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

Good afternoon, everyone, and welcome at the Air France-KLM Investor Day. My name is Michiel Klinkers, Head of Investor Relations and it's a great pleasure to see all of you here today in Paris, and I would like to welcome as well our guests following this Investor Day via the webcast. Today, we will provide an update on the group strategy, transformation, our people, customer experience, brand, Flying Blue, cargo, engineering and maintenance, sustainability and our financial trajectory. This will be done by the following 6 speakers from the Group Executive Committee. Ben Smith, CEO of Air France-KLM; Anne Rigail, CEO of Air France; Marjan E. Rintel, CEO of KLM, Steven Zaat, CFO of Air France-KLM, Angus Clarke, CCO of Air France-KLM, and Henri de Peyrelongue, EVP Marketing Air France-KLM. After the presentations, you will have the opportunity to ask all your questions to the management. And around 5:30, we would like to close the formal part of this Investor Day and invite everyone here in the room for a drink and a small bite to continue the discussion with the group executive committee. For now, I would like to hand over to Ben Smith to reveal the group's strategic plan until 2028. Ben, the floor is yours.

Thanks, Michiel. And good afternoon to all of you. A big crowd here. We weren't assure that we'll able to attract these many people but thank you all for joining, and thank you for those that couldn't make it in here today but are following us via the webcast. It's been almost 4 years since we've held one of these Capital Market Days. And for me, personally, I'm really happy we're finally able to do one of these. And thanks to those of you that follow us, we really appreciate it. So we'll get going here. Starting out here on the first slide. As you know, since my arrival, we put a lot of emphasis on improving the relationships with our frontline staff, in particular, in Air France where the social relationship in 2018 really was at poor level. So this is really the bedrock of our foundation, how we've been moving forward. And today, I'm quite pleased with how the progress we've been making. Moving on now to the next slide here. So the purpose here at the bottom is our official [indiscernible], which is at the forefront of a more responsible European aviation. We unite people for the world of tomorrow. So this is spread out internally quite extensively, and we use this externally. And then, of course, our strength, I think all of you know, we have quite a large number of employees, 78,000 around the world with the bulk of them being in France and in the Netherlands. Three strong brands. We've got KLM, Air France and Transavia. We've got some great partnerships. We are part of the SkyTeam. We have an extensive relationship with Delta Airlines in the United States, amongst many others. We got a fantastic network in -- from our 2 main hubs, Amsterdam, Schiphol and Roissy-Charles de Gaulle here in Paris, and we're well on our way to lead on the sustainability front. Okay. So in 2019, we came up with a lot of commitments and happy to share that we've pretty much delivered on everything that I was hoping we would achieve, took a little bit of time during the period of COVID to get back on track. But on the main items, which we presented to you in 2019, this was an extract this page here of the presentation that we made in 2019. And we'll just take the next 2 slides to walk you through what we've done here. So more flexible social contracts. In the Netherlands, we've always had a good collaborative relationship with all the work groups there, always some tensions and negotiation going on but have not never resulted at least in my time with any social action. However, in France, as you know, a little bit more challenging. Air France in 2018 was coming off of an extensive strike, general strike and the company lost over EUR 330 million alone in 2018 because of strikes. So that was a big, big endeavor of ours was to create a much stronger base and relationship, a trustful relationship, one of respect, transparency and to try to keep everything confidential inside Air France-KLM and this is stable now at Air France. There are 17 unions in Air France, of course, with ups and downs but in terms of impact on the operation and impact on our customers, we have a very stable operation right now at Air France. We are well on our way to simplifying our fleet. We've made some significant orders and we're going to be streamlining our fleet. Angus Clarke will be going through in further detail through the medium haul and the long-haul fleets, what we're doing at both airlines. And then we've got the domestic market here in France. Of course, there's no domestic market in the Netherlands but the domestic market here in France has been a challenge for a long time, money losing. The TGV train has been or is the #1 competitor that we have here in domestic France. And recently, we've got this new phenomenon since COVID, where more so than in the rest of Europe, we're seeing a big shift away from flying to video conferencing or we're not flying at all much more so than we're seeing in the rest of Europe. So this has resulted in the requirement to really accelerate our transformation and I'll go through that in further detail in just a few slides. But this is what we identified. We already knew we had to do this. What we've come across now is we have to go even further and faster than what we planned in 2019. Aircraft utilization was always quite strong at KLM. It was not set as an objective. Air France, we had a lot of flights where we're the leading airplanes on the ground for 8 to 12 hours at destination doing double overnights on routes where we had a monopoly position, so it wasn't necessary from a competitive purpose -- perspective. So the bulk of those have been removed, which has driven aircraft utilization up considerably at Air France. Operational transformation, as you know, Schiphol the airport is quite well positioned one terminal. It's -- Schiphol was airport that designed or invented the long-haul transfer concept with KLM and with the government of the Netherlands. And there's still lots of transformation opportunities we had in 2019 and we're moving forward on those. It's a lot more challenging here in Paris. The facility at Roissy-Charles de Gaulle was not designed for transfer traffic. However, with a consistent relationship building and joint plans with [ Aéroport Paris ], the operator of Roissy, we've managed to significantly improve the customer experience going through CDG. I don't know if any of you were connected through CDG but it is a lot better, just simple things like signage, having the right connection times, trying to cluster the flights that you have a lot of connections in the right zone in the airport has helped us. And if you look at the ratings that we get from our customers who connect, it's significantly higher. And then, of course, we now have new management in place at KLM, which is enabling us to really leverage additional group synergies to get the synergy levels up to our main competitors in Europe. So on increasing unit revenue, this at Air France, clarifying the brand strategy was key. We had sort of mixed brand strategy a bit confusing in 2019. We had HOP!, we had Joon, and of course, we had Transavia in Air France. So Joon, we decided to shut down, and HOP!, we reversed the brand HOP! took it out from upfront, and we positioned it just like we have KLM, so now it is Air France HOP! with the brand actually very, very light and it's really -- we're pushing Air France operated by HOP! similar to all the other ACMI contracts better in place in the U.S. and throughout Europe. So this is a clarification to the front to our market and we removed the separate commercial management team that we had at HOP!, who are running their own revenue management, their own sales, they're own advertising, that's now all been centralized into the main group. Configurations, we had a lot of different configurations in place in 2019 across the entire fleet. So we're standardizing those, first of all, to optimize the interior of the cabins to get unit cost down and revenue up and we've made a lot of progress, still long ways to go. But since 2019, quite a number of the airplanes have been optimized from an interior seating perspective and that's helped us. Gauge, the 380s -- the Airbus A380s were very difficult. In 2018, we had to make a decision on that fleet type. The onboard products that were on the A380s were quite old. So they're actual hard products, the first-class La Première business premium economy and the economy cabins required a complete retrofit to be at market standards. And of course, these air planes were on our -- they we're on our best routes. So the decision was made the money that was required to bring these up to market levels is too much, including the engine overhauls. So this is before COVID, we decided that we were going to early retire these airplanes. And then, of course, during COVID, we accelerated that. So we were ahead on that front. And as you saw during COVID, that was the aircraft type that our competitors took out first. So we were pleased that we did that. It took a lot of pressure of the operation in the morning. So we have 4 or 5 of these airplanes arrive early. It was driving a very, very complex banking structure in order to support those planes. So refocused market positioning, all the strategy, I'll talk about it in a minute. And then, of course, ancillary revenues, Angus will talk about Transavia growth in more some more detail. Flying Blue, we'll have Henri go through that, and I'll touch on E&M and cargo at the end. So the simplified and optimized operating model. This, as I said, cleaning up the brands was a major part of that, really focusing on 2 operating models, low cost at Transavia and network carriers at KLM and at Air France pretty straightforward. We've really, as I said earlier, improved the relationship with management and our frontline staff and those of you that fly on Air France, I hope you're seeing improved engagement that we've seen between our frontline staff and customers. Sustainability, we're leading on that front. I'll talk about that at the end. And then we continue to transform what we've had. We still have a lot of opportunities to bring our costs and that's still -- Steven will walk us through some of that on what we're continuing to do. So on the EBIT margin, 2019, first 9 months of 2023 increased that by 2.7% and if you look at the first 9 months of 2023, we're sitting at 7.8%. Of course, that includes our strongest quarter, which is the third quarter. And then our strategic ambitions remain the same that the ones we outlined in 2019. So improve our market position. So we want to solidify our position in Amsterdam with the slot portfolio we have, that's quite straightforward. But of course, in CDG being an open airport, this takes a strong planning and really good implementation to make sure that we're able to do that. Boost profitability, we think, with the largest inbound market in Europe if not in world that we have a lot of potential to improve our position here in Paris. And then as I said, that's connecting hub in Europe and Amsterdam, same opportunity there. The brands are fantastic. KLM is 104 years old, Air France 90. So we're going to bring out the foundation of those brands and see what else we can do to use the full value that those brands have got to boost the unit revenue, especially here in France in the premium market, we've got this unique luxury brand association that I think we can do more with. Commitments that we made going forward in the midterm, so operating margin above 8%, operating cash -- free cash flow significantly positive. Unit cost reduction, still we have ways to go on that and we can attain it. And of course, investment grade rating we're looking to get in the midterm. So to the team and they're all here today, I think most of them are seated over here. We have, I think, the top line is already. They've already been mentioned by Michiel. Then we also have Anne Brachet, who is Head of Air France-KLM engineering and maintenance. We have Adriaan den Heijer, in charge of Cargo. We have Oltion Carkaxhija, who is in front of me, in charge of Strategy. We have Constance Thio, who is in charge of HR and sustainability and we have Pierre-Olivier Bandet, who's in charge of IT; and Alexandre Boissy, who is our Corporate Secretary, who is right here in the middle. Okay. So just quick a few more updates here. I think you all follow this. I don't need to spend any time on this, where we are in '20. Where we're expecting to be in 2024 versus 2019 from a traffic perspective. On the right here, quite similar trends to what all of our competitors are seeing with the exception of the French domestic, which I think is quite unique. And here, very well positioned or clearer positioning than we've had in the past. We have -- if you look in the Transavia in the Netherlands, Transavia in France, or point-of-sale Netherlands, point-of-sale France, fully leisure-focused. And now that we have the flexibility that was negotiated with the Air France pilot unions, we can significantly grow Transavia of France, and that's exactly what we're doing. So the makeup of the customer base will be different but we don't have any plans to fly Transavia, either one beyond the medium haul. And then, of course, Air France and KLM we're going to continue to strengthen our hub positions in Amsterdam and at Paris CDG. So you can see here, great hubs, fully diversified in -- at CDG and Amsterdam, very solid, fully competitive. And you can see the breadth of the only network with Transavia and Amsterdam with Transavia. So quite dense there. Just the concentration of this is enabling our network teams to be much more agile and throughout COVID, we were able to much better. We're able to move capacity around in a much more flexible way than I believe our competitors. So here, this is -- this slide, I think, from my perspective, it's quite interesting. So Air France-KLM were at 91% versus our 2019 capacity level. So that's what we flew in Q3 2023. And you can see this is compared to the our 2 main competitors, IAG and Lufthansa Group. We are -- in terms of capacity, we're #2 on the transatlantic despite the fact that we don't have a position at London, Heathrow, which is the largest market into the U.S. So strong #2, Latin America, we don't have the same kind of strength in terms of links that Spain and Portugal have but we are still in a strong #2 position. Africa, we are, by far, the #1 player. Asia and Middle East, we don't have the same natural lengths on the Indian subcontinent that are there between the U.K. and still a strong #2. And then, of course, with the French overseas markets, these are very, very big. So Martinique ou Guadeloupe, Réunion Island as well as the Dutch overseas markets in terms of capacity to those regions well ahead of British Airways IAG. So here, we mentioned this in 2019, which is really key from Paris, the market being so big. In 2019, we had about a 50-50 split between connecting customers and local. And from what we're seeing in the market and the studies that we've done, that is not the most optimal mix, and we identified that in 2019, we don't want to go to 90-10. But just a few percentage points up. There's definitely an improved profitability potential, and we've done just that. We've gone up by 3 points in terms of flipping it more towards local. And we've also just happens to be, it's on directly linked, we happen to have gone up 3 points in premium share as well. So the Paris-CDG hub is moving exactly in the direction that we'd like. It matches the fleet configurations that we put in place. So this is -- this continues along the exact same strategy. So we see it getting to 54%, 55% local at CDG. That's our aim for the time being. So here, you can see in the medium-haul network, this is a challenge for legacy carriers. We want to make sure that we have as much fleet as possible at a reasonable COI return, which is tough. We have -- we use a lot of regional-sized airplanes, which worked extremely well at KLM with Cityhopper, and we have some unique strength holds in the Baltics in Scandinavia and in particular, the U.K. which drive high yield. And then we have about 50-50 KLM Cityharbor fleet sizes that feed our Amsterdam Hub. At CDG, we've had a challenge. And with the Airbus A220 coming in, that's becoming a lot more manageable. So getting the exact right mix between local and connecting, so that we get maximum profit on long haul is becoming a lot easier with the balance and the size of the airplanes that we have. And you can see we have less exposure to the money losing capacity. So we can keep the frequencies and with the average gauge coming down on some of these routes, you can see the exposure is much lower. So here, with Orly, those of you have been following , the -- I guess, the history of Orly. Just in 2019, the Air France Group, the green bar is Transavia, the lighter blue bar is Air France HOP!, so the regional arm and then Air France is the dark blue. Well over 50% of the slots in 2019, but you can see the makeup of the rest of the slots. So 23% were low-cost carriers have dominated type control of those. So Vueling, easyJet on the short haul and then Corsair, Frenchbee on the long haul. Those are the main players. And then if you look at the VFR to North Africa, which are big markets. So you've got Tunisair, Air Algérie, and Royal Air Maroc, big volumes, lower cost structure than Air France and difficult for us to compete with Air France and then a very small percentage of 10% of legacy carriers, and there aren't that many of Iberia, TAP and Lufthansa with feeding into their own hubs. So with the makeup of the -- of how we were deploying our slots in 2019, we're producing a lot of money on the Air France and the HOP! service. So how to evolve that and maintain our position at this extremely strategically located airport? This airport, as you know, is close to Paris. Paris is the largest city on the European continent. So to be in a situation where we have 50% of the slots and we're not profitable, we felt like we have a potential here with a low-cost carrier platform, which have similar unit cost to say easyJet that we should be able to turn this airport into profit. Obviously, a very big effort, a lot of risk on implementation and execution but walking away from this airport will be such a lost opportunity, and we think we can make it here with Transavia. So well on our way. We've pulled out the HOP! aircraft. We've taken the HOP! fleet in [indiscernible] they've not been redeployed. And Air France, we started to move airplanes over to CDG and the remaining aircraft that are there are only there because we can't grow the Transavia fleet fast enough. So we've announced recently that we will be pulling all Air France capacity out of Orly except for Corsica and we'll do that by 2026. So you'll see 95%, 98% of our capacity -- Air France capacity come out of Orly and then that will all be taken out. So we'll keep our slot portfolio by -- with Transavia Airplanes. And you could see there's an expansion of the low-cost number of slots or percentage of slots. We lost some slots during COVID. There were remedies put in place, to give up slots at Orly, the European Commission imposed that on us when we took the loans from the French state to stabilize the group during COVID. So there was a slight change there but we still have 50% of the slots right now. So here at the split and what we're looking at doing here. So Orly, we're going to try to move a good 60%, 70% of the domestic capacity out of Orly and redirect that to European and North African destinations. So we're well on our way there. We see that the North Africa is extremely strong. It -- new capacity gets absorbed quite quickly. We're able to make money quickly. It's the European services, which is taking time. We're obviously going against some well-established airlines like Vueling and easyJet. But we are just now starting to dial up our Flying Blue, which is the key unique tool that we have that the others have not got. And then, of course, CDG, we're trying to grow this and solidify this hub, as I said, as best as we can. Okay. So this is -- we do a lot of seasonal flying at Transavia. So these are not all the destinations but you can see they're all obviously, in Europe. We are doing, as I said, quite well in northern part of Africa, and we're starting to get a foothold in the Middle East in the leisure destinations in Egypt, and we've got -- unfortunate that we've got this situation going on right now in Israel, and their route is a little bit slower. But before the issues in Israel, the Tel Aviv market was very strong for Transavia. And here, you can see first 9 months, 25 million customers went through Orly. It's not a small airport. And then you can see here on the right, we don't hold the #1 position from a capacity perspective on some of the major routes out of Paris. So you Lisbon, Madrid, Rome, Barcelona very, very big market. So there's lots of opportunity for us to grow with no possibility for these competitors to add capacity because there are no slots. So as we transfer Air France slots to Transavia, we can choose to grow our position. These are just the top markets, there are plenty of others depending on where the most profit is. And we are -- I think, with Flying Blue, as I mentioned here on a couple of the slides, we have everything that we should to make this work. New fleet is on order. We're tweaking the customer offering, which we didn't have before to put a business-friendly type there in the Max fare to give full flexibility boarding. If many of you have tried easyJet before that kind of flexibility can be there. And then what's really exciting about Orly is the new link into Central Paris, which will open in June. It looks like it's going to be on time, and this is the Metro Line 14, which will be 20 minutes right in the Central Paris. So that's a huge positive for this airport. And then, of course, once we put -- we've solidified our position at Orly, we need 75 aircraft that Orly to -- around approximately 75 aircraft that Orly to solidify our position and use up our slots. Amsterdam, we've got just over 40-year planes based at Amsterdam, Rotterdam and Eindhoven, new fleet coming there. And then, of course, we've got -- the model is quite solid. We have Orly airport, which is key. We have to solidify our position there. Then in a few years, we'll look at additional bases around Europe and outside of the Netherlands when and if that becomes available. It's nothing in the short term that we have planned. Okay. So this -- you're all aware of the challenges we've been facing in Amsterdam. The Dutch state has -- they've come out quite strong with their desire to reduce the movements at Amsterdam Schiphol with the goal of reducing noise. So they did come up with -- the government did come up with a unilateral approach, which recently has been fought quite heavily by the European Commission and the U.S. DOT. So the Dutch state has pulled back on that first experimental phase that they wanted to put in and they are following the IKO. European Commission, U.S. DOT approved balanced approach, which gives an opportunity to all stakeholders to try and find the most balanced way of attaining or reaching the desired goal, which is 20% less noise reduction. So we've -- KLM has shown a alternative, which we think is quite solid and can achieve what the government is looking for. So that will be our impact -- or our input. And then if we're not able to maintain all the slots we need, we've got quite a lot of flexibility to mitigate the loss of any potential slots. We have full flexibility on our long-haul, medium-haul and regionally by gauging up with the orders that we've made. So we're confident we can maintain our seat capacity. We have a lot of -- we've got a lot of simulations around if we have to reduce 1 or 2 frequencies on some of the short-haul routes, we will keep the entire long-haul network that we have. If we are put in the situation, we have to reduce some slots. And of course, we'll up gauge to the airplanes I just mentioned here. The consolidation, as you know, we've been quite strategic on this. We looked at -- not strategic -- we've have been very careful on this. There was the opportunity to participate in the ITA. We -- as Air France-KLM, we've invested in the [ former ] Alitalia twice. So to put the third opportunity in front of our Board, we have to be quite solid and quite comfortable that we can make it, and we didn't feel that was the case. Very complex environment to operate in with 2 airports in Milan and of course, Rome, which is highly seasonal with not much traffic in January or February and March, so big seasonality. So how to optimize the fleet, very, very difficult, and that was the requirement of the Italian state was to develop a hub in Italy. So we stepped back and quite comfortable with our position at Linate Rome and at Malpensa. We'll get the feed that we want. And it's not causing us any grief that we do not move forward on that. We did -- as you know, we took a 19% stake in SAS, which is the final process of being fully approved. Coming out of the bankruptcy process is not quite done yet but we assume we're going to get there. And we view this as a very low cost, low risk way of participating in M&A. It's in our risk profile. We're quite comfortable with it. And what we like is immediately SAS will exit Star Alliance, which we think is a very, very big win for SkyTeam. And then in the near future, we'll look at does it make sense to bring SAS into the Air France, KLM, Virgin and Delta joint venture. So Scandinavia already is a very strong point-of-sale market for KLM. So we do have experience there. And like I said, 19.9% ability to move SAS out of the Lufthansa Group, we're quite happy with that. So that's the internal updates from where we were in 2019, and I'd like to invite Angus up to take us through more detail some of the commercial items.

Than you, Ben. Good afternoon, Angus Clarke, Chief Commercial Officer at Air France-KLM. I'm going to talk to you about 2 topics under my responsibility today. First one is alliances and the second one is fleet. Let's make sure this works. Yes, here we go. So alliances are absolutely essential in terms of driving that incremental bit of profit that I think the community here today appreciates but we also appreciate running the business. In order to achieve this, we've obviously joined and being a founding member of the SkyTeam alliance to counter Star Alliance in one world. So that's our alliance positioning that's important. That gives a lot of benefits to the customer as well as revenue benefits to our business. As part of this, we have 59 code share agreements that all serve to expand our reach across the global network, which is absolutely essential to attracting corporate customers. We need a very big, broad, profitable for us, but also effective network to attract the best and highest yielding customers. So partners are very important in terms of the partners we choose in order to have that comprehensive network that people actually want to travel on. We also have 6 joint ventures. Everyone here is largely aware of our very successful joint venture with Delta. That is the absolute bedrock of our global partnerships. It's our largest partnership by revenue and it's our most profitable partnership for them and us. So it's absolutely important. We also have very good success with interline agreements. We have a number of interline agreements that don't involve code share across the globe and a lot of them deliver for us a number of benefits in terms of connectivity, such as with Copa, we flied to Panama -- we couldn't fly to Panama City profitably without an interline agreement with Copa. So that's one example of something that's successful. So that's -- that all translates to the bit on the right side of the slide, which indicates in terms of our code share partnerships, we have the widest reaching network available in terms of cities served either by us or with code share. In terms of the 191 destinations served by Air France compared to the 200 by our competitors, when you think of unique destinations served by Air France and KLM, we actually exceed the 200. So the dual hub approach of Charles de Gaulle and Schiphol serves very well in terms of offering maximum choice to the customer. And really, that's what this is all about. So just quickly go around the globe to focus a little bit on some of our Alliance strategies. I mentioned Delta, the Bluesky's JV with Virgin Atlantic and Delta. I mean this is our single most important JV. It drives the majority of our global corporate contracting, which is our highest yielding revenue. So this is critically important. Delta is the #1 carrier by choice and margin for full-service North America. So they're a very important partner in terms of them being a very strong economic partner in the United States. The point of sale in the United States is incredibly important for our profitability. So the partnership with Delta is very important. We offer them Paris -- sorry Schiphol and Charles de Gaulle, excellent connectivity beyond Paris. So it's a very complementary relationship and we both value it very highly. Virgin Atlantic less so in terms of the relevance of Heathrow versus Schiphol and Charles de Gaulle, but again, very relevant in terms of U.K., Europe into North America. Air Mexico, quite a light partnership that works effectively in terms of our services to Mexico City. And WestJet's working nicely in terms of KLM flight to Calgary and WestJet flights to Paris, and we have code share and Interline that is successful. Canada is a very good market for us at the moment as well. Exciting news. We've renewed -- recently renewed our partnership with GOL. GOL delivers a very good quality of customer to our Brazilian services. Our Brazilian services are all profitable. This was not the case in 2019. So partnership with GOL is important and it delivers solid 8-figure profitability to our Brazilian P&L. So it's a good partnership. I mentioned Copa briefly. They do very well for us in Panama City. And as part of the GOL partnership with the Abra umbrella, we've agreed with that -- agreed that we will start commercial discussions with out the anchor irrespective of them being in the Star Alliance. So South America is looking interesting for us at the moment. You also would have seen in the media, we've got a new partnership with Etihad. Air France has launched services to Abu Dhabi. Abu Dhabi has a brand new -- effectively a brand-new airport. So it's in its early days. We only launched service on 30 October but signs are positive at this stage. So we're gradually expanding our code share into line and number of benefits around loyalty with Etihad. So wait and see. We'll let you know in a year's time how that's all going. Asia is quite interesting for us as well. We have sort of 2 pockets in Asia. We have the joint venture with China Eastern, which is -- it is another bedrock partnership. It is a little bit complicated at the moment because of Russian overflight. So we have to fly around Russia and they can fly over Russia. So we've had to take some time to work out how we're going to settle things in joint venture settlements and who's doing what that what code can go on what aircraft. But right now, it's -- we've reinstated the JV, and it's wait and see, but we're very close to China Eastern, they're a very good partner. The other little dynamic we have is what happens in Singapore. You can see a few carriers on there, Aircalin, Qantas, Garuda and Bangkok Airways. Singapore is a nicely profitable market for both Air France and KLM, and is achieving profitability in excess of 2019. Air France has been able to go from 7 a week to 10 a week and some of that is off the back of the partnerships that feed our service. So those partnerships, albeit look a bit smaller, are materially profitable for us and feed into the whole equation of our success in long haul. Next slide. So just a little bit of a deep dive on the Atlantic JV, just high level. We're doing well on the JV even though we're in the second position. We have the highest growth rate out of the 3 large Atlantic JVs 7% and as you can see on the right-hand side, we've achieved good share in terms of Alliance share on the Atlantic by gaining 4 points, whereas our competitors have not been able to gain the same amount of share that we've been able to. One thing that skews us against our alliance is Air Canada being in A++. It really means it's very hard for us to catch up against that market share simply because of the transatlantic size of Air Canada in the Canadian market, whereas we really only fly from Europe into Canada. They get it both ways with Lufthansa and Air Canada. So that's a bridge that I wouldn't expect us to close anytime soon. I'm going to move on to fleet. I think there are 3 key drivers that we get with fleet, better financials, the new generation technology, the cost of the plane, the fuel burn, the engine contract, the layout of the plane, the payload range performance, all of these play into a much better economic outcome by investing in fleets to get higher rates of return versus the old gen aircraft. CO2 consumption and fuel burn are very topical at the moment in terms of our sustainability credentials. The new generation wide are delivering between 20% and 25% reduction in CO2 and the narrowbody between 18% and 22%. So this is absolutely critical, given where fuel prices will go in the future in terms of mix of SAF and non-SAF fuel products. And the final pillar really is when you get a new plane, you got a brand-new interior with the latest innovation. So it allows -- investing in fleet is also indirect investment in new cabin and new products and allows -- the rate at which we take planes also allows us to roll out best-in-class customer service. Just quickly talking about the last 5 years of fleet procurement. I think everyone is largely aware who follows the stock in this room that we did order 2019 for 60 A220-300. This was a stand-alone order. It wasn't overly competed. It was take or leave in order to Airbus. Pricing was excellent. Engine contracts excellent. Layout of the aircraft very efficient. Customer experience, very high. Fuel burn excellent. So this aircraft in Air France service is absolutely key for turning the P&L in Europe, and it already is starting to turn the P&L in Europe. So that one gets a tick. The A320neo is really a combination of A321neo and A320neo. The Dutch businesses will largely focus on the 321neo and the Orly business will focus on mix between 320 -- 321neo and 320neo. The 321neo is the market leader in terms of unit cost economics in the narrowbody space. So we expect that to be very successful at Transavia Netherlands, some degree Transavia France and for KLM. Once KLM long haul starts to grow again, the cost of fleet from the 321neo will be very competitive and not easily beatable. 350 also is a great part of the future of Air France-KLM. As you can see, we will have up to 99 -- potentially up to 99 subject to Board approval, 350s. We have purchase rates on another 40. So that aircraft could absolutely be the dominant -- will absolutely be the dominant future of Air France-KLM. Alike in the 350-900 in Air France and KLM service to what the 737-800 is at Ryanair. It -- everything works, the price is good, fuel burns good, engine contracts good, lay out super-efficient. There's nothing -- that aircraft cannot do anything wrong in my opinion. So -- and when you compare it to the 2019 layout, the 777-200 in Air France service compared to what will be the 2026 delivery cabin of the 333-300 in Air France service, we will get close to 25% reduction in CO2. So this aircraft is leading our economic recovery but it's also essential for our environmental type of trajectory. Quickly on simplification. I'd just like to point out on the right, Air France was basically the Paris Air Show fleet prior to sort of the restructuring. So we had endless amounts of layouts, endless amounts of fleet types, which just translates into pilot training, engines, a whole lot of things that driving efficiency. The medium-term plan, as you can see, is really to done this down to 2 super-efficient types, 777-300. It's a very efficient fleet type and is really the gold -- has been the gold standard for the last 15 years in terms of long-haul efficiency. So that aircraft remains very hard to beat that. 350-900 does beat it but again, the age of the 777-300 fleet means it's staying for a while. I've explained the virtues of the 220-300, great unit cost, optimize layout, good fuel burn, good capital costs and really take the A320 family at the bottom of the fleet, 318, 319, put the 220 in there. And then we've got a young fleet of 320 Classics, which we will make a decision in the future as to what we replace them with. Again, Air France has ordered the 350-F common cockpit with the rest of the 350 fleet. So very -- and that's coming at the end of the decade. That's not soon. So very easy to deal with that. Embraer fleet at Air France, we haven't made a decision just yet as to what to do with that. For KLM, similar story, except we have the mix of 777-787, which is common cockpit, so that's fine. Airbus 1 the latest tender based on NPV and IRR. So that's pretty straightforward as to why we chose the 350 million. Also Russian overflight meant we had to circumnavigate Russia. 350-900 has 2.5 hours more range than 787-10 IGW. So in the end, it became an easy decision. I've talked a bit about the 320neo campaign, and that aircraft is going to be 321neo at KLM, and that's very straightforward in terms of the optimal low unit cost fleet for the network. 350-F, again alliance with 350 passenger at KLM. So that's a good decision. The standout here, however, is the E195-E2, super-efficient, very profitable in KLM's European network and is the margin leader for KLM in terms of European flights in terms of EBIT margin. Last slide. Again, same thesis. Transavia is a low-cost carrier. It needs low unit cost, 320 family. It was a very competitively tendered campaign against the Max on price. Engine contract. There is a third-party engine maintenance contract -- sorry, an engine maintenance contract that is for internal and third-party work that contributed to the present value analysis when we purchased the aircraft. So there are multiple silos of value associated with the 320, 321neo campaign that resulted in this choice. But again, for the -- for the slot-constrained airport at Schiphol, Transavia Netherlands and KLM, up gauging was a very important thesis in terms of lower unit costs and growing the revenue base in the swap constrained environment. As Ben talked a bit about Orly, Transavia France, we'll take a majority of 320neos but 20% of the fleet could end up being 321s on those routes in the Mediterranean and summer where the airports are slot constrained. Thank you, Ben.

Thanks, Angus. So I just said before, we've had the CEOs of the airlines up. I just mentioned there's a couple of things here. So we've been very, very laser focused in trying to simplify what the teams are working on. So as Angus mentioned, a lot of complexity at Air France on every front, starting with the fleet, it's driving costs that were disproportionately high versus our competitors. So big, big effort starting with the fleet all the way down to every customer offering that we've that -- we have in place. So that I can't underestimate the amount of effort that's gone through and still going on to simplify the operations in the group. Synergies between KLM and Air France, we are not at the same level as IAG or Lufthansa Group. So that's a big opportunity for us. This -- we're putting effort into this. Marjan and her team fully engaged with the Air France teams to see what we can get as quickly as possible. Revenue initiatives. We believe that we have a lot more opportunity in and out of Paris with the size of the market and having up to date only less than 50% of that market with the point of sale actually skewed to France in most of the markets. So this is a big concentration, a lot of focus on this. And then cost savings lot of it coming through fleet and through optimation of interiors, et cetera, utilization -- and better asset utilization throughout the rest of the operation. So Steven will go through some of the 700-plus initiatives we have to achieve those levers on the left and it's happening across all business units, and we expect to achieve over EUR 4 billion in structural benefits by 2026. That's what we have in our plans. So move on here to -- I'd like to invite Anne Rigail, who is the CEO of Air France to come up for the next part of the presentation.

Thanks, Ben. Good afternoon, everyone. So to focus on Air France, I can say that Air France transformation plan is on track since we delivered more than 50% of the ambition until now. So first, the network has been widely optimized since 2019, including, by the way, a first phase of restructuring of our domestic network together with the development of Transavia France, that has already contributed to our result by EUR 350 million. Another key project is intermodality with a reinforced partnership with -- between Air France and SNCF, so the French National Railways. So that now we can propose to our customers train process service to 41 high-speed train destinations and with a seamless digital experience that we just recently developed with SNCF. On the cost side, we implemented a permanent review of our standing. So we use, of course, the bargaining power of the group through joint RFPs, for example, on logistic activities, but a lot more. We also implemented an inflation tracking system in purchasing processes, leading to regular contract renegotiations. And beyond network and spendings, we also conducted a complete review of our processes and organization. For example, we strongly reduced our managerial lines in our hub and stations. We completely rebuilt and reorganized our engine workshop building in Orly now under a single roof. And the last transformation area is about questioning which activities could be either centralized or outsourced, mainly on transactional or non-differentiating activities. So for example, part of our ramp activities were outsourced on our main platforms. We also deployed a business model -- business partner, sorry, model in support functions and we relocated a shared financial service in Budapest to regular contract, but we need that we need to pursue strongly this transformation efforts. So we have set up a clear road map with lots of new projects based on 4 pillars that you can see on the screen. The first one is simplification. So we continue to streamline our processes, our organization, our operations to increase our efficiency. Cost optimization, of course, is still a very strong focus. For example, we launched a project called Integrated operations planning which is this, it's consisting in a global anticipated and transversal approach on all operational resources, sizing and planning. We also have projects on revenues, but I will let Henri elaborate on them. And we continue, as you could see on the Labor fleet to invest on the fleet and we optimize our capacities through cabin densification that is bringing a lot. And finally, as you know, we plan a strong change in our domestic model for 2026 with the second phase of domestic network restructuring that Ben just presented to you. I will now leave the floor to Marjan for KLM transformation.

Thank you. So from KLM perspective, we started with funding our journey and funding our journey is our plan today that links up all the transformation we do today. And the main reason we have this in place is because we have a lot of ambitions, of course, business and business operations and our financial performance needs to be synchronized. Its name -- it's a reference to our strategy, and our strategy is called a frontrunners journey. We need to improve, and we are improving every day the financial health by lowering cost, increase productivity and prioritize all the decisions we need to make to focus on our customer, our people with technology and sustainability. We made losses during COVID-19, and we have challenges in the Netherlands, like the tight labor market and the inflation, but KLM has proved in the past several times in history, that we made the right decisions to be successful, and therefore, launched this program last year. So we will improve our margins like we did in 2019. So we have 3 main buckets in this transformation program. It's about increasing revenue. It's about increasing utilization, and therefore, we need to overcome our operational constraints. It means that we need to reduce the shortage of staff, the shortage in operations and shortages in engineering and maintenance and we need to make sure that we improve the fleet health and availability. Next to this, we will focus on cost and productivity optimization by reducing, of course, absenteeism and we're working very hard on introduction of lifting aids but also -- in our baggage system but also containerized luggage in our European fleet and all other kinds of preventive measures needed for those workers that otherwise are absent. We have reintegration officers in place and of course, we advise on a healthy living way. We are reviewing core and noncore activities, and we are optimizing our real estate portfolio by assessing owned versus leased buildings, reduce the numbers of square meters for office buildings and optimize hangar capacity. Next to this, of course, we have our strategic initiatives. It's a long lease, but it's focused on emission reduction and cost control. And for example, we will reduce the fuel cost by optimized tooling and AI. We are really committed to this transformation plan, funding our journey. And I will give you the floor again.

Thank you, Marjan. So we will now see how you -- we engage our employees in this group's journey. So at Air France, we believe that the people development and employee satisfaction are key success factors. This is why we have set high standards and priorities in terms of human resources. Of course, social dialogue is our top priority, Ben said it, and we pay particular attention to embark our staff in all decisions. So to illustrate this, we have signed 26 agreements this year, in 2023, across all areas of the company from the cabin crew CLA to the recent agreement on disability at work, for example, despite a strong employee engagement, and we see that the resignation rate at Air France still well below the national average, we can still do more to increase -- to improve our employee promoter score. So with local action plans to improve the working conditions, of course, but also by encouraging all initiatives and events to leverage the collective pride of working at Air France that is real. For example, we still celebrate our 90th birthday anniversary. We -- next year, all our teams will be fully committed, and they are now fully committed to make our partnership with Paris 2024 Olympic Games, a real success. On the resources management side, one of our current challenge, as you know, is to have the right people in the right positions, especially in the context of the recovery post COVID. So in 2023, we managed to recruit more than 2,000 employees in all areas of the company, even those where the labor market is really tight. Our strong brand attractiveness is helping. It's a key asset to achieve these plans. As you can see, Air France ranks as third preferred company in France among students, which is good. And if we look at the transport sector, we rank in the first position. To enhance mobility throughout the company, which is important also to solve local overstaffing due to our transformation programs, we also implement more and more training and re-skilling, long re-skilling programs, for example, to allow station staff to integrate maintenance teams or even cabin crew teams. So finally, we also placed diversity and inclusion at the center of the approach to make sure that equal conditions and opportunities are granted to everyone without any discrimination. So we have strong commitments to promote female talents, and it's not only about Marjan and myself, with already close to 40% women in executive positions. We also work to provide opportunities to people with disability and to recruit employees in underprivileged areas. I will let Marjan describe the HR challenges at KLM.

So with 2 female CEOs, diversity is not solved. That's what we always say today. Our people are, of course, the key of our success. And therefore, we are proud that we have renewed our CLAs with cockpits with KLM and with ground for a 2-year period. And we are in difficult tight and tight labor market with inflation after a COVID period with difficult operation waiting lines last year, we solved that all, but the first summer after COVID, it was a bit difficult and still, we concluded on labor agreements with our colleagues, and that gives a perspective and, of course, an employee engagement. This is the sheet that belongs there. Each year, we will roll out our KLM employee survey. And this survey helps to understand how our colleagues are feeling and about their overall experience within KLM, allowing to take effective initiatives and action to enhance the employee experience. And the scores are improving since COVID. The scores are improving despite the operational disruptions last year. Our engagement score today is 79%, and that's above benchmarks. 80% -- 81% of the people feel happy in their jobs. And it is important that our colleagues within KLM feel recognized and valued, and we are working with different employee improvement plans within the company to improve better and better within the divisions every day. We also invest in lots in physical demanding jobs, like, for example, baggage handling and platform handling. So we achieve to have already in 2030, full electrification on the ground. Today, we are at 60%, 70%, and we will introduce lift equipment in baggage. Today, it's 50% next year, April, it will be at 100% as well. And then the last part, of course, diversity and inclusion. We are never satisfied. We are not satisfied today, but it is our ambition to be a sustainable and diverse employer. We have targets in place, but we have a lot of groups within KLM pushing us every day to improve and improve, such as over the rainbow, connecting colors, young KLM, women on board and we are proud we are still an attractive employer. We are in the top 5 in the Netherlands, and we are still #1 within the management trainees. So we trained as well our corporate recruiters. It's very important today to have an unbiased selection and we focus day after day on diversity because it will lead to more inclusion. Thank you. Ben, you will take over.

All right. Thank you, Anne. Thank you, Marjan. We're doing a lot of this back and forth because we didn't expect this room to be so full. So we had to do some last-minute adjustments, but that wasn't the original plan. And yes, we've got 2 great CEOs running our 2 main brands, and I keep trying to tell everybody and not that everybody listens that we're so lucky that we -- that the best people that were qualified for these jobs just happened to be women. And this happened. The two of them at the same time, but anyway, both Anne and Marjan, I think, are a great inspiration, and we're hoping that in a few years does not have to be something we talk about. But we're very lucky that we've got 2 of the best -- the best CEOs in Europe. So on to the next slide here, we've got 3 awesome brands as well. And with the simplification, we've pulled out the 2 that were not adding any value, so HOP! and [ June ] so that the brand offering we have in France it's really clear. It's -- we don't have to explain what Air France is when you have Air in France in your brand, it's pretty straightforward. And of course, showcasing the best of France around the world. This -- we're seeing a lot of traction on this front as we further align and concentrate what our messaging is to our key customer base. And we're seeing that we've had this last summer, the highest load factor in the history of Air France in our premium cabins, in particular, La Première. La Première is now profitable. I don't think there are any other carriers. I don't know their numbers that could claim that. So we're really proud of that, and we are going to be investing in that product. And at the end of next year, you'll see a fantastic new offering that will be implemented and rolled out. KLM, KLM is a pioneer, a great pioneer. Singapore Airlines at Chinese and Emirates at Dubai, those markets and those models were all copied from what KLM invented 40, 50 years ago. And that model keeps getting refined. The terminal is great. There's still a lot more we can do, but please don't forget that this was invented in our group in Amsterdam. And then Transavia, we've got this whole new opportunity with the flexibility we now have in France to grow the fleet, to fly it domestically, to fly it anywhere else in Europe. So we are -- this is changing. Now it's not only a low cost, it is also we need to ensure that the new expanded potential market that base does have that we have the products they're looking for and with the link into orally this has Air France, Air France-KLM brand can really take off. So here, just perhaps a little bit more detail on what I just said. So Paris, we have the dual hub gateway focus. So I want to make sure we're strong, not only on the origin destination Paris, but also ensure that we get our fair share and take advantage and power our global network with feed traffic and then, of course, Amsterdam being a smaller O&D steer a little bit further toward a connection model. The fleeting in Paris, of course, we have challenges because of the cost structure here, but with the A220s, that's becoming more profitable. Amsterdam, it works quite well for the refining with the Embraer 195 and then this hybrid corporate low-cost carrier, which is at Transavia, which normally I would shy away from any use of the word hybrid leisure at corporate. But the fact that this carrier, at least in France is based at Orly Airport is something extremely unique and it is very, very valuable for us. It is taking a lot of effort by an excellent team to put this in place, big investment on our part to completely refleet Transavia and the results, when you look at the results on its own, of course, it's -- it doesn't look so great financially, but you have to take in place what Air France would have been losing if we were to occupy those slots. We don't mix those 2 together. What is the penalty that Transavia is taking because it is bearing the cost that Air France would have had to have taken on if those slots are still operated by Air France. So we are moving as quickly as possible to get those slots away from Transavia and to move that capacity, as I mentioned earlier, out of the French domestic market to European destinations, which are much more profitable. And of course, Northern Africa, where the competitors are quite weak. So this -- it's flying blue is actually on the right is a major part of the plan. And then a lot of alignment on the bottom here between price-sensitive leisure, price-sensitive corporate and then premium leisure, corporate, medium leisure, corporate and leisure -- sorry, luxury with KLM and with Air France, we have a lot of alignment on quite a few of these segments. And then we have a small luxury component, which I mentioned at Air France with La Première, and then we have Transavia that is our low cost and out of Orly, there'll be a slight hybrid component to that, and we are introducing Transavia holidays as an actual branded product, which we've got a lot of experience in. It's not a new type of concept, but one that we think we can further leverage. So we'll do another switch again and we'll come up next.

Thank you. So we've been investing in our brand and services, both on the ground and on board. We have already seen some successes. As you can see, our Skytrax worldwide ranking keeps on improving year after year. So in 2023, we were voted best airline in Western Europe for the third consecutive year and we hope it will continue. To achieve this ambition of the improving global Air France customer experience, we have built a strong road map around 4 pillars. So the pillars, as you can see on the screen, the first one is to capitalize on the attractiveness of our brand. Second one is to focus on the premiumization across all cabins. Third one is to achieve operational excellence. And the last one is to invest for the future to prepare the customer experience of tomorrow. So let's now dive into each of those priorities. So considering our brand, we want to make it, of course, even more desirable. So we are leveraging our unique French heritage to showcase how Air France embodied the French elegance and [indiscernible]. We differentiate ourselves, thanks to the premium customer experience that we can offer to our customers. And we also take industry-leading sustainability commitments in our Air France [indiscernible] platform because we are convinced that tomorrow, and even today, customers choose their airline also based on its action to reduce its carbon footprint. Lastly, we have, as I said earlier, unique opportunities to make our brand alive with the celebration of the 90 years anniversary, but also through our partnership with the Olympic and Paralympic Games next summer. Our brand also relies on our first-class cabin La Première, which is amongst the best first class in the world because it was rewarded by many prices . So we keep on investing to offer the best service to our passengers. And Air France is currently designing a completely new La Première travel cabin, which will enter into service beginning of 2025. This future La Première suite will be the longest in the market. And we definitely aim to position it as the best in the world. So strong ambition on this one. We work, of course, to improve our customer experience at every step of their journey and not only in La Première. So we invest and upgrade our lounges, in Paris-Charles de Gaulle, our main platform, but also in San Francisco, in Montreal and even for more lounges abroad to come. We are proposing new services like the door to airport luggage handling with our partner all the way, and we are currently developing a new concierge service. And this premiumization continues on board with new cabin standards. We are currently deploying our new business cabin with the door on more and more aircraft. So we are able to cover more and more destinations. We are also upgrading the experience in premium economy with new recliner seats, much more comfortable and improved service. But our customers also expect a taste of French [indiscernible] and also, of course, French gastronomy. So we welcome on board 18 chefs, Michelin Star chefs that design exclusive menus for Air France. We also -- because it is totally mandatory today, invest a lot in WiFi and a new in-flight entertainment. But those investments in the product, in the premiumization, they only makes sense if we can deliver the basics and if the basics are in place. So indeed, a strong and seamless operational performance is what our customer expect first and what they deserve most. So first, we must be able, of course, to deliver our flight schedule. A lot has been done lately in the past year to support the activity post COVID ramp-up, so not an easy task. For instance, we structurally increased the number of spare aircraft to be more robust in a context that we all know of supply chain tensions. Our recruitment plan aims at securing additional crew with a lot of hiring at the moment and also ground resources, especially in maintenance. The way we design our flight schedule also has been fine-tuned in the last year to improve our on-time performance, so to better integrate all the operational constraints. At the same time, we need to enjoy our passenger in a smooth journey. So a lot has been done with our airport partners in Paris and other airports. But -- and with the authorities, of course, in terms of staffing, notably at border control, with more police officers because it was a huge issue after COVID crisis, and with more automated border control machines that are now accessible to a lot of nationalities. Investments have also been made in terms of infrastructure, and I'm thinking of new luggage sorter additional capacities to be more robust, for instance. And beyond those action plans, I can ensure you that all Air France teams are totally mobilized to secure operations for the great challenge that is ahead of us and promise I won't say it again, the Paris Olympic and Paralympic Games because it will be an operational challenge. Now as you know, aviation is a capital-intense industry, and the decision we make today have long-term consequences. So we must be sure that the products we design today will meet the expectations of the travelers of tomorrow, especially with regards to the environmental and societal evolutions. So the push towards a net zero emission is forcing us, airlines, to rethink our business model and implement viable solutions to accelerate the transition. So we heard a lot, Ben and Angus about the fleet renewal. Air France is investing over EUR 1 billion every year to acquire those new generation aircraft. In terms of sustainable fuel with the incorporation mandate, but also the voluntary mandates, we are with KLM, the first user of sustainable fuel within the industry for the second year and our goal, as you know, is to reach 10% of sustainable fuel incorporation by 2030, which is a big ambition. We also optimize the CO2 footprint of our operations, thanks to eco-piloting, of course, and our pilots aim at delivering a lot on this. And the development of intermodality and sustainable catering also are part of the transition strategy, and we clearly see that our customers expect us to be very proactive on those topics. And beyond decarbonization, ESG commitments affect all other aspects of our customer relationship from the caring attitude towards travelers with special needs to the progressive integration of societal evolutions like neutral gender that are in our customer interactions. Now I'll let Marjan deliver the KLM action plan on our customer [ relationship ].

We do a lot the same. We work together closely, so I can accelerate on some topics, but the brands are different. We have 2 brands and flying is our passion and safety is our license to operate. And in the recent period where I entered KLM,again, after working for the Dutch Railways for 9 years, I really experienced this in the company, and it's really what unites all the KLM employees. And we connect the world. We connect the world with that same passion every day. And we create memorable experience for our customers and for our people who love traveling. And we always need to say, we are the oldest airline with their original name still today after 140 -- 104 years. So we remain Dutch at heart. And our customers appreciate us. They appreciate the customer intimacy, the friendliness of the crew, our reliability and they love the spirit. And it's our strategy to run this great airline in this way. And at the same time, as I already mentioned, we are at a crossroad. We want to take responsibility, not for ourselves but for the generations after us. And that's why we pioneer sustainable aviation. And that's not what we do alone. We work closely together with a lot of partners. A lot of partners like, for example, as you see in the picture, the Delft University of Technology and how to reduce noise, but also how to reduce weight on board, optimize boarding processes, manage passenger flows, use the robots at the airports and the drones at engineering and maintenance. That's what we do at least today. And of course, you recognize this picture as well because digitization in social media, including customer experience, are part of KLM brand. Data is the new gold that's what we say for years already. And within KLM and of course, within Air France, we have a lot of data. We have a huge potential of data we use. And we always want to be where customers want us to be. So that's why, for many years already, KLM has been a frontrunner in customer service on social platforms, for 24 hours a day in 9 languages. And if you look at enhancing our customer experience, we will invest in our products. We will recover operational stability, strengthen our hub and invest in our future. And if you look closer, and you look at the products we have today, it's the renewal of the fleet, like Angus said already. It will have a positive impact on customer satisfaction. But what we do today is have our new business class with direct all access on our 777 implemented. And we also installed a premium comfort class. It was new for KLM. It's an entirely new class with its own cabin offering a new type of seats and distinctive service and catering concept. We have great expectations, but what we see today we see a really high customer appreciation, and we are very proud of this. Furthermore, of course, we need to upgrade WiFi. We need more stability, we are investing in this, and we add capacity. But next to this, we invest in our lounges, and we upgraded our lounges in Toronto and in Houston. And of course, we will invest in our own Crown Lounge at the Schiphol hub. We did the upgrade already but we will have a full renovations in the next coming years. And of course, customer experience is strongly linked to operational performance. And we need to work on operational performance. That's what we did to overcome our constraints last year when we see long lines -- waiting long lines in the summer mainly at security of Schiphol, but it's resolved and we focus on operational stability, solving supply chain issues and look at sufficient crew. We hired already more than 800 people at ground services. We hired already more than 300 people at engineering and maintenance and we increased cockpit capacity, we increased training and we even hired for a short period of time retired captains to come back. We invest in sustainability because it is our future. It's not only about SAF, which is the 1% Anne already mentioned and our promise in 2030, but it is also working closely with, for example, Eurostar to at least have block seats when our customers go to Paris, when our customers go to Brussels and have a transfer air and rail. And besides this, we have the sustainability catering. We invest a lot in reducing waste with artificial intelligence. We reduced -- we implemented new models to reduce waste by 30%, 40%. And we did this together with the full AI community in the Netherlands. And next to this, we introduced as well as Anne mentioned, the gender neutrality in all our channels. Ben.

Okay. Thanks, Marjan. Moving on just quickly to Transavia on the same axis. So I think here, maybe just a bit more time on Orly and how we're going through this transformation of this extremely, I'd say, well-positioned asset that we've got. So there are many other cities around the world, airlines to have positions at close in slot-constrained airports. So Delta Airlines, New York's LaGuardia, got American Airlines at Washington Reagan, EasyJet at London Gatwick, the former Alitalia [ ed Milan Linate ], et cetera. And our teams have spent endless hours saying, how can we position Transavia in what way, shape or form at Orly, so that we can really knock this out of the park with all the lessons learned through the other experiences that some of our competitors have had in other markets. Obviously, Paris is extremely unique. The airport is unique. The history of the airport is unique, but as I mentioned earlier, Paris is the largest market in Europe. The airport is well situated and we've got 50% of the slots and we have Flying Blue. So it is a lengthy transition period. We've got new planes coming. We have to train up with pilots. And it is -- there is a big investment, but once we've got the pieces in place, we should be -- my expectation is this should be one of the biggest profit drivers we have in the group, but it is going to take some time. And as I said, we have not to date incorporated the benefits of Transavia that have already been achieved because of the reduction in losses of Air France. We don't attach that into Transavia as of yet. So just one more slide here on Transavia. So the fleet growth, there's some slight delays on the NEOs, but not so bad. They are in line with the with our pilot training. So we're able to handle that. And Flying Blue, we are tweaking a little bit to make sure it is interesting for the customer base that we're starting to attract at Orly and how can we acclimate that very unique because, as you know, the other low-cost carriers in Europe have not got a full loyalty program that is global, the way we've got. So next up is Henri, who is EVP of Marketing, which includes Flying Blue, and he'll take us through the next part of the presentation for today.

Thank you, Ben. Good afternoon, ladies and gentlemen, and my name is Henri de Peyrelongue, EVP Marketing for Air France-KLM. Thank you for being today for the presentation of Flying Blue, which is the loyalty program of Air France-KLM. Today, we will show you how Flying Blue contributes to the finance performance of the group and how we plan to further develop it, and also, we'll share with you some exciting news regarding the recent transaction that enabled us to raise EUR 1.5 billion of quasi-equity financing, thanks to the miles business. So Flying Blue is one of the largest loyalty program in Europe, one of the most successful program in Europe with more than 40 airline partners, more than 100 non-airline partners, 13 co-branded cards, which is the largest amount of co-branded card for loyalty program in Europe. Our 40 airline partners with whom our customers can earn and burn miles are ensuring the global footprint for Flying Blue. With an enlarged portfolio on non-airline partners, Flying Blue is where the customer is. They can earn miles when they don't fly in their daily life. So now let's see some elements regarding Flying Blue and particularly for the customer base of Flying Blue. Flying Blue has 20 million -- 22 million members of which nearly 60% has been active over the past 3 years. By essence, the loyalty program is -- has a strong footprint in the market. And this is the reason why 1/3 of our customers are based in France and 12% in the Benelux. Nevertheless, we are very proud to have 55% of our customers in international markets with a strong presence in Europe outside France and Benelux and also in the U.S., even with the presence of our partners priority program of Delta Skymiles. Regarding the attractiveness of the program, I think that the figures which is shown in the presentation in the slide, of one new member every 6 seconds speaks for itself. So the question is now what is the contribution of this 22 million customer. Flying Blue is a loyalty program, but also a very powerful business engine. And I'm very pleased to share with you for the first time the contribution of Flying Blue in the result of the group. In 2022, Flying Blue generated 15% of the operating results of Air France-KLM Group. This result is mainly driven by partnerships who provides direct revenues to Flying Blue and because we sell them miles. I will come back later on our strategy regarding the partnership. But Flying Blue is a loyalty program, which drives customer behavior. Flying Blue members fly very frequently. They represent 41% of the total coupon sold on Air France-KLM and 47% of the revenue of Air France and KLM, which, by the way, shows that Flying Blue members pay on average more than a non-Flying Blue member. And the combination of higher frequency and higher sales paid by based -- the customer base of Flying Blue drives more than EUR 1 billion revenue, which is incorporated in the total revenue of Air France-KLM. So definitively, Flying Blue is a profitable business we want to grow. The contribution of Flying Blue to the result of the group and also, the growth perspective has been recognized through the transaction led by Apollo. This transaction allowed us to raise, as I said, EUR 1.5 billion of accounted equity and this has been financed by Apollo. We have created a new entity which contain the contract of the partners and also the trade value of Flying Blue. Other assets like the customer database, all remain within the airlines. This new entity will be the sole issuer of the miles, but it doesn't change anything for the customer. Under a pure business perspective, what we have done is we have distinguished the customer program and the miles activity. And this miles activity, which is managed by the new entity is scalable to participate to any new opportunity consolidation opportunity. So now let's go to the strategy to develop Flying Blue. We want to develop this profitable business. And for this, we have a strategy based on 3 priorities. First priority aligns the program to our customer-centric and sustainability growth. We want to reward our customers for choosing us -- for choosing our partners and also for making responsible travel decision. We are the first airline to reward customer when they voluntarily buy sustainable aviation fuel with XP, which allows the status points, which allows the members to get IoT and higher benefit. And just to share with you some figures since we have launched this new initiative, the staff take-up rate has increased by 800% among our Flying Blue members, which shows the real appetite of these customers for such an initiative. We want -- number two, we want to improve the rewards capabilities of the program by, for instance, proposing cash and miles to buy entire like selection, luggage or lounge access, but also, we want to target specific segments like U.S. points to miles conversion market, which is very lucrative and very dynamic. And what we do is we want to leverage the attractiveness of Paris and [indiscernible] destinations that these customers in the U.S. have -- and by this, we really develop new revenue streams. Number three, we want to engage customer -- the customer in their daily lives by enlarging non-airline partnerships. Now let's focus on the partnerships. And particularly, the most recent development we had. First, we have launched a new co-branded card in Canada with [ premium ], which is a fintech company, and we plan to have also to enlarge our co-branded portfolio in countries like Germany and the U.K. We have renewed our group-wide contract with [indiscernible] including Transavia. And we have also launched a partnership with Etihad with whom our customers can take advantage of burn and earn opportunities on new destinations. So we enlarge the capabilities of the program to take some new benefits. We also enlarge our portfolio beyond travel, for instance, with Amazon, a lifestyle partnership, where customers who buy online with Amazon, can earn miles. And we have also signed a very innovative partnership with [ indiscernible ] by which customers can really gain miles by paying their rent. So as you can see, partnerships create a lot of value for Air France and KLM, for Flying Blue, for the consumer and the customer of Air France-KLM and I will finish with the trajectory we have for this partnership. Our strategy is very clear. We want to grow the partnership. And when I speak partnership, it's all type of partnership. It's finance partnership, it's airline and non-airline. We want to grow this partnership, the revenue related to the partnership at an average of plus 8% per year. So in conclusion, Flying Blue is a profitable an asset-light business, it is also a resilient business. We will grow further to contribute to the group financial trajectory. Thank you. Ben?

Okay. Thanks, Henri. So maybe just one extra point to what Henri just mentioned is our #1 partner, which is Delta Airlines, those of you that follow the U.S. market may be aware that they have the most successful loyalty program in the United States. So we do have a great partner that shares their learnings with us, different market here in Europe. But this, I think, is a big plus for us that is an advantage that we're trying to leverage as best we can. So just 2 topics here that I'll mention and I'll go through now. We've got 2 great businesses that are great assets that not every big legacy carriers got. First one is our Cargo business unit, as we call it, we've actually got 3 brands for this. It's one of the ones we need to simplify. We've got Air France Cargo, KLM Cargo and we have a margin there as well. So this -- we haven't done a project yet, but it's just mentioning it here. So the average annual growth rate that we're expecting through to 2033 based on the order books that are there for MRO is about 3%. You can see next generation will take up a much larger portion of the MRO demand. It's natural by 2033. And of course, that by default means that the MRO focus will be on next-generation aircraft engines and aircraft components. We all have -- everybody who's involved in the MRO business got pressures with supply chain and staffing challenges, nothing unique to us. So it's not causing us to be on a lower or higher playing -- a competitive playing field, but it is definitely putting pressure on all of us who are in the MRO business. So we've got -- we've got a lot of history and experience in MRO. We have 3,000 aircraft that we support, 200-plus competitors -- 200-plus customers around the world, EUR 3 billion in revenue, over 12,000 employees. We have an order book, which is almost EUR 9 billion and of that EUR 1.2 billion are an additional external revenues. We've got -- we've been investing in all of the next-generation products, so the LEAP-1A, LEAP-1B, the GEnX for the 787, we're doing in Amsterdam. We've got the Pratt 1500G there powering our A220s, and we have the Trent XWB powering our A350s. We are going to be able to do all of that in-house or in partnership with the particular manufacturers. Components next generation, so we decided to move forward on all the aircraft types that we're going to be operating for the A220s, 320neo, 737 MAX. So the MAX obviously -- we're not -- we have an order, but we have such a big base from the last generation that we decided to move forward to support the NGs -- sorry, the MAXs, A350 and 787, and then on predictive maintenance, we're continuing to invest there. The operating margin of our MRO has grown 1.8 percentage points since the third quarter in 2021. So that's something we're quite pleased with. Here in cargo, obviously, we had a fantastic run during COVID, where the belly capacity around the world was significantly constrained, so we were lucky that we did have full freighters at our disposal. So we did take full advantage of that, and we scored well above some of our competitors because we did have that fleet in-house. So the capacity is almost going back to 2019 levels, but the yields are still well above what we saw in 2019. Go-forward demand still remains a little bit uncertain. So we've modeled out high base and low scenarios. And with the new order book, we have for full freighters, the size of the fleet that we're looking to introduce is about the same with the new A350 full freighters. We do have flexibility to switch those to passenger aircraft and we feel that, that's not the optimal capital expenditure. So we have got that flexibility. But our intention is to have a fleet of 8 Airbus A350s before the end of the decade, split between the 2 airlines and based in Schiphol and in Amsterdam, respectively. We do -- Schiphol and Amsterdam -- sorry, CDG and Schiphol. CDG is the #2 European cargo hub, so very close to the #1, which is Frankfurt, and Schiphol is #3. We have 120-plus direct intercontinental connections that are served either with full freighters or with the belly capacity that we have on our wide bodies. We do have a big, big fleet of 777-300ERs. We have 59 of these aircraft. And of course, that is the wide-body aircraft that is the most efficient, most powerful passenger aircraft in terms of cargo belly capacity. So we're really -- we're really happy and have really helped us with that fleet. And as Angus mentioned, even the fact -- even though it's not a brand new A350 or 787, the economics on the 777 are still very, very strong for us. And some of you may know that Air France was the launch customer for the 777-300ERs. So a lot of the specifications that we're putting there were we're optimized for the Air France network. So EUR 1.5 billion in revenues for the cargo division. So moving forward to 2023 with the new fleet that will support our staff ambitions and our customers, of course, extremely important for them, and industry-leading innovation programs moving as fast as we can to get more business direct and to make sure that we're ahead of our competitors when it comes to innovation. Here on sustainability, very, very big focus in Europe and particularly in the Netherlands and in France. So this puts a lot of pressure on us more so than some of our competitors. But on the positive side, we will lead the way in sustainable aviation with that pressure, with that support, with that alignment with the key stakeholders in the 2 main jurisdictions in which we operate. So standard 3 levers that airlines have to improve their environmental footprint. Fleet renewal, as Angus showed, we have a lot of new airplanes on order, those decisions have been made, the pricing that we've negotiated both on the airframe and the engine contracts are best-in-class. Sustainable aviation fuel, we've secured well over 1/3 of our 2030 requirements, and we're putting in place all the operational measures that will get us to our target to be able to be minus 30% CO2 versus 2019 and 2030. So here on this slide, you can see we only had 5% next-generation aircraft in 2019, and that will grow to 81% in 2030 based on the fleet order book that we have today. CO2 emissions on the A220s are less than 20% of the 318, 319 family. And the A320neo C02 emissions down 15% from current generation and the A350 is less than 25%. Big reductions in NOX and bid reductions and noise, noise, of course, is extremely important to the region around Schiphol Airport and Orly Airport. Okay. Here, Anne briefly mentioned this, but I'll bring it up again, is very proud to say, in 2023, 2022, we were the #1 SAF user in the entire world more than any other airline, even though we make up a [indiscernible] -- we are in terms of the users of fossil fuels, we are not #1. So we were -- we achieved that in 2022, we are going to achieve that in 2023. So in 2022, we used 17% of the global production. And in 2023, we're going to achieve 16%, so great statistics here. We don't talk about it enough, but we should -- we are very proud of those achievements to show that we are really confident we can reach our commitments in 2030, and 2050 where we've committed to be net zero carbon. And as I mentioned, go to the next slide here, you can see we've already sourced over 1/3 of our SAF needs for 2030, due to the partnerships and contracts we signed with all these companies. So now on to Steven Zaat, our CFO, for his presentation, which is really important for you guys, I'm sure. [indiscernible]

Good afternoon, everyone. I'm very happy to see you with such a big numbers. There are 70 people online altogether. And with almost 100 -- more than 100 people here. I think we have a great audience. I see my Paris friends very often here in Paris, usually to visit -- to see my, let's say, my London friends, I have to cross over the channels. So it's good to see that you also come once to our home based here in Paris. It has been 4 years ago that we had our last Investor Day, I was not yet at this position. But if I would have been here and if I would have predicted the future what would come over 3 months, I think you would have called a shrink and to ask me to get out of this room. The good news is that despite all this, we kept our plan for the midterm, and we welcome today with a new financial ambition. Before we move to the future, I would like to come back for the very, very last time on the previous years and all the challenges, which you actually overcame the last, let's say, 3 years. But at the end, it paves the way to the new financial ambitions, which we have today. So we went to the deepest crisis ever in our history or in our industry and also, of course, for our company. And it had a significant impact on our net result and of course, also on our equity. But I think we restored it quicker than we sold it ourselves. I can tell you when we presented the -- our plans in July '21 to the Board in restoring our equity, we didn't have in mind that we would be already today at a positive equity. So how did we do it? We did 2 capital increases, which brought more than EUR 3 billion. We did several quasi-equity financing with Apollo and also one with the market, which brought another EUR 3.5 billion, and we just signed, 2 weeks ago, to deal with Apollo on which we are very proud. But last but not least, and we sometimes forget that, we brought already EUR 2 billion in net result in the last 7 quarters to our equity. So I'm proud to say here that we restore the equity in 2023, actually, 3 years after we came into this difficult situation. Then we announced 4 years ago the transformation, and we continue the transformation. And I was very happy that I could join the Air France team in the beginning of this transformation. We saved Air France and KLM together more than EUR 2 billion already at the end of 2022. And I will show you later, we have improved our relative cost situation compared to the competition, which is also the way we are facing the future where we will see that we will make decent margins to restore, let's say, our profitability. Then on liquidity. We never came into any liquidity crisis. We had always EUR 8.5 billion cash at hand. We had EUR 8 billion COVID related aid from the state, but we were very quickly actually by paying it back. And also that was not so fast -- in our trajectory so fast. EUR 8.1 billion we did in refinancing, and we had 2 credit facilities of more than EUR 2 billion, all quicker than at least what I expected. And then on the investments, I know you don't like it in this room. And -- but what we have seen that if the economy turns down, that we are able to reduce immediately our CapEx and our investments level. So we reduced it. Always, we loaded EUR 2 billion, even onetime close to EUR 1 billion. And we continued, and I think that is important to phase in next-generation aircraft. So we didn't build on a liability for the future, and I'm happy to say, and it was also presented by Ben, that we have now more than 20% of our fleet is of next-generation aircraft. Ben explains where we are if you look Air France-KLM towards the other European groups. This one shows actually what all this transformation brings? And look at Air France. Air France increased their margin with almost 8%, getting close to British Airways, which reduced the margins since 2019 and ahead of Lufthansa. I included here also the logistics part. And you see that Air France is already ahead of Lufthansa Airline, including the logistics. So very promising and building to this restoration of our margins. So this creates actually a foundation for a new financial ambition. First, we continue -- we will continue with our cost effectiveness, and we will continue with our transformation at Air France, at KLM and at the group level. We continue with our disciplined capital allocation, supporting the so important sustainability trajectory, and we continue by optimizing our balance sheet and to optimizing also our capital structure. And I will show you later. I'm very happy that we now also have rating and being able actually to get 2 ratings [indiscernible]. I'm happy to have 2 ratings being able to also benefit from lower finance cost in the market. So let's start with the cost effectiveness and the continuation of this transformation efforts, which at the end results in a higher EBIT. This picture was already shown by Ben. And let's say, how did we went through this transformation. First, we started at Air France before COVID. We went very quickly into with COVID situation, and we went actually deeper than what we expected first. KLM reduced very quickly their costs, so they did it very quickly. And they now start since last year with funding our journey, bringing also structural savings in place. We have more than 700 projects, and as Ben said it, it is with a laser focus. They are very small projects. So we reduce 2, 3, 4, 5 FTEs, but we did also very big things like the Domestic France. We have 3 teams daily steering this transformation, and all our 3 CEOs are fully involved in steering this transformation. It is a key element of our success over the last 2 years. We will continue with these very tiny, small projects, which together bring a lot to our P&L. But we will also are preparing ourselves for both moves because I think both go hand in hand with each other. If you look what it brings in the coming years, you see it will bring from, let's say, the beginning of this year until the end of next year, it will bring another EUR 3 billion. And with funding our journey, which will especially bring savings in the years '24, '26 you will see we will bring another EUR 1.4 billion. This is necessary to counterbalance the inflation and, of course, to improve our cost base as compared to the competition. This picture for me actually shows that we are not talking about a quick win or anything. You see that our staff base in 2028, will be lower than in 2019. And at the same time, we will grow our capacity and our production with more than 20%, so the productivity is actually growing in our company by more than 20%. So again, our transformation is not just a quick win, it is structural improvements leading to higher margins. Now we reach the slide, and I think this is a slide which everybody wants to see because we have a lot of slides -- improving our customer, improving sustainability, improving the cost basis. But what does it now at the end, bring to the bottom line. I already got a lot of questions over the WhatsApp and SMS. And this EUR 2 billion is compared to where we are today. So compared to 2023, let's start at Air France and KLM. KLM turnaround its EBIT margins in the years 2014 to 2019. Air France followed up between 2019 and 2023. And now we aim for both airlines another EUR 700 million in terms of EBIT improvement. Then go to Transavia, we know that the results were just slightly positive in the third quarter. There is, as already explained by Ben, a lot of potential here. We had a rapid growth of Orly for Transavia, where the route needs to mature because they took over the slots of Air France. And we had, in the second quarterly, especially a lot of operational fleet issues. So a lot of potential in Transavia, where we will see an EBIT improvement of EUR 400 million in the coming 5 years. How do we do that? It will be -- we will stabilize the performance, we will influence new fleet, and we will grow our ancillary revenues. For instance, we will start our hand luggage -- paid hand luggage in the next year. Then engineering and maintenance, let's say, my love way, we will improve with EUR 200 million our profitability. How do we do that? We had -- we were especially hampered at this moment by a tight labor market and by all kinds of problems in the supply chain. We have the contracts in place for the next-generation aircraft. So actually, we will just have to grow these contracts, and we will further get more contracts. We have a partnership now also with Airbus. And just by maturing this fleet under contract, you will have an organic growth, which will lead to this additional EUR 200 million in the coming 5 years. The question is, of course, how are you going to reach that? So first, the unit cost, EUR 450 million continuation of the unit cost initiative and the productivity. EUR 430 million in terms of fleet renewal and sustainability. This is actually our self-help. It's just we influx these planes. They will bring lower fuel burn, it will increase our ownership cost, but the net benefit is at the bottom line, EUR 430 million in the coming 4 -- 5 years in Air France, in KLM and in Transavia. The third pillar is the revenue initiative. Henri explained very well that we have a lot of potential in Flying Blue, and we already built on that in the last 4 years, and with putting this at the group and actually exploring more opportunities with our Flying Blue program, that will bring another revenue stream, which is very, very profitable. At the same time, we will grow further our ancillary revenues. On Transavia, as I explained, we can still do much more on SME revenues, which will bring money on the bottom line and also on Air France and KLM, we will, for instance, go to dynamic pricing of the ancillary revenue. So we see it as selected [indiscernible] will not be the same price today as it will be in the peak summer. A very important driver for our profitability is the operational and business optimization. So let's start with the business optimization. Anne just announced it already. We are going with Air France from Orly to Charles de Gaulle, which brings EUR 80 million in bottom line. 2022 and 2023 were not the best years in operational performance. If we just go back to the levels where we were in 2019, that will immediately improve our profitability. KLM, as we said several times, is still operating with the breaks on, as they say themselves, it may be a little bit, Dutch saying. And as we know, Transavia also had their complications in the second and the third quarter. So just bringing the operations back and we need for that some staffing, we will bring another EUR 450 million plus the business optimization, which we continue. And as already explained, EUR 230 million, mainly coming from organic growth. If you look at these initiatives, they are actually everywhere. They are in Air France, they are in KLM, they are in Transavia, and part is on engineering and maintenance, especially on the organic growth. What is good to see is that we don't bet on one horse. It's not only improving Air France, it's not only improving KLM, we will improve all business segments in the 5 years to come. And it's also good to see is that everybody is benefiting from this new fleet. Everybody is working on the unit cost, and we have everywhere revenue initiatives. So all in all, a very balanced picture and which we will follow and track in the years to come. Always a favorable topic for you all is hedge policy, especially afterwards, everybody can tell me what has been the best hedge policy in place. For us, it's just a risk management. So what we want to do, we want to slow down the impact of any fuel price spike. We have seen that the geopolitical environment has been going more and more unstable, also having an impact on the fuel price. And as we see now that our capacity is getting more and more stable. So the capacity growth is actually not that high anymore as what we have seen, of course, in the build of during COVID. We are now planning to extend our hedge policy with 2 quarters. So we are not any more hedged for 4 quarters, but we will be hedged for 6 quarters. And at the same time, we keep the 70% in the first 2 quarters, which is higher than what we had before COVID to make sure that we are not impacted severely by a fuel price hike or spike, sorry. So an increased maturity of 2 quarters, and at the same time, let's say, the total exposure will be hedged for 1-year consumption for around 70% where we were closer to 50%. So I think also a way to reduce volatility in our profit and loss. Then the second pillar, which we will continue is the disciplined capital allocation and supporting still our sustainability trajectory. Let's first start at the capacity. So the capacity will grow moderately with 4% to 5%. It will be a very disciplined growth. If there's any downturn, we can quickly phase out old and mature planes, and we will grow where the profit is. So we will grow, especially on the long haul. We will grow further on Transavia. As Ben explained, we will further increase our activity in Orly for Transavia, and we will update, especially on KLM, the fleet on the medium haul. So we will grow, and we will look for the opportunities. But again, we can always scale back, and I think 4% to 5% is a, let's say, a disciplined growth in this market. Then another favorite topic of you, it's capital expenditure. So coming back again, during COVID, we swiftly reduced. Be aware that 20% to 30% of our capital expenditure is just maintenance. So when we reduce our capacity or production, we immediately reduce also our CapEx level. What is interesting to see is if you look at the CapEx level in relation to the revenue, you see it's not growing compared to today in relation to our revenues. Actually, we stay at the same percentage. We even go slightly down. And what's even more interesting to see is that we are much lower than what we were in 2019. We will focus, especially on fleet investments. 80% of the CapEx is related to fleet. So that this fleet plus the maintenance part. We have a lot of flexibility, 50% of the CapEx is committed, and 50% is not committed. And what is also important is that we continue our next phasing in -- of the next-generation aircraft. So in 2028, we will be at 64%, so close to 2 out of the 3 planes is in next-generation planes with less fuel, less nitrogen and less noise. And at the same time, we will not grow our operational lease rate. So we are currently at 51% of our fleet is operational lease. In 2026, we will be below 50% exactly -- actually at the levels where we were in 2019. So I think for the years to come, it is EUR 3 billion to EUR 3.5 billion. For the years 2026 to 2028, we talk about EUR 3.5 billion to EUR 3.8 billion with a lot of flexibility and again, with a lower CapEx level compared to the revenues we have. The third pillar is the optimize of the -- optimization of the balance sheet and the capital structure. The improvement of our balance sheet has been one of the key priorities since I took the job in July 2021. We have finally now restored our equity, and we are actually at the leverage of 2019. I'm very happy to announce that we have 2 credit ratings and it is an important new chapter in our group history. It will bring more discipline. It will bring increased focus on our balance sheet and value creation in our company. And of course, we can use the full potential of the debt market with these 2 ratings. So for S&P Global, we will have a rating -- a company rating of BB+ with a stable outlook. And our 2028 senior unsecured notes are rated at BB+. If you look at Fitch, we are rated at BBB- with a stable outlook, and our unsecured long-term debt is also rated at BBB-, which is an investment grade. So it's good to see that all our hard work after the last years is fully recognized by the credit agencies. Then on the financials. So where are we today? So we ended September 30, and I don't have yet the numbers for the end of December, but we ended with EUR 10 billion. We did the financing with Apollo, so that brought another EUR 1.5 billion, for sure, we burn cash in the fourth quarter as we always do. But we have a sufficient cash base at this moment. We target a liquidity of EUR 6 billion to EUR 8 billion, which actually means that if you look at the bonds at the left side, we have a lot of flexibility to redeem this debt in the next year. What is also interesting is that we are having -- actually, if you look at our gross debt of EUR 8.5 billion, you have 90% already fixed in interest rates. It means that the interest rates of this debt is below to 4%, and which is actually quite favorable. And that also means that if you get in a more nasty interest rate climate, we are very well hedged for that future. Of course, the rating provides another opportunity to optimize our cost of financing. And even on the hybrid coupons with, let's say, the use of our strong assets, we would bring, let's say, we are at a decent interest rate of 6.7% for [ switch a instrument ]. So good to see that on the fuel side, we are less exposed and also on the interest rates, we are less exposed for the years to come. Then the outlook. The outlook. Let's first start at the coming 3 years. So we confirm the 7% to 8% margin. We confirm that we have a positive adjusted operating free cash flow. If you exclude the incidentals, which are mentioned in the footnotes, which are mainly related to the COVID period, and we still have a cargo claim to pay. On the unit cost, we will reduce further our unit cost. For next year, we expect that it will be flattish. That is coming actually mainly from the KLM premiumization. So we have less seats in the plane, and we will fly at scale and more medium haul than long haul. So the growth is especially on the medium haul, which is a negative impact on the unit cost. The leverage we keep at between 1.5 and 2, but we are, let's say, very much at the low side of this leverage. And our new ambition is even more ambitious. So we will be at above 8% in margin. We do that by continuing our cost reductions, improving our revenue stream. So we don't bet on general increase of the revenue per ASK, but we really have defined the revenue streams to get these revenues in, and we are focusing on getting the operations back on track. Then we will have significant positive adjusted free cash flow. We will further reduce our unit cost, and we will be investment credit by at least 2 credit agencies. So to summarize, an increased ambition and outlook revised upwards for the years '26, '28. The EUR 2 billion additional EBIT improvement compared to where we are today with a contribution from all our businesses. A disciplined capital allocation with flexibility in the CapEx and in the cash levels. We have now the inaugural ratings showcasing our improvement in our financial structure, and we will deliver shareholders return to increased free cash flow generation. With that, I hand over the floor to our group CEO, Ben Smith.

Okay. Well, first of all, thank you for your patience today and your attention. I see everyone's still here, no one's left, which is good. So we're going to focus all these takeaways, which we've really slimmed down. We've got our teams as focused as we can on the key items that we believe we can fully deliver on and remove some of the smaller ones that don't have the kind of returns that we think are worth having our top performers spend time on. So the airlines that we have, the brands have been fully refined. And as I described, we're leveraging them and their benefit -- a potential benefit, the increase in brand potential. I'm going into all those 3. We believe we have best-in-class networks, which continue to be refined. We've got the flexibility at Amsterdam. Should there be an adjustment in the number of slots, we feel quite comfortable that the -- there'll be no material impact on us. We've got this new asset that has been money losing for a long, long time in the form of Orly Airports. So with the combination of CDG, Amsterdam and Orly, with the 3 brands, we think we're extremely well positioned. The fleet. We've chosen aircraft. We've got best-in-class pricing. The engines of overhaul are well set up. They're coming on a delivery stream, which we're really comfortable with. And as Steven mentioned, we have quite a few unencumbered older generation airplanes, which are still at fuel prices of today, making money. And if there's a speed bump or bigger speed bump that comes along, those airplanes are easy to ground. Customers. As we standardize our products as we invest more money in the premiumization, which is a natural for Air France and is showing solid results at KLM that we think is a key differentiator for us to improve RASK. And then, of course, Flying Blue, we think we've been underperforming there and it's got lots of potential. So efforts going in there, like all things I just mentioned. We've got solid businesses with our MRO and cargo. And we're not as exposed as one of our Lufthansa Group when it comes to cargo with a number of full freighters. So we think we're very well positioned from a flexibility perspective there. Steven just mentioned the targets and the commitments we're making from a profitability perspective for the midterm. And on the bottom 2 items here, the 10% SAF with the 1/3 of the SAF required to reach that already being committed. We're very confident we can attain that. And as I said, with the fleet that we've ordered 81% NexGen by 2030. So we're now going to move to your questions, and I'd just ask for all the speakers to come back up to the stage or to the podiums, seats and we'll move forward.

[Operator Instructions] We have 4 colleagues with a beautiful uniform from Air France-KLM and Transavia in the room with the microphone. [Operator Instructions]

It's Jarrod Castle from UBS. Sorry. Okay. Okay. Anyway, you spoke about operating cash flow target, Steven. But how would this translate into shareholder returns in the form of dividends or buybacks, et cetera, at some point in time?

Is that your only question?

No, no, there is 2, but I'll start with you and then ask one for Henri and Ben.

Let's say, we first want to restore our equity. So I think dividend is not -- will not be in place in the year to come. Of course, when we generate significantly positive cash flow, we will have a dividend policy in place, but it will require a certain leverage and it require a certain cash flow. But with this trajectory, a significant positive cash flow. Of course, we consider to pay dividends, but we have to bring that back to our Board.

Okay. And then one for the group CEO, if I may. I think probably a decade ago, there were plans that were given and there wasn't too much engagement with unions. I think after the Capital Markets Day or at least a week later, there was some form of strikes. I'd like to get your views in terms of engagement with the unions in terms of formulating these plans. And also they buy in because I would imagine the CLAs would expire before '26 to '28, or at least some of them.

Okay. A very important question for us. We just concluded the CLAs at KLM, which are solid and will give us the flexibility that we need. So at KLM, we feel quite good and there's the way they're going to extend or the potential extension of those, I don't think any material risk at KLM. Of course, at Air France, with the labor laws in place at here in France, it takes a lot more work to maintain those relationships. Very happy to say just here in the third row, we have Michel Delli-Zotti, who is a Board member who represents Air France pilots, and you're more than welcome to speak with him later, but we have the highest engagement levels we've seen at Air France from our pilots right now. So the EPS levels for our pilots are extremely high. I would -- if I had to guess they're probably one of the highest in the industry. When I arrived here in 2018, I believe that the relationship between management and the Air France pilot is probably the worst in the western world. And I would say now easily after 33 years in this business, I can confidently say it's the best in the world. So I would be very surprised if we would have a change in that relationship in the midterm. It's not something that we take for granted. It's something that we put a lot of effort into it. With Anne and with our head of, I would call it special relationships, we have Oltion Carkaxhija, who's just in the middle here. It does take a lot of effort, but we have great alignment with our pilots. And some of you, I think have even met the leaders of the main Air France pilot group. They join us sometimes when we go around to see some of our investors to show their alignment with the strategy of the group. So on that front, I don't -- unless we come up with some surprise, new Head of the Union at Air France are quite comfortable.

Neil Glynn from Air Control Tower Research. Maybe 2 questions following on from Jarrod's second question on governance. The EUR 4 billion number is obviously extremely large. And I expect the first half of that is far easier to achieve than the second half, tying into the engagement factor. Do you think as EBIT gets higher as perhaps various labor groups are less incentivized to keep pushing us hard. Does governance -- does incentivization need to change as you progress over the next 5 years? Then the second question related to that, you didn't spell it out, but if I look at current EBIT margins for Air France and for KLM and I look at the EUR 700 million improvement for each, is it fair to think or broadly reasonable to think that both are being held to the same margin target over time? And if that's close, close to correct. How does that change the dynamic within the overall group? Is that -- does that make it easier to manage relationships between Air France and KLM or is it not so relevant?

First of all, we get along really well. So the relationships are at least at the CEO, CFO level, great. I don't think we don't [indiscernible] that, I don't think so. Not even an argument. But the -- I think as the margins start to converge, it really helps with internal culture. In the past when you have Air France, who was really not performing at its potential and you had KLM over performing, not so easy to get teams to work together and aligned when the results weren't at the same level. So that definitely does help. And the objectives for both -- the reason why Air France is -- we're not aiming for a much higher target because so much has been done today at Air France but yes, there's a lot more to do. But at KLM, we think we can go even further. But Air France, we would be pushing for higher if we hadn't done so much at Air France today.

[indiscernible] from [indiscernible]. First, I am wondering if you could guide us to quantify the costs related to the EU emission trading system on your margins, considering the offset to FX from more efficient fleet.

Yes, I can do it. So we will lose gradually over the coming, let's say, 2 years, the ETS rights, and that has, of course, a significant impact in our cost that we assume that we can pass that through to the customers because we are not the only one. All the airlines will have this cost. It especially will be a big burden for the low cost because if you look at the relative positions, it's even higher. So our assumption is that at the end of the day, it will not have a negative impact on our margins.

And second, would you consider to make Transavia more independent and set maybe a brand CEO to develop the transformation?

Well, we're looking -- I mean, right now, we've got the network and the fleet strategy done in terms of brand positioning and the overall governance, the group is bad today. Can we do better? It is a discussion point. But the -- I think what was most important was to get the flexibility from the Air France pilot unions to at least get the network in place to make the fleet decisions. We do, I would say, from a high governance level, it's the 5 of us here that do manage it. It will be -- I think it would be great if we had somebody at the group level who was in charge of that brand, but that is not in place as of today.

This is Sathish from Citigroup. My first question is around the business optimization, you said about EUR 400 million. Out of that, EUR 80 million you said it's going to Paris only. Is that mainly accounted under the Transavia? Or is that EUR 80 million would be split between Air France and Transavia. So what does it mean for Transavia's margin evolution? Is it mainly a function of revenues, ancillaries coming through?

It's Transavia France only and Orly.

And so EUR 80 million would be under Transavia that all the benefit...

Yes. So maybe just to clarify, today, just on the Navette and the Navette [indiscernible] routes between Orly, Toulouse, Marseille and Nice. We are losing at least EUR 80 million a year. So that -- Air France -- so that will -- those routes will be transferred to Transavia. The capacity will be lowered. We're already lowering capacity significantly, and we expect -- and the objective is to eliminate those losses and get them to at least breakeven, if not profitability.

So that means that in EUR 700 million of Air France, it's more like already that EUR 80 million is kind of baked in.

Yes.

Okay. Got it. Yes. And in terms of the AOC optimization, like any -- can you share us like how many AOCs you have as of today? Is there any further opportunity within the consolidation of the AOCs?

Today, we have a separate AOC at HOP!, obviously, Air France, Transavia France, Transavia Holland and KLM. We have Cityhopper as well at -- in the Netherlands. It's not something on our list and then we don't see any true cost savings that could come out of that. It's not a priority.

Okay. Got it. And second one is on the capital allocation, M&A? Is that a priority before restoring equity? Or does that comes from the pecking order?

Now let's -- let's first, we are investing in new fleet, and we will organically grow our profitability. That is our first target. If we look at the M&A targets, it should -- first, it will be at our financial targets. So what we did with SAS, we have actually the option to get the majority share after 2 years, but then they should be fully on our M&A -- on our profitability target plus, of course, also our leverage target. So that goes hand in hand with each other.

Just -- I mentioned it during my part of the presentation, any investments that we're looking at have to be within our risk profile. As Steven mentioned, have to be clear to us that it's not going to weigh us down with the targets we just mentioned. We have a lot to do with Transavia, which is a major project to have to look at transforming another airline with the -- not the limited, but with the team that we have, it's not something that we take lightly. That's why there's 19% stake in SAS. We're comfortable with. We know the CEO, he used to work at KLM. We know him quite well. The relationship with the Danish State is good. We have excellent experience with 2 states. We know how to work with states and the SAS for us getting them out of Star Alliance for that 19% stake was good. The other M&A opportunities in Europe, we'll see. Again, that we -- as Steven just mentioned, they have to be clearly aligned with the commitments that we've made.

Ruxandra Haradau -- Ruxandra Haradau-Doser with HSBC. Congratulations for the significant changes at Air France since the last Capital Markets Day. Two questions, please. First, you mentioned that you are not at the level of competitors in terms of synergies between the airlines. Could you please talk about the main areas where you see potential for synergies going forward? And do you see potential to go beyond the revenue synergies more into the cost structure? And second, you mentioned that you plan to further slightly increase the O&D traffic. It seems, however, not to be any more significant topic in your strategy with a significant improved customer satisfaction levels, do you see now more potential in terms of transfer traffic?

Okay. So on the synergies question. The fact that we've just concluded our second joint fleet order and joint negotiation for engine contracts has been internally a great demonstration of what we've been leaving on the table in the past. So this being our biggest capital expense now is coming into play. This is something we're starting to realize. It's quite amazing that we weren't doing this to this extent before, like IAG and Lufthansa Group, as you know, [indiscernible] or in most cases, you don't even know where the airplanes are going. So this -- putting the 2 airlines needs together, I think that's been fantastic. We do run the sales and the revenue management teams already has joined teams. However, I would say they're probably not as integrated as they could be. Not too bad, but having worked in a different JV for many years, still see some areas where we could do more from a synergy perspective. That is straightforward to put in. It's not inventing anything. It's now that we've got more I'd say, a more functional relationship between the 2 airlines and we can get there. Transavia is also another option for us. It hasn't been the priority because the #1 priority of Transavia has been to get the business plan in place and to grow the Orly base, but that's another potential for us. But there's a lot of -- like there's a lot of small things, if you go through the whole running of the business. I'm not sure if you are -- how close you follow IAG and Lufthansa Group. On the O&D. So as I said, we're not looking to get a CDG to 90% local, 10% transfer. It's just tweaking it here and there. As I said that we can get it from 49% to 54% or 55% significantly increase our position in the premium. That's the objective because it's already quite optimized with the long-haul routes that we have does require feed. We have a lot of routes that would not be able to fly daily if we didn't have the feeds, we want to make sure that balance is in there. But with a lot of the upgauging that we're bringing into -- with the A350s replacing the A330s and some 777s, but the A330 replacement, we need to get more local share and we don't want to dilute the profitability with more lower-yielding transfer traffic. And we're seeing already with the airplanes that we're upgauging that formula is working. So there's no change to what we mentioned in 2019. We're seeing the results of that. We're seeing the improvement in premium revenue. So that strategy is bang on. At Schiphol, the 60%, 65% transfer ratio grade. And now with the new premium comfort cabin we have and the added competitiveness we have in world business class at KLM. This I think we can make the product even more attractive for transfer traffic. So I think we've invested in the right areas.

Stephen Furlong from Davy, Research. I just want to ask -- I suspect the answer is in the key takeaways at the end, but I'll ask the question anyway. Steven mentioned all the heavy lifting you've done, you got awarded by the credit rating agencies in the market and that was rewarding to see that. What excites you maybe, Ben, over the next couple of years, 2 or 3 things that the investment market will get behind the company. And if I could say what would be the one kind of risk? I mean, other than macro because, for example, you referenced your partner company on the other side of the Atlantic. And I think Delta has that stature on that side of the market.

So look, I think the brands have a lot of potential. I think we take the brands for granted. I think the brands can drive more value can be -- can drive more RASK. And this is -- from where I was coming with the airline, we pushed that as far as we could, but the brand at Air Canada is not Air France and never had. It was going to have the same potential. And we saw the value of being best airline in North America. There's no reason like both carriers cannot increase their position and go after more specific traffic streams that can drive higher RASK. We're seeing that with La Première. We put a lot of effort into it and to see in 2 years, that product go from heavy losses to profit and a much better, I'd say, refined way of managing it. It's partly any advertising because it is quite unique. And I think the business class cabin we have at Air France was just so different amongst the different airplanes. We couldn't put out a brand promise or a customer promise that was realistic. So despite best-in-class products on some of the airplanes, we weren't able to fully deliver on that. And at KLM, we were behind. We have -- we had a premium business class product, which was not at the level of the competition and we did not have premium comfort or premium economy. So in terms of the RASK potential at KLM, we were not there. So that is -- in my mind, that is a big, big advantage in something that I'm really excited about because we have not been able to work on that because we did not have the hard products in place to be able to put out a customer promise that is -- should be best-in-class. And I mean those of you here in Paris that don't live here, we have fantastic examples how brands can really drive improved unit revenue. Now we know we're heavily commoditized business, like when that doesn't go over our head. But even if we get 5%, 6%, 7% of our customers are truly buying us for the value of the brands and that they are not -- that they will pay a little bit more. I'm not looking for 100% of the aircraft to do that, but just La Première, we can put in not a 5% increase. We can put in a 50% increase. Somebody who's buying that ticket is not moving back into business class. Once they sat there, they're not going to do it. It's like somebody is buying a luxury product here, if it's Almaz or with CHANEL, not going to go buy Azora, it's not happening. This is what we're seeing. We have a lot of flights where Angus can tell us because he's doing the revenue management side of it. It's -- we have a lot of flights where we are able to really drive up the yield because we have a lot of sticky customers that are out of -- they've taken sells out of the shopping zone where they are stuck to us, which is really happy. So that, I think, is the biggest opportunity for us. That is not -- it's not baked into the projections that we have there. So I think that's a big bonus. In terms of risk, I think the -- I think Amsterdam, we just got a -- we've got to get over this hump of shortage of employees and manage the airport from an operational perspective back to where it used to be. So if the risk is taking longer than we would like to. That's the -- we'll get there. But I think the risk is can we -- will it take longer than we hoped. And in France, it's -- the facility at CDG, can we get it to the level that matches the customer promise we're making on board and not get it to ruin by the ground experience that we may get stuck with that we're not able to continue working with Orly Paray-Vieille to move it in the direction that we needed to.

Alex Irving from Bernstein. Two for me, please. So first of all, on -- you had a slide regarding labor productivity, 20% more capacity on a lower number of head count to 2019 levels. What are the big moving pieces within that, please? Is it pilot productivity, cabin productivity, ground, subcontracting? Just kind of understand where the big changes are coming from. And then second one, might be actually one for Angus here. Surprised not to see as far as distribution or NDC in the presentation, but where or how large you see the benefits of those being through 2028, both on the revenue side and on the cost side, please?

So let me start on the productivity, especially coming from the ground staff. So with, let's say, the strong transformation on Air France and us also getting KLM on the slot reductions. We will see that we will reduce further our grants. We have reduced the overheads within Air France with 30% or 25%, 30% and actually, that is what we are driving to. So we reduced the FTEs over there. At the same time, we will increase actually our production.

It's a support function and also the whole operational organization. So when I mentioned the managerial lines we just removed layers. And this is structural. So the issue is to increase the ASK without adding any new FTEs in the support function or in the organization, except operational teams.

So on the distribution topics, obviously, American Airlines is leading the way and sort of leading. They think they're leading the way in new distribution strategies. I think the reality for us is NDC is nice to have, but it's tracking very low-yielding traffic right now. It's also -- it's nice to have from a cost point of view, but the cost of servicing isn't perfect either. So where I look at it, the yields you get from effectively the high-end corporate travel managers, the high-end agents that are coming still by GDS is so far superior to any cost associated with that we just can't turn it back on that and walk away. And there are certainly a surcharge environment related to GDS for the lower volume, less relevant travel agents, and there's the -- effectively we call it the private channel agreement environment, where we have preferred rates with the GDS operators. So the revenue that comes from the preferred rate environment is so good and so critical to our profitability. And at the same time, the large corporate travel managers like Amex GBT, are just so negative on moving away from the GDS environment that it's certainly not something that we're going to flick a switch like American has done or tried to do and just say this is magic. It's not magic. That said, NDC is growing. It's growing well, but it lacks some functionality that the GDS has that we've got to invest in. So I still think we've got a 3- to 4-year path of further investment in NDC. Once we do that, okay, it gets interesting, you're then going to face a second issue that everyone's going to want to aggregate and Amadeus and the likes of those people that want to aggregate. So the travel agents have every airline in one NDC portal versus just having Air France-KLM is going to be the next battle. So it's got a series of battles. The endgame is we can distribute maximum content over time through NDC. So our ancillary revenue profile should increase. So it's got -- it's got different things. I think pure cost reduction is not turning out to be what it was meant to be. The real target now is for maximum product distribution. So I think that helps.

Conor Dwyer from Morgan Stanley. Two for me, please. So on one of the slides that you showed, it looked like about 1/5 of your gross debt was coming to by about early 2025. And I'm just wondering, is the plan to pay that down with cash or refinance it perhaps at a higher rate? And the second question is around CapEx. You spoke about a lot of flexibility in recent years. And my wonder is going forward, is there really quite as much flexibility given that some investment would have been or had to be delayed through COVID. And I assume that is somewhat linked to the profit targets going forward.

Sorry. The first -- so if you look at the redemption profile, first, we have a lot of cash. And of course, we will also refinance as we always do through the market. So we have now the opportunity also of the rating, which brings lower interest costs and more access actually to the financial markets. We did at the beginning of the year without any rating we did a EUR 1 billion sustainable linked bond. So we have already quite some access, but of course, we have now much more access even to -- so your second question, can you repeat it again?

Just around CapEx flexibility. Is it really as flexible going forward even if some of the [indiscernible].

No. The CapEx reductions we did during COVID were not so much related to delays of fleet. Partly was the delays of fleet, but we kept on actually taking all the planes. So we didn't ask to Boeing or to Airbus any delay of fleet, Boeing delivered delayed. So that is another issue, but it was not on our request. And on Airbus, we actually just pick up all the planes, which we got. So it is not related -- if you talk about the committed, it is fully committed to fleet actually and the other 50% is in the range of ground coverage and spare parts and all those kind of things. So there is the flexibility and also the maintenance because if you reduce your activity, you don't do any shop visit because you don't burn green time at the moment.

It's James Hollins from BNP Paribas, [Foreign Language]. My 2 questions are on costs and Transavia. So Steven, I think the last time you mentioned unit costs in 2024, they were guided down. Today, they guided flattish. I'm not quite sure I get what's changed at KLM to mean that change? Are we seeing any other cost pressures and perhaps broadening that question, what are the cost pressures of the Orly move or the Orly Transavia move. And then on Transavia, sort of following up from one of the questions earlier. I'm slightly surprised not to see a Transavia CEO on the 12-person executive committee. Perhaps I'm just being a little bit early to think about that, but what I would have loved to hear today is a bit more on given you're -- Orly, on Transavia, Orly and what a quality asset that is, just a bit more on maybe the brand strength of Transavia in France itself clearly was a Dutch brand, both on leisure and corporate. Maybe I hadn't appreciated how much corporate brand value there was in that. And I just think that's key, given it's 20% of your group EBIT improvement coming from Transavia.

I'll just take the first part or the last part, then you can continue. We do have the CEOs of the 2 Transavia AOCs at our weekly group executive committee. They're just not official check members. So if we don't have 1 person but the 2, but Marcel de Nooijer and Olivier Mazzucchelli, are the 2 CEOs of those business units.

And on the flattish cost, it has to do a bit with inflation. It has to do also that we have to fly more medium-haul flights. So that is also one of the reason we cannot fully upscale yet in 2024 the capacity on the long-haul. And the third element is also the CLA we just signed. So all that together brings us to, let's say, a flattish cost -- unit cost development for the year to come.

And maybe just to add one more thing on the leadership at Transavia, the -- in particular, in France, de Nooijer is 100% focused on the operational side of the business. Getting the pilots in place, training them, making sure that maintenance is up to date, managing the transfer of 737 to the A320neo family, which is -- I mean, it's really an operational focus. The commercial evolution of Transavia is being handled at the group level. So that is -- we're not ready yet to have somebody who is fully responsible for both of those 2 because there is an evolution in transfer at Orly, which is very unique. And the timing is it's taking a little bit longer than what is taking longer as planned, but Olivier is 100% focused on operations.

Muneeba Kayani from Bank of America. So my first question is around Flying Blue and loyalty. I wanted to understand how important do you think is having an American Express card to the profitability of the business since you did mention Delta's loyalty program. And kind of related to that, how important is giving the customers an opportunity to spend the point. So that's something that came up as a theme at IAG's Capital Markets Day. So if you could talk about that. And then the second question is around your forecast. So with the EUR 2 billion EBIT increase, what are you thinking in terms -- what are you assuming in terms of ticket prices? I see one of your slides where you show the revenue initiatives and can see the numbers broken out there, 4% to 5% capacity growth. But is there a ticket price increase in there as well?

Let me start the first one. No, we don't assume any ticket price increase in that one. So it's just additional revenue streams which are kicking in.

So regarding Flying Blue, yes, I confirm that there is a lot of value in having a partnership with Amex at 2 levels, 1 is about putting in place [ corporate card ] which we have today in our own markets. And on top of that, and it is the second part of your question, to have also point to [indiscernible] conversion deal. I totally confirm what you say, it's a very dynamic market on which we are. I mentioned that we are launching a new and also deal in Canada. We are also looking at Germany and U.K. But it's true that in the U.S., this market is huge and very dynamic because people have a lot on points and they want to convert and then benchmark the different program and then they choose one versus the other. And what we see is that Flying Blue is well placed compared to the other, also because we serve a very attractive destination like Paris and Amsterdam, and we are fully engaged in this type of deal.

And on the American Express front, American Express in our main home market does not have the penetration as an example in the United States. So it is a win-win or a big opportunity for both of us. So the alignment is there. Amex is really looking for a strong partner in France, a strong market in the Netherlands. So to develop a path towards greater penetration, obviously, they have their objectives, and we certainly have ours. The interchange rates are different in Europe versus the U.S. But as I said, we have a best-in-class partner that is really helping us in our development plans of how we can form a real true win-win with Amex here in Europe.

It's Andrew Lobbenberg from Barclays. Can I ask one for Steven, I think, which is whilst you've spoken about how [ leveling ] low your leverage is, that does exclude the hybrid capital. So what are you thinking about a time line of wanting to undertake some housekeeping on that equity, which costs you 7% a year. And then my second question, and I'm so sorry for becoming all hedge fund here. But Amex GBT, we were speaking about them just published their survey their forecast for airfares for next year, earlier this week or late last week. And they're talking about some quite clear reduction in long-haul airfares that they're expecting. So just curious to see what you think of that projection out of Amex GBT, and at the risk of being tacky, is that baked into your forecast?

Let's -- sorry, let's first start on it is lower than 7%, Andrew, 6.7%. So for equity, it's quite cheap. You know that we are reporting in IFRS in Europe. So these high rates are equity. But in our trajectory, we assume that we will repay those hybrids when we have sufficient equity. There's always a way to bridge the levels to positive equity to do it faster because it takes some time to have the net results and to restore our balance sheet. So we assume we will pay it, but it depends on, of course, on the interest climate at the moment. But our basis assumption is that we will refinance them.

In terms of next year, I don't really want to comment on Q1 to say we're happy with the revenue development at this point. No, but I mean it's not -- it's looking okay, so. It's certainly not as pessimistic as what Amex would be suggesting.

It's Harry Gowers from JPMorgan. I've got two questions. First one on Transavia. I mean the EUR 400 million EBIT improvement you talked about midterm is clearly a big step change relative to the current performance and historical. Maybe you could talk a little bit about the phasing of that and when you expect the benefits from Orly to really kick in, in terms of the maturity? And then secondly, just maybe an update where you're at in terms of the business or the corporate volume recovery and any expectations or change in expectations on that into 2024?

So I'll -- maybe Anne and I could share the first part of your questions, and then Angus can follow on. So to date, at Orly, first thing, first major hurdles, as I've said a few times here, was negotiating the flexibility with our pilots to be able to take the number of aircraft limit off. It was at 40 before. Those of you that have followed us for a while, when Transavia was sort of forced on to the Air France pilots, there was a EUR 400 million strike with a limit of 14 aircraft. And then a few years later, to get to 40 airplanes, it was another big strike. So to get to unlimited without any labor action and actual full alignment with an 80% ratification was a big win, we believe, on our front. Second decision that we made, which was difficult, was to remove all regional flying at Orly in the form of hop. So that took place in -- during the COVID period. So the second step there. And then to manage the slot transfer, which is what we're currently doing, which we have plans to do that. It's going to take at least 2, 3 years which we just committed and can describe this big hurdle that how it's been rolled out, how we're managing this transition from this moment.

Yes, we just announced, I think it was in October that we will move operations for Air France from Orly to Charles De Gaulle in 2026. Because we are losing. We were saying that we are losing currently EUR 80 million per year on the Navette. So Orly to Toulouse, Marseille and Nice. And I was mentioning that the first restructuring of our domestic that we've already done is bringing if we forecast what we -- it would have been without this restructuring, EUR 350 million because of the big drop of the demand and the fact that Air France can't compete on the point-to-point market. So from now on, we are working to, I would say, restructure our model to accompany our people in Orly and in the stations of Toulouse, Marseille and Nice, current negotiation to make it possible. I think the process is in progress and to grow Transavia to take the slot that will be freed by this movement. What we say that Transavia will offer a service to those stations, so Orly to Nice, Marseille and Toulouse, but with lower frequencies compared to Air France, for sure, because it's not the same model. But Transavia brand will be adapted, Transavia product to better serve our corporate customers. There is already some fares that are made to answer to the needs of those customers, but we are working to better recognize them on board, for example, and with the flying program to offer them a service that will be okay for them. So we've been discussing with them a lot. And at the same time, we are reinforcing our Provence to Charles de Gaulle. So Toulouse to Charles de Gaulle, Marseille to Charles de Gaulle, Nice to Charles de Gaulle because those routes are delivering good results, are filling our long haul. And so the restructuring is really possible. And we committed to keep 90% of the current offer in 2026. When you add up the offer of Air France at Charles de Gaulle and of Transavia in Orly in 2026 compared to today in 2023.

So those -- the traffic that we're letting go Orly to the Navette routes, a lot of it disappeared because of what we mentioned. A lot of it was not profitable. So we will be reducing frequencies. We've already started doing that. As Anne just mentioned, the traffic going via CDG is profitable. It's really helping flow our fund our long haul, and we're gaining that traffic from our competitors who have hubs outside of France. So Lufthansa hubs, IAG hubs, we're now putting more traffic on our airplanes going via CDG, which is great. . A big reduction in the domestic market is the traffic or the routes where the flights did not touch Paris, so what we call the transversal routes. We've exited almost all of those. It's the model and the cost structure of Transavia is very competitive for Orly. It's not at the levels that gets the return that we're looking for on the secondary market. And we can't do everything at once. So we chose Orly as the concentration point for Transavia and to strengthen CDG from all the secondary French markets. So not just the Navette routes, we're serving CDG, we're feeding CDG from Montpelier, from Beirut, from Nantes, from Lyon, from all these different cities, and that's working quite well so that we -- we were letting a lot of traffic slip to Frankfurt, Munich, Zurich, Heathrow, and that should naturally come over CDG because of Flying Blue because of the language and because of the affinity to Air France. So it's a multipronged approach, but growing this quickly at Orly is it's something that we've never done, but we were losing so much money that the benefit of pulling out quickly is also there, but that value is not being seen in the results of Transavia.

And maybe to complete, if you allow me, Ben, we also have long-haul routes in Orly to the Caribbean and Indian Ocean, half of them have been already moved to Charles de Gaulle to benefit from the connectivity in our hub. What we see is that these routes are quite okay at Charles de Gaulle and in 2026 because we also need some connected traffic to feed those long-haul, we will put the second -- the other part of the capacity to Charles de Gaulle. And it will allow us, as Ben say, to simplify our model and to lower our freight costs because everything is centralizing in Charles de Gaulle.

And these are big volume markets. So the #1 international route out of Paris is New York. #2 is Pointe-à-Pitre in Guadeloupe. #3 is Saint-Denis La Réunion. And #4 is Fort-de-France in Martinique. So the balancing out -- I think this is ahead of Los Angeles ahead of Tokyo. It's quite something. So the volume is incredible. Right now, we have a daily flight to each with 777s, and we've got the split between the 2 routes. But with the slot constraint at Orly, we're comfortable centralizing that at CDG.

In terms of corporate recovery, it's a little bit what Anne was saying, due to the restructuring in Orly, so you had the bias around French corporates traveling on the Navette route stable, switched largely to the train. So -- and you're seeing -- you obviously seeing the dynamic of the train proliferating across Europe. So that's something we have to contend with. In the markets that are fully recovered, we are seeing 75% to 80% -- 85% of corporate traffic recovering. We still have lags -- lagging in Asia where we haven't restored all the capacity. We put a lot more capacity back into the U.S. because that's where the money has been. So the lag in corporate recovery has also been a function of Asia, not fully recovering. The other dynamic with Delta in terms of how we corporate contract, we are winning share, certainly from American. American is losing corporate share to United and Delta. And as a result, we're a net beneficiary of that. So from that point of view, it's holding up quite nicely. But the reality is a lot of our recovery has also been off the back of high-yield leisure. So for us, we want that market to stay. It's pretty easy to service. So it's going to be a mix of things, but the high-yield leisure has backfilled at a higher yield than what corporate was in 2019. Corporate has obviously moved up again. So it still remains by far the highest yielding customer base. But I think we're pretty happy with it. We need interest rates to go down.

I think there's one question. Last question.

Yes, I have two questions. Quirijn Mulder from ING. My first question is for Steve. So you speak about the new targets and you include 2026. So for me, it's the question, where does 2026 belong to, to the first one or to the second part of your targets or the new ones? And my second question is for Marjan. If I look at the political situation in the Netherlands, it looks like that it is quite grim against KLM and Schiphol at this moment, whether you have a leftish or let me say, a right-wing government coming up. It does not look a big difference given also that the liberal party has even helped to, let me say, to reduce the number of slots for KLM, for example. So what is your view on that?

So do I start? It's good to see your face now because I read always your reports, but I never saw your face. And to the 2026 was the target for transformation. So the figure, the EUR 2 billion figure I gave is for 2028. So that's from 2023 to 2028.

Okay. So nobody knows what the next government will be. We still have to wait and see probably a few weeks and months. But then still, there are certain ways to go and look at it. First, we have the balanced approach. The balanced approach is a European regulation. We need to follow that process. That process is quite clear. It says, first, you have to start at the source by new fleet. Second, you have to look at operational measures. We did. And that's Ben, you spoke about it. It's the plan we introduced [indiscernible] in Dutch. It's better for you, but we show that you can reduce 20% noise without reduction. And the EU set, that's why we don't have the experimental rule in place. You need to follow this process first, and then we'll see what the outcome will be. Second, what we saw lately before elections is that a lot of politics have their own initiatives in place, different ones. And at the end, it's not decided to introduce, for example, the transfer tax and what we say to the government, and we will come up with our own plan with the industry. Let's talk about what does the industry look like in 10 to 20 years in the Netherlands and not come up with different measures competing with each other because that's not very helpful. And what we see today, customers are coming back. We saw the report of Minister Harbers, I think yesterday that [indiscernible], the shame of flying is less and less and less in the Netherlands. So at the end, we need to find a solution to have a sustainable aviation, and we need to work together from a corporate side, from a government side, from a business side to reach the goals we are committed to.

Just perhaps add a little bit more to that, to your question there. We were quite worried when the Dutch state unilaterally announce they were going to put in place, this reduction in slots at Schiphol. So it was right at the beginning of Marjan's mandate. So welcome to KLM. So when we were -- when I first met Marjan, we didn't even have that. It wasn't there on the horizon. And she still stayed with us, she didn't leave. That was quite worrisome. And when the Dutch stayed after a few lawsuits said they were going to move forward with an experimental phase, which is not recognized in Europe or around the world. This was of course -- at least it gave us a little bit more visibility, but also worrying. But what has given us some comfort is that the Dutch stayed has withdrawn the experimental phase because of the position of the United States DOT and the European Union. So that has given us a lot more comfort. They've committed to going down this balanced approach, which is -- which we're comfortable with. 20% noise reduction is understandable. We've already ordered the airplane. It was something we were doing anyway. So this is not an incremental cost to us. These -- the fact that there's some artificial blocks in place or reduction in slots because of ground handling or because of security or because of immigration constraints. That -- okay, that is -- we're talking 15,000 slots, it's not material per se to us. But what's really reassuring is under the experimental phase, we risked a reopening of the transatlantic JV antitrust immunity that we have between ourselves and Delta because the reduction was not being followed per the balanced approach. So now that the experimental phase has been removed, the balanced approach is being followed. That risk has been removed, so that was extremely important for us. There was also a -- there was a nature permit, which was never actually granted at Schiphol, which in the past was not a big issue, no one seemed concerned. But without having the nature permit, we actually could have been forced to go down to 200,000 movements. The nature permit has now actually been put in place. It's been approved at 500,000 movements. So if the balanced approach does lead to an agreement that the solutions that we're willing to put forward do cover all the needs and all the requirements to meet this 20% noise, the nature permit is there to go to 500,000 movements and I think #1 risk for us is to stay competitive on the North Atlantic with the JV and then, of course, not be materially impacted by any change in slots.

Maybe to add, Ben, we are committed to the 20% noise reduction, and that's why we say also for our network in the summer '24, we put our silent -- decide the most silent airplanes during the night. So we're not waiting. We are acting today and tomorrow.

We can take 1 or 2 more. Sorry, Michiel.

No, no. Please continue.

Okay. They better be quick questions.

A quick one. Maybe an -- Yan Derocles from BHF. Maybe a follow-up question on Transavia because I've Transavia early days a couple of times on your slide. Are you ready to share with us, I would say, your target, internal targets in terms of revenue, profitability for this new ancillary part, I would say. And the other one, back to the operations. Could you update us on the stages of the Airbus A220 and Embraer fleet?

Sure. So for the performance of the Embraer 195-E2 and the Airbus A220, let Angus, Marjan and Anne gave you a little bit of update on that. And Transavia, we're working on how we'd like to report out on the performance of Transavia because we've got to take into account this the fact that Transavia is bearing a lot of the cost of Air France. We want to get that right so that it's a clear metric that can we give out, but the unit cost of Transavia, the target is easyJet. That is what we're trying to match to. And obviously, there'll be few differences because Orly airport is a little bit of a unique airport to serve. But we believe that the RASK that we can get because of all the things that I talked about should be able to compensate for that. But in terms of the performance of the airplanes, perhaps quickly Angus and Marjan.

Yes, sure. In terms of the economic performance of both the 195-E2 at KLM Cityhopper and the A220-300 Air France, they're the highest margin medium-haul aircraft in the fleet right now. So it's a huge success in terms of fuel burn, maintenance costs and economic efficiency. The real issue, I think you're asking is what are we doing about the engines. So the reality is we have really solid contracts with Pratt & Whitney in terms of pricing protection on the engines. So they're rock solid in terms of protecting us on that. Where it falls down a little bit, and we're not totally experiencing this yet for a variety of good reasons. But the Pratt & Whitney is short on spare engines in terms of their in breach of the contract. Now one benefit we do have is we have a delivery stream of aircraft. So I won't divulge confidential negotiations, but we are appropriately compensated for aircraft that we can potentially park on the ground and use the engines. So the only thing we've got to do right is train our pilots in the right sequence in order to keep enough, say, A320s around long enough so we can cope with the delivery stream. So in terms of economic impact, it's really quite small. It's -- but the P&L looks good for these aircraft types. So we want -- perhaps got 2 issues on the engine. One is manufacturing issue. One is the durability issue, where reasonably confident they're going to get over both, but it's not 1 year. It's probably 2 to 3 years, 4 years at the outside.

Yes. Maybe regarding the Embraer. We have some start-up problems with the Embraer and the engines of the Embraer. But we have modifications in place that started a couple of weeks ago. We can introduce them this week and next week. So we are very hopeful that this will solve the problem.

That was a smell issue. The other one -- yes, the one.

We had a unique smell when I share it with some of our crew that we're not comfortable with that, well that's been solved inside the cabin with filters.

Now on the Airbus A220, as Angus mentioned, no impact currently on the engine issues, even if everyone is working very hard so that we don't have impact in the 1 or 2 years to come. The real issue that we are working hard on is training as quickly as possible our pilots because of the growth on long haul. That is a quick recovery. We will come back to 2019 capacity on long-haul. We're just at -- just almost there, and of course, next summer is the challenge.

And that's without the A380s.

Yes, exactly. So it means a lot in terms of long-haul growth so that we have a lot of mobilities of our medium-haul pilots to long haul, a lot of recruitments, a lot of trainings. So the -- it's not an issue because I think we are managing to improve every day on this. But this is a real target for next summer.

And those of you that have not been on either one of these airplanes, the customer returns we're getting on the Airbus A220 is unbelievable. There the brightness of the cabin, the fact that the aisle is quite wide. So with a cart in the aisle, you can get around it. It's only -- it's 2 on 1 side, 3 on the other in economy. This is -- it's a real different feeling on the airplane. And the Embraer 195 with no middle seats is -- the returns are fantastic as well. But what's great about the 195, it is, by far, the lowest unit cost airplane in its size, which is helping us get the feed into Amsterdam in a more efficient way. Okay. One -- last two, and then we're definitely done. Okay.

Johannes Braun at Stifel. I have 2 questions as well. First 1 would be on your equity, good to see this being restored. My question would be, is this really enough? Because I mean, it's the airline industry, very volatile. There's always happening something. So don't you need a significant surplus rather? And how can you achieve that? That will be the first one. Second one would be on the ATC situation in France. How do you see that developing into next year? Obviously, a lot of disruptions and strikes this year. I think there has been a lot of change recently, which hopefully leads to less strikes or less disruptions at least. So how would you see that situation going into the new year?

Yes. Thanks for the question. I think we will build it with net results. So that is actually, of course, what we currently have is not sufficient. But of course, with the net results coming in, then we will build an equity level, which is more sustainable.

Yes. On the ATC, you're right, it impacted a lot our activity, mainly on Orly, mainly on Transavia, and this is the reason why this was also a difficult year for Transavia because all the cancellation during the strikes for the -- you remember the retirement reforms were mainly in Orly, not affecting Charles de Gaulle. But this is over. What we've seen is the summer was a bit difficult in terms of air traffic control delays. We've seen a big improvement. I think the average delay per flight was divided by 4. So at the moment, it's a lot better. Of course, everyone is working because the Olympics is pushing everyone to be good. And we also have a new law that is passed, that is asking the air traffic controllers to 2 days before they want to go on strike to announce it, and it is a game changer. Because at the moment, there were cancellations for a very limited amount of strikers because the authorities never knew how many would go on strike. So this is something we were waiting for a long time, and I think it will help us.

And you probably heard some of our competitors complaint about the impact these strikes are having on them because they overfly France and they are not actually touching down in France. So it is something we're happy about. We're not the only ones that are impacted. But the fact that we can keep our CDG operation going and that Orly, yes, it's impacted, but there's what Emirates was just talking about, [indiscernible] is a big game changer. Okay. So last one?

It's Nikolas Mauder with Kepler Cheuvreux. I will be nice and ask only one. So the Paris Olympics have been called a challenge and various things today. And one would hope that there is also a big reward if you get the challenge right, so can you maybe help us quantify the potential range of outcomes that will affect sort of next year's P&L that will not repeat in '25?

Okay. Well, I participated in 2 previous Olympics. And the -- well, I particularly in the London -- in the London Games, and I was quite surprised how quiet the city was I think we're worried or a lot of people are worried about the congestion in Paris. I think the city has got solid plans to minimize that as much as possible. So our big -- one of the big risks we have is how do we ensure our staff get out to CDG airport and make sure that they're there ready to keep the facility going. So we've got mitigation plans in place for that. I think the destination Paris is I'm not quite sure you can do any better. The city is always sold out in the summer. So in terms of incremental traffic that we could be bringing in because of the Olympics, we don't see there's a huge opportunity. The summer is already heavy, heavy leisure on our flights. So we're not looking at displacing any corporate traffic that was there before. So in terms of the opportunity, don't see it being that big. I think what would be a huge benefit for us is because of the Olympics if a lot of the infrastructure that is not ideal or not at the level it should be, it does get addressed or improved. And coming out of the Olympics, this would be fantastic for us because Paris is a very -- well CDG is a very difficult airport to operate from, one of the most complex. Orly Airport run also by Paray-Vieille, has already spent a lot of money in linking Orly West and Orly South the new names are Orly 1, 2, 3 and 4. That's really helped our operation. And this Metro Line 14 is great. That's going to help us a lot into Orly, and it's one of the competitive advantages. Out to CDG, it's unfortunate that the CDG Express is not ready for the Olympics. But because of the Olympics, that project was started. So it is coming in 2027. So that's another big advantage that we'll have. Okay. So first of all, thank you very much for joining us here today. We really appreciate it. I hope we've been able to answer your questions and give you the information you were looking for. And of course, we have our investor relations team that is -- that are here today, and thank you to those who are listening online. Have a great day.