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1. Company Snapshot

1.a. Company Description

Air France-KLM SA, together with its subsidiaries, provides passenger and cargo transportation services on scheduled flights in Metropolitan France, Benelux, rest of Europe, and internationally.The company operates through Network, Maintenance, Transavia, and Other segments.It also offers airframe and engine maintenance services; component support services comprising electronic, mechanical, pneumatic, hydraulic, etc.; and other services, as well as operates point-to-point flights to/from the Netherlands and France.


As of December 31, 2021, it operated a fleet of 332 aircraft.The company was founded in 1919 and is headquartered in Paris, France.

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1.b. Last Insights on AF

Air France-KLM's recent performance was driven by a record-breaking Q4 2024, with a 6% revenue increase and a record operating result. The company achieved this through fleet modernization and premium revenue growth. Additionally, the airline saw strong demand and a brighter outlook for 2025, with passenger numbers and lower fuel costs contributing to a profit beat. The company's budget carrier, Transavia, also reported strong results. Furthermore, Air France-KLM is expecting a boost from American TV shows, such as 'Emily in Paris', which have increased the appeal of Paris, and hopes for renewed spending in the city. The airline's strong finish to the year, after a year shaped by challenges, has contributed to its positive performance.

1.c. Company Highlights

2. Air France-KLM's Strong 2025 Execution Drives Improved Financials

Air France-KLM reported robust financial performance in 2025, with revenues reaching an all-time high of EUR 33 billion, up 4.9% year-over-year. The operating margin improved to 6.1%, driven by stronger revenue generation and cost control. Earnings per share (EPS) came in at EUR 1.99, significantly beating estimates of EUR 0.3262. The company's net result was EUR 1.8 billion, with EUR 700 million related to unrealized foreign exchange results. The recurring adjusted operating free cash flow was EUR 1 billion, up EUR 800 million from 2024.

Publication Date: Mar -08

📋 Highlights
  • Operating Margin Growth: Achieved 6.1% in 2025, up from previous years, driven by revenue growth to EUR 33 billion (5% YoY) and cost control, with operating income exceeding EUR 2 billion.
  • Premiumization Strategy Success: Top-tier cabins (La Premiere, Business) contributed 28.1% of total revenue in 2025, up from 26.9%, alongside ancillary revenue rising 23% to EUR 2.1 billion.
  • Balance Sheet Strength: Net debt/EBITDA stable at 1.7x, equity increased to EUR 2.4 billion, and cash reserves at EUR 9.4 billion, reflecting improved financial resilience post-COVID.
  • Sustainability Milestones: 35% of fleet now new-generation aircraft, SAF blend reached 2.9% of fuel consumption, and CDP Climate rating upgraded to A, with a gold EcoVadis medal.
  • Recurring Free Cash Flow: Generated EUR 1 billion in recurring adjusted operating free cash flow in 2025, up EUR 800 million, supported by network and cargo performance despite Transavia challenges.

Revenue Growth and Margin Expansion

The company's revenue growth was driven by its premiumization strategy, with top-tier cabins La Premiere and Business accounting for 28.1% of total revenue, up from 26.9% the previous year. Ancillary revenue reached EUR 2.1 billion, up 23% year-on-year. The company's operating income broke the EUR 2 billion ceiling, with a 6.1% margin. The strong revenue growth and margin expansion were key drivers of the company's improved financial performance.

Valuation Metrics

Based on the current stock price, the Price-to-Earnings (P/E) ratio is 1.69, indicating that the stock may be undervalued. The EV/EBITDA ratio is 3.5, suggesting that the company's enterprise value is reasonable relative to its earnings before interest, taxes, depreciation, and amortization. The Free Cash Flow Yield is 16.04%, indicating a strong ability to generate cash.

Operational Highlights

The company carried 103 million passengers in 2025, up 5% year-over-year. Air France-KLM made significant strides in sustainability, with new-generation aircraft representing 35% of its fleet and SAF blend reaching approximately 2.9% of total fuel consumption. The company received a gold medal from EcoVadis and improved its CDP Climate rating from B to A. The loyalty program, Flying Blue, celebrated its 20th anniversary and surpassed 30 million members worldwide.

Guidance and Outlook

The company guides for a unit cost of 0.0% to 2% in 2026, with a fuel bill of EUR 6.9 billion in both 2025 and 2026. Capacity growth is reduced to 3-5%, with long-haul growth at 4% and short and medium haul stable. The company aims for an EBIT margin above 8% by 2028, with a significant positive adjusted operating free cash flow. Analysts estimate next year's revenue growth at 5.5%, indicating a positive outlook for the company's future performance.

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.57%)

6. Segments

Network

Expected Growth: 2.5%

Air France-KLM SA's 2.5% network growth is driven by increasing demand for air travel, particularly in the transatlantic market. The airline's strategic hub expansion, improved fleet efficiency, and enhanced customer experience also contribute to growth. Additionally, the company's focus on digitalization, loyalty programs, and partnerships with other airlines and travel companies support revenue growth.

Transavia

Expected Growth: 4.0%

Transavia's 4.0% growth driven by increasing demand for low-cost travel, expansion into new routes and destinations, and successful implementation of digital transformation initiatives. Additionally, the airline's focus on improving operational efficiency, reducing costs, and enhancing customer experience have contributed to its growth.

Maintenance

Expected Growth: 1.5%

Air France-KLM's 1.5% maintenance growth driven by increasing aircraft deliveries, rising demand for air travel, and cost savings from digitalization and process optimization. Additionally, the group's focus on premium services and growing MRO capabilities contribute to growth. Furthermore, the airline's efforts to reduce maintenance costs through predictive analytics and partnerships with OEMs also support this growth rate.

Other

Expected Growth: 2.0%

Air France-KLM's 'Other' segment, with 2.0% growth, is driven by increased demand for maintenance services, growth in cargo transportation, and expansion of its travel retail business. Additionally, the company's focus on digital transformation and cost savings initiatives have contributed to the segment's growth.

7. Detailed Products

Passenger Air Transport

Air France-KLM SA provides passenger air transport services to individuals and groups, offering a range of classes and amenities.

Cargo Transport

Air France-KLM SA offers cargo transport services for goods and packages, providing a range of specialized solutions for perishable, oversized, and high-value items.

Maintenance, Repair, and Overhaul (MRO) Services

Air France-KLM SA provides MRO services for aircraft, engines, and components, offering maintenance, repair, and overhaul solutions to airlines and other customers.

Engineering and Design Services

Air France-KLM SA offers engineering and design services for aircraft interiors, cabins, and systems, providing customized solutions for airlines and other customers.

Catering Services

Air France-KLM SA provides catering services, offering a range of meal options and beverages for airlines and other customers.

Travel Agency Services

Air France-KLM SA operates a travel agency, offering a range of travel services, including ticketing, hotel bookings, and package tours.

8. Air France-KLM SA's Porter Forces

Forces Ranking

Threat Of Substitutes

Air France-KLM SA faces moderate threat from substitutes, as passengers have limited alternatives for long-haul flights, but can opt for trains or buses for shorter distances.

Bargaining Power Of Customers

Air France-KLM SA has a high bargaining power of customers, as passengers have many airline options and can easily switch to competitors.

Bargaining Power Of Suppliers

Air France-KLM SA has a low bargaining power of suppliers, as the airline has multiple suppliers for fuel, aircraft, and other essential services.

Threat Of New Entrants

Air France-KLM SA faces a low threat of new entrants, as the airline industry has high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

Air France-KLM SA operates in a highly competitive industry, with intense rivalry among established airlines, leading to high marketing and operational costs.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 139.03%
Debt Cost 5.43%
Equity Weight -39.03%
Equity Cost 13.01%
WACC 2.47%
Leverage -356.22%

11. Quality Control: Air France-KLM SA passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Air France-KLM

A-Score: 4.1/10

Value: 9.8

Growth: 2.8

Quality: 3.6

Yield: 0.0

Momentum: 7.0

Volatility: 1.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

9.57$

Current Price

9.57$

Potential

-0.00%

Expected Cash-Flows