Air France-klm Sa · EURONEXT:AF
Air France-klm Sa — FY2013 Earnings Presentation
49 slides from Air France-klm Sa's earnings presentation, Feb 20, 2014
Slide 1: Full Year 2013 Results
Full Year 2013 Results 20 February 2014
Slide 2: Key data: underlying improvement at every level
Key data: underlying improvement at every level FY 13 FY 12(1) Change Revenue (€bn) 25.52 25.42 Reported: +0.4% Ex-currency: +2.3% EBITDA(2) (€m) 1,855 1,394 +461m Operating result (€m) 130 -336 +466m Net result, group share (€m) -1,827 -1,225 -602m Adjusted net result(2) (€m) -349 -696 +3
Slide 3: Highlights of 2013
Highlights of 2013 Return to positive operating result Financial in a challenging context Further reduction in unit cost Robust free cash flow generation Significant reduction in net debt Restructuring measures ongoing in all areas, Efficiency and reinforced where necessary Successful im
Slide 4: Activity and Results
Activity and Results Pierre François Riolacci
Slide 5: Full Year and Q4 2013 results summary
Full Year and Q4 2013 results summary Q4-13 Q4-12(1) Change FY-13 FY-12(1) Change In € millions Revenues 6,123 6,258 -2.2% 25,520 25,423 +0.4% Change ex-currency +0.7% +2.3% EBITDA(2) 381 281 +100 1,855 1,394 +461 EBITDA margin +6.2% +4.5% +1.7 pts +7.3% +5.5% +1.8 pts Operating result -65 -152 +87
Slide 6: Negative currency impact in H2
Negative currency impact in H2 Revenues Operating result (% change) (€m improvement) +566 +2.5% +466 +2.3% +2.0% +314 +1.6% +238 +252 +228 +0.4% H1 H2 FY -0.7% H1 H2 FY Reported evolution Evolution excluding currency Full Year 2013 Results 6
Slide 7: Net result impacted by restructuring and impairment expenses
Net result impacted by restructuring and impairment expenses FY 2013 In € millions Net result, Adjusted group share net result Asset valuation -349 Deferred tax asset impairment -937 Value of Non current hedging expenses portfolio Alitalia +57 shares: -119 Discontinued operations -357 (CityJet) -122
Slide 8: Contribution by business to Full Year results
Contribution by business to Full Year results Change Change Revenue Change ex-currency Op. result Change ex-currency (€ bn) (%) (%) (€m) (€m) (€m) Passenger 79% 20.11 +0.7% +2.6% 174 +434 +499 Cargo 11% 2.82 -7.9% -5.7% -202 +28 +37 Maintenance 5% 1.22 +11.8% +15.1% 159 +19 +29 Other 5%
Slide 9: Passenger activity
Passenger activity Passenger Disciplined capacity growth Activity Capacity (ASK) +1.6% Load factor up 0.6 pts Load factor 83.2% +0.6 pt 83.8% Unit revenue: up +0.8%* ► Long-haul up +0.6%* Traffic (RPK) +2.4% • Premium: -0.6%* • Economy: +1.2%* ► Medium-haul up +2.4%* • Positive effect of capac
Slide 10: Unit revenue by network
Unit revenue by network Passenger Full Year 2013 Medium-haul point-to-point RASK ex-currency -8.3% -3.4% 1.1% Total medium-haul ASK RPK RASK North America Medium-haul hubs -1.2% 1.7% 2.4% ASK RPK RASK -0.1% -0.3% 2.0% 1.4% 3.2% 3.2% ASK RPK RASK ASK RPK RASK Latin America Africa and Middle East Asia
Slide 11: Cargo activity
Cargo activity Cargo Activity Weak global trade and industry overcapacity Capacity (ATK) -2.7% Load factor 64.5% -1.3 pt Full freighter capacity reduced 63.2% by 11%, above initial plan Traffic (RTK) -4.6% RATK down by 4.2%* 2012 2013 CATK reduced by 4.9%* Unit revenue Unit cost But insuff
Slide 12: Strong performance of maintenance activity
Strong performance of maintenance activity Maintenance Third party revenue up 17.6% Order book like-for-like(2) €4.4bn ► Order book up €600m thanks +15% €3.8bn to new contracts ► Quarter to quarter volatility of revenues due to one-offs Targeted investments Dec 2012 Dec 2013 to reinforce positio
Slide 13: Other businesses
Other Other businesses Transavia activity Transavia +11.6% Capacity (ASK) ► Capacity growth: +11.6% Load factor +1.5 pt 90.1% 88.6% • Netherlands: +7.6% • France: +25.5% +13.5% ► Unit revenue: -0.2% Traffic (RPK) • Stable in spite of high growth ► Operating result down • Political unrest in some 2
Slide 14: Full Year: change in operating costs
Full Year: change in operating costs Actual Ex-currency €m change change 29% Employee costs 7,482 -2.3% -2.1% 25% Supplier costs(1) excluding purchasing 6,429 +1.0% +2.4% of maintenance services and parts 12% Aircraft costs(2) 3,093 -4.2% -2.4% 5% Purchasing of maintenance services 1,303 +15.2% +18.
Slide 15: Significant decline in employee costs
Significant decline in employee costs Change in employee costs Headcount reduction (€m, including temporary staff) ► -3,700 FTEs(1) Employee costs General pay freeze like-for-like 7,823 -2.8% at both Air France and KLM 7,655 -218 +50 Q1: -61 Increase in On track to achieve further Q2: -34 pens
Slide 16: Further reduction in unit costs
Further reduction in unit costs FY 2013 Net cost: €22,613m (-2.2%) Capacity in EASK: 333,480m (+1.6%) Unit cost per EASK: €6.78 cents Ex-currency Actual Net change change change Excluding increase in pension expense +0.1% Currency Change in -0.5% effect -2.0% pension expense Fuel price -2.5% Q1: -1.
Slide 17: Cost reduction drives improvement in operating result
Cost reduction drives improvement in operating result… In € billions FY 2012 Unit FY 2013 Restated IAS 19R cost -20 130 Increase in pension expense (non cash) +466 Currency Activity Unit Fuel price Impact change revenue ex-currency CEASK: -336 +123 -2.0% -100 -1 -2 Revenues: -465 REASK: Costs: -365
Slide 18: Positive momentum since Transform 2015 launch
…with a positive momentum since Transform 2015 launch In € billions Q1 Q2 Q3 Q4 2011, as reported 2012, Restated IAS19, 637 Cityjet reclassified as discontinued operation 494 2013 397 79 -75 -65 -145 -150 -202 -403 -520 -605 Change in operating -1.6 pt +3.5 pts +3.0 pts +2.3 pts margin 2013 vs 2011
Slide 19: Strong free cash flow generation
Strong free cash flow generation In € billions Operating free cash flow*: 538 5,966 (2012: -47) Sale & Lease-Back: Other 123 80 5,348 1,292 Net investments: -941 -183 370 Cash flow Voluntary before VDP, Departure and change Plans Change Gross In WCR (2012: -32) in WCR investments: (2012: 834) (2012:
Slide 20: Improved financial ratios at December 2013
Improved financial ratios at 31 December 2013 EBITDAR / adjusted net interest costs(1) Adjusted net debt(2) / EBITDAR 5.7x 5.4x 3.9x 4.2x 3.3x 3.5x 31/12/2011 31/12/2012* 31/12/2013 31/12/2011 31/12/2012* 31/12/2013 EBITDA / net interest costs Net debt / EBITDA 4.6x 3.6x 4.0x 4.8x 4.3x 2.9x 31/12/20
Slide 21: Good level of liquidity
Good level of liquidity Cash of €4.2 billion at 31 December 2013 Undrawn credit lines of €1.8bn Air France: €1.06bn until 2016 KLM: €540m until 2016 Air France-KLM: €200m until 2017 Amadeus shares: more than €900m Short term debt: €1.9bn Full Year 2013 Results 21
Slide 22: Update on fuel bill
Update on fuel bill In $ billions Fuel bill after hedging 2013 $126/bbl 9.7 2014 $116/bbl 9.4 9.2 9.0(1) $105/bbl 9.0 $97/bbl 8.5 $88/bbl 8.2 2.5 2.4(1) 2.2 2.1(1) 2.3 2.3(1) 2.2 2.2(1) Jan-Dec Q1 Q2 Q3 Q4 Market price Brent ($ per bbl)(1) 105 107 106 104 103 Jet fuel ($ per metric ton)(1) 970 980 9
Slide 23: Outlook for 2014
Outlook for 2014 Operating environment remains EBITDA € billions uncertain Timing/strength of economic recovery ~2.5 in different regions Still volatile currencies and fuel prices 1.9 1.3 1.4 Industry capacity Positive impact of Transform measures Initial measures fully delivering 2011 2
Slide 24: Strategy
Strategy Alexandre de Juniac
Slide 25: Agenda
Agenda Transform 2015: securing structural cost reductions Driving a new revenue dynamic Expanding and strengthening our international networks Full Year 2013 Results 25
Slide 26: Transform 2015 initiatives implemented in all divisions
Transform 2015 initiatives implemented in all divisions Distribution of Air France Transform 2015 More than 90 projects launched initiatives per area in 2012 6% 4% 3% Flight operations Ground operations 11% 36% Maintenance Sales IT 20% Cargo 19% Admin. Distribution of KLM Transform 2015 initiative
Slide 27: Significant reduction in costs since launch of Transform 2015
Significant reduction in costs since launch of Transform 2015 Change in unit cost* Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 +1.0% -1.2% -1.7% -1.9% -1.8% -1.8% -1.9% -2.6% Equivalent impact on costs +50 -100 -120 -90 -100 -160 -110 -100 (€m) 2012 vs 2011: -€260m 2013 vs 2012: -€470m Costs red
Slide 28: Reduction in both headcount and employee costs
Reduction in both headcount and employee costs Employee cost* Headcount* incl. temporary staff incl. temporary staff (Full Time Equivalent) -8,100 FTEs -€380m -8% o/w AF -10%, KL -3% 7.92 106,150 104,000 7.66 99,400 98,000 ~7.54 2012 2013 Target 2011 2012 2013 Target 2014 2014 * At constant pension
Slide 29: New collective agreements improve efficiency and productivity at Air France
New collective agreements lead to improved efficiency and productivity at Air France Ground Medium-haul Long-haul Ground staff: Annual cabin crew Annual cockpit crew Average cabin days worked per year flight hours flight hours crew complement +5.5% +16% +10% -8% 12.8 700 211 620 635 11.7 200 535 201
Slide 30: Medium-haul: new measures on track
Medium-haul: new measures on track French point-to-point capacity Losses reduced by €180m in 2013 (billion ASKs) Hubs: productivity gains, cabin -27%* densification, shorter turnaround times and ancillary revenues 17 -8% -16%* Point-to-point: reduction of activity in provincial bases, sale of
Slide 31: Cargo restructuring: ready to further adapt
Cargo restructuring: ready to further adapt Significant cost and capacity Full-freighter cargo capacity reduction achieved in 2013 (billion ATKs) Full freighter capacity down 11% CATK down 4% 9.1 New measures announced -38% in October 2013 on track Further full freighter fleet reduction, -
Slide 32: Targeting a further reduction in unit costs in 2014 and 2015
Targeting a further reduction in unit costs in 2014 and 2015 Trend in unit costs* 2012 2013 2014 2015 Further -1% reduction -2% ~ -2% In line with 0.4 cent cost reduction target in 2014 vs 2011 * Net unit cost per EASK in € cents, at constant currency, fuel price, and pension expense. Restated follo
Slide 33: Agenda
Agenda Transform 2015: securing structural cost reductions Driving a new revenue dynamic Expanding and strengthening our international networks Full Year 2013 Results 33
Slide 34: Air France long-haul product upgrade
Air France long-haul product upgrade full flat €500m investment in long-haul product by end of 2015 New cabins in 44 B777s Launch in June 2014 New seats and new In-Flight Entertainment in all cabins Business class seat positioned at highest standards full access “full flat” “full acces
Slide 35: KLM long-haul product upgrade
KLM long-haul product upgrade €200m investment in long-haul product by end of 2015 New World Business Class seat Launched in July 2013 22 B747-400s upgraded by Summer 2014 “full flat” Customer satisfaction* Marked improvement in customer Overall comfort satisfaction and cabin Seat comfor
Slide 36: Reorganization of medium-haul brands
Reorganization of medium-haul brands April 2012 October 2012 April 2013 Launch of HOP! Sky Priority New in-flight service Investment in medium-haul product New in-flight service at Air France (October 2012) Introduction of Economy Comfort at KLM (December 2012) Revised business model on regi
Slide 37: Accelerated development of Transavia France
Accelerated development of Transavia France Transavia to capture growth opportunities in French leisure market Transavia France fleet plan (number of aircraft) Positioned as a high-end leisure product 26 Based in Orly 21 Significant network development Aiming at both “sun” 16 and “city-bre
Slide 38: Agenda
Agenda Transform 2015: securing structural cost reductions Driving a new revenue dynamic Expanding and strengthening our international networks Full Year 2013 Results 38
Slide 39: Balanced long-haul network with strong exposure to high growth markets
Balanced long-haul network with strong exposure to high growth markets and high quality partners North America Benefits from JV with Delta Asia-Pacific 21% #1* 51* 25* JVs with Chinese airlines Share of Market Daily Destinations Development of total capacity position flights partnership with Etihad
Slide 40: Targeted capacity growth in 2014
Targeted capacity growth in 2014 Medium-haul: -2% North America* Hubs: ~ +3% ~ +3% Point-to-point: ~ -16%** Asia-Pacific ~ -1% Africa & Middle-East Latin America ~ 0% ~ +9% Caribbean & Total long-haul: Indian Ocean ~ +2% ~ 0% Total group: ~ +1% * Including Mexico ** o/w 5% due to sale of CityJet Ful
Slide 41: The North Atlantic JV: a unique asset
The North Atlantic JV: a unique asset JV represents 23% of industry transatlantic capacity North Atlantic RASK 98 flights per day 2013 vs 2008* Revenue: $11bn Leading improvement in RASK since +31% 2008 +28% +26% New initiatives Ancillary seat sales +18% Enhanced integration of Frequen
Slide 42: Africa: reinforcement of network
Africa: reinforcement of network West Africa 22 destinations in 20 countries Air France-KLM / Kenya Airways Joint Planned deployment of A380 Venture scope, effective 2014 on Abidjan LHR AMS 2014: Extension of Joint Venture CDG with Kenya Airways 27% shareholding Scope extended to 44 week
Slide 43: Accelerated development in Latin America
Accelerated development in Latin America Air France-KLM: strong organic Development of Air France-KLM growth in last 5 years Latin American network 12 destinations, o/w 6 served from (Summer 2014 vs Summer 2009) both hubs Summer 2014: #1 carrier between Panama Europe and Latin America x2 Air
Slide 44: Towards a deeper partnership with Etihad
Towards a deeper partnership with Etihad Geographic complementary with addition of destinations in Indian Ocean and Australia Initial cooperation involving trunks and beyonds Launched in October 2012 4 daily flights between respective hubs 24 codeshare destinations beyond European hubs 2
Slide 45: To sum up
To sum up Our priorities remain: The successful completion of Transform 2015 Securing net debt reduction down to €4.5bn in 2015 Repositioning our brands and products to reconquer our customer base and restore our revenue dynamic Continue to strengthen and expand our international network foc
Slide 46: Appendices
AIRFRANCE KLM a. Pa: an
Slide 47: Fourth quarter: passenger unit revenue by network
Fourth quarter: passenger unit revenue by network October-December 2013 Medium-haul point-to-point RASK ex-currency -11.8% -4.1% 2.6% Total medium-haul ASK RPK RASK North America Medium-haul hubs -2.5% 2.2% 3.4% ASK RPK RASK 2.8% 1.7% -3.3% 1.0% 4.2% 4.4% ASK RPK RASK ASK RPK RASK Latin America Afri
Slide 48: Fourth Quarter: change in operating costs
Fourth Quarter: change in operating costs Actual Ex-currency €m change change 29% Employee costs 1,790 -5.7% -5.5% 26% Supplier costs(1) excluding purchasing 1,585 +0.3% +2.0% of maintenance services and parts 12% Aircraft costs(2) 771 -4.5% -2.1% 5% Purchasing of maintenance services 327 +3.8% +7.9
Slide 49: Debt reimbursement profile at 31 December 2013
Debt reimbursement profile at 31 December 2013* Convertible bonds Plain vanilla bonds 2009 4.97% convertible January 2014: Air France 4.75% (€750m) bond (€661m) October 2016: Air France-KLM 6.75% (€700m) Maturity: April 2015 January 2018: Air France-KLM 6.25% (€500m) Conv. price: €11.80 Other long-t