— Building the future — Innovation — Achievements Horizons — Sector issues —New destinations and strategic partnerships — Committed

ANNUAL REPORT 2012 ANNUAL REPORT

AFRP023_RA_2012-13_VA.indd 1 23/04/13 16:24 — Building the future — Innovation — Achievements Horizons Editorial 05 — Sector issues —New destinations A spirit of conquest and strategic partnerships — Committed Jean-Cyril Spinetta, Chairman and Chief Executive Officer of Air France-KLM

NEWs 07 Achievements

ANNUAL REPORT 2012 ANNUAL REPORT Key figures 12

A shared vision 14 Building the future Peter Hartman, President and Registration Chief Executive Officer of KLM Document 2012 and Alexandre de Juniac, Chairman and —Including the annual fi nancial report Chief Executive Officer of Air France

How it works 20 The air transport 2012 ANNUAL REPORT players 03

ANALYSIS 22 Horizons

INNOVATION 36 Developed with — Governance — Environment — Society you in mind Committed — Environmental footprint SOLIDARITY 40 — Customer experience — Social policy Committed — Local development FINANCE 45

2012 Governance

Cover photo: Kuala Lumpur, Malaysia

CORPORATE SOCIAL RESPONSIBILITY REPORT Access the Group’s Annual Report,

CORPORATE SOCIAL RESPONSIBILITY REPORT CORPORATE Corporate Social Responsibility Report and Registration Document at www.airfranceklm.com

AFRP023_RA_2012-13_VA.indd 2-3 23/04/13 16:24 Editorial

In an environment of highly complex balances of power, Air France-KLM plans to reinforce its leadership position within the air transport industry. This implies both returning to profitability and developing its strengths to be able to affirm its positions at global level.

Air France-KLM is engaged in a vast transformation plan to reduce its costs and regain competitiveness. Launched in 2012, this plan dubbed Transform 2015 continues to be deployed across all the Group’s businesses: passenger transportation, cargo transportation and aeronautics maintenance.

In 2013, the Group is pursuing its strategic investment to offer innovative products and services which are adapted to evolving customer needs. It is also developing strategic partnerships jean-Cyril Spinetta and further extending its long-haul network, the leading network Chairman and Chief Executive Officer 2012 on departure from Europe. of the Air France-KLM group ANNUAL REPORT 04 05 The Group’s employees are driving this transformation by enabling the implementation of new working conditions and action plans, thereby building the future of Air France-KLM. A spirit of conquest

he European air transport industry is facing some major challenges. The heart of our market T is currently seeing a geographical shift towards Asia, Africa and South America, accompanying the exponential growth of the emerging countries. These are all new customers that we need to win over. Furthermore, competition is very cut-throat, particularly in Europe. Fares for domestic and European flights have collapsed under the effect of the low cost carriers and high speed rail while the Gulf State airlines are experiencing unprecedented growth, particularly on the flows between Asia and Africa. European and international regulations are also increasingly onerous for the industry. All these factors are, moreover, coinciding within a context of economic slowdown where the crisis is eroding travel budgets. his is why the so-called “major” airlines are T currently focused on two complementary strategies.

AFRP023_RA_2012-13_VA.indd 4-5 23/04/13 16:24 NEWS

jean-Cyril Spinetta Chairman and Chief Executive Officer of the Air France-KLM group

achievements

irstly, over the past decade, we have seen prevailed. After an intermediary phase launched in 2007, F a trend towards concentration in the sector. Back we are well on the way towards the integration of all the in 2004, Air France-KLM was a pioneer in this European strategic functions, from the commercial and maintenance consolidation which is now virtually complete. activities to a number of common functions such as IT. Hubs Secondly, the airlines are increasingly entering into This primarily reflects a rationale based on economic partnerships to extend their networks through code sharing. efficiency. The aim is to capture all the synergies in terms More rapidity and the handling of checked Our recent cooperation with Etihad Airways is a good of both costs and revenues. simplicity at Amsterdam- baggage. The new Schiphol and Paris- system, deployed in example in that it opens new markets which we would not The second fundamental aspect of this integration is Short and medium haul have been able to develop alone. adaptation to the changes in our industry. If the Europeans Charles de Gaulle a series of phases and In this context of highly complex balances of power, want to remain present in the major alliances they finalized in 2012, improves Revamped offers to respond The opening of Hall M, it is vital for the Air France-KLM group to reinforce its themselves created and continue to be fully fledged sector the speed at which to new travel developments a new boarding satellite in 2012 leadership position within the air transport industry. players, they will need to be more organized about making connecting baggage is Paris-Charles de Gaulle’s transferred at Amsterdam- This implies both returning to profitability to give us the their voice heard more effectively and defending their ANNUAL REPORT 06 Within the framework of the Transform 2015 Terminal 2E, has enabled 07 means to pursue our ambitions, continuing to develop the common interests. Schiphol. KLM now plan, Air France and KLM are offering new, Air France to regroup its network and defending our positions by making our voice This is why we have been working, in recent months, handles this transfer for operations to the east heard at global level. on a new coherent and efficient organization to be up and more competitive prices on their short and customers in a dedicated, of the airport. Terminal 2E o this end, we have launched two inseparable running by July this year which will give us the means to medium-haul network. With the launch of fully-automated area. now welcomes the projects. The first involves achieving a successful achieve these ambitions. its Mini fares, Air France enables customers This system will be able T international flights, with transformation so that we are more competitive. Our target he task entrusted to me by the Board of Directors to handle up to 70 million to choose between the all-inclusive Classic 2F exclusively for flights is to improve productivity and reduce our manageable in October 2011 was to ensure the Group’s pieces of baggage per T offer and the Mini range, a simplified product arriving from or bound for costs by 20%, something on which the two airlines are economic and financial recovery and to introduce a new, year, ensuring that both without checked baggage and Flying Blue the Schengen space and currently working via the Transform 2015 plan. Air France- more-integrated organization. Air France-KLM is now KLM and Amsterdam- 2G for the regional flights. KLM is targeting a €2 billion reduction in debt between embarked on the path to recovery through a reduction miles at fares starting from €49 including Schiphol airport are ready This regrouping of 2012 and 2014 by cutting costs and curtailing investment in both its costs and debt. A new management team can taxes to 58 destinations in France and for the future. operations together with in both companies. This is now well under way and I would now take over and ensure that the Group remains a leading across Europe. KLM is offering new fares the opening of faster, more like to pay tribute to the remarkable achievements of all airline and, together with employees, build on its strengths. on its medium-haul network with more convenient connecting our staff. he time has now come to hand over the baton: than 30 European destinations accessible channels simplifies transit n parallel, we have also decided to move to the on July 1, I shall step down from my positions as T through the airport. next stage in the integration of Air France and KLM. Chairman and Chief Executive Officer of Air France-KLM from €99 including taxes. The Group is I Ninety per cent of It is now key to have a much more integrated Group with Alexandre de Juniac as my successor. also investing in its regional subsidiaries. customers arriving from structure with a very clear demarcation of responsibilities firmly believe that this new stage in governance Air France is launching a new company the Schengen space now at both Group and subsidiary level. will give the Air France-KLM group the means I under the HOP! brand, regrouping its three benefit from streamlined The 2004 merger opened the way to an initial three- to reaffirm the leadership position that is its natural place Brit Air, Regional and Airlinair subsidiaries. circuits meaning they year period during which the principle of coordination within the air transport industry. HOP! now offers a new proposition which no longer have to queue is better attuned to the customer need for for security checks during mobility and autonomy. Transavia France their stopover in Paris. is developing its “leisure” destinations and Furthermore, KLM and Amsterdam-Schiphol expanding its fleet with the arrival of three airport are investing new Boeing B737-800s in 2013. together to optimize

AFRP023_RA_2012-13_VA.indd 6-7 23/04/13 16:24 NEWS

SkyTeam Alliance

1,000 destinations!

The SkyTeam global alliance now has 19 members and, in 2012 thanks to four new Minneapolis - Montevideo - Ålesund members, it crossed Network Designer Hella Jongerius the 1,000 destination mark in 187 countries. Six new destinations in Summer 2013 Upgrades The membership of Xiamen Airlines confirms Partnerships The Air France-KLM group will be offering 2012 A best-in-class Business customer proposition the alliance’s number one

new destinations for the Summer 2013 ANNUAL REPORT 08 position in Greater China. 09 The Air France-KLM group is investing for its Servair signs Air France-KLM schedule. It is now possible to fly with KLM The alliance also a partnership partnering to Fukuoka in Japan, Ålesund in Norway premium customers. KLM is engaged in a welcomed its first Middle Etihad Airways customers agreement with Etihad Airways and Manston in the United Kingdom. comprehensive upgrade to its World Business Class Eastern carriers, Saudia Royal Air Maroc can now travel on board with wider, more comfortable seats as of July 2013, and Middle East Airlines, Air France-KLM has seven weekly flights Air France is also launching three together with a brand-new cabin interior which and a first South American In early 2013, Air France’s signed a new commercial operated by KLM between destinations: Minneapolis in the United airline, Aerolíneas partnership with Etihad Amsterdam-Schiphol and has been completely remodelled by Dutch designer airline catering subsidiary, States, Kuala Lumpur in Malaysia and Argentinas, adding Servair, signed a strategic Airways, enabling a wider Abu Dhabi. In addition to Montevideo in Uruguay. The Group is Hella Jongerius. Air France has also announced 40 new destinations to partnership agreement choice of destinations these hubs, this code- an investment of several hundred million euros the network. with Royal Air Maroc. for customers. Thanks share agreement gives strengthening its offer particularly in Africa. to reposition its products and services in line Servair now supplies to the signature of mutual Air France passengers Since October 2012, KLM has been with the best in class thereby demonstrating its the catering for the aircraft code-share agreements, access to seven the first European airline to serve Harare, commitment to making customer satisfaction a key at the latter’s three units the services between destinations with a further the capital of Zimbabwe, in combination based in Casablanca, Europe and Abu Dhabi ten destinations for KLM element of its transformation plan. In June 2012, with Lusaka in Zambia. Air France is also Marrakech and Agadir. are being intensified. passengers in Asia and increasing its offer in the Ivory Coast, for example, Air France inaugurated the largest Servair is currently number KLM customers have the Australia. Etihad Airways Business lounge in its network at Paris-Charles three globally in the sector, opportunity to travel every passengers also gain Gabon and Nigeria. de Gaulle. As conceived by French designer with operations in 22 day between Amsterdam- access to twenty-three Noé Duchaufour-Lawrance, this lounge aims to turn countries and 60 airports Schiphol and Abu Dhabi European destinations across four continents. on flights operated by on flights operated by the airport experience into an opportunity to relax Etihad Airways while Air Air France and KLM. and experience a moment of pure well-being. France passengers have a choice of two daily flights operated by Etihad Airways between Paris- “By choosing to work with Hella Jongerius, KLM is opting Charles de Gaulle and to engage a top Dutch designer to help make our World Business Class Abu Dhabi. Inversely, passengers feel at home on board.”

Erik Varwijk Managing Director of KLM.

AFRP023_RA_2012-13_VA.indd 8-9 23/04/13 16:24 NEWS

I Amsterdam 2013 Innovative technologies Cargobus KLM the event’s Digital at the service of safety Towards a common, official partner harmonized vision Safety has been further Sustainable KLM is the partner reinforced thanks to new Thanks to the deployment development and official carrier technologies. Air France is

of a harmonized IT tool for of “I Amsterdam 2013”, 2012 the first major European airline Air France-KLM-Martinair Air France-KLM an event which this year ANNUAL REPORT

10 to equip its 4,100 pilots with 11 Cargo, customers will the global air transport celebrates a number benefit from a more leader in 2012 of significant milestones iPad digital tablets known transparent commercial for the city’s institutions, as “Pilot Pads”. This tool The Dow Jones including 400 years offer and a single Maintenance simplifies access to information, reservation system. Sustainability index (DJSI), of the Amsterdam canals, particularly the consultation the principal international the 125th anniversary of The sales team will have A new engine test cell dubbed Zéphyr real-time visibility on all index evaluating the Royal Concertgebouw of regulatory documentation, and facilitates communication capacity available for sale Appointments In November 2012, Air France Industries KLM companies based on their Orchestra, the 40th which should also enable sustainable development anniversary of the within the company. Air France effective Engineering & Maintenance (AFI KLM E&M) more profitability. This July 1, 2013 credentials, ranked Van Gogh museum and is thus pursing its policy of an inaugurated a new engine test cell at Paris-Charles major project launched Air France-KLM air the reopening of the ongoing improvement in flight in 2012 saw its first de Gaulle. Representing an investment of €43 million, transport leader for 2012, Rijksmuseum. Camiel Eurlings safety. commercial system has been appointed this facility known as ZÉPHYR enables the testing of the eighth year running. remodeling phase KLM’s President and 300 engines each year by offering an optimized service Thanks to its performance, initiated in early 2013. Chief Executive Officer to customers in terms of both processes and costs. the Group also heads This program, known the “Transport and Leisure” by the company’s This test cell can handle all the maintenance processes as “Cargobus”, is notably Supervisory Board. sector for the fourth year. aimed at better He will take over from on multiple engines such as the power-plants This distinction is management of the air Peter Hartman. equipping the Airbus A380s and those which will equip awarded to the 19 most freight capacity across future generations of aircraft. The deployment of a new responsible companies “In its transformation plan, Air France has Frédéric Gagey the three companies. engine test cell enables the Group to reaffirm its in the world, each in their systematically asserted that investment in flight safety has been appointed sector of activity. Chairman and Chief position as a major player in the multi-product aircraft would be preserved. With this “Pilot Pad”, we are favoring Executive Officer maintenance market and propose a competitive innovation and simplicity to reach the highest possible of Air France. He will offering for engine products, one of the priorities of standards of flight safety.” succeed Alexandre de the Transform 2015 plan. Juniac, who has been appointed Chairman Éric schramm and Chief Executive Executive Vice President, Flight Operations, Air France. Officer of Air France- KLM.

AFRP023_RA_2012-13_VA.indd 10-11 23/04/13 16:24 Key figures In 2012

Total revenues aIRCRAFT The leading long-haul network on departure from Europe with some 900 long-haul flights a week (Summer 2013 schedule)

billion euros generated

by the other businesses including Servair and Transavia destinations 2012 ANNUAL REPORT 12 by the passenger business 13 or 77.4 million passengers carried an aircraft load factor of 83.1%

by the maintenance business or 1,300 aircraft handled by the cargo business or 1.4 million tons of cargo transported

A turnaround under way Within a continued very difficult context, Air France-KLM’s annual results showed the first effects of the Transform 2015 plan. transform 2015 Revenues: €25.63 billion, up by 5.2% Targets: €2 billion of cost savings over three years at Group level Operating loss reduced to €-300 million (€-353 million* in 2011) Net result: €-1.19 billion - 10% reduction in the unit cost (on a constant currency and fuel price basis)

Net debt reduced to €5.97 billion versus €6.52 billion at the end of 2011 *pro forma - net debt reduced to €4.5 billion by the end of 2014 Figures to December 31, 2012

AFRP023_RA_2012-13_VA.indd 12-13 23/04/13 16:24 A shared vision Building the future BEING A LEADER MEANS ADAPTING TO NEW TRAVEL DEVELOPMENTS.

The Group is experiencing a period of transformation but your customers are also changing… How are you adapting to the new trends in consumption?

Peter Hartman - It is true that, been reflected in our new 2012

in the past few years, customers organization. Since January 2013, ANNUAL REPORT 14 15 have been demonstrating new Air France has been structured needs and behaving differently. around a number of autonomous Above all, customers are looking activities, with a more customer for more control over their travel centric organization. A new Digital which entails managing every Division centralizes all the detail from A to Z, from the choice Company’s initiatives to respond of route to the different options. to changes in customer behaviour They also want to be kept linked, in part, to more widespread informed at every stage of their use of the internet and mobile trip to be able to anticipate any services. This new organization changes. This is now possible is aimed at accelerating the thanks to the development of decision-making process, and mobile technologies enabling getting closer to our customers them to remain constantly in touch and their needs. wherever they may be. This is The information that we why we have made substantial provide to individual customers is investment in these new also strategic. It is vital to maintain technologies and consolidated a direct link with customers since, our presence on the social media. without this, you become just an This enables to us to inform our anonymous carrier. This is why we customers in a personalized way, are continuously developing new Alexandre rapidly and directly. It is a customer relations tools such as de Juniac guarantee of efficiency. a new website and innovative Chairman and Alexandre de Juniac - applications for smartphones, Chief Executive Officer of Air France These new travel dimensions have tablets, etc. Peter Hartman President and Chief Executive Officer of KLM

AFRP023_RA_2012-13_VA.indd 14-15 23/04/13 16:24 AFRP023_RA_2012-13_VA.indd 16-17 16 the future Building ourselves toincreasetheuse business, thisimpliesreorganizing in eachofourbusinesses. the rolloutofactionplans need tocontinueoureffortswith Air FranceandKLM.We now labor agreementsatboth the signatureofnewcollective of revisedworkingconditionswith significant progressinterms the frameworkofTransform 2015? More generally, where are you intermsofthecommitmentsmadewithin going withintheframeworkofTransform 2015plan,launchedin2012? We havetalkedalotabout customerrelationships buthoware employeerelations to thelowcostoffensive? Beyond thisproximity tocustomers,howare AirFrance andKLMresponding an increaseinthenumberofdays together. Thesemeasuresinclude aimed atkeepingthefamily agreed aseriesofmeasures management andtheunions and reducingcosts.KLM’s on increasingproductivity unions throughto2015,focused labor agreementwithallthe KLM signedanewcollective our offersonboardthemedium- Upgradingproducts andservices. in adynamictoimproveour never beseenassecondary. mustcompetitive, theservice fares obviouslyneedtobe I firmlybelievethat,whileour attention andmoreexcellence. morecustomers moreservice, We wanttoofferindividual vis-à-vis thelowcostcarriers. are arealdifferentiatingfactor P_H :Inthepassenger A_D_J :We havemade P_H :InDecember2012, We arepermanentlyengaged A_D_J :Personalrelationships

already startedtosimplifysothat organization, whichwehave andquality ofourservices, customers, byimprovingthe costs andincreasingproductivity, competitiveness, byreducingour performance inthreekeyareas: aims toimproveAirFrance’s the Transform 2015plan worked forallstaff. passengers, withhigh-end aimed atboththemostdiscerning offensive towinbackcustomers. launched ourowncommercial competitivefares.Weat very have flights acrossFranceandEurope Mini, anewpricestructureoffering listens tocustomersbylaunching Air Francehasshownthatit focused rationale.Similarly, one exampleofthiscustomer- isjustto thelong-haulservice haul flightstopositionthemcloser of thekeyturningpoints2013 growth objectives. business, wearepursuingour to demand.Inthemaintenance to adjustourfleetandproducts also requiresustocontinue common toAirFranceandKLM making airfreightbusiness Theloss- customer service. at alllevelswhileinvestingin of ourfleetandgainproductivity A_D_J :AtAirFrance, P_H :Ourambitionisanoffer A_D_J :AtAirFrance,one

companies. stand outrelativetothelowcost quality ofourofferalsomakeus the choiceofflighttimesand everyone. Europe evenmoreaccessibleto a newfarestrategymaking end, in2013,wehavelaunched most competitivefares.To this and atpassengersseekingthe positioning inthepremiumcabins, to remainontherightcourse. we aregoingtohavemobilize success ofTransform 2015and will beacrucialyearforthe development ofTransavia. 2013 the companyHOP!and network withthecreationof of theshortandmedium-haul is thein-depthreorganization would bepossible. these threedimensions,nothing mobilization ofemployeesaround that, withoutthecommitmentand achieve ourobjectives.Itisclear agreements toenableus subsequently signedframework of personnelandallhave with thedifferentcategories we canreactmorerapidly. The densityofournetwork, We discussedthisroadmap

What willbeyourprioritiesintermsofbuildingthefuture oftheGroup? You are bothabouttoassumenewfunctionswithinAirFrance-KLM. The priorityfortheyearsahead action plansarebeingrolledout. the rightpathandmostof KLM. OurTransform planison in theconstructionofAirFrance- while weembarkonanewphase particular strengthsofeachairline turnaround bydevelopingthe Officer willbetocontinuethe Chairman andChiefExecutive organization. the frameworkforanewcommon greatest. Hehasalsoestablished a globalgiant,onparwiththe has madeAirFrance-KLM My roleastheGroup’s new A_D_J :Jean-CyrilSpinetta

with Jean-CyrilSpinetta. having workedontheinitialplans the architectsofAirFrance-KLM of Directors.Leowasone Chairman oftheGroup’s Board as Viceto succeedLeovanWijk process. emerging globalconsolidation to beamajorplayerinthe training. AirFrance-KLMwillneed inthefleetand and services, continue toinvestinourproducts areaanda leaderinevery ensure weoncemorebecome room formanœuvreweneedto will betogeneratethefinancial P_H :Formypart,Iamgoing

A sharedvision winning backcustomers. anddown thispathofrecovery and wearegoingtocontinue This collaborationhasbeenfruitful Air FranceandKLMrespectively. of theTransform 2015planat together toensurethesuccess Juniac andIhavebeenworking 2012,AlexandredeJanuary of thissameambition.Since attheservice transport industry knowledge ofKLMandtheair and Iamgoingtoputallmy phase forAirFranceandKLM establishing thenewintegration He activelyparticipatedin

23/04/13 16:24 ANNUAL REPORT 172012 AFRP023_RA_2012-13_VA.indd 18-19 18 the future Building demanding customers.For upgraded tosatisfyeventhemost whichisconstantlybeinga service of course,accompaniedby full-flat Businessseat.Thisis, to developinganewlong-haul this iswhatguidedourapproach international standards.AtKLM, in linewithever-improved in anall-inclusivehigh-endservice we areseeinggrowinginterest – andparticularlyfrequentflyers Will thesamebetrueforeconomy? Will @Benchmarksky :Anupgradeofthepremium cabinsisplanned. in termsofin-flightservice? @mdial :HowdoyoucontendwiththelevelofAsiancompetition also beabletobenefitfrommore Economy customerswillsoon entertainment systems.Premium and upgradingoftheflight also workingontheimprovement seats withmoreleg-room.We are cabin, thiswillbereflectedinnew all travelclasses.IntheEconomy the cabinsstartingin2014for we havedecidedtoredesign of ourinvestmentforcustomers, With ourcustomersP_H :With Within theframeworkA_D_J :Within Facebook atwww.facebook.com/airfrance, www.facebook.com/KLM Twitter on@AirFrance,@AFNewsroom, @klm Follow AirranceandKLMonthesocial media: followers wereinvitedtoputquestionsAlexandredeJuniac For theGroup’s 2012AnnualReportourTwitter

Economy Comfortseatson We hadalreadyintroduced these leg-room whichreclinesfurther. can chooseaseatofferingmore in EconomyonEuropeanflights 2012, passengerstravelling Economy Comfort.SinceOctober class passengers,notablywith improve thecomfortofeconomy launched anumberofinitiativesto comfortable seats. is customer service. Weis customerservice. have possible standard.Thesecond ambition istoreachthehighest- The firstisflightsafetywhereour be reducedinallareas,bartwo. that AirFrance’s investmentwould renowned chefs. prepared byinternationally- the opportunitytotastedishes by offeringourcustomers amounts inin-flightgastronomy example, weinvestsignificant and PeterHartman. P_H :We havealready A_D_J :We havealwayssaid

possible. personalized andattentiveas welcome tocustomersisas investing intrainingsothatour Wecomfort andservice. arealso customers thebestintermsof million eurostoofferour amounting toseveralhundred thus deployedaninvestmentplan choice ofproductsandservices. with ouraimofofferingmore differentiation. Thisisconsistent customers forgreater of thestrongdemandfrom success ofthisprogramisproof intercontinental flights.The

23/04/13 16:24 How it works The air transport players

Alongside the airlines, multiple players compete for a share of the value added. 3 Air transport drives growth and development by connecting people and goods. Different purchasing channels Via 35,000 routes, air transport generates, directly and indirectly, 56 million jobs compete to sell airline tickets: retailers, the airlines, the major travel agencies, reservation systems and online and US$2.2 trillion of economic activity. In 2013, some 3.1 billion passengers agencies, soon to be joined by other major web-based are expected to travel by air, growth of 24% in five years. players, all compete to attract customers. On average, e-purchasers visit 22 websites before booking their travel.

4 Security checks are a mandatory filter for all passengers and 2 crew on boarding aircraft. Governed by strict The airline safety authorities regulations imposed by States, they have been significantly reinforced since September 11, 2001. develop the safety regulations and monitor the application of standards. In Europe,

the European Aviation Safety Agency works 2012 in close cooperation with the national agencies 1 (the DGAC in France, IVW in the Netherlands) ANNUAL REPORT 20 The aircraft manufacturers who issue, for example, the airworthiness 21 certificates for aircraft and licenses for pilots. design and manufacture the flight equipment. Over the last four years, the revenues of Boeing, EADS, Bombardier and Embraer have increased by 18%. 5 The kerosene supply is key to operating aircraft and its financial impact is increasingly onerous for airlines. While the fuel bill 8 represented 14% of airline costs in 2003, this figure Air traffic control had risen to 33% in 2012. in the different States authorizes takeoffs and landings and, more generally, monitors aviation traffic through en-route control centers and control towers.

6 The airports are the point of convergence between the airlines and their customers. They make infrastructures available to airlines in return for airport taxes. The taxes and fees paid to airports represent up to 90% of the price 9 of a ticket and average 7% of the costs of the European airlines. The maintenance of aircraft is an integral part of the value chain in that it guarantees 7 airworthiness. The airlines either have in-house maintenance capabilities or entrust their maintenance to specialized players. The airlines are responsible for carrying passengers and for their safety and in-flight service throughout the flight, thanks to the know-how of the pilots, flight attendants and ground staff. Between 2000 and Sources: Reuters – March 2012, financial reports, Industry Financial Report December 2012, IATA Vision 2050 2011, the airlines generated more than €20 billion of losses.

AFRP023_RA_2012-13_VA.indd 20-21 23/04/13 16:24 ANALYSIS

Within a still-fragile global economic environment, Air France-KLM is pursuing the strategy engaged by Transform 2015 and has opted to focus on growth markets. 22 23

Additional capacity in Asia, Africa and Latin America

The route openings and increases in the offer introduced in 2013 are a good illustra- tion of this targeted deployment of capacity in that they are mainly focused on Asia, Africa and Latin America. In these regions, demand has seen steady growth over the past few years. In Asia, Air France has inau- gurated its Kuala Lumpur (Malaysia) service Hori- with three flights a week. The opening of this route illustrates the Group’s strategy of rein- forcing capacity for flights on departure from Europe to high-growth regions. Thanks to its dual hub, the Group can leverage the com- plementarity of the Air France and KLM networks to link Europe to the rest of the zons world more effectively. AFRP023_RA_2012-13_VA.indd 22-23 23/04/13 16:24 ANALYSIS

In Japan, KLM is the first airline to operate a non-stop flight between Fukuoka and A balanced network 2012 Europe as of the Summer 2013 season. Revenue breakdown

With the launch of this new route, the Group by destination ANNUAL REPORT 24 for Air France-KLM 25 will offer a total of 42 weekly flights bound for scheduled flights Japan this summer, thereby responding to P22/23. K UALA LUMPUR, The Group’s development the growing demand in this market. malaYSIA. Africa is an important growth market for the p24. LIBREVILLE, Gabon. across all its businesses p25. Maintenance reflects a strategy of managed Group. Air France, which has been present on a Boeing B777 in this continent for more than 75 years, is engine. growth consolidating its offer with additional Mamadou Bamba frequencies to the most-rapidly-developing The same managed growth strategy applies Chief Executive Officer to the Maintenance business which plans areas. Libreville, in Gabon, now has a daily of Orange, Ivory Coast. service and the granting of additional traffic to develop in high-growth areas like com­ rights to Abidjan increases the weekly ponent and engine support where AFI KLM Air France has one E&M is already a major player. The develop- service to the Ivory Coast to ten flights. of the densest networks Air France also inaugurated the Abuja ser- ment of AFKLM E&M’s world-wide mainte- in Africa which is a real nance network is also one of the priorities vice in June 2012, increasing the destina- advantage. tions served by the Group between Paris, in the Transform 2015 plan. The Group’s aim Amsterdam and Nigeria to three including is very clear: capture the growth potential in Lagos and Port Harcourt. The opening of rapidly-developing markets. These busines­ ses operate in a highly competitive global Luanda by KLM enables the Angolan ca- asset for Air France marketplace which is developing fast espe- pital to be served on departure from both to multiply its technical cially in Asia where the growth is expected Paris and Amsterdam. With the Harare For safety reasons, partnerships and equity to be an annual 6% over the next decade. (Zimbabwe) and Lusaka (Zambia) services, I frequently transfer interests in the African In the engine activity, on November 15, KLM is reinforcing its presence in East flights via the Roissy hub to airlines. Africa is a major 2012, Air France Industries inaugurated Africa. link some African capitals. future growth market Zéphyr, its new engine test cell at Paris- In Latin America, another growth market, The regional service is where many companies Charles de Gaulle, representing a €43 million Air France-KLM is deploying new capacity. sometimes inadequate and from various sectors are investment. / Air France is opening the Montevideo it would be an additional currently investing. / service with five flights a week while KLM continues to fly to the new destinations, Havana, Buenos Aires and Rio de Janeiro, opened during the Winter 2012 season.

AFRP023_RA_2012-13_VA.indd 24-25 23/04/13 16:24 ANALYSIS

P27. The new Air France Business lounge Customers at Paris-Charles de Gaulle are changing and the Group is following suit

Within the framework of the Transform 2015 plan, the Group is implementing a profound reorganization at both Air France and KLM to underpin greater efficiency aimed at an improved, more personalized service for customers. Air France has reflected these objectives by streamlining its entire organization to gain responsiveness and make it more focused In its other businesses, the Group deploys on the customer. Since January 1, 2013, the same strategy. In 2013, Air France the Air France group has thus been struc­ subsidiary Servair, which is specialized tured around eight business units : long in airline catering and logistics, signed haul, medium haul transfers at Paris-Charles a strategic partnership agreement with de Gaulle, Paris-Orly and the French James Hogan Royal Air Maroc. With 120 airline clients, stations, HOP!, Transavia France, cargo, President and this subsidiary is steady developing its Chief Executive Partnership maintenance and Servair. international operations. Officer ofE tihad Each of these activities is responsible for

Airways. 2012 the economic performance within its

Our deal with scope, particularly through the manage- ANNUAL REPORT 26 agreements: 27 Air France-KLM ment of costs and the monitoring and marks a momentous control of Transform 2015 realization. This milestone for both win-win development new organization is now more responsive airline groups. and trans­verse, and is resolutely oriented towards customer satisfaction and financial It offers countless performance. opportunities to develop an unrivalled Air France and KLM Similarly, Air France-KLM signs bilateral A completely remodelled commercial relationship. enter into partnerships with agreements with numerous airlines to short and medium-haul network It reflects the core elements numerous airlines increase the offer of flights and destinations for greater efficiency of Etihad Airways’ 10-year to offer their customers more flight destina- for its customers. In October 2012, the master plan, driven by tions and frequencies and develop their Group thus announced the signature of a This new customer-centric organization is organic network growth, networks. The relevant flights are operated commercial code-sharing agreement with being reflected in a remodelling of Air France’s combined with the forging by one or other airline and sold under the Etihad Airways, extending the Air France- short and medium-haul network, aimed at of strategic codeshare flight numbers of the two carriers. KLM offer to some fifteen new destinations gaining competitiveness in the next few partnerships and minority in Asia and Australia. years. The airline has thus completely equity investments in other Highly diverse partnerships redesigned its network around three com­ airlines. For our passengers, Air France-KLM, Delta and plementary business units: Air France, HOP! it also opens up many new Since the Group is not able to develop every Alitalia operate the largest and Transavia France. markets in Europe and destination on a profitable basis, it enters trans-Atlantic joint-venture reinforces the importance into different types of partnerships. This of strategic commercial principle is, for example, behind the Sky- On the trans-Atlantic axis, Air France- partnerships as one of the Team alliance to which both Air France and KLM has had a joint-venture agreement key enablers for accelerated KLM belong, together with 17 other airlines. in place since 2007, the most advanced growth of our network. / With more than 15,500 daily flights to over form of commercial partnership. As the 1,000 destinations in 187 countries, the largest trans-Atlantic joint-venture it covers SkyTeam network offers more destinations the common operations together with the and connections to all the Group’s custo- sharing of revenues and costs on 250 daily mers on departure from the largest hubs in flights operated by Air France, KLM, Delta the world. and Alitalia.

AFRP023_RA_2012-13_VA.indd 26-27 23/04/13 16:24 AFRP023_RA_2012-13_VA.indd 28-29 28 ment withTransavia France. advantage ofthegrowthin“leisure”seg- tion ofitsregionalactivitywhiletaking and network,tooptimizetheorganiza- brand,itsfrequencies,loyaltyprogramtary to highlighttheattractivenessofitsproprie- These three business units enable Air France rating 20to22aircraft. 2015-16, Transavia Franceshouldbeope- gional capitalslikeNantes andLyons. By departure fromParis-OrlyandFrenchre- tinations andtheMediterraneanrimon France, operatesflightstoEuropeandes- The “leisure”division,comprisingTransavia Europe. to destinations in France and across ture fromParis-OrlyandtheFrenchregions together withpoint-to-point flightsondepar Charles de Gaulle hub on behalf of Air France, board 48to100-seateraircrafttheParis- latter havebeenoperatingtheflightson and Airlinair. SinceMarch31,2013,the regroups thecompaniesRegional,BritAir 2013undertheHOP!brand,January The French regional division, launched in and Nice. the provincialbasesinMarseilles,Toulouse together withtheflightsondeparturefrom to-point flights on departure from Paris-Orly portion ofBusinesspassengers,thepoint- across FranceandEuropewithahighpro- at Paris-CharlesdeGaulle,theroutes prises theflightsfeedinglong-haulhub ted by Air France in its own aircraft com- The short and medium-haul activity opera- -

P29.  P28. hop!, AirFrance’snewegionalairline. haul aircraft. revenues on the Group’s medium and long- business tomakeapositivecontribution These measuresshouldenablethecargo processes andorganization. schedule and capacity, and adapting its a newcommercialstrategy, optimizingthe notably by deployingand quality of service, to reducecostsandimproveitsrevenues redoubling its efforts of the past three years ment, thecargobusinessispursuingand Since difficult it operates environ in a very the Cargobusiness at Paris-Charle dGaulle. Relaxation andTVsp Redoubling efforts for

ace inHallM

- as captivecustomerssince the large European hubs. we competedirectly with There isnosuchthing together ontheexecution been workingclosely their employees,have Air France,andthusall Aéroports deParisand andbyinnovating.services adapt bycreatingnew means thatweneedto behaviour ofourcustomers level. Changesinthe commercial andemotional experience atboth needs andimprovingtheir is keytoadaptingtheir

our completefocus Making customers Chairman andChiefExecutive Officer ofAéroports deParis. AUGUSTIN DEROMAN ET

ANALYSIS

or transferringflights./ on arrival,departure reassuring, whether the overallatmosphere seamless aspossibleand transit mustbeas of anxiety. Passenger trip –shouldnotbeatime high pointsofany experience –oneofthe The passengerairport quality-focused culture. a service-oriented, at movingclosertowards of jointprojectsaimed an extensiveportfolio of “Hub2012”.We have

23/04/13 16:25 ANNUAL REPORT 292012 AFRP023_RA_2012-13_VA.indd 30-31 30 ten minutesonflightconnectiontimes. stopover inParis, meaning a saving of up to pass asecondsecuritycheckduringtheir with 90%ofpassengersnolongerhavingto nels hasmadetransfersfasterandmorefluid The introductionofnewconnectingchan- largest Businessloungeinitsnetwork. occasion, AirFrancealsoinauguratedthe new passenger-handling capacity. Onthis in Terminal 2E) on June 28, 2012, creating opening of a new boarding satellite (M gates airport. Thisprojecthasalreadyenabledthe competitiveness ofParis-CharlesdeGaulle offeredtocustomersandthethe service a project to both reinforce the quality of ports de Paris, Air France has invested in At Paris-CharlesdeGaulle,jointlywithAéro- for customers. facilitate andimprovetheairportexperience and KLMaredeployingmultipleinitiativesto Transform 2015plan.To thisend,AirFrance operational efficiencyisattheheartof guarantee oftheGroup’s competitiveness, As afactorincustomersatisfactionand A GURNTEEOFcompetitiveness Opera tional efficey

generation ofadditionalrevenues. lead to productivity gains and enable the number ofaircraft,thesenewprocedures the operationofmoreflightswithsame Embraer aircraftto35minutes.Byenabling has reducedtheturn-aroundtimeonits At Amsterdam-Schiphol,KLMCityhopper in productioncosts. increased staffproductivityandareduction use isgoingtoincreaseby10%reflectedin aircraft. AtthetwoParisplatforms,aircraft measures toacceleratetheturn-aroundof Air FranceandKLMhavealsointroduced / Loading aKLMircraft at Amsterdam-Schiphol.

23/04/13 16:25 ANALYSIS

Adapting to the new travel trends

MORE AUTONOMY WITH MOBILE SERVICES

In today’s world, being competitive increasingly means listening to customers. 2012

This has very much been Air France and ANNUAL REPORT 32 33 KLM’s focus in developing products and services to respond to changes in custo- mer behavior. Two principles guide this approach: offer more choice and personali- zation to all customers while upgrading pro- ducts and services in line with the best industry standards.

Air France and KLM have designed offers so passengers can find the one best suited growth for the airline, this ambition will also to their needs be reflected in new in-flight entertainment systems. Firstly, the two airlines are adapting to the From the in-flight catering service to the In March 2013, KLM also presented its new new forms of purchasing. Thanks to the cabin interior and innovation deployed to full-flat Business seat to be deployed on internet and mobile technologies, cus- enhance the overall travel experience, eve- board its fleet in July 2013. tomers are increasingly able to compare rything contributes to offering ever-more Another asset highlighted during the Group’s offers, and are looking for the solution which comfort and refinement whether on the dialogue with customers is the Flying Blue mostly perfectly suits their needs. The pur- ground or in the air. frequent flyer program. With its 21 million- chase of à la carte products is emerging Air France is thus aiming to position the strong membership, and bringing together as an underlying trend in evolving consu- La Première and Business classes in line more than 30 airlines (including SkyTeam mer behavior. To meet this need, Air France with the best international standards by members) and over 100 non-airline part­ and KLM have both launched offers desig- working on all the components of the offer. ners, Flying Blue is the most powerful loyalty ned to adapt to customer requirements. For For example, this will be reflected in a more program in Europe making it all the more example, customers on medium-haul flights personalized service which is better attuned attractive. To meet the needs of customers Top picture: Free use of a can now travel at lower fares thanks to a to individual needs, and improved services more effectively and welcome new mem­ touch-screen tablet in the Air France simplified offer with, for example, no chec- and investment in new La Première and bers, the Flying Blue website has been Business lounge at Paris-Charles ked baggage. Business cabins for the Boeing B777s completely redesigned and rebranded as de Gaulle. In parallel, Air France and KLM want to rein- and Airbus A380s starting from 2014. In flyingblue.com, with improved information Bottom picture: On board Air France’s force their services for premium customers. Economy class, an important source of and e-services. / La Première.

AFRP023_RA_2012-13_VA.indd 32-33 23/04/13 16:25 Network Destinations

Aberdeen in 2013 Aberdeen Glasgow Edinburgh Aalborg Glasgow Edinburgh Aalborg Newcastle Billund Copenhagen Durham Newcastle Billund Copenhagen Leeds Durham HumbersideLeeds Dublin Humberside DublinManchester Hamburg BreManchestermen Hamburg Birmingham Norwich BremenBerlin Birmingham Norwich Berlin Cardiff Hanover CardiffAMSTERDAM Hanover 243 Bristol AMSTERDAMDusseldorf LondonBristol Cologne PragueDusseldorf London FrankfurtCologne Prague Lille Brussels Frankfurt Lannion Lille Brussels Caen LannionMetz-Nancy Stuttgart Nuremberg Brest Caen Metz-Nancy Stuttgart Nuremberg destinations Quimper PARISBrest Strasbourg Munich PARIS Strasbourg Munich Lorient RennesQuimper Mulhouse Rennes MulhouseVienna Nantes PoitiersLorient Vienna Nantes GenevaPoitiers Zurich La Rochelle Clermont-Fd Geneva LjubljanaZurich La RochelleLyons Clermont-FdMilan Ljubljana Limoges Milan Brive AurillacLimogesTurin VeronaLyons Zagreb Bordeaux Brive Aurillac Turin Verona Zagreb AgenBordeauxMontpellier Venice AgenGMontpellierenoa Venice Toulouse Marseilles Bologna Genoa Biarritz RodezToulouse Marseilles Bologna Biarritz RodezNice Pisa 103 Pau FlorenceNice Pisa Trondheim Pau Florence Trondheim Lourdes Perpignan Toulon Bastia Lourdes CalviPerpignan Toulon Bastia Oslo Castres Ajaccio Calvi Bergen HelsinkiOslo Castres Rome Ajaccio SandefjordBergen Helsinki Figari Rome countries SandefjordSt. Petersburg NaplesFigari Stavanger Stockholm St. Petersburg Naples Stavanger Stockholm Linköping Kristiansand Linköping KristiansandGöteborg Göteborg Moscow Moscow

Vancouver Calgary Warsaw Vancouver Calgary Warsaw AMSTERDAM Kiev Montreal AMSTERDAM Kiev More than Toronto Montreal Budapest Toronto Budapest Boston PARIS Bucharest Boston PARIS Bucharest Bilbao Detroit New York Bilbao Sofia Chicago Detroit New York Sofia 300 flights San Francisco Chicago Vigo San Francisco VigoBarcelona Beijing Washington Barcelona Beijing Los Angeles Washington Madrid Valetta Istanbul Yerevan Los Angeles Lisbon Madrid Valetta Istanbul YerevanAlmaty Atlanta Malaga Lisbon Athens Almaty Seoul Dallas Atlanta Seville TunisMalaga BeirutAthens TokyoSeoul a week HoustonDallas Seville Tunis Beirut Tokyo Houston Rabat Algiers Wuhan Casablanca Rabat AlgiersTel Aviv ShanghaiWuhan Osaka Casablanca Tel Aviv Shanghai Osaka Miami Kuwait City Delhi Chengdu Miami Cairo Kuwait City ChengduHangzhou AmmanCairo Dammam Delhi Havana Marrakech Amman Dammam Hangzhou to Africa Marrakech Bahreïn 2012 Havana Taipei Port-au-Prince Riyadh Bahreïn Taipei Port-au-Prince RiyadhDubai Guangzhou Punta Cana Doha Dubai GuangzhouXiamen Saint-MartinPunta Cana MuscatDoha Xiamen

Santo-Domingo Muscat Hong Kong ANNUAL REPORT Santo-Domingo Saint-Martin Abu Dhabi Mumbai 34 Aruba Pointe-à-Pitre Nouakchott Abu Dhabi Hong Kong 35 Mexico City Aruba Pointe-à-Pitre Nouakchott Mumbai Mexico CityCuraçao Fort-de-France Curaçao Fort-de-France Dakar Bamako Niamey Bonaire Caracas Dakar Bamako Niamey Bangkok BonaireParamaribo Caracas N'Djamena Djibouti Bangalore Bangkok Manilla Panama City Paramaribo Conakry Ouagadougou N'Djamena Djibouti Bangalore Manilla Panama City Cayenne Conakry Ouagadougou More than Bogota Cayenne Freetown Abuja Ho Chi Minh City Bogota FreetownAccra Abuja Ho Chi Minh City Monrovia Accra Quito Monrovia Bangui Quito Bangui Guayaquil Abidjan Entebbe Guayaquil LagosAbidjan Entebbe 200 flights Port HarcourtLagos Nairobi Singapore Nairobi Singapore Douala Port Harcourt Cotonou KigaliDouala Kilimanjaro Lomé CotonouYaounde Kigali Kilimanjaro Jakarta Lomé Yaounde Jakarta Malabo Libreville Dar es Salaam a week Lima Malabo Libreville Dar es Salaam Denpasar Lima Brazzaville Denpasar Brazzaville Lusaka Pointe Noire Lusaka Mauritius Papeete KinshasaPointe Noire Harare Mauritius Papeete to Asia Rio de Janeiro Kinshasa Harare Rio de Janeiro Luanda Antananarivo São Paulo Luanda LaAntananarivo Réunion São Paulo La Réunion

Johannesburg Johannesburg Papeete Papeete Buenos Aires Cape Town 125 flights Buenos Aires Cape Town Santiago de Chile a week Santiago de Chile to Latin America

• Destination operated by Air France, KLM or HOP! in Summer 2013 • Air France-KLM hub New network destination in 2013 Air France KLM All the Transavia destinations at

AFRP023_RA_2012-13_VA.indd 34-35 23/04/13 16:25 Innovation

Developed Premium Economy: more comfort at competitive prices

with YOU Since late 2009, on board its long-haul air- Air France and KLM are attentive craft, Air France has offered a Premium Economy cabin, located between Business to the needs of customers and and Economy. This intermediate cabin the ways in which travel is changing. class offers customers a calm space with IN MIND increased comfort, as well as the privacy of They adapt to passenger expectations a fixed-shell seat offering 40% more room by offering ever-more-comfortable than a seat in the Economy cabin. In June 2012, a differentiated in-flight service was cabin interiors and a constantly-evolving introduced including an improved menu product range. They also continue with the starters and desserts inspired by meals served in the Business cabin plus to surprise passengers with innovative The growth of this cabin across a selection of fine chocolates. Premium the airline industry is undeniable: services both on the ground and Economy has proved popular with both in three years, our Premium Economy cabin has achieved its objectives in the air. business and leisure customers and, as a and been well-received by customers. competitive value proposition, perfectly

complements Air France’s range of ser- Eugénie Audebert 2012 vices. The quality of service on the ground Head of the Premium Economy product,

Air France. ANNUAL REPORT 36 and on board with special touches inspired 37 by Business class is contributing to the success of this product.

Remaining connected on board! The social media, playing a key role New serviceS in customer relations

To make the journey more enjoyable, internet browsing is The two airlines are strengthening their direct contact now possible on board Air France and KLM long-haul with customers by responding 7/7 on Facebook and flights. In 2013, the two airlines are launching an in-flight Twitter to travel-related questions. connectivity trial phase in partnership with Panasonic KLM replies to internet-connected customers around Avionics. This initial phase will take place on two Boeing the clock in seven languages while Air France currently B777-300 aircraft, one operated by each airline. During has a service in five languages. Passengers can also this period, travellers will be able to hook up to the internet choose a seat, change or cancel a reservation or request via their Wi-Fi enabled smartphone, laptop or tablet PC at the departure time of their flights via the social media. a fixed rate, as well as use their mobile phone for sms The airlines make every effort to reply to questions or e-mail, whatever their travel class. Customers will be in under an hour and find solutions within 24 hours. encouraged to provide feedback, along with their ex­ Furthermore, socialbakers.com, the industry benchmark pectations and suggestions on improving these new Communicating with customers in this fashion and analysis website, has ranked Air France the leading opens the way to service creativity and innovation services. This project will, in time, enable customers to while personalization is a response to a global trend. French company for its response to customer and user stay connected across the world through text messages requests and the company best able to respond on or emails as well as internet connection and ultimately Emmanuelle Sidem the social media. More than five million internet users through live broadcasts of TV programmes. President of ConnexConsulting currently follow Air France on Facebook and Twitter.

AFRP023_RA_2012-13_VA.indd 36-37 23/04/13 16:25 innovation

A new full-flat seat The largest Air France in KLM’s World Business Business lounge at Class Paris-Charles de Gaulle

This Business lounge at Paris-Charles de Gaulle is a real asset in that it is ideal for relaxing and I can stay connected with Asia and South America while in Europe. This saves precious time.

Juan Pablo Cavelier President of the “Sustainable Food Pavilion” (SFP), 2015 Universal Exposition in Milan.

Since the summer of 2012, Air France has welcomed Business passengers at the largest lounge in its network, situated in Hall M of Terminal 2E at Paris-Charles de Gaulle. As conceived by designer Noé Duchaufour-Lawrance, this space offers more than 3,000 square meters dedicated to well-being, enabling passengers to make the best use of the time prior to boarding or between flights. In this haven of peace, a hot meal service has been added to the 2012 existing offer of cold snacks and drinks ANNUAL REPORT 38 available in all Air France lounges. A Clarins 39 Unveiling my gourmet creations on board an Air France flight was well-being area invites passengers to relax a truly exceptional interlude. and enjoy a free massage before a flight, Michel Roth while Wi-Fi access and touch-screen digital French Michelin-starred chef. tablets and computers are available if they wish to work in peace. Customers can also freshen up and take a shower. In March 2013, KLM unveiled its new World Business Class cabin interior, A top-of-the-range gourmet offer with more comfort and privacy for passengers. The airline now offers a full-flat seat which can be transformed into a real bed during the flight. Michelin-starred chefs on board The ample storage and wrap-around design of the seats together with their In the Air France Business and KLM World Business Class This is all part of Air France’s ambition to surprise and cabin configuration give an impression cabins, two Michelin-starred chefs are currently show­ delight its customers and to serve as an ambassador for of well-being and space, accentuated casing their gourmet creations. French gastronomy and the art of fine living. by the contemporary atmosphere On long-haul flights the two airlines serve the best of French created by the top Dutch designer and Dutch cuisine. Since December 1, 2012, top interna- Choosing your à la carte menu Hella Jongerius. tional chef Richard Ekkebus has offered refined, bold As of July 2013, KLM’s long-haul fleet dishes inspired by the standards of excellence achieved in Air France and KLM now offer à la carte menus in economy will progressively be equipped with his renowned Hong Kong restaurant. class in addition to the free meal service included in the price this new cabin, starting with the Boeing For the February 1, 2013 launch of the new signature of the ticket. These menus are the opportunity to embark on B747-400s where the number of seats dishes, Michelin-starred chef Michel Roth unveiled his a varied and international culinary excursion on board long- will be reduced from 42 to 35 to offer gourmet creations in an exclusive for Business customers haul flights. For example, from reservation of their flight to the more space to each customer. KLM on board an Air France flight to Montreal. Customers were night before departure, customers can order a “Tradition” thus continues to invest in responding able to taste veal simmered with verbena, glazed duckling menu specially designed for Air France by the famous to customer expectations by offering with rare peppercorns and citrus honey, and a duo of Lenôtre culinary institute at airfrance.fr or an Indonesian meal them an exceptional in-flight product shrimp and squid. at klm.com. based on ever-higher standards.

AFRP023_RA_2012-13_VA.indd 38-39 23/04/13 16:25 Solidarity Committed

Innovation Air France-KLM’s commitment to corporate at the service social responsibility is reflected in innovation and of sustainable the development of products development and services for customers. he Group invests and leverages its inno- In 2012, Air France-KLM T vative capabilities to serve its customers A real market was ranked leader of the more effectively and continue to factor sus- for biofuel-powered “Transport and Leisure” tainability into its products and services. This flights sector by the Dow Jones approach is based on listening to custo- Sustainability Index (DJSI), mers and including environmental and CSR As of 2013, KLM has principles in the supplier selection process a distinction which recognizes Daniel Wild offered companies the Head of Research, to encourage them to adopt sustainable opportunity to become the 19 most responsible 2012 companies globally, each RobecoSAM. development best practices throughout the a partner of the Biofuel

service chain. From the eco-design of pro- program and travel on ANNUAL REPORT 40 in their sector of activity. 41 ducts to the development of responsible flights running on biofuel. The most in-flight catering, everyone needs to be com- KLM has been operating ir France-KLM’s ambition is to set the responsible mitted to reducing the environmental impact scheduled flights using companies are A standard in Corporate Social Res­ of the on-board service while improving its biofuel between ponsibility and to maintain its leadership those which will be of sustainable development quality standards. Amsterdam and New York position within the airline industry. the most successful principles within the air During 2012, innovative initiatives included since March 8, 2013. The Group places corporate social res­ in the long run. transport industry by, for Air France and KLM organizing the collection This type of innovative ponsibility at the heart of its strategy and example, promoting the of old uniforms which were subsequently partnership is an airline mobilizes around four key priorities: redu- For each of production of sustainable recycled and transformed into insulation first with customers like cing its environmental footprint, offering the sustainable next-generation biofuels, fiber and baggage tags at specialized re­ Accenture, Nike and Philips customers innovative products and high development themes, we developing flight cycling facilities. Air France also recycles participating in the project standards of service, implementing a res- seek to identify the best optimization procedures 80% of the equipment used during in-flight launch. Through this ponsible human resources policy and practices and encourage and supporting the service with, for example, meal trays being initiative, KLM aims to contributing to the territories where it has companies to improve introduction of new reused to manufacture blankets. demonstrate that there is a presence. their performance. regulations aimed at a real market for biofuel- Welcoming eco-design on board This commitment is recognized by the Despite having to contend ensuring the development powered flights in air DJSI, the leading international index eva- with increasing economic of European aviation. / transportation and ensure Since May 2012, Air France has been luating companies on their sustainability pressure, Air France-KLM the long-term development distributing new noise-reducing head-sets performance. As the airline leader for the is recording exceptional of this technology. in the Economy cabin on long-haul flights, eighth year running, the Group also heads performances on the offering improved listening quality. the broader “Transport and Leisure” sector. criteria specific to the An environmental and CSR approach was The DJSI ranking is based on the eva- airline sector. adopted as of the design phase. luation of the RobecoSAM rating agency The company has played The headsets are reusable and are which appraises companies according to a key role in the adoption collected, cleaned and repackaged by their economic, environmental and CSR a company in the sheltered sector based performance. near Paris-Charles de Gaulle. This initiative has resulted in a better service for customers, the creation of 50 jobs for workers with disabilities and a 400-ton reduction in annual waste.

AFRP023_RA_2012-13_VA.indd 40-41 23/04/13 16:25 Committed Solidarity

The Air France 20 years Foundation Award

of action Key figures The Air France Foundation Award to support 861 projects supported by the Foundation. was created in 2009 630 concern vulnerable children and 231 sick to recognize exemplary children or disabled children. men and women working with sick, Since its creation in 1992, The Foundation provides numerous associations disabled and vulnerable the Air France Foundation has and non-governmental organizations with children and young supported projects to support financial, technical and human support. people. In 2012, on the sick, disabled and vulnerable For some projects, it acts in partnership occasion of its twenty children and young people year anniversary of in France and the other countries with other foundations but also with public institutions and international bodies. its commitment to where the airline is present. supporting children, Amongst other good causes, the Air France Foundation supports the Foundation Award the French “Vaincre l’Autisme” association which aims to improve was won by Nathaly the well-being of autistic children. Charbonnier Andriananteina and The many projects supported by the Foundation aim to Isabelle Boursier, improve access to a normal education for vulnerable children. The Friends the two founders For the Foundation, this also means helping the associations of the Foundation of the “Aïna, Enfance which promote access to culture. It has thus established network et Avenir” association in recognition of their an extensive network of in-field partners to be able to act in 2012 In 2004, the involvement all territories and thus educate, raise sensitivity and stimulate work helping vulnerable ANNUAL REPORT 42 43 of Air France employees children in Madagascar. children’s interest in culture and the arts. enabled the creation of a Friends of the Foundation network. This active network of 2,100 employees is key to Cécile Vic “KLM Takes Care”, a new platform launched communicating the Managing Director of the Air France Foundation. in 2012 to regroup the corporate social responsibility Foundation’s work to their and sustainability initiatives. colleagues throughout the company. Each of “Aïna, Enfance et Avenir” The Air France In June 2012, to increase their visibility, the members commits to supported by the Air France Foundation Foundation enables KLM brought together its many volunteering with partner children in difficult situations associations and during Corporate Social Responsibility to build new lives, gain This association works in Madagascar to events organized by the initiatives under a single banner. access to education and Foundation. This adoption offer street-children shelter, balanced nutrition, regain the prospect of The “KLM Takes Care” logo can thus of the numerous projects medical care and someone who is prepared a better future. Over time be found on the menus distributed supported has become to listen. it has adapted to changes on board aircraft to clearly show that a real driver of social For International Women’s Day on March 8, in the humanitarian sector cohesion within Air France. KLM serves sustainable products, 2013, at the initiative of Valérie Loëvenbruck, as well as to its needs and and on the electrically-powered ramp a flight captain and member of the Friends of challenges. The Foundation vehicles. To take this further, KLM has become increasingly the Foundation, an all-women crew operated professional to enable us has launched an interactive platform, a flight to Madagascar. On arrival, the plan to select the projects www.klmtakescare.com, regrouping was to meet with representatives of the presented by other partner all the news regarding the CSR “Aïna, Enfance et Avenir”, and “SOS villages associations more effectively. activities and enabling internet users d’enfants” associations. Every year, France to message and engage in an online represents some 25% The Foundation finances these two associations of the overall Foundation dialogue about sustainability with KLM. and has donated educational toys and school budget devoted to financing supplies to the children. projects. /

AFRP023_RA_2012-13_VA.indd 42-43 23/04/13 16:25 AFRP023_RA_2012-13_VA.indd 44-45

Governance 23/04/13 16:25 GOVERNANCE THE group

Executive

Committee

As of March 31, 2013

Air F rance-KLM resident, E xecutive V ice P resident, F inance, Air F rance-KLM Pieter Bootsma, Lebel, Bertrand to the Group Secretary E xecutive Committee of Corporate Strategy, in charge Philippe Calavia, Calavia, Philippe E xecutive V ice P resident, Marketing, Revenue Management and N etwork, Air F rance-KLM Jean-Christophe Lalanne, Lalanne, Jean-Christophe E xecutive V ice P resident, I nformation Systems, Boireau, Christian Sales, F rench Air F rance-KLM Management Development, Air F rance-KLM Air F rance-KLM E xecutive V ice P resident, E xecutive V ice P resident, Franck Terner, Terner, Franck E xecutive V ice P resident, Strategy and Commercial E ngineering & Maintenance, Air F rance-KLM Kooijman, Wim 2012 ANNUAL REPORT 46 47

cer fi cer

cer fi cer cer fi cer

fi cer of Air F rance-KLM fi cer of KLM fi cer of Air F rance fi cer of Air F rance-KLM Frédéric Gagey, Gagey, Frédéric resident, E xecutive V ice P resident, of Air F rance Peter Hartman, Peter Hartman, F leet Management and Air F rance-KLM P urchasing, Pieter Elbers, xecutive Deputy Chief E xecutive O f and Chief E xecutive P resident O f and Chief F inancial O f and Managing Director Leo van Wijk, Wijk, Leo van Eurlings, Camiel E xecutive V ice P resident, and Air F rance-KLM Cargo of KLM Managing Director Chief O perating f of KLM Alexandre de Juniac, de Juniac, Alexandre Chairman and Chief E xecutive O f Spinetta, Jean-Cyril Chairman and Chief E xecutive O f resident, E xecutive V ice P resident, I nternational Sales and Alain Bassil, Alain Bassil, Chief O perating f of Air F rance Erik Varwijk, of KLM Managing Director Alexandre, Patrick the N etherlands, Air F rance-KLM

AFRP023_RA_2012-13_VA.indd 46-47 23/04/13 16:26 AFRP023_RA_2012-13_VA.indd 48-49 48 the financialcommunity. conference callsandinformationmeetingsdedicatedto with financialanalystsandinstitutional investors,andorganizes The InvestorRelationsteammaintains anon-goingdialogue conferences onairtransportation. They alsoparticipateinothermeetings andinternational institutional investorsinEurope andtheUnitedStates. senior executivesparticipateinroad-shows tomeetwith On theoccasionofhalf-yearandannualresults, theGroup’s Institutional investor Accountant Fabrice Lelong Retired Gilbert LeDain Consultant Michel Guerillot Engineer Jean-Louis Dervin Self-employed professional Laurent Dap Mason René Chateauneuf members: At December31,2012,thisCommitteecomprisedtwelve The IndivdualShareholders’Committee 93290 Tremblay-en-France. Ouest/Immeuble Altaï,ServiceAFKL-FI,10-14ruedeRome, address: AirFrance-KLM-RelationsActionnaires, Roissypôle [email protected] ortothefollowingmailing of shareholding proving thatyouholdatleast50shares to: of theAirFrance-KLMShareholders’ Clubbysendingacertificate If youholdmore than50shares , youcanbecomeamember the-scenes insightintotheRoissy-CharlesdeGaullehub. visits. In2012,forexample,theywere abletogainabehind- presentations intheFrench regions andcanparticipateinsite in bearer orregistered form.Membersare invitedtocompany to anyAirFrance-KLMshareholder owningatleast50shares exchange ideas.Some6,000membersstrong, thisClubisopen information, aswellmultipleopportunitiestomeetand gives accesstoallthecompany’s generalandfinancial The Shareholders’Club an activecontribution. more andtomake involvedinitscorporategovernance a determinedeffort toencourageshareholders tobecome In thepastfewyears,AirFrance-KLMgroup hasmade Listening to shareholders Retired Anne Somborn Designer Christian Samson Retired Huguette Rolet Civil servant Moustié Arnaud Company director Philippe Millet Lawyer Michel Martin

and encouragethem shareholders particularly the needsofindividual Our aimistocommunicate management bodies. shareholders totheGroup’s represent alltheindividual backgrounds who different from very comprising twelvemembers to whichIcurrentlybelong, Shareholders’ Committee KLM alsohasanIndividual shareholders. AirFrance- questions fromindividual responsible foranswering is aspecialdepartment quarterly newsletter, there interactive contentanda offering comprehensive, redoubling itsefforts shareholders channels for communica Dedica to participateinits

with shareholders dedicated website In additiontoa to communicate ted The Group is

tion

strategy.

Shareholders’ Committee.

Member oftheIndividual Arnaud MOUSTI É An eventnottobemissed!/ management anddirectors. to theGroup’s senior to meetandputquestions themselves directlyand opportunity toexpress shareholders havethe democracy duringwhich “the” keyeventincorporate participate. Thismeetingis Meeting inwhichweall General Shareholders’ but alsoattheAnnual meetings oftheCommittee and requestsduring their questions,suggestions responsible forpassingon communication. We are in termsoffinancial

any questionsandrequestsforcopiesofpublications. any withindividualshareholdershandles torelations the departmentdedicated documentation, agenda, emailalerts, [email protected]: www.airfranceklm-finance.com andwww.airfranceklm-finance.mobi, online Online services with theGroup. constructive dialogue to maintainaregular, some 6,000members Shareholders’ Club, The Contact: http://www.airfranceklm-finance.com

are heard. thevoicesofindividualshareholdersensuring that The Individual Shareholders’ Committee,

the Group’s quarterlynewsletter. Action’Air of allshareholders. the majorannualassembly Shareholders’ Meeting, The AnnualGeneral Bordeaux andNice. In 2012, meetingswereheldinLille, and issuessurroundingthesector. about theGroup’s strategy, results are anopportunitytolearnmore Regional meetings

Boeing B777FlightCaptain Representing theFlightDeckCrew shareholders, Bernard Pédamon and Ground Staff shareholders, FinanceExecutive Representing theCabinCrew Christian Magne Ministry fortheEconomyandFinance Agency forStateShareholdings, Deputy Director, Transport andAudiovisual, Solenne Lepage Chairman oftheHeinekenSupervisoryBoard J.A.vanLede Cornelis Chairman andChiefExecutiveOf Alexandre deJuniac Leiden University(Netherlands) Kooijmanschair forPeace,JusticeandSecurity, Jaap deHoopScheffer President andChiefExecutiveOf Peter Hartman Partner andExecutiveChairmanofMontefiore Investment Jean-Marc Espalioux Honorary ChairmanofSanofi-Aventis Jean-François Dehecq Honorary CivilAdministrator Jean-Dominique Comolli Sustainable DevelopmentandEnergy Director ofMaritimeAffairs attheMinistryofEcology, Régine Brehier Chief ExecutiveOf Patricia Barbizet Chair andChiefExecutiveOf Maryse Aulagnon and DeputyChiefExecutiveOf oftheBoardVice-Chairman ofDirectors Leo vanWijk Chairman andChiefExecutiveOf Jean-Cyril Spinetta appointed byministerialorder. shareholders) andthree representatives oftheFrench State Meeting (includingtworepresentatives oftheemployee 15 members,ofwhom12were appointedbytheShareholders’ At March 31,2013,theBoard ofDirectors comprised of thecompany’s activityandensures theirimplementation. The Board ofDirectors determinestheorientations at March31,2013 The mebersoftheBoardDirctor GOVERNANCE ficer andDirector ofArtémis ficer ofAf ficer ofAirFrance-KLM ficer ofKLM ficer ofAirFrance ficer ofAirFrance-KLM fine

23/04/13 16:26 ANNUAL REPORT 2012 49 FINANCE Summary Consolidated Financial Statements

Consolidated balance sheet

Assets Liabilities and equity In € million 31/12/2012 31/12/2011 In € million 31/12/2012 31/12/2011

Goodwill 252 426 Issued capital 300 300 Intangible assets 842 774 Additional paid-in capital 2,971 2,971 Flight equipment 10,048 10,689 Treasury shares (85) (89) Other property, plant and equipment 1,932 2,055 Reserves and retained earnings 1,738 2,858 Investments in equity associates 383 422 EQUITY Attributable to equity holders of Air France-KLM 4,924 6,040 Pension assets 3,470 3,217 Non-controlling interests 56 54 Other financial assets 1,665 2,015 Total equity 4,980 6,094

Deferred tax assets 1,151 1,143 Provisions and retirement benefits 2,287 2,061 2012

Other non-current assets 152 168 Long-term debt 9,565 9,228 ANNUAL REPORT 50 51 TOTAL Non-current assets 19,895 20,909 Deferred tax liabilities 431 466 Assets held for sale 7 10 Other non-current liabilities 384 321 Other short-term financial assets 933 751 Total non-current liabilities 12,667 12,076 Inventories 521 585 Provisions 555 156 Trade accounts receivables 1,859 1,774 Current portion of long-term debt 1,434 1,174 Income tax receivables 11 10 Trade accounts payables 2,219 2,599 Other current assets 828 995 Deferred revenue on ticket sales 2,115 1,885 Cash and cash equivalents 3,420 2,283 Frequent flyer programs 770 784 Total current assets 7,579 6,408 Current tax liabilities 3 6 Other current liabilities 2,474 2,386 Total assets 27,474 27,317 Bank overdrafts 257 157 Total current liabilities 9,827 9,147 Total liabilities 22,494 21,223

Total liabilities and equity 27,474 27,317

AFRP023_RA_2012-13_VA.indd 50-51 23/04/13 16:26 FINANCE

Consolidated income statement Consolidated statement of cash flows

In € million, period from January 1 to December 31 2012 2011 In € million, period from January 1 to December 31 2012 2011

Sales 25,633 24,363 Net income for the period – Equity holders of Air France-KLM (1,192) (809) Other revenues 16 39 Non-controlling interests 5 4 External expenses (16,432) (15,517) Amortization, depreciation and operating provisions 1,748 1,697 Aircraft fuel (7,328) (6,438) Financial provisions (15) (2) Chartering costs (556) (571) Gain on disposals of tangible and intangible assets (24) (6) Aircraft operating lease costs (957) (848) Loss / (gain) on disposals of subsidiaries and associates - (2) Landing fees and en route charges (1,862) (1,818) Gain on WAM (ex Amadeus) operation (97) - Catering (595) (577) Derivatives – non-monetary result (86) (8) Handling charges and other operating costs (1,389) (1,342) Unrealized foreign exchange gains and losses, net (94) 95 Aircraft maintenance costs (1,151) (1,172) Share of (profits) losses of associates 66 19 Commercial and distribution costs (876) (847) Deferred taxes (14) (266) Other external expenses (1,718) (1,904) Other non-monetary items 505 (369) Salaries and related costs (7,660) (7,460) Subtotal 802 353 Taxes other than income taxes (184) (191) (Increase) / decrease in inventories 65 15 Amortization and depreciation (1,591) (1,642) (Increase) / decrease in trade receivables (140) (49) Provisions (157) (55) Increase / (decrease) in trade payables (307) 690 Other income and expenses 75 110 Change in other receivables and payables 431 (75) INCOME FROM CURRENT OPERATIONS (300) (353) Net cash flow from operating activities 851 934 2012 Sales of aircraft equipment 7 16 Acquisition of subsidiaries, of shares in non-controlled entities (39) (30) ANNUAL REPORT 52 Sales of subsidiaries 97 1 Purchase of property, plant and equipment and intangible assets (1,472) (2,433) 53 Other non-current income and expenses (684) (144) Proceeds on Amadeus transaction 466 - INCOME FROM OPERATING ACTIVITIES (880) (480) Proceeds on disposal of subsidiaries and investments in associates 1 - Net cost of financial debt (353) (371) Proceeds on disposal of property, plant and equipment and intangible assets 745 1,168 Income from cash and cash equivalents 83 92 Dividends received 24 28 Cost of financial debt (436) (463) Decrease (increase) in investments, net between 3 months and 1 year 30 (562) Foreign exchange gains (losses), net 62 (116) Net cash flow used in investing activities (245) (1,829) Change in fair value of financial assets and liabilities 62 (66) Increase in capital - 6 Other financial income and expenses 15 2 Purchase of non-controlling interests, of owned shares - (21) INCOME BEFORE TAX (1,094) (1,031) Disposal of subsidiaries without loss of control, of owned shares 7 2 Income taxes (27) 245 Issuance of debt 1,780 1,414 NET INCOME OF CONSOLIDATED COMPANIES (1,121) (786) Repayment on debt (847) (990) Share of profits (losses) of associates (66) (19) Payment of debt resulting from finance lease liabilities (514) (838) INCOME FROM CONTINUING OPERATIONS (1,187) (805) New loans (90) (145) Net income from discontinued operations - - Repayment on loans 100 265 NET INCOME FOR THE PERIOD (1,187) (805) Dividends paid (2) (4) Non-controlling interests (5) (4) Net cash flow from financing activities 434 (311) Effect of exchange rate on cash and cash equivalents NET INCOME FOR THE PERIOD - GROUP (1,192) (809) and bank overdrafts (3) (19) Change in cash and cash equivalents and bank overdrafts 1,037 (1,225)

Cash and cash equivalents and bank overdrafts at beginning of period 2,126 3,351 Cash and cash equivalents and bank overdrafts at end of period 3,163 2,126

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