Good morning, and welcome to the Air France-KLM first quarter 2024 results presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Ben Smith, CEO, and Steven Zaat, CFO. Please go ahead, sir.
Thank you for the presentation of Air France-KLM's results for the first quarter of 2024. I'm joined today by Steven Zaat, our CFO, who will be available to take your questions at the end of this presentation. I'll start by sharing the first quarter highlights, and then Steven will take over for a detailed presentation of our financial performance and the outlook for the quarters ahead. Then after, we'll conclude and take your questions. So moving to slide 3. We're looking at our performance over the first quarter. But despite a challenging start to the year, marked by further geopolitical tensions, our activity was resilient.
Although our operating income is down compared to the same quarter last year, mainly due to both exceptional disruption costs and a slower cargo business that's facing significant headwinds, our group revenues are up 5%, driven by steady capacity deployment, robust load factors, and improved passenger yield, a sign that travel demands remain quite strong. Forward ticket sales are holding firm and point to a promising summer season, generating positive adjusted free operating cash flow in the first quarter. On the balance sheet side, we maintained a disciplined approach, both in terms of available liquidity and financial leverage. Our cash position remains strong, thanks to particularly the redemption of the OCEANE 2026 bonds and the positive impact of deferred social charges. Our net debt to EBITDA ratio is broadly stable and well under control at 1.3 times.
Our fleet renewal is advancing at a steady pace with the continuous delivery of next generation aircraft. Quarter after quarter, we get one step closer to our overall fleet renewal targets, a key pillar of our decarbonization strategy. Moving on to slide 5. Productivity labor relations is a pillar of our strategy. It stands at the core of our values as a powerful driver of Air France-KLM's performance and is the cornerstone of our approach, targeting increased employee engagement and alignment with the company's strategic vision. Since January 2023, this approach involved constant dialogue and has fostered since the signing of more than 40 labor agreements covering our entire organization, each reflecting our dedication to fair compensation and the well-being of our workforce, while also remaining in line with industry benchmarks.
Dynamic trend in our employee promoter score, as well as our employee dissatisfaction and engagement levels, prove that these efforts to resonate with our colleagues. These positive outcomes not only position us as an, as employer, as an employer of choice and a great place to work, but they also directly impact our ability to attract and retain top talent. Steven will now take over and go through in more detail our financial performance for the first quarter.
Good morning, everybody, and thanks for joining this call. So, as already indicated by Ben, the first quarter has been pretty tough. We indicated that already with the full year results. We had quite a difficult operational climate, especially related to the spare parts situation. But what is good to see is that we are seeing now actually the fruit of all the measures which KLM is taking to improve the operational performance. So since the end of the quarter, and also in April and May, you see that we are stabilizing the operation at KLM, which has a positive impact, especially on the disruption cost.
Then, of course, also the cargo is still coming down in the first quarter, as we also expected, because we know that the capacity was not yet fully there in terms of passenger capacity, which also holds the cargo capacity in the belly. So if we go to page six, you see that revenues further grow with more than 5%. We had a very strong, relatively, PAX unit revenue. It was up 2.1%, especially Transavia, at a unit revenue of almost 10%, despite the fact that they increased significantly the capacity, but I will come back on that later. And then you see that we had a hit of almost EUR 160 million on the cargo unit revenue.
The part was expected, but we also had an IT tool implementation, which costed us EUR 23 million for the group in this quarter. It is solved now, so the operation is stabilized, but we will still see an impact of around EUR 7 million in the next quarter of it. But the operation has been stabilized, as before. And then we had a tailwind from the fuel price, of EUR 144 million, if you include also the additional ETS cost. And then on the unit cost, you see, as we already indicated, there's a minus EUR 100 million in incidentals, EUR 50 million, which was a one-time payment salary at KLM, and EUR 50 million related to disruption costs. But again, the good news is we stabilize now the operations.
We have 75 FTEs relieved at the line maintenance because we stopped all the outsourcing of third parties at Schiphol, and at the same time, we outsourced other C checks of the 737 and the A checks on the A330. We are daily busy to manage actually our supply chain, but we see that operations are stabilizing in the second quarter, and also the starting of the summer at KLM went pretty well. If we then go to the next slide, on page 7, there you see the increase of the unit revenue, and I come back on it later. I will just take, I come back on it later, but we see an increase of 1.7% of unit revenues at the passenger business, despite the capacity growth of almost 4%.
Cargo, a -26%, not as much down as in Q4, but again, we had this EUR 23 million of this IT system change. Then the positive surprise and the positive news is that we grew capacity at Transavia in, let's say, the most difficult season, and we see that the unit revenue went up with 10%, and we improved even our operating result, despite the fact that this is a loss-making quarter always for our low-cost activity. So this is a very good sign what to come in Q2 and Q3 on Transavia. We have a stable operations, and we see demand is there. Then on the maintenance, despite the fact that maintenance is working in quite a difficult environment, we see that we grow further our third-party revenues especially on the next-generation aircraft, and there's new fleet phasing in from external customers.
We grew our revenues with more than EUR 40 million on the components, especially a 60% growth on the 787 fleet, and on the engines, we saw that now the issues on the GE90s are solved, so that brought another EUR 70 million in our engine shop, and we grew with our CFM56-7 platform with EUR 50 million. So, stable, significant increase in our revenues, third-party for the maintenance, and also growing our operating result. On page eight, you'll see the results per airline. So to start with Air France, minus EUR 68 million, you should take into account that the Flying Blue miles are now reported separately, so that has a negative impact if you compare year-over-year for Air France and KLM.
And then we have, especially on Air France, or it was actually only on Air France, the IT tool implementation impact. So if you disregard that EUR 26 million, and you disregard the carve-out of Flying Blue, Air France was more or less flattish. And KLM, as already indicated, EUR 50 million coming from the one-time payment in salary, and EUR 50 million coming from a high customer compensation in January and February. It's interesting to see that if you look at Flying Blue, we have now a margin of 24%. We didn't restate 2023, because that's pretty difficult in all the accounting flows we have over there. So from next year, we will report year-over-year, but it's good to see that actually the Flying Blue is delivering the results even better than we expected at the group.
On page nine, you will find the world map, so, as already indicated, we had an increase of capacity of 4.5%, with a revenue increase and yield increase of 1.5%, and again, we increased our load factor. On the premium side, you see that the yield is dropping with -0.6%, which is fully related to a mix impact. We grew capacity to Asia, which has a longer stage length, so if you just take that out, actually the network impact only at Air France is already 1.8%. So the negative yield has nothing to do with lower pricing in the premium, but is all related to, due to the network mix. On the long haul, still a strong performance. We grew 4%, with a further increase of load factor and a further increase of yield.
In North America, we had a stable yield, but driven also by an increase of our load factor of almost 2%, despite the fact that we increased the capacity over there further with 3.3%. Then on South America, that is just a fine-tuning of our network in South America. We didn't actually adjust significantly there, the capacity, but we needed some planes to fly to Asia. So it's just a small adjustment, and you see that the load factor is still at 90% with a very strong yield environment and even further increasing by 1.1%. Then the Caribbean, so we reduced capacity by 14%, but the good news is we increased the ticket prices there with 11%. So actually, we compensate with the ticket prices, the reduction of capacity and the reduction of revenues.
And then on Africa, we know that we have a difficult geopolitical context over there, so we reduced capacity by -5%, but actually, we still hold quite high yields in the whole region, which were up 2% with a load factor of 85%. And then the big increase is coming from Asia and the Middle East, so we doubled the capacity to China. We grew to Japan with more than 60%. We doubled the capacity to Korea, and then you see that this increase of capacity has also an impact on our yields. Of course, the Middle East was still hampered by the geopolitical situation. If you carve out the 6.9% drop in yield, you will see that around 10% is coming from the Middle East, and for Asia, the rest of Asia, is -7%.
We see still very strong bookings in Southeast Asia, especially in Vietnam and in Thailand. On the short and medium haul, we grew slightly with 2%, but also the yields we increased further by 2.6%, and load factor still further going up. Then Transavia, 11% more capacity with a drop of 2% in load factor, but with a 12% increase of ticket pricing. So very promising for the next quarters to come for Transavia. Then we go to page 10. So we had a positive free cash flow, especially supported by the promising summer ticket sales. There was EUR 1.5 billion coming from the ticket sales.
Then, as we already signaled into the market, we had a one-time payment to the Air France pilots, so that was EUR 610 million, and we had a quarter of EUR 120 million of the deferred social charges and wage taxes at KLM. So in total, there is an exception of EUR 730 million in. If you add then also, as we always do, the payment of the lease debt and the net interest cost, because we changed actually the definition of operating free cash flow. We took out the net interest cost as we actually following a new IFRS directive, which will put in place, I think, in 2027, this way of reporting the cash flow.
First, you see EUR 140 million if you take the IFRS definition. If you take out the exceptionals and you add the payment of lease debt and that interest, you see that we have a recurring adjusted operating free cash flow of almost EUR 600 million. Net debt, stable, EUR 140 million coming from the operating free cash flow, but we had new leases to be extended, so that was EUR 160 million, and there's a small currency impact.
We get to EUR 5.1 billion or EUR 2 billion in terms of net debt, a stable leverage of 1.3, and despite the fact that we paid back EUR 450 million on the OCEANE and we paid the exceptionals on the pension fund through the CRPN, we are still a very strong cash of almost EUR 10 billion. Let's look forward on page 12. And we indicated already during the full year results that we are aiming at an increase of unit cost of 1%-2%. We reconfirm that again. You see that we reached the 4%, exactly in line as we guided the market, and there were one-off slight disruption costs already explained, and a one-time payment of the salary at KLM.
If you take that out, we would be at 2.4, and for Q2, we guide 2% increase of unit cost. At the same time, we increased our transformation, so we had 700 projects running. We increased further. We speak now actually weekly on the profitability improvement for our both airlines and at the group level, and we will further go with reducing overhead and creating further synergies. We stopped hiring support staff, so there's a full hiring freeze for people on the SG&A, and we are stabilizing, and this is very important, our operations. KLM took significant actions. They, as already mentioned, stopped the third-party line maintenance. They outsourced the 77 C checks to KLM UK Engineering.
They outsourced the A330 A-checks to Sabena Technics, and it really improved the operations. It was very good to see that now with May, actually, the summer period starting, we were improving again our operation, despite the fact that we also increased significantly the capacity. So with stabilizing operations, with continuing on the transformation and stop hiring of support staff, we are fully confident with the 1.2% increase of unit cost. Then on page 13, you see the booking, the forward booking curve. So we are more or less in line with what we had last year.
So 75% of Q2 capacity is already sold on the long haul, on the minimal 65%, and on Transavia, it's 71%, slightly below, but we have an increase of capacity, don't forget that, of 10%-15%, and we see very strong yields in that market. On page 14, you see the new hedge policy, so we are actually almost 70% hedged now. You will see that in Q2, the fuel cost will go up, so the fuel price has a negative impact of more than EUR 100 million year-over-year, but we will expect it with the current forward, that Q3 and Q4 will be better in terms of fuel price.
So fuel price is dropping, yet fuel is actually expected to be at $911 per metric ton in the market, and especially the crack is coming down since the beginning of the year to levels of around $20 per barrel, which is a little bit what we have seen before COVID, or especially before the Ukraine war. So on page 15, you see the outlook. So it's a little bit boring. At the group capacity, we reconfirm again, the 5% versus 2023. The unit cost, we reconfirm the 1%-2% growth with a Q2 +2%, and the net CapEx, we reduced to safeguard our cash to €3 billion for the full year. With that, I hand over back to Ben.
Okay, thank you, Steven. So on slide 17, as you all know, we're firmly committed to implementing an ambitious carbon footprint reduction roadmap based on three complementary pillars, which are, one, renewing our fleet with more fuel-efficient aircraft, two, sourcing and using an increasing share of sustainable aviation fuels. And three, rolling out a series of operational measures positively impacting our operations, both on the ground and in flight, such as eco piloting. As I mentioned earlier, our fleet renewal program is progressing at a great pace. In 2023, we received 32 new generation aircraft, and 2024 will mark a further pursuit with the expected delivery of 47 new generation aircraft.
Between now and 2030, we will increase the share of latest generation aircraft in our fleet from around 20% in 2023 to over 80%, resulting in a significant reduction of CO2 and noise emissions, as well as a positive impact on our unit costs. Next, fleet renewal, our sustainable aviation fuel strategy is fostering results with major customers partnering with us, such as Airbus, which renewed its corporate SAF contract last week. On slide 18, as Steven said, the upcoming summer season will be dynamic, as demonstrated by the encouraging level of forward bookings. All of our airlines are actively preparing to respond to this promising trend. With this in mind, we are continuing to reinforce our capacity, particularly in strategic geographical areas such as North America, with both KLM and Air France.
The key challenge this summer will be to ensure the highest possible levels of operational robustness across all segments, from our fleet availability and readiness of our colleagues to airport infrastructure efficiency and reliability across all our bases. On to slide 19. This summer season will be really special with the long-awaited 2024 Paris Olympic and Paralympic Games. Air France is honored to be an official partner of the games, and all our teams are extremely excited in making this milestone a great success. Such a complex and large-scale event requires an enormous deal of preparation to ensure a smooth and flawless operation for both athletes and visitors to Paris.
We're expecting several traffic peaks: one, before the games, with the arrival of fans, sports delegations, and, media from all over the world converging on France and in Paris in particular, and two, toward the end of the games, when fans, athletes, and journalists will all be leaving over a very short period of time. We will also be transporting a significant amount of luggage and sports equipment, four times more than in normal summer, as well as a greater volume of special equipment during the Paralympic Games. To be able to take up the challenge, we have set up specific procedures to guarantee smooth operations for Olympic and Paralympic athletes and delegations, along with all of our customers. We are working closely with Aéroports de Paris and the Paris 2024 Organizing Committee. One of the common projects includes building check-in infrastructures at the Athletes' Village.
At the airport, athletes and delegates will also be able to use a dedicated departure hall, which of course means other passengers can equally expect a smooth experience. From a capacity perspective, we are confident that our unique and diversified network will anchor its fundamental role in accommodating extensive international demand during the peak weeks of August and September. Paris will be the capital of the world for several weeks, offering an exceptional showcase and a unique opportunity to promote the Air France brand to visitors from all over the world. Moving on to the last slide. The first quarter was a challenging one, with persistent geopolitical tensions, exceptional operational disruptions, and the considerable headwinds curbing our Cargo business.
Nonetheless, our group again proved that we are resilient, and thanks to the collective effort of our colleagues, we managed to further increase our revenues, pursue capacity production, and improve passenger yield. Looking ahead, we remain on track for a resilient trajectory over the coming quarters. We expect the summer season to be busy, and all of our airlines are gearing up to ensure smooth operational deployment. This includes, of course, Transavia, whose increased revenue and yield over the first quarter provides good momentum for a robust peak season. This leads us to feeling confident in our ability to achieve our midterm financial ambition. Thank you for your time and attention. We're now available to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. Thank you. We'll take our first question from Alex Irving with Bernstein. Your line is open. Please go ahead.
Hi. Good morning, gentlemen, and two from me, please. The first one on unit costs: could you please outline the moving parts that will drive reduction in the pace of cost increases in Q3 and Q4 this year? Are we right to think about your target for those two quarters as being basically flat unit cost ex fuel, and what are the biggest risks to achieving this? My second question, could we please have an update on corporate travel? Some of your U.S. peers have been quite vocal about the recovery here. Are you seeing the same, and where are you back to on a revenue and volume basis versus 2019, please?
Hi, Alex. Just coming back on the unit cost. So if we look at the third and the fourth quarter, we of course grow further our capacity, so that will drop further our unit costs. And you know that we had quite some disruption costs.
... especially in Q4. So in Q4, we expect actually a unit cost reduction. In Q3, it is more or less the same as we will see in Q2, maybe slightly better, but more or less the same. So especially from Q4, with this capacity, we expect an, let's say, a stabilizing of our unit cost. And for the corporate travel, I give it to Ben.
On the corporate travel side, we were at about 70%, on average across all of our markets, last year. I would say it's relatively stable on the medium-haul and long-haul markets. It's slightly and slowly moving upward. You know, we're not seeing what the U.S. carriers are seeing domestically or what we're seeing in Europe. It is very solid, but it's really international, which is moving slightly up in the premium cabins in particular, which is great news for us in La Première, which has outperformed our expectations.
Excellent. Thank you very much.
Thank you, and we'll now move on to our next question from Stephen Furlong with Davy. Your line is open. Please go ahead.
Morning, gentlemen. Two for me. Ben, maybe just, I'm just interested in getting your thoughts on the commission's general, I perceive a little bit more aggressively negative view on M&A, or maybe they're just being more stringent in conditions. I know your SAS deal is different, but just a general comment on that will be good. Then, just from my own, for Steven, I'm right in saying that what's left in terms of the kind of hangover from COVID is the deferred social charges and wage taxes, it's about EUR 500 a year for the next three years. Just confirm that, and just your general...
I know it's down the road, but how do you think about when you're asked about the hybrid capital in terms of what would you eventually do to exit that? Again, I understand it's down the road. Thanks a lot.
Okay. Stephen, so for commenting on the validation activity in Europe, so we start with ITA and Lufthansa Group. It's quite complex, this transaction, I would imagine, for the European Commission. The Linate Airport in Milan, very slot constrained, and how to put in place remedies to ensure competition does not deteriorate. I think it's quite a challenge for ITA and for the commission. That's at least our sense. I think that perhaps could be holding things up or slowing things down. We do strongly believe consolidation in Europe is a must. But you know, for us, we believe in fact from a competitive perspective will remain the same.
And then with IAG and Air Europa, in particular in Madrid, to be, you know, if that does go through, the resulting market position when you're in an airport that is not slot constrained, and how you deal with that, I think is also a concern. Now, for us, in Copenhagen and in Stockholm, the airports are open and the position that we'll be in, we will not be in a position where, of dominance. There'll be, obviously some synergies that come out of it, but, I don't think it's the same thing as Linate or the huge concentration that, IAG and Air Europa, the combination of those at, Madrid. So I think it's a- they're unique transactions that be difficult to find remedies.
However, we do believe that the thing in Europe.
Thanks, Ben.
So on the social charges, so at the end of the quarter, we are now at EUR 1.6 billion, so we significantly reduce it from EUR 2.3 billion. As you indicated, it's indeed EUR 500 million per year, so for 2025 and 2026, and then there is still EUR 200 million to come in 2027, which is related to the wage tax at KLM. But the impact is especially on 2024, 2025 and 2026. On the hybrids, yeah, as you know, we are looking especially to support first our equity by net results. So we have to gain further improvement of net results in the coming periods, and then we will also gradually pay off these hybrids by normal debt.
So that is an irregular process and not something we will do in one shot, and we need to support our equity to make sure that it is more stable than it was actually before the COVID crisis. So we are intending to reduce those hybrids in the years to come.
Perhaps, Stephen, I could add one more thing on the consolidation challenges with the European Commission. The ITA, in terms of long-haul capacity, is quite weak, so the ability to, or the necessity to maintain a balanced competitive network is difficult because a big portion of the Italian long-haul capacity market is traveling on a one-stop basis, and that is, that's a new thing for the European Commission to have to figure out a way to things in check, because if you look at the long-haul network today of ITA, it's not very extensive.
However, they will, with their, with Lufthansa's market position, it could direct, greater share of customers over Lufthansa hubs, could be at the detriment of IAG and else. So that's the other aspect. I think on the medium haul, point-to-point, standard type, of remedies, are relatively straightforward. It's the long haul that, you know, we're concerned, and I think the European Commission has to find a way to ensure that that, that there is a solution to ensuring that there is market stability and fairness.
Very helpful, Ben. Thank you. Thanks, Steven.
Thank you. We'll now move on to our next question from James Hollins with BNP Paribas. Your line is open. Please go ahead.
Yeah, thanks very much. Just three quick ones hopefully. Just any major labor agreements still to complete? I think you said you've done, or something like millions, but anyway, any more to still be done and key ones? And then the two follow-ups. I'm just wondering if you can give a little bit more, I guess, informal update on what you're seeing for some of those cargo demand and pricing trends into Q2. Obviously, you know, we're lapping some of the extraordinary, revenue trends. And then the third one, similar question on the MRO business. Obviously, that's seems to be doing well, and you, you noted a few pieces there around, you know, some more third-party work. Just, just give us, please, an update on both as we look into the rest of the year. Thank you.
Okay. James, so on the labor front, at KLM, all the agreements, CLAs, have all been concluded, so we don't have any pending agreements this year. At Air France, we have no full open agreements. However, we have what we call categorical and annual wage increase agreements and then profit share. So the actual working conditions and the general agreements, as they're called here, we don't have any up for renewal. We did. Those have all been signed. But we do have some smaller agreements that have to come up. One in particular that's difficult, which is not directly in our control, it's not in our control at all, the air traffic controller agreements. There was a potential big strike this week.
The government did manage to find a compromise, so we did not have to bear that. However, it was up to the last minute, so we did end up having to cancel about a third of our program, half of our program, last week, so that did cost, but it appears that that risk has now been eliminated for the rest of the year. So that was one that obviously concerned us. And we don't... I think what worries us the most, and we don't have any anything in particular that could directly hit our operation at the airport are, you know, perhaps other strikes in France that could make it more difficult for our staff to get to the airport.
You know, could there be other public transport disruptions, that sort of thing. But as of today, we have the small annual agreements that come up, but the general overall ones have been made at both major airlines, and we don't have anything pending at Transavia.
And then on the cargo demand, that's always quite difficult to predict because the bookings are getting in more or less three weeks ahead. We expect still a slight drop in Q2, so we are quite cautious over there. And then in Q3 and Q4, we are actually normalizing the situation. So, that is a little bit our view, what we have currently, but I can tell you, we have no booking in yet for Q4. I think nobody has. So it is really a short-term market where you can really see what is yield and load factor are doing. Then on the MRO business, we have, of course, a better view because we have long-term contracts.
It depends always a bit when the engines come out of the shop, because that will drive, at that moment, the revenue that we expect a 20% growth year-over-year on our third-party business.
Great. Thanks a lot.
Thank you. We'll now take our next question from Jarrod Castle with UBS. Your line is open. Please go ahead.
Great. Thank you. Good morning, everyone. Just thinking of around the middle, you know, the midterm, you know, your objective is 7%-8% margins, I guess, 2024-2026, and doesn't look like it's gonna be in 2024. So, you know, what is the missing ingredient? Is it getting to the right cost base? Is it just the general health of the trading environment? And, you know, should we be thinking at the back end of this period, really now? Secondly, you know, you're separately disclosing Flying Blue, so just, I don't think you gave the pro forma from a year ago, but any color on, you know, how profitability is developing and how you see that developing for the rest of the year would be very interesting.
And then just lastly, I mean, you highlighted more stage length from, I guess, Europe to Asia, impacting yields and that. But you know, are you seeing any intense competition from the Chinese airlines in terms of what they're doing on pricing? There's been some commentary that they're very aggressive on pricing. So interested to get your thoughts on that. Thanks.
Okay, so, hi, Jarrod. On attaining the seven to eight percent EBIT margin in the coming years, yes, we're quite confident we can still reach that. Today, what the major items that are holding us back, we are still having real challenge in getting KLM's production up to where we'd like it to be. So that is, I'd say that's one of the biggest issues we have with KLM. We still have a shortage of maintenance personnel, and we've still got challenges with training of our pilots under the right equipment. So we have a path to get that back to levels that are needed to get to that 7%-8%.
So that gives me some comfort that on, at least on the KLM side of our business, we're in pretty good shape. The CLAs that we have in place do address operationally the flexibility that we need. The cost structure of KLM I don't believe has gone above its major competitors in Europe with the increases that we've put out, and definitely nowhere near what we're seeing across the Atlantic in the U.S.. Also, we have a lot of new airplanes coming in, so the unit costs of the new aircraft are significant, especially on the medium haul with the Airbus A320neos, with the Embraer 195 E2s, and with the Airbus A220s.
They're exceeding our expectations in terms of unit cost reduction. So that's positive. And we are exiting a lot of unprofitable flying, in particular at Air France, with the reduction of our capacity at all the airports significantly, and transferring that capacity that was flying on money-losing domestic routes out into the European market. That's another big saving and should contribute significantly. And then, of course, we're still doing a lot of optimization of the cabins. We've got a good 20-25 long-haul airplanes still to go, and that will result in anywhere between 4%-10% unit cost reduction for the airplanes that are impacted.
So those are the high-level items that, you know, that give us confidence that we'll easily be able to reach that 7%-8% COI margin in the midterm.
Hi, Jarrod, and then on the profitability of Flying Blue. So the, the profitability of Flying Blue is pretty stable, so we expect more or less the same, trend what we have seen in, Q1 for the rest of the year. And then, regarding your questions on, China, so we have a partner, which is China Eastern, so we're working, quite well together over there. There's still restricted capacity, of, Chinese carriers flying to France and the other way around. So, in general, we are working very well together, but we are different markets, so we are more having, especially the European customer, flying towards China, where Chinese, and it's more the Chinese customers flying into Europe.
So we talk a little bit of a different markets, that although we try to we sell them here in Europe, and they sell us in China.
Jarrod, I have one more thing about the increase in our results over the midterm. Our joint venture with our biggest partner, Delta, across the Atlantic, we've recently evolved that joint venture to better reflect you know, the market environment that we have today. It is a very successful joint venture we've had over years. And with all the new equipment that both airlines are bringing in, we are ahead of Delta. The strength of the U.S. dollar and the different economic well, economical situation in the U.K. versus the U.S. was not 100% optimal in terms of creation of value.
So with the new agreement that we're putting out, it's much more realistic when you look at how it'll impact us with the current environment. And that should put us in a more stable and better position to share value with our two partners, which should help get us to that 7% or 8%. And of course, the transatlantic is our most profitable market.
Great. Thanks very much.
Thank you. We'll now take our next question from Sathish Sivakumar of Citi. Your line is open. Please go ahead.
Hi there. I got two questions here. On the long-haul booking, when you say 75% booked, how does it actually compare transatlantic and Asia within that trend? Yeah, any color on that would be helpful. And in terms of cost guide, obviously into quarter three, you did flag that the ground handling would be four times higher because of the Olympics coming in. Does the cost guide include any cost associated with the Olympics into Q3 trend? Yeah, those are my two questions. And sorry, quickly, a third one, actually. On the EUR 350 million bond that's up for refinancing this year, what's your, like, the where are we on that? Any update on that would be also helpful. Thank you.
Yes. Hi, Satish. Your first question didn't come through. There was a bit of a block or cut in the line. If you could just repeat your first question, it would be great.
Yeah, sure. In terms of the long-haul booking, where you've shown the booking curve, and you said 75%, but I just wanted to understand how does it actually compare between transatlantic and Asia? Because you did flag that that is some sort of a weakness in Asia. I just wanted to understand, how, how the booking curve looks between those two regions.
Okay, so on the bookings, they're relatively in line. There's no big difference in any of our segments. Based on historical on how each region books in terms of the relative versus previous year, it's very, very similar. There's no material difference between the different. There's no particular region that's an outlier.
Then on the repayment of the bonds, so of course, that is in our plan. We have very strong cash, as you can see. And of course, we are always looking at the market opportunity to put a bond in the market. With the current credit rating, it's quite attractive. If you look at our spreads, they have significantly come down since December. So, the market is there, but we have sufficient cash also to pay for it. That is not the issue at the moment. And we don't expect any additional cost for the Olympics in Q3. So, there are no specific arrangements on ground or anything for that one.
Okay. Yeah, thank you.
Thank you, and we'll take our next question from Harry Gowers with JP Morgan. Your line is open. Please go ahead.
Yeah, morning, Ben and Steven. Two questions, if I can. First one, just on the Q2, maybe if you could give us some color on the pricing or the yields that you've seen in the month of April, and directionally, I mean, where might you expect the Q2 group EBIT to come in or land? And then the second one, I mean, have you seen any impact on bookings from the latest escalations in the Middle East, or is it different to what we saw back in October? And I think you highlighted the Middle East yields in Q1 were down 10% year-over-year, I think. So, I mean, would you expect some improvement in that going forward from here? Thanks a lot.
Hi, Harry. Thanks for asking the question, because actually I forgot to tell the pricing in April. So, if you look at April, it was, let's say, I've only in the bookings in the first four weeks, so there are two or three days still not in, but it was quite, it was quite good. It was more than 3% in terms of yield ex FX, and the load factor was up 0.5%. So the bookings in April looking actually quite good. And, of course, helps is also that we have now stable operation at Schiphol. Then, you know, we don't guide on EBIT, so also not on the second quarter, but we gave you the fuel.
So the fuel is up more than EUR 100 million year-over-year, and we have given you the unit cost, which is up 2%. So it all depends on what the, the unit revenue will do. But for April, we see a quite strong yield. But for June and for May, it's even a little bit more difficult to say, although bookings from May are quite positive also because it's the middle of all the holiday seasons in Europe.
And then on the Middle East, things are leaning back to, to, I guess, historical volumes and yields relatively quickly on Tel Aviv and Beirut. Our three brands have either resumed or are about to resume service to, to Tel Aviv, and Beirut's been much more resilient over the last few past few months. So there's a big visiting friends and relatives business, VFR in particular, between France and those two markets. Business traffic has been relatively stable. So we're, I would say, cautiously optimistic that Tel Aviv and Beirut will come back to the levels that they were at prior to October. It's a bit different in the leisure markets of southern Egypt and in Jordan.
That's still not back, not close to where we were before October. So we've redeployed a big portion of that capacity to other markets, and luckily, we've got for Transavia, we have a lot of opportunity in the northern African countries of Morocco, Algeria, and Tunisia. So that's at least been able to maintain our forecast for Transavia. But if we're just particularly looking at Egypt and Jordan, still below where we were prior to the uncertainty or to the incidents in October. So I'd say Middle East to be seen overall. But Tel Aviv, Beirut, quite pleased with those.
Very clear. Thanks a lot, Ben.
Thank you. We'll now take our next question from Andrew Lobbenberg with Barclays. Your line is open. Please go ahead.
Oh, hi there. Can we talk a little bit about Transavia? It obviously had really nice unit revenues in that March quarter, but just wondering how much of that was down to Easter timing. And then looking forward, how much benefit are you expecting from the introduction of the wheelie bag fee? 'Cause that obviously gave a huge injection of unit revenues to the Pan-European locations as they brought that in. And then can I come back to TAP Portugal, where we're, you know, awaiting developments. I think I've seen some stuff in the press with you, Ben, saying that you're still very interested in the project. And yet, as you discussed earlier in this call, the EU competition authorities are being very attentive to competitive overlap.
It would seem to me that you guys have quite a bit of competitive overlap in that market. So do you still think it's realistic that you could have a run at it as and when the privatization comes? Thanks.
Okay. Thanks, thanks, Andrew. So Transavia's performance as you know, you know, we're transitioning a lot of Air France capacity over to Transavia, so that has a you know, transitional period, which we predicted. But in terms of the performance and how our forecast relates to reality, we're quite pleased. Transavia is doing slightly better than we'd expected for Q1, and the outlook for the rest of the year is exactly where what we got in our budgets. So happy with that. The bag fee is actually doing better than we had planned. It's always tough to forecast what the take up would be, so that's very, very strong. And Portugal, it's still a bit early.
I mean, it's we always knew that when you're, when you've got a very slot-constrained airport like, like Lisbon, that the potential remedies would be high, and we've got a good idea on what is necessary for the business case to make sense. And then, of course, there's always the unquantifiable value of having a strategically located hub in, you know, in Western Europe. But that's not stopping us from expanding our, you know, our partnership with Gol. We saw the exclusive partnership with Gol on the other side of the South Atlantic to ensure that we have we can maintain our number two position, you know, behind IAG on the Southern Transatlantic.
So we have other plans and, you know, ready to, or ensuring that we can maintain our position, in case such a transaction were not to happen, too difficult for us, or it took a long time. So we're still interested. We're following very closely the ITA file, and we'll see how Madrid goes. So you're right, things... It may be more difficult, but it's a bit early to tell.
And just while you mentioned Gol as a defense, I mean, is your partnership with Gol, would it endure as Gol or if Gol moves into Abra and it merges with Azul? I mean, there's an awful lot going on in M&A and strategic developments in Brazil, right?
Yeah, correct. So, you know, right now the relationship is very solid. It's a, you know, it's been a long, long-term relationship. We still have a very, very small investment of what Gol... I don't know if we can value anything, but no, with the management team and with Abra, it's quite solid. And as you know, it doesn't just because, you know, you're with the parent companies with one alliance or the partner companies with one alliance, does not mean you could have something a little different with another alliance. So our routes to the three cities that we serve in Brazil, so Fortaleza is very strong. We're increasing capacity by about 40% for this summer.
São Paulo and Rio are stronger than they were in 2019, so we're really happy with that. So we have a very good position. There are other opportunities to start nonstop service into Brazil. You know, if even if we don't have a partner on that end, our reach in Europe is very strong. And if you look, you know, it's like our geographical position of France and the Netherlands, our two hubs, are much better situated to capture a greater share of the European market versus the Lufthansa Group.
Great. Thanks.
Thank you. Ladies and gentlemen, once again, as a reminder, if you would wish to ask a question, please press star one on your telephone keypad. Thank you. And we'll now take our next question from Johannes Braun with Stifel. Your line is open. Please go ahead.
Yeah, thank you for taking my questions, two for me. Firstly, those EUR 610 million of pension funding that you had in Q1, any more background why it became necessary? And also whether there's more to come in future quarters or years. And secondly, any comments on how yields are trending beyond Q2, so into the peak season, I guess also against the backdrop of the Olympic Games? Thank you.
Hi, Johannes. Good to hear you. The EUR 610 million was actually, we didn't pay any pension premium to the CRPN during the COVID crisis, so that ended up to July 2023. And then we had an agreement with the pilots that we should pay that back in January 2024. So that is a EUR 610 million, which is a one-off, which we always, always, let's say, shows to the market that we still have, let's say, a deferred payments in social charges and pension premiums. And then on yields, so we see strong yields in April. I think May will also be good, and for June, et cetera, this is quite difficult to say, but for April, the first four weeks, it was up more than 3%, excluding a rate of exchange impact.
Anything on the summer, on Q3?
Yeah, that's very difficult to say. We don't have all the bookings yet in. The revenue management game is always played in the last three weeks, so it's very difficult to say at this moment. We see strong demand, but to say what is the exact yield, it is too difficult to say at the moment.
All right. Thank you.
And we have a follow-up question from Conor Dwyer, Morgan Stanley. Your line is open. Please go ahead.
Hi, guys. Yeah, just a clarification question for myself. Just on the slide, it shows that the book load factors heading into Q2 are down about a percentage point, but I think you indicated for April load factors were up slightly. And so just wondering, is that an indication that people are booking a bit later? And if so, will you expect a bit of a pricing benefit from that with the later fares, or are you having to discount at all in the late book revenue? Thanks.
Hi, Conor. The differences are so small, we don't see any material change in booking trends.
Cool. Thanks.
Thank you. That was our last question. Gentlemen, I give the floor back to you for the conclusion. Thank you.
Okay. Well, thanks to everyone for joining this morning, and we look forward to seeing you on the next call. Have a great day.