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Annual Report
2010-11
together
O P E N & C O M M I T T E D

Table of contents

  • Page 1
    together O P E N & C O M M I T T E D Annual Report 2010-11

  • Page 2
    ... and his brew wish you an enjoyable business trip to New York, Tokyo, Delhi...and more than 850 other bities, letting you take advantage of one of the world's leading networks with our SkyTeam partners. II _ Air France-KLM 2010-11 Annual Report airfranbe.bom making the sky the best plabe on earth

  • Page 3
    ... confidence Jean-Cyril Spinetta, Chairman of the Air France-KLM Board of Directors On the North Atlantic, the leading long-haul market globally, Air France-KLM has established a significant lead over the other alliances, and particularly Star Alliance, through the joint-venture that the Group has...

  • Page 4
    ...KLM are also members of the SkyTeam global alliance, bringing together 14 airlines. Air France-KLM is recognized as the sustainable development leader in the air transport sector and has been a Dow Jones Sustainability Index component for the past six years. 2 _ Air France-KLM 2010-11 Annual Report

  • Page 5
    ... our service culture P.59 P.18, 46, 56 FInAnce hIghLIghts teams mobilized 24/7 Key figures and highlights of the passenger, cargo and maintenance businesses a review of the results for the year • Governance • Consolidated financial statements Air France-KLM 2010-11 Annual Report _ 3

  • Page 6
    ... 31, 2011) 23.6 billion euros Revenues operating income 122 million euros % Breakdown of passenger revenues by geographical region Europe (including France) 3u 16% Africa-Middle East Americas Asia 2u % 27 % 7 % Caribbean and Indian Ocean 71.3 124 4 _ Air France-KLM 2010-11 Annual Report...

  • Page 7
    ...) Passenger 1 Cargo Maintenance 18.1 3.2 Other activities* 1.3 * Regrouping the leisure (Transavia.com) and catering businesses 59u aircraft in operation 168 long-haul aircraft 227 medium-haul aircraft 181 regional aircraft 14 full freighters Air France-KLM 2010-11 Annual Report _ 5

  • Page 8
    .... This first corporate project common to Air France and KLM unveils the Group's goals for the coming years: return to growth and be a leader in the globalized airline sector. The project is structured around three key values: together, open and committed. 6 _ Air France-KLM 2010-11 Annual Report

  • Page 9
    ... opening of the Xiamen service by KLM, the Group now serves an eighth destination in Greater China, consolidating its position as the leading carrier between Europe and China. Over the course of 2011, seven new destinations will be opened by Air France and KLM. Air France-KLM 2010-11 Annual Report...

  • Page 10
    ... reap the benefits of the pro-active recovery plan that we launched at the height of the crisis. "Our results were well above target." Business and Economy class. Lastly, the deployment of our Airbus A380 fleet has enabled us to rationalize flights to major destinations like New York, Johannesburg...

  • Page 11
    .... Air France-KLM and its partners are thus leaders air France-KlM currently operates the leading international long-haul network on "The quality of our offer and the strength of our partnerships are the keys to success." departure from Europe. How do you plan to develop your activity and network...

  • Page 12
    intErViEW the 3 values of the Embark strategic plan Together Open Committed More generally, the development of the skyteam alliance which has welcomed three new members this year is also very promising. How will the alliance contribute to the success of air France-KlM? We were one of the four ...

  • Page 13
    ... French provincial capitals. It is by redefining our model and improving our quality of service that we shall make Air France-KLM not only a leading Group within Europe but a responsible global leader in terms of growth, safety and sustainable development. Air France-KLM 2010-11 Annual Report _ 11

  • Page 14
    ... few months and I must say that the initial results are very encouraging. With teams working in close coordination and a focus on service quality, the two airlines are making a real different vis-Ã -vis customers. This is one of our Group's great strengths. 12 _ Air France-KLM 2010-11 Annual Report

  • Page 15
    custoMers rEinForCinG oUr sErViCE CUltUrE Air France-KLM 2010-11 Annual Report _ 13

  • Page 16
    ... profound transformation we have launched a new customer-centric dynamic within the framework of the Embark strategic plan. This dynamic concerns all our activities globally, meaning firstly, of course, the passenger business but also cargo and maintenance. 14 _ Air France-KLM 2010-11 Annual Report

  • Page 17
    ...Group. How does the new Connect service work? thanks to the mobile number and email address supplied by customers when booking their tickets, air France and KlM will be able to inform them, by telephone, sMs or email, up to 14 days prior to departure of any cancellation, delay or change of boarding...

  • Page 18
    ... on departure and arrival, at check-in and for lounge access, baggage handling, etc. CB. For its part, Air France is developing its long-haul Business product. In late 2010, we started to install a new structure comprising a lie-flat seat bed over 2m in length, one of the most spacious on the market...

  • Page 19
    ... changes led you to review your commercial policy? Yes, Air France-KLM Cargo launched an in-depth redefinition of its commercial policy to adapt it to the new business model. This redefinition was based on a revised customer segmentation and it is easier to program full freighters than passenger...

  • Page 20
    ... passenger travel. e-services enable them to manage their journey from A to Z from home, the office or on the road. Once on board, a high standard of in-flight catering and 600 hours of entertainment on demand make the flight an enjoyable experience. 18 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 21
    ... Blue has four levels: Ivory, Silver, Gold and Platinum. Members benefit from dedicated facilities on the ground and in the air. The miles earned can be redeemed with more than 130 partners. long-haul aircraft 168 passongor Since December 2010, Air France has gradually rolled out a new Business...

  • Page 22
    ... with fuel-efficient aircraft, smarter catering and our CO2ZERO compensation service. Our way is caring for children in need with KLM AirCares. Our way is to lead the way responsibly. Visit klm.com/csr to find out how to make our way - your way. D l m 20 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 23
    Development CONsOliDAtiNg OUR lEADERsHiP POsitiON AIR FRANCE-KLM 2010-11 Annual Report _ 21

  • Page 24
    ...Guayaquil Santo Domingo Boston Detroit New York Pittsburg Philadelphia Cincinnati Washington Memphis Atlanta Dallas Houston 33 daily flights to Asia 16 daily flights to Latin America 31 daily flights to Africa LIMA Rio de Janeiro São Paulo DEstiNAtiONs OPERAtED BY AiR FRANCE AND KlM, AND WitHiN...

  • Page 25
    ... Ho Chi Minh City Kuala Lumpur Entebbe Nairobi Kilimanjaro Dar es Salaam Mauritius Antananarivo La Réunion Johannesburg Nouméa Port Harcourt Douala Kigali Yaounde Malabo Libreville Brazzaville Pointe Noire Kinshasa Luanda Djakarta Denpasar CAPE TOWN AIR FRANCE-KLM 2010-11 Annual Report _ 23

  • Page 26
    Our Group is a player in the global recovery Interview with Bruno Mathou, Executive Vice President, Marketing, Revenue Management and Network, Air France-KLM 24 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 27
    ..., based on both the number of destinations served and seats offered. Despite acquiring a number of companies, the Lufthansa group remains, for the Summer 2011 season, significantly smaller with 10.6% of long-haul capacity between Europe and the rest of the world, versus 13.2% for Air France-KLM...

  • Page 28
    ... was to encourage the return of the best customers, has thus been achieved. Having restructured its medium-haul network in 2010, in April 2011 KLM launched the redefinition of its offer for Business customers. Business class was thus reviewed to respond, as at Air France, to the customer need for...

  • Page 29
    ... centres of excellence Air France-KLM's maintenance division increased its revenues by 7.6% over the financial year by capitalizing on its key strengths: the scale effects on the Group's fleets and those of airline customers, an extensive range of services, the expertise of its teams and the policy...

  • Page 30
    28 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 31
    ...Air France of a seasonal service to Cape Town in South Africa. The Group's development in Africa is in response to a strong commitment to supporting the growth of economic relations between the African continent and the rest of the world. Fishermen, Sierra Leone AIR FRANCE-KLM 2010-11 Annual Report...

  • Page 32
    ...youngest fleets in the world. Air France is the first airline to offer the A380 bound for Africa, the aircraft having been inaugurated in February 2010 on the Paris-Johannesburg route. On board flights to Brazzaville and Pointe Noire, customers benefit from new Business seats whose increased comfort...

  • Page 33
    DEVElOPMENt Agricultural landscape, Sierra Leone AIR FRANCE-KLM 2010-11 Annual Report _ 31

  • Page 34
    ... global power. China is stepping up its business and leisure interaction with the rest of the world. Air France and KLM participated in this dynamism by carrying more than 1.8 million passengers on their services to this major country where their presence dates back more than 70 years. The Group...

  • Page 35
    DEVElOPMENt Xiamen Island, Fujian province Haicang Bridge, Xiamen Statue of Buddha AIR FRANCE-KLM 2010-11 Annual Report _ 33

  • Page 36
    ...financial results and market shares on the routes operated. This joint-venture is also aimed at increasing the visibility of the Air France and KLM brands in the Chinese market while preserving and reinforcing the position of the Amsterdam-Schiphol and Paris-Charles de Gaulle hubs in Europe. In 2012...

  • Page 37
    ... a modernized fleet. In February, Lebanese carrier Middle East Airlines followed hard on its heels, reinforcing the alliance's presence in the Middle East, a strategic market which is seeing rapid expansion. daily flights dostinations countrios AIR FRANCE-KLM 2010-11 Annual Report _ 35

  • Page 38
    Florida Lifeguard station, Florida 36 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 39
    ... its customers since 2011. On March 21, 2011, KLM inaugurated its first flight between Miami and Amsterdam. On March 26, 2011, it was Delta's turn to launch a daily flight between Miami and London Heathrow. As for Air France, it has been operating three flights a week to Orlando out of Paris-CDG...

  • Page 40
    ...TRAVELING HAS NEVER BEEN SO SEAMLESS. With 14 SkyTeam members and a large number of partners to connect you to the world, traveling is seamless. More than 850 destinations across all continents make it easy to get wherever you need to go. skyteam.com o r t 38 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 41
    opErations Teams mobilized 24/7 AIR FRANCE-KLM 2010-11 Annual Report _ 39

  • Page 42
    ...crew. Ground flight coordination Meantime, all the decisions regarding the ground operations are made by the hub's Control Center: parking stands for the aircraft, passenger and baggage handling, oversight of the teams intervening around the aircraft, etc. 40 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 43
    ... teams check passenger identity documents and tickets while the crew welcomes them on board. Flight monitoring After take-off, the operation of the aircraft is monitored by the OCC which provides en route weather reports as well as technical assistance to the crews. AIR FRANCE-KLM 2010-11 Annual...

  • Page 44
    ... hubs Zurich 4,941 ParisCharles de Gaulle 25,624 Munich 6,354 The dual hub of Air France and KLM is one of the cornerstones of the Group's strategy. At the heart of this dual network are two powerful hubs, Paris-Charles de Gaulle and Amsterdam-Schiphol, interlinked by some dozen daily flights known...

  • Page 45
    ... of service quality everywhere in the world, Servair is actively engaged in a process to consolidate and develop its international network with local partners, the guarantor of respect for local specificities and the corporate culture specific to each company. AIR FRANCE-KLM 2010-11 Annual Report...

  • Page 46
    ... Review Team. Following these recommendations, a Flight Safety Committee was created within the Air France Board of Directors, tasked with monitoring the safety of operations and reviewing any issues relating to flight safety and the relevant indicators. 44 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 47
    The captain and his crew wish you a delicious trip with top-notch chefs' menus in La Première, gourmet meals in Business Class, varied menus in Voyageur Class. airfrance.com making the sky the best place on earth

  • Page 48
    ... 3.2 By calling on Air France-KLM Cargo's services, customers benefit from a vast and dense network based on two operating systems, Paris-Charles de Gaulle and Amsterdam-Schiphol. The two airlines are also members of SkyTeam Cargo, to date the only global alliance of air freight transporters...

  • Page 49
    HiGHliGHTs cargo Air France-KLM now prioritizes the marketing of the bellies of passenger aircraft. Bellies and combis accounted for 67% of capacity versus 33% for full freighter aircraft. full freighters 14 The new cargo strategy reduces the Group's environmental impact. The increased load ...

  • Page 50
    P P 48 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 51
    beHiNd THe sCeNes iN THe GRoUP PEOPLE AIR FRANCE-KLM 2010-11 Annual Report _ 49

  • Page 52
    ...customers, aircraft on the ground cost a lot of money, and they really need the engines to be delivered on time. What i like best about my job: teamwork and organizing the workflow so that, at the end of the day, the customer receives the delivery on time." 50 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 53
    ... head the crew and coordinate skills in what is, above all, a team effort. What i love about my job is the diversity: diversity in terms of destinations, the people you meet and the operational situations experienced...my passion for flying remains intact." AIR FRANCE-KLM 2010-11 Annual Report _ 51

  • Page 54
    ... Station Manager at Lomé (Togo), Air France-KLM "The working day of a Head of station is spent with his or her team, planning the departure and arrival of the aircraft. You need to deal with everything: the crew, the aircraft, the cargo, etc. and of course, most importantly, the customers! You...

  • Page 55
    ...and how to avoid them. We learn from experience: improving individual protection equipment, clear demarkation of working zones...most of the good ideas come from the operators themselves and my job is to deploy them and ensure that they are widely adopted." AIR FRANCE-KLM 2010-11 Annual Report _ 53

  • Page 56
    ... that enables the implementation of a veritable brand strategy. since most of the team is located in amsterdam, i work on a daily basis with my counterparts in the other airlines, which means the opportunity for a real insight into other ways of working." 54 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 57
    ... assistance. it can be passengers travelling for business or families going on holiday. it is challenging sometimes but i am always satisfied to see customers happy and properly checked in. i love travelling and enjoy sharing this passion with customers." AIR FRANCE-KLM 2010-11 Annual Report _ 55

  • Page 58
    ...business. In addition to the services delivered to the Group's fleets, one third of activity is realized with third-party customers in return for revenues representing more than 4% of the Group's total revenues. The maintenance activity operates under the Air France Industries KLM E&M brand (AFI KLM...

  • Page 59
    ... for corporate social responsibility. Following the evaluation audit carried out in November 2010, AFI, the first company to be assessed based on these criteria, became the first maintenance operator in the world to benefit from this new international standard. AIR FRANCE-KLM 2010-11 Annual Report...

  • Page 60
    F N C 58 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 61
    ... to be characterized by numerous unforeseen events and enduring uncertainties, Air France-KLM recovered strongly. A look back at the 2010-11 financial year and at the financial prospects for the Group, whose results improvement remains to be consolidated. AIR FRANCE-KLM 2010-11 Annual Report _ 59

  • Page 62
    ... between revenues and operating expenses, excluding operating leases, depreciation and provisions. It makes it easier to compare different airlines whatever the method used to finance their fleets. billion euros generated by the fuel hedges in seven years 60 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 63
    ...strategy has brought in â,¬2.5 billion, even if its impact was negative to the tune of â,¬800 million over the last two financial years. It should again be positive this year at some â,¬500 million if the oil price remains at the current level, i.e. around $115. AIR FRANCE-KLM 2010-11 Annual Report...

  • Page 64
    ... COst-sAViNgs PlAN: approaching E600 million of savings in the 2010-11 financial year 11% 2009-10 2010-11 3% 6.2 5.9 â,¬595 m 44% GEARING RATIO 2009-10 2010-11 115% 85% 42% • Procurement and productivity • Process • Fleet • Distribution costs 62 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 65
    ...PEtEr HArtMAN President and Chief Executive Officer of KLM PiErrE-HENri gOUrgEON Chief Executive Officer of Air France-KLM and Air France governance The Group's governance is ensured by its Board of Directors, chaired by Jean-Cyril Spinetta, and by the Group Executive Committee, headed by Pierre...

  • Page 66
    ..., Air France-KLM Cargo and Managing Director of KLM FréDériC gAgEY CHristiAN BOirEAU Executive Vice President, French Sales, Air France-KLM 64 _ AIR FRANCE-KLM 2010-11 Annual Report Executive Vice President, Fleet Management, Air France-KLM and Managing Director and Chief Financial Officer, KLM

  • Page 67
    ...strategic planning, Air France-KLM EDOUArD ODiEr PEtEr HArtMAN President and Chief Executive Officer of KLM Executive Vice President, Information Systems, Air France-KLM and Air France EriK VArWiJK Executive Vice President, International and The Netherlands, Air France-KLM and Managing Director...

  • Page 68
    ... Europe and the United States. Furthermore, every year the investor Day is the opportunity to meet with the Group's operational executives. DEDiCAtED tEAMs the shareholder relations team is responsible for day-to-day contact with individual shareholders informing them of the Group's financial news...

  • Page 69
    ... site visits offered the opportunity to meet the professionals in the passenger, cargo and maintenance businesses. ACCEss tO rEAl-tiME iNFOrMAtiON MEMBErs OF tHE Air FrANCE-KlM CONsUltAtiVE COMMittEE FOr iNDiViDUAl sHArEHOlDErs gérard Audran, Research Executive, Aix-en-Provence rené Chateauneuf...

  • Page 70
    ... for sale Other short-term financial assets (including â,¬149 million of deposits related to financial leases and â,¬574 million of investments over between three months and one year at March 31, 2011 versus a respective â,¬139 million and â,¬343 million at March 31, 2010) Inventories Trade accounts...

  • Page 71
    ..., 2011 March 31, 2010 Issued capital Additional paid in capital Treasury shares Reserves and retained earnings EQUitY AttriBUtABlE tO EQUitY HOlDErs OF Air FrANCE-KlM Non-controlling interests tOtAl EQUitY Provisions and retirement benefits Long-term debt Deferred tax Other non-current liabilities...

  • Page 72
    Consolidated income statement in â,¬ million March 31, 2011 March 31, 2010 sAlEs Other revenues EXtErNAl EXPENsEs Aircraft fuel Chartering costs Aircraft operating lease costs Landing fees and en route charges Catering Handling charges and other operating costs Aircraft maintenance costs Commercial...

  • Page 73
    Consolidated statement of cash flows in â,¬ million, period from April 1 to March 31 2011 2010 Net income for the period - Equity holders for Air France-KLM Non-controlling interests Amortization, depreciation and operating provisions Financial provisions Gain on disposals of tangible and ...

  • Page 74
    ...Alexandra Compain Tissier This document has been printed by Print Alliance on 100% FSC recycled paper. Air France-KLM's 2010-11 Annual Report, Registration Document and Corporate Social Responsibility Report are available at the website www.airfranceklm.com 72 _ AIR FRANCE-KLM 2010-11 Annual Report

  • Page 75
    ... and compensate for CO2 emissions. With your help we can make even more of a difference. Find out how easy, effective and inexpensive it is to compensate for your personal CO2 emissions on every flight you make. Visit klm.com and use KLM's CO2Zero service. AIR FRANCE-KLM 2010-11 Annual Report _ III

  • Page 76
    www.airfranceklm.com