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AIRFRANCE KLM FULL Year 2013 Results.

February 24, 2014 Financial No Comments Email Email

AirfranceThe Board of Directors of Air France-KLM, chaired by Alexandre de Juniac, met on 19thFebruary 2014 to approve the accounts for full year 2013.

Full Year and Fourth Quarter 2013 Results

Currencies had a marked negative impact of 100 million euros on the Group’s Full Year operating result, particularly in the second half of the year (86 million euros).

Full Year 2013 total revenues stood at 25,520 million euros versus 25,423 million euros in 2012, up 0.4%, and by 2.3% on a constant currency basis.

Operating costs declined by 1.4% and were flat on a constant currency basis. Ex-fuel, they rose fractionally by 0.1%, and by 0.8% on a constant currency basis. Unit cost per EASK2 (Equivalent Available Seat Kilometer) was reduced by 3.8%, and by 2% on a constant currency, fuel price and pension expense basis, against capacity in EASK up by 1.6%.  The fuel bill amounted to 6,897 million euros, a decline of 5.2% reflecting a currency effect of -3.1%, a 1.8% decline in fuel price after hedging, and a 0.4% reduction in volumes. Employee costs were down 2.4% to 7,482 million euros, and by 2.2% on a constant currency basis. At constant pension expense and scope, and including temps, employee costs fell 218 million euros, in line with the target of a 200 million euro reduction over the full year.

EBITDA amounted to 1,855 million euros, up by 33%, implying an improvement of 461 million euros. The EBITDA margin stood at 7.3%, a 1.8 point improvement on 2012. The operating result for the full year was back in positive territory at 130 million euros versus -336 million euros in 2012, a 466 million euro improvement.

The net result, group share reflected a tax asset impairment of 937 million euros as well as the impact of discontinued operations (CityJet, whose disposal is underway) to the tune of -122 million euros over the full year, to stand at -1,827 million euros against -1,225 million euros a year ago.

The impairment of deferred tax assets relates to tax losses from previous fiscal years which were recognised in the balance sheet. It results from taking into account activity forecasts as they were communicated to the market in October 2013 as well as a reduced visibility on the conditions for applying prior year tax losses. Under current French tax law, deferred tax assets no longer recognised in the balance sheet nevertheless remain available, and the group maintains the right to apply them to future profits. This impairment will not involve any cash out, current or future, and has no impact on the group’s liquidity nor its solvency.

On an adjusted basis2, the net result stood at -349 million euros against -696 million in 2012, a 347 million euro improvement.

Earnings and diluted earnings per share stood at -6.17 euros (-4.14 euros in 2012), and at -1.18 euros on an adjusted basis (-2.35 euros in 2012). The Board of Directors decided not to pay a dividend.

In the Fourth Quarter 2013, total revenues for the group stood at 6,123 million euros versus 6,258 million euros a year earlier, down 2.2%, but up 0.7% on a constant currency basis.

Operating costs declined by 3.5% and by 1.3% on a constant currency basis. Ex-fuel, they declined by 2.1% and by 0.9% on a constant currency basis. Unit cost per EASK (Equivalent Available Seat Kilometer) was reduced by 5.2%, and by 1.9% on a constant currency, fuel price and pension expense basis, against capacity in EASK up by 1.9%. The fuel bill amounted to 1,653 million euros, a decline of 7% reflecting a currency effect of -4.8%, a 3.3% decline in fuel price after hedging, and a 0.7% increase in volumes. Employee costs clearly reflected the impact of restructuring, declining by 5.7% to 1,790 million euros, and by 5.5% on a constant currency basis.

EBITDA gained 36% or 100 million euros to 381 million euros, implying a margin of 6.2%, up 1.7 points. The operating result amounted to -65 million euros compared with -152 million euros a year earlier, an improvement of 87 million euros. Elsewhere the group booked a provision of 82 million euros in non-recurring costs for the impairment of two full-freighter aircraft.

The net result, group share stood at -1,177 million euros versus -244 million euros a year earlier, including the impairment expense mentioned above and an impact of -80 million euros relating to discontinued operations (CityJet). Adjusted for these and other one-off items2, the net result, group share was -112 million euros compared with -126 million euros in Q4 2012.

Earnings and diluted earnings per share stood at -3.98 euros (-0.83 euros in Q4 2012), and at -0.38 euros on an adjusted basis (-0.43 euros in Q4 2012).

Passenger business

For Full Year 2013, passenger revenues amounted to 20,112 million euros, up 0.7%, but up by 2.6% on a constant currency basis. The operating result of the passenger business stood at 174 million euros versus -260 million euros in 2012, an improvement of 434 million euros.

Total passenger traffic for the full year rose by 2.4% while capacity rose by 1.6%, leading to a 0.6 point improvement in load factor to 83.8%. Unit revenue per Available Seat Kilometer (RASK) declined by 1.0%, but rose 0.8% on a constant currency basis. Unit costs (CASK) were reduced by 3.3% and by 1.8% at constant currencies.

Long-haul represented 81% of the Group’s traffic and 79% of capacity. Long-haul traffic rose 2.5% for a 2.4% rise in capacity. The load factor was stable (+0.1 point) at 85.7%. Long-haul RASK rose by 0.6% on a constant currency basis, driven by economy RASK up 1.2%, while premium RASK was down 0.6%.

Medium-haul traffic rose by 1.7% while capacity was reduced by 1.2%, a clear indication of the positive effects of Transform 2015, leading to a 2.2 point improvement in load factor to 76.8%. Medium-haul RASK improved by 2.4% on a constant currency basis.

Fourth Quarter 2013 passenger revenues amounted to 4,845 million euros, down 0.9%, but up by 2.0% on a constant currency basis. The operating result of the passenger business stood at -61 million euros, versus -143 million euros in Q4 2012, an improvement of 82 million euros.

Total passenger traffic in the fourth quarter rose by 2.5% while capacity rose by 1.8% leading to a 0.5 point improvement in load factor to 82.5%. Unit revenue per Available Seat Kilometer (RASK) fell by 2.9%, but was almost stable (-0.1%) on a constant currency basis. Unit costs (CASK) were reduced by 4.5% and by 2.2% on a constant currency basis.

Long-haul traffic rose 2.5% for a 3.0% rise in capacity, leading to a 0.4 point decline in load factor to 84.2%. Long-haul RASK was down -0.8% on a constant currency basis, partly reflecting an unfavourable year-on-year comparison base.

Medium-haul traffic rose by 2.4% while capacity was reduced by 2.5% leading to a 3.5 point improvement in load factor to 76.0%. Medium-haul RASK improved by 3.4% on a constant currency basis.

Cargo Business

The cargo industry continued to experience weak global trade and industry overcapacity. In this context, Full Year 2013 revenues stood at 2,816 million euros, down 7.9% and by 5.7% on a constant currency basis. The operating result improved by 28 million euros, but remained negative at -202 million euros.

The group reinforced its restructuring measures, with an 11.5% reduction in full freighter capacity versus 6% planned at the beginning of the year. In total though, capacity was reduced by only 2.7% due to a slight increase in belly space. Traffic declined more strongly, by 4.6% leading to a 1.3 point drop in load factor to 63.2%. Unit revenue per Available Ton Kilometer (RATK) declined by 6.3% and by 4.2% on a constant currency basis. Against this, unit cost (CATK) was reduced by 6.6% and by 4.9% on a constant currency basis but was insufficient to meaningfully reduce losses. Additional turnaround measures were announced in October 2013 which are in the process of being implemented.

Fourth Quarter 2013 cargo revenues amounted to 723 million euros, down 8.6% and by 5.4% on a constant currency basisThe operating result improved slightly from -27 million euros in Q4 2012 to-18 million euros. Traffic declined by 2.1% for a 0.9% decline in capacity, leading to a 0.9 point reduction in load factor to 66.3%). Unit revenue per Available Ton Kilometer (RATK) declined by 8.9% and by 5.8% on a constant currency basis. Unit cost per ATK was reduced by 9.8% and by 7.4% on a constant currency basis.

Maintenance

In Full Year 2013, maintenance realized third party revenues of 1,225 million euros, up 11.8% and by 15.1% at constant currencies, benefiting from a strong order book. The operating result stood at 159 million euros, up 19 million euros year-on-year, helped by the development of higher margin activities and Transform 2015 efficiency gains. The operating margin stood at 4.8% versus 4.5% a year earlier.

Fourth Quarter 2013 third party maintenance revenues were 298 million euros (316 million euros in Q4 2012), with an operating result of 48 million euros, up 12 million euros year-over-year.

Other business: Transavia

For the Full Year 2013, as planned in the framework of Transform 2015, Transavia capacity was significantly increased, up by 11.6%, of which 25.5% in France. Traffic was up by 13.5%, leading to a 1.5 point rise in load factor to 90.1%. In spite of this high growth, unit revenue was virtually stable at –0.2%. Transavia’s revenues stood at 984 million euros, up 10.7%. The operating result was -23 million euros (versus breakeven in 2012), impacted by the political unrest in some Mediterranean destinations and by the launch costs of certain routes.

In the Fourth Quarter 2013, traffic rose 12.9% for capacity up 11.0%, leading to a 1.5 point increase in load factor to 87.3%. Unit revenue was down 2.7%. Transavia’s revenue stood at 171 million euros, up 8.9%. The operating result was -35 million euros, down 11 million euros year-over-year.

Other business: Catering

In Full Year 2013, catering revenues stood at 915 million euros, of which 341 million euros with third parties, versus 355 million euros in 2012, down 3.9%, reflecting the deconsolidation of AirChef. At constant scope, third party revenues rose by 6.9%. The operating result improved from 7 million euros to 24 million euros thanks to the measures implemented within the framework of Transform 2015.

For Q4 2013, third party revenues amounted to 75 million euros, down 19% (93 million euros a year earlier). At constant scope, they were up 13.6%. The operating result was 5 million euros versus 2 million euros a year earlier.

Financial situation

The improvement in EBITDA translated into a 458 million increase in cash flow before change in WCR and Voluntary Departure Plan cash-out.

Net investments before sales & lease-back were down 466 million euros to 1,064 million euros, reflecting a strict control of investments and low capacity growth. Net investments after sale & lease-back transactions slightly increased to 941 million euros. In combination with a good performance on working capital requirement, it resulted in an operating free cash flow amounting to 538 million euros, versus -47 million euros in 2012, leading to a significant reduction in net debt from 5.97 billion euros at 31st December 2012 to 5.35 billion euros at 31st December 2013. The financial cover ratios therefore improved considerably, with EBITDA / net interest costs up from 4.0x a year ago to 4.6x. Net debt / EBITDA was reduced from 4.3x to 2.9x.

At 31st December 2013, shareholders’ funds amounted to 2.29 billion euros, down 1.35 billion euros year-over-year.

The group continues to enjoy a good level of liquidity, with cash of 4.2 billion euros at December 31st 2013, and undrawn credit lines of 1.8 billion euros. This compares with short term debt of 1.9 billion euros. The shareholding in Amadeus is valued in the region of 900 million euros.

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