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Good morning and welcome to the Air France KLM third 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 Zart, CFO. Please go ahead, Ben.

Okay. Thank you, Operator, and good morning to all of you. And thank you for joining us today for the presentation. Today, as the operator said, I'm joined by Stephen Zott, our CFO. I'll begin by sharing some of this quarter's key highlights. Following that, Stephen will present our financial performance in detail, as well as our outlook for the coming quarters. Lastly, I'll conclude the presentation with some closing remarks and open the Q&A session. So moving to slide three. First, let's start by looking at our key financial indicators this quarter. So during this quarter, our operating result reached 1.2 billion euros, overall remaining stable compared to last year, once adjusted for the 160 million euro Olympic Games impact. Group revenue grew by 4%, in line with our capacity development, while unit revenue remained steady, showing a 1.4% increase when excluding the Olympic Games effects. We experienced significant pressure on our unit costs during the quarter, impacting our operating margin, particularly at KLM. In response, KLM has announced the launch of what we are calling a back on track program, setting targeted measures to effectively curb the challenges while being aligned with the broader group wide transformation efforts. Our net debt to EBITDA ratio stands at 1.7 times, comfortably within our target range of 1.5 times time to 2.0 times. On the commercial side, I'm pleased to confirm the launch of our co-chair agreement with Scandinavian Airlines System, SAS, following their entry into the SkyTeam Alliance. This partnership marks an important milestone in expanding our network and enhancing connectivity for our customers. Our fleet renewal efforts are progressing well, with next-generation aircraft now comprising 24% of our fleet, a five-point increase from the same period last year. Aligned with our commitment to sustainability, we've signed a major new agreement with TotalEnergie to secure up to 1.5 million tons of sustainable aviation fuel over the next decade, marking a significant step forward in achieving our environmental ambitions. Moving to slide four, I'm proud to share that Alphonse performed with great success ensuring its operation withstood exceptional challenges posed by the Paris 2024 Olympic and Paralympic Games. After months of preparation across all areas of our airlines, we welcome customers, athletes, sports delegations, journalists, and spectators from around the globe, achieving the highest standards in our pursuit of excellence. Setting ambitious expectations for ourselves, our teams rose to the occasion with professionalism and iconic elegance. As a leading home market airline, Air France was the preferred choice for the largest share of athletes. We transported 18,000 accredited individuals from 150 nationalities and handled 38,000 pieces of baggage. The relocation of check-in facilities to the Olympic Village proved to be a significant value, optimizing flows and enhancing the robustness of our operations. During the Paralympic Games, Air France enhanced its services with a dedicated assistance process for passengers, with disabilities. The legacy of these games will be another step toward more inclusive services, delivering a welcoming and intentional experience for all our customers. With 600,000 requests for special assistance annually, Alphonse is committed to making the travel as smooth as possible for passengers with disabilities. Despite the particular intensity of this period, our teams achieved impressive punctuality results, significantly outperforming our peers. KLM, however, faced a bumpier summer, contending with operational difficulties and rising costs that impacted overall performance. A shortage of pilots and ongoing maintenance issues limited the airline's capacity growth. In response, KLM has launched a comprehensive global plan to strengthen both financial and operational performance, which I will address shortly in the presentation. On the product front, we are finalizing the rollout of premium comfort across the entire KLM wide-body fleet, with installations on the Boeing 787 complete and conversions on the Boeing 777 family aircraft nearing completion. Turning to Transavia, we observed a significant improvement in revenue trends this quarter, with strong growth in ancillary revenue per passenger, driven by successful implementation of a paid hand luggage offer. However, operational performance faced headwinds from various external challenges, including geopolitical tensions, adverse weather, and air traffic control disruptions. On a positive note, I want to highlight Transavia France's resilience during the Olympic Games, maintaining a high level of operational performance throughout this exceptionally busy and complex period. As a part of our ongoing fleet modernization plan, we have welcomed additional Airbus A350, A220, and A320neo family aircraft across our airlines. Despite manufacturing delays, these new aircraft will make a meaningful contribution to improving operational efficiency, economic performance, and environmental sustainability. Moving to slide five, one of our top priorities is to deliver an unparalleled travel experience to our customers, seamlessly blending exceptional service quality with an extensive selection of destinations. This quarter, we have made significant strides in advancing on both fronts. We have previously announced the signature of the acquisition of a 19.9% minority stake in SAS that was closed during this quarter. As of September 1st, 2024, our commercial cooperation has launched with co-chair and interline marketing agreements, which include reciprocal loyalty program benefits. By connecting our networks and hubs, we offer our customers an expanded selection of European destinations and high quality services, SAS also became a member of the SkyTeam Alliance on the same day, marking a groundbreaking move as the first founding member airline of an alliance to transition to a new alliance. We believe this strategic move will offer all our customers expanded travel options and an enhanced travel experience. Elevating our passengers' journey and ensuring the highest standards of excellence from check-in to boarding and beyond is one of our core commitments. And as part of our premiumization strategy, we are focusing on significantly improving customer experience. For our La Première clients, we now offer a personalized escort service along with a new exclusive check-in lobby and private lounge at Paris Charles de Gaulle Airport, delivering a refined experience with extra privacy. New suites connect directly to the lounge for seamless convenience. To further enhance the experience of all customers starting from mid-2025, Alphonse will progressively roll out across its entire fleet ultra-high speed Wi-Fi service which will be provided by Starlink, a global leader in satellite constellation. This service will offer passengers an in-flight internet experience comparable to that on the ground, entirely free of charge and accessible via their Flying Blue account. This is a major step toward elevating our customer experience offer And I'm proud Air France will be the first European airline to push boundaries by providing this high-quality service. Lastly, I would like to share that Flying Blue has been recognized as the best airline loyalty program globally by Points.me. This award is a testament to our team's hard work in fostering deeper customer engagement and reinforcing Flying Blue as a valuable asset of the group. Building on this recognition, we are committed to further enhancing the Flying Blue program in the coming quarters. Slide six, on the sustainability front, we are proud to remain the world's largest airline of sustainable aviation fuel, largest airline user for the second consecutive year. In 2023, the group incorporated 87,000 tons of SAF, doubling our usage from 2022 and accounting for 16% of global SAF production. Decarbonizing air travel depends significantly on the large-scale production and procurement of SAF, and we have made steps to secure the volumes needed to meet our incorporation targets. To this end, we have signed a new agreement with, as I just mentioned, TotalEnergie to supply up to 1.5 million tonnes of SAF to Air France KLM over the next decade, one of our largest SAF purchase contracts to date. On the global arena, we partner with suppliers developing diverse SAF initiatives, helping to build a global production network that can meet both our own long-term needs and contribute to the broader industry transition. Decarbonization requires a global, collective effort with consistent rules and shared standards. To this extent, we actively engage with suppliers, manufacturers, and regulators at both national and international levels to harmonize and align industry frameworks. Slide seven, I would like to focus on KLM's recently announced transformation program, which we're dubbing Back on Track. As mentioned earlier, KLM has been navigating a range of persistent challenges, and while we've made progress in addressing some priority areas, a more systematic approach is necessary to effectively tackle the broader issues at hand. In response to recent surges in costs, we launched Back on Track, a strategic plan to strengthen KLM's operational and financial performance. The program consists of five concrete action measures. We are targeting at least 5% improvement in labor productivity by 2025, enabling KLM to unlock €200 million in savings through efficiency measures and digitization efforts. These initiatives will also be supported by the upcoming collective labor agreement discussions. On the revenue side, KLM is aiming for an increase of at least €100 million through product enhancements, expanded paid options utilizing advanced dynamic pricing, and savings setting a paid catering pilot program to launch in early 2025. Additionally, we are focused on expanding long-haul capacity and enhancing fleet availability to support our operational needs. The plan also includes KLM optimizing its business mix by maximizing contributions from engineering and maintenance, cargo, and Transavia, while evaluating strategic options for KLM catering services. Finally, a capital expenditure prioritization program is set to further strengthen KLM's free cash flow, ensuring that each investment supports our commitment to sustainable profitability. In total, Back on Track is expected to generate €450 million in EBIT in the near term, addressing KLM's ongoing challenges as we work toward reaching EBIT margin target of over 8% by 2026 to 2028. On a broader scale, these efforts go hand-in-hand with Alphonse's own cost-cutting measures announced earlier this year, which include a hiring freeze and over 100 transformational projects now in active implementation. In closing, I'd like to extend my appreciation to all of my colleagues whose commitment and hard work are instrumental in advancing our overarching ambitions of the Alphonse KLM Group. I'll hand it over now to Steven, our CFO.

Yeah, thank you, Ben, and good morning, everybody. I think the third quarter started already quite difficult. We announced actually that we had the Olympic Games, which has a negative impact of 200 million over the full Olympic period, and which was 160 million, let's say, related to the results in July. So that 160 million, we already announced, let's say, to the markets, that if you take that out, then you see that the unit revenue on itself still grew by more than 100 million. Plus we had 100 billion advantage in terms of fuel cost because the fuel price is going down month over month, especially the jet fuel, which of course benefits also us in our P&L. And then we had the very difficult operational performance of KLM leading to a very high cost increase of 8.4%, which resulted also that we are really now on the unit cost reduction track and that we are making sure that we get back on track. So that's also why I like the program. We need to get back on track that KLM delivers the margins as we expected. So the unit cost increase which we had is actually compensated by a slightly higher unit revenue if you exclude it for the Olympics. And there was 100 million of fuel benefit. And you see it quite well if you go to the picture below. You see that in July we had the result of, if you compare year over year, of more than 200 million off. We had a unit revenue at Air France at minus 8%, where KLM was still positive with 1%. So that explains also the 160 million, which we exactly saw for the Olympics. And from August to September, you see that we are improving month by month the results. And of course, we also expect that in Q4, we will deliver better than we did last year. To keep in mind, if you look at the 8.4%, there was already the CLA increases in October last year, so that we're also comparing, let's say, the bottom of the bottom for KLM in terms of unit cost. But we are strictly back on track now. We will follow the program very closely to make sure that KLM gets back on the profitability as we have seen before COVID. On page 10, you see the results per business. So let's start on the network. So we had a minus 1.8% in terms of unit revenue. But if you exclude the Olympics, it's more or less flattish. And we see that on cargo, we are now improving our results. So it was up 6.3% in unit revenue. It was both on demand and both in yield. And then you see, if you look at the total network result, minus 199 million. 125 coming from the Olympics and the other part coming from the KLM unit cost performance. And I will come back later. Then Transavia, a very strong development in unit revenues, plus 5%. That includes also the Olympics. So if you take that out, you're at 8.2% and even 10% in yields. And that resulted that our results are 14 million better than last year. And despite the Olympics, again, I have to mention it again, 35 million impact on Transavia France. So if you would take that all together, actually, we improved our result by 70 million. On the maintenance side, we are very successful in our new context. We are very successful on the engine business, but we have a backdrop on the 787 components. We have actually the meantime between removals between the components are performing very poorly, which makes that we have to borrow a lot of parts from the market. And also we have much higher repair costs. So we are renegotiating first the new contracts with our customers, which we will implement in the coming period. Let's say before the summer, all these contracts should be renegotiated. And then we should also see the further growth again of the maintenance business because the engine business on itself grew significantly in terms of profitability so all in all if you look at it i think a negative impact from the olympics on the network but compensated partly by cargo doing better transavia doing very well and on the maintenance part we need to act on the development of the cost of our components business on page 11 you see the picture so air france is is down 74 million but if you exclude the 160 million And you take into account that they still had Flying Blue for two-thirds of the results of Flying Blue. You see that Air France actually is improving its results, where KLM is off with more than $114 million, driven by a much higher unit cost than we had last year, and partly coming from the fact that all the CLA increases kicked in in October 2023. On Flying Blue itself, we are even surprised every time. We are performing very well over there. We are, especially in the US market, we had yesterday discussion with the CEO of our Flying Blue. It's performing pretty well and it's also delivering actually more than even what we expect ourselves in our transformation program. So a good performance on Flying Blue, but at the end of today at Air France KLM Group, we are off 160 million compared to last year. But again, there was this Olympic Games, which was also 160 million. So it's unfortunate that we could not benefit from an improvement of our results due to the fact that the unit cost at KLM increased that much. If we go to page 12, there you see the yield and the load factor development. So still a very strong demand. You see that the load factor was still very close to last year, despite the Olympics. We heard that especially on the yield side by the Olympics, by the fact that we had more connecting passengers than direct passengers. But what is good to see is that the premium still holds very strong, 2.6% up in the yield despite the Olympics. And on the economy, you see we are still holding the strong load factor of 91%, but we had to drop our tariffs because we had more connecting passengers on our planes. On the long haul and the medium haul, the Olympic impact is more or less the same. And then on the right, you see the very strong performance on Transavia, 10% up in yield, mainly driven by the paid hand luggage, which we implemented since April this year. Then if you look at the long haul network below, you see North America minus 2.4%, which is more or less the Olympic impact, but we see still very strong demand Over there, South America, minus 1.3%, but we know the yields are very strong and with the load factor still of 92%. And still, if you look in the middle, you see that Africa is still holding strong, 1.2%, despite the fact that the geopolitical impact of these three African French-speaking countries in Africa was kicking in in the fourth quarter last year. And we compensate that completely by a strong growth on South Africa. And on the right, you see Asia heavily impacted, of course, also by the Olympics. That is one. We grew further our capacity and the yields are down with minus 7%. But also here, we see that especially, for instance, a country like Japan was highly impacted by the Olympics. on page 13 you see the the cash trajectory so we uh we have the cash flow which was slightly positive it's always our let's say most difficult period of the the year in terms of cash and of course you you still see the 1 billion which we pay in exceptional six more than 600 million to the Air France pension fund for the pilots and close to 400 million in deferred social charges and wage tax. On the right you see the development on the debt where we are still in the range between 1.5 and 2 and we still have 9 billion in cash at our hands. Let's then go to the outlook. So the outlook, let's first start at the revenue side. So the demand is still very promising. We see a load factor, which is actually going up year over year. So we already filled the long haul planes with 77% load factor currently, which is higher than what we had last year. On the medium haul, where we go with 5%, we see also that we have now already sold almost two thirds of all the seats, which is higher than we had last year. And then on Transavia, you see that the load factor is up 1%, where we grow capacity with 5% to 10%. And it goes with a yield which is more or less flattish. So that means that our unit revenues looks very promising for the fourth quarter. Then talking about costs, so the third quarter, we estimated actually at the 2%, in which we included a one-time payment for the Air France stuff related to the uh, good performance on the Olympics as we expected at that moment. Uh, so that was already in, but then again, I come back, uh, we had a very difficult operational climate in Amsterdam, both at KLM and Transavia, uh, which increased our costs significantly. So that's the big chunk of that cost increase. And then also the fact that we reduced capacity, uh, because we, it was difficult to operate that automatically has a negative impact on your unit cost. We expect also that Q4, especially although the operations are more stabilizing, we still have additional maintenance costs. So we have changed our guidance from 2% to 3% for the full year. Then on the fuel, so fuel is really coming down and it also has a big positive impact of the fourth quarter. But also in 2025, you see that fuel is actually now below $800 per jet fuel ton. And that, of course, will support also our 2025 results because it's much, much lower than what we see in 2024. And we already locked in 50% of that price due to our hedge strategy. so if we go to the outlook so we keep our group capacity at four percent uh there is uh let's say despite the fact that we lost some capacity in the third quarter we think we can still hold this on the unit cost we uh upgrade the unit cost to three percent where we were previously on two percent explained already earlier by the increase of the klm unit cost in the third quarter and on top of it also some maintenance costs which we see kicking in in the fourth quarter for our operations. On that CAPEX, we stick to 3 billion. We don't guide any more previously below 3 billion. That has to do with timing impacts. We will sell assets. We expected to sell assets in the third quarter, which will move to the first quarter of 2025, which one is the SPV, which we have with Airbus. We set up an SPV with Airbus on the A350 components. We expected that we would execute that before the 1st of January, but due to regulatory frameworks, we are expecting a slight delay. Let's say it will happen then in the first quarter, which brings $140 million in terms of capex reduction because we sell the components. Of course, we would also have put in equity in that company, but that's not in our capex guidance. And on top, we have some sale and leasebacks in the fourth quarter in. on which we paid already pre-delivery payments. If we do a sale and lease back, we usually have a positive cash coming from that transaction. And given the fact that the deliveries are a little bit difficult from both suppliers, we expect that there will be a slight delay, which will move the sale and lease backs actually from the fourth quarter to the first quarter with an impact of, let's say, close to 60 to 70 million. With that outlook, I hand over to Ben, our Group CEO, to conclude and give some final remarks.

Okay, thanks, Steven. So most of you have likely recently heard about the French TSBA, otherwise known as the Tax Chirade, or Solidarity Tax on Airline Tickets, and its potential ramifications for the entire aviation sector in France. I'll give you a few details. regarding how this proposed tax increase could impact us. So currently under discussion in the French Parliament as part of the 2025 budget, this tax could have serious negative implications for the strategic areas of our group. So a direct consequence could be higher fares, which may make air travel less accessible to customers in our home market. Given the limitations of price elasticity, we cannot pass on these additional costs onto customers. And consequently, we will need to absorb a portion of these costs ourselves, which will further impact our competitiveness and profitability. We're facing an additional tax burden of around 280 million euros, which could negatively affect our operating results by anywhere from 90 million to 170 million euros in 2025 compared to 2024. If these are in these funds, are not invested in next generation aircraft with a purchase of sustainable aviation fuels, it could directly impede our sustainability advancements. Unless a portion of these resources is allocated to the decarbonization of the aviation sector, it will offer no environmental benefit. The determination to push the boundaries of our decarbonization efforts is unwavering with billions of euros already invested at the group level. However, achieving our environmental goals requires a fair and level playing field. It's crucial that market dynamics remain competitive and unbiased and without players gaining from uneven conditions. Only then can we truly focus on what matters, maximizing our potential in transition toward a more sustainable aviation sector. This winter, we will continue to provide service to nearly 300 destinations worldwide. All regions will see ongoing capacity increases, and we maintain a momentum with new route openings. As of winter season, Air France will launch direct routes to Salvador de Bahia and Kilimanjaro, while KLM will expand its network with new non-stop services to Portland and Tampa. As we pursue a gradual recovery in Asia, a region that has yet to reach its pre-pandemic international capacity, we must acknowledge the ongoing geopolitical challenges in airspace that connect Asia and Europe, which are hindering a more dynamic recovery. On the medium haul, TransAvi will be expanding its network with around 20 new destinations, including routes such as Jetta, further enhancing the connectivity our customers seek. Our short and medium haul offerings provide a broad range of destinations that meet the needs of diverse clients, price-sensitive and leisure-focused passengers, all the way across the spectrum to savvy corporate premium clients. In closing, I'd like to briefly recap our major achievements this quarter and outline our priorities moving forward. Our operational success during the Paris Olympic Games demonstrated the group's expertise and allowed us to showcase our sense of service and operational excellence while also spotlighting France as a premier global destination. So the Air France teams contributed to this achievement with a remarkable dedication, leaving a positive and lasting impression of France on the world stage, a benefit that we are confident will bring long-term value to the group. Looking ahead, We remain deeply focused on operational and product excellence, ensuring an exceptional customer experience while fostering a greater engagement and loyalty among our customers. Our recent strategic partnership with SAS expands our reach in new markets, providing our customers with more options and an even broader range of destinations. Profitability remains a core focus in the near term, and we are committed to maintaining our medium-term objectives. To ensure sustainable financial resilience, KLM in particular has introduced new measures this quarter to address rising costs and reinforce its performance. These efforts are shared across the entire organization and align with our group-wide transformation plan, fortifying our foundation for long-term success. Finally, on the sustainability front, we are making steadily good progress in decarbonization of our operations through the integration of next-generation aircraft, and expanding strategic partnerships for more sustainable aviation fuels. These initiatives are essential to reducing our carbon footprint, also helping the industry to move forward to a more reliable SAP supply chain. In addition, we continue to actively advocate for a level playing field to ensure a healthy competitive environment in the long term. This underscores our unwavering commitment to building a stronger, more profitable, and more sustainable airline group. So thank you for your time so far, and please, we're now ready to take your questions.

Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. We will now take our first question from Jared Castle from UBS. Your line is open. Please go ahead.

Good morning, everyone. Thanks for taking my questions. Maybe I'll ask the standard three, if that's okay. Just on the French aviation tax and the 280 million, can you give us a bit of color in exactly what you're modeling in in terms of the increase in aviation tax? Because I think it's not a firm number yet by the French government, although I've seen numbers up to six times on economy over 1,000 being kind of waved about. And then also, you know, just related to tax, just the corporate tax going up, if you can give any color, you know, just in terms of how you see that developing for you, given there's a lot of kind of central costs in bronze as well versus the revenues. And then secondly, you know, how are you thinking about capacity, you know, deployment between KLM and And Air France, given these taxes and potential also related to taxes to come elsewhere across your network. And I guess lastly, just any color on potentially at this early stage how you see cost development in 2025 versus 2024, directionally at least.

Hello.

Hi, Jared. Hi. That's four questions. That's four questions. But I'm happy. I will see you Monday. So I will take them all. So on the TSBA, there is indeed a difference between premium and, let's say, economy. There's a difference also in long haul and, let's say, shorter haul. It's very difficult to, it's easier probably to say the amount in total what we have to pay, so that's 280 million, but of course it depends on your network, etc. But we know that quite well. What is the very difficult part is to calculate what is the inelasticity, because it is So it is for all our competitors, but it will harm, of course, our new month. So therefore, we are not happy with it at all. But at the same time, we have to see what is the real inelasticity at the end of today. And therefore, we give a very broad range if you see what is the impact on our bottom line.

And Jared, maybe I'll add something that's really important. We have got confirmation if this tax does go through, this amendment to the tax, that it will not apply to connecting customers. So the competitors for Air France for connecting customers will not be directly impacted by this tax. This is something we pushed very hard for. So it's only going to be applicable to departing passengers ex-France.

Then on the corporate tax, on the corporate tax, it is not a big impact for us. We have still a big tax asset, as you know. So in general, that is not impacting us very, very, very big because actually 50 percent of the tax bill we don't pay at all because we are still a tax asset which we can use for that. Ben will come back on the capacity, but for the unit cost, we are still, let's say, in the first phase of our budget. Of course, we see that the unit costs this year are going up, but we have now the plan at KLM, which should bring within a year certain results also on the unit cost. So I cannot guide you at this moment. We will, of course, we will update our mid-term trajectory anyhow in January, but let's wait for the outcome on that one. But of course, We should benefit from the fact that we have now the program at KLM running, which should deliver quickly results.

Okay, and on the capacity front, so KLM, we're still not on the long haul side, still not at the 2019 production levels. And this is our objective. It's proving very, very difficult to get our pilots trained through the system because of a complex CLA. Each time a pilot retires, it has a domino effect throughout the seniority list at our KLM pilots. So that is a challenge. We're finding ways, we're negotiating with our pilots to try to smoothen that out so we can get more pilots into the right seat on the right aircraft so that we can have the right number, the right amount of capacity in place. So that's an ongoing, very focused effort that we have in place today. And that is, so in terms of a an allocation of traffic or capacity, that's our objective at KLM. It's not to introduce any new per se capacity over and above 2019. It's just to get back to that number as quickly as we can. We have the airplanes to do it if we have an issue with training pilots. On the Alphonse objective for capacity, It was quite a challenging year to put up the capacity numbers that we were able to produce. Our view for the next, over the short to midterm, is to maintain sort of a 60-40% allocation of our assets between the two main business units that we have, of course not counting Transavia. And then we'll see how it goes with SAS right now, obviously under 20%. We don't have any commercial impact or commercial control in what they want to do. Where we are also adding significant capacity is at Transavia France, as Transavia France replaces Air France and the regional arm of Air France, all the slots that were at Orly. So that's a different exercise going on that we've spoken extensively on with this group here with the U.S.,

Right. Thanks very much.

We will now move to our next question from Stephen Furlong from Davey. Your line is open. Please go ahead.

Yeah, good morning. Just got two questions. I see on page 21 when you talk about the capacity allocation, but just wondering, Ben, pre-pandemic to now, do you think that the business or in the future will be more the overall group West facing than East facing. I'm thinking of the competition in China and issues there and Middle East Airlines and maybe that might influence your thought process on looking at TAP. So maybe just might ask that. And then just the second one, I'm just kind of going back to the investor day of last December. I know you've kind of reiterated your medium-term targets and you have back then, I think, Stephen, you were talking about the 2 billion of initiatives. So where do you think you're kind of running maybe behind or the market seems to appear that thinks you are on that? Is it delays in deliveries? Obviously, there's issues with KLM, et cetera. So thank you.

Okay, thanks, Stephen. Stephen, so on the capacity allocation between the various geographies, we're extremely happy with the North Atlantic. The JV we have in place between Delta and ourselves is outperforming all of our expectations. We have continued plans to optimize the route network to balance out what's best for Delta and ourselves. We're extremely, extremely pleased with the North Atlantic and we see plenty more opportunity And as we better optimize the cooperation or the JV, we think we can continue to pull market share from Starline. So very, very happy with that. On Latin America, we're quite happy with the resilience we have. Without having a major partner, we're still, in terms of capacity, number one. And the performance of the routes – not as good as the peak peak we had after COVID, but very, very promising. And Africa, the resilience is unbelievable. We have a lot of geopolitical issues in three of our main markets. However, it's more than made up by the rest of our network there. We have more than 20 destinations in Africa. It's more than any other European carrier. And we just see our product strengthening. We've had the aircraft that have been allocated there ever since I've arrived here, are the highest unit-caused airplanes, the A330 fleet that we have, at least at Air France. And as those aircraft get removed or replaced by A350s, we're seeing here a marked improvement in the performance of those routes. So Africa, we're happy with. India, with the inability for North American carriers to overfly Russian airspace, we've had a big increase in demand. How long that will last, we're not sure, but we're enjoying that for the current period. So that's a positive. Where, as you know, we are not back to 2019 numbers are China and the rest of Asia. We're happy with Thailand because there are big O&D markets. So the impact of one-stop service via some of the hubs. Yes, it does have an impact, but there's a big O&D market. China, the demand is down, so we're at the bare minimums in terms of a non-stop to each, and we're ready to stay at that for as long as it takes. There's no necessity to increase that, and we're just ensuring we have the schedule in place for our top customers, and we're using a the appropriate gauge. Japan is slowly coming back. The competitors on that route are very rational. So here we feel okay. Our partner, Korean Air and Korea, same thing, very rational. We have a daily flight from both carriers into there. Hong Kong, surprisingly strong from Paris, not so from Amsterdam. And Singapore, we're using Singapore as a as a connecting point to Asia Pacific, one particular Australia, which is very strong. The Australian market is strong, and that's helping our Singapore service. So to give a black and white answer to your question on capacity, it's the plans across the Atlantic, very clear. However, what develops with TAP or partnership potential with GOAL and ABRA and LATAM to be seen. Africa is resilient. India is resilient. to be determined depending on the geopolitical situation. And Asia, we'll see how it goes. We've got enough opportunities for our airplanes to deploy them elsewhere if Asia doesn't take off or get back to what it was in 2019. And we're very happy and we can quickly pivot to get back to where we were if things do change. So we like the diversity of our network and the capabilities of our aircraft. And we think we're resilient enough to take advantage of whatever comes about in the global market.

Okay. Hi, Steven. Of course, the $2 billion question. So let's start with the $700 million on Air France. Of course, we have a one-time of the Olympics of $200 million this year, so you should exclude that on Air France. We are really traveling in the right direction. There needs to be production, let's say, increase of the production further to make sure that also on the unit cost we are delivering further. But I would say Air France is right well on track for that 2 billion. On KLM, we, of course, the back on track, and that's also why I like the title, the 450 million is also to get back on track to that 700 million improvement. which we will see in 28. So we are off track there, but we are getting back on track with the back on track program. And then on Transavia, we expect 400 million better. You see the improvement of our results. We see that that was especially driven by fleet and ancillary revenues. The ancillaries are going very well. We are increasing more and more. And also if you compare with industry development, you see that we are keeping quite well our yields over there. And on E&M, I think we are doing very strong on the engines. We see improvement of margins over there. So that's going very well. And we need now also to deliver the engines, but we see it coming. But here we have the backdrop on the 787 components, which we need to repair in the, let's say, the nine months to come. So if you say, where are we off track? I would say at KLM. So therefore we have back on track. And of course we had the Olympics. But if you go over the five items, I think unit cost, we still continue to deliver on the unit cost. We continue with our transformation program at the Group and at both airlines. The fleet implementation, although we had some delays, it's not really impacting, let's say, our profitability growth. The delays are very marginal compared to our competitors and on the revenues. As explained, part is coming from more ancillary revenues, which are coming in, and part of it is also coming from Flying Blue, which is exceeding continuously our expectations. So on that front, it goes well. And then we have the 450 million on the operational and the business optimization, and there we need to improve. And again, I come back on track, but everywhere in our company, we need to improve our operations. It's a general theme, I think, in the industry. but that needs to come back at a certain moment where we are just asking to come back on the levels which we have seen in 2019. And I was there in 2019. It was not a very difficult world, so we should be able to get over there. And the growth is coming, and growth is also especially coming from engineering and maintenance, and we are signing the contracts to secure that. Very, very clear. Thanks, Steven.

Thanks, Ben.

We will now take our next question from Alex Irvine from Bernstein. Your line is open. Please go ahead.

Hi. Good morning, gentlemen. I'll have two, please. First of all, on KLM and the Back on Track plan, what's happened at KLM since the start of the year that surprised you the most? What are the biggest risks to the execution of the new plan? Second, around SAS, what impact are you seeing so far from the SAS cooperation? And how much improvement this can deliver for group profitability as you get better reach into Nordic source markets?

Thanks.

Hi, Alex.

So KLM, I would say the biggest challenge and I guess frustration we have, which is the results that you're seeing, is our inability to get the long-haul capacity levels in place. and it's taking way too long and it's not sustainable. So we have now put additional resources from the group who have deep expertise in this to kickstart this and put it into a faster gear to help get the capacity levels up and bring down the overall unit cost through the extra volume. So very, very frustrating on our part. not predicted, very unfortunate, but will get addressed quite quickly. We have the planes, we have the pilots. As I mentioned, we just have a very, very complex CLA, which does not allow a new aircraft type to integrate well because this has not happened at KLM before. So to integrate or potentially integrate a A new A350 at the simultaneous fleet to an A320 new fleet is not something that the CLA handles in an efficient way. So that's the biggest frustration we have with ETKLN getting the capacity in, which is driving, which is the main driver for the unit cost going up. Of course, inflationary measures, inflation, which has been relatively high in the Netherlands, has also put a lot of pressure on the CLAs. which we have not seen in France or not as evident in France.

And then on SES, so let's say we signed the deal at the end of August, we already have 1 million in our net result from it, so that is good to see, even if it's only 20% of the margin. Then we see that especially already in September, Through our co-chairs, we had very strong demand from the Nordic. It was actually 4 million coming from this co-chair. And for 24, what we see for the quarter to come, we expect around 16 million. So very strong demand from Scandinavia. We're rerouting these passengers over our hubs. Thank you.

We will now take our next question from James Holland from BNP Paribas. Your line is open. Please go ahead.

Thanks very much. Three quick ones. Just on the Q4 unit revenue, you obviously guided or talked about loads being booked one percentage point up. I think you talked about flattish yields. I just wanted to check if that was Transavia or the group. The second one, Just on the TSBR, is there absolutely any chance in hell you might get the French government to think again, at least on the quantum of this? And if it doesn't, does it change your view on actually tracking ahead of the European South mandate by 2030, i.e. that might send a message to the government? And then finally, on slide 18, last quarter, you talked about the 500 million improvement year on year. Obviously, the Olympics 200 million is a clear tailwind year on year. I was wondering if the 300 disruptions and 35 million cargo IT, I guess cargo would be, but is the 300 million disruption still something you're targeting? Has it been largely muddied by everything else going on? Thank you.

Okay. Hi, James.

The Chirac tax, Tax de Solidarité, TSBA tax, which we're learning more and more about each day, what we're still pushing for is the way it's going to be allocated amongst the various segments. It's a bit complex because the French overseas markets, which some of them are quite far away, such as Martinique, Guadeloupe, Réunion, they fall under the domestic France geography or region. And the European Commission, to ensure this tax does not impact the level playing field or European rules, domestic France falls under Europe. And of course, there's a lot of geopolitical issues with the French overseas markets, which puts the government in a precarious position on any new tax in those regions, which then has an impact on what level of tax they're willing to put into those markets, which by default covers all of Europe. And what we're trying to do is get the right balance because we're not as exposed domestically or within Europe as we are internationally. difficult for them politically to not hit in a much harder way the premium cabins. So these will not be at levels over and above what is in place at Heathrow or in the UK. I'm very happy that it's not going to impact connecting customers. But in terms of how this could impact our commitments to leading customers, On the decarbonization front, well, of course, all that is up for internal debate. The government knows quite well that this could lead to a change in policy for us. And we'll make that decision shortly, depending on the outcome of the debates in the French parliament on if this tax will go forward in whichever way it does. So we obviously have all the different options played out. And that's why we're giving this range of what the impact could be. And once the tax has been voted into law before the end of the year, we'll then be able to give a much clearer answer on how we see things playing out. So that's where we are today.

Good morning, James. Yeah, maybe on Q4, I should be a little bit more explicit. So indeed, you see the booking load factors of the fourth quarter, which are up on average by 1%. But if you take the total load factor of October, we see that we are up 2% and we see, and that's what I wanted to say. We see a yield, which is flat as X rocks. So in total, we see a unit revenue improvement of more than 2% in October. We see very strong demand on Air France, especially, but also KLM and also on Transavia better than expected. So on the bookings, it's going pretty, pretty well. Then on the, uh, the 500 million, um, let's say indeed Olympics, of course, there will not be an Olympic games. I think in 25, then the disruption that is part. The back on track is really lowering this disruption costs and improving the productivity. So it is for sure that comes back. We were starting now, let's say, uh, fully with that plan. We will implement it, uh, let's say within a year, but of course, The total benefit will be partly in 2025 and 2026. And the iCargo, that is now completely solved. We don't see any issues at this moment at the Air France operation. So that is solved by now.

Thanks very much. Ben, if you don't mind, I wouldn't mind following up on that SAF target. Do you think your customers or shareholders care a jot if you were to drop 10% to 6% by 2030, given everything that's going on?

Well, our largest shareholder is the French state. I think, yes, it's not something that they would like to see, but at the same time, they're in charge of this tax, so they're in a conflicted position. I think some of our customers will not like it, but we're still going to stay to whatever the mandate will be, which many of our competitors, that's where they are. So I don't think it's going to change the decision of the carriers of choice for our customers, but it will not help our brand. And we'll see how we're able to manage and how our main shareholders are able to manage their approach toward us.

That's very useful. Thanks, Ben.

Once again, if you would like to ask a question, please press star 1. We will now take our next question from Andrew Lovenberg from Barclays. Your line is open. Please go ahead.

Hi, Ben. Hi, Stephen. Can I ask you, Ben, I guess, to compare and contrast the restructuring you did at Air France with the one that is envisaged at KLM? Because when you came in, I think you focused on fixing social issues and then working on detail of network structure of aircraft layouts and stuff like that. What's the concept that you're trying to fix at KLM? And how does it differ? Because it sort of went off track under your watch, whereas you arrived at Air France and it needed fixing.

Okay, well, hi, Andrew. And yes, Air France, when I arrived, was not performing. We had horrible, horrible labor relations, the worst in the world, and a business model that did not work and had no potential future of it working. So you were there. As you know, we completely overhauled the business. We got the relationships into a much better spot. And Air France unit cost and its revenue production is – is going in the right direction. We think there's a lot more, a lot longer we can go, a lot further we can go to improve the Air France performance. KLM in 2018 was performing very well, 9% margins, and throughout COVID did reasonably well. Since COVID, we've had an unbelievable number of challenges that were not expected. As you know, we've been managing through this unilateral decision on the part of the Dutch state to lower the capacity at Schiphol Airport, which has thrown a number of unknowns toward us. How many airplanes? How many pilots? How many mechanics? What's the bank structure going to be? Is there going to be a curfew? To navigate through that has been a big distraction. The expectations of staff because of the inflation are disproportionately high. KLM has not seen that. and that has been a challenge to manage. The ability for Schiphol to handle the, this is not KLM, this is over and above the challenges we have at KLM, but Schiphol Airport itself to handle with customs and immigrations, with baggage handling, with enough gates that are functioning, put big strain on the operations of KLM and the costs of going up to the roof, in particular the customer compensation, EU 261, which is very expensive. So we've had just running KLM as is proving very, very difficult. So I'm quite, I would say, optimistic that we can address each one of those. I think we have a much more favorable Minister of Infrastructure who also covers transport and a much more, I would say, favorable toward Aviation Minister of Finance. So I think on the government relations front, we're in much better territory. We don't have the same level of hostility that we had for a three, four-year period. And we have a new CEO, Skipal, which finally recognizes us as the number one customer at the airport and is not going against us. The former CEO, as you may know, was advocating for a night curfew. So all to say, very challenging environment in the Netherlands. and then the complexity of bringing in new aircraft types into a fleet. As you know, there's always a transitional risk and cost to doing that. So all of this is fixable. It's going to be difficult. Back on track is why we're calling this program what it is. We're going to put the full resource expertise that we have at the group that, as of today, has not been – fully focused on KLM. And that is, I would say, as you say, under my watch, something we should have done earlier. And that is what we're going to do going forward because the base business of KLM is quite solid. The airport is a great airport. KLM invented the transfer business. You know all of that. And we don't believe it needs an overhaul in its business model. The traffic mix, the configuration of the aircrafts, because of the cost structure that is in place. We need a different mix, more local customers, more business customers, whatever it may be, that we'll work on. But there's no requirement to do a structural change as we had to do at Alphonse. So I'm hoping that this will be more straightforward. However, it will be difficult.

That's interesting. Thank you, Ben, and good luck. And congratulations on the Apex Award. Thank you.

Gentlemen, I'll give the floor back to you for the conclusion.

Okay, so thank you to all of you who participated today, and we look forward to talking with you, answering your questions next quarter.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.