Tag Archives: KLM Royal Dutch Airlines

KLM reports a 1.2 billion euros operating loss in 2020

Photo: Winter scene at the AMS hub.

KLM Royal Dutch Airlines issued this financial report for 2020:

“2020 was an incredibly tough year for KLM and its people. The relentless COVID pandemic brought KLM’s network to a virtual standstill in April and led to unprecedented losses and increased debt. We had to recalibrate many of our ambitions and constantly adjust our plans. Given the strategic importance of the KLM network for the Netherlands, the government has supported us with loans and guarantees on credit facilities. The NOW scheme has also helped us greatly. Nevertheless, it was with pain in our hearts that we had to say goodbye to more than 5,000 hard-working and dedicated colleagues in 2020. They were part of the blue KLM family.

At the same time, we as KLM are proud that we were able to make an important contribution in 2020 by repatriating 250,000 Dutch people and fellow Europeans and by bringing so many essential medical supplies to the Netherlands with (extra) cargo flights. KLM’s response to the COVID pandemic was a testament to our resilience, creativity and agility.

The consequences of this pandemic are clearly visible in the 2020 figures. KLM’s turnover fell by 54% to €5 billion. While our anniversary year saw a record 35 million customers, in 2020 only 11 million customers travelled with KLM. KLM’s total operational result came in at a loss of €1.2 billion, despite the fact that the cargo division managed to improve its margins as a result of the strong increase in demand for cargo capacity.

KLM’s financial results show how serious the situation is. Thanks to the support of the Dutch government, KLM has been able to maintain its financial liquidity. I know that I speak for everyone at KLM when I say that we are very grateful to the government and, through it, to Dutch society. The KLM people, in turn, have made their contribution by agreeing to the far-reaching conditions of this financial lifeline from government and banks.

The world of aviation will look very different for a longer period of time, with less traffic and pressure on revenues. This year has also started much less well than we had initially anticipated. Despite that, and looking to the second half of 2021, I sense cautious optimism and hope. People will start flying again and slowly but surely KLM will be able to fly the global network again with all the options available to its customers. KLM’s ambition is not only to survive, but also to remain an important and responsible player in the airline industry after the crisis. To achieve this, a restructuring plan has been drawn up, called ‘From More to Better’. The restructuring plan is agile, based on different market and recovery scenarios, and will allow us to be flexible and create opportunities in the areas of customer experience, digitalization, sustainability and technology.

With the help of our loyal customers and committed staff, KLM will weather this storm and get better, continuing to fulfil its important social and economic role for Dutch society. We will continue to pursue our ambitions and lead the way in sustainability and innovation. The Netherlands can continue to count on our full commitment and contribution when it comes to realizing these ambitions.”

Pieter Elbers – KLM President & CEO

KLM develops a safe alternative testing protocol for crews

KLM Royal Dutch Airlines has issued this statement:

After constructive consultations with the Dutch National Institute for Public Health and the Environment (RIVM), KLM has developed a safe alternative testing protocol for crews leaving the airport in countries that are not on the governmental list of safe countries. This includes an alternative whereby, among other things, the rapid antigen test for this crew will be arranged at Amsterdam Airport Schiphol before departing from and after returning to the Netherlands. In addition, there are local safety guidelines at the destinations. The government has indicated that this protocol meets the requirements.

KLM has also implemented the flight ban from the United Kingdom, South Africa and South America to the Netherlands as of 23 January. Cargo flights are excepted in the government measures.

For passengers traveling to Amsterdam from high-risk areas antigen tests are required by the Dutch government, in addition to the already existing PCR test requirement. The necessary procedures have also been put into effect. For a number of customers, the imposed 4-hour limit for this antigen test also causes practical problems, because not all airports in the world have antigen testing facilities. KLM helps customers where possible.

The operation to the limited set of safe countries remains unchanged.

Keeping flight operations running in a safe and responsible manner is and remains KLM’s priority, also since the COVID-19 outbreak in early 2020. This has enabled us to maintain essential travel, repatriation and the transport of necessary cargo so far. In addition, KLM has taken numerous measures on board, such as HEPA filters, facemasks and adjustment of the onboard service. The safety and health of our customers and staff have the highest priority for KLM. KLM also wants to continue to contribute to the fight against the COVID-19 pandemic. To this end, consultation remains necessary on effective and practicable appropriate measures for aviation, taking into account international agreements.

KLM will have to shed a further 800-1,000 jobs

KLM has made this announcement:

KLM is compelled to further downsize its organization. We have already taken an unbelievable array of measures to cope with the crisis sparked by the coronavirus pandemic. Regrettably, this resulted, among other things, in the loss of 5,000 jobs and colleagues at KLM in 2020.

This number was based on the premise that air traffic would begin to recover in 2021. However, KLM has repeatedly warned that this recovery might be delayed, which means a downgrading of the scenario and consequently the loss of more jobs.

The current reality is that the recovery of long-haul traffic will be delayed longer than anticipated, primarily due to existing and new international measures and travel restrictions. This means KLM will have to shed a further 800-1,000 jobs, including 500 FTEs in the Cabin domain, 100 in the Cockpit domain, and 200 to 400 in the Ground domain. The total number of jobs KLM has then reduced will be close to 6,000.

Pieter Elbers, CEO KLM: “In July 2020, we announced that 5,000 of our colleagues would have to leave KLM, after which we engaged with intensive consultation and cooperation with all social partners. Various instruments were made available as part of a social plan. These adjustments were very painful, but successful. I have every faith we will resolve these new challenges together once more.

The further downsizing of our organization does not yet encompass the latest measures announced by the Dutch government in the past 48 hours. These new measures are, however, in line with the restrictions and dynamics we have had to contend with since the start of the pandemic. Even if our crew members are exempt from the new regulations, the further loss of jobs will regrettably be inevitable. The impact of the latest measures will become evident in due course.”

KLM halts all long-haul flights to Amsterdam due to new COVID-19 rules

From Reuters:

“KLM, the Dutch subsidiary of Air France KLM, will halt all its 270 weekly long-haul flights to the Netherlands from Friday after new COVID-19 rules were imposed by the Dutch government, a spokeswoman for the airline said.

Among a series of new regulations announced on Wednesday was a requirement for passengers and crew to show evidence of a second negative rapid coronavirus test taken just before departure.”

Delta and KLM Royal Dutch Airlines to offer COVID-tested flights from Atlanta to Amsterdam

Delta Air Lines has made this announcement:

Trans-Atlantic partners Delta Air Lines and KLM Royal Dutch Airlines are launching COVID-tested flights from Atlanta to Amsterdam, effective Dec. 15. The airline partners have worked with the Dutch government, Amsterdam Airport Schiphol and Hartsfield-Jackson Atlanta International Airport to deliver a comprehensive COVID-19 testing program that will allow eligible customers to be exempt from quarantine on arrival after receiving a negative PCR test result on landing in the Netherlands.

The COVID-tested flights will operate four times per week from Atlanta to Amsterdam, with Delta and KLM operating two frequencies each. Only passengers with negative test results will be accepted on board. The flights will initially run for three weeks and, if successful, the airlines hope to extend the program to other markets.

Customers will be able to choose the COVID-tested flights when they purchase their tickets online or opt for one of the alternative Delta or KLM daily flights between Atlanta and Amsterdam that are not covered within the trial program.

Entry requirements for the Netherlands normally include 10 days of quarantine. However, by completing a negative PCR test five days before arrival in the Netherlands and self-isolating until departure, customers can choose to complete the quarantine ahead of their departing flight. No quarantine will be required upon arrival once the customer tests negative via a second PCR test at Schiphol airport.

This new protocol will be available to all citizens permitted to travel to the Netherlands for essential reasons, such as for certain specified work, health and education reasons Customers who are transiting via Amsterdam to other countries will still be required to follow entry requirements and any mandatory quarantine in place at their final destination.

To fly on Delta and KLM’s COVID-tested flights from Atlanta to Amsterdam, customers will need to:

Take a COVID-19 Polymerase Chain Reaction (PCR) test 5 days before arrival in Amsterdam.
Take a rapid antigen prior to boarding at the Atlanta airport.
Take a PCR test directly upon arrival at Schiphol.

KLM reduces capacity in Europe in response to second wave of COVID-19

KLM made this announcement:

The second wave of coronavirus in Europe has resulted in new lockdowns, prompting KLM Royal Dutch Airlines to make network adjustments for the coming period. KLM will keep serving as many destinations as possible, but will reduce seat capacity and flight frequency.

In the coming months, KLM will serve around 90-95% of the European destinations it served before the crisis. Service will be suspended to a number of destinations, primarily in the United Kingdom. Overall capacity aboard European flights will be reduced from about 50% to 40% compared to pre-corona figures.

In terms of intercontinental service, the number of passenger flights will be around 50-60% of pre-coronavirus levels. If we include our cargo-only services, we will be operating around 65% of our flights.

Network strategy

During the course of the pandemic, KLM strategically opted to restore service to as many of its network destinations as possible. In response to the prevailing circumstances, we are doing so with fewer flights and smaller aircraft. This means our customers have the widest possible choice of destinations, enabling us to maintain our network through our Amsterdam hub. We are also serving many of our intercontinental destinations on a cargo-only basis, in compliance with current travel restrictions.

This strategy has proved successful in recent months and has ensured that we did not have to trim our network as rigorously as some other airlines. August and September showed clear signs of recovery.

Regrettably, the second wave has led to new restrictions throughout Europe, not just in the Netherlands. Capacity will therefore be trimmed again into the coming period. KLM will maintain its existing network strategy, even adding several new destinations. Depending on developments, further adjustments will be made in the coming period.

New destinations

The coronavirus pandemic confirms that a flexible network is very important. By opening new routes, we can make up for declining demand on other routes. KLM also strengthens its market position whenever it adds a new destination to its network.

The following services have been recently added or will be added in the coming months:

Effective January 4, 2021, KLM will operate four weekly flights to Riyadh (Saudi-Arabia);
Effective December 10, 2020, KLM will operate twice-weekly service to Zanzibar, with a stop in Dar es Salaam (Tanzania) on the return leg to Amsterdam;
Since November 8, 2020, we have operated thrice-daily service to the new airport Berlin Brandenburg (Germany);
On October 29, 2020, KLM resumed its circle flight Amsterdam-Calgary-Edmonton-Amsterdam, thus restoring service to Edmonton;
Since October 25, 2020, we have operated daily service to Poznan (Poland);
Since October 24, 2020, KLM has resumed weekly service from Amsterdam to Chengdu and from Beijing to Amsterdam.

Dutch airline pilots association VNV signs commitment clause

The Dutch Airline Pilots Association VNV joined seven other unions today in agreeing to contribute to KLM’s cost-reduction efforts by signing a “commitment clause”. The airline and the eight trade unions have thus satisfied a key requirement, clearing the way for the Minister of Finance to assess whether KLM now meets the Dutch government’s demands.

KLM is in the midst of the worst crisis in its 101-year history, with the COVID-19 pandemic eroding its strong performance of recent years. The EUR 3.4 billion loan package, consisting of a government loan and guarantees on bank loans, is crucial to securing the future of the airline and its network for the Netherlands. KLM is very grateful to the Dutch government for its support and willingness to provide financing at this time.

The Dutch Government has made its loan package contingent on certain conditions, one being that all KLM employees must agree to surrender certain employment conditions for the duration of the loan (expected until 2025). KLM has spent the past few months hammering out the details of this austerity programme with the trade unions for cockpit, ground and cabin personnel, in line with the required structure and percentages.

The outcomes of these negotiations have been formalised in outline collective labour agreements and incorporated as such into the restructuring plan that KLM submitted to the Dutch Government on October 1, 2020. The outline agreements define the austerity measures that will apply until early 2022 (for cockpit crews) and late 2022 (for ground and cabin personnel). It was especially important to specify the contribution that all KLM employees would be making towards the airline’s cost-reduction efforts over the entire loan period.

To meet this demand without having to re-enter negotiations, a “commitment clause” was inserted into the agreements between KLM and the trade unions. Unions CNV, De Unie, NVLT, VNC and VKP signed the clause on October 31, 2020, with FNV Luchtvaart and FNV Cabine doing so on November 2, 2020.

Today, November 3, 2020, the Dutch Airline Pilots Association VNV also signed the commitment clause. KLM and the eight trade unions have therefore satisfied a key requirement, clearing the way for the Minister of Finance to assess whether the airline now meets the Dutch government’s demands.

“Now that all eight trade unions have signed the commitment clause, we have taken an important step. Since the outbreak of the COVID-19 pandemic in March this year, we have asked a lot of all our employees, but for a common purpose: to steer KLM through this crisis. These unprecedented times call for unprecedented and unusual actions. The far-reaching measures we must take and the accompanying processes and procedures are new and complex for KLM and the trade unions.

The past few days have been incredibly tense for everyone. The company has been under enormous pressure, its reputation has suffered and there have been internal divisions. In the end, however, KLM and the trade unions got through it together, and that’s really what it’s all about. We can now look forward and outward, rebuild our route network for our customers and continue to connect the world with and via the Netherlands. Together, we will honour the trust that the Dutch government has placed in us.”

KLM CEO Pieter Elbers

KLM: FNV Cabine and FNV Luchtvaart have signed the airline’s “commitment clause”

KLM confirms that the unions FNV Cabine (cabin personnel) and FNV Luchtvaart (ground personnel) have signed the airline’s “commitment clause”, thereby agreeing to join all KLM employees in surrendering employment conditions in accordance with the Ministry of Finance’s requirements (the precise details being up to KLM and the trade unions). The clause will be inserted into the agreements between KLM and the unions.

This brings KLM one step closer to obtaining the government loan and guarantees on bank loans totalling EUR 3.4 billion. The loan package is crucial to securing the future of KLM and its network for the Netherlands. Trade unions CNV, De Unie, NVLT, VNC and VKP have already signed the commitment clause. The Dutch Airline Pilots Association VNV has not yet signed.

Air France-KLM Group loses 1,665 million euros in the third quarter

Air France-KLM Group issued this financial report:

The continuation of the Covid-19 crisis severely impacted the Third quarter 2020 results:

 Revenue at 2,524 million euros, down 67% compared to last year
 EBITDA loss at -442 million euros, limited thanks to cost control and state aid
 Operating result at –1,046 million euros, down 1,955 million euros compared to last year
 Net income at -1,665 million euros, including restructuring provision at -565 million euros, Covid-19 related over-hedging at -39 million euros and fleet impairment at -31 million euros
 Net debt at 9,308 million euros, up 3,161 million compared to end of 2019
 At 30 September 2020, the Group has 12.4 billion euros of liquidity or credit lines at disposal
Air France and KLM have agreed with labour representatives on substantial restructuring plans and submitted them for final validation to the French and Dutch states.

OUTLOOK

Air France-KLM Group continues to implement the highest safety standards for its customers and employees to counter virus transmission risks.

After the lockdown, the Group observed a positive demand recovery trend until mid-August. Then, the negative trend reversal for the Passenger activity led the airlines of the Group to adjust downwards the capacity planned for the fall and winter period.

There is limited visibility on the demand recovery curve as customer booking behavior is much more short-term oriented and also highly dependent on the imposed travel restrictions, especially on the Long Haul network. The period of lockdown starting today in France is a new difficulty that will weigh on the Group’s activities.

In this context the Group expects:

 Capacity in Available Seat kilometers circa index 45 for KLM and inferior to index 35 for Air
France in the Fourth quarter 2020 compared to 2019 for the Network passenger activity
 Negative load factor developments for the Fourth quarter 2020, particularly on the long-haul
network, and negative yield mix effects due to a delayed recovery in business traffic

The Group anticipates a challenging fourth quarter 2020, with a substantial lower EBITDA compared to Q3 2020.

THIRD QUARTER 2020
Increase of demand until mid-August,
then new governmental restrictions impacted the expected level of demand recovery

Air France-KLM Group	Third quarter	Nine months
Air France-KLM Group	2020 Change	2020 Change 1
Passengers (thousands) Passenger Unit revenue per ASK1 (€ cts) Operating result (€m) Net income – Group part (€m) Adj. operating free cash flow (€m) Net debt at end of period (€m)	8,796 4.01 -1,046 -1,665 -1,220 -69.8% -42.7% -1,955 -2,026 -985	28,124 5.05 -3,414 -6,078 -3,547 9,308 -64.7% -24.5% -4,460 -6,213 -3,663 3,161

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1 Passenger unit revenue is the aggregate of Passenger network and Transavia unit revenues, change at constant currency
1

The Board of Directors of Air France-KLM, chaired by Anne-Marie Couderc, met on 29 October 2020 to approve the financial statements for the nine months 2020. Group CEO Mr. Benjamin Smith said: “After a promising recovery during the summer, the gradual closure of international borders in the second half of August and the resurgence of the pandemic strongly impacted our results in the Third Quarter, with the Group reporting an operating loss of 1.0 billion euros. We have accelerated the implementation of cost reduction and cash preservation measures. We are also working closely with our partners on various means, such as rapid detection tests, that would allow traffic within the best sanitary conditions for our customers and employees.

Beyond these immediate necessary measures, we are engaged in a more profound transformation of our Group, with the objective of exiting this crisis in a stronger position, ready to address the future challenges of our industry. Air transport will continue to connect people and cultures, but we foresee changes in customers’ expectations that we anticipate too.

We expect a challenging Fourth quarter 2020, with current forward booking sharply down compared to last year.”

Business review

Network: With active management of capacity to meet the increasing demand, the Group was able to ramp up capacity with incremental cash positive flights

Third quarter 2020 revenues decreased by 68.3% at constant currency to 2,004 million euros. The operating result amounted to -990 million euros, a -1,631 million euros decrease at constant currency compared to last year. Measures were strengthened to preserve cash, including reduction of investments, cost savings measures, deferral of supplier payments and partial activity for employees.

Passenger network: Long-haul suffering from travel restrictions, ability to capture traffic when border controls are less restrictive

Network	Third quarter	Nine months
Network	2020 Change Change constant currency	2020 Change Change constant currency
Total revenues (€m) Scheduled revenues (€m) Operating result (€m)	2,004 1,856 -990 -68.6% -69.8% -1,649 -68.3% -69.4% -1,631	7,220 6,753 -2,842 -58.8% -59.7% -3,555 -58.8% -59.7% -3,564

Passenger network	Third quarter	Nine months
Passenger network	2020 Change Change constant currency	2020 Change Change constant currency
Passengers (thousands) Capacity (ASK m) Traffic (RPK m) Load factor Total passenger revenues (€m) Scheduled passenger revenues (€m) Unit revenue per ASK (€ cts)	6,782 -71.3% 32,100 -59.6% 13,752 -80.7% 42.8% -46.9 pt 1,329 -77.4% 1,265 -77.9% 3.94 -45.2% -77.1% -77.6% -44.5%	23,671 -64.3% 103,268 -54.1% 66,861 -66.3% 64.7% -23.5 pt 5,512 -65.4% 5,271 -65.7% 5.10 -25.4% -65.4% -65.7% -25.3%

The passenger network activity was, as anticipated strongly reduced, at around 40% of last year’s levels. The tightening of travel restrictions, border closures and absence of corporate travel delayed the expected traffic recovery. July and August were relatively strong in term of traffic compared to a disappointing September affected by restrictive travel measures.

For the third quarter, the unit revenues were down at -44.5% at constant currency compared to last year primarily due to load factors decline on Long Haul operations.

The Group’s strategy was to only operate incremental cash positive flight and several routes were taking advantage of the strong worldwide cargo demand while having few passenger on board.

The visiting friend and relative demand was driving the summer traffic, with the French Domestic, African & Middle East and Caribbean & Indian Ocean as the more resilient with a unit revenue performance between -22% and -27% at constant currency.

The medium-haul performance was mixed during summer, with some leisure destinations such as Italy, Spain, Portugal and Greece benefiting from easing travel restrictions and other strongly affected by quarantine and testing process like UK or Germany.

North Atlantic, South American and Asian networks continued to be strongly affected by the border restrictions in place with an important decline in capacity and passenger traffic during summer.

Cargo: Continued strong performance of cargo due to the gap between industry capacity and demand

Cargo business	Third quarter	Nine months
Cargo business	2020 Change Change constant currency	2020 Change Change constant currency
Tons (thousands) Capacity (ATK m) Traffic (RTK m) Load factor Total Cargo revenues (€m) Scheduled cargo revenues (€m) Unit revenue per ATK (€ cts )	220 2,537 1,735 68.4% 676 592 23.35 -20.0% -33.3% -17.0% +13.4 pt +31.7% +35.7% +104.0% +34.1% +38.0% +107.6%	611 7,309 4,747 65.0% 1,708 1,482 20.28 -25.7% -32.9% -24.2% +7.5 pt +7.1% +8.7% +62.0% +6.9% +8.4% +61.6%

Global air cargo capacity is at the end of the Third quarter 2020 approximately 15% lower than 2019. Tightening of supply and demand levels increased yields by significant amount over the past months.

September was the fifth consecutive month of gradual air cargo market improvements and Air France- KLM’s Cargo activity continued to strongly perform with a unit revenue at constant currency up 104.0% in the Third quarter 2020. The Cargo capacity of the Group has been down 33.3%, primarily driven by the reduction in belly capacity of passenger aircraft partly offset by the increase of the full freighters’ capacity and mini cargo flights (passenger aircraft with only belly capacity commercialized). The load factors were strongly up 13.4 points for the quarter.

On the demand side, world-wide air freight volumes are down due to Covid-19 crisis but are expected to rebound to 90 to 95% of pre Covid-19 levels in 2021. The supply-demand gap of the past months is foreseen to narrow as industry capacity supply will increase and will depend on the passenger traffic recovery. Air France-KLM is in preparation to transport the future Covid-19 vaccines.

Transavia operating loss in the Third quarter at -13 million euros, impacted by border restrictions reinstatement

Transavia	Third quarter	Nine months
Transavia	2020 Change	2020 Change
Passengers (thousands) Capacity (ASK m) Traffic (RPK m) Load factor Total passenger revenues (€m) Unit revenue per ASK (€ cts) Unit cost per ASK (€ cts) Operating result (€m)	2,014 -63.3% 6,009 -44.7% 3,869 -61.8% 64.4% -28.7 pt 262 -60.6% 4.38 -30.2% 4.61 -1.3% -13 -189	4,453 11,178 8,505 76.1% 521 4.55 6.39 -206 -66.6% -57.4% -64.9% -16.4 pt -62.9% -16.3% +32.5% -364

The Third quarter operating result ended 189 million euros lower compared to last year at an operational loss of -13 million euros, as a result of the Covid-19 crisis.

Activity levels were close to 55% of last year’s level, with an unit revenue down -30,2% compared to the Third quarter 2019. Transavia France and Holland were able to capture traffic and fill their planes with reasonable load factors and good yields on several leisure destinations. Spain, Greece, Portugal and Italy routes were the most resilient during the quarter. However, severe travel restrictions from the Netherlands to Spain and Greece in the course of the third quarter, did put pressure on activity levels and loadfactor.

Transavia France will expend its French Domestic operation starting in November 2020 from Paris Orly and provinces airports.
However, the resurgence of Covid-19 and border restrictions have slowed down Transavia in the traffic recovery.

Strict cash preservation measures are still in place including reduction of investments, cost savings measures, deferral of supplier payments and partial activity measures.

Maintenance business operating result for Third quarter 2020 at -46 million euros, impacted by Covid-19

Maintenance	Third quarter	Nine months
Maintenance	2020 Change Change constant currency	2020 Change Change constant currency
Total revenues (€m) Third-party revenues (€m) Operating result (€m) Operating margin (%)	616 247 -46 -7.4% -47.1% -54.5% -117 -13.5 pt -53.1% -111 -13.1 pt	2,255 963 -366 -16.2% -34.7% -40.7% -536 -21.2 pt -41.6% -542 -21.3 pt

The Third quarter operating result stood at -46 million euros, a decrease of 117 million euros, highly impacted by the Covid-19 crisis. Revenues declined and were also impacted by the Air France-KLM Group airlines decrease in activity.

During the Third quarter, contracts signature have restarted and will be included in the order book before year end. The Maintenance business is carefully managing agreements with clients on payment terms.

Operating costs have been reduced in the Third quarter 2020 by a reduced maintenance activity level, partial activity pay schemes for employees and other initiated cost savings measures.

The Maintenance order book is assessed to 9.3 billion dollars at 30 September 2020 a decrease of 2.2 billion dollars compared to 31 December 2019, explained by the Covid-19 crisis effects already occurring and expected.

Air France-KLM Group: Decline of 5 billion euros in revenues and 2 billion euros in EBITDA during the third quarter

	Third quarter	Nine months
	2020 Change Change constant currency	2020 Change Change constant currency
Capacity (ASK m) Traffic (RPK m) Passenger unit revenue per ASK (€ cts) Group unit revenue per ASK (€ cts) Group unit cost per ASK (€ cts) at constant fuel	38,109 17,621 4.01 5.56 8.31 -57.8% -78.4% -43.4% -26.5% +26.7% -42.7% -25.6% +38.2%	114,446 75,367 5.05 6.34 9.33 -54.4% -66.2% -24.6% -12.3% +36.7% -24.5% -12.3% +40.4%
Revenues (€m) EBITDA (€m) Operating result (€m) Operating margin (%) Net income – Group part (€m)	2,524 -442 -1,046 -41.4% -1,665 -66.8% -2,095 -1,955 -53.4 pt -2,027 -66.4% -2,071 -1,931 -53.2 pt	8,725 -1,282 -3,414 -39.1% -6,078 -57.6% -4,545 -4,460 -44.2 pt -6,213 -57.7% -4,554 -4,470 -44.2 pt

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

In the Third quarter 2020, the Air France-KLM Group posted an operating result of -1,046 million euros, down by 1,955 million euros compared to last year.

Net income amounted to -1,665 million euros in the Third quarter 2020, a decrease of 2,027 million euros compared to last year, of which exceptional accounting items due to Covid-19:

 Restructuring costs provision of-565 million euros with Departure Plan of French Ground staff, contractual termination for Air France flight attendants, complement for contractual termination for Air France pilots, Departure Plan for Air France-KLM International Commercial staff and Departure Plan for HOP!
 Q4 2020 and Q1 2021 fuel over hedge has been recycled to “Other financial income and expenses” for -39 million euros
 Fleet impairment on Airbus A380 and the Canadair Jet of HOP! At -31 million euros Currencies had a negative 92 million euro impact on revenues and a positive 67 million euro effect on
costs including currency hedging in the Third quarter of 2020.

Since the beginning of the crisis, Air France, KLM and Transavia proceeded 1.8 billion euros of refunds including 300 million euros of voucher issued.

The Third quarter 2020 unit cost increased by 26.7%, primarily caused by Covid-19 related capacity reductions

Group net employee costs were down 36% in the Third quarter 2020 compared to last year, supported by partial activity implementation at Air France and KLM, release of temporary and hired staff and no profit sharing provisions to be made at both airlines. The average number of FTEs (Full Time Equivalent) in the Third quarter 2020 decreased by 5,500 compared to the Third quarter 2019, including 2,500 temporary contracts.

Net debt up 3.2 billion euros

In € million

Third quarter

Nine months

2020 Change

2020 Change

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Cash flow before change in WCR and Voluntary Departure Plans, continuing operations (€m)

Cash out related to Voluntary Departure Plans (€m) Change in Working Capital Requirement (WCR) (€m) Net cash flow from operating activities (€m)
Net investments* (€m)

Operating free cash flow (€m)

Repayment of lease debt

Adjusted operating free cash flow**

-594 -2,115

-137 -115 124 +831 -609 -1,399-362 +418 -970 -981 -251 -5-1,220 -985

page6image703284080

-1,926 -4,950

-152 -119 666 +582 -1,412 -4,487 -1,473 +738 -2,885 -3,749 -662 +86 -3,547 -3,663

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* Sum of ‘Purchase of property, plant and equipment and intangible assets’ and ‘Proceeds on disposal of property, plant and equipment and intangible assets’ as presented in the consolidated cash flow statement.
** The “Adjusted operating free cash flow” is operating free cash flow after deducting the repayment of lease debt.

The Group generated adjusted operating free cash flow in the Third quarter 2020 of -1,220 million euros, a decrease of 985 million euros compared to last year, mainly explained by an operating cash flow decline of 1,399 million euros, partly offset by a reduction in net investments of 418 million euros.

Postponement of social charges, taxes and negotiation with suppliers compensated the refunds process and the low inflow of bookings and generated an improvement of +582 million euros in Change in Working Capital Requirement compared to last year.

In € million

Both airlines results negatively impacted in the Third quarter 2020

30 Sep 2020

31 Dec 2019

page6image703443120 page6image703444800

Net debt
EBITDA trailing 12 months

9,308 -417

6 147 4 128

page6image974418768 page6image974419280 page6image974420096 page6image974420352 page6image974420912 page6image974423312

Net debt/EBITDA trailing 12 months

-22.3 x

1,5 x

Third quarter

Nine months

2020 Change

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2020 Change

Air France Group Operating result (€m)

Operating margin (%)

KLM Group Operating result (€m)

Operating margin (%)

-807 -54.1% -234 -20.5%

-1,200 -62.6 pt -745 -36.8 pt

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-2,401 -47.4% -1,002 -25.2%

-2,699 -49.8 pt -1,736 -33.9 pt

OUTLOOK

Air France-KLM Group continues to implement highest safety standards for customers and employees to counter virus transmission risks.

After the lockdown, the Group observed a promising demand recovery trend until mid-August. Then, the negative trend reversal for the Passenger activity led the airlines of the Group to adjust downwards the capacity planned for the fall and winter period.

There is limited visibility on the demand recovery curve as customer booking behavior is much more short-term oriented than before the Covid-19 crisis and also highly dependent of the imposed travel restrictions, especially on the Long Haul network. The period of lockdown starting today in France is a new difficulty that will weigh on the Group’s activities.

In this context the Group expects:

 Capacity in Available Seat kilometers circa index 45 for KLM and inferior to index 35 for Air
France in the Fourth quarter 2020 compared to 2019 for the Network passenger activity
 Negative load factor developments for the Fourth quarter 2020, particularly on long-haul
network, and negative yield mix effects due to a delayed recovery in business

The Full year 2020 Network passenger activity will be inferior to index 50 compared to 2019, due to the Covid-19 crisis.

The Group anticipates a challenging fourth quarter 2020, with a substantial lower EBITDA compared to Q3 2020.

At 30 September 2020, the Group has 12.4 billion euros of liquidity or credit lines at disposal.

The Group foresees important liquidity requirements in the Fourth quarter 2020 with:

 Negative Fourth quarter working capital requirement influenced by deferred payments and
substantial lower level of new bookings compared to Q4 2019.
 Capex spending at 0.6 billion euros, of which half is fleet Capex fully financed. The Group has
reduced to 2.1 billion euros his 2020 capex guidance. This is a reduction of -1.5 billion euros

compared to the initial 2020 guidance of 3.6 billion euros.
 The hybrid bond was repaid in October for 0.4 billion euros.

AIR FRANCE AND KLM HAVE AGREED ON SUSBTANTIAL RESTRUCTURING PLAN WITH LABOUR REPRESENTATIVES

The Group’s strategic orientations defined during the 2019 Investor day started to deliver results in 2019 and in early 2020. However, the Covid-19 which began in the first quarter of 2020 around the world is having an unprecedented impact on the industry and the Group has immediately reacted with safety, operational and cash protection measures.

The focus on reducing external expenses and the number of employees were one of the top priorities. Futhermore, the French and the Dutch governments have provided financial packages and the partial activity implemented in France and the “NOW” mechanism in Holland allowed the Group to further reduce labor costs.

To weather the crisis and cope with the new reality, Air France-KLM Group is accelerating its transformation plans and presented a substantial restructuring plan around the competitiveness and sustainability pillars. Negotiations with the trade unions have resulted in several agreements in Air France and KLM.

To better align the fleet with the lower passenger demand, Air France-KLM Group has accelerated the phase-out of the Airbus 380, Airbus 340, Boeing 747, Canadair Jet and Embraer 145 aircraft. These decisions will bring forward cost savings and efficiency gains due to operating fewer aircraft types. The Group does not anticipate to return to the pre-crisis levels of global demand before several years and the short-term recovery expected has been delayed with the resurgence of Covid-19 end of summer.

KLM business model is still both valid and valuable but needs to be reshaped to the new reality. KLM will be smaller, cheaper, more frugal, more agile and more sustainable.
Operating costs will structurally being reduced in 2021 and beyond, with 750 million euros benefits in 2021 coming from labour, fleet, procurements and fuel costs decrease.

KLM’s restructuring plan calls for a reduction of 5,000 FTEs end of 2020. The plan submitted to Dutch Government early October complies with state aid conditions.

Air France will enlarge and accelerate its restructuring plan to build a post-crisis successful model on several pillars to restructure the French domestic, optimize external spendings, transform support functions, adapt the opeartions to the new activity, modernize the fleet and regain commercial success.

This will bring 800 million euros structural benefits by 2021 and 1.2 billion euros in total by 2022. Air France’s restructuring plan calls for a reduction of 4,000 FTEs end of 2020 and a total of 8,500 FTEs by 2022. The plan submitted to French Government complies with state aid conditions. The long term partial activity establishement is under discussion with representative unions.

KLM loses EUR 234 million ($273.1 million) in the third quarter, scales back for the winter

KLM Royal Dutch Airlines has made this announcement:

The Air France-KLM results for the third quarter of 2020 grimly reconfirm the extent to which the COVID-19 pandemic has disrupted the air transport industry. This is without doubt our deepest crisis since World War II – for broader society, for aviation in general, and certainly for KLM. Our cargo division is performing well and generating extra revenue, but our passenger flights have been scaled down further for the winter season.

Traditionally, the third quarter is especially strong in the air transport industry, but KLM has now incurred a loss of EUR 234 million for the quarter, down EUR 745 million compared to Q3 last year. The result incurred during the first nine months of 2020 has deteriorated by 1,7 billion compared to 2019.

There were cautious signs of recovery in July and August, with an increase in bookings for KLM’s European flights. Regrettably, KLM was forced to respond to changing travel warnings for many European countries in September, downscaling its European network for the winter season, which will result in a further decline in revenues.

A wide array of measures have already been taken to downsize KLM operations in line with the sharp decline in demand and flights. By the end of the year, the KLM Group will have bid farewell to around 5,000 employees (-15%). In view of recent developments prompted by the second wave of the pandemic and the sombre outlook, further rightsizing of the organisation will be considered.

“These results confirm just how bad things are in the air transport industry. KLM has incurred a loss of EUR 234 million in the third quarter, down EUR 745 million compared to Q3 last year. Without the Dutch government’s NOW support scheme, we would have incurred a loss of EUR 500 million.

To safeguard the future of our airline and employment opportunities, the loan and loan guarantees offered by the Dutch government are of crucial importance.

These poor results are certainly no reflection of the continued commitment of KLM employees, who are braving difficult working conditions to keep serving our customers. I greatly appreciate and respect their efforts.

Pieter Elbers – CEO & President KLM