Earnings Call: Q2 2020

Jul 31, 2020

Good day, and welcome to the Happier 2020 Results Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Benjamin Smith, CEO of Air France KLM. Please go ahead, sir. Quarter point to point of fall. As you are all well aware, our industry is amongst the hardest hit, why there's unprecedented prices with April May activity levels near 0, both in our home markets, as well as in most other countries in Europe and around the world. In June, we saw demand start to show some signs of recovery, mainly in Europe. However, demand wrap up remains still very uncertain. Covid-nineteen triggered a global industry restructuring in which airlines are forced to make full decisions. This has large implications for our group our employees, our customers, our shareholders, and all other stakeholders. I imagine you have many questions about the current situation we are facing and what it means for our future. Therefore, I suggest we go through the Q2 2020 results relatively quickly and then focus on the situation at hand and our go forward plan in the context of the COVID-nineteen crisis. Freddie and I will do our utmost to provide answers to your questions as clearly as we can. Moving to page 3. As already mentioned, the COVID-nineteen crisis has had an unprecedented impact on the industry and also, consequently, on the FHANCE KLM group. With operations at a near standstill in April and May and a slow resumption of operations in June after our home markets and other countries in Europe came out of their lockdown. In the second quarter 2020, we carried 95% fewer customers than what we did last year during the same quarter. Thanks to quick and effective measures implemented since the start of the COVID-nineteen crisis at KLM and Al Haas, we managed to minimize our operational cash burn to an average of EUR 250,000,000 per month and posted a consolidated operating loss of EUR 1,500,000,000. Lower common the crisis, both the French and Dutch governments provided financial support packages to the EF House KLM group, its airlines, albeit with strict conditions attached, As for the end of the second quarter, our group has EUR 14,200,000,000 of cash available, after 1,000,000,000 in financing support from the French government and 1,000,000,000 from the Dutch government In the context of the COVID 19 crisis and as an integral part of the financial support measures, the group will at accelerate its key transformational initiative and we'll go into more detail on our approach and new focus during the strategy update at the end of this presentation. I would like now to hand over the phone to our CFO, Frederic Hajde, to provide further details on the financial impact on the Q2 2020 financial results. Hi, everybody. So if you move page 5, the first slide, and until the other, the most important look at the cash issue, you see from the left of the slide, the evolution of the EBITDA loss on a monthly basis, then you'll see that in fact, they go to the light because we have observed in June. We have a slight improvement in EBITDA flows moving from minus EUR 300,000,000 in April to minus 1,000,000 in June. So it is a slight improvement. It is also the sign of the recovery of the traffic by flight to be honest. We have observed at the end of subsequent quarter. Concerning the cash control, we have also tried to be extremely strict concerning the CapEx. There are the CapEx also on a monthly basis in the middle of the slide. You see that in April, it was minus EUR 94,000,000 in May it was close to 0 And in June, it was only one aircraft for around minus EUR 140,000,000, and this aircraft would be financed in July. In terms of net cash, the CapEx is close to 0 or the net CapEx is close to 0 during the quarter. Also good news concerning the working capital with a positive contribution during the quarter, quite close to 0 something around CHF 70,000,000. Which is due to the good control of the payment delay we have introduced with our suppliers, but also the fact that we have proposed to some passenger connections against vouchers, which explain why we have not be had so much reimbursement during the period. Also, there is all the cost control measures we have applied during this period. And also the first effect of the reduction of the FTEs. In the beginning of the year, we have minus 4000 FTEs for the entire group, mainly because of the natural departures. And as you know, and as discussed by Ben Raider, we also know that we are opening discussion with unions and with employees concerning voluntary departure plans for both in our front and in Karen. I move to the Slide number 6. When you see, description of the activity during this quarter, In fact, and to be honest, very poor activity, I saw first Transavia on the right of the slide. You see that was almost 0 in April May and with the beginning of the holiday period, there was a slight recovery of the activity during the month of June. And clearly, for Transavia, it would be a bit better in July and which is concerning the group Air France KLM and the network, activities also close to 0 in April, May, with a turnover of 57,000,000 in April, 88 in May and move in June, so if we move to close to EUR 200,000,000, which is a sharp increase compared to the multi farm, it is almost a thing, of course, if you compare that to what we did, last year during the same period. In terms of capacity, obviously, second quarter, the evolution has been 88 which is, of course, extremely large. The traffic is 5% compared to what it was last year. Load factor of course is suffering from the situation and is 51 points below what we add in 2019 and the unit revenue mainly caused by the reduction of the load factor, please add minus 40 5%. But earlier, there is bad payout concerning the labor cost of the turnover, a good first control many, many actions in order to reduce the cash drain. I move page 7. Where we describe the activity as the main KPI. So concerning the network, I have already described it. At the city minus 88.5 percent unit revenue negative and a change in revenue by minus 93 the good news and the good surprise is coming from the cargo. In fact, when you look at the cargo in due 3, around the world. There is a reduction of the volume, but which is expected at minus 30% only which is a good performance of course compared to the passenger activity. But in the same time, since the volume of the demand is lower, there was also far more capacity going down due to the fact that the last part of the cargo activity in the billing of the passenger have path, which means that the balance of the equity volume between demand and capacity was going into the right direction which explain why the unit revenue is positively oriented during the period for Air France and M The cost per unit will renew at least 1.45% compared to last year, and surprisingly also the revenue the cargo activity picked up by 6% but as you can see on the table, it is of course one exception. Transavia, he told that before close to 0 in April May, there was slight recovery in June, probably better result during the summer. Transavia expect to have capacity close to 50% at least in July and probably more in the congress. It seems that the result can improve significantly is during the summer period. On the net finance, revenue is down 60% at 2022. But there is a sharp deterioration of the operating revenue, which is moving minus 70,000,000 compared to last year. More than 1 half of that is due to exceptional, items. With the crisis. So we have a bad debt. We have the clients which are going into bankruptcy. We have clients which are changing their contract. There is provision to be taken because there are some excess of stocks, or there is some re evaluation of the profitability or some contract And because of that, there is almost 200,000,000 of exceptional items, which are hitting the operating result of the maintenance operations. And all in all, the property reserves at minus 1,000,000,000 the terms, of course, to EUR 2,000,000,000 compared to last year. I move then to the page 8 and the general metrics of this quarter. So all the new down should experience, of course, is also down. It's a good news, but not really a good news because only explained by the fact that we are operating less capacity and you can see sharp drop in the fuel expenses. EBITDA is negative. Of course, it is academic to the guidance we gave you in the first quarter. Operating risk management profile. The operating margin is a bit meaningless due to the record of the revenue. And the net income at minus EUR 2,600,000,000 due to mainly some exceptional items due to COVID 19 I will come back on that. The next slide, the ROCE and the net debt on EBITDA will show us still not actually, but of course, but down deteriorated slowly, but don't forget that calculated over 12 months period. And the net debt Fifty increase of almost 2,000,000,000 during the quarter, largely explained by the pool of personal cash coming from activity. I'm off page 9 to make the waterfall between the operating result and the net income. So operating result minus 1.5 and you have to take into consideration to move up to the net income to the fleet impairment. As you know, due to the COVID, we have accelerated the previous 380 fill out. And this decision has an impact of a 500,000,000 negative. We have also taken the decision to phase, I would reduce 3.40 separate into Air France and the impact of the decision is minus 72 1,000,000. On top of that, we have the over hedge impact. We have largely explained in the first quarter what was the exact nature of the overage concept and our debt to be treated accordingly and the impact of the overage is for the second quarter estimated to minus 100. It is a combination of the impact of the fuel price between Q1 and Q2. And also the impact of new competition concerning the volume of this overage fuel. Less than a month to be taken into considerations of restructuring costs, for this quarter. We are posted the Middle East, a provision coming from the KLM voluntary departure plan, which passed, which has an impact close to EUR 200,000,000 and we have also taken the impact of the Air France pilot voluntary departure plan with an impact of CHF 40,000,000 and the rest in others is mainly the cost of the debt that we follow. So we move from Cesar Provacing Reserve minus 1.5 to the need income minus 2.6. If I move slide 10, when you have the impact of the crisis during the second quarter for both Air France and KLM. Now we are surprised if I look, for example, to the bottom of the slide from the half one of the year. In KLM, the deterioration of the property result is 1,000,000,000 In the Air France, it is 1,500,000,000, which is totally aligned with the promotion of the size of the company before the COVID crisis. And now we are surprised, only difference, perhaps in the fact that in KLM, the turnover is a bit higher due to the fact that, thanks to the position of the KLM network concerning the cargo. KLM has been a able to operate a bit more cargo activity than Air France. That was the rise. As you can see, the impact of the crisis is the same for everybody else. Page 11, evolution of the balance sheet, have already indicated the net debt moving from 6.1to7.9a explained mainly by the fact that we have an adjusted operating free cash flow, which is negative by minus EUR 2,300,000,000 It is a result of a cash flow before working capital negative minus 1.3, which is close to the what we have indicated at the beginning of the presentation, the change in working capital is positive, I told you, with EUR 500,000,000 over the quarter. Net investment. In Q1, we spent 900,000,000 in Q2, 200,000,000. So in total, 1,000,000,000 of CapEx, which is lower than last year. Of course, during the same period 2019, we spend 1,000,000,000 for the capital extended 2 years. So it goes to an operating free cash minus 1.9. If I'm suppose that you have the payment of the lease debt, you have an adjusted operating free cash flow of minus 2.3 which is mainly explaining the evolution of the net debt So I move now to the outlook for the rest of the year. So I move page 13. When you see the possible development of the capacity during the next 2 quarters. What we plan today is to operate 45% of the capacity compared to last year for the third quarter of the year and 65 of the capacity for the 4th quarter. Just keep in mind that, of course, we continue to be extremely flexible. So it is what we plan to do today. And if there is new waiver, new political decision, new rules imposed by some countries, of course, would be able to adjust extra neuroplastic capacity is, but also taking into consideration what we see in the bookings. Even if concerning the bookings, situation is not really easy. We see a various change in behavior, amongst the customers. And one of the most important is that passengers are booking later and later or taking later and later the decision to buy the ticket. You can see that on the values that are at the right of the slide when we give the forward booking load factor 2020 a given period and we compare it to the forward booking load factor. Last year, I take, for example, the French domestic for September, last year, we had capacity at index 100. And CVA, we plan to be at 80 Last year, the forward booking was 31 and today it is only 15 crores up. I'm just indicating that there is a very late booking. There is also a strong shift to online channels. We see people moving more and more the online channels and not a surprise business recovery seems to be longer than what we observe Concerning the leisure activity, of course, we developed a quite active commercial policy, a specific assumption to the business segment but at least the situation remain both difficult and uncertain. However, If you look at the months of July, you can observe that the load factor has not so small and not ridiculous at all. For example, for the French domestic in July, we have a load factor at 76% for the medium move at 75 and for the long haul close to 50%, which is, I think, a good indication of the know how and the attention paid by our commercial teams concerning the choice of the flight and the capacity to be sure that there will be passenger in the flight, we are operating. And of course, for every flight, it is checked by the team that before we operate it, We are sure that he is, in terms of cash, positive and he is bringing positive cash to the company. I moved page 14 To go on, guidance on the CapEx evolution. In Q1, we have indicated that the CapEx was reduced by 1,200,000,000 compared to the initial gain outs coming from the budget. We are able to reduce, again, by 300,000,000 guidance, which means that we expect the CapEx close to 1,000,000,000 for the year 2020. Coming from a budget initially with almost 4,000,000,000 of CapEx that is reduced by almost 2. We continue, of course, to control the labor costs with a planned sharp reduction of 50s both in 2 efirm and into KLM. And on top of that, or a part of that, we are just obliged to admit that there will be again a significantly negative EBITDA for the second half of the year which is not really a surprise. In terms of cash, Page 15, as indicated by Ben before, we are the cash available or directly or with a credit line, which are available, thanks to the government of the loan, which are available in the case of the French age team, we have 14,000,000,000 of cash at end which is a 10,400,000,000 coming from the support of the government and the 3,800,000,000 of the cash in the hands of the group before the support of the government authorities, we consider our large level of cash available we continue, of course, to control the cash drain. What are the risks for the rest of the year? Clearly, there would be working capital risk due to the cash refund of the prepaid ticket that is in total, it is a global value of 1,600,000,000, but there is also it is 1,600,000,000, which been already distributed to the passenger with a butcher. So we consider that the risk of cash out for the rest of the year is probably far below 1.6. We will have also the cash, the CapEx spending for it for the second part of the year. Is estimated close to 1,000,000,000. The part of that will be also financed. I recommend you that the financing market is is open during the period March to July, the group has financed for 350 air abuse and 2 Boeing 7th came 7 using Joltko. That means that, it is still possible, of course, finance aircraft. Thanks to the support of the financial partners of the group. So part of the CapEx could be financed and the cash burn will be less than 1,000,000,000 on top of that, of course, Karen will have to reimburse his credit facility the former credit facility when he will draw the new one. And as you know, also we are to, we are on both 400,000,000 of hybrid at the group level and we are still considering if it is possible to refinance, it All in all, we are relatively comfortable with the level of cash. And clearly, we have time in front of us before to be in, in credit difficulty, if any, next slide as a conclusion. Very simple because I think it is also the same provision for the entire industry. Clearly, the COVID is an extremely severe crisis. Which is impairing all the industry financial metrics in KPI. It was through we probably also true for Q3, Q4. 2nd, the Ramon, clearly, the state edge teams have been extremely important because the allowed us to really significantly the cash constraints 3rd point, not a surprise also is the level of uncertainty. We don't know yet to be honest, totally what will be the level of the demand by the end of the year. And more specifically, what would be the reaction of the business people traveling for business and is of course a high level of uncertainty on our future profitability And lastly, the market, I suppose that it is true also for all who appears, the current situation is improving quite drastically the balance sheet of the group. And we are continuing discussion on the plan to reinforce by equity or quality equity or balance sheet. Thank you for your attention. And I give the floor to Ben again. Thanks, Frederic. The group's go forward plan started delivering results in 2019 with significant steps forward across key areas. This was achieved firstly through a dialogue with labor partners that has dramatically improved between management and the elected employee representatives. More than 40 labor agreements across our costs and KLM were signed last year. Which gave us much needed future commercial and operational flexibility. Secondly, we made some significant decisions on fleet restructuring, bringing increased productivity gains and organizational simplifications, which further drive unit cost improvements. Drastically increasing operational reliability has been the 3rd fundamental building block of our plan. We started the year 2020 with confidence and we're on track to continue the positive trends of improvements in our main KPIs, until the onset of the COVID 19 crisis. As I mentioned earlier, this crisis is unprecedented the impact to the global economy by COVID-nineteen is far more severe than previous economic crises. It is particularly devastating to the airline industry, which is strongly impacted by the subsequent travel restrictions imposed around the globe. Including the closure of the Shenzhen borders and various lockdown measures in place across Europe. In addition, the full duration of the crisis is as yet unknown with IATA forecasting a lengthy uncertain capacity development resumption after the crisis for the air transports industry. Moving to Page 20. During the second quarter of 2020, Alfalfe N KLMC capacity decreased by 95% in April, while bookings were unsurprisingly significantly diminished compared to last year. As explained earlier in the outlook by Frederic and in line with predictions of IATA for the air transport industry, thanks to the progressive lifting of intra European border restrictions from June onwards our booking trends show some sign of recovery, mainly within Europe. Page 21 to help support our group overcome this crisis. Both the French and Dutch states have provided financial packages to the LCOS KLM group with various conditions attached. The support of the French state in the form of guaranteed loans amounting to EUR 7,000,000,000 is accompanied by strong commitments to sustainability. El Paso must accelerate a transformation to achieve unit cost reductions to be in line with its peers, British Airways and Lufthansa. Net of costs of doing business in France and thus regain its competitive market position. Alfrost must also strengthen its leading position in terms of sustainability, including canceling roots where a train option shorter than 2.5 hours is available. And, currently, the airline must reduce its global CO2 emissions per passenger kilometer, by 50% in 2030 compared to 2005 levels. While CO2 emissions in France must be cut by 50% in 2024 compared to 2005 levels. Biofuels development will also be accelerated In addition to the €7,000,000,000 in funding granted by the French state to Alcois, the Dutch State provided a financial support package to KLM in the amount of 1,000,000,000. Conditions associated with the direct state loan are linked to the airline becoming more sustainable as well and the restoration of performance and competitiveness of KLM, including a comprehensive restructuring and contributions made by employees. Moving to Page 22, Before I move on to the implications of the COVID-nineteen crisis on our strategic areas of focus and key issues ahead, I'd like to make it clear that we are committed to improving the group's competitive position and global environmental sustainability by leveraging our unique strengths Page 23, in order for the group to reaffirm its leadership position in the sustainable transition of the air transport industry, the group has set a very specific 2030 commitment to reduce its global CO2 emissions per passenger kilometer by 50% compared to 2005 levels. This will be achieved through a multi faceted strategic solution with tangible reductions of CO2 due to a modernized fleet, better fuel optimization, increased use of sustainable aviation fuels, as well as compensation via market based measures like CO2 schemes and voluntary offsetting by a HAAS and KLM customer, programs. Since 2005, we have reduced our CO2 footprint by 30% And despite the fact that COVID 19 has created even more pressure, we have put an even stronger emphasis on our sustainability focus as part of the French and Dutch day based schemes and through the accelerated transformations, I will go through later. Moving to page 24, network coverage over the past few months was strongly driven by repatriation flights, and cargo demand. Customer's preferences and travel expectations have also changed besides assurance from regulators, lifting of travel restrictions and government advising against travel, as well as awaiting the white availability of a vaccine and rapid, accurate testing, customers also now expect generous flexibility and cancellation policies and evidence of strict sanitation and cleanliness aboard aircraft. This is exactly why we have, for example, introduced the most stringent sanitary measures on board and are actively promoting our travel with confidence campaign. We see our customers' preferences in these COVID 19 crisis times, expressed through their change to booking behavior, which is now, as Frederic mentioned, very last minute, with a strong shift towards our online channels. Overall, there remains a high level of uncertainty regarding demand in the year especially on our long haul network. Alfalfe KLM and Tazaviya, are all carefully increasing capacity for the summer months, where overall capacity levels are managed based on continuously scrutinizing developments of market demand and government policies, including opening of borders and slot moratoriums. The group aims to rebuild its worldwide network, step by step, with a wide variety of destinations in its portfolio Moving to page 25, as indicated on the previous slide in the booking trend for the week Mayender of 2020, we see a clear distinction between short and medium haul versus long haul recovery. The Alfons KLM group will reduce its global capacity by a minimum of 20% 2021 compared to 2019 levels and will continue to evaluate if further adjustments are required. It's a long negative impact on passenger demand in which demand is not expected to recover to pre crisis levels for several years. Will result in pre crisis capacity levels at Elseros KLM not being reached by 2024. Moving now to Page 26. In the post Covid world, Alfalfloss KLM group, we must balance its medium, short term or medium pardon me, medium term focus on managing liquidity risk and optimizing of CapEx Investments with long term focus on achieving increased competitiveness and sustainability targets. We're trying to do this through 5 key levers, labor, productivity, cost management, network and fleet. I will now take you through each one of these, 1 by 1. So page 27, First, with regards to labor, it is crucial for the group and its airlines to restructure their organizations to adapt to the new reality of reduced capacity and prolonged period of uncertainty. The airlines of the group will accelerate their ongoing transformation plans, and readjust their organizational size to match these new activity levels. We have an overall target to reduce headcount by around 17% compared to the 85,000 full time equivalent we have across the group, at the end of 2019, which translates to a reduction of around 14,000 FTEs across the group. In France, France will prioritize mobility options and voluntary departure programs in order to avoid involuntary layoffs while also utilizing some new French labor tools, notably the lube Chil, Covacian, Colletive, or else they say in order to permit voluntary departures beyond those, which would normally be permitted under French labor laws. In the Netherlands, KLM has launched a voluntary departure program to which 2000 FT Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Es I subscribe at the time of the deadline and combined with the departures due to reduction of external and temporary contracts This results in a total reduction of 4500 to 5000 FT Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Es compared to pre COVID KLM will announce their final restructuring plan by October later this year. Will be to Page 28. Besides the resizing of their respective organizations, both down costs and KLM will focus on further reducing labor costs since March that in France have been on what's called partial activity and a variable remuneration system for pilots and flight attendants, otherwise known as the minimum monthly guarantee or MMG, reflects lower levels of flight activity in both France and the Netherlands a percentage of employee wages are paid via the unique furlough schemes offered by the respective governments as part of their COVID support measures. In addition, at our cost base salaries, variable income, and any profit sharing schemes will be temporarily frozen, individual salary increases will be limited to contractual seniority increases and those associated with any promotions. Ongoing discussions are currently being held with all staff categories with the goal to negotiate agreements permitting increased flexibility in order to achieve unit cost parity with peers. At KLM, wage reductions for these employees who earn over the Dutch, modal wage are conditional to the state financing package and are currently under discussion with labor representatives like in France, variable income and profit sharing schemes will be temporarily suspended until loans related to state financing have been fully repaid. Moving to page 29, for the second lever, increase of productivity, Both the numerous agreements signed with our staff over the course of last year and a dedicated focus on network optimization and proven to aircraft utilization are helping to reduce costs and increase productivity. I'd like to specifically highlight the agreement we recently reached with the elected representatives of the S and PL which is the largest pilot union at El Hajas concerning a restructuring of the French domestic networks including shifting some domestic operations to our lower cost Contavia platform. The pilot union members at large are now in the process voting on a referendum concerning this agreement, and we look forward to a positive outcome before the end of the summer. Now moving to Page 30. This agreement with the SNPL is an important first step in our strategy to accelerate our transformation into profitability. The agreement is part and parcel of a full transformation of the French domestic market without cost maintaining operations on the historic Navette roots of Mafe Lease to lose as well as routes to Corsica from all Lee, while Hop will refocus on the Pallahuasi, Shaldago hub, and Leon. Transavia will begin operating domestic routes in addition to its continued development towards other European destinations. Page 31, looking to lever 3 network and lever 4 suite, Our future competitive position focus on sustainability and CapEx investments are largely linked to decisions we make with regards to network and fleet. 1st, as just explained, we must deal with the unprofitable domestic network which lost EUR 200,000,000 in 2019. Secondly, Air France has amongst the oldest fleet versus its key European competitors, leading to reliability issues, high maintenance costs, or CapEx required for end of life extensions. Thirdly, on the Efhof side, the aircraft utilization is simply too low on narrow body and regional aircraft. On the contrary, On KLM, we have 1 of the highest aircraft utilization rates in Europe. At KLM, it is of utmost importance that we strengthen our leadership position at Amsterdam Skippall through continued growth while continuing to maintain this high aircraft utilization rate. 1, exit aircraft as planned in order to avoid CapEx through the life extension 2, optimize our current fleet for example, through densification or other improvements to the layout of the interior seating configuration, otherwise known as Lopa 3, introduce committed new aircraft in line with our existing fleet plan. Continuing to invest in new aircraft will support the group's sustainability commitments and its amend or and and then its future competitive position. Page 32, in the short term, linked to delays in of Airbus and Boeing in response to the crisis situation at hand. Some Airbus A350, 900 deliveries at Alfaust, and some committed and uncommitted Boeing 787 dash 10 deliveries at KLM have been postponed. Has just explained, mid- and long term fleet investments are essential to achieve our ambitious future competitiveness and sustainability targets. In addition, we plan to continue retiring aircraft with the highest cost, fuel consumption and CO2 emissions and introduce new generation aircraft in order to firstly improve economics through lower costs pertaining to fuel MRO and Lopa. For example, a KLM replacing FSA 33100 by Boeing 787-ten yields a 20% fuel savings per seat, while at Alfa's the new Airbus A350900s represent a per seat fuel savings of 18% compared to the Boeing 770seven-two 100 ERs that they are replacing. Secondly, to obtain E Commerce of Scale via, for example, MRO Facilities And Employee Training. Thirdly, to reduce our environmental footprint, a new generation wide body aircraft will typically produce 25% lower CO2 emissions versus the previous generation aircraft it replaces. And for a narrow body aircraft, it is around a 20% reduction. Moving to Page 33, last but not least, the 5th lever, reducing our group costs and nonessential CapEx investment spend. Key measures to structurally improve future unit costs are being implemented throughout each of our business units. Such as a stringent policy to cancel or delay nonessential and non fleet CapEx investments, including IT, round and real estate investment projects. In addition, we have implemented a so called control tower procedure to scrutinize all controllable external expenses and have also frozen contracting of external staff. Finally, new initiatives linked to transformation to further simplify the support functions have been identified and added to our list of objectives. Page 34. Based on the group's strategic plan with the initiatives deployed under the header of 5 key levers, we restate the LCOS KLM group's objectives in the medium term as presented in November 2019, albeit with a 2 year delay to reach our target now in 2025. We maintain our target for a mid cycle operating margin of between 7% 8% and to be adjusted, operating free cash flow positive. On Page 35 at the conclusion for today, The COVID-nineteen crisis has had an unprecedented impact on our industry, and it is our expectation that the 2019 market will not return for several years. The group is agile and is adapting its capacity and commercial approach to cope with an uncertain demand ramp up capacity in ASKs in 2021. Will be reduced by and acceleration of transformation programs the group is adapting and aligning to the new reality at hand. We are maintaining our medium term financial goal through a 1 year delay. 3 year delay affirming the objectives for 2025 to reach an operating margin of 7% to 8% and a positive operating free cash flow. Why, responsibly will be a key, measure metric to our future, and we are committing to reduce global CO2 emissions per passenger kilometer by 50% in 2030s compared to 2005 levels. We are working full steam ahead on our new plan to ensure that the LCOS KLM group regains its competitive position in a deeply shaken world. And reaffirms its leadership position in the sustainable transition of the air transport industry. I'd now like to hand it over to the moderator to start with you. We will now take our first question from Daniel Roeska from Bernstein Research. Please go ahead. Good morning, gentlemen. I'm three questions then if I may. Number 1, how are you thinking about the cash burn in the restart kind of winter quarter and then into next year? And what will you have to achieve to breakeven, maybe in terms of a breakeven load factor or how you could kind of articulate that, what levels would you need to see to kind of be cash breakeven on those flights? And then secondly, could you elaborate a little bit for the Network Airlines, how you think the slower demand recovery on the long haul, if still reopening of global markets or the impaired business demand, How does this lower long haul recovery impact the short haul operation since there's significant connecting travel between the 2 to how are you thinking about the short haul ramp being influenced by that long haul recovery into next year? And then on the financials, your plan calls or net CapEx was up to $3,000,000,000 per year and probably repayment of $10,000,000,000 of government and state backed loans within the next 3 or respectively, 5 to 6 year. And even with your transformation plan, if we assume a favorable cash flow from operations of 2,000,000,000 to 3,000,000,000, That may just be enough to pay for the CapEx, but repaying the EUR 10,000,000,000 will be difficult. So how do I reconcile this with your 3 times leverage target you just mentioned? How are you planning to bridge that? Well, almost probably $8,000,000,000 to $10,000,000,000 size gaps within the next 5 years? Yes, that's a very nice question. Thank you. I will take to email the first and the third one. On CapEx, It's clear for me that, if we cannot finance, merely the fleet CapEx, then we would have to postpone the delivery and it would be the rules in the future. As I told you during the first presentation, today the market is not closed. We have indicated that in the last month, in the middle of the crisis, I have France and Canon together, I've been able to finance 6 aircraft. For the time being, the team is working on the delivery of 2021. And we have already created a good approach to the market concerning 4 aircraft to be delivered in Air France in 2021. So first of all, we have reduced drastically all the CapEx except with the market for financing aircraft is still open. It is clear that if one day we are not able to finance aircraft, we will not take the delivery. Regarding the demand, we have also extremely flexible. The EUR 3,000,000,000, which is given in the press release is accordingly to the free plan we have today. But I give you, I can give you many examples of flexibility number 1, all the fleet, in Transavia for both Transavia France and Transavia alone is not committed. Means that we can immediately adjust the fleet plan if we decide to do it. The reason the contract of the delivery of the 350 to Air France, also a possibility to play a lot with the contract. In order to erode and postpone some delivery. 3rd example in KLM last part of the fleet plan today is not committed. So 3,000,000,000 is ideal number. If an effort is not final, we will not take the delivery and there is a full flexibility in the fleet plan we have today in our plan. But it is just in order to make a bit more smooth as the reference to the 3,000,000,000 of CapEx. 2nd, concerning that we are most smart of the 10,000,000,000 off road. So a little bit just quite simple and quite realistic If you look in the case of Lufthansa, if you consider the announcement made by this morning, it is clear that one day there will be a need for some equity or quality equity operation in order to reinforce the balance sheet of the group, you know, so to smooth the amount to be robust in the future. It's clear that there is one specificities of the support provided by both the Dutch and the French states with front KLM that it has been decided to play first on the debt side. Is different compared to the scheme provider to, to Lufthansa. And in the case of British always, you have some sources in the morning that our colleagues in London are considering, of course, the possibility to inject a new equity into the balance sheet. So it will be also necessary the case for Air France KLM. And, because it's clear that them, and I suppose to be honest, and it is also the case for many, many corporates, getting benefited of, and provided by the state And if we apply, the normal calculation concerning the possibility to the emboss in the next 3, 4 years plan, you cannot do that without some specific operation concerning the balance sheet. Your first question is linked to seasonal. It's very difficult to answer to be honest because we will be breakeven to study based on the evolution of the demand. And for the time being, I can only consider that there is a lot of uncertainty. It's clear that you see during the the summer, a level of activity is entirely improving compared to what we had in spring. Happily, it is still quite modest to be, to be frank. I think that we manage that, in a very accurate manner, Is there some that the people in the network sales are upsetting to that day after day in order to add a flight, to consider flight open a new frequency, reduce it immediately, they consider that the demand is not there. I'm following the decision taken by the good amount concerning as always, they manage their borders. And I can only see that we continue to work in a extremely efficient way in order to be able to be an appreciative of all opportunities, if indeed, and to adjust immediately if there is some news decisions chart, suddently, giving the indications that the demand will totally disappear. I take, for example, the case of Algeria, We know that there is a very large number of people living in France and moving for the summer to Nigeria. But the demand is there and today it is impossible to satisfy it because the border is closed. So clearly, it is a new wall in which we are living today, which asked us to be extremely agile, extremely precise in the decision we take. And of course, the second part, sorry, your second question is linked to that. When the long goal, we increase, of course, it will support the development of the of the medium haul for the connections. For the time being, it's still at the last part of the medium haul activity is intra Europe for a digit France and relative purpose. Great, thanks. Maybe since the demand recovery is very uncertain, I think that on board with the 50% load factor you have on long haul right now, what you saw in Q2, how far away was long haul from breakeven during, during that phase? And how would you think about that right now in the current market environment for July? I can just tell you that all the flight are breakeven in terms of cash. We are never flying a flight, one flight when we consider that in terms of cash contribution, it is negative. After that, of course, we have to take the if container break even including the the position decision on the wall, But clearly, all the flights, all the revenue coming from the flights are covering the cash cost attached to the operations. That's helpful. Thanks. A few other comments to what Frederic just mentioned regarding the network. Both of our hubs, Skippal and it, ended Bosie in Paris have a both have well diversified networks, very well balanced, unlike some of our competitors in Europe. We're not heavily exposed to specifically any of our markets, anymore than the other North America, South America, Africa, Asia, the, the Ultracomao as we say in France or the, as or the Caribbean markets we have, out of the Netherlands. So we do have that to balance off. And then, that's predicted by many analysts and ourselves. We do see the visiting friends and relatives traffic coming back 1st, followed by leisure and then business. So we have the added flexibility at fos. We do have 32, 777s that do have a quick change, can figuration option, which only takes 1 day per aircraft to put in place. And that significantly reduces the business class cabin cabins on those aircraft, which in previous years, we've used for the month of August, when there's, heavy, heavy holiday demand in France, but these aircraft can stay in that can stay in that configuration for as long as we'd like. So we do have a few levers that, I believe, put us in a slightly better position than some of our competitors. Great, thanks. We will now take our next question from savi Syk from Raymond James. Please go ahead. Just a follow-up on Daniel's question. I'm not sure I quite understood Frederick, but your cash burn perspective you know, it came in line with your 2Q. Is it kind of close to breakeven currently or kind of what's and cash were in expectation. So the 3rd quarter, Rich, is kind of that $200,000,000 a month that you did, in 2Q. And then just a little bit on Transavia, what's kind of the expectation on capacity there and kind of 3Q flow to you in 2021? And along those lines, I'm a little surprised that kind of the long haul capacity is not that much different than kind of the medium haul in 2021. I'm guessing it's going to then along your lines of given diversity and given your willingness to maybe change your mix of business or Solesia, maybe that's what's driving that. But I was kind of curious if there is risk to the 2021 number, if that's where, where it is on the long perspective? Thanks. I think the cash burn and then we will tailor the capacity We have indicated clearly that we still expect an EBITDA negative during the 2nd part of the year. Would it be more or less than what we have in half 1, not necessarily worse, to be honest. Of course, it is based on the capacity that we have in mind to today. And again, we are being linked to the development of the demand. That will not necessarily, to be honest, planning, cash flow such as EBITDA level was in the second quarter. Paid to the first quarter. This is an indication. And at least this indication that with the cash available today, are fairly comfortable, for more than the end of the year, of course. But for those, difficult to say more, to be honest, because, the demand and, and more specifically, the demand we will have, service on your payer is something which is sort of being extremely difficult to, to participate. You remember, perhaps, that in the past, in the past presentations, where we are giving operating news from unlocking our tractor for the next 3, 4 months, which was, for us, a very good indication what was happening in the market. For today, So to that, it's extremely difficult to interpret, because, again, the decision to travel articulated and later on later by the passengers And we can just see that the forward booking load factor are far lower than what we had last year, but it is a sign that the demand would be so low or it is only the indication that the decision to book the flight are coming later. It's very difficult to to say. So for me, the crucial question, and it is true for Air France KLM, but I think it's true for everybody in industry. Would be what kind of a rebound or not concerning the demand after the summer period. The summer period is relatively clear. We have built the skeleton network, as we say, based on the mainly, appreciation flights, Two reasons and visit friends and relatives in Europe, but very few demand coming from the from the business. And for me, so the crucial question will be, is there or not recovery coming from the business? After the solar period. The answer is not necessarily totally negative. As I told you during the presentation, our salespeople are quite close to their business clients. They made some some workshop to discuss with them? What would be the demand? What could be the direction? How does it anticipate the 4 and the entire period. And there is some positive element, to be honest. People for the commercial or they need to visit their clients and after the crisis of the spring, to get in touch with the clients is something important. There are also people who need to visit for technical reasons, plants as they have overseas. Clearly, the answer coming from the business, the business awards not totally negative. Fairly for me. It is the most important question, and you will have the answer only in September October. Okay. Just a few other points from my end. So the group has been quite nimble On the fleet side, we made some decisions quite early ahead of, many of our competitors. So on the fleet side, And if you know, we made the firm decision to retire all A380s, which is open above the decision we made before prices of early retiring these airplanes, A340s will no longer be flying, and the 747s at KLM are being retirement is being early up. We do have a lot of flexibility, on the Elkhon side with our 7 77 200 Fleet And at KLM with the A330 fleet, that, those 2 aircraft types are we're using as flexible. Capacity when demand returns. And then on the narrow body side, now France, we have a lot of leases that are coming up for renewal, which do not need to be extended. And on the KLM side, the 7 37 NGs. Also, this negotiation that has been taking place over the last few months, even, prior to COVID, with the Air France main pilot union, the S and Pail, looks like we're going to have, in place a tool, that Alfalf has never had in the past to be able to finally address the, the issues surrounding the profitability of the domestic market. Will have costs similar to the low cost carriers that we, that we compete against. And if this vote does go through in a positive way, you're more quite confident that it will, we will replace our most unprofitable flights in domestic France as quickly as we can with Hawesville. None of the planes that we plan to use to, to increase the fleet of TAS IVF have been committed However, we have a lot of flexibility because of the availability of airplanes, as you can imagine, on the market. So this new tool, First of all, last year, we were able to remove the cap, which was at 40 airplanes before the negotiation took place. And throughout the development of Banzavia France over the last few years, it's been very contentious with pilots, 2 big strikes at LCOS. Over, over this creation and expansion. And then to be able to lift this this cap last year was a big win, but now to be able to put it on the domestic market, is extremely important. As Frederic mentioned, the domestic market, the return to activity has been encouraging, which seeing, obviously, there's no border restrictions or no, no health restrictions in place for travel throughout domestic France. The return to travel is extremely encouraging. We're seeing customers are showing a high level of confidence and we expect that that should extend to Europe once a similar level of confidence around the sanitary measures will be, will be in place and we're well along the way of our plans to reduce HOP. As I mentioned earlier, the HOP operation in the fleet will be, cut in half and the operation will be reduced down to, 2 main focuses feeding our Wazee Chalsa Gold hub in Paris and maintaining our mini hub in Lyon. All other traversal flights. These are flights that we call internally at the group, domestic france flights that do not touch Paris. Will be eliminated along with the flights that have a train option of under 2 hours 30 minutes. We will now take our next question from Jared Castle from UBS London. Please go ahead. Thank you and good morning everyone. 3 as well, please. Sort of get some indication in terms of how you're thinking about revenue management. You've given obviously, expectations for capacity and you're also saying that bookings are much more, last minute. So how does the revenue management system handle And because they're last minute as well, does that mean that there's a very positive mix given historically, at least, kind of last minute ticket, the more expensive ticket? Secondly, just on capacity, if the EU doesn't extend the lot rule in terms of not having to fly at lot of constrained airports in retaining the slots. What does that mean in terms of your expectations for Q4 capacity and potentially just some color on, Q1. And then lastly, you know, there's been obviously some legal challenges against the aid that has been provided to Air France and Lufthansa, what is your views on the potential ruling around the challenges that have been put forward to the EU? Okay. On your revenue management question, look, Alphon's KLM has one of the strongest revenue management teams in the world, plenty of experience, both in or to destination and connection traffic in the economy business class, as well as our low cost unit of Tanzania. And, of course, domestic fracs. So, the group is used to managing various types of demand. And demand curves that are totally different depending on the, on the specific route. The group also has a lot of experience in starting up new routes, both short, medium, and long haul. As you can imagine, as we mentioned a few times here, with the demand curve significantly changing, with all of, over this new way of booking, the new booking trends that we're seeing. But looking at this, in a similar way, as to, let's say, starting a new domestic will not have a history of what type of booking patterns that, that would have been in place for other routes. Sometimes we're pulling up against a competitor, what needs to be done to to take a business or to convince business to come to us. So as I said, I would, we're quite confident that the experience of our revenue management teams will, we'll be able to manage through this as best as possible. So we are focusing a lot more on the experience as opposed to the automated tool that we significantly count on in the past. And I think that will serve us well. On the slot side, we've benefited, quite extensively with the moratorium that is currently in place. The European Commission of Transportation has publicly indicated that She plans on extending this until the end of the year. And then a question on whether this will be expanded into next year, the second half of the winter season. Yet to be determined. However, there is a strong desire to, not only from airlines, but also the European Commission to put something in place so that we do not have to keep coming back to request for exemptions or moratoriums when other crises do come up. As I just said, we do have some visibility through the end of the year. And because of the way the booking bookings are coming in, but, that serves us well. At all new, we do have, two plans in place. Both one through the end of the year. Now that we have good confidence that the slot rules, for these law restrictions, exemption will be in place, but, we have a plan around that. And then, of course, at the second half of the winter, we do have to operate the full portfolio slots. We do have a plan surrounding that Amsterdam same thing. We do have quite a bit of flexibility in terms of gauge, and so that will help us manage the level of please? The legal issue, I think that first, we have to remind you that a receipt which has been done by your phone, by KLM, by SIS, by Lufthansa, by Iberia, is accordingly to the tamper with more decided by the European Commission. So we are not an exception the last part of January, airlines in Europe have requested the support like, the amount and also the amount concerned by his request are, I said, I could really need to legal framework extra nuclear and this by then by a good amount of the European community. So I would say that I cannot say more. After that, you can have 1 or 2 players trying to explain to the rest of the world that the situation is totally unacceptable, but frankly due to the crisis, in which we are living right now, I give personally not a lot of importance to this communication and this type of reaction. Okay. Thanks very much, gentlemen. We will now take our next question from Neil Glynn from Credit Suisse. Please go ahead. Good morning, everybody. If I can ask for you, please. The first one, just following on for some of the comments on feedback from your corporate customers and thinking about that in the context of the guidance that you've issued this morning. Just interested in your view on the premium cabin clearly very important to your restructuring plan over the medium term. But does that actually imply the fact that you still see those targets as achievable that you don't see this prices of having a structural impact on corporate demand over the medium term. We'd love to hear your thoughts on that. Secondly, on networking capital developments, and apologies if I've missed this, but you've obviously highlighted the inflow of working capital in the and quarter and trade receivables were a big source of that. But can you clarify exactly what happened there and whether any of that might reversing to the third quarter? And then a final question. You obviously have some trade and industry partners and shareholders. Interested to what extent has this been relevant or helpful to how you dealt with the crisis so far? Or given its extremity, has it been not that relevant that each party really needs to focus on its own issues before plotting medium term benefits from those relationship? I'll take the first question in terms of our view as to whether this will be or has been a structural change to, to business, business traffic demand. But the short, medium term most definitely business demand will be heavily impacted. I mean, but, we are all inside Alfonso's KLM quite bullish, and optimistic on the medium, long term, business traffic, demand returning. As if Huday mentioned, talking to our corporate customers, but also to individuals, who will be spending more time and traveling in the future. This, we've reached the point, before COVID where companies are global. A lot of our customers are global. France does not have the market business market share that it could have and should have in Paris. The diversified network we have at Amsterdam is the same. So if some markets do not come back as quickly as possible, just want to re mention that flexibility that we have, that we are confident and bullish that in the medium, long term that, the business market will return. Yes. Concerning the working capital. Yes, indeed, we're expecting the working capital less positive, contributing less positive real, which was immediately the way to the cash dividend in the second half of the year compared to the first one. There is two reasons for that. The first is that clearly we ask or supplier some postponement of payments. Sometimes it has been negotiated and then we a positive way with, some of, for a profit supplier. And, then, ultimately, the bill would have to be paid in the second half of the year. And second, we are still a significant volume of unfunded tickets for flights before the 1st July, The total volume certificate still in circulation is in the range of 700,000,000. We have already provided voucher to some of them, but we're still for EUR670,000,000 of ticket unflowing for flights before the 1st July, and his ticket has not yet been reimbursed. Which is for me, part of the risk we can have also in terms of working capital for the 2nd part of the year. We have also, as you know, distributed vouchers, value of these vouchers is around 900,000,000 and all together is 2 elements of the 1.6, which is indicated Page 15. So yes, both coming the bids to suppliers, which have been postponed and tickets still to be verbose or used which has also an impact in terms of working every time, ultimately. And in terms of cash in, we have in the forecast with both internally the negative contribution of the working capital to cash for the 2nd part of the year, where it was positive for the 1st part of the year, as indicated before. So that is it is a risk and that's why we listed it. We listed it in the slight in the slide 15. And we have also indicated something concerning this type of things in the press release. So in short, the negative contribution of the working capital in RFP We will now take our next question from James Hollins from Exane. Please go ahead. Hi. Good morning. Just a couple on fleet for me. Now, Ben, when you when you joined or at least, you know, after you joined, you said taking, new aircraft was about, sustainability, but also about product quality. Now I think you noted that your current CO2 emissions are 30% below 2005 and obviously the target is 50% by 2030. Just wondering how much of achieving that is coming from these new aircraft because clearly your commitment on aircraft and despite the flexibility in CapEx is very, very high. And what happens if you don't achieve that I'm assuming French government then slap you on the rest too hard and start demanding massive repayment and everything. Just a bit more update on that. And secondly, you talked in your Investor Day last year about a lease fleet ratio coming down to 33% by 2024. I'm guessing that's changed. I'm just wondering if you could give an update on what that number might be. Thank you. Okay, James. So to comply with the sustainability condition that the French government has attached to the loan support. Fleet does, take on a significant portion in helping us reach that condition or attain that condition, comply with that condition. The balance of the percentage of fleet, the level of activity, what type of aircraft will operate in domestic France all play off and we're working on plans, on how that's going to be. So we do have the RFA 2020s that, that will be, starting to deliver next year. We do have the reduction, of all the transversal flights that do not touch Paris or the in domestic France. We do have the 7 37 NG from, Tausavia, which will be also starting to fly in domestic frac, which will replace will be replacing, smaller fuel inefficient class, but replacing on able to say we had one tons out of your flight will replace 3 or 4 hot flights that we may have had in the past So the mix of new aircraft A220, the reduction in, activity on the flights where they're They were losing too much money and there's no future for making money. The replacement at Hans Valley, we only had multiple hop, flight. All that will be put together to ensure that we comply with this, 20 25% or 50% reduction of our CO2 activity by 2000 and and 4. So big, big balance going on there. Hamza Saganza, yes, you're right. Probably, we would be less aggressive in the next day concerning the target of the percentage of lease aircraft into the fleet. Clearly, I think that it will be less optimal compared to what we have indicated during the We will now take our next question from Andrew Lavender from HSBC. Please go ahead. Can I ask, for some explanation on on how quickly the the state support in different ways, on labor? Is, is likely to take it down and how much of a challenge that can be to cash or to P and L. And then another question is, is it then in the original plan, an interesting part of the Air France move was, was to do more point to point flying rather than connecting. I guess, in the short term, you'll just take any bloody passenger going anywhere. But, are you still, does the idea of taking more point to point Paris market rather than connecting. So is that still part of the vision? Okay. We'll start with the, the second, your second question. So in terms of the mix on board, the Afrikaans aircraft and the, presentation that we made in November, versus our position and their plans now going forward. So no change. The Paris market is very big. The largest market in Europe. Now France from a capacity perspective has just under 50%. And a big portion of that, large percentage is connecting. So as I said earlier, we have a huge diversified network We are, we do clearly believe and see based on historical, data that we can make higher margins in some markets or many markets if we change the, change the mix of local versus on haul. So that strategy will continue. And then also, out of Ole Airport, There are big opportunities, some for some of the high volume routes out of out of, France where we can focus more on Paris unless on some of the, domestic, connecting traffic out of Paris. The number one long haul market is New York, but the next three markets are in the Loutonnell, so Ponte Pizzoire, Elena and Folger Farms, but these are very, very big markets where today, of course, only has a 33% market share position. And the big portion of that is based on connections. But just to give you an idea of the top 100, routes that the group operates out of Paris. 3 of them are very big, French O and D, French traffic, O and D markets to reach El France is not the majority player, just as one example. On your first question, Andrew. I don't know exactly how to answer in the conditions requested by the government, and going together with the state at Skilvia. Think there is 2 things. I mean, 1st of all, and it's true for our funds and it's true for KLM. And I must say that the request is even expressing the same way, in the two packages, please come back with the restructuring plan, which is critical. It is exactly on what the two management are working right now with already presentation yesterday, concerning Air France, the presentation in, after summer concerning KLM. But there is a macro request. This is one. Please come back. We support you, but we need a unit to demonstrate that you have, a strategy and, a recovery plan even if the overall model is extremely difficult. And for me, this is a most important request. So we as there is a very much concerning sustainability, which are also quite stronger in importance. After that, we have some micro micro demands, which are different between the two companies concerning profit sharing, concerning variable income, concerning effort concerning general increase, etcetera, etcetera, but I will say that to give the impact of that is a bit is a bit difficult because I think that for us, at the group level, the most important of course, is a demand on the restructuring plant, which are requested. And this is a normal request, of course. By the grand month to each of the 2 car carriers. But to try to have a precise evaluation of the micro demand complaining us via the profit sharing, no bonus program. Frederick. Sorry to interrupt I was wondering about the the furlough support. I have to the fact that the request is for restructuring plan. Perfect. I was just wondering about the impact of the tapering of the slowing down of the part time working support from the government rather than specifically the state aid package. Sorry. Then I was a bit confused with your with your question. I come back to you in, probably later, I have collect all the last time to give you an estimate. If your question is on the order of magnitude of the state support, things of labor cost? Right, right. So let me to come back later on it. We will now take our next question from Walsh Shoal from Commerzbank. Please go ahead. Hi, good morning. Two questions on my side. First of all, can you give us an idea of how you see already voucher redemptions and by what time you assume that the majority of them will be redeemed perfectly because I assume there will also be drag on further working capital or because then there's no capital coming in. And the second question would be also now with Skippel having basically no restrictions on growth or any kind of applications there. Do you plan to grow KLM over proportionally aware France given that the high probability of the network? So on your second question, if you could just repeat that because it broke up here in our room. Okay. No problem. Given the triple now with, I mean, lower capacity in general had a lot of capacity left. Do you consider growing larger to larger share KLM given that KLM has significantly higher profitability than a fall? Look, we have 2 2 great hubs, to skip all from a slot perspective once we get to COVID and prior to COVID, was, was basically closed for additional flights, so increased activity at, at KLM only be done by using larger gauge airplanes. And on the narrow body side, this is exactly what our plans are. And on the long haul side, you can see we're focusing on, all new airplanes being the 787 most cases for -ten. We did order some, 2 more, 777300ers at the, at the end of last year. So there are gauge opportunities. And when you look at the exit of the 747 Combes, here again replacing those with full passenger sized aircraft does increase our average seat count on airplanes out of Skipball. And then again, we can play with the mix and how much local, how much long haul. So skip all, we just I think we are in a great position with an opportunity to increase gauge, change the mix, or optimize the profitability of that hub. On the French side, if you look at the, productivity benefits that the 4042 new agreements that were signed with the various unions with their heart last year, have opened up enormous flexibility for LCOS to start, increasing its profitability in a significant way. Of course, there are some unique costs and taxes in the French transportation sector. Those will not go away or we're pushing those for those who are away, but that's not the expectation. We're not counting on that. But with the with the improvement of the cost structure at Alfalfa. And at the beginning of this year, we saw a fantastic reduction in unit cost reduction. And that was done on top of the, the wage increases, the slight wage increases that were put in place last year, but with the, the amazing productivity flexibility that we signed off with the various agreements. Margin potential at Elfas with that lower cost structure and with the diversification of the network with the flexibility we have from a mix perspective at Elkhoth and with the updated fleet and the more optimized interior layout, the options and the opportunities in Paris in another Paris are great. And when you look at the market share position we have in Paris, versus Amsterdam, there's a lot of opportunity to grow the Paris operation. I'm Krishna Alfonso, and sorry, because my answer was not a correct one. We have some variation of the support provided by the 2 states both Air France and Karim and concerning the question of the partial work time of specific support, which is an OW system in Indonesia alone, and which are bringing to to corporate, not only Alliance, I think something which is open for all the corporates, support concerning the labor cost And a rough estimate is that for KLM in the 2nd quarter, the global competition brought by the Dutch debt is in the range of 3 40,000,000. And for Air France during the 2nd quarter, it is for Air France competitors, something in the range of 100,000,000 per month. It is a global evaluation of the support provided by the, states to airlines in the second quarter. And again, it is not something which is specific to airlines, of course, is something which is applicable to all companies in, in both in Israel and in France. We will now take question from Johannes Braun from MainFirst Bank. Questions. First one is a clarification. On Slide 21, you mentioned that Air Force needs to reduce unit costs to be in line with BA and Lufthansa as a condition to the state aid. I'm just wondering, does that mean that you need to reach unit cost level of BA in Lufthansa? Or is it only means that you need to reduce unit costs to be or to reduce unit costs in line with BA in Lufthansa? First one, second one, your equity position in the balance sheet has turned negative to, I think, 1,000,000,000 at the end of H1. Just wondering, is that a problem in terms of covenants, or is that putting more pressure on you to do a capital in check rather sooner than later or any other implications of that? Okay. For your first question regarding the conditions imposed by the French state on unit costs at Elfa. They are, quite clear. The unit cost at Elkhaz and, Elkhaz, and it's it's the competitive subsidiaries. We do have to get those down to, British Airways and Lufthansa levels. So similar, if not exact, CASK levels, but the key point is net of the unique charges and costs of doing business in France that you interpret that as you add all those, you take into account all those charges and taxes are unique here in France. The CASK, which should be extremely close, is not exactly the same as our 2 main full service long haul carriers of similar size. And the French government imposed this condition in a more flexible way, than on the Dutch side, on the French side, we can negotiate with the various unions to trade off productivity with, with actual wages and the, conditions surrounding those wages were in the Netherlands. There's more of a across the board, salary reduction, which we, we do not have to put in place, at our files. We, as I just said, there's more flexibility with these calls that our files work, KLM, yes, we are going to obviously We're going to negotiate with our unions to ensure that the company remains viable and remains as competitive as it was prior to COVID, we'll be doing that and approaching that in a slightly different way under the conditions of the pledged loans. Yes, concerning the negative equity, I would say, We are not saying that it is absolutely not satisfactory. We have to try all the way to to solve that and the sooner is the better. We budget are not legally speaking or in terms of financing. It does not immediate a negative impact by itself, but it's clearly, it's very something which has to be taken extra measures because it is is something that we have to solve, and again, as you know, it is a better, but not immediately very negative implication or impact. Okay. Just a follow-up on the first one. Can you be specific on how much, higher the unit cost levels are in France or the natural, I think, the natural unit cost levels are in France, opposed to doing business in Germany or in the UK? The, you know, if you do the breakdown of the cost of doing business at IELBoulder County and the unique taxes, that's relatively straightforward. What is and what we're still working through here to fully answer your question, but give us a little bit of time is these social charges and how they're broken out direct paid by the company and by the individual employee to give give us and to give you a full picture on, how it is that we're going to calculate, those reductions. But that last part the social charges is complex and we're going to be, we're in the middle of, calculating that to ensure that we have, the right goals to comply with that condition. We're 10 minutes over, over our allotted time. So moderator, we're going to have to cut it off. At this moment. So to, to all the financial analysts who, took the time to listen to us today and ask questions, we thank you And thank you for listening today and for all your questions. And again, if you do have further questions, you can contact any of the members of our team, finance team here at Alfalf KLM. Thank you. This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.