KLM Reports Operating Loss


AMSTELVEEN, THE NETHERLANDS, JANUARY 23, 2003 å- KLM Group today reports an Operating Loss of EUR 63 million for the Third Quarter, ended December 31, 2002, compared to an operating loss of EUR 76 million last year. The Net Loss amounts to EUR 66 million or EUR 1.41 per common share, compared to a net loss of EUR 94 million, or EUR 2.02 per common share last year. The effects of the Alitalia arbitration award have not been accounted for in the Third Quarter.


This year’s Third Quarter operating income was negatively affected by an additional EUR 8 million depreciation charge on KLM’s Boeing 747-300 fleet. Last year’s operating income included the government compensation of EUR 27 million for the damages incurred following the closure of US airspace between September 11 and 14, 2001. Excluding these effects, KLM’s operating income in the Third Quarter improved by approximately EUR 50 million compared to last year.


During the quarter ended December 2002, the airline industry was adversely affected by a continuing weak global economy and geo-political instability. The global economy has not shown signs of recovery and the geo-political instability in certain regions in the world also had a negative impact on demand.


The impact of these developments became increasingly visible in KLM Group’s Third Quarter performance. As a consequence, traffic volumes and yields were lower than expected, despite the fact that they compare favorably to the corresponding period last year.


Leo van Wijk, President and CEO of KLM, said: ‘In the Third Quarter, we experienced a declining trend in demand, which has put pressure on our traffic and yields. As we expect this pressure to continue in the last quarter of our fiscal year, we are adjusting our capacity and network plans for the remainder of the fiscal year as well as for the summer of 2003, and further increase our focus on cost management.’

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Operating Income for the nine-month period ended December 31, 2002 was EUR 119 million, which compares to an Operating Income of EUR 30 million in the corresponding period last year. Net income for this period amounts to EUR 31 million, or EUR 0.64 per common share, and compares to a net loss of EUR 48 million, or EUR 1.06 per common share last year.


KLM Group revenues for the Third Quarter increased to EUR 1,576 million, which is a 7 percent increase compared to the corresponding period last year. Group revenues were 10 percent below the level of 2000.


During the Third Quarter, overall traffic increased by 9 percent compared to the same period last year, and was 1 percent below the 2000 level with no capacity growth. With overall capacity this year up 7 percent on last year, overall load factor improved by 2.0 percentage points to 77.9 percent.


KLM airline manageable unit revenues per ATK (excluding currency effects) increased by 2 percent, being the result of a flat year-on-year overall manageable yield development and an improved year-on-year overall load factor.


Group operating expenses increased by EUR 91 million (6 percent) to EUR 1,639 million. KLM airline manageable unit costs (excluding currency and fuel price effects) increased by 2 percent compared to the corresponding period. Including these effects, unit costs were down 1 percent on last year.


Fuel costs remained flat year-on-year. The negative effects of higher jet fuel prices and volumes were offset by a positive effect of the lower USD exchange rate.


Salaries and benefits increased by 10 percent. This increase is mainly the effect of general wage increases (amongst others due to the newly concluded collective labour agreement), lower surplus refunds from KLM’s pension funds and additional costs for pre-pension arrangements.


Financial Income and Expense is EUR 4 million higher than last year, due to higher net interest charges.


Results of Holdings were positively influenced by a year-on-year improvement of Martinair’s results.


During the first nine months of Fiscal Year 2002/03, KLM’s net-debt position increased by EUR 14 million to EUR 2,622 million at December 31, 2002. Group equity decreased by EUR 48 million to EUR 1,944 million. KLM’s financial gearing (net-debt as a percentage of group equity) developed in line with our expectations from 131 percent at March 31, 2002 to 135 percent at December 31, 2002.


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