Turismo
Air France-KLM Q1 2024 results
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April 30, 2024
Commenting on the results, Mr. Benjamin Smith, Group CEO , said:
“Despite a challenging start to the year with persistent geopolitical tensions, Air France-KLM recorded further revenue growth this quarter, capitalizing on a structurally robust travel demand. However, as anticipated, our operating income was impacted by disruption costs and a slower Cargo business. We nonetheless remain confident in our ability to achieve our 2024 unit cost outlook, and are focused on executing our strategic roadmap to deliver our mid-term commitments. Our sustainability roadmap is also well on track, with continued next generation aircraft deliveries and SAF sourcing initiatives. Finally, we are actively gearing up for a promising summer season with, in Paris, the eagerly-awaited Olympic and Paralympic Games. A unique opportunity for Air France to showcase its expertise and customer service excellence.”
Unit revenue up thanks to improved load factor and yield
First Quarter 2024: Operating result impacted by cargo unit revenue reduction and disruptions
In the first quarter 2024, Air France-KLM welcomed 20.9 million passengers which is 6.2% above previous year. As capacity increased by 4.5% and traffic grew by 5.0%, the load factor was slightly up 0.4 point compared to last year.
The Group passenger unit revenue per ASK was up +2.1% at constant currency compared to last year. This increase was driven by an increase in yield across all long-haul areas except for Asia & Middle East, where capacity grew by 32% while Short & Medium-haul yield increased as well.
The operating result was €183 million below last year standing at -€489 million and was impacted by an increase of the unit cost (€243 million) and decrease of cargo unit revenues (€157 million) although partly compensated by a lower jet fuel price including ETS cost (€144 million) and a higher passenger unit revenue (€124 million).
The group unit cost per ASK is up 4.0% versus last year which is in line with the outlook provided during the FY 2023 results presentation. This increase resulted mainly from higher operational disruption costs accounting for 0.8% in the unit cost development, as well as a one-time salary payment at KLM as agreed in the collective labor agreement for 0.8%.
Cash
Operating free cash flow stood at €140 million driven by a positive working capital development due to promising summer ticket sales although impacted by the payment of deferred pension, social charges and wages taxes inherited from the pandemic.
These deferrals correspond to the one time pension payment of €610 million by Air France in January 2024 to the Caisse des Retraites des Personnels Navigants (CRPN) as well as the social charges and wages taxes amounting to €120 million and paid by the Group during the quarter.
Recurring adjusted operating free cash flow excluding deferred social charges and wage taxes and including lease debt and net interest payment amounted to €593 million.
In March, Air France-KLM has repaid, at the request of the bondholders, circa €452 million of the outstanding €500 million of the bonds convertible into new shares and/or exchangeable for existing shares due March 25, 2026 (the “OCEANE 2026”).
The cash at hand amounted to €9.9 billion, a decrease of €0.6 billion versus the end of 2023 due to the repayment of the convertible bond. Net Debt / EBITDA ratio stood at 1.3x.
Post quarter, Air France-KLM, Air France and KLM have executed the first one-year extension option of their Revolving Credit Facilities linked to ESG KPIs. Air France-KLM and Air France executed the accordion option in the facility to increase the RCF with an amount of €90 million bringing the amount of the two RCFs to approximately €2.3 billion.
Sustainability
Transition plan and trajectory
Since 2019, Air France-KLM has accelerated its environmental transition and has set ambitious sustainability performance targets to highlight its sustainability commitments. The Group's ambition is to reduce its greenhouse gas (GHG) emissions by 30% by 2030 compared to 2019 (gCO eq/RTK).
Sustainability key performance measures:
Three pillars to reduce greenhouse gas emissions
Fleet Renewal : Air France-KLM is committed to renewing its fleet with more fuel-efficient and less noisy aircraft. By the end of March, 21% of its fleet was composed of new-generation aircraft, compared to 17% end of March 2023. The Group plans to increase this ratio to 80% by 2030.
Compared to previous generation aircraft the A220 reduces CO emissions by 20%, the Airbus A320neo family by 15%, and the Airbus A350 by 25%.
During the first quarter one A321 Neo (new generation) was phased in and two A319 (old generation) were phased out.
Sustainable Aviation Fuels (SAF) : Air France-KLM Group is committed to increasing its use of SAF, which can reduce carbon emissions by up to 80%, on a life cycle basis, compared to conventional jet fuel. The Group estimates it will use 1% SAF over the total jet fuel consumption in 2024.
Operational Efficiency : Air France-KLM has launched internal programs to improve operational efficiency and reduce CO emissions. The programs focus on weight reduction, aircraft performance optimization, route and flight path optimization, and other fuel-saving measures.
2024 Outlook
Capacity
The Group expects the capacity in Available Seat Kilometers for Air France-KLM Group including Transavia to increase by 5% in 2024 compared to 2023.
Unit cost
Q2 unit cost development expected at +2% compared to last year.
For the full year 2024, the Group expects a unit cost in the range of 1% to 2% compared to 2023 supported by the below action plan:
Capex
Full year 2024 net capex is expected to stand at 3 billion euros.
Business review
Network result
Compared to the first quarter 2023, total revenues increased by +1.5% to €5,663 million. The increase in revenues was driven by the healthy demand in passenger network despite the weakening of the Cargo market. The operating result stood at -€356 million impacted by an increase in salary costs and other operating expenses.
Q1 2024 was impacted by operational disruptions especially in January and February resulting from supply chain issues.
Solid growth in passenger network unit revenue
During the first quarter 2024 capacity in Available Seat Kilometers (ASK) was 3.7% higher than last year. Higher traffic growth (+4.5%) than capacity growth has led to an increase of the load factor to 86.1% (up 0.6 point compared to last year) while yield continued to rise. This performance had a positive impact on Unit revenue per ASK which rose by +0.5%.
During the first quarter we observed per area the following trends:
North Atlantic
Q1 capacity increased by +3% compared to last year. Load factor improved 1.9 points at 84% against a solid Q1 2023 performance while yield was broadly stable at +0.3%.
Latin America
Demand remained very strong with high and stable load factor at 90% and a yield increasing by 1.1%. Capacity was down -2.4% on the back of a high comparison basis.
Asia & Middle East
Capacity in the first quarter has significantly increased (+31.8%) versus 2023, driven by both Asia and Middle East. Load factor remained stable compared to last year despite the significant capacity increase and the geopolitical disruptions across the area which affected the yield development (-6.9%).
Caribbean & Indian Ocean
The first quarter continued to show capacity reductions compared to 2023 (-14.2%) due to redeployment of the fleet to other long-haul areas. This lower capacity pushed the load factor up to 91% and yield improved by 11.2%.
Africa
T he geopolitical situation affected the Group's capacity development resulting in a -5% capacity decline while unit revenues improved. The yield showed resiliency and was up 1.6% above 2023 while the load factor was broadly stable (+0.1pt).
Short and Medium-haul
Capacity increased by +2.1% with different dynamics. KLM Medium Haul went up significantly while Air France Short and Medium Haul went down. Air France was impacted by the ATC system test roll out during January and February. Load factor improved +1.2 point at 82% and yield was well oriented +2.6% compared to last year.
Cargo: Unit revenue down due to cargo market situation and implementation of an IT system
The demand in the airfreight industry in the first quarter was higher than the capacity growth and was driven by e-commerce from Asia and the red sea disruption. The Group was limited in its ability to benefit from this tailwind due to relatively low capacity on China and payload restrictions on Asian flights due to the Russian airspace closure.
In the first quarter, unit revenue was below last year, driven by a -26% yield decrease and the challenging implementation of an IT system .
Transavia: Significant unit revenue improvement despite double digit capacity growth
Transavia's capacity increased by 11.1%, traffic increased by 9.0%, and the number of passengers increased by 8.9% resulting in load factor at 88.7% in the first quarter. The load factor declined compared to last year, driven by Transavia France which posted a high load factor last year due to reduced capacity as a result of the ATC strikes in France.
The operating result amounted to -€166 million which is a slight improvement compared to last year driven by higher revenues which were partly compensated by higher cost.
Maintenance business: Third party revenues continue to recover significantly
The maintenance segment continued its growth in the first quarter 2024. Total revenues increased by 32.1% compared with the same quarter last year while third party revenues increased by +43.4%, showing a very strong recovery especially on the engine side. The maintenance is still suffering from the supply chain issues and mechanics scarcity in all its activities. The operating margin stood at 2.3%, which is 0.6 point higher than in 2023.
Revenue outperforming capacity growth but operations remained difficult for both airlines
Air France Group
Air France's revenue increased by +2.8% driven by passenger revenues. The operating result stood at -€249 million and was impacted by supply chain issues and an IT system implementation for the cargo activity weighing on the revenues and on the profitability.
KLM Group
KLM's revenue grew by +8.5% while operations were especially impacted in January and February by supply chain issues. The operating margin stood at -10.6%, down -5.6pt compared to last year, hampered by one-time payment salary in January (c.€50m), as well as high customer compensation in January and February (c.€50m).
Flying Blue Miles
At the end of last year, Air France-KLM created a subsidiary, which holds the commercial partner contracts related to the joint Air France-KLM loyalty programme ("Flying Blue"), as well as the exclusive right to issue "Miles" for the airlines and their partners. This quarter is the first in which the Group reports Flying Blue Miles activity at Group level.
In the first quarter Flying Blue miles generated €196 millions of total revenue, including third party airline and non airline partners. The operating margin margin stood at 24.0%.
Nb: Sum of individual airline results does not add up to AF-KLM total due to intercompany eliminations at Group level.
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The results presentation is available at www.airfranceklm.com on April 30, 2024 from 8:15 am CET.
A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on April 30, 2024 at 09.30 am CET.
To connect to the webcast, please use below link:
https://channel.royalcast.com/landingpage/airfranceklm/20240430_1/
Income statement
Consolidated balance sheet
Statement of Consolidated Cash Flows from January 1 until March 31
*Restated figures include the change in presentation for the reclassification of interest received and paid from cash flow from operating activities to respectively cash flow from investing activities and cash flow from financing activities
Net debt
Recurring adjusted operating free cash flow
*Restated figures include the change in presentation for the reclassification of interest received and paid from cash flow from operating activities to respectively cash flow from investing activities and cash flow from financing activities
Return on capital employed (ROCE)
Unit cost: net cost per ASK
Unit cost per ASK excluding fuel and ETS vs Q1 2023: +5.0%
Definition: Unit cost = (total operating expenses - fuel - carbon emission - total other revenues) / Group Capacity in ASK
Group fleet at 31 March 2024
2024 TRAFFIC
Passenger network activity
Transavia activity
Total Group passenger activity
Cargo activity
Air France activity
KLM activity
1 at constant fuel, constant currency and excluding ETS
2 New generation fleet / Fleet in operation
3 against a constant fuel price, constant currency and excluding Emission Trading Scheme cost (ETS)
4 Excluding Transavia
Attachment
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