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    AF   FR0000031122

AIR FRANCE-KLM

(AF)
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Third quarter 2021 Results

10/29/2021 | 01:30am EST

October 29, 2021

THIRD QUARTER 2021

Continuing recovery in capacity generates strong revenue growth and

positive operating results for the first time since the start of the Covid-19 crisis,

Adjusted operating free cash flow positive at 278 million euros thanks to EBITDA contribution

Third quarter:

  • Revenue at 4,567 million euros, up 2,043 million compared to last year
  • Operating result at 132 million euros, up 1,178 million euros compared to last year
  • EBITDA improved to 796 million euros, an increase of 1,238 million euros compared to last year
  • Strong performance of Transavia with an operational result of 105 million euros
  • Net income at -192 million euros, up 1,473 million euros compared to last year
  • Net debt at 8.1 billion euros, down by 2.9 billion euros compared to end of 2020 thanks to the first set of capital strengthening measures

OUTLOOK

After the announcement in September of the reopening of the United States for European citizens, bookings came quickly for November and even more for Christmas holiday. The reopening of Canada in early September was another important milestone for the recovery of the Group, as well as the reopening of Singapore as from October.

In this context, the Group expects capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at index in the range of 70% to 75% in the Fourth quarter 2021 compared to 2019. EBITDA is expected to be positive in the Fourth quarter 2021 and slightly positive in Full Year 2021.

Due to the uncertainty regarding the reopening of the majority of the Asian countries, no capacity guidance will be provided for 2022.

Air France-KLM is considering the next steps of recapitalization measures to strengthen balance sheet. The reprofiling of the French Bank Loan "PGE", the EMTN program (Euro Medium Term Note) which is now ready for use, and the finalization of a S&P solicited ESG rating tool, will be part of the liability management actions.

On the equity side, discussions are ongoing on KLM recapitalization measures on current shareholder loan and also on further capital strengthening measures for Air France-KLM. These could include instruments such as a Rights Issue and Quasi equity instruments.

Air France-KLM Group

Third quarter

Nine months

2021

Change1

2021

Change

Passengers (thousands)

16,940

+92.6%

28,787

+2.3%

Passenger Unit revenue per ASK2 (€ cts)

5.48

+36.9%

4.34

-12.5%

Operating result (€m)

132

+1,178

-1,800

+1,614

Net income - Group part (€m)

-192

+1,473

-3,161

+2,917

Adj. operating free cash flow (€m)

278

+1,498

-856

+2,691

Net debt at end of period3 (€m)

8,121

-2,928

  1. The third quarter 2020 was highly impacted by worldwide travel restrictions
  2. Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
  3. See appendix for the calculation of the net debt

1

The Board of Directors of Air France-KLM, chaired by Mrs Anne-Marie Couderc, met on October 28, 2021 to approve the financial statements for the first nine months of 2021. Group CEO Mr. Benjamin Smith said:

"The Air France-KLM group had a good summer season thanks to the reopening of many countries. I would like to thank our employees who have enabled our customers to return to the skies in the best possible sanitary conditions. For the first time since the beginning of this Covid-19 crisis, the Q3 results show a positive operating result which encourages us to continue our efforts. The Covid-19 crisis is not yet over. Important continents such as Asia remain mainly closed and business travel is slowly recovering. This is why we must remain very agile and continue our transformation with the objective of improving both our economic and environmental performance. In this respect, the Air France-KLM Group has committed to setting greenhouse gas emission reduction targets in line with the Paris agreements and based on scientific data (through the science-based targets initiative). This new commitment comes in addition to our goal of zero net emissions by 2050".

Business review

Network: Recovery continued throughout the summer peak

Third quarter

Nine months

Network

2021

Change

Change

2021

Change

Change

constant

constant

currency

currency

Total revenues (€m)

3,791

+89.1%

+89.8%

8,011

+11.0%

+13.0%

Scheduled revenues (€m)

3,595

+93.7%

+94.4%

7,495

+11.0%

+13.3%

Operating result (€m)

-13

+976

+968

-1,728

+1,113

+1,095

Third quarter 2021 revenues increased by 89.8% at constant currency to 3,791 million euros. The operating result was close to break-even and amounted to -13 million euros, a 968 million euros increase at constant currency compared to last year.

Passenger network: All indicators showing positive results in the Third quarter

Third quarter

Nine months

2021

Change

Change

2021

Change

Change

Passenger network

constant

constant

currency

currency

Passengers (thousands)

12,694

+87.1%

23,015

-2.8%

Capacity (ASK m)

52,532

+63.7%

122,535

+18.7%

Traffic (RPK m)

34,019

+147.4%

63,382

-5.2%

Load factor

64.8%

+21.9 pt

51.7%

-13.0 pt

Total passenger revenues (€m)

2,956

+122.5%

+123.2%

5,443

-1.2%

+0.4%

Scheduled passenger revenues (€m)

2,866

+126.7%

+127.3%

5,223

-0.9%

+1.1%

Unit revenue per ASK (€ cts)

5.46

+38.5%

+38.9%

4.26

-16.5%

-14.8%

Third quarter 2021, the capacity in Available Seat Kilometers in the Third quarter was 63.7% higher than last year, however at 66% of 2019 Third quarter levels. Thanks to the Group's balanced network, less travel restrictions, for instance the reopening of Canada in September and the continuation of strong Cargo performance, the passenger network was in the upper limit of the Group's guidance provided during the Second quarter 2021 results presentation.

On most routes, the Group observed a decrease in unit revenue versus 2019 mainly due to lower load factors, while yields are close to 2019 levels for the entire passenger activity.

  • North Atlantic peak summer has shown strong increase compared to June driven by the U.S point of sales. The Group also observes good performance on Mexican routes and in Canada after the lifting of border restrictions.

2

  • On Caribbean and Indian Ocean, the Group posted a good performance despite sanitary restrictions on the French Antilles affecting especially September results.
  • Africa performance was driven by West and Central African countries with yield on Africa above 2019 for Air France due to the limited industry capacity and benefiting from positive traffic mix.
  • Asia capacity and traffic were still weak for both airlines due to the closure of almost all Asian countries.
  • South American routes showed mixed results with a start of recovery driven by Andean and Central Americas
  • The group posted encouraging short and medium-haul results in the peak summer driven by over-performing local leisure flows with same yield as 2019. Capacity redeployment to leisure areas and seasonal route openings enabled to leverage all leisure traffic opportunities. September confirms recovery of business motive traffic with stabilization of yield not far from 2019 levels.

During the Third quarter, Air France added one Airbus 350-900 to the fleet and received its first Airbus A220-300, KLM phased out two B737-700 and HOP decreased its aircraft in operation with two Canadair Jet 1000 and one Canadair Jet 700.

Cargo: High yield compensating the lower load factor in the Third quarter due to increase in capacity

Third quarter

Nine months

Cargo business

2021

Change

Change

2021

Change

Change

constant

constant

currency

currency

Tons (thousands)

247

+12.5%

789

+28.9%

Capacity (ATK m)

3,052

+20.3%

8,363

+14.4%

Traffic (RTK m)

1,889

+8.9%

6,055

+27.6%

Load factor

61.9%

-6.5 pt

72.4%

+7.5 pt

Total Cargo revenues (€m)

835

+23.4%

+24.1%

2,568

+50.3%

+53.9%

Scheduled cargo revenues (€m)

729

+23.1%

+23.7%

2,272

+53.3%

+56.8%

Unit revenue per ATK (€ cts )

23.89

+2.3%

+2.9%

27.17

+34.0%

+37.0%

Compared to the third quarter in 2020, capacity increased by 20.3% in Available Ton Kilometers and traffic increased by 8.9%. Additional belly capacity to leisure destinations could not be filled completely resulting in a reduction in load factor by 6.5 points. Thanks to an increase in yield, which compensated the reduction in load factor, the unit revenue per ATK at constant currency improved by 2.9%.

Cargo capacity this quarter is still 20% below the capacity in the Third quarter of 2019 while the demand remains high resulting in high revenues.

Strong demand is expected on Q4 as global trade is booming, sea freight faces bottleneck, and the belly capacities are still constrained overall.

The Sustainable Aviation Fuel (SAF) Cargo program welcomed 25 partners already, showing the sustainable commitment of Air France-KLM Cargo and its partners.

3

Transavia: Reaching close to 80% load factor in the Third quarter with strong capacity development

Third quarter

Nine months

Transavia

2021

Change

2021

Change

Passengers (thousands)

4,246

+110.8%

5,772

+29.6%

Capacity (ASK m)

9,393

+56.3%

13,645

+22.1%

Traffic (RPK m)

7,359

+90.2%

9,881

+16.2%

Load factor

78.3%

+14.0 pt

72.4%

-3.7 pt

Total passenger revenues (€m)

522

+99.3%

685

+31.5%

Unit revenue per ASK (€ cts)

5.59

+27.7%

5.04

+11.0%

Unit cost per ASK (€ cts)

4.47

-3.0%

5.87

-8.2%

Operating result (€m)

105

+119

-113

+94

The third quarter of 2021 showed a strong recovery in demand for leisure traffic in Europe, both from the Netherlands as well as France. With activity levels back to around 85% of the regular production, Transavia realized an Operating Profit of €105mln, with a healthy COI margin of 20,2%, moving towards Q3 2019 level of 26%.

Compared to last year, the capacity increased by 56.3% while traffic increased by 90.2% and the number of passengers more than doubled at an increase of 110.8%.

Transavia was able to continuously adjust and redesign the network to accommodate high leisure demand from both the Netherlands and France, with an increase of capacity to Greece, Spain and Portugal.

In the first nine months of 2021, the number of aircraft of Transavia France increased by ten as part of the growth strategy for Transavia France and will reach 61 aircraft in Summer 2022.

Maintenance business: Operating result positive for the Third quarter 2021

Third quarter

Nine months

Maintenance

2021

Change

Change

2021

Change

Change

constant

constant

currency

currency

Total revenues (€m)

703

+14.2%

2,005

-11.1%

Third-party revenues (€m)

247

0.0%

+3.0%

761

-21.0%

-12.5%

Operating result (€m)

29

74

76

19

386

405

Operating margin (%)

4.1%

+11.5 pt

+11.9 pt

1.0%

+17.2 pt

+18.9 pt

The Third quarter operating result stood at 29 million euros, an increase of 76 million euros at constant currency versus the Third quarter 2020.

The operating result increase in the Third quarter is mainly explained by less underactivity, costs control, savings and operational improvement.

Total revenues increased by 14.2% in the Third quarter while third party revenues remained stable and internal revenues increased by 24%. This increase in internal revenues is aligned with the activity increase of the Air France-KLM airlines compared to the third quarter 2020. Both internal and third party engines revenues are impacted by green time usage. Nevertheless, some recovery signs are there and E&M business should increase its external activity over the coming months.

4

Air France-KLM Group: Positive Operating result in the Third quarter for the first time since the start of the Covid-19 crisis

Third quarter

Nine months

2021

Change

Change

2021

Change

Change

constant

constant

currency

currency

Capacity (ASK m)

61,925

+62.5%

136,179

+19.0%

Traffic (RPK m)

41,378

+134.8%

73,262

-2.8%

Passenger unit revenue per ASK

5.48

+36.6%

+36.9%

4.34

-14.0%

-12.5%

(€ cts)

Group unit revenue per ASK (€

6.65

+19.6%

+20.0%

6.01

-5.3%

-3.5%

cts)

Group unit cost per ASK (€ cts) at

6.44

-22.5%

-24.4%

7.33

-21.4%

-19.7%

constant fuel

Revenues (€m)

4,567

+80.9%

+82.0%

9,477

+8.6%

+11.5%

EBITDA (€m)

796

1,238

1,232

-78

1,204

1,204

Operating result (€m)

132

1,178

1,172

-1,800

1,614

1,613

Operating margin (%)

2.9%

+44.3 pt

+44.3 pt

-19.0%

+20.1 pt

+21.2 pt

Net income - Group part (€m)

-192

+1,473

-3,161

+2,917

In the Third quarter 2021, the Air France-KLM Group posted a positive operating result of 132 million euros, up by 1,178 million euros compared to last year driven by an increase of capacity leading to a reduction in unit cost. In parallel increase of load factor generated an increase of the unit revenue.

Net income amounted to -192 million euros in the Third quarter 2021, an increase of 1,473 million euros compared to last year. Last year Third quarter was heavily impacted by the recording of exceptional accounting items due to Covid-19 (mainly due to restructuring costs provision for Air France staff, HOP staff and Air France-KLM international commercial staff, but as well due to fleet impairment and fuel over hedge).

Third quarter 2021 unit cost decreased by 24%, thanks to an increase of capacity and FTE reductions

On a constant currency and fuel price basis, unit costs were down 24.4% in the third quarter 2021 compared to the same quarter last year.

All cost items increased in the Third quarter 2021 compared to last year due to an increase in capacity of 62.5%.

Group net employee cost were up 8.7% due to less government support driven by higher activity, and partly compensated by FTE reductions.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Air France-KLM SA published this content on 29 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2021 05:27:06 UTC.


ę Publicnow 2021
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Financials
Sales 2021 13 897 M 15 745 M 15 745 M
Net income 2021 -3 375 M -3 823 M -3 823 M
Net Debt 2021 10 606 M 12 016 M 12 016 M
P/E ratio 2021 -0,64x
Yield 2021 -
Capitalization 2 568 M 2 912 M 2 909 M
EV / Sales 2021 0,95x
EV / Sales 2022 0,66x
Nbr of Employees 74 415
Free-Float -
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Number of Analysts 22
Last Close Price 4,00 €
Average target price 3,54 €
Spread / Average Target -11,5%
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Managers and Directors
Benjamin M. Smith Chief Executive Officer & Director
Steven Zaat Chief Financial Officer
Anne-Marie Couderc Non-Executive Chairman
Jean-Christophe Lalanne Executive Vice President-Information Technology
Isabelle Bouillot Independent Director
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