Turismo
Air France-KLM results at 30 june 2019
31 July 2019
SECOND QUARTER 2019
OUTLOOK 2019
Benjamin Smith, CEO of Air France-KLM Group, said: “In a challenging environment, Air France-KLM Group posted a robust second quarter. The slight increase in passenger unit revenue that we had anticipated, together with continued execution in unit cost reduction, enabled us to more than offset rising fuel costs. These elements, combined with satisfactory long-haul forward booking trends lead us to confirm our guidance for 2019. At the same time, we continue to implement our strategic vision focused on reducing costs and making our Group more robust in the very competitive marketplace in Europe. We have also made key decisions on the renewal of our fleet to transition to cleaner aircraft in order to support a more environmentally responsible operation, including the order of sixty Airbus A220s for short- and medium-haul and the accelerated phasing out of ten Airbus A380 to be replaced by more modern fuel efficient aircraft.”
Second quarter 2019 business review
Network: Solid revenue growth and increase in operating result
Second quarter 2019 combined Passenger and Cargo revenues increased by 3.9% at constant currency to 6.0 billion euros, for capacity growth of 3.9%. The operating result amounted to 291 million euros, a 77 million euro increase at constant currency compared to last year, with the non-fuel unit cost improvement partly offset by a higher fuel bill.
Passenger network: Long-haul driving the improvement of unit revenue as anticipated
Second quarter 2019 capacity increased by 3.9%, mainly driven by the South American, North Atlantic and Asian networks, with respective growth of 7.8%, 6.7% and 4.0%.
Taking into account a positive calendar effect from the Easter shift, the passenger network posted a positive unit revenue of +0.9% at constant currency.
The industry capacity growth has been lower in North America, Caribbean & Indian Ocean and Middle East network in comparison to previous year. The long-haul network generated positive load-factors and yields compared to last year in all networks except in the Latin American network:
The medium-haul network showed a mixed picture with a positive performance for the medium-haul hubs with the unit revenue +0.2% and, as anticipated, pressure in the medium-haul point-to-point network with unit revenue down -9.1%.
Cargo network: Unit revenue impacted by a challenging airfreight market
Negative market dynamics and continued higher industry capacity put pressure on the unit revenue during the second quarter 2019. After two strong years, renewed overcapacity in North America and Asia is putting pressure on freight rates, resulting in unit revenue down -7.5% at constant currency.
The Group's Cargo strategy is focused on maintaining and increasing load factors where possible and taking a pro-active approach to new opportunities.
Transavia: High capacity growth and positive unit revenue
Strong capacity growth of 9.2% in the second quarter 2019. The unit revenue was up by 1.3% compared to last year, supported by the Easter shift, strong demand throughout the network and a good ancillary revenue performance.
The second quarter 2019 operating margin stands at a level of 10.4%, with an absolute operating result of 52 million euros, 9 million euros down compared to last year explained by fuel price and currency headwinds.
Maintenance: Strong third-party revenue growth and margin improvement
Maintenance revenues increased compared to last year with third-party revenues up by 11.9% and 5.0% at constant currency, a continuation of the growth trend underpinned by the inflow of new contracts. The Maintenance order book stood at 11.6 billion dollars at 30 June 2019, an increase of 0.2 billion dollars compared to 31 December 2018.
The operating margin expressed as a percentage of total revenues stood at 4.9%, an increase of 0.3 point primarily driven by the components activity.
Air France-KLM Group: Operating result at €400 million with positive passenger unit revenue and unit cost improvement
In the second quarter 2019, the Air France-KLM Group posted an operating result of 400 million euros, up 54 million euros compared to last year, which was impacted by the Air France strike for 260 million euros.
Compared to last year, the Group's unit revenue was stable, the positive passenger unit revenue impact of 53 million euros being offset by a -54 million euro negative impact from Cargo.
The fuel bill including hedging amounted to 1,404 million euros for the second quarter 2019, up 220 million euros. This increase is explained mainly by a lower hedge gain for the second quarter 2019 (gain of 56 million euros compared to 212 million euro last year), and a negative currency effect on the fuel bill of 89 million euros due to a stronger dollar.
Currencies had a positive 123 million euro impact on revenues and a negative 52 million euro effect on costs (ex-fuel) including currency hedging. Together with the 89 million euro fuel currency effect, the net impact of currencies amounted to a negative 18 million euros for the second quarter 2019.
Unit cost down confirming the full year guidance
On a constant currency and fuel price basis, unit costs were down -2.3% in the second quarter 2019. This decrease is supported by the successful execution of cost focus measures in Air France and the high basis of comparaison last year due to the strikes at Air France.
However this was partly offset by higher unit costs at KLM due to the implementation of last year's labor wage agreements.
Group net employee costs were up 4.6% in the quarter compared to last year, explained by additional hires in response to the capacity growth and the impact of wage agreement implementation for Air France and KLM staff. The average number of FTEs in the second quarter 2019 increased by 1,650 compared to last year, including +700 Pilots and +650 Cabin Crew. However, productivity measured in ASK per FTE increased by 3.1% in the second quarter 2019.
Net debt down, leverage ratio improved slightly further, on track for full year guidance of below 1.5x
* 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 with deduction of the repayment of lease debt.
Positive adjusted operating free cash flow
The Group generated positive adjusted operating free cash flow of 110 million euros, an increase of 111 million euros compared to last year, mainly explained by lower capex in the second quarter 2019 due to a year-on-year shift in the investment-timing pattern.
Leverage on track with full year guidance of <1.5x
The Group reduced its net debt to 5,698 million euros at 30 June 2019 versus 6,164 million euros at 31 December 2018, this 466 million euro reduction being driven by operating free cash flow generation and the repayment of lease debt.
The net debt/EBITDA ratio stood at 1.4x at 30 June 2019, a decrease of 0.1 point compared to 31 December 2018, explained by the reduction in net debt.
Air France improvement explained by last year strike, KLM impacted by fuel
Outlook
The global economic and geopolitical context remains uncertain and the Group operates in a highly competitive marketplace.
Based on the current data for the Passenger network:
Capacity growth update:
Full year guidance update:
*****
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 www.airfranceklm.com on 31 July 2019 from 7:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Gagey (CFO) will be held on 31 July 2019 at 09.30.
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 +1 323 994 2093
Confirmation code: 3271997
To listen to the audio-replay of the conference call, please dial:
Investor Relations Press
Marie-Agnès de Peslouan Wouter van Beek
+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
Income Statement
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 January until 30 June 2019
Key Performance Indicators
EBITDA
Restated net result, group share
Return on capital employed (ROCE)
Net debt
Adjusted operating free cash flow
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).
Airline 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 30 June 2019
The Air France strike had a -€260 million impact on the second quarter operating result and a -€335m impact on the half year operating result
Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
To align with industry practice, as of 2019 the EASK metric will no longer be used.
The new Unit Cost definition will be: Net cost per Available Seat Kilometer at constant fuel and currency. The impact of this change for the unit cost is -0.1pt for 2019
Based on the forward curves of 26 July 2019 average Brent price of USD 65, average jet fuel price of USD 684 per ton including into plane costs. Assuming exchange rate of EUR/USD of 1.13 in 2019
The ROCE definition has been updated within the framework of IFRS 16 implementation. The asset value linked to the aircraft lease contracts now corresponds to the net book value of the right-of-use asset of all the lease contracts. Moreover, the “operating result, adjusted for operating leases” no longer existing having been replaced by “income from current operations” which, thanks to IFRS 16 implementation, no longer includes the financial cost of lease contracts. Finally, the Group now uses a normative income tax rate, calculated according to the tax rates applied in France and in the Netherlands.
Attachment
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