Air France-KLM: Q1 2006-07 results

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Overig advies 31/08/2006 07:26
�� Operating income up 84.3% to 411 million euros,
�� Excellent activity levels with strong growth in unit revenues in both passenger and cargo
�� Adjusted operating margin of 8.0%, up 2.7 points
�� Full year objective revised upwards

The board of Air France-KLM met on August 30th, 2006 under the chairmanship of Jean-Cyril Spinetta to approve the financial statements for the First Quarter of 2006-07.

Consolidated figures
First Quarter to June 30th
(in millions of euros) 2006 2005 Change
Revenues 5,802 5,186 +11.9%
Current operating income 411 223 +84.3%
Income from operating activities 388 228 +70.2%
Pretax income of fully integrated companies 310 149 +108.0%
Net income, Group share 244 112 +117.9%

First Quarter 2006-07: Operating income of 411 million euros, up 84.3%
Activity was dynamic in the First Quarter, in both Passenger, which saw a 2 point increase in load factor, and Cargo, which also recorded a slight improvement in its load factor. These robust levels of activity were accompanied by a strong increase in unit revenues. Revenues rose 11.9% to 5.80 billion euros, on capacity measured in EASK up 4.6%. Unit revenue measured in EASK was up 7.3%, and by 5.6% excluding the currency impact. Operating costs rose 8.6% to 5.39 billion euros. Excluding the fuel charge, the rise would have been 5.5%. Unit costs, measured in EASK were up 3.8%, and fell by 0.6%
on a constant currency and fuel price basis.
The main variations in operating costs were as follows:
• The fuel charge amounted to 1.0 billion euros (+201 million euros), a rise of 24.8%, composed of a volume effect of 3%, an unfavorable currency impact of 4%, a fuel price rise of 24%, and a positive hedging effect of 6%;
• Employee costs rose 4.2% to 1.66 billion euros, mainly as a result of a 10% rise in social contributions, linked to Air France’s contribution to the general redundancy insurance scheme.
Headcount rose slightly to 103,100 (+1.2%);
• Aircraft costs (operating leases, chartering, amortization and maintenance costs) were up by 7.6% to 953 million euros. An increase in the number of fully-owned aircraft and aircraft under financial leases impacted amortization charges, which were up 8.4%, while operating leases charge remained
• Commercial and distribution costs rose slightly by 1.9%. Commissions to travel agents continued to fall, while other costs evolved in line with activity levels.

Operating income was up 84.3% to 411 million euros at June 30th 2006 versus 223 million euros a year earlier. The operating margin (operating income over revenues) rose 2.8 points, from 4.3% at June 30th 2005 to 7.1%. The adjusted operating margin1 stood at 8%, up 2.7 points.
After other income and charges amounting to a negative 23 million euros, versus a positive 5 million euros a year earlier, income from operating activities amounted to 388 million euros, up 70.2% year on year.
Net interest charges amounted to 46 million euros versus 60 million euros a year earlier, a 23.3% reduction, in line with the decrease in net debt. Pretax income of fully integrated companies was 310
million euros compared with 149 million euros a year earlier.
After a tax charge of 87 million euros (52 million euros at June 30th 2005) and a contribution from associates of a negative 0.3 million euros (versus a positive contribution of 17 million euros a year earlier), net income, Group share amounted to 244 million euros, up from 112 million euros at June 30 th
2005, a rise of 117.9%. Earnings per share amounted to 0.91 euros (0.43 euros at June 30 th 2005).

Financial structure:
further reduction in net debt Operating cash flow amounted 1.36 billion euros at June 30th 2006 while capital expenditure was 655
million euros.
The financial structure improved further, with net debt standing at 3.72 billion euros (compared with 5.5 billion euros at June 30th 2005 and 4.38 billion euros at March 31st 2006), while shareholders’ equity
amounted to 8.21 billion euros (up from 7.85 billion euros at March 31st 2006) of which 1.18 billion euros relating to the valuation of derivative instruments.
The gearing ratio was thus reduced from 0.56 at March 31st 2006 to 0.45 at June 30th 2006.

Objective for Full Year operating income raised
On the basis of the current robustness of both activity levels and unit revenues, and on condition that these trends persist, Air France-KLM’s objective for the Full Year is to generate a significant increase in
operating income compared to last year.

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