Okay, whoever, on the operator side, we're ready to go.
Good morning, and Welcome to The Air France-KLM Analyst Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Benjamin Smith, CEO, and Steven Zaat, CFO. Please go ahead.
Good morning, everyone, and thank you for being with us today for this Presentation of The Air France-KLM's Results for The Second Quarter of 2022. I'm here with our CFO, Steven Zaat, and with two of our airline CEOs, Marjan Rintel of KLM and Anne Rigail of Air France. They'll be pleased to take your questions at the end of this presentation. As usual, I will start by presenting the highlights of the quarter. I will give the floor to Steven for a detailed presentation of our results and the outlook for the quarter. Before concluding the presentation, I'll be opening up for a general Q&A.
First of all, I'd like to start by thanking all of our colleagues across all of our airlines and business units for the incredible hard work and dedication they continue to display, especially during the summer season, marked this year by severe operational disruptions affecting our entire industry. I'd like to briefly highlight the fast-changing environment. Turn to page three, please, in which our industry at large operates. As expected, the travel demand has accelerated worldwide with COVID and regulatory restrictions easing in most regions. The IATA figures forecast shown here illustrate that this positive demand is picking up strongly, with full-year capacity and traffic projected to be much higher than it was foreseen a few months ago. However, this booming demand took many by surprise. We have seen a critical staff shortage in airports and major disruptions affecting our ground service worldwide.
Some of these operational challenges have been triggered by a lack of preparation and of anticipation by some industry players. The reality is that some of these disruptions will continue to surface for many years, with labor shortages, hub congestion, and ongoing supply chain issues. We are adapting to a more complex environment, both socially and geopolitically. To address these challenges, we will move fast in transforming our business, working collectively as a team. Moving on to page four. At Air France-KLM, we had anticipated the steep demand growth, and the group was prepared. We have, however, been facing operational difficulties across our global network in an industry-wide context of staff shortages, severe disturbances, and local strikes affecting some key industry players and airport service providers. The labor environment is tense globally, with fewer staff, more constraints, growing inflation, and challenging economic conditions for all.
It's a worldwide movement we cannot ignore. More than ever, we need to maintain acute and genuine dialogue with all employees. Our colleagues across all our airlines and business units have done incredible work to deliver the best service to our customers, and I would like to thank them again for their outstanding dedication. In such turbulent times, it is indeed critical that we continue to focus on preserving the trust of our customers. This has been our top priority. With Schiphol Airport requesting a reduction of departure slots in early July, KLM was forced to operate in significantly deteriorated conditions. We worked at mitigating these disruptions by, for instance, prioritizing delayed customers over on-time performance or by facilitating rebooking to manage these capacity restrictions. Air France took the same proactive approach with constant attention to customers' needs.
Overall, the company was able to maintain a steady operation, operating 99.4% of scheduled flights in June and July. For Q2, these disruptions led to an additional EUR 70 million in costs, essentially in compensation for our customers to limit the negative impact on their travel as much as possible. Turning now to page five. Despite these operational disruptions, Air France-KLM delivered a strong performance and solid results during Q2. The group posted a positive operating result of almost EUR 400 million, a level close to the second quarter of 2019 before the pandemic. This robust performance is the result of a strong rebound in travel demand, which our airlines were able to anticipate, prepare for, and manage, thanks to the ramp-up of their capacity throughout the quarter. We carried almost three times more passengers than last year during the same period.
We are not back to 2019 levels yet, but we are getting closer. This has translated into strong revenue growth, which is also approaching its 2019 levels for the same quarter. Our adjusted operating free cash flow amounted to EUR 1.5 billion, thanks to a dynamic EBITDA generation of EUR 931 million and strong bookings for summer, with more than EUR 1 billion in advanced ticket sales during Q2. Our internal transformation continues, even though the bulk of the workforce reductions are now complete. Since the second quarter of 2019, almost 12,000 employees have left the group, representing 14% of the group's total workforce. More broadly, we are committed to continuing our transformation and operational efficiency programs, the structural benefits of which will accelerate in the coming months.
We made great progress during the quarter to strengthen our balance sheet and continue to restore our equity. The success of our EUR 2.3 billion rights issue is a good testimony of this. This has enabled us to repay a significant part of the French state's aid. To strengthen our equity while consolidating our shareholder base with the arrival of CMA CGM as a new reference shareholder and an exclusive strategic partner for our cargo activities. The deal was announced a few weeks ago with Apollo Global Management for the EUR 500 million injection into an Air France affiliate owning spare engines also demonstrates our ability to attract leading investors in value creating capital projects that support our financial trajectory. All in all, repairing our balance sheet and paying back the state aid are on track.
While KLM fully repaid the state-backed RCF and the direct Dutch state loan, the group's ambition is now to repay the French state aid as soon as possible in order to be relieved from the operational and strategic constraints imposed by the European Commission's temporary framework. Our cash position is solid, with EUR 11.9 billion cash at hand, and we managed to further reduce our net debt, which has decreased by more than EUR 2 billion over the past six months. Moving on now to page 6. I also want to give you an update on our long-haul network, which continues to gradually recover. In terms of load factor for our premium cabins, i.e. La Première and business class, I'm very pleased to say that we closed the gap with 2019 levels, even exceeding them in the second quarter.
Our point of sale United States business is particularly strong, with its share of business and first class cabin sales up 5 points compared to what it was in the second quarter of 2019. The evolution of the load factor for the economy and premium economy cabins is also very satisfactory since it continues to progress rapidly and the gap of 2019 will soon be closed, while corporate travel revenue and traffic continued to grow gradually throughout the quarter with a positive yield dynamic. In addition, our corporate traffic is continuing its recovery, with revenues beyond 70% of what they were in Q2 2019. Moving on now to page seven. Taking a look at the performance of our airlines and business units. Our Passenger business is driven by a mix of increasing capacities and strong momentum of yields.
Air France and KLM capacity is at index 82 of 2019, with yields 15% higher than in 2019. Both our full service airlines have continued their fleet renewal programs, a driver of economic efficiency, but also, and above all, the spearhead of our action plan to reduce our carbon emissions. Transavia experienced strong capacity growth this quarter, well above its 2019 level. Transavia France, in particular, has accelerated its growth very strongly with capacity at an index of 140, putting pressure on the cost structure. The situation is different for Transavia Holland, which is back to its 2019 operating margin. Cargo continues to do well with growing capacity throughout the quarter. The efforts made on customer satisfaction have been reflected in the Net Promoter Score, which has increased by 10 points, and the environmental roadmap was rewarded with a trophy at the Air Cargo Week event.
The teams are now fully mobilized on the implementation of the partnership signed with CMA CGM. This strategic commercial partnership is expected to generate significant revenue synergies, including the joint design of the full freighter networks and enhanced products and services mix opportunities. Finally, maintenance continues to show strong momentum with a growing number of shop visits and new MRO contracts with renowned airlines such as Aeroméxico and Air Canada. The confirmation of the selection of the CFM LEAP engines to power our fleet of Airbus A320neo and A321neo aircraft secures Air France-KLM's position as a world-leading engine MRO provider. After the summary of our Q2 performance, I'd like to now pass over the floor to Steven Zaat, our CFO.
Merci, Ben. Good morning, everybody. [Foreign language] . I think we are living in very exceptional times. If you look at the operating margin in 2022, you see that we are already at the level of 2019. Who would expect that with 15% less capacity and China is still closed, and oil price at $110 per barrel, and last but not least, all the operational problems we face as an airline. I think it is an exceptional result, and I think it's good that I walk you through to it. It's especially coming from a very strong revenue development.
If you look at the revenues on page nine, then you see that we have an increase of almost EUR 4 billion in terms of revenues, and we come very close to the 2019 levels, despite the fact that we have 15% less capacity. Now, if you compare it year-over-year, you see there's EUR 2.1 billion actually coming from just capacity increase, but there's EUR 1.8 billion coming from additional revenues from the unit revenues. These were very strong. We have seen load factors which were actually very high, close to the 2019 levels. I come back on it. Actually we are able to increase our capacity and to increase at the same time also our load factors. Then we had also the positive windfall of the currency of EUR 60 million.
A strong revenue performance, which actually outpaced our own expectations and also outpaced, I think, the expectations from the financial market. We had let's say, the headwind of the aircraft fuel, EUR 1.3 billion more than we had last year. We were 72% hedged, that brought at least positive impact. If you dig into it, you see that EUR 500 million is related to capacity. EUR 1.2 billion is related to the price increase, and we have EUR 400 million coming back actually from hedges. What you see in this chart view is actually that the jet fuel is going up much faster and much higher than actually the oil price. We still have there a difference in the crack, which actually has a negative impact on our results.
Go into the salary cost. The salary cost, we're going up with EUR 600 million. This is not coming from any FTE increase. Actually, we are at the same level of numbers of salaries. We have 1,700 FTEs less at Air France side and 1,700 FTEs more compared to 2021. On the KLM side, actually, KLM has more flexible labor, so they need to ramp up also this flexible staff to support our capacity. The difference actually comes from the fact that we have much less furlough in place than we had last year. That's EUR 433 million. KLM doesn't have any more the NOW scheme, and there's only EUR 45 million in at the Air France side.
All the other operating expenses, an increase coming from customer compensation already mentioned by Ben, for EUR 70 million. We have higher costs coming actually in from the airport. Schiphol increased the tariffs with 9%. All in all, these other operating expenses, they are quite in line with the increase of capacity. If you look at it, we end EUR 386 million in terms of results, EUR 37 million less than what we had in 2019, and very close to the 6% margin, which we had in 2019. Maybe the best news is even that our net income is now positive. That's the first time since the fourth quarter in 2019. The first time since actually COVID started.
There are two incidentals, and one is that we had a negative headwind from the currency, so we had to reevaluate our balance sheet. That cost us EUR 200 million. On the other side, KLM, we recognize now the tax assets were actually from the losses which were incurred during COVID for an amount of EUR 300 million. There's a net positive impact, let's say, below cost of EUR 100 million. That still drives that we have a very strong net income in this quarter. If we go to page 10, there you see a little bit, let's say, how it evolves over our businesses. Network doing very strong. First, the increased capacity with 69%. We have a unit revenue increase of almost 100%.
That is not so much coming from the yield, but in this unit revenue, there's a lot of mix impact. We grew much more our long-haul than our medium-haul, and that has, let's say, a negative impact on the yields. If you look at the yields per region, in which I will do later, then you will see that actually everywhere, almost our yields are much more up compared to last year. The main driver for this unit revenue is actually the load factor. We had a load factor of 44%, and we were able to reach now a load factor of 85%, so very close to the 2019 levels.
If you increase capacity and increase your load factor and you keep, let's say, the same yields or even yields are up, then you see this explosion in terms of revenues. The drive for a big chunk, let's say, the increase of our network result. If you look at the cargo side, it has actually a little bit a different story. We increased further capacity. This is all capacity coming actually from the belly. Then you see a negative unit revenue. This unit revenue is not at all driven by pricing, so the yield is even up with 22%. But the load factor is down from 80%- 50%.
That has all to do, there's still a lot of demand, but of course, we put the planes now where we can drive actually our Passenger business. There's not always a favorable cargo for it. The load factor went down from 80%- 50%, more or less what we are used, but we are still seeing a very strong demand on the cargo if we can increase the yield with 22% compared to 2021. These two dynamics together brings EUR 1 billion improvement of operating results and a 6% margin for our network, which is even higher than what we had in 2019. On Transavia. Transavia is still not profitable, but we're getting close to a break-even result. We grew significantly, especially the Transavia France activity.
It brought in a capacity increase of more than 200%. We are still able to have a positive unit revenues. We increased the load factor here from 60%- 85%, and yields are up also 6%. Which is remarkable, especially given, let's say, the capacity increase, which we all have here. Last but not least, if you go to the Maintenance side, you see actually that the maintenance is back on the profitability of 2019. 6% margin, which is very good news. First, we have EUR 100 million more revenues on our Maintenance business, of which EUR 20 million is coming actually from the currency, from a stronger dollar.
We also see that the customers are flying now more of their planes, which brings EUR 50 million on our components business and EUR 23 million in our Engine business because the green time is running, they are running out of green time, so they will need to perform shop visits. Maintenance getting back also, let's say, to the profitable levels which we have seen in the past. If we go to page 11, we see that both airlines actually are able to have a positive operating margin. Both airlines have an operating margin which is very close to 2019. Air France is at 3%, actually surrounding 3.3%, where they were in 2019 at 3.6%.
KLM is at 9% where they were at 9.4% in, sorry, 9%, which is also rounding of 9.4%, which is exactly the same as in 2019. There were two developments. Air France grew their capacity with more than 100%. We knew that Air France was lacking in terms of capacity development. KLM increased by 48%. If you look at it now, you see actually that Air France is getting closer to the 2019 levels than KLM, mainly driven by operational problems which we have seen at Schiphol. KLM could not grow at the levels as they would have wanted. Air France is 13% from the capacity of 2019, where KLM is 19% off. Both very strong in terms of revenues.
You see that, Air France is at 147%, mainly driven by capacity. KLM grew by 130% with only a capacity increase, and that is mainly coming from the load factor increase. KLM increased their load factor from 37%- 86% this year. A very strong development also there in number of Passengers. I think it's good to see that both airlines are actually now at the 2019 levels of the profitability, which is very promising also for the quarters to come. If we go to page 12, that's actually the pictures of the story which I was telling when I explaining the results. Let's first go to the total network excluding Transavia.
You see that we are now at the load factor of 88% compared to 90% in 2019. We grew the capacity at the same time, because at 76% in January, where we now at 83%. Long-haul very steep increase in terms of load factor at 88% now where we have a capacity increase of 83%. We are getting closer to the 2019 numbers. The long-haul is extremely performing strong because we have a high load factor. We have a good yielding environment. I will come back on it on the next page. At the same time, we have the strong combined contribution from our cargo business.
If we go to the short and the medium-haul, there you also see that we reach actually the load factors of 2019, close to the 90%, and we have a capacity of 83%. We could have grown further if we would not have, let's say, the operational problems at the airport. We see Transavia. Transavia is already at 100%, steep increase of above 100%, a steep increase of capacity to 109%, and also the load factors getting closer to the ones in 2019. That's a little bit more challenging if you grow in your business like that. Still, it's good to get to these load factors of around 90% in our business, because then we are turning in the profitable zone.
Let's go to page 13. If we look at the world, let's go first to the beautiful part of the world, which is on the west side. On North America, we are already at a higher capacity than in 2019. We are up with 2%, and we have a very strong yield dynamic, +12%, especially coming from the fact that the North American market is very strong. Of course, we have also the dollar advantage because we are pricing there in dollars, which was very strong in the second quarter of 2022. Latin America, you see a yield of 24%. That is mainly driven by the fact that still on the supply, there's not all, let's say, our competitors are in. They are still struggling coming out of the chapter 11.
This imbalance between supply and demand brought us that we could steer the prices up to with 24%. The Caribbean, also a very good performance, 8.5% increase of capacity compared to 2019. At the same time, we are able to keep more or less the same load factor and have an increase of yield of 6%. Africa, as always during the crisis, still doing strong, a yield increase of 10%. We have a slightly lower HK, but it's mainly driven by the, let's say, type of aircraft we are putting in. We put always on the west, the medium-haul hub, but it's actually it's maybe in the middle. It's actually in Europe.
If you go to the left, you see the medium-haul hub is driving to 13% yield increase. Also in our European network, you see we are able to steer the prices up, which is actually also needed because we have a much higher fuel price to pay. Of course, we need around, let's say, a 13%-15% increase of yields to cover also this increase of fuel price. What is also remarkable, and that is what you see at the top, is that if you compare the premium and the economy, you see that we are still at 12.5% increase of yields compared to 2019 in our business class. While economy is already at 70%.
As Ben already explained, the load factor in the premium is already above the 2019 level. Despite the fact that there's less corporate customers in, you see that the premium yields are up with 12.5%. Now then, let's end maybe with a slightly negative part, which is Asia. Asia is of course still. China is not open. Japan is still not open. We are still only at, let's say, above 40% in terms of capacity. With a very strong yield, but of course with this capacity, and that is not the way we want to drive our business. Unfortunately, it's the case, so we are prepared for that.
The good news is that actually all the capacity which we can move from the east to the west are bringing the yields and the load factors as needed. Let's take a deep dive on the unit cost. If you go to page 14, and you see on the top, actually you see the unit cost development vs 2019. We correct here for fuel price, and we correct here for the currency. You see it's going up with 2.4%. We are still at a higher unit cost than we were in 2019, but we should take in consideration that the capacity is still 15% lower. We still have, let's say, the fixed cost in it.
We had certain, let's say, incidentals in the second quarter, which increased our unit cost level. First of all, we put back in place the CLAs, which were delayed actually. We implemented this in Q2, 2022 at KLM. That brings a 0.7% in the total unit cost. We saw a steep increase in airport and ATC charges. Everywhere actually around the world, we see increases of airport charges, which brings another 0.7% if you look at all the flight-related costs on our unit costs. Last but not least, we had a very high customer compensation, EUR 70 million more than we had in 2019, which drives up our unit cost by 1.2%.
If we do take out these, all these incidentals, we are actually at the unit cost levels of 2019, knowing that we still have a capacity which is 15% below. On the right, you see that we are continuing actually our efforts to reduce our FTEs. Air France is at - 16% compared to June 2019, and KLM is at - 13% vs June 2019. KLM was already at - 17%. It needs now the support of the flexible staff to support the operation. That brings us that our staff costs are down with 11%. If you take out the state support, you get to - 9%.
Still very promising if you look at our staff cost reductions, which are actually getting close to the capacity reduction. You can imagine what will happen when we get our capacity back on the 2019 levels. Let's then go to page 15. We had a very strong cash flow development. Again, a big chunk coming from the ticket sales. If you go to the second quarter, we had a EUR 1.5 billion adjusted free cash flow. Adding that up for the half year to EUR 2.2 billion. Mainly it's driven partly by the EBITDA, as mentioned already by Ben, but also driven by the very strong ticket sales.
The working capital decreased by EUR 1.5 billion in the second quarter, EUR 1 billion coming from the ticket sales and EUR 500 million coming from the fact that you increase capacity. At the end of the day, that also reduce your working capital because you have more outstanding bills. A very strong development in free cash flow. If you look at the end of the second quarter, we have now, as Ben already explained, a cash at hand of EUR 11.9 billion, where we ended actually the last quarter with EUR 10.8 billion. That is despite the fact that we paid back the Dutch state. The Dutch state has been paid back out of our cash. The French state we paid from our rights issue.
If you look actually at it, we had EUR 1.5 billion coming from our free cash flow development in the second quarter. There is EUR 0.6 billion coming from the net proceeds from the rights issue, because the rights issue brought EUR 2.3 billion that we allocated the main EUR 1.7 billion to the payback to the French state. That leaves that actually net proceeds is as mentioned on the right side to EUR 547 million. EUR 1.5 million + EUR 600 million brings to EUR 2.1 billion. Then there is the payback of the state loans at the KLM side to the banks and to the Dutch state.
Still a very strong cash position, a very strong net debt development, of course, with this cash development. Of course, again, I want to phrase a lot is coming from the ticket sales, and at a certain moment, we will fly these tickets. There are two things happening on the ticket sales data. One is we have an increase of capacity. For sure, your outstanding tickets grows. Second, we increased our pricing so that there's also a positive impact on the outstanding tickets. If we then go to page 16, I think we did major steps in terms of balance sheet repair. We announced in February that we would do an equity strengthening of EUR 2.4 billion. In June, we actually did the successful rights issue.
It was oversubscribed with EUR 2.3 billion with a new strategic shareholder, CMA CGM. I think that was a very positive one because we were able to support further our equity. At the same time, there's a commercial partnership in our strong cargo business, which will further strengthen also our EBITDA development for the future. We used EUR 1.6 billion to pay back the French state, so that is done. KLM, at the same time, paid back fully their RCF and the Dutch state loan in June of EUR 0.9 billion, which is even a rounding downwards because it is, I think EUR 940 million, if I'm correct.
We did another strengthening of our equity, with, let's say, the Apollo deal with our engines, which brought EUR 0.5 billion, which we all will use to pay back further the French state. There's still EUR 1.2 billion left, which we will use for hybrid bonds. We will, and I will rephrase it again, we will restore our group negative equity through net profits generation and further asset monetization and quasi-equity projects, and there is no additional dilution measures planned. If we go to page 17, I think it's good to clarify a bit what is the situation because I see some articles sometimes in the press that it is still a little bit unclear. Let's talk about the French state.
We had a loan of EUR 3 billion which was transferred into a hybrid, and then on top of it, we did also a capital increase in Air France, which was supported by the French state. That brought EUR 0.6 billion. The total amount of state aid is EUR 3.6 billion. With the rights issue, we pay back EUR 1.6 billion, and we did the deal with Apollo, we pay back EUR 0.5 billion. We are currently at 60% of the French state aid, which has been repaid. If we will do, let's say, another hybrid bond, then we will bring us up to the 75%, which is needed to be relieved from, let's say, the strategic constraints which we still have related to this French state aid.
60% is done, very close to get to the 75%. You should include also the subscription of the Air France capital increase in 2021. After looking back to a very positive quarter, let's look ahead of us for the quarters to come. If we go to the capacity, actually the capacity guidance we gave was 85%-90% in Q3. We downgraded that to 80%-85%, mainly due to the request of Schiphol to reduce the number of flights of KLM. We still expect that we can ramp up in Q4 to 85%-90% of the capacities of 2019 because we expect that the operational problems at the airports are solved at that moment.
On the right side, you see actually that the forward bookings are still very strong. For Q3, we already sold 78% of our long-haul capacity. For Q4, we already sold 31%. In Q3, we are very close to the 2019 levels. For Q4, there is a bigger gap as we know that the booking horizon is a little bit longer after COVID than it was before COVID. On the medium haul, we put in 91% in for Q3, and we have already sold 66% of the tickets, and the medium-haul market is a short-term booking market. Of course, we have only 70% sold for Q4, but that was all more or less the same case in 2019.
The French domestic, even a more shorter-term market. There's a lot of business travel and a lot of people who are just for visiting friends and families or their home somewhere in France. They book very shortly before they are going to fly. We have 6% sold for Q4, but that was 7% in 2019. All in all, we still see that the bookings are coming in, and we still see a healthy yield environment for the remainder of 2022. Let's talk about the fuel bill. As we always felt in our industry, the fuel went up, spiked up significantly after the Ukrainian war.
We assume that we are quite well hedged, so we were hedged in the second quarter for 72%, and we already hedged for 71% in the third quarter. In Q4, we are now at 57%, which we will ramp up during the quarter to 70%. We also have already in place the hedges for 2023. In Q1, we are above 40%. In Q2, we are above 25%. In Q3 2023, we are building now up from 0%-25% of that fuel consumption. It brought a total of $1 billion of hedge results in dollars, which supported of course our results. Let's go to page 21.
I gave you already the guidance on the capacity, so 80%-85% for Q3, 85%-90% vs 2019 in Q4. We will end at circa 80% for this year. On Transavia, we will be easily above the index of this 100%. If you look at operating results, we didn't change our guidance compared to the previous guidance. We still expect that it will be significantly positive, and we even will guide you that our full year result will be positive. We are confident with that to give a positive guidance for the operating results for the full year, and we stick to the CapEx of EUR 2.5 billion for this year. That was all for my side, so I hand over back the floor to Ben.
Okay. Thank you, Steven. Moving on now to page 23. I'd just like to spend a final few moments on the commercial trend for the end of the year, which is promising with the positive development of our booked load factor. We expect a load factor close to 2019 levels on the entire PassengerNetwork for the second semester and a capacity which should reach 85%, as Steven mentioned, of 2019 levels in the fourth quarter. Corporate traffic should be a positive contributor to this trend, especially on the North Atlantic and in other long-haul markets. Moving to the next page, I'm extremely proud of the progress and initiatives we took during this quarter regarding our environmental roadmap. We have achieved important technological milestones which demonstrate that reducing our carbon emissions is possible.
During the SkyTeam Sustainability Flight Challenge, we showed that we could reduce CO2 emissions by up to 50% by activating all decarbonization levels in our hands. On the occasion of the Connecting Europe Days, Transavia France operated its first flight with 30% SAF. In the longer term, our group is also determined to work with all industry players to find innovative technological solutions that will help combat global warming. This is the purpose of the partnership signed with Airbus, exploring Direct Air Carbon Capture and Storage to remove CO2 directly from the atmosphere. We also want to involve our customers in our actions for more sustainable aviation. This is why we launched the Air France-KLM Flying Blue, our loyalty program sustainability offer, rewarding members who choose to voluntarily contribute to SAF or reforestation projects.
In effect, by rewarding members who purchase sustainable options, the same currency required to earn or maintain status. This means customers will be able to earn or keep their tier status while actually flying less. This is a significant move, and we are proud to be one of the first in our industry to go this far. All these initiatives are building blocks of our global decarbonization plan, which should lead us to achieve a net zero emission by 2050. To conclude, I'd like to say that during the first half of the year, Air France-KLM took advantage of the ongoing recovery in our sector. We have delivered better than expected revenues and results with an operating margin close to 2019 levels.
Over the past, the much faster than expected recovery has put a strong pressure on the aviation industry as a whole, causing severe operational disruptions and critical infrastructure congestion. Over the past few weeks, we have done our utmost to limit the impact of these operational difficulties on our customers, especially as it continues through to the beginning of September. Looking forward, we currently operate in an environment that is becoming increasingly complex every day, with growing inflation and hard to predict macroeconomic conditions. In this challenging context, we must and we will be focused on what depends on us. We will keep implementing our internal transformation as planned. This should enable us to gain operational efficiency and generate substantial cost savings, and ultimately to make our organization more resilient to the changes of its environment.
Much has already been done to consolidate our financial trajectory, but we will continue our efforts with the goal of freeing ourselves as soon as possible from the restrictions imposed by the European Commission Temporary Framework. To thank you, we are now available to answer your questions.
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. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question. Jarrod Castle from UBS, your line is open. Please go ahead.
Thank you. Good morning, everyone. Just in terms of your thoughts around the hybrid, do you still think you need to size it at EUR 1.2 billion, or indeed even undertake a hybrid if trading continues, you know, in the direction that it seems to be heading? The second question, just looking a little bit into kind of 2023, just any thoughts on capacity ramp up, you know, given the views for potential recession, you know, the corporate recovery and more recently comments from Schiphol Airport around capacity. And then just lastly, any comments kind of as you kind of look through the months to the end of the year? I know visibility is probably low, but just in terms of corporate travel recovery, it seems relatively reassuring based on the comments you've made at the moment.
Thanks very much.
Yeah, thanks for the question. If we look at the hybrid, there are two reasons why we still want to keep this EUR 1.2 billion. First, we still want to restore our equity also in Air France. For that, we need cash equity to do it more quickly. Second, we want to repay the French state aid as soon as possible. That is actually the two reasons that we will stick to this amount. Of course, we don't need EUR 1.2 billion to pay back the French state, but we will still keep this EUR 4 billion, let's say, in total of recapitalization measures to strengthen our balance sheet.
It is a part of the trajectory to make sure that with all the, let's say, development of the net results in the coming period, we will restore our equity also in the coming years.
Hi, Jarrod. For 2023 capacity. We're doing our best to maintain full flexibility to get through this still uncertain period. We're reasonably confident that the positive trends that we're seeing in 2022 that we expect to continue at the end of 2022 will continue in 2023. As mentioned, we're trying to keep as much flexibility in place so we can adapt either up or down. What do I mean by flexibility?
We have quite a number of airplanes that are easily grounded or easily activated, depending on how the traffic continues to evolve. For instance, at Air France, we have 16 777-200s that are unencumbered, that can be activated or can actually be brought down. We have a lot of variable costs in the cabin crew area, and we do have pilots that are planned to come online. Of course, pilots can adjust down. In terms of Amsterdam capacity, this is I think it's a bit too early to comment on that. Of course, as you can imagine, we are moving forward and are going to fight this as best we can to ensure this does not have a negative impact on our activities.
We have Marjan Rintel. She's here today, and maybe I can have her just say perhaps a few extra words on how we're approaching this at KLM regards to what was announced by the Dutch state.
Thank you, Ben. As you said, it took us by surprise. We were not included when these plans were made. We are mapping out what this means. We are mapping out what the consequences are and the position of KLM and Schiphol. Of course, we take the climate and the inconvenience for the local residents into account. We will have our first review ready in the end of September, and then we will discuss this and with the Minister of Infrastructure.
Thanks. Any comments on the corporate travel as it ramps up, toward the end of the year?
Sure. I mean, we're just seeing a steady increase. It's very smooth. It keeps going up. You know, I'll re-mention what I said on the last call. This new, you know, well, not new, but this ever-expanding corporate, or not corporate, luxury leisure or high-end leisure that we're calling it, this phenomenon just keeps growing. This was not prevalent at all before the crisis. With that, you can see our premium load factors are higher than what they were in 2019. That combined with the increasing return of corporate traffic is really helping us in the premium cabins. I like what I'm seeing on the corporate side. We're quite pleased with that, and we're very happily surprised by what was not expected.
I mean, there's a new segment of travel which, from what we can see, appears to be a trend that should continue.
Great. Thanks very much.
We'll take our next question. Ruxandra Haradau-Döser from Kepler Cheuvreux, your line is open. Please go ahead.
Good morning. Congratulations on this operating performance and the cost discipline in the quarter. Three questions, please. We are seeing now discussions between several airlines and labor unions. Groupe Aéroports de Paris has just entered new agreements with labor unions. Could you please give us an update on your current discussions with labor unions and how do you see personnel costs developing in H2 and next year? Second, could you please give us an indication on your expected cargo performance in H2? Third, for clarification, since there have been restructurings of the state support you received in France and Netherlands, are you now again allowed to participate in M&A activities without restrictions? Thank you very much.
Okay. In terms of negotiations with our staff as well as our third-party partners and how they're dealing this summer with staff through negotiations and discussions, it has been very tense, not only at Air France-KLM, but all over Europe. Aéroports de Paris, as well as Schiphol, have had some difficult discussions, difficult outcomes, which we've had to bear the brunt of. As you know, in Paris, we had a strike by the firefighters. We also had a strike by some of the employees that handle the baggage systems. In Amsterdam, we had some strikes with the ground employees.
To date, the employees of KLM and Air France have really worked hard, quite pleased with how we've been able to get good alignment. The stress that's been put on them is quite difficult. What we're seeing, and I'll have Anne and Marjan continuing to add some comments of their own to what I'm going to say here is, with inflation, which is high, we are already starting discussions and negotiations with our key social partners to ensure that we have a balanced approach going forward that ensures that we maintain a competitive position. As yields go up to match the fuel increase, and as yields seem to be holding to handle inflation, I think we can find balanced agreements with our staff going forward.
Of course, it is always challenging, when we're trying to keep costs in check, and so far I think we can be reasonably confident that on a relative basis, we should be okay. Anne?
Yeah, Ben, thank you. On Air France side, what I would say is that our staff is really fully mobilized. We had anticipated, I think, quite well the recovery. As you could see in Steven Zaat's presentation, we had to follow up with our transformation plan - 16% FTE. To restart, we anticipate the hiring of our pilots with 300 pilot recruitment till now, also mechanics with 250. The disruption our customer can face are not at all linked to internal staff shortage, no internal social issues. In terms of salary, you know that we have a social salary moderation for the two years of crisis in 2021 and 2022.
Despite this, to help the staff in this period of high inflation, we had an agreement that was signed last March with the payment of an exceptional purchasing power bonus at the end of last March to eligible employees that were representing 73% of the employees of the airline. We also increased the commuting allowance by 8%. We have the next mandatory annual negotiation that will take place next year, but we are fully aware of the high inflation that are impacting our staff. We will start discussions with our representative unions as of September to see what we can do.
Before I pass it on to Marjan, I'd just like to add that, here in that Air France-KLM, I think the teams have done an amazing job of ensuring that we plan well ahead to have the right number of pilots, not only hired but also trained, for the summer. As you can see, many airlines in the U.S. and in Europe had to cancel 1,000s of flights to make up for lack of staff. If you saw in our figures the %age of flights that we completed vs what we planned, I think it's the best performance in Europe. Marjan, perhaps one or two words about the situation at KLM and staff.
Yes. Thank you, Ben. At Schiphol, as we all know, we had a lot of disruptions the last couple of weeks, months because of all the security lines and the lack of staff at security of Schiphol Airport. This caused a lot of disturbances, mainly for our customers, but also for our employees. We need to attract more workforce, mainly in the baggage and platform handling. We already have 150 employees extra, and we're still looking for 100, but we accelerated a lot, and we took a lot of measures at least so there's more stability and better performance for our customers.
If you look at the CLA, we closed the balance CLA with our ground operations and ground employees are well, you can call it compensated by the airport authorities these weeks during the summer. Thank you.
I come back on the other two questions. If you look at the cargo, you could say it's more or less the same development as we have seen in the second quarter. Cargo is very difficult to forecast. That's usually the bookings comes in two weeks before the flight. It's quite difficult. But we expect that it will be more or less the same development as what we have seen in the second quarter. Of course, an impact on the load factor, but still strong yields there and of course, an increase of capacity related to the belly. In relation to the M&A, I think the slide is quite clear.
We are at 60%, and we need to be at 75%. There is 15% to go on the French side. On the KLM side, there was not even this. Let's say KLM paid back all the state loans, but KLM didn't have, let's say, a recapitalization. The measures are on the Air France-KLM and Air France side.
Thank you very much.
Thank you. If your question has been answered, you may remove yourself from the queue by pressing star two. We'll take our next question. James Hollins from BNP Paribas, your line is open. Please go ahead.
Oui, bonjour. Just two from me, please. The first one, just on the yield evolution. Obviously you've done, I think it was a network airline up about 16%. Economy yields up 17% in Q2. Now, Southwest yesterday were hammered for effectively calling out June being peak yields, and they will effectively taper from here. Now, I obviously fully understand it's a very different market. Just wondering, Ben, your views on whether we perhaps hit peak yields, and most importantly maybe for Steven, what sort of yield evolution you mean by high through the rest of the year? Should we think about Q3 matching Q2 as my start point. Then the second one was just what does paying back the French state aid allow you to do?
Unless it's lost in translation, it sounded like, Steven, you're talking about looking to do this as soon as possible, with emphasis on soon. I'm just wondering what, if that is right, and B, what it means for you once you've paid back the 75% in terms of what you can do. Thank you.
On yields, as you know, we've had a request by Schiphol Airport to reduce capacity, and we are having this ongoing now debate and dispute and eventually lawsuit around whether we will have to permanently reduce capacity. There is yield upward pressure in Amsterdam despite already experiencing very high yields. I think we can expect that to continue. On here in Paris, we are seeing continued very impressive yields, in part because one of our biggest competitors, Norwegian, who was flying from Paris westbound into some of our biggest markets in the United States, as you know, ceased operations.
That is taking an enormous amount of pressure off of our economy yields on the transatlantic, and we're enjoying that pressure, and that will continue into the latter half of Q3 and obviously into Q4. I see a continued improvement in yield vs 2019 helped by a changed competitive environment.
On the state aid, I want to do it as soon as possible, but I need an equity to also replace it because I don't want to destroy further my equity. We are still aiming at the financial market to place such a hybrid into the market. The conditions, let's say, in the second quarter, especially after the rights issue, were not that fantastic yet because there was a fear of recession and there's still uncertainty about the interest rates. When this market will calm down on the interest rate side, we will, as soon as possible, launch a hybrid, and we will use that to pay back the French state. Your question on Q2 vs Q3, I could not fully match. Of course, we say it's significantly positive.
That is a indication. I guess I won't give a number, but we have full confidence in our Q3 profitability.
Well, thanks. Yeah, it was actually more any sort of directional Q3 yields vs what you've reported for Q2. On that state aid, what does it allow you to do once you've paid it back that you can't do now? I've just forgotten. Thanks.
Sorry. That is, we are relieved from the M&A ban, and we are relieved from the bonus ban at the 75%. We still have the dividend ban in place.
I guess we're not talking Q3 yields. Okay, thanks.
Let's say it this way, we still see the same kind of pricing in the market. We don't give a specific number, et cetera, but we see a strong yield environment still currently in the market for the third quarter. As you see, the load factors, you can imagine that the revenue management game is full on. That's all I can say.
Maybe specifically, you mentioned Southwest, if I heard you correctly, you know, peaking out in June. You know, I think in Q3, you know, we should in July and August, though you know, we will not be, you know, June is not our peak month in terms of yield.
Okay. Very clear. Thank you.
We'll take our next question.
I think just to add to that.
Yes.
You can see that in the marketplace when you if you look at our fares, it's clear that throughout Europe and in particular out of our hubs, that the pricing that's in place is quite high.
We'll take our next question. Sathish Sivakumar from Citigroup, your line is open. Please go ahead.
Yeah. Thank you. Good morning, everyone. I got a couple of questions here. Firstly, on the point of sale out of the U.S., if you could just share any color on how it actually looks in 2019, and how it compares today in Q2 as well as based on your forward bookings into Q3, where you're seeing the trends vs 2019. The second one is actually around the disruption cost. You reported EUR 77 million. Has it kind of peaked, and as you go into Q3, you should see substantially or at least directionally lower disruption cost? Yeah, that'll be helpful. Yeah, those are my two questions. Thank you.
Sure. We're very pleased with our point-of-sale U.S. business. I think it's helped by the relative strength of the U.S. dollar, in particular in our premium cabins, across all of our capacity. It's unbelievable actually. As you can see, the load factors that we're seeing, you know, in our first class and business class cabins, are in some cases the highest we've ever seen them. In the U.S., New York, Los Angeles, you know, Miami, they are all very strong markets, and point of sale is higher than it was in 2019, and the yield is significantly higher, and the load factors are much higher than we saw in 2019. We're very pleased with our performance. On the trans-Atlantic and in particular point-of-sale U.S..
On the customer compensation side, the EUR 70 million is mainly coming from, let's say, the operational problems at the airport of Schiphol. It's a big chunk of it. Of course, we took out flights. We expect now that we will stabilize our results, let's say our operations in the coming period. Of course, we still expect higher customer compensation than what we have in 2019, but not in these amounts.
Yeah. Thank you.
We'll take our next question. Andrew Lobbenberg from HSBC, your line's open. Please go ahead.
Morning, all. Sorry, long name. Can I ask you about Transavia France? You spoke of some teething troubles, I think, with the rate of growth. Then equally, if we look at the unit revenue that you disclosed, it's up in the French domestic, but not by that much given the price of fuel. Can you just give us a little bit of talk about what's happened at Transavia France and indeed in the broader French domestic network? The problems at Amsterdam and the pressure to permanently reduce capacity there, how are you thinking that you would manage the, you know, the capacity balance agreements you have within Air France and KLM if that plays out?
My third question would just be, how do you think about the potential reopening of Asia when, you know, you're flying so much capacity now? Would you have to reduce capacity on the North Atlantic were Asia to open up in 2023? Yeah, how would you manage that, let alone the indirect long routing?
Okay. Hi, Andrew. Yeah, for the French domestic market, you know, we're still finalizing the last part of our transformation. As you may recall, we've pulled out all of our regional operations from all the airports, so that's Air France HOP. We've reduced by 50% the size of the fleet of Air France HOP and all the, or I'd say 95% of the capacity that Air France HOP had at all the airports was assigned to the domestic markets. The transformation at Orly, some of those slots are now going to be assigned to domestic services operated by Transavia France, and of course, at lower frequencies, but with much lower unit costs. We were losing an enormous amount of money on the French domestic services in 2019.
With a combination of lower capacity, as well as lower unit, a lower unit cost vehicle being Transavia France, in our projection, we will reach at least break even and hopefully profits in the short to medium term. Some of these routes have been outright canceled, such as Bordeaux to Orly, Lyon to Orly, and Nantes to Orly. That's with agreement that we made with the French state. It was imposed on us that any destination with a train option of two hours and 30 minutes or less would be removed. We're expecting, and we still have, we're still 100% on track to transform our domestic business. Going through this transformation, you will see some swings in yield as we ease into it.
However, what I must mention is that a big portion of those slots that were operated by HOP in the French domestic market are now being reassigned to a much more profitable European network operation, which of course will take some time. The growth is big, but if you put it in context with the amount of money we lost in the past vs what we're putting there, we're very pleased with how it's transitioning.
Can I add something on that, Ben? If you, Andrew, look at the yield development at Transavia France, it is still very strong. Despite the growth, we are at 18% higher yields than that we were in 2019. We are able to charge the customers. Of course, with such a growth, you don't get this historical load factor. The impact on the unit revenue is coming on the load factors and not on the yield. It's 18% up at Transavia France, where it is at Transavia, the Netherlands is 22%. In the same kind of range of very high double-digit numbers close to 20%.
To follow on that, Orly Airport you know not being able to make money at a slot-constrained airport close in to you know the largest city, the largest metropolitan area in Europe is you know it's just not possible. For us, the opportunity is huge. As we rebalance the capacity that's there with long haul you know we have eight long haul flights a day out of Orly operated by Air France. We have a shuttle service to Toulouse, Nice, and Marseille. Flights to Corsica will continue to be operated by Air France.
However, all the rest of our slots there, which are more than 50%, are now being operated, or will shortly be operated by Transavia with the advantages of Flying Blue and a cost structure which is similar to the low-cost carrier at Orly. I think we've got a great future transformation plan that is being rolled out, and we expect to see the benefits. As far as capacity on the rest of our network, if Asia does come back. We've been lucky that the opportunities on the Atlantic have been great during the summer. Of course, if demand and capacity and if the Russian overfly gets removed and the restrictions of our key markets are relieved, we'll rebalance.
You know, we've got some flights that you know are still positive, but if the opportunities are more positive in Asia, then we'll shift capacity over there. As I mentioned, we do have 16 777-200 at Air France. We do have A330s at KLM, which we can activate or we can deactivate depending on what the opportunities are. We have quite a bit of flexible opportunity, which are good airplanes from a fuel efficiency perspective relative to some of the four-engine airplanes that we're seeing competitors bring back. I think from a position perspective to adjust to capacity when Asia hopefully does come back, I think we're well-positioned.
Okay, thanks.
You also had a question on some internal agreements we have with our various unions. Look, these are agreements that date many years. Of course, you know, as usual, we intend to respect all of these agreements. However, there's quite a number that we have throughout the group. You know, we don't foresee any major issues in staying online. We do have very positive and good relationships with both pilot groups.
Of course, we always have negotiations, we always have discussions, and we, you know, with inflation that's going to come up, we do expect negotiations to continue in the near and medium future dates.
Yeah. Andrew, I think you had also a question on Asia. I think on Asia, let's say you have as much information as I have, because if you look at China and Japan, it all depends on the development of COVID and all of the, let's say, the development of the policies they put in place. You see now everywhere where they have, let's say, a policy where people still can travel as long as they are vaccinated or they have a positive or negative COVID test, that is of course very helpful.
We have seen now the speed in our industry from that, but in China and Japan it's still much restricted and we all wait that it will open further, but that is fully related to the COVID situation and maybe the change in policy in those countries.
Great. Thank you.
Again, press star one to ask a question. We'll take our next question. Sumit Mehrotra from Société Générale. Your line is open. Please go ahead.
Thank you. I'll try to ask this question. Group equity is still -EUR 3.1 billion, and you plan to issue a EUR 1.2 billion hybrid maybe later on. What are your steps to fill the gap? I noticed you mentioned that you have further asset monetization through quasi-equity projects. May I risk asking you from where? Because already two projects are in place. MRO, you had Apollo and CMA CGM, we have gotten cargo. Where do you think, if you can share, further asset monetization opportunities might rise? Secondly, your thoughts on the stronger dollar and a weaker euro.
Yes, good news for U.S. point of sales, helpful for summer traffic flows, but how do you plan to address this issue of U.S. sales with weaker euro winter onwards? Your thoughts on a weaker euro would be welcome. Yeah. Thank you.
Let's first start on the equity side. Indeed we will execute this EUR 1.2 billion. Second, let's say we have time to restore that equity, and we will build net results in the coming period, so that will support our equity. We did actually at this moment only one asset monetization with Apollo. It was actually, if you look at the rate, it is an excellent rate we got and we are, let's say, in further discussions to look to make use of those kind of vehicles. That is actually the plans we have in place, and that is how we are going to restore the equity. What will also help is that we, KLM did it now. They put the tax asset on the balance sheet.
We didn't do that yet for Air France. We will do that in the second quarter. That will also add at the end of the day to our equity. If you look at the stronger dollar, yeah, that is always where there is one market has a benefit from the dollar. The other is negatively impacted, so it will probably impact the traffic from Europe to the U.S. As you know, there is much more flows from the U.S. to Europe. As long as this dollar stays as this strong, I think for the total North Atlantic it is good for us. There is a stronger pricing in the U.S., so with that dollar that is very beneficial for our bottom line at the end of the day.
Thank you.
Thank you. We'll take our next question. Johannes Braun from Stifel, your line is open. Please go ahead.
Yes, good morning. Thanks for taking my questions. I have three questions. First question is, you said earlier that you currently need 13%-14% yield increase to cover the higher fuel costs currently. Now, if you look out to 2023 in terms of fuel spot prices as they stand and in terms of your hedges for 2023, what would be the yield increase vs 2019 you need next year to cover the further increase in fuel costs? Back on the U.S. Dollar strength, I think you have a net exposure. Taking into account the U.S. dollar revenues, but also the U.S. dollar costs, which is around 5%. Just remind us on the hedging level of that net U.S. exposure, that would be helpful.
Lastly, can you remind us on the timing of the payment of the cargo claim, which I think was EUR 350 million, and also the payback of the deferred social charges, which I think were about EUR 2 billion, would be good. Thank you.
Yeah, sorry. It's a lot of good questions. We have to prepare this. Let's first start with your question on the yield. Yeah, of course, the hedges will wipe out. Also what you see is actually that the fuel price in the forward is coming down. We expect still this, let's say, 15% to be sufficient. If needed, then of course we will put in if the oil price stays where it is, let's say, or the jet fuel price where it stays today, then we put in another increase of hedges as we did before. As we are all impacted as airlines, those are quite sticky. We have seen that the competitors are following.
We all need to, let's say, have a balance of the fuel cost in relation to the yield. Those are going quite hand in hand. I think the results in Q2 and also what we see the yields in Q3, you see that it is very useful. Even Q4 we still see the same strong yields. On the hedge for the year ahead, we hedge around 50% of the operational, but the operational is not that big actually because we have revenues in dollars and that's a fuel cost and other costs in dollars.
You have seen that the exposure in our total results was lower than EUR 10 million in this quarter where we had this big spike of the dollar. You see that we actually are not substantially, let's say, exposed over there. Then on the fleet side, we always hedge. When we do an order, we hedge up to the delivery. I think if you look at KLM, they are almost at 100% because they didn't put so many new orders yet into place. I think on the Air France side we are also around 70%-80%. We have already quite a substantial number already in place with it.
I think, let's say the impact of the dollar is there. But as again on the operation, not so much impact, and we have 50% of it hedged. On the let's say specific items as you mentioned. On the cargo claim, we expect that we will pay that in 2024. We are still in appeal, so that is not coming this year or next year. There's still a time to go. On the social charges and the salary tax at KLM, we talk about EUR 2.7 billion which has to be paid. But we always have, let's say, an outstanding amount in our balance sheet because we never pay directly the social charges, et cetera.
I think in general, we talk about around EUR 2 billion of social charges. KLM, sorry, Air France will take five years to pay that back, and we started already in January. KLM started in October this year to pay back, let's say the salary taxes, and they also have five years to repay.
Can I just come back to the first question? When you say yields should be up 50% or 50% vs 2019, should be sufficient to cover the fuel costs. You are referring to 2019, yeah? That would mean that if we have this 30%-14% yield increase this year, we would hardly need any yield increase next year to cover the fuel costs.
If you look at the Brent specifically, and you look at the Q3 Brent or the Q2 Brent, we talk about $112 per barrel. If you look at the current forward for 2003, you talk about $87 per barrel. There's still an expectation that this fuel will come down in the coming period.
Thank you.
All right. Over and out.
There are no questions at this time. I will turn the conference back to the speaker for any additional or closing remarks.
Thank you, everyone for joining us, this morning.
This concludes today's call. Thank you for your participation. You may now disconnect.