KLM Reports Second Quarter

AMSTELVEEN, THE NETHERLANDS, OCTOBER 23, 2003 - KLM Group today reported an
operating profit of EUR 131 million for the second quarter, ended September 30, 2003. This
compares to an operating profit of EUR 141 million last year. Second quarter net profit amounted to
EUR 90 million, or EUR 2.03 per common share. This compares to a net profit of EUR 86 million, or
EUR 1.88 per common share last year.
The operating environment in the second quarter remained challenging. The aftermath of SARS
continued to have its impact on the Group’s operating revenues (EUR 1,619 million; minus 12 percent
on last year), although less pronounced than in the first quarter of the fiscal year (minus 16 percent).
Yields continued to be under pressure, albeit that manageable yields started to improve year-on-year
towards the end of the quarter. At the same time, traffic volumes gradually recovered through July and
August, with less robust volumes in the month of September.
Group operating expenses declined by 13 percent, as a result of lower capacity levels, as well as the
initial effects of the implementation of the Group’s structural cost savings program.
The Group’s operating margin and EBITDAR margin in the second quarter improved year-on-year to
8.1 percent and 18.2 percent respectively.
Leo van Wijk, President and CEO of KLM, said: ‘Our second quarter results confirm that the Group
takes the necessary steps to implement the structural cost saving measures. Against the background
of a difficult operating environment, we continued to focus on our costs, and were successful in limiting
the effects of lower revenues on our operating income, while at the same time improving our margins.
As the industry outlook is still fragile, we will remain committed to deliver on our cost savings program
to improve our financial performance.’
Operating profit for the six-months period ended September 30, 2003 was EUR 65 million, which
compares to an operating profit of EUR 182 million last year. Net profit for this period amounts to
EUR 36 million, or EUR 0.80 per common share, and compares to a net profit of EUR 97 million, or
EUR 2.12 per common share last year.
Passenger Business -
In the second quarter, passenger operating revenues of EUR 1,144 million were down 9 percent on last
year. Traffic revenues decreased by 11%, which is the result of lower traffic (minus 3 percent) and
lower yields (minus 8 percent, including currency effects). Manageable yields (excluding currency
effects) were only 1 percent lower than last year, albeit that for September they were above last year’s
level for the first time in this fiscal year. The year-on-year decrease in manageable yields was most
pronounced on the European routes, but showed a modest increase on intercontinental routes. The
recovery in manageable yields was most visible on the Asia Pacific route area, where traffic volumes
were favored at the expense of yield in the first two months of the quarter, with a strong yield recovery
towards the end of the quarter.
Operating expenses were EUR 1,028 million, down 9 percent on last year. Unit cost in the second
quarter declined by 6 percent. Without currency effects, unit cost was down 1 percent, in spite of a 3
percent capacity decrease.
Passenger Business operating profit in the second quarter was EUR 116 million. This compares to an
operating profit of EUR 122 million last year.
In the second quarter, cargo operating revenues amounted to EUR 253 million, a decrease of 4
percent compared to last year. The revenue decrease is mainly driven by lower yields, which declined
by 9 percent year-on-year (2 percent without currency effects). A 6 percent increase in cargo traffic
could only in part compensate for the lower yield. Due to the continuous weak European economy,
especially European outbound traffic continued to be under pressure. The increase in traffic is mainly
the result of the successful introduction of the two new freighters on Asia / Pacific routes.
Cargo operating expenses of EUR 240 million were 2 percent lower than last year. Unit cost was down
8 percent year-on-year. On a capacity increase of 6 percent, unit cost was down 2 percent without
currency effects. Cargo Business reported an operating profit of EUR 13 million, which is EUR 5 million
lower than last year.
In September, KLM Cargo and China Southern Airlines announced new joint long-haul 747-freighter
services between Amsterdam and Shanghai. These new services, which started on October 15, 2003,
further cement the close relationship between KLM and China Southern that allows KLM Cargo to
establish itself better in the world’s fastest growing cargo market.
We expect the uncertain economic environment to continue for the remainder of this fiscal year.
However we are confident that the structural cost saving measures, identified to be realized this fiscal
year, will be successfully implemented. We reconfirm the expectation that the operating income for
fiscal year 2003/04 will be approximately break even.
Full details at KLM website