Operating result at 178 million euros , higher than pre-Covid (Fourth quarter 2019) , says Air France-KLM on Fourth Quarter Results !

A Rosy Picture from Air France-KLM Group on Fourth Quarter of 2021 !

• Operating result at 178 million euros, higher than pre-Covid (Fourth quarter 2019) despite lower revenues but compensated by cost control and restructuring programs. Both Network and Maintenance activities showing a positive operating result.
•  Net income at -127 million euros, showing 874 million euros improvement compared to the same quarter last year supported by revenue at 4,838 million euros which is 2,475 million euros higher than last year Fourth quarter.
• Air France-KLM ordered 100 Airbus A320neo family aircraft - with purchase rights for an additional 60 aircraft - for KLM and Transavia, and signed a letter of intention for the purchase of 4 Airbus A350F Full Freighter aircraft for Air France with purchase rights for 4 additional aircraft, to increase cargo capacity at Air France.

2021 Full year Financial Journey :

In 2021, Air France-KLM continued to be flexible and agile in order to provide the right offer to its customers. The tremendous transformation and restructuring efforts performed during the Covid crisis paved the way to a sustained position as a European avaiation leader.

The Group was able to close 2021 with a positive EBITDA at 745 million euros, up 2,440 million euros compared to last year with a first semester impacted by lockdowns in France and the Netherlands, and worldwide travel restrictions in place.

The recovery was visible since June which continued in the second semester and thanks to less tight travel restrictions the Group was able to capture the recovery in a profitable way. Net debt ended at 8.2 billion euros, a decrease of 2.8 billion euros compared to end of 2020 thanks to the first set of capital strengthening measures.

The OUTLOOK !

After a good start of the Fourth quarter and the reopening of the United States early November, the rise of the Omicron variant hampered in December the continuous increase in load factors for the Medium haul and Domestic traffic.Due to high infection rates in France and the Netherlands, some flights had to be canceled in January.

In this context, the Group expects capacity in Available Seat Kilometers for Air France-KLM Network passenger activity at an index in the range of 73% to 78% in the First quarter of 2022 compared to the First quarter of 2019.

For FY 2022 no guidance will be provided yet due to uncertainty concerning the sanitary situation and reopening of Japan and China.

As of December 31 2021, the Group has a sufficient 10.2 billion euros of liquidity and credit lines at disposal.

• For the First quarter 2022, the Group expects to have an EBITDA around break-even in the current international context,
• Full year 2022 Net Capex spending estimated at circa 2.5 billion euros, which is 80% fleet & fleet related and 20% related to IT/ground.

Mid 2021, Air France-KLM initiated the first step of its recapitalization plan to strengthen its balance sheet which had been impacted by Covid-19, raising a total of circa 4 billion euros, including the completion of a 1 billion euro capital increase and the conversion of the 3 billion euros French State loan into 3 perpetual bonds in April 2021.

In line with market practice for perpetual bonds, Air France-KLM intends to pay discretionary coupons in alignment with point 77 bis of the European Commission’s Covid-19 Temporary Framework. 2 In addition, Air France-KLM implemented several refinancing measures to improve its senior debt profile, notably with 800 million euros of dual tranche senior bonds issued late in July 2021.

Part of the proceeds were allocated to repay 500 million euros of the 4 billion euros French State guaranteed loan (“PGE”). The maturity profile of the PGE was also spread over three installments (800m/1.3bn/1.3bn euros) and extended to May 2025 for the last installment.

Finally, Air France-KLM also set up an EMTN (Euro Medium Term Notes) programme, and obtained a solicited ESG rating from Standard & Poor’s to pursue its forthcoming refinancing strategy and reaffirm its strategic ESG ambitions in the mid to long term.

Capital Infusion Efforts !

Air France-KLM now plans to start a new step of equity strengthening measures, which could consist in:

• a capital increase with pre-emptive rights for shareholders ;
• an issuance of quasi equity instruments such as straight and convertible perpetual bonds in order to accelerate the reimbursement of the State supports, since the proceeds of such instruments would be fully allocated to this purpose in alignment with point 77 bis of the European Commission’s Covid-19 Temporary Framework cited above ;
• additional equity strengthening measures, including an potential ongoing project to refinance assets for an amount up to 500 million euros, through private perpetual bonds classified as equity. The proceeds would be used to partially redeem State aids.

Air France-KLM intends to remain flexible on the transaction structures, as well as on the sequencing and the sizing of each instrument depending on market conditions.

Existing reference shareholders are supportive of these equity strengthening measures; some of them will consider participating, amongst which the French State and the Dutch State on a pro rata and in-kind basis, through partial offset of their respective outstanding support.

Air France-KLM is committed to repaying the States aids as soon as practicable to be relieved from the set of operational and strategic constraints of the European Commission’s Temporary Framework.

Some of these measures are subject to the approval of the European Commission as well as legal and regulatory approvals. In total, these equity and quasi-equity issuances could represent up to 4.0 billion euros.

This new step in the recapitalization plan measures intends to further restore the equity position, and aims to reach a targeted Net debt / EBITDA ratio between 2.0x and 2.5x by 2023 (excluding the Dutch shareholder loan which is currently accounted as debt), depending notably on the sizing of the contemplated measures.