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FY results reflect deteriorating operating environment in the second

  20.05.2009    

The Board of Directors of Air France-KLM, chaired by Jean-Cyril Spinetta, convened on 19th May 2009 to
approve the accounts for Financial Year 2008-09.
Pierre-Henri Gourgeon, Chief Executive Officer, made the following comments: "The financial year 2008-09
was one of contrasting halves, with a resilient performance in the first half, wiped out by the full force of the
economic crisis in the second. Business traffic and cargo were especially affected, leading to a decline in
revenues which accelerated in the fourth quarter. The sharp decline in oil prices had a negative impact on
the fuel bill in the second half, whereas our hedging policy had been efficient in the first half. In the face of
these unprecedented conditions we moved rapidly to lower capacity, reinforce cost-saving measures, reduce
our investments and unwind part of our fuel hedges. The current year is likely to be equally challenging.
Visibility remains low, even though we have seen some signs of stabilisation in recent weeks. We will
therefore continue our strategy of adapting capacity and costs, while at the same time reinforcing our
fundamentals, notably via the strategic partnership with Alitalia and the North Atlantic joint venture with Delta.
Our responsiveness will continue to help us face up to the current challenges while ensuring we are
prepared for the economic recovery.”
In view of the challenging environment, the Board decided not to propose a dividend in respect of Financial
Year 2008-09.
The impact of the economic crisis deepened in the fourth quarter, with a marked decline in both passenger
and cargo traffic. The 2.7% reduction in capacity in the passenger business was insufficient to offset the
5.8% drop in traffic (including VLM) which was, moreover, accompanied by a decline in unit revenues. The
medium-haul network was worse affected than long-haul both in terms of volumes and revenues.
As in the previous quarter, cargo traffic experienced a sharp deterioration. Excluding Martinair, which the
group took over in January 2009, traffic was down 21.3% for capacity down 9.8%. Consolidating Martinair,
traffic was virtually stable (+0.2%) with capacity up 11.5%. Unit revenues also fell sharply.
Total revenues declined by 12.2% to 5.01 billion euros after a positive currency effect of 0.8%, for production
measured in equivalent available seat kilometers (EASK) up 1.7%. Excluding Martinair, revenues declined by
15.0%. Unit revenue measured in EASK fell by 14.8% and by 15.4% on a constant currency basis. Our costcontrol measures proved efficient, with operating costs down by 2.8% (-5.9% excluding Martinair) to 5.6
billion euros. Cost-savings in the fourth quarter amounted to 185 million euros. Unit costs measured in EASK
were consequently reduced by 4.7%, and by 2.6% on a same currency and fuel price basis.
The main changes in operating costs related to the fuel bill, marketing and distribution costs (-21.8%) and
other costs (-11.7%). For the first time since the beginning of the year, the fuel bill was down y-o-y,
amounting to 1.1 billion euros (-4.6%) under the combined effect of a 1% drop in volumes, a decline in the
fuel price limited to 14% by a 243 million euros negative impact from our fuel hedging and a negative
currency effect of 10%. Employee costs rose by 0.6%, but declined 1.0% on a comparable basis, in line with
the reduction in headcount.
The operating loss stood at 574 million euros versus a loss of 37 million euros at 31st March 2008.
Net interest costs increased from 20 million euros to 46 million euros under the impact of lower financial
income linked to the decline in interest rates. ‘Other financial charges’ amounted to 96 million euros
compared with 32 million euros at 31st March 2008. After a tax credit of 255 million euros and income from
associates of 9 million euros, the net loss stood at 505 million euros (versus a loss of 534 million euros in the
previous year which included a provision of 530 million euros in respect of the cargo fine).

Full year results reflect deteriorating environment in the second half
Despite a relatively resilient performance in the first half, results for the full year were clearly affected by the
sharp downturn in the second half, and especially the fourth quarter. Revenues amounted to 23.97 billion
euros, down 0.6% after a negative currency impact of 1.9%, for production measured in EASK (equivalent
available seat kilometer) up 3.6%. Unit revenue measured in EASK declined by 4.0% and by 2.2% on a
constant currency basis. Operating costs reflected the high oil price, rising 6.1% to 24.1 billion euros.
Excluding fuel the rise was contained to 1.4%. Unit cost per EASK was up 3.3%, but fell 0.8% on a constant
fuel and currency basis, thanks to 675 million euros in cost-savings under the ‘Challenge 12’ program.
The main operating costs evolved broadly in line with activity levels with the exception of fuel and marketing
and distribution costs. The fuel bill recorded a 1.1 billion euro (+24.7%) rise to 5.70 billion euros under the
combined effect of a 1% increase in volumes, a 9% increase in price after hedging and a positive currency
effect of 3%. Marketing and distribution costs were reduced by 14.1% thanks to the further reduction in
commissions and a cut in advertising spend.
The operating loss amounted to 129 million euros versus income of 1.41 billion euros at 31st March 2008.
Adjusted operating income1 stood at 91 million euros and the corresponding adjusted operating margin at
0.4%, down 6.3 points.
The loss from operating activities stood at 193 million euros, compared with income of 1.28 billion euros at
31st March 2008. Lastly, as indicated in March, Air France’s practice of settling its fuel bill on the basis of the
previous month’s price resulted in a 200 million euro negative impact which would not have existed had the
invoiced prices been in synch with consumption.
The pre-tax loss of fully consolidated companies amounted to 1.2 billion euros after ‘Other financial charges’
of 911 million euros, of which 179 million euros relating to currencies and 715 million euros in respect of the change in the fair value of hedging instruments, mainly fuel. The net loss, group share stood at 814 million
euros versus income of 756 million euros at 31st March 2008.
The loss per share and diluted loss per share both amounted to 2.76 euros, against earnings per share of
2.63 euros and diluted earnings per share of 2.47 euros at 31st March 2008.

Financial position: robust balance sheet
Investments amounted to 2.04 billion euros at 31st March 2009 down from 2.34 billion euros in financial year
2007-08, reflecting the reduction in the investment program during the year. Nevertheless, operating cash
flow of 798 million euros and proceeds from aircraft disposals of 141 million euros were insufficient to fund
the totality of these investments. In spite of the difficult second half, the group’s financial position remains
robust, with cash of 4.3 billion euros and available credit lines of 1.2 billion euros.
Shareholders’ equity amounted to 5.68 billion euros, after a negative impact of 1.50 billion euros relating to
the fair value of hedging instruments versus a positive impact of 1.82 billion euros the previous year. Net
debt stood at 4.44 billion euros (2.69 billion euros at 31st March 2008). The gearing ratio1 therefore stood at
0.78, and 0.62 excluding the valuation of hedging instruments against 0.27 and 0.33 respectively at 31st
March 2008 after restating shareholders’ funds by 636 million euros for the application of IFRIC 13 to the
frequent flyer program for financial year 2008-09.



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