Earnings Call: Q2 2021

Jul 30, 2021

Good morning, everyone. First of all, thank you for your patience. We've had a technical Issue here with our systems. I'm hoping it works right now. We're just going to do a quick little test. Okay. So I'm here with Steven Zard, who as You may now took over from Frederic Gaget on July 1 as Group CFO. We are at the Gare des Amelites in Central Paris I'd like to welcome you to the Alfons KLM's Q2 2021 results call. Unfortunately, we are Continuing to deal with the ongoing impacts from the COVID-nineteen crisis with travel restrictions still in force in many of our markets. However, we are seeing strong demand from our customers to travel when and where it is possible to fly. We are therefore optimistic when looking at the months ahead, And we expect a steady recovery when travel restrictions to and from our key markets are lifted. We're keenly waiting for the U. S. Government to lift border restrictions on foreigners in a reciprocal manner to what the European Commission did back in June that we can fully resume service across the Atlantic, which is our largest market. Turning to Page 3 of the presentation. The metrics on the right side all show a strong improvement of the group's performance in Q2 2021 Compared to Q2 2020, the period in which this unprecedented crisis first hit. In Q2 2021, our network passenger capacity It's still approximately half of our Q2 twenty nineteen capacity, but we carried 4 77% more passengers than in Q2 twenty twenty. In addition, our cargo activity is healthy and continues to show strong signs of resilience. The outcome is a sharp increase of 133% Our overall group revenues for this quarter compared to the same period last year. Our EBITDA loss was reduced to minus €248,000,000 Better than the group's previous guidance, and our operating results stands at minus €800,000,000 improving by €800,000,000 compared to last year. In addition, our adjusted operating free cash flow is positive at €210,000,000 thanks to strong ticket sales. We have a strong level of cash on hand at approximately €9,400,000,000 at the end of June, and we continue to strengthen our balance sheet. We successfully increased the group's capital by EUR 1,000,000,000, converted our direct French state loan of EUR 3,000,000,000 into perpetual hybrid instruments and successfully issued a senior bond of EUR 800,000,000 For which the cash will be received in Q3, resulting in a material net debt improvement. Net debt is down by approximately 25% From EUR 11,050,000,000 on December 31, 2020, to EUR 8,340,000,000 on June 30, 2021. Stephen will provide you with further details during his portion of the presentation. Okay, moving on now to Page 4. The group outlined its transformation and simplification plans during our Capital Markets Day in November 2019 with the goal of significantly improving the group's This plan still stands, and we are moving To get back on track as quickly as possible. It is based on the following 6 pillars: 1, optimize our operating model with our 3 main brands Grow profitable passenger revenues, maximize group businesses and synergies, maintain trust and transparency with our employees, modernize our fleet And lead the way in sustainable aviation. Our plan was showing positive results before the crisis hit and the group is Fully engaged in adjusting to our new reality, accelerating our efforts to achieve the goal of our base plan. Turning now to Page 5. We are working full steam ahead on our transformation plan to solidify the future of Aframax KLM. We launched hundreds of projects to make our group more efficient and effective, Such as the further rationalization of our fleet, the restructuring of the French domestic network, the massive renegotiation of contracts And the streamlining of our organization, while ensuring a stable social climate and a strong alignment with our labor partners, which remains an absolute priority. Our restructuring programs are showing improved results with an expected structural savings compared to 2019 of €2,100,000,000 which is €800,000,000 at KLM and €1,300,000,000 at Alfhouse. And this is all by the end of 2022. This comes through via voluntary departure schemes and with no forced leave. And we are also succeeding in streamlining our organization and driving efficiencies through a total reduction 14,000 full time equivalents, that's minus 5,500,000 at KLM and minus 8,500 at Air France. Moving now to Page 6. In order for the Air France KLM Group to affirm its leadership role in the sustainable transition of the airline industry, we have strong successive and specific phased Commitments. By 2024, in the French domestic market, a reduction of 50% of our absolute CO2 emissions compared to 2019 levels. By 2,030, carbon neutrality for our ground operations and an overall reduction of 50% of our CO2 emissions per passenger Per kilometer compared to 2,005 levels. And by 2,050, the group commits to net 0 emissions. These commitments are fully aligned with our current legislative context and with the commitments made to the French and Dutch states as part of the conditions For financial support, to reach these milestones, we have identified a variety of levers that will successively activate And that will be in the short term. These levers are mainly the renewal of our fleet, the use of carbon offsets and the reduction of emissions through operational improvements. In the medium term, it is primarily the adoption of sustainable aviation fuel. And in the long run, we anticipate breakthroughs and the use of new sources of energy. Our sustainability trajectory highly depends on the use of sustainable aviation fuels For which we fully support the development of the sustainable European industrial sector. So just we've got In the room with me here, we have Steven Zatt, who is, as I said, the group CFO we have Peter Albers, who is the CEO Of KLM, Andre Guay, CEO of Air France. We also have the 2 CFOs of Air France And of KLM, we have Erik Spaldheim, who is the CFO of KLM And we have Alexander Blanqulet, who is our new CFO at Alphonse. And all of them will be happy to take specific questions There is something that has to be specifically answered by one of these colleagues of mine. So Steven, please go ahead. Good morning, everybody. Let me start by saying that I'm thrilled to be here this morning as the new CFO of Franz Kehlen. It will not be easy to succeed in aviation legend as Frederic Hagelin. Those are very big shoes to fill, but you can count on my commitment. If you have any specific request, do not hesitate to contact my Investor Relations team. Let's talk about the results of our beautiful company. So if you go to Page 8, you see that the recovery is really visible since June. You see that the booking load Increasing and while we at the same time increasing our capacity. There are 2 things. There's a big travel appetite Where people can travel, they will travel. But of course, we are still far away from the 2019 levels. So if you look at the graph on the top of the left, you see that we have increased capacity from May from, let's say, levels below 50% To 53% in June and over 60% in July. And that goes hand in hand with the load sector increase. So in May, we were still around 40% in load sector. In June, we are above 50%. And in July, we are even at 67%. And actually, it is in all our markets the case. If you look at the long haul, you see that since the opening of the EU for the U. S, For vaccinated Americans, you see that we can increase our capacity steeply, while we at the same time fill our planes With more passengers. And it's very important because we have at this site, we have cargo revenues supporting this operation. And if you look at the total picture, 80% of our flight contribution is coming from the long haul operation. If you go to the medium haul Europe, You see that we are steeping up our capacity in the summer. So for July, we are close to 80%. And at the same time, we are able to fill it with even more passengers as a load factor than we did in the previous month. So very strong results over there. On the French domestic, the soybean is a bit different because we never want to go back. We are not going to go back to the 2019 levels. So you see that we are increasing capacity to 60% because this is only the network part. It doesn't include Transavia. And at the same time, you see we are closing the gap to the booking load factors, which we are used to. So Good to see that we see some recovery in the market and, of course, still far away from the 2019 levels. If you go to Page 9, then you see that, of course, this increase of capacity and at the same time, this increase of load factor supports the growth of our revenues. We have €500,000,000 more revenues in than we had in last quarter. And that has a significant impact on our EBITDA. As you know, we guided The EBITDA at approximately €600,000,000 loss, and we beat actually this level to minus €248,000,000 And it's driven partly that's driven mainly by the fact that we are able to gain variability on our costs. We are now at an 80% Variability of our cost side, which is very strong. So after the real hard lockdown in the COVID crisis, we were at levels of 400 to 600, let's say, per quarter. And we are now reducing getting closer to breakeven at the moment. If we then go to the score sheet, Ben already explained the explosion in revenues. In the fuel expense, There are actually, there's one main element, which is the capacity. So out of the €300,000,000 there's €200,000,000 coming from capacity. Of course, the oil price increased significantly over the period. In Q2, we had a very strange Fuel price, as we can still remember, with even some days with a negative fuel price, the average was around $33 per barrel. In the second quarter This year, we are at €69,000,000 But we had in Q2 2020 still negative hedges in of around €50,000,000 We see now that our hedge policy becomes effective. So we had a €50,000,000 contribution on positive hedges, which reduced the price impact, let's say, Only EUR 100,000,000 over the 2 quarters despite this spike in oil price. On EBITDA, as already said, we are at minus 248 on the road to get to a breakeven EBITDA. And then on the operating results, we are slashing it, let's say, with around 50% compared to, of course, the very Low level we had in the Q2 2020. If we then go to net income, you see still that we have a significant net income. It's Very important to understand that it is mainly an accounting effect. The accounting impact is coming From the derecognition of the KLM count patient, which is very good news, because at the end, this will decrease Our guess on the balance sheet with 1,000,000,000. So I will explain later what is exactly happening, but the impact Before tax was €938,000,000 And if you take all the positive tax impacts in the quarter, you get to €700,000,000 impact below But I will get further to that later in the presentation. If you look at the different businesses, As already explained, of course, on the passenger side, with the growth in ASKs, you see that our revenues are growing. What is very positive news is still we are able to have a unit revenue, which is at the same level as the Q2 of 2020. You know that in the Q2 of 2020, there was very limited capacity in the market due to all the hard lockdowns. What is very good to see is that we can keep this very high level of unit revenue and at the same time increasing our capacity on the cargo with 60 6%. So that means a very significant contribution to our profit and loss. But still, we are at minus 645 And 54, sorry, which is still of course not at the levels of 2019, because in the second quarter we should make profits In our business. Transavia slightly recovering compared to the 2nd quarter, Still very much hampered by the difficult travel restrictions which are in place. And then there's also good news from our maintenance business. There is €300,000,000 improvement. There's €200,000,000 coming from incidental. So let's say, we cleaned the balance sheet last year Related to outstanding customers and to inventory. So if you take that out, we have Actually, an improvement of €100,000,000 which comes from the strong cost reductions over there and the benefit, of course, that the operator, Air France and KLM are growing, Plus the 3rd party growth. So good to see that our maintenance business is at least at breakeven level, which is very helpful for the coming period. Then we go to the results of our airlines. As you can see, Air France grew more than The main reason for that is that KLM reduced less capacity in Q2 2020 than Air France. So now we are getting more back into business also on the funds level. So you see that the revenue grew is 200%. For Okay. Let me it's only grown by 72%. If you look at the change in operating results, you see also, of course, a bigger impact on Air France also due to the size. So it's €500,000,000 versus €300,000,000 There is still a gap. We see Air France is at the loss of €566,000,000 where KLM is at €185,000,000 There are actually two reasons. One is that KLM could go faster in the labor reduction. There's more higher and temporary staff. And the implementation of labor restructuring goes faster in the Netherlands than in France, where we have to take step by step by step. But we see now that at the end of this year, Alfonso will be at minus 30% in staff compared to KLM, who's already at the target Close to minus 16%. And we have just signed or have an agreement on the PayDigi, the result of some restructuring at ROCE, And the second reason is that the NOW scheme is richer Then let's say the activity per shell where you have to put people really as further under the NOW scheme, people can still work. If we go then to the free cash flow, this is actually the very good news. Both carriers are cash positive. So that is very good news. Of course, we start with our operation with a minus €500,000,000 in cash flow, but we had a significant Improvement of working capital of €1,200,000,000 which is mainly driven by the advanced ticket sales. So 70% Of that amount is coming from the advanced ticket sales, in which, by the way, is included a €500,000,000 refund. So if you would, It's even deducted, let's say, from that amount. Then we had a very limited investment. We are still very strict in our Investment policy and then you get to an operating free cash flow of €427,000,000 And if you then take the payment of the lease debt, it's 2.17 €15,000,000 off, so it gets to above €200,000,000 So very good news for the first time since the crisis. We have an operating free cash flow, which is positive, Which is, I think, a hopeful sign for the future. Let's then talk about the net debt development. On the left side, you see the free cash flow evaluation of the first half year. So we started the year with €11,000,000,000 of net debt. If you take then the adjusted free cash flow, which we lost, We will increase the net debt by €1,100,000,000 And then due to the capital strengthening, which we did in April, €3,000,000,000 by converting the French state loan into a hybrid and €1,000,000,000 getting it of new equity in from the market and from the current shareholders, The French state and China Eastern, you see that we have in net, we reduced our net debt with €3,000,000,000 So going to the road Actually to our target where we want to be targeted at the net debt of EBITDA before any restructuring of our equity Of 3 net debt EBITDA of a level of around 3. So we are on the road. I think we did some Major exercises this quarter, we put an €800,000,000 bond in the market. We did the recapitalization. So we are on the right track to reduce our net debt to more sustainable levels. If you then go to Page 15, this is the picture of the derecognition of the KLM Grant Pension Fund. As already said, is very good news by DIRIS in the balance sheet. So congratulations to the team who negotiated it. We started with a net asset €211,000,000 we made a deal with the unions to pay, let's say, €50,000,000 So that's the only cash out actually, which we have. And then unfortunately, you could say you saw that during the period, the net Assets grew and that is 50% coming on the asset side, which is growth due to the strong capital markets and 50% on the liability side. This is just accounting. There's no cash over it. It's also, let's say, a net asset, which we do not cannot touch due to the obligations, which there are At the Dutch pension regulation, so actually what we had to do is to take this OCI impact plus the opening net pension asset, We have to watch that through the P and L to take it out of our equity. But I think it's a very good step we made to derisk further our Balance sheet. So then on the recapitalization. As we all know, we did some significant steps in the Q2. We increased our share capital With existing shareholders, we did a €3,000,000,000 of conversion of the French state loan into quasi equity. So this step is actually done. And now we are preparing actually for the next step. So the first thing where we are working on is to reduce the debt Wall which we had in 2023. We have €4,000,000,000 of the PGA, which is a bank loan, Guaranteed by the French state for 90%. We had to pay that back in 2023. What we are currently discussing with the French state and with the banks and the discussions are very, very in a positive atmosphere It's actually to split this in 3 amortized tranches of €1,300,000,000 per year. But what we will do, we will also Take €500,000,000 of, let's say, €800,000,000 which we put in the bond market, we will use that to redeem already a part of This state guarantee loan. So that will reduce our redemption profile in 2023 with €500,000,000 So you get to €800,000,000 in 20 2,000 sorry, 2023,000,000 and €1,230,000,000 in 20 20 4 and 20 25. At the same time, we signed an EMTN program. So we can with this EMTN program, we can easily and go very fast to the debt markets To support our financing strategy and also at the aim actually to, at the end, gradually repaint all the state aid. And then we are currently selecting an ESG rating offers to make sure that we have an ESG rating that gives us Actually, to green money, which will also support our financing strategy. Then on the equity side, I think there are 2 things important to mention. We are preparing actually for all the tools Which can be used under the different, let's say, circumstances. Currently, the Dutch state is pursuing discussions with the EU On the recapitalization measures of KLM, which is very good news. And at the same time, as you know, we have up to €3,500,000,000 on which we can As an allowance from the AGM to use it in equity linked instruments. So we will we are currently working on several instruments. For sure, you are going to ask the timing. I cannot say you anything on that one. But be aware that we are working on several tools to execute In the coming periods. And the target is at the end from our business, we have, let's say, a net debt EBITDA level of 3 in 2023, and that will be reduced then to 2.0, which is actually the level Which we had before the crisis and which also our peers have before the crisis. So this is the target for 2023 with all these instruments Taking into place. On Page 18, you see then actually this debt profile. So that is after, let's say, the restructuring of So we had a debt wall of €4,500,000,000 in 2023. And you see now that we reduce it With this exercise to €1,300,000,000 if you also take pay €500,000,000 already of this page here. And then you see that we, of course, increased the In the years after, in those years, let's say, we expect that the business is back to the 2019 levels, and we will generate cash To pay off these loans or to renegotiate the loans. So having said, let's say, the first Sign of recovery, which we saw in the Q2. We still see also for July August a very positive market dynamic. We guide you to 60% to 70% of the capacity compared to 2019. So we will ramp up further The capacity and if you look at the right, you see that at the French domestic for the summer period, we are, Let's say at levels between 58% 65% with already decent booking load factors into July. Of course, the pattern of booking is very late. So of course, the numbers you see for August September will increase over the period. And then we will go back to lower levels in September because there's still uncertainty in the market and we have to adjust and be agile and that's something we learned over this crisis To be very agile on our network, if we see demand is not coming back after the summer. On the long haul, we expect Actually to keep the current levels in of July, so we will be at around 2 thirds of the capacity. And you see now in July decent load factors. And don't forget, this is also all supported with significant cargo revenue. So with these levels Load sector, we are able to generate sufficient contribution to our profitability. And then on the medium haul, you see around 80% in for July August, and then we scale back to 72% In September and also on the medium haul, you see that on July. And also there, the bookings are late, but the weather conditions of the last days in Paris And Amsterdam helps, of course. So we expect still there good load factors in for our medium haul European business. Then on Page 21, you will see the cash. So still very good cash level, €9,400,000,000 including increase of €1,000,000,000 There is €800,000,000 not yet in. We released 2 senior bonds to the markets. Those were done in June, But we received the money just on the 1st July. So let's say, if you count those in, you are above €10,000,000,000 at €10,200,000,000 So what do we expect for the coming period? I think we will expect a positive EBITDA in Q3 For both carriers, both Air France and KLM, we still have a risk on the cash refunds, but We are getting now more or less to a normal level of €500,000,000 You should not forget that in normal circumstances, we also They, of course, back tickets from, let's say, last periods which are not flight by the customer. So if you look at this €1,000,000,000 at the end of March, We're at €1,200,000,000 We have then €640,000,000 in vouchers, where we have currently €500,000,000 of vouchers. We reduced that by over €100,000,000 It's still going quite slow. And if you look at the tickets with a past flight date, We moved from €530,000,000 to €440,000,000 so €100,000,000 But if you look at these tickets with the past flight date, It is getting close actually what it is normally. That is in the normal date, it was around 20%. And if you take out the vouchers, we are at around 15%. And this €1,000,000,000 you should compare that to an outstanding level of €2,900,000,000 So it's only 34%, Where it was in March, it was over 54%. So all in all, we're getting to a more normal situation, and we hope that the vouchers will be used by our customers Quickly. Sorry, no, no, I'm not you're done. On Page 21, the other guidance. On the CapEx, we still expect to be below €2,000,000,000 which is mainly especially for the coming period related to the fleet. There are still 787-100 to come in. We have the A320 coming in. There are 2 additional A350s and there are 95 is coming in, and it's actually more at the second half of the year than we had it on the first half year. And on the restructuring cash out, We estimate that it is below €500,000,000 We still have the same number of people in. We are very and this is especially related to Air France. You see that we are aimed at we're getting the FTEs in as we expected when we released this PDV, even a little bit above our expectations. But it is a little bit lower due to the fact that there's more people close to pension than people younger who should get a higher package. So also there, we expect A little bit more positive news. Then on the medium term, we reconfirm our guidance. So We plan that we get back to the capacity of 2019 2024. If you look Let's say the capacity for 2022, be aware that we already reduced 7% of the aircraft compared to 2019. And in seats, it's even bigger We downgraded actually the fleet, especially by the phase out of the A380. We reconfirm the unit cost Operating free cash flow adjusted to be positive in 2023. So we reconfirm that number based on our current strategy. And then on the net debt to EBITDA, before any financial transactions, that will be around the level of 3. And after all the recapitalization steps, it will be close to 2%. And we still aim at an operating margin of 7% to 8%, which should be reachable With all this restructuring on costs on both airlines in our plans. So I hand over for the conclusion now to our Group CEO, Ben Smith. Okay. Thank you, Stephen. As you heard, so there are some encouraging steps in the road map to recovery. The team has done a great job of preserving cash levels and strengthening the balance sheet, as we said, following the successful completion of 1st phase of the recapitalization and but we still have many challenges ahead. Rapid rollout of wide scale vaccination Remains very key to our recovery and the reinforcement of trust and demand with the launch of vaccine passports that caution does This still prevailed. So I'd like to now hand it back to the operator, operator, moderator, so we can Take your questions. Thank you. Thank We'll take our first question from Daniel Roshka from Bernstein Research. Your line is open. Please state your question. Thanks very much. Good morning, gentlemen. Under the temporary EU framework, Could you remind us by when you need to repay which of the government aid elements and especially the quasi equity, The $3,000,000,000 from Defense States and how that kind of relates to your leverage target of 2x? And secondly, on the CapEx, What is the total approximate size of your order book right now? I saw kind of a tender for 100 and 60 jets at Transavia. And will you increase CapEx again after the timeframe kind of even if that puts leverage back up or is the leverage Kind of the dogma and everything else have to follow-up from that. And just a short one, I noticed that your capacity for cargo Seems to be down sequentially from Q1. Could you just elaborate and help us how to think about your cargo capacity for the rest of the year? Thanks. So on the state aid, so let's if you take The current state aid from the French state, that is actually now a hybrid. So You could say there is no real time frame, but there's, of course, the time frame for the European Union that the current, Let's say, increase in shareholders percentage should go back to the original level. So that is more in the range 2024 and 2025, but it's still equity. So we could use it. However, we want to use it, of course, in conjunction with the French state also when we increase, let's say, our capital to the market. So that is the first one. And then on the KLM side, I think we already put it in slide 18, so you have the numbers over there. Then the increase in CapEx. So we have, of course, a very ambitious fleet renewal program to support our sustainability target and also to support our unit cost target, but we are not aiming to get back to the levels at the moment of 2019, if that is your So we are very careful with our CapEx, both on the Air France and the KLM side, and we do it together So it's very certain areas on the group side. We are very restrictive in any CapEx expenditure. The question on the cargo, there are 2 things. If you look at the cargo, we have all the full freighters operating as much as possible. Those are, Let's say money making machines at the moment. Of course, the other cargo is related to the belly, where we reduced some capacity. And I know especially on the French side, because I was close to it in my previous job, we reduced some cargo only flights with Passenger aircraft because the oil price increased. So then in terms of flight contribution, you don't make the flight contribution you want. And then we stopped These slides, but that's more related by the fact that the fuel price increase, but we are still with our freighters and our normal belly operation, we're still having more capacity Then before. Great. Thanks. If I may, I'll follow-up on that second comment And the CapEx and the leverage, is that leverage target at 2x something you foresee for the, let's say, Forceval future at Enerflex KLM? Or is that something you'll be willing to review kind of as we go into the start of this new cycle? You mean the leverage target of 3? Was I mistaken? We've already started on the contract. Without any operations and of 2 with all the financial operations. And that includes our ambitions on the CapEx. So the fleet renewal programs are in, And we are very strict, as I already say, on ground CapEx, on maintenance CapEx, etcetera, to keep that at a minimum. Okay. Thanks. Ladies, we'll take our Next question from Jarrod Castle from UBS London. Your line is open. Please state your question. Thank you and good morning everyone. Just coming back to The potential equity raise, where is the shareholders' deficit in Air France? I think it was Minus €4,600,000,000 year end 2020 and then you've done €4,000,000,000 Of hybrid and equity and then you've obviously had losses in the first half, which you don't disclose a net income loss in Air France, That's it, dollars 1,500,000,000 So are we talking about something over $2,000,000,000 now despite the issuance? Then just secondly, looking at kind of your operating margin target, I mean, this still remains in line with what you Produced in the CMD in 2019. But you've obviously undertaken a very aggressive cost cutting program. Why is it not at least towards the top end of 7%, 8% or indeed even higher when you're kind of looking ahead? And then just lastly, just in terms of operating cash flow, are we now in a positive position for the second half of the year? Thanks. Let's Start on the equity question. Calin was at the beginning of the year, let's say, around 0. Of course, with this The recognition of the pension funds of the grant, they are at closer, let's say, to minus €1,000,000,000 Indeed, for Air France, we still have a significant target to improve our equity. That is for sure. If we and we are working on that. So that's actually all we are working on in the current period. We know it is around levels of At Q1, it was at minus €6,500,000,000 But with this transaction, it's reducing to minus €2,500,000,000 in the IFRS. So we are working on that to get debt closer to 0 with all the recapitalization actions. The second remark on your operating margin is a very good one. We put in our trajectory, I think, maybe modest improvement of our unit revenues. I think we should be very prudent on that level. But of course, if the market conditions are better. And maybe the market conditions are better because all airlines are actually reducing capacity at the moment. There is a lot of fleet There are a lot of bankruptcy. So it could be that we are positively surprised by it. But our mid cycle target It's 7% to 8%. Because as we know, I don't know, it's actually the big theory. So when, of course, We will see that the market will be very, very strong. Then there will also be new capacity coming in, etcetera, etcetera. So this was a mid target. I saw Lufthansa Aiming at a specific number in 2024. For us, it's a mid target. So it can be up, it can be down, but this is a little bit the average over the period. Thanks. And operating cash flow in terms of second half of the year, Should we now expect something positive? Or how are you thinking about that? No. I gave you all the numbers where you can do your own math. So the EBITDA will be positive in the Q3. We don't say anything on the Q4 because the business circumstances are still very difficult To predict, and then we gave you the CapEx. So you can do your own math. If you have your own assumptions for the Q4 for EBITDA, You'll see what you can do on operating free cash flow. And of course, the working capital will not be as positive as we had this quarter. But we give not any further guidance on that number for the moment. Okay. Thanks very much. We'll take our next question from the line of Jim Hollins from BNP. Your line is open. Please state your question. Many thanks and welcome, Stephen. I hope you're having fun. 3 for me, please. Just I think I may have missed it, but the 60% to 70 For Transavia, so I don't think it's in that numbers. I saw some headlines from the Transavia CEO saying bookings were very, very strong. I was wondering if could maybe comment on that as well. Secondly, because I'm lazy and I haven't looked it up, can you remind us where we are on furlough Update. So I think Netherlands further was due to end at the end of Q2, but maybe save me looking it up. You can remind me where we are for Netherlands and France. The final one, again, I may have missed something, but it looks like for Air France restructuring benefits relative So the full year presentation, that's gone up from €1,200,000,000 to €1,300,000,000 Maybe a question for Anne, Just to run us through why that's increased. Apologies if I missed something very obvious. It looks like Carolinas edged up from 750 to 800 On lower staff reductions, maybe Peter wants to comment on the Kallen restructuring and where the benefits are coming if it's not from staff. Thank you. I will take the first three Questions. And Andy will take the last one on the restructuring with Alex. On the capacity side, if you look at the to 70%, let's say there is a difference of 10% between the 2 operators. So, KeylaM is still 10% more Capacity yen, it's of course also related to the network and also to the cargo markets, which are a bit different between the two. And as I explained also, let's say, the furlough scheme, where in the Netherlands, you can still use the people. Where Air Once we only can get any furlough payment, if we really put people at home. So there's a 10% difference Between the two, it is 64% and 4% for Air France and 74% for Caelum. Your question on the bookings of Transavia. We saw a very steep increase in July in the bookings. Then, of It went down with all the a bit down with all the COVID issues, which were in Portugal, in EBITDA, in Mallorca, And it started to increase, but with the weather now, and we hope it's continue to rain the coming week in the Netherlands and in France, We see also the bookings are really coming back. So as I said, the appetite to travel is really, really big. If you can travel and there are no COVID restrictions, people immediately try to take the biden. Then on the furlough update, It is actually on slide let me get back. It was in the presentation. I went to slide 5. So KLM is already there. They are already at 5,700 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es currently. So they have done The full restructuring, and they will even need to hire some temporary stuff probably in the coming period. For Air France, We are at currently at the 5,300. That will move to 6,400 at the end of December. So then there is still only 2,000 FTEs to go. But at the moment, we still see every time that we are Actually beating our own forecast in terms of restructuring. And that was also one it's not a big contribution in the second part, but it was part of the contribution of the better result we had in crude tumor. Maybe Anh can give a little bit more Coloring on the total restructuring increase from EUR 1,200,000,000 to EUR 1,300,000,000. Yes, of course. So our current transformation plan is regularly reviewed to be able To increase with a lot of new initiatives, you know that we have more than 200 initiatives. At the moment, we Expected to bring €800,000,000 by the end of this year. The current global transformation plan Is sized at €1,600,000,000 by 2023, and It was reevaluated by €100,000,000 I think it was in February with a lot of little initiatives On procurement, on digitalization, we are on FTA decrease reviewed. As Stephen said, the voluntary departure plan was better than expected, so we re challenged, and we are not replacing Everyone without rechallenging the organization. So it's an ongoing process, and we will go on Putting some pressure on the transformation initiatives. Thanks very much everyone. We'll take our next question from Andrew Lobbenbrook from HSBC. Your line is open. Please state your question. Hi there. Could I ask what are the politics and what's the timing Potential timing on the reopening of the North Atlantic. Clearly, it's an imperative for European airlines and Perhaps less so for U. S, but it's still important. Could I ask for a bit more color or description on what happens in Holland With regard to the negotiations between the Dutch government and the EU and perhaps following the French in changing the Structure of the aid, particularly in the context that I don't think, I may have this one, I don't think we currently have a Dutch government. So how does that move forward? And then if I can just follow-up On James' question, I think we'd be curious to learn about The development of the furlough structure is not in terms of getting people out of the business, but the furlough structures in terms of the state providing support So people are away from work and when do those programs roll off in France and Holland? Hi, Andrew. So regarding your question, Whether we can provide more color on the reopening or the reciprocity that we're hoping the U. S. Government will introduce For travel into the U. S. By foreign citizens, look, we don't have, obviously, as you know, a fixed date. We're hopeful that somewhere between the end of Q3, it should be We should see some news. We should see some opening. And that is when we talk to our colleagues at some of our partner airlines and some of our competitive airlines, that is The date that we're looking at, obviously, we have no confirmation of that. We follow very closely What all of our contacts in the United States are telling us, there was a lot of pressure by many groups on the U. S. State, U. S. Government, you can there's a lot of tourism industry, a lot of businesses in the that are based in the U. S. That are putting pressure on the U. S. Government For this to open, there are countries in Europe where the delta variant is peaking, And we are hearing that once that takes place in the U. S, that could be a point where there could be a change. But as I said, this is we have No confirmation. I don't know, probably what you have, but we are hoping that sometime at the latest in September, we could see a change. Next step is Stephen for the other questions. Maybe I'll skip to your the question about the government next in the Netherlands and perhaps any further actions in France. Obviously, we don't speak on behalf of either state. We do know that there are ongoing talks between the Dutch state and the European Commission. And in terms of timing and When there could be a move on the part of the Dutch state, we don't have anything to share with you today. Okay. And then on the furlough scheme, you can find it also on Page 5. So for KLM, it will end At the end of Q3 in 2021. And for Air France or in the French situation, we have long term activity per share until the end of 2022. We'll take our next question from Jamie Rowbotham from Deutsche Bank. Your line is open. Please go ahead. Good morning all. 2 hopefully fairly simple questions. Ben, if we were to assume By 1st Jan, 2022, by then the U. S. Is open to Europe. What sort of capacity index Do you think is sensible for the group next year versus 2019? Perhaps you could at least provide a range, please. And Stephen, welcome. Looking at Slide 13 on the operating free cash flow in the quarter, There's a part of the working capital inflow that wasn't related to the advanced ticket sales. Could you give us any color on the main moving parts There, that led the underlying working cap to be positive ex advanced ticket sales. Thanks. Okay. So If we assume that Europe either stays status quo or gets better, if the if our African markets Remain resilient. If the French overseas markets remain strong, if Canada moves forward As we're seeing and if Asia and South America, we see no major improvement by the beginning of next year. But if the U. S. Market does open in both directions, then I guess we could assume that's between 75%, 79% Good afternoon, Robof. Yes. And on the if you look at The additional working capital contribution, it's coming from one sector, which is the suppliers because we grow capacity. And then, of course, we have the later payments Ovid, especially showed the growth in June. So that is, of course, beneficial for our working capital. And we had some tax payments, which are still delayed, but it's mainly coming from the suppliers on top of it. Super. Great. Thanks guys. We'll take our next question from the line of Johannes Perron from Stifel. Your line is open. Please go ahead. Yes, good morning. Thanks for taking my questions. I have two questions. Firstly, could you explain the EUR 200,000,000 one offs In the maintenance business a bit in more detail, I think you mentioned that it has to do with balance sheet cleanup in the maintenance business, but some more details would be appreciated. And actually, Why was that included in the underlying operating income for the group? Shouldn't this number be reported below the line because it distorts the picture quite a bit? And then secondly, Aeropodi Paris and Chipol, they have terminated their collaboration and will also unwind across shareholding. Just wondering if you think that impacts you in any way. So first, coming back on your question on CPL of ADP, we don't see any impact on our group. And so we have no comments to make over there. Coming back on your question of the maintenance business, it was in the Q2 last year. There are two things. First of all, it was related To customers who went bankrupt, so and also some customers who had difficult There's problems to pay actually because of the very, very negative impact on the industry. So that is one big part. We never take that in incidental results. We always take that in our operating results. And the second one is related by the fact that due to the fact That we see less business coming in than our inventory levels. It's a little bit a technical thing. But the inventory levels are actually too big And then we need to take a hit on it. So that's not a cash impact, but that is actually a revaluation of your inventory levels in the Engineering and Maintenance business. It is very complicated. I work there, and I needed every time to spend at least 2 hours to exactly understand how it works, but it is an accounting impact also. Okay. Thank you. We'll take our next question from Carolina Doris from Morgan Stanley. Your line is open. Please go ahead. Hello. Good morning. I have two follow-up questions. 1 on the Furlough scheme, if you could quantify what has been the benefit Of both teams in the 3rd quarter results. And also on once you go back To 2019 capacity given the comments that you may even need to hire temporary staff at KLM, What is the net level of FTE that you could operate? I'm assuming it's lower Then 2019. Let me first come on the Furlough schemes. So if you look at the front side, you talk about, Let's say EUR 230,000,000 and on the Dutch side, you talk about also, let's say, in the same order of magnitude, It is a furlough contribution in this quarter. And the second question, I pass to the CEOs. Regarding The employee numbers within the group for when we get back to 2019 levels, We're assuming the same base number of full time equivalents. And when it comes to temporary staff, we'll adjust where needed. Obviously, the pilots and cabin crew will be a reflection of the number of flights, but the same ratios or as the productivity improves, We'll adjust versus that, but the structural costs that we're bringing out of the company, that will those will not return once we get back to 2019 numbers. It appears we have no further questions. I'll hand over the call back to the speakers for any additional closing remarks. Hi, speakers, we have no further questions. Please go ahead for any additional closing remarks. Okay. Thank you for participating today. And again, apologies for the technical error this morning and the slight delay. And please have a good day and a good weekend. Thank you. That concludes today's conference call. Thank you everyone for your participation. You may now disconnect.