Turismo
Air France-KLM Q3 2022 results
THIRD QUARTER 2022 RESULTS
Commenting on the results, Mr. Benjamin Smith, Group CEO , said:
“Thanks to s olid preparation and to our agile approach to capacity, Air France-KLM was able to make the most of the strong travel demand this quarter. While the situation remains unsatisfactory in some key airports - ,
notably impacting KLM at its Amsterdam Schiphol hub , we saw significant improvements following the operational challenges that had erupted earlier this year.
The Group posted a strong operating result in spite of rising fuel costs and inflation, and the Group remains confident in its ability to further increase capacity during the
Winter season.
I would like to thank all customers who chose to fly with us, and our employees who did their very best to welcome them at every step of their journey. Going forward we will continue to implement our transformation plan and accelerate our sustainability efforts, as illustrated by the recent signing of long-term SAF supply contracts. This reinforces our position as a responsible leader in transportation, as well as our commitment to being frontrunners in the
decarbon iz ation of our industry.”
Strong improvement T hird quarter revenues, operating result and margin
In the third quarter 2022, the Air France-KLM Group posted a positive operating result of 1,024 million euros, up by 897 million euros at a constant currency compared to last year. This increase was driven by an increase in capacity, load factor and yield.
Net income amounted to 460 million euros in the third quarter 2022, an increase of 653 million euros compared to last year.
In the Third quarter Air France-KLM welcomed 25 million passengers which is 47.6% above the same quarter in previous year. As capacity increased by 29.1% and traffic increased by 70.7%, the load factor increased by 21.6 points compared to last year.
The passenger unit revenue per ASK of the Group increased by 52% against a constant currency compared to the third quarter 2021. This increase was driven by both load factor and yield.
The group unit cost per ASK at constant fuel and constant currency is up 1.8% versus the same quarter last year.
The unit cost is up 2.9% at a constant fuel price and constant currency (USD & related currencies only) versus the third quarter of 2019, with a capacity down by 11%. The ongoing transformation programs enable Air France-KLM to limit the impact of increasing costs such as airport and ATC charges, and the increase of labor cost at KLM.
Compared to September 2019, the number of Full Time Equivalents (FTE's) at Air France, excluding Transavia France, decreased by 16% and by 11% at KLM.
In the third quarter staff costs decreased by 6% compared to the same quarter in 2019 thanks to FTE reduction.
Air France-KLM keeps redeeming liquidity support while maintaining a solid cash position
OUTLOOK
Context:
In the third quarter, Air France and KLM remained among the most active airlines to accommodate the travel recovery, with a capacity for Network passenger activity at index 85%, in line with the upper end of the guidance provided, meaning that the Group delivered according to its plan. Despite some isolated disruptions in Paris, operations were more robust in France than in other European countries while Schiphol remains in a challenging situation, in a context of a very tight labor market conditions, and imposed capacity restrictions to KLM.
Air France and KLM did their utmost to mitigate these challenges and continue to prioritise safeguarding the trust of their customers. For the third quarter, these disruptions resulted in 60 million euros additional compensation costs compared to the same quarter in 2019.
Capacity
Air France-KLM is confident that the recovery context will continue and therefore, the Group expects the capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at an index of:
All indices compared to the respective period of 2019.
The capacity of Transavia keeps on growing with Available Seat Kilometers expected at an index of circa 115 for the full year and at an index of circa 140 in both the fourth quarter 2022 and the first quarter 2023 compared to 2019.
Yield
The yield environment should remain healthy for the winter season with a solid demand in line with the capacity, resulting in yield levels above 2019.
Expected o perating result
Above 900 million euros for Full Year 2022, based on fuel forward curve at 21 October 2022 and under currently foreseen circumstances.
Cash
As of September 30 2022, the Group has a strong 12.3 billion euros of liquidity and credit lines at its disposal.
Full year 2022 Net Capex spending is estimated at circa 2.3 billion euros, which is 80% fleet & fleet related and 20% IT & Ground related.
BUSINESS REVIEW
Network: Significant improvement in revenues and operating result
Third quarter 2022 total revenues increased by 76.1% at constant currency to 6,907 million euros. The operating result amounted to 851 million euros, which represents an 863 million euros increase at constant currency compared to last year.
Strong summer demand resulting in high yield across the diversified network
Third quarter 2022 capacity in Available Seat Kilometers (ASK) was 29.3% higher than last year and at 85% of 2019 third quarter level, which was at the upper end of the Group's guidance provided during the second quarter 2022 results presentation.
In response to the rise in fuel prices and other external costs, the Group proceeded to several fare increases during the first half of the year across all long-haul flights. The amount of the increase varied according to destination and class of travel, and applied to flights operated by Air France and KLM. Additionally, in line with the strong summer demand, the strong performance in Premium cabins and the solid corporate traffic recovery have all led to a yield above the 2019 level in the third quarter.
The third quarter result is driven by a strong performance of the entire network:
During the third quarter, Air France added one Airbus A350-900 and two Airbus A220-300 to its fleet. One B777-200, two Airbus A380-800, two Airbus A320, one Airbus A319, one Airbus A318 and two Canadair Jet 1000 left the fleet. KLM phased in one Embraer 195 E2. The Group will continue to introduce new generation aircraft to its fleet in order to improve its economic and environmental performance.
Cargo: S trong yield increase mitigates lower load factor
Compared to the third quarter of 2021, cargo capacity increased by 15.9% in Available Ton Kilometers, mainly due to the increase in worldwide belly capacity. Despite this increased belly capacity the overall traffic decreased by 13.5% and resulted in a drop in load factor of almost 16 points. Yields, however, remained at a consistently high level (+14% vs. 2021), leading to a third quarter total revenue performance close to last year's level.
Compared to the pre-COVID year 2019, cargo capacity in the Third quarter was still 7% below. However, due to exceptional yield performance, total revenues in the Third quarter of 2022 were 61% higher compared to 2019.
Transavia: Significant increase in traffic resulted in a positive operating result
In the Third quarter of 2022, the demand recovery in leisure traffic in Europe and North Africa continued. Compared to last year, the capacity in the third quarter increased by 28.1%, traffic increased by 45.4%, and the number of passengers increased by 41.8%.
The operating result stood at 123 million euros and improved by 18 million euros compared to the third quarter of 2021.
Compared to the same quarter in 2019, the third quarter of 2022 showed activity levels at index 110 and a load factor slightly below 2019 levels. The average unit revenue per ASK increased by 18% compared to 2019, mainly driven by a strong yield increase of 23%. The average unit cost per ASK increased by 36% versus 2019, mainly driven by the high fuelprice and high disruption cost.
The fleet of Transavia reached 100 aircraft in the third quarter and supported to capture the strong demand of leisure traffic in Europe.
Maintenance business : S olid performance continued in the t hird q uarter
The third quarter operating result stood at 46 million euros, which represents an increase of 19 million euros at constant currency compared to the third quarter 2021 and is due to a higher activity and an operational improvement.
Total revenues increased by 17.4% in the third quarter while third party revenues increased by 38.6%, showing a strong recovery.
The operating margin stood at 5.6%, which is 1.5 points higher than the operating results in the third quarter 2021. The nine months year margin amounts to 5.7%, which is above the level of the pre-covid period but still included States supports.
Adjusted operating free cash flow positive in Q3 reducing the net debt slightly below €6bn
* S um of 'Purchase of property, plant and equipment and intangible assets' and 'Proceeds on disposal of property, plant and equipment and intangible assets' as presented in the consolidated cash flow statement .
** The “Adjusted operating free cash flow ” is operating free cash flow after deducting the repayment of lease debt.
The Group generated an adjusted operating free cash flow in the third quarter 2022 of 290 million euros, which is slightly higher than last year. This is the sixth quarter in a row that the adjusted operating free cash flow is positive.
Both airlines operating margin above 10%
We can see significant improvement in the Operating result of both airlines with the operating margin of Air France being above its 2019 level.
******
The results presentation is available at www.airfranceklm.com on from 7:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on at 08.30 am CET.
To connect to the conference call, please dial:
France: Local +33 (0)1 70 72 25 50
Netherlands: Local +31 (0)20 703 8210
UK: Local +44 (0)330 165 4027
US: Local +1 323-794-2551
Confirmation code: 6069631
Income Statement
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Consolidated Balance Sheet
Statement of Consolidated Cash Flows from 1 January until 3 0 September 2022
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Return on capital employed (ROCE)
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Net debt
Adjusted operating free cash flow
Bridge from EBITDA to Financial capacity
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
Unit cost: net cost per ASK
* Restated figures include the change in accounting principles for pensions (interpretation of IAS19)
(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 results
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
Group fleet at 30 September 202 2
THIRD QUARTER 2022 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
based on fuel forward curve at 21 October 2022 and under currently foreseen circumstances
Change versus 31 Dec 2021
Attachment
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