Earnings Call: Q1 2020

May 7, 2020

Good day, and welcome to Air France KLM First Quarter 2020 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Benjamin Smith, CEO of Air France KLM. Please go ahead. Good morning, ladies and gentlemen. Farid Gaje, and I welcome you to the Alfrance KLM's first quarter 2020 results call. Well, it has only been 3 months since relash presented at the full year 2019 results in February. Much has happened since then. We are in the midst of the biggest health crisis ever faced by our industry. Our industry is amongst the hardest hit by this unprecedented crisis with current activity levels near 0 both in our home markets as well as in most other countries in Europe and around the world. This has large implications for our group, our employees, our customers, our shareholders, and all other stakeholders. I imagine you have many concerns and questions about the current situation we are facing and what it means for our future. Therefore, I propose to take you through the 20 results relatively quickly and then focus on the situation at hand and the implications of the COVID-nineteen crisis. Heather and I will do our utmost to provide answers to your questions as clearly as we can. Turning to page 3 of the presentation, I would like to emphasize our strong start to 2020 with good development in both unit revenue, which was up by 0.8% and unit costs which was down by 1.6% through the end of February. We have previously indicated the impact of COVID 19 to our China roots However, we were able to successfully redeploy this capacity to other parts of our network, primarily to our North Atlantic route. As we all know, in the last week of February, the COVID-nineteen crisis strongly accelerated into Europe and other parts of the world. For the month of March 2020, our capacity fell by 35% combined with a 20 point reduction in load factor. Like many other airlines in our industry, this had a significant impact on our top line revenues and unit costs. I'll let Kylie provide further details on the financial impact to quarter 120twenty results a bit later In response to the acceleration COVID-nineteen, stated starting in February, we immediately took a wide range of far reaching emergency measures. I will go through these measures in more detail in a minute. Point out that the collective action of our group and our 85,000 employees has been recognized by both the French and Dutch states their strength, resilience, tenacity and compassion for our customers and fellow citizens was nothing short of remarkable. And for this, over 300,000 European residents, repatriated by Alfas KLM and Transavia. And within a debt of gratitude. Both Dutch and French governments have also clearly demonstrated their support National Aviation Industries by supporting the group's business plan and environmental goals. Thanks to their backing. I feel confident in stating that amongst the large European airline groups, we are the furthest along in terms of the implementation of specific aid measures that will enable our group to remain solvent while meeting our obligations part of the financial support measures, we will create a new transformation plan for our group, including ambitious new environmental goals. At the end of this presentation, I'll go into more detail on these goals and our approach to delivering on these commitments I'd like I'd like to hand over the, the call to Sarah Gauge, the group's CFO, for the presentation on the Q1 twenty twenty financial results. To everybody. I propose to move, slide 5 when you have the main numbers of this first quarter. Not a surprise that they are extremely impacted as explained by Ben, because of a COVID crisis. And we saw the first impact, which is mainly coming from the month of March because as explained by Ben, the 1st 2 months were okay. I mean, in line with the budget, with the positive unit revenue and a strong cost reduction. It is, of course, not the case anymore when you integrate March 2, the 1st 2 months of the year, which lead to the following results concerning the quarter, a drop in the revenue minus 922, which is, of course, significant. To be frank, comparable to what we heard from Lufthansa and the EHA group, which means that, of course, the impact is quite similar. On all the airlines in Europe. The fuel expenses close to last year Of course, hedging result is not positive due to the strong drop of the fuel cost of the fuel price during all this period. EBITDA negative, which is quite strange. It is really not quite common to see a negative EBITDA for the 1st quarter. It was 443,000,000 last year. It's minus 61 during the first quarter of 2020. Going together with the ramping operating result, of course, at minus 815 and an operating margin of minus 16%. So net income is at -1.8 per drop, which is far more significant than the drop in the operating result, but I will explain why in the next slide But she and the net debt on EBITDA are still, I would say, acceptable, but it's clearly just explained by the fact that these two KPIs are calculated over a 12 month sliding period. Of course, as we will go further in the crisis, and we will add the very bad quarters in the next month. You will see a loss the further deterioration of the ROACE and of the leverage ratio. I move page 6 just to clarify the, waterfall between the operating result and the net income. So operating result minus 800 net income minus 1.8. What is, between the two Probably the biggest impact is the fuel edge result, which is a minus 4,550,000,000. That is the origin of negative impact. Quite clear, we were edged normally and, accordingly to the hedging strategy we developed already 4 years. Due to the drop in capacity, we plan now for the rest of the year. We are presently over hedged in the sense that the volume of fuel, which is hedged, is higher than the volume of fuel we expect to burn due to, air activity. So we have to consider that the overage is something like pure couder the speculation of financial operations and according to IFRS, which has recognized its fully logical. We have been not for, but we have been led to take, in financial result, the 2 day value of the fuel hedge portal for you, we consider to be over hedged compared to expected, consumption During the rest of the year and at the price of today, it has been estimated at -4,000,000 dollars, $55,000,000. Of course, If in the future, we see the fuel cost going a bit up. We can now partly revert of seasonal loss at the first quarter And then we would take some benefit during the next quarter, but we have to wait for that other impact to be noted is the deferred income tax, something quite clear also that due to the COVID 19 crisis, we are considering the future a bit in the less optimistic than before, not surprised. And due to that, aligning to the rule of the recognition of the deferred tax asset we are now considering that some parts of this tax asset will not be recognizable anymore. Or recuperated in the next 7 years according to the IFRS rule, which means that we have depreciated a bit That also is asset, which is in balance sheet. I move page 7 to give per business what is the situation? No surprise all the numbers are in red. There is only one, but which is for a bit of spurious reason. The unit revenue in Transavia, which is a bit technical in the sense that there is a lot nonrefundable ticket into Transavia, which means that when there is flight cancelled, people cannot recuperate fully the price of ticket, and then you have a revenue EBIT less ASK, which is explained since +13 percent, but for the rest, You see, of course, the impact of the crisis with the unit revenue negative concerning the network activity minus 8%. The cargo at minus 10. Even he's concerning the cargoes, the things are a bit moving in the right direction in the sense that if you look today, the demand concerning the cargo activity, the level is relatively high due to the fact that a lot of the passenger aircraft, not only from Air France scale and for any airlines in the world. I will pass it means that because there's absence of abilities available cargo, the demand for a full freighter is extremely high, which means that in the recent weeks, we see, let's say, recovery of the cargo activity and of the unit revenue for the cargo. But for the rest, if you look at the result of the first quarter. It is clearly the absolutely terrible impact of the crisis, mainly in March, which means indirectly, and it will won't be a surprise that probably the result in Q2 would be, of course, worse than what you see today concerning the first quarter. I move to the next slide concerning the unit revenue. We have considered it was probably interesting for you to separate the unit revenue evolution between the period up to the end of February. And after the full quarter, when you integrate March, let's just say that the 1st 2 months were okay. You see that The total RASK was at stable at 0%. With some difference between the value subnetwork To be noted that friends domestic and medium haul hubs networks were relatively, going well. With unit revenue close to 4% in the French domestic, which is one of the consequence of already launched the restructuring plan for the France domestic network. The medium also was okay with plus 2.5 of unit revenue, even if the capacity have increased by 1.4. On the long haul, 2 things also to be to be noted concerning area during this period Jan Feb, you see already the deterioration of the azian network, mainly due to the beginning of the crisis in China during this period. You see the ASK already negative minus 5.2. The traffic even more negative minus 10. And they're asked not to surprise being at minus 5%. On the other side of the of the world, if I can say going to west, you see that North America where we are a redeployed part of the fleet when we reduce capacity to Asia. So North Atlantic is characterized by a growth relatively significant, please say 10% which has even a bit above what we have planned initially due to the road requirement of the fleet. Traffic as followed or well understood, which is that traffic is at +11 percent, so in line with the capacity, And, due to that, probably, relatively a slight reduction of the RASK at -2 percent. Latin America is not yet totally recovering, but that too is the number of hybrid data compared to the last 2 years. And a good development, partly pushed by the price of the of the oil. Which was increasing during the beginning of the year. You see Africa recovering with the RSAT 3.6 in positive traffic. And the same is true for Caribbean and Indian Ocean probably also explained by the reduction of the competition due to the bankrupt of XLA was mainly. Of course, on the left on the slide, you see that when you look at the first quarter, not to surprise, the regions are not at all aligned with what we have seen up to the end of Feb. Zirasquez negative minus 8%, traffic minus 10%, sorry, minus 17% for capacity minus 10%, So clearly, a quite strong and negative impact from the month of March. Next slide number 9, not a surprise impact per car years, of the crisis. I would say very similar for Air France and KLM, a drop in margin of around 11 point is, of course, extremely, extremely significant. Revenue minus 17 for Air France minus 10% for KLM, in minus 15, all in all, for the, for the group. You also see some difference concerning the net debt evolution In Air France, the net debt increased by 400,000,000 in KLM it is almost stable at 2017. Partly explained by the fact that, of course, these two carriers or the 2 teams have engaged very quickly some measures in order to save cash and rationalize the cash out. There has been the possibility in KLM to apply immediately the strategic consisting to external supplier payment terms up to 90 days, which in France is not legally possible as we have not to go beyond 60 days. So it is clearly a short term impact which has been salable for for KLM, which is a good news, but part of that will be compensated in the second quarter I move then to page 10 to see the evolution of the net debt during the quarter. So a cash flow before change in working capital at minus 180,000,000, a change in working capital, of course, which is less positive than last year. Last year, it was 800,000,000 dollars, $462,000,000, which is above the combination of the fact that you are selling less tickets, not as surprised. But also that you try to compensate that by your cash savings, measures and strategy into the 2 companies, which has been nice and relatively successful. And, thanks to that, we have been able to limit the drop in the contribution of the WCR to the cash flow evolution CapEx were totally in line with the budget You see that on the quarter, we have invested 800 as we told you at the beginning of the year that the CapEx would be in the range of 3.6. I see that we have to tell you, we were to tell the airline in terms of a CapEx flow during the beginning of the year. Immediately at the beginning of the crisis, we have adopted that strategy far more strict in terms of CapEx, which means that suitably in March, the level of CapEx have been reduced to $82,000,000, so clearly lower compared to what we have done in Jan and Feb. So we have record, I would say, extremely rapidly. To adjust as a result of CapEx. And for the time being, we plan a CapEx, at 2,400,000,000 compared to the 3.6 we add in the previous guidance and 2.4 given fact that we have already spent 800,000,000 in the first quarter. It's clearly a sharp reduction since the beginning of the crisis Then operating cash flow is at minus 576. I had the payment of lease debt to apply the IFRS 16 and we have an adjusted free cash flow of minus 825. You'll find it back on the right of the slide with the calculation of the net debt. And it is mainly the 2 determinants of the evolutionals and net debt, payment of lease debt, additional operating free cash flow and also some additional new lease debt but relatively limited at 100,000,000. Then I move page sorry, Page 12 just to share with you what, what has been, again, as a quick Sorry. So I give the floor to that. Sorry. Sophie Frederic, so continue on page 12. As said at the beginning, the Chrysler's Office is extremely great unprecedented. It is devastating to the airline industry, and we've seen travel restrictions imposed around the globe, including the closure of the EU Shenzhen borders and down measures implemented in our 2 home markets. 1st and foremost, I must point out that our highest priority is the safety of our employees and our customers. To this end, we have been ruthless in implementing strict health and safety measures at all touch points. To name a few modification of customer channels on the ground, reinforcement of daily cleaning procedures, and adaptation of in flight service. In addition, our crew are wearing mask on board and wearing a mask will also be made compulsory for our customers on all flights operated by Nacraft and KLM from May 11th. Working in close coordination with the French and the Dutch governments, all airlines at the group have contributed to maintaining both a national medical supply, or as we call an air bridge, as well as a means of repatriation for European citizens, including preservation, of essential links with the overseas territories of France. 2nd, we have drastically adjusted our business activities. Our network and schedule has been adjusted downwards. We strong capacity reductions. In March, activity was down, as I mentioned, 35%. And overall, in the 2nd quarter, it was down 95% with Transavia to be expected to be fully grounded. On a positive note, the cargo demand has proven to be resilient in response to which we strictly deployed additional freighter capacity. Thanks to quick work by the team, the revenue impact on our cargo operations is expected to be only modestly negative for the second and third quarter of 2020. In our engineering and maintenance business, the 3rd party activity is continuing when and where possible. We currently foresee an activity level for the 2nd quarter around the 45% compared to last year. So moving to Page 13, and the group has implemented stringent cash preservation measures in response to the COVID-nineteen crisis. I would like to speak further on these measures. And the liquidity situation of the group. Also for the outlook of the month ahead. Thank you, Ben. You have on the page two things. First, we try to make simple how we see the cost evolution or the capacity to manage the cost in such an environment. So, clearly, I see that, but we have, you have all taken into account, according to us when we look at your models, the fact that nobody speaking, when you reduce capacity, we can apply the firm rule, which is at approximately 50% of the costs are viable. And we'll look at that and check that during the last week. And we, it seems to us that it is a good approximation. On top of that, of course, we have to the 2 airlines to think about additional savings even compared to the budget, what we have immediately launched together with the businesses. And for the time being, we are estimating that the global to see the cost measures is totaling 500,000,000 for the year 2020. And of course, there was a permanent work. It's not an easy period, of course, for controllers and financial people in order to continue to improve as it possibility to reduce the cost. On top of that, of course, we have been supported in the 2 countries. I will say both France and the Netherlands concerning the fact that we had to manage, we had to manage the fact that we had a lot of people, which are today, to be paid, but not even an activity, for example, people working at the airport, of course, which have a bit without any activity due to the evolution of capacities. For that, the group, as many other corporates, are benefited of in France a system, which is called activity, partial, when people are working less, paid a bit less, but part of the salary is paid, thanks to payment coming from the government amount. And for KLM, there is a debt system, which is called no and our audio, which is also a contribution coming from, from the government to the crop profit, which are hit by an external crisis and in which people have less activity than before. We can see there for the time being that these two measures, which is, of course, relatively significant. As contributing for 350,000,000 per month in the 2nd quarter. Concerning the CapEx reduction, I have already discussed in the Diet part, Immediately after the beginning of the crisis, we have launched a new plan consisting to reduce CapEx. Already 900 were already spent in Jan in in Feb. So the CapEx still at stake was 2.7. And on this 2.7, we have a long a plan and taken decision, which are providing a reduction of 1.2. We will of course continue to work on it. The rule is for the aircraft to be delivered relatively soon, I mean, in the next month, for we have, financing, which has been already committed by bank. We will take the aircraft and as a delivery, we will be as expected. But for the aircraft supposed to be delivered by the end of the year for the time being, we are trying to postponing some of them, and it is, obviously, the case for the delivery of 3 and with 3.50s, which would be delivered not in 2020. But in 2021, and at the time, we will walk a little on on the expected delivery for 2021 when the new fleet plan taking into account the new economic context on the environment will be finalized. Of course, there have been a last or third way to work on the cash protection, which is to negotiate delays in terms of payment. It is the case, for example, concerning some tax and social charges. When we got approval from French or Dutch Ministry with the possibility to postpone this payment over our values, timing. Sometimes it is delayed in Tuesday at 2020, but there is also some other for which the possibility to delay the payment goes up to 2021 and even 2022. We are also of course negotiation with some suppliers. I think about later about airport and various suppliers with whom we have also negotiated some delays of payment when you take all that together and you look at the evolution of the operational cash burn, we have made own estimates And we consider that if we apply first the rule of the variable cost at 50%, the additional cost measures we have taken. And the fact that we continue to work on cost reduction measures, we are considering that If in normal operation, we will have cost about 2,000,000,000, which is more or less the case. If you look at the budget for the 2nd quarter, so 2,000,000,000 per month, we are considering in our own that with all the adjustments and taking into account the variable cost. The pure operational cash burn can be estimated per month for the second quarter of 2020 to around 400,000,000 Of course, on top of that, you have to take, the CapEx, the, the, the, we are most not of some debts that they are. But let us say that it is, we think, a quite important KPI to have an idea of what is the operational cash burn and we can give you this value for the next shipment of the 2nd quarter. The last word on the liquidity position and its evolution during the first quarter liquidity end of December was at 4.7 not taking into account the undrawn facility, treasury facility RCF for 1,700,000,000. In fact, we have drawn these 2 credit lines during the quarter. But if I don't take that into account, the level of cash at the end of the quarter is at 4.6, which means that there is not a big deterioration of the cash level during this first quarter in the found that the negative adjusted operating free cash has been compensated by the sale of Amadeus Shares. We had still in the Air France portfolio and the new net financing, including the fact that in Jan, we issued, as you know, a bond issue of 750,000,000. So all in all, we are entering the 2nd quarter with the level of cash of 4.6 excluding the 2 RCF. In the meantime, as you know, we are also open the distribution with the states, both in France and in the Netherlands. In order to negotiate state support, but I will discuss that a bit later on So if I go on the next slide, page 15, when we have, today, our vision on the capacity for the second and the third quarter. Of course, to be honest, there is a high level of uncertainty. I think that we are all plunged in the scenario and a very specific entire amount. Depounding on what will be the reaction of the epidemic in the next weeks. And progressively in some countries, you see that the strict measures imposed by the government are made step by step a bit lighter concerning the capability to for people to circulate and to travel. So we are still totally in a full, in a full uncertain uncertain uncertain environment. Let's just say that for the time being, what we consider as scenario or central scenario is that for the 2nd quarter, we expect a reduction in capacity in the range of -95 percent. For the 3rd quarter, and here, of course, the level of uncertainty is, is even bigger. We are, for the time being, a plan in our capacity with a reduction of minus 80% compared to what we are in the budget. So taking altogether, I say that we have to to to take position concerning the full year 2020 outlook. And there is 3 parts, I think we can make quite clear prior to the uncertainty. First, okay, not really necessary to say that, but I think it is normally to do it of course, we withdraw earlier 2020 guidance and not really as a price for you. Second point, I think that clearly now we foresee for the year a significant negative EBITDA. Which is really, I think it never happened since the merger between Air France and KLM. And third point, but I think that here, we joined what has been told by Lufthansa Group and all colleagues of IAG. We expect a current operating income for the second quarter was than what we are presenting today. Continuing the first quarter, is not also really a surprise because again, you know that the first quarter has been 8, let's say, 3 weeks only. For 1 month to simplify by the month of March went early for the 2nd quarter. So April, May, June, for the time being, will be all bringing a negative contribution in terms of current operating income. I move page 16 just to indicate where we are concerning the negotiation with the 2 state France and Dutch containing the state 8 package under our discretion. Concerning the French package just to remind you, but we have already provided some information to the market last week, which expect to have this package organized with 2, 2 elements. 1 is the 1,000,000,000 bank loan provided to Air France scale in order to support Air France. It will be provided by 9 French and international banks. One of the characteristics of the loan of course is that it is guaranteed by the French state And second element is a 3,000,000,000 shareholder loan, again, to Air France, SKADM, to support Air France, which will be coming direct from the French state with a term of 4 year plus 2 times the possibility to have one expansion of 1 year important characteristic of student loan by the shareholder that is subordinated to the bank loan. So I think that we are very into the process concerning since 2 elements. And we expect to have all the documentation to be signed in the very, very index very, very, very negative. In confirming the package to KLM, it is now under distribution in the kingdom of the Netherlands. There were years to the long distribution in the Dutch party And we expect that progressively as season negotiations will come to an end and that the case would be ready to support the Canon and I give back the floor to Ben. Okay, Ralphie. Moving to page 17. Before going any further, I would just like to emphasize the progression we have already made on our strategic plan that was presented to you during the Investor Day presentation that, we made last November. The strategic direction we outlined has been the basis for several ongoing projects, some of which are already starting to deliver concrete results. I'm pleased to note a structural savings in unit costs particularly at FHAS with unit cost down 1.8% in Q4 of last year. And down 2.9% through the end of February of this year. The improved labor relations at El Paso. Over the last 18 months has been remarkable and over 37 new union agreements were signed in 2019. So I'd like to thank all unions and employee groups for their willingness to work so closely with us in a trust, trust and respectful and, most transparent way. These agreements were starting to deliver concrete value and flexibility before the onset of COVID-nineteen and we expect this new relationship to significantly help us weather, this storm that is so grave. Nevertheless, in view of the current crisis, We have to drastically accelerate and intensify important elements of the strategic plan. The optimization and simplification of Our internal airline processes is a key part of the strategy and all actions we intended to do over the next 5 years will need to be realized much more quickly. Another important element is the revision of the scope of the French domestic market at Ephrons. We have previously indicated the loss stemming from the French domestic network, accelerating this transformation program, combined with the environmental transition goals, which I'll go to later, drive an enhanced opportunity for structural improvements to work profitability. The third element I would like to highlight today is the opportunity to speed up and intensify the transformation of the EF House value all the strategy, including a much larger role for Tanzavia at Oak Lee as well as the introduction and development of Transavia in other French cities. The name pilot union at El France, the SNKL, has received a positive mandate from their council to start discussions on this, which is an extremely vital first step in the process. Very good news for us. Page 18. First, I'd like you, once again, thank our employees for their rapid and effective response to this unprecedented crisis. Rate of its ability to adapt to the unknown and the unforeseeable, in a very, very quick timeline. 2nd, I would like to emphasize the mutual acknowledgement of management and our elected employee representatives that there is a shared responsibility among all employees to reduce costs and increase the profitability of the airlines at the LCOS KLM group. Improved operational processes, adjustment of the scope of unprofitable activities and greater flexibility are all tools we will use to reschedule our business and emerge from this crisis stronger than ever. Our group in airline management engage in discussions with elected employee representatives for all staff categories looking to amend agreements. Were necessary in order to find increased flexibility and added cost savings to help achieve the objectives of this restructuring plan. The group and the airlines must adapt, including adapting staffing levels to our new reality and the inevitable lower activity levels that will follow, even post crisis. Turning to page 19, like I mentioned, we will have to adapt to a new reality post COVID 19. We do not believe the airline sector will do the same in the short term, and we do not seek We do not foresee demand returning to pre crisis 2019 levels before several years. This will require a global repricing of our long and medium haul networks, and we envisage the capacity plan for 2021 being at least -20 percent below 2019 levels. As a first step, we have decided on the early phase out of the Boeing 747s at KLM and FS A 3 forties at that cost. And the return of the remaining Airbus A380s at El Paso is also under study. Secondly, there are the earlier revisions to our short and medium haul strategy. Finally, we will reassess new fleet orders in view of the new market reality as well as the group's future investment capacity. This will all be integrated into our restructuring plan. To page 20, this strategic repositioning to the current crisis aligns well with the objectives of our ambitious environment mental roadmap, including reducing the volume of CO2 emissions from French Metropolitan flights by over 50% by the end of 2024. We also foresee a dramatic reduction in the number of French domestic routes on which there is an alternative by train less than less than 2 a half hours with the exception of regional flights feeding our child a goal hub in Paris. Overall, by 2030, we envisage a 50% reduction in CO2 emissions per passenger kilometer across our entire network compared with 2005 levels. On page 21 as a conclusion for today, key takeaways regarding the Covid-nineteen implications and our decision making to secure the group's future are as follows 1, we had a promising start to 2020 and the strategic plan unveiled in November 2019. We're seeing impressive early results 2, the entire airline industry, including the Air France KLM group, have been hit incredibly hard by the unprecedented COVID-nineteen crisis, 3, we have demonstrated our ability to adapt by implementing quick and thorough measures related to both health and safety as well as cost savings. 4 uncertainties remain regarding the evolution of COVID-nineteen, and we must be cautious in our assumptions of recovery in the coming months. The quick support of the French government and ongoing discussions with the Dutch government essential for our group to get through this major crisis and to rebuild itself as a testament to their confidence in the future of the group. 5, we are working full steam ahead on our renewal plan to ensure that the NLFOS KLM group, we gained its competitiveness in a deeply shaken world. And reaffirms its leadership role in the sustainable transition of the Air Transport Industry, a new transformation plan will be presented in the coming months. So I would now like to hand it over to the moderator to start with the questions and, our answers. And please make sure the The first question comes from Daniel Roeska of Bernstein Research. Please go ahead. Gentlemen, good morning. 3 if I may. Number 1 on the kind of restart of operations and maybe a view on the next kind of 12 to 18 months, which are the additional health and safety protocols you're considering currently putting in place to get people comfortable flying again? And do you think it will be possible to reach an industry consensus on this or will this rather be an individual approach of airlines in the beginning? And then secondly, on the transformation plan, not going into details, but how would you balance the need between investing into the transformation. And we kind of looked at that in the Capital Markets Day and that there was quite a bit of CapEx involved. Against the requirements to kind of work on free cash flow quite drastically in the next couple of quarters. To reduce the net debt levels again. How do you balance kind of that investment versus free cash flow requirement in the transformation plan? And just lastly, short comment, maybe if you will, on your North Atlantic joint venture, kind of how would for the development scenarios of Virgin Atlantic impact your Delta joint venture on the North Atlantic. Okay. Hello, Daniel. It's Ben. So on the sanitary measures that we are taking and will continue, to put in place, over the coming months. Already over the last few weeks, we have significantly increased like many of our partners, the cleaning of our aircraft and our gate areas as well as any other, areas where our customers come into contact in in the, in the airports and onboard our aircraft. We are working very closely with Iowa Baldi, at Shaldegold And, eventually, at all, once the airport reopens to ensure that Alfa is in front and ahead of the market on, on that aspect and as well in Amsterdam at Skippall. We're also working with Delta to ensure the same is the case, in the United States, as well as our other partners around the world. As I mentioned, effective May 11th, it'll be mandatory to wear a mask, all customers to wear a mask, onboard all KLM, and they'll file flights. You may have read a few days ago that Alexander Eugeniak, the head of IATA, it come out strongly with a message that, representing over 200 airlines that the view is that masks are the best protection onboard aircraft and the A for E organization has the same approach. So we are hoping that an industry wide approach to, to Oregon MASKS on board is, is the way forward. I'll let somebody answer the second question, but I'll quickly move to the third question. Regarding our North American joint venture with, Delta, and also recently added Virgin Atlantic. Our view is we will continue with this joint venture as negotiated and as implemented since the beginning of the year. And obviously, we'll hopefully regain its prominence as quickly as possible. Yes, on the second, just to remind you what we did already for the year 2020. So we had a CapEx at 3.6. We spent 1,000,000 before the beginning of basis in Jan Pham, which means that the residual to be, investing a year to go was around 2 point 8, and we have been able to already save 1,200,000,000, which is 40,000,000 dollars, $0.44. So clearly, we have been able to reduce the CapEx plan. And what to say health plan, it is exactly what we'll do in the next years to be very focused on the CapEx with the higher ROI and by progressively eliminating all the CapEx we don't consider as essential to support to support the financial sustainability of the group. And to be frank, I think that all airlines could be in the same situation, of course, which means that probably some CapEx we consider before as absolutely essential to be in the right position, because there is a competition will become less urgent and can be easily postponed because we will observe that in the market, all colleagues are not investing in, in some specific domain because there will be, of course, distribute it to the same constraints. So I think that first, we have to see first part what can be the development of the crisis. After that, how much it will have impacted the balance sheet of the Alliance Industry. And after that, David, as you clearly to be a CapEx savings approach over the next years in order to progressively recover As we did already after the crisis for 2008, of course, a balance sheet, which is, which could be progressively more acceptable vis a vis the banks and the financial market and to be honest, I don't see any other solutions. Thanks. If I could follow-up on your first comment, Ben, on the kind of cleaning and active measures, do you think it's possible that in the longer term, so kind of beyond 18 months from today, we'll see some residual measures remaining in place when you think back to September 11, very vividly. A lot of the security protocols that were designed and developed after that remained in place and are in place today. So is there something where you think, you know, preventive measures, health screening, kind of, health passports of some way would you expect some of those, or what is the risk or the likelihood of those elements coming into the industry over the next 2 years and actually staying, for the future? Yes, Daniel, for sure. I think it's a bit early for us to predict, 18 months from now what the and what the new norm, will be, you know, obviously around in 2001. And obviously, at the beginning, immediately after 9:11, it was quite an impact on airlines and customers to have to adapt to the new, rules and regulations put in place, in various forms, in, in countries and eventually became a standard So our view is, at this moment in time, with the crisis, in, in a way that it is playing out that masks are, the way forward in the short term, medium and longer term, I think, to be determined Great, thanks. Thank you. We will now move to our next question from Savi Syth from Raymond James. Please go ahead. Hi, good morning. A limit mine to 2. Just, 1st on the financing side, you know, following the kind of the financing packages from the French states and and likely Dutch government, you know, how do you view your financial needs and just kind of wondering what your unencumbered assets are and what you're seeing in the market in terms of kind of secured debt or sale leaseback opportunity And on the second question, I was wondering what you're seeing in terms of refunds, if it's going to completely vouchers and just a little bit more color on the kind of the working capital risk that you noted. Concerning the financing package and what is the situation? Is it for financial market today? I would say for airlines? So it's clear that the financing package for both air France and what we expect for KLM will be a significant amount covering. I will not give you exactly the period, but we think it is a long period that in terms of cash needs for the group as a whole. On top of that, of course, the market is not totally closed for airlines, I think. In the sense that if I take the case of Air France, for example, we have 3 deliveries of Air 350s in the next let us say 6, 7 months. And for all these deliveries, we have now financing which has been negotiated and fully committed by banks, which means that the secured market is not closed today. And I will say that the conditions are a bit higher compared to what we had in the next 3, 4 years. Of course, we have the situation was extremely favorable to, to to to the corporate, but, it still possible to finance a plenty new aircraft. On top of that, we have, of course, some unsecured assets I will just give you the example of KLM when there is approximately, if I am correct, a 7 to 8 aircraft, 20 new which have been delivered in the next 1 or 2 last years and which are an unconvert from any, from any financing, so which are available, if needed, for financing, or if needed to be used as a current for some new financing. And in Air France, we have a level of non converged asset, I think, around 1,000,000,000 if I am correct, I can't say the number. If it is wrong, I will call you later on, but I think it is more than the numbers. I think we have in recently, which are more somasets, some engines, some to Kiara, which can be, for example, through a double digit easy to use as a collateral for a new financing. So there is some margin, for future financing on both deliveries of aircraft and, unencumbered assets, sorry, which can be used for financing on top of the financing package coming from the, from the 2 states. Concerning the working capital, this probably is the most complex question. It's true that, and made aware, I noticed these mornings that, EAG was not giving a lot of information and even indicating that they will not give a clear number concerning the to the working capital. It is, in fact, extremely difficult. We know that we have some influence ticket. For many of them, we have provided Vosier We propose that Evocea will be possibly wrong both after 12 months. And based on that and based on the evolution of the regulation, we can have a more or less positive or negative impact in terms of working capital. So it is where we are today. There is a global order of magnitude of the unfund ticket likely to be one that we are on board or by wheelchair for attend given period or a direct fee in cash, which is around 2,000,000,000. And, but clearly, the timing of the reimbursement in other categorization of these tickets is for the time being, not totally known because it's still a link to the various regulation. You know that the deal teams in the US 2, recently, I think, 3 weeks ago, a bit more strict position, work ratings are aligned to directly in cash when the client was asking for, in Europe as there was still some uncertainty personally, we can see there or at least not personally, but okay, personally, I don't see there that it is with sharing with the passenger. In the sense that when he bought the ticket 6 months ago, he asked us to be prepared to making flying in the next month, which is that we are we have buy aircraft, prepare as operations, etcetera, etcetera. Suddenly, because of the crisis, we have engaged a lot cost or CapEx to be sure that we'll be able to fly, or to operate the flight for the passenger with both the tickets. Suddenly, we are not possible to do that. So there is something like a risk sharing between us and or below customers by asking them to wait some months before to be reimbursed or before to fly with their tickets. So this is a situation for the time being. Perhaps I'll just add one more point to what Frederic has just mentioned about the unflowing tickets, and the the majority of European States, are lobbying the European Commission to take a formal stance on this. And, we're hoping to get an official view on this shortly, but I believe that's what I said. All European states are taking on about the majority of the European states are taking a view that this is an exceptional circumstance and that, a voucher is, a reasonable way for airlines to move through this crisis. Our next question comes from Jarrod Castle from UBS. Please go ahead. Everyone is well on the call. 33 as well, if I may. You've given some indications of 2q and 3q capacity, would you care to give any kind of view on 4Q? And I guess, you know, if you fall 2021, it seems like starting block is minus 20%. I wasn't quite sure if that's capacity or, you know, kind of fleet as well, etcetera, or fleet and capacity see. Secondly, just in terms coming back to the question about government support, are there any kind of elements to it, which might impact your ability to to undertake your your new strategy, I guess. So so any any kind of elements with you are unable to execute on given the financing involved. And then, you've touched on some of it But just on the fuel hedging, I mean, any change in thinking about hedging going forward, I mean, you know, Air France CalA Lamb, you know, coming out of the GSE, there was a lot of hedging losses. Now there's been a lot of hedging losses. I know it's quite formulaic, your your current approach, but but any changes in in in going forward, how how you're thinking about fuel hedging? Thank you. Okay. Thanks, Jared. I'll answer questions 1 and 2. And I'll leave the 3rd question for Feilake. Of course, our forecast of capacity is changing every week based on new information and rules and regulations and policies of, countries around the world. So we do not foresee the European borders opening at least until the end of Q3. And based on that assumption, and the reopening of some of our major markets toward the end of the year. If we're to be optimistic, we, we foresee approximately 60% of our capacity being flown at, at the end of the year. Now we've given, as I said, it's an approximate number. It's a more optimistic number. We hope to have flexibility with our staff and aircraft to be able to scale down or up depending on information that we receive, over, over time, but, that's what, We're looking at as of today for q 4. And then, conditions attached to the, the support we've received from the French state, there is a large conditions surrounding the improvement or the increase in our ability or our impact on the environment. So as you heard, we must eliminate service whether the train option under 2 hours 30 minutes in domestic France And we have to ensure that, alcohol has a 50% net reduction in CO2 emissions by 202324. This, this does align, our environmental goals and, the rest of the financial strategy that we have is in line with what the French government would like us to do. However, we are to do this in a much more accelerated way. So as, as we mentioned earlier, we are to present a restructuring program taking into account the new conditions that have been imposed on, on the group, notably our costs, and the market and present that to the French state in, in the middle of the summer. Concerning edging, we know that there is different approach around the world. And that, for example, in the US, where the market is already far more consolidated than in Europe. Normally, today's US carriers are, engaged in, almost no edge policy. In Europe, in different, you will see that the 3 big legacy carriers are all to the, hedging strategy, which is, I would say, almost comparable. If I'm making that short, it is volume of hedging is around 1 year of consumption over 2 years. And when we compare the situation in Air France KLM to what we have in Lufthansa and AAG, we have the idea that we have, let us say, aligned Then I think this is a big question. Why are you hedging we are urging, first, not to make money, but to, absorb and to smooth the shock. In the fuel price, both short, by the way, up or down. If you look at the the hedging policy ratio towards the group over the last don't remember, but we made a study on the long period. It is, in fact, neutral, slightly positive. But all in all, it is neutral, which means that it it has paid exactly what's for what it's done, which is not to make money, but to smooth the valuation of the of the fuel price. And there is a certain amount we to take into account is that what it's done by your competitors. Because if you are the only one, not to not to hedge when the 2 competitors are smaller than that, but let's say, to some people in Europe, the 2 competitors are hedging, You can be in a bit isolated situation where, incidentally, what we have said is, of course, you'll see the full price going up. And you are totally exposed to the variation of the fuel cost when your competitors are not. And I think this is all the question. And it is all the purpose of the hedging strategy, to smooth, not to make money and to be more or less aligned with part of the competition, and it is a strategy we are, we are exactly following today. Being relatively stable because all competitors are stable. Is there another model? Yes, probably. But as long as you see that there is some competitors paying differently. You cannot move along. So it is a bit the situation where we are, where we are. I recognize that it is a bit complex both for the teams and for the people in charge of the accountings. But for the time being, I will say this is what what we do. I just noticed, in the publication of IHS this morning, I am looking at the report of one of you that, a comment that the exceptional chart rule wise to 1,500,000,000 mark to 1st May. So I suppose it is comparable to what I have made or tried to make during the presentation. I also remember, but you would check yourself that, in the Lufthansa pre result publication as the 23rd April. It was also indicated an impairment, negative coming from the sugar aging, so I think that we are all in the same situation. In the sense that for that I'm being, we have almost a light position because it is also of the hedging to be sure that you are not too different from your competitors. We'll now take our next question from Neil Glynn from Credit Suisse. Please go ahead. Good morning. If I can ask, firstly, just with respect to the the process and the mechanics of agreeing the next phase of labor support from the French and the Dutch government, You've obviously highlighted this morning, I guess, a step down in capacity plans for the third quarter. So keen to understand, how you agree additional support and the timing of that. And also your capacity plans for next year, suggest, I would think maybe a 20 percent reduction in headcount being necessary, but how does that actually influence your discussions ongoing at the moment? And then following up on that, clearly, some of your major suppliers are also partially owned by at least the French state and somewhat influenced by the French state. Just interested, does the French state actually play a role in negotiations, whether on cash flows and payment terms or bigger decisions with Airbus Airport at the moment? And do you foresee a bigger role from the French state in those talks in the future. Okay. Thank you, Neil. The, obviously, for our employees and for our group question about, employment levels is, you know, is a is a top, topic and extremely important. So here in France, there is a this activity partial program, which, helped us applied for, and the application was accepted relatively early. So that, that program was was to go through Q3. We have now requested and applied for an extension of that program. Through the end of the year. And as Freddie mentioned, there is the Now program in place in, in the Netherlands for the KLM side of our business. And this program as well, we are trying to keep that in place as long as possible. So saying that, we have in France, there is a requirement as we work through the the plans for the level of activity, at LCOS, at the end of this year, and into next year, how we go into consultation with the representative unions, in a purpose called JPEG, And that will take place in June where we will have made good progress on the level of activity, the level of capacity that we plan to operate toward the end of the year or between now and the end of the year as well. As next year and present a plan to, this group and start working out in a mutual way. The the mutual way is not a requirement, but we plan to do this, to find, and come to an agreement with how best to approach the much lower activity. So that, that, mandatory discussion starts play takes place in June. We're hoping, as I'm just to repeat that the activity kickoff sale will go through to the year and that the Now program, the Netherlands will will continue. On the second question regarding discussions with with either state on, on conditions and terms would have, with 2 of our major partners I don't think you mentioned skip all, but, our bus, I hope all the value and Boeing. Right now, we have many airplanes on order. From both manufacturers. We are working on a, as a normal public enterprise you know, with the with the regular board of directors and we make appropriate business decisions. And same goes with Iopold a pallet and Skippo. Obviously, we are doing everything we can to ensure that, we can get the best possible terms or improve, improved terms as we go forward. But we are operating as a regular, business a listed business company. We'll now turn our next question from Monita Kaniani from Bank of America. Please go ahead. Hi, good morning. This is Mani Bakhiani from Bank of America. Couple of questions. Firstly, you had made in your press release earlier about possibly an equity raise, later on. Can you talk a little bit about the timing and process and do you still maintain, in the longer term, a target net debt to EBITDA of, 1.5 max. Is my first question. Secondly, just following up on some of the questions earlier on the return, to service, what's your view on leaving the middle seat empty? And, Delta said that they would leave the middle see them, these are kind of where are you in terms of your thoughts on that? And then just as you think over the next couple of years and you've said, the company would be slow. What's your outlook on short haul versus long haul demand? In the next couple Yes. 1st on the semis, 1.5 what I want, my thoughts on on the topic. If you look the way we manage post crisis 2008 years, I think that for the group as for many of the company, it has been a long step for longer history to progress we come back to level of leverage, which, which, which are comparable to what we call investment grade like. After some distribution with credit analysts during the last year, we have been more or less convinced that the 1.5 was okay. And by the way, up to now, if I look at the year 2019, database various calculation, but let us say that the three big legacy in Europe were around 1.5 probably France can be a bit higher and the 2, 3 bit better than that, but we are all, I think, comparable concerning this may So we still consider that this metric is extremely important. This metric also is even more meaningful after the adoption of IFRS 16. Because it is a global treatment of the lease and the full own aircraft. So clearly, this is a metric on which we put a lot of attention and of which we had put a lot of time function during the last year. So what will be the situation post crisis? So first, I don't know when the crisis will finished and when in order to be the intensity during all these process, but it's clear that number 1, all airlines will be probably with a high deteriorated balance it and season 86 will not be at 1.5, I think. Chevron, the market will have to be, we'll have to accept that at least for a given period. And after that, of course, it will be the role of the management to proactively come back. It can take years. In fact, So to make it short, the 1.5 is a target. The target is, has been put farther than us due to the crisis and then it will be a long pass progressively. I've come back to season 11, but I think consider as a good one, but probably a bit far from us for, relatively long period, I suspect. 2nd element on equity I have the question by some of you, you will not remember the debts. We will not be able to remove the a debt of 7,000,000,000. And my answer is all the time being, I have no increased my debt. First of all, I have not yet received any money. Suppose I received M and A, we have more cash for debt, but the net debt has not increased. What will really increase the debt is a loss in EBITDA in the next quarter. And for that, I cannot tell you right now what would be the reality and the actual numbers by the end of December. So don't be too, too, too quick. Let us wait the development of the crisis. Of course, it won't be a positive. We know that. Our fight would be negative and we are still to wait a bit. And after that, of course, if we have a crisis with such an intensity, we are to the mid of 2021. The situation, I believe, for many main airlines, if not all, around the world will be extremely difficult and then you'll be necessarily in the situation to speak about equity story a bit for everybody. And this is a sense of, vision today. We need to solve, to give I'm comfort to our partners that we have to solve the cash, the possible cash crisis. We have a crisis nobody knows yet how long it will be. And clearly, with 2 solutions, or it is relatively short, and we will come back to a normal path even a bit deteriorated, of course, in terms of balance sheet, all the longer it will be or the crisis will be very long. And then the impact will be absolutely detrimental to all the balance sheet in the industry And there will be necessarily a question and, impact and project concerning the equity. I think that it is a simple analysis. That you also share. I hope. So we view from a realistic perspective and what has been stated by, IATA as the official position of IATA that, realistically, masks are the best way forward, mandatory for our customers. And as I mentioned, all KLM and L phosphide, that will be the case, in, as of May 11th. In terms of demand, in the short term, we view, you know, first of all, we view our activity on the short haul. So that's intra France and the medium haul, which is our European network, to come back faster than long haul, but that's in in large part because we do not see, all of our major markets having the borders open in as as quickly as, as what we can do inside of, of Europe. Just to follow-up, late next year, once if international borders are open do you see a structural change in demand for short haul versus long haul? And as you can hear, please? No. We have structural demand at our group. You know, we say we have we have a short, medium, and long haul routes. And we have a very balanced portfolio, though, at both airlines, and we have a good mix of origin destination flows as well as connecting flows. So we believe with the exposure we have to all regions of the world. We have, a balanced network that positions us quite well. Versus some of our competitors. We will now move to our next question from Andrew Lobbenberg from HSBC. Please go ahead. Morning. Can I just ask, what, you see delaying the, settlement of the of the Dutch support, and how relations developed between the and French governments through this process? The second question, which I suspect will be constrained on what you can say, but what can you help us understand in terms of the cost to you in terms of interest costs of the state support on on a on a in a forward looking basis? And then finally, what's happening in the broader French industry with the secondary French airlines? Do you expect them to be rescued by the government? Or do you expect to see failures? And is that, you know, potentially an opportunity for, for ad hoc as we go forward? Okay. Thank you, Andrew. First of all, we're very We're very thankful and happy about how things have played out, in France. So very thankful to, the French government for putting this APAC is together in record time and, having it approved at the European level so quickly. So that, that is a very, very positive thing for the group on the Dutch side of our business, also moving relatively quickly. There were debates, lengthy debates yesterday in the Dutch parliament And we are, you know, reasonably, reasonably positive. I'd say confident that, we can get a package put in place for the Dutch side of our business, in, in the short term, in terms of relations between the Dutch and the French state, from where we sit, in that on the management front, it's what's what is positive is both governments. It's very clear that what they are looking for, and what's important for them So again, from where we sit is, it's for both airlines to, maintain their important position, relative to the impact that we have on the economies in, in both countries. As you know, in the Netherlands KLM plays a disproportionate important to the disproportionate importance to the economy. It's a major component of the transportation infrastructure, and so this obviously is key to the Netherlands key to the economy. And similarly, so in France, you know, France being the largest, tourist market in Europe, ensuring that the transportation market is in place as quickly as possible is a, obviously, a major component of the recovery of the French economy, on aid to other smaller carriers, particularly in France, can't speak to that, you know, from our end. We know that there are thousands of companies in France that are looking for, state support. Obviously, affecting millions of, of citizens. What I can say is, that's, Alfons is, operations that is is well diversified. And the bulk, if not all, of the other carriers in France that, we operate, where we compete against. Are, operating in, in a very, in a very small portion, a very small area of, of our network. Thanks. Can you say anything about the price that you happen to pay for the bank loans and the state or the shareholder loan from the state? Good morning. All the characteristics of these two loans will be shared with the market, of course. I think that, I'm sure that the press release will be published very soon. And then you will have all the info and all the characteristics of these 2 operations. Just to give you some indication, at least, not too sure price, the shareholder loan will be with an interest higher than the bank loan, at least for two reasons. The first one is that the shareholder loan is longer than the bank loan. Which is more a bridge to bonds our bridge to equity. So which is a good reason to have an inter rate higher. And second, the shareholder loan is fully subordinated towards the bank loan, but also to the others, paper bonds into the France scaling groups. So there is a full subordination of the shareholder role in a duration, which is a longer than the loan provided by the bank. For these 2 reasons. We have a higher interest rate on the shareholder loan. But everything will be made very clear in the press release. We will communicate quite soon concerning these operations. We will now move to our next question from Jamie Rowe Bolton from Deutsche Bank. Please go ahead. Thanks. Good morning, everyone. Actually, my main question was same as Andrews around the, interest rates on the loans. So, I guess we will wait for the press release, Frederick, as you suggested. Could I just ask though, should we expect some profitability conditions alongside the environmental ones? I'm not sure if there's any clues you can give us as to what our expectations should be there. As as you probably heard from from both governments, what they've said publicly, has obviously the, the main The main goal in the short term is to ensure that enough liquidity, is in place at both airlines to, for us to get through the initial parts of this crisis. Any other conditions or, you know, or, I would say, pressure to produce, financial specific financial results. You know, we are being, you know, as part of these conditions is to accelerate the business plan that we had already presented in November of last year. And one of the major components of that business plan was to overhaul the French domestic market and return it to profitability and also improve our environmental impact. And as you've I assume you've heard, this has been stated as a major, objective that's been that's been placed on the group and then when they significantly increased environmental improvement environmental impact improvement. Thanks Ben. We will now move to our next question from Johannes Brown from MainFirst. Please go ahead. Hi, good morning. Thanks for taking my questions. Firstly, can I come back to the terms of the state aid? There was also some commentary that you are required to remain a good customer for Airbus. Can you just be a bit more specific with that actually means, will there be hard commitments for future orders or anything to prefer adverse overbuying or how will that work. And then secondly, you have that $400,000,000 perpetual that becomes callable, I think, in October, will that be repaid or will you keep it? And then lastly, how do you expect the current situation to impact the next regulatory period, with Airport. Do you expect fees to be lower to support the airlines to recover from the crisis or is it rather the other way around as regulated returns for the airport will be lower and therefore, they will have more scope to increase fees. Okay. So try to, do my best to answer, your questions. Hey. So before the crisis and, as of today, all, orders and options and purchase rights that are in place at elfHouse, r, and we're with Airbus. So the A350, series 900 and the a220 series 300. So that was the case, before this crisis, and it still is the case. On the KLM side of the business, all orders, that were in place. So with Boeing, both the 787 dash 9 dash 10 and 2 additional 777300. And recently, we placed an order for Embraer E2s. So that's what's on the books right now. In terms of additional orders, definitely is not something we are talking about today. So that's something I can tell you on our plan with respect to fleet. I hope all the Paris, we are in discussions with them to to amend and, come hopefully come to a shared view and an agreement on how best to react to this crisis and how to move forward. You may be aware that, prior to the crisis, there was a very large capital expenditure plan, at Los Chaldego, with, with the goal of building a new terminal large, large terminal terminal 4, that was going to, predict the cost between €8,000,000,000 9,000,000,000 of which, you know, to which Air France was going to eventually be the main tenant at, that terminal. So we do not foresee the need in the short and medium term for this terminal. So we are, supportive of a other significant delay in the construction of that terminal and to perhaps do, some minor adjustments to terminal e and terminal f, to get to some some additional operational improvements and customer benefits. Concerning your second question, yes, of course, we will be on both the hybrid, which is supposed to be on both in all. If you don't do that, as you know, the interest is with a step up to 11%. And so the same intention to emboss. It gives you the first limit to the shareholder load, of course, yes. Indication I give you to the communication of the press release. Just to mention another point on on conditions imposed there by the French government and also perfectly aligned with a business plan. And that, is on the productivity and unit cost competitiveness. And, it's unfortunate that what was starting out as an excellent year for the group. And in particular, Alfalf, on the unit cost improvement, you know, it was not, I'm not able to fully, we're not able to fully benefit from that in the coming quarters. But in terms of a business plan and strategy and the transformation and restructuring teams, going forward with that plan, Uh-huh. We are, putting in place an accelerated version of that to ensure that, the plan can actually deliver and more. But, as I said, the results, they're actually overproducing initial results in January February, which is a strong indication of the strength of that program and the team working on it. Thank you. We will now move to our next question from Caroline Torres from Morgan Stanley. Please go ahead. Hi. Good morning. I have one question left. When you anticipate an 80% reduction in capacity in the third quarter. Do you think that, a proxy for the market, or do you anticipate that the pricing environment would be so weak that it's possible that you lose share because you don't want it to complete. Yes. Thank you, Caroline. In, in the third quarter, our intent is to to operate at the same relative level as, as our competitors. Obviously, we're going to do it in a fashion that, maximizes our cash position and profitability. But we we do operate, out of some heavily restricted, in terms of in terms of availability of gates and slots, airports, all new, which is closed, but, now, Waseem and Amsterdam, despite the slot more toym that is in place. We do have, privileged positions in those airports similar British Airways at, at Heathrow and, some US carriers in some of the US airports and mitigation carriers in Asia. Thank you. And we will now take our last question in the queue from Malte Schulz from Commerzbank. Please go ahead. Hi, thank you also for taking my question. Not a lot left, but I still want to touch on a few points. I mean, given that the oil price is very low at the moment, wouldn't it also make a case to even defer more and more investments of for example, in 787s and just you see all the even the A340s or a 7 47s longer, given that they're fully depreciated and with relatively low operational cost if you have now a very low oil price. And maybe also on this point, is there a very cheap opportunity to convert the 747 combos of KLM into full freighters for just Q2 and Q3 for use as a full freighter? Yeah. I think that that's that's one of the most important one. Okay. Thanks, Mark. On the fleet, converting a 7 point 7 Kombi into a full freighter. It's not something you can do in the very short term. However, with the significant main deck capacity of the of those airplanes you've seen, we've kept, we've kept a few of the 747 copies at KLM, beyond their original, retirement date to take advantage of the demand in cargo, and also, you know, with the demand and cargo being, being relatively high, we are flying, several 777300 passenger aircraft, without customers and using the customer cabins for cargo as well. We have all the capacity on the seeds, underneath the seeds in, in the aisles and the overhead bins, as well as the very large cargo capacity of the airplanes underneath in the bellies. So we do have, we do have that capability. In terms of, you know, extending, even further the life, or the, the A340s, 747s, remaining those, keeping those in the fleet, longer. These were all lined up to, to retire, with major engine and air frame over overhaul. Advanced very expensive CapEx. So, you know, we pushed these airplanes pretty much at their limit. Of course, they can fly longer, but, the ability to do so will will require significant increase in CapEx to do that. As there are no further questions in the queue, I would like to turn the call back to Benjamin Smith for any additional or closing remarks over to you, sir. Okay. But just like to thank everyone for, for participating in today's call. Obviously, with the this extenuating circumstances, appreciate the time that, you've taken to, to listen to us today. So, please, take care of yourself and stay, stay safe. Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.