• High level of uncertainty regarding fuel price and unit revenue due to geopolitical context and industry capacity environment
• Impact of fuel savings on P&L expected to be significantly offset in the coming quarters by downward pressure on unit revenue and negative currency impacts
• Continued progress in unit cost reduction targeted around 1% in 2016
• Free operating cash flow generation after disposals between 0.6 billion euros and EUR 1.0 billion euros in 2016
• Further significant net debt reduction

The Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on May 3^rd 2016 to examine the accounts for the First Quarter of the Financial Year 2016.

Key data

* Servair reclassified as discontinued operation.

The consolidated financial statements of the Group have been revised as of 1^st January 2016 in order to reflect Servair as discontinued operations. The 2015 financial statements have been restated accordingly. Details of this restatement can be found in the appendix of this press release.

First Quarter 2016 total revenues were stable at 5.6 billion euros versus First Quarter 2015, down 1.3% excluding the impact of currency (like-for-like).

Currencies had a positive 95 million euro impact on revenues versus First Quarter 2015, primarily driven by the strengthening of the US dollar against the euro partly offset by the weakening of other currencies. The negative impact on costs reached 174 million euros, including a lower tailwind from currency hedging compared to the First Quarter 2015. In the First Quarter 2016, the net impact of currencies thus amounted to a negative 79 million euros.

Total operating costs were 4.9% lower year-on-year and down 7.6% on a like-for-like basis. Ex-fuel, they increased by 2.0% and by 0.3% on a like-for-like basis. Unit cost per EASK was down 1.3%, on a constant currency and fuel price basis, with a stable capacity measured in EASK (+0.3%).

Total employee costs including temporary staff were up 0.8% to 1,844 million euros. In addition, the Group recorded under “other non-current income and expenses” a 146 million euro provision for a Voluntary Departure Plan targeting 1,600 full time equivalent positions.

The fuel bill amounted to 1,096 million euros, down 25.9% and like-for-like down 30.5%. Based on the forward curve at 22 April 2016, the Full Year 2016 fuel bill is expected to reach 4.6 billion euros4[1]

EBITDAR amounted to 531 million euros, a reported increase of 307 million euros. Like-for-like, EBITDAR increased by 371 million euros. Over the First Quarter 2016, 55% of the savings achieved on the fuel bill were retained. The positive fuel price effect of 450 million euros was partially offset by pressure on unit revenues (negative 119 million euros) and currency impacts (negative 79 million euros).

EBITDA amounted to 266 million euros, an increase of 292 million euros. Like-for-like, EBITDA increased by 370 million euros, mainly as a result of the strong Passenger network performance, which improved by 356 million euros like-for-like over the first quarter.

* Servair reclassified as discontinued operation.

First Quarter 2016 EBITDA improved by 179 million euros like-for-like at Air France and 196 million euros like-for-like at KLM. EBITDA margins were up at both airlines, reaching 4.2% at Air France and 5.5% at KLM.

* Servair reclassified as discontinued operation.

The operating result stood at -99 million euros versus -417 million euros, a 318 million euro improvement. Like-for-like, the operating result increased by 397 million euros.

The net result, group share stood at -155 million euros against -559 million euros a year ago.

At 31 March 2016, the trailing 12 months return on capital employed (ROCE) was 11.2%, up 6.0 points compared to 31 March 2015.

Passenger network5 business

First Quarter 2016 total passenger network revenues amounted to 4,473 million euros, up 1.2% and down 0.2% like-for-like. The operating result of the passenger network business stood at -18 million euros, versus -322 million euros over the First Quarter 2015. Like-for-like, the operating result improved by 375 million euros.

The Group maintained its strict capacity discipline, growing the total passenger network capacity during the First Quarter 2016 by 1.1%, while increasing the average loadfactor by 2.0 points to 84.5%. The traffic increased in all regions of the network, except Asia following the planned reduction in capacity. Unit revenue per Available Seat Kilometer (RASK) remained volatile, down by 1.3% overall on a like-for-like basis in the First Quarter.

The Group continued to restructure its cargo activity to address the weak global trade and structural air cargo industry overcapacity. During First Quarter 2016, full-freighter capacity was reduced by 32%, while belly capacity increased by 0.7%, leading to a decrease in total capacity of 8.1%. Revenue per Available Ton Kilometer (ATK) was nevertheless down by 10.8% like-for-like, reflecting the industry overcapacity, especially on flows from Asia to Europe.

The operating result stood at -50 million euros, an improvement of 16 million euros like-for-like.

Within the framework of Perform 2020, 1 MD-11 freighter was retired during the First Quarter, down to 8 full-freighters in operation. The Group plans to operate only 5 full-freighters by the end of 2016.

First Quarter 2016 third party maintenance revenues amounted to 431 million euros, up 13.4% and by 7.0% like-for-like. Revenues benefited not only from the strong dollar, but also from the contracts gained in previous years. The operating margin remained stable as a result of change in business mix from mature contracts to new growth, OEM supply chain under pressure in the engine business and labor costs inflation due to the profit sharing scheme.

The operating result stood at 38 million euros, up 3 million euros year-on-year, and stable like-for-like.

Over the period, the Group recorded a further 4% increase in its order book to 8.7 billion dollars with new contracts for CFM engines and first A350 total support contract.

In the First Quarter 2016, Transavia capacity was up by 8.4%, reflecting the accelerated development in France (capacity up by 18.6%). Traffic rose by 8.2%. Unit revenue per ASK decreased by 0.7% and with increased capacity, total revenues increased to 160 million euros, up 9.6%.

Unit costs were down 5.3%. At constant currency and stage length, the unit costs decreased by 11.7%. The operating result improved by 6 million euros to reach -63 million euros.

* Servair reclassified as discontinued operation.

In the First Quarter 2016, the increase of 292 million euros in EBITDA resulted in a cash flow before change in WCR and cash out related to Voluntary Departure Plans of 255 million euros. The Group disbursed 39 million euros for Voluntary Departure Plans. The change in Working Capital Requirement contributed 524 million euros to operating cash flow. Net investments before sale & lease-back transactions stood at 544 million euros. As a result, operating free cash flow improved by 242 million euros.

Net debt amounted to 4.16 billion euros at 31 March 2016, versus 4.31 billion euros at 31 December 2015. The trailing 12 months adjusted net debt / EBITDAR ratio stood at 3.0x at 31 March 2016, an improvement of 0.4 points compared to 31 December 2015, and 0.8 points compared to 31 March 2015.

The 35 basis points fall in discount rates (for period > 20 years) during First Quarter 2016 led to another significant increase in the actuarial valuation of retirement obligations of more than 1.3 billion euros. The change in asset value amounted to 325 million euros during the First Quarter. The balance sheet pension situation thus moved from a net liability of 177 million euros at 31 December 2015 to a net liability of 1,164 million euros at 31 March 2016.

At 31 March 2016, equity, group share, amounted to -510 million euros, down 783 million euros over the quarter due to the strong seasonality of results (net result of -155 million euros) and an increase of 753 million euros in after tax net pension liability. The change in fair value of the fuel hedging portfolio had a positive impact of 178 million euros over the quarter.

The global context in 2016 remains highly uncertain regarding fuel prices, the continuation of the overcapacity situation on several markets and the geopolitical and economic context in which we operate. As a consequence, the Group expects the forecasted savings on the fuel bill to be significantly offset in the coming quarters by unit revenue pressure and negative currency impacts.

Under these conditions, the Group is maintaining its expectations for 2016:

• Free operating cash flow generation after disposals between 0.6 billion euros and 1.0 billion euros. The 2016 investment plan (between 1.6 billion euros and 2.0 billion euros) and disposals programme (between 0.2 billion euros and 0.5 billion euros) will be adjusted depending upon operating cashflow generation
• 2016 unit cost reduction target around 1%
• Further significant reduction in net debt

4 2016 average Brent price of USD 43, average jet fuel price of USD 409 per metric ton, average exchange rate of 1.10 USD per euro for period april-december 2016

5 Air France, KLM and HOP!. Transavia is reported in its own business segment.

• 7.0 million passengers, up 1.5%
• Increase in traffic in all regions of the network
• Increase in capacity on Latin America driven by the continuation of KLM developments to Bogota, Cali, Buenos Aires and Santiago
• Excluding last year’s strike impact on October revenues, unit revenue per available seat kilometer (RASK) ex-currency down compared to October 2014

• 1.1 million passengers, up 11.9%
• Ongoing accelerated development of Transavia in France (passenger volumes up 42%) 

• 8.1 million passengers, up 2.8%

• Ongoing restructuring of cargo: full-freighter capacity down 32% compared to October 2014
• Unit revenue per available ton kilometer (RATK) ex-currency clearly down compared to October 2014

Strategic developments

For the 2015-2016 winter season (from 25 October 2015 to 26 March 2016), Air France-KLM total capacity will increase by 1.5% compared with the previous winter season. Growth will be driven by long-haul passenger network operations (+1.7%) and Transavia activity (+9.1%), while medium-haul passenger network operations will decrease by -1.8%.

• On long-haul, Air France-KLM is mainly increasing capacity to North America and the Caribbean while reducing capacity to other destinations including Brazil, Japan and East Africa. Two destinations are suspended: Fukuoka (Japan) from Amsterdam-Schiphol by KLM and Kuala Lumpur (Malaysia) from Paris-Charles de Gaulle by Air France.
• On medium-haul, Group capacity is stable on departure from the hubs at Paris-Charles de Gaulle and Amsterdam-Schiphol, apart from the suspension of Air France services to Vigo (Spain), Verona (Italy) and Stavanger (Norway).
• Transavia will welcome 3 new Boeing 737-800 aircraft as from January 2016 to support its growth in France and the Netherlands.
• KLM will take delivery of its first 3 Boeing 787 this winter, which will fly to Abu Dhabi, Bahrain, Dubai and Rio de Janeiro during this season. In parallel, the Boeing 747 will be definitely withdrawn from the Air France fleet in January 2016.
• The Group continues to roll out its new products and services, with more than 60 long-haul aircraft equipped at the end of the year. In addition, the cabin renewal program continues on medium-haul: the new leather seats, already in place onboard 24 Air France Airbus A319, will be fully deployed on 25 Airbus A320 during the first half of 2016.

Agenda

• 8 December 2015: November 2015 traffic
• 11 January 2016: December 2015 traffic
• 8 February 2016: January 2016 traffic

STATISTICS

Passenger network activity*

* Air France, KLM, and HOP!

Transavia activity

Total group passenger activity**

** Air France, KLM, HOP! and Transavia

Cargo activity

• Revenues of 19.7 billion euros, up 3.1% excluding strike impact, down 3.1% like-for-like
• EBITDAR of 2,658 million euros, an improvement of 388 million euros like-for-like
• Strong operating free cash flow (2) generation: 533 million euros
• Further net debt reduction: net debt (2) of 4.33 billion euros, down 1,077 million euros compared to 31 December 2014
• Adjusted net debt / EBITDAR ratio (3) of 3.4x, an improvement of 0.6 compared to 31 December 2014

Full year 2015 outlook

• Unit cost target: reduction in the 0.5% to 0.7% range (4) (previously: in the 1.0% to 1.3% range)
• End 2015 net debt target unchanged: around 4.4 billion euros, down 1 billion euros compared to end of 2014

The Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on 28 October 2015 to examine the accounts for the Third Quarter of the Financial Year 2015.

1) Like-for-like: excluding currency and September 2014 pilot strike. Same definition applies in rest of press release
2) See definition in appendix
3) Trailing 12 months, EBITDAR adjusted for September 2014 pilot strike impact; see definition in appendix
4) On a constant currency, fuel price and pension-related expense basis. See computation in appendix

Traffic highlights

7.6 million passengers, up 1.3%

Increase in traffic in all regions of the network

Unit revenue per available seat kilometer (RASK) ex-currency down compared to July 2014

1.3 million passengers, up 9.4%

Ongoing accelerated development of Transavia in France: capacity up 19% and load factor up 4.4 points

8.9 million passengers, up 2.4%

Ongoing restructuring of cargo: full-freighter capacity down 31% compared to July 2014

Unit revenue per available ton kilometer (RATK) ex-currency clearly down compared to July 2014

Agenda

9 September 2015: August 2015 traffic

8 October 2015: September 2015 traffic

29 October 2015: Q3 2015 results

9 November 2015: October 2015 traffic

STATISTICS

Passenger network activity*

* Air France, KLM, and HOP!

Transavia activity

Total group passenger activity**

** Air France, KLM, HOP! and Transavia

Cargo activity

• Revenues of 6.64 billion euros, up 3.0%, down 4.5% like-for-like[1]
• EBITDAR[2] of 824 million euros, a decrease of 30 million euros
• Operating result of 185 million euros, a decrease of 53 million euros,stable like-for-like
• Unit cost² down 0.5% like-for-like

FIRST HALF

• Revenues of 12.30 billion euros, up 2.4%, down 3.6% like-for-like
• EBITDAR of 1,053 million euros, an improvement of 32 million euros
• Strong operating free cash flow² generation: 274 million euros
• Further net debt reduction: net debt² of 4.55 billion euros, down 857 million euros compared to 31 December 2014
• Adjusted net debt / EBITDAR ratio[3] of 3.8x, an improvement of 0.2 compared to 31 December 2014

FULL YEAR 2015 OUTLOOK: OBJECTIVES MAINTAINED

• Unit cost reduction in the 1% to 1.3% range[4]
• Significant reduction in net debt, from 5.4 billion euros at end 2014 down to around 4.4 billion euros at end 2015

ACCELERATION OF PERFORM 2020

• Launch of immediate cost-saving measures
• Acceleration of all cost reduction initiatives
• Adjustment of Winter 2015-16 capacity

[1] Like-for-like: excluding currency. Same definition applies in rest of press release

[2] See definition in appendix

[3] Trailing 12 months, EBITDAR adjusted for September 2014 pilot strike impact; see definition in appendix

[4] On a constant currency, fuel price and pension-related expense basis. See computation in appendix

----------------------------------------------------------------------------------------------------------------------------------------------------

The Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on 23 July 2015 to approve the accounts for the First Half of the Financial Year 2015.

Key Data

The consolidated financial statements of the Group have been revised as of 1^st January 2015 in order to improve their clarity. The changes are:

• In view of its rapid development, Transavia is now presented as a separate business segment. The passenger business segment is thus renamed from “passenger” to “passenger network”.
• Capitalized production costs are no longer deducted from individual cost lines in the profit and loss statement, but are instead fully allocated to the “other income and expenses” line. The impact per quarter of this restatement is provided in the appendix.
• Foreign currency effects on provisions are no longer recorded in “amortization, depreciation and provisions” but in “other financial income and expenses”. The closing exchange rate is used to convert provisions at the closing date. Previously, the Group used the average rate of the US dollar to convert maintenance provisions. The consolidated financial statements as of December 31, 2014 have been restated for reason of comparison. The impact of this restatement is provided in the appendix.

• Watch the broadcast of the press conference at 10:30 am CET

1. Revenues of 5.7 billion euros, up 1.8%
2. EBITDAR[1] of 229 million euros, an improvement of 62 million euros
3. EBITDA1 of -21 million euros, an improvement of 29 million euros
4. Operating result of -417 million euros, an improvement of 109 million euroslike-for-like[2]
5. Net negative currency impact of 81 million euros on operating result
6. Net debt¹ of 5.28 billion euros, down 127 million euros compared to 31 December 2014, and down to 4.68 billion euros including April 2015 hybrid bond issuance
7. Adjusted net debt / EBITDAR ratio[3] of 3.7x, an improvement of 0.5 compared to 31 March 2014

FULL YEAR 2015 OUTLOOK: OBJECTIVES MAINTAINED

1. Unit cost¹ reduction target of 1 to 1.3%
2. Significant reduction of net debt, from 5.4 billion euros at end 2014 down to around 4.4 billion euros at end 2015, in part as a result of the April 2015 hybrid bond issuance

[1] See definition in appendix

[2] Like-for-like: excluding currency. Same definition applies in rest of press release

[3] Trailing 12 months, adjusted for September 2014 pilot strike impact and April 2015 hybrid bond; see definition in appendix

KEY DATA

The consolidated financial statements of the Group have been revised as of 1^st January 2015 in order to improve their legibility. The changes are:

• In view of its rapid development, Transavia is now presented as a separate business segment. The passenger business segment is thus renamed from “passenger” to “passenger network”.
• Capitalized production costs are no longer deducted from individual cost lines in the profit and loss statement, but are instead fully allocated to the “other income and expenses” line. The impact per quarter of this restatement is provided in appendix.

First Quarter 2015 total revenues stood at 5.7 billion euros versus 5.6 billion euros in First Quarter 2014, up 1.8%, but down 2.4% like-for-like.

Currencies had a positive 239 million euro impact on revenues, primarily driven by the strengthening of the US dollar against the euro. In spite of higher profits on currency hedging, the negative impact on costs reached 320 million euros. It was larger considering the bigger share of costs than revenues in US dollars, and considering the fact that a sizeable portion of First Quarter 2015 revenues were booked in 2014 at a time when the dollar was weaker. In the First Quarter 2015, the net impact of currencies thus amounted to a negative 81 million euros.

Total operating costs were 1.2% higher year-on-year and down 3.9% on a like-for-like basis. Ex-fuel, they increased by 3.3% and by 1.5% on a like-for-like basis. Unit cost per EASK was stable, on a constant currency, fuel price and pension-related expense basis, against stable capacity measured in EASK (+0.1%).

The fuel bill amounted to 1,480 million euros, down 4.7% and like-for-like down 17.6%, on the back of a 20.3% reduction in jet fuel price after hedging and of a 15.6% negative currency impact. Based on the forward curve at 17 April, the Full Year 2015 fuel bill is expected to reach 6.6 billion euros4[1]. Based on the same forward curve, the Full Year 2016 fuel bill could amount to 6.1 billion euros4.

Total employee costs including temporary staff were up 2.1% to 1,920 million euros. They included a non-cash increase of 31 million euros in pension-related expenses at KLM due to changes in actuarial assumptions (lower discount rate). On a constant scope and pension-related expense basis, they were flat (+0.3%). In addition, the Group recorded under “non-current income and expenses” a 56 million euro provision for the Voluntary Departure Plan targeting 800 positions that was announced in February.

EBITDAR amounted to 229 million euros, an improvement of 62 million.

4 2015 average Brent price of USD63, average jet fuel price of USD608 per metric ton, average exchange rate of 1.10 USD per euro. 2016 average Brent price of USD69, average jet fuel price of USD663 per metric ton, average exchange rate of 1.10 USD per euro.

EBITDA amounted to a negative 21 million euros, an increase of 29 million euros. On a like-for-like basis, EBITDA improved by 91 million euros. The Passenger network had the largest contribution to the improvement of EBITDA, up 58 million euros, whereas cargo EBITDA decreased by 30 million euros. At 85 million euros, maintenance achieved a good performance on EBITDA level, up 9 million euros.

The operating result stood at -417 million euros versus -445 million euros in 2014, a 28 million euro improvement. Like-for-like, the operating result increased by 109 million euros.

The net result, group share stood at -559 million euros against -608 million euros a year ago. It included notably the non-current result related to the capital gain on the sale of Amadeus shares (+218 million euros), partly offset by the change in value of the fuel hedging portfolio (-26 million euros) and the unrealized foreign exchange loss (-143 million euros). On an adjusted basis, the net result, group share stood at -504 million euros against -485 million euros in First Quarter 2014, a 19 million euro decrease.

At 31 March 2015, the trailing 12 months strike-adjusted return on capital employed¹ (ROCE) was 5.6%, up 1.6 point compared to 31 March 2014.

PASSENGER NETWORK BUSINESS

First Quarter 2015 total passenger network revenues amounted to 4,421 million euros, up 1.3% and down 2.0% like-for-like. The operating result of the passenger network business stood at -322 million euros, versus -378 million euros over the First Quarter 2014. Like-for-like, the operating result improved by 132 million euros.

The Group maintained its strict capacity discipline, keeping total passenger network capacity stable (+0.1%). Unit revenue per Available Seat Kilometer (RASK) remained volatile, down by 2.3% on a like-for-like basis in the First Quarter. On the long-haul network, unit revenue was affected by the expected capacity-demand balances reflected in the unit revenue performance of the different parts of the network: good performance on North America and the Caribbean & Indian Ocean, weaker performance on the Latin American network on the back of a weak economic environment in several key markets, whereas the capacity-demand balances put pressures on both Eastern-Africa and Asia networks.

As planned, short and medium-haul point-to-point capacity (excluding the Paris and Amsterdam hubs) was further reduced by 11.8%, leading to a significant improvement in unit revenue of +9.6% like-for-like, whereas for hub-related short and medium-haul traffic, unit revenues were down -1.4% like-for-like.

CARGO BUSINESS

The Group continued to restructure its cargo activity to address the weak global trade and structural air cargo industry overcapacity. During First Quarter 2015, full-freighter capacity was reduced by 9.6%, while belly capacity increased by 1.2%, leading to a decrease in total capacity of 1.9%. Revenue per Available Ton Kilometer (ATK) was nevertheless down by 11.3% like-for-like, reflecting the structural industry overcapacity, especially on flows from Asia to Europe.

The operating result stood at -63 million euros, a decrease of 15 million euros like-for-like.

Within the framework of Perform 2020, 3 Boeing 747 were retired in the Winter 2014-15 season, while another 5 MD11s will be retired by the end of the Winter 2015-16 season. The Group plans to operate only 5 full-freighters by the end of 2016. This reduction should enable the full-freighter business to return to operating breakeven in 2017 (versus a strike-adjusted loss of around 95 million euros in 2014).

MAINTENANCE BUSINESS

First Quarter 2015 third party maintenance revenues amounted to 380 million euros, up 31.0% and by 13.8% like-for-like. Revenues benefited not only from the strong dollar, but also from the contracts gained in previous years and from weak comparables in Q1 2014. In the quarter, the Group performed its first GEnx engine overhaul.

The operating result stood at 35 million euros, up 13 million euros year-on-year, and down 2 million euros like-for-like.

Over the period, the Group recorded a further 5% increase in its order book to a record high 5.9 billion euros, including several new B787 component support contracts. The Group further expanded its service portfolio with an investment in a US engine parts trading business.

TRANSAVIA

In the First Quarter 2015, Transavia capacity was up by 5.1%, reflecting the accelerated development in France (capacity up by 48%) partly offset by seasonal capacity adjustments in the Netherlands (capacity down 7.5%). Traffic rose by 7.1%. The load factor remained high (87.9%, up 1.7 point) despite the increase in capacity. Unit revenue per ASK increased by +0.7% despite the increase in capacity, resulting in total revenues of 146 million euros, up 5.0%.

Unit costs were up 4.3% on the back of the stronger US dollar, a shorter stage length, ongoing ramp-up investments in France, and the seasonal capacity adjustments performed in the Netherlands.

The operating result was thus down by 11 million euros to reach -69 million euros.

The development of Transavia will further accelerate in 2015: on top of a 30% capacity increase to serve 44 destinations from France, Transavia is launching a new brand identity, a new web site, implementing a tighter integration with Flying Blue, and has recently ordered 20 Boeing 737s.

OTHER BUSINESS: CATERING

In the First Quarter 2015, third party catering revenues amounted to 75 million euros, up 2.7%.The operating result stood at -1 million euros, up 3 million euros.

FINANCIAL SITUATION

In the First Quarter 2015, the increase of 29 million euros in EBITDA translated into a 27 million euro improvement in cash flow before change in WCR and cash out related to Voluntary Departure Plans. The Group disbursed 30 million euros for Voluntary Departure Plans. The change in Working Capital Requirement contributed 477 million euros to operating cash flow. Net investments before sale & lease-back transactions stood at 350 million euros. As a result, operating free cash flow improved by 43 million euros.

The operating free cash flow does not include free cash flow from financial investments, including the cash-in of 327 million euros from the sale of Amadeus shares in January.

Net debt amounted to 5.28 billion euros at 31 March 2015, versus 5.41 billion euros at 31 December 2014. Currencies had a significant 175 million euro negative impact on net debt. After issuance of an hybrid bond in April, net debt would stand at 4.68 billion euros at the end of First Quarter 2015.

Excluding the impact of the pilot strike on EBITDAR and including the hybrid bond issued in April, the trailing 12 months adjusted net debt / EBITDAR ratio stood at 3.7x at 31 March 2015, down 0.3 points compared to 31 December 2014, and 0.5 points compared to 31 March 2014. In parallel, a 661 million euro convertible bond was reimbursed on 1^st April, reducing the diluted share count by more than 70 million shares to 370 million shares.

Despite strong returns on pension plan assets and the positive impact of the changes in Dutch fiscal rules on pensions, the 70 basis point fall in discount rates during First Quarter 2015 led to another significant increase in the actuarial valuation of retirement obligations. The balance sheet pension situation thus moved from a net liability of 710 million euros at 31 December 2014 to a net liability of 1,051 million euros at 31 March 2015.

At 31 March 2015, equity, group share, amounted to -1,515 million euros, down 844 million euros over the quarter due to the strong seasonality of results (net result of -559 million euros) and an increase of 257 million euros in after tax net pension liability. The change in fair value of the fuel hedging portfolio had a limited impact over the quarter. At 31 March 2015, the fair value of the fuel hedging portfolio remained however strongly negative, at around -1.3 billion euros. This level of equity does not take into account the 600 million euro hybrid bond that was issued in April.

The Group continues to enjoy a good level of liquidity, with net cash² of 3.5 billion euros at 31 March 2015, and undrawn credit lines of 1.77 billion euros. At the end of April, the Group renewed some of its credit lines for an amount of 1,100 million euros with a wide pool of international banks. In addition, in January 2015, the Group received net proceeds of 327 million euros on the sale of Amadeus shares, and it issued a 600 million euros hybrid bond in April.

OUTLOOK

All the operational initiatives planned within the framework of the new strategic plan Perform 2020 are being deployed.

In parallel, negotiations with unions on labor productivity are ongoing.

As demonstrated in the First Quarter, almost all of the expected savings on the fuel bill could be offset by unit revenue pressure and negative currency impacts.

For Full Year 2015, the Group maintains its key targets:

• unit cost reduction of 1 to 1.3%
• net debt around 4.4 billion euros at the end of 2015

Third Quarter 2014 activity was strongly affected by 14 days of strike by Air France pilots, which had an estimated negative impact of 330 million euros on the operating result. Total revenues were reduced by an estimated 416 million euros, partly offset by 86 million euros of net savings on costs. The strike led to the cancellation of an estimated 4,249 million ASKs (18% of September ASKs) and 213 million ATKs (16% of September ATKs) resulting in an equivalent cancellation of 4.75 billion EASKs (Equivalent Available Seat Kilometer).

Total revenues amounted to 6,695 million euros versus 7,175 million euros in 2013, down 6.7%, but up +0.2% on a constant currency basis and adjusted for the Air France pilot strike (“like-for-like”). Currencies had a negative 78 million euro impact on revenues.

Operating costs were 1.3% lower year-on-year and 0.7% lower on a constant currency basis. Ex-fuel, they increased by 0.7% and by 0.8% on a like-for-like basis. Unit cost per EASK¹ was reduced by 1.2%, on a constant currency, fuel price, pension expense and strike adjusted basis, against capacity measured in EASK up by 2.0%, corrected for the strike. The fuel bill amounted to 1,737 million euros, down 6.4%, but slightly up (+0.4%) on a constant currency and strike adjusted basis. Total employee costs including temporary staff were down 1.6% to 1,871 million euros, and by 1.7% on a constant currency basis. On a constant pension expense and adjusted for the strike, they declined by9 million euros.

EBITDA amounted to 682 million euros, a decrease of 397 million euros. On a like-for-like basis, EBITDA decreased by 21 million euros. The operating result stood at 247 million euros versus641 million euros in 2013, a 394 million euro decrease. Like-for-like, the operating result decreased by 18 million euros. Currencies had a 47 million euro net negative impact on the Third Quarter operating result.

The net result, group share stood at 100 million euros against 148 million euros a year ago. It includes the non current result of the Amadeus transaction (187 million euros), mainly offset by the change in value of the fuel hedging portfolio (-172 million euros). On an adjusted basis⁴, the net result, group share stood at 111 million euros against 372 million euros in Q3 2013, a 261 million euro decrease.

In the first Nine Months of 2014, total revenues stood at 18,7 billion euros versus 19,4 billion euros in 2013, down 3.6%, but up +0.4% on a like-for-like basis. Currencies had a negative 365 million euro impact on revenues.

Operating costs were reduced by 2.8% and by 1.4% on a constant currency basis. Ex-fuel, they decreased by 1.6%, and by 1.0% on a like-for-like basis. The fuel bill amounted to 4,926 million euros, down 6.1%, and down 0.8% on a constant currency and strike adjusted basis. Total employee costs including temporary staff were down 3.1% to 5,651 million euros, and by 3.0% on a constant currency basis. On a constant pension expense, scope and strike adjusted basis, they declined by 115 million euros as a result of the Transform 2015 actions.

EBITDA declined by 200 million euros to 1,273 million euros, resulting in an EBITDA margin of 6.8%, a 0.8 point decrease on 2013. On a like-for-like basis, EBITDA improved by 224 million euros. The operating result stood at 40 million euros versus 193 million euros in 2013. On a like-for-like basis, the operating result improved by 267 million euros. Currencies had a 92 million euro net negative impact on the operating result in the first nine months of 2014.

The net result, group share stood at -514 million euros against -651 million euros a year ago. It includes the non-current result of the Amadeus transaction (187 million euros), the change in value of the fuel hedging portfolio (-146 million euros), foreign exchange losses (including the adjustment in the value of the cash held by the Group in Venezuela), and the impairment charges related to the Cargo business. On an adjusted basis[1], the net result, group share stood at -231 million euros against-314 million in the first nine months of 2013, an 83 million euro improvement.

Earnings and diluted earnings per share both stood at -1.74 euros (-2.20 euros in 2013), and at-0.78 euros on an adjusted basis (-1.06 euros in 2013).

[1] See definition in appendix
 

PASSENGER BUSINESS

In the Third Quarter 2014, passenger revenues amounted to 5,232 million euros, down 8.2% and 0.3% like-for-like. The operating result of the passenger business stood at 211 million euros, versus 584 million euros in Q3 2013, a decrease of 40 million euros on a like-for-like basis (-373 million euros on a reported basis).

The Group maintained its strict capacity discipline, increasing total passenger capacity by only 1.6% excluding strike impact. Unit revenue per Available Seat Kilometer (RASK) remained volatile, down by approximately -1.8% on a like-for-like basis after a +1.3% increase in the second quarter.

On the long-haul network, unit revenue was affected by industry overcapacity on certain parts of the network, a disappointing performance on the Latin American network on the back of lower economic growth in several markets, and high comparables in the third quarter last year (long-haul RASK up 2.9% at Q3 2013 compared to Q3 2012, of which +5.6% on Latin America).

As planned within the framework of Transform 2015, point-to-point (not linked to the Paris-CDG and Amsterdam hubs) short and medium-haul capacity was significantly reduced (down 14.2%, excluding strike impact), leading to a significant improvement in unit revenue (estimated at +7.6% like-for-like). Total short and medium-haul RASK improved by 1.6% like-for-like, in line with the second quarter.

For the 2014-15 Winter season (November 2014 to March 2015), the Group will maintain its strict capacity discipline in the passenger business, with stable capacity (planned ASK growth: +0.1%), notably including a reduction of 11.3% in short and medium-haul point-to-point capacity.

As a result of Transform 2015, and in spite of the low capacity growth, the passenger activity delivered a further decrease in unit cost, with Cost per Available Seat Kilometer (CASK) down by 1.2% like-for-like.

In the first Nine Months of 2014, passenger revenues amounted to 14,709 million euros, down 3.7%, but up 0.8% like-for-like. The operating result of the passenger business stood at 88 million euros, versus 233 million euros in the same period last year. Like-for-like, it improved by 226 million euros.

Unit revenue per Available Seat Kilometer (RASK) fell by 2.9% and by 0.3% like-for-like. Unit costs (CASK) were reduced by 1.9%.

CARGO BUSINESS

Third Quarter 2014 cargo revenues amounted to 623 million euros, down 9.4% and by 3.6% on a like-for-like basis. The Group continued to reduce full-freighter capacity (down 7% in July and August), leading to a decrease in total capacity of -0.5% on a like-for-like basis. Demand remained weak, with unit revenue per Available Ton Kilometer (RATK) decreasing by 2.1% on a like-for-like basis, and by 3.5% on a reported basis.

The operating result amounted to -102 million euros, down 2 million euros on a like-for-like basis.

In the first Nine Months of 2014, cargo revenues amounted to 1,967 million euros, down 6.0% and by 2.3% on a like-for-like basis. Unit revenue per Available Ton Kilometer (RATK) decreased by 2.9% and by 0.7% on a like-for-like basis.

On a like-for-like basis, cargo unit cost was down 1.7% in the first nine months. The operating result improved by 3 million euros and by 24 million euros like-for-like.

At its Perform 2020 investor day in September, the Group announced the finalisation of its cargo repositioning plan: it is implementing a significant further reduction in its full-freighter fleet, from 14 aircraft in operation in 2013 to 5 aircraft by the end of 2016. This reduction should enable the full-freighter business to return to operating breakeven in 2017 (versus a loss of €110 million in 2013 and a €200 million loss including bellies).

MAINTENANCE

Third Quarter 2014 third party maintenance revenues amounted to 319 million euros, up 4.2% and by 5.3% on a constant currency basis, driven by the consolidation of Barfield, a US component support business. The operating result stood at 61 million euros, up 7 million euros year-on-year. The Air France pilot strike had a 22 million euro impact on operating result due to lower internal revenues from the maintenance of the Air France fleet. Excluding strike impact and at constant currency, the operating result was up 27 million euros.

In the first Nine Months of 2014, third party maintenance revenues amounted to 895 million euros, down 3.5% and by 0.5% on a constant currency basis. The operating result increased by 2 million euros to 113 million euros. Like-for-like, the operating result improved by 31 million euros, representing a 1.2 point increase in operating margin.

Over the period, the Group recorded a 20% increase in its order book to 5.3 billion euros, including a major contract with Air China covering the maintenance of GE90 engines.

OTHER BUSINESS:
TRANSAVIA

In the Third Quarter of 2014, Transavia capacity was up 8.3%, reflecting the accelerated development in France (up 21.4%) and the ongoing repositioning in the Netherlands (with scheduled capacity up 15.3% and charter capacity down 3.7%). Traffic rose 6.0%, and load factor remained high (91.8%, down 1.9 point). Unit revenue was down 0.6%, but up 0.5% in France despite the rapid increase in capacity. Transavia’s total revenue stood at 427 million euros, up 7.6%. The operating result was 62 million euros, down 4 million euros year-on-year.

In the first Nine Months of 2014, Transavia traffic increased by 6.5% for capacity up 6.9%, leading to a 0.4 point decrease in load factor to 90.3%. Unit revenue was down 0.8%. Total revenue stood at 861 million euros, up 5.9%, while the unit cost per ASK decreased by 0.7%, but increased by 0.3% on a constant currency basis. The operating result decreased by 14 million euros to -2 million euros, mainly due to the rapid ramp up in France.

For the 2014-15 Winter season, Transavia will continue its rapid growth in France, with a planned 56% capacity increase (+13.3% including activity in the Netherlands).

In October 2014, Air France and its pilots’ unions finalized a draft agreement relating to the development of Transavia in France. If this agreement is validated, it will ensure the entirety of the Transavia development plan in France over the next five years:

• Continued strong growth in Summer 2015: 21 aircraft in operation versus 16 in Summer 2014, Transavia to become the largest low cost carrier at Paris-Orly by Summer 2015.
• 37 Boeing 737s in operation by 2019, operating flights potentially on departure from all French airports excluding the Paris-CDG hub, notably on destinations already served by Air France.
• Transavia to maintain its own operating and remuneration conditions, which are key to achieving its unit cost and operating flexibility objectives.

OTHER BUSINESS:
CATERING

Third Quarter 2014 third party catering revenues amounted to 82 million euros, up 5.1%. At constant scope (excluding the impact of the sale of Air Chef that occurred in Q2 2013), third party revenues increased by 6.5%. The operating result increased by 2 million euros like-for-like, corrected for the impact of the Air France pilot strike on internal revenues.

In the first Nine Months of 2014, third party catering revenues amounted to 234 million euros, up 8.8% at constant scope. Like-for-like, the operating result increased by 5 million euros.

FINANCIAL SITUATION

In the first Nine Months of 2014, the fall of 200 million euros in EBITDA, primarily due to the Air France pilot strike, translated into a 183 million euro reduction in cash flow before change in WCR and cash out related to Voluntary Departure Plans. The Group disbursed 162 million euros for Voluntary Departure Plans representing nearly all of the cash out expected in the Financial Year.

Change in WCR was also affected by the strike, with delayed sales partly offset by not yet processed reimbursements. Net investments before sale & lease-back transactions stood at 1,106 million euros.

As a result, operating free cash flow amounted to minus 75 million euros, versus a positive 496 million euros a year earlier. Operating free cash flow does not incorporate free cash flow from financial investments, including the cash-in of 339 million euros from the sale of Amadeus shares in September.

Net debt amounted to 5.27 billion euros at 30^th September 2014, versus 5.35 billion euros at 31^st December 2013. The 12 months trailing net debt / EBITDA ratio stood at 3.2x at 30 September 2014 compared to 3.1x at 31^st December 2013. Corrected for the strike impact, it was down to 2.7x.

OUTLOOK

Delivery on the Transform 2015 plan is fully on track, and several key initiatives of Perform 2020, the new strategic plan covering the period 2015-2020, have been launched.

In July, the tough operating environment led the Group to revise its 2014 EBITDA target to between 2.2 and 2.3 billion euros.

Long-haul industry capacity growth remains high, though lower in comparison to the summer season, and economic activity is recovering slowly in Europe. In addition to the 330 million euro direct impact of the Air France pilot strike on the third quarter operating result, the Group noted the build-up of a delay in fourth quarter booking trends, without being able precisely to apportion responsibility for this delay between the strike and the unfavorable demand trend seen since the early summer and subsequently confirmed. The Group estimates that part of this delay could be progressively reduced over the coming weeks, without being able to quantify this adjustment exactly given the exceptional nature of the event.

As announced on 8 October 2014, all of the above elements could have an impact of around 500 million euros on EBITDA for the 2014 financial year.

Moreover, while continuing to implement the Perform 2020 plan, the Group has the firm intention to limit the financial consequences of the pilot strike and of the weaker unit revenue trend that developed over the past summer. This will be achieved thanks to the further adaptation of its investment plan, the acceleration of unit cost reduction measures, and through dynamic management of its asset portfolio.

                                                                    ******

The Third Quarter 2014 accounts are not audited by the Statutory Auditors.

• Revenues of 12.01 billion euros, up 1.0% like-for-like
• Net result, group share of -614 million euros, improvement of 185 million euros
• Adjusted net result, group share1 of -342 million euros, improvement of 344 million euros
• Net debt of 5.4 billion euros; net debt/EBITDA ratio of 2.6, a 0.3 point improvement compared to 31 December 2013

FULL YEAR 2014 OUTLOOK

• Tough operating environment
• EBITDA expected between 2.2 to 2.3 billion euros
• On track to reach net debt target of 4.5 billion euros next year

KEY DATA

In the Second Quarter of 2014, total revenues amounted to 6,451 million euros versus 6,541 million euros in 2013, down 1.4%, but up +1.7% on a constant currency and scope basis (like-for-like). Currencies had a negative 168 million euro impact on revenues.

Operating costs were reduced by 3.8% and by 1.5% on a constant currency basis. Ex-fuel, they decreased by 3.4% and by 2.6% on a constant currency basis. Unit cost per EASK¹ (Equivalent Available Seat Kilometer) was reduced by 4.0%, and by 1.7% on a constant currency, fuel price and pension expense basis, against capacity measured in EASK up by 0.9%. The fuel bill amounted to 1,636 million euros, down 5.6%, but stable (+0.2%) on a constant currency basis. Total employee costs including temporary staff were down 3.4% to 1,934 million euros, and by 3.2% on a constant currency basis. At constant pension expense and scope, they declined by 47 million euros.

EBITDA amounted to 641 million euros,  an improvement of 131 million euros. The EBITDA margin stood at 9.9%, a 2.1 point improvement on 2013. The operating result stood at 238 million euros versus 84 million euros in 2013, an 154 million euro improvement. Currencies had a 20 million euro net negative impact on the Second Quarter operating result.

The net result, group share stood at -6 million euros against -158 million euros a year ago. It was impacted by an 106 million euro impairment charge relating to assets of the Cargo business[1]. On an adjusted basis², the net result, group share stood at 143 million euros against -34 million euros in Second Quarter 2013, a 177 million euro improvement.

In the First Half 2014, total revenues stood at 12,005 million euros versus 12,222 million euros in 2013, down 1.8%, but up +1.0% on a like-for-like basis. Currencies had a negative 287 million euro impact on revenues.

Operating costs were reduced by 3.6% and by 1.7% on a constant currency basis. Ex-fuel, they decreased by 2.9%, and by 2.0% on a constant currency basis. The fuel bill amounted to 3,189 million euros, down 5.9%, and 1.5% on a constant currency basis. Total employee costs including temporary staff were down 3.6% to 3,780 million euros, and by 3.4% on a constant currency basis. At constant pension expense and scope, they declined by 106 million euros.

EBITDA improved by 197 million euros to 591 million euros, resulting in an EBITDA margin of 4.9%, a 1.7 point increase on 2013. The operating result stood at -207 million euros versus -448 million euros in 2013, an 241 million euro improvement. Currencies had a 45 million euro net negative impact on the operating result in the First Half.

The net result, group share stood at -614 million euros against -799 million euros a year ago. It was impacted by the adjustment in the value of the cash held by the Group in Venezuela recorded in the First Quarter and the impairment charge in the Cargo business in the Second Quarter. On an adjusted basis[2], the net result, group share stood at -342 million euros against -686 million in the First Half 2013, a 344 million euro improvement.

Earnings and diluted earnings per share both stood at -2.07 euros (-2.70 euros in 2013), and at -1.16 euros on an adjusted basis (-2.32 euros in 2013).

[1] See details in “Cargo business” section below

[2] See definition in appendix

PASSENGER BUSINESS

In the Second Quarter 2014, passenger revenues amounted to 5,112 million euros, down 0.2%, but up 2.4% like-for-like. The operating result of the passenger business stood at 255 million euros, versus 96 million euros in Q2 2013, an improvement of 159 million euros (178 million euros on a constant currency basis).

The Group maintained its strict capacity discipline, increasing total passenger capacity by only 1.0%. Passenger traffic rose by 2.8%, leading to a 1.5 point improvement in load factor to 84.8%. Unit revenue per Available Seat Kilometer (RASK) fell by 1.1% but increased by 1.3% on a constant currency basis. Thanks to Transform 2015, and in spite of the low capacity growth, the passenger activity delivered a strong cost performance, with Cost per Available Seat Kilometer (CASK) down by 2.3% like-for-like.

Long-haul traffic rose 3.1% for a 1.5% rise in capacity, leading to a 1.4 point increase in load factor to 86.0%. Long-haul RASK was up 1.6% like-for-like.

As planned within the framework of Transform 2015, point-to-point (not linked to the Paris and Amsterdam hubs) short and medium-haul capacity was significantly adjusted (down 7.1%), leading short and medium-haul capacity to fall by 0.7%. Traffic rose by 1.6%, resulting in a 1.8 point improvement in load factor to 80.4%. Short and medium-haul RASK improved by 1.7% like-for-like.

All regions improved their profitability with the exception of Latin America, impacted by the situation in Venezuela.

In the First Half 2014, passenger revenues amounted to 9,477 million euros, down 1.0%, but up 1.4% like-for-like. The operating result of the passenger business stood at -123 million euros, versus -351 million euros in the First Half 2013, an improvement of 228 million euros (268 million euros like-for-like).

Total passenger traffic rose by 2.5% while capacity rose by 1.2% leading to a 1.0 point improvement in load factor to 83.8%. Unit revenue per Available Seat Kilometer (RASK) fell by 1.8% but increased by 0.5% like-for-like. Unit costs (CASK) were reduced by 4.2% and by 2.4% like-for-like.

CARGO BUSINESS

Second Quarter 2014 cargo revenues amounted to 669 million euros, down 5.1% and by 1.9% on a constant currency basis. Faced with a slower than expected recovery, the group continued to reduce full-freighter capacity (down 8.6%). In consequence, total capacity decreased by 2.0%. Traffic decreased by 1.6%, leading to a 0.3 point increase in load factor to 63.2%. Unit revenue per Available Ton Kilometer (RATK) increased by 1.1% on a constant currency basis (-2.1% on a reported basis).

The operating result improved slightly to -45 million euro, up 5 million euros.

The recovery in demand being slower than expected, the group has initiated a strategic review of its full-freighter business, with different scenarios under consideration. Having already decided in October 2013 to reduce its full-freighter fleet to 2 aircraft in Paris and 8 aircraft in Amsterdam by 2015, the group is now looking to further reduce its Amsterdam-based full-freighter exposure either through a partnership with a third party or through internal restructuring. In consequence, the group has recorded an impairment of 106 million euros in its Second Quarter 2014 accounts.

First Half 2014 cargo revenues amounted to 1,344 million euros, down 4.3% and by 1.6% on a constant currency basis. Traffic was stable for a -1.5% decline in capacity, leading to a 1.0 point increase in load factor to 64.0%. Unit revenue per Available Ton Kilometer (RATK) was stable on a constant currency basis (down 2.7% on a reported basis).

On a constant currency basis, cargo unit cost was down 1.7% in the First Half (down 3.9% on a reported basis). The operating result improved by 21 million euros to -79 million euros.

MAINTENANCE

Second Quarter 2014 third party maintenance revenues amounted to 286 million euros, down 10.3% and by 7.2% on a constant currency basis. Q2 2013 revenues had been boosted by high volumes from the engine contract with General Electric. The operating result stood at 30 million euros, down 7 million euros year-on-year.

First Half 2014 third party maintenance revenues amounted to 576 million euros, down 7.2% and by 3.4% on a constant currency basis. The operating result decreased by 5 million euros to 52 million euros. At constant currency, the operating result improved by 4 million euros in the First Half. The operating margin was stable (-0.3 point) at 3.2%.

In the First Half 2014, the group recorded a 16% increase in its order book to 5.1 billion euros, including a major contract with Air China covering the maintenance of GE90 engines. In addition, the group acquired Barfield, a US component support business.

OTHER BUSINESS: TRANSAVIA

In the Second Quarter of 2014, Transavia capacity was up 4.8%, reflecting the accelerated development of Transavia France (up 10%) and the repositioning of Transavia Netherlands (up 3% including a 6% reduction in charter capacity). Traffic rose 6.0%, leading to a record high load factor of 90.7% (up 0.9 point). Unit revenue was down 1.7%. Transavia’s total revenue stood at 296 million euros, up 5.0%. The operating result was -6 million euros, down 3 million euros year-on-year.

In the First Half of 2014, Transavia traffic increased by 6.9% for capacity up 5.8%, leading to a 0.9 point increase in load factor to 89.2%. Unit revenue was down 2.6%. Total revenue stood at 435 million euros, up 4.5%, while the unit cost per ASK decreased by 0.8%, but increased by 0.5% on a constant currency basis. The operating result decreased by 10 million euros to -64 million euros, mainly due to the ramp up of Transavia France.

OTHER BUSINESS: CATERING

Second Quarter 2014 third party catering revenues amounted to 77 million euros, down 25.2%. At constant scope (excluding the impact of the sale of Air Chef that occurred in Q2 2013), third party revenues increased by 6.9%, reflecting new contracts and international development, while the operating result improved by 3 million euros.

First Half 2014 third party catering revenues amounted to 150 million euros, up 8.7% at constant scope. The operating result increased by 5 million euros at constant scope.

FINANCIAL SITUATION

In the First Half of 2014, the further improvement in EBITDA translated into an 232 million euro increase in cash flow before change in WCR and the cash out related to Voluntary Departure Plans.

The group disbursed 144 million euros for Voluntary Departure Plans representing 90% of the cash out expected in the Financial Year. Net investments before sale & lease-back transactions stood at 808 million euros.

Operating free cash flow amounted to 95 million euros, versus 566 million euros a year earlier. In the First Half 2013, operating free cash flow had benefited from the full effects of the reduction in investments and the structural improvements in WCR within the framework of Transform 2015.

Net debt amounted to 5.41 billion euros at 30^st June 2014, versus 5.35 billion euros at 31^st December 2013. At 2.6x, the net debt / EBITDA ratio continued to fall.

OUTLOOK

Delivery on the Transform 2015 plan is fully on track. However, as indicated at the beginning of the month, the operating environment remains tough, with industry overcapacity on certain long-haul routes, notably North America and Asia, impacting yields. This trend comes on top of the persistently weak cargo demand and the challenging situation in Venezuela already identified in the First Quarter.

Under these conditions, as indicated at the beginning of the month, 2014 EBITDA is expected to be between 2.2 and 2.3 billion euros. Strong capital discipline will enable the group to remain on track in terms of debt reduction and achieve its objective of 4.5 billion euros in net debt in 2015.

1. Revenues of 5.55 billion euros, stable on a like-for-like basis, impacted by Easter calendar effect
2. Operating result of -445 million euros, an improvement of 87 million euros
3. EBITDA¹ of -50 million euros, an improvement of 66 million euros
4. Reported unit cost[1] down 4.3%, and 1.7% like-for-like

FULL YEAR 2014 OUTLOOK: OBJECTIVES CONFIRMED

1. Positive effect of Transform 2015
2. Operating environment remains tough
3. Measures underway to address headwinds from Caracas route and the slower than expected recovery in cargo demand

[1] See definition in appendix

First Quarter 2014 revenues stood at 5,554 million euros versus 5,681 million euros in 2013, down 2.2%, but stable on a constant currency and scope basis (like-for-like). Currencies had a negative 108 million euro impact on revenues.

Operating costs were reduced by 3.4% and by 2.0% on a constant currency basis. Ex-fuel, they decreased by 2.3%, and by 1.3% on a constant currency basis. Unit cost per EASK¹ (Equivalent Available Seat Kilometer) was reduced by 4.3%, and by 1.7% on a constant currency, fuel price and pension expense basis, against capacity measured in EASK up by 1.2%. The fuel bill amounted to 1,553 million euros, down 6.3%, and down 3.5% on a constant currency basis. Total employee costs including temporary staff were down 3.8% to 1,846 million euros, and by 3.6% on a constant currency basis. At constant pension expense and scope, they declined by 60 million euros, well on track towards the 120 million euro reduction targeted for the full year.

EBITDA amounted to -50 million euros,  an improvement of 66 million euros. The EBITDA margin stood at -1.0%, a 1.0 point improvement on 2013. The operating result stood at -445 million euros versus -532 million euros in 2013, an 87 million euro improvement. Currencies had a 15 million euro net negative impact on First Quarter operating result.

Net result, group share stood at -608 million euros against -641 million euros a year ago. It was impacted by 117 million euros of foreign exchange losses, in particular related to an adjustment in the value of the cash held by the Group in Venezuela, to take into account the currency conversion risk. On an adjusted basis[1], the net result, group share stood at -485 million euros against-652 million in First Quarter 2013, a 167 million euro improvement.

Earnings and diluted earnings per share both stood at -2.05 euros (-2.17 euros in 2013), and at -1.64 euros on an adjusted basis (-2.20 euros in 2013).

[1] See definition in appendix

Passenger business

First Quarter 2014 passenger revenues amounted to 4,365 million euros, down 1.9%, but stable on a constant currency basis. The passenger business was particularly impacted by the calendar effect of Easter, which fell in March last year. The operating result of the passenger business stood at -378 million euros, versus -447 million euros in Q1 2013, an improvement of 80 million euros on a constant currency basis.

Total passenger traffic rose by 2.1% while capacity rose by 1.3% leading to a 0.6 point improvement in load factor to 82.8%. Unit revenue per Available Seat Kilometer (RASK) fell by 2.5% and by 0.7% like-for-like. Unit costs (CASK) were reduced by 3.9% and by 2.4% like-for-like.

Long-haul traffic rose 2.2% for a 2.1% rise in capacity, leading to a stable load factor at 85.2%. Long-haul RASK was down 0.4% like-for-like.

Cargo Business

As planned in the framework of Transform 2015, medium-haul capacity was reduced by 2.2%. Traffic rose by 1.6%, leading to a 2.7 point improvement in load factor to 73.3%. Medium-haul RASK improved by 0.6% like-for-like.

First Quarter 2014 cargo revenues amounted to 676 million euros, down 3.4% and by 1.3% on a constant currency basis. Traffic experienced a slight upturn, rising by 1.9% for a 0.9% decline in capacity, leading to a 1.8 point increase in load factor to 64.8%. However, the yield remained weak, leading to a 1.0% decline in unit revenue per Available Ton Kilometer (RATK) on a constant currency basis (-3.0% on a reported basis).

Thanks to a reduction in unit cost (down 3.7% on a constant currency basis, and 5.4% on a reported basis), the operating result improved, from -50 million euros in Q1 2013 to -34 million euros. Nevertheless the recovery of cargo demand is taking longer than expected, and further scenarios are now under consideration to restructure the full freighter business in order to accelerate the turnaround.

Maintenance

First Quarter 2014 third party maintenance revenues amounted to 290 million euros, down 4.0% and by 1.9% on a constant currency basis, reflecting quarterly variations in the scheduling of engine shop visits. The operating result stood at 22 million euros, up 2 million euros year-on-year. The operating margin stood at 2.7% versus 2.5% a year earlier. In the quarter, the group recorded a 15% increase in its order book to 5.2 billion euros, including a major contract with Air China to cover the maintenance of GE90 engines.

Other business: Transavia

In First Quarter 2014 Transavia traffic rose 8.4% for capacity up 7.6%, leading to a 0.6 point increase in load factor to 86.3%. Unit revenue was down 4.3%, also affected by Easter timing. Transavia’s total revenue stood at 139 million euros, up 3.7%. The operating result was -58 million euros, down 7 million euros year-on-year.

Other business: Catering

First Quarter 2014 third party catering revenues amounted to 73 million euros, down 13.1% reflecting the deconsolidation of Air Chef. They were up 12.3% at constant scope.

Financial situation

The further improvement in EBITDA translated into an 84 million euro increase in cash flow before change in WCR and the cash out related to Voluntary Departure Plans.

In the First Quarter net investments before sale & lease-back transactions stood at 327 million euros, in line with the Transform 2015 full year capex budget. Operating free cash flow amounted to -80 million euros, versus a positive 40 million euros a year earlier, partly due to the fact that Q1 2013 benefited from a cash inflow of 77 million euros from sale and lease-back transactions.

Net debt amounted to 5.54 billion euros at 31 March 2014, versus 5.35 billion euros at 31 December 2013. The slight increase in net debt reflects foreign exchange losses partly relating to Venezuela. At 2.9x, the net debt / EBITDA ratio was stable compared to 31 December 2013.

Outlook
Delivery on the Transform 2015 plan is fully on track. However, the general operating environment remains tough. Under these conditions, the group remains committed to its objective of an EBITDA in the region of 2.5 billion euros in Full Year 2014, subject to the successful implementation of the measures aimed at compensating for the slower than expected recovery in cargo demand and the network adjustments linked to the situation on the Caracas route, and no reversal in other operating trends. The group will continue to reduce its net debt in line with its objective of 4.5 billion euros in 2015.

1. The results presentation is available on www.airfranceklm-finance.com on 31^st October 2013 from 7.15h CET
2. For the complete review, please find on the righthand side on this page the PDF document.

In a persistently tough economic environment, the group pursued its cost and debt reduction measures in this traditionally difficult quarter.

Activity
The passenger activity recorded a 0.8% rise in traffic for virtually stable capacity (+0.2%). The load factor gained 0.5 points to 82.1%. Unit revenue per available seat kilometre (RASK) rose by 1.2% (+1.3% ex-currency). Passenger revenues were up 1.4% to 4.49 billion euros. The operating result stood at -447 million euros (-515 million euros a year earlier).

The cargo activity, which continued to be affected by the economic slowdown and the situation of overcapacity in the industry, reduced capacity by 4.1%. With traffic down 6.9%, the load factor declined by 1.9 points to 63.0%. Unit revenue per available tonne kilometre (RATK) fell by 1.9%, and by 1.0% ex-currency. Cargo revenues amounted to 700 million euros (-5.9%). However, thanks to the Transform 2015 measures, the cargo loss was reduced to 50 million euros (70 million euros a year earlier).

Third party maintenance revenues stood at 302 million euros (+17.1%). The operating result amounted to 20 million euros (15 million euros at 31st March 2012). This improvement was mainly due to component maintenance. 

The other businesses generated revenues of 229 million euros, of which 134 million euros for the leisure business (+14.5%). The operating result stood at -53 million euros (-41 million euros at 31st March 2012).

Total revenues amounted to 5.72 billion euros, up 1.3% after a negative currency effect limited to 0.2%. Unit revenue measured in equivalent available seat kilometre (EASK) rose 0.5% (+0.7% at constant currency).

Reduction in unit costs
Unit costs measured in EASK were down 1.0% and 1.7% on a constant currency and fuel price basis for virtually stable production in EASK (+0.2%). 

Operating costs were stable (-0.1%) with the main changes as follows: 

• Despite a rise in the fuel price after hedging of 4%, the fuel bill was slightly down (-14 million euros to 1.67 billion euros) on the back of a 3% decline in volumes. 
• Employee costs fell 1.7% to 1.89 billion euros mainly reflecting the reduction in headcount (-41 million euros), a 13 million euro rise in non cash pension costs, a consolidation effect linked to the integration of Airlinair of 9 million euros and the French competitiveness tax credit (CICE, -10 million euros).
• Maintenance purchases increased by 12.0% to 309 million euros on the back of the increase in third party maintenance.

The operating result stood at -530 million euros, an improvement of 81 million euros on previous year. The adjusted operating result was -451 million euros (-535 million euros at 31st March 2012). 

Net interest charges amounted to 97 million euros (82 million euros at 31st March 2012). ‘Other financial income and costs’ stood at 51 million euros versus 276 million euros a year earlier. This decrease was mainly due to lower foreign exchange gains (down 50 million euros) and the change in the fair value of hedging instruments, which stood at 43 million euros at 31st March 2013 versus 220 million euros at 31st March 2012, reflecting the  decline in the oil price at the end of the period.

The net result, group share, stood at -630 million euros (-379 million euros at 31st March 2012). Earnings and diluted earnings per share stood at -2.13 euros (-1.28 euros at 31st March 2012).

Reduction in net debt
Investments amounted to 282 million euros with disposals at 108 million euros (416 million euros and 25 million euros respectively at 31st March 2012). Operating free cash-flow stood at 38 million euros in a traditionally negative quarter. At 31st March 2013, Air France-KLM had cash of 4.3 billion euros of which 547 million euros generated by the convertible bond issue. Elsewhere, the group has credit lines of 1.85 billion euros. 

As already indicated, the application of revised norm IAS19 on pension, and in particular the suppression of the corridor at 1st January 2013, led to a negative adjustment of shareholders’ funds of 1.33 billion euros at 31st December 2012. At 31st March 2013, shareholders’ funds reflected a positive trend in the return on plan assets and a revaluation of the discount rate amounting to 347 million euros, as well as various positive adjustments for 200 million euros. As a result, shareholders’ funds were stable (3.59 billion euros versus 3.64 billion euros at 31st December 2012). Net debt amounted to 5.90 billion euros (5.97 billion euros at 31st December 2012). The financial cover ratios were stable or slightly improved over the 12 months at 31st March 2013.

Outlook
In a difficult and uncertain environment, the group continues the implementation of Transform 2015 which remains on track.  It confirms its objectives for 2013, of a reduction in unit cost on a constant currency and fuel price basis, and a reduction of net debt.

Additional information
The accounts for the quarter January to March 2013 are not audited.
The results presentation will be available on www.aifranceklm-finance.com on May 3rd as of 07h15 CET.

Practical information

• A audio-web conference will be organized for press on Friday 4th May 2013 at 10:00 am (Paris/Amstelveen time), only in English.
• Any journalists who wish to listen in to the conference without asking questions are welcome

To connect

• dial  from France: 01 70 99 32 08 
• from others countries: + 44 (0)20 7162 00 25 password: AKH  
• To follow the presentation, go to: http://airfranceklm.viewontv.com/webcast/ 
• To listen to the recording, dial +33 (0)1 70 99 35 29 (code: 895689)

>> On the righthandside you wil find the complete overview (PDF) <<

The group realised a satisfactory third quarter across all its businesses with the exception of cargo. In passenger, the limited capacity increase in the industry led to an improvement in unit revenues, which, for the group, were also helped by a positive foreign exchange effect due to the depreciation of the euro versus other currencies. On the other hand, the cargo business continued to deteriorate over the quarter. As previously indicated, measures undertaken in the context of the plan Transform 2015 are starting to have a significant impact on costs.

(!) on the right side of this page you can download the complete overview of the Financial Year 2012 - Quarter July-September 2012 document (PDF).

The Board of Directors of Air France-KLM, chaired by Jean-Cyril Spinetta, met on 17th November 2010 to examine the accounts for the First Half of Financial Year 2010-11.
Commenting on the First Half, Pierre-Henri Gourgeon, Chief Executive Officer, said: “In the context of a more favourable economic environment, all the strategic actions we have undertaken over the past year have enabled us to return to profit.
The second quarter is especially satisfying and, despite the disruption in April, we improved our operating result by some one billion euros in the First Half. This has required a significant commitment from the entire group, and, together with Peter Hartman, President and CEO of KLM, I take this opportunity to thank, all our employees for their efforts. While we have achieved a great deal in a short space of time, we will remain focused on accomplishing the further measures required to ensure that we generate a value-creating level of profitability. This is our ambition for the next three years.”

Jean-Cyril Spinetta made the following comment: “Despite the many measures pursued over the last three years, our insufficient profitability in recent quarters, in an economic environment affected by the weak global demand and high oil prices, shows that we need to go further. This context requires the new management to focus on three priorities. The first is the re-establishment of the Group’s competitiveness, implying additional cost savings. The second is the restructuring of our short and medium-haul activity. The third is a rapid reduction in our debt. An action plan for these priorities will be presented during the first quarter of 2012. I am confident that both Air France and KLM will be able to deliver an effective response to these new challenges.”

The Board of Directors of Air France-KLM, presided by Jean-Cyril Spinetta, met on 27th July 2011 to examine the accounts for the quarter April-June 2011.

The operating result stood at -145 million euros (-132 million euros at 30th June 2010) after a 16% rise in the fuel bill (+232 million euros) and a loss estimated at 100 million euros resulting from the political events in Africa and the Middle East, as well as the nuclear crisis in Japan.

Nine months to December 31, 2010

• Revenues up 14.5% to 18.29 billion euros
• Operating result of 525 million euros, an improvement of 1.3 billion euros
• Net income of 980 million euros
• Operating cash flow close to 1 billion euros

15% drop in revenues
Negative impact of 637 million euros due to fuel hedges
Operating loss of 1.28 billion euros 

Outlook for FY 2010-11: Objective of operating break-even maintained excluding impact of pre-2009 fuel hedges and subject to definitive cost of European airspace closure

Click here (PDF, 150KB)