AIR FRANCE-KLM 31 October 2019
RESULTS AS AT 30 SEPTEMBER 2019
Resilient operating result at 900 million euros in a challenging macro-economic
context
THIRD QUARTER 2019
- Passenger growth up 2.1% and load factor up 0.2 point.
- Passenger unit revenue slightly down by -0.6%, as a consequence of the macro-economic context.
- Unit costs slightly increase by 0.4% at constant currency and fuel, on track for full year guidance.
- Operating result at 900 million euros, down by 165 million euros compared to the third quarter 2018, with revenues up 2% and fuel expenses up 135 million euros.
- Net income at 366 million euros, down by 420 million euros compared to last year impacted by a stronger dollar end of September and Airbus A380 phase-out financial impact of 100 million euros.
- Reduction in Group net debt, down by 253 million euros to 5.9 billion euros and Net debt/EBITDA ratio at 1.5x, stable compared to 31 December 2018.
OUTLOOK 2019
- Based on the current data for the Passenger network:
- Long-haulforward booking load factors from November to March are on average ahead compared to last year.
- Network passenger unit revenue for the fourth quarter 2019 at constant currency expected to be slightly down compared to last year.
- Full year guidance update:
- The Group will pursue initiatives to reduce unit costs, with a targeted 2019 reduction of between -1% and 0% at constant currency and fuel price.
- The 2019 fuel bill is expected to increase by 600 million euros compared to 2018 to 5.5 billion euros, based on the forward curve of 25 October 2019.
- Net debt/ EBITDA ratio at/below 1.5x.
"Air France-KLM Group's performance in the third quarter showed resilience amid geopolitical uncertainties and softening macro-economic environment." said Benjamin Smith, CEO of Air France- KLM Group. "Operationally, we achieved a solid performance during the Summer peak travel period. Air France and KLM ranked in the top European legacy carriers in terms of punctuality. Based on long- haul forward bookings on average ahead of last year and renewed commitment to a strict cost discipline, we are confident that we can deliver on our annual objectives of reduced unit cost and stable leverage ratio. All the Group's employees are mobilized to ensure the success of our strategic ambitions, which we will further outline on the occasion of the upcoming Investor Day next week."
Air France-KLM Group | Third quarter | Nine months | ||
2019 | Change | 2019 | Change | |
Passengers (thousands) | 29,119 | +2.1% | 79,593 | +3.4% |
Passenger Unit revenue per ASK1 (€ cts) | 7.08 | -0.6% | 6.69 | -0.5% |
Operating result (€m) | 900 | -165 | 997 | -295 |
Net income - Group part (€m) | 366 | -420 | 126 | -501 |
Adj. operating free cash flow (€m) | -235 | -221 | 116 | -11 |
Net debt at end of period (€m) | 5,911 | -253 | ||
1 Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
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Third quarter 2019 business review
Network: Softer Passenger demand, Cargo industry still under pressure
Third quarter | Nine months | |||||
Network | 2019 | Change | Change | 2019 | Change | Change |
constant | constant | |||||
currency | currency | |||||
Total revenues (€m) | 6,460 | +0.5% | -0.7% | 17,651 | +2.5% | +1.4% |
Scheduled revenues (€m) | 6,151 | +0.9% | -0.4% | 16,752 | +2.6% | +1.3% |
Operating result (€m) | 649 | -161 | -180 | 660 | -300 | -249 |
Third quarter 2019 revenues decreased by -0.7% at constant currency to 6.5 billion euros, mostly impacted by cargo industry pressure. The operating result amounted to 649 million euros, a 180 million euro decrease at constant currency compared to last year, mainly explained by rise of fuel expenses besides revenue pressure.
Passenger network: French domestic unit revenue lifted by capacity reduction, and Long-Haul impacted by trading environment and a high year on year comparison base
Third quarter | Nine months | |||||
2019 | Change | Change | 2019 | Change | Change | |
Passenger network | constant | constant | ||||
currency | currency | |||||
Passengers (thousands) | 23,627 | +1.1% | 66,278 | +2.7% | ||
Capacity (ASK m) | 79,443 | +1.6% | 224,889 | +2.6% | ||
Traffic (RPK m) | 71,317 | +1.8% | 198,558 | +3.1% | ||
Load factor | 89.8% | +0.2 pt | 88.3% | +0.4 pt | ||
Total passenger revenues (€m) | 5,947 | +1.4% | +0.3% | 16,057 | +3.2% | +2.1% |
Scheduled passenger revenues (€m) | 5,714 | +1.9% | +0.6% | 15,388 | +3.3% | +2.1% |
Unit revenue per ASK (€ cts) | 7.19 | +0.3% | -0.9% | 6.84 | +0.7% | -0.5% |
Third quarter 2019 capacity increased moderately by 1.6%, mainly driven by the South American, North Atlantic and Asian networks, with respective growth of 4.2%, 4.1% and 3.0%.
- The North American network posted negative unit revenue at -1.8% compared to last year, caused by an environment of lower booking-volumes and high competitive pressure. Yield development in point to sale USA is still positive and stronger than yield development in point of sale Europe.
- The Asian network unit revenue was down by 2.8% in the third quarter 2019, notably impacted by weak China and Hong-Kong traffic.
- The Caribbean & Indian Ocean network posted a continuing strong result with unit revenue at +5.3%, supported by peak period leisure demand.
- The Africa & Middle East network saw an unit revenue improvement of 1.9%, underpinned by West African oil and gas countries solid performance combined with improvement thanks to network rationalizations in the Middle East.
- The unit revenue pressure in the Latin American network remains ongoing for the time-being due to the current economic context in Argentina and Brazil.
The medium-haul hubs showed a resilient performance despite a strong capacity increase. French domestic network posted unit revenue up 4.0%, lifted by capacity reductions in the route network.
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Cargo network: Unit revenue still impacted by a challenging airfreight market
Third quarter | Nine months | |||||
Cargo business | 2019 | Change | Change | 2019 | Change | Change |
constant | constant | |||||
currency | currency | |||||
Tons (thousands) | 274 | -5.3% | 823 | -1.3% | ||
Capacity (ATK m) | 3,816 | +0.8% | 10,895 | +1.5% | ||
Traffic (RTK m) | 2,091 | -5.1% | 6,259 | -1.2% | ||
Load factor | 54.8% | -3.4 pt | 57.4% | -1.6 pt | ||
Total Cargo revenues (€m) | 514 | -9.3% | -10.7% | 1,594 | -3.6% | -5.5% |
Scheduled cargo revenues (€m) | 437 | -11.0% | -12.3% | 1,364 | -4.9% | -6.8% |
Unit revenue per ATK (€ cts ) | 11.44 | -11.8% | -13.1% | 12.52 | -6.3% | -8.2% |
Airfreight capacity is for another quarter significantly higher than the demand development, putting pressure on load factor and yield.
The demand is suffering from weakness in global trade, resulting in unit revenue down -13.1% at constant currency. The Group's Cargo strategy is focused on maintaining and increasing load factors where possible and taking a pro-active approach to new revenue opportunities.
Transavia: High capacity growth and positive unit revenue
Third quarter | Nine months | |||
Transavia | 2019 | Change | 2019 | Change |
Passengers (thousands) | 5,492 | +6.4% | 13,315 | +6.7% |
Capacity (ASK m) | 10,874 | +7.9% | 26,227 | +9.1% |
Traffic (RPK m) | 10,117 | +8.1% | 24,239 | +9.2% |
Load factor | 93.0% | +0.2 pt | 92.4% | +0.1 pt |
Total passenger revenues (€m) | 683 | +11.1% | 1,431 | +9.9% |
Unit revenue per ASK (€ cts) | 6.28 | +3.0% | 5.43 | +1.1% |
Unit cost per ASK (€ cts) | 4.69 | +8.4% | 4.84 | +4.9% |
Operating result (€m) | 173 | -5 | 154 | -27 |
Strong capacity growth of 7.9% in the third quarter 2019. The third quarter operating margin stands at a level of 25.3%, with an absolute operating result of 173 million euros, 5 million euros down compared to last year. The unit revenue was up by 3.0% compared to last year, supported by a strong demand throughout the network and a good ancillary revenue performance. Unit cost in the third quarter at +8.4% compared to last year, +6.0% at constant fuel and currency, explained by temporary increased fleet- and non-performance expenditures.
Maintenance: Strong third-party revenue growth and operating result stable
Third quarter | Nine months | |||||
Maintenance | 2019 | Change | Change | 2019 | Change | Change |
constant | constant | |||||
currency | currency | |||||
Total revenues (€m) | 1,163 | +9.6% | 3,453 | +9.9% | ||
Third-party revenues (€m) | 543 | +11.0% | +7.2% | 1,623 | +13.5% | +7.4% |
Operating result (€m) | 75 | -2 | -6 | 177 | 28 | 13 |
Operating margin (%) | 6.4% | -0.8 pt | -1.0 pt | 5.1% | +0.4 pt | +0.1 pt |
Maintenance revenues increased compared to last year with third-party revenues up by 11.0% and 7.2% at constant currency, a continuation of the growth trend underpinned by the inflow of new contracts. The Maintenance order book stood at 11.5 billion dollars at 30 September 2019, stable compared to 31 December 2018.
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The operating margin expressed as a percentage of total revenues stood at 6.4%, a decrease of 0.8 point impacted by airlines bankruptcies.
Air France-KLM Group: Operating result at 900 million euros with revenues up 2% and fuel expenses up 135 million euros
Third quarter | Nine months | |||||
2019 | Change | Change | 2019 | Change | Change | |
constant | constant | |||||
currency | currency | |||||
Capacity (ASK m) | 90,323 | +2.3% | 251,116 | +3.2% | ||
Traffic (RPK m) | 81,434 | +2.6% | 222,798 | +3.7% | ||
Passenger unit revenue per ASK (€ cts) | 7.08 | +0.5% | -0.6% | 6.69 | +0.6% | -0.5% |
Group unit revenue per ASK (€ cts) | 7.57 | -0.5% | -1.6% | 7.24 | -0.1% | -1.3% |
Group unit cost per ASK (€ cts) at | 6.57 | +1.4% | +0.4% | 6.84 | +0.8% | -0.7% |
constant fuel | ||||||
Revenues (€m) | 7,696 | +2.0% | +0.8% | 20,732 | +3.8% | +2.3% |
EBITDA (€m) | 1,647 | -7.0% | -8.2% | 3,218 | -6.5% | -5.3% |
Operating result (€m) | 900 | -15.5% | -17.4% | 997 | -22.8% | -20.5% |
Operating margin (%) | 11.7% | -2.4 pt | -2.6 pt | 4.8% | -1.7 pt | -1.4 pt |
Net income - Group part (€m) | 366 | -420 | 126 | -501 | ||
In the third quarter 2019, the Air France-KLM Group posted an operating result of 900 million euros, down by 165 million euros compared to last year, impacted by trading environment and fuel bill increase.
Net income amounted for 366 million euros in the third quarter 2019, a decrease of 420 million euros compared to last year, including non-operating cost impact related to Airbus A380 phase-out of 100 million euros and effects on currency hedge portfolio related to a stronger US dollar and Japanese Yen.
The fuel bill including hedging amounted to 1,512 million euros for the third quarter 2019, up 135 million euros. This increase is mainly explained by a hedging loss of 50 million euros in this quarter compared to a hedging gain of 100 million euros last year, and a negative currency effect on the fuel bill of 48 million euros due to a stronger dollar.
Currencies had a positive 92 million euro impact on revenues and a negative 20 million euro effect on costs (ex-fuel) including currency hedging.
Third quarter 2019 unit cost at +0.4%, annual unit cost result on track for full year guidance
On a constant currency and fuel price basis, unit costs were up +0.4% in the third quarter 2019. The Group had a ramp up of Pilots hiring over the past 12 months, supporting the 2020 capacity growth plan.
Group net employee costs were up 5.0% in the quarter compared to last year, explained by additional hires in response to the capacity growth and the impact of wage agreement implementation for Air France and KLM staff. The average number of FTEs (Full-time equivalent) in the third quarter 2019 increased by 1,600 compared to last year, including an additional 600 Pilots and 850 Cabin Crew. However, productivity measured in ASK per FTE increased by 0.4% in the third quarter 2019.
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Net debt down, leverage ratio stable, on track for full year guidance at/below 1.5x
Third quarter | Nine months | |||
In € million | 2019 | Change | 2019 | Change |
Cash flow before change in WCR and Voluntary Departure | 1,514 | -80 | 2,979 | -49 |
Plans, continuing operations (€m) | ||||
Cash out related to Voluntary Departure Plans (€m) | -22 | -10 | -33 | +100 |
Change in Working Capital Requirement (WCR) (€m) | -715 | +108 | 72 | +62 |
Net cash flow from operating activities (€m) | 777 | 18 | 3,018 | 113 |
Net investments * (€m) | -765 | -211 | -2,154 | -112 |
Operating free cash flow (€m) | 12 | -193 | 864 | 1 |
Repayment of lease debt | -247 | -28 | -748 | -12 |
Adjusted operating free cash flow ** | -235 | -221 | 116 | -11 |
- Sum of 'Purchase of property, plant and equipment and intangible assets' and 'Proceeds on disposal of property, plant and equipment and intangible assets' as presented in the consolidated cash flow statement.
- The "Adjusted operating free cash flow" is operating free cash flow with deduction of the repayment of lease debt.
A lease debt reduction of 247 million euros and an adjusted operating free cash flow negative at -235 million euros
The Group generated a negative adjusted operating free cash flow of -235 million euros, a decrease of 221 million euros compared to last year, explained by higher capex in the third quarter 2019.
The year-to-date lease debt amounted for 4,399 million euros, down by 136 million euros compared to the end of 2018.
Leverage on track with full year guidance at/below 1.5x
In € million | 30 Sep 2019 | 31 Dec 2018 |
Net debt | 5,911 | 6,164 |
EBITDA trailing 12 months | 3,994 | 4,217 |
Net debt/EBITDA trailing 12 months | 1.5 x | 1.5 x |
The Group reduced its net debt to 5,911 million euros at 30 September 2019 compared to 6,164 million euros at 31 December 2018, this 253 million euro reduction is driven by the repayment of lease debt. The net debt/EBITDA ratio stood at 1.5x at 30 September 2019, a stable situation, explained by the reduction in net debt and EBITDA.
Air France and KLM both impacted by lower unit revenues and rise in fuel costs
Third quarter | Nine months | |||
2019 | Change | 2019 | Change | |
Air France Group Operating result (€m) | 383 | -110 | 270 | -58 |
Operating margin (%) | 8.2% | -2.5 pt | 2.1% | -0.6 pt |
KLM Group Operating result (€m) | 512 | -61 | 714 | -246 |
Operating margin (%) | 16.2% | -2.2 pt | 8.5% | -3.1 pt |
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Air France-KLM SA published this content on 31 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2019 06:26:05 UTC
