Good morning and welcome to the Air France-Klm third quarter 2026 results presentation. Today's conference is being recorded. During the presentation, participants will be on listen mode only. At the end of the presentation, analysts will be able to ask questions by dialing pound. I would like to turn the conference over to Benjamin Smith, CEO, and Steven Zaat, CFO. Please go ahead, sirs.

Okay, thank you. Good morning, everyone, and thank you for joining us for Alphonse KLM's third quarter 2026 results presentation. As usual, I will begin with the strategic and operational highlights of the quarter before handing over to Steven, our CFO, who will walk you through our financial performance in detail. So starting on slide three, so we delivered a solid third quarter despite an operating environment that remains highly volatile. Group revenues increased by 7.6% to 9.9 billion euros with nearly 30 million passengers traveling across our global network during the quarter. Unit revenue rose 7% at constant currency driven by resilient travel demand, the strength of our upmarket strategy and strong commercial execution. This performance was broad-based with passenger unit revenues up 6.9% and cargo unit revenues surging nearly 22%. At the same time, we maintained rigorous cost control. Unit costs remained essentially stable year on year, despite ongoing strategic investments in our cabins and customer experience across our airlines. As a result, adjusted operating profit increased by €126 million to €1.35 billion, pushing our operating margin up to 13.6%. We also continued to generate strong free cash flow and kept our leverage ratio disciplined at 1.6 times, even after the successful repayment of our 500 million euro hybrid bond in July. Fleet modernization continues at a fast pace with next generation aircraft now representing 39% of our fleet at a seven point increase year on year. Crucially, the strength of our unit revenues in Q3 allowed us to fully absorb higher fuel costs during the peak summer period. That said, fuel remains a major headwind. Based on the current forward curve, we now project our full-year fuel bill to reach approximately €9.2 billion, roughly $2.3 billion higher than last year and $300 million above the guidance shared last quarter. While the environment remains demanding, this quarter once again demonstrates the fundamental resilience of our model, The relevance of our strategy as well as our ability to adapt through dynamic yield management, strict cost control, and agile commercial execution. So this operational discipline is particularly critical at KLM. While the back on track transformation plan has already yielded tangible results, KLM today announced additional structural measures to further elevate operational stability, strengthen profitability, and secure the group-wide 8% operating margin target by 2028. Moving on now to slide four. At Air France, we continue to build on the core attributes that make our brand unique. This quarter, we brought together seven renowned French chefs to curate our new long-haul menus while continuing to elevate our ground experience with refreshed lounge offerings. We're also making the customer journey seamless beyond the airport terminal. Our partnership with SNCF Voyageur reached a new milestone with the extension of the Train Plus Air program to all WeGo high-speed services connecting to Paris-Chaldegold, providing our customers with even greater intermodal choice and regional connectivity. At KLM, we celebrated the 60th anniversary of KLM City Hopper, which continues to play a vital role in feeding our Amsterdam hub and connecting Europe to our global network. KLM also marked a major sustainability milestone with the groundbreaking of the Netherlands first dedicated sustainable aviation fuel production facility developed by Sky Energy. This directly supports KLM's offtake commitment of purchasing at least 75,000 tons of SAF annually starting in 2028. On the operational front, I want to recognize both the Air France Transavia teams for their flawless execution in supporting the logistics of an exceptional event and Hope Leo's visit to France this quarter, once again demonstrating our group's exceptional agility, operational precision and service expertise under high-profile conditions. Finally, as testament to our customer-centric focus, Flying Blue was named the world's number one airline loyalty program for the third consecutive year by Point.me. This award reflects our ongoing efforts to build deep, rewarding customer relationships across Air France, KLM and now Transavia while continuously expanding the reach of our partner network. Moving on to slide five. When we made a strategic decision in 2018 to move our offering further upmarket, our objective was never simply to add more premium capacity. It was to design products and experiences that would genuinely differentiate us at the very highest end of the global aviation. In September, the long-term ambition received landmark recognition Air France La Première was named the world's best first class by Skytrax. This award honors the meticulous work of our teams across the entire La Première ecosystem from ground service to the cabin and fully validates the disciplined investments we have made over the past several years. More importantly, it reinforces our firm conviction that moving up market is the right strategy for Air France-Klm combining operational and service excellence with strong customer preference and superior financial returns. I want to extend my heartfelt thanks to everyone who contributed to this journey. Our focus remains on the future and we will continue to push the boundaries of luxury travel for our customers. So on to slide six. So here you see that this upmarket shift is clearly reflected in our revenue mix. Over the past two years, The share of passenger revenues generated by business and La Première has expanded from 26% to 29%, while premium economy grew from 7% to 8%. In other words, our premium cabins now represent approximately 37% of our total passenger revenues, up 4 percentage points compared to 2024. Looking ahead, we expect our revenue mix to continue shifting upmarket through 2028. The commercial momentum underpinning this shift is exceptionally strong. Over the past two years, business and la première revenues grew by 21%, led by outstanding performance across India, Asia, and the United States. Premium economy revenues grew by 38%, outpacing capacity growth of approximately 21%, with a strong performance shown by high-yield leisure travelers. This continuous outperformance of premium revenues relative to capacity growth confirms the strong pricing power and market appeal of our upgraded cabins. I want to take a second to highlight the fact that our upmarket strategy positively impacts the experience in all cabins. The new high-speed Wi-Fi powered by Starlink currently being rolled out at Air France and soon to come to KLM is free for all customers, also in economy. And when we modify An aircraft's cabin, we installed new seats in all cabins, improving the comfort of all passengers. Our aim is clear, to provide a great traveling experience to all our customers and to elevate our offering in all cabins. Slide 7. We're very proud to highlight a major structural milestone in our MRO strategy, the formal finalization of Alpha Component Solutions. are 50-50 joint venture with Airbus dedicated to A350 component support. This venture brings together the best of both worlds, the advanced capabilities of Airbus' flight hours services and the deep frontline operational maintenance expertise of our MRO division, Alphonse Industries and KLM Engineering and Maintenance. Launched with immediate global scale, this JV already contractually supports more than 500 aircraft worldwide. By combining world-class supply chain integration with our proven maintenance excellence, this partnership allows us to optimize component availability, drive lifecycle efficiency, and capture high-value growth in the rapidly expanding Airbus A350 aftermarket. On to slide 8. As you know, we were not selected in the TAP privatization process. While we would have welcomed a different outcome, our strategic ambition in South America and Portugal remains clear. To protect and further solidify Alphonse KLM's leader position on routes between Europe and South America, while continuing to capture high-value opportunities in the Portuguese market. We already hold the leading market position across the South Atlantic, anchored by the strength of our own network and our long-standing strategic partnership with Goal. Our priority is to continue deepening this alliance, driving greater commercial integration and expanding seamless connectivity across Brazil and the broader Latin American continent. Looking ahead, we will continue to pursue targeted organic growth in Portugal, notably through Transavia, while remaining opportunistic regarding potential remedies or slots that may become available in Lisbon following regulatory review. Throughout the privatization process of TAB, we maintain strict financial discipline and we remain fully confident in the strength of our standalone strategy. On to slide nine, to build a stronger and more competitive future, KLM is further pushing boundaries and taking far-reaching structural measures across its operations. The plan laid out today by KLM rests on several key pillars. First, a strict focus on the core a powerful network of 160 direct destinations from Amsterdam Schiphol, reliable operations, an excellent customer experience and the iconic KLM brand. Second, restoring our European network profitability, adjusting our European fleet composition and expanding the central role of KLM Cityhopper. Third, a smaller, more agile and more simple organization, streamlining processes, simplifying the organizational structure and making much more targeted choices regarding resource allocation. Together, these initiatives will further establish a stronger financial foundation for a sustainable KLM, ensuring it continues to connect the Netherlands with the world for decades to come. I'm handing it over now to Steven Zaat, our CFO.

Thank you, Ben, and good morning, everybody. If I could use one word for this presentation, I would use the word resilience. Resilience in executing the strategy growing our profitable premium segment, leading to resilience in charging to the customer more than the additional fuel cost, resilience in an effective hedge strategy which is a strong fundament under our results, and resilience in our focus on cost reductions. And it all comes together if you go to page 11. which is a very simple way to look at the results where we are actually able to increase our unit revenues with 7% while the fuel price is just bringing a 400 million. If you look at the fuel price it's around 6.2% which you need to get back to the market and actually we are overperforming on that and I will go later to all the segments. What is very keen and what is very important for us is we stress it again and it is again also mentioned on the KLM measures. We need to get our unit cost under control and we get our unit cost under control. We have a flat unit cost in this quarter, even beating our own guidance, which we give to the market, which is between 0 and 2%. If we look at the results per business segment, you see that we have a 6.9%. Unit Revenue at the Passenger Business. I will go back later over the world map as usual to show where we are gaining that high unit revenue, but especially strong also the cargo segment. We had a 22% unit revenue per ATK growth, partly coming from the fact that we increased our pricing by fuel surcharges, partly coming of course by the situation in the Middle East, but also there is a fundamental demand coming also from the high tech. So all that's together a strong demand for that product and also we are able actually to offset our fuel price. If you look at the 134 million increase in the adjusted operating profit for the network, there's 89 coming from our cargo business. Then on Transavia, we grew our capacity further taking over the slots in Orly. You see that the unit revenue increased by 3%. That is not beating our 6.2%, but on top of it, they had 2.3% cost reductions. So, including the cost reductions, they were able to improve their results year over year in this third quarter by, let's say, a more difficult operation also to taking over all the slots from Air France and in Orly. The maintenance segment is more or less flattish. We had a better performance at KLM components. but it deteriorated a bit on the Air France component side. So all in all it's a flattish result on the maintenance at a stable margin around 6% for this segment. If we then go to the difference between Air France, KLM and Flying Blue, you see that Air France has a, let's say, more or less stable result. They were able to offset with the unit revenues the higher fuel price, but at the same time there was a slight unit cost increase. At KLM, we see that the unit costs are decreasing. That is good news. They were able also to offset the fuel price, but you see that there's still a gap of 2% between Air France and KLM. So we need to improve further KLM to make sure that they are able to reach our 8% margin for a full year in 2028. And Flying Blue, as I already stated it, the gift that keeps on giving, again, a 25% growth Thank you very much. to cover the increase of fuel costs, which again I come on the 6.2%. Especially very strong on the first and business segment, almost 12% increase over there with a slight drop in load factor. The premium economy up 9% and even our economy segment was very close actually to that 6.4%. If you look at the world, very strong demand, and we have also seen it, let's say, at other presentations still in North America, 9.3% increase of yields in this segment. Latin America, a little bit lower for us, 4%, that we increased the capacity with 9% over there, so that's a significant impact, and Africa is fulfilling its compliance with the 6.2% increase of unit revenues. So that is good to see. And then Asia still holding strong despite the fact that we, of course, decreased capacity related to the Gulf. We see that we have an increase of 10% in terms of yields. And despite the fact that the Gulf carriers are coming back, we see still that especially on the corporate segment, there is a big preference to fly with European airlines towards Asia. So long-haul 7.6%, then on the short and medium-haul in Europe we were able to have almost 7% increase in yields. To our surprise, to be honest, because I think that we all saw the situation in Europe where it was extremely hot, so in this hot season we would expect less results, but it is good to see that we could pass through this higher fuel cost to our customers. And then Transavia already explained with a 2.5% yield. We are happy with our unit revenue performance and we are happy of the success of our premiumization strategy.

Then the unit cost.

So we were able actually to gain in productivity to offset the increase of the labor cost. So in total there is almost no impact from the labor cost part on our unit cost. Then the fleet. Renewal brings a 0.4% fuel efficiency, so this newer fleet is really bringing also lower costs in our operations. And then you see that the other is more or less flattish at minus 0.1%. There are ups and downs there, so we still see high flight-related costs, high ATC costs, high costs especially on the ground in the airports. but at the same time we have less wet leases in place during the summer which had an impact of 0.5% positive on our unit cost. So excluding the premiumization you see that we had actually reduced our unit cost by 0.4% and then if you add that 0.5% of the premiumization which is partly coming from having less seats in the plane and at the same time We are improving our product on the catering and on the whole ground operation and including the cabin. So it's quite good to see that we can offset those premiumization costs in our unit cost trajectory.

Then if you deliver a good result, you deliver sure good cash.

So we had 1.4 billion in recurring adjusted operating free cash. The good news is that we see that there are still these exceptionals in for $744 million and the good news is that next year actually we only have to pay the wage taxes for KLM up to October and then we get rid of all this debt which we are still having from the COVID. So good also in relation to our guidance to significantly positive free cash flow delivery. on the net debt you see we reduced it by 133 million if you take out the hybrid so we are able to let's say slightly reduce our net debt and we paid the hybrid of Apollo of around 500 million which increased the net debt but it is a hybrid debt so you could also and there are some analysts in this room who are actually taking it as debt when they value our shares so the leverage ratio stayed stable 1.6 which is the same as we had at the beginning of the year despite the fact that we paid off this hybrid. The good news is that all the financing needs were secured before the summer with very attractive conditions which you can again have seen on the bonds which we put into the market and 80% of our debt is actually a fixed rate interest and that excludes even operational leases which you could also see as a fixed rate interest rate. So we have an average cost of 3.7% for those financial debts which is I think very healthy also for the coming years. And then on the outlook. Now the big issue let's say in our industry is of course the fuel price. So we see that the fuel bill is going up. with $2.3 billion this year. It's good to see that we had an impact of our hedge portfolio of $2 billion this year. So very good cushion under our results. We hedged 62%. We stopped hedging actually for 2026 after the first quarter. So actually we didn't add any hedges for Q4 this year. And if you look at the 2027 portfolio, you see that we have hedged 54% for the overall year bringing at the end of the day a cushion of 1.4 billion which is helpful because part of our hedge result of 2026 will fade away next year. First I have to admit this is the forward of last Friday so the oil and the fuel prices are much higher than it is today so probably it will be slightly lower. If you look at our strategy is that we continued hedge Thank you very much. So we put actually in a ceiling, another ceiling to execute our hedges on the oil price. If you look at this portfolio, there is around 50%. We always have a minimum of 50% of our portfolio, which we do in jet fuel or in gas oil.

And we are still above that target.

So it's good to see that we actually have also that crack already hedged let's say more in the previous month and also of course in the year 2025 in the beginning of 2026. So I think we have a healthy hedge portfolio. We continue our hedge policy of course looking at all the market aspects, also looking carefully at our competitors and also looking very carefully what is the maximum upside risk and what is let's say the potential for any drop in this fuel market. Let's then look at the bookings. So we see already for a long time that there is a small load factor gap last year compared to this year. So you see that we are for the long haul 1% below, for the medium haul 1% below, and for Transavia also 1% below. But it comes with very strong yields. If you look at the first 26 days of October, Load factor gap, actually we have a higher load factor in October than we had last year. You see that the shoulders are strengthening in the sense that the month of September was very strong, but also October is very strong and we have a yield X currency of 12% for the first 26 days. Then it is in Q3. so that where I referred for Q3 for 6.2% on the unit cost it is around 11% in Q4 what the higher yet fuel price does but still again that is related to the fuel price of a week some weeks ago and maybe also to add sorry on page on this page on the booking because you will ask it what is the impact of Paris so before to save you other questions to us the impact up to now if it takes October and also November and December is around 10 million of cancellations on our bookings but of course it all depends what are the bookings doing in the weeks to come. So then the guidance on our capacity, so actually it is unchanged, so Longwell 2%, Short and Minimum 1%, Transavia 8%, Q4 we will be around 1% increase of our capacity where our main network is more or less flattish but we still grow Transavia in that quarter because we are taking over the slots and you see that for the total group we are at the lower end of our range which we gave you between 2 to 3%. If we then go to page 21, you see the outlook of our guidance. Actually, we didn't change anything. The group capacity I already discussed, 2%. Unit cost still 1%, including the 0.5% increase coming from the cabin premiumization. Net capex below 3 billion and our leverage between 1.5 and 2. With that, I hand over to Ben for his concluding remarks.

So just as an ending here before we open up for questions, another solid quarter for us, strong execution for Alphonse KLM. However, we enter the final quarter of the year with prudent caution while maintaining strict operational and financial discipline across the group. Before we open the floor to your questions, I want to express my sincere thanks to all our teams across Alphonse KLM all around the world for their continuous dedication, hard work, and commitment throughout the quarter. So thanks for your attention and we're now very happy to take your questions.

Ladies and gentlemen, if you wish to ask a question, please press pound key 5 on your telephone keypad. If you wish to withdraw your question, please press pound key 6. The next question comes from James Hollins from BNP Paribas. Please go ahead.

Thanks very much. Good morning, both. Turning on the unit cost guide, is there any particular cost pressure in Q4? I think year-to-date you're up 0.6%. Can you suggest an acceleration in Q4? Are you just being very cautious, just that low capacity increase in Q4? Any detail would be welcome. And then secondly, on M&A, So I wanted to get an update, if you can, the SAS timing moving to 60%. And I guess I'd be remiss not to ask you, Ben, on a scale of 1 to 10, how annoyed were you really at losing TAP? What went wrong? Did you offer the wrong price, et cetera? And I suppose less flippantly, a bit more detail on how you'd expect to evolve your LATAM network in light of not getting it. Thank you.

Good morning, James. Yes, let's say if you look at our unit cost guidance for the full year, you could say that we are maybe a bit pessimistic for the end of the year. We don't have any specific items which are actually popping up in the fourth quarter, but we have to admit that in the third quarter the maintenance costs were pretty, let's say, pretty flattish. I think especially on the maintenance side, you see that the costs are going up a bit, but there's no any specific specificity. We just wanted to give a rounded number and then you come to the 1%. Okay, Jim, it's Ben.

On SAS, so the next major milestone we have to reach is regulatory approval by the European Commission. So the teams are working diligently on that and based on what I'm seeing, and what the feedback we're getting from the case team in Brussels is that we should be well aligned to complete this transaction, hopefully by the first quarter of next year. And on tap TAP, one to 10, or I would say maybe five or six. Listen, when we went into this, We knew it was going to be a tough battle with our competitor, knowing full well that the requirement to have a presence in Latin America was much more important for them because of their current situation. There were limits to how far we wanted to go in terms of bidding for strategic investment. We already have SCS in the works. The timing for TAP was not ideal for us. Thank you very much. Thank you very much. We'll see. We have a great position. We have great partners in South America. There are lots of other partners that would like to do business with us, and we actually do have growth plans. So I'm disappointed, but based on the result of how the decision was made, I don't think we ever would have imagined or would be comfortable going that far.

Thanks very much.

The next question comes from Axel Stass from Morgan Stanley. Please go ahead.

Yeah, morning everyone. A couple of questions on my side. Just wanted to understand, you said at the first 28th of October the yields were up 12%. Is this trend accelerating even further going to November and December driven by the business travelers and how should we think about early 2027 as well? And second question is related to the unit cost inflation excluding fuel going to next year. You just mentioned maintenance is probably slightly higher than expected in Q4. Is low single-digit a reasonable number going to next year? Are there any moving parts we should be aware of going to 2027? Just to have your views on this. Thank you very much.

Yeah, thanks for the question. Let's first start on the yields. So indeed we see also for November and December strong yields. It is a little bit less than October because October is actually, what I said, there is an impact of, let's say, increasing the summertime towards October. And then November, as you see the weather today, it's not really, let's say, the best time to travel. It's still strong, it's still double-digit, and as I told you, we need double-digit numbers, but October is slightly stronger than what we see for November and December. And for Q1, you know we are a very, very lazy booking market in France and in the Netherlands, because they think about the next holiday after the Christmas, So if you look at, for instance, January, you see that we have just a booking load factor of 40%. And the game is especially after that. But we don't see any drops in January, February, and March in the ticket pricing.

So for the moment, you can hold it.

But it is a little bit too soon to tell. And the same is for the unit cost. We are just entering in the discussions for the budget. You know that we have a strong cost discipline. The next question comes from Steven Furlong from Davie. Please go ahead. Good morning, Ben and Steven.

I just want to ask first of all Steven in terms of the you mentioned the social taxes are basically concluding in October also next year if I remember perpetual hybrid there's one more to be repaid and can you just confirm after that in effect the balance sheet is clean and then for Ben it's kind of related to that maybe you'll talk about this when you do a capital market today but I just, since you've joined, there's been great progress being made with all the stakeholders. I'm thinking of employee relations. I'm thinking of customers, premium award. I'm thinking even dealing with governments and on the environmental side. But I'm just wondering about investors. And is something on the board down the line in terms of dividends or something like that? Because obviously it's a long time, I think, the global financial crisis before Air France KLM. Steven thanks for this interesting questions let's start over there

If we go back to the social charges, yes, it is only for KLM what is continuing. So we talk about, I think, 241, which is remaining next year. And then it's done. We have paid the social charges to the French state at the end of this year. And we have no cargo claim anymore to pay. So that is all done. then indeed you're right we have this 1.5 billion hybrid so that is at the end in December I don't call it dirty as you do it I think it's a clean instrument we relatively to be honest if you look at the interest rates today it's not that bad and we have an option actually to postpone it for one year if we want if the interest rates are interesting You know we are trying to reduce the hybrid stock, so that is actually really our ambition. Usually we do 50% in a year and we want to replace it by the net result, but we will come back on what we will do with this hybrid. But it is not a very expensive hybrid, to be honest, and at the same time we have enough cash in that entity to pay back

This hybrid then the question on dividends and You will start okay Okay, Steven, so I mean you you laid out some of the key elements of you know reaching a more solid Position so, you know in 2018 when I arrived we had a very very weak foundation starting off with significantly improving the relationships with staff in particular at Air France where If you followed us in 2018, we had rolling strikes that were costing us about 300 million euros in 2018 alone, and about a billion euros for the years before. Also, the Air France model did not work, so a lot of negotiations with the unions and some difficult decisions around fleet were made. The concept of expanding TransAvi is one of the major ones. moving the Airbus A380s, and then putting forward a clear brand, in particular, again, at Alphonse that could meet customers' expectations and be very clear. So that took time, and we're very pleased with the results. There's still a lot more to come. And so the stakeholders of employees and customers, you know, much improved to the position we were in 2017. So I think we now have a much stronger foundation. The margin is more stable. We are going to 8%. That's our commitment. And then for shareholders and dividends by extension, yes, we are a listed company. It's our objective to be in a stable, sustainable position to be able to pay dividends. I'm a shareholder as well, so this is front of mind very often. So the timing, we're not ready to make a commitment either today, but yes, it's something we talk about a lot, and yes, it is something we do expect to put in place as soon as we have a better and more sustainable foundation that we know. We don't want to start paying and then have to remove them again. Obviously, that's the position we take. It's the same thing. The next question comes from Harry Gowers from JP Morgan. Please go ahead.

Yeah, morning, gents. Thank you for taking the time. First question, just an extension, really, on the balance sheet one, because I can see that the cash on hand, I think, is $10.5 billion now, which is a lot higher than your target kind of range. So is that cash just being saved up to continue to simplify the balance sheet? So just any kind of further color on why the cash level has to be so high above your target range. And then just an extension of that and an extension of the dividend question as well. I mean, would you consider share buybacks as well, or do you think a dividend would always be the first port of call? And secondly, I just wanted to ask on the Paris protests, can you just confirm, I think the 10 million impact you said is just for October and November so far, and has there been any other impact in terms of the bookings? Thank you very much.

will be used also to pay off this hybrid towards Apollo. So it is true that we keep it also for the uncertain times to come. So we saw especially when, let's say, the uncertainty kicked in, we used the right moment to put a bond into the market and also to have a kind of security buffer for this year. Now, this year turns out to be better than what we expected when the war started. So, of course, we have more room to use also to pay off certain debt. If you talk about share buyback and dividend, we don't have those kind of discussions yet. But I think if we didn't pay any dividends so far, it would be for me more logic to do it in dividends. But we didn't have that internal debate at all at this moment. And then on the Paris impact, I hand over to Ben.

So yes, confirming that for October and the beginning of November, we're expecting about a 10 million euro hit and probably maybe even all the way through the end of November. And what we're pleasantly surprised is today, November 5th, is a countrywide strike and less than 1% of Air France employees are following this strike. So the impact on our operation is basically zero. and all of our flights are operating. So as an outsider, I would have thought much more. The impact would have been much higher, but it's minimal.

Great. Thank you both.

The next question comes from Jared Castle from UBS. Please go ahead.

Good morning, Ben, Steven. A couple of questions. I mean you're able to offset fuel. It doesn't seem like any other airline I'm aware of can do that. What's different about Air France-Klm? Is it your premium mix, your network, your client base, or is it some secret sauce that how you revenue manage? Secondly, I think Steven you said you don't want to talk too much about next year, but is there any color on capacity for next year and fleet deliveries given all the moving parts how you're thinking about getting planes and then one more if I may but I think you made some comments that you know you're still doing pretty well in Asia given issues in the Middle East I mean do you think this is going to be a bit longer lasting when you know all hostilities have ceased you know is there a change from your customer base in terms of how they're thinking about the product thanks

and more. We have a very experienced team and our network is very diversified. Not many people know that CDG is the largest international hub on the continent by far. So the number of destinations, the number of flights that we have out of CDG is incredible. And Amsterdam for its size is actually the number two hub The teams that manage the revenue and put in place the pricing and the distribution have extensive experience in all the different regions around the world. As you can imagine, each region has different characteristics of how we revenue manage. But the upmarket strategy we started putting in place six years ago, I think we were one of the first in the Western world that Thank you for joining us. and many other industries in Paris, extremely resilient. So I think we have that as a big advantage versus our competitors. And also the aircraft size that we now are focusing on, so the mainstay of the Air France fleet being the new Airbus A350s, the efficiency of that airplane, as well as the reconfigured 777-300s at Air France are proving to be winning aircraft. The right number of premium seats in terms of the balance of the configurations on board. And that is 1%, 2%, 3% improvement of what we had in the past. And you add all that up over almost 100 airplanes, it makes a difference. At KLM, the introduction of the 787-10 and now more recently the Airbus A350-900 is proving out to be the same as a little bit lagging at KLM. And obviously the formula is not the same as not Paris. but Amsterdam is really well set up to feed or to link a lot of secondary cities in the UK and in Scandinavia which is going to be enhanced now with the SAS majority position. So it does have unique destination. For example, if you look at the number of destinations we serve in the UK, I think it's about 12. three quarters of destinations have limited service to other hubs. So our ability to channel those passengers via Amsterdam, our ability to yield up is quite strong because the other choices are not great. So I don't think we have secret sauce. I think we have a unique hub in Amsterdam and we have a very unique destination and home market in Paris. And then maybe the second part of your question here on avoiding We don't have that much exposure so there is a significant increase in the flights that we have but you look at the overall number of flights that we operate in the whole system It is not a big percentage, but we are seeing a significant increase on those few flights that we have because of the reluctance of consumers to fly over the Gulf, which I think eventually will revert back to normal habits, but I think it's going to take a little bit of time in the short term.

Anything on capacity and fleet delivery, Ben, Steven?

I think if you look at the capacity, the fleet deliveries are still coming in. I think there's a little bit less pressure, I would say, on the aircraft manufacturing given the current circumstances. But we keep on refleeting our fleet. But it's not actually to increase significantly our capacity. So we will have a moderate capacity increase as we have seen more or less where we give the bandwidth this year. Ben, I don't know if you want to add.

So we had 67 long-haul aircraft at KLM in 2018, and we're moving towards 70, so not a big increase here. And at Alphonse, we had 108, and we're at 120. But in 2018, 10 of those airplanes were A380s, so you could say double two airplanes for one when you switch those out. But the number, which we mentioned in the beginning of this call, the number of premium seats, on each one of those airplanes has considerably gone up. So the mix is very different. So the number of passengers has stabilized, but the footprint of the seats that are carrying the higher yielding customers takes up obviously a lot more space. So the number of seats on the airplanes and the ASKs are tempered compared to the capacity that we have out there. We've also had the, something else I should mention, the utilization of the airplanes that we have, especially at Air France, has gone up considerably.

Thanks very much.

The next question comes from Alex Irving from Bernstein. Please go ahead.

Good morning. Two from me, please. First, how do you think about the need for a southern European hub now that CAP is not available? Do you need to take another look at Air Europa as the last asset there, or is your most southern hub going to have to be in Paris? If so, is that an issue, given that it's further away from the South Atlantic geographically, less direct Latin American traffic, whether it's either Madrid or Lisbon? Second question, you announced some KLM restructuring measures this morning, which sounds like it includes the meaningful down gauging in medium-haul flying. For TAP or the need for a southern European hub, this was the strategic reason why we moved forward with the bid.

but not at any price. There are other ways for us to serve Latin America. And without a southern European hub, we were number one off the continent in terms of capacity. And if you count one of the other competitors that we have, only if you combine their non-continent hub with the continental hub were they slightly above us in terms of capacity. So we're in a very good position. We have a very strong partner. It would have been a lot of money to invest in TAP. So there are other ways for us to maintain or to improve our position in Latin America. And also our other competitor on the continent, they're also developing a southern hub in Italy. So they'll have their resources stretched. They've committed to investing in Porto. So to have a concentration in In Lisbon, which is a slot-constrained airport, we don't see a big amount of additional capacity. And that airline is already in the Star Alliance. So impact on us is not as great as if they would be switching alliances. It would have been accretive for us. But I think we'll be focusing on additional capacity out of Europe and strengthen our relationships with our partner in Latin America, and then also looking at new partnerships potentially in Latin America. So I think at the price that the Portuguese government ended up selling the big stake in TAP for, as I said earlier to answer one of the other questions, I don't think it would have been worth it and would have been a creep for us in the short term. As for Air Europa, We've looked at this company for a while. It's not an easy shareholding structure for us to imagine getting ourselves into. Would we look to do some kind of more extensive commercial partnership with them? Possibly. It's not number one on our list. But for now, our ability to properly serve Latin America is not a concern. for the next two to three years, and in that time it gives us a lot of opportunity to solidify our already strong position in Latin America. You also asked a question, sorry, on KLM. So previously, over many years, KLM had an extensive European and so on. This is what's under severe pressure with a big increase in low-cost entry Europe flying, some new non-stop links that have been put in place. So a lot of this traffic we're saying it's too expensive to carry with the increase in charges at Amsterdam as well as the new aviation taxes that the Dutch state has put in place. So we're reducing our exposure to that part of the market while ensuring we have enough flights and enough capacity to maintain the same amount of feed to our long haul. So the offering The next question comes from Andrew Lobenberg from Barclays. Please go ahead.

Hi Ben, hi Steven. Can I ask, as you look ahead to bringing SAS into the group, what are your thoughts on governance structures or perhaps changing the structure of the group and how it works with the opcodes? And just on the same thing, just to clarify, did I understand that you're saying that SAS will happen in, or you expect SAS to happen in, in the first quarter of next year? Can we just be clear on that? And then can I just come back on the question on the KLM fleet change and restructuring? That makes good sense that you're trying to get rid of the short haul to short haul connecting stuff. But how much of the decision to go to the Embraers is motivated by labor arbitrage? And also, do you see scope to increase the premiumization at at KLM, obviously it's a connecting hub, and Amsterdam's not Paris, but how can you leverage the premium strategy as best you can for KL? Thanks.

Hi, Andrew. So you've been following the industry for a while. So the governance structure, when you only have two airlines, is obviously more challenging than if you have more. I think with one of our competitors it was similar until they added a third and then a fourth carrier so we're within this is a this is positive from a governance structure perspective and the ability for management to work more effectively so we you know we in the work we're doing to the best position to integrate the KLM sorry the SAS management staff So far, we're all excited about how this will further simplify the way KLM and Air France work today. That review is straightforward. This is not new. We have examples of other carriers on what some of the other practices are, and in most cases, they're better than how we operate today. There should be increased synergies that we have not put into any of our forecasts. So I'm really excited about that, the streamlined, simpler, more straightforward governance, which hopefully will have less interference by outside people who have views on how we operate. So Q1 for SAS, assuming that the remedy package that we put in front of The European Commission is accepted, then I think we should be good to go in terms of closing in Q1. If the package is not enough, then that will take some time to work out something that makes sense. But I think what we're confident about is there are no barriers to entry into Copenhagen or Stockholm. And we've already allotted into the plan are taking into account the loss of some slots at skip-all airports to account for maintaining the same amount of competition. And of course, CDG is not slot constrained other than just a few hours in the morning. So I think if we were in another jurisdiction, it would be much faster, but this is Europe. But the fact that Stockholm and Copenhagen are not slot constrained gives us a lot of comfort that this should This should be more simple than perhaps, let's say, TAP around an airport that is heavily slot-constrained. And on the KLM fleet side, so a little bit of everything. When we ordered the Airbus A321s, we also ordered A350-1000s and the Embraer 195E2s. And this was an upgauge of the entire KLM fleet to reduce unit costs. So that was on the regional, on the Thank you for joining us. on the long haul. So we're going to reduce the number of 321s and increase the number of Embraer 195s. Even though the 195s is a step up from the Embraer 190, this is the airplane that I think will best suit KLM's network for the future. And in terms of labor arbitrage, of course there are different different CLAs with the cabin crew and the pilots at City Hopper and we'll work that through. But this, you know, City Hopper is already created. This is not a new AOC. It already had 50 airplanes before we, you know, before we went down this path and 50 airplanes in 2018, you know, and we had a few more, maybe we had 10, 20, 25 more. It's not a complete shift in the way we work with our unions. There's not a new long-haul AOC or a new AOC for a medium-haul. It's just putting more capacity in one of the existing AOCs that we have. You had one last one, Andrew, which is around the premiumization and whether that would work in Amsterdam. We don't have a La Première market in Amsterdam, a first-class market in Amsterdam, so that's not part of the plan. The business cabins, because KLM was a real volume market because of the relatively low cost of transferring customers in the past in Amsterdam, that model is now changing. We need to get a greater share of the local market, which we can do. It won't be easy, but we can do. And what's new, which we didn't have in 2018, it's only been introduced over the last few years, is a premium economy, which we dub premium comfort at KLM, which is doing extremely well, as you know, with most carriers that have this cabin. So we're increasing the size of that cabin. Right now, we have only two-thirds of the KLM long-haul fleet equipped with a premium comfort, premium economy cabin. That'll go to 100% over the next two years. And the profit per square foot The next question comes from Antonio Duarte from Goodbody. Please go ahead.

Good morning, Jen, and congratulations on the results. Two for me, if I may. One of them relates with the load factor gap. If I remember correctly, on your Q2 results, you reported between long and short medium haul, about a 2 percentage point gap. This has now decreased, apparently, to 1%. Just wondering if there are any changes in terms of booking trends that you have seen there, or if it's just related with your capacity management. And the second one, you mentioned the strong performance in premium leisure. Just talking about on the corporate side, in terms of corporate demand, what types of trends are you seeing there? Thank you.

Hi, Antonio. Yeah, the load factor gap indeed decreased compared to what we have seen when we entered the third quarter. I think there is a couple of reasons. I think it was also part of the weather at that moment when we looked more or less at the third quarter. So I think that also had an impact on the bookings itself. And it is not a big difference. We talk about 1%. But indeed, and I think last but not least, Then we were looking at July, July and August. And especially August was, if you look at three months, relatively a more difficult month compared to September. So especially September and October. And again, October we have a higher load factor in at the moment for the first 26 days than we had last year. You see that there's also more demand. So I think it has to do a little bit on the timing where we are looking at these results.

And on the corporate demand, so if we focus on Air France, the resilience of the market coming into France is welcomed by us and very positive, but we're seeing really no change in corporate demand Thank you for joining us. But again, I was just really excited. When you look at the 90 departures we have a day long haul out of CDG, we're talking 10, 12 flights that fly over the Gulf region. And those, of course, are getting the performance in those flights much, much higher than what we had before. And out of the Netherlands, everything's pretty much stable. Thank you.

The next question comes from Kirijn Mulder from ING Financial Markets. Please go ahead.

Good morning, everyone. This is Kirijn. I have a couple of questions. My first question is, if you look at last year, $5 billion, and probably you're going to exceed that in 2026, given the developments, despite the fact that there was a real crisis in February starting, but still what are the lessons you have learned from this crisis what are you picking up and what you're taking up in let me say in the case that everything is probably normalizing in a couple of years time so what are the takeaways from that what's happened here especially with regard to the fuel and maybe also with regard to the increases of rates etc. And then about the competition, it looks like that, okay, so some sort of benefits were there from the developments in the Middle East. Have you now reduced your capacity completely back to the level before the crisis? And let me say, redirected all your fleet to North America, South America, from Southeast Asia? Is that what you're mentioning in the press release? That's one of my questions.

Hi Quirijn, good to have you. It's the last time so thanks for following us all this long time and I appreciate our working together. What are the lessons from the crisis? I think first it shows that a resilient hedge strategy is really, really important because the fuel price has a strong, strong impact on our results. You cannot adjust capacity overnight and you want to keep your network running so I think having That is the first lesson. The second one is to be very agile in your network. So when you see that there is no demand anymore in the Gulf, really look for the spots and really quickly act in terms of capacity management. That's what we did. And last but not least, I think you should not be nervous in pricing. So if you see increases in your cost structure coming from the fuel, you should really pass that to the customers. And for that, you need loyalty. and I think by, let's say, upgrading our product, we have more loyalty, also more loyalty customers in our flying blue. So these loyal customers, they are willing to pay a higher price for our product. Actually, you see that the value perceived by the customer is still higher than what we charge them and that's also that we can still able to charge that. So I think there has been discipline in the industry. We were not nervous in our pricing strategy and we immediately put in place and the let's say what we call a fuel component in our tariff structure. And for a second, I hand over to Ben.

And then in terms of redeploying our airplanes, so Dubai has been closed, reopened, closed, reopened, same as Saudi Arabia, Israel and Lebanon. So the eight to ten airplanes, We found new places to deploy these airplanes or we've taken the opportunity to early up some maintenance so that we have more availability to fly these during busier times in the third quarter of next year. So the airplanes are being well optimized during this unusual period. Thank you.

The next question comes from Mark Zek from Kepler Shoebrew. Please go ahead.

Good morning. Thank you for taking my questions. First one is on yields, and I recognize they're pretty strong, but I would assume that you still had a There is a sizable percentage of tickets in there that were booked pre-crisis. Could you quantify what percentage that was and if possible what the year track was from tickets sold pre-crisis? And the second question just to follow up on lessons learned. I guess the guys at United and Lufthansa would say that one of the lessons learned is that maybe ticket prices were structurally too low pre-crisis and that the crisis gave the airline industry an opportunity to reset the structural underpricing to a higher level. Would you agree or do you see things differently on that one? Thank you.

Good morning, Mark. Now, I think we don't have a lot of tickets. I don't know the number, to be honest, but we don't have a lot of tickets for Q4, which are pre-crisis. But I say in France and the Netherlands, it's a very slow booking market. It's not like the UK where people are already booking for the next holiday in September, for the next summer holiday. So not a lot is in related to the pre-crisis. Then on the remarks of the US carriers, I think that actually echoes my sentence that we say the perceived value is actually higher than the ticket prices. So indeed, the fact that we could increase the ticket prices, let's say, in this period with 7% and that we are now currently at 11% has to do also that there is still a strong demand and that we actually have a Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.

The next question comes from Jack Rayburn from Bank of America. Please go ahead.

Hello. Thank you very much for taking my questions. Three from me. I was wondering if you could maybe give us some color on the 12% October yield, maybe split segment in geography. We're seeing some over and under performance on that number. Secondly, perhaps linked to that, North Atlantic yields are up 9.3%, this 4.6% capacity growth. How sustainable do you think that yield dynamic is moving forward? and with fuel still elevated, how much do you expect US carriers will continue to raise fares heading into next year? And finally, just on hedging, you're currently 54% hedged at 2027. I'm just wondering, looking into next year, is there an intention to continue to top up programmatically or kind of opportunistically? And is there sort of a cap level that you wouldn't want to go over with jet fuel at the current price? Thank you.

Hi Jack, if we go first to your first question, if you want some coloring, I think it doesn't change so much as what we have seen in Q3. So we still see a very strong US market, we still see a very strong long-haul market, and I would even say that the hub is doing not too bad at all. I think it is more or less the same, and I don't have the details for that yet for Transavia. But let's say you can more or less take the same geographical split. What the US carriers say, I don't know. It is nice that they say that they will increase the pricing. We are working very closely together with Delta, so of course we will benefit from that. But I think we are quite, let's say, We are pleased by the pricing in the US. We are very pleased on the result on North America. And if we can drive up further prices, that is the big question. Although we will see that also, of course, other European carriers will also run out of their hedges. So there is also, as I showed you, the fuel price is still increasing. So we still need to pass through a part of the vehicles which we are actually absorbing at the current moment with our hedge strategy. Then on what we did for the strategy, we keep our strategy, so the strategy is still the same as was before. We adjusted for the moment, let's say the month that we didn't hedge, so that is we are not going to rush to lock that also in. And that is actually the basis. But indeed, as you say, we have a ceiling for Jetfuel and we have a ceiling for oil only. and that means that we up to now we were more hatching in the third and the fourth quarter and not so much in the first quarter of 2027 but we already have 57 percent locked in but the official target that is that we should be at 70 but we at the end of the quarter so but what we need to do is actually we have a combination of pragmatism but following Thank you for your questions. Let me hand the conference back to the speakers for closing remarks.

Thanks to all of you for taking the time to listen to our presentation today and for all your questions, and we look forward to speaking with you in February at our next session. Thank you.

Thank you all for your participation. The call is over now. You may now disconnect.