UBS Transport Conference September 15 th 2008 Jean-Cyril Spinetta
Air France-KLM key operating data Fiscal year 2007-08 The number one airline worldwide in terms of revenues* and number one in Europe in terms of passenger and cargo traffic* A fleet of 607 aircraft in operation: 156 long-haul aircraft 13 full freighters 231 medium-haul aircraft 207 regional aircraft 258 destinations in 103 countries linked by 2,500 daily flights 75 million passengers and 1.5 million tons of cargo in last financial year * Source: Air Transport News September 1, 2008 2
Continuous improvement in profitability since the merger millions Revenues x% Operating income Adjusted operating margin* 21,448 23,073 24,114 1,240 1,405 19,467 936 553 6.3% 6.7% 5.4% 3.8% 2004-05 pro forma 2005-06 2006-07 2007-08 2004-05 2005-06 2006-07 pro forma 2007-08 * Adjusted for the portion of financial costs of operating leases (34%) 3
Airline sector: undergoing profound change Deterioration in the economic environment is currently impacting demand Rise in fares to compensate for higher fuel costs is accelerating the slowdown in demand Leading to a re-drawing of the airline industry landscape through bankruptcies, mergers and acquisitions Strongest players reinforced under these conditions 4
Air France-KLM: Among the strongest of the leading players We have already paved the way with the Air France-KLM merger and we will seize any compelling opportunity to reinforce our position We have key competitive advantages allowing us to remain in profit in this difficult environnement and that will ensure we emerge as a winner from the current downturn 5
Six key competitive advantages Largest international network linked by the most powerful European hubs A four-way joint-venture on North Atlantic A balanced network in terms of markets, traffic and customers A fuel-efficient and flexible fleet Synergy and cost-saving reserves thanks to the merger A strong balance sheet and efficient hedging policies 6
The number one network linking Europe to the rest of the world Of the 181 long-haul destinations* operated from Europe by AEA members British Airways: 71 destinations i.e 39% Lufthansa + Swiss : 85 destinations i.e 47% Air France: 80 destinations i.e 44% KLM: 62 destinations i.e 34% AF+KLM = 114 destinations i.e 63% * Number of destinations served by operational flights S2008 program 7
with unique competitive advantages The highest number of unique destinations The highest number of connection opportunities 114 destinations 42 uniques 23 13 45 71 destinations 7 4 uniques 85 destinations 18 uniques 6,872 AMS 3,749 ZRH 4,904 23,694 MUC CDG 14,011 FRA 7,156 LHR Air France-KLM Lufthansa + Swiss BA Long-haul destinations from Europe (Summer 2008) Long-haul/medium-haul connection opportunities in under 2 hours (Summer 2008) 8
A balanced network in terms of markets, traffic and customers Asia: 16% Business: 48% - Leisure: 52% France: 12% North America: 16% Latin America: 7% Revenues Point to point traffic: 20% Europe: 27% Africa and Middle East: 14% Caribbean and Indian Ocean: 7% 9
The North Atlantic: an important source of additional profitability A ground-breaking organisation around two JVs: between KLM and Northwest between Air France and Delta ATI granted for a JV between Air France, KLM, Delta and Northwest which would be launched before the end of 2009 Market share: 25% Turnover: $12 billion* RASK: + 3 points* * Estimation 10
Position in London reinforced Direct transatlantic flights from London Heathrow in cooperation with our US partners, Northwest for KLM and Delta for Air France SEA LAX MSP DTW ATL JFK Point-to-point offer extended on short and medium-haul from London City Airport with the acquisition of VLM Compelling offer on RoW via our two long-haul hubs 11
Capacity growth adapted to current conditions Total Group capacity growth 2009-11: 2.6% +2.8% on long-haul +2.3% on medium-haul North America: +1.1% Europe and North Africa: +2.3% Middle East: +3.2% Africa: +4.3% Asia:+4.0% Latin America: +4.2% Caribbean & Indian Ocean: +0.1% 12
Operating lease policy gives us significant flexibility to adjust capacity Long-haul fleet (number of seats) Five year plan Downward flexibility Medium-haul fleet (number of seats) 62 000 44 000 58 000 +13% +17% 40 000 54 000 50 000 +4% +8% +4% +4% +9% 36 000 32 000 +1% +3% +4% +5% +6% 46 000 1% 42 000 38 000-11% -11% -12% 28 000 24 000-5% -6% -12% -17% 34 000 S 2008 S 2009 S 2010 S 2011 S 2012 S2013 20 000 S 2008 S 2009 S 2010 S 2011 S 2012 S2013 13
Ongoing fleet modernization to improve efficiency in terms of fuel consumption Trend in fuel consumption 4.27 Air France long-haul fleet KLM long-haul fleet (litres par PAX/100 kms) 4.23 4.07 3.80-4% of fuel consumption 3.91-9.5% of fuel consumption 3.44 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 14
Challenge 10 cost-savings programme revised upwards millions 114m in savings realised in Q12008-09 190 m in further savings identified over the next three quarters 1,600 445 620 535 Objective for FY 2008-09 of 620m versus 430m 2007-08 realized 2008-09 objective 2009-10 objective 15
Challenge 12 : a new set of structural savings In addition to Challenge 10, Air France-KLM is working on a new set of savings, aimed at adapting its cost base to enable it to remain comfortably in profit in an environment of persistently high oil prices, even without the benefit of hedging 16
Reserves of future synergies thanks to merged structure New organisation in place since October 2007 will accelerate the further integration of the Group New sources of synergies under review Development of around 100 IT applications to improve current processes and develop new projects to generate synergies Implementation of a new, common central buying organisation 17
Among the most efficient fuel hedging policies Fuel bill before hedging ( bn) Fuel bill after hedging ( bn) Total value of hedges 7.42 8.26 6.71 8.53 7.51 8.73 8.31 2.63 2.17 5.71 1.41 0.60 2008-09 2009-10 2010-11 2010-12 114.72$/bl 111.48$/bl 112.04$/bl 112.21$/bl 1=$1.51 1=$1.40 1=$1.39 1=$1.39 2008-09 2009-10 2010-11 2011-12 Total: $6.81bn *Brent IPE realized + forward price at 5th September 2008 18
A strong balance sheet Net financial debt ( billion) Shareholders funds ( billion) x x Net debt Gearing ratio Gearing ratio ex derivatives Shareholders funds Derivative instruments 3.76 0.45 2.69 2.17 8.41 0.56 10.61 1.82 13.36 4.37 0.48 0.25 0.31 0.16 0.24 7.85 8.79 8.99 31/03/2007 31/03/2008 30/06/2008 31/03/07 31/03/08 30/06/08 19
To conclude Current year: we will remain comfortably in profit with an objective of operating income in the region of 1bn Longer term: our competitive advantages will allow us to continue to strengthen our position in this changing landscape 20