Good day, welcome to the first half 2018 results of Air France-KLM. This conference is intended for analysts and investors only. For your information, this conference is being recorded. Now, I will hand over the call to Frédéric Gagey, Chief Financial Officer and Chief Executive Officer of Air France-KLM. Please go ahead, sir.
Thank you. Good morning to everybody, thank you to join us in the conference call on the second quarter 2018 Air France-KLM result. I am in Paris with Erik Swelheim and Marc Verspieren, the CFO of Air France-KLM, and with the financial team of the group, Air France-KLM. I propose to go first to page 2, when you see the main information coming from this second quarter, the key highlights. The first one is coming from the commercial environment. We consider that the environment was characterized by a solid demand. We have been able to develop a RASK, corrected for currency, of +1.7%, and the number of passengers, in spite of the strike in Air France, has increased by +0.8%.
This good development in the RASK is in fact a bit better compared to what we discussed with you at the end of the first quarter. We were expecting a flattish RASK during the second quarter, we have been happily surprised by the outcome of these three months. The RASK and the development in terms of commercial and passenger activity is 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. The impact of the strike has been estimated at EUR 260 million, of course, it is not good news. 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 result for 2018 is at EUR 345 million, compared to EUR 588 million last year, which is a decrease of EUR 241 million. Clearly, a strong impact of the strike and an evolution of the operating result in line with this impact. I move page 4, when we describe quickly the number for this second quarter. The revenue is flattish at +0%, if you correct for the currency impact, we are at +4%. EBITDA is at EUR 1,048 million, which is a decrease of EUR 244 million. Again, in line with the strike impact I just gave before. The operating result is at EUR 345 million compared to EUR 586 million last year, which is a decrease of EUR 241 million, again, aligned with the strike impact. You can observe that the net result is positive at EUR 109 million for the second quarter 2018.
It has to be compared to 593 last year, it is a drop of 484. The drop is here larger than what we have observed for the operating result, which is mainly due to a pure technical accounting effect. If you need more explanation, I will give you that during the Q&A. If you correct for that effect, in fact, the reduction of the net result compared to last year is aligned with what we observed at the operating result level. Page five, quickly for the first half. Similar evolution concerning the revenue, flattish but increasing close to 5% when you correct for currency. EBITDA, -270 compared to last year, at EUR 1,670 million. Again, aligned with the impact of the strike over the six months, which is estimated to -335 million EUR. Operating result at EUR 228 million, a decline of EUR 325 compared to last year.
Again, alas, aligned with the impact of the strike. You observe the same phenomenon as the net result. The net result is for the six months at -159, a decrease of close to EUR 600 compared to last year. Again, we have this specific accounting effect I can describe more precisely if you want during the Q&A session. I move page six, when you have a global view of the performance of each activity of the group. Network capacity, +0.1, flattish and of course impacted by the strike. The strike effect in terms of capacity at the group level is estimated at 2.5%, it is extremely large. Because of the strike, we have at the group level capacity which are only flat. Unit revenue, quite positive and better compared to our expectation, +1.6.
Concerning the cargo, which is now part of the network activity, we have capacity -2.5, which is mainly explained by the fact that in KLM, the swap of Boeing 747 Combi against Boeing 787 is going on. During the quarter, there has been 3 Boeing 747 less compared to last year and +3 Boeing 787, we have less cargo capacity available for this activity. In spite of that, or thanks to that, we have a very good development in terms of unit revenue at +6%. In total, concerning the network, you see for the quarter, a drop in the operating result of EUR 245. Clearly, it is the activity which is the 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, +6%, in spite of this relatively aggressive capacity development, unit revenue is clearly positive at +4.5%, which explains the evolution of the revenue at +11%, the improvement, of course, of the operating result. In the maintenance, very good development of the turnover for third party, we continue to have good commercial performance. In spite of that, you can see that there is a slight decrease of the operating result, which is mainly explained by the strike and some one-off. Correcting for these two elements, we should have a stable margin for the maintenance business. I move page seven, when you see the evolution of the capacity traffic and unit revenue per sub 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 explained by the strike, we have plus 2.9% in terms of RASK. For the hubs, which is to be noticed, we have plus 5% of RASK, which is clearly a very good number. Concerning the long haul, the unit revenue is at plus 0.9% compared to last year. You see that it's coming mainly from North America, when you have, again, a good demonstration of the efficiency of the JV we have with Delta. In Latin America, when we are also supported by the partnership we have with Copa and with GOL in Brazil. You see Asia at minus 1.9%, which seems to be a bit specific to this quarter.
We checked this number with the unit revenue department. You see that if you look for the six months, unit revenue in Asia is flattish, and according to the revenue management department, they are not anxious or scared about the development of the unit revenue for the rest of the year. Page nine, 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 currency, the fuel, we are at plus 2.4. Of course, we have to see what is the impact of the strike at Air France. Two remarks. First, on Air France, the strike had an impact of 4.5 negative, of course, in terms of capacity. If you apply that for the group, the strike in Air France has impacted the capacity of the group by 2.5%.
Of course, we have to correct the unit cost again for the strike. It is just a correction. Of course, it is not eliminating the effect of the strike, unhappily. You can see that when we made this calculation, we have an underlying structural unit cost savings, which is estimated for the second quarter at minus 0.7%, which is reassuring on all the measures we are taking concerning the cost control into the two 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 phase out of the 340 Air France and the 747 into KLM. Page nine, productivity, of course, impacted by the lower capacity.
During the quarter compared to the quarter Q2 2017, we have plus 500 people into Air France, plus 700 people into KLM. In Air France, it is mainly the subsidiaries. The FTE in the Air France company are stable compared to last year. In KLM, 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 this department, and also some development in some KLM subsidiaries, but also a bit more people for the ground operation linked to the development of the business. Concerning the crew and both cabin and cockpit, we have plus 400 cabin into the group, and plus 150 cockpit.
Mainly due to the development of the in KLM, on the expected, based on the plan and the program, the expected but not realized during this first part of the year of the activity into Air France. Concerning the global staff cost, we are at +2% compared to last year, with some evolution concerning some social negotiation. In HOP!, following the merger of the three company, Brit Air, Airlinair, and Régional, it was necessary to have an agreement with pilots concerning the unified working and labor condition, which is done. Yesterday, the pilots gave the approval concerning this new CLA. In KLM, there is still some discussion with cockpit and ground staff concerning the CLAs, but the KLM management is comfortable and expect that these two CLAs will be concluded after summer. Page 10. The normal waterfall of the EBIT from Q2 2017 to Q2 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 EUR -160, and the currency impact, which is a headwind estimated to EUR 70 million. Of course, the activity change impact is close to zero. 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, revenue, and operating margin for the two main components of the group. Not a big surprise. In KLM, there is a stability of this result compared to last year, in spite of the two headwinds I just gave before, coming from the fuel and from the currency. The operating result of KLM stands at EUR 328 compared to EUR 351 last year, so almost stable.
Concerning Air France, of course, we have the disastrous effect of the strike. Last year, Q2 2017, the operating result was at EUR 244 million. For Q2 2018, it is close to zero, at +EUR 13 million alone. 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 2018. Again, stability, even a slight improvement into KLM, where the operating result moved from EUR 379 to EUR 388. In Air France, impacted by the strike, a move from black to red figures, +EUR 187 last year half one, and -EUR 164, 2018, half one. The revenue in Air France is decreasing by EUR 100 million. The revenue in KLM is increasing by a bit more than EUR 100 million.
Concerning the balance sheet and the free cash flow, we have a free cash flow of +EUR 141 million. Just to be precise, following a lot of studies and discussion we had internally, what we call now the adjusted operating free cash is exactly the same free cash definition as before the application of IFRS 16. 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. Following the old definition, a free cash which is of EUR 141 million. If you go to the next page 14, you have the evolution of the net debt after the application of IFRS 16. Which is really the new net debt, including the treatment of the operating leases coming from all the contracts we have.
See, net debt is decreasing. It was EUR 6.6 billion at December 2017. It is at EUR 6.2 billion end of June, with also a decrease of around EUR 100 million of the financial net debt. The usual KPI we are following every quarter, which is a net debt on EBITDA, is stable, 1.4 end of December, 1.4 end of June 2018. The liquidity situation is extremely comfortable, standing at EUR 5.9, with EUR 4.1 billion of cash and EUR 1.8 undrawn credit lines facility. The decrease in the cash being, of course, explained by the fact that we have reimbursed beginning of June, EUR 500 million of bonds at the holding level. If I go now to the strategy where we stand concerning the work we have done during this quarter. First, we continue, of course, the phasing of the new efficient fleet according to the plan.
During the six months first half of 2018, we continue to reduce the number of 747, minus one compared to what was in December 2017. We continue to increase the fleet of Boeing 787. We have increased the number of these aircraft by three since the month of December 2017. In Air France, this is a reduction of the 340 fleet, which continues minus one of these aircraft during the first six months of the year 2018, with the number of long-haul aircraft stable almost from 170 to 171. In terms of short and medium-haul fleet, nothing to be indicated except that we are preparing some RFPs in order to prepare the long-term renewal of the medium-haul fleet of the group, both in terms of 737 and in terms of Airbus 320.
Also, we continue the simplification of the regional fleet by decreasing progressively the number of ATR, which are propellers used by HOP!, with the intention to go relatively rapidly to zero. We made also a lot of progress concerning our partnership during this quarter. First, concerning the new JV or planned JV with Delta and Virgin Atlantic, we have signed the definitive agreement the 15th of May, and we have applied to the U.S. authorities for antitrust immunity on July the 20th. We have also already discussed with Virgin how to try to increase our strategic cooperation, not only concerning the JV, but also concerning some other possibility of partnership concerning some flights to the east of Europe by developing, for example, codeshare with Virgin. We still expect to have a new JV with Delta and Virgin fully operational 1st of April 2019.
We made also during this last quarter, a lot of work with our Chinese partners. First, concerning China Southern and Xiamen Airlines. You know that we had before this quarter two agreements, one with Air France, one with KLM, and we have now merged these two existing joint ventures to create a single one. We have also increased, of course, and developed the scope of this now single JV. Concerning the partnership with China Eastern, which is, as you know, part of the Air France-KLM equity with 8.8% of our equity owned by China Eastern. We have developed the joint venture as it was planned when we negotiate with China Eastern in 2018, by extending the current scope to Paris, Wuhan, and by Kunming. We have also signed with China Eastern a contract in terms of maintenance concerning the components of the 787 fleet of China Eastern.
We have also continued to develop discussion with GOL, where we are entering a new phase of our partnership following the opening of the route between Europe and Fortaleza. We have also signed a contract with Qantas concerning the possibility to connect some flights from Europe to Australia. More important, we have opened discussion or continued discussion with Air Europa, with the projects to create with Air Europa 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 18. Two remarks. The first, we give you every quarter the evolution of the long-haul forward booking load factor.
You have that in front of 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, plus one in August, plus one in September, plus two in October, plus one in November. Based on that, after discussion with the yield management team, we are expecting for Q3, again, a positive unit revenue, which means that in total, having now good info 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 correction for the currency impact. Also, a technical note following the industry standard and also the decision taken by Lufthansa some months ago.
Just for your info, we will stop giving RASK indication during the monthly traffic result publication. We think that it is providing information which are not sufficiently important. It is just trend or slight evolution, we consider that to stop giving that will introduce more rationality into joint analysis. 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 Friday, we have a fuel bill increase, which is now estimated at plus EUR 450 million. It is a bit more compared to what we told you in the last conference call, or last presentation, sorry. It was EUR 350 in April, it is EUR 450 now, so a deterioration of EUR 100 million in terms of fuel bill. The hedge result will be, however, relatively high this year, plus $850 million.
For the last two quarters of the year, we are hedged at 55% and 58% in line with our strategy. Which means on page 23, to the main full-year guidance in terms of capacity for the passenger network schedule, we stand where we were in the previous guidance. Traffic should be a bit higher due to the quite good dynamic in the market. The fuel, I just told you, EUR 100 more in terms of headwinds, moving from EUR 350 to EUR 450. Currency, also, a small increase of the headwind, estimated now at EUR 150, all other guidance are unchanged with, however, a message a bit more positive, as you have noticed, concerning the unit revenue development. I have finished with this presentation, we are all available to answer your questions. Thank you.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, please press star one to ask a question. We will now take our first question from Jarrod Castle from UBS. Please go ahead. Your line is open.
Good morning, thank you. Three questions, if I may. One, just on kind of where things stand with regards to Group CEO at this stage. Coupled with that, where things stand with regards to the relationship with staff at the moment and how negotiations are coming along there at Air France. Then thirdly, Accor 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. Thanks.
Concerning the Group CEO, it's clearly a question which is in the hands of the first nomination committee of the board, and second, the board itself. It means that, of course, and it is normal, the management is not involved. The process is just continuing, and when there will be some news, of course, you will be informed. Concerning the staff relationship, first, I have indicated during the presentation that some progress has been made in KLM, also in Air France, I mean, in HOP! subsidiary. Concerning the discussion of the strike at Air France level, it will be clearly one of the first tasks of the new management when it will be there to solve this question. At this stage, I cannot say more, to be honest. Concerning Accor, one or two remarks.
First, we have observed, like you, the evolution of the share price of Accor after the announcement of the interest into Air France-KLM. A good demonstration that probably the proposed deal was not really in the interest of the shareholders of Accor. Second, we have analyzed internally the type of cooperation we could do with Accor. First, it is not new. Accor is a partner of Air France-KLM, and we had some contract here or there. Our analysis at this stage is that nothing is sufficiently large or important to really justify the entry of Accor into the equity of Air France-KLM. For the rest, I think that Accor communicated a lot last week about its decision. We have nothing to add to that.
Okay. Thanks very much.
We will take our next question from Daniel Roeska from Sanford Bernstein. Please go ahead. Your line is open.
Good morning, gentlemen. I'll stay on the unions with the first question and ask more kind of how has the relationship with the unions developed since Jean-Marc's departure? Frédéric, you just said it's for the new management, but does progress with Air France unions really have to wait on a new CEO, or couldn't Franck and his team kind of take on a larger role for their unions, similarly to the way that management at KLM deals with their unions by themselves? Second question, you've 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 second-line managers at Air France, KLM, and Transavia? 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 a JV with IAG? Would that bring an end to your JV plans with that airline? Thanks.
Concerning the union and the Air France situation, I think I told you already, of course, there have been strikes. For the time being, it has been indicated that it was not possible, really, to open discussion before a new management. I can only state to my previous comment. It will be, of course, the first task of the new management to try to solve the situation in Air France. For the time being, I cannot say more. Concerning the non-fuel unit cost, yes, of course, it is in the target of any manager into Air France-KLM. I will say for the CEO, with a significant percentage of the calculation in their variable income. What are we doing? I gave some example during my presentation, introducing new aircraft, developing subsidiary with lower cost, like Transavia or like Joon.
Working in terms of productivity, you see that even if the productivity is negative for the second quarter, if you correct for the lost activity or capacity due to the strike, we should have, again, a positive productivity in the two companies. We have recently hired a new chief procurement officer with a clear target for him to improve the procurement process at the group level by even intensifying the cooperation between the Air France and the KLM teams. It is all these initiatives which are taken constantly with the management at all levels in order to contribute to the unit cost performance, which was, I would say, not so bad during the last years. If you look at your data during the last four or five years, I think that the unit cost evolution in both Air France and in KLM was relatively good, even compared to peers.
We have, of course, to continue, because we know that we are not a company with low cost compared to some peers, and that we have clearly to continue into that direction. For your last question, the fact that China Southern is linked to IAG is not new. Historically, it was first a joint venture between KLM and China Southern. After that, we had a rich story with the development of the link with China Eastern. Progressively, we have seen China Southern a bit closer to IAG, and this is the current situation. To be frank, it is not a strange situation.
You have a lot of case of company being part of an alliance and working with the members of this alliance, also developing some cooperation with a company for historical reasons, what we call the grandfather right, which are authorizing a member of an alliance to work with a member of another alliance. Even in the various JV rules, there is even quite often a provision. You have the possibility to have X% of your HQ to be operated in cooperation with somebody which is not part of all alliance. I just give you a very simple example. We continue to work with Austrian. We, Air France, when Austrian is, of course, not part of SkyTeam. I think there is nothing strange to see sometimes see the type of situation.
By definition, it does limit a bit the type of cooperation we have with somebody which is not part of our alliance, but it is not forbidden to do that.
Frédéric, if I may follow up just on one thing you said, it'll be up to the new management 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 up within Air France S.A.?
I didn't say anything concerning the management of Air France. It's clearly a new management. It's just some that for the time being, as you know, we have a non-executive chairwoman at the head of the group. It has been confirmed by the group board that as long as the new management at the group level was not there, it was not necessary to try to solve the question of the situation into Air France. Yeah. Okay, thank you. I have no clear indication concerning what could be tomorrow the management at Air France, of course. Being the task of the nomination committee is to find management for the group, Air France-KLM.
Thank you. We will take our next question from Simon Leopold from Raymond James. Please go ahead. Your line is now open.
Good morning. 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 expect to be able to benefit from a similar pace in the third quarter. Second question, in terms of unit cost, also a good achievement in Q2. Based on the initiatives you just mentioned, I was wondering if you expect the cost savings momentum to further accelerate in the second half, or if the underlying performance in Q2 is maybe a fair expectation for the upcoming months. Thank you.
Concerning the medium-haul and the point-to-point, the medium-haul in general, the only positive impact which can be considered as a one-off is clearly the strike at SNCF. I will say that it is mainly impacting the medium-haul point-to-point, which is, by the way, at 2.9%. Second, it is also true that during this quarter, due to the strike, the development of the capacity in medium-haul point-to-point has been negative, minus 7.8%. When you combine together the restricted level of capacity with the possible impact of the strike at SNCF, it can be, I will say, the most remarkable one-off which has possibly contributed to improve a bit the unit revenue for the total medium-haul.
Concerning the unit cost, it is clear that we expect for the second half of the year, the unit cost behavior being negative, because again, we are reiterating our target for the full year, which means that of course, the unit cost performance has to be better during the second part of the year compared to what we had during the first six months. Again, as I told you before, we continue to work. We have, in terms of productivity, something which is negative for the first half, clearly, it should turn to positive, because we increase capacity even a bit more in terms of the second half. Even excluding the strike, the acceleration of capacity is a bit more in the last six months of the year, which means that the productivity will improve.
Of course, we expect that we would have solved some of the problem we had during the first quarter and second quarter, mainly in Air France, in terms of unit cost. Part of the unit cost development is coming from the cost of the indemnification to passengers. We hope that by solving progressively the 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, sorry, to the unit cost during the second part of the year. Again, I will correct you. You say quite softly that the unit cost performance is good during the second quarter. I will be even a bit more severe than you.
The unit cost performance is not good in the sense that if you correct for strike, it's good, but the rough and published number are, of course, not satisfactory. We cannot be happy with the unit cost performance because it has been, of course, strongly impacted by the strike.
Yeah, I was talking about the underlying performance.
Okay.
Thank you.
Thank you. We will now take our next question from Andrew Lobbenberg from HSBC. Please go ahead. Your line is open.
Hi, Frédéric. Can I ask a question about Joon? How is Joon? Does it make a material contribution to the profitability of the group, particularly in the context of the complexity, the training, and the marketing that it brings as an independent brand? Can I come back? We'll stop asking Mrs. Lincoln about the play. We'll ask about your husband. What is happening with the CEO mandate? I appreciate it's for the nomination committee, but can you tell us anything, because there's been stuff in the press, about what mandate the headhunters have been given in terms of seeking someone? Do they have to be of any particular nationality or skills? Then can you talk on the labor side, unions have announced plans to resume strike action in September if there is not progress. How confident are you that can be avoided?
How does that interplay with the timing of forthcoming union elections? Thank you.
Okay, concerning Joon, just to remind you, Joon is a new vector for operation, but it is on the former or the existing 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. I would say that the most important contribution of Joon to the economics of the network is that it is operating at lower cost, and it is a way to hire cabin crew at market condition or at labor condition close to the market conditions. It's not necessary to ask how Joon is working. Joon, in terms of sales, is exactly the result of the sales process we have at the Air France-KLM Group.
For me, the most important question concerning Joon is: Are we happy with the cost development, and are the cost or the unit cost aligned with what we had when we prepared the business case and when we prepared the organization of the company. From that point of view, I have Marc beside me, but having discussed already with Marc and with Franck Terner, the answer is yes. The unit costs in Joon are lower for medium-haul flight compared to the Air France unit cost. It's explained by the labor condition of the cabin crew. Not only, it is also explained by the new product, by the fact that on the first part of the cabin, this is a business product, as in any other medium-haul flight of Air France.
In the rear cabin, it is a new product, when you have to pay when you want to have food, et cetera. There is a basic free product, and after that, there is something the client or the passengers has to pay if he wants to have something different from the basic product. It's clearly something which is new in terms of marketing, in terms of service. This is the same service for business travelers. Yes, the unit costs are aligned to the business plan and are lower than the unit cost per flown hours than in the Air France network operated by Air France aircraft. Concerning the CEO mandate, there is only one, from my point of view, it has to be the one fitting the most with the Air France-KLM group, and that's it. Again, the management is not involved.
I repeat that it is normal to have the management not involved, which means that it is clearly a process under the responsibility of the nomination committee, and after that, the board of Air France-KLM. Again, concerning the labor issue at Air France, 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-KLM management when he will be there.
Thanks, Frédéric.
Thank you. We will now take our next question from Damian Brewer from RBC. Please go ahead. Your line is now open.
Good morning, everybody. 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. In terms of your corporate revenues, how did those trend in Q2? Was the unit revenue there above or below average? Indeed, what were the booking trends like during the strikes? Very finally, the Air France results within the Air France-KLM 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 into the Air France business until the unions provide an efficient business? Do you consider yourselves to continue putting CapEx into Air France? Thank you.
Concerning the MRO story, the main one-off, which is exactly one-off, I indicated during the presentation, is the strike effect. Of course, if you look at Air France, because of the strike, we have less flown hours, and it is impacting, of course, the global margin of the MRO business during this quarter. Concerning your second question, which is on corporate contract.
Hello?
Very well. Concerning the global contract, during the second quarter, we had the revenue meeting every month. I can only say that, of course, it can make some discussion with corporate contract a bit more difficult. My vision is that when you look at this type of strike, first, of course, it is not a good news. Of course, as a manager, I can only regret it. I have to say that it has not necessarily very long-term impact, both in terms of relationship with the passenger and also in terms of contract. Of course, you have to repair the relationship, which means that after such an event, you have to be closer to your passenger and closer, of course, of the people with whom you sign this type of business contract. We have not observed a too negative impact.
Sorry, I missed your third question.
Okay. Maybe if we can clarify the second.
Sorry. Yeah. CapEx on Air France. Yes, indeed.
Yes.
We have discussed that with Marc and with the management of Air France, and we have asked that compared to the budget, the management revise, negatively of course, the level of CapEx during the second part of the year. It has been given a target to Marc and to Franck in terms of CapEx reduction compared to the budget. Of course, yes.
Okay. Can I 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 would say that you see that when you look at the unit revenue in premium, which is a high contributor to the evolution of the unit revenue. In fact, the evolution of the unit revenue in premium is even higher than in the total. Which is, I think, a good sign.
Okay. Thank you very much.
As a reminder, if you wish to ask a question, please signal by pressing star one on your telephone keypad. Once again, press star one on your telephone keypad. We will take our next question from James Hollins from Exane. Please go ahead. Your line is open.
Good morning, Frédéric. Three, please. On the first one, the Q1, you noted in your guidance for the full year that EBIT would be notably lower year-over-year. That phrase is no longer there at Q2. Is that because you believe EBIT will not be notably lower, or am I reading too much into that? Secondly, your Q3 2018 unit revenue up year-over-year. That's against 3.7% last year. 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? The third one is on cargo. I saw some headlines, you're wet leasing some cargo capacity or cargo freighters from Qatar Airways. I was wondering if you had any intention of actually growing your full freighters from the current six, or whether that's just to cover a short-term shortage. Thank you.
Okay. You know that we don't give normally a forecast concerning the EBIT for the full year. It's clear that with such a strike effect and with impact on currency and fuel, the EBIT for the full year will be lower than last year. Nothing has fundamentally changed since the Q1 presentation, except in fact, that we are a bit more comfortable with the evolution of the unit revenue. We have not had again the sentence. The sentence was there in the Q1 presentation, not necessary to repeat it, but clearly, we have an EBIT in 2018, which will be, alas, lower than in 2017. Concerning Qatar, to be honest, I am a bit surprised by so many reactions on it. The question is relatively, the answer is relatively simple. There is some maintenance for 2 777 full cargo into Air France, as it is normal.
During that period, which is impacting the capacity at Air France, mainly during the summer, we continued to have some clients, and 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 2 777 cargo of Air France. That's it. Of course, we discussed that with KLM, but the aircraft in KLM were fully busy during that period. After discussion with KLM, we have jointly decided at the group level, I mean, with Marcel de Nooijer, which is head of cargo Air France-KLM. He has decided to go to an external supplier. After a quick discussion with the market and a short tender, Qatar was the best supplier for this wet-leased aircraft.
We read in the French press and also in the Dutch press some comments, How is that possible to work with Qatar? Okay, it is a bit strange. For example, in the Air France-KLM maintenance unit, we are working for Etihad, and nobody is surprised by that. Of course, you cannot necessarily be in cooperation with a company and however, to work with it or other supplier or other clients. 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 KLM and 2 aircraft in Air France. Now the belly are representing around 80% of the capacity we operate in terms of cargo, and the rest is the 6 full freighter.
You had a second question that I missed. It was on Q3. Yes, 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 year comparison. It is exactly this type of conclusion is coming from the sharp and accurate analysis of our revenue management teams.
The question was really.
I don't.
Sorry, did you expect premium and economy both up year-on-year in Q3?
Yes. For the time being, we expect that it will be both for premium and economy.
Thanks very much.
According to what I see on the screen, it was the last question. I will thank all of you to 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.