Air France-KLM SA (AF) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the Air France-KLM annual results. Mr. Benjamin Smith, CEO of Air France-KLM, the floor is yours.

[Foreign Language], Olivier. [Foreign Language] Good morning, everyone. Frédéric Gagey and I both welcome you to the Air France-KLM Group's Fourth Quarter and Full Year 2020 Results Call. As you're all aware of the current situation of the airline industry, I imagine you are more interested to understand what we did last quarter and what steps the group will take in the near future to overcome this unprecedented crisis. I would therefore suggest we move quickly to the presentation. Of course, Frédéric and I will do our utmost to provide answers to your questions as clearly as we can. So turning to Page 3 of the presentation. We've been dealing with this unprecedented COVID-19 crisis since March of last year, which had and still has a tremendous impact on Air France-KLM. During the first few months of the crisis, we moved from almost a complete standstill in April and May with almost only cargo and repatriation flights still operating to a more optimistic summer period which ended mid-August with the implementation of more severe travel restrictions in Europe and abroad. During the autumn months, we faced a stable yet low capacity situation. And during the holiday period towards the end of the year, we were able to ramp up capacity to some destinations, which is a clear indication that our passengers are still willing to travel and there is pent-up demand if the opportunity arises. In order to keep our employees and our customers healthy and permit them to travel safely, we implemented high-level hygienic measures resulting in a 4-star from Skytrax. To protect our liquidity position, we took immediate action and implemented stricter cost control. The group and the airlines also adapted full-time equivalent levels to the situation at hand while reducing capital expenditures and working diligently to preserve cash by deferring tax, social charges and supplier bills wherever possible. We are grateful to our 2 largest shareholders, the Dutch state and the French state, for their continued support. Thanks to the loans provided by the 2 states last year, the guarantees on the bank loans and their wage subsidy programs, Air France-KLM was able to have almost EUR 10 billion in cash at hand at the end of December 2020. Our transformation plan, as presented at the November 2019 Capital Markets Day, was well underway before the COVID-19 crisis. And we have accelerated these plans, resulting in accelerated fleet phaseout, reduction of FTE and a step-up in our sustainability commitments. Turning to Page 4. Despite strong cuts in capacity, the group has still been able to maintain its well-balanced global network. Thanks to the balanced network, both Air France and KLM have the strong cargo presence and performance we have been able to operate higher capacity in the global industry and 2 of our large European competitors. Page 5. As Air France-KLM has built a balanced network all over the world, we are less dependent, as some of our competitors are, on certain areas like North America or Asia. If border restrictions become less tough, we are able to ramp up capacity immediately as we have shown during the holiday period and in January on our Caribbean and Indian Ocean markets. Turning to Page 6. Management remains convinced that our go-forward plan remains the best way forward for Air France-KLM, and we have accelerated its deployment and implementation during the crisis, while focusing on efficiency and simplification as our primary objectives. On the left side of the slide, you will see our main unit cost reduction initiatives; and on the right, you'll see our plans to increase our unit revenues. I will not go through all these initiatives one by one, but one thing I think is important to mention is that the group fleet simplification and the phase-in of the next-generation, fuel-efficient aircraft has already started, with the inflow of the Airbus A350, Boeing 787 and Embraer 195-E2, which are all replacing older and less efficient aircraft. We expect to see significant savings from these aircraft, both in terms of a harmonized fleet, which has several downstream effects, as well as a significantly reduced environmental footprint, as each aircraft produces approximately 25% less CO2 emissions than the aircraft they replace. We have also been fortunate to establish very productive relations with our labor partners in both France and the Netherlands. And they have shown their agreement and willingness to work together with management to find new sources of commercial flexibility, benefiting all stakeholders. This collaborative approach plays a key role in the transformation of both Air France and KLM. Moving to Page 7. I will give a short overview of some of the key indicators for full year 2020, which clearly shows the unprecedented impact of the COVID-19 crisis on the group's performance. Passenger carried showed a drop of 67% versus full year 2019, and the operating result was down by EUR 5.7 billion. Thanks to strict cost control, government support and strong cargo performance, the EBITDA loss was mitigated to minus EUR 1.7 billion. Our cash position at hand stood at a relatively comfortable EUR 9.8 billion at December 31, 2020. As already mentioned earlier, the group continues to work on quasi-equity and equity solutions in order to strengthen the balance sheet and expect progress in the following weeks. Discussions are continuing with the European Commission within the Temporary Framework. I would now like to hand over the phone to our CFO, Frédéric Gagey, to provide further details on the fourth quarter and full year 2020 financial results and the short-term outlook.

Sorry. Thank you, Ben. I propose to go a bit in detail concerning the result of this fourth quarter of the year 2020 and also to try to make a synthesis of the full year 2020. So I go Slide #11, where you will see the global economic indicator -- sorry, Page 9. When I go to the global indicator for the Q4, no surprise, a terrible drop in terms of revenue, which is, of course, true both for Air France and for KLM. But again, it is not a surprise. When you compare that to the level of the year 2019, it is almost 2/3 of the revenue, which vanished during this quarter due to the terrible situation concerning the epidemic and the decision concerning lockdown and travel restrictions which are applicable in a very large number of countries around the world. If you compare the change in revenue and the change in EBITDA, clearly, there is a bit of difference, minus EUR 4 billion for the revenue year-on-year and minus EUR 1.2 billion for the EBITDA, which is clearly the demonstration that we have been able to manage correctly first, of course, the variable cost. We have already discussed that during the presentation of the second quarter with the first estimate of the variability of the cost we provided to the market, which was in the range based on our first calculation of 50%. But you see that we have improved, I will say, this elasticity of the cost to the reduction of revenue and capacity, which explains why, all in all, with EUR 4 billion of reduction of revenue, the EBITDA is just deteriorating by EUR 1.2 billion but which is, all in all, of course, a terrible result. And EBITDA for the quarter is at minus EUR 400 million. Operating result at minus EUR 1 billion, which is relatively close to our expectation when we comment the outlook 3 months ago, a bit better than what we were expecting, in fact. And last element to keep in mind, you see very small difference this quarter between operating result and net income. This is due to the fact that we have taken maximum of provision in Q2, Q3. I will describe later the provision we have post during the year 2020. And from that point of view, the last quarter of the year was relatively pure in the sense that we have not any additional provision to take. So adjusted operating cash flow is negative, again, not a surprise alas minus EUR 2 billion, which is giving an indication of the cash drain quarter-per-quarter. Then I move to the next slide. What is interesting is that, in fact, the EBITDA in Q4 is relatively close to the one in Q3. That's why I said just on the last slide that we were happily surprised by the balance sheet's result because we are more expecting worse EBITDA for Q4 compared to Q3, which is not the case. The first element, the revenue index is similar to Q3, index 36 for Q4, 33 for Q3, which was relatively source of satisfaction. You remember what happened in the end of the year, October, a bit optimism with the announcement concerning the vaccines. And in November in France and in some countries in Europe and in December in the Netherlands, deterioration of the epidemic situation and stricter travel restriction applied in various countries. So from that point of view, we can consider that the revenue index is relatively satisfactory. In the current situation in terms of capacity, also, note that we had the same level of capacity, 37 million of ASK in Q4 compared to 38 million in Q3. To be totally transparent, we have also to indicate to you that there has been, on the Dutch side, a recalculation of the NOW mechanisms, which are -- brought EUR 150 million not really attributed to the period Q4 in the P&L of KLM. I move to the next slide just to give, as usual, the evolution of capacity, traffic and RASK. Per subnetwork, everywhere, I will say, the result are, of course, [ disparaging ]. You also know that we have been, I think, relatively agile, but I will comment a bit later in the presentation in the sense that we have been able to adjust relatively, I will say, rationally the evolution of capacity to the situation of the market. For example, Asia ASK, minus 61%, but a sharp drop in the half, minus 66%. And Caribbean and Indian Ocean, for example, minus 40% of capacity only, I would say, but a development in terms of RASK, a bit more satisfactory compared to the situation in Asia or in North America. I move to the next slide to illustrate the situation business per business. The only number in green are coming from the cargo, as you probably know already, due to the restriction on capacity, mainly coming from the fact that there was less passenger aircraft operating, means that there is less bellies available for the forwarders and our clients which means that facing such a situation, we have seen the market able to negotiate higher unit revenue compared to the same situation in 2019. And in Q4, a sharp increase of the unit revenue by more than 100% has been contributing to push up the revenue, which is, to be honest, an exception when you compare the other activities, pushing up the revenue of the cargo compared to Q4 2019. By the way, a significant, significant way, you see that the revenue is increasing by 54% compared to Q4 2019. For the rest, no surprise alas again. Network unit revenue, negative; capacity, negative, which explains why the revenue is close to minus 80%. And we have the same into Transavia, where capacity has been a bit more cut, and the unit revenue has been a bit less negative. But it is also for Transavia, quite negative result. The maintenance, the revenue is minus 45%. Some clients, when the aircraft are not flying, are taking the fact that they are available for some shop visits. It explains why we see a reduction of the maintenance turnover a bit less than what you see concerning the network and Transavia. But all in all, just a succession of very negative number. Facing such a situation, I move to the next slide, we have, of course, with Pieter and Anne, worked a lot concerning the cost control. They will be able to comment if there is some question from your side during the Q&A session. I will insist on this slide concerning the management of the labor cost to indicate 2 things. First, the reduction of the labor cost is the result of the reduction of the FTE, and I will say that we are, more or less, in agreement to what we have explained to you before earlier presentation. You see that the group FTE evolution is minus 10% between end of 2019, end of 2020, which is approximately 9,000 people, which is, I would say, already a quite significant number. At the left of the slide, bottom, you see the development we expect for the year to come in KLM, but it could be explained by Pieter. The target to reduce in 2021, again, the number of FTE by around 1,000, 900 to be more precise. And concerning Air France, the fact that the voluntary departure plan is -- has been launched a bit later than it took KLM, the reduction of capacity of 5,000 FTEs is expected over the period 2021 up to the end of 2022. At the right of the slide, you can see what I explained before concerning the cost elasticity to the capacity. For the quarter, we have reduced capacity by 54%. And the total operating cost has been reduced by minus 46%, which is giving an indication of an elasticity of the range of 85%, which is something, I will say, relatively significant and better than what we have discussed with you at the end of the presentation at the second quarter. We are also to admit that part of this cost flexibility has beneficiated from the support of the government. There is some national system in both France and in the Netherlands. The companies, as others, have beneficiated of this support, and the contribution of this support to the reduction of the labor cost is relatively significant for Q4. It was in the range of 65%, but I will explain later that in the year 2021, the contribution of the state aid will be less, and the contribution of the restructuring to the control of the labor cost will be higher than in 2020. I move to the next slide concerning the full year. So the full year is, again, something absolutely difficult to present due to the sustainable impact of the crisis, minus EUR 16 billion of reduction of the revenue. Revenue was EUR 27 billion in 2019. It is EUR 11 billion in 2020. As for the Q4, and happily, the reduction of the EBITDA is less than the loss in terms of revenue, minus EUR 5.8 billion, so more or less 1/3 of the reduction of revenue. Thanks to, again, the cost control and the impact of the variable cost, operating result at minus EUR 4.5 billion. And a net income this time different for the operating result due to the various provisions we have taken mainly in Q2 and Q3. Adjusted operating free cash flow, which is the cash drain during the year in the range of minus EUR 5.6 billion. And as a result, of course, the net debt of the group has increased tremendously by EUR 4.9 billion and which now EUR 11 billion. I move to the next slide just to explain the difference between the operating result and the net income. And to remind you, the origins of the various provisions we have taken during Q2, Q3, EUR 800 million to prepare the future. This is mainly the restructuring cost and the restructuring provision for the GDP in both Air France and in KLM, even if KLM has been able to manage part of the departures already in 2020. So a bit quicker than what happened in Air France when a large number of departure will be observed during the first -- the second quarter of 2021. Second element in terms of provisions, fleet impairment. As it has been already discussed in the past, you know that we have decided to phase out the 380, the 747, the 340, which is basically all the aircraft with 4 engines, have now left the group fleet. But it had an impact in the range of EUR 672 million, due to the necessary impairment we had to post. And the last element to be taken into consideration, the fuel over-hedging impact, EUR 600 million. As many of our competitors, we have prepared the hedging portfolio at the beginning of the year to cover the expected capacity and the expected fuel consumption due to the sharp reduction of the capacity we have been in a situation of overage, and it has been necessary to take this impact below the operating income. I move to the next slide, but I will not make a lot of comments, where we present for the full year the situation per business, which is approximately, of course, the same as I described. Concerning the Q4, terrible result for our network and Transavia. Cargo, positive with unit revenue over the year, plus 77%. In maintenance, a reduction of the operating result by EUR 800 million, partly due to the fact that the activity has been reduced due to the fact that some clients have postponed the decision to make some shop visits or also the loss of some contract but also the fact that we have been able to take some provisions due to bad debt, revaluation of the stocks and revaluation of the margins on some contracts we are then to take in the P&L. Page 19. It is just a slide to try to demonstrate that the network and the revenue management teams have tried to work in a quite rational way. You can see on the graph that each time the share of subnetwork has increased compared to last year, it is correctly correlated to the evolution of the unit revenue. Just for example, if you take Caribbean and Indian Ocean, the share of this network was 8% in 2019, 12% in 2020, and the unit revenue reduced by only minus 18%. On the other side for North America, the share of North America in the network decreased from 22% to 17%, and of course, the evolution of the unit revenue in worse -- is worse, sorry, than in the example of Caribbean and Indian Ocean network. So just to illustrate, the rational behavior of our -- and the rationality of our decision concerning the management of the capacity. But all in all, for the full year, capacity, minus 54%; traffic, minus 69%, which means that we have deteriorated, of course, the load factor, but not, I will say, in a relatively limited way; unit revenue, minus 32% for the full network; and revenue, minus 69%. For cargo, I move to the next slide. So we have been able, as I told before, to maintain a positive evolution of the revenue, plus 19%. Even if capacity has been reduced by minus 31%, the increase in the unit revenue has compensated. So just to indicate that we have been extremely active in order to try to take all turnover and cash we can from the cargo activity by developing an extremely agile policy, by organizing a lot of flight with the full freighter, but also using the passenger aircraft in order to be able to operate cargo flights and to be able also to answer to the demand of the market. On Transavia, next slide, a very difficult year, revenue, minus 65%. A more deterioration of the margin, a bit less than for the rest of the total network in Transavia, preparing itself for its future, which is mainly to increase its role on the French Domestic operations, which have already started in Q4 2020 with opening on new routes on the domestic market, already 5 new domestic routes which have been launched by Transavia beginning of November. For the maintenance because it is an important element concerning some exceptional items which have hit the P&L, which are mainly the provisions I have discussed before. EUR 120 million for our doubtful receivable, which is due to the difficulty of some of our clients, which have been unable to pay the bill in due time. EUR 110 million due to provision on asset. Of course, we are losing contracts. We have less activities, and we have been able to evaluate a lot of the stocks mainly. And also EUR 90 million following the revision of some contract margins. And then according to IFRS, we have to take such reevaluation of the contract margins as a provision in the P&L to note also that the order book has been reduced. Some contracts have disappeared because the clients also disappeared. And there have been also some renegotiations sometimes with some of our clients. And in total, the order book is still quite high, $9 billion, but $2.4 billion below what it was last year. Last slide is a comparison of the evolution of the margin and the absolute margin for the year 2020 for Air France and for KLM. So clearly, alas the 2 companies have the same negative operating result, minus EUR 1 billion for KLM, minus EUR 3 billion for Air France. The deterioration is also -- is the same order of magnitude but not totally, minus EUR 2 billion for KLM and minus EUR 3.6 billion for Air France. There is some explanation behind the difference in terms of evolution of the operating result. Keep in mind that the initial size of the 2 airlines was not exactly the same in 2019. So the bigger you are, the bigger also is the impact on your P&L when you lose 80% of your revenue. Also the fact that KLM has been a bit more quick than Air France to try to develop the cargo activity even in such a difficult environment. And the situation improved by the end of the year also in Air France, and now the 2 groups are extremely active on cargo. And also a third difference which is that the state support mechanisms is not exactly the same in France and in KLM, which has also contributed to support a bit more KLM than in Air France. But all in all, what is important to note is that the impact of the crisis is, of course, extremely negative for both carriers. I move to the next slide to speak about the strategy concerning the cash savings approach. You know that we have, at the beginning of crisis, launched immediately a lot of actions in order to be sure that we can keep the cash at the highest level as possible. You see that it has been effective when you look at the CapEx management. We had a CapEx guidance beginning of the year of EUR 3.6 billion. And we have been able to cut by almost 50% the CapEx expenses during the year 2020, all in all, at EUR 1.9 billion, of which almost EUR 1 billion for the fleet CapEx, knowing that all these aircraft deliveries are fully financed. These are new rules we're applying now into the group. If we're not able to finance an aircraft, we don't take the delivery. Good evolution also, I think, concerning the working capital. In 2019, the working capital contribution was plus EUR 135 million. And in 2020, it is plus EUR 165 million, which is, I will say, a relatively surprising positive result. Knowing that we have been extremely active to negotiate with suppliers, with administration, with our clients, also the possibility to postpone some payment or some reimbursement in order to keep the cash as high as possible. It doesn't mean that we have not reimbursed ticket, of course. In the full year, the total reimbursed amount of ticket unflown reached 2.3 billion, and there was still EUR 1.4 billion to reimburse or that -- or tickets or vouchers, which can be used later for flight when we will be able to operate. I move to the next slide which is a technical one. Of course, when you have the CapEx, the working capital and the free cash flow, you can easily calculate the evolution of the net debt, which increased during the year 2020 by close to EUR 5 billion to reach now EUR 11 billion. I move to the next slide concerning the outlook. So of course, not a surprise, the situation is still extremely uncertain. We still expect, of course, as everybody, that the vaccine campaign will permit a positive evolution of the situation between now and the summer. But for the time being, we are extremely cautious for the first quarter of the year which means that in both Air France and KLM, capacity compared to 2019 first quarter will be with an index of 40, more or less split equally in the various subnetwork. For French Domestic, you see the capacity for Jan, Feb, March, around 40%, 35%. And similar result for long-haul and medium-haul. I will say that, as I told before, the load factor is absolutely not ridiculous. If you look, Jan, for example, load factor was 60% for the French Domestic, 51% for the long-haul and close to 70% for the medium-haul, which means that, again, with these numbers, we try to illustrate the good optimization and the good rationale in the decision taken by the network, the sales and the revenue management department. Next slide concerning the cargo. We think that we will continue to take the benefit of the current situation. The cargo people have even recently increased EBITDA forecast for the year 2021 in terms of revenue. And we will try, of course, also to take the opportunity concerning the vaccine transportation around the world, which is already the case, for example, with some flights devoted to vaccine transportation to [ Paris ], America, Peru, Ecuador, et cetera. Page 29 (sic) [ Page 27 ], future evolution of the labor cost. As I explained before, the support of the government with the national system, NOW, and partial activity in France will reduce in 2021. In 2020, the support is estimated to EUR 1.6 billion, and it will be reduced by 50% in 2021. But in the same time, we will see the increasing impact of the internal restructuring measures which have been applied or which are to be applied right now in Air France concerning the labor cost, which means that we will compensate, not totally, but a very significant part of the reduction of the state scheme by the evolution of the FTE and the restriction we have negotiated concerning the unit cost per FTE into both KLM and Air France. So ability of the group to compensate for this reduction of the state scheme concerning the labor cost. Next slide. Of course, but again, Anne and Pieter are better than me to make some comments on this restructuring program. They are going well at the right speed, with KLM as an idea of structural benefits in the range of EUR 750 million for 2021; and in Air France, EUR 1.2 billion spread on '21 and '22 but with at least EUR 800 million of structural benefit in 2021. And concerning the FTE evolution, I have already provided a number, which is minus 6,000 for KLM compared to the beginning of 2020; and minus close to 9,000 people for Air France compared to the beginning of 2020. Next slide. The group has clearly sufficient liquidity to not be under pressure. To be honest, we have today EUR 10 billion available drawn or undrawn. But clearly, it is cash available for us. Of course, we will spend part of this cash in the year 2021, not a surprise alas, first, because we expect for the time being at least for Q1 an EBITDA which is expected below Q4 2020. Of course, we have been quite efficient to manage the working capital in 2020, but it could have some negative impact in 2021. For example, some payment of supplier bills which have been postponed last year will have to be paid in 2021, and there is still some tickets to be refunded. We estimate the risk today for the unflown ticket for flights having been already canceled at EUR 1.4 billion. Capital spending at EUR 2 billion, but of course, for all the part of this CapEx which is consisting in aircraft delivery, it will be financed by the market. And finally, of course, taking into account the cash out coming from the restructuring, clearly, in 2020, we have taken the provision concerning the VDPs. But in 2021, we will have, mainly for Air France, to cash out for these departures or [indiscernible]. So last slide just to conclude. Of course, it's a bit difficult to have a quite clear conclusion due to the uncertainty where we are now. We still continue to expect that it's possible to reach in 2024 a level of capacity back to the level of 2019. Clearly, all the effort and the restructuring plans we are developing now will have an impact. The fact that we expect that at the end of the crisis, being back at the level of capacity of 2019, the unit cost could be lower by 9% (sic) [ 8% ] to 10%. Again, following the 5-year plan, we expect to come back to a positive adjusted operating free cash in 2023. And if things are going well, when the traffic is back to the 2019 level, thanks to the reduction of costs, we expect to progressively be back to the level of margin we have targeted already 1 year ago when we are present in Investor Day. And the target of an operating margin mid-cycle between 7% and 8%.

Thanks, Frédéric. So given the major initiatives taken by the group during 2020, as explained at the beginning of this call, we are confident we can maintain our medium-term objective of achieving an operating margin of between 7% and 8%, although it will be delayed. Furthermore, at this point in time, we estimate we will see 2019 capacity levels return to 2024. Once capacity is back at 2019 levels, we expect the unit cost to be 8% to 10% below 2019 levels. In 2023, the group estimates the adjusted operating free cash flow levels to be positive again. Turning to Page 31. So a path to recovery requires continued reaction and adaptation and by the group as well as an integrated approach between all stakeholders. The group will continue to improve our agility and swift adaptation of our flight operations in order to seize opportunities as they appear. Transforming Air France-KLM is key to building a successful and sustainable post-crisis model that takes into account strict cost and CapEx control to preserve cash and maintain financial flexibility. Our sustainability commitments are in line with our ambitious environmental road map of reducing our carbon emissions per passenger kilometer by 50% by 2030. Finally, our group will ensure it is prepared to capitalize on the traffic growth once the industry recovers in order to position itself once again as one of the leading combinations of European airlines in the post-crisis era. However, to speed up recovery, we need the harmonization of cross-country policies in order to restart travel as soon as possible. Rapid vaccine rollout worldwide is the key to recovery, and a vaccine passport could be another enabler of a successful recovery trajectory. I would now like to hand it over to the moderator so we can begin the Q&A. Thank you.

[Operator Instructions] We'll now take the first question from Jarrod Castle from UBS.

Three if I may. Firstly, just in terms of the conversations with government about further aid, can you talk a little bit about timing and also the magnitude? Any color on that would be appreciated. Secondly, kind of related, but where do you see your cash burn in terms of a closed [ Sky ] scenario now? And then, obviously, ADP this morning talking about Paris maybe being 35% to 45% of volumes. How do you see or think about opening up? I mean, you highlighted, for instance, the North Atlantic. But when you look at vaccination rates between countries, is there a chance, for instance, that the North Atlantic opens up to the U.K. before, let's say, France, et cetera? So how are you thinking about kind of just the profile of recovery going forward?

Concerning the discussion we have with the government, I think there is something you all know, which is that in the France and the Dutch scheme provided to Air France and KLM in the middle of the year 2020, we have -- the components of this -- or the composition of this scheme was only debt, which is clearly something different if you compare, for example, to the support provider to SAS , Lufthansa, et cetera. So it's clear that this situation has to be corrected, corrected -- modified. And that's why we are clearly discussing with the government the possibility to see if part of this support can move from debt to equity, which is clearly one of the concerns we have, to only increase the debt and not yet improve the equity. And this is the type of discussion we have right now. As you know also, when you move from debt to equity, you have to notify this support to the European Commission. And then you are entering, which is also normal in a relatively complex and technical discussion, which can be a bit long. So it is exactly where we are today and where the 2 governments are also because, as you know, for this type of notification, it is a discussion between the state and the commission even if, of course, the companies have to be involved. So it's complex. That's why it is not totally ready. But as I told you today, to our Board, it is more a question of days and weeks than quarters. So we are confident, and we think that it will -- that one day, we will find a solution, as always. Concerning the cash, I will not give you right now our forecast for the full year because we have also to see what are the developments in the next months. What I will say is that even if we see some source of cash going in the year 2021, working capital evolution of the result, we -- and also the cash impact of the restructuring decisions, we are comfortable with the level of cash we have today, in the sense that we consider that there is no risk of cash stress for the year 2021, of course.

And then for your last question regarding the possibility of the U.K., U.S. market opening up before Europe to U.S., our view is that perhaps it may not happen simultaneously but within the same period. So that's our current hypothesis.

We'll now take the next question from Daniel Roeska from Bernstein Research.

Three from me as well. First, from your discussions with government and authorities, what is your assessment what we would need to see in terms of infection vaccination levels to start easing travel restrictions? Secondly, once demand returns, how concerned are you about your mainline narrow-body networks, given that profitable segments like business travel and connecting travel seemed to be impaired for several years? Is there a larger loss in that segment inevitable even as traffic returns? And then maybe a longer-term outlook, then, if you will. Considering the unprecedented crisis we're witnessing, what are the fundamental shifts or changes in the airline business in Europe you're expecting for the next cycle? You talked about your mid-cycle margin, so you must have kind of reviewed your program. Could you give us the 3 biggest themes you're considering in your planning when you think about what will be changing in that cycle we're heading into?

So I'll start with a question perhaps 2 and 3. Our view is that the model that we have at Amsterdam Schiphol is robust and works quite well and that our plans for the medium, long term, we're assuming we get back -- the market returns so that we can continue to operate that model. We have a fleet plan surrounding -- getting back to that as soon as possible. So we don't see too many changes in how we operate at Schiphol. At Oise, prior to the crisis, we had already planned to reduce our dependence on connecting traffic and move closer to -- or increase our percentage of O&D traffic that we're carrying at Oise, considering the size of the Paris market. So we do have quite a bit of flexibility in Paris to alter the numbers of passengers we take on a connection basis or on a local basis. In Orly and the rest of French Domestic, we're well on our way of transitioning from smaller regional type aircraft into the Transavia model. And our Transavia tool, the cost structure that we have with Transavia, is very close to some of our low-cost competitors. So we feel that with that model, we will be better able to participate in segments of the market that we weren't before, which gives us a greater or lower risk on the future, depending on how things play out. In terms of the vaccinations, look, whether a vaccination passport or the rate at which vaccinations rollout, of course, we're extremely anxious as to how long it will take. We believe that in France and the Netherlands and the rest of Europe, there has been a slower start than some other jurisdictions in the world. But we do feel that in the medium, long term that it will speed up and that Europe will be on the same -- at least on the same level as the rest of the western world.

Have your discussion with government yielded any indication kind of when that point is? Because, as you say, developments are different, may speed up. But has government voiced any indication kind of how far along that road they would need to be to be comfortable to remove restrictions?

We haven't -- I don't think we have any information that you don't have.

We'll now take the next question from Neil Glynn from Crédit Suisse.

If I can ask 3 also, please. The first one with respect to your approach to managing what's left to be achieved on the labor cost side. Just interested that you're obviously targeting the full restoration of ASKs, albeit with 7% less claims. That suggests that you're not using scheduled recovery at the negotiation tool with labor. Just interested in your thinking, why not, why that wouldn't be an effective strategy to effectively reward productivity improvements with capacity growth, which we've seen from some other carriers in the past as we're getting through difficult labor situations. The second question with respect to the 8% to 10% unit cost reduction plan by 2024. Could you give us a feel for what kind of savings on the supplier cost side you expect? Should we expect similar 8% to 10% savings on supplier costs? Or should they be better or worse? Then the third question, EUROCONTROL published an interesting analysis recently highlighting maybe intuitively, the longest flights are generating a very disproportionate amount of the industry's emissions. The state aid that you've already received has come with some domestic capacity conditions. So just interested, do you see any prospect on long-haul operation curtailment due to future state aid as part of the equity solution? Or do you think that the -- each respective government is very comfortable with your carbon reduction plans as they currently stand?

Okay. We have both Pieter Elbers and Anne Rigail, CEO of KLM and CEO of Air France, in the room with us here. So perhaps Pieter can start out with answering your questions on the KLM side, and then we can have Anne follow for Air France.

Thank you, Ben. Good morning, everyone. Yes. To your first question on using the recovery as a means -- and reinstating the network as a means to increase productivity, in fact, we make a distinction between the various phases of the recovery. The first phase is actually where we're in now, where schedules are still very inefficient. We only fly a couple of flights per week, and in many countries, we do have series adjustments of our schedules. Quite a few of the flights to Asia are operated through places where we have different crew regimes, and as such, we have a rather inefficient operation at this point in time. So I think the priority now is first to make sure that we have the operation running. And you could see in the 2020 results, both Air France and KLM did it relatively well compared to our competitors. That's a priority for now. Priority #2, it's probably the second half of the year and early next year, it's going to be very much on reinstating the network and bringing back all the frequencies and the destinations. And after that, and that's more in the later part, and you see that in Frédéric's presentation when the capacity is going to be further restored in the '23, '24 timeframe, it's also going to be the right point in time to address that matter. Again, today, the operational circumstances are very challenging and already require a large extent of flexibility of our flight crews. And I'm very proud, actually, that they are doing so, and we are able to keep that operation going for mostly cargo and some of the passenger flows.

To complete a bit on Air France side, as Pieter said, I think that the efficiency of the network with the decrease of the frequencies is quite low at the moment, and that the restart will help us to go back to a lot better efficiencies. In terms of efforts, clearly, we have already important steps that have been taken at the beginning of the year with the signature with all the people in Air France, pilots, cabin crew and ground staff, of agreements with relating to partial activity. That, we will implement during 2 years, and we are in the middle of the implementation on the ground voluntary departure plan. That is going on quite well. We have a strong wage moderation, freeze of the salaries, that is already planned for 2 years. But in view of the duration of the crisis, we are exploring additional savings opportunities to improve our competitiveness in the short term and during the recovery phase. And of course, we are discussing this with the trade unions.

We will now take our next question from James Hollins from BNP.

Just 3 from me, please. Just on the furlough support, that EUR 150 million of -- looks like exceptional or surprise income on KLM. I was wondering if you could quantify how much of that was in Q4. I think you said not all of it was. And secondly, I know it's part of the negotiations with the EU, but do you fully expect to lose some slots, remedy slots at Orly and Schiphol? And then thirdly, I see you've drawn all of the Air France's EUR 7 billion package, owning EUR 0.9 billion of the EUR 3.4 billion on KLM. Just wondering if you can draw further on the KLM and use that for the Air France CapEx and restructuring through this year.

Okay, let me in, coordination with Frédéric Gagey, answer your first question. That was related to a booking for the NOW in the range of EUR 90 million out of the total amount, which was put at EUR 150 million, to the NOW support we got for the month of March. The introduction was done very quick and very swift on the Dutch side, and then there were some sort of different dynamics on the actual starting date, whether it was April or March. So in clearing the full year, eventually, the start was in March, and then we needed to make some corrections there. And that was also sort of aligned with all the parties involved. I think the second question, Frédéric, on the slots in Amsterdam, you or Ben or me?

Okay. Regarding the remedies that the EU is looking for, from a slot perspective, there are negotiations going on between the 2 states and the European Commission. We're expecting to be asked to release slots in Paris and in Amsterdam. We are pushing to ensure that they are proportionate and comparable with what Lufthansa has released. Frankfurt and Munich are somewhat similar to Oise. None of those 3 airports are fully saturated. There are still openings for new entrants. However, there are peak periods. Orly and Amsterdam are fully saturated, so an impact on slot release would be different than what Lufthansa is going to be -- how they're going to be impacted in the future. Also, Orly is much smaller than the 4 other airports. So we are negotiating with the European Commission, and we're hopeful that we will have an agreement, as Frédéric said, in the short term.

Concerning your third point, no, you're right. Normally, when there is this type of state support, the money is supposed to remain into the company to which it has been addressed first. So it means that the EUR 7 billion for Air France, the EUR 3.4 billion into KLM, and there is some control, which are the rules by the way to be sure that there is no flow of money between the 2 companies with, as an example, all the French state going to KLM or vice versa. So there is a relatively ceiling between the companies concerning the money coming from this state support.

The next question comes from Stephen Furlong from Davy.

In 2024, you're expected to be back to precrisis levels in terms of ASKs. And I'm just wondering, I mean, you talked about, Ben, to point O&D versus connecting traffic at Oise. In terms of the actual cabin mix, would you see more -- or really more a function of the aircraft type you'll have by then, but more kind of growth in premium economy or premium share because of smaller aircraft type? Or do you think because of the crisis, we have more economy traffic? So I'm just trying to get an understanding of the traffic mix in 2024. Obviously, a long way away but compared to precrisis.

Okay. So on the Air France side, there's a -- I think Air France will be better positioned than the other 2 major competitors that we have in Europe, be it Lufthansa or British Airways premium traffic and long-haul legacy type of flows. The Paris market is the largest destination market in Europe, so it's a big, big O&D. And also historically, 50% of the premium traffic at Air France has been leisure. So the exposure to premium business traffic is somewhat different. As you know, at Heathrow and at Frankfurt, the business cabin and the premium cabins are made up of pure business traffic, which to us at Air France is not at the same levels. At -- also at Air France, with the -- all the 380s being removed from the fleet, those airplanes have the largest business cabins at Air France. And of the 68 777 at Air France, 44 of those airplanes have a quick-change capacity, which -- what that means is that the business cabins can be reduced by up to 50%, and that can be done overnight. So the mix in 2024, Air France has an enormous amount of flexibility with the A380s out being able to tap into the local larger French market by balancing out -- by balancing outflows versus local, flexing up the size of the business cabin and also taking advantage of the large leisure, higher-end business which does not exist or does not exist to that extent in other cities in Europe. On the KLM side, Amsterdam is the best connecting market in Europe, so we can access smaller markets, already has a very well-diversified network throughout the world. So I think when you look at the ability to balance out different options, different flows and also the business cabin at KLM is relatively small already prior to the crisis versus its major competitors. So I think we are well-positioned as a group based on the setup of the airline before, based on the evolution of the fleet that have taken place throughout this crisis and on the flexibility that the airlines will have after the crisis and also taking advantage of the respective markets, the flexibility that we have that some of our competitors don't today.

The next question comes from Ruxandra Haradau-Doser from Kepler Cheuvreux.