- Revenue: Up 4% year-over-year.
- Operating Result: Down to EUR 530 million from over EUR 700 million in Q2 2023.
- Net Debt to EBITDA Ratio: 1.6 times.
- Cash Position: Solid, with tightly monitored financial leverage.
- Fleet Renewal: New generation aircraft now represent 23% of the total fleet, up from 18% in June last year.
- Premium Revenue: Grew 7.4% year-over-year.
- Direct Sales: Increased by 8%, with direct online channel growing by 10% year-over-year.
- Corporate Revenue: Up 5% year-over-year.
- Ancillary Revenues: Grew by 11% year-over-year.
- Flying Blue Revenue: EUR 208 million in Q2 2024.
- Active Flying Blue Members: Increased by 9% year-over-year to over 12 million.
- Operating Result (Air France): Negative EUR 220 million.
- Fuel Price: Increased to EUR 800 per metric ton from EUR 750 per metric ton last year.
- Unit Cost: Up 1.7% year-over-year.
- Capacity Increase: 3% year-over-year.
- Transavia Capacity Increase: 12% year-over-year.
- Transavia Unit Revenue: Up 4.5% year-over-year.
- Maintenance Business Growth: 23% year-over-year.
- Operating Free Cash Flow: Slightly negative.
- Net CapEx: Expected to be below EUR 3 billion for the full year.
- Booking Load Factor (Q3): Impacted by the Olympics, with an expected EUR 200 million negative effect.
- Fuel Price Impact (Q3): Expected positive impact of EUR 80 million.
- Fuel Price Impact (Q4): Expected positive impact of over EUR 200 million.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Air France-KLM (AFLYY, Financial) transported more passengers this quarter compared to the same period last year, with group revenue and capacity both up by 4%.
- The company's cash position remains solid, and financial leverage is tightly monitored.
- The ongoing renewal of the fleet is progressing steadily, with new generation aircraft now representing 23% of the total fleet, up from 18% last year.
- Premium revenue grew by 7.4% compared to last year, driven by the premium leisure segment.
- The company has successfully signed a joint venture deal with Airbus to provide Airbus A350 components maintenance services worldwide, which is expected to offer cost-related synergies.
Negative Points
- Operating results are down compared to the same quarter in 2023, partly due to sluggish performance at KLM and Transavia.
- Air France's activity was weak due to exceptional items, including significant exposure to the Olympic Games, which negatively affected June traffic in Paris.
- The net debt to EBITDA ratio stood at 1.6 times, primarily due to high levels of net investments for the quarter.
- The company has implemented a hiring freeze for non-operational overhead staff and a 20% reduction in discretionary spending for the second half of the year.
- The fuel price increased from EUR750 per metric ton last year to EUR800 per metric ton this year, negatively impacting costs.
Q & A Highlights
Q: Your sales mix shows premium, direct, corporate, and ancillary revenues up between 5% and 11%, but total passenger revenue is only up 3.8%. Have you made material changes to your distribution strategy?
A: No unique changes in our distribution strategy. Our sales and marketing teams continue to push corporate and direct customers as they have in the past, and the results are consistent with previous efforts. (Benjamin Smith, CEO)
Q: What is the path for SAS to join the Atlantic joint venture, and do you expect resistance from regulators?
A: Integrating SAS into the Atlantic joint venture will be challenging, especially under the current U.S. administration. However, SAS appears to be the most straightforward airline to integrate, and we believe it will benefit consumers in Scandinavia. (Benjamin Smith, CEO)
Q: Could you talk about KLM's performance during the Olympic Games and whether it benefited from a shift of transfer traffic from Paris to Amsterdam?
A: There hasn't been a significant shift of traffic from Paris to Amsterdam. Instead, we are seeing more connecting traffic at Air France. (Steven Zaat, CFO)
Q: Can you provide an update on your discussions with Airbus regarding airplane deliveries for this and next year?
A: We expect slight delays of a couple of months for the remaining 787-10s at KLM and some Airbus A350, A320NEO, and A220 deliveries. Some CapEx planned for next year may shift to 2026. (Benjamin Smith, CEO)
Q: How are you addressing the cost increase of 2% year-on-year, and does this include the measures announced today?
A: The 2% increase is mainly due to lower capacity. We are cutting discretionary costs by 20% for the second half of the year and have implemented a hiring freeze for non-operational staff. (Steven Zaat, CFO)
Q: Can you clarify the impact of the Olympics on your Q3 results and provide more details on the EUR200 million impact?
A: The Olympics have a 2% impact on our passenger network. Without this, we would be slightly positive. The biggest impact is in July, with EUR160 million affecting Air France and EUR40 million affecting Transavia. (Steven Zaat, CFO)
Q: Is there an incremental softening in underlying demand for air travel, particularly in the economy class?
A: We don't see any incremental softening compared to Q2. The yield impact is mainly in the economy class, but overall demand remains strong. (Steven Zaat, CFO)
Q: How confident are you in recovering the EUR300 million impact from staff shortages and supply chain problems by 2025?
A: We are confident in recovering this amount by 2025. The operational performance is improving, and we expect to return to 2019 levels. (Steven Zaat, CFO)
Q: What is the latest on the GTF-powered aircraft, and when do you expect the issues to be resolved?
A: We expect some smaller issues to be resolved by next year, but the core issue with the GTF engines may take until 2027. We are managing the situation by using other aircraft to replace grounded ones. (Benjamin Smith, CEO)
Q: Can you provide the yield development during Q2 per month and how July looks in terms of yields?
A: In Q2, April was up 2.8%, May up 1%, and June down 3.1%. In July, KLM's yield is up 0.5%, while Air France's yield is down 8%, mainly due to the Olympics. (Steven Zaat, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
