Good day. 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.
Okay. Thank you. Good morning, ladies and gentlemen. Frédéric Gagey and I welcome you to the Air France-KLM's first quarter 2020 results call. While it has only been three months since we last 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 among the hardest hit by this unprecedented crisis, with current activity levels near zero, 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.
I propose to take you through the quarter one 2020 results relatively quickly, and then focus on the situation at hand and the implications of the COVID-19 crisis. Frédéric and I will do our utmost to provide answers to your questions as clearly as we can. Turning to page three 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 cost, which was down by 1.6% through the end of February. We have previously indicated the impact of COVID-19 to our China routes. However, we were able to successfully redeploy this capacity to other parts of our network, primarily to our North Atlantic routes. As we all know, in the last week of February, the COVID-19 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 Frédéric provide further details on the financial impact to Q1 2020 results a bit later. In response to the acceleration of COVID-19, 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. First, I'd like to 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.
For this, over 300,000 European residents repatriated by Air France-KLM and Transavia owe them a debt of gratitude. Both the Dutch and French governments have also clearly demonstrated their support to the importance of their respective 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 in the current crisis. As an integral 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 now like to hand over the call to Frédéric Gagey, the group's CFO, for the presentation on the Q1 2020 financial results.
Thank you, Ben. To everybody, I propose to move to slide five, where you have the main numbers for the first quarter. Not a surprise that they are extremely impacted, as explained by Ben, because of the COVID crisis. We saw the first impact, which is mainly coming from the month of March, because as explained by Ben, the first two months were okay. I mean, in line with the budget, with a positive unit revenue and a stronger cost reduction. It is, of course, not the case anymore when you integrate March to the first two months of the year, which leads to the following result concerning the quarter. A drop in the revenue, a minus EUR 922, which is, of course, significant.
To be frank, relatively comparable to what we heard from Lufthansa and the IAG group, which means that, of course, the impact is quite similar on all the big airlines in Europe. The fuel expenses are close to last year. The hedging result is not positive due to the strong drop 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 first quarter. It was EUR 443 last year. It's EUR -61 during the first quarter of 2020. Going together with the drop in the operating result, of course, at EUR -815 and an operating margin of -16%. Net income is at EUR -1.8, a drop which is far more significant than the drop in the operating result, but I will explain why in the next slide.
ROCE and 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. As we will go further in the crisis, and we will add the very bad quarters in the next months, you will see, alas, a further deterioration of the ROCE and of the leverage ratios. I move page six just to clarify the waterfall between the operating result and the net income. Operating result EUR -800 million, net income EUR -1.8 billion. What is between the two? Probably the biggest impact is the fuel hedge result, which is EUR -455 million. What is the origin of this negative impact? Quite clear. We were hedged normally and accordingly to the hedging strategy we developed already for years.
Due to the drop in capacity we plan now for the rest of the year, we are suddenly 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. We have to consider that this over-hedge is something like a pure quarter speculation of financial operations. Accordingly to IFRS, which, as we recognize, is fully logical, we have been, not forced, but we have been led to take in financial result the today value of the fuel hedge portfolio we consider to be over-hedged compared to expected consumption during the rest of the year. At the price of today, it has been estimated at -EUR 455 million.
Of course, if in the future we see the fuel cost going a bit up, we can now partly revert or see the loss at the first quarter, and then we will 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 a less optimistic way than before. No surprise. Due to that, according to the rule of the recognition of the deferred tax asset, we are now considering that some part of this tax asset will not be recognizable anymore or recuperated in the next seven years according to the IFRS rule, which means that we have depreciated a bit part of this asset, which is in our balance sheet.
I move page seven 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 of non-refundable ticket into Transavia, which means that when there is flight canceled, people cannot recuperate fully the price of the ticket, and then you have a revenue, but less ASK, which explains this +13%. For the rest, you see, of course, the impact of the crisis with the unit revenue negative concerning the network activity, -8%, the cargo at -10%.
Even concerning the cargo, 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-KLM, but for any airlines in the world, are now parked. It means that because of the absence of bellies available for cargo, the demand for full freighter is extremely high, which means that in the recent weeks, we see a, let us say, recovery of the cargo activity and of the unit revenue for the cargo.
For the rest, if you look the result of the first quarter, it is clearly the absolutely terrible impact of the crisis, mainly in March, which means indirectly, and it won't be a surprise, that probably the result in Q2 will 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 more interesting for you to separate the unit revenue evolution between the period up to the end of February, and after that, the full quarter when you integrate March. Let us say that the first two months were okay. You see that the total RASK was at stable, at 0%, with some difference between the various sub-network.
To be noted that France domestic and medium-haul hubs networks were relatively going well, with a unit revenue close to 4% in the France domestic, which is one of the consequences, already launched a restructuring plan for the French domestic network. The medium-haul hubs also was okay, with +2.5 of unit revenue, even if the capacity have increased by 1.4%. On the long haul, two things also to be noted concerning Asia. During this period, January, February, you see already the deterioration of the Asian networks, mainly due to the beginning of the crisis in China during this period. You see the ASK already negative, -5.2%. The traffic even more negative, -10%, and the ASK, not a surprise, being at -5%.
On the other side of the world, if I can say, or going to west, you see that North America, where we have redeployed part of the fleet when we reduced capacity to Asia. North Atlantic is characterized by a growth relatively significant, plus 10%, which has even a bit above what we had planned initially due to the redeployment of the fleet. Traffic has followed, or well answered, which is that traffic is at plus 11%, so in line with the capacity. Due to that, probably, relatively a slight reduction of the ASK at -2%. Latin America is not yet totally recovering, but at least the numbers are a bit better compared to the last two years. Good development, partly pushed by the price of the oil, which was increasing during the beginning of the year.
You see Africa recovering, with the ASK at 3.6 and positive traffic. The same is true for Caribbean and Indian Ocean, probably also explained by the reduction of the competition due to the bankrupt of XL Airways, mainly. Of course, on the left on the slide, you see that when you look at the first quarter, not a surprise, the results are not at all aligned with what we have seen up to the end of February. The ASK is negative, -8%, traffic -17%, for capacity, -10%, so clearly a quite strong and negative impact from the month of March. Next slide, number nine. Not a surprise, the impact per carriers of the crisis. I would say very similar for Air France and KLM. A drop in margin of around 11 point, which is, of course, extremely significant.
Revenue, -17% for Air France, -10% for KLM, and -15% all in all for the group. You also see some difference concerning the net debt evolution. In Air France, the net debt increased by EUR 400 million. In KLM, it is almost stable at EUR 217 million, partly explained by the fact that, of course, if the two carriers or the two 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 strategy consisting to extend the supplier payment terms up to 90 days, which in France is not legally possible, as we have not to go beyond 60 days. It is clearly a short-term impact, which has been favorable for KLM, which is a good news, but part of that will be compensated in the second quarter.
I move to page 10 to see the evolution of the net debt during the quarter. A cash flow before change in working capital at EUR -180 million. A change in working capital, of course, which is less positive than last year. Last year, it was EUR 800, this year it is EUR 462, which is both the combination of the fact that you are selling less tickets, not a surprise, but also that you try to compensate that by your cash savings measures and strategy into the two companies, which has been, I think, relatively successful. 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 EUR 800.
As we told you at the beginning of the year that the CapEx would be in the range of EUR 3.6 billion. I think that we were totally aligned in terms of a CapEx flow during the beginning of the year. Immediately at the beginning of the crisis, we have adopt that strategy far more strict in terms of CapEx, which means that suddenly in March, the level of CapEx have been reduced to EUR 82 million, so clearly lower compared to what we have done in Jan and Feb. We have reacted, I would say, extremely rapidly to adjust the level of CapEx, and for the time being, we plan a CapEx at EUR 2.4 billion compared to the EUR 3.6 billion we had in the previous guidance.
EUR 2.4, given the fact that we have already spent EUR 800 million in the first quarter, is clearly a sharp reduction since the beginning of the crisis. Operating cash flow is at the -EUR 576. I add the payment of lease debt to apply the IFRS 16. We have an adjusted free cash flow of minus EUR 825. You'll find it back on the right of the slide with the calculation of the net debt. It is mainly the two determinants of the evolution of the net debt, payment of lease debt, adjusted operating free cash flow, and also some additional new lease debt, but relatively limited at EUR 100 million. I move, page 12, just to share with you what has been, again. Sorry? I give the floor to Ben. Sorry.
Merci, Frédéric. Continuing on page 12. As said at the beginning, the crisis, obviously, is extremely grave, unprecedented. It is devastating to the airline industry, and we've seen travel restrictions imposed around the globe, including the closure of the EU Schengen borders and lockdown measures implemented in our two home markets. First 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 touchpoints. 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 masks on board, and wearing a mask will also be made compulsory for our customers on all flights operated by Air France and KLM from May 11th.
Working in close coordination with the French and the Dutch governments, all airlines of 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. Second, we have drastically adjusted our business activities. Our network and schedule has been adjusted downwards with strong capacity reductions. In March, activity was down, as I mentioned, 35%, and overall, in the second quarter, it was down 95%, with Transavia expected to be fully grounded. On a positive note, the cargo demand has proven to be resilient, in response to which we swiftly 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 third-party activity is continuing when and where possible. We currently foresee an activity level for the second quarter around 45% compared to last year. Moving to page 13. The group has implemented stringent cash preservation measures in response to the COVID-19 crisis. I will let Frederic speak further on these measures and the liquidity situation of the group, also for the outlook of the months ahead.
Thank you, Ben. You have on page 13 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. Clearly, I think that you have all taken that into account according to us when you look at your model. The fact that globally speaking, when you reduce capacity, we can apply the same rule, which is that approximately 50% of the costs are variable. We have looked at that and checked that during the last weeks, and it seems to us that it is a good approximation. On top of that, of course, we have asked the two airlines to think about additional savings, even compared to the budget, what they have immediately launched together with the businesses.
For the time being, we are estimating that the global impact of the cost measures is totaling EUR 500 million for the year 2020. Of course, there is a permanent work. It is not an easy period, of course, for controllers and financial people in order to continue to improve this possibility to reduce the cost. On top of that, of course, we have been supported in the two countries, I will say both France and the Netherlands, concerning the fact that we had to manage the fact that we had a lot of people, which are today to be paid, but not having an activity. For example, people working at airports, of course, which are a bit without any activity due to the evolution of our capacities.
For that, the group, as many other corporates, have benefited of, in France, a system which is called Activité Partielle, when people are working less, paid a bit less, but a part of the salary is paid thanks to payment coming from the government. For KLM, there is a Dutch system, which is called NOW, which is also a contribution coming from the government to the corporate, which are hit by an external crisis, and in which people have less activity than before. We consider, for the time being, that these two measures, which is, of course, relatively significant, as contributing for EUR 315 million per month in the second quarter. Concerning the CapEx reduction, I have already discussed the divide part. Immediately after the beginning of the crisis, we have launched a new plan consisting to reduce CapEx. Already, EUR 900 were already spent in Jan and Feb.
The CapEx still at stake was EUR 2.7, and on this EUR 2.7, we have launched a plan and taken decision, which are providing a reduction of EUR 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 which we have financing, which has been already committed by bank. We will take the aircraft, and the delivery will be as expected. 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 already the case for the delivery of three Airbus A350s, which will be delivered not in 2020 but in 2021, and et cetera.
We will work later on the expected delivery for 2021, when the new fleet plan, taking into account the new economic context or environment, will be finalized. Of course, there will be 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 administration with the possibility to postpone this payment, other various timing. Sometimes it is delayed into the year 2020, but there is also some other for which the possibility to delay the payment goes up to 2021 and even 2022. We had also, of course, negotiation with some suppliers. I think about lessors, 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 our own estimate, 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 EUR 2 billion, which is more or less the case, if you look at the budget for the second quarter, EUR 2 billion per month. We are considering now that with all the adjustment and taking into account the variable cost, the pure operational cash burn can be estimated per month for the second quarter 2020 to around EUR 400 million. Of course, on top of that, you have to take the CapEx, the reimbursement of some debt, et cetera.
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 three months of the second quarter. The last word on the liquidity position and its evolution during the first quarter, liquidity end of December was at EUR 4.7, not taking into account the undrawn facility, treasury facility, RCF for EUR 1.7 billion. In fact, we have drawn these two credit lines during the quarter.
If I don't take that into account, the level of cash at the end of the quarter is at EUR 4.6, which means that there is not a big deterioration of the cash level during this first quarter in the form that the negative adjusted operating free cash has been compensated by the sale of the Amadeus shares we had still in the Air France portfolio, and the new net financing, including the fact that in January, we issued, as you know, a bond issue of EUR 750 million. All in all, we are entering this second quarter with a level of cash of EUR 4.6, excluding the two RCF. In the meantime, as you know, we have also opened the discussion with the states, both in France and in the Netherlands, in order to negotiate state support, I will discuss that a bit later on.
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 a scenario and a very specific environment, depending on what will be the reaction of the epidemic in the next weeks, when 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 for people to circulate and to travel. We are still totally in a full uncertain environment. Let me say that for the time being, what we consider as our scenario or central scenario, is that for the second quarter, we expect a reduction in capacity in the range of -95%.
For the third quarter. Here, of course, the level of uncertainty is even bigger. We have, for the time being, a plan in our capacity with a reduction of minus 80% compared to what we had in the budget. Taking all together, I think that we have to take position concerning the full year 2020 outlook, and there is three parts I think we can make quite clear in spite of the uncertainty. First, okay, not really necessary to say that, but I think it is normal to do it. Of course, we withdraw our earlier 2020 guidance. Not really a surprise 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.
Third point, but I think that here we joined what has been told by Lufthansa Group and our colleagues of IAG, we expect current operating income for the second quarter worse than what we are presenting today. Concerning the first quarter, which is not also really a surprise because, again, you know that the first quarter has been eaten, let us say, three weeks only, or one month to simplify, by the month of March. Barely for the second quarter, sorry, April, May, June for the time being, will be all bringing a negative contribution in terms of current operating income. Move page 16 just to indicate where we are concerning the negotiation with the two states, France and Dutch, concerning the state aid package under our discussion.
Concerning the French package, just to remind you, we have already provided some information to the market last week. We expect to have this package organized with two elements. One is the EUR 4 billion bank loan provided to Air France-KLM in order to support Air France. It will be provided by nine French and international banks. One of the characteristics of this loan, of course, is that it is guaranteed by the French state. Second element is a EUR 3 billion shareholder loan, again to Air France-KLM, but to support Air France, which will be coming direct from the French state with a term of four year, plus two times the possibility to have one extension of one year. Important characteristic of this loan by the shareholder is that it's subordinated to the bank loan.
I think that we are very well into the process concerning these two elements, and we expect to have all the documentation to be signed in the very, very next days. Concerning the package to KLM, it is now under discussion in the Kingdom of the Netherlands. There were yesterday a long discussion in the Dutch parliament, we expect that progressively, this negotiation will come to an end, and that the package will be ready to support KLM. I give back the floor to Ben.
Okay, merci, Frédéric. 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 cost, particularly at Air France, 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 Air France over the last 18 months has been remarkable, and over 37 new union agreements were signed in 2019.
I'd like to thank all unions and employee groups for their willingness to work so closely with us in a trust and respectful and most transparent way. These agreements were starting to deliver concrete value and flexibility before the onset of COVID-19. 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. All actions we intended to do over the next five years will need to be realized much more quickly. Another important element is the revision of the scope of the French domestic market at Air France. We have previously indicated the losses 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 improvement toward profitability. The third element I would like to highlight today is the opportunity to speed up and intensify the transformation of the Air France-Paris Orly strategy, including a much larger role for Transavia at Orly, as well as the introduction and development of Transavia in other French cities. The main pilot union at Air France, the SNPL, 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 to once again thank our employees for their rapid and effective response to this unprecedented crisis. The Air France-KLM Group has clearly demonstrated its ability to adapt to the unknown and the unforeseeable in a very quick timeline.
Second, I would like to emphasize the mutual acknowledgment 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 Air France-KLM Group. Improved operational processes, adjustment of the scope of unprofitable activities, and greater flexibility are all tools we will use to reshape our business and emerge from this crisis stronger than ever. Our Group and airline management will engage in discussions with elected employee representatives for all staff categories, looking to amend agreements where 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 be the same in the short term, and we do not foresee demand returning to pre-crisis 2019 levels before several years. This will require a global resizing of our long and medium-haul networks, and we envisage the capacity plan for 2021 being at least -20% below 2019 levels. As a first step, we have decided on the early phase-out of the Boeing 747s at KLM and Airbus A340s at Air France, and the retirement of the remaining Airbus A380s at Air France is also under study. Secondly, there are the earlier mentioned 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 environmental 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 two and a half hours, with the exception of regional flights feeding our Charles de Gaulle 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, the key takeaways regarding the COVID-19 implications and our decision-making to secure the Group's future are as follows.
One, we had a promising start to 2020, and the strategic plan unveiled in November 2019 was seeing impressive early results. Two, the entire airline industry, including the Air France-KLM Group, have been hit incredibly hard by the unprecedented COVID-19 crisis. Three, we have demonstrated our ability to adapt by implementing quick and thorough measures related to both health and safety as well as cost savings. Four, uncertainties remain regarding the evolution of COVID-19, 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, is a testament to their confidence in the future of the Group.
Five, we are working full steam ahead on our renewal plan to ensure that the Air France-KLM Group regains 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. I would now like to hand it over to the moderator to start with the questions and our answers.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question. The first question comes from Daniel Röska of Bernstein Research. Please go ahead.
Gentlemen, good morning. Please, if I may. Number one, on the restart of operations, and maybe a view on the next 12- 18 months. Which are the additional health and safety protocols you are considering currently putting in place to get people comfortable flying again? 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?
Secondly, on the transformation plan, not going into details, but how would you balance the need between investing into the transformation, and we looked at that in the capital markets day, that there was quite a bit of CapEx involved, against the requirement to work on free cash flow quite drastically in the next couple of quarters to reduce the net debt levels again. How do you balance that investment versus free cash flow requirement in the transformation plan? Just lastly, a short comment, maybe if you will, on your North Atlantic joint venture.
How would further development scenarios of Virgin Atlantic impact your Delta joint venture on the North Atlantic? Thanks.
Okay. Hello, Daniel. It's Ben. 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 the airports and on board our aircraft. We are working very closely with Aéroports de Paris at Charles de Gaulle, and eventually at Orly, once the airport reopens, to ensure that Air France is in front and ahead of the market on that aspect, and as well in Amsterdam at Schiphol. 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 will be mandatory to wear a mask. All customers to wear a mask on board all KLM and Air France flights. You may have read a few days ago that Alexandre de Juniac, the head of IATA, did come out strongly with a message that, representing over 200 airlines, that the view is that masks are the best protection on board aircraft, and the A4E organization has the same approach. We are hoping that an industry-wide approach to wearing masks on board is the way forward. I'll let Frédéric 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.
On the second, just to remind you what we did already for the year 2020. We had a CapEx at EUR 3.6. We spent EUR 900 million before the beginning of the crisis in Jan/Feb, which means that the residual to be invest in the year to go was around EUR 2.8, and we have been able to already save EUR 1.2 billion, which is 43%. Clearly, we have been able to reduce the CapEx plan. What to say here, Ben, it is exactly what we'll do in the next years, to be really focused on the CapEx with the higher ROI, by progressively eliminating all the CapEx we don't consider as essential to support the financial sustainability of the group.
To be frank, I think that all airlines will be in the same situation, of course, which means that probably some CapEx we considered before as absolutely essential to be in the right position, there is a competition, will become less urgent and can be easily postponed because we will observe that in the market, our colleagues are not investing in some specific domain because they will be, of course, subject to the same constraints. I think that first we have to see, first point, what will be the development of the crisis. After that, how much it will have impacted the balance sheet of the airlines industry.
After that, David, as you say, clearly, it will be a CapEx savings approach over the next years in order to progressively recover, as we did already after the crisis of 2008, of course, a balance sheet which will be progressively more acceptable vis-à-vis the banks and the financial market. To be honest, I don't see any other solutions.
Thanks. If I could follow up on your first comment, Ben, on the cleaning and active measures, do you think it's possible that in the longer term, so beyond 18 months from today, we will see some residual measures remaining in place? When we think back to September 11th very vividly, a lot of the security protocols that were designed and developed after that remained in place and are in place today. Is there something where you think preventive measures, health screening, health passports of some way, would you expect some of those? What is the risk or the likelihood of those elements coming into the industry over the next two years and actually staying for the future?
Yeah, Daniel, for sure. I think it's a bit early for us to predict, 18 months from now, what the new norm will be. I was 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 countries, and eventually became standard. Our view is, at this moment in time with the crisis, in the 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 Savanthi Syth from Raymond James. Please go ahead.
Hey, good morning. A little bit mine too. First, on the financing side, following the kind of the financing packages from the French state and likely Dutch government, how do you view your financial needs? Just kind of wondering what your unencumbered assets are and what you're seeing in the market in terms of secured debt or, say, a lease-back opportunity. On the second question, I was just 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. Thanks.
Concerning the financing package and what is the situation of the financial market today, I would say for airlines. 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 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 three deliveries of Airbus A350s in the next, let us say, six, seven months. 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.
I will say that the conditions are a bit higher compared to what we had in the next three, four years. Of course, where the situation was extremely favorable to the corporate, but it is still possible to finance plenty new aircraft. On top of that, we have, of course, some unsecured assets. I will just give you the example of KLM, where there is approximately, if I am correct, seven to eight aircraft, plenty new, which have been delivered in the next one or two last years, and which are unencumbered from any financing. Which are available, if needed, to be used as a corridor for some new financing. In Air France, we have a level of unencumbered asset, I think around EUR 1 billion, if I am correct. I can check the number. If it is wrong, I will call you later on.
I think it is more or less the numbers I think we have seen recently, which are more some assets, some engines, some et cetera, which can be, for example, through a EETC, easily used as a collateral for a new financing. 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 two states. Concerning the working capital, this is probably the most complex question. It's true that, and by the way, I noticed this morning that IAG was not giving a lot of information and even indicating that they will not give a clear number concerning the impact of the working capital. It is, in fact, extremely difficult. We know that we have some unfunded ticket. For many of them, we have provided voucher.
We propose that the voucher will be possibly reimbursed after 12 months. 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. It is where we are today. There is a global order of magnitude of the unfunded ticket likely to be one day reimbursed or by voucher for a certain given period or directly in cash, which is around EUR 2 billion. Clearly, the timing of the reimbursement in, or the cashization of these tickets is for the time being not totally known because it's still linked to the various regulation. You know that the DOT in the U.S. took recently, I think three weeks ago, a bit more strict position, requesting the airline to reimburse directly in cash when the client was asking for.
In Europe, there is still some uncertainty. Personally, I consider that it is a risk sharing with the passenger. In the sense that when you bought the ticket six months ago, you asked us to be prepared to make flying in the next month, which is that we have to buy aircraft, prepare the operation, et cetera. Suddenly, because of the crisis, we have engaged a lot of cost of CapEx to be sure that we'll be able to fly or to operate the flight for the passenger who bought the ticket. Suddenly, we are not possible to do that, there is something like a risk sharing between us and/or beloved customers by asking them to wait some months before to be reimbursed or before to fly with their ticket. It is the situation for the time being.
Perhaps I'll just add one more point to what Frédéric has just mentioned about the unflown tickets. 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. I believe, as Frédéric said, all European states are taking, or not all, the majority of European states are taking the view that this is an exceptional circumstance and that a voucher is a reasonable way for airlines to move through this crisis.
Understood. Thank you.
Our next question comes from Jarrod Castle from UBS. Please go ahead.
Thank you. Good morning, gentlemen, and hope everyone is well on the call. Three as well, if I may. You've given some indications of two Q and three Q capacity. Would you care to give any kind of view on four Q? I guess, if you pull 2021, it seems like the starting block is -20%. I wasn't quite sure if that's capacity or fleet as well, et cetera, or fleet and capacity. 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 undertake your new strategy, I guess? Any kind of elements which you are unable to execute on given the financing involved? You've touched on some of it, but just on the fuel hedging, any change in thinking about hedging going forward?
Air France-KLM, coming out of the GFC, there was a lot of hedging losses. Now there's been a lot of hedging losses. I know it's quite formulaic, your current approach, but any changes in going forward, how you're thinking about fuel hedging? Thank you.
Okay. Thanks, Jarrod. I'll answer questions one and two, and I'll leave the third question for Frédéric. 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. We do not foresee the European borders opening at least until the end of Q3. 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 foresee approximately 60% of our capacity being flown 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 time. That's what we're looking at as of today for Q4.
Conditions attached to the support we've received from the French state. There is a large condition surrounding the improvement or the increase in our ability or our impact on the environment. As you heard, we must eliminate service where there's a train option under two hours and 30 minutes in domestic France. We have to ensure that Air France has a 50% net reduction in CO2 emissions by 2023, 2024. 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.
As we mentioned earlier, we are to present a restructuring program, taking into account the new conditions that have been imposed on the group, notably Air France, and the market, and present that to the French state in the middle of the summer.
Concerning hedging, we know that there is different approach around the world, and that's why, for example, in the U.S., where the market is already far more consolidated than in Europe, normally today, the U.S. carriers are engaged in almost a no-hedge policy. Europe is different. You see that the three big legacy carriers have all, today, hedging strategy, which is, I would say, almost comparable. If I make it that short, it is volume of hedging is around one year of consumption over two years. Okay, it is easy. When we compare the situation in Air France-KLM to what we have in Lufthansa and IAG, we have the idea that we have, let us say, aligned. I think this is the big question, why are you hedging? We are hedging, first, not to make money, but to absorb and to smooth the shock in the fuel price.
Both shock, by the way, up or down. If you look at the hedging policy result of the group over the last, I don't remember, but we made the study on the long period, it is in fact neutral, but slightly positive. All in all, it is neutral, which means that it has paid exactly for what it's done, which is not to make money, but to smooth the variation of the fuel price. There is a second element we have to take into account, is that what it's done by your competitors.
Because if you are the only one not to hedge when the two competitors, or there is more than that, but as I say, to simplify, in all the two competitors are hedging, you can be in a bit isolated situation where suddenly, what we observed in some years, of course, you see the fuel price going up, and you are totally exposed to the variation of the fuel cost when your competitors are not. It 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. It is a strategy we are exactly following today, being relatively stable because all competitors are stable. Is there another model? Yes, probably.
As long as you see that there is some competitors playing differently, you cannot move alone. it is a bit the situation where we are. I recognize that it is a bit complex, both for the teams and for the people in charge of the accountings. for the time being, I will say this is what we do. I just noticed in the publication of IAG this morning, I am looking the report of one of you that comments that the exceptional charge will rise to EUR 1.5 billion marked to 1st of May, so I suppose it is comparable to what I have made, or tried to make clear during the presentation. I also remember, but you will check yourself, that in the Lufthansa pre-result publication, the 23rd of April, it was also indicated an impairment negative coming from the fuel hedging.
I think that we are all in the same situation in the sense that, for the time being, we have almost aligned position because it is the world also of the hedging to be sure that you are not too different from your competitors.
Okay. Thanks very much, gentlemen.
We'll now take our next question from Neil Glynn from Credit Suisse. Please go ahead.
Well, good morning. If I could ask firstly just with respect to the process and the mechanics of agreeing the next phase of labor support from the French and the Dutch governments. You've obviously highlighted this morning, I guess, a step down in capacity plans for the third quarter. Keen to understand how you agree additional support and the timing of that. Also, your capacity plans for next year suggest, I would think, maybe a 20% reduction in headcount being necessary. How does that actually influence your discussions ongoing at the moment? 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, Aéroports de Paris at the moment? Do you foresee a bigger role from the French state in those talks in the future?
Okay. Thank you, Neil. Obviously, for our employees and for our group, question about employment levels is a top topic and extremely important. Here in France, there is this activité partielle program, which Air France applied for, and the application was accepted relatively early. That program was to go through Q3. We have now requested and applied for an extension of that program through the end of the year. As Frédéric mentioned, there is the NOW program in place in the Netherlands for the KLM side of our business. This program as well, we are trying to keep that in place as long as possible.
Saying that, we have, in France, there is a requirement as we work through the plans for the level of activity at Air France at the end of this year and into next year, we go into consultation with the representative unions, in a process called JPEC, 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 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. That mandatory discussion takes place in June.
We're hoping, just to repeat, that the activity at KLM will complete in a year and that the NOW program in the Netherlands will continue. On the second question, regarding discussions with Interstate on conditions and terms with two of our major partners, and I don't think you mentioned Schiphol, but are both Aéroports de Paris and Boeing. Right now, we have many airplanes on order from both manufacturers. We are working as a normal public enterprise, with a regular board of directors, and we make appropriate business decisions. same goes with Aéroports de Paris and Schiphol. Obviously, we are doing everything we can to ensure that we can get the best possible terms or improved terms as we go forward. we are operating as a regular listed business company.
Great. Thank you, Ben.
For the next question from Muneeba Kayani from Bank of America. Please go ahead.
Hi. Good morning. This is Muneeba Kayani from Bank of America. Couple of questions. Firstly, you'd mentioned 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 from some of the questions earlier on the return to service. What's your view on leaving the middle seat empty? Delta said that they would leave the middle seat empty. Where are you in terms of your thoughts on that? just as you think over the next couple of years, and you've said recovery would be slow, what's your outlook on short-haul versus long-haul demand in the next couple of years?
Yeah. First, on the famous 1.5, what are my thoughts on the topic? If you look the way we managed the post-crisis 2008 years, I think that for the group, as for many other companies, it has been a long step, a long history to progressively come back to level of leverage, which are comparable to what we call investment grade-like. After some discussion with credit analysts during the last years, we have been always convinced that the 1.5 was okay. By the way, up to now, if I look at the year 2019, there is various calculation, but let us say that the three big legacies in Europe were around 1.5. Probably Air France was a bit higher and the two others a bit better than that, but we were relatively comparable concerning this metric. 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-owned aircraft. Clearly, this is a metric on which we put a lot of attention and of which we had put a lot of attention during the last year. What will be the situation post-crisis? First, I don't know when the crisis will finish and when, and what will be the intensity during all this process. It's clear that, number one, all airlines will be probably with a high deteriorated balance sheet, and these metrics will not be at 1.5, I think. Second, the market will have to accept that, at least for a given period. After that, of course, it will be the role of the management to progressively come back.
It can take years, in fact. To make it short, so 1.5 is the target. The target has been put farther than us due to the crisis, and then it will be a long path to progressively come back to a certain level that I still consider as a good one, but probably a bit far from us for a relatively long period, I suspect. Second element on equity. I heard the question by some of you will not be able to reimburse the debt of EUR 7 billion. My answer is, for the time being, I have not increased my debt. First of all, I have not yet received any money. Suppose I receive the money, we have more cash for debt, but the net debt has not increased.
What will really increase the debt is the loss in EBITDA in the next quarter. For that, I cannot tell you right now what will be the reality and the actual numbers by the end of December. Don't be too quick. Let us wait the development of the crisis. Of course, it won't be positive. We know that. How far it will be negative, we have still to wait a bit. After that, of course, if we have a crisis with such an intensity, we have up to the middle of 2021, the situation, I believe for many, many airlines, if not all around the world, will be extremely difficult. You'll be necessarily in the situation to speak about equity story a bit for everybody. This is the sense of our vision today. We need to solve, to give some comfort to our partners.
We have to solve the possible cash crisis. We have a crisis. Nobody knows yet how long it will be, and clearly, there is two solutions. It is relatively short, and we will come back to a normal path, even a bit deteriorated, of course, in terms of balance sheet. The crisis will be very long, and then the impact will be absolutely detrimental to all the balance sheets 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.
Okay. Thank you, Frédéric. Benoit, if it's you again. 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. As I mentioned, all KLM and Air France flights, that will be the case as of May 11th. In terms of demand in the short term, 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. That's in large part because we do not see all of our major markets having the borders open as quickly as what we can do inside of Europe.
Just to follow up, late next year, once international borders are opened, do you see a structural change in demand for short haul versus long haul? as you plan your fleet.
No.
There is structure demand at our group. We have short, medium, and long-haul routes, and we have a very balanced portfolio at both airlines, and we have a good mix of origin destination flows as well as connecting flows. 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.
Thank you.
We will now go 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 Dutch support and how relations developed between the Dutch and French governments through this process? Second question, which I suspect you'll 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 a forward-looking basis? 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 potentially an opportunity for Air France as we go forward?
Okay. Thank you, Andrew. First of all, we're very thankful and happy about how things have played out in France. Very thankful to the French government for putting this aid package together in record time and having it approved at the European level so quickly. That is a 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 reasonably positive, I would say confident, that we can get a package put in place for the Dutch side of our business in the short term.
In terms of relations between the Dutch and the French state, from where we sit on the management front, it'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 for both airlines to maintain their important position relative to the impact that we have on the economies in both countries. As you know, in the Netherlands, KLM plays a disproportionate importance to the economy, is a major component of the transportation infrastructure. This obviously is key to the Netherlands, key to the economy. Similarly so in France being the largest tourist market in Europe, ensuring that the transportation market is in place as quickly as possible is 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. From our end, we know that there are thousands of companies in France that are looking for state support, obviously affecting millions of citizens. What I can say is that Air France is a operation that is well diversified and the bulk, if not all of the other carriers in France that we operate, or we compete against, are operating in a very small portion, a very small area of our network.
Thanks. Can you say anything about the price that you're having to pay for the bank loans and the shareholder loan from the state?
Good morning. All the characteristics of these two loans will be shared with the market, of course. 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 two operations. Just to give you some indication at least, not a surprise, 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 has more a bridge to bonds or bridge to equity. Which is a good reason to have an interest rate higher. Second, the shareholder loan is fully subordinated to both the bank loan, but also to the others, papers, bonds, into the Air France-KLM group.
There is a full subordination of the shareholder loan in a duration which is longer than the loan provided by the banks. for these two reasons, we have higher interest rate on the shareholder loan. everything will be made very clear in the press release we will communicate quite soon concerning these operations.
Okay. Thanks both.
Thank you. We will now move to our next question from Jaime Rowbotham from Deutsche Bank. Please go ahead.
Thanks. Morning, everyone. Actually, my main question was the same as Andrew's around the interest rates on the loans. I guess we will wait for the press release, Frédéric, 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. Thanks.
As you probably heard from both governments, what they've said publicly, obviously the main goal in the short term is to ensure that enough liquidity is in place at both airlines for us to get through the initial parts of this crisis. Any other conditions or I would say pressure to produce specific financial results. 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. As I assume you've heard, this has been stated as a major objective that's been placed on the group, and then with a significantly increased environmental impact improvement.
Thanks Ben.
We will now move to our next question from Johannes Braun from MainFirst. Please go ahead.
Yeah. 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 what that actually means? Will there be hard commitments for future orders or anything to prefer Airbus over Boeing, or how will that work? Secondly, you have that 400 million perpetual that becomes callable, I think, in October. Will that be repaid or will you keep it? Lastly, how do you expect the current situation to impact the next regulatory period with Aéroports de Paris? Do you expect fees to be lower to support the airlines to recover from the crisis?
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. I'll try to do my best to answer your questions. Before the crisis and as of today, all orders and options and purchase rights that are in place at Air France are and were with Airbus, so the A350 series 900 and the A220 series 300. 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 were with Boeing, both the 787-9 and -10, and two additional 777-300ERs. Recently, we placed an order for Embraer E2s. That's what's on the books right now. In terms of additional orders, that definitely is not something we are talking about today. That's what I can tell you on our plans with respect to fleet.
Aéroports de Paris, we are in discussions with them to amend and 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 Roissy Charles de Gaulle with the goal of building a new terminal, a large terminal, Terminal 4, that was going to potentially cost between eight and nine billion EUR, to which Air France was going to eventually be the main tenant at that terminal. We do not foresee the need in the short and medium term for this terminal. We are supportive of a significant delay in the construction of that terminal and to perhaps do some minor adjustments to Terminal E and Terminal F to get some additional operational improvements and customer benefits.
Concerning your second question, yes, of course, we will reimburse the hybrid, which is supposed to be reimbursed in fall. If you don't do that, as you know, the interest is with a step up to 11%. The firm intention to reimburse it give you a first limit to the cost of the shareholder loan, of course. Yeah. It shouldn't be more than 11%. Christian, I give you up to the communication of the press release.
Just to mention another point on conditions imposed by the French government and also perfectly aligned with our business plan, and that is on the productivity and unit cost competitiveness. It is unfortunate that what was starting out as an excellent year for the group, and in particular Air France on the unit cost improvement, we will not be able to fully benefit from that in the coming quarters. In terms of a business plan and strategy and the transformation and restructuring teams going forward with that plan, we are putting in place an accelerated version of that to ensure that the plan can actually deliver and more. As I said, the results, they're actually overproducing initial results in January and February, which is a strong indication of the strength of that program and of the team working on it.
Thank you. We will now move to our next question from Carolina Dores 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's 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 compete?
Yes. Thank you, Carolina. In the third quarter, our intent is to operate at the same relative level as our competitors. Obviously, we're going to do it in a fashion that maximizes our cash position and profitability. We do operate out of some heavily restricted, in terms of availability of gates and slots, airports, Orly, which is closed, but now Roissy and Amsterdam. Despite the slot moratorium that is in place, we do have privileged positions in those airports similar to British Airways at Heathrow and some U.S. carriers in some of the U.S. airports and many Asian carriers in Asia.
Thank you. 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. 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 A350s, for example, and 787s and just use your older even A340s or 747s longer, given that they're fully depreciated and with relatively low operational cost if you have now very low oil price? Maybe also on this point, is there a very cheap opportunity to convert the former 747 combis of KLM into full freighters for just the Q2 and Q3 for use as a full freighter? I think that's one of the most important one.
Okay, thanks, Mark. On the fleet, converting a 747 combi into a full freighter is not something you can do in the very short term. However, with the significant main deck capacity of those airplanes, you've seen we've kept a few of the 747 combis at KLM beyond their original retirement date to take advantage of the demand in cargo. also, with the demand in cargo being relatively high, we are flying several 777-300ER passenger aircraft without customers and using the customer cabins for cargo as well. we have all the capacity on the seats, underneath the seats, in the aisles, in the overhead bins, as well as the very large cargo capacity of the airplanes underneath in the bellies. we do have that capability.
In terms of extending even further the life or the A340s, 747s, keeping those in the fleet longer, these were all lined up to retire with major engine and airframe overhaul events, very expensive CapEx. We pushed these airplanes pretty much to their limit. Of course, they can fly longer, but the ability to do so will require a significant increase in CapEx to do that.
Okay, great. Thanks.
Thank you. 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. I would just like to thank everyone for participating in today's call. Obviously, with these extenuating, circumstantial extenuating is very difficult circumstances. Appreciate the time that you've taken to listen to us today. Please take care of yourselves and stay safe.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.