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Annual report
2009-10

Table of contents

  • Page 1
    Annual report 2009-10

  • Page 2

  • Page 3
    ... Chairman's message 3 Interview with the Chief Executive Officer 4 A pro-active response to the crisis 8 Activities 11 Passenger business 14 Cargo business 24 Maintenance business 32 Governance and shareholders 41 Summary consolidated financial statements 53 1 Air-France KLM Annual report 2009-10

  • Page 4
    ..., its second business with 12% of revenues. On the aeronautics maintenance market (5% of revenues), Air France-KLM ranks number two amongst the multi-product players world-wide. With operations in every continent, the Group has more than 100,000 employees. 2 Air-France KLM Annual report 2009-10

  • Page 5
    ... Group's management and employees as they strive to achieve continuous progress in flight safety. I would also like to thank you, our shareholders, for your unwavering confidence and support over the years. Jean-Cyril Spinetta Chairman of the Board of Directors 3 Air-France KLM Annual report 2009...

  • Page 6
    ...management system for Air France flights. How do you see the results of the Air France-KLM group for the 2009-10 financial year? Pierre-Henri Gourgeon: We experienced a period of extreme crisis which saw an unprecedented collapse in air transport activity. The long-awaited recovery is now starting...

  • Page 7
    ...partner we have a 25% market share of the leading global air transport market. We also benefit from the SkyTeam alliance which brings together nine airlines serving more than 850 destinations world-wide. million euros of cost savings 718 Challenge cost-savings plan 5 Air-France KLM Annual report...

  • Page 8
    ... the opening of new services such as AmsterdamDenpasar, Amsterdam-Hangzhou and Paris-Abu Dhabi. To better gear the business to market needs, we also introduced an intermediary proposition between business and economy class, with Premium Voyageur at Air France and Economy Comfort at KLM. These offers...

  • Page 9
    ... global leader that will emerge from this crisis with a young fleet, a rejuvenated commercial offer adapted to the new needs of our customers, a leading network between Europe and the rest of the world based on our dual Roissy-Schiphol hub and a preserved financial position. 7 Air-France KLM Annual...

  • Page 10
    ... and even costly. For Air France-KLM, this reversal accounted for â,¬637 million of the operating loss for the financial year. A very different exit from crisis depending on the world region Since December 2009, there have been some signs of a recovery in Premium traffic on long-haul flights: in...

  • Page 11
    ... for the benefit of the customers of the two groups, is the leading operator on the North Atlantic, the number one global air transport market, with a market share of 25%. More than 200 daily flights link the six hubs: Paris, Amsterdam, Atlanta, Detroit, Minneapolis and New York. Adapting capacity...

  • Page 12
    10 Air-France KLM Rapport annuel 2009-10

  • Page 13
    ... mobilized around serving the customer. To serve its customers world-wide, the Air France-KLM group is present in all the major air transport activities: from passenger and cargo transportation to aircraft and engine maintenance and in-flight catering. 11 Air-France KLM Annual report 2009-10

  • Page 14
    ...in two ways. In long-haul, it adapted its offer and capacity while, in medium-haul, it undertook an in-depth transformation by redefining its products, fares and networks. At March 31, 2010, the passenger business recorded an operating loss of â,¬918 million. 12 Air-France KLM Annual report 2009-10

  • Page 15
    ... amplified its effects with international air freight collapsing by 25% in value terms. Air France-KLM revised its strategy by focusing on the bellies of passenger aircraft and reducing the cargo fleet from 24 to 14 freighters. In the 2009-10 financial year, the operating loss reached â,¬436 million...

  • Page 16
    Passenger business Moving closer to the customer 14 Air-France KLM Rapport annuel 2009-10

  • Page 17
    ... weekly connecting opportunities, the dual hub based at Paris and Amsterdam is positioned well ahead of its competitors. This system also enables the optimization of the fleet and the use of larger aircraft, thus reducing noise disturbance and CO2 emissions. 15 Air-France KLM Annual report 2009-10

  • Page 18
    ... cabin interiors were improved as part of the Harmonie 2010 project. •• The Group redoubled its commercial efforts: e-commerce with new internetbased services for individual customers and the corporate marketing strategy directed at companies, offering more competitive fares and increased...

  • Page 19
    ... also foresees code sharing on flights. •• A commercial agreement with Canadian low cost airline WestJet, which serves 66 cities in North America and the Caribbean, enables Air France-KLM passengers travelling to North America to fly with WestJet on the same ticket. •• November 23, 2009: the...

  • Page 20
    ... commercial offer, reducing expenses and particularly logistics costs and adjusting flight schedules. Network highlights Asia-Pacific network 5.4 million passengers, 22 destinations in 11 countries, 15.4% of passenger revenues, 23% of traffic and 22% of the Group's capacity •• Air France-KLM...

  • Page 21
    ... fuel used on 650 Paris-Marseilles flights. •• The commercial offer was enriched with innovation coming from the new European offer: online reservation with a Time to Think option, a choice of a window or aisle seat, boarding pass sent out by email •• The fare structure, season ticket offers...

  • Page 22
    ... camelina. Between January 30 and the end of 2010 Air France will equip its entire domestic fleet with new, slim-line seats, weighing 9.1kg instead of 14kg for the previous model. The plus point On departure and arrival, the procedures also helped to minimize noise levels by up to 7dB, a remarkable...

  • Page 23
    ... classes by offering very good value for money. KLM offers the Economy Comfort seats in economy class, sold as a paid option. In medium haul, Air France has completely redefined its commercial proposition to offer a more price-competitive, simpler product that responds to the new needs of customers...

  • Page 24
    ...it and fly in this cabin again. They cite the main benefits as being on-board comfort and value for money. KLM's new, elegant uniform for women flight crew

  • Page 25
    ...a new seat, launched on January 30, 2010, is gradually being fitted in Air France's short-haul fleet. In time, it will be available on the Airbus A319s, A320s and A321s operated by the airline's domestic network. This more streamlined and comfortable seat has been ergonomically designed to offer the...

  • Page 26
    Cargo business A pro-active response and a revised strategy 24 Air-France KLM Rapport annuel 2009-10

  • Page 27
    ... two hubs or choosing between two operational systems via Paris-Charles de Gaulle or AmsterdamSchiphol. The Group's customers benefit from a modern fleet and access to the leading global network present on all the major air freight routes. The network is also extended by the SkyTeam Cargo alliance...

  • Page 28
    ... (excluding integrators) with respective market shares of 32.7% and 8.4%. During the financial year, it carried 1.46 million tons of cargo of which 65% in the bellies of passenger aircraft and 35% in the all-cargo fleet to 350 destinations in 175 countries. 26 Air-France KLM Annual report 2009-10

  • Page 29
    ...Air France-KLM Cargo website and follow a very simple procedure to check the status of their consignment and locate its position in the transport process. This system has been extended to the 728 destinations of the SkyTeam Cargo alliance. •• At the beginning of the financial year, this network...

  • Page 30
    ... to save paper, the recycling of batteries in refrigerated containers and the purchasing of lighter cabin equipment. CO2-18% Solidarity with the victims of the Haïti earthquake 4 United Nations World Program flights - 4 UNICEF flights - 1 SDV flight 28 Air-France KLM Annual report 2009-10

  • Page 31
    ... imported goods, although the latter represent only 15% of air freight. What is Air France-KLM Cargo's current situation and what are your key objectives for the next few years? In parallel with these measures, we redefined our strategy by opting to focus mostly on the bellies of passenger aircraft...

  • Page 32
    ... aircraft. The shipment is reserved by the freight forwarder via a secure messaging system and a VIP code assigned to it. After checking the number of pallets required, these are ordered from the manufacturer. The trucks are reserved for the journey to the airport. 30 Air-France KLM Annual report...

  • Page 33
    ... number of pallets. The packages are loaded into the trucks in Spain. D-1 The cargo management department views the shipment on its control screen using the VIP code input at the time of reservation. D+1/ D+2 The dresses are delivered and displayed in the stores. 31 Air-France KLM Annual report...

  • Page 34
    Maintenance business Industrial and commercial momentum 32 Air-France KLM Annual report 2009-10

  • Page 35
    ... & Maintenance, adapting its services to customer needs and developing its global network. million euros of operating income 956 +81 million euros of third-party revenues of the multi-product MRO players globally No.2 aircraft maintained 1,260 33 Air-France KLM Annual report 2009-10

  • Page 36
    ...the world in Johannesburg, Los Angeles, Melbourne, Munich, New York, Paris and Singapore. •• Based in Amsterdam, the Group's EPCOR subsidiary has, since its creation a decade ago, refocused its offer on auxiliary power unit (APU) maintenance for Boeing B737NGs, B777s, Airbus A318-321s, A330s and...

  • Page 37
    ...remote markets, where customers are looking for integrated services with local access to a pool of spare parts. To meet their needs, the Group is deploying a global support network based on local logistics units. At the service of the Group •• AFI KLM E&M geared up to prepare for the arrival of...

  • Page 38
    ...inaugurated in 2009, and the engines building that came on line in 2010. The Group's vehicles, ground support and other equipment are increasingly powered by electricity. Since 2008 AFI KLM E&M has been developing the recovery and recycling of materials from retired parts. The plus point ISO 14001...

  • Page 39
    ... in place for strategy, sales and marketing, corporate communications and business development. The teams are mixed and are based in Paris and Amsterdam or within our other operations globally. In parallel with developing the network, we are strengthening its management. We thus benefit from solid...

  • Page 40
    ... Alliance for the maintenance of the engines. In 2009, the maintenance teams dedicated to the A380 were created with some 5,000 training days devoted to their preparation. The A380, extensive preparation and special handling The A380 in its dedicated hangar at Roissy >>> 38 Air-France KLM Annual...

  • Page 41
    ... monitoring and maintenance At Roissy, 365 days a year and 24 hours a day, a team is responsible for monitoring the technical operation of the A380. Trained on the aircraft prototypes in Toulouse, this team monitors flight operations and executes the maintenance program in the H6 hangar. The...

  • Page 42
    40 Air-France KLM Annual report 2009-10

  • Page 43
    ... executes the strategy approved by the Board of Directors. During this very difficult period for the air transport industry, the Group made a resolute commitment to the greatest possible transparency for shareholders, with whom it maintains a permanent dialogue. 41 Air-France KLM Annual report 2009...

  • Page 44
    ...by the Board of Directors. It meets every two weeks, alternating between Amsterdam and Paris. The members of the Group Executive Committee fulfil responsibilities at the level of the Air France-KLM group while retaining their functions within their companies. 42 Air-France KLM Annual report 2009-10

  • Page 45
    ... Officer of KLM 3 Alain Bassil Chief Operating Officer of Air France and Executive Vice President, Commercial & Strategy for Engineering & Maintenance, Air France-KLM 4 Christian Boireau Executive Vice President, France Sales, Air France 5 Philippe Calavia Chief Financial Officer of Air France...

  • Page 46
    ... the 2009-10 financial year, the Board of Directors met nine times. The Air France-KLM Board of Directors may comprise up to 18 members, appointed for a four-year term of office. At March 31, 2010, the Board comprised 15 members, of whom ten Board directors appointed by the Shareholders' Meeting...

  • Page 47
    ...company. Members of the Board of Directors at March 31, 2010 Jean-Cyril Spinetta Chairman of the Board of Directors of Air France-KLM and Air France Pierre-Henri Gourgeon Chief Executive Officer of Air France-KLM and Air France Leo M. van Wijk Vice-Chairman of the Board of Directors of Air France...

  • Page 48
    ... stock subscription or purchase option plan policies. Information on the compensation of the executive directors can be found on the company's website in accordance with the AFEP-MEDEF recommendations. The Remuneration Committee met once during the 2009-10 financial year. 46 Air-France KLM Annual...

  • Page 49
    ...* Board directors considered to be independent. ** Board director representing the French State: awaiting publication of the decree. (1) Expiry date: Shareholders' Meeting called to approve the financial statements for the financial years mentioned in the table. 47 Air-France KLM Annual report 2009...

  • Page 50
    ...with shareholders Engaging with the financial community Financial analysts and institutional investors have a dedicated point of contact: the Investor Relations department. Conference calls and information meetings are scheduled for them to coincide with results announcements. The Group's management...

  • Page 51
    ... 14h30 to 17h30, a member of the financial communication team is on hand to answer shareholders' questions on +33 1 41 56 56 56. Outside these periods, a voice server reports the Air France-KLM opening and closing stock prices. Shareholders can also contact the team by email at: mail.actionnaires...

  • Page 52
    ...ÉANEs) for a total of â,¬661 million. These bonds have a nominal unit value of â,¬11.80 and an annual coupon of 4.97%. The conversion/exchange ratio is one share for one bond and the bonds are redeemable at par on April 1, 2015. Air France-KLM in the stock market The stock price mirrored the rises...

  • Page 53
    ...94 55 In the United States Citibank Shareholders Services 250 Royal Street Canton, MA 02021 Tel.: +1 877 CITI ADR (877 248 42 37) Email: [email protected] Method of holding the stock Shareholders can choose between bearer and registered form. 51 Air-France KLM Annual report 2009-10

  • Page 54
    52 Air-France KLM Annual report 2009-10

  • Page 55
    ... flexible and balanced business model. The Group's consolidated results reflect the impact of the crisis on all its businesses. Within this environment, the Group implemented a robust strategy aimed at reducing costs and preserving its financial situation. 53 Air-France KLM Annual report 2009-10

  • Page 56
    ...the cost higher than before the crisis. Lastly, despite the crisis in the financial markets, Air France-KLM successfully raised a total of â,¬1.4 billion in two market transactions. After this difficult year, what are your key objectives for the current financial year? in headcount and the measures...

  • Page 57
    ...low cost operator Transavia, generated revenues of â,¬918 million while the catering business, organized around Servair, generated external revenues of â,¬347 million. This geographical breakdown confirms the internationalization of the Air France-KLM group. 55 Air-France KLM Annual report 2009-10

  • Page 58
    ...loss) from current operations by business (in e million) After the impact of the pre-2009 fuel hedges Excluding the impact of the pre-2009 fuel hedges 81 -12 81 8 -436 -389 -348 -918 Passenger Cargo Maintenance Others Passenger Cargo Maintenance Others 56 Air-France KLM Annual report 2009-10

  • Page 59
    ...of operating leases, as a percentage of average capital employed. Comparing this ratio with the cost of capital shows whether the Group is creating value for its shareholders. The average weighted cost of capital was 7% at March 31, 2010, unchanged on March 31, 2009. 57 Air-France KLM Annual report...

  • Page 60
    ... equivalents Total current assets Total assets March 31, 2010 March 31, 2009 401 612 11,349 2,252 446 2,733 840 1,122 19,755 93 517 537 2,142 1 979 3,751 8,020 27,775 400 559 12,125 2,313 446 2,499 938 1,440 20,720 93 580 527 2,038 2 1,065 3,748 8,053 28,773 58 Air-France KLM Annual report 2009...

  • Page 61
    ... shares Reserves and retained earnings Equity attributable to equity holders of Air France-KLM Minority interests Total equity Provisions and retirement benefits Long-term debt Deferred tax Other non-current liabilities Total non-current liabilities Liabilities relating to assets held for sale...

  • Page 62
    Consolidated income statement In e million Period from April 1 to March 31 Sales Other revenues Revenues External expenses Salaries and related costs Taxes other than income taxes Amortization and depreciation Provisions Other income and expenses Income/(loss) from current operations Sales of ...

  • Page 63
    ...) (2,043) 16 141 6 (246) (2,474) 1 1,899 (312) (573) (58) 149 (177) (10) 929 3 169 3,466 3,635 (3) (357) 79 4 (743) 4,209 3,466 89 (372) 224 61 Air-France KLM Annual report 2009-10

  • Page 64
    ... security of air transport and of air space in the Netherlands. E-services Range of ground services offered by Air France and KLM to their passengers, based on new information technologies. E-services notably enable passengers to check in using self-service kiosks or via the two airlines' websites...

  • Page 65
    .... This type of shareholder structure notably allows the implementation of technological or industrial alliances in order to undertake specific projects common to both partner companies. Load factor Revenue passenger-kilometers (RPK) divided by available seat-kilometers (ASK). In the cargo business...

  • Page 66
    ... TUNIS NORTH AMERICA UNITED STATES ATLANTA BOSTON CHICAGO CINCINATTI DETROIT HARTFORD HOUSTON LOS ANGELES MEMPHIS MIAMI MINNEAPOLIS NEW YORK PHILADELPHIA SAN FRANCISCO SEATTLE WASHINGTON CANADA MONTREAL TORONTO VANCOUVER ASIA CHINA CANTON (GUANGHZOU) CHENGDU HONG KONG BEIJING SHANGHAI SOUTH KOREA...

  • Page 67
    ... on 100% FSC recycled paper by Print Alliance. For additional information on the Air France-KLM group, the 2009-10 reference document is available on the www.airfranceklm-finance.com website or on request from Air France-KLM financial communication department, 45 rue de Paris, 95747 Roissy-CDG cedex

  • Page 68
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