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Air France-KLM (NR, BB+, BBB-) {AIR FP Equity} 1Q Earnings Call

CONSUMER CYCLICALS


{FR} Air France-KLM (NR, BB+, BBB-) {AIR FP Equity} 1Q Earnings Call


Mgmt also taking note of strong airline compression; "if you look at our spreads, they have significantly come down since December."...which wasn't a firm yes to refi'ing the €300m July 24's but sounds likely. We don't see a S&P upgrade this year...sounds like mgmt not concerned on that adding "current credit rating quiet attractive". Cash lines are muted this morning.

  • On unit costs guidance it confirmed should see a drop in Q4 as year rolls through. Says Q3 may be flat to lower on Q2. Decrease mostly on more capacity coming.
  • On wages; its positive major agreements have been cleared for the year. On air traffic controller strikes that were expected this week - even though government settled at last minute, it says disrupted operations. Sees any risk from them gone for rest of the year though.
  • On MT EBIT margin target of 7-8%; says easily achievable in medium-term mainly on new aircraft reducing unit costs & exiting unprofitable routes. Co's target is similar to Lufthansa's >8% while IAG has a >10% target - consensus only sees IAG hitting target this year.
  • Not much on hybrid paydowns - says it will be gradually refi'd into normal bonds in "years to come"
  • On cargo guidance; notes booking generally 3-weeks in advance so hard to predict - right now has slight drop in Q2 and Q3/4 "normalising" - cargo dragged on both AFFP & LHA this qtr - was just shy of ~10% of revenues for both last year but is a volatile contributor.

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