Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — FY2019 Earnings Presentation
45 slides from Air France-klm Sa's earnings presentation, March 2020
Slide 1: Air France-KLM Investor Roadshow Presentation Full Year 2019
Air France-KLM INVESTOR ROADSHOW PRESENTATION FULL YEAR 2019 MARCH 2020
Slide 2: Overview
Overview Resilient operating results in a challenging macro-economic context Net improved operating performance since 2012 Leverage successfully taken down to investment grade like levels Group guidance for 2020-2024: Capacity growth +2 to +3% p.a. Commitment to Global Environmental Sustainability G
Slide 3: FY 2019 Results
3 A I R F R A N C E - K L M G R O U P FY 2019 Results
Slide 4: 2019 highlights
2019 highlights Labor stability Operational reliability Sustainability • Improved social dialogue based • Air France operational measures • A step up in sustainability, on trust, respect, transparency & resulting in strongly-improved launching new impactful initiatives confidentiality Arrival-punctu
Slide 5: 2019 KPI targets achieved
2019 KPI targets achieved Guidance 2019 Full Year 2019 Unit cost Passengers carried Group revenue ex-currency at -1% to 0% -0.9% constant fuel price +2.7% +3.7% 24.5m 101.4m 24.6m 104.2m 26.2bn 27.2bn Capex €3.2bn - €3.3bn €3.3 bn FY 2018 FY 2019 FY 2018 FY 2019 Operating result (1) Net debt -18.8%
Slide 6: Full Year operating result at €1,141m, with revenues +3.7% and fuel expenses +11.2%
Full Year operating result at €1,141m, with revenues +3.7% and fuel expenses +11.2% FY 2019 FY 2018 Change Change at constant currency Revenues (€ bn) 27.19 26.23 +3.7% +2.2% Fuel expenses (€ bn) 5.51 4.96 +11.2% +5.5% EBITDA (€ m) 4,128 4,293 -3.8% -3.3% Operating result (€ m) 1,141 1,405 -18.8% -1
Slide 7: Operating result evolution at €1,141m
Operating result at €1,141m with cost-efficiency measures offset by pressure on Cargo unit revenue and a higher fuel bill FY 2019 Operating result evolution in € m 1,405 +40 -300 +203 -188 -19 1,141 Passenger -80m Cargo -220m FY 2018 Activity change Unit revenue Unit cost Fuel price ex-currency Curr
Slide 8: Revenue growth for all businesses, margin decline in Passenger airlines
Revenue growth for all businesses, margin decline in Passenger airlines and a positive margin trend in Maintenance at 5.6%, +0.7pt Full Year 2019 Capacity (1) Unit Revenue (2) Revenues Change Operating Change Operating Change Constant Curr. (€ m) result (3) margin (3) (€ m) +2.5% -0.4% Network 23,27
Slide 9: Growth in traffic +3.2% underpinned by load-factor improvements
Growth in traffic +3.2% underpinned by load-factor improvements, mitigating yield pressure on unit revenue at -0.4% Total RASK ex cur. 2.5% 3.2% FY 2019 1 -0.4% Premium -0.7% Economy -0.3% ASK RPK RASK ex cur. French domestic Medium-haul hubs Total short & medium-haul 2.9% 4.7% 2.8% 1 0.6% 1.0% 0.1%
Slide 10: Network: Strong improvement in Air France operational and NPS performance
Network: Strong improvement in Air France operational and NPS performance, steady solid appreciation in KLM Net Promoter Score trend Air France rated 7th airline in the On Time Performance (A14) 2019 worldwide ranking 42 40 41 38 39 KLM All indicators improved for Air France, on the back of a succes
Slide 11: Both airlines improved results in Q4 2019
Both airlines improved results in Q4 2019, with cost efficiency measures paying off for Air France resulting in a margin increase of +0.8pt Q4 2019 Capacity Revenues Change Operating Change Operating Change change (€ m) YoY result (1) YoY margin (1) YoY (€ m) +1.9% 4,056 +1.9% -19 +30 -0.5% +0.8 pt
Slide 12: Net debt stable and Leverage ratio at full year guidance of 1.5x
Net debt stable and Leverage ratio at full year guidance of 1.5x (1) FY 2019 Free cash flow evolution Net debt stable In € m In € m (FY 2018: +3542) (FY 2018: +256) (FY 2018: -2711) 3,760 +135 -3,272 6,164 -1,008 6,147 +607 -1 +385 (FY 2018: +1087) (FY 2018: -972) 623 -1,008 -385 (FY 2018: 115) Net
Slide 13: Outlook
A I R F R A N C E - K L M G R O U P 13 OUTLOOK
Slide 14: Network: Passenger unit revenue outlook for Q1 2020 impacted by Covid-19
Network: Passenger unit revenue outlook for Q1 2020 impacted by Covid-19 After a good performance with positive unit revenue in January, recent developments with regards to the Covid-19 have impacted Long-haul forward booking load factor the demand outlook, especially in the Asian network. (change v
Slide 15: Fuel bill to decrease by €450m in 2020
Fuel bill to decrease by €450m in 2020 $ bn 6.2 2019: 2019 (1) Fuel bill €5.5bn(2) 5.6 5.3 (1) 2020: 2020 Fuel bill €5.1bn(2) (1) (1) 1.5 (1) (1) 1.5 1.4 1.4 (1) 1.3 2021: 2021 Fuel bill €4.8bn(2) 2019 2020 2021 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Brent ($ per bbl)(1) 64 52 51 62 56 50 50 50 Market price
Slide 16: Currency impact on operating result
Currency impact on operating result Currency impact FY 2020 guidance update 2 March 2020 on revenues and costs In € m Currency impact FY 2020: +€100m, based on spot €/$ 1.11 Net operational exposure hedging for 2020: -19 USD ˜58% JPY ˜57% GBP ˜69% 141 122 108 92 87 Revenues and costs per country 65
Slide 17: Unit cost ex-currency at constant fuel price between -1% and 0%
Unit cost ex-currency at constant fuel price between -1% and 0% • 2020 unit cost trend for Air France foreseen to be more • Simplification plan measures on track for than at target 2020: • KLM unit cost performance impacted by Pension plan(1) Transformation well underway in and new CLAs Group and
Slide 18: Summary of Full Year 2020 guidance
Summary of Full Year 2020 guidance In view of the recent evolutions of Covid-19 The Group is monitoring closely the situation and will communicate an updated guidance in due time, but at the moment, there is too much uncertainty to provide a precise direction Guidance 2020 (1) Capacity Passenger +2.
Slide 19: Debt reimbursement profile at 31 December 2019
Debt reimbursement profile at 31 December 2019 Debt reimbursement profile(1) In € m 600 400 600 2,000 400 850 650 600 500 450 2020 2021 2022 2023 2024 2025 and beyond Bonds issued by Air France-KLM Air-France KLM Other Long-term Debt : AF and KLM Secured Debt, September 2021: March 2026: Hybrid Unse
Slide 20: Key Financial Achievements
P U R O G - K L M C E R A N Key Financial Achievements A I R F 20
Slide 21: Leverage Successfully Taken Down to Investment Grade Like Level
Leverage Successfully Taken Down to Investment Grade Like Level Air France-KLM successfully deleveraged post-crisis years Air France-KLM vs peers Net Debt/EBITDA trailing 12 months (1) Net Debt/EBITDA trailing 12 months In € bn 5.4 4.2 4.0 3.4 2.9 1.5x 1.5x 1.4x 1.4x 1.4 1.5 1.3 2012 2013 2014 2015
Slide 22: Strong Focus on Unit cost Reduction and Increasing Productivity
Strong Focus on Unit cost Reduction and Increasing Productivity Unit Costs reduction evolution FTE reduction and productivity improvement At constant currency, fuel price Productivity(1) Average FTE 1.0% 105 120,000 4.0 0.6% 0.5% 0.1% 100,000 0.0% 100 0.0% 3.5 80,000 -0.5% -0.6% 95 -0.7% 60,000 3.0
Slide 23: Improved Operating Performance Though Not Yet Up to the Level of Peers
Improved Operating Performance Though Not Yet Up to the Level of Peers Operating result evolution (1) Operating margin evolution versus peers In € bn Revenues in € bn 1.9 40 7.9% 1.4 1.4 1.9% 30 (2) 1.14 6.2% 1.1 0.1% 14.3% 20 0.7% 0.4 10 0.2 0 - 2012 2013 2014 2015 2016 2017 2018 2019 -2% 0% 2% 4%
Slide 24: Building A European Champion Based on a New Value-Focused Model
P U R O G - K L M Building A European Champion C E R A N Based on a New Value-Focused Model A I R F 24
Slide 25: Air France-KLM has Numerous Unique Strengths
Air France-KLM has Numerous Unique Strengths 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: Best-In-Class Joint Commercial Teams in the
Slide 26: Our Value Creation Model To be a European Champion
Our Value Creation Model CONTRIBUTING TO THE UN SDG’S To be a European Champion OUR RESOURCES OUR BUSINESS MODEL OUR VALUE CREATION 2019 PERFORMANCE PEOPLE 85,000 engaged and EPS professional employees EMPLOYEES and a diverse culture Be the best 40 place to work HOURS OF TRAINING PER BRANDS EMPLOYEE
Slide 27: Our Employees, #1 asset of the Group
Our Employees, #1 asset of the Group EMPLOYEES Be the best place to work are proud to work • Inclusive talent management, a company culture 1 for the Group which fosters diversity and equality are professional and • Strong increase in the Employee Promoter Score 2 (1) engaged +15% in 2019 and are pu
Slide 28: Our customers at the forefront of everything we do
Our customers at the forefront of everything we do Record levels of customer satisfaction in 2019 CUSTOMERS Exceed customer expectations Best in class Customer Products Striving for excellence Brands’ sustainability commitments • Installation of Air France full flat beds in • On Time Performance ran
Slide 29: Becoming a European champion reaching top financial performance
Becoming a European champion reaching SHAREHOLDERS Reach top financial performance top financial performance 2020 2021 2022 2023 2024 Commitment to Global Environmental Sustainability Optimize our Operating Model Grow Profitable Passenger Revenue Leverage European Consolidation Develop Customer Data,
Slide 30: Air France-KLM the leading airline group in 2019 on Sustainability
Air France-KLM the leading airline group in 2019 on Sustainability PLANET & SOCIETY Contributing to UN sustainability goals European airline groups’ Sustainability Sustainalytics No. 1 position in the DJSI RobecoSam rankings by leading rating agencies Bloomberg ESG Disclosure Top ranking for 15 year
Slide 31: New Financial Strategic Framework 2020 - 2024
P U R O G - K L M New Financial Strategic Framework C E R A N 2020 - 2024 A I R F 31
Slide 32: Mid-Cycle Operating Margin Reaching 7-8%
Mid-Cycle Operating Margin Reaching 7-8% Air France-KLM operating profit evolution (€m) Target Mid-Cycle Operating Margin: 7-8% +€100m €2,500m +€100m +€250m +€900m Operating Margin: 4% +€1,141m 2019 Operating Result Additional Group 2024 Target Synergies and Operating Result other businesses 1. Comp
Slide 33: CAPEX 2020-2024 Underpinning Objective to Rejuvenate Fleet
CAPEX 2020-2024 Underpinning Objective to Rejuvenate Fleet & Improve Ownership Ratio Capex investment 2020-2024 Fleet rejuvenation Before leases Air France-KLM group fleet projection of average years of age In € bn 12 Average ~4.0 Guidance 2020: €3.6bn after operating leases 11 3.3 10 9 2019 2022 20
Slide 34: Financial Structure Robustness
Financial Structure Robustness 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) 2020 2022 2024 Adjusted Operating Free Cash
Slide 35: Group Capacity Evolution
Group Capacity Evolution 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 impact utilization +2 to +3% p.a. (1) Long-haul
Slide 36: Strict Cost Control
Strict Cost Control Turn-Around Plans 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% Wage inflation Productivity Cost control 40% ta
Slide 37: Group Objectives and Guidance
Group Objectives and 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 till 2024) Capacity growth +2 to +3% p.a. Unit cost averag
Slide 38: Appendix
A I R F R A N C E - K L M G R O U P 38 Appendix
Slide 39: Creating Win-Win Partnerships with Employees
Creating Win-Win Partnerships with Employees Air France Signed a New Pilot Agreement Permitting A New, More Flexible Agreement Has Been Signed Increased Flexibility in Commercial and Fleet Strategy Between Air France and SNPL Pilots Previously, an agreement was in While Block Hours and number of ASK
Slide 40: Summary of Key Initiatives Currently Underway
Summary of Key Initiatives Currently Underway And Estimated Operating Result Impact Commitment to Global Environmental Sustainability Optimize our Grow Profitable Leverage European Develop Data, Flying Blue Operating Model Passenger Revenue Consolidation Cargo, E&M Increase Clarify Brand and Pragmat
Slide 41: Air France Turn-Around – Priorities
Air France Turn-Around – Priorities 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 CDG hub consolidation (incl. cabin LOPA…
Slide 42: Focus on Simplification
Focus on Simplification Ambitious action plan has already started… … And will deliver steadily until 2024 2020 Accelerate implementation of transformation projects: some Net impact highlights of transformation projects €400m+ External spend IT (after inflation) • Implement “Control tower” • Improve
Slide 43: 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 60% margin to ensure profitable 40% growth 20% Operating margin objective mid-cycle 0% at 7-7.5% 2020 2022 2024 Simplification f
Slide 44: KLM Strengthening of the Success Model – Priorities
KLM Strengthening of the Success Model – Priorities 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 Operational excellence E195 phase in Revenue…
Slide 45: KLM Strengthening of the Success Model – Timeline
KLM Strengthening of the Success Model - AIR FRANCE-KLM INVESTOR DAY – NOVEMBER 2019 Timeline Timeline % completion +€250m Objective medium 100 100% term 80 Further grow KLM's successful model, 60 including continuous 40 focus on cost 20 Operating margin 0 objective mid-cycle 2020 2022 2024 at 9-10%