Action

Air France-KLMs
Shareholders Newsletter
April 2012

Jean-Cyril Spinetta
Chairman and Chief Executive Officer,
Air France-KLM

Dear Shareholders,
2011 was a tough year for
the Group due to the uncertain
operating environment and
the high fuel price. Furthermore,
the economies of certain countries
where we have a strong commercial
presence were affected by various
crises, the consequences of which
are still being felt. This was reflected
in sizeable losses for the financial
year over twelve months with
a 353 million operating loss
and a net loss of 809 million.
This difficult economic environment
has been accompanied by a
structural change in our industry.
The tremendous development
of the low cost carriers in Europe,
the very strong growth of the Gulf
State airlines and the rise of the
emerging country airlines all require
a transformation in our business
model. The success of the
transformation plan announced
on January 11 is all the more
necessary in terms of achieving
the objectives set by your Board
of Directors, namely

Air France-KLM Transform 2015:

An ambitious three-year plan
aimed at restoring profitability
See page 2

Annual results
See page 4

The Air France-KLM

Shareholders Meeting
See page 6

Highlights
Jean-Cyril Spinetta
editorial continued

restoring the Groups competitiveness

through a 10% reduction in unit
costs ex-fuel, restructuring the
medium-haul operations which must
return to break even and reducing
net debt by 2 billion by the end
of 2014. I would like to stress
the fact that all the announced
actions are already underway, and
the immediate measures, notably
the wage freeze in 2012 and 2013,
are for the most part already in place.

Air France-KLM Transform 2015:

An ambitious three-year plan
aimed at restoring profitability

The framework and methodology

agreements covering the objectives
(particularly a 20% improvement
in economic efficiency across
the companys scope), the schedule
and the key isssues for negotiation
were signed on March 20 with
the representatives of the ground
staff, cabin crew and pilots.
This plan does not call into question
our strategic choices and existing
strengths. We are going to continue
to reinforce our presence in dynamic
markets.
For example, with more than 80 flights
in the Summer 2012 season, we shall
be the leader on the Europe-China
routes and we shall, of course,
be looking to deepen our alliances
with our Chinese partners.
The opening, in July, of Terminal S4
at Roissy is going to reinforce
the attractiveness of our hubs since
this modern satellite will enable virtually
all our long-haul flights to be
in direct contact with the terminal.
This represents a considerable
improvement in our operations
and the service to our customers
for whom we are continuing to invest
in our products and services.
Please be assured that, against
this backdrop, we are all committed
to the success of the plan which will
enable our Group to remain a leading
player in the air transport sector.
I would like to take this opportunity
to thank you for your unwavering
loyalty.

02

ActionAIR April 2012

Within the context of the current

economic crisis, while the forecasts
for air transport demand are not in
question, numerous competitive and
economic factors are putting pressure
on revenues.
The industry is having to contend with a
situation of overcapacity mainly created
by the low cost carriers in Europe and the
Gulf State airlines. Consumer behavior
has changed with price becoming the key
factor.
Furthermore, the oil price is going to remain
above the $100 level and the euro/dollar
exchange rate may be unfavorable to
European airlines. Lastly, the introduction
of new taxes and the ETS are limiting the
ability to increase prices in this high-oilprice environment.
While Air France-KLM has responded
with multiple measures over the last
three years, the results remain insufficent,
particularly at Air France.

As a result and faced with the persistent

economic crisis, the Air France-KLM
Group has launched a three-year (201214) transformation plan.
The objective of this plan, Transform
2015, is to restore profitability by
pursuing the Groups investment strategy
which consists of investing in products
and customer services, reinforcing its
presence in growing markets, stepping
up its cooperation with its American
and Chinese partners and securing
agreements with new partners within
the SkyTeam alliance supported by its
fundamental strengths.

The Transform 2015 plan

Transform 2015 responds to the three
priorities set by the Board of Directors:
restoring the companys competitiveness
implying a reduction in costs, restructuring
the short- and medium-haul operations
and rapidly reducing debt.

Highlights

Cost-saving measures

It comprises a first phase of immediate

measures and a second phase aimed at a
transformation in the business model over
three years. The Group has already started
work in all the areas required to realize this
plan.
2 bill reduction in net debt
by the end of 2014
The 2 billion reduction in net debt by
the end of December 2014 is a priority
objective and will enable net debt to
fall to 4.5 billion from 6.5 billion at
December 31, 2011. This additional 2
billion of free cash flow will be the result
of the immediate measures and the
transformation plan.

Phase 1:
Immediate measures
A downwards revision in capacity
growth and investment
Capacity growth has been revised down.
Whereas, in 2011, capacity growth was
4.7% at a constant perimeter, it will be
limited to 1%-2% in the next three years.
As a result, the Group has reviewed
its fleet plan and investment program
while preserving investment aimed at
the ongoing improvement in operational
safety and customer services. These
investments have been revised down,
especially investment in the fleet which
will be, before sale and lease back
operations, a maximum of 700 million
in 2012, 600 million in 2013 and 300
million in 2014 compared with 1.2 billion
in 2011.

More than 1 billion of new

cost-cutting measures over
three years have already
started to be implemented
and notably a freeze on
general salary increases
at Air France in 2012 and
2013 and continued wage
moderation at KLM. The recruitment
freeze has been maintained and additional
productivity efforts introduced, together
with a further reduction in overhead
costs and network adaptations.
These measures should generate more
than 1 billion of savings over the next
three years, with 280 million in 2012,
390 million in 2013 and 400 million in
2014.
As these measures are not enough to
restore our competiveness and profitability,
the transformation plan for all the
professions has been launched. It must
enable the generation of an additional 1
billion of free cash flow over three years.

Phase 2:
Transformation plan
Improving productivity
The transformation plan has been
launched. The first stage enabled the
signature, on March 20, of framework and
methodology agreements between the
General Management and the unions at
Air France. These agreements relate to the
objectives (notably the 20% improvement
in economic efficiency over the Companys
entire scope), the schedule and the key
issues for negotiation.

R
 eturning to break even in medium

haul within three years

The short and medium-haul network is
the base needed for the Air France-KLM
Groups development, guaranteeing its
positioning in Europe and feeding the longhaul flights on departure from the ParisCDG and Amsterdam-Schiphol hubs.
Since the 2008-09 crisis, initiatives such
as the NEO (New European Offer) and the
launch of the provincial bases have limited
the losses but have not enabled a return
to break even.
To achieve this, the following structural
measures will be implemented: increased
use of aircraft and assets, a significant
improvement in productivity across all staff
categories, the redefinition of the main and
regional networks and the redefinition of
the areas of activity sometimes requiring
recourse to subcontractors.
Improving levels of performance
in the long-haul network and cargo
Although the long-haul network remains
profitable, the levels of economic performance need to increase. To this end,
the Group is working on improving the
productivity of the relevant staff and
growing the capacity generated by an
optimized use of the current long-haul fleet
and the closure of loss-making routes.
The cargo business must return to structural
profitability. While the improvement in
productivity is also a priority, other measures
including the adaptation of capacity are
currently being considered.

This is a major sign of commitment on the

part of most unions for ground staff, pilots
and cabin crew in a negotiated process of
reworking Air Frances social agreements.
The objective is to sign, in late June, new
collective labor agreements at Air France
which is going to open negotiations
regarding wage moderation.

April 2012 ActionAIR

03

Results

2011 financial year

Annual results
2011: a tough year
> 2011: a tough year
The economic environment and
geopolitical crises weighed on the
Groups activity during the financial
year from January 1 to December 31,
2011 pro forma. Over the year, the
Group generated revenues of 24.4
billion (+4.5%). While volumes were
satisfactory, the level of unit revenues
was insufficient to absorb the steep
increase in the fuel bill (+904 million
to 6.4 billion). The operating result
was negative at 353 million and, after
net financial expenses of 371 million
and 116 million of foreign exchange
losses, the net result was a loss
of 809 million (+289 million
for the financial year to December 31,
2010 which had recorded a 1.03
billion capital gain on Amadeus).
There will be no dividend proposed
to the forthcoming Shareholders
meeting on May 31.

>

Financial situation
at December 31, 2011
Net investments amounted to 1.26
billion while operating cash flow was
a positive 934 million. Net debt stood
at 6.52 billion and stockholders
equity at 6.1 billion with the gearing
ratio at 1.07 (0.86 at December 31,
2010). The Group has cash of 2.9
billion and credit facilities of 1.85
billion.

>

Transform 2015 plan

This three year-plan is aimed at

restoring the Groups profitability
and reducing net debt by 2 billion
by the end of 2014. A first phase
of immediate maeasures has been
launched including limited growth
in capacity and a consequent
downwards revision in investment,
salary measures, and a reduction
in overhead costs.
A second phase is also being prepared
which must lead, in late June, to a
transformation plan whose principal
lever is an improvement in productivity.

04

ActionAIR April 2012

>

2012 outlook

For the 2012 financial year, the

economic outlook remains uncertain
while the fuel price remains at
record levels in euros. The fuel bill is
estimated to increase by 1.1 billion(1)
relative to its 2011 level . As a result,
the operating result for the first half
will be below that of the previous
year. However, the second half should
benefit from the first positive effects
of the three-year plan. Furthermore,
the Board of Directors has fixed an
objective of net debt of a maximum of
6.5 billion at the end of 2012.
(1)

Based on a forward curve at March 2,

2012 and a /$ rate of 1.32.

Results
January-December: 12 months pro forma

+ .5%

Revenues
in billion
23.31

Revenues by business
in billion
24.36

1.35
1.04
18.83

increase in revenues

2010

1.26

billion euros of net investment

3.14

2011

Passenger
Cargo
Maintenance
Others

Income/(loss) from current operations

in million

Net income/(loss), Group share

in million
289

28
2010

2011

2010

2011

-809

-353

Quarter to December 31, 2011

Satisfactory volumes but weak unit revenues
Passenger
A 6.6% rise in traffic for capacity up by 6.0%. These rises
reflect a favourable comparison basis (strikes and adverse
weather conditions in 2010) as well as the launch of the
Marseilles base in October 2011 and the integration of the
Martinair capacity by KLM since November. The load factor
stood at 81.8% (+0.4 points). Revenues increased by 3.2%
to 4.68 billion. After a fuel bill 252 million higher than
in the previous year, the operating result stood at a loss of
224 million (income of 12 million at December 31, 2010).
Cargo
Since the middle of 2011, the cargo business has seen
a decline in global trade, resulting in a 4.7% decline in traffic
for capacity down by 0.5%, and leading to a 2.9 point fall
in load factor to 67.5%. Revenues stood at 802 million
(830 million in the previous year) while the operating result
was at break even (+60 million at December 31, 2010).
Maintenance
The operating result was 43 million (36 million at December
31, 2010) for third-party revenues of 273 million (+3.4%).
The other activities, including leisure and catering, generated
revenues of 269 million (-6.3%) and an operating loss of
21 million (a loss of 27 million at December 31, 2010).
In total, the Group generated revenues of 6.03 billion
(+1.8%) for the October-December quarter of 2011.

A decline in ex-fuel unit costs

Operating costs rose by 6.7% and by 2.7% ex-fuel.
The fuel bill increased by 273 million to 1.62 billion
(+20.1%) under the combined effect of a 2% increase
in volumes, a negative currency effect of 4% and a rise
in the fuel price after hedging of 13%. Employee costs
were slightly higher at 1.87 billion (+1.4%).
The operating loss stood at 202 million (income of 81
million at December 31, 2010) and the net loss, Group
share at 259 million (a loss of 46 million at December 31,
2010).
The net loss and diluted loss per share both stood at 0.88
(a loss of 0.16 for the October-December 2010 quarter).

Seen in the press

International Herald Tribune: March 9, 2012
Fuel bill hurts Air France-KLM.
Les Echos: March 9, 2012
Air France-KLM losses deepen.
Wall Street Journal: March 9, 2012
Air Frances CEO presses cost cutting.
Aujourdhui: March 9, 2012
Air France-KLM reports a 809 million loss.

April 2012 ActionAIR

05

Practical Information

Air France-KLM

Annual General Shareholders Meeting

Thursday May 31, 2012 at 14h30 in the Carrousel du Louvre
99, rue de Rivoli, 75001 Paris

Any shareholder, irrespective of the number of shares they hold, has the right to attend and vote at the Shareholders Meeting.
The right to take part in the Meeting is subject to the registration of the shares on the third business day prior to
the Meeting (record date). For the Air France-KLM Combined Ordinary and Extraordinary Shareholders Meeting
of May 31, 2012, this record date will therefore be Monday May 28, 2012 at 0h00 (Paris time).

I plan to attend the Meeting in person

My shares are in bearer
form:

My shares are in registered

or direct registered form:

I am a shareholder
in the Netherlands:

I ask my financial intermediary

for an admission card
If I dont receive it, I can still
attend the Meeting bringing with
me a certificate of participation
issued by my financial
intermediary, proving that I have
been a shareholder since at least
May 28, 2012.

Socit Gnrale automatically

sends me the converning notice
and voting materials.
I request an admission card
as soon as I receive these
documents
If I dont receive it, I can still
attend the Meeting provided I
bring proof of identity.

I request an admission card

from RBS, who send the list of
participants to Air France-KLM.

Socit Gnrale

The Royal Bank of Scotland NV

Service Assemble

Equity Capital Markets/Corporate

Actions HQ3130

BP 81236
44312 Nantes Cedex 03

Gustav Mahlerlaan 10
1082 PP Amsterdam

I shall not attend the Meeting but shall be voting

I give the Chairman a proxy:
I tick box 2 I give a proxy
to the Chairman of the
Shareholders Meeting then date
and sign the bottom of the voting
form filling nothing in and send
it to Socit Gnrale.
If my shares are in bearer
form, I enclose a certificate
of participation issued by
my financial intermediary
with my letter.
I mail the letter for receipt
by Socit Gnrale no later
than May 28, 2012.

06

ActionAIR April 2012

I want to vote by mail:

I tick box 1, I am voting by mail
then complete, sign and date
the form.
If my shares are held in bearer
form, I enclose a certificate
of participation issued by
my financial intermediary.
I mail the form and certificate
for receipt by Socit Gnrale
no later than May 28, 2012.

I want to be represented
at the Meeting by an
individual or corporate
body of my choice:
Pursuant to the provisions
of article R225.79 of the
Commercial Code, the notification
and designation of a proxy may
be done electronically
I tick box 3 I grant a proxy
to, then fill in the details
of my representative at
the Meeting before signing
and dating the form.

Committee Life

Annual General
Shareholders Meeting
The Annual General
Shareholders Meeting provides
an exclusive opportunity
for individual shareholders
to meet the management
of the Group in which they
own shares, learn more about
the companys financial and
social situation and comment
on its management

Air France-KLM
One share
=
One voting right
It is also an opportunity to participate in
the companys decision-making process
by voting for the resolutions proposed by
the Board of Directors.
The Shareholders Meeting approves the
results but also appoints members of the
Board of Directors.
There are three types of Shareholder
Meeting:
the Ordinary Shareholders Meeting
the Extraordinary Shareholders
Meeting, and
the Combined Ordinary and Extraordinary Shareholders Meeting.
The Ordinary Shareholders Meeting
is held once a year, during the six months
following the end of the financial year. A
20% quorum is required for the first meeting and none for the second.
The Extraordinary Shareholders
Meeting is convened when the company
submits a proposed change in the bylaws
or a capital transaction such as a capital
increase, capital reduction or merger to
the shareholders for approval.
So that the Extraordinary Shareholders
Meeting can deliberate, the shareholders
must represent at least 25% of the voting

rights for the first meeting and 20% for

any subsequent second meeting.
The Combined Ordinary and Extraordinary Shareholders Meeting
convenes the two types of Shareholders
Meeting for the same time and date. Depending on the resolutions, the quorum
and majority conditions are based on the
Ordinary or Extraordinary Meeting.
If you are a direct registered shareholder
of Air France-KLM, Socit Gnrale in
Nantes manages your shares and your
convening notice and voting materials
will automatically be sent to your home
address.
If you hold bearer shares, you need to ask
your financial intermediary for an admission card by immobilizing your shares no
later than three days before the Meeting
or request a mail voting form.
During the Meeting, the Chairmans office
and the scrutineers are responsible for
ensuring that the discussion and voting
is properly conducted. The Chairman ensures that the agenda is followed, grants
attendees the right to speak, closes the
debates and, when necessary, reiterates
the rules for the Meeting.
The scrutineers ensure that the Meeting
and voting process proceeds properly
and counts the number of shares represented.

Renewing
the Committee

There is still time to put your name

forward for a mandate to start
in June 2012.
If you would like to contribute
to the Committees work you can
join us in working on communication
for our individual shareholders.
To apply, just download the
application form from our website
www.airfranceklm-finance.com.
You can also request the form
by telephone at +33 1 41 56 56 56
or by email at: mail.actionnaires.
afklm@airfrance.fr
To apply you must be a shareholder
in the Air France-KLM Group
and hold a minimum of 50 shares.
You must also abide by the Charter
enclosed in the application pack
and complete and return these
documents to us.
The Committee will draw up
a short-list on Thursday March 29
and the short-listed candidates
will meet with the Committee
at the Shareholders Meeting
on May 31 with the final choice taking
place in June.

The secretarys role is to take notes of the

debates and decisions taken so as to be
able to establish the minutes.
April 2012 ActionAIR

07

My notebook

My shares

My
meetings

Share price trend

since January 1, 2012
Sign up from Monday
April 16 by telephone
at +33 1 41 56 56 56 or by
email at mail.actionnaires.
afklm@airfrance.fr
Tuesday May 29, 2012
13h30: Visit to
the Air France Hub
Roissy-Charles de Gaulle
airport
Thursday June 7, 2012
19h30: Miss Julie
by Frdric Fisbach
Thtre de lOdon
Please note that numbers
are limited for these events

Next meetings
of the Consultative
Committee for Individual
Shareholders (CCRAI)
Thursday March 29,
Wednesday April 18 and
Thursday June 14, 2012

140
135
130
125
120
115
110
105
100
95
90
01
01
12

04
01
12

09
01
12

12
01
12

17
01
12

20
01
12

25
01
12

Analysts
recommendations
(Source : Bloomberg, Reuters at 9/03/2012)
11

10

Buy
_Add

Sell
_Lighten

30
01
12

02
02
12

07
02
12

10
02
12

15
02
12

20
02
12

23
02
12

28
02
12

02
03
12

07
03
12

Stock information

Tuesday May 15, 2012

Lille with Le Revenu
Monday June 11, 2012
Bordeaux with
Capital Com

Air France-KLM
CAC 40 (relative)
Sector index (relative)

Hold

_Dual listing
NYSE Euronext Paris
and Amsterdam
ISIN code: FR0000031122

_Number
of shares
at March 8, 2012

_Included
in the following
indices
CAC Next 20
and Euronext 100

_Market
capitalization
at March 8, 2012

300,219,278

1.25 billion

Sustainable development
indices: DJSI World and
STOXX, ASPI Eurozone
and FTSE4Good

Monday October 8, 2012

Nantes with Investir
Tuesday November 13,
2012
Nice with Investir
Club members
in these regions
will receive
a personal
invitation

My space on the website

www.airfranceklm-finance.com

and also by telephone: from Monday through Friday,

between 10h30 and 12h30 and between 14h30 and 17h30,
+33 (0) 1 41 56 56 56
By mail: Air France-KLM, Shareholder relations - DB-AC
45 rue de Paris, 95747 Roissy- CDG Cedex
By e-mail : mail.actionnaires.afklm@airfrance.fr

Head of publications: Dominique Barbarin - Chief Editor: Christine Machard

Printing: Air France Publications DBAC Financial Communication - Photo credits: Air France and KLM
photograph librairies - Data to March 8, 2012