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Net income stood at €931 million, up by €471 million, further supporting the equity restoration.

The adjusted operating free cash flow decreased to -€434 million due to seasonality in the ticket sales. The net debt ended at €5.0 billion, an improvement of €1.3 billion compared to year end 2022.

Passenger unit revenue driving the group unit revenue increase

In the third quarter 2023, Air France-KLM welcomed 26.9 million passengers which is 7.6% above previous year. As capacity increased by 6.0% and traffic grew by 7.6%, the load factor increased by 1.3 points compared to last year.

The Group reached a very strong group passenger unit revenue per ASK, up +3.3% compared to last year. This increase was driven by an increase in load factor on the Long-haul, Short & Medium-haul and Transavia, and an increase in yield on the North Atlantic, Africa, Caribbean & Indian Ocean and Short & Medium-haul.

Group unit cost per ASK at constant fuel and constant currency is up 3.6% versus last year (3.4% excluding furlough), showing an improvement compared to Q2 2023 and in line with the trajectory announced during the previous results presentation. Group unit cost per ASK increase was driven by an increase in salary cost, which was partly compensated by a higher productivity, profit sharing and flight related cost. The change year-over-year in Group’s unit cost per ASK is expected to further decrease in the fourth quarter and the low-single digit increase outlook provided remains unchanged.

  

Equity restoration: Air France-KLM and Apollo Global Management sign a definitive agreement for a quasi-equity financing for €1.3 billion, with a potential upsize to €1.5 billion

On October 26^th, 2023, Air France-KLM and Apollo Global Management (NYSE: APO) announced having signed a definitive agreement between Apollo-managed funds and entities and a dedicated operating affiliate of Air France-KLM regarding a €1.3 billion financing, accounted as quasi-equity under IFRS, with the option for Apollo to increase the nominal amount up to €1.5 billion in total, prior to closing.

This dedicated operating affiliate of Air France-KLM will hold the trademark and most of the commercial partners contracts related to Air France and KLM’s joint loyalty program (Flying Blue). The affiliate will become the exclusive issuer of miles for the airlines of the Group and partners, enabling Flying Blue’s scalability and enhancing its growth prospects.

Under the agreement, Apollo-managed funds will subscribe to perpetual bonds issued by this dedicated operating affiliate. The financing will be accounted as equity under IFRS and is non-dilutive to shareholders. The structure is similar to two previous financings raised by Air France on its pool of spare engines in July 2022 and its maintenance activity components in July 2023.

This transaction will allow Air France-KLM to make an additional step towards its commitment to restore its IFRS equity and strengthen its balance sheet, in addition to net profit generation.

The perpetual bonds will bear a coupon of 6.4% for the first four years, with the ability to redeem with an overall financing cost of 6.75% on the first call date.

Air France-KLM will continue to manage and operate its loyalty program Flying Blue, and Air France and KLM will keep full ownership rights of their customer database.

The agreed structure will incur no changes for Flying Blue members. It will not affect social aspects for Air France, KLM or Air France-KLM employees’ contracts.

Air France-KLM to team up with SAS AB through equity and commercial cooperation

On October 3^rd, 2023, Air France-KLM announced its intention to take up to a maximum 19.9% non-controlling stake in the share capital of the reorganized SAS AB, subject to approvals and conditions. Via this minority stake, the Group’s ambitions is to enhance its footprint in Scandinavian markets through a commercial cooperation between its airlines and SAS AB.

Should this transaction be approved and all the other conditions (including regulatory clearances and cancellation of all existing shares of stock of SAS AB) be satisfied, the Consortium, together with the Danish State, would invest USD 1.175 billion of which USD 475 million in common shares and USD 700 million in the form of secured convertible bonds.

Air France-KLM’s investment would represent a total of USD 144.5 million, of which USD 109.5 million would be invested in common shares and USD 35 million would be provided in the form of secured convertible bonds. Definitive agreements between the members of the Consortium would include specific provisions whereby Air France-KLM’s stake may be increased such that Air France-KLM may become a controlling shareholder, after a minimum of two years, subject to among other things, certain regulatory conditions and financial performance.

Air France-KLM’s investment will be in line with the Group’s medium-term outlook.

In parallel to the transaction, and subject to the satisfaction of certain conditions including SAS AB’s exit from Star Alliance, Air France-KLM will seek to establish a commercial cooperation between its airlines and SAS AB. In doing so Air France-KLM will strengthen its footprint in Scandinavian markets, where the SAS brand and loyalty program are well-established. Such commercial cooperation would benefit Scandinavian customers through extended connectivity and broader access to the worldwide network of Air France-KLM.

Air France-KLM launches a global employee share purchase plan

On September 28^th, 2023, Air France-KLM launched "Partners for the future", an employee share purchase plan offered to around 75.000 eligible employees (circa 95% of the group’s workforce) in around 20 countries.

The objective of this plan is to strengthen the link between Air France-KLM and its employees by giving them a long-term stake in the Group's objectives, performance and future success.

The proposed shares will be issued as part of a capital increase that may not exceed 3% of Air France-KLM's share capital. This operation is carried out in accordance with the 34^th and 35^th resolutions of the Annual General Meeting of June 7, 2023.

Air France-KLM reverse share split and capital reduction

On August 31^st, 2023, Air France - KLM announced the completion of the reverse share split of all outstanding shares of the Company and the simultaneous acknowledgment of the capital reduction by reduction of the nominal value of each share, as decided by the Board of Directors at its meeting on 4 July 2023 and in accordance with the 36th and 37th extraordinary resolutions of the Combined General Meeting of 7 June 2023.

These transactions result in:

• The exchange of 10 ordinary shares in the Company with a par value of €1 each for 1 new share with a par value of €1 (taking into account the simultaneous capital reduction reducing the par value of each new share from €10 to €1, i.e. a reduction of €9 per share allocated to the "share premium" account).

• The Company's share capital standing at 257,053,613 euros divided into 257,053,613 shares (ISIN code FR001400J770) with a par value of 1 euro each.

2023 OUTLOOK UNCHANGED

Capacity

The Group expects the capacity in Available Seat Kilometers for Air France-KLM Group including Transavia at an index of:

• Above 95% for the fourth quarter of 2023

• Circa 95% for the Full Year 2023

All indices compared to the respective period of 2019.

Unit cost²

The Group expects a low single digit increase compared to 2022.

Capex

Full year 2023 net capex is estimated at 3.0 billion euros.

Business review

Network: Operating result more than doubled

Compared to the third quarter 2022, total revenues increased by +4.2% to €7,199 million. The operating result improved by €240 million and amounted to €1,091 million. The increase in revenues was driven by the network passenger business while the Cargo revenues declined compared to the third quarter last year due to a further normalization of the market.

Robust growth in unit revenue

Third quarter 2023 capacity in Available Seat Kilometers (ASK) was 4.6% higher than last year and at 89% of 2019 level, which is in line with the Group’s guidance provided during the second quarter 2023 results presentation (c.90% versus 2019). Higher traffic (+6.0%) than capacity growth has lead to an increase in load factor of 1.1 point, resulting in a total load factor of 89.4% while yield continued to rise (+4% against a constant currency).

This performance had a positive impact on Unit revenue per ASK which rose by 5.7% at a constant currency.

During the third quarter we observed per area the following trends:

North Atlantic
Demand recovery continued to be driven by Point of Origin North America. Yield increased by 6% at a same capacity and load factor level (91%). Corporate traffic stood at 80% of 2019 levels.

Latin America
Demand remained very strong over the summer, enabling to maintain yield performance versus high summer 2022 reference on traffic growth +10% (on capacity +9%) reaching a load factor at 93%.

Asia & Middle East
Capacity in the third quarter has significantly increased versus 2022 by 49%, mainly driven by China and Japan. Nevertheless, this is still -33% below 2019 levels. Due to this significant increase in capacity, yield slightly decreased by -1% compared to last year (but still 39.5% above 2019 level), however load factor increased thanks to strong demand.

Caribbean & Indian Ocean
The third quarter continued to show capacity reductions compared to 2022 (-24%) due to redeployment of fleet to other long-haul areas and a high comparison basis in 2022. This lower capacity pushed the load factor up to 90% and yield improved by 20%.

Africa
Despite the geopolitical situation in Niger, Mali and Burkina Faso, the Group enjoyed continued strong traffic dynamics with load factor up 2 points compared to 2022. Robust yield at 4% above 2022.

Short and Medium-haul
Capacity increased by +3% with different dynamics: KLM Medium Haul up +13% (impacted by operational issues last year), while Air France Medium Haul is stable and Air France domestic down -18%. The Group was able to increase the yield +3% on the back of a stable load factor at 85%.

Cargo: continued normalization of the activity translating in a decrease of unit revenues

Compared to last year, total revenues dropped by -32.8% (as a reminder, revenue decreased by -33.9% in Q2 2023). The traffic increased year over year by 0.1% on the back of a strong demand in 2022. The load factor was -1.4 point below 2022, due to the increased belly capacity. The yield declined as well resulting in a decrease in unit revenue per Available Ton Kilometer of -38.9% at constant currency. The decrease in unit revenue per ATK at constant currency has stabilized compared to 2022 (Q3 2023: -38.9%; YTD 2023: -38.3%).

The resumption of the passenger travel resulted in an increase in Available Ton Kilometers of 3.3% versus the third quarter of 2022. Furthermore, some operational issues of the Group’s full freighters resulted in a reduction in South America operations in order to restore reliable operational performance for our customers.

Transavia: Load factor up while capacity growth of 14%

Transavia’s capacity increased by 14.0%, traffic increased by 16.9%, and the number of passengers increased by 17.4% resulting in a load factor 2.2 points above the third quarter in 2022. Transavia is still expanding its network, with a capacity growth in available seat kilometers of +20% compared to 2019 and the routes are yet to mature further. Transavia reached an operating result of €188 million despite the late inflow of new aircraft and wet lease cost to cover this delay.
The forward booking load factor for the fourth quarter 2023 compared to last year is stable and the first quarter 2024 is at a higher level than the year before while capacity continues to grow.

Maintenance business: Operating margin above last year

Total revenues increased by 27.6% compared with the same quarter last year while third party revenues increased by 29.4% at constant currency, showing a robust recovery.

The operating margin in the third quarter stood at 6.0%, which is 0.4 point higher than in 2022 and almost in line with 2019 levels (6.1%).

Air France-KLM and Airbus entered into exclusive negotiations for the creation of a joint venture dedicated to Airbus A350 component support

On September 4^th, 2023, Air France-KLM and Airbus announced that Air France and Airbus have entered into exclusive negotiations to establish a long-term strategic partnership for Airbus A350 component support (supply chain management and repairs), as well as the creation of a worldwide shared-access pool of aircraft components.

The envisaged cooperation would take the form of a 50-50 joint venture between Air France and Airbus and involve the transfer of aircraft components assets belonging to both partners into the joint venture’s pool.

This exclusive partnership would entail a joint commercial offering between Air France Industries KLM Engineering & Maintenance and Airbus, aimed at better meeting the growing long-term maintenance needs of the Airbus A350 worldwide fleet (1,000 aircraft on order and 550 currently in service worldwide) through enhanced capacity, an expanded global footprint, and the development of innovative solutions.

The objective is to finalize the terms of a strategic partnership by the first half of 2024 in line with all compliance requirements, subject to approval by all relevant authorities.

Fleet

Compared to the end of 2022 the group added three B787-10, two A350-900, sixteen B737-800, fourteen A220-300, four Embraer 195-E2 and one Embraer 190. The following aircraft left the fleet: three B737-700, two A321, one A320, five A319, three A318 and three CRJ-1000, as a result the fleet increased by twenty three aircraft.

The Group will continue to invest in new generation aircraft in order to improve its economic performance and will decrease its C0₂ emission and reduce noise and announced recently:

Air France-KLM will place an order for 50 Airbus A350 family aircraft - with purchase rights for 40 additional aircraft - to accelerate the renewal of its long-haul fleet

On September 25^th, 2023, Air France-KLM announced that it plans to place a landmark aircraft order to pursue the renewal and rationalization of its long-haul fleet, to the benefit of the Group’s environmental and economic performance.

This Group order will cover 50 Airbus A350-900 and A350-1000 aircraft - with purchase rights for 40 additional aircraft - with first deliveries expected in 2026 through to 2030. This will be an evolutionary order, providing the Group with flexibility to allocate aircraft within its portfolio of airlines, according to market dynamics and local regulatory conditions.

These aircraft will replace previous-generation aircraft, namely Airbus A330 and older Boeing 777 aircraft. This new order will come in addition to an existing Air France-KLM order for 41 Airbus A350-900s for Air France, of which 22 have been delivered to date.

Air France-KLM will also be among the launch customers of the Airbus A350 Full Freighter version of the aircraft, having ordered 8 aircraft to renew and expand its cargo fleet.

Fleet renewal is the Group’s primary lever to immediately cut CO2 and noise emissions. Alongside the use of sustainable aviation fuel and eco-piloting techniques, it is one of the pillars of the Group's decarbonization trajectory, which aims for -30% CO2 emissions per passenger/km by 2030 compared to 2019. Since the 2000s, Air France-KLM has reduced its noise footprint by 40% and the Group continues to work with all its stakeholders to adapt its operations.

By 2028, the share of new generation aircraft in the Air France-KLM fleet will reach 64%, compared to 5% in 2019.

Strong profitability for both airlines

Air France Group

Air France performance is stemming from a strong performance of long-haul resulting in an increase of revenue of +7.5%. Operating result up +236 million euros compared to last year.

KLM Group

KLM’s revenue grew by +5.9% on the back of improved operations, although not optimal yet, while operating margin stood at 15.7%, representing an improvement of +2.0pt compared to last year.

Nb: Sum of individual airline results does not add up to AF-KLM total due to intercompany eliminations at Group level.

******

The results presentation is available at www.airfranceklm.com on October 27, 2023 from 7:15 am CET.

A conference call hosted by Mr. Smith (CEO) and Mr. Zaat (CFO) will be held on October 27, 2023 at 08.30 am CET.

To connect to the webcast, please use below link:

https://channel.royalcast.com/landingpage/airfranceklm/20231027_1/

Income statement

* Restated figures include the change in accounting principles for CO2 quotas

Consolidated balance sheet

* Restated figures include the change in accounting principles for CO2 quotas

Statement of Consolidated Cash Flows from January 1 until September 30

* Restated figures include the change in accounting principles for CO2 quotas
(1) Participation to warrants issue of GOL 26 September

Return on capital employed (ROCE)

^{(1) Proforma figures include restatement related to change in accounting scheme of ETS quotas (see financial statements of the period).}

^{(2) Compared to previous periods, the working capital has been restated to exclude the report of social & fiscal charges granted consequently to Covid.}

^{(3) Excluding the report of social & fiscal charges granted consequently to Covid.}

Net debt

Adjusted operating free cash flow

* Restated figures include the change in accounting principles for CO2 quotas

Bridge from EBITDA to Self-financing capacity

* Restated figures include the change in accounting principles for CO2 quotas

Unit cost: net cost per ASK

Group fleet at 30 September 2023

2023 TRAFFIC

Passenger network activity

Transavia activity

Total Group passenger activity

Cargo activity

Air France activity

KLM activity

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1 change is nominal and not corrected for fuel price
2 against a constant fuel price, constant currency and excluding furlough contribution
3 Excluding Transavia

Attachment

• Q3 2023 - AFKLM - Press release