Air France-Klm Ads

Good morning and welcome to the Air France KLM full year 2025 results presentation. Today's conference is being recorded. During the presentation, participants will be on listen mode only, and analysts will be able to ask questions by dialing hashtag 5 on their telephone keypad after this presentation. At this time, I would like to turn the conference over to Benjamin Smith, CEO, and Stephen Zott, CFO. Please go ahead, sirs.

Okay. Thank you very much for that. for your introduction, operator. So, good morning, everyone, and thank you for joining us for the presentation of Air France-KLM's four-year 2025 results. I'm joined today by Stephen Zat, Group CFO, Emily Guy, CEO of Air France, and Marianne Rintel, President and CEO of KLM, whose mandate has just been renewed for another four years. Congratulations to Marianne. I'll start with the key highlights from the year, followed by Stephen. who will walk you through our financial performance and outlook for 2026. I'll then wrap up with closing remarks on our 2028 ambitions before opening the floor for Q&A. Okay, moving on to slide three. Let me begin by recalling that we are executing our strategy in a consistent and disciplined manner across all the pillars of our strategy, and this execution is translating into tangible and encouraging results. We are reinforcing our market position, notably through the proposed increase of our stake in Scandinavian airline system, strengthening our footprint in the Nordics and enhancing connectivity to key North American and Asian markets. We continue to improve profitability, with our operating margin reaching 6.1%, reflecting stronger revenue generation and rigorous cost control. Customer satisfaction and brand value remain strong, as reflected by multiple international distinctions across the group, including Air France being named best airline in Western Europe by Skytrax for the fifth consecutive year. Employee engagement continues to improve, with our employee promoter score up 33%, reflecting the strong commitment and professionalism of our teams, supported by targeted action plans. We are also accelerating technological simplification, retiring more than 200 legacy applications to improve efficiency and agility. Finally, sustainability stays fully embedded in our strategy. Fleet renewal remains a cornerstone of our transition plan with next generation aircraft now representing over 35% of the fleet alongside SAF blending significantly above regulatory requirements. Now moving on to slide four. Let me now turn to our full year 2025 performance. In a demanding environment, Air France KLM delivered strong execution translating into positive results on multiple fronts. We carried nearly 103 million passengers, which is up 5% year over year, and the first time since COVID that we have surpassed the 100 million passenger mark. Group revenues reached 33 billion euros, up 4.9% year on year, an all-time high for our group. We delivered an operating result of 2.0 billion, an improvement of 400 million euros compared with 2024, marking the highest operating result in our history. At the same time, we generated 1 billion euros in recurring adjusted operating free cash flow, up 800 million euros year on year, reflecting solid cash conversion. Our balance sheet continues to strengthen with net debt to EBITDA stable at 1.7 times, well within our target range, and equity increasing by 1.6 billion euros to 2.4 billion. Overall, 2025 demonstrates how discipline execution is translating into structurally stronger financial performance. Yes, beyond the numbers, it was also a year defined by significant commercial achievements. Slide five. Modernizing our fleet remains a top priority for value creation. The integration of new generation Airbus A320neo family aircraft at Transavia and KLM delivers a superior customer experience while significantly reducing our environmental footprint and operational costs. At the apex of the market, we continue to redefine luxury travel. Air France unveiled its new La Première experience, the ultimate expression of comfort and sophisticated service, and further enhanced the onboard offering. We strengthened our in-flight entertainment through new partnerships between Air France and Canon Plus and Apple TV Plus, bringing premium content to our long-haul customers and enriching the onboard experience. KLM is now among the first European airlines to offer free internet on flights within Europe, and simultaneously both Air France and KLM continue to expand and enhance their high-speed Wi-Fi offering to meet growing customer expectations. Our pursuit of excellence is equally reflected on the ground With the opening of our new Alphonse Chicago O'Hare Lounge and the refurbishment of our Boston Logan Lounge, we are offering an elegant environment anchored in French hospitality. Collectively, these initiatives demonstrate our unwavering commitment to strengthening the prestige and appeal of our brands at every touchpoint of the customer journey. Turning on to slide six, last year's Flying Blue, our loyalty program, celebrated its 20th anniversary. milestone that highlights the enduring strength of our loyalty program over two decades flying blue has evolved into one of europe's leading airline loyalty platforms now surpassing 30 million members worldwide growth has been particularly strong in recent years with membership doubling since 2022. today flying blue connects customers across 40 partner airlines more than 100 commercial partners and over a dozen co-branded credit cards embedding the program to members' everyday lives well beyond travel. This scale translates into both engagement and impact. In 2025 alone, 1.2 billion miles were donated by members to NGOs, representing roughly 2.5% of annual miles issued. Importantly, Flying Blue has been recognized by Point.me as the best airline loyalty program for the second consecutive year, a distinction that underscores the strength of our value proposition and the trust of our customers. More than a loyalty program, Flying Blue is a cornerstone of our commercial strategy, driving customer retention, premium engagement, and long-term value creation. Moving on now to slide seven, we continue to advance our premiumization strategy through targeted investments across the entire customer journey. Since 2018, our focus on cabin renewals, high-speed connectivity, and upgraded global lounges has significantly strengthened our value proposition. These efforts are now driving a structural shift toward a more premium revenue mix. In 2025, our top-tier cabins, La Première and Business, accounted for 28.1% of total revenue, up from 26.9% the previous year. Meanwhile, our premium economy offerings, branded Premium at Alphonse and Premium Comfort at KLM, a surge to reach 8% of revenue, showing significant growth over the last two years. Collectively, premium cabins now generate more than 36% of group revenue. This evolution is underpinned by strong commercial momentum. In 2025, La Première revenues grew by 17% and business revenues by 9%. Our premium economy segments saw even more dynamic growth, with revenue up 18%. Crucially, this expansion was achieved while maintaining stable load factors, demonstrating the robustness of demand for our mid-term premium offering. Additionally, our direct online revenue grew by 9%, further enhancing our distribution efficiency. This continued shift toward a higher value mix remains a key driver of profitability and long-term value creation. Our focus on a more personalized customer experience continues to drive exceptional growth in ancillary revenue across all our airlines. In 2025, ancillary revenue reached 2.1 billion euros, up 23% year-on-year, following 26% increase in 2024. Alphonse and KLM generated 1.2 billion euros in ancillary revenue, while Transavia contributed 800 million, reflecting solid momentum and continued expansion of revenue streams beyond traditional ticket sales across the group. Growth was broad-based across all segments. Feed selection delivered double-digit growth for the second consecutive year, supported by more dynamic and personalized options. At the same time, hand luggage performance strengthened further, particularly at Transavia, supporting continued revenue growth. This sustained expansion remains an important contributor to margin improvement and revenue diversification. Moving now to slide nine. We continue to make significant strides in our sustainability journey, underpinned by disciplined investments in fleet renewal and SAF. As highlighted earlier, new generation aircraft now represent 35% of our fleet. These aircraft are the primary lever of our decarbonization strategy, more fuel efficient, and contribute to reducing both CO2 emissions and noise footprint. In parallel, our SAF blend reached approximately 2.9% total fuel consumption, significantly above current regulatory requirements. Our efforts are also recognized externally. We received a gold medal from EcoVadis, placing the group in the top 98th percentile, and our CDP climate rating improved from a B rating to an A rating. Collectively, these achievements demonstrate measurable progress and reinforce Air France KLM's position among the leaders in sustainable aviation. Moving on now to slide 10. In cargo, more than 90% of bookings are now made through digital channels powered by our MyCargo portal, which has evolved into a comprehensive end-to-end service platform. The global rollout of our CRM360 system has been completed across our network, enabling more consistent, efficient, and customized customer support while opening the door to AI-enabled services. We were particularly proud to receive the Airline of Excellence in Europe Award from the World Air Cargo Awards, recognizing the quality of service delivered by our teams. Turning to engineering and maintenance, we secured more than 30 new contracts, bringing our total order book to 10.7 billion euros. We also continue to advance next generation technologies, including leap industrialization and new test cell capabilities, and expanded our industrial footprint with the opening of a new APU facility in Amsterdam. and our expertise was further recognized by the European MRO of the Year Award from Airline Economics. These achievements highlight how innovative and customer-centricity are strengthening our long-term competitiveness across both cargo and MRO businesses. With that, I'll now hand it over to Steven, who will walk you through the further detailed financial results. Over to Steven.

Yeah, thank you, Ben. And good morning, everybody. As you can imagine, despite all the rain, which we had the last days, I'm very happy to announce that we have broken the $2 billion ceiling in terms of current operating income. I think getting the margin up by another percent closer to the 8% margin in a very difficult geopolitical context is really an achievement. If we go to page 12, you see that our revenues are going up by 5%, so growing to $33 billion. That led also to the 6.1% margin, which we currently have. And if you look at the operating result, you see, of course, we had a big tailwind of our fuel price. But at the same time, we could increase our unit revenue by 1%, especially by our premiumization strategy on which I come back and which was explained by Ben. And then at the same time, we have really, really, really strict cost control in the company. We are now at the unit cost of 1.2% year over year. That is at the low end of the guidance where we started at the beginning of the year, which was between 1 to 3%. So we are very satisfied by getting our efficiency up and also to getting, let's say, all the transformation, really finding it back now in our results. On the net result, we have a record here with 1.8 billion. We have to be honest, there's 700 million related to unrealized foreign exchange results, but still 1.1 billion driving net results, driving up our equity, and that gives us more leverage also to take out this hybrid equity out of our balance sheet. If we go to page 13, you see the results per business. So very strong performance on the network. I come back later also in Q4, we see on the yield. This is driven especially by premiumization in a very strong North Atlantic and South American market. That is on the passenger side. On the cargo, it's a little bit a mixed bag, so it is more or less flattish. But don't forget, in Q1, we had a plus 16% related to, let's say, all the discussions in the U.S. about tariffs. And we ended Q4 with a minus 11% because the Q4 in 2024 was up 20% by the election. So there is a lot of impact quarter year over year. But all in all, despite all the tariffs and all the challenges over there, we were able to keep the unit revenues stable in our cargo segments. Then on Transavia, Transavia we grew by 15%. We had a site unit decrease of 1.7%. The results are down 52 million, which is split between Transavia Netherlands and Transavia France 50-50. There are several reasons. First, we take over the slots in our lease, so we grew significantly our capacity, and these routes need to mature before they become, let's say, profitable. Then second, we have a lot of transition costs related to that we move from the 737 to the A320s, which is not an easy transition and may be more difficult than what we expected ourselves. And last but not least, we had a very difficult summer. It was very hot, and it is less appetite to actually fly in to other places where the sun is shining if the sun is already shining in your backyard. So all in all, I think it was a complicated year for Transavia, but we keep on going, and I think we are also, if you look at the Q4 results, we see that we're getting a better momentum in place, and at the end of March, all the slots are transferred to Transavia and Orly, and we get to a more stable picture over there. On the maintenance, we are getting closer to the 5.6% margin, which we had in 2019. We grew our revenues externally by more than 10%. This is fully driven by our engine activity. It is really, really, really doing very strong. The complication is still on the components business where we should grow further our margins and where there's still an opportunity to go in the coming years. So all in all, the 6.1%, I'm pretty happy, and also, of course, with the 2004 results on the operating results. It's not 2005, which is my favorite bar in the egg, but we were getting close to that one. If we then go to the picture between Air France and KLM, so KLM, sorry, Air France benefited from the premiumization, and, of course, we had the Olympics impacted. Last year, so we grew our operating result by close to 400 million. On KLM, it is stable. We have more benefits actually from back on track, so it's at least 450 million, but we had a lot of headwinds. We had a triple increase of the tariffs, which costed us 100 million in landings and take-off charges, and around 150 million also on the revenues, because we have two charts higher charges towards Schiphol. The whole Schiphol environment cost us $250 million. I don't know if you saw the results of Schiphol, but they should be very happy with it. They have a margin of 26%, but unfortunately it's over the back of our airline. And then on top we had, let's say, more connecting passengers on KLM and especially long-haul connecting traffics from Africa and from Asia. there was a yield pressure in the low yielding segment, which is bigger at KLM than it is at Air France. If we then go to Flying Blue, I think it grows and it grows. As Ben already explained, the program is very successful. We grew another 18 million despite the fact that the dollar is weaker and that has a significant impact on our Flying Blue profitability, but we grow our volumes over there. So it's good to see that we get more and more positive results from this business segment. And there's more to come in 2026 because then we also fully implement in our P&L the new American Express deal. If we then move to page 15, so if you look at the cash flow, we are very happy that we are now having a recurring adjusted operating free cash flow above a billion. We still have these exceptionals which are coming in which cost us around 500 million related to the deferred social charges and the wage tax. But if you take that out and you take all the cash out which we have, we have a billion which we generate by the business. And if you look at the net debt, then you see that it's still going up with one billion. There's 300 million which is related to this hybrid convertible. And there is, again, the 500 million of these deferred social charges and the wage tax, so that's 800 million. And then you see that especially the new and modified lease that is quite high, that has to do with the introduction of the A320s and the A321s because we needed a lot of direct leases to start up and to transfer quickly the 737 transfer at Transavia and at KLM towards the A320. That has an impact of around 800 million. on this net debt and then on top of it we renewed our 787-9 operational leases which had an impact of more than 300 million. So this is an exceptional high number. We know that it will come down in the coming years and we are more or less let's say in the range of the 1.4, 1.5 billion for the years to come. So on page 16, you see that our strengthening of the balance sheet and also the simplification is working. We have now cash at hand of $9.4 billion, significant above our targeted liquidity level. We had the lowest credit, again, with the new issue of the bonds, which we did in January, which was very successful with the coupon below the 4%. And with that, we are continuing the simplification of the balance sheet. So we paid the Apollo bond, we paid the hybrid convertible, we did one issue of a hybrid, and we will pay the next Apollo bond, which is due in July 2026. And then we are simplifying our balance sheet, having less of this hybrid quasi equity in, and at the same time, the strong net result generation, which you have seen over last year, will strengthen the balance sheet to do that. So it's good to see that we have now an equity level of 2.4 billion, which is exactly at the pre-COVID level, and we will support that further with our net results. Let's then go to the quarter. So if we go to page 18, you see that we have less and more or less a stable result. We already indicated the impact on the cargo unit revenue, so we spoke about double-digit decline in cargo unit revenue terms, and we are, let's say, at the minus 11%. Don't forget, again, that we had an uptick of 21% in Q4 2024 in the unit revenues of the cargo. So the cargo unit revenues are still very strong, but, of course, there is these impacts of these tariffs and these elections in the U.S., So if you take that out, you see that we have improved further our results. First, on the unit revenue, again, I come back to this driven fully by the cargo. On the unit cost, you see that we reached a minus 1.1%, which is very promising, but we had some positive incidentals year over year. And then if you look at the net results, 600 million better. Again, there was this unrealized foreign exchange of 300 million, and also we benefit from the tax assets we have on our balance sheet, so we don't pay the full tax to, let's say, we don't pay the full income tax because we still can use 50% every time of our tax asset. If we then go to page 19, you see that the network, still the unit revenue going up with 2.2% excluding currency, and then there is the minus 11% on the cargo. So that stabilized the network result for this quarter. Transavia, despite the fact that they grew with 22% and a unit revenue decrease of 6%, you see that the operating result at least improved, which is not very easy in, let's say, in the winter months of October, November, December. So we are happy with the Transavia result, but we need to improve that further to make sure that we are getting to our profitability target of 8% in 2028. If we then go to maintenance, so I think in Q4, in Q4-24, we had a big benefit of delivering a lot of agents in Paris and in Amsterdam. So we are now actually stabilizing the result, but there is still room to improve in the coming quarters because we still have components contracts which we should make more profitable as we used to before the COVID. Then on page 20, so Air France results. slightly down, mainly driven by a higher fuel price and a higher ETS cost, and we should not forget that we had a very high unit revenue last year on the passenger business side over there. On KLM, we see that we improved our results. It's good to see that the unit cost reductions are really coming in now with the back-on-track program, and it's promising also to see forward in the years to come to get KLM at a better result in terms of operating margin than they are today. And then on Flying Blue, Twenty-four percent margin, 40 million again coming in, so very strong result also in Q4 on our flying blue, and it's promising also to see that for the quarters to come. If we then take a step back and we look at the world map, so it becomes a little bit like a broken record, to be honest, but you see the premium, the premium and North America and Latin America are driving up actually this unit revenue. So in the first and business class, you see that the load factor is up close to 1%, and the yields are up 4%. On the premium economy, we have 8% growth in capacity. There's a little bit of a mixed impact, which drives the load factor down, but still the yield is up 6.8%, so we see a unit revenue increase over there of 4%. And then the economy, that's more and more difficult. You see a 1.4% gap. We see, if you look at the map, and we come back on it later, you see that it is more difficult with all the traffic towards the U.S. to fill, let's say, the connecting traffic towards the U.S. The point-of-sale U.S. is doing very strong, so there's a lot of passengers coming from North America to Europe, but the other side is getting a bit more difficult. But all in all, I think if you look at North America with a load factor reduction of 0.5 and an increase of yield of 6%, it's still... very, very strong. Latin America, 91% load factor, a 10% capacity increase, and a yield increase of more than 2%, so also still very, very strong. And then if we move to the east, it's also good to see that the east is doing better, so we grew our capacity with 6%, but we see also that we have strong yields over there, and we see the yields which are strong in China, they are strong in Japan. They are strong in Korea. So everything that's Asia-related is very strong. On the Middle East, we took back capacity. So that has an impact, of course, on the yield. So we could also drive up the yield. So Asia is really, let's say, promising if you see where we were in the fourth quarter. And then in the middle of the picture, you see Africa. Africa is getting more difficult. It's more, let's say, less attractive for people from that region to go to North America, and you see that also if you look at the point of sale mix. So Africa is actually not a big part of those flows on the North Atlantic, but they are down year over year, and if you look at their percentage with 23%. So all this growth of the U.S. is actually coming from the U.S. point of sale, which is up 3%. Europe you see down with 2%, and also Asia and India are down with 4% to 5%. Connecting traffic towards the U.S. is getting more difficult if you compare it with a year ago. And then, last but not least, Transavia I already spoke about, but the short and the medium mall, still difficult. We have flattish yields, but we know that the costs are going up there. We have the increase of the soft costs. We have the increase of the ETS costs because we are losing ETS rights, and you see also that the load factor is down 1.5%. Then let's go to the unit cost. So you can imagine that we, after a long, long, long, long period, we had for the first time unit cost decrease. So that was very, very good. Let's first start at the last time. You see the productivity brings in 2%. So that is really a strong indicator that our transformation and all the programs we have in our companies are working. You see also that the fleet renewal brings 0.6% in fuel efficiency. And then you see what we call other, 0.6%. And we had a lot of, and I don't know if you remember, in Q4-24, our unit cost went up with 4%. We had a lot of incidentals in that period. So I think if you take it all together, it was $60 million. And we have a lot of good news this year, actually, in our unit cost. So I think if you take them all together, you talk about a range of $100 million, which is impacting, actually, is unit cost performance, but all in all, I think the left side shows that we are doing very strong in keeping the transformation going and delivering the unit cost improvements which we see in our company. And then, of course, there's the premiumization, but that drives also up the unit revenue, so that has an impact of 0.6%, and we still have these charges in ATC and airport charges which are hurting us for 0.7%. Let's then go to the year 2026. So it started not very good. We had terrible weather in Amsterdam that had an impact of $90 million in the first quarter. If you look at that $90 million, around, let's say, 80% is related to KLM and Transavia Netherlands, and the other part is related to Transavia France and Air France, so especially a high impact on KLM. If you look at the unit revenues which we have, you see that the unit revenues in the first quarter, excluding ancillaries, et cetera, so it's the NTR, is down 0.4%. Air France is still at 1.5%, less impacted also by the snow. But if you take KLM, they had a unit revenue of minus 3.8%. If you take out the snow, you come to plus 0.5%. And if you would apply that also to the total unit revenue, we are up 1.1%. So still the demand is there. We had a hiccup, let's say, in the operations in Amsterdam, which cost us quite some money. But it's good to see that the underlying trend is still very positive. And if you look at the forward bookings, it's more or less in sync. What we have seen the last quarter, we are below what we were the year before. But on the long haul, you see that we already – there's only 1%. And there's always for us, let's say, a tradeoff between yields and load factor. And we have a very aggressive revenue management manager to driving up the yields in our system. Let's then go to page 25. So the fuel bill, $6.9 billion in 2025. 6.9 billion in 2026, so nothing is really happening, but the yet fuel price, because we grow our capacity, I will come back on that later, is still coming down, and it's good to see that we have already hedged 62% of that volume. And then you see on 26 we are increasing the tenor of our hedges, so instead of hedging six quarters ahead, we are hedging eight quarters ahead. If you start at the quarter, and that brings that we are now having total exposure hedged of close to 90% of a bond a year consumption. I think this is giving us robustness in this very, let's say, dynamic world, you could say, also in terms of fuel price. So we are getting closer to our European competitors, and I think we are very close to the bonds which their head office is in London. If we then go to the capacity outlook, You see that we are reducing, I think, compared to what we initially thought during the investor day. We are now at a 3% to 5%. We still will grow the long haul, which is our, let's say, backbone of our profitability with 4%. The short and the medium haul, we keep that stable. We are not going there anymore. We are trying actually to improve our results, and we are keeping the capacity stable and for the next year. And then Transavia still going up with 10%, mainly coming from upcoaching of the fleet. And at the same time, we still have a quarter to transfer the activities in Orly from Air France towards Transavia. So that results in a capacity outlook between 3% to 5%. On page 28, you see our total outlook. So the unit cost is guided at 0.02%. So there is the premiumization in which is 0.5%. We still have higher ATC cost, by the way. We still see high cost on Schiphol for another quarter. So that drives us that our unit cost, despite the fact that we had a very good unit cost even down in the fourth quarter, that we are between 0 to 2%. for the year to come, and as we are disciplined, as we were this year, we will be getting more to the left than to the right side of that picture. But it all depends on the completion factor and, of course, all the things which we need to further implement on our transformation, because there is still inflation in the system. But it's good to see we have the CLAs actually now in. We closed the NLOP. for Air France, and we have the CLAs in place for KLM for the majority of the staff. And then on the net CAPEX, you see a $3 billion, which is in line with what we had last year. So we are moving, and we are still disciplined on our CAPEX, although we still want to renew our fleet. And then on our leverage, between 1.5 and 2, and we are now at 1.7, so we are quite comfortable with that. which drives me to our outlook. So we keep this same ambition. So we want a margin above 8%. We want a significant positive adjusted operating financial, which you see that we're already realizing in 2025. If you take out this repayment of the wage tax and the social charges in France, we keep on focusing on reducing our unit costs. It is not easy in this inflationary environment. We will keep on going. to reduce that because that will improve our robustness in our business. And we are aiming on our leverage to have an investment grade for Fitch. We already have it, and we are very much in the safe zone over there. And we see that on SAP we are moving really on the right tracks towards that investment grade. So we guide for 2028. We never guide in the year where we live because the circumstances are too uncertain to guide for it. So, this is a nice trajectory from the current 6% towards 8% in 2028. With that, I give the floor to my chef, Ben.

Okay. So, final slide here. Thank you, Steven. 2025 was a solid performance. We're quite pleased in a very demanding environment, in particular with the unique charges and taxation. airline focus in the Netherlands and in France. But the execution was well-disciplined, and we've delivered both revenue growth and improved margins, as we've just been outlining. Premiumization is clearly gaining traction. Our robust cash generation reflects improved profitability and strict investment discipline, and we're also delivering on our sustainability commitments via both fleet modernization and increasing staff adoption. Looking ahead, we will continue to execute our roadmap with rigor and consistency, with priorities on accelerating KLM's transformation, playing an active role in European consolidation, and advocating for a level playing field. So these are the three main focus areas for us looking forward to 2026. Our ambition is to build a future-proof European champion, one capable of competing globally in a fair and transparent environment. So, with these strong foundations and discipline execution, we're carrying the momentum into 2026 with full confidence. So, thank you for your attention, and we're now happy to take any questions you might have.

Ladies and gentlemen, if you wish to ask a question, please press hashtag 5 on your telephone keypad. If you wish to withdraw your question, please press hashtag 6. The next question comes from Harry Gowers from JP Morgan. Please go ahead.

Yeah, thank you. Good morning, everyone. A couple of questions, if I can. First one, Stephen, can I just confirm what you said on the unit revenue point in Q1? I think you said to date that Q1 network total unit revenues are down minus 0.4%, but excluding the SHPO impact. It's up plus 1%. Was that correct? And then also, are you talking about network specifically and also X currency? Second question, just on the X fuel unit cost guidance for 2026, the range is obviously flat to plus 2%. Maybe you can give us a little bit of colour on what scenario you're kind of baking in, which would lead you to being towards low end and flat. And then what sort of scenario would lead you to being at the higher end at plus 2%? Kind of what are you building into your guidance at both ends? And then final question, just on your EBIT margin guidance of over 8% by 2028, I mean, anything you can say at all in terms of progression to get there? I mean, will it be a linear journey from the 6% that you reported in 2025? Thanks a lot.

Hi, Gary. Yeah, so first, it was not Q1. What I said, it was January, just to make sure. It is indeed the network X currency and just our net ticket revenue, so excluding ancillaries. And you are right. Let's say if you take the January numbers, it's minus 0.4%. But if you take out the snow, you get to plus 1.1% in terms of unit revenue in January. So it's not... the full quarter, but to be honest, the first weeks of February were also not too bad. But I don't want to guide on weeks, because then we get, because there's always a week-over-week comparison, which is difficult, so I give you the number for January. Then on the unit cost, I think it is fully driven by the operations. So as long as we keep the completion factor and the operations going well, then we get more to the left side of our range. Of course, if we don't make the completion factor and we have a lot of compensation costs due to the factor, as we have seen also in January, then, of course, that drives up our unit cost. So I think it's all about execution. I think on the transformation, we have the programs in place. That is a journey, which is not a one-day journey, so it's just an ongoing procedure or operation. But the real unit cost difference comes from the execution in our operations. And for the long-term guys, I give the floor to Ben.

Hi, Harry. So, look, in 2018, where we were with the Kovacs 2018, where we were with Alphonse sitting at 1%, 2% margin and the very difficult transformation we went through with a clear strategy, we're quite happy to see the results and how that's been panning out. And that was a linear, you know, sort of straight line. If KLM was starting the transformation or a new transformation, effort from a much higher position. I'm not sure how close you are in following what's going on specifically in the Netherlands, but we've had an enormous increase in costs of operating at Schiphol. There's been a sharp increase in taxes related to transportation that have been imposed by the Dutch state and with a relatively high level of inflation. The pressure on costs with our staff has also gone up. So we've got some very good plans in place. We have to re-look at how the network is set up to make sure it's sized correctly for the new environment in which we're operating in. But I'm confident that we can get the margins up at KLM to ensure that that contributes to our ambition of at least an 8% margin in the near term.

Right. All clear. Thank you very much.

Thank you, Irene.

The next question comes from Alex Irving from Bernstein. Please go ahead.

Hi. Good morning. Hope all is well. Two for me, please. First is on the air front medium haul fleet. Now, you've still got A220 deliveries for the next two and a bit years. Then those are done. By when do you need to place the next order given the aging COs you have? Is the main trigger for that an 82500 program, or if not, then what are you looking for to make that decision? The second question is on distribution and specifically how you're approaching the decision about whether and how to sell through large language models. Are you planning to engage directly with LLMs using an API or to rely on GDS and travel agents continuing to pay commissions? When do you think you'll sell your first ship through a large language model? Thank you.

Okay. Hi, Alex. So on the fleet front, we've decided to go exclusively with the Airbus A220s for, you know, to fly the entire medium haul mainline fleet at Air France. We hope to have between 90, 95 examples in place before the end of the decade, replacing the entire Airbus SEAL fleet. We are going to also look probably sooner rather than later at a replacement for our long-haul Boeing 777-300ER aircraft when you look out at how the order book looks at both Airbus and Boeing. So there are two options there. So on the fleet side, that's what we're looking at. At KLM, the decisions have been made, and the 777-300ERs are much newer. And as you know, Transavia, we've made the decision. On distribution, we're still not 100% clear on which way we're going to go. We have some very unique markets in Africa which don't fall into the categories that a lot of North American airlines deal with. It's one of our European competitors. We have a big exposure to Western Africa. And this requires a specific type of distribution, which we need to fit into our overall distribution strategy.

All right. Thank you.

The next question comes from Steven Furlong from Davey. Please go ahead.

Good morning, gentlemen. It's more of an overview question to Ben. I would have thought, my view is that 2026 is a very important year for the group to set you up for the greater than 8% margins in 2028. I think, Ben, you called it in New York earlier in January a pivotal year. You might just go through, if we look to the end of the year, what would be your wish list at the end of the year, both organically or inorganically in terms of the group, and then What would be the biggest challenge you think this year or anything that would worry you in terms of operationally or anything else, restructuring, et cetera? Thank you.

Okay. Thanks, Stephen. The strategic plan that we started out in 2019 at Alphonse has not changed. We've done the bulk of the domestic overhaul, which the plan will be completed in the next month. So that looks like we're in good shape to complete that. Of course, this was the biggest money losing region of our network in 2019. So that is panning out as we'd hoped. The introduction or the replacement of the slots at Orly from, you know, being used by our regional operator HOP and now FOSS by Transavia activity that takes some time to adjust. You know, we were flying on average smaller gauge airplanes and we're replacing those with high capacity or higher capacity densified A320, A321 aircraft. So that adjustment and transition hoping goes as quickly as possible so that we're able to take advantage of the slot constrained order airport and the cost structure we have at Transavia. So on that side, if I look at domestic France, and the Orly operation and the ability to take some of those slots that we're operating today at Orly and move those to more European focused network and have something more comprehensive at Orly that we can offer to customers. That would be a big win for us. So we've got a timeline over the next two or three years from a profitability perspective on what our ambitions are for Transavia. But as I've said many times before, The Transavia results, particularly in France, have to be looked at in context with what we've been able to restructure at Alphonse. So we are saving a couple hundred million by pulling Alphonse out. Of course, it's Transavia that has to cover those flights, simultaneously reducing capacity in France and redeploying the use of those slots to European destinations and then going up against some very tough, low-cost competitors. However, with the cost structure of Transavia being pretty much in line with our main low-cost competitors at Orly, and with the advantage of the 50% slot portfolio and the Flying Blue affiliation, we've got a very good customer offering. So that's on the Orly front. At CDG, continued simplification, both from an operational and maintenance perspective with Reducing the types of fleets, we'll have the last of the Airbus A330-200s out of the fleet. The standardization of the cabins and the modernization of the existing fleet will almost be complete, so we can continue to drive pricing premiums, which we're seeing are working quite well, and that's why you're seeing the increased performance in the revenue on the revenue side at Airbus. at Alphonse and we can continue to improve the relationship with the airport operator that handles the noise responsible for both CDG and oily airport, which is much, much better now. So we're aligning our CAPEX with their CAPEX plan with our needs. So the operating environment at CDG should bring down cost significantly because it is a very difficult airport to operate a hub from. So that's on the airport front and we can maintain the competitive cost structure of that airport and the taxes that the French state imposes on the airline industry, which we've been able to do so far, despite the unstable government environment here. So on France, there's quite a few, you know, difficult items or elements that we've got to navigate through. But so far in 2025, the team under Anne Le Guy have been able to do so, and the result is a as you've seen, has been above expectations. So for 2026, it's pretty much the same. At KLM, we have a few more headwinds with also an unstable government, which has put in place a lot of incremental taxes that we were not expecting. So Marianne Rindell and her team are doing their best to temper those and even reduce these taxes. We're lucky that we have a new Minister of Finance and a Minister of Infrastructure, which is much more friendly to aviation. So we're a We're reasonably optimistic that we can get some improvements. And the Schiphol Airport charges, this is our number one objective at KLM to help reduce costs. If we're not able to significantly do that, we're going to have to seriously look at the operation and the hub that we operate there and what we're able to do profitably with the assets and the network that we have. So I'd be very happy if through 2026 we could get some more clarity on what we can and can't do at SkipAlt and that we've got more assurance that our situation at Paris remains as it is today. And then also a last point here is with SAS that we're pretty much completed our transaction and the takeover by the end of the year. So long term Long answer there, but those are the three elements we're looking at amongst our carriers. Thank you.

The next question comes from Jared Castle from UBS. Please go ahead.

Good morning, everyone. Three as well. Are there any negotiations which are worth highlighting during the next 12 months for any of the airlines and any concerns around that? Secondly, just coming back to AI, you signed an agreement with Accenture. I wonder, Ben or Stephen, if you could just go through the buckets of where you see the use cases internally. I'm not necessarily talking distribution, but what makes sense. what makes it exciting for you. And then, okay, I guess thirdly, you know, the ETS price or price of carbon has been very volatile. So just an update on, you know, hedging. And then just related an update on, you know, how you see Corsia developing and all these environmental headwinds coming your way. Thanks.

Okay. On the CLA labor agreement front, in France, there are no significant negotiations that are planned to take place in France. However, things do come up, but, you know, as we see today, things are relatively stable in France. And as I said, we don't have anything scheduled. Next year, there are some big agreements that do come up in 2027. which we're laying the groundwork, and hopefully we can get those agreed to earlier rather than toward the deadline. At KLM, we have constant CLA negotiations that are continuing, but with the situation at Skippal and with the cost structure that we have at KLM today relative to the unit revenue, we've got to work with the unions there to come up with a model that can get us back to – to the profitability levels that we need at KLM. So there's, I would say they're not necessarily scheduled, but there must have, there must, you know, these are new negotiations that are part of the transformation model that needs to take place.

Hi, Gerrit. And then on the AI, I think AI is everywhere. So we will use it in our administrative process. We will use it in revenue management where we haven't big project running. So it is not to say that we have only one part where we will use AI. So we have an approach where we have a discussion on, let's say, at the total group level where we are going to invest in AI, but it is very also decentralized in all the executions within the operations. So I could say it is in every domain where you can talk to. If you talk about customer management, if you talk operations, if you talk about commercial operations, I think it's not one domain, and therefore we explore with Accenture further where we can implement further our AI. On ETS, we are, let's say, buying the ETS rights one and a half year ahead, so we are fully hedged on that front for one and a half year. And then if you talk about Corsia, yeah, Corsia is a little bit – it's a very difficult – There are not a lot of projects, so we are just looking which projects where we can invest the money, but there are not that many, so we are a little bit skeptical about the execution, but it is there. I don't know what will happen in the U.S., so that is also important to see, but all in all, we have the, let's say, the provisions for us to invest in it, and we need more projects, actually, which are really helping this planet. All in all, the cost levels are not that high at the moment. It is not the same as putting sustainable aviation fuel in, which is, let's say, the first trigger, together with the fleet, how we decarbonize, let's say, our operation. But it should be there at a certain moment coming, but we need to have the projects where we have full confidence in that it is helping our planet. Thanks.

The next question comes from James Hollins from BNP Paribas. Please go ahead.

Thanks very much. Two for me, please. Just picking up on your comments there, Stephen, on U.S. outbound, U.S. inbound. Is it the case that US outbound from Europe is getting worse? I think you were talking about some softness there. Is it just still a bit difficult? And maybe a comment also on US inbound. Is that potentially getting stronger as we head into or heading through 2026? And a slightly annoying question alert, but do you expect to reduce your Q1 losses year on year, even with that weather issue costing you 90 million? Thanks very much.

James, let's first start at your last question. So I don't guide on anything, but, of course, the ambition is to go to 8%, so that also means that we are trying to reduce our losses in the Q1. But don't forget that the seasonality is getting bigger in our industry. But, of course, it is not that on itself we have an ambition to grow our losses in the first quarter. The situation in the U.S., yeah, let's say if I look at the point of sale, and I come back on what has happened in Q4, so the total revenues on the U.S. were up 9%. Then there was a 12% growth from the point of sale USA, so really, really strong, and only 7% in Europe. So you see that Europe, and especially northern Europe, so if you look at Scandinavia, Germany, And also the Netherlands, I think you see if you look at how popular the U.S. is currently in those countries, it is at a very, very low level. And that impacts, of course, also the appetite to go to the U.S. But there's another element on the U.S. It's extremely expensive to go there. So the inflation is very high over there. Despite the fact that the dollar is coming down, it's still much cheaper to get in a hotel in Europe than if you go to a hotel in the U.S. for the same Then on Africa, so if you look at the – so 9% up we are in revenues and Africa point of sale is down 16%, so you see really a significant impact over there, but we should also be modest on it. The share of let's say the point of sale of Africa on our U.S. is only 1.8%, so it's not very significant. And then we see indeed also India and Asia a little bit in the same range, so only 4% up in terms of sales, but with the growth of 9%. So that's a little bit the mixed bag. So we still see a stronger point-of-sale USS, both in corporate and both in leisure, and we see a declining demand in Europe. But as you can see, at the end of the day, our unit revenue is up 6% year-over-year, or sorry, the yields are up 6% year-over-year. It is still very strong, and we all know that the point of sale of USA has the strongest price. So by definition, it's more favorable to move to the U.S. point of sale than the point of sale in Europe or elsewhere. Thank you. Yeah, I think that's it. So I hope you're happy with my answer, James. More I cannot say.

Yeah, no worries. Very happy. Just given you mentioned that, maybe just some general trends on corporate travel, if you could, please.

Corporate travel is just holding like it was. So it is not getting stronger year over year, but it still has the same share of percentage. So corporate traffic is doing well in line with all the other revenues, but not stronger than earlier.

Okay. Thank you.

The next question comes from Andrew Lobenberg from Barclays. Please go ahead.

Hi, Stephen. Hi, Ben. Can I ask, you gave us in the deck the advance loads for Q1. I know it's obviously early days, but how does it look for the summer for Q2 and Q3? Is that level of lag obviously on lower numbers? Is that stable or is there a bigger gap this year? Second question might come to SAS. Is there any information you can give us on the progress through the competition policy process to take SAS on? And also, you know, I see you don't want to give us guidance on what it would cost, but can you just remind us of how that process works and also whether your leverage guidance that you give us, is that inclusive potentially of having SAS on the books at the end of the year. And the third question, you know, with Dutch airport policy, I think I read that there are plans to open a reliever airport for Amsterdam. Peter Elbers always used to laugh at me because I couldn't pronounce it properly, but it's Lelystad or something like that, isn't it? Do you think that's going to happen and is that good or bad for you guys? Thanks so much.

Yeah, the summer, Andrew, is very far away, especially for French people and Dutch people. They are just thinking about their skiing holidays or not so much into, let's say, the holidays of December. But if I look at the summer period and I look at the booking load factor, let's say July, for instance, is close to where we were last year. So there's not even a gap. But, yeah, we talk about numbers of – what is it, just 20% of our plane, which is filled. So it is very low. We are late bookers in our home countries due to, let's say, our relative good schedule in terms of holidays. Then on SES, so we had the first discussions with the EU, so it's going on. and we are still aiming to get it done at the end of 2026. So we have more than 100 questions. We are very nicely answering them, and we are discussing with the EU. It's more an information session at the moment than any other discussion. They need to get a full picture of what is the competitive landscape in Europe, and specifically what is the competitive landscape in Scandinavia together with Air France and KLM. Then what is the cost? So what we have a formula, which is actually that we pay for the shares, what is actually the EBDA multiple in the market. So this is our EBDA multiple, the one of IAG, the one of Lufthansa, and the one of Finnair. And then we have an EBDA, which we multiply, and then we deduct the net debt. The same as you do in your modeling, actually. And indeed, if you look at the leverage, we take into account also SES. It will not have a big impact on the leverage because the results of SES are not that bad at all. I cannot disclose them, but in total, it will not have a significant impact on our leverage. And then the question on Lelystop I give to.

Hi, Andrew. So as you know, In 2019, Schiphol was saturated in its capacity and Lelystad was planned to open and there were discussions of even raising the cap at Schiphol. So Schiphol was at 500,000 movements and there was discussion to go to 525,000 movements and discussions about opening Lelystad Airport which was built and laid. So now we're sitting at 478,000 cap movement at Schiphol. We'd like that pretty much locked in stone so we have some visibility. We have much higher costs at Skibble than we had in 2019. We do believe that Lelystad will open with 10,000 movements. We're not looking at a lot of movements today at a lower cost operation. So to answer your question, is this good or is this bad for us, I think when you look at the whole picture, We want visibility on both the number of slots at Skippal. This will be available in the short to medium term. And what is it going to cost us to operate at Skippal in the short to medium term? And I think once we have that, we'll be able to, you know, take a position on whether it's good or bad.

Great. Thanks.

The next question comes from Mark Zak from Kepler Shoebrew. Please go ahead.

Good morning, and thank you for taking my questions. I tried to get answers to two questions. First was really on Airbus. Airbus today said they will scale back deliveries somewhat due to engine issues and at least judging by Airbus share price reaction that came as a surprise to the market. So what do you currently factor into your unit cost guidance for 2026 and the margin guidance for 2028 in terms of Airbus deliveries? Do you kind of already have today's Airbus announcement in that or might there be a bit of headwind if there's less planes delivered and there's maybe more What type of situation in the engine market? And the second question really would be on the EU point of sale Atlantic traffic. And you kind of said you already answered or said everything you could say. But I was looking for any signs maybe of – improvement from the very depressed levels of EU point of sale. I believe Q4 last year, there was not yet really an impact from US politics that only kind of emerged in Q1 2025, really. So if you're now looking at bookings, EU point of sale into the US, especially from France and the Netherlands, Do you see an improvement compared to the depressed level we saw in 2025, or is it still very much unchanged or even a deterioration on that one? That's my two questions. Thank you.

Okay. Hi, Mark. So a couple things. You know, we're lucky that we have quite a number of unencumbered airplanes, older generation airplanes, which gives us some flexibility for delays that we may incur from Airbus or Boeing. We took a very lengthy delay with the deliveries of our last Boeing 787 aircraft. We just received our last 787-10 at KLM a couple of years late, so we're pleased that we've now got the entire 787-9-10 order book now completed for Air France and KLM. And for the, on the Airbus side, Airbus A320s, we ordered the airplane with the CFM LEAP motor, CFM LEAP engine, not the Pratt GTF. So that is one of the big roadblocks for Airbus to deliver. Here again, we have 737s at KLM and A320 COs at Air France that are either owned or unencumbered that we can continue to fly. should we encounter any delivery delays on the 320neos powered by CFM LEAP engines. We have taken some delays over the last two, three years, so we have been managing. So it's not new. We have to take a few extra months. It's not the end of the world for us. We've been on a big fleet renewal for the last five years, and so we've got some good experience in managing either engine delays or delays or the airframe delays and also difficulties in integrating new technologies such as challenges on the Airbus A220 fleet and how that impacts the operation and how we can handle it. So I think so far we don't see any change in our assumptions for 2026 on the fleet front. And then point of sale Europe on the transatlantic, our position on that and what we've seen has not evolved in the recent weeks. You know, it is reducing some softness, but it is being offset by stronger point of sale U.S.

All right. Thank you.

The next question comes from Axel Stass from Morgan Stanley. Please go ahead.

Yeah. Good morning, everyone. Thanks for taking my questions. Sorry to come back on this, but how much is your U.S. point of sales for the Is it fair to assume it's close to 50%? Asking this just to make sure we understand how much of a headwind Europe represents for the group right now. And maybe a follow-up on this is what are the yield differences for the U.S. and the U.P. in point of sales for the transatlantic routes? That's my first question. And then my second question is about the cost benefits. Can you quantify how much of the KLM cost benefits you guys benefit in 2026 versus 2025? and should we see more of these cost benefits in the first part of the year or in the second part of the year? Thank you.

Hello, Axel. So let's say the point of sale U.S. is around 56%, so really, really strong foothold there. The yield difference, I don't know by heart, so I don't want to mislead you by that, but I know from the past it was quite significant, and we have also seen that the U.S. pricing has gone up, so I don't have the answer on that one, to be honest. And on the cost benefits, we will see that, let's say, it will gradually go. You have seen in this year, it started actually more in Q3 and Q4, but we also expect that the cost benefits will probably more I think it will be more evenly spread as what we have seen last year. But we have a shipple specifically, which is still charging again an increase year over year in the first quarter, which we will not have in Q2 to Q4. So there's maybe more of a difference than what we have seen this year.

Okay. Thank you.

The next question comes from Rory Cullinane from RBC Capital Markets. Please go ahead.

Yes, good morning. I found the comments on the level playing field for airlines globally pushing for that interesting given you are using more staff than mandated. Is that something we should expect you to continue to do? And then secondly, just because it is such a substantial demand Is the tax impact, you know, purely a function of the DTAs that were mentioned in the prepared remarks?

Thank you. Hi, Roy. Welcome to our group of analysts. We are very happy that you follow us from now, so thanks for that. Yeah, RBC, yes. Yeah, we are very happy with your work. Just one quick, can you repeat your last question, please, because we could not fully understand the question.

Yeah, thank you. Yeah, it's just on the 354 million sort of income tax impact in the quarter. Is that, I mean, you mentioned the DTAs in your prepared remarks, but I wondered if there was anything else notable there.

Okay, thanks. So first on the SAF, let's say we have a mandate. So we, of course, we fulfill our mandate, which is automatically more or less done. Then on top of it, we will sell SAF to the markets, to our corporate customers and to our, let's say, directly to the passengers. And then, of course, also on the cargo, we sell SAF. We consumed, especially in the Q4, a high level of SOF in the Netherlands because there were the HPE credits. So jet fuel was more or less the same price as SOF. So that is why we had a very high volume at KLM in the fourth quarter on sustainable aviation fuel. If you look at the income tax, so it is driven actually by the fact that we are making more profits in France, so we can make more use of the tax asset. And at the same time, we revalue the tax asset based on our, let's say, profitability trajectory, which we have agreed with the board. So it is those two elements which is driving up that tax. We still have, let's say, every time we have to pay tax, there's a 50%. then you know that there is an additional tax in France, which they say it's temporary, but it has now been extended again. But that has a very marginal impact. It had around 11 million impact in 2025, but it will grow because our profitability will grow, and they also take two years into account, so we have more profitable years to take into account. But it is mainly coming from evaluating the tax asset and the use, of course, in the year 2025.

Thank you.

As a reminder, if you wish to ask a question, please dial hashtag 5 on your telephone keypad. The next question comes from Jack Rayburn from Bank of America. Please go ahead.

Hi, good morning. Standing in for Miniba this morning. A couple of questions, please. Maybe picking up on the U.S. point of consumer or point of sale again, What gives you confidence on the strength of the U.S. consumer continuing in 2026? And how are you viewing transatlantic industry capacity and potential yield implications? And maybe touching on TAP Portugal, if there's any latest developments on that, and if you have any issue with the minority stake. Thank you.

Yeah, why are we confident? Now, let's say, I don't say that we are confident or anything, but still every time we are surprised by the strong foothold of the point of sale US. Of course, it's a very dynamic market. There's a lot of things happening over there. Of course, some people are worried about recession, etc., but still the prices are much different in Europe than over there. And as already said, probably the lower dollar at a certain moment will also help a bit of traffic towards the U.S., especially in countries like the Netherlands where they look very carefully at pricing and to make use of that. So all in all, I think, let's say the booming on the North Atlantic is even exceeding our own expectations, and we still see very strong bookings coming in and out of the U.S. Then on TAP, now you know that there were three parties qualified for the process. One of them is us, and we are working on a non-binding offer, which we will bring in before the deadline, which is at the beginning of April. So that is where we are, not any further, and it takes time to, let's say, get a real offer on the table. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for closing remarks.

Thank you, operator, and thank you, everyone, for your questions, and we look forward to speaking to you at the end of Q1.

Thank you for your participation. The call is now over. You may now disconnect.