Air France-KLM S.A.

Frédéric Gagey - Chief Financial Officer, Air France-KLM

Daniel Roska - Bernstein Stephen Furlong - Davy Stockbrokers Damian Brewer - RBC Neil Glynn - Credit Suisse Securities Andrew Lobbenberg - HSBC Anand Date - Deutsche Bank Simon Lechipre - Raymond James Jarrod Castle - UBS Johannes Braun - Mainfirst

Yes, thank you. Good morning, everybody.

For this presentation of the third quarter 2017 I suppose you have all of the presentation we sent to you. I propose to comment it relatively quickly and after that we will have time for your precise and accurate question as usual.

So I go Slide number 2 just to see the global description of this quarter let us say that it is - this is a strong quarter, of course it is a somewhat prior so which is good by definition, but if you compare - Q3 to the last year result you see that we're improving on all of the KPIs, that's true for traffic where the number of passengers also boost by Transavia, we will see that later is increasing by plus 5.1%. Is a very good news I think of this quarter, is that it does confirm the trend confirming the unit revenue corrected for currency and we post plus 4.1% of RASK for this Q3.

Concerning the financial result of course boost by solid commercial performance versus operating income increasing by close to 40% from 700 a bit above €1 billion, €1,022 million to be precise and the operating free cash excluding any financial operations, which is moving from €250 million to €793 million. So let us say that both in terms of commercial and in terms of financial this quarter is strong.

From the strategic point of view also we see that we continue to be extremely active following the track of trust together. If you look on the left of the slide what we've made strategically concerning the commercial activity you have learned some weeks ago that we are making some progress in the alliance domain by strengthening network of alliance thanks to JV with Vietnam Airlines which would clearly well-organized cooperation with Vietnamese partner.

Big deal also concerning the implementation of new distribution strategy. I think it is not a surprise after the decision taken by Lufthansa in 2015 and British Airways more recently, but clearly we have the idea [ph] to move into the direction in order to participate to the evaluation of the distribution of airlines ticket by continuing of course to work with our partners GDS and the travel agency but also by moving on and adopting the new capability offered by the new tools.

Also important that is mainly for passengers we're working already some quarters on the revamping of the Flying Blue program it will announced in next week. We are trying to offer to the passenger simpler, more efficient, more open with more access to the seats and also well controlled financially speaking.

Thanks to the evaluation of the Flying Blue program. Concerning the financial side in terms of strategy, so of course mid-quarter we've finalized reserved capital increase with Delta and China Eastern everybody know that of course.

More recently we have been able to exercise the soft call for the OCEANE 2023 which is also a good step in terms of consolidation of full balance sheet and more recently and I've got with me today Erik Swelheim, the CFO of KLM. We have continued to work on the de-risking of the pension schemes.

We have now full agreement with the cabin crew and you see the impact of that in the Q3 result mainly below the operating result of course and we're making quite significant progress concerning the pilots and we're still waiting for pool organized by the VNV, which is pilot union to get the approval of the pilots population of KLM concerning these new scheme. Last but not the least, as you know we're working hard in order to implement IFRS 16 in the beginning of 2018 which is also I think task relatively complex, but we've made a very good progress and we will be ready for the first quarter 2018.

I move to Slide 4, when we give the main KPI for third quarter. Okay everything is green so I think it is just confirming what I said before.

The revenue is up plus 4% and plus 5% at constant QNC [ph]. EBITDA is up 30% operating result as I told above €1 billion, but if you take the lease adjusted operating result when we increase it by one-third of the operating leases; you have €1.1 billion lease adjusted operating result which translates in a margin of 15.3%.

The net result is at €552 million but it is impacted by the de-risking of the cabin crew pension fund as you know the process is that when you move from a defined benefit to defined contribution scheme you're putting out of your balance sheet the pension asset, associated to the decision and in that case we made it in Q3 concerning the cabin crew of KLM pension fund. Page 5 if go to the nine months.

I will not describe all the data, the most important for me is probably the operating free cash flow, we have operating free cash close to €800 million which is an improvement compared to last year above €500 million and the ROCE at 10.5%, you will not observe very end of the table adjusted net debt EBITDAR is 2.4 times which is quite on track with the target of 2.5 I shared with you during the investor day and of course this result is before plus taken into the consideration the soft call of OCEANE. Page 6, how do we explain the improvement?

Okay by definition it's coming by the network which is the main activity of the main business of the group. You will see also it's a quite strong evaluation in Transavia when you have for the quarter and operating result at €164 million an improvement close to 80% compared to last year.

The maintenance is more or less neutral. There is a slight decrease but if you correct the change, it is stable compared to the year before.

Page 7, the network. Good unit revenue 3.7% it is an interesting trend if you go to the diagram on the left of the top, you see that there is trend since Q1, 2017 when we're seeing the unit revenue moving from minus 0.5%, 1.5%, 3.7% but clearly this is quite good trend.

Of course the problem for all the industry will be to us, what is the next step, but I will come back on that a bit later. A very good load factor to be honest, at 89.2% improvement compared to last year, by close to two point which is I think also a quite good demonstrating the capability of revenue management teams and of course of sales people.

On top of the improvement last but you also see a good development of the ancillary revenues posted at €160 million for the quarter an improvement of €20 million which translates in plus 14%. Page 8, the two big steps I've announced in my introduction.

First, the fact the Air France KLM with implement in fact, its new distribution strategy by using the NDC tool which are being developed under the supervision of IATA, we're close to - how do we say, ready for the implementation of the tool. I don't know, the idea is not to stop working with old partners of course GDS are quite important partners for the sales process of airline ticket, but we have also all the partners in the travel agency and the idea is to just take the opportunities offered by these new NDC Technology by offering the possibility to the travel agency to use it, when we'll develop tool to put NDC, if we want to use it in their offices.

And of course because we have also to accept that we have to change some timings in terms of distribution systems. It means that, there will be different channels for selling ticket, one using the GDS where we will have to pay the surcharge and to be frank, Lufthansa and British Airways already did in the past.

And if you're using the new distribution capabilities this time, of course it will be free of surcharge but you have some question, we can answer to that after the presentation. The loyalty program it will be announced next week, the 6th November so next Monday which is a new way to accept to support the passengers which are part of this program.

It will be enriched, it will be more simpler and we will try to open more and more possibility to use the Miles accumulated by the most loyal clients of the group. Back to Page 9, when you look the explanation behind the strong development of the RASK.

To make it short, Asia and Latin America when you see quite positive development plus 8% in Asia, plus 12% in Latin America for the last ex-currency evaluation. Regular performance also on North America in spite of the gross of 4% the RASK is almost double at minus 0.5% it is also compared to some of the competitors, a very good performance and lastly not, which is quite important I will say the fact the RASK in the medium-haul is also increasing which is a bit new.

We have for the medium-hauls hubs which is a feeding [indiscernible] RASK by 4.6% so in total 3.7%. As said before.

For the cargo Slide 10, difficult to say if it is a global turnaround you know that we're felicitating to be too optimistic concerning the cargo, let us turn that Q3 is not too bad we see slight improvement in the RTK which are increasing 0.6% so which is not the fantastic evaluation but at least very positive to compare to what we have seen during the last two or three years. It's clearly something new.

The load factor is improving, but there is still space a variable to believe 57% only. Concerning to unit revenue plus 3.8%.

Here also it is clearly a change compared to what we're seeing in the past, so let us be quite prudent concerning the cargo evaluation in the figure, but what to not, that if you look the difference in evaluation between Q1 whereas the RASK, ATK, so it was 25% and the Q3 when it is at plus 4%. Let us say that for the time being new [indiscernible] coming from the cargo business.

Transavia Page 11, a very good quarter, difficult to not describe it like that. Plus 4% of capacity, 5 million of passenger, capacity up 6% out of all the 3% out of cheaper [ph].

The revenue is up 13% far higher than the traffic which means that, it is reported of course by the unit revenue. We have at RASK at plus 9% and the load factor at 93% during the quarter.

So clearly also a good management of the two low cost companies during bad summer which is by definition the best period. Unit cost up also improving for Transavia minus 4%, so not difficult explain why is the operating result is up 72% compared to last year at €164 million.

Maintenance quite stable when you correct for currency operating margin almost stable and we continue to accumulate some contract, which means that we are already at the target in terms of order book, we were expecting €10 billion in 2017 and we are already at €10.4 billion of order book for the nine months unit of group. Page 13 now to explain the evaluation of the operating result between 2016 and 2017 mainly by the extremely good performance in terms of activity and unit revenue.

You see that in the bar with €266 million of contribution, the unit cost is slight negative at minus €31 million, but I will come to that question in the next slide, share price 61 [ph] but clearly we're benefited during that summer of weak dollar relatively weak fuel and very good commercial performance. In terms of unit cost Page 14, the published unit cost for the Q3 is minus 0.8% if you correct currency fuel price and change intention, we get plus 0.6%, but see again we have to correct for two elements we have already introduce at the end of H1.

One is the fact that when you optimize your commercial results, there is more passenger per seat so the cost of seat by definition is increasing because you have a GDS surcharge, you have catering, you all this type of cost which are increasing the unit cost per seat when the load factor is improving. We have estimated this effect at 0.3% and there is a profit sharing as we have explained already and to be open, the result we post and we expect for this full year 2017 is far higher than we have budgeted.

Because clearly the nature of new development and the demand has been most higher than what we were expecting, so in the budget process by end of 2016, which means that we're putting in all budget profit sharing far lower compared to what we are now obliged to put in the provisions due to the development of the operating result of the two companies. So it's explained why we are profit sharing which is higher than what we put initially in the budget.

But we consider that it is necessary to correct for that and if you correct for the profit sharing on the Q3, you have in total cost reduction of minus 1.6% and if you look for the nine months unit cost evaluation we calculate the unit cost evaluation after correction for the profit sharing mainly in the load factor effect at minus 1.5%. But to illustrate, that in fact what is important is indeed the structural cost evaluation we gave Page 15 the evaluation of the productivity during Q3, if you compare Q3, 2017 to Q3, 2016 the average headcount is down 700 FTEs mainly on ground people minus 1,400 which means that the productivity calculated as capacity in EASK divided by the FTE you see productivity increasing by 2.7%.

And concerning the labor cost, you see that if you exclude the profit sharing in the Q3, the labor cost would have been totally flat compared to last year, so we continue to increase the productivity but its product unit cost is impacted by profit sharing. Page 16 nothing to say, fuel bill which is down €100 million compared to last year as you know the hedging was negative last year, €195 million and slightly positive in Q3, 2017 plus €10 million which explain large part of the evaluation as it should be.

Evaluation of the adjusted net debt and over the free cash, Page 17 and operating free cash flow is €2,800 million almost three times what we had last year. Last year was at €250 million it is steady coming from the operating cash flow.

Relatively limited change in working capital, we're still paying €100 million for the last part of the Voluntary Departure Plan into Air France and the CapEx is at minus €0.7 billion for the nine months prior which is totally in line with what we've indicated to you. So the total is that, the debt was 3.6 it is now 2.8 and if you move to the adjusted net debt, it is now at when it is compared to EBITDA it is at 2.4.

Page 18, I will leave that for questions, but as you know with two deals on pension fund, we will clearly make the balance sheet of the group a bit lighter. In September 2016 the asset and liability coming from pension were in the range of €20 billion, after the deal we had with the cabin, we are now in the range of €18 billion and by the end of December, if we finalize the deals with pilots we will again reduce both the asset and the liability by very a significant amount in the range of €8 billion each both on the asset and the liability.

And at the bottom you see that if you look at the evaluation of the leverage, when we've taken into the account the reserve capital increase in July and the early redemption of the OCEANE, we will allow finally the adjusted net debt on EBITDA between 2.2 and 2.3 pricing that one of the characteristic of this nine months period is that we are both walked on quite new initiative concerning the commercial, which translated in a good performance in terms of unit revenue but also a lot of work has been done concerning balance sheet. Page 19 the contribution by the two airlines.

Both up improving at the EBITDA margin as it is, that is relative margin and there is still that difference that we know between Air France and KLM. Page 21, what is our outlook?

We have indeed for the October, November, December period long haul forward booking still positively compared to last year. We're still plus 3% and 0% for December.

We have already all the [indiscernible] sending the unit revenue for October which will be, which is positive and based on the first info we have concerning the month of November, December and long haul forward bookings, we now consider that the unit revenue in Q4 will be continue to be positive compared to last year. Even in the capacity of the passenger network would be in the range of 3%, 4% and Transavia in the range of 6%, 7%.

Concerning the fuel bill, we expect two effects to be compensated. First effect is the increase of fuel cost and the second is the weakened dollar.

But all in all, we will have on Q4 it should be which is up by $100 million by stable in Euro, after the impact of the weakening dollar vis-à-vis the Euro operating currency, so which means that if we try to finalize an outlook for 2017 first there will be unit cost evaluation slightly negative but between minus 1% and minus 1.5% when you correct for the two effect I have indicated before the CapEx would be in the range, we have given to you at the beginning of the year €2.2 billion. The operating free cash of course before disposal will be clearly above last year and the adjusted net debt to EBITDA which was quite important target for us when we shared it with you will below 2.5 by the end of the year 2017.

A bit early to speak too much about 2018 as we are just for the time being in the budget area size. First point, we're still optimistic when you look at the booking for the first two months of the year as you know for the passengers we have a good clear view between three and four months in advance, so we are for the time being positive long haul forward booking for January and February.

The fuel bill estimation as far as last quarter it increased by $300 million in that is stable in Euro and finally, first estimate of the implementation of IFRS 16 is at the new depth calculated under the IFRS 16 definition will be at least €1.5 billion the adjusted net debt as we consider it today. So it is end of my presentation and now with Erik, with [indiscernible] with of course.

And with that [indiscernible] NDC project to answers your questions. Thank you.

Just a short note, we actually have a group of analyst sitting here at the ING Capital Market this morning we've got Damian, Stephen, Neil, Andrew, Jarrod and myself. I'll start off and you'll excuse us if we kind of follow-on with the few guys from the room.

I'll just take.

Where are you?

They always do nice couple of months, today they have nice coffee and sandwiches, so that's why we are here. Let me start off with few questions please guys.

Can I just ask you because it is bit noisy around you? No problem with that, but don't ask too many question in the same call.

Only one or two.

Absolutely, I'll just do two. Number one during our last discussions you hinted that the new distribution scheme may take a little bit longer now it's moved up to April, any color on why that was faster than somewhat expected your comments during the dinner started a little bit more muted?

And any cost increase around that we can expect for the GD SC, so how much more are you paying to GDS's and when do you think that the bottom line of more direct connections will actually be positive? Thanks.

So we expect that, the first year with the compensation between the increasing unit cost and the GDS surcharge. And that the global effect on the P&L is not for the year one for 2018, but it is positive during year two, so there is an immediate effect which is that we'll pay more to GDS.

This is compensated by the GDS surcharge in total on the P&L it is neutral on the P&L and it is positive in 2019. So clearly there was many amounts which are playing, you have the GDS surcharge, you have the price that you pay more to the GDS, there is a move of the passengers from some distribution channel to another one which is also compensating for the increase of the GDS cost, but all in all the team work on that consider that it is not for year one, positive year two.

What's your target on direct distribution for the end of financial year 2018? So how fast do you think can you move people away from the GDS?

Difficult to give numbers to be honest. It has be checked when progressively the system will be implemented, so to-date it is a bit too early but another way to answer your question, it is that we expect the financial neutrality of that move during the year 2018.

Stephen Furlong here from Davy. Hi, Frederic.

I'll ask one question then. Just the slide you have on the geographical distribution of the unit revenue, can you just talk to that a little bit more in terms of obviously LATAM and Asia is very strong and maybe, US, North Atlantic not as strong.

Do you see this? Why is this and do you see this continuing?

Thank you.

I think there is quite simple explanation for LATAM, America and Asia and that Latin America is mainly driven by the crisis mainly in Brazil in 2016 which has been partly sold in 2017 and for Asia it is fairly explained by the fact that among the market, the most influence by the effect of the tax on France. And 2015, 2016 we have made the biggest impact on the both Japanese and Chinese tourist because this effect is progressively disappearing it explains week-over-week we have observed concerning the both the - from Asia to Europe concerning the North Atlantic to be frank I find you a bit negative if you compare to some competitors I think that the minus 0.5% we have in terms of unit revenue to be frank not to bad and you also see that between the ASK and the RPK we have been extremely dynamic during that summer in terms of traffic.

If I look forward for the time being we are clearly positive. I cannot tell you the reason for 2018 of course but at least if you just focus on what you know, not too bad which is Q4.

We are positive for the Q4 both traffic and RASK on the North Atlantic market, we consider there is still a strong demand and we even expect the positive RASK for the Q4 on the North Atlantic. So clearly I will not be submitting unit value on the result concerning the North Atlantic.

It's Damian here. Damian Brewer from RBC.

Can I too ask one question? Free cash flow looks better, your RASK is looking better, the premium RASK looks good.

Could you talk a little bit more about your thoughts at the speed of the rollout to the best and beyond product and whether you think about revising that now?

No without saying that we have to accelerate plan, we'll of course continue as it is expected, also you know that it is not quite easy to accelerate should enter the process as you know there is some pressure on some ship provider, so we continue to do it as expected by targeting at the first half quarter to be transformed the fleet 330. And we have not yet totally finalized that we'll do concerning the revamping of the cabin of 380.

And the 777 fleet is finished except for the 777 we use to the Caribbean-Indian Ocean but we're working on it also.

Neil Glynn from Credit Suisse here just two quick ones. The first one you're obviously ramping up your capacity growth rate into the winter from 3% to 4% interested in your take as to how much the weight of that may weigh on revenue progression into the fourth quarter relative to the third quarter and where it that capacity ramp actually going.

And then the second question on maintenance your third party revenues were down 1.5% at constant currency, there's obviously been a big growth focus so just interested in terms of the key drivers of the decline and how we should think about progression over the next six to 12 months?

Concerning the [indiscernible] so we are accelerating new contracts, so we expect we're not so worried about the increase of third party revenue. It is true however that I think it has been indicated already in half one there is the feeling that there is more and more pressure coming from the OEM some of them are waiting to take, to enter the market, to develop themselves on the market of the repair.

So clearly when you speak with a guy in the E&M big business of Air France-KLM they clearly are commercial success, but I feel that there is stronger pressure coming from the competition. So that's the idea is we have to grow in terms of turnover but to be sure that the margin will continue to improve or at least will not deteriorate so in the E&M world, it is more or less where we are.

Concerning the evaluation of the capacity during the winter, so it will concerning the long haul push for 0.7%. It is clearly OEM if you look at that by some network to North America and south and Central America.

It is a bit more calm in Asia when it is positive but only 2%. And in Africa it is increasing by 7% which is explained partly by small recovery in West Africa.

In the Middle East it is slightly negative. So in total, we are driving geographical zone of North America, South and Central America and in terms of contribution Africa.

When I look at the network medium-haul, we're growing both in CDG and Amsterdam for the feeding system. Amsterdam a bit more than Air France.

Air France in around 4 and Amsterdam feeding network is more in the range 9%, 10%. And only point to point excluding Transavia of course is stable slightly negative, but we have the direct effect of the introduction of the high speed trend to Quando [ph] which is of course impacting the domestic network of Air France.

But you still answered that question following the, with those ramping capacity growth rates I guess you expected dilution to your unit revenue growth rate because of that?

I was just trying to summarize that. so in fact when you look at the suppliers industry in winter 2017 compared to winter 2016, you see that there is a growth of the ASK operated by the industry, in the same time we have also the feeling that based on the forward booking for example, that the level of the demand remained for Q4.

I'm extremely conscious I just think about Q4 remained well aligned with the capacities. Which means that in spite of sales growth we're expecting for the Q4 positive RASK it is clear for October and it is expected by the revenue management team for November, December?

So the problem is what is coming after, so of course we have not yet committing on something for the full year 2018, but we're just waiting to share with you that the booking forward are also positive compared to last year concerning the months of January and February. To be honest, we have not more info when you speak to the people in the volume management after three, four months for them it is actually difficult to be precise on the evaluation of the booking because the load factor is too low to be frank when you look forward four or five months in advance.

So this is a bit the situation as we can describe bit today. Dynamic in terms of supply of the industry but also of Air France-KLM even if it is clearly they're well managed I think not increasing in terms of capacity and it is not geopolitizing [ph] the evaluation that you need to review for last quarter of the year.

I feel like review is the problem for full scenario for the year 2018, suppose that we have clear view of the balance between supply and demand as usual in all industry.

Frederic it's Andrew Lobbenberg from HSBC. Could you talk a little bit about June that's been a whole lot of stuff in the media focusing on the marketing and then how well that's been received, but with your CFO hat, can you give us a description of how you think it will impact the economics in the winter but more thoroughly into 2018?

You want really my CFO opinion.

Always.

No what is June. June is where to introduce gross in the medium-haul with by hiring new cabin people, with new labor contract.

This is the main point behind June on top of that of course we take that opportunity to say, since we're introducing this new vehicle which is quite close to Air France as you know it can be also an opportunity to be a bit creative in terms of product, in terms of what is expected by new clients or new passengers or younger passengers. To be honest, with respect to Transavia the service what you're offering to the passengers in Transavia is totally different compared to what we're proposing onboard the Air France or even the KLM aircraft of course.

So June is going into that direction, it is a new vehicle which has been introduced to be able to hire new cabin as it is case in Transavia too, it will be on some destinations already operated by Air France. The destination in medium-haul more focused to the new generation because there is some cities in Europe of course which are more attractive for young people.

So it is both something which is important in terms of unit cost reduction, but also domain or field for experimenting something new when to speak to the passengers. Will it be commercial success?

I think that as you know - the what is making flight a commercial success is of course we have to design the good network and good schedule but on top of that, it is the sales distribution you have to sell ticket and as you know the tickets on June would be sell by all Air France-KLM sales organization with the same argument and demand, the same partners, etc., etc. so by definition from it the sales performance will be clearly fully supported by the fact that it will be tickets sold by the fantastic machine of selling ticket, that represents the Air France-KLM sales system.

So which means that in total it is tickets sold by Air France-KLM on the flight which is operated by June. It will not be a big change in terms of sales performance but June it's fairly I think reaching us to reach its two targets.

One is to allow Air France to hire new cabin at labor conditions which are a bit closer to that of the market and so going of course, it opens opportunity to be a bit creative in terms of marketing, in terms of product as we have been some years ago into Transavia. But look at the result of Transavia it's also worth, when you're introducing new product and you sold approximately thanks to the Air France-KLM sales system.

I've just got couple more. It's Anand from Deutsche Bank.

Can I ask on Flying Blue the revamp that you're talking about, can I ask why now? Right now it's saying it's introducing travel credits.

Everyone seems to be really pushing quite hard, is there a specific reason and what you're actually planning to do with Flying Blue. And then secondly on the NDC side, the revamp of KARMA seems to be delivering very good unit revenue.

Is there anything you think where Air France-KLM can be more innovative or do something slightly different on NDC versus IAG in this concern? Thanks.

Thank you. Anand.

I'll give the floor to Emmanuel, we'll she's in charge of this program into Air France-KLM.

I think indeed KARMA having very good results. With NDC the end goal is also to develop what we call dynamic processing that's what I go for and we'll need to adjust the tools to be able to deliver those kind of process to our customer, so KARMA is a very good base but it needs to evolve for sure.

Concerning Flying Blue I think that when we've launched this revamping program idea, well that probably is the system efficient, but a bit old and that we've accumulated and analyze also, remarks from all passengers and the most loyal passengers of Air France-KLM and we have considered that it was not necessary to revamp in order to improve NPS and the acceptance by the passenger, so this is quite important program for Air France-KLM, so clearly the move was not strategically oriented by an event, but more coming as an opportunity to renew a system which - relatively old, without big modification coming from the last year. So however by doing that I think that we had some by-product one is that, we think that we have now quite clear view on the economics on Flying Blue.

As you know it is extremely difficult and to build P&L and balance sheet for this type of business and in the transformation as revamping of the loyalty program because it was necessary to take decision which were economically rationale, we have been quite conscious to walk on challenging some decision of some type of qualification for the passengers based on extremely rationale economic analysis. And the only way for that was to build, which has been long exercise I have to say, clear P&L, clear balance sheet for the royalty program and which is done now.

Even if the debt of revamping not seen as strategic step at the beginning. I think that I will say that it's coming exactly the right moment.

But see that the loyalty business is moving, we see what is happening into British Airways, you see that there's more and more people looking around asking what is happening to have and not to have in a country larger loyalty program, with different partners etc. So I think that from that point of view to have illustrated on the economics of the program and to also make it more attractive to the clients.

I think it's coming exactly at the right moment. I will also that in the revamping of the program we have totally clarified the relationship between the loyalty program Flying Blue and the revenue management.

Today internally Flying Blue is a client of the revenue management. It is not long discussion on what is price for this empty seat.

I will not say that Flying Blue is considered as a normal client, but as I said there is a clear contract based on commercial analyses between the revenue management and Flying Blue. So it's clearly in terms of way of functioning for the future, also I think quite big step.

Can I just ask one quick one? You said you started looking very closely at the financials at Flying Blue and really trying to isolate it.

Of course there is a lot of trends surprising, could you give us an idea of what kind of EBIT that business might be generating?

Not today.

Okay, fair enough. I think we're all done on this.

Not today not because I don't have it, but not today for because I will not give you that today.

Yes, that's fair enough and operator I think we're done on Daniel's name. Thanks.

My first one would be on the unit revenue trend in the medium all point-to-point in Q3. It seems like it's deteriorated in Q3 compared with Q2 if you could maybe provide us with any reason for this deterioration.

And my second question is on the, still on unit revenue trend, but for Q4 you talked about your expectation from North America. If you could maybe give us some color on the unit revenue trend in Q4 for other agents.

Thank you.

Concerning the - how to say that, I guess mitigation on expectation on the North America because clearly focused on network but I will not give you all the RASK evaluation network by sub network. But because of course it is based on some indicators which are how to say that, not 100% sure so we're sure about the reason for the unit revenue global network and because North Atlantic is so important, when you walk off, to eat.

But I cannot give you the good level of certainty of RASK on sub network, so let us keep in mind that Q4 RASK will be positive and Q4 North Atlantic will be positive, so even better compared to what we had in Q3. Concerning the medium-haul which you have bit lower than Q2 in terms of evaluation, it is mainly the problem of domestic trends and mainly the hub company.

So we see do not forget that on the domestic market we have this - how to say that, the impact of the high speed trend which has impacted the roots to Brittany and the root to Southwest and mainly Bordeaux, but of course okay we have two opinions concerning of competition of the high speed trend of course, but it - sharply impacted the evaluation not sharply because it is not too negative number, but compared to the Q2 it has impacted a bit evaluation of the unit revenue into domestic market.

Okay, thank you very much.

And the feeding both in [indiscernible] in the Q3 as a positive. And I will say relatively good RASK, which is good sign because it means that the connection engine seems to have are working relatively well.

Okay, very helpful. Thank you.

Just a little bit on the balance sheet and related. One and obviously it's been good progress on the balance sheet any thoughts in terms of reinstitution of cash returns, dividend anything like that.

And then kind of related, any thoughts on future M&A. thanks.

On M&A as we always speak with bankers to see there's opportunity but there is no to be frank, there is no big fight on the table for the time being. We continue to be active in M&A concerning the maintenance mainly, where there is some project to buy shops sometimes around the world in order to establish the footprint.

In the market but in terms of M&A in airlines today, there is no big things which are cooking but of course it is not an answer for the rest of my life. When we see there is new opportunity then you'll be informed of course but for the time being there is nothing specific to discuss.

Concerning so with dividend, yes I think given answer that if we continue to post years as what we're doing in 2017, I can accept that the question is little redundant will become more and more an accurate question. Is that the correct way to answer your question?

Probably not but.

Okay, so it's something to consider going into 2018.

Okay. I gave my answer already.

Okay, thank you.

I just wanted to clarify on your guidance for unit revenue trends the Q4 - you've obviously talked about some constructive elements to the environment at the moment and your forward looking profile is also looking good. Could you maybe give us a bit more feel for whether positive is sort of means closer to sort of 1% or whether your positive is you're being able to extrapolate the same kind of trends from Q3.

It was question [indiscernible]. And I will give a quite disappointing answer.

Okay. Let us say that the unit revenue is well positive.

Also because we're - last year also October was a bit weak, so we see that in the development of unit revenue in October. For November and December I can only repeat what the revenue management people are updating us, of course we speak with them every time before we sit for conference and they're comfortable to have a unique revenue positive both in November and December.

But they will not commit today for two months in advance to tell us that it is 0.5, 1.5, I don't know what. So info what they're clearly positive in October but taking to account the positive effect of this last year, but I'll not give the final number for October, when we see the development it seems to be okay and November, December.

Yes it will be positive but I cannot give you any number.

Thank you.

Can I just touch on the cost performance, just trying to understand the down trade of unit cost guidance for the current year better? So you mentioned that profit sharing and higher load factors behind headwind but clearly we knew about these headwinds already at Q2 reporting and still you downgraded the unit cost guidance now at Q3.

So just wondering if there is any other underlying cost movements that we should have on the radar screen really. And then, you also gave us some indications of unit revenue trends into 2018, could you please give us some indications on the unit cost targets for 2018, also.

Will be in line with the minus 1% to minus 1.5% framework.

Sorry, I didn't give any indication on the lead revenue 2018. Just to be clear.

2018.

No I 2018 I just give indication concerning the booking for one long haul January, February. I've absolutely not given any indication or the unit revenue for 2018.

It is bit too far, just to clear it is just that in fact we see that the bookings for the time being begin advance compared to the period accumulated well compared to last year, but I've not given more than that. For cost earnings so you need cost, I'll do the same sorry, we are now in the budget area size and it's a bit too early for me to give you any guidance concerning the unit cost, we will do that when we will have money coming from the business and from the two allies, not necessarily to tell you that we continue to put really pressure by indicating to unions to management that of course the cost reduction has to continue being one of priorities.

And then yes sorry, and then on the units revenue 2017, when it is an internal war with ID [ph] before we present the slide as it is, forecast of operating result in July is lower compared to what we will finally post in 2017. And in fact during the summer we have continued to increase the full year forecast internally which means that we have, it has been necessarily to continue to provide in the books for the profit sharing which have increased between the June numbers and the to-date numbers.

Which explained why we think it is appropriate to give you these evaluation of the unit cost after the correction for profit sharing? So this is the reason.

To be honest, the main reason of all season quarter difficulties to interpret. It is just coming from the fact that beginning of the year the forecast for the full year 2017 was clearly lower compared to what we will post finally.

And it was also true by the end of F1. When still the forecast was significantly lower compared to as the numbers we'll finally post in the full year.

So we continue to run after the forecast and as the consequence we're also obliged to continue providing for the profit sharing.

So nothing unexpected beyond the profit sharing.

No, I see your point. Look at the positivity you think that difficult to interpret as we're at positivity, but you see that the result in the two company in Q3 is I will say positive, when your positivity both in Air France-KLM in terms of EASK per FTEs I think it is a good news, so - again for 2017 we gave on the Page 15, so what is in Q3 the evaluation of the labor cost excluding the profit sharing, you see that it's reasonable and there is no surprise and let me check.

I compared it actually in profit sharing, but - yes and when you look at the salary year-to-date this is compared to last year 2% of which as you can see in the Page 15 probably relatively large part is related to the profit sharing. So the FTEs are down, there is not increase paid by FTEs which is visible when you look at the salary and related cost.

So I will say that for the time being I have no news from that side to tell you that we will not control the productivity of the - we expect structural increase of the labor cost. After that we have to manage with EMEA [ph] and you know there is some contract sometimes escalation which are quite high to be honest, I will be happy to have same escalation in the price of the tickets.

There is - the growth around the volume in terms of GDP as explained by Pieter Elbers is for example putting some pressure on the hotel price of course for the crews around the world, so clearly there is a bit more inflation due to the GDP world gross, so clearly we have to deal more carefully with your suppliers and there is some suppliers they're trying to take the benefit of the situation to increase that price, but let us say that. If you look at the positivity of the FTEs, Q3 but I think it is the same if you look nine months.

If you look at the development of the labor cost excluding profit sharing both in Q3 and on nine months. I think that we can share with you that - I will say it is under control, that there is no reason to be - to see internal cost.

So I think it is 9.30 lot of your colleagues have left for the BA Investor Day, ING sorry, investor day. So I think it will be just normal to stop now that we lost significant part of the attendees.

So thank you to everybody and I give you for the next meeting, yes which will be in 2018 because the full year result of the year 2017. So thank you for your presence and your attention and I wish you a nice day.