- Operating Result: EUR1.2 billion, stable compared to last year after adjusting for the EUR160 million Olympic Games impact.
- Group Revenue Growth: 4% increase, in line with capacity development.
- Net Debt-to-EBITDA Ratio: 1.7x, within the target range of 1.5x to 2.0x.
- Fleet Renewal: Next-generation aircraft now comprise 24% of the fleet, a 5-point increase from last year.
- Unit Cost Increase: 8.4% increase, particularly impacting KLM.
- Transavia Revenue Growth: Significant improvement with strong growth in ancillary revenue per passenger.
- Cash Flow: Slightly positive cash flow despite challenging period.
- Net Debt: EUR9 billion in cash available.
- Unit Revenue: More than EUR100 million increase, excluding Olympic effects.
- Fuel Cost Advantage: EUR100 million benefit due to decreasing jet fuel prices.
- Transavia Unit Revenue: 5% increase, 8.2% excluding Olympics, with 10% yield growth.
- Maintenance Business: Successful in new contracts, but challenges with 787 components.
- Air France Operating Result: Down EUR74 million, excluding EUR160 million Olympic impact.
- KLM Operating Result: Down more than EUR140 million due to higher unit costs.
- Flying Blue Performance: Strong performance, especially in the US market.
- Load Factor: Strong demand with load factor close to last year despite Olympics.
- Premium Yield: 2.6% increase despite Olympic impact.
- Transavia Yield: 10% increase driven by paid hand luggage implementation.
- Cash Trajectory: EUR1 billion paid in exceptional items, including pension fund and deferred charges.
- Outlook: Group capacity maintained at 4%, unit cost guidance increased to 3% for the full year.
Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Air France-KLM (AFLYY, Financial) reported a stable operating result of EUR1.2 billion for the quarter, maintaining performance despite the EUR160 million impact from the Olympic Games.
- Group revenue increased by 4%, aligning with capacity development and showing resilience in unit revenue with a 1.4% increase when excluding Olympic effects.
- The company successfully launched a codeshare agreement with Scandinavian Airline System (SAS), expanding its network and enhancing connectivity.
- Fleet renewal efforts are progressing, with next-generation aircraft now comprising 24% of the fleet, supporting sustainability goals.
- Air France demonstrated operational excellence during the Paris 2024 Olympic and Paralympic Games, achieving high standards and impressive punctuality.
Negative Points
- KLM faced operational difficulties and rising costs, impacting overall performance and leading to the launch of a 'back on track' program.
- The shortage of pilots and ongoing maintenance issues limited KLM's capacity growth, affecting financial and operational performance.
- The proposed French aviation tax could negatively impact Air France-KLM (AFLYY)'s operating results by EUR90 million to EUR170 million in 2025.
- KLM's unit cost increased by 8.4%, driven by operational challenges and inflationary pressures in the Netherlands.
- The company experienced manufacturing delays in fleet modernization, affecting the timely contribution of new aircraft to operational efficiency.
Q & A Highlights
Q: Can you provide more details on the French aviation tax and its potential impact on Air France-KLM?
A: Steven Zaat, CFO, explained that the tax could result in an additional burden of EUR280 million, impacting operating results by EUR90 million to EUR170 million in 2025. The tax will not apply to connecting passengers, which is a relief for Air France's competitiveness. The exact impact on demand is uncertain due to price elasticity.
Q: How is Air France-KLM planning to manage capacity deployment between KLM and Air France, considering the new taxes?
A: Benjamin Smith, CEO, stated that KLM aims to return to 2019 capacity levels, focusing on training pilots to achieve this. Air France plans to maintain a 60% to 40% capacity allocation between its main business units, excluding Transavia.
Q: What are the main challenges KLM is facing, and what is the focus of the "back on track" program?
A: Benjamin Smith highlighted that KLM's main challenge is increasing long-haul capacity due to complex pilot training requirements. The "back on track" program aims to improve operational and financial performance, targeting EUR450 million in EBIT improvements by addressing cost and productivity issues.
Q: What impact has the SAS cooperation had on Air France-KLM, and what are the expectations for future profitability?
A: Steven Zaat noted that the SAS cooperation has already contributed EUR1 million to net results and generated strong demand from Nordic markets. The partnership is expected to deliver EUR16 million in the upcoming quarter, enhancing group profitability.
Q: How does Air France-KLM plan to address the challenges posed by the new French tax on sustainable aviation fuel (SAF) targets?
A: Benjamin Smith mentioned that the tax could impact Air France-KLM's SAF targets, but the company will evaluate its strategy based on the final tax decision. The French government, as a major shareholder, is aware of the potential implications on the group's decarbonization efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
