Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — Investor Day (November 2019)
115 slides from Air France-klm Sa's investor day presentation, Nov 5, 2019
Slide 1: Air France-KLM Investor Day
Air France-KLM Investor Day NOVEMBER 5TH 2019
Slide 2: Agenda
Agenda AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 8:30 Registration & Breakfast 9:30 Building A European Champion Benjamin Smith, Chief Executive Officer, Air France KLM 11:00 KLM Strategy Pieter Elbers, Chief Executive Officer, KLM 11:20 Air France Strategy Anne Rigail, Chief Executive Officer,
Slide 3: Building A European Champion Based on a New Value-Focused Model
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Building A European Champion Based on a New Value-Focused Model Benjamin Smith Chief Executive Officer Air France KLM 2
Slide 4: Employees Are Air France-KLM's #1 Asset
Employees Are Air France-KLM's #1 Asset AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Thank you to all Air France-KLM Group employees! 3
Slide 5: Our Business Revolves Around Our Customers
Our Business Revolves Around Our Customers AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Our goal is to exceed the expectations of our customers at all touchpoints 4
Slide 6: A New Value-Focused Model for All Stakeholders
A New Value-Focused Model for All Stakeholders AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Commitment to Global Environmental Sustainability Medium Term (2024) Leading Employees Be the Best Place to Employee Work Promoter Score Strong Shareholders Improvement Reach Top Financial of Group Performance
Slide 7: Air France-KLM is Building a New Value-Focused Model
Air France-KLM is Building a New Value-Focused Model AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Commitment to Global Environmental Sustainability Optimize our Grow Profitable Operating Model Passenger Revenue Develop Customer Leverage European Data, Flying Blue, Consolidation Cargo, and E&M 6
Slide 8: Becoming a European Champion
Becoming a European Champion AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 2020 2021 2022 2023 2024 Commitment to Global Environmental Sustainability Optimize our Operating Model Grow Profitable Passenger Revenue Leverage European Consolidation Develop Customer Data, Flying Blue, Cargo, and Engineerin
Slide 9: Air France-KLM Has Numerous Unique Strengths
Air France-KLM Has Numerous Unique Strengths AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Our Core Assets Three Powerful 85 000 Engaged and Extensive and Powerful PARTNERSHIPS BRANDS Professional PEOPLE Complementary NETWORKS Our Unique Competitive Advantages France: #1 Inbound Destination Schiphol:
Slide 10: Brand Portfolio Simplified around Three Master Brands
Brand Portfolio Simplified around Three Master Brands AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 From Unclear Value Proposition… …to Three Master Brands, Targeting the Right Customers with the Right Brand Showcasing the Best of France Around the World Strong Innovative Global Brand Making Low Cost
Slide 11: Clear Roadmap For Each Airline
Clear Roadmap For Each Airline AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Commitment to Global Environmental Sustainability Continue to develop Leverage unique Fully leverage brand current successful assets to build a power and new business model successful model, flexibility one step at a time 10
Slide 12: Optimizing Our Operating Model
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 11 Optimizing Our Operating Model
Slide 13: KLM: Continue to Develop Current Successful Business Model
KLM: Continue to Develop Current AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Successful Business Model Successful Initiatives Since 2014, With Strong Results • Significant decrease of structural cost and increased operational efficiency Ongoing Simplification Effort Focusing on 5 Pillars • Customer
Slide 14: KLM Fleet Will Be Simplified and Optimized
KLM Fleet Will Be Simplified and Optimized AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Current Passenger Fleet 5 cockpits Future Fleet 3 cockpits Regional E175/190/ E175/190 175 190 49 195-E2 175 190 195-E2 Target Regional Fleet: 52-54 aircraft Medium Haul 737-700 737-700 700 800 -900 51 700 800 900
Slide 15: KLM Will Continue to Support Future Growth At Schiphol
KLM Will Continue to Support Future Growth At Schiphol AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Aircraft movement reaching Natural leading position Looking ahead… current capping at Schiphol for KLM Adapt Fleet: • Short term growth via larger aircraft gauge Aircraft movement at Schiphol +30 desti
Slide 16: Maintain the Power of the KLM Brand
Maintain the Power of the KLM Brand AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 For the Next Generation of Travelers 15
Slide 17: Air France: Leverage Unique Assets to Build a Successful Model
Air France: Leverage Unique Assets to Build AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 a Successful Model, One Step at a Time A New Social Contract Step by step evolution of each group contract (pilot, cabin, ground) to ensure best position for future success Focus on operational robustness signifi
Slide 18: Creating Win-Win Partnerships with Employees
Creating Win-Win Partnerships with Employees AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Four New Underlying Values Trust Respect Transparency Confidentiality 17
Slide 19: Air France Signed a New Pilot Agreement
Air France Signed a New Pilot Agreement Permitting AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Increased Flexibility in Commercial and Fleet Strategy While Block Hours and number of aircraft directly affect pilot employment, the ASK Previously, an agreement was in place metric has no direct link wit
Slide 20: A New, More Flexible Agreement Signed With SNPL Pilots
A New, More Flexible Agreement Has Been Signed AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Between Air France and SNPL Pilots ASK metric is replaced by a new KPI based on Maximum Seating Capacity of aircraft Air France is now able to make optimal fleet and product decisions, Restrictions regarding m
Slide 21: Air France Was Forced to Reduce Premium Cabin Size
Previously, Air France Was Forced to Reduce Premium Cabin Size AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 to Comply With ASK Production Rule Premium Cabin Reduction: Impact: Decreased Footprint on High- Illustration on Boeing 777-200ER Margin Premium Segment 2014 2018 Industry Long Haul Air France
Slide 22: Air France Fleet Will Be Simplified and Optimized
Air France Fleet Will Be Simplified and Optimized AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Current Passenger Fleet 9 cockpits Future Fleet 5-7 cockpits E145 13 Regional ATR 72-6 4 CRJ 700/1000 700 1000 CRJ 700/1000 700 1000 24 E170/190 170 190 E170/190 170 190 29 Target Regional Fleet: 50-60 airc
Slide 23: Multiple Benefits of A380 Replacement
Multiple Benefits of A380 Replacement AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 + €400m CAPEX avoidance for cabin refurbishment and necessary maintenance & engine overhaul Increased operational reliability and reduced environmental footprint with more efficient & sustainable replacement aircraft B
Slide 24: New Air France Fleet Will Yield Strong Economic Benefits
New Air France Fleet Will Yield Strong Economic Benefits AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Beyond 2024 Widebody Fleet: Narrowbody Fleet: Airbus A350-900 Airbus A220-300 +€12.5m 28 +€350m +€1.3m 60 +€75m EBITDA Increase Ordered A350-900 EBITDA Increase Ordered A220-300 Per Aircraft Aircraft
Slide 25: Cabin Optimization (LOPA) Potential
Cabin Optimization (LOPA) Potential: AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Current Boeing 787-9 Illustration For Illustrative Purposes Only Prem # Seats Business Econ Economy Total Business Premium Economy Economy 276 30 21 225 Avg Pitch: 31' Prem 9% less Business Econ Economy efficient Indust
Slide 26: Increased Fleet Utilization Will Reduce Ownership Cost
Increased Fleet Utilization Will Reduce AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Ownership Cost Fleet Utilization (hours) Narrowbody Widebody 15.4 13.7 14.0 14.1 Potential reduction 9.2 9.2 9.3 9.4 of up to 10-20% in 8.2 8.3 8.7 ownership cost Through improved Air France fleet utilization Low Cos
Slide 27: Response to Long-Haul Low-Cost Competition
Response to Date to Long-Haul Low-Cost Competition AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 # Seats CASK2 Total Premium1 Economy €ct/km Current Benchmark: Airbus A330-200 314 21 293 <5 €ct New Benchmark: Airbus A350-900 411 35 376 <4 €ct Future A350-1000 will have 480 seats and even lower CASK ha
Slide 28: Air France Will Lobby for a More Competitive Business Environment
Air France Will Lobby for a More Competitive French Airline AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Business Environment Paris-CDG more expensive than Schiphol France has the Highest Social Taxation in Europe Taxes and charges in CDG vs Amsterdam Schiphol + €300m Illustration of employer cost fo
Slide 29: Fully Leverage Brand Power and New Flexibility
Fully Leverage Brand Power and New Flexibility AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Optimize & grow position in a Become the #1 LCC in France in slot-constrained market terms of based aircraft • Remain #1 low cost carrier in The Netherlands • Strengthen core markets • Grow seat capacity throu
Slide 30: Transavia Fleet Will Grow
Transavia Fleet Will Grow AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Current Passenger Fleet 1 cockpit Future Fleet 1 cockpit Medium Haul 737-700/800 700 800 79 737-800 800 Transavia Fleet Growth Target: +5-6 aircraft per annum 29
Slide 31: Further Leveraging Group Efficiencies
Further Leveraging Group Efficiencies AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Continued Cost Synergies Ongoing Better Focus on Strategic Group Levers Commercial, Distribution and Strategic Group Levers Alliances Fleet & Network Commercial & Alliances IT Efficiency Human Resources Purchasing & Pr
Slide 32: Growing Profitable Passenger Revenue
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 31 Growing Profitable Passenger Revenue
Slide 33: Complementary Group Network to be Further Leveraged
Complementary Group Network to be AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Further Leveraged KLM to/from Amsterdam Air France to/from Paris (CDG/ORY) • 171 347 194 444 Destinations Daily Frequencies Destinations Daily Frequencies Strong AFKL Group VS ‘Dual Hub’ Model British Airways to/from Londo
Slide 34: Revenue Strategy
Revenue Strategy AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Air France and KLM Will Grow Their Strongest Segments KLM Current Strength per Segment Air France Current Strength per Segment Local Connection Local Connection Premium Premium Domestic Domestic Economy Economy Premium Premium Medium Haul
Slide 35: Attractiveness of Paris & France Is a Major Asset
Attractiveness of Paris & France AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Is a Major Asset for Air France France, most visited country in the world Airline market largely centralized around Paris International tourist arrivals in 2018, Top 10 Passenger traffic in 2018 per airport city x8 89 M 83
Slide 36: Grow Profitable Air France Local Traffic
Grow Profitable Air France Local Traffic AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Traffic type per hub Strong Connecting Airlines Benefiting Airlines Maximizing Airlines from Mixed Traffic Local Revenues 24% 22% 39% 51% 49% 60% 55% 1 pt Local 72% 68% 68% share shift: + €30m op. profit 76% 78% 61%
Slide 37: Opportunity to Strengthen Air France Position on Premium Segment
Opportunity to Strengthen Air France AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Position on Premium Segment Air France has recently been losing premium market share Air France now has the means to strengthen its market position: Long haul premium seat capacity from Paris CDG & Orly Restrictive stru
Slide 38: Develop Customer Data, Flying Blue, Cargo and E&M
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Develop Customer Data, Flying Blue, Cargo and E&M 37
Slide 39: Growing Customer Data, Personalization and Loyalty Capabilities
Growing Customer Data, Personalization AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 and Loyalty Capabilities Personalization Data, Personalization, Loyalty Growing Share of Bookings Ancillary Revenue Evolution Flying Blue: Solid Foundation with Through Direct Sales & NDC Room to Grow Increased contri
Slide 40: Air France-KLM E&M is Strong and Well Positioned
• Air France-KLM E&M is Strong and Well Positioned to Benefit AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 From Future Growth in MRO Market Growing order book is solid basis for Strong position on the fast growing market of Next Future E&M Business Growth Generation Products Order Book (€m) 787 GEnx
Slide 41: Air France-KLM Cargo Will Continue to Maximize Contribution
Air France-KLM Cargo Will Continue to Maximize AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Contribution to the Group #5 #2 and #3 €2.3bn Global Cargo Carrier European Cargo Hubs Cargo Revenues 130+ 1.1 m 3.8 % Air France-KLM Direct Intercontinental Global Market Share Freight Tons Connections 135 1.
Slide 42: Leverage European Consolidation
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 41 Consolidation Leverage European
Slide 43: Air France-KLM Will Pragmatically Evaluate Consolidation Opportunities
Air France-KLM Will AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Pragmatically Evaluate Consolidation Opportunities •Active role when and where consolidation makes sense •As a complement to the global reach and robustness of the Air France and KLM networks •Strict financial discipline 42
Slide 44: Commitment to Global Environmental Sustainability
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Commitment to Global Environmental Sustainability 43
Slide 45: Leading Position in the DJSI
Air France-KLM's Leading Position in the DJSI AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Recognition for our Environmental Stewardship Commitment to Global Environmental Sustainability #1 Rank: Leading Airline Group 44
Slide 46: Key Initiatives and Impact
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 45 Impact Key Initiatives and
Slide 47: Summary of Key Initiatives Currently Underway
Summary of Key Initiatives AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Currently Underway Decreasing Unit Cost Increasing Unit Revenue More Flexible Labour Contracts Air France Transavia Clarified Brand Strategy Air France Simplified Fleet Air France KLM Optimized Interior Configurations & Air Franc
Slide 48: Key Initiatives and Estimated Operating Result Impact
Summary of Key Initiatives Currently Underway And AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Estimated Operating Result Impact Commitment to Global Environmental Sustainability Optimize our Grow Profitable Leverage European Develop Data, Flying Blue Operating Model Passenger Revenue Consolidation C
Slide 49: Mid-Cycle Operating Margin Reaching 7-8%
Mid-Cycle Operating Margin Reaching 7-8% AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Air France-KLM Operating Profit Evolution (€m) Target Mid-Cycle Operating Margin: 7-8% +€100m €2,500m +€100m +€250m +€900m Operating Margin: 4% €1,150m 2019 Operating Additional Group 2024 Target Result Consensus Sy
Slide 50: KLM Strategy: Pieter Elbers
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Strategy Pieter Elbers Chief Executive Officer KLM 49
Slide 51: Where We're Coming From and Where We're Going
Where We’re Coming From and Where We’re Going AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Where We’re Coming From: Where We’re Going Our Strategy Build Up 2014-2018 KLM’s 2015 strategic review has provided a clear set of strategic choices that Future strategy centred around 5 pillars: remain valid t
Slide 52: A Strategy Without Execution is a Hallucination
A Strategy Without Execution is a Hallucination AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 5 Pillars of Our Annual Flight Plan Guide the Implementation Win the hearts of our customers and excel in Customer and Customer satisfaction: NPS > 44 customer intimacy by focusing on integral Product custome
Slide 53: Where We Stand Now
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 New topic WHERE WE section STANDheader NOW Sub-header placeholder 52
Slide 54: KLM is a Fit and Financially Healthy Airline
KLM is a Fit and Financially Healthy Airline AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Sustaining upward spiral of revenue generation to continue investing Creating Solid Revenues: €11bn KLM Revenue in 2018 Sustaining the Upward Spiral 2018 Revenues (€m) 2018 Share of KLM Passenger Revenue Operati
Slide 55: KLM KPIs Significantly Improved Since 2012
KLM KPIs Significantly Improved Since 2012 AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 2019 YTD September—Year to Date Figures Do Not Reflect Full Year Outlook Operating Income (€m)¹ Operating Margin (%) Investing Cash Flow (€m) Adjusted Free Cash Flow² (net CAPEX) 1,079 1,073 10,3% 408 Adjusted for
Slide 56: Continued Investment to Enhanced Profitability
Continued Investment to Enhanced AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Profitability +€60m +€250m Digital and Fleet CSR Staff Innovation +€130m +€60m Cost and Fleet Revenue Mix Operating Operational Renewal Optimization Result impact Excellence 2024 55
Slide 57: Pillar #1: Why People Fly KLM
Pillar #1: Customer and Product Why People Fly KLM AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Our Customers’ Most Important Decision Factors Main Reasons for Flying KLM ... …Creates an Integrated Approach • We have an integrated approach between commercial, network 43% & fleet and operations Schedu
Slide 58: Pillar #1: Improving Customer Satisfaction & Brand Strength
Pillar #1: Customer and Product We Continuously Improve Customer Satisfaction & Brand Strength AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 APEX Granting Us the Official Five Star Global Airline Rating Targeted initiatives & investments have led to a Decline in NPS mainly caused by unforeseen strongl
Slide 59: Pillar #2: Simplifying Fleet to Reduce Complexity and Costs
Pillar #2: Network & Fleet Simplifying Fleet to Reduce Complexity AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 and Costs Widebody fleet simplified to 2 families, ambition to reach 1 by 2025 Total fleet evolution KLM Group 767 300 MD11 MD11 200 747-400 747-400 747-400 Pax/combi Pax/combi Pax/combi A33
Slide 60: Pillar #2: Continue Growth and Fleet Optimisation
Pillar #2: Network & Fleet Continue Growth and Fleet AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Optimisation/Simplification Capacity Long Haul ASK (index = 2011) & Load factor (in %) 119 123 124 108 110 114 104 107 96 94 100 90 92 KLM – with a small home market but large 87% 87% 88% 87% 87% 88% 89%
Slide 61: Pillar #2: KLM Agility in Network
Pillar #2: Network & Fleet KLM Has Shown Agility and Has been Dynamic in its Network AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 With Multiple New Route Openings in Recent Years KLM Network in 2015 KLM Network in 2019 72 Long Haul destinations 93 Long Haul destinations 69 Medium Haul destinations 78
Slide 62: Pillar #2: Industry Leading Network With Partners
Pillar #2: Network & Fleet Together With Partners, KLM As Part of the Air France- AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 KLM Group is Able to Grow an Industry Leading Network KLM code-share destinations in 2015 KLM code-share destinations in 2019 498 Long Haul destinations 533 Long Haul destina
Slide 63: Pillar #2: KLM Passenger Business: Value-Focused Model
Pillar #2: Network & Fleet KLM Passenger Business: Value-Focused Model AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Fleet Network Partners Airports Through an integral approach between these topics, KLM positions itself for long term profitability, expansion and growth • Utilization • Destinations •
Slide 64: Pillar #3: Growth Coupled With Increased Asset Utilization
Pillar #3: Operational excellence • Growth Coupled With Increased Asset Utilization AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Number of flights increases over the Although ASK grows, passenger growth Average flight time per aircraft increase years for both Intercontinental as Europe is higher and
Slide 65: Pillar #4: Transformation Towards Digital Age in Aviation
Pillar #4: People and Organization Transformation From Industrial Towards Digital Age in Aviation AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Transformation Organisation Leadership Social Dialogue 2014 Transform: HPO Frontline staff in airline Hierarchical, linear, Controls and focus on Laws industr
Slide 66: Pillar #4: Employee Promoter Score and Productivity
Pillar #4: People and Organization While in the Same Time Employee Promoter Score AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Increases With improved Productivity Numbers Employee Promoter Score (week score) 80 Productivity (index) 75 120 +17% 70 115 EASK/FTE 110 Revenue/FTE +13% 65 105 60 100 55 95
Slide 67: Pillar #4: Talented And Diverse Workforce
Pillar #4: People and Organization KLM Is a Large And Mature Organisation With a AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Talented And Diverse Workforce Empower employees to be “the best of themselves” by creating an optimal, engaged, diverse and inclusive workforce that fits strategy execution a
Slide 68: Pillar #5: KLM Focuses on Radical Innovation Topics
Pillar #5: Innovation and Sustainability KLM Focuses on Radical Innovation Topics AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Apron Robotizing Additive manufacturing Cargo Volume Scanning Components Trading trading Apron Robotization Additive Manufacturing Cargo Volume Scanning Platform platform Goa
Slide 69: Fly Responsibly
Fly Responsibly AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Pioneer sustainable solutions. Connect to new partners in sustainability. Adapt to changing society expectations & maintain a liveable planet. Horizon 2050 Our day Horizon 2030 Electric flights after Horizon 2025 Bio-fuel Fleet renewal Subs
Slide 70: Schiphol Has Grown to 500,000 Movements
Schiphol In Recent Years Schiphol Has Grown to AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 500,000 Movements For the coming years new growth initiatives will be undertaken Passenger and aircraft movements at Schiphol (base 100 in 2005) Schiphol movements possibly 180 expanded to 540.000 in coming ye
Slide 71: Transavia: Sustainable Position As #1 LCC in the Netherlands
Transavia NL Transavia: Sustainable Position As AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 #1 LCC in the Netherlands Cooperation KLM-Transavia Holland intensified Key themes 2019 for To continue sustainable Transavia Holland growth… • Joint slot portfolio management • Partnering beyond slots Creati
Slide 72: Five Priorities KLM 2019/2020
Five Priorities KLM 2019/2020 AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Sustainable growth on Schiphol Airport Integral approach for running the business Financial Health People & Air France-KLM Technology Synergy 71
Slide 73: Air France Strategy: Anne Rigail
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Air France Strategy Anne Rigail Chief Executive Officer Air France 73
Slide 74: CSR: A renewed environmental ambition
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 73 CSR: A renewed environmental ambition
Slide 75: End-to-End Transformation Launched at Air France
End-to-End Transformation Launched at AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Air France Contributing to Group Goals CSR Customer experience Talent Employees & culture engagement Revenue enhancement Optimized 360 AIR FRANCE External Spend TRANSFORMATION Customer Network satisfaction Tech & Fleet
Slide 76: Financial Recovery Launched Around Seven Clusters
Financial Recovery Launched Around Seven Clusters AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Optimize our operating model Grow profitable passenger revenue Optimized Simplified organization Network and Fleet Network and Fleet External Spend • Reduce layers • Operations • Fleet simplification • CDG
Slide 77: Structural Impact on Four Dimensions
Structural Impact on Four Dimensions AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Strong increase of Air France operating result Three success KPIs Customer NPS +€200m +€900m satisfaction +€300m Employee Employee +€400m Engagement Promoter Score CO2 emissions CSR Simplification Fleet renewal Revenue
Slide 78: Focus on Simplification
Focus on Simplification AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Ambitious action plan has already started… … And will deliver steadily until 2024 Keep costs Accelerate implementation of 2019 on track 2020 transformation projects: some highlights Net impact of transformation projects €400m+ (afte
Slide 79: Fleet Simplification and Renewal
Fleet Simplification and Renewal INVESTOR DAY – NOVEMBER 2019 Long Haul fleet Medium Haul fleet • A350 ramp up • A220 ramp up • A380 replacement • ATR and ER4 phase out Benefits • Targeting 2-3 cockpits A350-900 • Scale savings A220-300 • Unit costs • Simplified processes • Operations reliability •
Slide 80: Network: Strong Position in Paris, an Asset to Build On
Network: Strong Position in Paris, an Asset to Build On AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Strong natural traffic in Paris Resilient, balanced, global network High footprint in CDG, with still opportunity to increase High Yield Competition Home Carrier #1 Low Yield #2 30% 20% #3 #4 17% 19%
Slide 81: Air France Hub Will Be Further Optimized
Air France Hub Will Be Further Optimized AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Dynamic Network Management Improving Asset utilization Enhancing Customer Experience Dynamic strategy to reallocate fleet from Aircraft utilization improvement One unique brand: Air France loss-making/less dynamic a
Slide 82: Domestic Network Restructuring Plan
Domestic Network Restructuring Plan AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 • Closure of loss making routes Adjust Orly’s network to • Reduction of frequencies in weak period face TGV competition • Reduction of average gauge to increase load factors Reduce poor performing transversal routes expo
Slide 83: Orly Strategy (1/2): Towards New Frontiers for Air France
Orly Strategy (1/2): Towards New Frontiers AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 for Air France Quality network tailored for business customers from Leisure European destinations to adjust to Orly to Europe seasonality of French business demand Take full advantage of our Paris business airport
Slide 84: Orly Strategy (2/2): Grow Transavia France
Orly Strategy (2/2): Grow Transavia France AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 to Strenghten #1 Position Structural changes Have Unlocked Future Transavia France will grow in Orly to strengthen Potential of Transavia France its leadership International routes up to 3000 nautical miles Remova
Slide 85: Customer Experience Improvement Drives NPS
Customer Experience Improvement Drives AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 NPS Growth 3 drivers of same importance: Air France Yearly NPS evolution 1• Products & services 40 2• Operational performance 3• Disruption handling 28 25 17 19 12 Action plan with 1st results visible: 2019 NPS improv
Slide 86: In-Flight Experience Will Reach Top Industry Level
In-Flight Experience Will Reach Top Industry Level AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Consistent business product Larger overhead bins Connectivity Entertainment Upgraded cabin features 80% of long haul fleet at Business cabin on all routes 45% of Medium Haul fleet 100% of fleet connected i
Slide 87: Introduction of Business Class on French Domestic Network
Revenue Growth on Strongest Segments Introduction of Business Class on French Domestic Network AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Consistent business product on all Air France network, including domestic Ground experience • Sky Priority access • Lounge access Inflight experience • Dedicated
Slide 88: Fluid and Serene Ground Experience
Fluid and Serene Ground Experience AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 2018 2019 2020 Lounges upgrade July: CDG, Terminal E Hall L January: Lyon January: Orly Hall 3 (Long Haul December: JFK with dinner service May: Washington with dinner service flights), Geneva, San Francisco, Los Angeles,
Slide 89: Operational Performance Is Another Key NPS Driver
Operational Performance Is Another Key AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 NPS Driver 2019 results are very encouraging Next steps ahead Punctuality consistent for months, progressing in • • industry benchmark FlightStats ranking (A14, Europe) Ambition: become #1 on completion factor • Aircr
Slide 90: An innovative ecosystem to reinvent our air travel experience
An innovative ecosystem to reinvent our air travel experience AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Focus on digitization and new technologies Transform our core Build new opportunities Invest in new technologies experience for customers for the future Customer 360° view connected to Bots comp
Slide 91: People: a renewed dynamics with our employees
People: a renewed dynamics with our employees AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Renewed social Employee Promoting Culture dialogue engagement diversity Transformation • 26 agreements signed • Staff CSR initiatives. • Gender equality • Improve cross- in less than 12 months e.g. Citizen Days
Slide 92: Reaching Leading European Performance: Frédéric Gagey
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Reaching Leading European Performance Frédéric Gagey Chief Financial Officer Air France KLM 91
Slide 93: Where Do We Stand?
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 92 Stand? Where Do We photo
Slide 94: Leverage Successfully Taken Down to Investment Grade Like Level
Leverage Successfully Taken Down to AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Investment Grade Like Level Air France-KLM successfully deleveraged post-crisis years Air France-KLM vs peers Net Debt/EBITDA trailing 12 months Net Debt/EBITDA trailing 12 months In € bn 5.4 (1) (1) 4.2 4.0 (1) (1) 3.4
Slide 95: Strong Focus on Unit Cost Reduction and Increasing Productivity
Strong Focus on Unit cost Reduction and Increasing AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Productivity Unit Costs reduction evolution FTE reduction and productivity improvement At constant currency, fuel price Productivity(2) Average FTE 1.0% 105 120,000 4.0 0.6% 0.5% 0.1% 100,000 0.0% 100 0.0%
Slide 96: Improved Operating Performance Though Not Yet Up to Peers
Improved Operating Performance AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Though Not Yet Up to The Level of Peers Operating result evolution Operating margin evolution versus peers In € bn Revenues in € bn 1.9 40 (1) 7.9% 1.4 1.3 30 1.9% 1.1 (1) 1.15 6.2% (3) 0.1% 14.3% 20 0.7% (1) 0.4 (1) 10 0.2 (
Slide 97: Past Achievements Supporting Catch Up Thesis
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Past Achievements Supporting Catch Up Thesis (2) Operating margin evolution of Air France and KLM Operating margin % 12.0% 8.4% 10.4% 8.0% 9.8% 5.1% 7.4% 4.0% 5.5% 4.0% 3.9% 2.2% 1.7% 0.0% 1.2% 0.8% -0.5% -0.6% -1.6% -4.0% -2.4% (3) 2012 2013 2014 2015 201
Slide 98: Gap Analysis Pointing to Divergence in Capital Utilization
Gap Analysis Pointing to AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Divergence in Capital Utilization Equivalent salary cost in Air France and KLM today EBITDA margin of Air France is nearer to KLM RTM 2019 Salaries & related costs / Revenues (1) compared to operating margin EBITDA Margin % 19.8% 1
Slide 99: Similar Results in E&M and Leisure; Lower Network Profitability
Similar Results in E&M and Leisure, Air France AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Profitability Lower than KLM in Network Activity Operating margins per business unit Full year 2018 Limited gap between Air France & KLM Significant gap between Air France & KLM Short haul exposure at Air Fran
Slide 100: New financial strategic framework
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 New financial strategic framework Build Value-Focused Model • Financial roadmap • Financial KPI’s • Shareholder returns 99
Slide 101: Mid-Cycle Operating Margin Reaching 7-8%
Mid-Cycle Operating Margin Reaching 7-8% AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Air France-KLM operating profit evolution (€m) Target Mid-Cycle Operating Margin: 7-8% +€100m €2,500m +€100m +€250m +€900m Operating Margin: 4% €1,150m 2019 Operating Additional Group 2024 Target Result Consensus Sy
Slide 102: Air France Turn-Around – Priorities
Air France Turn-Around – Priorities AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Optimize our Operating Model Grow Profitable Passenger Revenue Operating result +€900M Simplification focus Fleet renewal Revenue mix optimization +€𝟒𝟎𝟎m +€𝟑𝟎𝟎m +€𝟐𝟎𝟎m Operations transformation A380 replacement…
Slide 103: Air France Turn-Around – Timeline
Air France Turn-Around —Timeline AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Timeline +€900m % completion 100% 100% Medium-term objectives 80% Deliver sufficient operating margin to ensure 60% profitable growth 40% Operating margin 20% objective mid-cycle at 7-7.5% 0% 2020 2022 2024 Simplification f
Slide 104: KLM Strengthening of the Success Model – Priorities
KLM Strengthening of the Success Model – Priorities AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Optimize our Operating Model Grow Profitable Passenger Revenue Operating result +€250M Focus on cost and Fleet renewal Revenue mix optimization operational excellence +€𝟔𝟎m +€𝟏𝟑𝟎m +€𝟔𝟎m…
Slide 105: KLM Strengthening of the Success Model – Timeline
KLM Strengthening of the Success Model - AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Timeline Timeline % completion +€250m 100% Objective medium term 100 Further grow KLM's 80 successful model, 60 including continuous focus on cost 40 Operating margin 20 objective mid-cycle at 9-10% 0 2020 2022 2024
Slide 106: CAPEX 2020-2024 Underpinning Fleet Rejuvenation
CAPEX 2020-2024 Underpinning AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Objective to Rejuvenate Fleet & Improve Ownership Ratio Capex investment 2020-2024 Fleet rejuvenation Air France-KLM group fleet projection of average years of age In € bn 12 Average ~4.0 11 3.3 Incl. fleet order-book 10 positi
Slide 107: Financial structure robustness
Financial structure robustness AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Leverage ratio to remain ~1.5x Adjusted Operating Free Cash Flow Net Debt/EBITDA projection ~1.5x positive medium-term mid-cycle 2020-2024 Investment grade like 1.5x 1.5 8,000 1.0 6,000 0 0.5 (2) 2020 2022 2024 0.0 4,000 (1)
Slide 108: Group Capacity Evolution
Group Capacity Evolution AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Long-haul capacity evolution 2019-2022 111 -6pt 6pt 4pt 2pt 105 Capacity evolution 2020-24 100 Passenger Network & Transavia In Available Seat Kilometers 2019 Fleet size Maintenance Aircraft 2022 Block-hour Gauge 2022 Capacity impa
Slide 109: Strict Cost Control: Turn-Around Plans to Deliver Unit Cost Reduction
Strict Cost Control: Turn-Around Plans AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 to Deliver Unit Cost Reduction in Average of -1% per Annum Unit cost objective 2020-24 Net cost break-down Unit cost at constant fuel and currency (1) Net cost RTM 2019 100% Average -1% p.a. 80% Fuel efficiency 60% Wa
Slide 110: Shareholders - Dividend envisaged as turn around plan materializes
Shareholders - Dividend envisaged AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 as turn around plan materializes Dividend policy Progressive step-up dividend envisaged + + + 2020 2021 2022 2023 2024 beyond 2024 Ordinary dividend payout policy: • Minimum of 25% underlying after-tax profit Trigger, as s
Slide 111: Financial Strategic Framework
Financial Strategic Framework AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Reach top Financial Performance Building a Value-Focused Model Profitability Cash generation Financial roadmap Operating margin at 7 to 8% Adjusted Operating Free Cash Flow medium-term mid-cycle positive medium-term mid-cycle
Slide 112: Thank You
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 111 Thank You
Slide 113: Q&A
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 112 Q&A Air France-KLM Investor Day
Slide 114: Appendix
AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 113 Appendix photo
Slide 115: Air France-KLM Group Objectives and Guidance
Air France-KLM Group Objectives and AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Guidance Objectives medium-term (2024) Operating margin mid-cycle at 7-8% Adjusted Operating Free Cash Flow positive Operating margin mid-cycle at 7-7.5% Operating margin mid-cycle at 9-10% Guidance elements (period 2020