Turismo
Q1 2023 Financial results
FIRST QUARTER 2023
Commenting on the results, Mr. Benjamin Smith, Group CEO , said:
” In the first quarter, Air France-KLM further capitalized on the
recovery momentum in the airline industry .
I'd like to thank all my colleagues who have
worked tirelessly throughout the quater to
ensure we continue on our path to
sustained profitability . The Group continued to show
strong revenue growth as well as
robust cash flow generation thanks to the
very encouraging summer ticket sales. This
is paving the way for a busy holiday season across our global network,
which all of our teams are actively gearing upfor . I
am also pleased that we have now
fully repaid all State aid , which releases us from the
associated restrictions and gives us back
our full strategic autonomy . We now stand on
our own feet . Looking ahead ,
we remain focused on further strengthening our balance
sheet and delivering the transformation efforts
that will enable us to continue to improve our competitiveness while accelerating our decarbonization efforts. “
Operating result improved by revenue growth
In Q1 2023, revenues were up 40.6% against a constant currency compared to Q1 2022, mainly driven by a higher capacity and a higher passenger load factor. Operating result improved compared to last year by €44 million. The operating margin improved against a constant currency by 3.4 points to -4.8%. Last year, the operating result benefitted from a €210 million furlough contribution. Corrected for this furlough contribution, the improvement of the operating result amounted to €254 million.
The adjusted operating free cash flow amounted to €683 million, an improvement of €53 million compared to last year, driven by strong summer ticket sales. The net debt ended at €5.5 billion, down €0.9 billion compared to year end 2022.
In the first quarter 2023, Air France-KLM welcomed 19.7 million passengers which is 35.3% above the previous year. As capacity increased by 19.8% and traffic grew by 38.9%, the load factor increased by 11.8 points compared to last year. Group passenger unit revenue per ASK increased by 35.3% against a constant currency compared to last year. This increase was driven by both load factor and yield.
Group unit cost per ASK at constant fuel and constant currency is up 5.2% versus last year due to €210 million euro furlough contribution last year and inflationnary pressure on costs in 2023. The inflation started last year after the outbreak of the Ukraine war and is seen in several cost categories such as staff costs, handling costs and general expenses. Corrected for last year's furlough contribution, the Group unit cost per ASK against a constant currency and constant fuel price increased slightly by 0.7%.
Air France-KLM is now relieved from Covid-19 State aid support and related restrictions
As announced during the Full Year 2022 results presentation, Air France-KLM intends to restore its balance sheet, aside from net profit generation, by means of non dilutive initiatives such as quasi-equity financing instruments (similarly to the one raised by Air France on a pool of spare engines in July 2022), and/or straight hybrid bonds.
Air France-KLM announced yesterday that it was entering into exclusive discussions with Apollo Global Management for a €500 million quasi equity financing into an affiliate owning Engineering and Maintenance (MRO) assets. This transaction would mark a further step towards the reinforcement of the Group's equity. Meanwhile, the Group received several non-binding offers on quasi equity financing supported by the Loyalty Program. Discussions are still ongoing with potential investors.
2023 OUTLOOK
Capacity
The Group expects the capacity in Available Seat Kilometers for Air France-KLM Group including Transavia at an index of:
Transavia will contribute to this growth and expects to be at circa 135% for the Full Year 2023.
All indices compared to the respective period of 2019.
Unit cost
The Group expects for full year 2023 a stable unit cost, against a constant fuel price, constant currency and excluding furlough contribution, compared to FY 2022.
C ap ital ex penditures (Capex)
Full year 2023 Net Capex spending is estimated at 3.0 billion euros.
BUSINESS REVIEW
Network: Significant improvement in revenues and operating result
Compared to the first quarter 2022, total revenues increased by 41.9% at constant currency to €5,575 million. The operating result improved by €160 million and amounted to -€149 million. The increase in revenues was driven by the network passenger business while the Cargo revenues declined compared to an exceptionally strong first quarter last year.
Strong yields and load factors on our diversified network
First quarter 2023 capacity in Available Seat Kilometers (ASK) was 17.9% higher than last year and at 89% of 2019 first quarter level, which is at the same level as the Group's outlook provided during the Full Year 2022 results presentation, circa 90% versus 2019.
Unit revenue per ASK increased by 38.3% at a constant currency thanks to strong demand which resulted in an increase in load factor of 11.5 points and a yield increase of 21% compared to last year.
During the first quarter we observed the following trends per area compared to the first quarter last year:
Compared to the end of 2022 the Group added one B787-10, five B737-800, five A220-300 and one Embraer 195-E2. The following aircraft left the fleet, two B737-700, one A321, two A319 and one CRJ-1000, as a result the fleet increased by six aircraft.
In 2023 and beyond the Group will continue to invest in new generation aircraft in order to improve its economic and environmental performance. During the second half of 2023, the first Airbus A320neo/A321neo will be delivered.
Cargo: Revenues and unit revenues down compared to an exceptional ly strong f irst quarter last year
Due to the resumption of passenger travel, belly capacity improved and resulted in an increase in Available Ton Kilometers of 10.7% versus the first quarter of 2022. After the first quarter last year the demand for air cargo decreased due to slower growth of global trade and the partial rebound of sea freight. The first quarter last year still showed an exceptionally strong demand and therefore traffic decreased year over year by 11.8%. The yield declined as well resulting in a decrease in unit revenue per Available Ton Kilometer of almost 35% against a constant currency. Total revenues dropped by 26.4% against a constant currency versus the same quarter last year.
At the beginning of April, Air France-KLM and CMA CGM announced the effective launch of the long-term strategic air cargo partnership they made public in May 2022. This partnership will have an initial duration of 10 years and will see Air France-KLM Martinair Cargo and CMA CGM Air Cargo combine their complementary cargo networks, full freighter capacity and dedicated services to build an even more compelling offering thanks to their unrivalled knowhow and global footprint.
Transavia: Significant increase in capacity and traffic
Compared to the first quarter 2022, the demand in leisure traffic in Europe and North Africa continued to grow. The capacity increased by 38.5%, traffic increased by 63%, and the number of passengers increased by 49.7% resulting in a load factor 13.7 points above 2022. As the flown capacity in the first quarter last year was rather limited due to the impact of Omicron virus, the routes that were operated showed outstanding yields. Therefore the yield decreased year over year, although the unit revenue per ASK increased thanks to the higher load factor.
The operating result stood at -€172 million and decreased by €80 million compared to the same quarter last year. This decrease was caused by higher costs, mainly related to a higher fuel price, an increase in handling costs and partly due to the furlough contribution last year. The operating result was also impacted by Air Traffic Control strikes in France and grounded aircraft in the Netherlands.
The fleet of Transavia reached 104 aircraft by the end of the quarter.
Maintenance business : Operating result slightly positive
The Maintenance operating result stood at €15 million, a decrease of €32 million against a constant currency caused by increase in costs. The main cost categories increased relatively more than the revenue increase. Revenue growth was hampered by supply chain disruption, in particular on the GE90 engine. Staff costs increased mainly due to the furlough contribution last year.
Total revenues increased by 11.4% compared with the same quarter last year while third party revenues increased by 24.4% and 16.9% at constant currency, showing a strong recovery.
The operating margin stood at 1.7%, which is 3.9 point at constant currency lower than the operating margin in the first quarter 2022.
Adjusted operating free cash flow at €0.7 billion leading to a Net debt/EBITDA ratio at 1. 5 x
The Group generated an adjusted operating free cash flow in the first quarter of €0.7 billion driven by strong summer sales, which is €53 million higher than last year.
A ccel e ration in revenue generation for both airlines
Air France Group
KLM Group
NB: Sum of individual airline results does not add up to Air France-KLM total due to intercompany eliminations at Group level
******
The results presentation is available at www.airfranceklm.com on from 7:00 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on , at 08.15 am CET.
To connect to the conference call, please dial:
Confirmation code: 9880361
Income Statement
* Restated figures as the expense corresponding to the obligation to surrender quotas of the period have been integrated in “Carbon emission” coming from “Other income and expense”
Consolidated Balance Sheet
* Free CO2 quotas allocated by the State and the ones purchased on the market recognized as “intangible assets” are now disclosed in the line “other assets”
Statement of Consolidated Cash Flows from 1 January until 3 1 March
* Restated figures include the change in accounting policy regarding CO2 quotas moving from “net cash flow used in investing activities” towards “net cash flow from operating activities”
Return on capital employed (ROCE)
* Restated figures include the change in accounting principles for CO quotas
Net debt
Adjusted operating free cash flow
* Restated figures include the change in accounting policy regarding CO2 quotas moving from “net cash flow used in investing activities” towards “net cash flow from operating activities”
Bridge from EBITDA to Financial capacity
Unit cost: net cost per ASK
(1) 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 fleet at 3 1 March 202 3
FIRST QUARTER 202 3 TRAF F IC
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 Against a constant currency and constant fuel price and excluding furlough
2 Change versus 31 Dec 2022
Attachment
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