KLM Limits its Annual Operating Loss to EUR 94 Million


KLM today reports an operating loss of EUR 124 million for the fourth quarter ending March 31, 2002, compared to an operating loss of EUR 70 million last year. This quarterå‘s loss includes a non-recurring, pre-tax charge of EUR 17 million for aircraft impairments. The net loss for the fourth quarter amounts to EUR 108 million or EUR 2.31 per common share, compared to a loss of EUR 88 million or EUR 1.88 per common share for the same period last year.
The operating loss for the fiscal year ending March 31, 2002 amounts to EUR 94 million, compared to an operating profit of EUR 277 million last year. The net loss of EUR 156 million or EUR 3.37 per common share compares to a net profit of EUR 77 million or EUR 1.61 per common share last year. The cash flow from operating activities of EUR 526 million was virtually equal to that of last year.


The fiscal year 2001/02 was a difficult year for the entire airline industry. However, KLM was able, due to its operational and financial flexibility, to respond quickly and effectively to the fall in passenger traffic demand following both the economic downturn in the first half of the year and the events of September 11, 2001. After cutting overall capacity by 8 percent year-on-year at the start of the winter season, KLM has added back capacity on a conservative basis as passenger traffic levels have improved. Since October overall traffic has improved month-on-month to a level just below that of last year. In contrast to many of its competitors that have been substantially impacted by the widespread discounting and the pressure on premium traffic, KLM has been able to maintain its passenger yields. At the same time, KLM continues to be the leading airline amongst the major hub-and-spoke carriers in Europe in terms of arrival punctuality, with the airline’s operational reliability improving every quarter throughout the year.


Leo van Wijk, President and CEO said: “In a difficult year KLM has produced an encouraging set of results. KLM proved its flexibility in its rapid response to the challenging times following September 11. A focus on quickly and effectively cutting passenger capacity, on increasing utilization of its fleet of combi-aircraft and on implementing measures to enhance revenues and reduce its cost base enabled KLM to manage the downturn successfully. The encouraging results in the fourth quarter demonstrate that KLM is well positioned to improve its financial performance in the coming years.”


He added: “During this turbulent year our employees made a substantial contribution to the performance of the organization. Without their commitment and flexibility KLM would not have been able to respond as quickly and effectively as it did.”


Fourth quarter: Although group operating revenues decreased by EUR 64 million or 4 percent year-on-year, the decline was far less than the fall of 16 percent in the previous quarter. This positive trend was mainly due to passenger traffic levels improving whilst yields were maintained. In addition, despite the continuing general economic downturn, the trend in revenues from Cargo was encouraging. Revenues from Engineering & Maintenance were virtually equal to those of last year.

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Fiscal year: Group operating revenues decreased by EUR 428 million (6 percent). Group traffic revenues were EUR 300 million (5 percent) lower, while other revenues declined by EUR 128 million (15 percent).


Fourth quarter: The fourth quarter was characterized by a strong recovery in the KLM Company passenger business. Targeted capacity reductions of 9 percent mitigated the general pressure on airfares with yields improving by 1 percent, while the load factor increased by 3.5 percentage points to a record high of 79.9 percent. Traffic on African and Central and South Atlantic routes continued to be well above last year’s levels, while traffic on European routes was also higher. Although traffic on the North Atlantic was still weak with a decline of 18 percent year-on-year, the trend during the quarter was positive. Traffic in both Business and Economy Class has continued to recover from post September 11 levels, with Business Class traffic levels being especially encouraging in March.

Fiscal year: Passenger traffic and capacity were 5 percent and 4 percent lower than last year, resulting in a decrease in load factor from 79.8 percent to 78.7 percent. Yields remained effectively the same.


Fiscal year: Transavia closed the fiscal year with a profit, although its charter traffic levels fell in comparison to last year due to the continued impact of the economic downturn and the events of September 11. This was partly compensated by a year-on-year increase in traffic on scheduled services as well as a substantial improvement in traffic on Transavia’s low cost brand BASIQ AIR. Traffic in KLM’s other low-cost operation buzz also showed a considerable year-on-year increase.


Fourth quarter: KLM Company cargo traffic developed favorably month-on-month, while gaining market share. Traffic was only 2 percent lower compared to last year with traffic in March being higher than last year’s level for the first time since September 11. The improvement was mainly due to a strong recovery of traffic on the important North Atlantic and Asia Pacific routes. As cargo capacity was 4 percent lower than last year, load factor increased by 1.8 percentage points to 73.1 percent. Due to lower traffic from high yielding market segments, cargo yield declined by 5 percent year-over-year.


Fiscal year: Cargo traffic decreased by 3 percent year-on-year, while capacity was 1 percent higher. As a result, the load factor decreased by 2.3 percentage points to 69.4 percent. Yield declined by 4 percent.


Fiscal year: KLM’s Engineering & Maintenance illustrated its resilience in such a difficult year by growing its revenues generated from third parties by 6 percent to EUR 289 million. The increase was realized mainly through volume growth in engine overhaul and aircraft base maintenance with margins also improving slightly.


Fourth quarter: In the last quarter of the year, the cash flow from operating activities, which included a reduction in working capital of EUR 38 million, was neutral. As EUR 71 million was spent on investing activities, the free cash outflow for the fourth quarter also amounted EUR 71 million, compared to an outflow of EUR 127 million last year. Fiscal year: Despite the net loss for the fiscal year, KLM generated a positive cash flow from operating activities of EUR 526 million, virtually equal to that of last year. This was caused by, amongst others, a firm reduction in working capital following September 11. The investing cash flow amounted to EUR 234 million, resulting in a total free cash flow for the year of EUR 292 million. KLM’s overall liquidity position as at March 31, 2002 increased to EUR 1,383 million. EUR 1,029 million of this amount is included under Cash and marketable securities, whereas EUR 354 million of triple A bonds and long term deposits are included under Financial fixed assets.


Fiscal year: During the fiscal year 2001/02, KLM’s net-debt position decreased by EUR 223 million to EUR 2,608 million on March 31, 2002, mainly caused by an increase in cash resources of EUR 235 million. Although group equity also showed a small decrease, KLM’s financial gearing (net debt as a percentage of group equity) improved from 138 percent last fiscal year to 131 percent at March 31, 2002. Rob Ruijter, CFO and Managing Director said: “Over the past year, KLM has proven its ability to generate positive operating cash flows even in difficult times. The flexibility offered through the combination of owned and leased aircraft has proven to be a valuable asset. KLM’s cash-generating capability as well as its financial structure form a solid foundation for the future.”
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