SECOND QUARTER
Improvement in operating result (+79 million euros versus -79 million euros at June 30th 2012) driven by costs
A tough environment in Europe which held back revenues
Strong increase in free cash flow
FIRST HALF
1.3% increase in revenues to 12.3 billion euros
2.2% reduction in unit cost on a constant currency and fuel price basis Net debt reduced by more than 600 million euros
OUTLOOK FOR THE SECOND HALF
Objective of an improvement in operating result during the Second Half in line with that of the First Half
Reduction in net debt relative to December 31st 2012
Adoption of additional measures in medium-haul and cargo
The Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on 25th July, 2013 to examine the accounts for the First Half of Financial Year 2013.
Alexandre de Juniac made the following comments: Transform 2015 is fully on track, with cost reduction measures, the industrial plan and initiatives to win back our customers all underway within the planned timeframe. For the past year our results have improved quarter after quarter, in spite of the persistently tough economic environment. Nevertheless, revenues remain below target at this stage and the turnaround of the Medium-haul and Cargo businesses in particular is taking longer than expected. As a result, further measures will be adopted in both businesses in the Fall to ensure that, on completion of our plan, we will have met our cost and debt reduction objectives, paving the way for a return to growth.
Second quarter 2013
Activity: 1.2% increase in revenues
The passenger and cargo businesses improved their operating result despite a deterioration in the economic environment which held back unit revenues.
Passenger traffic rose by 3.2% for capacity up by 2.6% enabling a 0.5 point increase in load factor to 83.2%. Unit revenue per available seat kilometre (RASK) was, however, down by 1.9% (-1.3% ex- currency) due to the weakness in unit revenue per revenue passenger kilometre (RRPK) (-2.5% and -1.9% ex-currency). Revenues rose by 0.6% to 5.16 billion euros. The operating result of the passenger business was positive at 93 million euros (-57 million euros at June 30th 2012).
The cargo business recorded a 5.8% decline in traffic for capacity down by 4.3%, leading to a one point fall in load factor to 63.0%. Unit revenue per available tonne kilometre (RATK) declined by 5.2% and by 4.8% excluding currency. Revenues stood at 705 million euros (-7.7%). The operating loss was reduced to 50 million euros (-64 million euros at June 30th 2012).
The maintenance business recorded a sharp rise in third party revenues to 319 million euros (20.4%) accompanied by a significant increase in aircraft maintenance expenses (25.2%). The overall operating result was stable at 37 million euros.
Revenues from the other businesses increased by 16.4% to 397 million euros reflecting mainly a 14.2% rise in Transavia revenues. The operating result stood at break-even (-1 million euros versus +4 million euros a year earlier).
Total revenues for the Group amounted to 6.58 billion euros against 6.50 billion euros at June 30th 2012 (+1.2% after a 0.6% negative currency effect).
Results: improvement in the operating result thanks to a reduction in unit cost
The unit cost, measured in EASK, declined by 5.0% and by 2.5% on a constant currency and fuel price basis for a 2.4% increase in production measured in EASK.
Operating costs declined by 1.2% with the main changes as follows:
• The fuel bill fell by 7.7% to 1.74 billion euros, due mostly to an 8% decline in the fuel price after hedging, the volume and currency effects offsetting one another.
• Employee costs declined by 0.6% to 1.97 billion euros, mainly reflecting the reduction in headcount (-45 million euros), a +11 million euro rise in non-cash pension costs, a +9 million euro consolidation effect linked to the integration of Airlinair, an accounting effect of +6 million euros linked to the deconsolidation of a subsidiary and the French competitiveness tax credit (CICE, 9 million euros).
• Maintenance costs increased by 25.2% to 338 million euros in line with the growth in third party activity.
The operating result was positive at 79 million euros, a 158 million euro improvement on the previous year. The adjusted operating result amounted to 159 million euros (2 million euros at June 30th 2012).
The net interest cost amounted to 104 million euros (88 million euros at June 30th 2012). ‘Other financial income and costs’ stood at a negative 140 million euros (-454 million euros at June 30th 2012). This variation was due to the 30 million euros of foreign exchange gains this year (-86 million euros at June 30th 2012) and the change in the fair value of fuel hedging instruments: -158 million euros at June 30th 2013 versus -372 million euros at June 30th 2012.
The net result, group share, stood at -163 million euros (-897 million euros at June 30th 2012 after the 368 million euro restructuring provision). Earnings and diluted earnings per share stood at a -0.55 euros (-3.03 euros proforma and -3.02 euros reported at June 30th 2012).
First Half 2013
The passenger business saw traffic and capacity up by 2.0% and 1.4% respectively, the load factor gaining 0.5 points to 82.7%. Unit revenue per available seat kilometre (RASK) was slightly lower due to a negative currency effect (-0.5% and -0.1% ex-currency). In the cargo business, traffic fell sharply (-6.3%) for capacity down by 4.2% resulting in a 1.4 point fall in load factor to 63.0%. Unit revenue per available tonne kilometre (RATK) declined by 3.6% (-2.9% ex-currency).
Total revenues amounted to 12.30 billion euros (1.3% after a negative currency effect of 0.4%). Operating costs were up by 0.8% ex-fuel and down by 0.6% including fuel. The main changes came from the fuel bill (-4.5%), employee costs (-1.1%) and aircraft maintenance expenses (18.5% in line with the growth in third-party revenues).
The operating result stood at -451 million euros (-690 million euros at June 30th 2012) and the adjusted operating result, while still negative, moved from -532 million euros at June 30th 2012 to -292 million euros at June 30th 2013.
The net interest cost increased to 201 million euros versus 170 million euros a year earlier due to the two convertible bond issues in December and March. On the other hand, other financial income and costs moved from an expense of 178 million euros to an expense of 89 million euros at June 30th 2013 thanks to an improvement in net foreign exchange result and in fair value of hedging instruments.
The net result, group share, was a negative 793 million euros at June 30th 2013 (-1.28 billion euros after a 368 million euros restructuring provision a year earlier). Earnings per share and diluted earnings per share stood at -2.68 euros (-4.32 euros proforma and -4.27 euros published at June 30th 2012).
Continued reduction in net debt
In the First Half, investments net of disposals stood at 476 million euros (600 million euros at June 30th 2012): with operating cash-flow at a positive 1.03 billion euros, the Group generated operating free cash flow of 563 million euros. The Group has 4.7 billion euros of cash and fully available credit lines of 1.85 billion euros.
Net debt stood at 5.3 billion euros versus 5.97 billion euros at December 31st 2012, i.e. a reduction of 630 million euros. The financial cover ratios4 are improving, the net debt/EBITDA ratio on 12 month rolling basis having moved from 4.3x at December 31st 2012 to 3.3x at June 30th 2013.
2013 Outlook
Based on our strict capacity discipline, a good level of bookings for the Summer season, slightly higher unit revenues in the passenger business and a fuel bill of around 4.8 billion dollars based on the forward curve at July 19th 2013, the Group’s objective, in the current market conditions, is an improvement in the Second Half 2013 operating result in line with that of the First Half.
The measures already taken have enabled medium-haul and cargo to improve their operating results but not sufficiently in view of the weak economic conditions. Additional major measures will be adopted during the autumn for implementation in early 2014. They will concern voluntary departure plans together with industrial and commercial decisions.
Improvement in operating result (+79 million euros versus -79 million euros at June 30th 2012) driven by costs
A tough environment in Europe which held back revenues
Strong increase in free cash flow
FIRST HALF
1.3% increase in revenues to 12.3 billion euros
2.2% reduction in unit cost on a constant currency and fuel price basis Net debt reduced by more than 600 million euros
OUTLOOK FOR THE SECOND HALF
Objective of an improvement in operating result during the Second Half in line with that of the First Half
Reduction in net debt relative to December 31st 2012
Adoption of additional measures in medium-haul and cargo
The Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on 25th July, 2013 to examine the accounts for the First Half of Financial Year 2013.
Alexandre de Juniac made the following comments: Transform 2015 is fully on track, with cost reduction measures, the industrial plan and initiatives to win back our customers all underway within the planned timeframe. For the past year our results have improved quarter after quarter, in spite of the persistently tough economic environment. Nevertheless, revenues remain below target at this stage and the turnaround of the Medium-haul and Cargo businesses in particular is taking longer than expected. As a result, further measures will be adopted in both businesses in the Fall to ensure that, on completion of our plan, we will have met our cost and debt reduction objectives, paving the way for a return to growth.
Second quarter 2013
Activity: 1.2% increase in revenues
The passenger and cargo businesses improved their operating result despite a deterioration in the economic environment which held back unit revenues.
Passenger traffic rose by 3.2% for capacity up by 2.6% enabling a 0.5 point increase in load factor to 83.2%. Unit revenue per available seat kilometre (RASK) was, however, down by 1.9% (-1.3% ex- currency) due to the weakness in unit revenue per revenue passenger kilometre (RRPK) (-2.5% and -1.9% ex-currency). Revenues rose by 0.6% to 5.16 billion euros. The operating result of the passenger business was positive at 93 million euros (-57 million euros at June 30th 2012).
The cargo business recorded a 5.8% decline in traffic for capacity down by 4.3%, leading to a one point fall in load factor to 63.0%. Unit revenue per available tonne kilometre (RATK) declined by 5.2% and by 4.8% excluding currency. Revenues stood at 705 million euros (-7.7%). The operating loss was reduced to 50 million euros (-64 million euros at June 30th 2012).
The maintenance business recorded a sharp rise in third party revenues to 319 million euros (20.4%) accompanied by a significant increase in aircraft maintenance expenses (25.2%). The overall operating result was stable at 37 million euros.
Revenues from the other businesses increased by 16.4% to 397 million euros reflecting mainly a 14.2% rise in Transavia revenues. The operating result stood at break-even (-1 million euros versus +4 million euros a year earlier).
Total revenues for the Group amounted to 6.58 billion euros against 6.50 billion euros at June 30th 2012 (+1.2% after a 0.6% negative currency effect).
Results: improvement in the operating result thanks to a reduction in unit cost
The unit cost, measured in EASK, declined by 5.0% and by 2.5% on a constant currency and fuel price basis for a 2.4% increase in production measured in EASK.
Operating costs declined by 1.2% with the main changes as follows:
• The fuel bill fell by 7.7% to 1.74 billion euros, due mostly to an 8% decline in the fuel price after hedging, the volume and currency effects offsetting one another.
• Employee costs declined by 0.6% to 1.97 billion euros, mainly reflecting the reduction in headcount (-45 million euros), a +11 million euro rise in non-cash pension costs, a +9 million euro consolidation effect linked to the integration of Airlinair, an accounting effect of +6 million euros linked to the deconsolidation of a subsidiary and the French competitiveness tax credit (CICE, 9 million euros).
• Maintenance costs increased by 25.2% to 338 million euros in line with the growth in third party activity.
The operating result was positive at 79 million euros, a 158 million euro improvement on the previous year. The adjusted operating result amounted to 159 million euros (2 million euros at June 30th 2012).
The net interest cost amounted to 104 million euros (88 million euros at June 30th 2012). ‘Other financial income and costs’ stood at a negative 140 million euros (-454 million euros at June 30th 2012). This variation was due to the 30 million euros of foreign exchange gains this year (-86 million euros at June 30th 2012) and the change in the fair value of fuel hedging instruments: -158 million euros at June 30th 2013 versus -372 million euros at June 30th 2012.
The net result, group share, stood at -163 million euros (-897 million euros at June 30th 2012 after the 368 million euro restructuring provision). Earnings and diluted earnings per share stood at a -0.55 euros (-3.03 euros proforma and -3.02 euros reported at June 30th 2012).
First Half 2013
The passenger business saw traffic and capacity up by 2.0% and 1.4% respectively, the load factor gaining 0.5 points to 82.7%. Unit revenue per available seat kilometre (RASK) was slightly lower due to a negative currency effect (-0.5% and -0.1% ex-currency). In the cargo business, traffic fell sharply (-6.3%) for capacity down by 4.2% resulting in a 1.4 point fall in load factor to 63.0%. Unit revenue per available tonne kilometre (RATK) declined by 3.6% (-2.9% ex-currency).
Total revenues amounted to 12.30 billion euros (1.3% after a negative currency effect of 0.4%). Operating costs were up by 0.8% ex-fuel and down by 0.6% including fuel. The main changes came from the fuel bill (-4.5%), employee costs (-1.1%) and aircraft maintenance expenses (18.5% in line with the growth in third-party revenues).
The operating result stood at -451 million euros (-690 million euros at June 30th 2012) and the adjusted operating result, while still negative, moved from -532 million euros at June 30th 2012 to -292 million euros at June 30th 2013.
The net interest cost increased to 201 million euros versus 170 million euros a year earlier due to the two convertible bond issues in December and March. On the other hand, other financial income and costs moved from an expense of 178 million euros to an expense of 89 million euros at June 30th 2013 thanks to an improvement in net foreign exchange result and in fair value of hedging instruments.
The net result, group share, was a negative 793 million euros at June 30th 2013 (-1.28 billion euros after a 368 million euros restructuring provision a year earlier). Earnings per share and diluted earnings per share stood at -2.68 euros (-4.32 euros proforma and -4.27 euros published at June 30th 2012).
Continued reduction in net debt
In the First Half, investments net of disposals stood at 476 million euros (600 million euros at June 30th 2012): with operating cash-flow at a positive 1.03 billion euros, the Group generated operating free cash flow of 563 million euros. The Group has 4.7 billion euros of cash and fully available credit lines of 1.85 billion euros.
Net debt stood at 5.3 billion euros versus 5.97 billion euros at December 31st 2012, i.e. a reduction of 630 million euros. The financial cover ratios4 are improving, the net debt/EBITDA ratio on 12 month rolling basis having moved from 4.3x at December 31st 2012 to 3.3x at June 30th 2013.
2013 Outlook
Based on our strict capacity discipline, a good level of bookings for the Summer season, slightly higher unit revenues in the passenger business and a fuel bill of around 4.8 billion dollars based on the forward curve at July 19th 2013, the Group’s objective, in the current market conditions, is an improvement in the Second Half 2013 operating result in line with that of the First Half.
The measures already taken have enabled medium-haul and cargo to improve their operating results but not sufficiently in view of the weak economic conditions. Additional major measures will be adopted during the autumn for implementation in early 2014. They will concern voluntary departure plans together with industrial and commercial decisions.
