Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — H1 2015 Earnings Presentation
49 slides from Air France-klm Sa's earnings presentation, Jul 24, 2015
Slide 1: First Half 2015 Results
FIRST HALF 2015 RESULTS 24 July 2015
Slide 2: Results
AIRFRANCE KLM SINAN SS b= Results
Slide 3: Highlights of the Second Quarter 2015
Highlights of the Second Quarter 2015 Weak economic environment in several key markets Environment including Japan, Brazil and oil routes Significant currency and fuel price volatility affecting unit revenue development and results Passenger network: strict capacity discipline limiting Operations dr
Slide 4: Key data
Key data In €m Q2 2015 Q2 2014 Change H1 2015 H1 2014 Change Revenues 6,642 6,451 +3.0% 12,298 12,005 +2.4% Change like-for-like(1) -4.5% -3.6% EBITDAR(2) 824 854 -30m 1,053 1,021 +32m EBITDA(2) 569 641 -72m 548 591 -43m Operating result 185 238 -53m -232 -207 -25m Net result, gr
Slide 5: Continued significant negative currency impact on operating result
Continued significant negative currency impact on operating result Currency impact on revenues and costs Revenues and costs per currency In €m FY 2014 -54 US dollar (and related 25% currencies) +561 Euro 50% -81 +507 Revenues -65 +320 25% Other +239 currencies +163 +98 -44 -90 -46 Q3 2014 Q4 2014 Q1
Slide 6: Contribution by business segment to Second Quarter 2015
Contribution by business segment to Second Quarter 2015 Change Change Revenue Reported Op. Result Reported Like-for- Like-for- (€bn) change (%) like (%) (€m) change (€m) like (€m) Passenger network(1) 79% 5.24 +2.5% -4.3% 210 -45 -3 = Cargo 9% 0.60 -9.6% -18.6% -78 -33 -29 Maintenance 6% 0.40
Slide 7: Passenger network activity in Second Quarter 2015
Passenger network activity in Second Quarter 2015 Strict capacity discipline Activity ► Reported unit revenue up 2.2% +0.4% 84.8% 85.0% on the back of currency +0.2pt Increased pressure on unit +0.7% revenue excluding currency ► Unit revenue down 4.8% at constant currency Q2 2014 Q2 2015 Long-haul
Slide 8: Passenger network capacity and unit revenue by quarter
Passenger network capacity and unit revenue by quarter 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Capacity +2.7% +1.6% +1.8% +1.6% +1.3% +1.0% +0.6% +0.3% +0.4% +0.1% -0.2% RASK Ex-currency +3.2% +2.7% +1.3% +1.3% +0.0% -1.3% -0.7% -1.1% -1.8% -2.3% -4.8% +0
Slide 9: Second Quarter 2015 Passenger network unit revenue by network
Second Quarter 2015 Passenger network unit revenue by network North America Medium-haul point-to-point 2.1% 8.1% 1.3% -2.9% -14.1% Total medium-haul -15.4% ASK RPK RASK ASK RPK RASK -3.2% -2.1% -1.1% Medium-haul hubs 0.0% 1.3% ASK RPK RASK Latin America -3.3% 6.3% 4.9% ASK RPK RASK -13.7% Africa & M
Slide 10: Cargo activity in Second Quarter 2015
Cargo activity in Second Quarter 2015 Full-freighter capacity further Activity reduced by 26.0% -5.7% Persistently weak demand 63.2% -3.7pts ► RATK down 13.8% at constant 59.5% currency -11.1% ► Pricing environment dictated by non-hedged players Q2 2014 Q2 2015 Ongoing reduction Capacity (ASK) Traff
Slide 11: Maintenance activity in Second Quarter 2015
Maintenance activity in Second Quarter 2015 Third party revenue up more Order book In USD than 38% ► Revenues up 13.0% at constant +13.7% $8.5bn $7.5bn currency ► Strong dollar supporting revenue ► Benefiting from weak comps in Q2 2014 and integration of US component business completed at beginning
Slide 12: Transavia activity in Second Quarter 2015
Transavia activity in Second Quarter 2015 3.1 million passengers, up 8.9% Activity +7.1% Accelerated ramp-up in France 90.3% 90.7% -0.4pt on track ► Capacity up 22.5% +6.6% Temporary negative impact expected in H2 from Tunisia/ Morocco/Greece exposure Q2 2014 Q2 2015 Capacity (ASK) Traffic (RPK) Loa
Slide 13: Second Quarter 2015: change in operating costs
Second Quarter 2015: change in operating costs(1) Reported Change In €m change at constant currency Total employee costs 30% 2,013 +2.5% +1.8% including temps Supplier costs(2) excluding fuel 27% 1,727 +10.4% +5.1% and purchasing of maintenance services and parts 12% Aircraft costs(3) 749 +3.0% -4.1
Slide 14: Second Quarter 2015: stable fuel bill in euros
Second Quarter 2015: stable fuel bill in euros Fuel bill In €m 1,636 1,661 -340 +25m +707 Change in fuel hedging -406 Activity change Fuel price -14 Currency ex-currency impact and hedging Market price Q2 2014: 970$/ton Q2 2015: 600$/ton Q2 2014 Q2 2015 First Half 2015 results 14
Slide 15: Update on 2015 fuel bill
Update on 2015 fuel bill Fuel bill after hedging In $bn 8.9 2015 sensitivity 2014: fuel bill $8.9bn / €6.6bn 7.1(1) $75/bbl 7.4 2015: $63/bbl 7.3 6.3(1) fuel bill $7.1bn / €6.4bn(2) $60/bbl 7.1 2016: fuel bill $6.3bn / €5.7bn(2) $57/bbl 7.0 $54/bbl 6.9 2.3 2.4 2.2 2.1 1.8 1.9(1) 1.7 1.7(1) 2014 2015
Slide 16: Second Quarter 2015: further headcount reduction
Second Quarter 2015: further headcount reduction Headcount down 1,600 FTEs Change in total employee costs In €m, including temporary staff in Q2 2015 Restatement Pension 98,800 Other 98,400 of capitalized related 97,100 97,100 (consolidation) 96,800 production(1) expenses 96,400 +17 +3 2,013 1,934 +
Slide 17: Operating result: currency and pressure on unit revenues offset fuel benefits
Operating result: currency and pressure on unit revenues offset all fuel price benefits Operating results In €m Currency Unit 238 Impact cost Fuel price Activity Unit ex-currency +31 -54 change revenue -30 185 +0 CEASK: Change Revenues: -507 -0.5% in pension-related Costs: -561 expense -53m (non cas
Slide 18: Second Quarter 2015 unit cost performance impacted by low capacity growth
Second Quarter 2015 unit cost performance impacted by low capacity growth Net Costs: €5,703m (+0.5%) Capacity in EASK: 85,948m (+0.2%) Unit cost per Equivalent Available-Seat Kilometer (EASK): 6.64 euro cents Currency effect +2.1% Net change excluding change Fuel price Change in pension- effect at c
Slide 19: First Half 2015: significant net debt reduction
First Half 2015: significant net debt reduction… Analysis of change in net debt, First Half 2015 In €m Operating free cash flow(1): +274 (H1 2014: +95) Cash flow before VDP, and change In WCR 5,407 (H1 2014: +364) Voluntary Departure Change Gross Financial Plans in WCR Investments Operation +327 (H1
Slide 20: In line with net debt reduction target
…in line with net debt reduction target Net debt level since 2012 In €m, adjusted net debt / EBITDAR ratio 6,515 5,966 5.7 5,348 5,407(1) Target: €-2.1bn 5.4 4,550 4.2 4,400 4.0 3.8 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 30 June 2015 31 Dec 2015 Target First Half 2015 results 20 (1) Net deb
Slide 21: First Half 2015: improved pension situation
First Half 2015: improved pension situation Evolution of net pension balance sheet situation In €m 31 Dec 2014 30 June 2015 Change in asset value -343 Liabilities: €21.3bn Regular Assets: €21.0bn evolution Change +421 of net pension in actuarial situation assumptions -710 +7 -61 Main discount Liabil
Slide 22: Further strengthening of liquidity
Further strengthening of liquidity Liquidity situation In €m 327 million euros cash-in from Amadeus transaction (January 2015) 1.82 1.85 1.77 Successful placement of hybrid bond raising 600 million euros in April 2015 3.90 3.91 Renewal of Revolving Credit 3.55 Facilities ► Air France-KLM and Air Fra
Slide 23: Financial ratios at 30 June 2015, trailing 12 months
Financial ratios at 30 June 2015, trailing 12 months EBITDAR / adjusted net interest costs (1) Adjusted net debt(2) / EBITDAR 4.2x 4.0x 4.0x(3) 3.8x(3) 4.3x 4.3x(3) 4.3x(3) 3.9x 31/12/2013* 30/06/2014 31/12/2014 30/06/2015 31/12/2013* 30/06/2014 31/12/2014 30/06/2015 EBITDA / net interest costs Net
Slide 24: Strategy
AIRFRANCE KLM SINAN SS b= Strategy g
Slide 25: Roll out of Perform 2020 in line with our initial calendar
Roll out of Perform 2020 in line with our initial calendar Strong momentum of growth initiatives All cost initiatives under implementation Good progress on renegotiation of collective agreements First Half 2015 results 25
Slide 26: Roll out of Perform 2020 in line with our initial calendar
Roll out of Perform 2020 in line with our initial calendar Strong momentum of growth initiatives All cost initiatives under implementation Good progress on renegotiation of collective agreements First Half 2015 results 26
Slide 27: Investments in products and services very well received by customers
Investments in products and services very well received by customers Further deployment Improvements in Long-haul satisfaction(1) of new long-haul products ► 30% of long-haul fleet equipped at 30 June 2015, including half +30 of KLM fleet +22 +13 +13 Redesign of Air France medium-haul hub product ►
Slide 28: Transavia: accelerating growth in line with plan
Transavia: accelerating growth in line with plan Number 1 international Transavia passengers Low Cost Carrier at Paris-Orly In million >16 and in the Netherlands ► 63 destinations at Summer 2015, including 18 European capitals (Berlin, Copenhagen, Dublin, Prague, +60% 65 Vienna, Warsaw…) 9,9 8,9 Bro
Slide 29: Further momentum in maintenance
Further momentum in maintenance Growth of order book External revenue and operating result In €m +44% $8.5bn $7.5bn 1,251 1,225 $5.9bn ~4.9 1,096 196(1) years 1,040 of revenue 159 145 ~3.6 110 years of revenue Dec 2013 Dec 2014 June 2015 2011 2012 2013 2014 2015 Operating result External revenue Fir
Slide 30: Roll out of Perform 2020 in line with our initial calendar
Roll out of Perform 2020 in line with our initial calendar Strong momentum of growth initiatives All cost initiatives under implementation Good progress on renegotiation of collective agreements First Half 2015 results 30
Slide 31: Initiatives to deliver 1.5% unit cost reduction per year
All initiatives to deliver on the 1.5% unit cost reduction per year have been identified and are being rolled out Unit cost per EASK initiatives Crew productivity 380 Other passenger 260 0.54 cents 6.88 Fleet/fuel efficiency 240 equivalent 6.64 to €1.8bn Commercial 190 Maintenance 180 6.34(1) Moment
Slide 32: Update on the negotiation of productivity agreements
Update on the negotiation of productivity agreements KLM ► Significant agreements with all work categories, for 15-36 months ► Pilots expected to vote on agreement in August ► Introduced selective Voluntary Departure Plans ► Focus on execution of new Collective Labor Agreements as of September; nego
Slide 33: Cost reduction initiatives: further repositioning of HOP! Air France
Cost reduction initiatives launched across the organization: further repositioning of HOP! Air France New renovated commercial offer HOP! Air France operating result In €m 2013 2014 2017 Ongoing Voluntary Departure Plans to reduce station costs Merger of regional operating carriers ~40 -120(1) Full
Slide 34: Cost reduction initiatives: G&A initiative
Cost reduction initiatives launched across the organization: G&A initiative Systematic review of General Breakdown of G&A costs In €m and Administrative processes Other HR/ Combined with initiatives G&A training/ planning to delayer/simplify 20% 22% the organization Quality 4% Facility ~€1.5bn Grow
Slide 35: The tougher revenue context has slowed down the pace of results improvement
The tougher revenue context has slowed down the pace of results improvement... Passenger network ex-currency Change in operating income unit revenue evolution In €m +3.2% +238 +228 +241 +168 +0.8% Last 12 months: +0.5% -2.5%(1) Last 12 months: -€100m(1) -1.5%(1) -25 -75(1) -3.7% -115 2012 2013 H1 H2
Slide 36: Leading us to accelerate and amplify Perform 2020
…leading us to accelerate and amplify Perform 2020 Revised capacity plan for Winter 2015-16 ► Q4 capacity growth revised down from +2.3% to +0.3% Implementation of immediate measures ► Short-term initiatives targeting external expenses and general purchasing ► Air France: targeting 80 million euro i
Slide 37: Outlook
AIRFRANCE KLM SINAN SS b= Outlook g
Slide 38: Outlook for Second Half of 2015
Outlook for Second Half of 2015 All initiatives planned within the Perform 2020 framework are being deployed Significant expected savings on the fuel bill could be almost completely offset by unit revenue pressure and negative currency impacts H2 capacity growth(1) revised down from +1.8% to +0.9% F
Slide 39: In conclusion
In conclusion Selective development on growth markets Product and services upgrade Strict capacity and investment discipline Timeline adapted to labor context of each airline Accelerated cost initiatives Support from other stakeholders A more efficient business and a deleveraged balance sheet, a l
Slide 40: Appendix
AIRFRANCE KLM SINAN SS b= Appendix g
Slide 41: Contribution by business segment to First Half 2015
Contribution by business segment to First Half 2015 Change Change Revenue Reported Op. Result Reported Like-for- Like-for- (€bn) change (%) like (%) (€m) change (€m) like (€m) Passenger network(1) 79% 9.66 +2.0% -3.3% -112 +11 +129 Cargo 10% 1.23 -8.6% -16.1% -141 -62 -44 Maintenance 6% 0.78
Slide 42: First Half 2015 Passenger network unit revenue by network
First Half 2015 Passenger network unit revenue by network North America Medium-haul point-to-point 8.8% 2.0% 1.9% -0.9% Total medium-haul -13.0% -13.0% ASK RPK RASK ASK RPK RASK -2.5% -1.4% -0.3% Medium-haul hubs 0.6% 1.5% ASK RPK RASK -2.6% Latin America 3.2% 2.4% ASK RPK RASK -10.4% Africa & Middl
Slide 43: Revised capacity plan for Winter 2015-16
Revised capacity plan for Winter 2015-16, with significant adjustments on most affected routes Passenger network(1) capacity growth ASK +2.3% Winter 2015/16 schedule +1.4%(3) ► Japan: -14% +1.4%(2) ► Brazil: -5% ► East Africa: -6% +0.7% +0.4% +0.3% +0.1% +0.1% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Februar
Slide 44: Cargo capacity and unit revenue by quarter
Cargo capacity and unit revenue by quarter 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Capacity -0.5% -0.3% -1.5% -0.9% -0.9% -2.0% -1.7% -3.5% -4.1% -4.2% -5.7% +1.1% RATK Ex-currency -1.0% -1.0% -1.2% ~-2.1% -3.8% -4.8% -5.2% -5.7% -11.3% -13.8% -4.2% -0.9%
Slide 45: First Half 2015: change in operating costs
First Half 2015: change in operating costs(1) Change In €m Reported change at constant currency Total employee costs 31% 3,934 +2.3% +1.8% including temps Supplier costs(2) excluding fuel 27% 3,304 +7.0% +2.9% and purchasing of maintenance services and parts 12% Aircraft costs(3) 1,502 +4.5% -2.8% 9
Slide 46: KLM: summary of signed productivity agreements
KLM: summary of signed productivity agreements Ground staff Cabin Crew Cockpit Crew 18-month agreement 15-month agreement 3-year agreement (January (January 2015-June 2016) (January 2015-March 2016) 2015-December 2017) No general salary increase No general salary increase No general salary increase
Slide 47: Second Quarter 2015 EBITDA and operating cash flow by airline
Second Quarter 2015 EBITDA and operating cash flow by airline EBITDA EBITDA margin In €m 362 346 280 11.3% 220 9.0% 8.3% 8.6% Q2 2014 Q2 2015 Q2 2014 Q2 2015 Q2 2014 Q2 2015 Q2 2014 Q2 2015 Operating Cash Flow Operating Cash Flow margin In €m, before VDP and WCR Before VDP and WCR 338 300 8.6% 8.4%
Slide 48: First Half 2015: restated net result
First Half 2015: restated net result Calculation of First Half 2015 adjusted net result In €m Net result, Adjusted group share net result Asset valuation -427 Discontinued operations Value of +244 Non current hedging 0 result portfolio -638 -84 +51 Unrealized foreign Amadeus: -218 exchange result: +
Slide 49: Debt reimbursement profile at 30 June 2015
Debt reimbursement profile at 30 June 2015(1) 2005 2.75% convertible bond 2013 2.03% convertible bond 2015 6.25% undated hybrid (€420m) (€550m) bond (€600m) Maturity: April 2020 Maturity: Feb. 2023 Call: October 2020 2nd put: April 2016 Put: Feb. 2019 Conv. price: €20.50 Conv. price: €10.30 500 606