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

CONSUMER CYCLICALS

Similar issues to Lufthansa driving EBIT margin to -7.4%. Guidance for unit costs to be up +1-2% this year is left unch, only change was small revision down in Capex. AFFP has moved wider of Airport retailer Dufry (on the 28s, screen cheap view was on Dufry 27s) - no firm view to fight AFFP widening - we see it remaining crossover rated this year.


  • Revenues in-line at €6.65b (c€6.6b) up +5yoy on +6% passenger growth. RPK looks tad below expectations, capacity similar while load factors were in line & flat yoy at 86%.
  • Miss on EBIT at a loss of -€489m (c-461m) - margin has fallen from -4.8% last year to -7.4% this qtr. Similar issues to Lufthansa (above); cargo unit revenues fell €157m, with another -€243 in unit costs rises - €100m of that its tagged to one-off disruption/salary payments.
  • Operating FCF was at €140m which included a €610m one-time pension payment & €277m paydown in lease debt & interest. Net debt was little changed at €5.1b on €9.9b cash on hand & leverage of 1.3x.
  • Its guiding to unit costs (ex. fuel price) that was up +4% in Q1 to fall to +2%yoy in Q2 & +1-2% over FY24 (unch guidance).
  • Q2 bookings it says are solid with forward load factors in-line with last year on +3%yoy capacity increase. Transavia seeing stronger capacity increase of 10-15% while load factors holding 3pp below last year (at 71%). Group capacity is expected to be +5% this year (unch guidance).
  • Capex guidance is at €3b (previous €3-3.2b, c€3.3b). Consensus (x6) currently looking for -€740m adj. FCF this year.
Earnings call at 8:30am London; https://channel.royalcast.com/airfranceklm/#!/airfranceklm/20240430_1
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