Air France-Klm Ads

Good morning and welcome to the Air France KLM first quarter 2026 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 Steven Zott, CFO. Please go ahead, sirs.

Thank you. Good morning, everyone, and thank you for joining us for Air France-KLM's first quarter 2026 results presentation. I'll start by highlighting our key achievements for the quarter before handing over to our CFO, Stephen Zott, who will provide a more detailed review of our financial performance. I'll return later for some closing remarks before we open the floor to your questions. Before diving into the details, I want to highlight a critical point regarding the quarter. While fuel prices have surged since the start of the Middle East conflict, This impact is not yet visible in our first quarter results due to a lag in fuel pricing. This is a vital distinction as these costs will weigh on the upcoming quarters. Overall, the first quarter represents a solid start to the year, defined by strong commercial momentum and disciplined execution in a volatile environment. We carried over 22 million passengers, up 2.3% year-over-year, confirming that travel demand remains resilient. Furthermore, we demonstrated our agility by swiftly reallocating capacity following the suspension of services to the Near and Middle East. Group revenues rose 4.4% to 7.5 billion euros, fueled by higher yields in our network activity and a strong performance in maintenance. Unit revenue grew by 3.4% at constant currency, supported by our premiumization strategy and reduced industry capacity in March. Simultaneously, we reinforced our strict cost discipline Unit costs increased by only 0.5% as we balanced investments in our premium offering with productivity gains and the benefits of fleet renewal. As a result, our operating result improved significantly to negative 27 million, a 301 million euro step up compared to last year. We also moved forward with our fleet modernization with next generation aircraft now representing 36% of our total fleet, an eight-point increase year over year. As I noted, these solid results do not yet reflect the full financial impact of the current crisis. Stephen will come back to this in more detail, including the measures in place. Moving to slide four, it's important to contextualize our performance within the current situation in the Middle East and the specific complexities it has introduced to our operations. The conflict has directly impacted Gulf carriers that up to conflict already covered more than a quarter of the traffic volumes between Europe and Asia through their mega connector hubs. The disruption of these flows has created significant imbalances in global travel supply and demand. Furthermore, the conflict introduced even more airspace constraints and higher spot fuel prices, all of which contribute to a more demanding operating environment. In this context, our group has once again demonstrated its resilience and agility across three pillars. First, our limited exposure to the Near and Middle East at approximately 2% of group capacity allowed us to swiftly withdraw capacity from the region, ensuring that no aircraft remain unutilized or grounded. Second, our hub-and-spoke model and diversified network of over 300 destinations enabled us to reallocate that extra capacity to markets where demand remained strong. And third, by actively managing east-west traffic, we responded dynamically to supply demand shifts, rerouting international long-haul flows through our hubs in Paris and Amsterdam while capitalizing on rising yields. I want to emphasize that while our agility allowed us to mitigate the disruption and recapture demand, the situation remains uncertain. Looking ahead, as previously mentioned, we anticipate that we will not be able to fully offset the impact of higher fuel prices in the quarters to come. Moving now on to slide five, I'm very pleased to announce the successful completion of a major step in our strategic roadmap, and that's the transfer of Air France's Orly-based routes to Trans-Avier France. This move is central to our ambition to strengthen the group's efficiency and long-term competitiveness. Operationally, this transition planned over the last three years, has been executed seamlessly. We have maintained comprehensive coverage on key domestic routes, including two daily flights to Marseille, eight daily flights to Nice and Toulouse, respectively. Load factors are already exceeding expectations and continue to build. Furthermore, operational reliability has been exceptionally strong with a 99.9% completion rate. Beyond operational success, we are seeing encouraging commercial traction The strong update of our plus and max fares reflects higher customer satisfaction with the Transavia product and a clear appetite for our premium ancillary offerings. Financially, this transition is a structural turning point for Alphonse, effectively addressing the historically loss-making domestic point-to-point segment. By consolidating Alphonse operations at Paris CDG Airport, we are already seeing improved hub feeding, greater operational efficiency, and increase booking volumes on connecting groups. Looking forward, we will continue to maximize demand, support customer migration, and further leverage Flying Blue across the group to drive loyalty. So I'll now hand it over to Steven, who will take you through the financial results in more detail. Steven.

Yeah, good morning, everybody, on this beautiful day in Paris, where it's much more peaceful than it is in the rest of the world. So let's go to page seven. If we look at the result, it gives a bit of a surrealistic view, which doesn't show yet, as Ben mentioned, the current fuel price increase, and at the same time we already benefited from all the measures we took in the unit revenue. So if you go to the picture at the right top, you see that we had a positive impact of the fuel price, and that comes that the fuel price is actually having a delay before it gets into our system. Places where it takes almost three weeks before we pay the fuel price. We have places where it is one week. So let's say on average it's around two weeks. And then you see that the fuel price impact on itself of the spot is around 107 million. And at the same time, we get the full impact of the hedge, which is 164 million. So we have a 60 million gain just out of the situation. But of course, this fuel price will get into the system later. in the month to come. If you then go to the unit revenue, you see the unit revenue is up 3.4%, but be aware that the March unit revenue is up 12%. So there is a big impact for March and that resulted at the end of today that we have an improvement of our result because the unit revenue increase is already kicking in. The fuel price is even positive due to our hedge strategy and at the same time, you see that the unit costs are quite well under control. We are at 0.5% despite the weather impact which we had in January, especially in Amsterdam. If we then go to page 8, you see the view over the business segment. So let's start on the network. Passenger business unit revenue up 5.1%. And also there, if you split it, you will see that it is more or less flattish up to February, and then it is spiking with 14% in March. On cargo, you see a slight decrease, but we should keep in mind that we had last year the front-loading because of the tariff announcements in the U.S. So last year, the unit revenues in the cargo were up 16%, and that is also reflected if you look at the cargo unit revenue in this quarter. Year-to-date, until February, we were at minus 6%, but in March, we had an increase of 7% of our unit revenues, which in total gets to the minus 0.7 if you take the mixed difference between January and March. Then on Transavia, Transavia you see a steep increase in capacity, and that goes hand-in-hand with the unit revenue decrease. Ben explained the rationale for this, so we grew, especially on Transavia France, but also Transavia Netherlands grew by the upgaging of our fleet. And last but not least, if we look at our maintenance segment, you see a minus 7 million. We have a negative impact from the dollar due to the fact that we have more maintenance revenues than maintenance costs. So the impact of the dollar is around 17 million. We saw a stronger maintenance performance in our components business, especially in Amsterdam. So that's good to see that the back on track is working there. But at the same time, we see more complications in Paris on the GE90. But overall, it's mainly impacted by the dollar. If we would not have this dollar impact, the maintenance business would go further in profitability. Then, going to page 9, where we see the results of Air France, KLM and Flying Blue. Let's start at the bottom. Flying Blue, you see a significant increase in our performance. We have now the full impact of the AMEX contract, because it gets, let's say, operational from the 1st of January, what we signed, actually, last year, and that resulted in an increase of our profitability by $32 million, bringing our margins up to 30%. Then KLM, we know that KLM had a very difficult January. It was around $18 million impact of the weather disruptions, but you see that the back on track is starting to work now. They had a unit cost decrease in the month in this quarter. So all in all the KLM performance is quite going in the right direction with also seeing that the operational performance if we keep out the snow was quite good in this quarter. So if you put back this 80 million to the results you see that they are also close to break even and they will improve let's say with around 160 million compared to last year. And then Air France benefiting from the strong improvement of the unit revenues which we just saw. And same story, we didn't have the fuel price impact yet in place. If we then go to page 10, on the top you see an increase in capacity, an increase in load factor, an increase in yield. First, you see again that the premiumization is working. So in the first and business class, you see an uptick in the load factor and you see an increase again in our yield. So all in all together, it is... Let's say 8% in terms of unit revenues. Then our premium economy. We keep on premiumization of our economy sector and you see that we increase the capacity and at the same time we increase further our yields over there and this is a very profitable segment so we are very happy that we are growing in this segment further and it's well appreciated by our customers. Then on the economy, you see an increase of 2% of capacity, the load factor more or less flattish, and then at the end it was a plus 2% and mainly driven also by the month of March. If you look on the right bottom, you see that the March impact is significant, an increase of load factor close to 3% and an increase of yield close to 9%. So you can imagine that it has a big impact on the unit revenue picture. Over the world, the West is still holding strong, so increasing capacity. In Latin America, we increase also the load factor, and you see yields going up between 6% to 7%, so strong demand over there, and we are also able to push up the prices over there since the crisis started. And then on the right, that's very interesting to see, we put them together, Asia and the Middle East. We are not so exposed to the Middle East. That's only 2% to 3% of our revenues, And you see if you put them together and we know that there's only one month in after the situation, you see that the yields increased by 8% and the load factor increased by almost 2%. And we were able also to reallocate capacity to that segment. And especially, of course, in the month of March in Asia, we saw unit revenues in that segment over the 30%. So all in all it's quite strong, even in the short and medium haul you see that we are able to increase the prices year over year to cover our increase of fuel price which didn't come yet into our system in the first quarter. Then if we go to page 11, I think you see a further evidence of our strong unit cost control. First, we had the customer conversation mainly related to the January situation, so actually if we would not have that, we would have a flattish unit cost. We gained almost 1% in productivity. We still had the impact of the Schiphol charges, and we are welcoming, let's say, the new announcements of Schiphol, but this still has a negative impact in the first quarter because the charges are not yet reduced, and so it was still increasing year over year. Then the premiumization didn't have a big impact in this quarter. That is just a seasonality impact when we, let's say, take out planes to, let's say, to put them in modification and planes are coming out. For the full year, we expected 0.5%, but in this quarter, it was just 0.1%. So I think the unit costs are well under control, and we keep on keeping our guidance between 0% and 2%. As Ben mentioned, we are taking more measures to, let's say, to keep control and to keep control of our financial results. First, we stopped hiring for the support staff. We have 500 million on discretionary spend where we are cutting significantly by reducing significantly any cost related to consultants, any cost related to internal travel. So we are cutting all the costs there which we can to the maximum. Of course, we keep on recruiting operational staff because we need them to keep our operations running. And we also will, in this 500 million, there's also a part related to training, which we will keep on continuing. Then on the cash flow, which you see on page 12, the main outlay is, of course, that after 17 years, I think, we paid now the cargo claim. So that is an impact of almost $370 million. If you take that out and you take into account the payments of the lease debt and the net interest, you see that we were improving our cash flow with around 100 million. And on the right side, you see that we reduced our net debt. We are now at the lower end of the guidance at 1.5 at the end of March 2026, which is a reduction of 0.2%. versus the beginning of the year. But we are always helped in this quarter, as we all know, by the strong ticket sales, which we still have to fly in the second and the third quarter. Let's then go to the outlook, because that is actually maybe more interesting than what we did in the first quarter. If you look at the outlook and we look at the fuel bill, you see that we have an increase of the fuel bill of $2.4 billion. That includes our hedge results, so the hedge results brings a $1.5 billion reduction of our fuel bill, but the net impact is still $2.4 billion, with a significant increase in the quarter two, where there's $1.1 billion, and it slides away because the forward curve is still in degradation for the coming quarters. You know we have a hedge strategy which we have opened, and publicly we kept on our hedge strategy until the end of March. Then we took a pause because the forward is really moving with all the news coming from the truth platform. But our teams have the room to take action if they see that there are big decreases in the market, especially for the year 2022. So they have a room of 2% of our consumption. So they have room to act quickly because before we sit together, then there's another message on the truth platform which can impact the price. So we have a technical approach. We will see in the coming weeks what we will do and how we will continue our few hedge strategy. But for 2026, we are almost 70% hedged already for the full year because we continue that part. If we then go to the The bookings, so we still see that there is travel appetite. Actually, you see that the gap in booking load factor is reducing compared to what we saw in the previous quarter. So in the long haul, it's just 1% down, where we were more in the range of 2%. You see that on the short and medium haul, it's even up. And Transavia, despite the growth in capacity, you see it's going up with another 1%. Then the big question, of course, for everybody is how much of this 2.4 billion are you able to compensate through your revenues? Now, let's go to the month of April. So based on the actuals of the first 24 days of April, we estimate that the yield in the month of April for our passenger business will be up 1%. 9% year-on-year X currency, and that reflects approximately a recapturing of around 60% of the fuel price increase in April. So that is what we are currently seeing. So all the tariffs, let's say the increases in price which we put into the market, are there to compensate also the fuel costs, but we are not able in the second quarter to fully compensate that through our revenues. Then if we go to page 16, we have slightly downgraded our capacity. We still see that for the quarters to come, especially for the summer, there is still with the current fuel price, it's still profitable to fly all these routes. We look at the flight contribution level. And as we all know, the prices in these months are at such a level that you can even compensate for the higher fuel prices. Then the question mark comes more, what will happen in the winter? And I think nobody knows yet what will happen in the winter. And there we take a little bit more cautious approach because we need to act. If this fuel price stays at the current level, we will, of course, be agile and will reduce our capacity. So for the long haul, where we previously guided at 4%, we are now at 2% to 4% for the short and medium haul. It's stable, but we went down actually a little bit in our own view, but it is more or less stable year over year. In Transavia, where we were previously at 10%, we are now at 8% to 10%. So we reduce our capacity kindness with 1%. Of course, we take tactical actions. If you see that the flight contribution is negative on flights, but for the moment, we see quite good bookings coming in also for the summer. Then on page 17, now group capacity I already explained. Unit cost, we keep our guidance. So 0 to 2%, including 0.5% related to the premierization. On the net capex, we will also act on capex. So we will be very cautious on our investment committees. So actually everything which is not necessary, but if it's still necessary for our strategy, we will continue on the capital expenditure. So we have discussions on the IT side. but for sure we are continuing our innovation over there to make sure that we are getting even stronger out of this situation. But it will be below the $3 billion compared to the previously $3 billion which we stated to the market last quarter. And then on leverage, the Net Depth Current EBITDA, We were in March at the 1.5. We expect to end more at the higher end of this range, but that, of course, all depends on the circumstances which are happening in this world. So with that, I hope that I gave you enough coloring so that there will be no questions, but probably that will not be the situation. So I hand over to Ben.