Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — Q2 2023 Earnings Presentation
33 slides from Air France-klm Sa's earnings presentation, July 2023
Slide 1: Results Q2 2023
2 CSULIS QO? 2025 AIRFRANCE KLM GROUP
Slide 2: Highlights Q2 2023
HIGHLIGHTS Q2 2023 Benjamin Smith – Chief Executive Officer Air France-KLM 2
Slide 3: Strong Q2 operating margin and further deleveraging
Passengers carried Group revenues STRONG Q2 OPERATING MARGIN +8% AND FURTHER DELEVERAGING 24.7m +14% 22.8m €7.6bn €6.7bn • Revenues up 14% driven by strong and sustainable market demand • Operating result improved by +€347m compared to Q2 2022 Q2 2022 Q2 2023 Q2 2022 Q2 2023 • Group operating margin
Slide 4: Solidified operational robustness while investing in customer journey
AIR FRANCE-KLM SOLIDIFIED ITS OPERATIONAL ROBUSTNESS WHILE CONTINUOUSLY INVESTING IN CUSTOMER JOURNEY Operational robustness at our main bases has significantly improved compared to last year despite more passengers carried and external events Steady operations at Schiphol since May holidays Continu
Slide 5: Committed to investing in customers to uphold premium standards
WE REMAIN COMMITTED TO INVESTING IN OUR CUSTOMERS TO UPHOLD HIGH PREMIUM STANDARDS AND LIVE UP TO OUR CUSTOMER PROMISE Ranking Skytrax World Airline Awards1 Q2 Updates 2018 2019 2020 2021 2022 2023 7 10 7 First KLM flight with World Business 8 9 Class (WBC) seats Boeing 777 in June & 11 11 Premium C
Slide 6: Q2 2023 Financial Results
Q2 2023 FINANCIAL RESULTS Steven Zaat – Chief Financial Officer Air France-KLM 6
Slide 7: Strong Q2 operating margin driven by robust unit revenue
STRONG Q2 OPERATING MARGIN DRIVEN BY ROBUST UNIT REVENUE Operating result evolution In € m Q2 2023 Q2 2022 Change Revenues (€ m) 7,624 6,707 +917 Operating expenses (€ m) 6,296 5,776 +520 EBITDA (€ m) 1,328 931 +397 Operating result (€ m) 733 386 +347 Operating margin 9.6% 5.8% +3.9 pt Net income -
Slide 8: Results driven by strong passenger network performance
RESULTS DRIVEN BY STRONG PASSENGER NETWORK PERFORMANCE Unit Revenue2 Revenues Operating result Operating Q2 2023 vs Q2 2022 Capacity 1 (€ m) Change (€ m) Change Change Constant Curr. margin +8.1% +13.1% 5,913 +22.3% Network 692 +340m 10.6% +4.5 pt 3 +6.5% -42.1% 606 -33.9% Transavia +9.6% +8.8% 712
Slide 9: Further revenue growth for both airlines
FURTHER REVENUE GROWTH FOR BOTH AIRLINES Capacity Revenues Change Operating Change Operating Change Q2 2023 vs Q2 2022 (€ m) change YoY result YoY margin YoY (€ m) +8% 4,667 +15% 482 +349 10.3% +7.1 pt +8% 3,111 +12% 257 -5 8.3% -1.2 pt +8% 7,624 +14% 733 +347 9.6% +3.9 pt • Air France performance i
Slide 10: Favorable demand supports solid yield while capacity increased
FAVORABLE DEMAND SUPPORT SOLID YIELD ENVIRONMENT WHILE CAPACITY INCREASED Q2 2023 vs Q2 2022 Total Long Haul Short & Medium Haul1 Transavia Total 88% 88% 85% 89% 8.3% 9.0% 9.1% 11.1% 9.7% 9.6% 2.6 pt 2.7 pt 4.1% 0.8 pt 3.9 pt 4.1% Premium1 North America Caribbean & Indian Ocean Asia & Middle East 76
Slide 11: Unit cost development
UNIT COST DEVELOPMENT 2023 Quarterly unit cost1 per ASK evolution Expected impact on Unit cost1 evolution in 2023 vs previous outlook In % year-over-year Non-structural or compensated in the results include: • Capacity decrease 5.6% • Increase in profit sharing • Load factor higher than anticipated
Slide 12: Positive adjusted operating free cash flow driven by summer ticket sales
H1: POSITIVE ADJUSTED OPERATING FREE CASH FLOW DRIVEN BY STRONG SUMMER TICKET SALES Solid Cash at hand €10bn at end June H1 2023 Free cash flow evolution Net debt In € m In € m Continued deleveraging Net debt/EBITDA 1.8x 1.2x December 2022 June 2023 Cash flow before Change Net Operating free Payment
Slide 13: Outlook
OUTLOOK Steven Zaat – Chief Financial Officer Air France-KLM 13
Slide 14: Full year 2023 capacity outlook
FULL YEAR 2023 CAPACITY OUTLOOK Capacity in ASK versus 2019 Q1 Q2 Q3 Q4 FY 2023 Total network 89% 88% c.90% 90-95% c.90% Long Haul 91% 90% c.90% c.95% 90-95% Short and medium Haul 79% 83% c.90% c90% 85-90% Transavia 131% 120% 125-130% >135% 130-135% AF-KLM 92% 92% c.95% >95% c.95% Group 14
Slide 15: Forward booking in line with Q3 2022 and above Q4 2022
FORWARD BOOKING IN LINE WITH Q3 2022 AND ALREADY ABOVE Q4 2022 IN A STRONG YIELD ENVIRONMENT Long Haul Short and Medium Haul Transavia 79% 78% 72% 76% Q3 67% 67% 2022 2023 2022 2023 2022 2023 Q4 31% 30% 15% 18% 23% 29% 2022 2023 2022 2023 2022 2023 Forward booking load factor 2022 Forward booking lo
Slide 16: Fuel hedging policy unchanged, covering circa 70% of 2023 consumption
THE FUEL HEDGING POLICY REMAINS UNCHANGED AND COVERS CIRCA 70% OF 2023 FUEL CONSUMPTION 7.5 7.5 Fuel bill after hedge ($bn) FY 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 Q1 2024 Q2 2024 Market Brent ($ per bbl) 99 82 78 80 80 80 79 78 price Jet fuel ($ per metric ton) 1,166 1,042 849 888 893 914 8
Slide 17: Outlook 2023
OUTLOOK 2023 FY 2023 Group Capacity¹ c.95% Low single digit Unit cost2 vs. 2022 increase Net Capex €3.0bn 1) ASK capacity versus 2019 2) Against a constant fuel price, constant currency and excluding furlough contribution 17
Slide 18: Medium term outlook
MEDIUM TERM OUTLOOK 1 Capacity back to 2019 Decrease of the Unit cost2 year over year levels (as from 2024) Reach Operating Margin 7% to 8% Maintain positive Maintain Net Adj Operating Debt/EBITDA ratio Free Cash Flow excl. between 1.5x and 2.0x exceptionals3 1) Refers to 2024-2026 period 2) At cons
Slide 19: Focus on loyalty
FOCUS ON LOYALTY Benjamin Smith – Chief Executive Officer Air France-KLM Steven Zaat – Chief Financial Officer Air France-KLM 19
Slide 20: Flying Blue: an asset driving revenues and growing customer loyalty
FLYING BLUE: AN ASSET DRIVING REVENUES AND GROWING CUSTOMER LOYALTY Flying Blue, a strong asset for the Group… … that is leveraged further >100 3rd party contracts 13 co-branded cards Proposed Transaction Recurring revenues NewCo With 39 airline partners Miles Bank 1 new member >19M members every 6
Slide 21: Proposed transaction: raise €1.5bn quasi-equity financing
PROPOSED TRANSACTION: LEVERAGE THE PROGRAM’S MILES ISSUANCE ACTIVITIES TO RAISE €1.5BN QUASI-EQUITY FINANCING 1 4 Positive impact on IFRS equity: • Air France and KLM to be compensated respectively in cash and in equity for transferred assets, resulting in material improvement of IFRS equity • Air F
Slide 22: Update & Outlook
UPDATE & OUTLOOK Benjamin Smith – Chief Executive Officer Air France-KLM 22
Slide 23: Executing on sustainability roadmap and improving ESG rating
AIR FRANCE-KLM IS STEADILY EXECUTING ON ITS AMBITIOUS SUSTAINABILITY ROADMAP AND IMPROVES FURTHER ITS ESG RATING Sustainable Aviation Fuel (SAF) ESG Ratings1 Support to develop the French e-Fuel sector dedicated to air transport : • MoUs with EDF and Engie for 2nd generation e-SAF fuel supply • Supp
Slide 24: Conclusion
CONCLUSION … putting the Group in a good position to Continued strong momentum in Q2… accelerate its strategic roadmap • Operational robustness has significantly • H2 capacity to keep growing to 95% by end of improved 2023 and reach 100% in 2024 • Double-digit growth in revenues driven by strong • S
Slide 25: Save the date: 2023 Investor Day
SAVE THE DATE! AIR France-KLM 2023 INVESTOR DAY November 7th, 2023 Paris city center 25
Slide 26: Appendix
APPENDIX 26
Slide 27: Strong yield environment while capacity recovers
STRONG YIELD ENVIRONMENT WHILE CAPACITY RECOVERS Q2 2023 vs Q2 2019 Total Long Haul Short & Medium Haul1 Transavia Total 88% 85% 89% 88% 25.0% 30.6% 21.0% 20.0% 25.7% -1.2 pt -1.3 pt -16.6% -2.9 pt -8.3% -1.2 pt -10.6% Premium1 North America Caribbean & Indian Ocean Asia & Middle East 76% 90% 88% 87
Slide 28: H1 2023 operating result development
H1 2023 OPERATING RESULT DEVELOPMENT Operating result evolution In € m H1 2023 H1 2022 Change Revenues (€ m) 13,953 11,152 +2,801 Operating expenses (€ m) 12,339 10,000 +2,339 EBITDA (€ m) -350 1,614 1,152 462 Operating result (€ m) 426 36 390 H1 22 operating result published 36 Operating margin 3.1
Slide 29: H1 2023 versus H1 2022 businesses performance
H1 2023 VERSUS H1 2022 BUSINESSES PERFORMANCE Unit Revenue2 Revenues Operating result Operating H1 2023 vs H1 2022 Capacity 1 Change Change Change Constant Curr. (€ m) (€ m) margin +12.6% +22.4% 10,816 +38.3% Network 542 +499m 4.5% +4.0 pt 3 +8.4% -38.3% 1,279 -30.0% Transavia +19.5% +7.6% 1,089 +28
Slide 30: H1 2023 versus H1 2022 airlines performance
H1 2023 VERSUS H1 2022 AIRLINES PERFORMANCE Capacity Revenues Change Operating Change Operating Change H1 2023 vs H1 2022 change (€ m) YoY result YoY margin YoY (€ m) +15% 8,591 +27% 301 +531 3.5% +6.9 pt +11% 5,632 +20% 129 -136 2.3% -3.4 pt +14% 13,953 +25% 426 +390 3.1% +2.7 pt NB: Sum of individ
Slide 31: Currency impact on operating result
CURRENCY IMPACT ON OPERATING RESULT Currency impact on revenues and costs In € m -8 Revenues and costs per currency FY 2022 -19 REVENUES COSTS -28 US dollar (and related US dollar Q2 2023 currencies) 20 35 Currency impact on revenues 60 20 65 Currency impact on costs, including hedging Euro Other Ot
Slide 32: Debt redemption profile at 30 June 2023
DEBT REDEMPTION PROFILE AT 30 JUNE 2023 Debt reimbursement profile(1) In €m 500 500 800 750 2,200 650 700 750 600 550 400 2023 2024 2025 2026 2027 2028 and beyond Bonds issued by Air France-KLM Other long-term Debt: AF and KLM Sustainability-Linked Bonds Secured Debt, mainly “Asset-backed” 2026: 7.2
Slide 33: Investor Relations department
Investor Relations department Michiel Klinkers Marouane Mami Michiel.klinkers@airfranceklm.com mamami@airfranceklm.com