Air France-KLM S.A.

Thank you, operator. Good morning, everyone.

I'm here today at Air France-KLM's office near Charles de Gaulle Airport here in Paris with Steven Zaat, our group CFO. We would both like to welcome you to the Air France-KLM's Third Quarter 2021 Results Call.

I'd like to start off by thanking all of our colleagues at all airlines in our group and business units for the incredible hard work and dedication they continuously display throughout this unprecedented period. It goes without saying that the COVID-19 crisis is far from over with many destinations, including much of Asia remaining closed.

It is also positive to see that the demand for travel continues to be strong. And as expected, we are seeing leisure travel resume more quickly than business travel.

Since the height of the crisis in the second quarter of 2020, global capacity has been continuously on the rise and has now reached 60% of 2019 levels. In this context, the recovery, the Air France-KLM group has had a better than expected summer season, thanks to the Group's balanced network, including our strong position in France as well as the large inbound tourist market that we enjoy here coming into France as well as the geographically well positioned and efficient hub in Amsterdam, the continuation of strong cargo performance and the reopening of countries such as Canada in September.

Another point to mention is that KLM has been able to restore service to the bulk of its 2019 destinations, albeit at lower capacity levels. KLM has operated the highest capacity levels versus 2019 of all European carriers.

Overall, the passenger network capacity was in line with our guidance provided during the second quarter 2021 results presentation. So turning to Slide 3 of the presentation.

We continue to closely monitor global demand for and accessibility of travel and are seizing every opportunity we see. Air France-KLM's network passenger capacity reached 66% of the benchmark Q3 2019 levels for an overall load factor of 65%.

I'm pleased to note that we carried 93% more passengers than last year in the same period. Our agile and opportunistic approach generated strong revenue growth, with group revenues increased -- increasing by 81% compared to Q3 2020.

For the first time since the beginning of this crisis, our Q3 results showed a positive operating result of EUR132 million, representing an improvement of EUR1.2 billion compared to Q3 2020. Moreover, after the announcement in September regarding the reopening of the United States borders to European citizens, starting November 8, we are already starting to see a strong uptake in new reservations in our most important market.

A few words on Transavia. Over the busy summer holiday period and thanks to the new flexibility we have at our leisure carrier, thanks to the agreements with the Air France pilots, we nimbly adapted our network to accommodate high leisure demand from the Netherlands and France with increased capacity to Greece, Portugal and Spain and with 10 additional aircraft added to the fleet in the first 9 months of 2021 as part of the growth strategy of Transavia France.

The outcome was positive with an operating result for Transavia at EUR105 million with a 20% margin approach in Q3 2019 levels. Transavia is the cornerstone of our French domestic transformation.

I'm pleased to advise that this transformation, which is critical to the future of Air France is moving ahead of schedule. Overall, for the second quarter in a row, the group adjusted operating free cash flow is positive, coming in at EUR278 million, thanks to a positive EBITDA of EUR796 million.

We've also been hard at work on reducing our debt profile. And in the first 9 months of the year, the group's net debt has decreased by EUR2.9 billion or approximately 27%.

Our continuous efforts to lead in the recovery through excellent customer service and the highest health and safety standards have also been recognized. Along these lines, I'm very proud to note that Air France was recently awarded best airline in Europe in the Skytrax World Airline Awards for 2021.

So moving now on to Page 4. Overall, Air France-KLM is doing its utmost to revitalize travel in all areas, including corporate travel, through stimulation of the more resilient customer segments and by gaining additional market share when and where possible.

To do this, we're leveraging all tools at our disposal, such as demand of our corporate accounts through better, more tightened relationships, leveraging the SME segment resilience through a dedicated program we call here Bluebiz, which we are enlarging, and this program also offers various promotional opportunities. And finally, we're listening to the change of priorities of many of our customers, reacting accordingly, adapting commercial flexibility and leveraging our strong differentiators, such as our commitments to sustainability, which we'll be translating to dedicated, sustainable aviation fuel offers.

Our surveys show that our corporate customers value their relationship with us and give us high scores regarding their experience with our airlines. So moving now on to Page 5 of the presentation.

In complement to our actions in the corporate travel segment, we are also fully leveraging our traditionally high proportion of what we call premium leisure traffic or leisure customers who travel in the first class, business class and cream economy class cabins. We are very fortunate to count roughly 50% of our premium customers, which is much higher than our competitors.

And just to restate that because we find that it's a huge, huge advantage for Air France, Air France-KLM is that 50% of the customers purchasing tickets in our premium cabins. So La Premiere first-class business and premium economy are flying for leisure purposes.

This is a true asset for the group since leisure travel is the fastest recovering segment in today's environment and is important again that I mentioned the importance to have a base in France, the largest inbound tourist market in the world. Now this stat, 50% premium customers in the premium cabins was based on 2018, 2019 numbers, and we expect to see that even rise this year, next year going forward.

Thanks to these customers, we have been able to backfill our premium cabins with pent-up high-yield leisure demand, which translates into a load factor gap between premium and economy cabins that are at the same level in the first 9 months of the year compared to the 2019 benchmark. Furthermore, the Air France-KLM group is increasing its flexibility to derisk potential exposure of its business class by selectively implementing the quick change option, which allows us to quickly and nimbly resize the business cabins on our long-haul fleet.

Today, 30% of the Air France-KLM long-haul fleet is already equipped with this option and can make the switch in half a day. At KLM, our business class cabins are relatively small, giving us less exposure to the change in business demand environment.

Turning to Slide 6. Air France-KLM is continuing its efforts to reduce its environmental footprint as part of a transparent and responsible approach to the challenge of global climate change.

In this respect, through the Science-Based Targets Initiative for SBTI, the group has committed to set a science-based target in line with the Paris Agreements. This new commitment comes in addition to our goal of Zero Net emissions by 2050 and sets a new CO2 reduction target for 2035.

Through this commitment, Air France-KLM will ensure that its sustainability transformation is aligned with climate science in a transparent and externally approved manner. Turning to Page 7.

Additionally, the group has requested a solicited ESG rating by Standard & Poor's to objectify the Group's ESG profile and enhance its strategy and practices. This is the first public ESG evaluation on an airline.

The evaluation of 64 reflects that Air France-KLM, 1, demonstrates its capacity to make swift decisions, is adequately prepared to manage risks in the near to medium-term and competes well with the airline industry with regards to its significant exposure to environmental challenges. For instance, it's Scope 1 carbon intensity of 929 metric tons of CO2 per EUR1 million revenue is 15% below the global industry median and should further reduce.

Air France-KLM performed particularly well on its environmental profile with strong score on greenhouse gas emission, waste and pollution and water use. This ESG evaluation reflects our clear environmental commitments and sustainability strategy.

Overall, the Group remains very agile and continues its transformation with the objective of improving both our economic and environmental performance. I'd now like to hand over to Steven Zaat, who will provide further details on the quarter three 2021 financial results.

Good morning, everybody. As you can imagine, I'm quite satisfied with the continuation of the recovery.

It's actually even better than what I expected when I was in our last analyst call. If you go to the picture left, you see actually that before June, we were at capacity levels below 50% and with load factors, around 40%.

And you see that actually, recovery is starting strong in June, where we get to 50% of capacity and 52% of load factor. And then you see a very, very strong quarter three.

You see, in July, we had a 67% capacity. And in August, it was 68%, and in September, we scaled back slightly because the summer was actually over.

So that's 62% still in September. And that goes hand-in-hand with a very high load factor.

It's not, of course, at the levels where we used to in 2019, where we were close to 90%. But in Q3, in July, we were at 63%.

In August, we reached almost 70%. And even in September, we had a load factor of 63%.

If we then go from markets to markets, then you see that on the long-haul, we increased the capacity in July to 65%, especially, of course, since the opening of the U.S., we see strong bookings coming in, of course, more for the end of the year, but it had a positive impact, not only on the U.S., but actually everywhere. It has been seen that actually the travel policy, where you can travel when you are vaccinated, is going to be the norm, which helps us also, for instance, if you see on a route like Singapore, which is now also open for vaccinated people.

So in July, we had 65% in capacity, the same in August, and we scaled slightly back in September with 61%, with a load factor of 61% to 65% of the quarter, which is very strong given the current cargo market because the cargo market supports these flights. So the yield is still stronger than where we were in 2019.

So we can easily operate these long-haul aircraft with -- in this context. I'd like to remember, again, that 75% of our flight contribution is coming from the long-haul.

Then if we go to the medium-haul, you see a very strong uplift in terms of capacity. We are reaching the levels of around 85% in August.

And also there, you see it goes hand-in-hand with a very strong load factor. So we are at 71% in July on the load factor, almost 80% in August and 76% still in September.

So demand is picking up. We are not yet fully at the 2019 level, but we are getting closer on the medium-haul.

Then on the France domestic, it's a little bit a different picture because we want to reduce capacity over there. That's actually our strategy.

So of course, we will not get back to the 2019 numbers in terms of capacity. But you see that the load factor is actually reaching already in September, 2019 numbers.

So what we fly is quite full, and I took some flights this summer to Nice, and I can tell you that the flights are actually very crowded in that market. So I think the recovery is starting.

It's a very good signal, not only for Q3 but also for Q4, where we see stronger bookings getting in every week. Then going to the next slide, where we will spend some time on Transavia.

First of all, I want to give a big complement to both Transavia teams. As we discussed in the previous call, it started a bit difficult because all the tourist destinations were actually impacted by COVID.

It was in Portugal. It was in Majorca.

It was in Ibiza, it was in Greece. But nevertheless, you see the pickup of the activity.

We were at 85% of the capacity of 2019 with actually a load factor close to 80%, and we even could increase the prices. So we had a 6% higher yield than which we had in 2019.

So for me, this is, again, a proof that the vaccinated travel policy of the EU is working and boosts our demand. And this result at the end of the day that we have an operating result above the EUR100 million for Transavia, which is a margin of 20% approaching the 2019 levels where we were close to 2 -- sorry, 25%.

So by adapting the network, especially to the holiday destinations in Greece, Portugal and Spain. We had a tremendous result in Q3 for Transavia.

We received 10 aircraft, so we will continue on this path by taking advantage of this very effective tool in our group. If we then go to Page 11, what is very interesting to see is, actually, you see that the capacity was around 40 million ASKs per quarter.

And in Q3, we ramp up, we always ramp up in Q3 because it's the best quarter for our business. But you see actually that we are getting close to the Q1 2020, where we left actually the pre-COVID levels.

Of course, you cannot compare Q1 with Q3, but it's at least good to see that we are at the same time of activity as business as we were before the crisis. In terms of group revenues, we increased our revenues with 70% year-over-year.

55% is coming from more capacity and 20% is coming from more load factor. And I think that is a very, very strong signal because that means that the planes, which we have already in place, flying are filled better, and the additional capacity is also filled with a higher load factor.

And then actually, the contribution to our bottom line starts as we have seen now that for the first time, we have an operating result, which is positive. So I think it's very positive news also for the outlook of Q4.

I will come back on that later. But I think that the revenue development is much better even than what I expected in the beginning of this summer.

If we go to the EBITDA development, what you see actually, of course, after, what is it, 1, 2, 3, 4, 5 quarters of EBITDA losses, we are now at an EUR800 million EBITDA. We guided the market that we would be positive.

But to be honest, it was even more positive than what I expected in our Q2 call. But the EUR800 million actually drives out actually all the losses of Q1 and Q2, not fully, but we still have a small loss, but it drives almost about all these losses in EBITDA.

And as we expect a positive EBITDA in Q4, we will be EBITDA positive for the full year. And I think that is a very, very good news.

Of course, it depends all what happens with COVID, also what happens on the fuel price. But as I will explain later, we are quite effectively hedged for Q4 and for the quarters to come.

So with this positive EBITDA and not a slight positive EBITDA, but really a strong positive EBITDA, I think we are showing that we are getting back on track. If we then go to Page 12 to our usually KPIs, so as you can see, we have a EUR2 billion increase in revenues.

To be honest, if you compare that to 2019, Q3, we are still EUR3 billion below. So we have still a big, big, big jump to make.

On the fuel expenses, you see the only red side in our presentation. The fuel expenses is 50% is related to the capacity increase, and 50% is related to the pricing increases, where we had a very effective hedges, close to 70% of our fuel bill was hedged in the third quarter.

On EBITDA, we made a jump from a negative EBITDA of EUR442 million to a positive one of EUR800 million, so EUR1.2 billion up. But of course, also here, we still have a gap to close compared to 2019.

And then I think operating results which is always our main KPI on the financial side, we see for the first time since the crisis that we have a positive operating result of above EUR113 million. So coming from a loss of more than EUR1 billion, we actually improved our operating results with EUR1.2 billion.

And of course, again, of course, I know you can remember me that in 2019, we made EUR900 million. So if you look at the road where we are in recovery, I would say we are at 70% in terms of financial results, which is very good news for the moment.

Then, of course, the net income increase with the operating result, but another good win is that our adjusted operating free cash flow for the second time in a row is positive. So we had an almost EUR300 million positive free cash flow this time, not coming from the working capital because in Q3, usually, we don't sell more tickets than what we fly.

Actually, it's the reverse. We fly more tickets than we sell, but despite that, due to the strong EBITDA performance, our operational cash flow was positive, and even if we include our CapEx.

So very strong operating free cash flow also in the third quarter despite the fact that we, of course, don't sell that many tickets compared to what we fly. If we then go to Page 13, then let's start on the network side.

So as you can see, with the increase of capacity and the increase of the unit revenue, especially driven by the load factor. But also here, it's good to see that on the yield side, we are still doing very strong.

We increased our revenues with 122%. Then another good news is that despite the fact that we increased our capacity on the passenger side, which increased, of course, also our belly capacity, we are still able to get a very strong prices in the cargo market.

So our unit revenue is even up. And we know that in 2020, there was very limited cargo capacity.

You see actually that the situation continues in 2021 on which we benefit significantly. Then we go to Transavia.

You see that we are at EUR105 million operating result, as already explained. It's quite a good number.

We are getting closer also to the 2019 number where we were at EUR170 million. So we are on the path of recovery towards the 2019 level.

And last but not least, our dear maintenance operation, we saw that we had a hard time during the crisis. But for the first time, also the maintenance activity is contributing to our operating results with a EUR29 million profitability.

So all in all, all the numbers are here on the green side. So as you can imagine, I'm quite happy with these results.

If you then go to the next slide, if you compare Air France and KLM. So let's start with Air France.

We are not yet there fully but we have a positive operating result. We have a positive EBITDA.

KLM is already performing very well with EUR170 million operating result. If you look at the gap, there are 2 main effects which explain the gap.

First of all, the NOW system in the Netherlands is stronger than in France. That explains around EUR100 million of the gap.

And then second of all, especially the implementation speed of the voluntary departure plan and the higher flexibility on the labor brings KLM already further than Air France. But I'll come back on that later when we talk about restructuring, but it's also good to see that Air France is getting closer to breakeven results.

Then on the net debt, as already explained, we have we have a recapitalization in place this year. So that brought the net debt of Air France down.

We are currently discussing with the Dutch state recapitalization on KLM, so that would also bring further, the net debt low. But the good news is also that without any recapitalization, KLM had a positive contribution to the net debt.

Then on Page 15, you see our free cash flow, so EUR600 million coming from the operations, change in working capital contributing only EUR240 million. Of course, when you increase your capacity, you have all kinds of suppliers, which has a positive impact on your working capital.

CapEx, the net investment is still very modest. It's even lower than what we had in Q3.

We had an A350 delivery and an A220 delivery, but we are very modest in our CapEx expenditure, both on the maintenance side, so have -- we use all our green time of our fleet at the most as possible. And also on the ground, we are very, very modest in spending any CapEx.

We have all the committees in place to make sure that the CapEx discipline is there. That brings us to an operating free cash flow of around EUR500 million.

And then if you adjust it for the payment of the lease debt, we get to EUR278 million. Which brings us to Page 16.

So we still have, in total, a negative free cash flow over the 9 months. But all in all, you see that the net debt has been reduced from EUR11 billion at the beginning of the year to EUR8 billion at the end of the year, mainly coming from the capital strengthening, but also you see that we don't have big impacts anymore coming from our cash flow development.

On Page 17, because I think this is a very important page, we show you what we are all busy with in terms of strengthening our balance sheet. So let's first start on the page here.

We had a State-guaranteed loans of the French State of EUR4 billion, which we needed to pay in 2023. We will -- we have discussed with all the cadet committees, and we have the approval of all the credit committees to re-profile this redemption and to pay back EUR500 million in the coming weeks.

So how did we re-profile this redemption? We go from EUR4 billion to EUR3.5 billion because we will pay back the EUR500 million.

And then we will pay EUR800 million in 2023, EUR1.3 billion in 2024 and EUR1.3 billion of 2025. In the appendix, you can see the repayment profile of all our debt.

And you see it smoothening to more normal pattern than what we had at the beginning of this crisis or what we had before we made this deal. So I think this is very good news.

We re-profiled in such a way that when the recovery is there, we can repay these loans. You see that we have a very strong support of all the Air France-KLM banks in this PGE.

So there was actually no big discussions to re-profile this PGE. And I think that shows actually that there's big confidence in our trajectory.

As already discussed last time, we have the EMTN program in place to do anything on the debt capital markets. And what is very good news is that we have now the ESG ratings, which is more positive even than what we expected, which gives us leverage also to get all kind of money from institutional investors who are looking for a certain ESG rating.

So I think on the liability side, we have done already actually what needed. Then on the equity side, because I know there is the big, big question.

Let's first start to say that we have no liquidity crisis. We have EUR10 billion -- more than EUR10 billion of available cash, and we are looking at the right moment to take the action.

So it depends really on what is the market conditions and what is the right moment to place such a right issue. So first, we have discussions with the Dutch State on the recapitalization measures of KLM.

The discussions are going fairly well. I cannot tell you more about that at this moment.

And further, we are prepared to do anything on the right issues and the clarity equity. And we have the AGM approval for this.

So we are looking for the right moment, the right timing. We see the recovery is starting.

And when the moment is there, we will execute, and we are ready for that. If we go to the outlook, as you can see in Q4, we will see that the recovery will continue.

We are now at -- we guide you to 70% to 75% in terms of capacity. If you look at the load factor, you see that actually currently already the booked load factor, and the month is not yet over, it's already at 73% for the French Domestic domestic, close to 70% for the long-haul, and above 80% for the medium-haul.

I was here that Charles de Gaulle today, and I was even having a traffic jam towards the airport, so that is very promising. And if you look at December, you see that we are even -- there's only a gap of 10% in forward bookings.

So there is -- actually, we are getting to the numbers, and it improves day-by-day since all the announcement. And of course, the fact that Joe Biden gives exactly the scheme and what are the conditions to fly to the U.S., that has immediate impact on our bookings.

So we are prepared, of course, to vent up further if needed, but the bookings are coming in much better than what we expected. On Page 20, you see the cash at hand or the available cash.

So we have EUR8 billion on the banks, and we have still EUR2.5 billion of loans, which are undrawn on the KLM side. We will pay in the coming weeks, the EUR500 million back on the PGE here, so then we get to EUR9.9 billion.

So we have a very strong cash reform. For Q4, we expect to be positive in EBITDA, which brings us actually that on the full year, we are positive in EBITDA, which I think, again, is a good news because it means that on our operation, we don't lose any cash for the moment.

Then on the potential refund also there is good news to mention, we had a risk of EUR1 billion at the end of June. We are now closer to EUR700 million.

We have still EUR450 million of vouchers open. But actually, the refunding of that is going very, very slowly.

So also in the third quarter, we saw that there are not a lot of requests of these vouchers. So it reduces the risk, and we will see where we are at the end of the year.

Then on Capex, we guided you in the previous session at the level of EUR2 billion. We are currently estimating at EUR1.5 billion.

One reason is that Boeing 787s are expected to be delayed again. So we push that to next year.

But we see also, again, as I already explained, that especially, we use all the green times of the engines. So we have a very limited CapEx spending.

That's why we guide you now to EUR1.5 billion instead of 2 billion. And then on the restructuring cash out, where we had a guidance of below EUR500 million, we have now actually -- the full number inside, we will spend around EUR300 million.

The lower cash out is not coming from a less ambitious restructuring because we have still the same number of FTES, as you can see on the next slide, but we see that is much cheaper because we have more people with early retirement than people who are younger in their age and leaving the company, which is also good because it means that the younger people are still staying to support us in the recovery to come. Then on the fuel bill.

We have seen a very, very, very dynamic market on the oil price. You have seen that I think, all.

What you can see, if you look at Q3, we were hedged at 68%. So close to 70%.

What we are trying to do is always to be, for the next quarter at 70% of hedges. And we didn't expect so much capacity increase in Q4, you see that we had 61% in Q4, but that brings still EUR200 million in terms of hedge result.

So for 2021, we have a positive hedge result of EUR350 million. But we expect, if the price stays where it is in Q4, and for the coming period, you see we have quite some hedges in place already for Q1, 22, 57% and 42% for Q2.

So we have currently an hedge portfolio, which also brings a positive impact on our bottom line of $300 million. Then we go to my last page, and then again hand over back to Ben.

So as you can see, we still confirm our restructuring program, EUR2.1 billion of -- at the end of 2022. KLM is already there with EUR800 million.

For Air France, the EUR1.3 billion, welcome, I have been in that team, and I've seen all the actions we have taken, for instance, if you look at my own finance department, we get more than 30% of the job. So it's all starting to kick in.

And you see that also on the FTE side, we reduced the number of FTEs by 17%. KLM is already there.

They're even already further, but they will need to hire some flexible staff for the coming period. But Air France is already now at 7,200, which is 14 -- more than 14% or their staff.

So the gap is actually very small to close for 2022. We are preparing for a next transformation.

For the years, actually, especially a focus on 2023 and 2024, but I will give you more beef on the bone when we are getting there. So this is my optimistic and positive view of the third quarter and also the very promising fourth quarter, and I hand over the word to Ben Smith for the conclusion.

Okay. Thank you, Steven.

So just quickly in conclusion, before we take your comments -- your questions. So you're seeing an improved performance, thanks to the Group's agility, our ability to capture higher demand.

Very impressed with how the Group and how the individual teams were able to shift focus to the Mediterranean Basin during what typically was always -- historically, it was always a leisure period. So that was positive.

The continued restructuring efforts and further steps considered to strengthen the balance sheet, as Steven just mentioned, not easy to have a big job reduction program at Air France like what we've just seen over the last 18 months. So by the end of the year, 17% reduction is something we're quite pleased with without any labor disruptions.

And then finally, new commitments to execute our ambitious environmental road map. So with that, why don't we open the lines for questions.

And I'll just hand the call back to the Operator.

Three from me, please. First of all, on your yield performance.

So it's saying that it's higher than 2019, but can you please break that down a bit? So what are you seeing in different customer segments, cabin classes, the affected the booking window?

And do you think you can sustain this performance going forward? Second, on your fleet plan.

So I know you said the a A280 isn't coming back, but how you think about other potential phase outs of aircraft across your fleet? And how should we be thinking about the evolution of the total long-haul, medium, short-haul fleets over the coming years?

And then third, please, on corporate programs and loyalty. You mentioned Bluebiz earlier on.

Could you please expand on what that is doing for the group? And then related, are there any changes that you think you need to make to flying blue as we kind of get into the post pandemic world?

So on the yield side, actually, you see that we have more or less the same yield as we had in 2019. So that's actually to start with.

If you look at the different classes, but there is always in this yield -- the problem is there is a lot of mix impact. So it depends a lot if you fly to Asia or if you fly to the U.S.

also because we measure yield also on the passenger kilometers. But where we are currently, we are on the long-haul, we are at 1.1%.

And there is around 7% difference between the business and the economy. So there is a small yield gap, but still, again, I think we are reaching the levels of 2019.

And what we should always is that Q3 especially is more a leisure market. So that is also different than where we are in the business season.

And Alex to continue on your other 2 questions. So on the fleet side, starting with KLM.

So the 747s that we have at KLM have all been retired. They will not be coming back.

We do still have some 747 freighters. The long-haul fleet at KLM will be centered around the 2 fleet dudes, the 777, both the 300ER and the 200ER as well as 2 models in the 787 family, the Dash 9 and the Dash 10.

And because we have a similar number of units at each fleet type, we're able to have a dual qualified pilot port, which makes the long-haul fleet at KLM extremely efficient. We do have some remaining A330s that we're using at swing capacity that over the next few years, can stay in the fleet or eventually, for sure, they will be leaving the fleet.

So that's our swing capacity at KLM. And then we have a 737 narrow-body fleet with several different models, the 700, 800, 900, and may form part of the narrow-body tender that we currently have out to replace those airplanes as well as expand and replace some of the aircraft at Transavia France as well as replace and help expand some of the aircraft at Transavia, Poland.

At Air France the 380s and the other 380s and the Airbus 340s have been permanently retired. Both those freights, if they were to have stayed in the fleet required an extensive passenger product retrofit, which we decided not to do.

The 777-300ERs at Air France, have 43 of those airplanes. We're reducing the number of configurations to simplify.

We're 3 quarters of the way through that program. We had put it on hold when the crisis first started.

We've resurrected that program. And by the end of next year our 777-300 fleet will be fully retrofitted with the latest products.

And obviously, we are starting to see some of those benefits through the recent Skytrax win. We have a fleet of 777-200s, the aircraft that are leased are heading back to the lessors.

We had 25. 10 of them are leased.

We have 15 that are owned or will shortly be unencumbered. Those 15 airplanes are swing capacity for us.

We'll see how it goes over the next few years. We'll either ground them if necessary, we'll fly them in low utilization or if demand ramps up quickly, we will fly them back at utilization levels that we had in 2019.

So the 777 side of the Air France fleet, we've got a lot of a lot of good flexibility, and the product offering is solid. We, of course, have our A350s that are coming in by the end of 2025.

We'll have 38 of those airplanes. We did slow down delivery of those airplanes last year, this year and next year.

And we do still have some flexibility on pushing out some of those deliveries. But we do plan to maintain our goal of having 38 of those airplanes in the fleet by 2025, the end of 2025, early 26.

Something we do have to decide at Air France is the small, relatively small 787 fleet. We do have 10 airplanes at Air France, not -- of course, we've got the 787s at KLM.

So either this fleet has to be expanded or removed. So if we do decide to remove the fleet from Air France, one of the options is to transfer them to KLM, which eventually will need airplanes were to replace the A330s, or send them back to lessors.

Some of those airplanes are leased, and those leases will be coming up in the coming years. So we have some options with the 787.

And when I say we either can transfer them to KLM, let the leases go back, and those are planes that are always in demand because they are GE powered. We could put them on the market.

We do have eventually the need to replace the A330 200 fleet. So along with the 777-200s that are aging or form part of our Flex suite with the A330s, that will make a decision on whether we expand the 787 fleet at Air France.

So we think we're very well positioned. We have not committed to replace the entire fleet.

We've got good flexibility to deal with whatever the demand is over the next 2, 3 years. And then we are -- in terms of what we're offering from a customer perspective, very pleased with the customer offering that we are at the market or above market.

And then just quickly on the Air France narrow body side, we have currently in the fleet, over 100 Airbus narrow-body family, so 318, '19, 2021. We did place an order prior to the crisis to replace the 318 and 319s with the Airbus A220, which is a delivery of our first aircraft.

Very happy with that. Working with our partner, Delta and also talking to Swiss, which is right next door to us.

This airplane, we think, is going to outperform what we have planned, both from an efficiency, environmental perspective and then, of course, from a customer experience perspective. The Airbus 320, 321, I'm just going through this whole fleet because I think there's been asked a lot of questions, but hopefully, some of the others on the line, will be able to get there the 320, 321s, those are yet to be determined what we do there.

And last point, sorry, and then I will move on to the next question, is the flexibility we now have with the Air France pilots. And this is very, very key because it's been the cause of some very big labor dispute Air France in the past.

With the new agreements we've signed give Air France the flexibility to grow Transavia, and we have flexibility on how that growth is balanced with Air France. That positions Air France to perform in a much, much better rate than it did prior to the crisis.

And we can go into those details perhaps in another call. So thank you for that patience, everybody is on the call, but I know I've already been sent a lot of messages on the fleet.

I thought it would be good to just go through it all. And your last question regarding Blubiz, it's our program for SME.

We introduced that prior to the crisis, and it's proving to be a great asset that we have, and we will expand on that as we move through the next quarters.

So on Slide '19, you've shown long-haul bookings compared with 2019. I was hoping you could give some color on what you're seeing specifically on the trans-Atlantic bookings right now compared to pre-crisis levels?

Then secondly, on the fuel hedging slide, you have a percent of consumption hedged, but we don't know planned capacity for '22. So how should we think about that?

And then on staff costs, can you talk about what's the impact on staff costs from the end of the NOW program at the end of September? And what is needed to get to the FTE reduction at Air France?

And what makes you confident that you can achieve it?

Okay. So I'll take the first one.

Steven, take the second, and then I'll come back for the third. So the trans-Atlantic, when Europe reopened to U.S.

citizens, U.S. residents, we saw an incredible return to demand this past summer.

And as I said, in France, in particular, high end leisure demand. We're quite pleased with that, but very frustrated that it was only available in one direction or 2 halves of our base.

Now that on November 8, the borders are going to open to European citizens, and what we're seeing over the holiday period, very strong bookings. So it's clear to us, there's a lot of pent-up demand from those that have not been able to travel over the last 2 years, very, very strong demand.

I would say, either at levels that we saw in 2019 are just slightly below. This is just for the mix for the short period.

It's too early to say whether this is a 1-time, get back to see family or friends and will that return to what we saw in 2019 in the first quarter. But what I'm pleased to say is at least for mid-November through first week of January, we're very pleased with the demand.

But again, is this just a 1-time surge because of the pent-up demand. We are, however, well prepared for a strong mid-season in 2022.

As I said, we've got the flexible fleet. We are putting out a lot of capacity for sale.

We do have the flexibility to adjust, but we are quite confident that the trans-Atlantic in terms of international markets will be the first market to return to 2019 levels. And then Steven, on the fuel hedge.

Yes. So first, on the capacity side related to the fuel hedge.

So as you see, we don't give any guidance for 2022. So we guide to 70% to 75% for Q4.

So we still pick up in terms of capacity. For us, the big unknown is what will happen in China and Japan.

So it's very difficult to guide on 2022. Of course, we have an internal scenario.

So that is where we base our hedges on, but I cannot give you any further details on the capacity development in 2022. If we then go to the KLM, so the NOW that ended actually here with this quarter, but even without NOW, KLM is able to reduce the staff cost with 20%.

So that is very strong. And then if you ask me, how are you so secure on the transformation on Air France?

I joined -- I was in the team when we built all these plans. Below this EUR1.3 billion in Air France, they are really projects.

So it's not something that we have just targets or anything. It's real projects, which just need to be executed.

It is in the execution. But for instance, when you look at the voluntary departure plan, there are still people leaving in the coming quarter.

So there are 2 things happening. First, there is a timing of the people are leaving.

And then when you will see the impact in your P&L. So I'm pretty sure on the EUR1.3 billion on Air France, and we are currently already working on bigger and increased transformation.

But we'll get back to you in the coming sessions.

And I think 1 last point to add on the Air France transformation, in particular, the French domestic market transformation, which was the biggest market -- the biggest loser, the biggest segment loser in the Air France system prior to the crisis, almost EUR200 million in losses in 2019. A big portion of that was made up of the regional hub operation that we have, Air France Hop.

And so we have resized Hop. We are reducing the fleet down by 50%, and we've canceled all flying out of the domestic airport Orly, and only Hop right now is solely based at CDG for seating purposes, and we have a small hub in Lyon to maintain our market position there, strong market position there.

Transavia is filling up the freed up slots at Orly with French domestic flying as well as European flying. We did not participate in that, we did not have any European service -- business market service out of Orly prior to the crisis.

So using the Transavia model that we have on some of the big volume markets like Barcelona, like Lisbon into Italy, we're now able to competitively compete against some of the lower cost carriers from a slot constrained airport. So we think we've got a good formula there.

And we significantly reduced the non-Paris flying. So flying we call it [Foreign Language] here in France.

So flying -- on the secondary French reduced to other French secondary cities that, of course, was a big money losing. So we're seeing already a big turnaround in domestic France.

And of course, as we replaced Transavia in domestic France, all the associated Air France infrastructure is coming out. So that is the ground services, the maintenance, which is all outsourced as well as the cabin crew at Transavia are at market rates, and we do have an extremely competitive private deal.

Suffice to say, I won't be requiring any more detail on fleet plans, but I do have 3 questions. First of all, you talked of Q3 yields.

You've talked of Q4 bookings. I was wondering if you could give any detail on yields into Q4?

And maybe specifically, whether you're targeting a yield build or getting loads back to normality as you build capacity, and there's clearly some mixed news on pricing on trans-Atlantic. Just wondering if you could give any color as you're seeing it.

The second one on the cost side, I wondering if you could remind us where we are, obviously, everyone in the world is talking about staff cost inflation. Are you set on staff or wages rather through 2022?

And maybe remind us where we are on staff wage negotiations through the Group. And the final one, just news on the Qatar EU Open Skies deal.

Just wondering if you could let me know, I assume in France that they've ratified that deal? And why France, and I assume by proxy yourselves or so anti that?

And what might be the impact for Air France of that deal?

So I will take the first question, and then you take the other 2. If you look at -- so the yield is always very difficult to if you look at your booking load factor, you know that in our curve, the yield is always going up at the end of the bookings.

So if you look at the pricing levels, which we see currently in there is, we see no difference actually than what it was in 2019. So it's quite the same levels.

But the exact number is very difficult to predict because at the end of the day, it depends on the lost bookings, which you get in with the highest yield. So as I already told you, we see stronger and stronger bookings in, which, of course, brings up the prices in our cabins.

So I cannot give a precise answer. You see that the load factor is especially on the in December, it's getting close to the 2019 numbers.

And as I tell you, this gap is continuously closing to 2019, especially when it gets more clear when you can travel. So that is actually all I can say because the yield at the end of the day is determined in the last weeks or even the last three weeks of the bookings.

Okay. Then on staff costs and what we plan or forecasting going into 2022, '23, '24, so at KLM, we've got -- the majority of the contracts are in place for next year.

So I was quite confident on the numbers. We do have a couple of outstanding issues, but nothing major.

So we're -- we don't see that as a major risk for 2022. In France, there is the annual -- what's called here the NRO, which is a negotiation on salary increases across the country, this is not unique to Air France.

We were able last year to negotiate, as an example, a 0 increase for the Air France pilots, which was a positive. The agreement we have in place would be Air France pilots is solid for at least the next two years.

So an issue there. On the in-flight service, the cabin crew at Air France, we continue to negotiate on improved productivity.

And we're cautiously optimistic we'll be able to actually do better than what we had planned for 2022. So cautiously optimistic that we'll be ahead of our plans with productivity improvements and cost reductions for the cabin crew.

For the ground, as I recently mentioned, the -- we have a big, big reduction in staff in the French provinces, and that is -- we're now using outsourced providers. And of course, we have guarantees on those prices.

And then in the airport, at CDG, we've had an ongoing effort of transferring some of the positions to third parties that that is bringing down the cost as well. Lastly, which is going to be dependent on which aircraft we select for the RFP for the narrow-bodies as well as decisions we'll continue to take on our wide-body is the maintenance staff costs.

As you know, KLM engineering and maintenance and Air France, we do a lot of in-house heavy maintenance, engine overhaul and components. So those contracts, depending on the activity still are yet to be negotiated.

And cancel?

Yes, obviously, we regret to the agreement, and already well before this agreement was in place, the capacity levels between not only the Netherlands and France and the Middle East and within the Middle East as well as to Turkey are completely imbalanced. But that's our reality as well as the reality of many other countries around the world.

What we did get is a guarantee for fair competition, and we're asking for a guarantee for fair competition, but we do have this provision for more transparency and compliance with competition and social rules. This is something new.

So these new provisions are, I think, what gave the European Union comfort to agree to this deal. It's this requirement for Qatar to be more transparent with its books.

In terms of impact, Amsterdam Schiphol is completely saturated, close to impossible to give it a new slot. And here at LaCie in the most important time slots for our bank structure and the most profitable arrival and departure times are in the morning hours.

So 5:00 a.m. until 11:00 a.m.

and that period at LaCie is completely full. So any additional flying coming in from Qatar into CDG will not be in our most important bank periods.

Can I just check, I think now sort of unlimited on what they can do between Qatar and Paris-Amsterdam, or what constraints come in?

It's a phased agreement. I haven't got exactly what the timing is.

Why don't we get you the exact phase-in and what they can add each year. Marie-Agnes can follow-up with that after the call.

I'm sorry to go back to the fuel, but just kind of interested in your thinking about the ability to pass it on and maybe just over the medium term, what drivers you're going to push so that you do achieve your margin targets related to that, please? And then just secondly, we've obviously got COP26, and any views on anything you're hearing in terms of the aviation industry.

You've obviously included your current approach, but how do you see things developing? And related to that, I guess, European Fit for 55, the latest coming out of some of those proposals a couple of months ago would be very interesting.

And then just lastly, I mean, you kind of touched on kind of the equity recap. I know maybe you can't give any more color.

But you did say the right moment. Does this mean kind of conclusions of discussions?

Or is it a certain share price or valuation of capital options?

Yes. So regarding demand and the -- as it relates to the increased fuel prices.

Well one thing. We've none of us in the airline business like it when fuel prices go up in most cases.

However, it does make it more difficult for new entrants. Historically when fuel is higher, it's more difficult for new entrants to penetrate markets.

So that's probably the only positive. The fact that it is not on a steep spike, that is also good.

We're not having to deal with a huge number of tickets that have been pre-sold on the assumption of lower fuel prices. So we're not dealing with that.

How higher fuel prices, whether we can pass it on to customers, whether we'll be successful on that, I would say, a bit early to tell. I think what we're seeing at least, as markets reopen, if there's such an initial pent-up demand, all business and leisure segments.

I think once we see, after these first trips take place for people who are regularly flying, what kind of tolerance will have to 2%, 3%, 4%, 5%, maybe even 10% increases to be determined. This is -- as I said, next year, we have a lot of flexibility with our capacity, and we'll adjust accordingly.

But I think in the short term, I think we're well positioned from what we've hedged to the booking curves that we have into the demand patterns we're seeing that so far, as in the short term, it's not having much of an impact on our plans.

On the COP26, I don't expect any specific measures on the aviation, but let's see. That's just it's at a higher level than specifically on industries.

So I think that we will see what will be the outcome. But as you know, we are committed to anything they agree in the worldwide world on CO2 reduction.

We talk about the equity recap. Of course, it depends on all the conditions.

So I think, first, it's very important that we have a very clear view on the recovery. So we see that we are building up.

But the further we go, the clear the picture is. And of course, that's also related to the share price.

So those are actually the 2 elements where we are looking at what our the recovery is doing, what is the share price doing, and those are the moment we see that it is the right one. But again, I have to say, we are not in a liquidity crisis.

We need to repair our equity, but we can do that in the coming periods.

And then for Fit for 55, I mean, just to reiterate, we are fully supportive, and we expect to be fully aligned surrounding that initiative.

And any kind of current new music? I know the European airline industry was anti some of the proposals around the increase in the fuel taxes, just given views that it was anti-competitive, but anything you're hearing around that at the moment.

No, no.

Can I just ask -- go back and ask about Transavia, at maybe about cargo. At Transavia, obviously, you're saying you're going to have 61 aircraft for summer '22.

What I feel from that, you think that, that market, the point-to-point market for Transavia is likely to be very strong next summer. You might just make a general comment on your view of the market.

And I know also out of Orly, the slot, I think went to went to Vueling. You might just talk about, is the competitive dynamic there for Transavia, quite strong.

And the second thing on the cargo market, which is obviously also extremely strong. Do you think that long-haul comes back up the -- clearly, the cargo performance, in general, will taper off?

Or do you think you can perform almost better for longer because of e-commerce and just the demand on the cargo side and the freight side.

Okay. So Transavia.

So as you know, we have 2 Transavia units, Transavia Holland and Transvia France. We had a limit that was made or it was part of an agreement with the Air France pilots on the number of airplanes where these flights could operate, commercial benefits that could be offered to customers on the Transavia France side.

So very restrictive. The cap was at 40 airplanes, no domestic flying, as an example.

So we've been able to do 2 things or a lot of things, but 2, in particular, which have been very helpful. One is, the cap has been lifted.

And they'll fly as many airplanes as we want at Transavia, as well we can deploy Transavia France in the domestic French market. So 2 big advantages.

We've made the decision that I mentioned before that we are removing the Hop operation from Orly. We're currently still after having to give up 9 round trips to Vueling, we still have more than 50% of all slots at Orly, so we're in a very strong position.

The 70-plus airplanes we had at Hop, 50% have left the fleet. So all those flights, all the airplanes that were based out of Orly are being replaced by Transavia.

So that's the first deployment of the additional Transavia lift. We cannot add Transavia airplanes any faster than we're doing right now because of pilot training issues.

We would go even faster if we could. So in the interim, as we're back filling those Hop slots, we are operating on a short-term basis, some incremental Air France flying.

But that, of course, is on a short-term basis. So end state, what we see at Orly is Air France deployed solely on what we call the Navette Routes of Toulouse and I'll say Nice, as well as Corsica, and the long-haul network to the French territories, and 1 flight to New York, and that will be the Air France Orly network and all the rest will be operated by Transavia.

So that is one of the Transavia objectives. Transavia Holland will continue to participate in the markets that it was operating in 2019, which are a point of sale, Holland, leisure outbound destinations and where and when possible, we will add more.

Transavia Holland also has the dual role of ensuring that we maximize and optimize our slot portfolio with Schiphol. If we add an airplane Transavia Holland, usually means removing one from KLM.

So there's that balance. And also there's the opportunity to deploy Transavia Holland at some of the secondary airports in the Netherlands.

And then I would say, the point you bring up on cargo. So yes, we've had a great 1.5 years with cargo due in part the huge reduction in belly capacity in passenger airplanes.

As we see belly capacity coming back, we do see -- we do expect yields to come down or at least stabilize. And going forward, to be determined.

You brought up a good point, will there be an increase in demand or a further increase in demand because of the increases in e-commerce online ordering, to be determined. We have done an extensive study on whether we convert some of our 777-300ERs, the older ones we have at Air France into full freighters.

Now that program is in place. We have identified quite a few airplanes if we'd like to do that.

We're fortunate that we can completely overhaul our 777s in-house. So this flex way, we are not -- we do not have the license to convert them to full freighters, but there is the one operator in Israel.

And there is a second shop that will be opening up in the Middle East as well that will be able to do this. And so we believe we've got enough flexibility to participate in that market if we feel that it could make sense long term.

Just a quick one from me. I noticed in long-haul, in Q3 on the flights to the Caribbean and Indian Ocean, you actually ramp capacity 2% above pre-crisis ASKs.

Is that something we should expect to see develop further positively over the winter and into next summer, i.e., flights on that segment above pre-crisis levels? Or now the other long-haul markets are maybe reopening and showing signs of life, do you maybe have to redeploy a bit away from that market to others?

Just a sense to how you're strategizing around making the most of the long-haul recovery, please?

Flights to French overseas territories, so Fort-de-France, in Martinique, Pointe-a-Pitre in Guadalupe and Saint-Denis La Reunion in the Indian Ocean, these markets have proven to be big, big volume markets for us over the crisis, partly because the restrictions on entry, not at all times, but during many periods have been much less restrictive than other long-haul markets. So couple of reasons why we've added so much capacity.

One, just prior to the crisis, there was an airline in France called XL Airways, Eclair Airways that had an operation to these regions based at its CDG airport. Prior to the crisis, all of the capacity operated by Air France from Orly airport.

These markets, you could classify as quasi-domestic. So operating out of all the airports.

So the capacity increase that we've put out into the market over the last year, 1.5 years has been almost exclusively from CDG airport. And with CDG airport, of course, being our main hub, we've been able to source traffic that perhaps would not have looked at these markets in the past.

As well, I think we've attracted some share from the other carriers where their base -- their customer base may be better, it may be easier for them to get to CDG Airport, which is the northern part of the city as opposed to Orly in the south. So we were pleasantly surprised at the performance of the Utama flying out of CDG.

and we expect to keep that in the schedule as we come out of this crisis and even post crisis. Those routes have performed extremely well.

We've -- some peers had actually 3 flights a day, 3 777s a day to each one of these markets, so quite a lot of capacity.

If I could ask two questions, please. Following on from some of the themes that we've already discussed.

First of all, on the staff cost side and pilots, in particular. Just interested within your 8% to 10% unit cost reduction plan, can you give us some precision on how you expect productivity levels from pilots at Air France-KLM -- Air France and KLM to develop relative to pre-crisis to actually achieve those kinds of savings?

I know, for example, the pilot number, as you report, are 6% down relative to the first quarter of 2020 at this point. And I assume to achieve bigger unit cost savings, you will need higher levels of productivity gains relative to pre-pandemic?

And then the second question, if we go back to Investor Day, 2019, when you outlined the medium term strategy, which still holds you obviously talked about reclaiming premium share in Paris. Just interested in your take on this current situation as you presumably refresh some corporate contracts into a market where I think we should have lower levels of capacity, certainly for 2022.

Is this a great time to execute on taking market share in the premium market, on long-haul in particular?

So first question regarding the pilot costs within the Group and how we're going to achieve that. Well, first of all, we've got solid contracts in place that have been negotiated over the last 2 years and some of the contract negotiations started even before.

And they've all been going extremely well. We have one left.

We're trying to find a deal with the KLM pilots around bringing in a larger regional airplane type, the Embraer 195-E2, which is a new airplane type into the contract. But other than that, we've managed to negotiate every productivity gain and simplification that we -- simplification, and the contract items that we've been looking for.

So very happy on the pilot side at both airlines. Fleet simplification at Air France is -- do wonders to our costs.

As you know, productivity, when you're training from one airplane to the other, can have a lot of downtime. With the 380s, the 340s out, that's making a huge, huge difference.

The configuration of the airplanes, we're doing a lot of densification in particular at Air France. So the unit cost up a pilot, when we've had a densified airplane or more efficient, more optimized airplane is help -- is very helpful.

What's really interesting here is those of you that have tried to visit Paris over the last weeks, it's unbelievable, the entire 5 Star luxury hotel sector in Paris has been at almost 100% capacity, at rates and yield, which are either similar to 2019 or even higher. And that bodes well for our high-end leisure customer base, which, as I said, 50% of our premium cabins make up that leisure base.

And we had less than 50% share prior to the crisis. So we're quite bullish that we can continue in the short-term on that pre-crisis strategy.

On the business segment side, we actually have a lag. So the timing is good for us, in increasing the average size of our business cabins relative to the whole airplane was not and is not going to take place until the second half of 2023.

With the A380s coming out earlier than planned, these airplanes have the largest business cabins in our fleet, 80 business class seats, so with that entire fleet exiting, and as we gradually replace those airplanes with large business cabins in a much smaller aircraft type, at much lower unit cost, we've got that lag, and the timing is working well for us. We do -- as I mentioned in my opening remarks, we do have 32 777 at Air France that have a quick change option.

So 50% of the business classes can be reduced. But our strategy before of increasing our premium seat share in Paris, we believe that it won't be a reduction in business reason, business purpose trends will be offset or more than offset by an increased share of the premium leisure market.

Two questions for me. Since Ben, you have given very several details on the fleet.

But I guess my question is when we think about pilot training and maintenance of the aircraft, looking into 2022, what would be -- are these any restrictions to go back to 2019 levels? And if so, what is the maximum capacity that you could be ready to fly next year on the 3 airlines, given limitations on training and maintenance?

My second question is, if you could quantify how much of the support programs have helped employee expenses in the third quarter, so both on the France and the Netherlands side?

Can you repeat the last question?

How much the government support programs for employees have reduced or have reduced employee expenses in the third quarter.

So in terms of our ability to scale up for 2022, by mid-2022, we believe on the KLM side, if demand is there, we can get close to, if not right at, 2019 levels because we have got the flexibility of the A330 fleet and the training required to ensure that we're able to do that is in place because the fleet is so simple. The maintenance required that will be required to keep that fleet or get that fleet ready is already planned.

We're flying the fleet at lower utilization rates today. So the aircraft are all serviceable.

And this is just a question of increase in utilization and demand coming back. So at KLM, that's not a problem.

Transavia Holland, not a problem. Transavia France, I said we're already going full speed ahead.

We will meet our budget needs. But if we could go faster, we would go faster.

And then at Air France, we are still working on what -- how high we could actually get capacity levels versus 2019. So I said, we do have a lot of flexibility with the 777-200s.

We did have 25. We're expecting it to go down to 15.

The airplanes are all supposed to come out in 2024. We will have the ability to expand those up to 2027 to avoid any major checks.

But to give you a precise number for Air France, I would say, at least 90% of 2019 levels, perhaps higher at the top end.

The government support in the labor cost, it is for -- at the KLM side, it's EUR146 million. And on the Air France side, it's EUR99 million, but then I include the fact that we don't pay social charges for the people on activity share.

So it is not a direct contribution from the state, but it includes the fact that we don't have to pay social charges for people in activities.

I think I could also just add one more point on the ability to size up our operation to meet whatever the demand may be next year. I'm confident that we will not be in a position to lose share because of other airlines' ability to ramp up.

We're quite confident on that.

A couple of Dutch related questions, if I may. How do you think the situation is going to develop with the proposals for the Schiphol Airport charges?

And then in Holland on slot allocation, I think that that slot coordinator has proposed some unusual specific plans for future slot allocation at Schiphol, which has created a lot of noise out of IATA, but I'm wondering what your attitudes are for the stock coordinates picking specific routes to be allocated to? And perhaps whether you're still expecting slot exercise to be an important part of KLM recapitalization discussion?

And a final question, if I've not been degrading at 58, is on the North Atlantic, as we look out to '22, I know you're uncertain about where demand settled after the pent-up demand. But how confident are you that the industry will avoid shooting itself in the foot by deploying all of its aircraft that can't be flown to Asia on the North Atlantic.

Do you think there will be modesty in matching of capacity to demand? Or you think there's a risk that everyone will throw every piece of metal onto the Atlantic.

Okay. So why don't -- we have in here, Erik Swelheim, in the room here with us, Andrew, who was the CFO of KLM.

So he could take the first part of your questions, and then I'll take the second.

Okay. Can hear me, Andrew, thanks for your questions.

Yes, the Schiphol Airport charges, we object quite strongly against it that you've seen. They go up in 3 years by almost 40%, which is 9% for next year and then more for the years to come.

We're still in a discussion, and we will have to see where this ends. Schiphol is literally applying the rules.

And -- but they can change the rules. So we are still in discussion with them probably for next year.

It's 9%, which is not yet the allocation of losses of Schiphol. This was more the investments it did in the past.

But for the years '23 and '24, we're still in discussion, and that's mainly the settlement of losses at Schiphol to the airlines. And not only KLM, but all the other airlines are objecting to that as well.

And then secondly, the slot allocation rules also, we object there. This is the fact that Schiphol may have impact on where slots will be allocated to and what routes will be flown.

Although it might not always be negative for KLM, we still object against it because it's the airline that decides where slot will be used, and where to fly to and not Schiphol Airport that will decide that some routes are -- get preference over other routes. So also, there are no news yet for the time being, Andrew, but we are on top of it.

And then your second question, which is an excellent question, one that we follow daily, is what our competitors are deploying on the Atlantic, or at least What are they selling on the Atlantic, what amount of capacity for 2022. So first off, if you go through the fleets of our various competitors and where they were in 2019 and where they are today and what is being delivered between today and 2022, it's quite amazing.

So if you look at the big reduction in long-haul aircraft at British Airways, the entire 747 400 fleet is out, and that was over 30 airplanes, and those are not being replaced 1-for-1 at a rate that will bring them anywhere close to where they were by next year. The 777-9X is late.

So, Lufthansa, who was expecting those airplanes will not have them. So if you look at the relative size of Lufthansa long-haul, it's also significantly down.

And if you look at the capacity that they are currently selling in the market, it's -- we don't believe there's any irrational capacity being deployed by our two major trans-Atlantic European-based competitors. When we look at the other side of the Atlantic, my former employer is down 25% in long-haul aircraft.

So here again, this big operation into Europe into France. We do not see the same level of the capacity -- the direct capacity that would impact us.

So that is, that's not too worrying. American Airlines, again, big fleet reductions on the long-haul side.

Where we're seeing a lot of announcements, new routes, new capacity is from United Airlines. But the bulk of that is into Heathrow Airport.

And of course, we don't fly any long-haul capacity out of Heathrow, neither KLM, nor Air-France. And so to-date, we don't see anything that has caused us to change our plans for the near and medium-term.

And then what's also reassuring is that with the opening of the U.S. domestic market over the last 12 months, we've seen that the U.S.

carriers have been relatively disciplined in their deployment of capacity and that the capacity does closely match demand. So it would be -- I don't think we would expect them to change their way of workings for the trans-Atlantic.

I just noticed, are you still holding on to your guidance of adjusted operating free cash flow to be breakeven by '23? Or things have moved in the more positive direction there?

Secondly, on CapEx, I believe you would have a better view today about what CapEx you would expect for '22. I also noticed that you have cut it by EUR500 million at least for '21.

So I mean, coming from that perspective? And yes, the most difficult bit, so positive EBITDA for fourth quarter for sure and for the full year.

For the winter, do you think that now we are going to see EBIT and EBITDA both positive for the winter season? Those are my three.

So let's first start at the medium-term guidance. So the adjusted breakeven cash flow for 2023, and that was still based on our strategy plan, which we discussed with the Board in July.

We are currently busy with updating our 3 to 5-year plan because we are starting with the budget for the next year. So we don't adjust anything of this guidance at the moment.

So it's still the guidance as it is. And if we look at the CapEx, I'm not going to guide you at this moment on the CapEx on 2022.

We will have our discussions first internally, which we are working on, actually, we are currently working on the budget. And then on the Q4 EBITDA, it's still a volatile market.

So I think we are confident on a Q4 where we are EBITDA positive. Of course, they can still a lot in terms of travel restrictions.

So we keep it at EBITDA positive, and that's it.

I have two questions basically. First one would be back on cargo.

And specifically on the Q4 cargo yield outlook, I'd say. So clearly, for Q3, the yields have been solid.

But now going into Q4 peak season, there's a lot of talk about supply chain disruption, labor shortages on crowd and ocean freight, meaning that potentially, there will be additional support for air cargo as companies upgrade to air cargo to ship their goods to make sure they arrive on time for Christmas. So what's your view on that?

Will air cargo yields and also volumes will get an additional boost from up trading in Q4? And then secondly, turning back to the balance sheet, so the IFRS equity in your balance sheet was negative at EUR3.8 billion at the end of Q3, and I guess, the gap is still growing.

And I think you may clear it apart from straight equity would also continue to use some of the equity to fill the gap. But our perpetuals really the long-term solution for equity.

I mean credit agencies and I guess also analysts would see that as debt, not as equity. So just wondering if those perpetuals are only a temporary solution in your mind, which would ultimately be replaced by straight equity or whether it's really a long-term, let's say, balance sheet fix for you?

So let's -- if we talk about Q4, we see indeed that the cargo forecast every month actually improves. The problem of the cargo market is it's a very short term market.

So it is only 2 to 3 weeks ahead, you get when you get the bookings in. But we see, indeed, a very strong market.

And so I think Q4 will be quite strong. But where it will end, it depends, of course, when we see the actual result.

But up to now, we see, indeed, if we look at where we are today at the end of October compared to the end of September, we see an increase of pricing. Then on the IFRS side and the long term, look, I agree with you, it is of course, a bridged solution, this equity.

We have it mainly coming also from our States. So it's a way to bridge the equity gap.

Thank you, Operator. Well, thank you to all of you for taking part in today's call, and look forward to speaking with you at the Q4 results.