Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — FY2018 Earnings Presentation
41 slides from Air France-klm Sa's earnings presentation, Feb 20, 2019
Slide 1: Air France-KLM Results Presentation Full Year 2018
AIR FRANCE-KLM RESULTS PRESENTATION Full Year 2018 20 February 2019
Slide 2: Resilient full year result despite strike impact and fuel increase
RESILIENT FULL YEAR RESULT DESPITE STRIKE IMPACT AND FUEL INCREASE Passengers RASK(1) • More than 100 million passengers carried in 2018, At constant currency +2.8% European leader for long-haul +1.1% • Successful expansion of Transavia in France and 98.7m 101.4m the Netherlands and solid growth tre
Slide 3: Financial Review
FINANCIAL REVIEW FRÉDÉRIC GAGEY Results at 31 December 2018
Slide 4: Q4 2018: revenue increase of 4.1% and operating result at €40 million
Q4 2018: REVENUE INCREASE OF +4.1% AND AN OPERATING RESULT AT €40 MILLION AFTER SIGNIFICANT FUEL IMPACT (1) (1) Change Q4 2018 Q4 2017 Change at constant currency Revenues (€ bn) 6.54 6.28 +4.1% +4.3% EBITDA (€ m) 776 970 -20.0% -15.7% Operating result (€ m) 40 228 -82.4% -77.7% Operating margin 0.6
Slide 5: Q4 2018: revenue growth supported by all businesses
Q4 2018: REVENUE GROWTH SUPPORTED BY ALL BUSINESSES Unit Revenues Operating result Capacity (1) Revenue (2) Change Change (3) Operating margin Change (3) Constant Currency (€ m) (€ m) +3.2% -0.1% Network 5,727 +3.7% 34 -82.9% 0.6% -3.0 pt +0.7% +1.3% Transavia +14.4% -0.9% 309 +12.0% -42 +20.4% -13.
Slide 6: Q4 2018: long-haul unit revenue slightly positive, strong Asian network performance
Q4 2018: LONG-HAUL UNIT REVENUE SLIGHTLY POSITIVE WITH A STRONG ASIAN NETWORK PERFORMANCE, STABILITY IN THE MEDIUM-HAUL NETWORK Total RASK ex cur. 3.2% 3.5% Premium Economy 1 +1.1% -0.6% -0.1% ASK RPK RASK ex cur. Medium-haul point-to-point Medium-haul hubs Total medium-haul 1 3.0% 1.8% 0.5% 2.0% 1.
Slide 7: Q4 2018 unit costs down 0.9%, full year unit costs +0.6%
Q4 2018 UNIT COSTS DOWN -0.9%, FULL YEAR UNIT COSTS AT +0.6% IN LINE WITH GUIDANCE • Q4 2018 cost efficiencies offsetting wage inflation including retroactive booking • Full Year 2018 unit cost +0.6% within guided target range, and -0.2% net of strike impact Q4 2018 Underlying unit cost +3.0% -0.5%
Slide 8: Q4 2018: labor productivity improved, annual wage agreements at Air France
Q4 2018: LABOR PRODUCTIVITY IMPROVED, IMPLEMENTATION OF ANNUAL WAGE AGREEMENTS AT AIR FRANCE Q4 staff cost +3% and +1% excluding retroactive booking of the new Air France labor agreement Employee productivity +2.2% in Q4 (with capacity +3.7%) Employee productivity Average FTEs, including tempora
Slide 9: Full year operating result at €1.3 billion, net debt reduction of €195 million
FULL YEAR OPERATING RESULT AT €1.3 BILLION, FURTHER NET DEBT REDUCTION OF €195 MILLION (1) Change FY 2018 FY 2017 Change at constant currency Revenues (€ bn) 26.51 25.87 +2.5% +5.0% EBITDA (€ m) 4,217 4,763 -11.5% -8.0% Operating result (€ m) 1,332 1,923 -30.7% -23.4% Operating margin 5.0% 7.4% -2.4
Slide 10: Resilient results despite strike impact and fuel increase, substantial margin at Transavia
RESILIENT RESULTS DESPITE STRIKE IMPACT AND FUEL INCREASE, SUBSTANTIAL MARGIN AT TRANSAVIA Unit FY 2018 Capacity (1) Revenue (2) Revenues Change Operating result Change (3) Operating margin Change (3) Constant Currency (€ m) (€ m) +2.1% +1.1% Network 22,943 +1.6% 994 -36.1% 4.3% -2.6 pt +0.1% +5.2%
Slide 11: Network revenue increase driven by higher unit revenues, result impacted by strikes
NETWORK REVENUE INCREASE DRIVEN BY HIGHER UNIT REVENUES AND OPERATING RESULT IMPACTED BY STRIKES • Q4 2018 Passenger unit revenues -0.1% at constant currency, including the negative impact of protest movements in France • Full Year Passenger unit revenues at +1.1% at constant currency despite negati
Slide 12: Transavia strong growth and a record high margin
TRANSAVIA STRONG GROWTH AND A RECORD HIGH MARGIN • Best result since launch of Transavia: operating result of €139 million and operating margin above 8% in the two companies, of which Transavia France 9.1% • Accelerated capacity growth in fourth quarter 2018 +14.4%, ending 2018 with growth of +8.4%,
Slide 13: Maintenance order book increase continuing
MAINTENANCE ORDER BOOK INCREASE CONTINUING • Several large contracts won for NextGen components and Engines • Third-party revenues maintain solid growth trend, margin pressure partly due to one-offs • For 2019, focus on margin through better optimization of the turn-around-time and first effects of
Slide 14: Air France result impacted by strikes, KLM delivers a solid result
AIR FRANCE RESULT IMPACTED BY STRIKES, KLM DELIVERS A SOLID RESULT IN LINE WITH LAST YEAR’S PERFORMANCE FY 2018 Operating Revenues Operating Net debt Capacity Change result Change Change Change (€ m) margin (€ m) (€ m) +2.5% 16,073 +1.2% 266 -69.2% 1.7% -3.8 pt 3,556 -36 +2.3% 10,955 +5.0% 1,073 -0.
Slide 15: Positive adjusted operating free cash flow despite the strikes
POSITIVE ADJUSTED OPERATING FREE CASH FLOW DESPITE THE STRIKES FY 2018 In € m (FY 2017: +291) (FY 2017: -141) (FY 2017: -2438) (FY 2017: +3949) +246 -130 -2,625 3,596 (FY 2017: +1661) (FY 2017: -984) 1,087 -972 (FY 2017: 677) 115 (1) Cash flow before VDP Change in WCR Voluntary Departure Net investm
Slide 16: Net debt reduced by €195 million, including repurchase of hybrid bonds
NET DEBT REDUCED BY €195 MILLION YOY, INCLUDING REPURCHASE OF €197 MILLION OF HYBRID BONDS Net Debt evolution In € m 6,359 -972 +242 6,164 +211 +439 -115 Net debt at 31 Dec Payment of lease debt Adj.operating free cash New lease debt Repurchase hybrid Currency & other Net debt at 31 Dec (including p
Slide 17: Outlook
OUTLOOK Results at 31 December 2018
Slide 18: Revenue outlook
REVENUE OUTLOOK Long-haul forward booking load factor (change vs previous year) Easter effect +2 pt +2 pt +2 pt -0 pt -2 pt Feb-19 Mar-19 Apr-19 May-19 Jun-19 Based on the current data for Passenger network: Long-haul forward booking load factors from February to April are on average stable compar
Slide 19: Fuel bill increase by €650 million in 2019
FUEL BILL INCREASE BY €650 MILLION IN 2019, EXPLAINED BY DIFFERENCE IN HEDGE IMPACT COMPARED TO 2018 (1) (1) 6.8 $ bn (1) 6.4 5.8 2018: Fuel bill €4.9bn(2) 2019: Fuel bill €5.6bn(2) 2020: (1) (1) (1) Fuel bill € 5.8bn(2) 1.5 (1) 1.4 (1) 1.6 1.8 1.6 2018 2019 2020 2018 2019 2020 Q4 18 Q1 19 Q2 19 Q3
Slide 20: Capex supporting the Group's ambition
CAPEX SUPPORTING THE GROUP’S AMBITION Capex breakdown 2019 Aircraft type Entry 2019 787 6 New fleet A350 3 737 4 10% Ground & IT 10% innovation 40% €3.2bn Maintenance 20% planned 2019 Capex compared to former medium-term guidance: Spare parts • E&M business expansion for spare parts +€ 150 m • Aircr
Slide 21: Full year guidance
FULL YEAR GUIDANCE Actual 2018 Guidance 2019 Passenger +2.1% +2.0% to +3.0% Capacity Transavia +8.4% +9% to +11% Fuel +€450m +€650m Currency €183m headwind Neutral effect (1) Unit cost ex-currency at +0.6% -1% to 0% constant fuel price Capex €2.6bn €3.2bn Net Debt / EBITDA 1.5x below 1.5x (1) To ali
Slide 22: Strategic Orientations
STRATEGIC ORIENTATIONS BENJAMIN SMITH Results at 31 December 2018
Slide 23: A strong position in the competitive airline marketplace
A STRONG POSITION IN THE COMPETITIVE AIRLINE MARKETPLACE 548 aircraft 2,000 aircraft maintained for 200+ clients 318 destinations 88,800 full-time employees+ 74 new routes in 118 countries added in 2018 101m+ passengers 1.1m tons of cargo carried in 2018 transported in 2018 23
Slide 24: A strong position in the competitive airline marketplace
A STRONG POSITION IN THE COMPETITIVE AIRLINE MARKETPLACE Outstanding professionalism and commitment of the Group employees Paris-CDG & Amsterdam-Schiphol: Strong presence 2 of the largest connecting hubs in all major markets in Europe Leverage our powerful The European pillar competitive The largest
Slide 25: Strong brands benefiting from exceptional reputations
A STRONG POSITION IN THE COMPETITIVE AIRLINE MARKETPLACE… …relying on strong brands benefiting from exceptional reputations • Globally recognized as premium • An efficient network airline • The Group’s low-cost business airline • Primarly focused • Point-to-point flights to Europe • Strong French ho
Slide 26: Three priorities to regain the leading position in Europe
THREE PRIORITIES LAYING THE FOUNDATION TO REGAIN THE LEADING POSITION IN EUROPE • Representing a major step towards rebuilding confidence Conclusion of new, and trust balanced labor • Enabling necessary flexibility to implement future commercial agreements at Air France strategy • Key goals: Simplif
Slide 27: Simplifying and strengthening Air France-KLM's brand portfolio
SIMPLIFYING AND STRENGTHENING AIR FRANCE-KLM’S BRAND PORTFOLIO From several over-lapping brands to a simplified brand portfolio Objective: provide greater clarity for customers and more consistency with the Group's global commercial product offer • Decision to integrate Joon employees and aircraft i
Slide 28: Simplifying offer through network optimization: Air France long-haul
SIMPLIFYING AND STRENGTHENING AIR FRANCE-KLM’S OFFER THROUGH NETWORK OPTIMIZATION Long-haul network Toronto Vancouver Detroit Montreal Paris Seattle Minneapolis Boston Beijing San Francisco Chicago New York City Osaka Los Angeles Atlanta Washington D.C. Niamey Beirut Seoul Tokyo-Narita Ammam Dallas
Slide 29: Simplifying offer through network optimization: KLM long-haul
SIMPLIFYING AND STRENGTHENING AIR FRANCE-KLM’S OFFER THROUGH NETWORK OPTIMIZATION Long-haul network Edmonton Amsterdam Calgary Montreal Vancouver Minneapolis Toronto Beijing Salt Lake City Boston San Francisco Chicago New York City Seoul Las Vegas Washington D.C. Shanghai Tokyo Los Angeles Tel Aviv
Slide 30: Delivering the best product offer to our clients
DELIVERING THE BEST PRODUCT OFFER TO OUR CLIENTS • Right-sized cabins and more efficient aircraft interior configurations, to serve each market segment with appropriate gauge and product • Aircraft retrofit to latest cabin standards to be accelerated • First Air France Airbus 330 retrofitted on line
Slide 31: Simplifying and optimizing the fleet
SIMPLIFYING AND OPTIMIZING THE FLEET LONG-HAUL MEDIUM-HAUL FLEET FLEET • Fuel efficient aircraft: • Tender offer to be launched in 6 Boeing 787 and 3 Airbus 350 to enter the combined 2019 fleet in 2019, more to come in the following years • Ongoing phase out of the remaining REGIONAL Air France Airb
Slide 32: Boosting our competitiveness
BOOSTING OUR COMPETITIVENESS The strategy of upgrading and simplifying the product offer and optimizing the fleet aims to reinforce the Group’s competitiveness, and we will go further: • Achieve Air France profitability in order to increase its margin to industry standards • Improve the operational
Slide 33: Q&A
Q&A Results at 31 December 2018
Slide 34: Appendix
APPENDIX Results at 31 December 2018
Slide 35: Long-haul and medium-haul hubs contributing to positive unit revenue performance
LONG-HAUL AND MEDIUM-HAUL HUBS CONTRIBUTING TO POSITIVE UNIT REVENUE PERFORMANCE Total RASK ex cur. FY 2018 2.1% 2.8% 1.1% Premium Economy 1 +3.5% +0.6% ASK RPK RASK ex cur. Medium-haul point-to-point Medium-haul hubs Total medium-haul 1 1.7% 2.2% 2.8% 0.8% 1.6% 1.5% -3.3% -1.4% -2.6% 1 1 ASK RPK RA
Slide 36: Q4 2018 positive operating result at €40 million with unit cost savings
Q4 2018 POSITIVE OPERATING RESULT AT €40 MILLION WITH UNIT COST SAVINGS OFFSETTING PART OF HIGHER FUEL BILL In € m +53 -198 228 +7 -12 -48 +10 40 (1) Q4 2017 Activity change Unit revenue Unit cost Fuel price ex- Currency Change in Q4 2018 currency impact pension-related expense +353 -133 -665 1,923
Slide 37: Fuel bill sensitivity for full year 2019
FUEL BILL SENSITIVITY FOR FULL YEAR 2019 $10 Bln $9 Bln Market 65.03 $/bbl AFKL price 2019 64.00 $/bbl $8 Bln Hedge gain + 1.03 $/bbl $7 Bln $6 Bln Fuel bill $5 Bln $4 Bln $3 Bln $2 Bln Price before hedge (in $/bl) without ITP $1 Bln Price after hedge (in $/bl) without ITP $0 Bln 35 40 45 50 55 60 6
Slide 38: Currency impact on operating result
CURRENCY IMPACT ON OPERATING RESULT Currency impact on revenues and costs FY 2019 guidance In € m -183 Currency impact FY 2019: no effect, based on spot €/$ 1.14 35 Net operational exposure hedging for 2019: > USD ~60% -40 -12 > JPY ~50% -128 > GBP ~75% -224 -190 Revenues and costs per currency
Slide 39: Adjusted net income of the Group at 31 December 2018
ADJUSTED NET INCOME OF THE GROUP AT 31 DECEMBER 2018 In € m +12 -53 409 +0 +18 409 +23 Unrealized foreign exchange result: 23 Net income - Discontinued Non current result Value of hedging Balance sheet Depreciation of Adjusted net Group part operations portfolio valuation shares available income for
Slide 40: Pension details at 31 December 2018
PENSION DETAILS AT 31 DECEMBER 2018 In € m 31 Dec 2017 31 Dec 2018 1 -1,612 -1,767 Net balance sheet situation by airline Net balance sheet situation by airline 67 1 1 -81 -1,679 -1,686 Air France Air France end of service benefit plan (ICS): pursuant to French regulations and the company agreemen
Slide 41: Debt reimbursement profile at 31 December 2018
DEBT REIMBURSEMENT PROFILE AT 31 DECEMBER 2018 Debt reimbursement profile(1) In € m 150 600 400 400 1,350 800 750 800 600 350 200 2019 2020 2021 2022 2023 2024 2025 and beyond Plain vanilla bonds Hybrid bond (recognized as equity) June 2021: Air France-KLM 3.875% (€600m) October 2022: Air France-KLM