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Good morning and welcome to the Air France KLM first quarter 2024 results presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Ben Smith, CEO, and Steven Zat, CFO. Please go ahead, sir.

Thank you for the presentation of Air France KLM's results for the first quarter of 2024. I'm joined today by Steven Zat, our CFO. will be available to take your questions at the end of this presentation. We'll start by sharing the first quarter highlights, and then Stephen will take over for a detailed presentation of our financial performance and the outlook for the quarters ahead. And then after, we'll conclude and take your questions. So moving to slide three, we're looking at our performance over the first quarter. Despite a challenging start to the year marked by further geopolitical tensions, our activity was resilient. Although our operating income is down compared to the same quarter last year, mainly due to both exceptional disruption costs and a slower cargo business that's facing significant headwinds, our group revenues are up 5%, driven by steady capacity deployment, robust load factors, and improved passenger yield, a sign that travel demands remain quite strong. Poor ticket sales are holding firm and point to a promising summer season, generating positive adjusted free operating cash flow in the first quarter. On the balance sheet side, we maintain a disciplined approach, both in terms of available liquidity and financial leverage. Our cash position remains strong, thanks to particularly the redemption of the Oceana 2026 bonds and the positive impact of deferred social charges. Our net debt to EBITDA ratio is broadly stable and well under control at 1.3 times. Our fleet renewal is advancing at a steady pace with the continuous delivery of next-generation aircraft. Quarter after quarter, we get one step closer to our overall fleet renewal targets, a key pillar of our decarbonization strategy. Moving on to slide five, productivity-labor relations is a pillar of our strategies. It stands at the core of our values as a powerful driver of Air France KLM's performance and is the cornerstone of our approach targeting increased employee engagement and alignment with the company's strategic vision. Since January 2023, this approach involves constant dialogue and has fostered since the signing of more than 40 labor agreements covering our entire organization, each reflecting our dedication to fair compensation and the well-being of our workforce. while also remaining in line with industry benchmarks. The dynamic trend in our employee promoter score, as well as our employee dissatisfaction and engagement levels, prove that these efforts resonate with our colleagues. These positive outcomes not only position us as an employer of choice and a great place to work, but they also directly impact our ability to attract and retain top talent. Lieven will now take over and go through in more detail our financial performance for the first quarter.

Good morning, everybody, and thanks for joining this call. So as already indicated by Ben, the first quarter has been pretty tough. We indicated that already with the full year results. We had quite a difficult operational climate, especially related to the spare parts situation. But what is good to see is that we are seeing now actually the fruit of all the measures which KLIM is taking to improve the operational performance. So since the end of the quarter and also in April and May, you see that we are stabilizing the operation at KLIM, which has a positive impact, especially on the disruption cost. And then, of course, also the cargo still coming down in the first quarter, as we also expected, because we know that the capacity was not yet fully there in terms of passenger capacity, which also holds the cargo capacity in the belly. So if we go to page six, you see that revenues further grow with more than 5%. We had a very strong, relatively, Pax unit revenue. It was up 2.1%, especially Transavia had a unit revenue of almost 10%, despite the fact that they increased significantly the capacity, but I will come back on that later. And then you see that we had a hit of almost 160 million on the cargo unit revenue. Part was expected, but we also had an IT2 implementation, which costed us 23 million for the group in this quarter. It is solved now, so the operation is stabilized, but we will still see an impact of around 7 million in the next quarter. But the operation has been stabilized as before. And then we had a tailwind from the fuel price of $144 million, if you include also the additional ETS cost. And then on the unit cost, you see, as we already indicated, there's a minus $100 million in incidentals, $50 million, which was a one-time payment salary at KLM, and $50 million related to disruption costs. But again, the good news is we stabilize now the operations. We have 75 FTEs relieved at the line maintenance because we stopped all the outsourcing of third parties at Schiphol and at the same time we outsourced other C-checks of the 737 and the A-checks on the A330. We are daily busy to manage actually our supply chain but we see that operations are stabilizing in the second quarter and also the starting of the summer at KLM went pretty well. If we then go to the next slide on page seven, there you see the increase of the unit revenue. And I come back on it later. I will just take... I come back on it later, but we see an increase of 1.7% of unit revenues at the passenger business, despite the capacity growth of almost 4%. Cargo, a minus 26%. not as much down as in q4 but again we had this 23 million of this i t system change then the positive surprise and the positive news is that we grew capacity at transavia in let's say the most difficult season and we see that the unit revenue went up with 10 and we improved even our operating result despite the fact that this is a loss making quarter always for our low cost activity so This is a very good sign what to come in Q2 and Q3 on Transavia. We have stable operations and we see demand is there. Then on the maintenance, despite the fact that maintenance is working in quite a difficult environment, we see that we grow further our third party revenues, especially on the next generation aircraft and there's new fleet phasing in from external customers. We grew our revenues with more than $40 million on the components, especially a 60% growth on the 787 fleet and on the engines. We saw that now the issues on the G19s are solved, so that brought another $70 million in our engine shop and we grew with our CFM platform with 50 million. So stable and significant increase in our revenues third party for the maintenance and also growing our operating result. On page eight, you see the results per airline. So to start with Air France, minus 68 million. You should take into account that the flying blue miles are now reported separately. So that has a negative impact if you compare year over year for Air France and KLM. And then we had, especially on Air France, or it was actually only on Air France, the IT tool implementation impact. So if you disregard that 26 million and you disregard the carve-out of Flying Blue, Air France was more or less flattish. And KLM, as already indicated, 50 million coming from the one-time payment in salary and 50 million coming from a high customer compensation in January and February. It's interesting to see that if you look at Flying Blue, we have now a margin of 24%. We didn't restate 2023 because that's pretty difficult in all the accounting flows we have over there. So from next year, we will report year over year, but it's good to see that actually the flying blue is delivering the result even better than we expected at the group. On page nine, you will find the world map. So as already indicated, we had an increase of capacity of 4.5% with a revenue increase and yield increase of 1.5%. And again, we increased our load factor. On the premium side, you see that the yield is dropping with minus 0.6, which is fully related To a mixed impact, we grew capacity to Asia, which has a longer stage length. So if you just take that out, actually the network impact only at Air France is already 1.8%. So the negative yield has nothing to do with lower pricing in the premium, but is all related due to the network mix. On the long haul, still a strong performance. We grew 4% with a further increase of load factor and a further increase of yield. In North America, we had a stable yield, but driven also by an increase of our load factor of almost 2%, despite the fact that we increased the capacity over there further with 3.3%. And then on South America, that is just a fine-tuning of our network in South America. We didn't actually adjust significantly there the capacity, but we needed some planes to fly to Asia. So it's just an small adjustment and you see that the the load factor is still at 90 with a very strong yield environment and even further increasing by 1.1 percent then the caribbean so we reduced capacity by 14 but the good news is we increased the ticket prices there with 11 so actually we compensate with the ticket prices the reduction of capacity and the reduction of revenues and then on africa we know that we have a difficult geopolitical context over there So we reduced capacity by minus 5%, but actually we still hold quite high yields in the whole region, which were up 2% with a load factor of 85%. And then the big increase is coming from Asia and the Middle East. So we doubled the capacity to China. We grew to Japan with more than 60%. We doubled the capacity to Korea. And then you see that this increase of capacity has also an impact on our yields. Of course, the Middle East was still hampered by the geopolitical situation. If you carve out the 6.9% drop in yield, you will see that around 10% is coming from the Middle East and for Asia, the rest of Asia is minus 7%. And we see still very strong bookings in Southeast Asia, especially in Vietnam and in Thailand. On the short and medium haul, we grew slightly with 2%, but also the yields we increased further by 2.6% and load factor still further going up. And then Transavia, 11% more capacity with a drop of 2% in load factor, but with a 12% increase of ticket pricing. So very promising for the next quarters to come for Transavia. Then we go to page 10. So we had a positive free cash flow, especially supported by the promising summer ticket sales. There was 1.5 billion coming from the ticket sales. And then as we already signaled into the market, we had a one-time payment of the Air France flight. So on the pilot for Air France, so that was 610 million. and we had a quarter of 120 million of the diverse social charges and wage taxes at KLM. So in total, there is an exception of 730 million in. If you add then also, as we always do, the payment of the lease debt and the net interest costs, because we changed actually the definition of operating free cash flow, we took out the net interest costs as we actually following a new IFRS directive which will put in place, I think in 2027, this way of reporting the cash flow. First, you see 140 million if you take the IFRS definition. If you take out the exceptionals and you add the payment of lease debt and net interest, you see that we have a recurring adjusted operating fee cash flow of almost 600 million. Net debt stable. or 140 million coming from the operating free cash flow, but we had new leases to be extended, so that was 160 million, and there's a small currency impact. So we get to 5.1 or 2 billion in terms of net debt, a stable leverage of 1.3, and despite the fact that we paid back 450 million on the OCEAN and we paid the exceptionals on the pension fund to the CRPN, we have still a very strong cash of almost 10 billion. Let's then look forward on page 12. And we indicated already during the full year results that we are aiming at an increase of unit costs of 1 to 2%. We reconfirmed that again. You see that we reached the 4% exactly in line as we guided the market. And there were one or slightly disruption costs already explained and the one-time payment of the salary at KLM. So if you take that out, we would be at 2.4. And for Q2, we guide a 2% increase of unit cost. At the same time, we increased our transformation. So we had 700 projects running. We increased further. We speak now actually weekly on the profitability improvement for our both airlines and at the group level, and we will further go with reducing overhead and creating further synergies. We stopped hiring support staff, so there's a full hiring freeze for people on the SG&A. And we are stabilizing, and this is very important, our operations. So KLM took significant actions. As already mentioned, they stopped the third-party line maintenance. They outsourced the 737C checks to KLM UK Engineering. They outsourced the A330A checks to Sabena Tactics. And it really improved the operations. And it was very good to see that now with May, actually the summer period starting, we were improving again our operation, despite the fact that we also increased significantly the capacity. So with stabilizing operations, with continuing on the transformation and stop hiring of support staff, we are fully confident with the 1.2% increase of unit costs. Then on page 13, you see the forward booking curve. So we are more or less in line with what we had last year. So 75% of Q2 capacity is already sold on the long haul. On the medium haul, 65%. And on Transavia, it's 71%, slightly below. But we have an increase of capacity, don't forget that, of 10% to 15%. And we see very strong yields in that market. On page 14, you see the new hedge policy. So we are actually almost 70% hedge now. You will see that in Q2, the fuel cost will go up. So the fuel price has a negative impact of more than 100 million year over year. But we will expect with the current forward that Q3 and Q4 will be better in terms of fuel price. So fuel price is dropping, yet fuel is actually expected to be at 9.11%. dollars per metric ton in the market and especially the crack is coming down since the beginning of the year to levels of around 20 dollars per barrel which is a little bit what we have seen before covet or especially before the ukraine war so on page 15 you see the outlook so it's a little bit boring at the group capacity we reconfirm again the five percent versus 2023 The unit cost, we reconfirmed the 1 to 2% growth with a Q2, a plus 2%. And the net capex, we reduced to safeguard our cash to 3 billion for the full year. With that, I hand over back to Ben. Okay, thank you, Steven.

So on slide 17, as you all know, we're firmly committed to implementing an ambitious carbon footprint reduction roadmap. based on three complementary pillars, which are, one, renewing our fleet with more fuel-efficient aircraft, two, sourcing and using an increasing share of sustainable aviation fuels, and three, rolling out a series of operational measures positively impacting our operations both on the ground and in flight, such as eco-piloting. As I mentioned earlier, our fleet renewal program is progressing at a great pace. In 2023, we received 32 new generation aircraft, and 2024 will mark a further pursuit with the expected delivery of 47 new generation aircraft. Between now and 2030, we will increase the share of latest generation aircraft in our fleet from around 20% in 2023 to over 80%, resulting in a significant reduction of CO2 and noise emissions as well as a positive impact on our unit costs. Next to fleet renewal, our sustainable aviation fuel strategy is fostering results with major customers partnering with us, such as Airbus, which renewed its corporate SAF contract last week. On slide 18, as Stephen said, the upcoming summer season will be dynamic, as demonstrated by the encouraging level of forward bookings. All of our airlines are actively preparing to respond to this promising trend, With this in mind, we are continuing to reinforce our capacity, particularly in strategic geographical areas such as North America with both KLM and Air France. The key challenge this summer will be to ensure the highest possible levels of operational robustness across all segments, from our fleet availability and readiness of our colleagues to airport infrastructure efficiency and reliability across all our bases. On to the slide 19. This summer season will be really special with the long-awaited 2024 Paris Olympic and Paralympic Games. Elfrance is honored to be an official partner of the Games and all our teams are extremely excited in making this milestone a great success. Such a complex and large-scale event requires an enormous deal of preparation to ensure a smooth and flawless operation for both athletes and visitors to Paris. We're expecting several traffic peaks, one Before the Games, with the arrival of fans, sports delegations and media from all over the world converging on France and in Paris in particular. And two, toward the end of the Games, when fans, athletes and journalists will all be leaving over a very short period of time. We will also be transporting a significant amount of luggage and sports equipment, four times more than in normal summer, as well as a greater volume of special equipment during the Paralympic Games. To be able to take up the challenge, we have set up specific procedures to guarantee smooth operations for Olympic and Paralympic athletes and delegations, along with all of our customers. We are working closely with Aéroports de Paris and the Paris 2024 Organizing Committee. One of the common projects includes building check-in infrastructures at the Athletes' Village. At the airport, athletes and delegates will also be able to use a dedicated departure hall. which of course means other passengers can equally expect a smooth experience. From a capacity perspective, we are confident that our unique and diversified network will anchor its fundamental role in accommodating extensive international demand during the peak weeks of August and September. Paris will be the capital of the world for several weeks, offering an exceptional showcase and a unique opportunity to promote the Alphonse brand to visitors from all over the world. Moving on to the last slide, The first quarter was a challenging one with persistent geopolitical tensions, exceptional operational disruptions, and the considerable headwinds curbing our cargo business. Nonetheless, our group again proved that we are resilient and thanks to the collective effort of our colleagues, we managed to further increase our revenues, pursue capacity production, and improve passenger yield. Looking ahead, we remain on track for a resilient trajectory over the coming quarters, We expect the summer season to be busy, and all of our airlines are gearing up to ensure smooth operational deployment. This includes, of course, Transavia, whose increased revenue and yield over the first quarter provides good momentum for a robust peak season. This leads us to feeling confident in our ability to achieve our midterm financial ambition. Thank you for your time and attention. We're now available to take your questions.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Thank you. We'll take our first question from Alex Irving with Bernstein. Your line is open. Please go ahead.

Hi, good morning, gentlemen, and two from me, please. First one on unit costs. Could you please outline the moving parts that will drive reduction in the pace of cost increases in Q3 and Q4 this year? Are we right to think about your target for those two quarters as being basically flat unit cost X fuel, and what are the biggest risks to achieving this? My second question, could we please have an update on corporate travel? Some of your U.S. peers have been quite vocal about a recovery here. Are you seeing the same, and where are you back to on a revenue and volume basis versus 2019, please?

Hi, Alex. Just coming back on the unit costs. So if we look at the third and the fourth quarter, we of course grow further our capacity. So that will drop further our unit costs. And you know that we had quite some disruption costs, especially in Q4. So in Q4, we expect actually a unit cost reduction. In Q3, it is more or less the same as we will see in Q2. Maybe slightly better, but more or less the same. So especially from Q4, With this capacity, we expect, let's say, a stabilizing of our unit cost. And for the corporate travel, I give it to Ben.

On the corporate travel side, we were at about 70% on average across all of our markets last year. I would say it's relatively stable on the medium haul and long haul markets, it's slightly and slowly moving upward. We're not seeing what the U.S. carriers are seeing domestically or what we're seeing in Europe. It is very solid, but it's really international, which is moving slightly up in the premium cabins in particular, which is great news for us in La Première, which has outperformed our expectations.

Thank you very much.

Thank you, and we'll now move on to our next question from Stephen Furlong with Davey. Your line is open. Please go ahead.

Morning, gentlemen. Two for me. Ben, maybe just I'm just interested in getting your thoughts on the Commission's general, I perceive, a little bit more aggressively negative view on M&A, or maybe they're just being more stringent in conditions. And I know your SAS deal is different. But just a general comment on that would be good. And then just for my own, for Stephen, I'm right in saying that what's left in terms of the kind of hangover from COVID is the social charges and wage taxes. It's about 500 a year for the next three years, just confirm that. And just your general, I know it's down the road, but how do you think about when you're asked about the hybrid capital in terms of what would you eventually do to exit that? Again, I understand it's down the road. Thanks a lot.

Okay, Stephen. So for commenting on the consolidation activity in Europe, so we start with ETA and Lufthansa Group. It's quite complex, this transaction. I would imagine for the with the European Commission. The Nazi airport in Milan, very slot-constrained, and how to put in place remedies to ensure competition does not deteriorate, I think is quite a challenge for ITA and for the Commission. That's at least our sense. I think that perhaps could be holding things up or slowing things down. We do strongly believe consolidation in Europe is a must. But, you know, for us, we believe that the competitive perspective will remain the same. And then with IAG and Air Europa, in particular in Madrid, to be, you know, if that does go through, the resulting market position when you're in an airport that is not slot constrained and how you deal with that, I think, is also a concern. For us in Copenhagen and in Stockholm, the airports are open and the position that we'll be in, we will not be in a position of dominance. There'll be obviously some synergies that come out of it, but I don't think it's the same thing as Lunarte or the huge concentration that IAG and Aeroport, the combination of those at Madrid. So I think they're unique transactions. It'll be difficult to find remedies. However, we do believe that it's a good thing in Europe.

Thanks, Ben.

So on the social charges, so at the end of the quarter, we are now at 1.6 billion. So we significantly reduced it from 2.3 billion. As you indicated, it's indeed 500 million per year, so for 25 and 26. then there is uh still 200 million to come in 27 which is related to the wage tax at kalem but the the the impact is especially on 24 25 and 26. on the hybrids um yeah as you know we are looking especially to support first our equity by net result so we have to gain further improvement of net results in the coming period and then we will also directly pay off these hybrids by normal debt so that is a regular process is not something we will do in one shot and we need to support our equity to make sure that it is more stable than it was actually before the covet crisis so we we are intending to to reduce those hybrids in the years to come and perhaps

Stephen, I could add one more thing on the consolidation challenges with the European Commission. The ETA, in terms of long-haul capacity, is quite weak. The ability to or the necessity to maintain a balanced competitive network is difficult because a big portion of the Italian long-haul capacity market is traveling on a one-stop basis. That's a new thing for the European Commission to have to figure out a way to get things in check. If you look at the long-haul network today of ETA, it's not very extensive. However, they will, with Lufthansa's market position, it could direct a greater share of customers over Lufthansa hubs to be at the detriment of IAG and others. So that's the other aspect. I think on the medium haul, point to point, standard type of remedies are relatively straightforward. It's the long haul that we're concerned, and I think the European Commission has to find a way to ensure that there is a solution to ensuring that there is market stability and fairness.

Very helpful, Ben. Thank you. Thanks, Stephen.

Thank you. And we'll now move on to our next question from James Hollins with BNP Paribas. Your line is open. Please go ahead.

Yeah, thanks very much. Just three quick ones, hopefully. Just any major labour agreements still to complete? I think you said you've done something like millions. But anyway, any more to still be done and key ones? And then the two follow-ups, I just wonder if you can give a little bit more I guess informal update and what you're seeing for some of those cargo demand and pricing trends into Q2. Obviously, we're lapping some of the extraordinary revenue trends. And then the third one, similar question on the MRO business. Obviously, that seems to be doing well. And you noted a few pieces there around some more third party work. Just give us please an update on both as we look into the rest of the year. Thank you.

Okay. James, so on the labour front at KLM all the agreements, CLAs, have all been concluded so we don't have any pending agreements this year. At Air France we have no full open agreements. However, we have what we call categorical and annual wage increase agreements and then profit share. So the actual working conditions and the general agreements, as they're called here, we don't have any up for renewal. We did, those have all been signed. But we do have some smaller agreements that have to come up. One in particular that's difficult, which is not directly in our control at all, the air traffic controller agreements. There was a potential big strike this week The government did manage to find the compromise, so we did not have to bear that. However, it was on to the last minute, so we did end up having to cancel about a third of our program, half of our program last week. So that did cost, but it appears that that risk has now been eliminated for the rest of the year. So that was one that obviously concerned us. And we don't, I think what worries us the most, and we don't have anything in particular that could directly hit our operation at the airport, are perhaps other strikes in France that could make it more difficult for our staff to get to the airport. Could there be other public transport disruptions, that sort of thing. But as of today, we have the small annual agreements that come up, but the general overall ones have been made at both major airlines, and we don't have anything pending at Transavia.

And then on the cargo demand, that's always quite difficult to predict because the bookings are getting in more or less three weeks ahead. We expect still a slight drop in Q2, so we are quite cautious over there. And then in Q3 and Q4, we are actually normalizing the situation. So that is a little bit our view, what we have currently. But I can tell you we have no booking in yet for Q4. I think nobody has. So it is really a short-term market where you can really see what is yield and load factor are doing. Then on the MRO business, we have, of course, a better view because we have long-term contracts. It depends always a bit when the engines come out of the shop because that will drive at that moment the revenue that we expect at 20% growth year over year on our third-party business.

Great. Thanks a lot.

Thank you. We'll now take our next question from Jared Castle with UBS. The line is open. Please go ahead.

Great. Thank you. Good morning, everyone. Just thinking around the middle, you know, the midterm, you know, your objective is 7% to 8% margins, I guess, 24% to 26%, and it doesn't look like it's going to be in 24%. So, you know, what is the missing ingredient? Is it getting to the right cost base? Is it just the general health of the trading environment? And, you know, should we be thinking at the back end of this period really now? Yeah. Secondly, you know, you're separately disclosing flying blue. So just, I don't think you gave the pro forma from a year ago, but any color on, you know, how profitability is developing and how you see that developing for the rest of the year would be very interesting. And then just lastly, I mean, you highlighted more stage length from, I guess, Europe to Asia impacting yields and that. But, you know, are you seeing any... intense competition from the Chinese airlines in terms of what they're doing on pricing. There's been some commentary that they're very aggressive on pricing. So, interested to get your thoughts on that. Thanks.

Okay. So, Jared, on attaining the 7% to 8% market, sorry, COI margin in the coming years, yes, we're quite confident we can still reach that. Today, the major items that are holding us back, we are still having a real challenge in getting KLM's production up to where we'd like it to be. So I think that's one of the biggest issues we have at KLM. We still have a shortage of maintenance personnel, and we've still got challenges with training of our pilots onto the right equipment. So we have a path to get that back to levels that... that are needed to get to that 7%, 8%. So that gives me some comfort that at least on the KLM side of our business, we're in pretty good shape. The CLAs that we have in place do address operationally the flexibility that we need. The cost structure of KLM, I don't believe it's gone above its major competitors in Europe with the increases that... We've put out and definitely nowhere near what we're seeing across the Atlantic in the U.S. Also, we have a lot of new airplanes coming in, so the unit costs of the new aircraft are significant, especially on the medium haul with the Airbus A320neos, with the Embraer 195E2s, and with the Airbus A220s. They're exceeding our expectations in terms of unit cost reduction, so that's positive. and we are exiting a lot of unprofitable flying, in particular at Air France, with the reduction of our capacity at all the airports significantly and transferring that capacity that was flying on money-losing domestic routes out into the European market. That's another big saving and should contribute significantly. And then, of course, we're still doing a lot of optimization of the cabins. We've got a good 20, 25 long-haul airplanes still to go, and that will result in anywhere between 4% and 10% unit cost reduction for the airplanes that are impacted. So those are the high-level items that give us confidence that we'll easily be able to reach that 7% to 8% coin margin in the midterm.

Hi, Gerrit. And then on the profitability of Flying Blue. So the profitability of Flying Blue is pretty stable, so we expect more or less the same trends what we have seen in Q1 for the rest of the year. And then regarding your questions on China, so we have a partner which is China Eastern, so we're working quite well together over there. There's still restricted capacity of Chinese carriers flying to France and the other way around. So in general, we are working very well together, but we are different markets, so we are more having especially the European customer flying towards China, where the Chinese customers are flying into Europe. So we talk a little bit of a different market set, although we sell them here in Europe and they sell us in China.

I think, Gerald, I have one more thing about the increase in our results over the midterm. Our joint venture with our biggest partner, Delta, across the Atlantic, we've recently... evolved that joint venture to better reflect the market environment that we have today. It is a very successful joint venture we've had over years. And with all the new equipment that both airlines are bringing in, we are ahead of Delta. The strength of the U.S. dollar and the different economic situation in the U.K. versus the U.S. was not 100% optimal in terms of creation of value. So with the new agreement that we're putting out, it's much more realistic when you look at how it will impact us with the current environment, and that should put us in a more stable and better position to share value with our two partners, which should help get us to that 7% or 8%. And, of course, the transatlantic is our most profitable market.

Great. Thanks very much.

Thank you. And we'll now take our next question from Satish of Citi. Your line is open. Please go ahead.

Hi there. I've got two questions here. On the long-haul booking, when you say 75% booked, how does it actually compare transatlantic and Asia within that trend? Any color on that would be helpful. And in terms of cost guide, obviously into the quarter three, it will flag that the ground handling would be four times higher because of the Olympic coming in. Does the cost side include any cost associated with the Olympics into Q3 print? Yeah, those are my two questions. And sorry, quickly, third one, actually. On the 350 million bond that's up for refinancing this year, what's your, like, the on that? Any update on that would be also helpful.

Thank you. Yes, your first question didn't come through. There was a bit of a bit of a block cut in the line. If you could just repeat your first question would be great.

Sure. In terms of the long haul booking, where you shown the booking curve and you said 75%, but I just wanted to understand how does it actually compare between transatlantic and Asia because you did flag that that is some sort of a weakness in Asia. I just wanted to understand. how the booking curve looks in those two regions.

Okay, so on bookings, they're relatively in line. There's no big difference in any of our segments. So based on the storics on how each region books in terms of the relative versus previous year, it's very, very different. It's similar. There's no material difference between the two. There's no particular region that's an outlier.

And on the repayment of the bonds, of course, that is in our plan. We have very strong cash, as you can see. And, of course, we're always looking at the market opportunity to put a bond in the market. With the current credit rating, it's quite attractive. If you look at our spreads, they have significantly come down since December. So the market is there, but we have sufficient cash also to pay for it. That is not the issue at the moment. And we don't expect any additional costs for the Olympics in Q3. So there are no specific arrangements on ground or anything for that one. Okay, yeah, thank you.

Thank you. And we'll take our next question from Harry Goers with JP Morgan. Your line is open. Please go ahead.

Morning, Ben and Stephen. Two questions, if I can. First one, just on the Q2, maybe if you could give us some colour on the pricing or the yields that you've seen in the month of April and directionally, I mean, where might you expect the Q2 group EBIT to come in or land? And then the second one, I mean, have you seen any impact on bookings from the latest escalations in the Middle East or is it different to what we saw back in October? And I think you highlighted the Middle East yields in Q1 were down 10% year over year, I think. So, I mean, would you expect some improvement in that going forwards from here? Thanks a lot.

Hi, Henry. Thanks for asking the question because actually I forgot to tell the pricing in April. So if you look at April, it was only in the bookings in the first four weeks. So there are two or three days still not in, but it was quite good. It was more than 3% in terms of yield XROX and the load factor was up 0.5%. The bookings in April looking actually quite good. And what of course helps is also that we have now stable operation at Schiphol. Then, you know, we don't guide on EBIT. There's also not on the second quarter, but we gave you the fuel. So the fuel is up more than 100 million year over year. And we have given you the unit cost, which is up 2%. So it all depends on what the, uh the unit revenue will do but for april we see a quite strong uh yield but for uh for june and for made even a little bit more difficult to say although bookings from may are quite positive also because it's the mid middle of all the holiday seasons in europe um and then on the middle east things are are coming back to uh

to historical volumes and yields relatively quickly on Tel Aviv and Beirut. Our three brands have either resumed or are about to resume service to Tel Aviv. And Beirut's been much more resilient over the last few months. So there's a big visiting friends and relatives business, VFR in particular, between France and those two countries. Those two markets, business traffic has been relatively stable. So we're, I would say, cautiously optimistic that Tel Aviv and Beirut will come back to the levels that they were at prior to October. It's a bit different in the leisure markets of southern Egypt and in Jordan. That's still not back, not close to where we were before October. So we've redeployed a big portion of that capacity to other markets. And luckily, we've got, for Transavia, we have a lot of opportunity in the northern African countries of Morocco, Algeria, and Tunisia. So that's at least been able to maintain our forecast for Transavia. But if we're just particularly looking at Egypt and Jordan, still below where we were prior to the uncertainty or to the incidents in October. So I think Middle East to be seen overall. But Tel Aviv, Beirut, I'm quite pleased with those.

Very clear. Thanks a lot, Ben.

Thank you. And then I'll take our next question from Andrew Lobenberg with Barclays. Your line is open. Please go ahead.

Oh, hi there. Can we talk a little bit about Transavia? It obviously had really nice unit revenues in that March quarter. But just wondering how much of that was down to Easter timing. And then looking forward, how much benefit are you expecting from the introduction of the wheelie bag fee? Because that obviously gave a huge injection of unit revenues to the pan-European locus as they brought that in. And then can I come back to TAP Portugal, where we're awaiting developments? I think I've seen some stuff in the press with you, Ben, saying that you're still very interested in the project. And yet, as you discussed earlier in this call, the EU competition authorities are being very attentive to competitive overlap. And it would seem to me that you guys have quite a bit of competitive overlap in that market. So do you still think it's realistic that you could have a run at it as and when the privatization comes? Thanks.

Okay, thanks Andrew. So TransAvia's performance, as you know, we're transitioning a lot of Air France capacity over to TransAvia, so that has a transitional period which we predicted. But in terms of the performance and how our forecast relates to Reality, we're quite pleased. Transavia is doing slightly better than we'd expected for Q1, and the outlook for the rest of the year is exactly where we caught in our budgets. So happy with that. The bag fee is actually doing better than we had planned. It's always tough to forecast what the take-up would be, so that's very, very strong. And Portugal, it's still a bit early. We always knew that when you've got a very slot-constrained airport like Lisbon, that the potential remedies would be high. We've got a good idea on what is necessary for the business case to make sense. Then, of course, there's always the unquantifiable value of having a strategically located hub in Western Europe. That's not stopping us from expanding our you know, our partnership with Goal. We still have the exclusive partnership with Goal on the other side of the South Atlantic to ensure that we have, we can maintain our number two position, you know, behind IAG on the Southern Transatlantic. So we have other plans ready to, or ensuring that we can maintain our position in case such a transaction were not to happen, too difficult for us, or it took a long time. So we're still interested. We're following very closely the ETA file and we'll see how Madrid goes. So you're right, it may be more difficult, but it's a bit early to tell.

And just while you mentioned Goal as a defence, I mean, with your partnership with Goal, Would it endure as Goal or if Goal moves into Abra and if it merges with Azul? I mean, there's an awful lot going on in M&A and strategic developments in Brazil, right?

Yeah, correct. So, right now, the relationship is very solid. It's a long-term relationship. We still actually have a very, very small investment of what Goal... I don't know if we can value it or anything. But no, with the management team and with Abra, it's quite solid. As you know, just because you're with the parent companies with one alliance or the partner companies with one alliance does not mean you could have something a little different with another alliance. So our roots are the three cities that we serve in Brazil. So Fortaleza is very strong. We're increasing capacity by about 40% for this summer. Sao Paulo and Rio are growing. stronger than they were in 2019, so we're really happy with that. So we have a very good position. There are other opportunities to start nonstop service into Brazil. Even if we don't have a partner on that end, our reach in Europe is very strong. And if you look, you know, like our geographical position, France and the Netherlands, our two hubs, are much better situated to capture a greater share of the European market versus the Lufthansa Group. Great, thanks.

Thank you. Ladies and gentlemen, once again, as a reminder, if you would wish to ask a question, please press star one on your telephone keypad. Thank you. And we'll now take our next question from Johannes Braun with Stifel. Your line is open. Please go ahead.

Yeah, thank you for taking my questions too for me. Firstly, those 610 million of pension funding that you had in Q1, any more questions background, why it became necessary, and also whether there's more to come in future quarters or years. And secondly, any comments on how yields are trending beyond Q2, so into the peak season, I guess, also against the backdrop of the Olympic Games? Thank you.

Hi, Johannes. to hear you. The 610 million was actually, we didn't pay any pension premium to the CRPM during the COVID crisis. So that ended up to July 2023. And then we had an agreement with the pilots that we should pay that back in January 24. So that is a 610 million, which is a one-off, which we always, let's say, showed to the markets that we still have, let's say, deferred payments in social charges and pension premiums. And then on yields, so we see strong yields in April. I think May will also be good, and for June, et cetera, this is quite difficult to say, but for April, the first four weeks, it was up more than 3%, excluding a rate of exchange impact.

And anything on the summer, on Q3?

Yeah, that's very difficult to say. We don't have all the bookings yet in. The revenue management game is always played in the last three weeks. So it's very difficult to say at this moment. We see strong demand, but to say what is the exact yield, it is too difficult to say at the moment.

All right, thank you.

And we have a follow-up question from Connor Dwyer with Morgan Stanley. Your line is open. Please go ahead.

Hi, guys. Yeah, just a clarification question for myself. Just on the slide, it shows that the book load factors heading into Q2 are down about a percentage point. But I think you indicated for April, load factors were up slightly. And so I'm just wondering, is that an indication that people are booking a bit later? And if so, will you expect a bit of a pricing benefit from that with the later fares, or are you having to discount at all in the late October? Thanks.

Hi, Connor. The differences are so small, we don't see any material change in the booking trends. Cool. Thanks.

Thank you. That was our last question. Gentlemen, I give the floor back to you for the conclusion. Thank you.

Okay. Well, thanks to everyone for joining this morning, and we look forward to seeing you on the next call. Have a great day.