Air France-KLM: fiscal year 2004-05

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Overig advies 19/05/2005 07:31

* Turnover up 7.3% at 19.08 billion euros, with increased activity across all businesses
* Continued and effective control of costs excluding fuel
* A 20.7% increase in operating income before aircraft disposals to 489 million euros and a 33.4% increase in pre-tax income
* Dividend of 0.15 euro per share.

At the Board meeting on May 18, 2005, chaired by Jean-Cyril Spinetta, the Directors of Air France-KLM approved the annual financial statements. During the meeting, the Chairman made the following comments:
“The first year of the merger between Air France and KLM has been a complete success. Our teams have worked with great enthusiasm to co-ordinate the activities of the two groups and offer our customers a significant network, combining the hubs of Paris and Amsterdam. The success of these common efforts is reflected in the synergies which have been achieved over this period. At 115m euros, they have comfortably exceeded our initial expectation of 65m euros. The impact of these synergies, together with the relentless pursuit of the cost control programs implemented at both companies, have enabled us to generate a strong rise in our results, in spite of the sharp rise in oil prices during the second half of the year. As a reflection of its confidence in the future of the Group, the Board will submit a proposal at the general meeting for the payment of a dividend of 0.15 euro per share."

Quarter ended March 31, 2005: positive operating income before aircraft disposals The quarter was marked both by a dynamic level of activity and a further series of sharp oil price rises, averaging out at around 48 dollars a barrel. However, the Group’s hedging policy enabled it to minimize the negative impact of these rises and to keep the fuel bill within budgeted levels.
Revenues rose 5.4% to 4.62 billion euros. Operating expenses were up 6.0%.
In spite of oil prices some 50% higher than in the same quarter of the previous year, the effectiveness of the hedging policy combined with the weakness of the dollar, made it possible to limit the increase in the fuel charge to 22.1%, at 619 million euros at March 31, 2005. Hedging gains amounted to 137 million euros and the dollar effect was a positive 29 million euros. Personnel costs rose 6.0%, with 1% of this increase linked to the employer’s contribution in connection with the share offering reserved for employees. The roll out of
the offering of the French State’s shares to employees, further to its withdrawal in December 2004, generated a non-recurring cost of approximately 16 million euros, corresponding to the employer’s contribution made by the company and various connected fees. In total, unit costs measured in equivalent
available seat kilometers (EASK) were up 2.8% and by 0.6% at constant currency and fuel prices.
Gross operating income before operating leases (EBITDAR) totaled 611 million euros compared with 618 million euros at March 31, 2004 (-1.1%). The Group recorded an operating profit before aircraft disposals (EBIT) of 9 million euros, compared with 34 million euros the previous year. Operating profit improved by 17 million euros excluding the impact of the staff share offering and of slot exchange products.
Net financial expenses amounted 56 million euros at March 31, 2005 (versus 40 million euros at March 31, 2004). The foreign exchange result deteriorated from a gain of 14 million euros to a loss of -3 million euros.
After taking into account 15 million euros in income from equity affiliates and 3 million in goodwill amortization, net income (group share) was a negative -6 million euros compared with a net profit of 42 million euros at March 31, 2004.
Full year 2004-05: operating income before aircraft disposals up 20.7% to 489
million euros Turnover increased 7.3% to 19.08 billion euros. Operating expenses excluding fuel rose 3.6%, compared with a 7.3% increase in equivalent available seat kilometers (EASK), reflecting the effective management of
costs. The fuel bill came to 2.65 billion euros, up from 1.99 billion euros in the previous year, representing an increase of 33.3%. The hedging policy adopted by the Group enabled it to save 372 million euros, representing 14% of the fuel bill. In total, operating expenses were up 7.0%. Unit costs, measured in equivalent available seat kilometers (EASK), remained stable implying a 2.8% decrease at constant currency and fuel prices.
Operating income before aircraft disposals totaled 489 million euros (405 million at March 31, 2004), an increase of 20.7%. All the activities contributed positively to this rise, with a particularly strong performance in
the cargo business. For the year to March 31, 2005, the operating margin (operating income before aircraft disposals over revenues) saw a slight improvement, rising by 0.3 points to 2.6%.
The Air France-KLM Group’s performance was adversely impacted by the scope of consolidation which excluded KLM’s operations for April 2003, which was marked by the Asian crisis, and for April 2004, which saw a return to breakeven. Over a full 12-month period, the increase in operating income would have been
36%. Net interest charges fell from 228 million euros to 202 million euros, including the impact of rebate letters, which, at the time of the unwinding of the financing of two aircraft and, based on their market value, enabled
a reduction in the amount of the last instalment. However, net financial charges rose from -187 million euros to –219 million euros, under the combined impact of a negative foreign exchange variation of 42 million euros and 16 million euros in net charges for financial provisions.
Earnings before taxes and the amortization of goodwill amounted to 397 million euros, up from 283 million euros at March 31, 2004 (+40.3%). After a tax charge of 96 million euros (40 million at March 31, 2004), net income (group share) rose by 20.2% to 351 million euros (292 million at March 31, 2004). Earnings per
share came to 1.30 euros compared with 1.08 euros the previous year.

Outlook for the current fiscal year
The Air France-KLM Group is targeting a 5% increase in capacity compared with the initial 2004-05 flight schedule and investments of some 2.4 billion euros, financed through operating cash flow and 800 million in cash before taxes generated by the Amadeus operation.
The Group has retained the assumption of a stable unit revenue excluding currency, an average jet fuel market price of 553 dollars per ton which, thanks to effective hedging, will give a fuel bill of some 3.37 billion euros, and a euro/dollar exchange rate of 1.30. On the basis of these assumptions as well as 165 million euros in additional synergy gains, the Air France- KLM Group expects to generate an operating income of a similar level to last year. Net income should rise substantially due to the Amadeus operation.

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