Earnings call transcript: Air France KLM Q2 2025 sees revenue growth, stock rises

Air France KLM reported a solid performance for the second quarter of 2025, with revenue increasing by 6.2% to €736 million and an operating margin of 8.7%. The company’s stock rose by 4.44% following the announcement, driven by a positive market reaction to its financial results and strategic initiatives. According to InvestingPro data, the company has maintained strong momentum with a trailing twelve-month revenue growth of 5.36% and holds a "GOOD" Financial Health Score of 2.85 out of 5. Despite not having specific EPS and revenue forecasts to compare against, the results were well-received, reflecting confidence in Air France KLM’s operational and strategic direction.

Key Takeaways

• Revenue grew 6.2% year-over-year to €736 million.
• Operating margin stood at 8.7%.
• Stock price increased by 4.44% post-earnings announcement.
• Strong demand in premium cabins, with revenues up 11%.
• Strategic partnerships and network expansions bolster competitive position.

Company Performance

Air France KLM’s performance in Q2 2025 highlights its resilience and strategic focus. The company benefited from increased demand in corporate travel and premium cabins, contributing to a revenue increase of 6.2% compared to the same period last year. The operating margin of 8.7% marks a steady improvement, supported by effective cost management and strategic partnerships.

Financial Highlights

• Revenue: €736 million, up 6.2% year-over-year
• Operating margin: 8.7%
• Adjusted operating free cash flow: $700 million
• Net debt reduced by €200 million
• Leverage ratio: 1.5x

Market Reaction

The market responded positively to Air France KLM’s earnings, with the stock price climbing 4.44% from the previous close, reflecting investor confidence in the company’s strategic direction and financial health. Trading at a P/E ratio of 6.41 and with a market capitalization of $3.47 billion, InvestingPro analysis suggests the stock is currently undervalued. The stock’s performance is notable given its proximity to the 52-week high of €12.085. For more insights on undervalued opportunities, visit our Most Undervalued Stocks list.

Outlook & Guidance

Air France KLM maintained its capacity growth guidance at 4.5% and expects unit cost increases in the low single digits. The company plans capital expenditures of €3.2-3.4 billion and aims for an 8% margin by 2026-2028. With an analyst consensus rating of 2.93 (where 1 is Strong Buy and 5 is Strong Sell), market experts maintain a cautiously optimistic outlook. Discover more detailed analysis and 12+ key metrics with InvestingPro’s comprehensive research reports, available for 1,400+ top stocks. Fuel prices are hedged at 70% for 2025 and 35% for 2026, providing some protection against volatility.

Executive Commentary

CEO Benjamin Smith emphasized the importance of "premiumization" in driving sustained demand, while CFO Stephen Zatt highlighted the company’s leverage position, stating, "We are now at the low side of our leverage ambition." These comments underscore the company’s focus on strategic growth and financial stability.

Risks and Challenges

• Geopolitical tensions affecting Middle East routes
• Potential operational challenges with Transavia
• Negotiations for KLM collective labor agreements
• Market saturation in European routes
• Fluctuations in fuel prices despite hedging

Q&A

During the earnings call, analysts queried Air France KLM’s fleet strategy for medium-haul aircraft and the potential of the Copenhagen hub post-SAS acquisition. Executives also addressed geopolitical impacts on Middle East routes and challenges with Transavia operations, highlighting ongoing negotiations for KLM labor agreements.

Full transcript - Air France KLM SA (AF) Q2 2025:

Conference Operator: Good morning, and welcome to the Air France KLM Group’s Q2 and Half Year twenty twenty five Results Presentation. Today’s conference is being recorded. At this time, I would like to turn the conference over to Benjamin Smith, CEO and Stephen Zatt, CFO of Air France KLM. Please go ahead, sirs.

Benjamin Smith, CEO, Air France KLM: Okay. Thank you, operator. Good morning, everyone, and thank you for joining us today for the presentation of Air France KLM’s results for the 2025. Today, I’m joined by Stephen Zad, Group CFO Anne Leguy, Air France CEO and Marianne Rintell, KLM’s CEO. As usual, I’ll begin by covering the key highlights of the quarter before handing over to Stephen, who will walk you through the financial results in more detail.

I’ll then close with an overview of our medium term ambitions and conclude with remarks before opening the floor to questions. Okay. Moving to Slide three. Alphonse KLM delivered strong results in the 2025 with revenue up 6.2%, and we reported an operating income of €736,000,000 which is an increase of €223,000,000 year over year. The operating margin stood at 8.7%, reflecting the continued impact of our strategic choices and disciplined execution.

We also made further progress in strengthening our financial profile. Adjusted operating free cash flow reached $700,000,000 for the 2025, and our leverage ratio decreased to 1.5 times, now fully within our target range. At the same time, we continue to invest in fleet renewal. New generation aircraft now represent 30% of the group’s fleet. These results underscore the strength of our execution, our financial discipline and the resilience of our business model, even as we continue to navigate a complex environment marked by geopolitical tensions, rising taxes and airport charges as well as ongoing tariff uncertainty with the details and impact of the recent EU U.

S. Agreement announced last week still to be clarified. Moving now to Slide four, which highlights how our premiumization strategy continues to be a key driver in revenue quality and resilience for Air France KLM. Altogether, the share of revenue generated by our La Premiere business, premium economy and premium products increased by nearly three percentage points, confirming sustained customer appetite for our top of the range offering. In the 2025, La Premiere and Business Class revenues grew by 11% with particularly strong momentum on the North Atlantic routes.

Premium economy cabins at Air France and KLM, respectively, saw remarkable growth with revenues up 27%, the strongest increase across all cabins. And to conclude on commercial trends, I’d like to highlight that corporate travel demand continues to rise steadily with overall year on year growth of 6% since the beginning of the year observed across all cabin segments. Now moving to Slide five. So the trend goes beyond cabin segmentation. It’s about redefining the entire travel experience.

At Air France KLM, we continue to push the boundaries of aspirational travel with many enhanced products and services at every stage of the journey. This includes the launch of our new La Premiere suite, now operating on routes to New York, JFK, and Singapore, setting a new global benchmark for first class travel. At the same time, premium comfort continues to expand across the KLM network, while Air France is growing out its latest long haul business cabin to 23 destinations this summer. This quarter also saw the launch of a new Air France Canal plus partnership, bringing a curated selection of premium French content to all long haul flights, further enhancing the in flight entertainment experience. And in a unique showcase of French aude de vivre, Air France opened a pop up rooftop restaurant at the Gallerie Lafayette Paris Hauspan department store, allowing guests to enjoy the finest onboard cuisine in an exceptional Parisian setting.

Together, these initiatives demonstrate how premiumization is now fully embedded in the way we design, deliver and differentiate our offer. Moving to Slide six. This quarter, Air France KLM marked an important milestone, the twentieth anniversary of our loyalty program, Flying Blue. With 30,000,000 members across all group airlines, Flying Blue is not only one of the leading programs in Europe, it is also a cornerstone of our commercial strategy and customer engagement model. Its recent recognition as both best loyalty program in Europe and Africa and best loyalty program in the world highlights the strong connection it fosters with our customers and the growing value it generates.

As we continue to develop the program and expand our partner ecosystem, Flying Blue remains central to how we foster loyalty and elevate the premium experience we offer, embedding the program into our customers’ daily lives and driving engagement that extends well beyond travel. Moving to Slide seven. We made tangible progress in advancing group wide synergies, notably by increasing crew flexibility and resource sharing across Air France, KLM, HOP and Transavia, particularly in response to pilot shortages affecting our Dutch subsidiaries. Starting from the winter twenty twenty five, HOP will be operating three Embraer e one nineties on behalf of KLM Cityhopper. Since July 16, a daily Amsterdam New York JFK flight operated by a KLM Boeing seven seventy seven is now crewed by Air France pilots and KLM cabin crew, a clear example of how we are pooling capabilities across airlines to optimize resources.

In support of KLM’s introduction of the Airbus a b 50, Air France will be training the core team of KLM instructor pilots demonstrating in practice how we can share expertise across the group. Finally, during the winter twenty twenty five season, Transavia France will provide three Boeing seven thirty seven eight hundreds along with full crews to Transavia Netherlands, further strengthening our operational flexibility. These initiatives show what we can achieve when we act as one integrated group with agility and coordination to respond swiftly to operational and market needs. Turning to Slide eight. Let me now turn to a strategic development that would further strengthen our footprint in Europe.

As you know, in August 2024, Air France KLM acquired a 19.9% noncontrolling stake in SAS. We have recently announced an intent to increase its stake to 60.5% by acquiring the shares currently held by Castlelake and Lind Investments. This transaction, subject to regulatory approvals, would give us a majority stake in SAS securing control of the airline by the 2026. SAS is a strong and trusted brand in the high yield Nordic market with a loyal customer base and a well established commercial presence across Europe. This is a strategic move for Air KLM.

It will reinforce our position in Northern Europe and strengthen our role in key connecting markets across the continent. Now moving to Slide nine. Alongside our M and A activity, Air France KLM continues to build targeted partnerships that support our global reach. To further strengthen our MRO capabilities and reinforce the strategic positioning of this business segment, I’m proud to announce several key developments. We have extended our GE90 engine maintenance cooperation with Saudia Group, deepening an already strong partnership.

We are currently in exclusive negotiations with AerCap to establish a joint venture dedicated to LEAP engine maintenance, a move that would significantly enhance our position in the next generation engine market. And following yesterday’s evening announcement, we have just launched a strategic alliance with Riyadhair for the full maintenance and support of APS 5,000 auxiliary power units, which power the airline’s Boeing seven eighty seven fleet. Also with Riyadhair, but on the commercial side, we have signed a partnership aiming to enhance global connectivity between Riyadh, Paris, Amsterdam, and beyond. Moving on to Asia Pacific, we’ve deepened our partnership with Qantas Airways moving connectivity or improving connectivity and enhancing the travel experience between Europe and Australia. And we’ve also expanded our commercial partnership with Indigo through a new four way agreement with Delta and Virgin Atlantic, enhancing connectivity between India, Europe, and North America.

Meanwhile, I’m particularly proud to say that we’re also deepening our collaboration with group ADP, the operator of the Paris airports through Connect France, an unprecedented initiative to strengthen the competitiveness and efficiency of our Paris Charles De Gaulle hub while accelerating progress on decarbonization and service quality. Together, these strategic moves reflect our selective, disciplined approach to global growth and reinforce Air France KLM’s leadership in international aviation. With that, I’ll now hand it over to Steven, who will walk you through the detailed financial results. Over to you, Steven.

Stephen Zatt, CFO, Air France KLM: Thank you, Ben, and good morning, everybody, on this beautiful summer day in Paris. I think we showed a robust result, given all the headwinds we had in the second quarter, like the tariff war, the NATO summit in The Netherlands, a full impact of the TSBA in France and the crazy increase of the tariffs at Schiphol and last but not least, a very unstable geopolitical situation. For sure, we had one big tailwind, which is the fuel price. But all in all, we are quite satisfied with this robust result. If we go to the revenues, you see that the revenues are up with 6.2%.

This is driven by capacity increase, but also by a strong unit revenue increase of 2.4%. And actually, it’s all set on the right side. You see that the fuel price is bringing a tailwind of almost €200,000,000 and the unit revenue and unit cost are almost in sync with each other, where the unit cost is exactly what we guided you already to, let’s say, at the higher range of the low single digit. But we are they are completely in line with our expectations. If we go on Page 12, you see our network results.

So let’s start on our passenger network and unit revenue increase of 2.8%, mainly driven by our long haul and especially our premium cabins. I will come back on that later. And we saw also a strong unit revenue increase at the cargo of 2.6%. So all in all, that drove it our operating margin close to 10%, a 3% change on our network business. Transavia had a little bit harder quarter.

We had a strike in France, which cost us €25,000,000 We had uncertainty around The Middle East and Tel Aviv. So that is also not very beneficial for our activity, both in France and The Netherlands. And we saw more competition to Spain, which is especially hampering Transavia, The Netherlands. And last but not least, the Schiphol tariffs are moving away our passengers to Germany and Brussels. So quite some headwinds for our Transavia business segment.

If we then go to maintenance, we see an increase of almost 20% for twothree driven by our very strong engine business. I think it is, at this moment, very easy to contract any engine business because there is a shortage of slots of the shop visits. And we also increased further our order book. We increased our order book by almost 300,000,000 up to €8,900,000,000 for our MRO business. And if you look at the operating margin, you see it’s going up with 2%.

So we are now at the 5% margin, and we are still hampered by the supply chain, but I think we had a quite decent result on our MRO business. If we then look at the split between Air France and KLM and Flying Book on Page 13, You see that Air France had a very strong margin improvement, especially coming from the strong unit revenue development. And of course, we had a negative Olympic Games effect last year of around €40,000,000 in June. So strong unit revenue, 3,400,000.0. Air France is actually in all business segments improving their unit revenues in passenger, in cargo, in Transavia, so a very dynamic unit revenue climate in the second quarter.

And on top of that, a strong fuel price decrease, which helped the result. Then on KLM, I think we had a lot of tailwinds. They are written here. We had the NATO Summit. We had a last year positive maintenance related one off.

We got a compensation for from a supplier. We had a Schipholterra, which is going up at 41%. We had the problems with the 787s in May. And last year, the CLA increase kicked in, in July. So that is already, let’s say, for a year over year comparison, not so good.

So that is one of the reasons that KLM is down year over year. And on top, we see also more impact on the unit revenue, especially as we are more as we see lower low yielding more pressure on the low yielding segments, which is especially impacting KLM. Plus, we have more growth on Europe, where the unit revenue development was weaker and the growth on it was stronger. So all in all, I think on KLM, we had quite a tough quarter this year, but it was in line actually with our expectations, which we had except, of course, for, let’s say, the July grounding, for example. If we then go to Page 14, where we will explain the unit revenue development.

So a 4% increase of capacity overall with a 2.5% yield increase ex currency. On the premium, very strong, almost 5% yield increase, so very good and also an increase further of our premium segment. And then on the economy, you see that we are still gaining in terms of yield, but it is especially driven by successful implementation of the premium economy further. So we grew our capacity with 15%, bringing a unit revenue in of 9%. And if you look at KLM, they increased their capacity by 42% with an unit revenue increase of 11%.

So I think the premiumization in our long haul is working very well. If we then go to North America, I think everybody was worried this this quarter after the tariff war that North America would be hit severely. We see an increase of 5% of capacity and almost 6% in yields. Latin America also still holds strong with a load factor of 90, even further increase. We could not imagine that it was even possible with this capacity increase.

And still, the yields are going up with 6%. And then if we go to the East, you see on the East that we increased our yields with 6%. That’s especially driven that we reduced capacity to The Middle East. But all in all, at the rest of the Asia, we see quite a strong yield development. The only weak spot, I would say, is in The Caribbean, both in The Netherlands and in France, where we see that the competition is lowering prices.

And also, we see less demand. We see a lower load factor than what we had last year. If you then go to the top, you see that the Europe, it’s quite difficult. We grew our capacity with 4.5%, and you see that we have a flattish unit revenue in this quarter. And then on Transavia, you see an 11% increase and a 3.3% increase in unit revenue, especially driven by Transavia France.

If we then go to Page 15, then on the left, you see our unit cost development, which we can completely control. So an increase of salaries, which impacted us for 1.4% on the total unit cost. It is around 3% increase of salaries to our staff. That is partly been absorbed by an increase That’s 1% over the total unit cost.

If you take it only if you take the A Scaper FTE, you talk about 3%. And then on the operations, we already saw it coming. There was one, there was the higher maintenance cost at KLM. But on top, we also had more customer conversations related to the Transavia France strike and the groundings of the 787s of KLM in May. Then another 1.1% comes on top of it, mainly driven by ATC, but also the airport charges.

And I come back on it again, a 41% tariff increase just in one quarter is amazing what they do at Schiphol. So this 1.1% plus that 1.5% brings us closer to €2,700,000,000 There is a small impact of the premiumization of 700,000,000.0 And due to the mix impact because we grew some segments harder with lower unit revenues and also lower unit costs, the total impact is 0.3%. If we then deduct the fuel price impact, you see that we have a unit cost, including fuel off, which is flattish, and at the same time, the unit revenue is up 2.4%. So that is the moment that you start improving your results. Given all the context at KLM, we are hardworking or working on KLM back on track, especially the KLM team.

I think they are busy with it night and day. And I give the floor to Mojang to elucidate Slide 16, where we show the details what we reached in the first half year on back on track. Mojang?

Marianne Rintell, KLM CEO, KLM: Thank you, Stephen. So back on track. It’s in full execution. So our target is EUR $450,000,000. Each quarter, we have a detailed program and plan in place.

For the first half year, we reached the EUR 185,000,000. So we realized it according to plan. It’s based on different initiatives. As you know, the program consists in increasing productivity and saving costs, increasing revenues, considering the business mix and restore the network. We realized the reduction in nonperformance costs.

We realized the reduction in nonquality costs at E and M. We renegotiated E

Analyst: and

Marianne Rintell, KLM CEO, KLM: M contracts, and we are really focusing and anticipating to face headwinds, if possible. So we continue pursuing new initiatives at the end of the year to realize the EUR $450,000,000 in total.

Stephen Zatt, CFO, Air France KLM: Thank you, Marianne. Let’s go to Page 17 to look at the cash flow development. So we had a strong cash flow development in the first half year, of course, driven also by the sales of ticket. But also, if you compare it to last year, we see a significant increase in what we call the recurring adjusted operating free cash flow, taking out all the payments of lease debt and net interest and also taking out the exceptionals, which we still have to pay related to COVID. On the right, you see the development on the net debt.

So the operating cash flow brings a EUR 1,300,000,000.0 reduction of our net debt. But at the same time, you see that our lease debt is going up. That is for almost 50% related to the replacements of our NEOs. So we are trying to switch much quicker from, let’s say, the seven thirty seven fleets in Transavia and KLM to the Neos, and we do that also supported by direct leases to make sure that we can do it as quick as possible. But all in all, you see a net debt reduction of around €200,000,000 in this quarter.

If we then go to Page 18, I think we did a lot in the last years on our balance sheet. As you all know, you see that the leverage is now at 1,500,000,000.0 which is at the low side of our ambition. We have a cash at hand of €9,400,000,000 We have renewed our RCS at KLM and at Air France and Air France KLM in total for 2,400,000,000.0 till and we extended it till 2029. So we have a wide pool of banks of it coming from China, coming from France, coming from The Netherlands, coming from Germany. So everywhere around the world is fully trusting us in our future in terms of cash and liability management.

Then we issued a successful hybrid. This was a long time ago that we put a public hybrid into the market, now also with a rating for the first time. We are quite happy with the coupon of 5.75%, which we used, and we go then to the next point to repay Apollo. So we repaid Apollo 500,000,000 We did that last Monday. We paid a coupon of 6% on that.

So this strategy in the coming period is to reduce our hybrid stock. There is another €300,000,000 to come in November. So this year, we will reduce for at least €300,000,000 our hybrid stock. And in general, the ambition is every time we have to do a redemption that we will reduce at least 50% in our hybrid stock. And we can all do that because we have a strong net result generation.

It contributed €500,000,000 We increased actually our equity, and that is including the reclassification of the Apollo debt because we the €500,000,000 which we will pay which we paid last Monday has been classified as debt as we already had the intention to repay. And last but not least, we started with the credit rating in 2023, and you see it’s still confirmed at a BBB minus and a BBB plus by S and P. So we are very happy with that. But of course, our ambition is to get to investment grade from both credit rating agencies. Let’s then go to the outlook, and let’s start with the forward bookings.

And I know everybody is always more interested in the quarter to come than the quarter behind. So what we see is that we see actually the same trend as what we have seen in the second quarter. It is a late booking behavior due to all the uncertainties in the world. And on top, we also had some warm months of May and June, which doesn’t help in our bookings. However, we’ve shown in the second quarter that the late bookings can still be bridged during the quarter.

So we still expect that to happen for at least a big chunk. So let’s look at the July, which we already know. The load factor gap has been closed, and we are even slightly above last year. We see an increase of unit revenue of 2% over the full network, excluding the currency impact. And if we zoom in at the different holes, we see that the unit revenues of our European network is flat, where we see an increase of unit revenues in long haul of 3%.

In the long haul, we see that North America is relatively weaker at plus 1%, where the other long haul regions are at plus 4%. And then on top, we see a big difference between premium traffic and the low yielding classes in the overall long haul network. The unit revenue in the premium cabins is really strong, 9%, where the economy class is at a flat unit revenue. And within the economy class, there is a difference between premium economy, which is also at 9% unit revenue, like the business class despite a growth of 11% over there, where the other economy classes are even minus 2% in unit revenues. So we see that our premium strategy is working, offsetting the lower yield classes, but we will not see back in the third quarter the strong unit revenues of the first half year, especially if you take into account that last year, we had the Olympic Games, although this year, we have the impact of the TSBA in France and the increase of the CIPO charges to the customer.

But the good news is that we still have the tailwind of the fuel, and we will see a unit cost increase coming down, which I will explain later on Page 23. If we then go to Page 21, yes, there’s not a lot to say here. The good news is that the Brent price is more or less flattish. We have around 70% hedged for the year 2025, and we hedged already 35% for 2026. On the capacity, it starts to be a bit boring, but we feel completely confident with this capacity guidance.

So the 4.5% is reachable. We are comfortable with that. Transavia will be probably even higher than the 10%. And on the long haul and the short term minimum, we expect to be between three to 5%. So let’s then switch to Page 23, where you see that the group capacity, as already explained, is still at the 4% to 5%.

On the unit cost, you see the low single digit increase, again confirmed. We stick to our guidance on the unit costs, on which we are quite comfortable. After the second quarter where we had some one offs, we expect to be in the coming period at the lower side of the range, so let’s say between 1% to 2%. But we feel completely comfortable with this unit cost guidance for the next quarters. And then on the CapEx, we still guide at the same level, 3,200,000,000.0 to €3,400,000,000 especially related to the deliveries of the of our aircraft suppliers.

And last but not least, of course, we stick to our net debt current EBITDA at between 1,500,000,000 and €2,000,000,000 With that, I hand over to Ben for the conclusion.

Benjamin Smith, CEO, Air France KLM: Okay. Yes. Thanks, Stephen. So to wrap up, Air France KLM, we continue to deliver strong results. Very happy on how we’re advancing our strategic priorities in an extremely complex environment.

So solid Q2 performance, improved margins driven by strong execution. The premiumization remains central with new cabin rollouts and Flying Blue growth supporting sustained demand. We’re expanding our global footprint, notably through the planned majority stake in SAS and reinforced strategic partnerships. Agile and forward looking response to challenges, leveraging our network strength and anticipating market shifts. The 2025 outlook confirms, reconfirmed, as Steven just mentioned, with a balanced approach to growth, investment and ongoing financial discipline.

So thank you for listening today. We’re now available to answer any questions you may have.

Conference Operator: The first question comes from Alex Irving from Bernstein.

Analyst: Two for me, please. First of all, on the Air France medium haul fleet, how are you thinking about the right structure for this over the medium term? Clearly, you have some A220 orders, but few in the total A320 family fleet already there. How are you thinking about the merits of either having a mixed fleet of neo A220s or instead of just going all A220? The second question is also on fleet, specifically as it relates to SAS, we are planning to take control of next year.

Will we need to change anything about the fleet plan there? Specifically, I’m thinking that we’ve had a lot of E2s coming with the recent order, but very few wide bodies on order. Do you need to take more planes, specifically more wide body orders for SAS? Thank you.

Benjamin Smith, CEO, Air France KLM: Hi, Alex. Yes, on the fleet side, we still have a number of A220s on order yet to be delivered. So for the remaining replacement of the narrow body fleet at at Air France, still to be determined. But you may know that our Air France pilots, they do flow between, Transavia and Air France. And, of course, we do have the a three twenty meal family in place at at Transavia, and both fleets are maintained by the same team at Air France and Dussly.

So we do have flexibility in which way we’d like to go. So far as you know, the a two twenty is performing extremely well with the exception of the engines. It is getting better. So we do very much like the a two twenty. It does give us the ability to add frequencies.

We don’t have slot restrictions at CDG, but we then we then do have, routes that are you know, we do have big volumes. So it’s a it’s an ongoing, evaluation within the group. But as of today, we’ve not yet made a decision on, when it’s going to replace the remaining twenty twenty five, narrow body aircraft where we have not placed firm orders. And then with the SAS wide body, future fleet plan, That’s also under evaluation. Of course, we are not managing the airline as of today.

But when we made the decision to invest in this airline, a further development of the Copenhagen hub forms a major part of that strategy. So, yes, all that will be relooked at. We are hopeful that we can have SAS join the, Delta, Air France, KLM, Virgin JV, which, would have an big, big impact on what the future, long haul fleet would be at, at SAS.

Analyst: Very clear. Thank you.

Conference Operator: James Hollins from BNP Paribas. Your line is now open.

James Hollins, Analyst, BNP Paribas: Oh, thanks very much. Yeah. A couple for me. First of all, we’ll put it both for Steven, actually. Steven, you’ve my touch typing wasn’t quite good enough.

Can I just confirm, you were talking about Q3 unit revenue perhaps not tracking as strongly as q two? Maybe confirm that. And on the unit cost side, you obviously did plus 2.4% in h one. We’re talking about full year low single digit being one to two and thus implying h two more like sort of 1%? Just clarifying my, my amateur typing.

And secondly, again, probably for Steven, but certainly q one, and and I think in the full year, actually, you talked about a 300,000,000 EBIT improvement. I think in q one, you didn’t specifically say that, but that offline, you were saying that’s still intact. Perhaps let us know online if it is still intact. James,

Stephen Zatt, CFO, Air France KLM: let’s first start what I said on the unit revenues. That all unit revenues, excluding currency, it’s all year over year impact, just to be clear. So therefore, also I referred, for instance, to the Olympic Games. And on the unit cost, so the it is low single digits, so let’s say, between 1% to 3%. We see that we are at the higher side in the first half year, so more to the 2% to the 3%.

In the second half year, we will be more between the 1% to the 2% to reach exactly, let’s say, in the middle, I would say, between the 1% to 3%, whatever that will be. And on the full year, yes, we gave a guidance, but I didn’t know what was happening on the fuel price. I didn’t know that there would be an attack on Iran. I didn’t know that the situation in Tel Aviv and Gaza would continue like this. So you should take that all into account.

And then, of course, the €300,000,000 still holds. We are today, by the way, already €400,000,000 above last year in the first half year.

James Hollins, Analyst, BNP Paribas: Okay. Thanks very much.

Conference Operator: The next question comes from the line of Stephen Farlow from Davy.

Stephen Farlow, Analyst, Davy: Good morning, gentlemen. Two questions. One for Stephen. Could you go through, again, just for my benefit, the strategy in terms of time line for reducing the stock of subordinates and subordinated instruments? And what do you think is needed to get that investment grade rating from S and P?

Because I think that’s quite important if you look compared to your peers. And then for Ben, I’m just thinking about Copenhagen again, and you might have said that, at the when it was announced, the intention to take the majority stake. But it just seems to me so under, the potential seems to be a lot bigger than it’s ever been in the context of what that could do as a long haul type of hub. And I’m just wondering the the if and I understand if it gets into the JV, etcetera, but I mean, is it, the potential there to allocate a lot of capital to that to there, or is it more a kind of moving a capital between, say, in Amsterdam and and Copenhagen? Because one country seems to be quite progressive in terms of, I’m positive about aviation and the other one, well, not so positive, really.

Your thoughts there would be great, Ben. Thank you.

Stephen Zatt, CFO, Air France KLM: Steven. So let’s say, if we look at the hybrid strategy, it’s not directly linked to the investment grade. It’s true that these the hybrids, which we put in the market, they have a 50% equity recognition from the credit rating, but we are not trying to replace it all by hybrids, which has an equity content. So what will bring us to investment grade is our development on our EBITDA. That is actually what we need.

So we need to generate more cash, and therefore, you know our ambition to have an 8% margin from in the period 26% to 28 And if we reach that, then automatically, we reach, let’s say, the targets for S

Benjamin Smith, CEO, Air France KLM: and P in relation to investment grade. I see. But regarding the potential of the Copenhagen hub, this was the one of the prime reasons why we decided to invest this company. The geography is excellent. They have high GDP.

And the opportunity to grow, as you just mentioned, is enormous. And if you go back in history and you saw what their network was thirty, forty years ago, this airline’s done it before. And what we have in Amsterdam is perfectly replicable at at Copenhagen. Now in Amsterdam, we don’t have plans to to reduce our activity there. We, however, need to get alignment, much better alignment with the Dutch state and with the airport in order to maintain and ensure skip all competitiveness.

But we do have Copenhagen as an alternative. But, ideally, we would would have organic growth out of SAS. And potentially, yes, as you said, move some CapEx or slow down some CapEx at Air France or at KLM to allocate to SAS, but that’s all to be determined. Right now, we’re very happy with the Air France performance. The plan is going better than we had anticipated when we first put this strategy in place.

And of course, at KLM, we have a lot of headwinds, and we’re hopeful we can balance out some of those. But to be specific to your question, difficult to be more precise than that, but we’re extremely, extremely excited about options we have in Copenhagen, and we’re this was part of our decision, was a full alignment with the Danish state.

Conference Operator: Next question comes from the line of Harry Gowers from JPMorgan.

Harry Gowers, Analyst, JPMorgan: I’ve got a couple of questions. The first one, just if you could maybe talk through the financial impact from The Middle East. Is there any lingering demand softness due to the geopolitical tensions there? Or is that like fully recovered or normalized into Q3? Second question, can I Stephen, can I just go back on what you said on the unit revenues similar to James’ point?

Were you forward looking? Were you talking about the whole of Q3, where you said network ex FX could be up 2%? Or are you just talking about the month of July? And then the last question was just on the Transavia result in Q2 because it does look a little bit weaker. It was lower year over year.

So maybe you could just talk through the issues in more detail in Q2. And are they more structural in nature? Or maybe they’re kind of like one off impacts?

Stephen Zatt, CFO, Air France KLM: Now let’s start with the financial impact of the geopolitics. I think it is if you look at the situation in The Middle East, it has specifically an impact on Transavia. So we see that, of course, we miss destinations in that area. And those are, let’s say, quite profitable destinations for us. So we miss those.

And also the stop and go and stop and go every time is not really helping because you don’t have another route to fly at the moment. And that also impact and coming back on Transavia is that everybody puts their capacity on the same place. So I think that is a big issue coming actually from The Middle East. For sure, it has an impact also on the long haul, but we see especially coming, let’s say, less connecting traffic now to The U. S.

From countries like India and like Africa, also related to, let’s say, the situation in The U. S. And at The U. S. Border and, for instance, for international students at universities in The U.

S. If we talk about the third quarter revenues, yes, maybe I should have been more specific. It is the passenger revenues, and it’s the July. So I never give any guidance on yield in the coming period because it still takes some weeks always to get it in before the bookings are fully in. So these are the actual NTR.

So it is even not TTR. It’s not the total traffic revenues, but it is the ticket revenue directly over the first twenty five days because we have them already. And then on the second quarter on Transavia, I think let’s look at it. So the geopolitical situation in The Middle East, I cannot I don’t know when that will end. Then we had indeed a strike.

So that is for €25,000,000 hurting Transavia, France. And I think also the development that we have more development on the medium haul at KLM compared to where we will grow further on the long haul in the year to come, that will also be easier for Transavia Netherlands. And last but not least, we had the ATC strike also in July. And if that’s structural, non structural, I don’t know, but it doesn’t help at all this business segment. And last but not least, Schiphol, which is not helping at all our Transavia Netherlands operations.

Harry Gowers, Analyst, JPMorgan: That’s very clear. Thanks a lot.

Conference Operator: The next question comes from Jared Castle from UBS.

Jared Castle, Analyst, UBS: Just a couple of clarification questions. You said premium is very strong. Can you just give some color in terms of premium leisure versus premium business? And then secondly, air freight, that was some really strong revenue growth in the first half. How much of this do you think is kind of stocking ahead of tariffs?

And know it’s incredibly short booking windows, but any commentary you can give at the moment, how you see things there? And then I think with the Q1s, you gave some color on North Atlantic, U. S. To Europe and Europe to U. S.

And just trying to get some color in terms of how demand on both sides of the Atlantic are looking.

Benjamin Smith, CEO, Air France KLM: Hi, Jared. Okay. So on what’s happening in our premium cabins. So at KLM, the big, big improvement is around premium comfort, Our premium economy, which we market as premium comfort at KLM, this is new cabin at KLM. KLM, we were late to this market, but the expectations around yields has far surpassed what we were anticipating.

So extremely happy with that performance. And that’s we’ve seen it’s mostly buy up. We don’t see any buy down. Difficult to have an exact breakout as how much of that is business versus leisure, but it would appear it’s predominantly leisure as opposed to business. At Air France, the huge increase in our performance of La Premiere seems to all be coming from leisure, which is is I mean, it’s absolutely unbelievable if you look at how this the performance has improved over the last few years.

We are gonna add aircraft, to that are gonna be equipped with our La Premiere cabin. It was very niche, in the past. We’re now putting it on many, many more routes. And the business cabin at Air France, as we mentioned, there is some good growth in business travel. So that is going into that cabin.

And then of course, we are seeing buy up on the leisure side in business class and in premium at Air France. So I would say, overall, well over half is coming from the leisure segment.

Stephen Zatt, CFO, Air France KLM: Morning, Jared. Yes, on the airfreight, you say it a little bit yourself. It’s a very short booking window. I think the second quarter was pretty strong because we’re even holding back a little bit of intake because we had an IT replacement also at KLM on it. So I think the second quarter on the airfreight was very strong.

If you look at it, I think there are two impacts. There’s the fuel price. So if the fuel price decrease, of course, it also has an impact on the freighter tariffs or the cargo tariffs. And I think on the stocking, I think that has been done more in the fourth quarter, maybe a bit in the first quarter. I think there’s no we don’t see a big impact in the second quarter from that.

But we will expect in the fourth quarter a year over year lower cargo unit revenue due to the fact that there was a lot of stocking in the fourth quarter last year. So that is a little bit how I would describe the situation on the cargo. But so far, I would say it is still good. But let’s see what the fourth quarter will bring because that is our most important quarter from the cargo. And then on The U.

S, yes, so what we see is that The U. S. Point of sale is still holding strong. Europe is recovering a bit, also related to the fact that the dollar has weakened. And but what we see especially is that the sales on the rest, let’s say, outside of Europe and outside of The U.

S, is weakening. So let’s say, the parts in India, in Africa and all those kind of things, it is more weakening. So that is a little bit taking over by Europe, and U. A. Is still holding strong.

But this is a little bit the mix which we see at this moment.

Conference Operator: The next question comes from Andrew Lobbenberg from Barclays.

Andrew Lobbenberg, Analyst, Barclays: Hi there. Can I just ask about the plans for Transavia? You’re saying that the capacity is likely to be above 10%, and, you know, the capacity pulls for winter look to show very high growth in the Transavia businesses. Where’s that capacity going, and how confident are you that you can get the economic performance out of it given given the challenges you’ve you’ve had in in the most recent quarter? Then can I ask my answer, you know, any any update on on the CLA at at KLM?

Clearly, progress has been delayed. Do you think you’ll get there? When will you get there? How can you deliver the four fifty if you don’t? And then the third question might come back to the unit revenue performance.

Can you perhaps quantify maybe the benefit that you had in the second quarter from Easter? And maybe we can compare that with or remind us of the negative impact you had last year from the Olympics, So, you know, if we can try and understand what’s going on with the underlying yields because you’re obviously boosted by Easter. Thanks.

Benjamin Smith, CEO, Air France KLM: Okay. Hi, Andrew. So Transavia, you and I have talked about this several times, so it is extremely challenging. But I would say, you know, we’re we’re we’re we’ve been working through this. We’re still excited about Transavia, and we still have strong ambitions for Transavia.

So we have not been able to catch a break. Q2, we had, as Steven mentioned, we had air traffic controller strikes, the worst we’ve seen in France in well over eight years. So we’re hopeful that that will steady out or that will calm down a little bit. Then we had our first strike at Transavia itself, and this was extremely unfortunate. It was a fight between two unions, and we got caught in the middle.

And that hopefully seems to seems to have dissipated going forward. And, of course, many of these of the employees, they are new. They don’t you know, they’re not you know, they don’t have the same relationship with their union as we have with the with the cabin crew at Air France. So that is work in progress, but I’m pleased that that seems to be going in the right direction. So those two items were hopefully one offs.

And then as you know, transitioning the entire slot portfolio of Air France at Orly Airport to Transavia, which will be completed in April 2026, is a challenging ongoing process, especially while we’re trying to maintain the slots, integrate a new type of airplane, the a three twenty neo family, and also continue to add to the robustness of the operation of Transavia, which, you know, for many years, it was operating with a much smaller fleet. And as an example, we don’t even today have a system of reserve reserve system to manage pilots or or cabin crew. So I would say from the cost structure, that is that all those items, they should improve over time. On the revenue side, you know, the the fleet at Transavia Holland is only going up by a couple of units. It’s very small overall growth.

I think what it is, we had a lot of airplanes on reserve, and we had a lot of problems not only with reserve airplanes but also with completion factors. So the growth that you’re seeing there, I think, is mostly driven by our view that we’re going to get a better operational performance at the Transavia Holland. And the growth at Transavia France was already in our plans, and it is from a commercial perspective, from the money that we’re saving by not operating Air France and only if you do net net, it is still, from our view, much, much better than we expected. So it’s hard to break out all of those items, but I can I’m still extremely confident that we’re headed in the right direction on Transavia.

Stephen Zatt, CFO, Air France KLM: And on the let’s say, the Eastern impact, indeed, was stronger than May and June. May and June were, let’s say, more or less the same in the area of 2%. And on April, it was 4.5%. So for sure, let’s say, there’s an impact of around 2% related to the shift of Eastern. If you go to the Olympic Games, so I think in the document, you see the EUR 40,000,000 for the Air France Group in the second quarter.

In the third quarter, we had on the passenger business of Air France, we had EUR 125,000,000. And on Transavia France, we had EUR 35,000,000 in the third quarter. And then on top of it, we had a unit cost impact, a one off of €50,000,000 because we gave a premium to the staff. So it is €200,000,000 over the two periods on the revenues and €50,000,000 on the cost.

Andrew Lobbenberg, Analyst, Barclays: KLM CLA.

Marianne Rintell, KLM CEO, KLM: Okay. Yes.

Stephen Zatt, CFO, Air France KLM: Yes. Yes. You get your answer then.

Marianne Rintell, KLM CEO, KLM: I’m here. I’m here. Hello. Hi. Hi.

Regarding the CLAs, so it’s important to have CLAs for all the KLM employees working day and night with proud for all the customers. But it’s a difficult task today. The last years, we increased salaries already a lot between the 25% and the 40% based on the inflation in The Netherlands. So we offered today a one off and a structural increase next year dependent on the results. And we really ask the unions not looking only at today, but also at tomorrow.

And related to the back on track program, we took this in account, the one off. So we increased the $450,000,000 to $480,000,000 and we have mitigating actions already in place to close that gap.

Benjamin Smith, CEO, Air France KLM: Yes. I’m confident, Andrew, perhaps I can just add a couple of words. It’s been a long, long road to try to close pilot CLA at KLM. It is moving in the right direction. A lot more trust has been established.

And group, along with the KLM teams, as Marianne said, I think, the relationship is much, much better. And I think the the benefits of of the entire group, supporting KLM, hopefully will show, a close on this on this pilot deal, which is the most difficult of all the CLAs that we’ve got we’ve got going on there, and obviously, the most critical from a operational perspective.

Andrew Lobbenberg, Analyst, Barclays: Perfect. Thank you. Once

Conference Operator: again, if you wish to ask a question, please press star, the number one on your telephone keypad. The next question comes from Antonio Duarte from Goodbody.

Benjamin Smith, CEO, Air France KLM0: Two for me, if I may. One of them relates to your premium development. So given the strong performance and the successful rollout of the Le Premiere and and premium cabin, could you give us some light on how much capacity do you intend to allocate to these categories overall, if there’s any targets, for example? And my second question comes more related to the medium short haul. You mentioned that certain markets such as Spain, we’re seeing a bit more of impact in terms of unit revenues.

Could you break this down a bit more maybe between holiday destinations and your home markets? Thank you.

Benjamin Smith, CEO, Air France KLM: Hi, Antonio. On, the split in capacity between our premium cabins and economy, think we’re just continuing on the same trend. There’s not gonna be any marked change. You know, we’ve we’ve we’ve exited some very large airplanes. So particularly in El Paso, the average gauge is going down, but we’re maintaining the the absolute premium number of seats.

So the the exposure to economy will go down. And at KLM, you know, if you go back to prior to COVID, we had a, you know, a very different makeup of the fleet. We had an extensive fleet of seven four seven combis. So at KLM, introducing Airbus a three fifties, I think, is a much more efficient airplane than the a three thirties that’ll be exiting. The balance between premium and economy at KLM will go up, not as significant as what we had at Air France.

But the premium comfort at KLM, I think, is going to be a sweet spot that’s quite unique to KLM when you look at the dynamics of that market. So as we watch how that develops over the short term, that will dictate how much we invest in terms of real estate on the airplanes into that cabin. But we’re, as I’ve already mentioned a few times here, we’re really pleasantly surprised by the financial performance of Premium Comfort. So to specifically answer your question of how much capacity is going to be allocated to each one, now that we’ve renovated all these planes, we’ve designed them in a way that we can easily flex up and flex down depending on market conditions, and that was one of the key components of the of the renovation, the retrofits of the of the airplanes. We’ve retrofitted and the ongoing ones so that the major monuments, galleys, toilets, and all that are would stay in the same place.

But the if we want to improve if we wanna increase economy economy plus or or premium comfort as we call it at at KLM or Premium in Alphonse. We’ve got that ability without spending or investing too much money into into the airplanes. So flexibility is what we have.

Stephen Zatt, CFO, Air France KLM: And Antonio, to come back on your Spain question, I think that is especially for our low cost segment, and it’s especially for the, let’s say, Transavia, The Netherlands, there it is, the big impact. Because in the let’s say, the markets from The Netherlands to Spain is pretty big. We saw that competition is withdrawing now also some capacity. But at the end of the day, we also added capacity because we flew with bigger planes. So I think it’s especially load factor impact, but I cannot specify what is the exact number.

Conference Operator: The next question comes from Corinne Mulder from ING.

Benjamin Smith, CEO, Air France KLM1: Yeah. Good morning, everyone. A couple of questions from my side, if I may allow if you allow me. For my young lady, if you speak about the CLA, it’s not only about cost where the unions have problems with, but it’s also the the working schedule and that sort of things, which in my view could lead to to hiring more people in that in that respect. So maybe you can comment on on that, And I’m speaking about, let me say, the ground personnel, the the the threats they have for September.

That’s one. And then to continue on the KLM, 185,000,000 cost savings. How much is already realized in the first half year, and how much do you think you will realize in the second half, given your target, I think, at the end of the year of 450,000,000? That were my first question. And then maybe something on the FX for the second half, how you how you look at that situation with regard to, well, let me say, the weakening dollar, some positive FX, some negative impacts as well.

Maybe you can can give me give give us an idea. Thank you.

Marianne Rintell, KLM CEO, KLM: Steven, I will start. Yeah. Okay. So hi. Regarding the CLAs, and you specifically asked for ground handling.

So what we did the last couple of years, we needed after COVID a lot of extra staff to come back up at the level we need for operations. We did that in the last few years. We raised salaries in the last few years with 25% to 40%. So what we said today, looking ahead, we need, at least productivity, but productivity, you can find within the CLA and outside of the CLA. So we did both, and we will do both.

And at the same time, if you look at back on track, we realized already the 185,000,000 Our target is $450,000,000 So it’s two we 65 need to realize in Q3 and Q4, and that is according to plan.

Stephen Zatt, CFO, Air France KLM: Hi, Kirin. Welcome to this call. So I think the first time, so good to hear you. On the rate of exchange, I think we are in generally, we are short in dollars. So it is quite good if the dollar is weakening for us.

As you we have incomes in dollars mainly coming from The U. S, but there are also dollar related currencies like the Mexican pesos and, for instance, usually also the Canadian dollar. So those kind of elements, those are bringing, let’s say, a lower exposure. Our maintenance and our fuel are, of course, the biggest driver for our fuel cost. But in general, we are short, and we have hedged our positions between 5060% for the coming year.

So there’s also an impact over there. And then on the fleet, we usually build up our dollar position when we, let’s say, order the plane over the period, and we have quite some substantial currencies already hedged for the fleet because we could make a good deal in the market.

Andrew Lobbenberg, Analyst, Barclays: Thank you.

Benjamin Smith, CEO, Air France KLM: Good. Okay. Thank you, operator. Thank you, operator. I think we’re ready to close the call.

Conference Operator: Gentlemen, I give the floor back to you for the conclusion.

Benjamin Smith, CEO, Air France KLM: Okay. Thank you, everyone who, who’s on the call today, and we look forward to, to speaking with you at, the next quarter end. Have a good, a good weekend.

Conference Operator: Ladies and gentlemen, this concludes the conference call. Thank you all for participation. You may now disconnect.

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