Air France-KLM S.A.

Jean-Marc Janaillac - Chairman and CEO Pierre-François Riolacci - CFO

Oliver Sleath - Barclays Ruxandra Haradau-Döser - Kepler Cheuvreux Andrew Lobbenberg - HSBC James Hollins - Exane Jarrod Castle - UBS. Damian Brewer - Royal Bank of Canada Michael Kuhn - Société Générale

Ladies and gentlemen, good morning, and welcome to our 2016 Results Presentation. Thank you for attending this meeting and thank you to those who are connected through us web.

We are happy to share you this result and also our outlook for 2017. I will first refer to Pierre Riolacci for presentation on our 2016 results, before taking over for business review and our 2017 outlook.

We will then move to questions from both those of you who are connected through the web and presenting this conference to Pierre Riolacc.

Thank you, Jean-Marc. So, just a quick view on the results for the year 2016 improving, we have an operating income a bit above 1 billion, which is an improvement around 300 million and close to 550 million, if you correct like-for-like for the currency impact.

Unit costs are down minus 1%, which should exclude fuel, currency, pension cost, which is in line with what we and also the market during the year’16. The free cash flow after disposals are close to 700 million, again to the market around 600, 800; and we are just in the middle.

Thanks to this free cash, we can improve relatively, consistently adjusted net debt on EBITDA ratio; it was 3.4 last year end of ’15 and 2.9, end of ’16. The net result is close to 800 million, which is impacted by one-off into two directions; mainly the sale of survey, high tax expenses and it is up 674 for compared to last year.

So, unit revenue is down by 3% many expand by the deduction of the unit revenue. But this activity, if you take the number of passengers has increased by 4%.

Of course also in terms of [Indiscernible] ongoing in March, you have to keep if you look at the last year, 2 billion amounts, while there is true cost decision. I will come on that later and [Indiscernible] is impact of the terrorist attacks in Europe which have impacted mainly the French market due to the weak attractively of France to touristic destination.

Important to note that, '16 is in line in terms of improvement of the result with the five year, sorry, I put on the slide three main KPIs. These adjusted operating results, operating cash flow, registered net debt on EBITDA.

And you see that from 2011 up to 2016, we have continuous improvement of these three KPIs, which is actually the good demonstration of the focus of the management to the improvements of both operating profitability, but also improvement of the balance sheet. Fourth quarter, I will not spend too much time on it is more or less in line with our expectation.

We see that we are a bit above the consensuses, and it's clearly a contribution to the full year improvements like-for-like. And if I go to the full year result, you find the EBITDA which is improving 200 million, operating margin improving by 1.2.

We have also indicated the lease adjusted operating results. We see this is important when we try to compare France KLM to some competitors.

So, we have increased operating result by the interest portion in the operating lease. And you see that after this correction, the operating margin corrected for the full year 2016 is more interest of 6%.

So, operating cash flow 2.2 billion improving by 200 million compared to last year. Royalty of 9% which is we consider higher than the one of the group and the reduction of the net debt by 600 million.

So, globally it is not bad result, of course it is not totally good year and things are just we also completed our efforts after strike Air France, the negative impact of the terrorist attacks. I think that we have had good and bad a month impacting economic performance, but at least it is improving compared to 2015; and it is continuing to improve months in 2011.

I want to explain with water full global reservation result, you see that fuel price insurance it is a savings of 1.5 billion. Unit revenue decrease is impacting negatively by 1.2, the recurring performance and also as indicated before the currency impact is negative in the range of 200 million.

Besides that, which is more as less neutral activity -- months are more or less neutralizing themselves. You see the positive contribution of the unit cost, we estimated to 200 million.

Unit cost reduction minus 1.5 after exclusion of function fuel and currency. There is however some elements, which are going into the opposite direction, the strike impact Air France, which is estimated to minus 0.3, and the fact that due to the excellent performance of KLM, the viable income in profit sharing has increased in 2016 compared to 2015.

If you correct for that, you will increase the unit cost performance by transform. So, all-in-all, it means that there is true deduction of unit cost is in the range of minus 1.7, but because of the true aspect I have given on actual number, it's proved to be minus 1%, it is important to make the difference between what we can consider as of structural reduction of unit cost and once we see in the bookings.

You also see at the bottom right that unit cost reduction not due to only one quarter it has been over each quarter. The permanent [Indiscernible] management to work on the cost reduction with the exception of the fuel suite where due to the strike effect, you see the report early cost reduction and return to minus 0.2.

One of the explanations, but not only, is the reduction of the headcount, globally for the group the headcount has reduced by 1,850 FTEs. It is in the two airlines, but a bit different.

If you look at the bottom right, you see that the largest part of the headcount reduction came from Air France is minus 1.4, but also from KLM of course with minus 450. In terms of productivity, if I put together the reduction FTE and the growth in the capacity, you see that the positivity increased by 2.3 in Air France, 4.2 into KLM.

This is partly explained also by the size of the growth in the KLM once the stronger than the growth in Air France. Basically Air France has been stable and KLM grew by between 2% and 3% in terms of EASK.

The change in total employee cost is what you see on the left. You see that in total the labor costs are flat between '15 and '16.

If you exclude for the effect of the profit sharing, we are with a net change of minus 0.5 over the year '16 compared to '15. Unit cost reduction, but also sharp fall in the fuel bill due mainly to remind further the fact that fuel is decreasing, the fuel price is decreasing, second also due to the change in the impact of the fuel hedging.

In 2015, the hedge result was strongly negative, 1.4 billion. In 2016, it continues being negative, minus 800 million, but less than the year before.

So it is plain part of the reduction of the fuel bill which is extremely consistent of course, 1.5 billion over the year. And so that amount is the evolution of the unit revenue, high level of competition, effect of the terrorist attacks, major unit revenue development negative over the year.

I will say that it has been worsening during the first three quarters, Q1, Q2, Q3, the decreasing neutral new m ove from 1.3% to minus 6.5%. So, clearly the third quarter was -- with the next negative level of unit revenue.

You see that in the last quarter, the situation is improving a bit. It is even better if you consider as a quite limited result in the month of January when we see the unit revenue being closer to minus 1% then to the value which has been obtained during the year 2016.

So, unit revenue for the full year minus 4.5%, in long haul minus 4.7% with a sharp difference between the recommend means of net premium and premium revolution is only minus 1.4. In economy, it is minus 5.4.

In medium haul, it is minus 4.2. In short haul, it is close to zero of course the short haul is mainly the Air France activity from all and in the French province.

So, the level of competition here is a bit more limited, which can explain why. So, unit revenue has been almost stable look also the evolution with ancillary revenue.

They are now amounting to 500 million, ends out 12% in the last year. You’re the next slides evolution of the yielded by sub network.

You see among other, the result Asia when we have reduced capacity due to the lower level of demand partly strained by the fact of terrorist attack of the ASK minus 4% and RASK is minus 5.6%. Also look at result in Latin America where the RASK mainly explained as a crisis in Brazil is minus 6%, and as I said before, the medium-haul point-to-point, which is on the left pulled RASK of plus 1%, which is mainly explained by the difference in terms of competitive value.

Here, we consider that we had relatively good performance in terms of unit revenue compared to peers. As you know, we are using now the camera in that belt of augment of one per system, which is a totally new system put in operation by the end of 2014 and progressively after one year we’re seeing that this volume in as month where is coming to reduce and offering in that in terms of unit revenue.

We’re probably doing a bit better than peers, which is of course quite important in the industry like the airline industry. By sub network in terms of profitability the long haul in pool strong lead with strong at 50 million to medium haul feeding is deteriorating by 60, but the different, so the situation is quite different in Amsterdam and in Paris.

In Amsterdam, the hub feeding operations profit increase by 60 million and now the medium haul operations in Amsterdam are breakeven. In Paris, also partly explain by the terrorist attack impact.

There has been a deterioration of 120 million for the feeding operation and the point-to-point is continuing as per situation. We are not yet breakeven.

We’ve indicated to the market as the target where it has to be breakeven 2017, and during four months a year is still positive and step-by-step we expect to be breakeven in 2017 from the operations in the south Paris and in the French province. Cargo is still extremely difficult, if you know that the load factor of the building is worldwide airlines industry is still quite low.

So, there is room which explained that the competition is extremely strong, so it will continue important to decrease. We have been able to improve a bit result due to two things.

First, we have now achieved the restoration of full-freighters fleet. We are now only two full freighter in Paris and three full freighters in Amsterdam.

And the management of the Cargo provisions being successful in continuing the unit cost reduction, which are impressively down 2.6%, impressively because many of if you see revenue cost reduction with capacity being minus 5%, is clearly very good performance. Nothing to say about E&M, they continue to post a good performance.

The margin moved from 5.4 to 5.7 with an operating result from 214 to 230. So, good performance and also quite good evolution of the order book, which has increased during last year by growth to 10%.

And we expect to its 10 billion of order book for the year 2017. Transavia still rapid growth, 23 in France, 11 in Holland, Transavia together, Transavia Holland, Transavia France are breakeven.

When you speed between the two companies, it is positive into Transavia Airlines and negative into Transavia France and of course we continue next year. Production is net debt due to an operating free cash flow of 247 million, so revenue from operating cash flow from 1.9 to 2.4, then almost the same evolution of the working capital.

Do not forget that seems, again we have cash out due to the voluntary departure plan of 228 million. If you add that to the operating cash flow, you can consider the secured performance in the operating cash flow is more in the range of 600 million and negotiating the amount 2 billion.

Financial operation impacted by the sale of one half of our share in Amadeus, which provide 200 million of cash, still 49.9% of survey, which provided 142 million of cash. As I said of Cobalt limited handing operation at London Heathrow, which provides cash for 50 million, and all-in-all reduction of the financial net debt from 4.3 to 3.6, if you look at the adjusted net debt by capitalizing in the operating lease which is reduction which is in the range of 350 million.

Good liquidity situation, we have net cash on balance sheet above 4 billion and we are still underlying credit line for 1.7 billion. And you see the strength reduction of the unit, of the debt during the last year.

The second, of course continue to decrease at 400 million in 2013, 310 million in 2015 and they are in 2016, 260 million. When you try to look at, what actually performance for the two companies, you see that in terms of EBITDA, the two companies increase their margin 9.1 to 9.8 for Air France, 9.2 to 12 for KLM, so an impressive improvement into KLM partly explained by the different in terms of online just try.

Of course in terms of lead into the operation margin, Air France is flat compared to last year to 3.9 and KLM is improving 5.1 to 8.4.

Okay. Thank you, Riolacci.

I would like now to present our growth of the businesses review and as well as our outlook for 2017 and the coming years. Okay, so, presentation of the group.

We have four businesses which are strong passenger network business represented by Air France, KLM and HOP! And we're the European leader in terms of network with 320 destinations in 114 countries and there is our two powerful hubs in CDG and Schiphol, and Transavia which is increasing which is -- that is the number one low cost in Netherlands and number one in Paris Orly and number two in Paris including Burway.

Our engineering and maintenance is also world leader in MRO and the cargo activity after heavy restructuring is in position to make recognize contribution to the group. One word on the governance, we've governance -- we've implemented a new organization to align in our priorities and that combines pragmatism and subsidiarity principle giving a large room to the airlines and with governance strengthened by reinforced CEO committee where with Franck Terner and Pieter Elbers.

Three of us are steering all group. We've also and it's quite efficient, if it's different I think with our competitors quite efficient integration in some areas like international sales, like also very efficient yield management and network planning system and marketing and digital strategy, that are run at group level.

We've also this kind of coordination and cooperation for maintenance in cargo activities in order to maximize the revenue and we've also developed set of function and back office function, with shared service centers in some of cities in Europe and elsewhere. One word on trust together, which I presented to you in early November, the goal of this project, was to tackle the strategic issues we're facing currently by regaining the offensive with a plan of growth for passenger activity and so you have the goal in this slide.

And the spirit is to reinforce the competitiveness of our business. First, by continue to develop the Perform 2020 initiatives that has been put in place in KLM and in many operations in Air France, but also to work with the creation of the new company adapted to the ultracompetitive situation known as the Boost project, but that will come later on it.

Just this one, we are going to begin to start with the maintenance because I think it something that not looked after enough by the outside world. Each one of the key strengths of our group is this maintenance where our full scale is the global leader.

And our teams have developed expertise and scales as I deployed not only in Netherlands and French, but also everywhere in the world. We have 14,000 employees working in 15 industries all the sites half in France and Netherland and half in other countries.

And these teams are doing 450 shop visits per year. And they ensure the component support on starting 1,300 aircraft for the third-party airlines.

And to support and to develop this growth, our engineering and maintenance teams are focused on innovation and work on developing the maintenance of the future with the big instance from Big Data. It means to collect and analyze the message of the technical data generated by the fleet in order to be able to anticipate technical problems.

First, to reduce maintenance cost and also to limit the mobilization of the aircraft which is the key priority for airline operations, so by leveraging this positioning our goal is to reinforce our growth and value creation for the group. We have today 200 external customers in each in every continent and for 2017, our target of growth for this business is at least of 10%.

So, we are working notably in on engine with plants to develop our presenting engineering while consolidating market share on other big engines. But also we are implementing joint venture with South Hall, which is going to be dedicated to the repair of the compressor blade.

And for the component business, the priorities to become the front player on the new neo and max aircraft and we want to continue to develop market share on the Boeing 787 and the Abuse 350. So coming to the passenger activity, our ambition is to regain the offensive for passenger activity for the long haul, we target growth between 2% and 3% until 2020, which is at the same time quite reasonable but also read more important and the growth we have had the previous share.

And we will fix this growth and develop our revenues with joint venture and alliances. And of course by improving the competitiveness of the activity and one of way is to increase fleet utilization, which is some room of progress that we have especially in hauls.

For the outfitting, we have, two. One, main goal is to improve further, the operation or robustness of our tours with strengthening of CDG and at Schiphol optimization of the coordination between KLM and Transavia.

And two, to compete on this ultracompetitive market and strengthen CDG feeding, our goal is to create this new company called code name the Boost and it will operate 18 narrow-body aircraft and 10 wide-body aircraft in 2020. And as you know, we are under negotiation with the unions for creation of this airline.

To develop our revenues, the backbone of our strategy on our long haul network is to strengthen and develop the network of RNC with our partnership. Our main partner being Delta with whom we have built the most integrated partnership on the North Atlantic JV.

And we have also added partnership, we want to develop and strengthen with our partners in China, China Eastern and China Southern, but also Jet Airways and Kenya Airways in Africa, GOL in our Mexico in the American Continent. One point, I want to insists because it has been a nice price surprised by arriving in the group is the fact that on digital, we are and it’s seen like that by the outside world of digital activities.

Air France-KLM is either recognized as frontrunner in digital. We have already €5 billion of sales generated by online channels and we are right now strengthening the performance of our band websites and mobile applications.

U.S. still some example on the stride, where show that our customers and the possibility to contact Air France-KLM or of course Facebook Messenger and to our services on Facebook, Twitter, which had signed label and talking in different languages and of course 24 hours a day in seven days week.

And in ’16, represent a quite important step in this digital dimension seems as mobile becomes the first digital touch point with 56% of topic and we have launch quite great number of new apps for example you need to be able to read the press before 30 hours before the flight to everybody in cart and time information about flights that is what engaged and so on. In that direction, we have decided also to invest heavily in Big Data to better leverage as a growing amount of customer data available in each system, so we have developed our own customer Big Data platform built internally, gathering data on 90 million annual customers connected to all data sources and released to create 360 degrees customer view in order to have the possibility to personalize our relation at each touch point with our client either when they call or when they use their mobile, but also important of course in the planes during their trips.

And thanks to these major steps taken in '15 and '16, Air France-KLM already belongs to the few worldwide companies that collect and use their offline data to offer their customers personalized offers. I think we don't have communicated in us about achievements in this area of Big Data, but I think that's it's quite important and that we're here an expertise and in advance in the use of data and it's way all very important assets for the group.

And so we have decided to invest heavily over several years in that direction; on '16 we had spend €55 million on Digital and Big Data and will be our goal to spend more than €200 million by 2020. And it's going to be our priority and it's quite important in terms of revenues because we do think that this possibility towards personalized link with our customers will enable us to get €200 million of additional revenue.

So, everything I've told the growth in passenger activity, the development of our RNCs, the investment in digital, the maintenance, every single hand-in-hand with resolute focus on improving productivity. Year-after-year for the past five years and you have the figures here Air-France KLM has demonstrated its ability to reduce its unit cost by more than 1% and within the framework of Trust Together we're going to maintain and even reinforce these efforts with targeted annual reduction in unit costs of at least 1.5%.

We're talking here of reduction of course on the cost and currency, fuel price and pension expense basis. Regarding staff costs, several negotiations are currently taking on Bosch Company.

At of course they are engage since December, the negotiation with the Bosch as a Cockpit and the Cabin Crew is a proper so this negotiation is a creation of the new company within Air Force group they boost the project. And the stabilization of our unit cost.

For the Cockpit after an intern around the discussions we have propose an agreements to our union and according to the union government this agreement where to be discussed at the Board of the Union Force 22 February. And for the Cabin Crew, the discussion is entering now in the last phase and we expect to propose an agreement by the end of the month.

With respect to the KLM Cabin Crew, we have the ambition to come to the new CLA after we have closed the pension issue end of 2016. This is at present topic of discussion.

For the Cockpit in KLM, the discussion will continue on the pension scheme de-risking spare of agreement end of 2016 for KLM, ground no specific CLA discussion at present, but implementation with high performance organization will continue. So note some words the outlook, so the 2017 outlook is based on growth scenario for the passenger of around 3% to 3.5% growth, after several years of far more moderated growth.

We intend to return to the offensive in long haul implying the growth in improvement of our medium operations. Air France capacity growth should just be between 1.5% and 2.5% while that of KLM should reach to 3% to 4%.

Concerning [Indiscernible] the growth will remain strong on the structure from French and Netherlands with the capacity increase of 10% to 15%. The Cargo capacity will be nearly table at 0.5% after several year of significant reduction.

What we see right now even within geopolitical compact which remains difficult and full of tier. And which is still categorized by industry over capacity, it’s a resilient start for 2017.

We clearly want to maintain the quality of our unit revenue, and in this regard January has proven encouraging with ex-currency unit revenue only down by 0.7% for Air Force and KLM, and down 0.6% for January for total year. We must be careful because it's only the first month of the year and it's premature to draw conclusions for the coming months, but we are also seeing a slight increase in forward booking related to 2016, particularly in Asia and Latin America.

Coming to unit cost reduction, this unit cost reduction is one of our main objective and in 2017. The minimum 1.5 reduction in unit cost will be achieved across all manageable cost items.

The entire group is really focused on this target and ready to deploy all the levels. So it means to pursue and intensifying initiatives already underway through perform 2020 by notably maintaining the operational efficiency programs Air France and KLM.

The main key factor driving the improvement is firstly concerning stuff cost the fact that in the cost of 1,400 people ground staff asset to the Air France before the end of March. In the framework of the voluntary departure plan that was put in place in 2016.

And as you have seen, we are at Air France and KLM engaging discussions with the unions to enable ongoing productivity gains. We are also going to improve the competitiveness of our fleet.

Firstly, in improvement in energy efficiency send to the progressive replacement of Air France 340 and KLM Boeing 747 with Boeing 787 and Boeing 777. We also negotiated reduction in the cost of our leasing contract and plan to increase as I told before, the use of our fleet.

Clearly, we will also involve major contributions from external expenses driven notably by new handling especially with outside of companies IT and coming contracts. In 27, we are also going to see some 20% reduction of our air terminal dedication charge meaning concentrating of €13 million for Air France.

On this subject, I would like to stress that we are engage in intensive will be at both French and opened at all. In France, we have taking to reduce the structural gap in competitiveness due to taxes and charges, which are higher in France in other countries.

And this labeling doesn’t imply on the upfront, but all the airlines flying and using the airports of CDG and ORY. And within Europe, we are also making in terms of being towards the EU in order to establish level paying share with especially Gulf State Airlines.

Concerning fuel, after the sharp fall in 2016 we should post a limited increase in the fuel bill in '17 and '18 based on our current level of hedging 54% in 2017 and forward prices the fuel bill should increase by US$100 million, if $1 in 2017 and US$200 million in '18. Derivation in euros will of course depend on the euro dollar exchange rates.

Also you must remember that our net dollar position after deducting revenues in dollars is around 50% hedged. To conclude and submit our outlook for 2017, the global context remains highly uncertain because of the geopolitical and economic environment in which we operate because of the fuel prices and the ongoing over capacity on several markets resulting in certain pressure on unit revenues.

However the January traffic statistics and forward bookings indicate resilient start to the New Year, something which is a key for the group. So, we're continuing as I told to our effort to reduce our unique, cost and we're maintaining strict CapEx discipline to enable the group to continue to deliver positive free cash flow before divestment in 2017, CapEx is thus expected to be in the range of €1.7 billion to €2.2 billion.

We plan to continue to reduce debt thereby reducing our adjusted debt to EBITDA ratio to below 2.5 in mid cycle by end 2020. So, I thank you for your attention.

I suggest we now move onto our questions either over the conference call or directly from those attending the conference in person, but I think we're going to begin with the conference call, if I'm not mislead. So, please your question from the conference call.

I've got two questions please. Firstly, I am interested to know a little bit more about the improving trading trends that you're been seeing and the encouraging commentary in January.

Could you talk a little bit about what you're seeing specifically in the North Atlantic market and also the shorter haul environment, and is it mainly Asia and Latin America where you see the improvements or how do you see those on a markets shaping up relative to the trends in 2016? And secondly, I'm interested to know about the union discussions with the Boost program, in particular could you talk about how you see the discussions with the pilots compared to the cap and crew unions, in relation to that program?

Continuing to improve markets mainly so the traffic is up, some markets are improving and mainly Asia, Latin America, but the situation in the North Atlantic is still also improving. So, we are globally speaking what is really to be notice concerning the performance in January is increase profit and improvement in terms of unit revenue, but again as explain by remarks it is only one month which proves that we have also selling this number an improvement in terms of net revenue development.

And we are not telling you that the net revenue will be minus 7 for the rest of the year, we don’t know, but just indicating that compared to the trend we have in 2016 what we see right now is big better than the trend in the last year.

Okay. The second question, we have two negotiations right now with the unions of pilots and Cabin Crew.

For the pilots, as you know we made the agreement of the pilot union in order to create new company because of the scope close we have been similar level agreement with the SMPL, and we have put on the table project of agreement which allow us to create a new company and at the same time that enable us to make the amount of cost prediction we need to have on the entire air force of fleet including boost but for all the fleet. And this agreement is on the table and we should have an answer from the unions and they are right now discussing between themselves in order to have yes owner, next week.

As far as the Cabin Crews are concern, we are in discussion right now with them, because they CLI let us say end of the February and we have to renew it for air force. And we regularly, done to need the agreement of the Cabin Crew unions for creating boost for the CLI within boost.

So discussion with the Cabin Crew unions is only on the condition within air force. And so we aim to finish these discussions before the end of the month.

I have couple of questions on IFRS '16. First, for clarification, the figures on page three accounts for aircraft and non-aircraft operating leasing or only aircraft operating leases?

You include the value of aircraft operating leases in your adjusted net debt figures, but at least so far based on the rule of thumb of seven times in your rent from current perspective, it is a good fix approximation of the present value of the future payments implied by your aircraft and non-aircraft operating lease contract calculated on the principal of the IFRS '16. Do you see potential during negotiate operating lease contract over the next one to two years in order to reduce the average duration of the operating lease portfolio?

And since can balance multiples will likely be significantly impacted? Do you see the risk of some implication for covenants and need to renegotiate some financing contract to credit lines?

And then, on your guidance for 2017, you target positive free cash flow before the sponsors. What are assets that you might consider to divest in 2017?

Thank you very much.

Okay. The link was not very good and the quality or your link was not perfect.

First, for the on correction for register of course, we just use lease on aircraft. So, we correct, it is a traditional in industry just to make the comparison a bit easier between companies who fleet is fully-owned or partly fully-owned, and some other companies will fleet more operatively.

So, we correct, in the lease of the aircraft. So, going to year, of course IRFS 2016, we changed a lot of things.

We are working hard. We are part of working good on that question.

Clearly, all the lease of the cost will be taken into consideration and will be both at two side of that balance sheet. We're still working with auditors to see exactly how to proceed.

It is not totally simple, but you can imagine that the debt assets of, the value of the lease attached to the Leased aircraft, you will find that in the balance sheet on the two sides of the balance sheet. The negotiation of operating lease, if I correct you correctly, indeed, we are in the two companies, but mainly in Air France.

In the next two years, a lot of operating lease coming to ended. And as you know, when an operating lease aircraft is coming to the ended, which greater possibility to discuss with the result and to negotiate, and quite often, when you propose to extent the lease, it has, is going together with significant solution of the amount underwent.

So, we have launched a complaint mainly into Air France due to some came under effect. And of course, it will have also an impact in the adjusted net debt because we will use the new value of the lease in the revaluation of adjusted net debt.

And we have last question on the…

2017 was accessed to the list?

Mainly for the time being, what we consider as a possibility is one half of -- sorry is Amadeus shares. We had last year as a plan to set in 2016 all Amadeus shares with the target to free cash after disclose or between 600 million and 800 million, because we have been evolve with forecast.

We have decided in 2016 to only one half. So which means that we have still to-date available 200 million, if I take two days value in Amadeus shares, and we will see in two times, if we decide or not to put shares into the market.

Next question?

Thank you very much. Maybe coming back to my question, do you see any implication from IFRS ’16 for your covenants?

For the covenants, no, no sorry, no, no -- of course it will extend to IFRS '16, not changing your economics, it is just a new way to present things. As you indicated before clearly seven times operating lease is a quite good proxy of what will be the not even -- as you said, but the net debt because after that it won't be adjusted.

So, I think that seven times operating lease to be added to the financial debt is an extremely good proxy. We've already of course some calculation as we're not so far from that.

So, which means that for the bank the situation already is known, you know the another analyst and not credit analyst sorry already using the seven times metrics towards a better perception of the balance sheet of airlines so that we'll not -- I think that we -- it'll have no impact in the relationship and liquidity there in the bank.

Can I ask how you see the political debate with the built carriers evolving given the change in leadership politically in the U.S., but also in Europe when we see Lufthansa building a relationship with Etihad? Second question would come to be negotiations with Cabin Crew, whilst as Jean-Marc explained that the Cabin Crew don't need to approve the foundation of Boost, do they still have the ability to undertaking industrial action at mainline in protest of it?

And how do you manage that risk if that's the case? And then finally, a question on your good ancillary performance and your identification of 200 million digital revenue growth, to what extent do you need to adjust your channels of distribution to deliver that digital growth and to continue your ancillary performance?

Okay, on the first question, I really do think that there's among EU, the [Indiscernible] meaning the fact that people are beginning to understand that what is the stake, ability of Europe to have direct links with some part of the world and especially the most dynamic part of the world. I am thinking of South East Asia, and if they don't do anything and in the future, we will have -- we'll stop having direct links between Europe and these countries, which for the European economy but also for strategic question will be a problem, and we've seen some European Commissioners Ritt Bjerregaard, Mr.

[Indiscernible] and with the Lufthansa CEO, the German Commissioner and I have seen also the French Commissioner Mr. Mitsubishi.

So, all of them have been aware of this question. And we are not against competition, we do realize that this airlines benefit from the very efficient geographical situation and benefit from very positive tax legal and social environment.

And so, it’s up to government to give us this environment, so we are working in that direction. What we are fighting against is in fact that as once this commission by the U.S.

Airlines prove it, this airlines have benefited from unit subsidiaries from their governments and thus creating an even revolving playing field. And it’s a on that direction that we are fighting.

As far as I'm not here to talk on behalf Lufthansa, but the CEO of Lufthansa was very clear that the commercial agreement they have with Etihad don’t implies that they are going to seize they are flight, and they are doing it in corporation with us in order to get this level playing over. And as you know we have three main US Airlines that have return to the new Secretary of State in Washington to put under table as the question of the open sky with the State of Qatar and the Unity of our revenue rates in order to have also this level playing field.

On the second question, of course Cabin Crew unions are aware of the boost, and it's not part of the negotiation we have right now for the CLA and if you talk about strike risk in our business, as you know and we are not anyone of course, there is also this risk that we may important to convince them that this solution is the solution that can protect their jobs right now. And don’t jeopardize their status.

For the ancillary revenues, we are right working right now to of course adjust our distribution centers in order to be able to give to have this personalize relation with our customers and to be able to reach them in a different way, as we are right now able to tweet them through GDS and it's part of the work we're doing specially with GOL of NDC. So it's something quite important for us very promising for the future.

Three questions to me please. The first is on Transavia, I was wondering if it's likely to be profitable in full year 2017 and higher fuel environment.

And perhaps you could split out the full year 2016 split of the French versus the Netherlands in term of Transavia EBITDA? Second one will be on the Cargo, I see you no longer going to split that out, but I was wondering if, will that might impossible to tell when, you think that the time frame for breakeven on that division.

And then finally on the January unit revenue minus point 7, as one you could split that for premium versus economy? Thank you.

For Transavia, Transavia the result last year is plus 20 basically into a tagline, so Transavia hold on in minus 20 to Trnasavia. I can give you more precise number, but it is out of magnitude.

The Transavia have allowed us launch its circularly plan with this three year ago, sustained by steps that improves always positive, which is great news. And for Transavia France, which is negative result, but we explain matter of fact that the operator extremely significant during the last year by opening new routes.

And in especially in low cost in the low cost airlines, when you launch a new, you need one to two year before to see the in that when you're going to maturity. So, the rapid growth of Transavia in France as push a bit in the next chair, as opportunity to come to a book even situation but off course it is the target of the management of Transavia.

On Cargo, there are initial points.

I think you just don’t need to leave our read that you no longer going to split that out by revenue need there.

We continues at now that the full freighter activities, what actually millimeter, it is only 15% of global business as a cargo full freighter [Indiscernible]. You know the progressively came in, with that combine, so which mean that we have no business which is mainly the daily Cargo transportation.

So for that reason and because of Transavia flies between belies and passenger is of course extremely important. For defining the profitability of the cargo, we consider and we're considering for the example of other alliance as it will be more rationale to progressively put all the Cargo business into a new entity, which will be the network business, which will off course group in the future, both the passenger and cargo activity in belies plus the activities of full freighter.

And the chance will be applied in 2017.

I don’t know. I don't know the difference between premium and economy in January.

We have the global number since some day, and I don’t know yet vis-a-vis who is different in terms of fees revenue between the two type of traffics. So, I don’t see new reason why it will be on one side.

I see that when we move from minus 0.5 to minus 0.7, it’s clearly probably improving the two type of -- it's a two type of traffic compared to last year.

Couple of questions from me. As one just on the Big Data I mean how much of that is actually reacting to competitors because you are talking about €200 million investment which would generate €300 million of additional revenues.

So there seems a lot of investments to get 200 million of sales if you put a margin on that obviously than additional 200 million of sales is are going to generate much less and profits. So how much of the investment is reacting to competitors?

Secondly, any kind of thoughts on capacity, the lower cost airlines has been a quite scaling about the capacity coming into the industry and I think it's probably fair to say your capacity indication is a little bit higher maybe than and as we expect that is that partly to maintain market share or do you actually see an opportunity there in terms of increasing profitable growth. And then lastly just on the MRA, you said that you expect 10% revenue growth from that business and I think I guess we could potentially expect that some of the kind of profit growth is that fair to say and related to that any color overall in terms of casting just less cargo on whether or not you think profits will be higher for all those divisions in 2017 compared to 2016?

Thanks.

For the first question, I do think it's very good investment because as we saw additional revenues and it means that they are really in profit. So it's quite interesting and first so it creates revenue and second thing it create fidelity links and special increase with the companies, so it means that this are renewed revenues and we can increase in the future.

So, I'm really convince that as this ability through big bag data to better know our customers and to our provide to them specific offers, not the general offer that we can provide to everybody, but very specific offer is re-optimums and by the way it is exactly what Amazon or this other big companies on digital are doing. And we know a lot about our customers, because we see then during sometime flights are quite long time.

And we have set all touch points and with what we can know on the social media plus what we have the information, we have from the touch points, we have, with them. We have a huge amount of data that we didn’t use and our intention is to using first to provide them with better service.

Because we know what they like, what they do like, what they intend to get our service can be more personalized. And secondly, we can offer them specific offers.

And in this direction of personalization, we intend for example to plenty of efforts to provide to each crew member an iPad that we’ll give information on the desire of our customers in order to have a more personalize product and KLM and Air France. I’ve got also in the station iPad to better sell our customers.

So, it’s really a major policy in order to have this personalization.

Concerning, I mean it was another of 10%, in order to turnover, I guess 10% is expected increase of the order look for the next year. It is not the turnover, if you look the turnover from third-party in ’16, it was plus 15% corrected for the haul.

So that I will not give any evolution of the turnover, we still part in 2017 yet. So 10% is what stick to order book.

So don’t -- yes, you’re right, the industry as, I mean the net amount as clearly pressure on the margin. You’ve seen that in ’16, we have been able to keep the margin even a bit higher compared to ’15, but you know perfectly that with tentative of some supplier 20 to more market of the repair so with some pressure of the margin in the whole market.

ut as I said that by aiming good type of products, by developing new line of products into all sorts of Amsterdam and of Parris, which we have to be developed, we have out of Europe. Of course, which try to do everything is possible, in order to not to be expose to the risk of margin reduction.

But you’re right in the supplier, you see this is a situation will over voice of course that you see some there are trying to compare with us the same pack again. It is not easy today or not any more easy today to increase the margin since, I mean all business, sorry.

The capacity, it is not, I don’t know if it is too high or not. Keep in mind, our Air France has been excellent during the last four years.

So to move now to something between 1.5, 2.5 as space 34, is not taking a big risk down because we're in so crucial, in Air France following the registration of the companies that to increase capacity by such amount I think is not too risky. KLM it is a bit lower than what has been made in 2016, and I will say that the growth in KLM during the last year has proved to be profitable and Transavia it is same with that but not, bit less risky because of the closure of Munich.

So, globally speaking we think that the operation we forecast for 2017 as we call it our smart growth, and not too risky even if you're right, the global picture is probably bit of over capacity when you look at the flows from Europe to the rest of the world.

And I would add to it part of the capacity, increase of capacity of Air France is better fleet utilization. So, it means it's rather in terms of cost.

Three questions if I can for you. First, of all you just touched on it, but could you elaborate a bit more about the reshaping of Transavia, and in particular, if you look into 10% to 15% growth next year.

Where does that go, is that going to Netherlands or is there focus on France, Paris you pull back from Munich? Secondly, on the shale to go hub you mentioned about the result deterioration on the medium haul.

Could you tell little bit more about how that looked by quarter through the year? Was that a particular problem in first half of the year or was it consistent through the year?

And then very finally just the question on product, long haul unit revenue reduction obviously better than the rest of the group, does that provide you any incentives to think about accelerating the roll out of your long haul premium product?

So, [Indiscernible] in some more Air France will continue to grow out of Orly, but also out of the France province. And the amount of the capacity we'll be investing my other magnitude of 2016.

In Transavia, alone the growth will 10%, and it'll be also '17 it will grow together with the closure of the Munich base. So, we're seeing that in the two companies or in the two countries we've a bit -- redefines the world of Transavia, on the two Transavia, company as mainly to different local market and the domestic market.

So, that's why in cadence that we've said that to stop see the Munich base, but to continue to grow all activity dynamically out of Amsterdam and the same is true for Transavia France. There's one difference between the two models, in Holland Transavia is based in Schiphol, which means that Transavia can easily contribute to the feeding system, that is not exactly the same as current fly that of course you can mix a bit with the Transavia and the current medium haul fly to contribute to the feeding system.

In France of course Transavia is operating out of the all which means that the contribution of Transavia forced to the feeding system does not exist. So in terms of such as these, which is bigger from between the mother of Transavia along and off Transavia France in terms of growth, the two companies differencing the domestic market will continue to go dynamically that in 2017.

The GOL is out and it's on the process of improving the processes, so that we are improved the operational betterment observed, and in the reorganization designed by Air Côte d'Ivoire beginning of this year, we have revenues fight as the operation in the organization of long-haul and medium all and renew flight up so that we have a direct organization and unified organization that is a key element to have a more efficient and cost system to operations throughout the year. And for the long-haul premium product it’s our goal to keep on the base as the roll out of this product without nicest billing, not deceleration of the roll out to keep under growth that has been projected plan in accordance with our investment plan.

Just come back to shorter goal because I've just want to be clear. The 120 million deteriorations in the financial position of the medium haul, was that specifically skewed to H1 of the year or is that across the year?

I watched the trends getting better or deteriorating?

No, it is clearly explain last year by the terrorist attack impact. We've have seen and you've heard probably that in France, there was the mission of the Air France we are marketing at a number of tourism in 2016 has reduced by more than 1 million in Paris, mainly due to what the course was the fear factor, which is not a beautiful NIM.

But it's released the impact of the attack. As explained by Jean-Marc, we are seeing not really by 2016 as the market from Japan and from China improving significantly.

So, I suppose that if you look for also 2017, we can consider that is negative impact on the million hauls of activity, as our goal, we improve during the year 2017. I don’t know if you can indicate the things in first half for if for us to wait a bit longer but to say that the situation in terms of tourisms in France is improving probably for some months and Air France we will appreciate from season pull month.

Off course when I look at the balance sheet for the last couple of years, you have quite a peak amount of capital; you come from six days on two quite most nothing. So obviously quite a huge set amounts, so I wonder what point you should go far increase and it has been very encouraging, that is timing of market.

Are you planning for or going for capital increase in 2017?

No, there is no plan for that being to consider as pictured.

I got three questions on my side. First one on debt prediction and [Indiscernible], I would like to know is ratio after 2016 for debt prediction 50/50 between cash flow generation and asset disposal will remain the same in 2017?

This is my first question. Second on Boost projects and nuclear project, would like to share with us, you're estimating member of Cabin Crew members that will be higher by this new in 2017, 2018?

And so it impacted headcount predictions for Air France knowing what is highlighted by the Slide number 8, meaning your stable employees goes in 2017 with headcount prediction, I would like to know, if we have to expect from this same new? And last question may be on the most strategic one, I would like to share with us, feeling your thoughts about this difference of performance between Air France and KLM in 2016, and do you see the risk of the break up between the two companies?

That's it. Thank you.

Can you repeat your first question?

I was taking some debt prediction, it was a ratio 50/50 between asset disposal and cash flow generation in 2016, and do you expects the same effect in 2017?

If I say yes and if I say that we still not able to use and your idea of was in the predictions. So if you not move my part.

In term of possibility to make some of disposals, I indicated before that we're mainly €200 million revenue in share that we've legit plan to share them. And containing or commitment, we still at waits for the CapEx which is negative 1.7, 2.2 and the commitment to be positive in free cash before disposal.

At that stage we stop, we're not going for where, we're clearly there is let as set for steel in 2017 compared to what we've done in 2016. For the year, so keep in mind that we're still 50.01% share there.

There is intention would be probably later on to continue the duration of sales, equity in survey. If the reports are going in the right duration, so there are 300 to 400 available, but no plans for 2016 not yet.

And it indicates, the target we give to us and we are used to other market is that that of course it is free cash before disposals us to be consist possibility year-after-year even if we are relatively agree to the evolution of other EBITDA or I just think that debt evolution more 2004 to 2005, we think it is really an important setting tools progressive around first month of the balance sheet.

For you other questioned the numerous Cabin Crew that will be at the end of 2020 and boost that will be at 1,000. It will not have a huge impact on the 2017 because the for long haul Boost will be up accretive that for summer 2018, not this year and for medium haul at the end of 2017.

And the idea is to that we will have a growth in Boost and new Cabin Crew will replies Cabin Crew Air France [Indiscernible] so, it means that we will not have a redundancy and the negotiation with the Cabin Crew unions right now is to at the same time it is to have not an increase of the cost of Cabin Crew within reference because they have less new comers with the increase due to the age. We don’t want to add an increase so as the negotiations we've done ours to have the stable cost for the year Cabin Crew in a half and at the same time decrease of costs are into the new company.

For the differences between Air France and KLM in 2016, first they can be explained why specific factors. In France, it's terrorist attacks that have urged and more strongly Air France and KLM also which is not external factors but not structural one just flights within their friends that this cost €120 or €130 million.

Nevertheless and if you take eastern account, you will see that the amount is not too far in terms of rate of in terms of margin is still higher at KLM. Part of the difference can be explained also by the environment.

As taxes we have Air France higher than in Netherlands, but I do agree that this difference is not healthy, and so I don’t think it create a risk to what you have described. But we cannot be a sustainable for long term and if there is NY [ph] to find the ways to have a better resort at a fast is totally compulsory and it's why we are we have welcome this boost project and on the trust so we had a project it role imply in the every better productivity and that's a resort we are seeing in the France, which is for us quite important.

Michael Kuhn of Société Générale. Firstly, one basically follow-up on the possibility between two airlines and given that the environment right now is improving in France.

Would you expect the margin get to narrow and also in the contexts and looking at your outlook and statements on pricing trends? Do you see a better unit revenue development at far at the moment, compared to with KLM?

And again on outlook, we know the 0.7% down unit revenues of January and mid-February. You should have some idea of ticket prices for the first quarter.

Do you see similar trends for the remainder of the quarter? I know there is environment, this is volatile, but maybe an idea where we are here right now.

And then lastly different topic, you had one slide on joint ventures and partnerships in your presentation. Do you have any update on your negotiations in Asia and especially in China?

Thank you.

For the last question, as you know negotiation in China takes some time, so negotiated, but we are going in the good direction and we have partners that are quite willing to finds away to stronger and more develop partnership, so they’re going into good direction.

Concerning, again the margin between the two companies. First, we’ve come from far, if I take 2010 and 2011, the gap in terms of operating income which is two companies was hundreds of millions now.

So, progressively, we have indicated that in the past, progressively two-company were more or less aligning performance, we still a gap between Air France and KLM. Last year, I didn’t get it by Jean-Marc the two operating income comparable around 500 million for the two companies.

In ’14, it was the case to correct for the slides. In ’16, it is not the case.

I should speak absolute number in a lots of margin. But will you know the two minimum amounts, which can explain the fact that, okay, the gap between the two companies as widened.

And indeed if you have logic, you can don’t see that in 2017, so gap between the two companies as now to be less. Because KLM has exceptionally good market provision and when for Air France we have the two effects of the indicator.

So indeed, we eventually after stay it’s in the 2017, the margin between the two companies or we get in the margins up to be senior than what it was in 2016. In terms of unit revenue, let just say further time being, the improvement is same between the two companies.

Due to the lower capacity in Air France in ’16, we indeed we expected very good revenue a bit better and Air France than KLM, because KLM was going relatively well I believe 2.7, when Air France was more stable in terms of capacity. But due to the difference in the two markets and share factor indeed, we have seen the two developments of the unit revenue of the two companies more or less just said.

Because we can consider as the improvement in the market has to be a bit better in France and in [Indiscernible] indeed; we expect for '17 unit revenue bit better for Air France than for KLM, but it is as mainly a confrontation of what we're seeing in 2016. What to say about the minus 0.7 in terms of unit revenue of January, we've something not too bad also in February, but it is only for the first week, stuff I cannot give you any number.

So, offset was a wide in February negatively new is not minus 4.5%. Yes, so good to see the improved mark of the evolution of the unit revenue offset in December, January and also February it is still negative.

But far less at what we're into 2016.

So, three quick ones for me, maybe the first one to come back on your Boost proposal, could you detail the current proposal to the pilots because it seems to me that the latest proposal is far less aggressive then at the beginning of the discussion? Maybe there's a second one on Etihad around could you update on biggest statues of the relationship with Etihad and the index that if anywhere with this relation?

And maybe just a follow-up on the capital increase question, when you're looking on your sizeable debt repayment do you see any specific issue in terms of refinancing or are you worrying about your in terms of refinancing?

Of course we've financial plan; when you see the level of cash today and if there's constant positive free cash flow -- operating free cash positive, again we've built potential plan for the next three years and clearly with such a level of cash and the opportunity to finance the [Indiscernible] due to the delivery of aircraft. We consider that we are in a comfortable cash situation.

Etihad I would say.

For Etihad, we have right now got share with Etihad, it's mutually been received to the both groups, Etihad and Air France and by the way we have more cu share with Etihad than Lufthansa, got share with Etihad. And it's good for us, it's good for them, so VIP with the situation and then plan to go any further.

For Boost, we've changed the organization within Boost. We had in the first time plan to have specific pilots going from air force to Boost and work in specific condition which will allow us to have a certain amount of economy and after discussion with pilots we have changed the organization, it means that pilots are going to be air force pilot and working in air force condition but the economies that we had planned within Boost are going to be made by all the pilots of our front, meaning that we are going to have cost reductions on all the pilots of Air France.

And it's a lot of seats on the table of the pilot unions right now. Okay, thank you very much for your presence in this exchanging.

Thank you. Have a good day.