Earnings call transcript: Air France-KLM shows revenue growth in Q1 2025

Air France-KLM reported an 8% increase in revenue year-over-year for the first quarter of 2025, reflecting strong performance despite ongoing challenges in the travel industry. The company also improved its operating result by €161 million, reaching a negative €328 million. The stock saw a decline of 2.79% in early trading, reflecting investor concerns over specific market dynamics and competitive pressures. According to InvestingPro data, the company’s market capitalization stands at $2.24 billion, with a P/E ratio of 8.04, suggesting relatively attractive valuation metrics compared to industry peers.

Key Takeaways

• Revenue increased by 8% year-over-year.
• Operating result improved by €161 million, though still negative.
• Stock price declined by 2.79% following the earnings release.
• Strong performance in premium segments and new product offerings.
• Continued focus on capacity growth and operational efficiency.

Company Performance

Air France-KLM demonstrated solid performance in the first quarter of 2025, with notable revenue growth and improvements in operational metrics. The company has been expanding its premium economy capacity and investing in new cabin products, which have contributed to its revenue increase. InvestingPro analysis shows the company’s revenue growth at 4.8% over the last twelve months, with an EV/EBITDA ratio of 4.01, indicating efficient operational performance. Despite these positives, the company faces competitive pressures, particularly in the transatlantic market, where booking softness has been observed. For deeper insights into Air France-KLM’s valuation and growth metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: Up 8% year-over-year.
• Operating result: Improved by €161 million, reaching -€328 million.
• Net debt to EBITDA ratio: 1.6 times.
• Positive recurring adjusted operating free cash flow: €800 million.
• Unit revenue growth: 3%.

Outlook & Guidance

Air France-KLM maintains its 2025 capacity guidance, with projected long-haul capacity growth of 3-5% and short/medium-haul capacity growth of 3.5%. The company also anticipates a 10% increase in Transavia capacity. InvestingPro’s Fair Value analysis indicates that Air France-KLM is currently undervalued, with a Financial Health Score of 2.43 (FAIR). Despite a low single-digit unit cost increase, the company is 70% fuel hedged for 2025 at favorable terms, which should help mitigate cost pressures. The stock’s beta of 1.78 suggests higher volatility compared to the market, presenting both opportunities and risks for investors.

Executive Commentary

CEO Ben Smith emphasized the company’s adaptability in a challenging macroeconomic environment, stating, "We remain agile in the face of current macroeconomic uncertainty." He also highlighted the importance of premiumization as a core strategy, noting, "Premiumization continues to be a core pillar of our strategy." CFO Steven Zatt added, "We see very strong bookings on the premium."

Risks and Challenges

• Competitive pressures in the transatlantic market.
• Potential impacts from tariff changes on maintenance costs.
• Ongoing negotiations with KLM pilots for productivity improvements.
• Macroeconomic uncertainties affecting travel demand.
• Geopolitical uncertainties impacting global travel patterns.

Air France-KLM faces a complex landscape with both opportunities and challenges. The company’s strategic focus on premium products and operational efficiency positions it well, but competitive and macroeconomic factors remain significant hurdles. The company’s debt-to-capital ratio of 0.76 and current ratio of 0.65 highlight the importance of monitoring its financial stability. Investors seeking detailed analysis of these metrics and more can access comprehensive financial health indicators through InvestingPro’s extensive database of over 1,400 stocks.

Full transcript - Air France KLM SA (AF) Q1 2025:

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

Ben 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 first quarter of twenty twenty five. Today, I’m joined by Steven Zad, our Group CFO. I will start by covering the key highlights of the quarter before I hand it over to Steven, who will walk you through the detail of the financial results, and then, I’ll close with an overview of our medium term ambitions before opening the floor to your questions.

So moving to slide three. So we’re very proud to report that the group delivered an improved performance this quarter, once again demonstrating the resilience and strength of our business model. Revenues were up 8% year over year, driven by a solid performance across all our activities, including maintenance. Our operating result improved by €161,000,000, reaching a negative €328,000,000, a significant step forward compared to the same period last year, supported by strong unit revenue, development, a more favorable fuel price environment, and an overall improvement in operational performance. I got to apologize for perhaps some background noise.

The building next door is under heavy travel work, so hopefully, you can hear us clearly. Our net debt to EBITDA ratio now stands at 1.6 times, fully aligned with our midterm ambition range of 1.5 times to two point zero times. Importantly, we generated a positive recurring adjusted operating free cash flow of €800,000,000, highlighting the robustness of our cash generation capabilities even during the seasonally weakest quarter of the year. Finally, in line with our commitment to sustainability, the share of new generation aircraft within the group increased by seven percentage points compared to last year, now representing 28% of our total fleet. On to slide four.

Despite a context of political and economic uncertainty, Europe continues to demonstrate its strength as a leading travel destination. So looking at industry bookings for the coming months, Europe is holding up against the turmoil with inbound traffic from both United States and the rest of the world showing growth compared to last year. It’s worth noting that these markets are predominantly inbound towards Europe, 60 6 Percent of The US traffic, and 51% of the rest of the world traffic are inbound flows. As you can also see on the slide, part of the missing US outbound traffic may be redirected to other regions of the world where we, as a group, would be well positioned to capitalize on our extensive network of destinations. In this setup, France continues to serve as a key anchor for this momentum, maintaining its leadership position as the world’s number one inbound tourism destination and also capitalizing on the positive coverage of the Olympics in 2024.

Combined with our diversified network and strong exposure to international traffic, this places us in a strategic position to mitigate the impact of current uncertainties and to adapt quickly if needed. On to slide five, as we declined or as we defined in 2019, we maintain a clear strategy of covering and enhancing all market segments to ensure we meet and ultimately exceed the expectations of our customers. And at the entry level segment, we address point to point leisure and price sensitive markets through Transavia, pursuing our growth trajectory. This strategy already communicated previously will culminate in the full replacement of Air France’s loss making domestic operation by summer twenty twenty six. Both Air France and KLM are simultaneously upgrading their long haul premium offerings, focusing on capturing growth in both the premium corporate and premium leisure markets.

This includes the development of economy comfort at KLM and premium, comfort at KLM. Both airlines now offer a business cabin seat with a door establishing a new standard in business class travel. At the end of the market, top end of the market, Air France has recently unveiled its new La Premiere suite. As the pinnacle of our premiumization strategy, this launch elevates the level of excellence across the board and brings a strong luxury halo to our brand. We will take a closer look at this product on the next slide.

As I just mentioned, we’re very, very proud with the successful launch of our new Air France La Premiere cabin, which was officially unveiled during a global media reveal on March 18 in Paris and performed its inaugural flight to New York JFK on April 8. The new cabin offers a stunning 3.5 square meters of personal space, five windows in length, making it the longest first class seat suite on the market. Featuring outstanding amenities such as a separate armchair and a chaise lounge that transforms into a fully flat bed with the option of a fully partitioned double suite for complete privacy. This enhancement complements the complete revamp of our La Premiere ground experience finalized in summer twenty twenty four, together delivering seamless and exclusive service at every stage of the customer journey. La Proemielle is the ultimate expression of our luxury vision, delivering an exceptional level of experience both on the ground and in the air.

And this launch marks a major milestone in reinforcing Air France’s position as a global leader in premium travel. And I’m very happy to share, that prior to COVID, this cabin, this service was heavily loss making. We don’t break out the details. Very pleased to share that in q one, this service is now very, very in a very strong financial performance results, and we are profitable in that scenario. Moving on now to slide, the final slide here.

So I’d like to take a moment to thank every one of my colleagues who contributed to turning the vision behind this product into a reality for our business. With that, I’ll now hand it over to Steven, who will take you through the detailed financial results. Thank you.

Steven Zatt, CFO, Air France-KLM: Thank you, Ben, and good morning, everybody, on this beautiful day. I said last quarter that one swallow doesn’t make a summer, but you can imagine that we are happy that we have seen a second swallow before even the summer has to come. We improved our margin by 3%, but let’s go to those details on Page eight. If you go to Page eight, you see that we had a very strong development of unit revenue, and there was, of course, the tailwind of the fuel price. In total, we were able to grow our revenues by 7.7%.

Four % is coming from the capacity growth and 3% is coming from our unit revenues, and there’s around 1% coming from the currency. So the unit revenue increased by 3%. The unit cost increased also by 2.1, but that is for a big chunk also related for to our unit revenue development. So you see that the differential between the unit revenue and the unit cost brought for us an additional percentage in terms of margin. And the other 1.8% is actually coming from, let’s say, the fuel price and the currency.

There’s it’s around 1.9% margin improvement coming over there. And it’s good to see that we have at least a cushion for the quarters to come in these uncertain times. And this result, this improvement of operating margin, we should also keep in mind that we had last year, we had Eastern in the first quarter, and we have now Eastern in the second quarter. We don’t lay out a specific number, but you can imagine that this Eastern impact will support our second quarter. If we then go to Page nine, then you see the differences over the network.

Let’s start on the passenger business on the network, an improvement of our unit revenue of 2.8%, especially driven by a stronger yield. The load factor is slightly down, but we have seen that the steering, especially for yields in this quarter, has helped us also to increase our yield over the whole network. So as you still can remember, maybe last quarter, we started the quarter with a booking load factor of 2% gap. And at the end of the day, we closed almost that whole booking load factor, especially coming from a very strong unit revenues from the premium, on which I will detail out further on the coming page. Cargo, also very strong, 16.2%, both coming from a load factor increase of 2% and also heavy unit revenue increase from our cargo segment, and that drives in total our network performance by €163,000,000 Then on Transavia.

Transavia, we grew our capacity by close to 4%. Our unit revenue is more or less flattish despite the fact that, that has been, let’s say, supported by the paid hand luggage. So let’s say, if you would have taken out, let’s say, the unit revenue is slightly down, and that’s coming actually by four impacts. First, Transavia is very dependent on Eastern and holiday season. And as we move the holiday season to the second quarter, that for sure has an impact on Transavia.

Second, the weather was very bad in Spain. So 44% of Transavia in The Netherlands is flying to Spain in this quarter. And you see that the bad weather and also the fact that we didn’t have, eastern impacted Transavia as well. And we should not forget the introduction of the ticket tax in The Netherlands, bringing more than €25 on the tickets, that didn’t help this business segment, and that moved actually passengers towards Germany and towards Belgium. So a bad implementation actually from another additional tax on our industry.

And last but not least, we don’t have to forget, we grow this capacity. So for sure, we know always that the first quarter is difficult in the low cost segment. So we are going to regain those results in the quarters to come. Then on maintenance. Maintenance, a significant step up in the revenues, supported also by a stronger dollar.

We see that the engine business is actually booming. So both on the revenue side and the operating result side, it’s fully coming from a very booming engine business, both in The Netherlands and in France. So good to see that we are heading towards the margins, which we had pre COVID for our engineering and maintenance despite the fact that there are still, let’s say, some difficulties in the supply chain and especially hurting our components business. But all in all, very strong results for the engine business, on which we can very proud of. If we then go to Page 10, let’s start with of course, both carriers improved the results coming from the fact that the fuel price is coming down, and partly, that has been eaten up by the higher U.

S. Dollar, which is negative in terms of our costs. So at all, let’s say, we have a positive impact from that fuel wind, both for Air France as for KLM. Air France has a very strong unit revenue increase coming from the premium. So the premium demand is really, really strong, resulting in high yields.

And on KLM, you see even a higher unit revenue growth, specifically coming from a very strong implementation of the premium economy. KLM increased the capacity by more than 60% on the premium economy. The yield over there was up 9%, and the load factor is up 2%. So it’s good to see that the revenue growth of premium economy for KLM grew by more than 80%. Then we see the first signs of back on track coming in, so especially by a better operation and also a better performance of the engine maintenance business, as just explained.

And of course, we had a one off cost of €50,000,000 last year in Q1, which we didn’t have this year in the first quarter, which helped also and supported the KLM results. What is important now for us is that we get the productivity delivered to the CLAs. We are currently in those discussions, so that should happen from Q2 onwards. And we have, unfortunately, also in the second quarter, this ridiculous increase of the Schiphol tariffs by 40%. So that will kick in the second quarter.

Then on Flying Blue. On Flying Blue, we see a stable performance due to the fact that we have a very strong yield and we have, let’s say, very tight seats available. We reduced a bit the Flying Blue activity to that segment. We signed a commercial agreement with American Express, which will be there till September 2033, but the results of that will kick in from the 01/01/2026. So Flying Blue, still a very, very decent margin, but we have a little bit more tightness in our revenue management system to give access to our Flying Blue passengers.

If we then go to Page 11, then you see that we have on every, let’s say, if you look at the premium and economy and the total, you see that we have a positive yield impact, very strong on the premium. We grew our capacity by close to 6%, and, resulting even, with a yield improvement of 7%. On the economy, we grew only by 2.2%. You see a positive yield impact of 1.7%, but that’s purely coming from the successful implementation of the premium economy. We grew the capacity over there for Air France KLM in total with 21% and with a yield increase of 5% and also a load factor increase in 2%.

So a lot of demand of this premium product in the economy where there is more to come. If we then look at the total long haul, you see a very strong West Side. So The U. S. With an 8% increase in yield has been, of course, very, very strong.

But also, Latin America is at 4.5% and even Asia at 6.2%. We reduced the capacity towards Asia, but that’s not on the real Asia, let’s say. It is a reduction of capacity of The Middle East, and we had a slight increase of the Asian capacity. Strong yield development in India, China and also Japan and also in Korea. So the Asian segment is developing well, especially in attractiveness in terms of yields.

Then if we look at the middle, you see let’s first start with short and medium haul. We increased our capacity significantly, which is for a big chunk coming from the fact that last year, we had an ATC closure. So we needed to reduce our capacity significantly, and that drove down the capacity last year. So we restored that capacity now, and that’s actually representing this increase in our short and medium haul with a slight decrease also in yields, which is also coming from the fact that there was less capacity and also from the competition in twenty twenty four first quarter. Then on Transavia, as already said, so we increased capacity by close to 14%, minus 2% in terms of load factor coming from the Eastern impact and an increase of yield of 2.3% supported by the paid hand luggage, which we implemented in the second quarter.

So we still had a positive in the first quarter. So in a nutshell, very strong results in the East and West, very strong results in the premium segment. And I will come back to you later if you talk about the second quarter, what we see in The U. S. And what we see at the rest of our network.

If we then go to Page 12, and I think this shows for us pretty well what what is our strategy and how we are going to improve our margins. So you see the unit revenue was up 3% despite the fact that there was no Eastern. That goes hand in hand with a unit cost increase of 2.1%. But out of this 2.1%, there’s 1.1% coming from unit revenue related cost. A part is coming from the capacity mix, so we have more medium haul flying than long haul, that’s, by definition, grow your unit cost, and it comes from the premiumization of the cabin, where we have 3.4% more growth in the business class and 21% growth in our premium economy.

And last but not least, the 0.7% of total cost increase of our total unit cost coming from our airport and ATC charges. I want to repeat it again. Also, in the first quarter, the triple tariffs went up, and we see it again going up further with 40% in the second quarter. But then all the costs which we have in our hands, let’s first see say that we still have on the labor price an increase that we had a one off payment of EUR 50,000,000. So if you take that into account, the labor price impact on our unit cost was 2.3%.

But it’s good to see that we partly absorbed that by increased productivity, and we know that there still needs productivity to come from KLM. So it’s a 0.6% productivity impact on our unit cost, which is an improvement of our productivity of the staff of 2%. And last but not least, also related by, let’s say, the much better operations, which we have done in this quarter, that has a positive impact of 0.6% on our unit cost. And that is actually also part of, let’s say, the KLM back on track parts to improve the operations to make sure that we are having the right product for our customers and that we don’t spend it on EU EU261 compensation. If you look at the next quarter, we will probably be at the high end of our range.

I already told you, we have an increase of Schipholtigers of an outrageous 40%, and we still have high maintenance costs on the KLM side. And we still have to see that the productivity comes in with the CLE, which actually we are now already, let’s say, over one month after the closure of the CLA date because it should be closed on the 03/01/2025. So it it takes a bit of a delay, but there will be productivity gains coming in, in the second quarter, but it’s absorbed by higher maintenance costs and also this increase of the Schiphol tariff. If we then go to the cash, so 1,000,000,000 operating free cash flow, of course, very strongly supported by EUR 1,500,000,000.0 sales in tickets, but we are really ahead of our own internal plans in terms of free cash flow delivery, 800,000,000 we reached. So we are quite happy with the strong free cash flow performance in this quarter.

It brought down our net debt by six from 7,300,000,000.0 to 6,900,000,000.0 and it improved our leverage from 1,700,000,000.0 to 1.6 Still a very strong cash at hand, it’s €9,300,000,000 We reduced our liabilities with €700,000,000 and we paid €500,000,000 of a bond out of our own cash. So very strong cash development in this quarter. Let’s then go to the outlook. Let’s go to page 15. And, of course, everybody is coming here to listen what we are going to tell you about what’s happening in the future.

Let’s first go to the picture of the booking load factor. So we see that we are down compared to last year in terms of forward booking load factor, which was also the case last quarter. So there is a gap of 3% on the total long haul. On the North Atlantic, actually, it’s only 2%. So it’s it’s it’s less on the North Atlantic than on the total long haul.

And on the short and medium haul, we are very close to where we were last year, and it’s good to see that Transavia sold already 71% of their, seats. So, on that side, it looks pretty good. Then, if we then go to, let’s say, the situation in The US, What we have seen in April so far is that that we actually see, and it was already explained by Ben, that we see a shift from the point of sales U. S, which is getting stronger from the point of sale Europe. Usually, we have on Air France, we have around 46% of our tickets are sold in Europe.

For KLM, it’s around 50%. And we have seen that in the first three weeks, that 40 that is going down in for Air France and Europe to 43% and for KLM to 46, but it shifted to The US. So it’s the the shift is around 3% from Europe to The US for Air France and 4% for KLM. And usually, the point of sale sale of The US is much stronger in terms of pricing than what is happening in The US. And I will come back later on the differential between on our U.

S. Network, what we see in terms of load factor and yields. If we go to the first three weeks of April, because we have only three weeks, let’s say, in our books, We see that the on the long haul, the load factor is up 1%. So if you see that the forward bookings is down 3% in the April. When we get closing, we are higher than last year.

We had a yield of 3.9% increase on the long haul. On the North America, we see that we have around the same load factor as we had last year. It is down 0.2%, but the yield is up still 5.1%. And if you go to Europe, the load factor is up with 1.3%, and the yield is up with 1.9. So over the total network, the load factor is up by 1%, and the yield is up 3.6%, for sure, also impacted by Eastern.

So for sure, that has an impact on this yield development. If we then go to the specifics on The U. S, if we look at the forward bookings for May and June, you see that the load factor in May is down 3%, but the yield is up 4%. And in June, the load factor is down also 3%, booking load factor and the yield is up 6%. So still a very strong pricing dynamics on this segment.

We see very strong bookings on the premium, where even our unit revenue is strongly up. We see a very strong booking also on the premium economy as we have seen also on the first quarter in The U. S. And it is, as Ben already explained in last weeks to the past, we see a little bit of softening in the, let’s say, the lower class yield passengers. But overall, we still have a positive unit revenue in May and June and for sure, in April, as I just explained, on our U.

S. Segment. If we then go to Page 16, and as our only Dutch philosopher always say, Johan Cruyff, every disadvantage has also an advantage. You see the fuel price comes down with 300,000,000 in dollars compared to what we have guided, last quarter. So a strong decrease coming from, this fuel bill, and it’s even 600,000,000 below last year.

So, that is a good cushion for whatever happens on, let’s say, the traffic related to The U. S. Situation to, let’s say, have a cushion from our reduction of our fuel bill. And also the good news, we have almost 70% hedged for the year 2025 at very favorable hedge terms. Then let’s go to the outlook.

So we keep our outlook. I think despite there is, of course, uncertainty, we still see that the demand is, as described in the previous section, is still continuing. Of course, especially the second quarter and the third quarter are the best quarters in terms of pricing and in terms of profitability. So these quarters, and especially in the high summer in July and August, you can sell any ticket you want. So on the long haul, we are at 3% to 5%.

We guide you the same, 3.5% short and medium, well, 3.5. And for Transavia, we will be at the 10%. So the guidance has not been changed. We will have an agile approach network if we see a deterioration coming, but we expect that it will be more coming when the winter is kicking in than when the summer is kicking in as it is a high profitable season. And then for the full year, the outlook, so we didn’t change the group capacity outlook.

The unit cost, we are still comfortable with the low single digit increase. Although we repeat again, we will be at the high end of the range in the second quarter due to Schiphol and due to the maintenance tariffs, where we also had last quarter a compensation, by the way, on this. So there’s also onetime effect, which we have in the second quarter. But we will be in the third in the second quarter at the higher range of that low single digit increase, and then we will further continue with the growth as we have seen in this quarter. We stick to the CapEx, which, of course, we will we it is still too soon to tell.

But if we are going to develop our network differently, we will also, of course, will be agile in our CapEx, and we are sticking to the net debt to EBITDA, which we improved this quarter between 1.52. So I think I give enough coloring on everything what’s happening in The US. This is all the figures we have, but with that, I hand over to Ben, and I will answer later the questions you want. Okay.

Ben Smith, CEO, Air France-KLM: Thank you, Steven. So just quick summary here. So we’d like to highlight a few takeaways. So first, we had a strong start to the year as you’ve as you’ve just heard. We see solid summer ticket sales, and that’s being driven by revenue growth and improved cash flow across all businesses.

And second, we remain agile in the face of current macroeconomic uncertainty. So we have a very well diversified network, as you know, strong attractiveness of our inbound markets. We’re well positioned to respond and adapt the shifts caused by geopolitical and economic factors. And lastly, premiumization continues to be a core pillar of our strategy with expanded offers both at KLM and Air France. And as I’ve already mentioned with the unveiling of the new La Premiere Cabinet Air France, we reaffirm our commitment to leading the way in luxury travel and delivering excellence at every stage of our customer’s journey.

The brands are really continuing to gain traction into and out of our markets. Fourth, we are making steady progress on sustainability with a further increase in our share of new generation aircraft, advancing us toward our decarbonization goals. So 2025 outlook remains unchanged. We will maintain our capacity and unit cost guidance. And with our agile approach to capacity deployment and favorable fuel dynamics, we’re confident that our strategy will continue to drive profitable results.

So thank you for listening to our preliminary our preliminary presentation, and we are now available to take any of your questions.

Conference Operator: Thank you, mister Smith. Ladies and gentlemen, if you wish to ask a question, The first question comes from the line of Jarrod Casson from UBS. Go ahead, sir.

Jarrod Casson, Analyst, UBS: Good morning, everyone. Thanks for the presentation. Steve and Ben, you say that the guidance is unchanged, and it looks like the building blocks indeed, obviously, are the same. But in Q4, you did say that you should be able to do at least EUR 300,000,000 in profit progression. I guess you also got the more of a fuel tailwind now.

Can you kind of confirm that you’re still happy with at least EUR 300,000,000 in profit progression? I know it’s all and then secondly, I know it’s very short term booking windows, but any commentary on what you’re seeing on airfreight? It looks like certainly March was very strong, but just any comment on how you’re seeing things, around restocking ahead of potential tariffs? And then just lastly, I guess, linked to tariffs, any views on how this will affect your business, especially related to CapEx and maintenance costs?

Steven Zatt, CFO, Air France-KLM: So, hi, Jared. How are you? Let’s start with the the the guidance. So that we we don’t give a profit guidance. Let’s start over there.

We explained last year that there were 600 millions coming from all kind of incidentals, for instance, the Olympic games. That will not happen this year. That I can fully guarantee you. We also said that there was EUR 300,000,000 of headwinds, which are, let’s say, are kicking in the current, let’s say, triple tariffs, which I explained, and also the increase of the French tax aviation, which impacting our unit revenues. So we still stand by with the EUR 300,000,000 impact coming from these incidentals of last year.

And then there’s all kind of other things happening. For instance, we have the fuel bill, we have the revenues and the unit cost. On the unit cost, we’ve given very clear guidance, and I think I gave you some coloring on the second quarter and also what we expect for the summer. On the airfreight, we see not a, but you know the booking window is very, very, very, very short. It’s three weeks ahead.

We are exposed only 2%, from, let’s say, flows between The US and China, so there’s not so much coming over there. And so we don’t see any real impact on the softening on the airfreight yet. But again, it’s very too soon to tell. It’s also a little bit of a weak quarter, so it would have been the fourth quarter. We we we could have probably seen a bigger impact coming from all these tariff impact.

And then on the maintenance, so let’s first start. If you look at the planes, which we bought, we bought almost only, Airbus planes. So for the fleet deliveries, if you refer to that, we don’t expect any issues. We have only four, 787 10 to come. And I think we will we will not yeah.

So we have we have all Airbus fleet, and so we are not very dependent on, let’s say, all the deliveries of Boeing. Then there is the question mark on the maintenance cost for the for the quarters to come. That is too soon to tell, to be honest. First, the US is an exporter of aviation, so they really would hurt themselves if they would, continue to stick on that part, and it all depends for us more on the retaliation from Europe. So for now, that is, let’s say, still under discussions.

It’s more the retaliation of Europe than what is happening in The U. S, although there are parts which are coming from The U. S, which are, let’s say, coming out of Europe. But for this time, I think it is too soon to tell. And we know that, let’s say, if you look in the contracts, usually, there’s not an exception to make for any any U.

S. Tariffs. So for any, sorry, tariffs, import tariffs you have. So but we are carefully watching the situation, and we will aggressively reply to any suppliers which are intending to increase their fees.

Jarrod Casson, Analyst, UBS: Thank you.

Conference Operator: Our next question comes from the line of Jamie Robofan from Deutsche Bank. Please go ahead.

Jamie Robofan, Analyst, Deutsche Bank: Good morning, gentlemen. Two from me. Firstly, if I could, please focus on the Transatlantic just for a moment. Thanks for the helpful color about Q2. Lufthansa yesterday were talking about a gap in in bookings for Q3.

Three. Appreciate it’s it’s a little bit far away, but I wondered if you could maybe comment a bit on, you know, presumably, the the gap on book load factors is maybe a bit wider for q three at the moment. And they were suggesting that, you know, reciprocal tariffs had had caused a hesitancy in booking, but they felt those volumes might still come through just in a shorter later booking window. So they don’t think that those volumes are necessarily lost. Just wondered if you thought that’s the case or whether you can envisage having to, do some, you know, price stimulation to fill the economy transatlantic cabin, for for q three.

And then secondly, you know, feel free to ignore this, but I just want to follow-up on Jared’s question to be totally clear.

Jarrod Casson, Analyst, UBS: You’re

Jamie Robofan, Analyst, Deutsche Bank: standing by there being a 300,000,000 benefit from all the big moving parts you highlighted, but you’re not committing to the net of everything else, you know, yields, cost, fuel being, neutral or supplemental to that, which is kind of what we had inferred, hopefully, correctly at the full year result. Thanks.

Steven Zatt, CFO, Air France-KLM: Let’s say, what you say on the bookings for the third quarter, I think it is true what you’re saying. We don’t see an ink, let’s say, a further increase of the gap between last year. So it is even a bit down if I look, for instance, on July. And the further you come, the more difficult it is to say. So I think on July and August, it looks very good.

And on September, we that is yes, that’s still too far away because it’s a very low number of seats which we are selling so far ahead because there’s also a lot of business traffic in that month. On the €300,000,000 I think I clear you guide you on the unit cost. I think you have a view on the yields, but we don’t give any profit guidance. So that is true. We don’t give a profit guidance, but this €300,000,000 coming from, let’s say, incidentals of last year is still to be around.

Ben Smith, CEO, Air France-KLM: And perhaps, Jamie, I could add one extra one extra compare point here. We, at France KLM, our exposure to The United States transatlantic market so let’s see. We just specify United States. We’re at 26% of our capacity is to and from The US. Or if you look at our two major competitors based here in Europe, they’re between 3747%.

So we’re at 26%. So our exposure is far less than than two other groups here in Europe. Thanks, guys. The

Conference Operator: next question comes from the line of Harry Gowers from JPMorgan. Please go ahead.

Harry Gowers, Analyst, JPMorgan: Good morning, Ben and Stephen. Two questions, if I can. Just on on your network directly, do you have any tangible or even anecdotal evidence that, you know, potential US traffic is maybe substituting or transferring to other destinations outside of The US, whether that’s long haul or or short haul? And and if so, where is that traffic going to instead? And then just on the extra unit costs, apologies.

I might have misheard it slightly, Steven. I think you mentioned maybe there’s another onetime compensation effect in Q2 or in the base last year. So could you just go over that again? And then just a follow-up on that, how much of the total ex fuel unit cost increase in Q2 will be related to the ship haul tariff increase? Thanks a lot.

Ben Smith, CEO, Air France-KLM: Okay. Thanks, Harry. So we are seeing some slight shift in the overall look at our overall capacity, toward Canada, quite a little bit to, to Latin America. But, no. Canada is holding up.

I’m actually seeing, some growth. But, as we’ve already mentioned, premium, so business as well as premium economy are actually doing better than we would have expected across all markets to and from The United States as well. So it’s it’s the economy cabins where we’re seeing the the softness, in particular, on the Transatlantic. And then we do see the stimulation impact being positive when we do lower pricing. And we’re just we’re you know, we’re taking it a little slower than we normally would to see how things play out because we know there are a lot of customers that are just they’re they’re holding back on buying tickets to get a little bit more clarity on how we did this across the border, things like that.

But, you know, when we lower pricing, we’re seeing volume is still there. But because of our well diversified market, we’re we’re not shifting any cap capacity as of yet. I don’t see a shift in any capacity through q three. And perhaps in q four, if necessary, we’ll we’ll start to relook at that. But as of today, we’re maintaining our capacity across the network as planned, put into the into the the various sales channels, last year.

Nothing has shifted as yet.

Steven Zatt, CFO, Air France-KLM: Hi, Harry. So let’s say, the compensation was last year. So we had last year, we had a one off compensation, which we which was, of course, strengthening our maintenance costs. So if you look year on year, that will impact our year on year development for the rest for the remaining part. There’s not so much strange things happening on the maintenance costs, but you should take that into your consideration.

And that’s also what we, let’s say, guided already earlier that we see actually till the end of the second quarter higher maintenance cost coming in, but we are still within, let’s say, the range of the unit cost guidance. So it is not not that there’s something really out of, how do you say, out of sync. On Schiphol, I would say, I I think it is around 100 even more than 100,000,000 per year. So you you can say you can almost calculate yourself. So you come to, I think, 0.3% or 0.4% on the total unit cost of Air France KLM.

It’s not only SCRIPOY, which increases the tariff. So we see that it is not only coming from that part, and we have the ATC charges. But I think that issue we already explained that also for the first quarter, which we see in the whole industry. But if you look specifically on this outrageous increase of Schiphol tariff, yes, that is the EUR 30,000,000, which you can consider.

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

Andrew Lobbenberg, Analyst, Barclays: Oh, hi there. Can I come back to the, back on track in, KLM and the negotiations around the CLA? I think you were previously targeting, you know, 0% tariff increases and incremental productivity. We were a month behind schedule. What what should we be hoping for?

And is there any risk? I know it’s rare because the Dutch are generally calm, but is there any risk of of of disputes as we go into summer peak? And then the second question would would perhaps come back to the M and A situation in Europe. With the less certain trading outlook, do you think the potential m and a deals at at TAP Air Europa where you’ve been publicly looking, are they still as interesting today when we face, you know, a less clear trading environment, less clear profitability, and and hence balance sheet outlook. Thanks.

Ben Smith, CEO, Air France-KLM: Okay. Hi, Andrew. The CLAs, they’re they’re moving along. The most important one and most difficult one being with the pilots at KLM, we’re we’re quite optimistic we’ll be able to secure what it is that we need to, you know, to maintain maintain back on track as as committed. I can just share something which I never would have imagined ever since I’ve now been here six and a half years.

We will have Air France pilots, flying, KLM aircraft to, to help get the capacity up at KLM starting this, this summer on JFK JFK to Amsterdam, which is a real, big step forward to show alignment with the KLM pilots that, we need to do things that we normally wouldn’t do to to strengthen the KLM business. So that’s I think that’s been a very it’s a very strong field to show that the alignment between the KLM pilots and management is stronger than ever. So I’m optimistic we can get the the necessary ingredients that are required to stay, you know, with our back on track program. On the m m and a front, on SAS, nothing’s changed. We have a couple of options on how we take our stake up to majority with the the other investors.

And, you know, everything’s everything’s going as planned. I think we’ve full flexibility. We’re quite pleased with how things are working out despite the fact that they’re not already in the joint venture on the Transatlantic. So no change on SAS, if not a little bit more positive than I than I was expecting in terms of the way that business is is moving. And then on the Iberian Peninsula, as you know, the the process the official process for the sale of TAP has still not started, so that file is not there’s nothing going on there.

And Air Europa, we’re we’re continuing to to discuss with the owners if there is a a deal to be had. So nothing more to share here because of the the the uncertainty across, you know, with our with the new US administration. So far, it hasn’t it hasn’t slowed down any of the discussions that we have that we’re having with the the owners of Air Europa.

Andrew Lobbenberg, Analyst, Barclays: Lovely. Thank you.

Conference Operator: The next question comes from the line of Antonio Duarte from Goodbody. Please go ahead.

Antonio Duarte, Analyst, Goodbody: Good morning, gentlemen. Thank you for the presentation and taking my questions. One for me, if I may, only. Regarding your costs, namely on staff, we have two different, different things, here at, at hand. One of them is your premiumization, and on the other hand is your fleet expansion.

How do you see your staff numbers, and costs going from there? Is there any more, benefits you can take in terms of efficiencies, considering, the increasing your fleet? And how does this play out considering the premiumization aspect on the other side? Thank you.

Steven Zatt, CFO, Air France-KLM: So yes, so we have two impacts. So one impact is, of course, indeed, the premiumization. When I talk here about the productivity, I don’t even exclude there the premiumization impact of it. So we still we will as we guide you, you see that our capacity is still growing, and we continue, let’s say, to implement measures to improve our productivity. The CLA at KLM is crucial for that.

But for on the ground, for instance, you don’t even need a CLA. It is just making sure that you are getting your operations in order and to be efficient as possible. So for the quarters to come, we even expect that the productivity will go up, and especially the implementation of back on track is key for that.

Conference Operator: There are no further questions. So I’m heading back to your host for closing remarks.

Ben Smith, CEO, Air France-KLM: Okay. Thank you, operator, and thank you, those who are still on the line, listening in this morning.

Conference Operator: Thank you for joining today’s call. You may now disconnect your lines.

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