Good day and welcome to the conference call for Air France-KLM Group, the Q3 2020 results presentation. Today's call is being recorded. Now I would like to turn the conference over to Mr. Benjamin Smith, CEO of the Group, Air France-KLM. Please go ahead.
Thank you, operator. Good morning, everyone. I'm here together with Anne Rigail, CEO of Air France, Pieter Elbers, CEO of KLM, and Frédéric Gagey, Air France-KLM Group CFO. We would like to welcome you to the Air France-KLM's Q3 2020 results call. The unprecedented crisis caused by COVID-19 has triggered a global industry restructuring in which airlines are forced to make bold decisions. This has significant implications for our group, our employees, our customers, our shareholders, and indeed, all stakeholders. I'd also like to take this opportunity to thank all Air France, KLM, HOP!, and Transavia employees during these very difficult and unprecedented times. I'm so pleased to have them as our number one asset as we seek to secure the continued support from all our stakeholders, including the French and Dutch governments.
The hard work and dedication of our employees is what makes the difference for us and is what will help us successfully transform into a stronger, more powerful European champion following this crisis. The CEOs of Air France and KLM are here today with us to provide insights on the airline objectives and the latest status of their respective transformation plans. Second, both the Dutch and French governments provided financial support packages to the Air France-KLM Group and its airlines in order to enable the airlines to restructure and ensure the survival of our businesses. I'd like to thank both governments for helping us ensure we have enough liquidity to maintain operations during this challenging period. As has been mentioned before, the increase in the debt burden will require significant changes to our business in order to render them more profitable by reducing costs and increasing flexibility.
Frédéric will provide you with more information regarding upcoming financial operations. I suggest we go through the Q3 2020 results relatively quickly, and then focus on the transformation plans and the financial operation. The team and I will do our utmost to provide answers to your questions as clearly as we can. Turning to page two of the presentation. After a promising recovery during the summer, particularly in the short and medium-haul network, the gradual closure of international borders in the second half of August and the resurgence of the pandemic affecting customer travel demand strongly impacted our revenues in the Q3 of 2020 at EUR 2.5 billion, down substantially at index 33 compared to last . Thanks to strict cost control and acceleration of the implementation of cost reductions, the group mitigated the size of the operating result to a loss of EUR 1 billion.
We have continued with cash preservation measures, at the end of September, we had €12.4 billion in cash at hand, which is €1.8 billion less compared to the end of last quarter. I would now like to hand it over to our CFO, Frédéric Gagey, to provide further details on the financial impact on the Q3 2020 financial results.
Thank you, Ben. I propose you to go page four, which is a global view of the result for this quarter. Probably the most interesting in the slide is the title, a decline of EUR 5 billion in terms of revenue and only quoted, of course, a EUR 2 billion in terms of EBITDA. You remember that at the beginning of crisis, a lot of airlines have tried to give you some idea about what part of the cost could be all manageable or variable because linked to the capacity. I think that the ratio from 5 to 2 is a good indication that in fact, in normal time, if you work correctly, you are able to manage at least 50% or even more than 50% of the decline in your revenue by working on your cost and by optimizing your capacity.
This is clearly what we have done during this quarter with, again, revenue, which is moving from EUR 7.6 billion to EUR 2.5 billion, which is, of course, a totally dramatic figure. It is more than 50% reduction of the turnover. The fuel expense is down, not a surprise. EBITDA, as indicated by Ben, we move from +EUR 1.6 billion last year same period to -EUR 400 million in Q3 2020, which is a reduction of EUR 2 billion compared to last year.
Operating result is also EUR 2 billion compared to last year. It was +EUR 1 billion last year, -EUR 1 billion in Q3 2020, and of course, the operating margin is going down, not a surprise. In terms of net income, it is a bit lower. Explained mainly, we will see that later, by the restructuring provisions we have taken, mainly concerning the voluntary departure plan this quarter into Air France.
I go page five just to indicate that the profile of the summer was not absolutely equal. In April, May, June, you have seen progressively a slight improvement of the EBITDA from minus EUR 300 million in April, which was the beginning of the crisis, to minus EUR 200 million in June. July, August continue to improve compared to the end of the Q2. And it is of course, a quite important information, we have all been disappointed by the level of the demand in September. You remember perhaps that at the beginning of crisis, a lot of airlines were expecting a possible improvement of the situation by the end of the year.
Clearly, the result of September show that after the peak of the traffic during the summer, there is no more business people entering the aircraft, and that the recovery and the compensation of the visit friend and the relatives from the summer by business in September is not there. Which explain that the EBITDA in September is deteriorating compared to July and August. In total, however, the Q3 has been a bit better than the Q2. Just one important indication is the load factor. In Q2 it was 37%, so extremely low, if we think about the standard of the industry before the crisis. In Q3, load factor for the group, the entire group, excluding Transavia, was at 46%. It was a bit better than Q2, but we are also quite anxious about what will happen in Q4. I move page six.
Just to give you two or three indication. First, clearly, all the sub-networks are not equal. It is clear that the France domestic, Mediterranean, Caribbean, Indian Ocean, and Africa, where the group, for many, many reasons you know, of course, has some competitive advantage. Let us call that in such a way. You see that the RASK is between -20, 21 to -40%. Clearly, there is some privileged sub-networks where the constraint in terms of traveling or the safety conditions are sufficiently equal, such that it has been possible for people visiting their family, going back to their country for the holidays has been possible, such that there has been limited traffic, but there has been some traffic. Traffic still negative, of course, -64 for France domestic, -64 for Mediterranean, -60 or -79 for Africa and Caribbean.
It was far better than what we had in the other long-haul networks. North America, the traffic is -90%. Latin America, the same, and Asia, the same. Clearly, when there is not homogenization of the safety rules, and where the situation between countries are not similar, clearly there is a behavior of passengers consisting not to travel, or the travel is difficult for rules. Because of that, of course, you see the big difference in performance between these various sub-networks. Another information you have to keep in mind is that globally speaking, the yield has developed positively. When we have RASK extremely negative, as you see on the page six, you have also to keep in mind that at the global long-haul network, and it's true for each sub-networks, the yield has developed positively during the Q3.
Last info coming from this page six, the difference, of course, not a surprise between premium and economy. You see that at the top right part of the slide. Premium RASK is at -63%. Premium travelers are not coming back, especially at the end of the quarter. Economy is, of course, negative, but a bit less, only, quoted unquoted again, -14%. I move page seven just to present, I would say, the only good news for this quarter, the fact that there is, in fact, not a recovery, but a good behavior of the cargo activity for the group. We have benefited first of the strong increase of the cargo yield during this period due to the reduction of the capacity available for cargo transportation. You have seen a quite positive development of the yield in the industry.
I will say that Air France-KLM has been able, in a very agile way, to try to take its part of this development of the activity and development of the yield by increasing and managing significantly the cargo capacity, by using extensively the full freighter fleet, or by developing also what we call the mini cargo flights, which are flights using passenger aircraft, but where there is no passenger, but only cargo. If I go page eight, you have the result of these various comments on the economic performance per business. Network capacity down, unit revenue down. A dramatic decrease of the revenue, -77%. For the cargo, due to the sharp increase of the unit revenue at +107%, you see that the revenue is even increasing compared to last year, which is, of course, a remarkable performance.
It is matching a bit or compensating a bit for the quite negative situation concerning the passenger. All in all, of course, the biggest part of the loss of the group during this quarter is explained by network with -EUR 990 million of operating result. Transavia, I would say, not too bad in the current circumstance. You see a margin -5%, which is an operating result of -EUR 13 million, in spite of a sharp decrease also of the revenue.
During the summer, we have seen some people traveling for holidays or for family purpose, all in all, the revenue is down -60%, because we are flying less, because our clients are flying less, not a surprise. Maintenance turnover is also down -50%, the operating result is -EUR 100 million. Keep in mind, however, that we signed some contract with clients for maintenance.
There has been some negotiation in spite of the period, and there is some new contract for this activity. In the same time, of course, there is some contract which have been canceled, or because the client is bankrupt, or because there has been a renegotiation. It's clear that the maintenance order book is lower than what we had at the end of the year 2019. Just to give you an order of magnitude, the maintenance order book was EUR 2 billion higher end of December 2019 compared to what it is today, but it is still yet quite significant at EUR 9.3 billion. I move page nine, just to give, as we do usually, the split of the performance between the two companies.
Globally, if you look the nine-month performance, you see that KLM deteriorate the operating result by EUR 1.7, Air France by EUR 2.7, which is more or less proportional to the relative size of the two carriers before the crisis. I move page 10. As I told you before, the link from operating results to net income is relatively simple. It is mainly explained by EUR 565 million of restructuring costs, which are explained by the departure plan, in Air France for the ground staff, but also the effect of the contractual termination for Air France flight attendants and pilots, and also the departure plan for HOP!.
The effect of the over-hedging is relatively limited, and the effect of the fleet impairment also is limited during the quarter. It's mainly explained by the progressive phase out of some Canadair jets at HOP! company. I move page 11.
I give before the link between the loss in terms of revenue and the evolution of the EBITDA, the five to two. You see that it is partly explained by, we think, relatively efficient cost control, which has been engaged by the two management at KLM and at Air France. Also that's also supported by some mechanisms decided by the two states, which is in the Netherlands, the NOW mechanisms, and in Air France, it is the temps partiel, which is allowing the company to save some labor cost. The management work also, as indicated in various presentation before on the control of the FTEs, and you have at the bottom left of the slide, what we expect in terms of FTE evolution between today and the end of the year.
Between Q4 2019 and Q4 2020, we expect already a reduction of the FTEs by 10%, a bit more than 8,000 people, half for KLM and half for Air France. Of course, in the next quarter and years, you will have the full effect of some measures which are now to be implemented, and this is mainly the voluntary departure plan for ground people into Air France. At the right of the slide, you see our estimate of the viability of the operating cost, which is contributing to the control of the loss in spite of the reduction of the turnover. Slide 12. Nothing new in terms of presentation. It is the usual slide on the net debt evolution. Of course, the net debt is increasing due to the negative operating cash flow. During the quarter, the debt has increased by a bit more than EUR 1 billion.
In total, since the beginning of the year, it is more than EUR 3 billion, which have been added, alas, to the net debt of the group. Page 13, just to remind you the good control of CapEx. Initial CapEx guidance we gave you at the beginning of the year was EUR 3.6. CapEx spend reduction will be more than EUR 1.5, so we continue to stick to a CapEx guidance for the full year at EUR 2.1. Also a relatively surprising result, which is a good development of the working capital, which is contributing positively to the cash evolution, even more than last year. For the nine months 2019, we had working capital contribution of +EUR 84, and for the nine months 2020, the contribution is +EUR 666, which is explained by various phenomenon, as you can imagine.
One is, of course, the fact that there is still a lot of tickets to be refunded. From that, sorry, we made already a significant step into that direction. Since March 2020, we consider that more than EUR 1.8 billion tickets, sorry, have been reimbursed. There is still a stock of vouchers and people can use for also up to the end of the next year, which are owned by the client. Another contribution to this evolution of the working capital is coming from the postponement of some payment or of social charge, for example, tax, but also negotiations with some suppliers. Concerning the outlook, just concerning the capacity, it is not a surprise for you that we will reduce capacity compared to what we have done in the Q2 .
Concerning Air France, also following the announcement made by Mr. Macron two days ago, and the new confinement measures decided, Air France now is intending to have capacity below 35% for the Q4 . Concerning KLM, which is not impacted exactly in the same way. The KLM management is, for the time being, expecting capacity in the range of 45% compared to the same period of the last year. Of course, be sure that the two management keep a high level of flexibility, which means that if there is an adjustment to be done in the two ways, by the way, they are done in due time. Second element, it is clear that all the flights we operate are considered as incrementally cash positive. I will say that in the days before any flight, this check is done by the controlling of the group.
If we have the feeling that a flight is not positively providing cash, the flight is cancelled. We will try to manage this capacity with a lot of flexibility. On the right, you see the expectation we have today using the forward booking for the month of November, December. To be honest, the numbers are a bit less optimistic than the similar numbers we gave you at the communication on the Q2 , which is clearly indicating that we have to be extremely cautious concerning the development of our capacity. Page 16, to give some conclusion to this presentation. First, level of cash, EUR 12.4 billion, and we have together the cash, which is today into the company and the available credit line we have from mainly the bank guaranteed by the state or from the states themselves.
Which is, I would say, compared to our two peers in Europe, relatively comfortable. We see also that the cash drain, even in Q3, is relatively significant. Second element, it's clear that the Q4 EBITDA will be significantly below Q3 due to the environment, due to the legal and rules which are applied between the countries at the borders.
We are not expecting, of course, a Q4 EBITDA improving compared to the already significant loss of Q3. Working capital probably will be less positive than what we had since the beginning of the year, because in the Q4, we'll continue to reimburse the tickets and voucher if the clients want that. Of course, there is some bills to be paid that have been postponed sometime for three or six months, but some of them will be reimbursed between now and the end of the year.
CapEx will be limited, EUR 600 million. For your cash forecast, do not forget that we have reimbursed the hybrid bond of EUR 400 million in October 2020. Thank you for your attention. I give back the floor to Ben.
Merci, Frédéric. A clear roadmap has been set for each group airline, the group's go forward plan started delivering results in 2019 with key significant steps forward across key areas. The group has also set a very specific 2030 commitment to reduce its global CO₂ emissions per passenger kilometer by 50% compared to 2005 levels. In addition, Air France has committed to go above and beyond this commitment, an accelerated sustainable transition by doing the same on a shortened calendar on its domestic network by 2024, which is a condition put in place by the French state as part of the loans that were also put in place recently.
We are 100% invested in the proven KLM global hub business model in a post-COVID world, with an efficient and attractive hub in Amsterdam Schiphol for local and transit customers, while supporting global links from Amsterdam to all major cities around the world. Meanwhile, over the last two years, Air France and its employees have undergone a massive cultural shift, and the company transformation has been accelerated due to COVID. The domestic market will be transformed, leveraging some of the new flexibility that has been provided by the over 40 labor agreements that have been ratified. I'm so pleased to note the positive and collaborative atmosphere and alignment shared by Air France and its labor partners, representing a significant step forward for Air France. The Transavia brand helps us connect the Netherlands and France to key leisure destinations.
This tool, including its attractive brand positioning, along with the added flexibility Transavia France now brings, will help us better position ourselves to compete against low-cost carriers in key markets not previously served. Going forward, Transavia will continue to grow and compete against these low-cost competitors where there is demand for its distinctive product, soon to be further improved with the addition of benefits provided by our loyalty program, Flying Blue. Across the group, and in comparison with other legacy European carriers, we are fortunate to benefit from France, the largest inbound market in Europe with its two largest airports, the Air France global hub in Roissy Charles de Gaulle, and the 50% market share Air France enjoys at the strategically located Paris-Orly Airport, as well as Amsterdam Schiphol, the best transit hub in Europe.
We have a well-diversified global network and a unique high-end leisure demand to and from Paris, which we expect to return earlier than the business segment. Despite the commendable efforts from Pieter and Anne, COVID-19 has triggered an unprecedented crisis for the group, and we are forced to quickly make difficult decisions. The group is ready to adapt its capacity and commercial approach as quickly as is necessary in order to cope with an uncertain demand ramp-up. We are also working closely with our business partners on various related measures, such as rapid detection tests for customers departing from Paris, both Roissy and Orly, and Amsterdam Schiphol. This will allow traffic recovery within the best possible sanitary conditions for our customers.
Beyond these immediate and necessary measures, we are accelerating the transformation as presented during our investor day in November 2019, while simultaneously accelerating the most critical aspects of the plan. Our group and our airlines will exit this crisis in a much stronger position, ready to address the future challenges of our industry that lie ahead. I'll now pass it over to both Pieter and to Anne to go into more details regarding the transformation plans at KLM and Air France.
Thank you, Ben. I think it's me looking through the sequence of the slides for the transformation plan of KLM. Is that correct?
Yes, Pieter, we can't hear you.
Okay. All right. Do it again. I hope you can hear me now. For the transformation plan of KLM, it's important to recognize that the business model itself, with a strong hub in Amsterdam, will continue to be the basis of our operation. Two out of three customers are connecting in Amsterdam, and we believe that the slow and gradual recovery out of this crisis will eventually be led by the hubs in Europe. Clearly, the group is in a great position with the hubs in CDG and Amsterdam to position well for that recovery. However, in order to make it valid and valuable again, we need to adjust ourselves, and we have submitted to the government and to the boards our restructuring plan with five very strong pillars where we adjust.
First of all, we make the organization smaller, cheaper, more agile, more sustainable, and at the end of the day, make sure that we're adapting ourselves to this new situation. With that, we have already put forward a significant cost reduction plan. The first results of the cost reduction could already be seen in 2020. They will continue to work for the next few years in order to have the first big step in 2021 of another EUR 750 million of structural cost reductions being planned for 2021. In terms of staff cuts, we have already taken quite significant steps, and that means by the end of this year, we have a total reduction at KLM in the order of around 5,000 jobs. That's all been completed already and signed by collective and individual agreements by people leaving.
That's in the range of 15%, and even more recently, a new voluntary departure plan has been opened in order to prepare for a longer duration of lower flights and lower production levels. Part of the cost savings are also by reduction of labor benefits. That's working hand-in-hand with the conditions as put forward by the government for the loans. That's cuts in labor conditions up to 20% for the highest-paid groups. That combination of reduction of labor costs, reduction of fleets, supplies, and procurement costs, further steps in fuel efficiency, and addressing all other costs is extremely important for our recovery trajectory. We're in the final stage of discussions with the government. We submitted our restructuring plans on October 1st, and that should be finished in the next couple of days, really, in the discussions with the government. That is for the KLM restructuring plan.
I think I give the word to Anne now.
Yes. Thank you, Pieter. On slide 22, you can see the transformation plan of Air France. We have built, end of November 2019, transformation plan to increase Air France margin and bring it to the level of the competition by 2023. This plan has been accelerated and amplified to the COVID crisis context. It's based on six pillars. Ben has told about it, the restructuration of the domestic network that lost EUR 200 million in 2019, with a strong decrease of the capacity of our regional subsidiary, HOP!, by about 50%. HOP! will refocus on our hubs of Orly and Lyon. With the growth of Transavia France, our low cost tool, from Orly on the domestic network and from region to region, to be able to compete with low-cost carriers. Air France in Orly, remaining on La Navette route, that is Orly to Marseille, to Toulouse, and to Nice.
This plan is in progress. We are implementing it even in the COVID crisis. The second part is a strong optimization, of course, of all external spendings. A real transformation of our support functions to be more agile, with a decrease of 30% of those functions. A structural simplification of our operations and also resizing during the COVID crisis. Also, to lower our unit cost, it's key to modernize our fleet, and it allows also us to lower our environmental footprint by 25% with each new generation aircraft coming. We have ongoing the arrival of the A350 in an order of 38 A350 and also the arrival of the Airbus A220 that will happen next year in the winter. The sixth pillar consists of a recovery plan and commercial action plan on our offer. Next slide 23.
This transformation plan will bring EUR 1.2 billion of structural benefits by 2022. It will allow us to decrease our staff by more than 8,500 FTE by 2022. That is about minus 16%. We expect minus 11% by the first semester of 2021. That will bring around EUR 500 million of savings. We've already finished the voluntary departure plans for cabin crew, and we expect to launch, because of the legal delays in France, we will be able to launch the voluntary departure plan for the ground as of beginning of 2021. It will be validated by the Ministry of Labor. Added to these FTE decrease, we have a reduction of salaries due to two effects. The first one is a Activité partielle that has begun in March, and that will continue throughout this crisis.
The second, for our crews, there is an important part of their wages that is variable and impacted by the decrease of the flight hours. Maybe three more comments. The first one is that we pursue a positive social dialogue, and we see several agreement that has been signed this year, with the pilots. Of course, the removal of the historical constraints to allow Transavia France to grow, including on the domestic markets. With the pilot and the cabin crew, they have a negotiated and signed and done collective contract termination. With the ground staff, the social plan that we call in France, PDV-PSE, that will be launched as of the validation, has also be validated by the union.
Just this week, and that was a very good news, we have signed with cabin crew an agreement to reduce crew composition when the load factors are low, and it will be very helpful during this crisis. This plan is also compliant with state aid conditions. That is, to increase our competitiveness and to lower our environmental footprint, especially on the domestic network, with a decrease of 50% of our emissions in net value between 2019 and 2024, including the closure of domestic routes when there is an alternative by train of less than two hours and 30 minutes. We closed Orly to Bordeaux, to Lyon, and to Nantes routes. We are also currently negotiating agreements to implement what we call in France, it's a French scheme, long-term partial activity for the two years to come.
As Frédéric said, we are quickly adapting our capacity for the weeks and months to come, because of the new confinement in France. We will really need to make an optimal use of this long-term Activité partielle scheme provided by the French government.
Okay. Merci Anne. Thank you, Pieter. Operator, we can move now on to questions. Because of the lockdown here in France, we have Pieter Elbers in Amsterdam, and we have Frédéric Gagey and myself here at the Invalides. We'll do our best to coordinate the Q&A session, depending on what the specific question is. Back to you, operator.
Thank you. Ladies and gentlemen, if you wish to ask a question, please do so by pressing star one on your telephone keypad. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, it is star one to ask a question.
Now the first question comes from the line of Jarrod Castle from Union Bank of Switzerland. Please go ahead.
Thank you, and good morning, everyone. Three as well, if I may. Firstly, can you just give an update in terms of how the monthly cash burn is progressing? I guess, August, September, October, and any views on how you see it progressing as we go through the quarter, and that's operating. Secondly, just sticking with the balance sheet. Can you give a little bit of color in terms of some of the conversations going around with regards of potentially converting debt into equity or new equity issuance and, briefly, when do you think something like this needs to be done or could be done? Then just lastly, it seems like the drop-through on revenues is around 20% and you're still not at a steady state run rate, just given all the restructuring you're undertaking.
Where do you see maybe the drop-through rate going to on revenues, as we enter next year? Thanks.
On the cash burn, I will not give a precise indication. I see that I have been, however, relatively clear in the comment, with worse Q4 EBIT compared to Q3, and it is a clear guide on Air France. With the fact that part of the good development of the working capital has been explained in the beginning of the crisis by our ability to postpone some payment to some suppliers and to initiate this type of measures. I also clearly indicated during my presentation that the working capital development will be less positive in the next months and quarter compared to what we had in the first, let us say, six months of the crisis.
It is a clear guidance, which is not positive, that clearly the cash development of the cash drain we have on a monthly basis will clearly, I think, deteriorate during the next 3 months at least. I cannot give you a global indication, but I will be a bit less positive compared to what we have observed during the 6 first months of the crisis. Concerning the recap, Ben. Concerning the recap. Okay. I am looking as you to the various publication of Air France. I will say many are in Europe. You see that the equity of all our peers are, of course, deteriorating. There is one element which is a bit specific for Air France-KLM, which is that the state aid, which has been brought to the two companies in May and July 2020, were only with 100% debt component.
When you see the situation to some of our colleagues, I think, for example, to SAS, to Singapore Airlines, to Lufthansa, there has been, during this scheme, aid, also an equity component. It is not a surprise to consider that for Air France-KLM one day, we also need to find a way to improve the equity, which has been not supported, let us say, by the pure debt component of the state scheme aids. Anyway, as I told yesterday when I was speaking with some people at the board, the wisest is not to give too precise indication concerning the debt. I will say that clearly we need this type of intervention and at the level of the equity. Second, there is various, not an infinity, but there is different ways to support the equity of a corporate, as you know, and we are still discussing.
I did that with some partners or stakeholders recently. There is many ways or many tools which can be used to improve the equity or the quasi equity of a corporate, and we are working on that. Concerning the last point, I miss the question.
Hey, Jarrod. The question was, how do we see revenue for the coming year? We did see a positive buildup in the summer. We were pleasantly surprised with the return of demand, leisure demand, in particular in domestic France. It was more than we expected. The business traffic that we're hoping to see come back in the fall, obviously not just with Air France-KLM, but with most other carriers or all other carriers, did not materialize. With the new lockdown in France, we're making adjustments to the Air France capacity plans for the next six weeks.
We're cautiously optimistic that we will continue to see strong leisure demand, in particular to the French domestic market and the overseas, Outre-mer, destinations from France, which are Pointe-à-Pitre, Fort de France, Reunion, very large markets to and from Paris, where in the summer, we actually saw, again, demand that was a little more than expected. On the KLM side, with the strong cargo demand that we've been experiencing and with the four freighters, as well as the support we have from the NOW employment insurance scheme that we have in the Netherlands, we do expect to continue to take advantage of that and move considerable amounts of cargo through Q4. For next year, 2021, I don't think we're ready today yet to give any guidance on capacity or revenue for 2021.
Just on the last question, if I may. Obviously, the expectation is for an even bigger revenue fall, I guess, but the question was really around drop-through rates on that revenue fall. Should we be thinking that the impact on profit, in terms of lost revenues and profit, will be lower than Q3, given the restructuring that you're putting through, even if the absolute magnitude of those losses are greater?
Yes, I will agree a bit with you. It is clear, for example, that the departure of some people of the company, something which is progressive. As I told you in the presentation concerning Air France, for example, the first effect of the voluntary plan for the ground people will be only seen in Q1 2021 and a bit further. There is some plan concerning the cost control, the cost reduction, which are also ongoing negotiation. We are the supplier, so we considering the product or the type of service we are asking to our suppliers.
I would say it is an ongoing process, and I will rather be on your side, considering that the more we go, the more the effect of these cost savings will be visible, which means that the ratio, loss of value of EBITDA, that I have indicated in the slide number three, will rather improve in the future than the contrary.
Thank you. Thanks very much.
Our next question comes from Rosandra Hardow, of Exane BNP Paribas. Please go ahead.
Morning. 3 questions, please. First, you mentioned more refunds are likely. How high do you estimate the total pressure please due to refund passengers? Second, since KLM has been the profitability driver of the group over recent years, and KLM business model strongly relies on transfer passengers. Could you please discuss your expectation on trends for transfer passengers, both in the leisure and corporate segment, over the next few months? Third, again, a strong cargo performance. There's expectations in the sector that it will take several years until passenger traffic recovers to pre-crisis levels. Do you believe airlines might again focus more on cargo activities and convert passenger airplanes into cargo airplanes, which could increase cargo capacities in the market? Dedicated cargo capacities at Air France have decreased over recent years. Do you see the opportunity to focus more on cargo going forward? Thanks.
I can take the first concerning the refund. We have given in the presentation, first amount we have refunded since the beginning of the crisis, around EUR 1.8 billion, which is a significant amount. We have put in place some automatic tools to facilitate the reimbursement of the ticket for the passenger. We were pressuring to immediately reimburse, which we can totally, of course, consider as an option. We have also proposed that if you keep the voucher, there is an interest for you to keep the voucher because there will be a reduction in the future ticket you will buy. We try to have, I would say, have a nice and open relation with the clients concerning the reimbursement of the ticket when the flight is deferred.
We were going out, of course, because we have seen that in the press from time to time, that at the beginning, due to the big amount of ticket to reimburse in terms of logistics, it was not totally fluid. Frankly, we consider that now the situation is clearly at a good level, and we continue to work with this spirit. It's clear that there is still a stock of ticket, of vouchers to reimburse. Of course, we prefer the passenger keeping the voucher. That's why we have made this discount, if you keep the voucher and you buy the ticket later. We will continue to reimburse the flow of the ticket when it's requested by the passengers. Difficult to say exactly what will be the amount during the next three months.
Clearly, for the date of the deferred flight, the current stock is not always the beginning of the crisis. We have some tickets which have been sold two weeks ago. Finally, the flight is canceled, and probably there will be less pressure to reimburse this ticket. For the others, it will depend on the behavior of the passengers, so difficult to make an estimate. To be honest, there is no reason to see an acceleration of the reimbursement. In our forecast, we rather see stable flows of ticket to be on board with a stable impact in terms of cash.
If we can get Pieter to answer the second question, if you're able to hear us on the specific KLM one.
Thank you. I can hear you. No problem. We believe that the connecting hubs will really lead to recovery, and the ability to have the small flows or flows which just had a direct flight but can no longer sustain direct flights with demand, which is down, will really need the hubs to have the passengers flowing. We do believe that especially the transatlantic hubs where the traffic will return once the situation is stabilized and the business environment will be improving. We will have the strong European hubs, CDG, Amsterdam, and then the hubs of Delta on the U.S. side, helping us to start recovering the traffic. The reintroduction of some of the smaller spokes will take much longer, simply because there's no connection.
In order to support that, we have really brought back not so much the capacity, but we have brought back the network in terms of destinations throughout Europe. I think in the Q3, looking at the European network, we were back in the range of 90% of the destinations with only 50%-60% of the capacity, as you show in the presentation of Frédéric. Again, there, to have the ability of the network and the connections and the smaller flows will really help us through the recovery. Having said that, it will take some time. We believe that our model and the strong hubs are really helpful in order to participate in the recovery taking place going forward. Thank you.
Thank you, Pieter. On the third question regarding our views on cargo in the medium and long term. Right now, of course, it's a unique period in terms of cargo demand, cargo yield. We do feel we are very well positioned for the medium long term. Should cargo yields be higher, should demand accelerate to what it was previous to COVID. We do have 59 777-300ERs that will be in the fleet by early next year. We do of course have six full freighter aircraft. Difficult to predict medium term what the demand will be, but what we can say is we're very pleased with the flexibility that we have to pivot and ensure that we're well positioned to take advantage of potential higher yields.
Thank you. Thank you very much.
Good morning. If I could ask three quick ones, please. The first one, as difficult as it is, I'd like to understand your base case for summer 2021 capacity planning at this point. Even a reference point that I'm sure you'll continue to sense-check would be very helpful to understand. Second question, Aéroports de Paris mentioned recently that they're aiming for a tariff increase for next year. I assume you'd hope for the opposite. I'd be interested in what your expectations of how that negotiation plays out are. Third question, obviously, the equity question was asked earlier by Jarrod. Two of your competitors' maintenance business have been a key part of their potential equity recovery story. I'm just interested in how you think about your own maintenance business, which is obviously usually quite a valuable asset.
Is that potentially part of your recapitalization plan, or are you firmly against anybody else owning even a minority stake in that business, given its relevance to the group?
I would explain that concerning the capacity. I will rather make comparison compared to our expectation at the beginning of the crisis. When we speak today with the two teams, I will say that compared to the plan they had in March, April, when we have made some scenarios concerning the possible recovery, we were not only Air France-KLM, I will say also a lot of our peers, but this is an industry who are considering a possible slow recovery by the end of the year 2020. Looking for the time being to the first numbers coming from the budget preparation, what is admitted by the revenue management teams of the group is that they consider that at least this recovery period is postponed up to six months.
Which means that when they build the scenario in terms of revenue and capacity for the year 2021, they now also use what they planned to have in December 2019, the traffic is developed in July 2021. It is something like a postponement of 6 months concerning the recovery scheme we had in mind before the last 1 or 2 months. Clearly, postponement by 6 months of the recovery scheme we had in mind at the beginning of the crisis. In terms of capacity, of course, we have some number, but I will say that we will clearly keep the agility and the capability to adjust or down or up in case of evolution of the market. I would not give you at that stage the precise numbers we will put into the budget. We'll do that when we will discuss the Q4 resulting in February 2021.
Of course, we will give you the capacity for year 2021.
Yes. Maybe on the question of airport charges and the recent demand of Aéroports de Paris. As we told you, we are fighting against all cost increase, and we are decreasing a lot of all our external charges. We are, by the way, working with Aéroports de Paris to identify all the action plans to commonly find some cost increase. Of course, it's difficult for us to accept any cost increase, so we voted against it, and we asked ATIS to freeze it. It is the decision of the regulator.
Thank you. We will now move to our next question from James Hollins from Exane BNP Paribas. Please go ahead.
Hi. Good morning. I have two from me, please. First of all, you talked a lot about restructuring. I am just going to flag here some headlines you have seen from the KLM, rather the Dutch government rejecting the KLM restructuring plan. With that in mind, obviously, a comment on that would be good. Also, just maybe one or three important key hurdles you are seeing to restructuring, whether it is any particular union resistance.
I know you have done a good job on getting the unions on side. Just wondering where are we stood specifically on the key blockages that may be coming. The second one is on travel corridors or bridges or whatever you want to call it. Just wondering where you are on airport testing, whether you are trialing any pre-flight testing on a particular route, and obviously where your regulator is on potential for any bilateral agreements.
I assume that everything's on hold during the French lockdown, but an update on France and the Netherlands would be useful. Thank you.
Sure. If Pieter can answer the first question, we can have both Pieter and Anne answer your second question.
Yeah. Before jumping immediately to the headlines this morning, there are new headlines every morning, actually. Looking at what we have done already, basically a lot has been achieved already, the reduction of 15% of the staff has been done already. The adjustments of the organization has been done already. The first stage of the cost reductions have been agreed with the unions up to early/end 2022. The discussions with the government are now whether the duration of the union agreements until 2022 is long enough or whether it should be longer already now. Clearly, it's an important element, but it doesn't take away any of the efforts or the achievements which we have done already now and which will be also implemented in 2021. We know that the restructuring and the adjustments of the organization, it's not going to be done overnight.
It will take some time. I think as we have proved and demonstrated over the last few years, companies with significant histories, like KLM, changing that and making restructuring is taking some time. Again, if I look to all the steps we've taken over the past six months and the agreements we're having for 2021, I think we can be confident on the trajectory we're in. Having said that, we still need to finalize the debate with the government and get their endorsement of the full plan, where indeed, we are still having some debates on the sort of remaining part of labor concessions for years after 2022. We'll continue to do that in the next few days. Thank you.
Thank you. We will now move on to the next question from Tom Kingsley from BNP Paribas. Please go ahead.
Good morning. I just wondered if you could give us a sense of how much within your working capital is accounted for by deferrals of taxes and deferrals of supplier payments, and when those would roll off. Also, secondly, to what extent are the restructuring costs of EUR 565 expensed in the Q3 yet to be paid in cash?
For the restructuring cost, let us say that everything concerning voluntary departure plan in KLM has to be paid before the end of the year, mainly, I would say. For Air France, the last part of that, with the largest part, has to be paid at the first part of 2021. Concerning the postponement of some payment, I will, for example, give you the order of magnitude concerning the tax and the social charge for Air France. I suppose that for KLM, you can do that proportionally. For Air France, we have avoided, in 2020, EUR 700 million of expenses, and they will have to be paid over the next two years. Which is one-third, let us say, 2021 and one-third in 2022. Let us say that it is not a significant amount, but for a large part of that, it will be spread over the next two years.
I'm not so sure that Pieter has this info, but in the conversation we had with Erik Swelheim, the CFO for KLM, I would say it is the same type of order of magnitude. Concerning the postponement of the payment to suppliers, I would say that generally speaking, it is a bit narrow, and we have avoided some payment for a duration of six months, I would say maximum. For example, with vendors, it was more three, five months of postponement of the bills. I would say that we have already paid and will pay in Q4 the part of the bills which have been postponed during the period of beginning of the crisis. This is what I would say concerning the postponement and the cash impact of the restructuring. Concerning the restructuring for Split, I would say that normally it is longer.
Because first, there is part of these restructuring costs which are not cash. It can be just a writing off some assets. Part of it also is accelerated depreciation. There is not immediate cash impact. There is also, of course, cash impact for this restructuring, but I would say more spread over a longer period. I think also that we missed the question concerning sales of assets in maintenance or in cargo then. Of course, it can be part of the plan, but to be candid, for the time being, there is no precise project in this domain. It doesn't mean that we are not to consider it, especially if the crisis was deeper and longer. For the time being, we have not yet finalized or even studied such a project in terms of selling this type of activity.
Sorry. On the supplier payments, could you just give an indication of the quantum of outstanding supplier payments deferred as at this Q3 ?
Thank you. We'll now take our next question.
Air France is not very big, so I think that it is more or less the same for KLM. I have only the data just given to me by Steven, the CFO of Air France. I don't know if you have this on the call. Just with this key indication coming from Air France, and suppose that it is the same for KLM, it should be true.
Okay, thanks.
We will now take our next question from Andrew Lobbenberg from HSBC. Please go ahead.
Oh, hi there. Can I ask you to talk a little bit about why you're flying so much more than your peers? I'm not talking about long-haul network and cargo, but the gap is really quite large relative to your peers. Can you talk about why you're flying so much more? Then just coming back to a question that I think James asked, but I don't think it got addressed. About the efforts to make some progress with preflight testing. Really particularly what I'd be interested in learning is, how can you guys try and encourage multinational agreements? How can you lobby the EU or more broad international agreements? Obviously, unilateral decisions by countries don't help the market.
Okay, thank you, Andrew Lobbenberg. In terms of the amount of flying that KLM and Air France are doing relative to the other major carriers in Europe, there are, of course, these two employee pay support programs that are in place. The Activité partielle in France and the NOW program in the Netherlands, which provide us with a relatively large EUR amount of support.
We have that as number one. Number two, on the Air France side, as I said earlier, the French domestic market is rather large, which is unique relative to other global peers. Of course, the very large volume of customers that fly to and from the French overseas territories. That's a reason on that side, on the Air France side. On the KLM side, the cargo network and the amount of cargo that we've been able to-
To secure relative to prior COVID-19 numbers is also significantly helping. I think the most important metric, the most important thing that we have in place here is that none of our flights operate without being cash flow positive. That is the rule we have in place throughout the group, and that there is no excess capacity that is not generating any cash.
What I could ask is if Pieter and Anne want to just elaborate a little bit further on how the decisions were made and what they've been able to achieve over the last couple of months, and why we are confident in cutting the amount of capacity we have there for the rest of the year based on the experience we've had in Q3. Just as an example, the first month in October, the capacity we had in place performed exactly as we had expected.
Maybe start off with Pieter, and then Anne can make a few comments after.
Sure. Thank you, Ben. Just to echo and to underline the words of both Ben and Frédéric. We have quickly reestablished our European network during the summer months, basically in July. With that, we are having very small flows, but providing at least some feed to the long-haul network we're having. That, in combination with the very significant cargo amounts we're having, and the fact that the labor support program is sort of pushing down the level to where variable costs are being covered. We have been able to operate, as compared to some of our peers, a relatively strong network. Again, here, the fact that our network is pretty much spread across the globe, much less concentrated on one particular place, is really helping us as well.
We have the combination of these factors, and just to underline what Ben said, on an individual flight basis, we are having people reviewing every week all the flights being operated. None of them is operated on a level below flight contribution, so making up more than only variable cost. This combination of European network, small flows, cargo, labor support program, and the geographical widespread is really helping us to have that network in place. I think going forward with many of the competitors taking out long-haul capacity, we probably see a continuation of a trend whereby some of these smaller flows still have to be accommodated. Cargo capacity will still be needed, and at least for the next few months, we still have the same labor support program in place. Thank you.
On Air France side, if I look at the figures of October, we were able to have a 40% activity compared to last year. Mainly pushed by domestic, which was above 50%. Hub was below 30%, and long-haul was at 40%. Quite dynamic on French Antilles, French overseas islands. Also, some destinations in Africa, where we have a lot of big events and we keep traffic. It was quite dynamic since the summer. If I look at the other regions, of course, it's a lot weaker on North Atlantic and on Asia. We still are capable of having some routes that are cash positive. Again, as Pieter and Ben said, we are reviewing every day the margin contribution in terms of cash of each flight, and each flight has to be positive. Otherwise, we can't put it in anticipation.
On those regions, North Atlantic and Asia, we have a strong benefit of the cargo that can be up to 48% of the revenue on those routes. On Air France side, I think it is because the core of our fleet is 777-300 with a huge capacity for cargo. That helps a lot. That is the main reason for us to still fly on those destinations. A350 are also aircraft that are very useful for cargo.
On your question regarding lobbying for safe corridors between certain big markets and how we can do this in a more effective way. We are working with IATA, as many major carriers are, in trying to lobby the various jurisdictions and governments around the world to get some of these corridors in place as quickly as possible. We do have support alignment from the Dutch state and the French state on that same regard. Specifically at the two major international carriers, SkyTeam and FC, that we have bases in, we have a strong lobby going on there. A4E, Airlines for Europe, is also lobbying on behalf of all the long-haul carriers in Europe.
We have had some success with A4E recently, and that was with a common approach to lobbying Brussels to put the slot moratorium in place through to the middle of next year, which has helped us reduce activity significantly at the slot-constrained airports that we operate from. That, of course, has helped us to ensure that we maintain these key assets at key airports. We do have some good experience with A4E. We're hoping that can help us get a larger, louder voice that what I say is completely aligned with IATA, the Dutch state, the French state, and of course our other partners around the world, in particular Delta.
Thanks. Good luck.
Thank you. We will now take our next question from Erik Wilmink from ABN AMRO. Please go ahead.
Hi, good morning, everyone. I had a question on early fleet retirements at KLM, specifically. The structural capacity reduction at KLM from early retirement screening is relatively low in the context of the 15% headcount reduction at KLM, and also virtually announced early fleet retirements at Air France. Also because this would result in a capacity difference between Air France and KLM becoming materially smaller going forward. I think at KLM, the capacity decline from the 747 retirement is in the single digit area. What is the main reason to be reluctant on early flight retirements at KLM specifically?
What I can say, I can start and then Pieter can chime in after, is we do have a medium long-term plan to simplify the fleets at both KLM and Air France. At KLM, of course, the 747s have now been fully exited. We are moving toward a simplified 787, 777 fleet, where we do have a dual cockpit rating in place, which will put in place the most efficient long-haul fleet of any airline in Europe, of any of the major carriers in Europe at KLM. At Air France, similar exercise, obviously many more aircraft types. It's an industry four. The A380s are now out, the A340s are out, and there is a common pilot rating now on the A330s and the A350s, and then of course, a large fleet of 777s and a very small fleet of 787s.
The removal of aircraft from either one of the carriers has not been our strategy to date. We have halted all overhauls and engine work that is not required, which has removed a significant amount of CapEx, which you'll have seen in the indicators that Anne released publicly this morning. The planes that are still operating, we're not taking the position as of today to ground planes that still have life in them. However, the utilization of all of these aircraft is significantly down. In terms of pulling a fleet type out, the one aircraft type at KLM, which we are continuing to consider, of course, would be our A330. We do have some flexibility there. On the Air France side it's as simple as it can get up until now.
If Pieter and Anne want to go into a little bit more detail on the specific fleet plans at either airline and how we're operating day-to-day and where we see us going in the short term, it will be helpful to answer your question. Maybe Pieter can start.
Thank you, Ben. Your observation is right that the number of 747s retired is a relatively limited number, yet it was important to do so, and by doing so, we could phase out that entire fleet type and have any pilots retrained and so on and so forth. I think the difference here really for the next fleet type would be the A330s. We still have 13 of them in operation. If we were to take out completely the 13, the capacity drop would be very significant, one, and two, we would lack any flexibility at this point in time to anticipate any return of traffic since there's a very significant difference at KLM as compared to other carriers, including Air France. The actual fleet orders are very limited. We still have a handful of wide bodies on order going forward and not very more.
Every fleet which is going out eventually would mean a structural reduction of capacity, and that's why we're taking a bit more prudent approach. First of all, there's no immediate cost saving related to it. There was a cost saving with the 747s. There's no immediate cost saving with the A330s, which are a mix of ownership and leases, and we would lack all the flexibility. Of course, going forward, we will review how things are going, and we keep the flexibility to take any decisions once it's needed on the A330s. The 787s are the core in combination of the 777s for the operation, and the 777s as in again, just to echo Anne's remark on the 777-300s cargo capacity. The actual operation, the A330-200s are the sort of least operated number of flights today.
On Air France side, I think the main thing to say, we have exited the A380, the A340. For the moment it's mostly 777-300 and A350 that are flying on the long-haul side. We will exit the 777-200 that are leased and that are come to an end. It's part of the renewal. There is no major cost saving in deciding to exit earlier other aircraft. What we try to do to optimize the partial activity scheme and the subsidy of the French government on the partial activity scheme is to have a longer grounding of the aircraft. We will adjust the capacity, as we said, with the announcement of the confinement and really optimize the part of the fleet that is flying to save to the maximum the maintenance cost. That is the urgent decision to make.
Very helpful. Thank you.
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Okay. Well, thank you everyone for participating in this call, and we look forward to speaking with you at the next call, hopefully under better circumstances.
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