AIR FRANCE - KLM : First quarter 2012 results


May 4, 2012

FINANCIAL YEAR 2012  

QUARTER JANUARY-MARCH 2012

  • A tough quarter, but in line with our expectations  

  • Satisfactory passenger traffic, ongoing weakness in cargo 

  • 5.6% increase in passenger unit revenue, but still insufficient to offset rise in fuel bill 

  • Implementation of the first phase of 'Transform 2015', and negotiations underway for second phase   

OUTLOOK  

  • Full year 2012 objectives maintained: reduction in unit cost on a constant fuel price and currency basis, net debt of a maximum level of 6.5 billion euros.   

The Board of Directors of Air France-KLM, chaired by Jean-Cyril Spinetta, met on May 3rd, 2012 to examine the accounts for the First Quarter of 2012.  

As anticipated, the first quarter was difficult, in spite of an improvement in activity in March. Strict capacity control as well as good traffic levels led to a rise in unit revenue in the passenger business. However the persistent weakness of international trade weighed on that of cargo. Overall, the improvement in unit revenue was still insufficient to compensate for the rise in costs, notably fuel.

Key data

€ millions (per share data in €) Quarter to 31st March
2012 2011 change
Revenues  5,645 5,326 6.0%
EBITDAR[1]
37 205 -82.0%
Operating result -597 -403 nm
Adjusted operating result[2]
-521 -333 nm
Net result, group share[3]
-368 -367 nm
Earnings per share -1.25 -1.24 nm
Diluted earnings per share -1.25 -1.24 nm

Activity

Marked improvement in passenger unit revenue
The passenger business saw a 5.5% rise in traffic for an increase in capacity limited to 1.6%. The load factor gained 3.1 points to 81.6%. Unit revenue per available seat kilometer (RASK) progressed by 5.6% (+4.7% ex. currency) on the back of the rise in volumes. Passenger revenues rose by 8.8% after a favourable currency effect of 0.9%, to 4.43 billion euros. The operating result was -504 million euros (-367 million euros a year earlier) due notably to a 224 million euro increase in the fuel bill.

The cargo business continues to be affected by the slowdown in economic activity which started to weight on transportation of cargo as of May 2011. Traffic fell by 6.1% for capacity down by 2.0% leading to a 2.9 point decline in load factor to 64.9%. Unit revenue per available ton kilometre (RATK) declined 2.6% (-4.1% ex. currency).Cargo revenues amounted to 744 million euros (-3.3%) and the operating result was -68 million euros (-9 million euros at 31st March 2011).

Third party maintenance revenues progressed by 10.7% to 258 million euros. The operating result stood at 16 million euros (+26 million euros at 31st March 2011). The engines and components activities performed well during the quarter. Other activities generated revenues of 213 million euros of which 117 million euros for leisure. The operating result was -41 million euros (-53 million euros at 31st March 2011).

Total revenues stood at 5.65 billion euros, up 6.0% after a positive currency effect of 1.1%. Unit revenue per equivalent available seat kilometer (EASK) rose 6.6% (+5.5% ex. currency) but this was insufficient to compensate for the rise in the fuel bill.

Rise in operating costs, notably driven by fuel

Operating costs rose 9.0% and by 6.0% ex-fuel. Unit cost per EASK was up by 7.3%, but by just 1.9% on a constant currency and fuel price basis, for a slight rise in production measured in EASK (+1.3%). The group nevertheless maintains its objective of a slight decrease in unit cost on a constant currency and fuel price basis for Full Year 2012.

The fuel bill rose by 255 million euros to 1.68 billion euros (+17.9%) under the combined effect of a 1% rise in volumes, a negative currency effect of 3% and a 13% rise in fuel costs after hedging.

Employee costs amounted to 1.91 billion euros (+6.0%) notably due to the knock-on effect of 2011 salary increases and a rise in pension costs at KLM of which 23 million euros based on actuarial assumptions as at December 31, 2011. This rise in employee costs does not reflect the trend for Full Year 2012 which is expected to record a rise in the region of 2% (+3% including the additional pension charge estimated at 80 million euros for the Full Year).
The operating result was -597 million euros (-403 million euros at 31st March 2011). The adjusted operating result was -521 million euros. Net interest charges improved from 91 million euros at 31st March 2011 to 82 million euros at 31st March 2012. 'Other financial income and costs' stood at 276 million euros (67 million euros a year earlier) of which 220 million euros from the change in the fair value of hedging instruments.

Net result, group share stood at -368 million euros (-367 million euros at 31st March 2011). Per share, the net and net diluted result stood at -1.25 euros (-1.24 euros at 31st March 2011).

Satisfactory level of liquidity

Investments net of disposals of 25 million euros amounted to 391 million euros at 31st March 2012 (versus 275 million euros after 306 million of disposals in Q1 2011). Operating cash flow was -58 million euros. At 31st March 2012 the Air France-KLM group had cash of 2.85 billion euros as well as available credit lines of 1.85 billion euros.

Shareholders' funds stood at 5.75 billion euros. Net debt amounted to 6.43 billion euros (6.52 billion euros at 31st December 2011). The gearing ratio[1] stood at 1.12 (1.07 at 31st December 2011).

Outlook

The economic environment continues to be uncertain, while the fuel price in euros remains at record levels. The annual fuel bill is expected to increase by 1.1 billion euros[2]. In this context, the group is highly focused on the negotiations underway, the successful outcome of which will enable it to significantly improve its economic efficiency between now and 2014.

The results of the First Quarter lead the group to maintain its expectations for Full Year 2012, of a reduction in unit cost at constant fuel price and currency and a maximum level of net debt of 6.5 billion at year end.  The operating result for the First Half is expected below the level of last year (-548 million euros at 30 June 2011), while the Second Half will see the benefits of the first 'Transform 2015' measures feeding through.

  

Information by business    

 

Passenger

Quarter to 31st March
2012 2011 change
Traffic (RPK millions) 51,733 49,019 +5.5%
Capacity (ASK millions) 63,391 62,399 +1.6%
Load factor 81.6% 78.6% +3.1 pts
Total passenger revenues (€ m) 4,430 4,072  +8.8%
Revenues from scheduled passenger business (€m) 4,205 3 896 +7.9%
Unit revenue per RPK (€ cts) 8.13 8.00 +1.9%
Unit revenue per RPK  ex currency (€ cts) - - +0.8%
Unit revenue per ASK (€ cts) 6.63 6.28 +5.6%
Unit revenue per ASK  ex currency (€ cts) - - +4.7%
Unit cost per ASK (€ cts) 7.43 6.89 +7.9%
Unit cost per ASK at const. currency and fuel price (€ cts) - - +2.7%
Operating result (€m) -504 -367 nm

Cargo

Quarter to 31st March
2012 2011 change
Traffic (RTK millions) 2,594 2,764 -6.1%
Capacity (ATK millions) 4,293 4,041 -2.0%
Load factor 64.9% 67.7% -2.9 pts
Total cargo business revenues (€m) 744 769 -3.3%
Revenues from the transportation of cargo (€m) 698 731 -4.5%
Unit revenue per RTK (€ cts) 26.90 26.46 +1.7%
Unit revenue per RTK ex currency (€ cts) - - +0.1%
Unit revenue per ATK (€ cts) 17.46 17.92 -2.6%
Unit revenue per ATK ex currency (€ cts) - - -4.1%
Unit cost per ATK (€ cts) 19.16 18.16 +5.5%
Unit cost per ATK at const. currency and fuel price (€ cts) - - -1.0%
Operating result (€m) -68 -9 nm

Maintenance  

The maintenance business recorded revenues of 772 million euros (+2.6%) of which 258 million euros in third party revenues, up by 10.7% in Q1 2012. The operating result stood at 16 million euros (versus 26 million euros a year earlier). High value added businesses, notably engines and components remained robust.

Other businesses

'Other Businesses' mainly include the leisure activities of Transavia and the catering business of Servair. In Q1 2012, the leisure business generated revenues of 117 million euros versus 141 million euros in Q1 2011. This decline was due to the transfer of Martinair's passenger activity to that of KLM. At constant perimeter, Transavia recorded a 9% rise in revenues and an operating result of -45 million euros (-41million euros au 31st March 2011 at constant perimeter). Catering recorded third party revenues of 87 million euros and an operating result of 1 million euros (5 million euros a year earlier).  

Additional information

Accounts for January-March 2012 are non-audited.  

The results presentation will be available on line at: www.aifranceklm-finance.com on May 4th, 2012 from 08.00h CET.

Practical information

Conference call on 4th May 2012 at 10.00h CET

  • To connect, dial: 

        - UK 44 (0)20 7162 0125 (password: AKH)
        - US 1 334 323 6203 (password: AKH)

  • To listen to a recording of the conference in English, dial: 

        - UK 44 (0)20 7031 4064 (code: 915069)
        - US 1 954 334 0342 (code: 915069)

 

Contact
  Dominique Barbarin                        Bertrand Delcaire
  SVP Investor Relations                   VP Investor Relations
  Tel : +33 1 41 56 88 60                   Tel : +33 1 41 56 72 59       
  Email: dobarbarin@airfrance.fr         Email: bedelcaire@airfrance.fr
INCOME STATEMENTS  

 
First Quarter (January to March)
In euros million 2012 2011 Variation
SALES 5,645 5,326 6.0%
Other revenues 1 1 0.0%
EXTERNAL EXPENSES (3,884) (3,566) 8.9%
Aircraft fuel (1,681) (1,426) 17.9%
Chartering costs (138) (130) 6.2%
Aircraft operating lease costs (225) (207) 8.7%
Landing fees and en route charges (434) (419) 3.6%
Catering (138) (131) 5.3%
Handling charges and other operating costs (321) (314) 2.2%
Aircraft maintenance costs (276) (265) 4.2%
Commercial and distribution costs (221) (177) 24.9%
Other external expenses (450) (497) (9.5%)
Salaries and related costs (1,911) (1,802) 6.0%
Taxes other than income taxes (46) (42) 9.5%
Amortization and depreciation (390) (409) (4.6%)
Provisions (19) 8 nm
Other income and expenses 7 81 (91.4%)
INCOME FROM CURRENT OPERATIONS (597) (403) (48.1%)
Sales of aircraft equipment 3 (3) nm
Sales of subsidiaries 98 1 nm
Other non-current income and expenses (6) (101) 94.1%
INCOME FROM OPERATING ACTIVITIES (502) (506) 0.8%
Income from cash and cash equivalents 19 21 (9.5%)
Cost of finmncial debt (101) (112) (9.8%)
Net cost of finmncal debt (82) (91) 9.9%
Foreign exchange gains (losses), net 54 70 (22.9%)
Change in fair value of finmncial assets and liabilities 220 (2) nm
Other finmncial income and expenses 2 (1) nm
INCOME BEFORE TAX (308) (530) 41.9%
Income taxes (22) 170 nm
NET INCOME OF CONSOLIDATED COMPANIES (330) (360) 8.3%
Share of profits (losses) of associates (38) (7) 442.9%
INCOME FROM CONTINUING OPERATIONS (368) (367) (0.3%)
Net income from discontinued operations - - -
NET INCOME FOR THE PERIOD (368) (367) (0.3%)
Minority interest - - -
NET INCOME FOR THE PERIOD - GROUP (368) (367) (0.3%)
 
 

CONSOLIDATED BALANCE SHEET

Assets
In € millions
March 31, 2012 March 31, 2011
Goodwill 425 426
Intangible assets 789 774
Flight equipment 10,698 10,689
Other property, plant and equipment 2,019 2,055
Investments in equity associates 387 422
Pension assets 3,278 3,217
Other financial assets 1,539 2,015
Deferred tax assets 1,094 1,143
Other non-current assets 231 168
Total non-current assets 20,460 20,909
Assets held for sale 10 10
Other short-term finmncial assets 730 751
Inventories 540 585
Trade accounts receivables 2,138 1,774
Income tax receivables 11 10
Other current assets 1,049 995
Cash and cash equivalents 2,424 2,283
Total current assets 6,902 6,408
Total assets 27,362 27,317

Liabilities and equity
In € millions
March 31, 2012 March 31, 2011
Issued capital 300 300
Additional paid-in capital 2,971 2,971
Treasury shares (82) (89)
Reserves and retained earnings 2,509 2,858
Equity attributable to equity holders of Air France-KLM 5,698 6,040
Non-controlling interests 54 54
Total equity 5,752 6,094
Provisions and retirement benefits 2,109 2,061
Long-term debt 9,129 9,228
Deferred tax liabilities 428 466
Other non-current liabilities 316 321
Total non-current liabilities 11,982 12,076
Provisions 149 156
Current portion of long-term debt 1,152 1,174
Trade accounts payables 2,406 2,599
Deferred revenue on ticket sales 2,586 1,885
Frequent flyer programs 770 784
Current tax liabilities 2 6
Other current liabilities 2,400 2,386
Bank overdrafts 163 157
Total current liabilities 9,628 9,147
Total liabilities 21,610 21,223
Total liabilities and equity 27,362 27,317

CONSOLIDATED STATEMENT OF CASH FLOWS

In € millions
Period from January 1 to March 31,
2012 2011
Net income for the period - Equity holders of Air France-KLM (368) (367)
Non(controlling interests - -
Amortization, depreciation and operating provisions 409 401
Finmncial provisions (2) 1
Derivatives - non monetary result (229) (20)
Unrealized foreign exchange gains and losses, net (61) (74)
Share of (profits) losses of associates 38 7
Deferred taxes 16 (166)
Other non(monetary items (6) (73)
Subtotal (304) (292)
(Increase) / decrease in inventories 33 28
(Increase) / decrease in trade receivables (388) (191)
Increase / (decrease) in trade payables (131) 347
Change in other receivables and payables 732 484
Net cash flow from operating activities (58) 376
Acquisition of subsidiaries and investments in associates, net of cash acquired - (23)
Purchase of property, plant and equipment and intangible assets (416) (561)
Proceeds on disposal of property, plant and equipment and intangible assets 25 306
Dividends received 13 -
Decrease (increase) in investments, net between 3 months and 1 year 115 (150)
Net cash flow used in investing activities
(263)
(428)
Increase in capital - 6
Purchase of non(controlling interests, of shares in non(controlled entities - (15)
Disposal of subsidiaries without loss of control, of shares in non(controlled entities 474 -
Issuance of long(term debt 325 546
Repayment on long(term debt (228) (116)
Payment of debt resulting from finance lease liabilities (129) (149)
New loans (8) (43)
Repayment on loans 28 80
Dividends paid - (1)
Net cash flow from finmncing activities
462
308
Effect of exchange rate on cash and cash equivalents and bank overdrafts (6) (19)
Change in cash and cash equivalents and bank overdrafts 135 237
Cash and cash equivalents and bank overdrafts at beginning of period 2,126 3,351
Cash and cash equivalents and bank overdrafts at end of period 2,261 3,588

AIR FRANCE-KLM FLEET

Air France fleet

Aircraft AF Brit Air City Jet Régionml VLM Transavia Owned Finmnce lease Operating lease Total In operation Change /
3/31/11
B747(400 8 3 5 8 8 (1
B777(300 34 14 5 15 34 34
B777(200 25 15 2 8 25 25
B767(300
A380(800 6 2 1 3 6 6
A340(300 15 10 2 3 15 15
A330(200 15 3 2 10 15 15
MD11
Total long haul 103 47 12 44 103 103 (1
B747(400 cargo 5 2 3 5 3
B777( cargo 2 2 2 2
MD(11(CF
MD(11(F
Total freighter 7 4 3 7 5
B737 900
B737(800 8 8 8 8
B737(700
B737(400
B737(300
A321 25 11 1 13 25 25
A320 61 23 3 35 61 60 +1
A319 44 21 4 19 44 43
A318 18 12 6 18 18
Total medium haul 148 8 67 14 75 156 154 +1
AVRO RJ 85 23 12 11 23 21 (1
CRJ 1000 13 13 13 13 +2
CRJ 900
CRJ 700 15 6 9 15 15
CRJ 100 13 12 1 13 13
Embraer 190 10 4 6 10 10
Embraer 170 13 8 2 3 13 12 +2
Embraer 145 25 11 11 3 25 25 (1
Embraer 135 7 4 3 7 4
Fokker 100 3 3 3
Fokker 70
Fokker 50 14 12 2 14 14
Total Regionml 44 23 55 14 85 26 25 136 127 +2
TOTAL 258 44 23 55 14 8 203 52 147 402 389 +2

KLM fleet

Aircraft KLM KLM Cityhopper Transavia Martinmir Owned Finmnce lease Operating lease Total In operation Change /
3/31/11
B747(400 22 13 4 5 22 22
B777(300 5 5 5 5
B777(200 15 6 9 15 15
B767(300
A380(800
A340(300
A330(200 13 6 7 13 13 +2
MD11 10 8 2 10 10
Total long haul 65 21 23 21 65 65 +2
B747(400 cargo 4 4 3 5 8 5
B777( cargo
MD(11(CF 4 3 1 4 4
MD(11(F 3 2 1 3 2 (1
Total freighter 4 11 3 5 7 15 11 (1
B737 900 5 2 3 5 5
B737(800 23 19 12 5 25 42 42 (1
B737(700 18 10 13 15 28 28
B737(400 4 4 4
B737(300 1 1 1
A321
A320
A319
A318
Total medium haul 51 29 17 20 43 80 75 (1
AVRO RJ 85
CRJ 1000
CRJ 900
CRJ 700
CRJ 100
Embraer 190 19 2 13 4 19 19 +2
Embraer 170
Embraer 145
Embraer 135
Fokker 100 5 5 5 5
Fokker 70 26 23 3 26 26
Fokker 50
Total regionml 50 30 16 4 50 50 +2
TOTAL 120 50 29 11 71 64 75 210 201 +2
TOTAL AIR FRANCE-KLM GROUP 274 116 222 612 590 +4

[1] Before amortisation, provisions and operating leases
[2] Adjusted for the portion of operating leases corresponding to financial costs (34%)  
[3] Net result group share henceforth restated only in the case of exceptionally large operations such as Amadeus
[1] See calculation on p 144 of the 2011 Registration Document. Reconciliation available in the results presentation.
[2] Based on forward curves at 26 April 2012 and a euro/dollar rate of 1.32 in 2012


Attachments

Q1 2012 results