KLM's Q1 2020 performance

KLM President & CEO Pieter Elbers presents his views on the performance of KLM during the first quarter of 2020.

“As a consequence of the Covid-19 outbreak, KLM is currently navigating a storm of unprecedented severity, as reflected in the figures for the first quarter of 2020. While the first two months started positively, the downturn from the start of March has been enormous. In the course of March, most of the fleet was grounded and the number of flights operated was reduced to less than 10% compared to the situation before Covid-19. KLM therefore generated a Q1 loss of €275 million compared to a loss of €47 million in the same period last year."

KLM Group	First Quarter
	2020	Change
Revenue (in €m)	2,140	-9.7%
EBITDA (in €m)	11	-199
Operating result (en m€)	-275	-228
Operating margin (%)	-12.9%	-10.9 pt
Operating cash flow before WCR and restructuring cash out (in €m)	-15	-202
Operating cash flow (before WCR and restructuring) margin	-0.7%	-8.6 pt

NB: Sum of individual airline results does not add up to Air France-KLM total due to intercompany eliminations at Group level

Elbers continued: "At the same time, we are proud that – as KLM – we have in recent weeks contributed significantly towards repatriating hundreds of thousands of Dutch citizens from elsewhere in the world, as well as carrying essential medical relief supplies to the Netherlands by operating (addition) cargo flights.

In recent weeks, KLM has adopted numerous measures in an effort to compensate for the consequence of this crisis in relation to the medical, operational, personnel and financial fields. This week, a number of initial flights were cautiously added and supplementary measures were taken in relation to facial protection to additionally guarantee the safety of both customers and staff.

As a result, KLM is now operating 15% of its original scheduled network. KLM is now also taking all possible measures to be in a position to once again operate a large proportion of its network later this year. Expectations are that it will nonetheless take a long time for KLM and Transavia to recover.

Also on behalf of all my KLM colleagues, I would like to express my enormous gratitude and appreciation for the unwavering support received from the Dutch government. KLM hopes to continue to play an important social role in Dutch society in the future, and will emphatically continue to pursue its ambitions, leading the field in terms of sustainability and innovation. The Netherlands can count on our full commitment and contribution towards achieving these ambitions."

FIRST QUARTER 2020

A strong performance at the start of the year with passenger unit revenue up +0.8% end of February 2020. March 2020 however was strongly impacted by the expansion of the virus and consequential globally imposed travel restrictions to counter the spread of the Covid-19 virus. This influenced negatively the first quarter 2020 results:

• Revenue at 5,020 million euros, down 922 million compared to last year

• Unit cost at constant currency and fuel reduced by 1.6% end of February 2020, and then up 3.5% end of March 2020
• Operating result at -815 million euros, down 529 million euros compared to last year, entirely caused by March 2020 with an operating result at -560 million euros¹

• Net income at -1,801 million euros, including Covid-19 related over hedging -455 million euros, release of deferred tax assets -173 million euros and impairment of Boeing 747 aircraft -21 million euros
• Net debt/EBITDA ratio at 1.8x, compared to 1.5x at the end of 2019

RAPID RESPONSE TO THE COVID-19 OUTBREAK

• Implementation of the highest sanitary safety standards for frontline operation staff, crew and customers to counter virus transmission risks. The Group operated special flights for repatriation of citizens, setup of an “air bridge” fore essential medical supplies, in close cooperation with the French and Dutch governments and is maintaining the essential links with territories
• Swift adjustments in network and capacity, March 2020 capacity down 35% and around 95% of planned capacity to be suspended for the second quarter 2020
• Quick and effective cash protection measures implemented, costs reduced by 500 million euros on 2020, Capex reduced to 2.4 billion euros for 2020 and positive impact of partial activity implementation and crew variable pay reduction estimated at 350 million euros per month in the second quarter 2020
• Liquidity injections of 7 billion euros benefiting to Air France through a bank loan guaranteed by the French state and a direct shareholder loan from the French state. Ongoing discussions with the Dutch state concerning KLM support
• As an integral part of the financing packages the Group will build a new transformation plan to ensure economic and financial sustainability over the medium and long term with integration of new ambitious environmental goals. This new plan will be communicated in summer 2020.

OUTLOOK

High level of uncertainty on the duration of the Covid-19 crisis and impact on the macro-economic environment. The Group withdraws its earlier 2020 guidance elements.The Group now anticipates:

• Progressive lifting of border restrictions in 2020, enabling a slow capacity resumption in Summer 2020, with capacity for the second and third quarter 2020 around respectively -95% and -80% compared to previous year
• A prolonged negative impact on passenger demand, not expected to recover to pre-crisis levels before several years
• A fleet repositioning including structural capacity reduction of at least -20% in 2021 compared to pre-crisis 2019 level

The Group foresees significantly negative EBITDA in full year 2020 and a significantly higher current operating income loss in the second quarter than in the first quarter 2020.

Air France-KLM Group	First Quarter
	2020	Change
Passengers (thousands)	18,111	-20.1%
Passenger Unit revenue per ASK2 (€ cts)	5.80	-6.9%
Operating result (€m)	-815	-529
Net income – Group part (€m)	-1,801	-1,477
Adj. operating free cash flow (€m)	-825	-1,066
Net debt at end of period (€m)	6,584	437

1 2019 results restated for LLP componentization accounting change and EU passenger compensation reclassification between revenues and external expenses

2 Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency

The Board of Directors of Air France-KLM, chaired by Anne-Marie Couderc, met on 6 May 2020 to approve the financial statements for the first quarter 2020.

Benjamin Smith, Chief Executive Officer of the Air France-KLM Group, said: "The Air France-KLM Group had a promising start to the first quarter in line with the objectives of the strategic plan presented in November 2019. However, the acceleration of the Covid-19 crisis in March had a strong impact on the Group's first quarter results. I would like to thank our teams for their exceptional mobilization in this unprecedented crisis. The Air France-KLM Group has adapted rapidly, by implementing health safety measures essential to our staff and customers, reducing our costs to preserve our liquidity, continuously adjusting our flight schedule, and the many repatriation flights and flights to transport medical equipment.

Uncertainties remain regarding the evolution of Covid-19 and we must be cautious in the assumptions of recovery in the coming months. Nevertheless, the commitment to financial support of the French and Dutch governments to our Group, as well as that our banking partners participating in these schemes, is a strong testimony of their confidence in our ability to weather this crisis and rebuild. We are working on a renewal plan to ensure that the Air France-KLM Group regains its competitiveness in a deeply shaken world and reaffirms its leadership in the sustainable transition of air transport. These new orientations will be presented in the coming months.”

Air France-KLM Group: First quarter 2020 revenues down 922 million euros and operating result down 529 million euros

	First Quarter
	2020	Change	Change constant currency
Capacity (ASK m)	67,295	-11.0%
Traffic (RPK m)	54,304	-17.2%
Passenger unit revenue per ASK (€ cts)	5.80	-6.0%	-6.9%
Group unit revenue per ASK (€ cts)	6.39	-6.0%	-6.9%
Group unit cost per ASK (€ cts) at constant fuel	7.60	+6.0%	+3.5%
Revenues (€m)	5,020	-15.5%	-16.5%
EBITDA (€m)	-61	-504	-542
Operating result (€m)	-815	-529	-567
Operating margin (%)	-16.2%	-11.4 pt	-12.1 pt
Net income - Group part (€m)	-1,801	-1,477

2019 results restated for LLP componentization accounting change and EU passenger compensation reclassification between revenues and external expenses

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