Agenda. Conclusion of Transform Key Perform 2020 initiatives. Perform 2020 financial framework. Information meeting

Transcription

1 Information meeting

2 Agenda Conclusion of Transform 2015 Key Perform 2020 initiatives Perform 2020 financial framework 2

3 Transform 2015: first phase of group turnaround accomplished Strict capacity discipline Successful renegotiation of labour agreements Operational transformation Upscaling of long-haul offer through investment in product and new partnerships Short and medium-haul restructuring well underway Full-freighter activity significantly downsized Financial targets delivered Reduction in unit cost Significant improvement in profitability Improvement of financial situation 3

4 Transform 2015: strong improvement in profitability and financial situation Full Year EBITDA ( bn) Full Year Operating cash flow bn, before change in WCR and Voluntary Departure Plans Net debt/ebitda ratio sliding 12 months FY 2011 FY 2012 FY 2013 FY 2014 FY 2011 FY 2012 FY 2013 FY 2014 Dec 2011 Dec 2012 Dec 2013 June 2014 FY 2014 vs FY 2011: ~ 900m increase FY 2014 vs FY 2011: ~ 1.2bn increase June 2014 vs Dec 2011: almost halved 4

5 Agenda Conclusion on Transform 2015 Key Perform 2020 initiatives Perform 2020 financial framework 5

6 Perform 2020 priorities: growth and competitiveness Selective development to increase our share of growth markets Smart growth in passenger hub business Transavia development as a pan-european low-cost Profitable service activities around the air transport industry Upgrade products and services to world-class level Product and brand evolution to increase customer focus and capture new revenue opportunities Ongoing focus on competitiveness, within a framework of financial discipline Capacity discipline Cost reduction and more efficient processes, addressing underperforming activities Strict capital discipline, to ensure increase in ROCE and deleveraging 6

7 Maintaining ongoing capacity discipline Capacity growth plan passenger business Change in passenger capacity : +1% to +1.5% +1.2% ~1.2% of which Long-haul: ~2% Hub feeding: ~0% Point-to-point: negative +0.6%

8 Long-haul product: 2/3 of fleet equipped with new product by Summer 2017 New World Business Class already deployed on 22 KLM aircraft B777 fleet to follow as of September First Air France 777 equipped with new cabins launched in June 2014 Strongly positive qualitative feedback New Air France La Première suite launch in September 2014 On top of Best first-class lounge in the world Skytrax award 8

9 Smart growth in passenger hub business Stronger differentiation of brands Broader access to growth thanks to well-balanced long-haul network Building joint-ventures and strategic partnerships in all key markets, with a focus on Asia- Pacific Leverage dual-hub structure Further adapt medium-haul hub feeding network Efficiency initiatives in hub operations Hub (1) operating result 400 ~ (1) Long-haul + short and medium-haul hub feeding 9

10 Effective segmentation of short and medium-haul point-to-point Business/network driven segment High network quality: destinations, schedule, frequency Differentiated offer and distribution per segment Includes attractive prices, especially to capture non-business travel Leisure/price driven segment Route driven, point-to-point Simple, transparent offer, at sharp prices Options at a fee Direct distribution 10

11 Perform 2020: aiming for point-to-point breakeven in 2017 Point-to-point operating result ( m) Breakeven ~ Further restructuring of network Further cost reduction ~-140 ~50 Full impact of Transform 2015 measures 3 4 Repositioning of offer Reorganization in single business unit Breakeven in 2017 and profitable beyond 11

12 Cost per ASK Short and medium-haul leisure market: unit cost is the key factor in achieving profitable growth cents per ASK, Source: Airline business, financial reports 9,00 Cost per ASK vs stage length 8,00 Air Berlin 7,00 Air Europa 6,00 easyjet Vueling Pegasus Norwegian Transavia Jet2 Monarch 5,00 Wizz 4,00 Ryanair 3,00 2, Stage length (km) 12

13 Transavia: development plan will build on existing solid assets Continue fast growth in Orly Aiming to open 5-10 bases outside of home markets Targeting #2 or #3 market position with 3 to 10 aircraft in each base Building on existing links with home markets Transavia fleet plan (number of aircraft) Solid brand and product positioning Enhanced low fare plus value proposition: pleasant Leveraging group assets Access to slots, especially at Orly Link with Flying Blue Air France-KLM brand endorsement Group sales and distribution Summer 2014 Summer 2015 Base fleet Summer 2016 Short term leases in Summer Summer

14 Transavia in 2017: a solid footprint in the fast growing leisure market, targeting profitability by 2018 Among Top 5 low cost carriers in Europe Low cost leader in the Netherlands Largest international airline at Orly #2 or #3 in 5 to 10 markets outside France and the Netherlands Above 20m passengers in 2017 (versus 9m in 2013) Delivering medium-term operating margin above 5% profitability impacted by on-going ramp-up costs of new bases Reinforcing group position in European markets in the long-run target: 100m additional EBITDAR 88 Transavia EBITDAR target EBITDAR ( m)

15 Further full-freighter fleet reduction in Amsterdam Accelerated phase out of 5 MD11s in Amsterdam On top of phase-out of 5 full-freighters already decided in October 2013 Phasing out of MD11 rather than B747-ERF Maintaining a small full-freighter fleet as important commercial lever to maintain revenue premium in bellies Planned ~400 employee reduction achieved mainly through internal mobility Expecting limited restructuring cost 25 aircraft % Full-freighter capacity (billion ATKs) % 14 aircraft % 5 aircraft 2 777F at CDG 3 747ERF at Amsterdam full-freighters in operation in Amsterdam by /

16 ensuring return to full-freighter profitability by 2017 Full-freighter operating result ( m) An extensive belly network Complemented by 5 full-freighter aircraft representing less than 15% of capacity Strong focus on specialized products Investments in state-of-the-art IT infrastructures and E-developments Further cost reduction and expansion of partnerships A major player in the European cargo sector, with very limited exposure to full-freighter volatility Bellies 85% more than 100 destinations 2017 planned cargo capacity mix Breakeven Full-freighter 15% 5 efficient aircraft 16

17 Maintenance: rapid growth of order book secures significant share of future revenues Growth of order book Order book by region (at 30 June 2014) +55% 4.4bn 5.1bn Europe 34% Americas 24% 3.3bn 3.8bn Africa Middle-East 9% Asia-Pacific 33% Dec 2011 Dec 2012 Dec June target: 50 to 80m additional EBITDAR contribution 17

18 Agenda Conclusion on Transform 2015 Key Perform 2020 initiatives Perform 2020 financial framework 18

19 Continuous reduction in unit cost: targeting a further reduction of 1 to 1.5% per year Net unit cost per EASK in cents, at constant currency, fuel price and pension expense TRANSFORM 2015 Change in unit cost % ~-1.5% -2% Target: -1 to -1.5% per year 19

20 Selective capex management billion Investment plan capex plan breakdown ~ 1.9 ~ 2.2 ~ 2.2 ~ 2.2bn Net Fleet ~ 1.6bn Aircraft maintenance and spare parts 0.9 ~ 1.3 ~ 1.7 ~ 2.0 ~ 2.0 ~ 1.0bn Ground ~ 0.7bn Transavia development ~ 0.9bn Product upgrade Net capex SLB Transavia growth Total capex ~ 6.4bn 20

21 A pragmatic approach to development opportunities Growth opportunities Conditions Further development of Transavia low cost activity Expansion of maintenance business Higher capacity growth in core business, depending on market conditions Selective investments in efficiency Strict hurdle rate for new investments Deleveraging remains our priority Allocating dedicated sources of funding to each project 21

22 Perform 2020 delivering significant increases in profitability billion -200 EBITDAR up 8 to 10% (1) per year Passenger Cargo +xx Low cost Maintenance and other 2.8 EBITDAR 2013 EBITDAR 2017 Restructuring Unit cost reduction Development (1) At constant currency, fuel price and pension cost 22

23 Medium-term financial objectives (2017) EBITDAR up 8 to 10% per year (1) Adjusted net debt (2) to EBITDAR (2) below 2.5 Existing business consistently generating positive free cash flow Significant growth operations funded through dedicated resources Consistent with a ROCE (2) of 9 to 11% in 2017 and beyond (1) At constant currency, fuel price and pension cost (2) See press release for definition 23

24 Air France-KLM in 2020 Long-haul operations at the center of a global network of world class partners An efficient short and medium-haul business including a strengthened low-cost operation A more balanced portfolio of service activities around the air transport industry: cargo, maintenance and catering A strong brand portfolio addressing all customer segments A de-risked business and a deleveraged balance sheet, delivering healthy ROCE Delivering growth and value to shareholders 24

25 Appendix

26 Three operating platforms for passenger air transportation Traffic revenue (2013, bn) Operating profit (2013, m) Long-haul % +800m 20.1bn Short & medium-haul hub feeding % -400m Point-to-point 1.7 9% -220m Transavia 0.9 5% -23m 26

27 Broader access to growth thanks to balanced long-haul network with significant exposure to higher growth markets North America #1 (1) Market position 25 (1) Destinations Latin America #2 Market position 11 Destinations 28% 14% 12.8bn long-haul revenue 20% 27% 11% Caribbean & Indian Ocean #1 Market position Africa & Middle-East #1 Asia-Pacific #2 Market position Destinations 14 Destinations Market position Destinations (1) Including flights and destinations served by Delta as part of JV, Summer 2013 data 27

28 A deep transformation of the business mix Medium-haul capacity (ASK) Cargo capacity (ATK) Hub connection 22% 69% % 31% 23% Point-to-point Transavia Bellies Fullfreighters Hub connection 10% 2017 ~+5% 46% Bellies 85% 15% 43% Point-to-point ~-40% Transavia ~+130% Fullfreighters ~+6% ~-60% 28

29 First Half: key data In millions Q Q (1) Change H H (1) Change Revenues 6,451 6, % 12,005 12, % Change like-for-like (3) +1.7% +1.0% EBITDA (2) m m Operating result m m Net result, group share m m Adjusted net result (2) m m Operating free cash flow (2) m m Net debt at end of period (2) 5,414 5,348 (4) +66 (1)2013 restated for IFRIC 21, CityJet reclassified as discontinued operation (2)See definition in press release (3)Like-for-like: change at constant currency and scope (4)Net debt at 31st December

30 First Half: contribution by business segment Revenue ( bn) Reported Change (%) Change Like for like (1) (%) Op. result ( m) Change ( m) Change Like for like (1) ( m) Passenger 79% % +1.4% Cargo 11% % -1.6% Maintenance 5% % -3.4% Other 5% % +5.2% Total % +1.0% (1)Like-for-Like: At constant currency and scope 30

31 Passenger unit revenue by network in Second Quarter Short and medium-haul point-to-point -7.1% ASK -4.5% RPK 10.6% RASK Total short and medium-haul North America Short and medium-haul hubs -0.7% ASK 1.6% RPK 1.7% RASK 3.6% ASK 4.1% RPK 3.0% RASK 1.3% ASK 3.2% RPK -0.9% RASK Latin America Africa and Middle East Asia 6.9% ASK 5.3% RPK -2.1% RASK 0.0% ASK 3.8% RPK 4.1% RASK -1.9% ASK -0.4% RPK -0.5% RASK Total long-haul Caribbean & Indian Ocean Total 1.5% ASK 3.1% RPK 1.6% RASK 0.6% ASK 5.7% RPK 3.1% RASK 1.0% ASK 2.8% RPK 1.3% RASK 31

32 First Half: change in operating costs m Reported change Change at constant currency 29% Total employee costs including temps 3, % -3.4% 25% Supplier costs (1) excluding fuel and purchasing of maintenance services and parts 3, % +0.6% 12% Aircraft costs (2) 1, % -4.3% 5% 27% Purchasing of maintenance services and parts Operating costs ex-fuel (3) Fuel % +5.3% 9, % -1.8% 3, % -1.5% Grand total of operating costs 12, % -1.7% Capacity (EASK) +1.0% (1)Catering, handling charges, commercial and distribution, landing fees and air-route charges, other external expenses, excluding temps (2)Chartering (capacity purchases), aircraft operating leases, amortization, depreciation and provisions (3)Including other taxes, other revenues, other income and expenses 32

33 Operating free cash flow in First Half Analysis of change in net debt through First Half 2014, in million euros Operating free cash flow*: +95 (H1 2013: +566) 5, Cash flow before VDP, and change In WCR (H1 2013**: 132) -144 Voluntary Departure Plans (H1 2013: -56) Change in WCR (H1 2013: +964) +650 Gross Investments -808 (H1 2013: -585) Sale & Lease-Back +33 Net investments Other including provision on cash held in Venezuela 5,414 FY 2014 expected impact: - 160m Net debt at 31 December 2013 Net debt at 30 June 2014 * Net cash flow from operating activities less net capex on tangibles and intangibles. All amounts excluding discontinued operations. See definition in press release ** 2013 restated for IFRIC 21, CityJet reclassified as discontinued operation 33

34 Financial ratios at 30 June 2014, sliding 12 months 3.5x EBITDAR / adjusted net interest costs (1) 3.7x 3.9x 4.3x Adjusted net debt (2) / EBITDAR 5.4x 4.6x 4.2x 4.0x 31/12/2012* 30/06/2013** 31/12/2013** 30/06/ /12/2012* 30/06/2013** 31/12/2013** 30/06/2014 EBITDA / net interest costs Net debt / EBITDA 4.0x 4.3x 4.6x 5.3x 4.3x 3.2x 2.9x 2.6x 31/12/2012* 30/06/2013** 31/12/2013** 30/06/ /12/2012* 30/06/2013** 31/12/2013** 30/06/2014 * Restated for IAS19 ** Restated for IFRIC 21, CityJet reclassified as discontinued operation (1)Adjusted by the portion of financial costs within operating leases (34%) (2)Adjusted for the capitalization of operating leases (7x yearly expense) 34

35 Outlook for Full Year 2014 Positive effects of Transform 2015 Initial measures fully delivering Additional measures will deliver as of H Operating environment remains tough Persistently weak cargo demand Challenging situation in Venezuela Impact of industry overcapacity on certain long-haul routes EBITDA expected between 2.2bn and 2.3bn Net debt reduction on track towards 2015 objective of 4.5bn 35

36 Update on fuel bill Fuel bill after hedging, in billion dollars (1) $129/bbl 9.3 $118/bbl 9.1 $108/bbl 9.0 $97/bbl 8.7 $86/bbl (1) (1) Jan-Dec Q1 Q2 Q3 Q4 Brent ($ per bbl) (1) Market price Jet fuel ($ per metric ton) (1) % of consumption already hedged 65% 66% 68% 63% 64% (1)Forward curves as of 18 July 2014 Sensitivity computation based on July-December 2014 fuel price 36

37 Debt reimbursement profile at 30 June 2014* % convertible bond ( 661m) Maturity: April 2015 Conv. price: % convertible bond ( 550m) Maturity: Feb Put: Feb Conv. price: % convertible bond ( 420m) Maturity: April nd put: April 2016 Conv. price: Convertible bonds Plain vanilla bonds October 2016: Air France-KLM 6.75% ( 700m) January 2018: Air France-KLM 6.25% ( 500m) June 2021: Air France-KLM 3.875% ( 600m) Other long-term debt - mainly assetbacked (net of deposits ) H Beyond * In millions, net of deposits on financial leases and excluding KLM perpetual debt ( 570m) 37