Earnings Call: Q1 2019

May 3, 2019

Good day, and welcome to the Air France KLM Q1 2019 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Frederic Hajier, Chief Financial Officer. Please go ahead, sir. Thank you. Good morning to everybody and thank you for attending this conference call on the 2019 first quarter of the health care and group. So I suppose you have the press in interview. I propose to go to the first slide, which is just giving the global environment and what are the main reasons from this first quarter. I think that as everybody know, and following also some indication, a share with the market by some of our colleagues. You know that we were a bit under pressure concerning the unique revenue. Which is not a surprise for us as already in the last for the full year result, we had indicated to you that we were expecting a negative unit revenue for this first quarter due mainly to the relatively large development of capacity by industry. And in fact, it is what happened If you look to the slide, you see that the passenger unit revenue, which is a unit revenue for both the networks Air France KLM, Paris Transavia, we are at -1.9. Is negative. We consider it is probably a bit better compared to some of our competitors. It sounds that if it is negative, we also think that we are sewn in the market indication of worse evolution of unit revenue for sum of numbers of the competition. In spite of that, you see that the activity has been growing in terms of number of passenger. We are at 3%. If you add also the fact that the fuel bill increased by roughly 140,000,000 over the quarter, We have the main explanation of the drop in operating result. Last year was minus 100. This year, it is minus 300 So a reduction of 185. If you like for like, In spite of this reduction of the operating result, which is contained, I will say, we have been able to continue a deleveraging of the company. The net debt is down 400000000. This is a net debt according to the new IFRS 16 standards. And the free cash, according to the old standard is also positive. I will come back to that at the end of the presentation. 2 other element 1, suppose that you know that we have successfully launched a convertible bond for 500,000,000 with interest coupon of 0.1 percent. And we have also discussed with, with Ben Smith, who will be very happy to welcome you in a Capital Market Day. We plan in November 2019. I go slide number 4 when you have the main result for this quarter, revenue is up plus 3 and plus 2, if you correct, for the currency effect, The fuel expenses, as I told before, EUR 140,000,000 more compared to last year. Which is explained mainly by the fact that we had last year a very positive result of the hedging. This year, we had still a positive result for the hedging, but which is far less than in 2018. And this is a main explanation for the increase of the fuel bill, operating with minus EUR 300,000,000, operating margin minus 5% negative, of course, but we are in winter and the net income group part is minus 300,000,000 adjusted free cash flow positive 241. And as a consequence, the net debt on EBITDA ratio stands below 1.5@1.4 for the 1st quarter. Slide 5, show you the development business unit. Network, which is both the passenger network activity and the cargo, it is a main explanation behind the reduction in terms of operating result. It explained minus 193 of the change. This is explained by the fact that we have as I told before, this negative unit revenue minus 1.6% for the passenger network activity. But you also see that in terms of cargo, we are back in a period with negative unit revenue. As you know, the year 2017, 2018 were relatively dynamic in terms of cargo. And we shared recently with our colleagues of the business unit Cargoes that they are now facing more difficulty due to a weakening market in terms of international exchange. Transavia also in its revenue negative minus 3 0.5% not really a concern. As you know, Transavia is still planning to go a lot during the summer. In order to go, you have to prepare that a bit in advance. It explain why the capacity is pushed 11% also during this first quarter, which is a weaker period, of course, in terms of demand. Also, as Easter shift in 2019, is also explaining the unit revenue in Transavia. As you can imagine, the Easter period is very important for a local company, both in terms of a departure out of 40 or out of triple in total, we have a small reduction of the margin to Transavia, but again, it is not a concern. Good news is coming from the month now. Last year, We are a bit concerned about the reduction of the margin in the maintenance business unit. You see as a contrary during this quarters, the margin increased by 1.5%. Last year, we suffered from some one off One of them very important was the loss of the contract with Alitalia, which had a significant impact during this quarter. Now for the first quarter, 2019, we have a clean sheet in terms of accounting and we have still a good margin of 4%, which will be even a bit higher over the 12 months 2019. So all in all, This reduction of 100 and 85 for the operating result and this negative margin of 105%. But again, We are in end during our presentation of the full year 2019 and also because we were expecting these negative units revenue during the first quarter. Next slide number 6 per geographical area, you see that the medium haul point to point and the medium haul connecting hubs are registering in not too bad. If I refer to some, to some evolution of huge revenue in some of our competitors. It is minus 2.7 in the major mall point to point minus 2.1 for the medium haul connecting to hubs. So in total, total medium haul as units revenue minus 2.4, risk capacity developing at 1.4%. Concerning the long haul, it is slightly negative minus.9 with some weakest parts in the global network. Of course, One clearly is Latin America where we increased capacity a lot mainly to the Hungarian countries but due to the crisis in Brazil, Argentina, and Venezuela, you'll see the unit revenue at minus 7%, which is really a very weak result. North America minus 2 point 5. And for the rest, we are all stable or increasing, increasing in Caribbean and Indian ocean at plus 4.3 Asia also still continuing to develop correctly at +1.7 in Africa is stable after a period where it was to be honest a bit weaker due to the low fuel price and the impact from the all countries. So in total, long haul, resisting relatively well with only a reduction of unit revenue of minus.9. Of course, all sales development are impacted by the duration events in France. We have considered a some as precise as we can calculations that the impact is around 1,000,000 during the first 2019. 2 other elements. 1st, premium is existing better than economy. The vast ex currency for premium is at minus.6went for economies -2.2 And second element, ancillary revenues continued to grow very dynamically. You are at for the quarter at 106 1,000,000 and the growth is above 17%. Next slide, page 7, if you go to the unit cost, We have a unit cost, which is continuing to give us comfort about full year guidance. So we still maintain the guidance that the unit cost will be between minus 1% and 0%. And it is what we have today in the reforecast we made in March for the quarter. It is at minus.4. There is a labor productivity improvement. We estimate at +.7 percent. However, the staff costs are increasing and the other consequences for the 2 wage agreements signed in 2018 in Air France and in KLM. And I would say that the impact of agreements are a bit increased due to some timing effect. Remember, for example, that's in Air France, The merger concerning the 2018 Agree Mart has been distributed to employees by the end of the year. Which means that for the like for like comparison, there is a bias because the 2% of the wage increase into Air France has been paid by the end of the year. Now when you consider Q1 2019 to Q1 2018, there is a pure timing effect increasing the evolution of the staff cost, which means that over the full year 2018, we expect staff cost happily below plus 6.5% in terms of increase. If I go next slide, we have, I think, a very clear explanation of the waterfall between 2018 Q1 2019 Q1. When you look how to explain evolution of the operating result. There is a big impact of the unit revenue -1 115,000,000. Also, an impact of the fuel price. Excurrencies, it is minus 44. So it's a net currency impact, which is a combination of the currency impact on both the revenue and the cost And of course, it is negative due to the impact of the allowance of fuel cost and mainly on the leases and also the also currency impact on the revenue side. And these three elements are partly, but very partly, I would say, compensated by the contribution of the reduction in unit cost of 4%, which has an impact of 1,000,000 over the quarter like for like, which means that we we have clearly a very simple explanation why we move from minus 100 last year to minus 300 in 2019. If you look to the operational performance as you know, for Ben Smith and Enrique mainly in Air France, a lot of focus has been given to the improvement of the operational performance. And we see during this 1st quarter a relatively significant evolution concerning the time performance, the on time performance and concerning the net promoter score. Given by clients concerning the on time performance. Air France was very, very low in the ranking of flight stats, in the middle of 2018, 31st July, 20 ago in August. And you see that since the beginning of Jan 2019, you see an improvement for Feb March 2019, the company Air France only because the KLM has found better, on time, therefore, months, which is that the company is going to 6 and 7s, which is really the first signal of the effort driven by Enrique on the evolution of the operational performance of the company concerning the net promoter score. Also, we see an improvement during the last year. We had a very large gap in the current performance and the Air France 1. But you see that on the beginning of 2019, the NPS has increased from 12, which was delivered of 2018 to 24 which is, I will say, a relatively sharp increase and you see that when you look at the 1st 2 weeks of April, is at 26, so clearly, a good evolution in order to restore 2 big issues into Air France, which have been observed in 20172018. I'll move to the next slide. Slide 10, when you see as usual, the comparison in terms of economic performance between Air France and KLM. At this time, I will say KLM margin is going down minus 4.5 points, which is more than the performance of Air France, which is going down only by 1.9, but of course, the main explanation In that, you have to take into account the fact that in 2018, of course, the first quarter has been impacted by the strike at Air France. And we have estimated the impact at negative EUR 75,000,000. When you correct for that, you see that I would say the evolution of performance or the reduction of margin in the 2 company is of the same order of magnitude, important also to see that the 2 company continued to reduce their net debt for minus 1,000,000 into Air France, minus 1,000,000 for KLM. And that's the net debt on EBITDA ratio are not so different, especially if you correct for Air France, the strike effect of the last year. Next slide, page 11 evolution of the leverage. So, you know, the way we have introduced for presenting seasonal amounts since adoption of IFRS 16. So you have the cash before working capital. Same level of working capital compared to last year, 806 versus 807, not a big deal, concerning the investment investment in 2019 Q1, a bit lower or significantly lower by EUR 200,000,000 if you compare that to the first quarter of 2018 and it explained partly. The operating free cash flow which corrected for payment of the lease that gives you a positive adjusted operating free cash flow which is I remind you the free cash flow as it was before the adoption of IFRS 16. Now if you move to the net debt, You have on the right of the slide, duration of this net debt from 6.1to5.7 So this is a reduction of the net debt pushed by the free cash and the unbalance between the repayment of this debt and the new lease which are added to the global debt of the group. So again, the net debt on EBITDA ratio is end of March 2018 at 1.4. I go now page 13 to, first try to describe a bit what is the situation. So clearly winter has been wise, but a very high level of development of capacity also compared to last year and mainly on the medium haul. What is happening for the 2019. First, on the left on the slide, you can see that the group has a relatively cautious develop more in terms of capacity. It will be 4% for Air France and 3.2% for KLM, but the 4% in Air France is not corrected for the strike. So which means that we continue to maintain or guide on that over the year, the growth of the group in terms of ASK would be between 2% 3%. 2nd, you see that the development of the capacity operated by the industry is a bit of even significantly slower than last year. Last year in terms of number of seats, long haul as the industry, form and to Europe, developed a growth of 7.6% in 2019, we have a growth of 5.2%, which is, I would say, significantly less than in summer 2018. Where are the most growing destination? It's still in Latin America, with the number of seats increasing by 12% and Asia where you have a number of seats increasing by 7 But also, this growth are less than last year, mainly in Asia. Last year, it was 9% since yet. 7% the same on North America. Last year, the growth in terms of number of seats was 7% and now it is 3.6 And, Middle East, it was 11% last year. It is 5% in 2019. Second, the demands, the comfort amount of the players are a bit changing. If I try to summarize that, I would say that the legacy carrier are slowing down the rate on growth compared to last year. The Gulf carrier also increasing far less than what they did years ago and also the long haul low cost are clearly also growing less actively than in 2018. So all in all, we have a picture, which seems to be a bit more favorable compared to last year. Then I go page 14, what does that or how does it translate in terms of, in terms of long haul forward booking load factor for Air France KLM, So as usual, we show you this long haul forward booking load factor for the next 5 months. What do you see? You see that for May June, we are above last year in spite of the increase of it is, so it still is a load factor and not the number of bookings. And for the time being, from July, August, September, we are more or less stable compared to the last summer 2018, which, if you remember, well, was a relatively good summer. So stable for the summer up to now and booking load factor a bit higher for the month and the months of June. On top of that, you have to also keep in mind that last year concerning the point to point unit revenue developed relatively quickly, plus 2.9% as the point to point network was helped supported by the strike in the French railways company, which means that taking into account all seasonal amounts, what we think is that for the second quarter, the unit revenue corrected for the currency is expected slightly improved compared to last year, which is clearly something positive as a long roll and which will be largely offset by the negative point to point unit revenue. So this is the way today we are looking and the unit revenue for this second quarter 2018. I move page 15 should be no surprise We give you the fuel bill estimate for the year based on the forward curve at the 26th April 2019, which is last week since, as you know, the fuel is of the grant is weather going down. Which means that there is no risk for the time being due to the very last day, a fuel cost development. And we are confident with today's data that the fuel bill will increase by 1,000,000 compared to 2018 with a few hedging over the year, which is expected at $200,000,000 to be compared to the $800,000,000 of the hedge result in 2018. Which means that all in all, for the time being, a part of the slight evolution of or estimate for the fuel bill, we continue to keep the same guidance we shared with you at the beginning of the year, capacity for the passenger business, please 3 at Transavia +9 to +11. So it should be like just all plus 650,000,000 currency seems to be neutral for the time being, but there is some, to be honest, variability when you look, for example, to the dollar, but this is the estimate we have today. Unit cost, as I told before, still expect between minus 1 to 0. So in that range, CapEx, unchanged, and net debt on EBITDA, unchanged also. So thank you. Now I give the floor for your question, and I am happy to answer with close to me, Eric Salaim, who is the CFO of Karim, Marrianez, that you know, of course, and Voucher, that you know, of course, and I am also with our Chief Accounting Officer and our Chief Controller for the group, Steven Zats So I give the floor to your questions. We will take our first question from savi Syth from Raymond James. Hi, good morning. Thank you. Could you please elaborate just a couple of questions from me? The first one is if you could elaborate what you're generally expecting to confirm the various regions, that's driving that passenger unit revenue up slightly in 2Q. Just somewhat similar to, you know, what you, as from a demand perspective, what you're seeing. I know you kind of highlighted a lot on the capacity side. And then just on the second one, with the premium down, year over year in 1Q, just wondering what you are, what's driving that? If it's that across the regions? Or, if there's kind of any specific area that's, that's driving that and what you might expect to, as you kind of go through 2019, Thank you. If I look on your first question, which is how to split the Q2 assumption in terms of future revenue per region. I will say, normally, we don't share such precise data, but I will say that for the 2nd quarter, for the in long haul, everything is positive except South America. Means that we have positive mutual venue for Indian Ocean, Caribbean, Middle East, Africa, Asia, and North America but there is still a significant drop for the South America. The second question is a premium per region and that, sorry, we are not going at this level of granularity. And we just give, elements on the unit revenue for Global traffic there region. I wonder if maybe I can ask it a different way. From that from a business and corporate demand standpoint, are you seeing kind of a trend change or what's the is there kind of any softening in the in the kind of the business demand side of things? For the time being, as you know, you don't know, we have every month what we call the revenue meeting. And the element I have in mind following the last the last meeting. So it shows that normally there was no big change concerning the demand or big change in behavior. Concerning the demand for the premium segment. The demand level seems to remain relatively solid. And as you see, when we split the unit revenue between premium and between economy, so that this is in the slide that the reduction of the unit revenue in premium is far less than in economies. So it was a good resilience for the business on the premium traffic. We will now take our next question from Gerard Castle from UBS. Please go ahead. Your line is open. Thank you. Good morning. 3 if I may. 1, just from the full year results, the load factors have weakened a little bit for May June. I think you were plus 2 rather than the plus 1. So is there any comment around that? Secondly, just page 15, just the quarterly progression of the of the fuel bill, but the quarters don't seem to add up to the the total or or is it in a different kind of metric for constant currency, etcetera? But it just don't seem to add up. And then Lastly, any kind of commentary at the moment in terms of, corporate governance from a perspective of the new shareholder or Since you have a Dutch government. Thanks. Okay. I will, Steven will take second one, and I will answer the new shareholder. Okay. As you know, it has been a decision for the date we are not And I will say, this is a decision. We have not really to comment we will announce during the EGM if it is changing the composition of the board. And I will say at that stage, we have nothing we need to add, but I will say for the day to day business, of the company. It doesn't change a lot as the way we are working. I think that Ben Smith and Gregi and Peter Albert are certainly concentrated and focused to the management of the company and that's it. We are business people first and above everything and this is what we are doing every day. Concerning the fuel bill, I supposed to refer to 2019 in the quarters. If that's right. Rounding. Okay. And then just a lot of the first question, but the one on the load factors going from plus 2 in May June to plus 1 now. On that question, it's true that if you take the presentation of February, Page 18, you had for April, May, June, April May, June, please 2, please 2, please 2. When you have now, please 1, please 1. I think that the more you are close to the months, you're more there is a robust data because, of course, when you are 3 or 4 months in advance, booking load factor is relatively limited, yeah, So and, what is important when you speak to the team of the revenue management is to be sure that you are at least at the level of the year before. So from that point of view, the first one, first one for May, June, gave us this level of relative comfort concerning the fact that the unit revenue for the long haul will be positive at as I told before, with, however, this, this effect of last year on the point to point which explains why we have seen outputs consisting to tell that the unit revenue into 2 compared to last year will be slightly improved but positive for the long haul. Okay. Thank you very much. We will now take our next question from Daniel Roska from Bernstein. Please go ahead. Your line is open. Thanks very much. Good morning, gentlemen. And three answers from me. Number 1 on the SNPL, Frederic, could you please remind us kind of of your roadmap for the remainder of the year? Kind of what are the topics you wanted to thrust with the unions, kind of as we look towards 2020? I assume it takes a considerable amount of time to get the discussions going, but what will be the main points you'd like to achieve? Maybe in that context, number 2, priorities for hop and Transavia in this year. How do we think about those smaller ones? You mentioned the capacity growth, maybe any color on the kind of top items on the Hop Management And Transavia Management Agenda. And lastly, I'll keep asking fleet order on short haul. Anything to expect has Max kind of issue right now delayed that process And can we expect any news on a fleet order before the Capital Markets Day or is that kind of the big reveal for November? Okay, thank you. Very quickly to see three questions. 4 for the Air France and Pear, because you probably heard about a strike announced more, but it was a national unions for the French pilot, which is absolutely not the Air France organization. And we would have to say, but on that topic, it is mainly topics, which are to be discussed with month. So we are not really involved and we support, of course, any solution in order to avoid such strike for the time being, which had been postponed and even called as a technical priority by the national union of the pilot in France. Concerning more precisely as Union payload in Air France, as you know, there is, as always, in any airlines continuing and continuous discussion, in order to keep the morale as high as possible. And one of the topics which is discussed for the time being is of course, the Transavia fleet and the possibility to go one day above 40 aircraft, which is today which is today a limitation for Transavia. Concerning hope, there is a lot of work, of course, is managed now by the management of the domestic point to point network. First, of all, we have already indicated that the development of capacity will be negative for the domestic network. And for the year 2000, you saw that already in the slide page, page 6. You see that in the medium haul point to point for the first quarter, we are at minus 3% in term capacity. It will be even less for the full year. We are more targeting minus So let me check minus 6. Yeah, minus 6% for the full year 2019. So clearly, there is a continuous effort consisting to restructure the point to point network, mainly by, operating lower lower capacity for this domestic for this domestic network. 2nd, we are also working in Air France to the possibility to launch a voluntary departure time concerning the domestic network and mainly some ground stations in France. This is a normal effect of the reduction of capacity. As you know, we are still hit by the development of the high speed railways it was to Bordeaux, which had, of course, a very strong impact in terms of demand for the air travel. And we have just to follow Cesar's situation in order to adjust the Air France network to the new economic environment characterized mainly by the development of the trend in domestic France. 3rd question on the MAX and the short haul fleet So just two, three elements. 1, we have not ordered for the time being any 7 37 MAX. It is just a matter of fact. And of course, we are now looking extremely carefully. Through the development and the announcement made by Boeing and all the bodies which are involved in the management of these events and we will see later what to do. But for the time being, there is no firm orders made by Air France or by KLM or by Transavia concerning the aircraft. 2nd concerning the existing medium haul fleet, 2 elements: 1, in KLM, the shortfall fleet is relatively young. Which means that there is no urgency to move or to launch big order. It is just a normal replacement year on year basis, but there is no there is nothing urgent due to the relatively low age of the medium haul fleet of KLM concerning Air France. The medium haul fleet is the short haul fleet is older. There is no urge, but clearly, there will be a need for replacing some aircraft after the year 2020. So we have right now considering all the possibility, all the choice, which are offered to a in order to prepare this change, but no big decision to be taken, I would say, in the next quarter. Very clear. Thanks. We will now take our next question from Neil Glynn from Credit Suisse. Please go ahead. Your line is open. Oh, good morning. If I could start, first of all, with, you've touched on premium traffic. Premium demand in earlier questions. But on the leisure side, as we progress into the summer, clearly, Georges, stuff continues, but also clearly across Europe macro concerns are certainly relevant. Are you seeing any change in consumer behavior and appetite to book whether short haul or long haul leisure trip for the summer months? 2nd question, it might sound small, but I noticed that the 10ths headcount has fallen year on year for the 2nd quarter in a row, if that's correct. Just interested, does that suggest any change in approach in terms of managing headcount as you progress? And if you could give us some insight in terms of how count should actually grow through the rest of that year, rest of this year. That would be helpful following a 1% growth, at the total group level for the first quarter. And then the 3rd question, obviously LatAm challenges continue. Can you give us an update on your expectations as to the timing of the launch of the Air Europa joint venture and give us some insight in terms of how you think that structurally changes your returns or at least your operations within the LatAm market, which is always volatile? Thank you. I have to say it's a bit difficult first to make estimate on the impact on the current development. We are ask the revenue management team to look at it. And for the time being, we consider that for the period November to December, it was something between 1,000,001,000,000. And for the first quarter 20 19, we have an estimate, which is between 1,000,001,000,000. So clearly difficult to estimate, but there is some impact. For So I would say that with such estimation of the impact, it is difficult to say that is changing the behavior of the tourism of the of the non premium traffic. It's clear that it cannot be positive for the time being. We consider that it is, of course, negative, but the order of magnitude is relatively limited based on the numbers I just gave you. Concerning the headcount, I give the floor to Steven. Yeah, if you look at the headcount figures, there is, 1st of all, there were a lot of training needed for our pilots related to the growth. So actually, we don't have any strategy change. And the main increase of FTEs is coming from our E and M business where we try to in source more and also to support our external turnover growth. So that's actually the main reasons for our FTE growth. And there see a little bit of mismatch because the FTEs of E and M are not linked to the capacity growth, because there's, of course, the growth is just our passenger business and Transavia activity. Concerning your last question, which is ARROPE We continue to work, of course, with Aeropar in order to fulfill obligation visavis competition authorities in South America. So we work in the various countries which are concerned in order to get the necessary antitrust immunity We still hope to launch the JV between Air France CalM and the Spanish partner before the end end of the year. Clearly, we have not yet given full estimate of the impact of this project. But it's clearly seen by us a very important step concerning the organization of opposition on the LATAM market. And I will also take the number we give right now concerning both the capacity and the unit revenue a bit cautiously, the capacity again, it is not that we fly to Brazil. Or to have something that is more that we are developing new capacity to some on demand countries. And concerning the unit revenue, I think that it's mainly the impact of the crisis in both Brazil and Argentina. Since GV is a step in terms of increasing our market share together with Virgin, to the south Atlantic we will expect that probably we will reach some single around 20% of capacity. In the future when we will have this joint venture with Air Europa. We will now take our next question from Andrew Lobinger from HSBC. Please go ahead. Your line is open. Oh, hi, hi, Frederic. Hi, everyone. Can I ask just to come back on the comment about cautious point to point revenues in the second quarter? I mean, is that all focused purely on the domestic market? Or or is it point to point international? And and and how should we read it for the Transavia as well in in in that regard? Then can I ask about, the partnership with Jet because, up until very recently, you guys were very positive about the scale of connections that you were getting in the collaboration you were getting with Jeff, and it was driving quite a lot of traffic on on the India US market, I think, through both CTG and Schiphol? So to what extent is that, that a loss? And how can you mitigate that? And then a third question might come to, your approach towards the Alipodipati and their, proposals for the next regulatory review with, a remarkably low cost of capital and drop and, and, and yet a doubling of their CapEx plans. How are you engaging with that consultation process? Concerning the approach, when I speak point to point, I speak about point to point. Which means that this is really a domestic, a short hold of domestic, which means that if I look at what we have in mind today, in terms of unit revenue between, point to point domestic and the hub is fairly different. When I speak about something negative, it is really limited to the point to point domestic partly explained by the big effect due to the railway strike in 2018 Q1. 2nd question, Jet Airways, First, of course, it is not a good news. And we agreed that for our colleagues of Jet Airways with whom we used to work already for, I would say, a long period. It is, of course, a disappointment because we work with them in order establish this JVs, which was a very important project. And now at least for the time being, as you know, the company is just grounded for the time being, it not been grouped. We have to manage the situation. So economically, what we can say is that there is a one off a negative effect, we estimate around 10,000,001,000,000. Due to the fact that there is some ticket booked on 1 of the reserves and you have to exit asset down. So it is a normal effect of any situation where one of your partner is stopping flying and that you have to take the economic a transfer of that. So it is something not very large, but this is significant, I will say. Then concerning the normal impact on a year on year basis, we have considered that the impact of the loss of the partnership with Jet Airways could be around 20,000,000 per annum, but of course, progressively, we'll try the way to compensate that and to find another way to continue to increase growth presence to the Indian market and also to offer to Indian passengers a good connection to the U. S. So first, it is not a good news and we work with that of course, so going for the time being the company is grounded, not bankrupt, and a short term impact, something around 10,000,000 dollars, $15,000,000 and per year before we find the remedy, you know, not to compensate something which an estimate and 20,000,000 per year. Then your last question is You can repeat it because the Mayanese will answer. It is the low cost of capital and sorry, Andrew, And and the doubling, proposed doubling of CapEx. We will not we're sorry. We will not take our next question from James Rob Bolson from Deutsche Bank. Please go ahead. Your line is open. Frederick, you may want to come back on Andrew's last question, but I'll just give you mine as well. 4 hopefully quick ones. 2 on the guidance, 2 on the non fuel unit costs. On the guidance, just firstly on fuel, is it really the case that spot going up say 4% or 5% since 20th February, the impact of that on the 40% of your requirement that's unhedged has no impact on the on the full year guidance? And secondly, on cash generation, despite the 1,000,000 CapEx reduction in Q1, you maintain your guidance for it to rise by 1,000,000 year on year in the full year. And you also maintain your view that now debt to EBITDA can come down from 1.5. I think with EBITDA likely to be flat at best, I would have thought what do you see offsetting the step up in CapEx to leave the net debt lower in the full year? Then just turning to costs, on the non fuel unit costs, that the non recurrence of strikes must have been a material tailwind in Q1, yet the non fuel unit costs only by 40 bps and you've given some, helpful reasons as to why that was. When the strikes tailwind goes away in the second half, it's not a risk of the non fuel unit costs going up quite a lot year on year. And lastly, on employee costs, you've mentioned in today's press release, the additional hirings that took place in Q1 for the parts of the business where you're growing capacity, but obviously alongside that, it's encouraging to hear potential voluntary departure plan for employees in the domestic network. Is that plan something you might be able to have in place and be able to update us on by the time of the Capital Markets Day in November? And is there anything you can say at this stage on associated costs and benefits? Your first question is a guidance of fuel? Correct. Yes, please. And why we have not increased the fuel bill compared to what we said at the beginning of the year? That's right. In fact, during the last week, you saw the fuel price increasing significantly. And I have to say that we have the same surprise as yours when we look at the forecast given by the fuel department. But I would like to give you some condition. The first one is that if the fuel price increase, sorry, if the Brent price increased significantly. It is not exactly the same for the fuel in the sense that the cracks margin have reduced over the last weeks. 2nd element, we are exactly at the range where the fuel hedging effect is extremely efficient in the sense that we have taken some barrier, some color that they ask is that of normal options. And when we look at the efficiency of the hedging when you are in the neighborhood of $70 or $71 per barrel, it is exactly where the efficiency of our portfolio is for the time being maximal. As there is a way to illustrate that, which is that in the Feb, we told you that the hedge result will be 100,000,000 and we In the last figures, we have in this presentation, it is EUR 200,000,000. So just to indicate that we are the boundaries, in terms of jet fuel where the hedging is extremely optimal. So I will say this is the 2 reasons why but we look and see that I firmly care fully with Steven, because we are a bit surprised, but it is the 2 explanation we found in order to Spain why the fuel bill seems to be relatively stable in spite of the evolution. Of the Brent during the last week. Your second question is is the cash generation and the CapEx in the first quarter. If I am correct, clearly for the time being, you can observe that the CapEx level in Q1 is lower than last year. This is a matter of fact. We are not changing today. Our CapEx guidance for the full year. Which means that if you are consistent, we shall have an acceleration of the CapEx during the next 3 quarters compared to last year. In spite of that, however, based on internal calculation, and budget, budget plans. We still expect to have a net debt on EBITDA below 1.5. At the end of December 2019. Concerning the strike effect, yes, you're right. The strike had last year, negative impact on the unit cost. Mainly in Air France. Of course, we are in fact 2 different element in the unit cost for the first quarter in Air France. In fact, there is a relatively sharp reduction due to part of this effect of the strike in 2018 in KLM on the other hand, we have for this 1st quarter an increase of the unit cost. So there is a so that's why you don't see that at the global level. But in fact, the strike effect is present into Air France, whereas the unit cost for the Q1 are negatively oriented. And what explains the global Air France KLM data is due to the fact that in KLM, because KLM developed relatively limited capacity during his first quarter. Calum has been hit by weather and some technical problems reduced capacity, similarly compared to their budget, for example. And this is why you don't see that as a global level. So, to summarize, minus 0.4 for the group, negative for Air France, positive KLM, negative for Air France because we are collected for the strike last year and positive for KLM due of course to the CLA or the labor agreement signed last year. Which will serve you to the fact that the capacity in KLM as relatively slow and in any case follow us on the budget. You have to repeat the question if you want. Just any additional color on this potential voluntary departure plan for employees in the domestic network, timing associated cost benefits, anything you can say at this stage? As you know, or you don't know, but there will be a discussion with, employees representative mid May. And as usual, we are not willing to speak before that we cease dialogue. We the management and the employee representative. So at least it will be discussed for the first time, mid May, into Air France, but they will not say more for the time being. We will now take our next question from Malte Schulz from Commerce Bank. Please go ahead. Your line is Hello, and thank you. A little bit note on the unit cost, do you think you can give us a lot of guidance on what would you expect for the next quarters if you can maybe give us a little bit more color, particularly then when we have strike effect I mean, if you can also like clearly reiterate that you are quite confident on reaching the full year guidance of minus 120. And, one clarification cost on the cost, it sounded it was 1000000 to 1000000 and not 1000000 of the just to be sure that it's just 11000000 to 13000000 on the extra cost. And my final question is on M and A. Do you also plan to engage into the consolidation wave, to a certain degree, or do you, particularly leave it out to your legacy competitors to move their head and benefit rather passively from the consolidation. Concerning the unit cost per quarter, I think it's difficult. We will not give you unit cost per aircraft to be honest. What I can just tell you is that for the time being in the forecast we made in March, we are confident to stay absolutely in the range we gave concerning the unit cost and I can add under the your insist on that you are hazardous on the good side of the range. Yeah. But I will not do more than that and not giving to you the unit 1st quarter or 1st quarter Second question. Yes, for the generation, I think that we gave you, it is 10 to 13. For the months of for the period of Q of the last quarter, And for Q1, we are 11 to 13 also. So it is around something like 10,000,000 10,000,000 per quarter for the time being. It is not insignificant. It is not in our mood, but clearly, nobody can ask that it is a positive, that it is positive for us or for the tourist industry. Into into Paris. Then you had a third question on M And A. Yes. If you plan to become more active on the consolidation or if you're able to leave it to your legacy competitors to drive, consolidation if you're also looking at some of the assets in the market? Hi, Tim. And if we had a plan, I will not tell you that by phone first or Of course, we are looking as usual, what is happening in the market. What I have to add is that last year, you saw a big step in terms of consolidation. And that there is no immediate plan for the moment to participate to the consolidation in Europe. We will now take our next question from Michael Kuhn from Societe Generari. Please go ahead. Your line is open. Good morning. Also, 3 from my side firstly on personnel cost. You mentioned that the 6.5% increase in the 1st quarter was partly influenced by timing effects. I would be interested in what we should expect on personnel costs for the whole year. Then secondly, on the Capital Markets Day, I understood earlier that it was rather planned for summer so some indication what determined the timing of the CMD would be interesting? Is it union negotiations or are there also other topic that finally determines November? And then lastly, on financing, you issued the convertible lately, what are your general thoughts on financing and your capital structure at the moment what elements do you prefer and what is possibly on the agenda here? Thank you. Okay. Concerning the labor costs. Yes, indeed, they will be lower for the full year. It says that there is at least between 1% 2% in excess for the Q1 compared to the full year. And then I'd like you to make your own calculation. Concerning the timing of the investor day of the market today, okay, there is no table or suspect of secret interpretation to give to this debt, we have just considered that probably there will be more content if we postpone a bit that to the month of November And also you have to organize that in a quiet period. So which means that if you want to take the time to prepare and to be sure that You will be happy with the content. We have decided to put that in November, but there is no other interpretation to give to that. Concerning the convertible bonds, it is a convertible bonds, which has been launched by the group Air France KLM, in the 2 days organization, we try to let every car here to be responsible for its own financing, which means that at the group level, you have also to manage the cash situation and the the reimbursement of debt. As you know, in 2020, we have to reimburse 1,000,000 of the hybrid which has been launched at number 1, but we have in 2020, 400,000,000 to be on board. It is in hybrid, which is extremely costly. Because it is with a coupon of 6.25 percent. And by launching this convertible, we are just preparing the month of sales abroad, which means that we will exchange a coupon of 6.25% by a coupon at 0.1%. Which is less expensive and which is good for the unit cost base of the group For the rest, as you know, the 2 companies are financing, independently from the group, their needs in terms of capital, which are mainly to invest in acquisition of aircraft, developing some secured, secured operation in order to finance aircraft acquisition. We will now take our next question from James Hollins from Exane. Please go ahead. Your line is open. Hi, good morning. 2 for me. Just on the operation performance on time, are we seeing better air traffic control issues year on year? And is there any sort of indication that we should be thinking that that overall looking ahead as well, ATC might be less of a headwind for you this year? And then secondly, it's coming back to some of those questions at the beginning on premium traffic, obviously against the comp of plus 8% on premium last year, you've only down a little bit. Your comp in Q2, I think it's up 6%. Should we be thinking about premium actually being up in Q2? Thanks. Concerning the improvement of operational performance in Air France, I would say it is in the product forms of ATC because it is a ranking compared to the global industry. I think it's improving. It's improving for everybody. So that's why we think that the evolution of the on time performance of Air France is clearly But it's just the beginning. It has to be confirmed. Of course, it is in winter. So everything has to be looked at quite carefully in the next month, but at least it is a good beginning. 2nd, I cannot give you any, complete issuance for the summer concerning the ATC. We know that there was still a constraint and really tense activity for all the operations in Europe, especially during the summer period. So at that stage, we continue to monitor carefully the situation, but I can really not ensure you that for the entire industry and more specifically for Air France and KLM, we'll have necessarily the capability to maintain the high standard of operation, we want to develop vis a vis or passengers concerning the premium traffic No, as I told before, concerning the forecast, we prefer only to give you the global estimate concerning all of you for the unit revenue for the next quarter. So I cannot tell you what it is for premium and what it is for economy. However, I just answered before to one of the questions that we add no alarm or, orange light concerning the development of the premium traffic up to now. I cannot tell you more about the forecast of the premium mass in Q2. It is a bit too small. We will now take our next question from Nuala McMahon from Eyal Gutwazi. Please go ahead. Your line is open. Hi guys. Just two questions from me. The first one on the cargo business. I'm just wondering what trends you're seeing for Q2 in terms of pricing and demand? And then is there any areas that remain weak on outlook? And then the second one is just on ancillary. I understand it's a very small proportion of your total revenues nearly less than 3%. I'm just wondering, and it's also coming off a very low base in Q1. But just what was the driver of the result and has management set any target in terms of what ancillary could be of overall revenues on a 3 to 5 year view? Thank you. Okay. I think on today, we have no, I would say complete target concerning the share of ancillaries in the global traffic revenue. Of course, What we just know is that there is still a lot of opportunities. And when you look at the growth during the last years, is normally 2 digit growth already for relatively long, long period. So we have to continue. And the ID is always the same as the client is extremely sensitive to the price of the ticket when he buy it on Internet. But after that, if you are offering to him, a specific service of good quality doing this trip is able to pay for that. It is his combination to be able to offer, as low, if you can, in order to attract the client. And after that, thanks to the quality of the service and of the offer, you are able to develop the ancillary service. So we will continue I don't know exactly what is the limit or if there is a golden rule in terms of a percentage of the on the total revenue. But I can just tell you that we will clearly continue to develop this type of service of course, the new distribution capability is an opportunity by improving the quality of the dialogue between the airlines and the clients, we are able to receive new type of distribution to enrich the content of the dialogue we have with the customers. And this is extremely important because when you are just working with a normal channel, with a limited kind of enforced if you could to add new services, etcetera, with all the potential offered by the new distribution capability, we have clearly the possibility to expand this as is ancillary revenue. Again, for the quarter, it is 1,000,000 and the growth is more than 17% is clearly excellent number. Your second question was on the cargo. We cannot add anything compared to what I just told you in the presentation. As you know, the predictability of the traffic in the cargo is extremely limited when we speak with our colleagues from the cargo business unit, they speak to the last sorry, over the next 3 weeks, but it's very difficult to go further that period. So for Q2, we have not yet indication concerning what could be the unit revenue in Congo. Only in 4Q1 is weaker compared to what we have experienced during the year 2018. Good question. You can press We do not have any questions at this time. I would like to thank you for your participation to seize call. And, I wish also a good weekend and the next rendezvous is for the publication of the 2nd quarter. So bye and thanks a lot again. This concludes today's call. Thank you for your participation. You may now disconnect.