus on working capital management the Group was able to mitigate the negative change in working capital to -92 million euros in the first quarter.
Since the beginning of the crisis, Air France, KLM and Transavia proceeded 2.8 billion euros of refunds to customers, of which 550 million euros during the First quarter 2021.
Air France and KLM continued to be negatively impacted by travel restrictions
OUTLOOK
Due to the stricter lockdown in France until, at least beginning of May, continuation of the lockdown in the Netherlands and travel restrictions worldwide still in place, the Group anticipates a difficult start of the Second quarter whereby the customer booking behaviour is still short-term oriented.
The key to reduce travel restrictions and reopen borders is a rapid roll-out of wide-scale vaccination. The vaccination pace in Europe is slower than in the US where the domestic demand recovers quickly thanks to the high speed vaccination process.
In this context the Group expects capacity in Available Seat kilometers circa index 50% for Air France-KLM in the Second quarter 2021 compared to 2019 for the Network passenger activity.
During the second half of the second quarter the Group will progressively ramp up capacity given the vaccination deployment in Europe.
For the Third quarter the Group foresees a capacity in Available Seat kilometers between index 55% and 65% compared to 2019 for the Network passenger activity thanks to estimated higher demand.
At 31 March 2021, the Group has a 8.5 billion euros of liquidity and credit lines at disposal. This level can be considered comfortable, given the expected recovery in the summer, despite the cash requirements for 2021 which include:
A first set of capital strengthening measures was successfully executed in April and resulted in an increase in equity of 4 billion euros and cash of 1 billion euros.
The Air France-KLM group continues to work on strengthening its balance sheet. Additional equity and quasi-equity measures are currently under consideration. Extraordinary resolutions will be presented at the next Annual General Meeting, aiming to give the Board of Directors great flexibility to restore equity and initiate the gradual refinancing of state aid and restore leverage ratio.
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The first quarter 2021 accounts are not audited by the Statutory Auditors.
The results presentation is available at www.airfranceklm.com on 6 May 2021 from 7:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Gagey (CFO) will be held on 6 May 2021 at 08.30 CET.
To connect to the conference call, please dial:
France: Local +33 (0)1 76 77 25 07
Netherlands: Local +31 (0)20 703 8259
UK: Local +44 (0)330 336 9434
US: Local +1 720-543-0206
Confirmation code: 6657799
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
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 Jan until 3 1 March 202 1
Return on capital employed (ROCE) 1
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 3 1 March 202 1
F IRST QUARTER 202 1 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
1 The first quarter of 2020 was impacted by Covid-19, particularly in March
2 Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
³ Change versus 31 December 2020
1 The definition of ROCE has been revised to take into account the seasonal effects of the activity.
Attachment
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