Earnings Call: Q2 2018

Aug 1, 2018

Good day, and welcome to the first half twenty eighteen results of Air France Kylem. This conference is intended for analysts and investors only. For your information, this conference is being recorded. And now I will hand over the call to Frederic Gauge, Chief Financial Officer and Chief Executive Officer of Air France Carlin. Please go ahead, sir. Thank you. Good morning to everybody and thank you to join us in the conference call on the second quarter 2018, Air France KLM Resort. I am in Paris with Eric Silrahim and Mark Wirespeek. This CFO of KLM Air France. And we, the financial team of the group Air France KLM, I propose to go first to the page number 2 when you see the main information come from this second quarter, the key highlights. The first one is coming from the commercial environment. We consider that It's under your mouth who was characterized by a solid demand. We have been able to develop a vast corrected for currency of plus 1.7% and the number of passengers in spite of the strike in Air France has increased by 0.8%. So it's good development in the RAS is in fact a bit better compared to what we discussed with you. At the end of the first quarter, we expect a flattish work during the second quarter, but we have been happily surprised by the outcome of see 3 months. As RASK has developed more in terms of commercial and passenger activities, also extremely good in Transavia. I will develop that later. Concerning the economic result, of course, this quarter is impacted by the strike in Air France. As the impact of the strike has been estimated by EUR 216,000,000. And of course, it is not a good news. And what you observe that the decrease of the operating result compared to last year is more or less comparable to the strike effect. The Q2 operating region for 2018 is at +45000000 compared to 588 last year, which is a decrease of 1,000,000 So clearly, a strong impact of the strike and an evolution of the party result, in line with see impact. I move page 4 when we describe it quickly, the number for is 2nd quarter, the revenue is flattish, of course, there are poor sound, but if you correct for the currency impact we had, please EBITDA is at EUR 1,048,000,000, which is a decrease of minus EUR 244,000,000. So again, in line with the strike impact I just gave before the operating result is at 3 45 compared to 586 last year. Which is a decrease of 241, again, aligned with the strike impact. You can observe that the net result is positive at 1,000,000 for the second quarter 2018. It has to be compared to 590 3 last year. So it is a drop of 484. The drop is here, larger than what we have observed for the product result. Which is mainly due to a pure technical accounting effect. So if you need more a combination, I will give you that during the Q And A. But if you correct for that effect, in fact, the reduction of the net will compare to the last year, is aligned with what we observe at the operating result level. Page 5 quickly for the first half a similar evolution concerning the revenue, flattish, but increase includes to 5% when you correct for Q1 see EBITDA minus 270 compared to last year at 1000000000670. Again, combined with the impact of the strike over the 6 months, which is estimated to minus 1,000,000 to 1,000,000 operating results at $228,000,000, a decline of $225,000,000 compared to year again and Elias aligned with the impact of the stripe, you observe the same the same phenomenon as the net result. The net result is for the 6 months at -159 a decrease of close to 6 100 compared to last year. But again, we are seeing specific accounting effect I can describe more precisely if you want during the Q And A session. I move page 6 when you have a global view of the performance of each activity of the group, network capacity plus 0.1 flotation, of course, impacted by the strike as a strike effect in terms of capacity at the group level is estimated that two point 5%. So it is extremely large. So because of the strike, we have as a group level capacity, which are only flat unit revenue quite positive and better compared to expectation. 1.6 Concerning the cargo, which is now part of the network activity, we have capacity managed 2.5, which is mainly explained by the fact that in KLM, This swap of 747 can be again 787 is going on. During the quarter, there has been 3747 less compared to last year and plus 3787. So we have less cargo capacity available for this activity. But in spite of that, or thanks to that, we have a very good development in terms of unit revenue at plus 6 And in total, concerning the network you see for the quarter, a drop in the operating result of 245 Clearly, it is the activity, which is most impacted by the strike in Air France. Transavia, very good result capacity are increasing by 6% declining a bit in Transavia Holland due to the closure of the Munich activity when it is increasing significantly in Transavia France in total to develop more unit revenue is clearly positive at +4.5percent which explains the evolution of the whole new adverse event and the improvement of course of the operating result. In the matter now, a very good development of turnover for 3rd party. So we continue to have good commercial performance In spite of that, you can see that there is a slight decrease in the operating result, which is mainly explained by the strike and sub one off correcting for this 2 elements, we should have a stable margin for the maintenance business. I move page 7 when you see the evolution of the capacity traffic, can you issue a new pair of networks It's positive everywhere in terms of long haul, medium haul and, domestic point to point in France. In domestic point to points, thanks to a strict evolution of capacity also partly a standardized strike, we have plus 2.9% in terms of RASK. For the first, which is to be noticed, we have increased 5% of RAS which is clearly a very good number. And concerning the long haul as a unit revenue is at plus up 9% compared to last year. And you see that it's coming mainly from North America. When you have again a good demonstration of the efficiency of the TV we have with Delta. Also in Latin America, when we are also supported by the partnership with Copa and with, and with gold in Brazil, you see Asia at minus 1.9% which seems to be a bit specific to this quarter, which exit number with the unit revenue department. First, you see that if you look for the 6 months, unit revenue in Asia is flattish. And according to The robbery management department, they are not anxious or scary about the development of the clinic revenue for the rest of the year. Page 8, page 8, so where I move to the unit cost, we have a published reported change of plus 2.7 in terms of unit cost. After correction for the currencies of fuel, we are at least 2.4%. Then of course, we have to see what is the impact of the strike at Air France. So two remarks. First, on Air France, the strike had an impact of 4.5 negative of course, in terms of capacity. And if you apply that for the group, the strike in Air France has impacted the capacity of the group by 2.5%. So of course, we have to correct the unit cost again for the strike. It is just a collection. Of course, it is not eliminating the effect of the strike. And I believe And you can see that when we've made this calculation, we have an underlying structural unit cost savings, which is estimated for the 2nd quarter at minus 0 point 7 percent. Which is reassuring on all the measures we are taking, companies across control into the 2 companies, partly due to the lower operating cost in June, the contribution of the development of Transavia, which are of course, a unit cost basis lower than Air France and KLM. The development of the new generation fleet with the introduction of the 787 in both Air France and KLM with the face of the 3 14 Air France and the 747 into KLM, Page 9 project of course, impacted by the lower capacity during the quarter compared to the quarter q22 2017, we have placed 500 people into Air France, 3700 people, into KLM. In Air France, there's mainly the few deliveries, the Feet in the Air France company are stable compared to last year. In CalAmp, it is explained by the good development in the maintenance activity for third parties which is requesting a bit more people, mainly ground people, of course, in season daypart amount and also some developed mark in some KLM subsidiaries that was a bit more people. For the ground operation, a link to the development of the business and concerning the crew and the Boscabinet cockpit. We have plus 400 cabin into the group at plus 150 cockpit that may lead you to the development of the floor hours in KLM and on the expected based on the plan. And the program that expected that not realized during this 1st part of the year of the activity into Air France concerning the global staff cost. We are at +2 percent compared to last year with some evolution concerning some social negotiation in hope following the merger of the 3 company. Great Airline and regional, it was necessary to have an agreement with payloads concerning the unified working and labor condition, which is done. Yesterday, the pilots gave approval concerning this is new CLA. And in KLMs, we've seen some description with cockpit and ground staff concerning the CLAs. But the carrier management is comfortable and expect that these 2 CLAs will be conclude after summer. Page 10, the normal waterfall of the EBIT from Q2 2017 to Q22 2018. Of course, everything is a bit mixed up with the strike effect. It is important. However, to notice the fuel price ex currency effect, which is estimated to minus 160 and the currency impact which is a headwind estimated to EUR 70,000,000. Of course, the activity change impact is close to 0 it should have been far more if we had not the strike at Air France. Page 11 gives a picture of the operating result EBITDA of new and operating margin for the 2 main components of the group. Not a big surprise. In KLM, there is a stability of C300 compared to last year, in spite of the 2 headwinds I just gave before coming from the field and from the currency. The operating result of KLM stands at $328,000,000 compared to $351,000,000 last year, so almost stable concerning Air France. Of course, we have tose effect of the strikes. Last year, Q2 2017, operating with you, it was at 244,000,000 and for Q2 2018, it is close to 0 at plus EUR 13,000,000 alone And you have, of course, the same indications or information coming from the EBITDA. Next Page gives the same numbers and figures for the first half twenty eighteen Again, stability, even a slight improvement into KLM, where the operating result moved from $379,000,000 to $388,000,000 and in Air France impacted by the strike, move from black to red figures, plus 187 last year. Half 1 and minus 164. 2018, half 1 The revenue in Air France is decreasing by 100,000,000,000. The revenue in KLM is increasing by a bit more than 100,000,000 concerning the balance sheet and the free cash flow We have a free cash flow of +141,000,000. Just to be precise and following a lot of studies and discussion, we are internally, what we call now is we're adding free cash in exactly the same free cash definition as before. As before the application of IFRS 16. And we are following the recommendation of some rating agency which have published a credit rating paper on that issue concerning the definition of the adjusted of the operating free cash flow. So following the all definition of free cash, which is of 141,000,000. Now if you go to the next page, page 14, you have the evolution of the net debt after the application of IFRS 16, so which is really the new net debt including the treatment of the operating leases, coming from all the contracts we have, MC's net debt is decreasing. It was EUR 6,600,000,000 at December 2017. It is at 6,200,000,000 end of June with also a decrease of around 100,000,000 of the Financial net debt. The usual KPI we are following every quarter, which is a net debt on EBITDA is table, 1.4 end of December, 1.4 end of June 2018, and the liquidity situation is extremely comfortable, standing at $5,900,000 with $4,100,000,000 of cash, 1.8 and broad credit lines facility as the decrease in the cash building, of course, explained by the 5 we have reimbursed beginning of June 600,000,000 of bonds sorry, 500,000,000 of bonds at the closing level. If I go now to the strategy where we stand concerning the work we have done during says quarter. First, we continue, of course, the phasing of the new efficient fleet according to the plan. During the 6 months first half of twenty eighteen, we continue to reach the number of 747 -1 compared to was in December 2017. We continued to increase the fleet of Boeing 787 We have increased the number of CE aircraft by 3 since the month of December 2017 and in Air France This is a reduction of the 3 forty fleet, which continue minus 1 of the aircraft during the 1st 6 months of the year. 2018 with a number of long haul aircraft stable almost from 170 to 171 in terms of short and medium haul rate nothing to be indicated except that we are preparing some NFPs in order to prepare the long term renewal of the medium haul fit of the group was in terms of 7, 6, 7, and in terms of Airbus 320, and also we continue the simplification of the regional fleet by decreasing progressively the number of ATR which are popular used by hub, with intention to go volatility rapidly to 0 We made also a lot of progress concerning, partnership during this quarter. 1st, concerning the new GV plant JV with Delta and Virgin Atlantic. We have signed a definitive agreement of 15th May. And we have applied to the US authorities for antitrust immunity on July 20th. And we have also already discussed with Vireen, how to try to increase our strategic cooperation not only concerning the GV, but also concerning some other possibility of partnership concerning some flights to the east of Europe by developing, for example, codeshare with Virgin, and we still expect to have a new JV with Delta and VIAGEN fully operational 1st April 2019. We made also during this last quarter a lot of work with our Chinese partners first concerning China, Southern Xiamen Airlines. You know that we had before this quarter, 2 agreement, one with Air France, one with KLM, And we have now made this 2 existing joint venture to create a single one. And we have also increased, of course, and developed the scope of since now single JV. And concerning the partnership with Chen High Stern, which is, as you know, part of the Air France Credit Equity with 8.8% of, or equity owned by Shanghai's term. We have developed the joint venture as it was planned when we negotiate with China starting in 2018 by extending the current scope to a pie 1 and pie creaming. And we have also signed with a Chenneister contract in terms of methanol concerning the components of the 787 fleet of China Eastern. We will also continue to develop discussion with GOL where we are entering a new phase of poor partnership following the opening of the road between Europe Fortaleza. We have also signed a contract with Contas concerning the possibility to connect some flights from Europe to Australia. And more important, we have open discussion or continued discussion with Aerohopa with the projects to create with a joint venture between Europe And Central And South America We expect that this new joint venture could be operational, in summer 2019. I go now at the outlook page, sir, 18. Sorry. Page 18. So two two remarks. The first you, we we we give you every quarter the evolution of the long haul for what book load factor. So you have that in front of you and you see that for the period, August, September, October, November, we have clearly in spite of the development of the capacity, long haul forward booking load factor, which are positively oriented press 1 in August, press 1 in September, press 2 in October, press 1 in November. So based on that and after a discussion with yield management, team, we are expecting for Q3, again, a positive unit revenue. Which means that in total, having now a good inflow on Q1, Q2 and Q3, we expect that for the full year 2018, the unit revenue is expected to be above last year after, of course, the collection for the currency impact. And also technical note, following the industry standard and also the decision taken by Lu on that some months ago, just for your info, we will stop giving a last indication during the monthly free reserve duplication, we're saying that it is providing information, which are not sufficiently important. It's just trend or slight evolution. And we consider that to stop giving that we'd introduce more rationality in joint analyze this. If I go again concerning the outlook on the fuel bill, following the last published internal reporting date on the forward curve of the last 5 days. We have a few bid increase, which is now estimated at plus 4 50,000,000. It is a bit more compared to what we told to you in the last in the last conference call. Or last presentation. So it was 3.50 in April, and it is 4.50 now. So the deterioration of 100,000,000 in terms of fuel bill. The hedge result will be however relatively high this year, please. $850,000,000. And for the last 2 quarters of the year, We are hedged at 55.58 percent, in line with our strategy. So which means on the page 23, sorry, to the main full year guidance in terms of capacity for the passenger network schedule, we stand where we where, in the previous guidance, Transavia should be a bit higher due to the quite good dynamic in the market. The fuel I just told you, 100 more in terms of headwinds. Moving from 3.50 to 4.50. QNC also a small increase of the headwind estimated now at 150 and all further guidance are unchanged with however a message to a bit more positive. As you have noticed, concerning the unit revenue development, So I have finished with this presentation and we are all available to answer your questions. Thank you. Thank If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach your equipment. We will now take our first question from Jarrod Castle from UBS. Please go ahead. Your line is open. Good morning, and thank you. 3 questions if I may. One, just on kind of where things stand with regards to group CEO. At this stage, and coupled with that, where things stand with regards to the relationship with staff. At the moment and and how negotiations are coming along there at Air France. And then thirdly, our call obviously walked away from doing some kind of JV from Air France, with their results, they gave some kind of color that they couldn't reach an agreement. Just want to get your view on working, with the hotel group and how things progressed? Concerning the group CEO, it's clearly a question which is in the hands of the 1st nomination committee of the board and second, the board itself. So it means that of course, and it is no more the management is not involved. And, the process is just continuing. And when there will be some news, of course, you will be informed Concerning the staff solution shape, 1st, I have indicated during the transition that some progress has been made in KLM also in Air Force. I mean, in hope to be the way. Concerning the discussion at all the strike at the Air France level, it will be clearly one of the first task of the new management when it will be there to solve Steve's question, but at this stage, I cannot say more to be honest. Concerning, I call 1 or 2 remarks. 1st, we have observed like huge variations of the share price of Acura after the on smart of the interest into Air France KLM. So a good demonstration that probably the proposed deal will not release the interest of the shareholders of Agro. So again, we have analyzed internal ease of tight of cooperation we could do with Accor. 1st, it is not you. Akor is a partner of France scale. I mean, we had some contract a over there, but to analyze this at this stage, is that nothing is sufficiently large or important to really justify the entry of Atkore into the equity of Air France Care. And for the rest, I see that Ecoc communicated a lot last week about its decision. So we have nothing to add to that. We will take our next question from Daniel Roska from Stanford Bank. Please go ahead. Your line is open. Good morning, gentlemen. And I'll stay on the unions with the first question and ask more kind of is the relationship with the unions developed since there's a market departure? And so like you just said, it's for the new management, but Does this progress with Air France humans really have to wait on a new CEO or couldn't Frank and his team kind of could take on a larger role for their unions similarly to the way that management at KLM deals with their unions by themselves? And second question, you spent some time talking about your initiatives regarding revenues and joint ventures. Could you describe your current efforts in non fuel cost control at the individual airlines and also whether reduction of the non fuel unit cost is part of the target agreement for the executives and 2nd line managers at Air France, KLM and Transavia. And a short third one, if I may, could you just comment a bit more in detail on the current progress with China Southern, especially also concerning statements that China Southern is considering JV with IAG, would that bring an end to your JV plan for that airline? Thanks. Yes, concerning the union and the air constitution, I think I told you already, of course, the rebalances try for the time being that been indicated that it was not possible way to open discussion before New Management. So I can always take to my previous comment It will be, of course, the first pass of the new management to try to solve the situation in Air France. And, but for the time being, I cannot say more concerning the non fuel unit cost. Yes. Of course, it is in the target of any major into Air France KLM. And I will say for the CEO, with a significant percentage of the calculation in their variable income, What are we doing? I give some example, doing my presentation, introducing new aircraft, developing should be the way with lower costs like Transavia or like June, working in terms of activity, you will see that even if the productivity is negative for the 2nd quarter, if you correct for the lost activity or capacity, but due to this price, we should have, again, the positive productivity in the 2 companies, We have recently hired a new chief procurement officer with a clear target for him to improve the proper amount, process at the group level. By even in interfering the cooperation between our France and the Cali and teams. So it is also the initiative which are taken constantly with the management at all labor in order to contribute to the unit cost per 4 months. Which was, I will say, not so bad during the last years. I should look at your data. During the last 4 or 5 years, I think that the unit cost evolution in Boston in Karim was relatively good even compared to to 2 days. We are, of course, to continue. Because we know that we are not a company with, with low cost, compared to some peers and that we have plenty to continue. Into that direction. So the fact that for your last question, the fact that China solution is linked to IIIG is not new. Historically, historically, it was first the joint venture between KLM 10 China sulfur. After that, we had a rich story with the developed part of the English Channel size. Which Shannon has turned. Progressively, we have seen Shannon's house a bit closer to IAG. And this is a current situation. But to be frank, it is not a strange situation. We have some you have a lot of case of company being of final items and working with the members of seasonal items, also developing some cooperation with with a company for, historical reasons, what we call the grandfather white, which are authorizing a number of an alliance to work with a member of another alliance, even in the various a DV rules or in value, DV rules, there is even quite often a provision You have the possibility to have export out of your ASK, to be, operated in cooperation with somebody, which is not part of our alliance. I just give you a very simple example. We continue to work with Austrian. We Air France, when Austrian is course, are not part of SKITing. So I think there is nothing strange to see sometimes. Since the type of situation But of course, by definition, it does limit a bit, the type of corporation we have with somebody which is not part of alliance, but it is not forbidden to do that. Verig, if I may follow-up just one thing. You said it'll be up to the new management kind of to take up those union discussions. Am I correct in assuming that by that, you mean basically the new CEO of the group or does that also imply that you're thinking about changing that within your friends as a? I I I didn't say anything concerning the management of Air France. It's clearly a new management. It just sounds that for the time being, as you know, we have a non executive chairwoman at the head of the group. And it has been confirmed by the group board that as long as the new management has a group level while not there. It was not necessary to try to solve the question of the situation into Air France. Yes, but they have no indication. So concerning what could be tomorrow, the management at Air France, of course. Being the task of the nomination committee is to find a management for the group Air France Care. Thank you. We will take our next question from Simon Leship from Raymond James. Please go ahead. Your line is now open. I would have two questions if I may. First of all, in terms of unit revenue, you have had a very good performance for the medium haul segment in the second quarter. I was wondering if there was any positive one off, that boosted this performance. And, if you, if you expect to be able to benefit from a a similar pace in the third quarter? And second question in terms of unit cost, also a good achievement in Q2. So based on the initiatives you just mentioned, I was wondering if you expect the cost savings momentum to further accelerate in the 2nd half or if the underlying performance in Q2 is maybe a fair expectation for the upcoming launches Thank you. Concerning the medium haul in the part to part the medium haul engine. The only positive impact, which can be considered as a one off is clearly the strike, assets, and sales. But I will say that it is mainly impacting the medium haul point to point, which is, by the way, 2.9 percentile. And second, it is also true that during this quarter, due to this price, the result of the capacity in medium haul point to point has been negative minus 7.8. So when you combine together, the restricted level of capacity increases, it's a possible impact of the strike at SSNCF. It can be, I will say, the most remarkable one off we are which has possibly contributed to improve the unit revenue for the total medium haul. Concerning the unit cost, it's clear that we expect for the second half of the year, unit cost the review being negative because again, we are reiterating our target for the full year, which means that of course, the unit cost per month to be better during the 2nd part of the year compared to what we had during the 1st 6 months. And again, as I told you before, we continue to work. We have in terms of productivity, something which is negative for the half, but clearly it should turn to positive because we increased capacity even a bit more in terms of, for the second half, You are next doing the strike, the acceleration of capacity is a bit more in the last 6 months of the year, so between the productivity will improve. And of course, we expect that we will have solved some of the problem we are doing the first quarter and second quarter mainly in Air France. In terms of unit cost. Part of the unit cost, there were more days coming from the cost of the indemnification to passengers. And we are that by serving progressively as operational difficulties in Air France due to some shortage of pilots and due to the strike. And due to some, delays coming from the training program. Will, of course, have a positive or negative contribution. So to the unit costs during the 2nd part of the year. But again, I will correct you, you said, quite so fully that you need Comcast among in good drinks, second quarter. I would be even a bit more sales than you. The unit is not good. It sounds that if you collect for a strike, it's good, but the the rough and previous number are, of course, not satisfactory. So we cannot be happy with the unit cost per month because it has been, of course, a strong impact on major strike. Yes, I was talking about the underlying performance. We will now take our next question from Andrew Lobbenberg from H. HSBC. Please go ahead. Your line is open. Can I ask a question about June? How June, does it make a material contribution to the profitability of the group, particularly in the context of the the complexity, the training, and the marketing, that it brings as an independent brand. Can I come back? We'll we'll stop asking Mrs. Lincoln about the play. We'll ask about your husband. What is happening with this CEO mandate. I appreciate it for the nomination committee, but can you tell us anything because there's been stuff in the press about what mandate the head hunters have been given in terms of of seeking someone. Do they have to be of any particular nationality or skill And then can you talk on the labor side? Unions have announced plans to resume strike action in September. If if there is not progress. How confident are you that that can be avoided? And how does that interplay with the timing of forthcoming union elections? Thank you. Okay. Concerning June, just to view menu. June is a new vector from operation. Competitive and the former of the existing Air France scale and network, Air France network. It is sold by all the Air France KLM sales organization. The yield management is made by the Air France KLM teams. So I would say that the most important contribution of June to the economics of the network is that it is operating at lower cost And it is, a way to hire a cabin crew at market condition or political condition close to the market conditions. So, it's not necessary to us our June is working, June in terms of sales. It's exactly the result of the sales process. We have a Air France CareM, uh-uh, at the Air France CareM group. For me, the most important question concerning June is, we're happy with the cost development and also cost of the unit cost aligned with what we add in the when we prepare the business case and when we prepare the the organization of the company. And from that point of view, I am marked beside me, but, I think this is already with Mark and Ms. From Telena's answer is yes. The unit cost in June are lower for medium haul freight compared to the Air France unit cost. It's explained by the legal condition of the cabin crew, but not only it is also explained by the new product. By the fact that the first part of the cabin, this is a business product has been any other medium haul flight of Air France. And in the rear cabin, it is new product, when you have to pay, when you want to have a food, it's a carafe. There was a basic, a free product. And after that, there was the recently, the client or the passengers has to pay if he wants to have something different from the basic for the bebezi products. So it's very something which is new in terms of marketing, in terms of service, which is the same service of our business travelers, and yes, the unit costs are aligned, to the business plan and are lower than the So unit cost per ounce in the Air France. Network operated by Air France Aircraft. Concerning the CEO mandate there is only one from from my point of view. It has to be, the the one fitting the most with, Air France, Calum, from scale in the group. And, and that's it. I think that And again, the management is not involved. I repeat that it is normal to have the management not involved, which means that it is ability of the domination committee. And after that, the board of Air France KLM. And again, concerning the labor issue, I can only just repeat what I said before. The strategy on how to handle that question will be in the hands of the new Air France telemanagement. When he will be there. Thanks, Frederick. Thank you. We will now take our next question from Damian Drewer from RBC. Please go ahead. Your line is now open. Could I ask first of all, in the prepared remarks, you mentioned about one offs in the MRO business. Could you elaborate a little bit more about what those were in Q2 and how much they were? Secondly, thank you for slicing and dicing the unit revenues. Could I ask though, in terms of your corporate revenues, how did those trend in Q2? Was the unit revenue there above or below average? And indeed, what was the booking trends like during the strikes? And then very finally, the Air France result within the Air France Care numbers looks pretty appalling. It's delivering no return on capital whatsoever. Is there any decision within the company to withhold any future incremental capital in the France business until the unions provide an efficient business? Or do you consider yourselves to continue putting CapEx into our France? Concerning the E and M stories and then one off, which is not exactly one off. I I indicated during the presentation, you were right effect. Of course, if you look at Air France, because as we try to have less slowdowns, and it is impacting Of course, the global margin of the E and M business during this quarter concerning, then I missed your second question, which is on corporate contract. Sorry. Concerning the global contract during the second quarter, we had the revenue meeting every month. Yeah. I I can also say that, of course, it can make some distribution with corporate contract a bit more difficult. My vision is that, when you look at this type of strike, first of course, not a good news. Of course, as a manager, I can only work with it. I have to say that it does not necessarily very long term impact. Both in terms of relationship with the passenger and also in terms of contract. But of course, you have to repair the relationship, which means that after such an event, we have to be closer to your passenger and closer, of course, of the people with whom you sign this type of business contract. Which we have not observed the, too negative, too, too negative impact. And then sorry, I missed your 3rd question. Okay. Maybe if I can clarify the second. Sorry. Sorry. Yeah. CapEx on the Air Force. Yes. Indeed. We have discussed that with market with the management of Air France, and we have asked that compared to the budget, the management revised, negatively. Of course, the level of CapEx during the second part of the year. So it has been given a target to mark into front in terms of CapEx reduction compared to the budget. Of course, yes. Okay. And just kind of just clarify the second question. I was more interested in compared to where the overall revenues went How did the corporate revenue stream behave in Q2? Was it above or below average growth? I I will say that you see that when you look at the unit revenue in premium, which is a higher contributor to the evolution of the unit revenue. And in fact, the evaluation of the unit revenue in premium is even higher than in the total. So which is, I think, a good a good sign. We'll take our next question from James Hollins from Exane. Please go ahead. Your line is open. Good morning, Frederick. 3, please. The first one, the Q1 you noted in your guidance for the full year that EBIT would be notably lower year on year. That that phrase is no longer there at q 2. Is that because you believe EBIT will not be notably lower or have you just or am I reading too much into that? Secondly, your Q3 2018 unit revenue up year on year, that's against 3.7% year. And within that premium, I think, was up 8.3. Economy was up 3.1. Would you expect to beat both of those both premium and economy? And the third one is on cargo. I saw some headlines, your wet leasing, some cargo capacity, your cargo freight from Qatar Airways. I was wondering if you had any intention of actually growing your full freighters from the current SIPs or whether it's just to cover a short term shortage? Thank you. Okay. Then you know that we don't give normally a forecast concerning the EBIT for the full year. It's clear that we set a strike effect and with the impact on, currency and, fuel as a EBIT for the full year will be, again, low, will be lower than last year. Nothing has fundamentally changed since the Q1 presentation, except in fact that we are a bit more confronting that with the resolution of the unit for review. So we have not add notably, we have not add again just sometimes This one turns were there in the Q1 presentation and, okay, not necessary to repeat it, but clearly, we have a limit in 2018, which will be less lower than in 2017. Concerning Qatar, to be honest, I am a bit surprised by so many reactions on it. The question is relatively also answered as well as the recent currency. So Matt announced for 2, triple 7, full cargo into Air France as as it is normal. During that period, which is impacting the capacity at Air France, mainly during the summer We continue to have some clients and we have, we have went to the market to see if it was possible to have a wet lease. In order to compensate for the impact of the maintenance window for the 2, 3.7 cargo of Air France. That's it. Of course, we issued that with KLM, but the aircraft in KLM were fully busy during that period. And, after discussion with Karen, we have jointly decide at the group level, I mean, with Marcelo in the years, which is head of cargo and France Karen, yeah, decided to go to an external supplier and after a quick discussion with the market and in the short tender. Qatar was the best supplier for this wet lead aircraft. We are in the French press and also in the Dutch press, some comments. How is that possible to walk with Qatar? I don't think it is a bit stranger. For example, in the Air France scale and methanol unit, we are working for Ityad and nobody in Japan, but by that, of course, you can, not necessarily be in cooperation with the company. And, however, to work with it, or as a supplier or as a client. For a short period, as it is a case for Qatar, but for the time being to the end of your question, we are not intending at that stage to increase the full cargo fleet of the group. We have today 4 aircraft in the KLM and 2 aircraft in Air France. And those who believe are presenting around 80% of the capacity we operate in terms of cargo and the rest is the 6 full fighter. You had a second question that I missed it, so it was Q3. Yeah, on the unit revenue, yes, indeed, last year, the unit revenue was relatively positive. What we can just say I just reiterate my comment during the presentation. We expect in Q3, a positive unit revenue, whatever is, the last comparison, it is exactly of this type of a conclusion is coming from the sharp and accurate analyzes of our value management teams. Sorry. Did you expect premium and economy both up year on year in Q3? Yes. Yeah. Yeah. Yeah. Doing, doing, doing, for the time being, we expect that it would be both coming to what I see on the screen, it was the last question. So I will thank you all of you to have attending this meeting. Thank you for your again. As usual, accurate and precise question, And I can only wish you a very good holidays if you have a chance to stop a bit during the month of August. This concludes today's call. Thank you for your participation. You may now disconnect.