Information meeting

Information meeting
Pierre-Henri Gourgeon
Deputy CEO of Air France-KLM
Forward-looking statements
The information herein contains forward-looking statements about Air France-KLM and its business. These forward-looking
statements, which include, but are not limited to, statements concerning the financial condition, results of operations and
business of Air France-KLM are based on management’s current expectations and estimates. These forward-looking
statements involve known and unknown risks, uncertainties and other factors, many of which are outside of Air France
KLM’s control and are difficult to predict, that may cause actual results to differ materially from any future results expressed
or implied from the forward-looking statements. These statements are not guarantees of future performance and involve
risks and uncertainties including, among others: the expected synergies and cost savings between Air France and KLM
may not be achieved; unanticipated expenditures; changing relationships with customers, suppliers and strategic partners;
increases in aircraft fuel prices; and other economic, business, competitive and/or regulatory factors affecting the
businesses of Air France and KLM generally. Additional information regarding the factors and events that could cause
differences between forward-looking statements and actual results in the future is contained in Air France-KLM’s Securities
and Exchange Commission filings, including its Annual Reports on Form 20-F for the year ended March 31, 2006. Air
France-KLM undertakes no obligation to update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
THIS FORM 6-K REPORT IS HEREBY INCORPORATED BY REFERENCE INTO THE PROSPECTUS CONTAINED IN AIR FRANCE-KLM'S
REGISTRATION STATEMENT ON FORM F-3 (REGISTRATION STATEMENT NO. 333-114188), AND SHALL BE A PART THEREOF FROM
THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS
SUBSEQUENTLY FILED OR FURNISHED.
2
Reminder: Air France-KLM key figures
É
Number one world-wide in terms of revenues and Europe’s
leading airline in terms of passenger and cargo traffic
É
A fleet of 583 aircraft
165 long haul aircraft
222 medium haul aircraft
196 regional aircraft
É
247 destinations in 104 countries linked by 2,500 daily
flights
É
70 million passengers and 1.4 million tons of cargo last
year
É
102,000 employees
3
Air France-KLM: the largest international airline and a pure
carrier
Flight revenues in €bn
Other revenues
%
Flight revenues / total revenues
21.45
92%
18.06
13.61
77%
92%
Air France-KLM
Lufthansa
British Airways
Source: Lastest full financial year
4
A strategy of profitable growth
A strategy of profitable growth
Capacity yoy
Revenue per available seat kilometer yoy (excluding change)
2004-05
2005-06
2006-10
+7%
+6%
+5% per annum
+3%
+2%
EBIT : 553 M€
EBIT : 936 M€
6
Strong foundations from which to grow
É
The most powerful combined network and two well coordinated hubs, with the potential to expand in the future
É
Leading positions on the main markets and a balanced
network, allowing for targeted growth
É
Efficient customer loyalty tools
7
Air France-KLM: the most powerful combined network
linking Europe to the rest of the world
Over 182 long-haul destinations* operated out of Europe by AEA members
British Airways:
Lufthansa + Swiss :
Air France :
KLM :
83 destinations
81 destinations
80 destinations
64 destinations
i.e
i.e
i.e
i.e
46%
44%
44%
35%
AF+KL
= 113 destinations
i.e 62%
* Operating flights+ marketing flights
8
The multi-hub strategy optimizes destinations
where we are in competition
Number of long-haul/medium-haul connecting
opportunities of less than 2 hours
É
A wider offer in terms
of schedules …
6,813
Schiphol
20,961
2,847
Zurich
3,334
Munich
Roissy
12,956
Frankfurt
7,173
Air France-KLM
Heathrow
É
New York: 11 daily flights
Washington: 4 daily flights
Montreal: 4 daily flights
San Paolo: 2 daily flights
Tokyo: 4 daily flights
Beijing: up to 4 daily flights
Dubai: up to 4 daily flights
Johannesburg: 2 daily flights
…and fares, thanks to fare
combination
Lufthansa + Swiss British Airways
Source: OAG data as at 9 May 2006 (week 36)
9
Strong foundations from which to grow
É
The most powerful combined network and two well coordinated hubs, with the potential to expand in the future
É
Leading positions on the main markets and a balanced
network, allowing for targeted growth
É
Efficient customer loyalty tools
10
Leading positions on the main global markets…
Capacity share on EuropeLong-haul routes
AF-KL: ~ 10%
3 European carrier
rd
Europe
North America
1st
AF-KL: ~ 8%
European carrier
Middle East
AF-KL: ~ 22%
1st European carrier
AF-KL: ~ 12%
1st European carrier
Asia
AF-KL: ~ 25%
1st European carrier
Africa
Latin America
(including Indian Ocean)
(including Caribbean Islands)
Source: ASK, OAG data tapes, week 36 (Summer 2006) – non stop operating flights
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…with further potential to grow
World economic growth forecasts
average annual growth 2006-2010: > 3%*
+6%
Europe
+4%
North America
Japan
+8%
Middle-East
+8%
+4%
+7%
Asia ex-Japan
Africa
South America
To/from Europe (2006-2010)
average annual growth in demand ~ 6%*
for average annual growth in capacity of 5-6%
* Air France-KLM estimates based on Global Insights GDP forecasts
12
Strong foundations from which to grow
É
The most powerful combined network and two well coordinated hubs, with the potential to expand in the future
É
Leading positions on the main markets and a balanced
network, allowing for targeted growth
É
Efficient customer loyalty tools
13
Corporate contracts are key for our corporate customer
loyalty
É
Corporate contracts represent 49% of business segment passengers
Long-haul passengers AF-KL
April-September 2006 yoy
+ 18%
+ 7%
Total passengers
Corporate passengers
14
Frequent Flyer Programme is key for our customer loyalty
Number of members (million)
Fréquence +
Flying Dutchman
12
11
2.8
3.2
2.5
2.1
1.5
0.9
1.5
199697
1.1
1.8
1.3
2
2.5
3.2
199798
199899
199900
3.9
200001
4.7
200102
5.5
200203
6.3
6.8
200304
200405
200506
20062007*
Flying Blue
* Results end of September 2006
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The drivers behind improving profitability
É
Synergies
É
Cost control and improved productivity
É
Investment in product and efficiency
16
IT and revenue management integration
will boost synergy reserves
1 bn
In €m
Revenues synergies
Cost synergies
Announced in September 03
670
570
495
465
375
350
270
75
115
2004-05
2004-05
135
2005-06
2005-06
2006-07
2006-07
2007-08
2007-08
2008-09
2009-10
2008-09 2010-11
17
Ongoing efforts in terms of cost control
Target (in € m)
Achieved (in €m)
900
+€246m
+€80m
730
650
654
520
215
31-Mar-05 31-Mar-06
200
31-Mar-07
Air
Air France
France cost-savings
cost-savings plan
plan
31-Mar-04
31-Mar-05 31-Mar-06
31-Mar-07
KLM
KLM cost-savings
cost-savings plan
plan
New cost-savings plans covering 3 years as from 1st apr-07 will be
implemented to pursue successful path of achievement
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Our hedging policy: a short term competitive advantage
which will be transformed into long term benefits
2003-07: cash saving of $2.7bn
Air France-KLM payouts
($m)
1,160
865
465
400
370
180
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
Based on the futures at October 27th 2006
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Investment in the fleet will lead to enhanced efficiency
in energy consumption, costs and environment
Average AF-KL fuel cost in euros per seat*
4,000 nautical mile stage, with a 60USD/barrel oil price
78.8 €
-5%
75.2 €
2005
2011
In 2011, Air France – KLM will have one of the youngest long haul fleet
with an average age of 9.2 years
* Seat: “equivalent” economy seat including cargo space
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The cargo example: productivity gains will far outweigh
current hedging gains
200
In €m
Air France Group
130
107
78
15
Hedging
2006
Crew
Fuel
Maintenance
Total
Savings
2011
21
Our latest results reflect the
success of this strategy
Buoyant activity in 2005-06…
Operating income
Revenues
Passenger: €686m
+79%
Passenger: €16.9bn
+10%
€21.45bn
(+10.2%)
€936m
(+69.3%)
Cargo: €2.9bn
+12%
Maintenance: €0.89bn
+12%
Other: €0.73bn
+2%
Cargo: €166m
+19%
Maintenance: €54m
+116%
Other: €30m
ns
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…continued into the First Quarter 2006-07
Operating income
Revenues
Passenger: €363m
+106%
Passenger : €4.61bn
+12%
€ 5.80 bn
(+11.9%)
€411m
(+84.3%)
Cargo: € 0.73 bn
+11%
Maintenance: €0.23 bn
+9%
Other: €0.23 bn
+10%
Cargo: €28m
+154%
Maintenance: €3 m
+ns
Other: €17m
ns
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Strong rise in operating cash flow
First Quarter (in € millions)
Operating cash flow
Capital expenditure
1,356
834
730
Financing
Investments
Q1 2005-06
655
Financing
Investments
Q1 2006-07
25
…in line with our objective of a free cash improving
strongly
In € billions
Investments in the fleet
Other investments
(capitalized maintenance costs,
spare parts, ground capex)
Operating cash flow
2.6
2.5
2.3
2.1
2.1
2.0
1.8
1.5
1.2
1.0
1.0
0.8
0.7
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
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Further reduction in net debt
Gearing ratio at 30th June 2006: 0.45
(at 31st March 2006: 0.56)
Net debt
Shareholders’ Equity
(in billions of euros)
(in billions of euros)
7.85
7.02
5.49
1.03
4.38
1.06
6.79
8.21
1.18
Derivative
instruments
7.03
5.99
3.72
30 Jun 05
pro forma
31 Mar 06
30 Jun 06
30 Jun 05
31 Mar 06
30 Jun 06
pro forma
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Air France-KLM: Extremely healthy financial position
1.65
1.26
1.14
1.11
0.91
0.49
0.58
0.45
0.02
British Airways
Air France-KLM
Lufthansa
net on-balance sheet debt / shareholder's equity
net on-balance sheet debt + pension obligations / shareholder's equity
net on-balance sheet debt + pension obligations + capitalised operating leases (7x) / shareholder's equity
Based on figures at 30 June 2006 (BA adjusted for latest pension deficit estimate)
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To sum up
É
Air France-KLM enjoys a long term competitive advantage
É
Upgraded Full Year 2006-07 objective:
É
underpinned by our ongoing cost-control measures
and a high level of future synergies.
to generate a further significant increase in operating income
compared with last year.
Medium term objective:
RoCE of 7% (post tax) by 2009-10.
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