Air France-KLM SA (OTCPK:AFRAF) Q2 2022 Earnings Conference Call July 29, 2022 2:30 AM ET
Company Participants
Anne Rigail – Deputy CEO & CEO of Air France
Benjamin M. Smith – CEO
Marjan Rintel – CEO, KLM
Steven Zaat – CFO
Conference Call Participants
Jarrod Castle – UBS
Ruxandra Haradau-Doser – Kepler Cheuvreux
James Hollins – BNP Paribas Exane
Sathish Sivakumar – Citigroup
Andrew Lobbenberg – HSBC
Sumit Mehrotra – Societe Generale Cross
Johannes Braun – Stifel, Nicolaus & Company
Operator
Good morning and welcome to the Air France-KLM Analyst Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ben Smith, CEO; and Steven Zaat, CFO. Please go ahead.
Benjamin M. Smith
Good morning, everyone and thank you for being with us today for this presentation of the Air France-KLM’s results for the second quarter of 2022. I’m here with our CFO, Steven Zaat; and with two of our airline CEOs, Marjan Rintel of KLM; and Anne Rigail of Air France. They will be pleased to take your questions at the end of this presentation. As usual, I will start by presenting the highlights of the quarter, then I will give the floor to Steven for a detailed presentation of our results and the outlook for the quarter. Before concluding the presentation, I’ll be opening up for a general Q&A. First of all, I’d like to start by thanking all of our colleagues across all of our airlines and business units for the incredible hard work and dedication they continue to display, especially during the summer season marked this year by severe operational disruptions affecting our entire industry.
I’d like to briefly highlight the fast-changing environment. Turn to Page 3 please, in which our industry at large operates. As expected, the travel demand has accelerated worldwide with COVID and regulatory restrictions easing in most regions. The IATA figures forecast shown here, illustrate that this positive demand is picking up strongly with full year capacity and traffic projected to be much higher than it was foreseen a few months ago. However, this booming demand took many by surprise. We have seen a critical staff shortage in airports and major disruptions affecting our ground service worldwide. Some of these operational challenges have been triggered by a lack of preparation and of anticipation by some industry players. But the reality is that some of these disruptions will continue to surface for many years with labor shortages, hub congestion, and ongoing supply chain issues. We are adapting to a more complex environment, both socially and geopolitically. To address these challenges, we will move fast in transforming our business, working collectively as a team.
Moving on to Page 4. At Air France-KLM, we had anticipated the steep demand growth and the Group was prepared. We have, however, been facing operational difficulties across our global network in an industry-wide context of staff shortages, severe disturbances and local strikes, affecting some key industry players and airport service providers. The labor environment is tense globally with fewer staff, more constraints, growing inflation, and challenging economic conditions for all. It is a worldwide movement we cannot ignore. More than ever, we need to maintain acute and genuine dialogue with all employees. Our colleagues across all our airlines and business units have done incredible work to deliver the best service to our customers, and I would like to thank them again for their outstanding dedication.
In such turbulent times, it is indeed critical that we continue to focus on preserving the trust of our customers. This has been our top priority. With Schiphol airport requesting a reduction of departure slots in early July, KLM was forced to operate in significantly deteriorated conditions. The work on mitigating these disruptions like, for instance, prioritizing delayed customers over on-time performance or by facilitating rebooking to manage these capacity restrictions. Air France took the same proactive approach, with constant attention to customers’ needs and overall, the company was able to maintain a steady operation, operating 99.4% of scheduled flights in June and July. For Q2, these disruptions led to an additional €70 million in costs, essentially in compensation for our customers, to limit the negative impact on the travel as much as possible.
Turning now to Page 5. Despite these operational disruptions, Air France-KLM delivered a strong performance and solid results during Q2. The Group posted a positive operating result of almost €400 million, a level close to the second quarter of 2019 before the pandemic. This robust performance is the result of a strong rebound in travel demand, which our airlines were able to anticipate, prepare for, and manage thanks to the ramp-up of their capacity throughout the quarter. We carried almost three times more passengers than last year during the same period. We are not back to 2019 levels yet, but we are getting closer. This has translated into strong revenue growth, which is also approaching its 2019 level for the same quarter.
Our adjusted operating free cash flow amounted to €1.5 billion, thanks to a dynamic EBITDA generation of €931 million and strong bookings for summer with more than €1 billion of advanced ticket sales during Q2. Our internal transformation continues, even though the bulk of the workforce reductions are now complete. Since the second quarter of 2019, almost 12,000 employees have left the Group, representing 14% of the Group’s total workforce. More broadly, we are committed to continuing our transformation and operational efficiency programs, the structural benefits of which will accelerate in the coming months.
We made great progress during the quarter to strengthen our balance sheet and continue to restore our equity. The success of our €2.3 billion of rights this year is a good testimony of this. This has enabled us to repay a significant part of the French State’s Aid and to strengthen our equity while consolidating our shareholder base with the arrival of CMA CGM as a new reference shareholder and an exclusive strategic partner for our cargo activities. The deal was announced a few weeks ago with Apollo Global Management for the €500 million injection into an Air France affiliate owning spare engines, also demonstrates our ability to attract leading investors and value-creating capital projects that support our financial trajectory.
All in all, repairing our balance sheet and paying back the State Aid are on track. While KLM fully repaid the state-backed RCF and the direct Dutch state loan, the Group’s ambition is now to repay a French State Aid as soon as possible in order to be relieved from the operational and strategic constraints imposed by the European Commission’s temporary framework. Our cash position is solid with €11.9 billion cash at hand, and we managed to further reduce our net debt, which has decreased by more than €2 billion over the past six months.
Moving on now to Page 6, I also want to give you an update on our long-haul network, which continues to gradually recover. In terms of load factor for our premium cabins, i.e. La Premiere and Business Class, I’m very pleased to say that we closed the gap with 2019 levels, even exceeding them in the second quarter. Our point-of-sale United States business is particularly strong, with its share of business and first-class cabin sales, up five points compared to what it was in the second quarter of 2019. The evolution of the load factor for the economy and premium economy cabins is also very satisfactory since it continues to progress rapidly, and the gap for 2019 will soon be closed, while corporate travel revenue and traffic continued to grow gradually throughout the quarter with a positive yield dynamic. In addition, our corporate traffic is continuing its recovery, with revenues beyond 70% of what they were in Q2 2019.
Moving on now to Page 7, taking a look at the performance of our airlines and business units. Our passenger business is driven by a mix of increasing capacity and strong momentum of yields. Air France and KLM capacity is at Index 82 of 2019, with yield 15% higher than in 2019. Both our full-service airlines have continued their fleet renewal programs, a driver of economic efficiency, but also and above all, a spearhead of our action plan to reduce our carbon emissions. Transavia experienced strong capacity growth this quarter, well above its 2019 level. Transavia France, in particular, has accelerated its growth very strongly, with capacity at an index of 140, putting pressure on the cost structure. The situation is different for Transavia Holland, which is back to its 2019 operating margin.
Cargo continues to do well, with growing capacity throughout the quarter. The efforts made on customer satisfaction have proved that the Net Promoter Score has increased by 10 points, and the environmental roadmap was rewarded with a trophy at the Air Cargo week event. The teams are now fully mobilized on the implementation of the partnership signed with CMA-CGM. This strategic commercial partnership is expected to generate significant revenue synergies, including the joint design of the full freighter networks and enhanced products and services mix opportunities.
Finally, maintenance continues to show strong momentum, with a growing number of shop visits and new MRO contracts with renowned airlines, such as Aeromexico and Air Canada. The confirmation of the selection of CFMI LEAP engines to power our fleet of Airbus A320neo and A321neo aircraft, secures Air France-KLM’s position as a world-leading engine MRO provider. After the summary of our Q2 performance, I’d like to now pass over the floor to Steven Zaat, our CFO.
Steven Zaat
This is Steven. Good morning, everybody. [Foreign Language]. I think we are living in very exceptional times. If you look at the operating margin in 2019, you see that we are already — sorry, if you look at the operating margin in 2022, you see that we are already at the level of 2019 and would expect that with 15% less capacity and China is still closed, and oil price at $110 per barrel. And last but not least, all the operational problems we faced as an airline. So I think it is an exceptional result and I think it’s good that I walk you through to it, it’s especially coming from a very strong revenue development.
If you look at the revenues on Page 9, then you see that we have an increase of almost €4 billion in terms of revenues, and we’ve come very close to the 2019 levels, despite the fact that we have 15% less capacity. Now if you compare it year-over-year, you see there’s €2.1 billion actually coming from just capacity increase, but there’s €1.8 billion coming from additional revenues, from the unit revenues. These were very strong. We have seen load factors which actually were very high, close to the 2019 levels. I come back on it. And actually, we are able to increase our capacity and to increase at the same time, also our load factors. And then we had also a positive windfall of the currency of €6 million. So a strong revenue performance, which actually outpaced our own expectations and also outpaced, I think, the expectations from the financial market.
Then we have the headwind of the aircraft fuel, €1.3 billion more than we had last year. We were for 72% hedged, so that brought at least a positive impact. So if you dig into it, you see that €500 million is related to capacity, €1.2 billion is related to the price increase, and we had €400 million coming back actually from hedges. And what you see in this aircraft fuel, is actually that the jet fuel is going up much, much, much faster and much higher than actually the oil price. So we still have the difference in the craft [ph], which actually has a negative impact on our result.
Then going to the salary costs; the salary costs were going up at €600 million. This is not coming from any FTE increase. Actually, we are at the same level of numbers of salaries. We have 1,700 FTEs less at the Air France side and 1,700 FTEs more compared to 2021 on the KLM side. Actually, KLM has more flexible labor, so they need to ramp up also the flexible staff to support our capacity. But the difference actually comes on the fact that we have much less furlough in place than we had last year. The €433 million, KLM doesn’t have any more the NOW scheme, and that’s only €45 million at the Air France side. And then all the other operating expenses, an increase coming from customer compensation already mentioned by Ben, for €70 million, we have higher costs coming actually from the airports, Schiphol increased their tariffs with 9%. But all in all, these other operating expenses, they are quite in line with the increase of capacity.
So if you look at it, we have €386 million in terms of reserves, €37 million less than what we had in 2019 and very close to the 6% margin, which we had in 2019. And maybe the best news is even that our net income is now positive. That’s the first time since the fourth quarter in 2019. So the first time, since actually COVID started there are two incidentals, and one is that we have a negative headwind from the currency. So we had to reevaluate our balance sheet, that costed €200 million. And on the other side, KLM, we recognize now the tax assets were actually from the losses, which were occurred during COVID for an amount of €300 million. So there is a net positive impact, let’s say, below COI of €100 million. So that still drives — that we have a very strong net income in this quarter.
If we then go to Page 10, there you see a little bit, let’s say, how it evolves over our businesses. Network doing very strong. First, the increased capacity with 69%. We have a unit revenue increase of almost 100%. That is not so much coming from the yield. But in this unit of revenue, there’s a lot of mix impact. We grew much more our long haul than our medium haul and that has, let’s say, a negative impact on the unit revenue, if you — sorry, on the yields. If you look at the yield per region, and which I will do later, then you will see that actually everywhere, almost our yields are much more up compared to last year. The main driver for this unit revenue is actually the load factor. We have a load factor of 44%, and we were able to reach now a load factor of 85%, so very close to the 2019 levels, and if you increase capacity and increase your load factor and you keep, let’s say, the same yields or even yields are up, then you see this explosion in terms of revenues. So one — so the drive for a big chunk, let’s say, the increase of our network result.
If you look at the cargo side, it’s actually a little bit a different story. So we increased further capacity. This is all capacity coming actually from the valley. Then you see a negative unit revenue, this unit revenue is not at all driven by pricing. So the yield is even up with 22%, but the load factor is down from 80% to 50%, and that has all to do — there’s still a lot of demand. But of course, we put planes now, where we can drive actually our passenger business, and there is not always a favorable cargo for it. So the load factor went down from 80% to 50%, more or less what we are used, but we still see a very strong amount on the cargo, if we can increase the yield with 22% compared to 2021. So these two dynamics together brings a €1 billion improvement of operating results and a 6% margin for our network, which is even higher than what we had in 2019.
Then on Transavia. Transavia is still not profitable, but we’re getting close to a breakeven results. We grew significantly, especially the Transavia France activity, so it brought in a capacity increase of more than 200%. We are still able to have a positive unit revenues. We increased the load factor here from 60% to 85%, and yields are up also 6%, which is remarkable, especially given, let’s say, the capacity increase, which we all have here. And then last but not least, if you go to the maintenance side, you see actually that the maintenance is back on the profitability of 2019. So 6% margin, which is a very good news. First, we have €100 million more revenues on our maintenance business, of which €20 million is coming actually from the currency from a stronger dollar. But we also see that the customers are flying now more of their planes, which brings €50 million on our components business and €23 million in our engine business, because prime time is running up — they are running out of prime time, so they will need to perform short visits. So maintenance is getting back also, let’s say, to the profitable levels, which we have seen in the past.
If we then go to Page 11, where we see that both airlines actually are able to have a positive operating margin. Both airlines have an operating margin which is very close to 2019. Air France is at 3% –actually, it’s rounding 3.3% where they were in 2019 at 3.6%, and KLM is at 9% where they were at 9.4% in — sorry, 9%, which is also rounding of 9.4%, which is exactly the same as in 2019. There were two developments; Air France grew the capacity with more than 100%. We knew that Air France was lacking in terms of capacity development. KLM increased by 48% and as you look at it now, you see actually that Air France is getting closer to the 2019 levels than KLM, mainly driven by the operational problems, which we have seen at Schiphol, okay, and could not grow at the levels as they would have wanted.
So Air France is 13% on the capacity of 2019, where KLM is 19% growth, very strong in terms of revenues. You see that Air France is at 147%, mainly driven by capacity. KLM grew by 130%, with only a capacity increase, and that is mainly coming from the load factor increase. KLM increased their load factor from 37% to 86% this year. So a very strong development also there in number of passengers. So I think it’s good to see that both airlines are actually now at the 2019 levels of the profitability, which is very promising also for the quarters to come.
Then if we go to Page 12, that’s actually a little bit — that is actually the pictures of the story, which I was telling when explaining the results. So let’s first go to the total network, excluding Transavia, you see that we are now at a load factor of 88% compared to 90% in 2019. And we grew the capacity at the same time, it was at 76% in January, where we’re now at 83%. Long haul, very, very steep increase in terms of load factor at 88%, now where we have a capacity in of 83%. So we are getting closer to the 2019 numbers, and the long haul is extremely performing strong, because we have a high load factor, we have a good yielding environment, I will come back on it on the next page. And at the same time, we have the strong contribution from our cargo business.
Then if we go to the short and the medium haul, there you also see that we reached actually the load factors of 2019, close to the 90%, and we have a capacity in of 83%. And we could have grown further, if you would not have, let’s say, the operational problems at the airport. And then we see Transavia, Transavia is already at 100% — above 100%, a steep increase of capacity to 109%, and also the load factors getting closer to the ones in 2019, but it’s a little bit more challenging, if you are growing your business like that. But still, it’s good to get to these load factors of around 90% in our business, because then we are turning into profitable zone.
Let’s go to Page 13, if we look at let’s say the world. Let’s go first to the beautiful part of the world, which is on the West side. So on North America, we are already at a higher capacity than in 2019. We are up with 2% and we have a very strong yield dynamic, plus 12% especially coming from the sectors and the North American market is very strong. And of course, we have also the dollar advantage, because we are pricing there in dollars, which was really strong in the second quarter of 2022. Latin America, you see a yield of 24%. That is mainly driven by the fact that still on the supply, there’s not all, let’s say, our competitors and they are still struggling coming out of the Chapter 11. So there is imbalance between supply and demand, motors [ph] that we could steer prices up to 24%. Then the Caribbean, also a very good performance, 8.5% increase of capacity compared to 2019, and at the same time we are able to keep more or less the same load factor and have an increase of yield of 6%. And Africa, as always and as always, during the crisis, still doing strong, a yield increase of 10%. We have a slightly lower ASK, but it’s mainly driven by let’s say, the type of aircraft we are putting in.
We put always on the west medium haul, but it’s actually — it’s in the middle, it’s actually Europe. As you go to the left, you see the medium haul, that is driving to 13% yield increase. Also in our European network, you see we are able to steer the prices up, which is actually also needed, because we have a much higher fuel price to pay. So of course, we need around, let’s say, 13% to 15% increase of yields to cover also this increase of fuel price. And what is also remarkable and that is what you see at the top, is that if you compare the premium and the economy, you see that we are still at 12.5% increase of yield compared to 2019 in our business class, where economy is already at 70%. But as Ben already explained, the load factor in the premium is already above the 2019 level. So despite the fact that there is less corporate customers in, you see that the premium yields are up at 12.5%.
Now then let’s end maybe with a slightly negative part, which is Asia. Asia is, of course, still China is not open. Japan is still not open. So we are still only at, let’s say, above 40% in terms of capacity, with a very strong yield. But of course, with this capacity in, that is not the way we want to drive our business. But unfortunately, this is the case. So we are prepared for that and the good news is that, actually all the capacity, which we can move from the East to the West are bringing the yields and the load factors as needed.
Let me then take a deep dive on the unit cost. So if you go to Page 14 and you see on the top, actually, you see the unit cost development surge 2019. We correct here for fuel price and we correct here for the currency. You see it’s going up at 2.4%. So we are still at a higher unit cost than we were in 2019, but we should take in consideration, that the capacity is still 15% lower. So we still, let’s say, the fixed costs in it. And we were — and we had certain, let’s say, incidentals in the second quarter, which increased our unit cost level. So first off, we increased, we put back in place the CLAs, which were delayed, actually. So we implemented this in Q2 2022 at KLM. So that brings an 0.7% in the total unit cost. We saw a steep increase in airports and ATC charges, and everywhere actually around the world, we see increases of airport charges, which brings another 0.7%, if you look at all the flight-related costs on our unit cost. And last but not least, we had a very high customer compensation, €70 million more than we had in 2019, which drives up our unit cost by 1.2%. So if we take out these — all these incidentals, we are actually at the unit cost levels of 2019, knowing that we still have the capacity which is 15% below.
On the right, you see that we are continuing actually our efforts to reduce our FTEs. Air France is at minus 16% compared to June 2019 and KLM is at minus 13% versus June 2019. KLM was already at minus 17%, it needs now the support of a flexible staff to support the operation. And that brings us — that our staff costs are down with 11%. If you take out the state support, we get to minus 9%. So still very promising, if you look at our staff cost reductions, which are actually getting close to the capacity reduction. So you can imagine what will happen when we get our capacity back on the 2019 levels.
Let’s then go to Page 15. We had a very strong cash flow development. Again, a big chunk coming from the ticket sales — so if we go to the second quarter, we had €1.5 billion adjusted free cash flow, so adding that up for the half year to €2.2 billion. And mainly, it’s driven partly by the EBITDA, as mentioned already by Ben, but also driven by the very strong ticket sales. So the working capital decreased by €1.5 billion in the second quarter, €1 billion coming from the ticket sales and €500 million coming from the fact that you have increased capacity. So at the end of the day, that also reduces your working capital, because you have more outstanding bills. So a very strong development in free cash flow. If you look at the end of the second quarter, we have now, as Ben already explained, cash at hand of €11.9 billion, where we ended actually the last quarter with €10.8 billion, and that is despite the fact that we pay back the Dutch State. So the Dutch State has been paid back out of our cash. The French State we paid from our right issue. So if you look actually added, we had €1.5 billion coming from our free cash flow development in the second quarter, that is €0.6 billion coming from the net proceeds from the right issue, because the right issue brought €2.3 billion that we allocated, remaining €1.7 billion to the payback to the French state. So that lease that – -actually net proceeds is, as mentioned on the right side to €547 million. So €1.5 billion plus €600 million comes to €2.1 billion, and then there is the payback of the State loans at the KLMs, to the banks and to the Dutch state.
So still a very strong cash position, a very strong net debt development, of course, with this cash development. And of course, again, I want to phrase, a lot is coming from the ticket sales, and at a certain moment, we will fly these tickets. There are two things happening on the ticket sales, [indiscernible] is we have an increase of capacity. So for sure, your outstanding tickets grow, and second, we increased our pricing, so that is also a positive impact on the outstanding tickets.
If we then go to Page 16, I think we did major steps in terms of balance sheet repair. So we announced in February, that we would do an equity strengthening of up to €4 billion. In June, we actually did the successful rights issue, it was oversubscribed with €2.3 billion with a new strategic shareholder, CMA-CGM. And that I think is — that was a very positive one, because we were able to support further our equity. And at the same time, we have — that’s a commercial partnership in our strong cargo business, which will further strengthen also our EBITDA development for the future. Then we used €1.6 billion to pay back the French State. So that is done and KLM at the same time, paid back fully the RCF and the Dutch State loan in June of €0.9 billion, which is even rounding downwards because it is, I think, €940 million, if I look — if I’m correct. And then we did another strengthening of our equity with, let’s say, the Apollo deal with our engines, which brought €0.5 billion, which we will use to pay back further to the French State. So there’s still €1.2 billion left, which we will use for hybrid bonds. We will — and I will reiterate again, we will restore our Group negative equity through net profit generation, and further asset monetization and quasi equity projects, and there is no additional dilution measures planned.
Then if we go to Page 17, I think it’s good to clarify a bit what is the situation, because we see some articles sometimes in the press, that is still a little bit unclear. So let’s talk about the French State. So we had a loan of €3 billion, which was transferred into a hybrid. And then on top of it, we did also a capital increase in April, which was supported by the French State. So that brought €0.6 billion. So the total amount of State aid is €3.6 billion. With the right issue, we paid back €1.6 billion, and basically with Apollo, we paid back €0.5 billion. So we are currently at 60% of the French State aid, which has been repaid. Then if we will do, let’s say, another hybrid bond, then be opening us up to the 75%, which is needed to be relieved from, let’s say, the strategic constraints, which we still have related to this French State aid. So 60% is done very close to get to the 75%, but you should include also the subscription of the Air France capital increase in 2021.
So after looking back to a very positive quarter, let’s look ahead of us for the quarters to come. So if we go to the capacity, actually, the capacity guidance we gave was 85% to 90% in Q3. We downgraded that to 80% to 85%, mainly due to the request of Schiphol to reduce the number of flights of KLM. But we still expect that we can ramp up in Q4 to 85% to 90% of the capacities of 2019, because we expect that the operational performance at the airports are soft at that moment. Then on the right side, you see actually that the forward bookings are still very strong. For Q3, we already sold 78% of our long-haul capacity, and for Q4, we already sold 31%. So we’re — in Q3, we are very close to the 2019 levels. For Q4, there is a bigger — a little bit bigger gap, as we know that the booking horizon is a little bit longer after COVID, than it was before COVID.
On the medium haul, we put in 91% for Q3, and we have already sold 66% of the tickets and the medium-haul market is a short-term booking market. So of course, we have only 70% sold for Q4, but it was all more or less the same case in 2019. And then the French domestic even more shorter-term market. There’s a lot of business travel and a lot of people were just for visiting friends and families or their home somewhere in France. So they book very shortly before they are going to fly. So far we have 6% sold for Q4, but that was 7% in 2019. So all in all, we still see that the bookings are coming in, and we still see a healthy yield environment for the remainder of 2022.
Then let’s talk about the fuel bill. So as we all have felt in our industry, the fuel went up, spiked up significantly after the Ukraine war. We have seen that we are quite well hedged. So we were hedged in the second quarter 72% and we already hedged — or 71% in the third quarter. And in Q4, we are now at 57%, which we will end during the quarter to 70%. And then we also have already inflated hedges for 2023. In Q1, we are above 40%, in Q2, we are above 25%, and in Q3 23%. We are building now from 0% to 25% of that fuel consumption. With a broad total of 1 billion of hedge results in dollars, which supported, of course, our results.
Then let’s go to Page 21, I gave you already the guidance on the capacity, so 80% to 85% for Q3, 85% to 90% versus 2019 in Q4. So we will end at circa 80% for this year. On Transavia, we will be easily above the index of this 100%, and if you look at operating results, we didn’t change our guidance compared to the previous guidance. We still expect that it will be significant positive, and we even will guide you that our full year results will be positive. So we are confident with that, to give a positive guidance for the operating results for the full year, and we stick to the CAPEX of €2.5 billion for this year. That was all from my side. So I hand over back the floor to Ben.
Benjamin M. Smith
Okay. Thank you, Steven. Moving on now to Page 23. I’d just like to spend a final few moments on the commercial trend for the end of the year, which is promising, with a positive development of our load factor. We expect the load factor close to 2019 levels on the entire passenger network for the second semester, and the capacity, which should reach 85% as Steven mentioned of 2019 levels in the fourth quarter. Corporate traffic should be a positive contributor to this trend, especially on the North Atlantic and in other long-haul markets.
So moving to the next page, I’m extremely proud of the progress and initiatives we took during this quarter, regarding our environmental roadmap. We have achieved important technological milestones, which demonstrate that reducing our carbon emissions is possible. During the SkyTeam sustainability flight challenge, we showed that we could reduce CO2 emissions by up to 50% by activating all decarbonization levels in our hands. On the occasion of the Connecting Europe phase, Transavia France operated its first flight with 30% staff.
In the longer term, our Group is also determined to work with all industry players, to find innovative technological solutions that will help combat global warming. This is the purpose of the partnership signed with Airbus, exploring direct air carbon capture and storage to remove CO2 directly from the atmosphere. We also want to involve our customers in our actions for more sustainable aviation. This is why we launched the Air France-KLM Flying Blue, our loyalty program sustainability offer rewarding members who choose to voluntarily contribute to staff or reforestation projects. In effect, by rewarding members who purchase sustainable options, the same currency required to earn or maintain status, this means customers will be able to earn or keep their tier status will actually fly less. This is a significant move, and we are proud to be one of the first in our industry to go this far. All these initiatives are building blocks of our global decarbonization plan, which should lead us to achieve a net zero emission by 2050.
But to conclude, I’d like to say that during the first half of the year, Air France-KLM took advantage of the ongoing recovery in our sector. We have delivered better-than-expected revenues and results, with an operating margin close to 2019 levels. Over the past [Technical Difficulty] much faster than expected recovery, has put a strong pressure on the aviation industry as a whole, causing severe operational disruptions and critical infrastructure congestion. Over the past few weeks, we’ve done our utmost to limit the impact of these operational difficulties on our customers, especially [Technical Difficulty] continues through to the beginning of September.
Looking forward, we currently operate in an environment that is becoming increasingly complex every day, with growing inflation and hard to predict macroeconomic conditions. In this challenging context, we must and we will be focused on what depends on us. We will keep implementing our internal transformation as planned. This should enable us to gain operational efficiency and generate substantial cost savings and ultimately, to make our organization more resilient to the changes of its environment. Much has already been done to consolidate our financial trajectory, but we will continue our efforts, with the goal of freeing ourselves as soon as possible from the restrictions imposed by the European Commission’s temporary framework. Thank you. We are now available to answer your questions.
Question-and-Answer Session
Operator
[Operator Instructions]. We’ll take our first question, Jarrod Castle from UBS. Your line is open. Please go ahead.
Jarrod Castle
Thank you. Good morning everyone. Just in terms of your thoughts around the hybrid, do you still think you need to size it at €1.2 billion or indeed even undertake a hybrid, if trading continues in the direction that it seems to be heading? The second question, just looking a little bit into kind of 2023, just any thoughts on capacity ramp-up, given the views for potential recession, the corporate recovery, and more recently comments from Schiphol Airport around capacity? And then just lastly, any comments kind of as you kind of look through the months to the end of the year. I know, visibility is probably low, but just in terms of corporate travel recovery, it seems relatively reassuring, based on the comments you’ve made at the moment? Thanks very much.
Steven Zaat
Yes, thanks for the question. So if we look at the hybrid, there are two reasons why we still want to keep this €1.2 billion. First, we still want to restore our equity also in IFRS and for that we need quasi equity to do it more quickly. And second, we want to repay the French State as soon as possible. So that is actually the two reasons that we will stick to this amount. Of course, we don’t need €1.2 billion to pay back to the French State, but we will still keep this €4 billion, let’s say, in total of recapitalization measures to strengthen our balance sheet. So it is a part of the trajectory to make sure that with all the let’s say, development of the net result in the common period, we will restore our equity also in the coming years.
Benjamin M. Smith
Hi Jarrod. For 2023 capacity, we’re doing our best to maintain full flexibility to get through this still uncertain period. We’re reasonably confident that the positive trends that we’re seeing in 2022, that we expect to continue to the end of 2022 will continue in 2023, because through expansion, we’re trying to keep as much flexibility in place, so we can adapt either up or down. So what do we mean by flexibility, we have quite a number of airplanes that are easily grounded or easily activated, depending on how the traffic continues to evolve. For instance, at Air France we have 16, 777-200s that are unencumbered, that can be activated or can actually be brought down. We have a lot of variable costs in the cabin crew area and we do have pilots that are planned to come online. And of course, pilots can adjust down. In terms of Amsterdam capacity, this is — I think it’s a bit too early to comment on that. Of course, as you can imagine, we are moving forward and are going to fight this as best we can, to ensure that it does not have a negative impact in our activities. We have Marjan Rintel, who is here today. And maybe I can have her just say perhaps a few extra words on how we are approaching this at KLM, with regards to what was announced by the Dutch State.
Marjan Rintel
Thank you, Ben. As you said, it took us by surprise. We were not included when these plans were made. We are mapping out what this means. So we are mapping out what the consequences are and the position of KLM and Schiphol. Of course, we take the climate and the inconvenience for the local residents into account. But we will have our first review ready in the end of September, and then we will discuss this with the Minister of Infrastructure.
Jarrod Castle
Thanks. Any comments on the corporate travel, as it ramps up towards the end of the year?
Benjamin M. Smith
Sure. I mean, we’re just seeing a steady increase. It’s very smooth. It keeps going up, and we already mentioned what I said on the last call, this new — not new, but this ever expanding corporate luxury leisure or high-end leisure that we’re calling it, this phenomenon just keeps growing and this was not prevalent at all before the crisis. And with that, you can see our premium load factors are higher than what they were in 2019. So that combined with the increasing return of corporate traffic, is really helping us in the premium cabin. So I like what I’m seeing on the corporate side, we’re quite pleased with that, and we’re very, very happily surprised by what was not expected, and there is a new segment of travel, which — from what we can see, appears to be solid and appears to be a trend that should continue.
Jarrod Castle
Great, thanks very much.
Operator
We will take our next question Ruxandra Haradau-Doser from Kepler Cheuvreux. Your line is open. Please go ahead.
Ruxandra Haradau-Doser
Good morning. Congratulations on this operating performance and the cost discipline in the quarter. Three questions, please. We are seeing now discussions between several airlines and labor unions. Groupe Aeroports de Paris has just entered new agreements with labor unions. Could you please give us an update on your current discussions with labor unions and how do you see personnel costs developing in H2 and next year? Second, could you please give us an indication on your expected cargo performance in H2? And third for clarification, since there have been restructurings of the state support you received in France and Netherlands, are you now again allowed to participate in M&A activities without restrictions? Thank you very much.
Benjamin M. Smith
Okay. In terms of negotiations with our staff as well as our third-party partners and how they’re feeling this summer with staff through negotiations and discussions, it has been very tense not only at Air France-KLM, but all over Europe. Aeroports de Paris as well as Schiphol has had the same difficult discussions, difficult outcomes, which we’ve had to bear the brunt of. We had, as you know, in Paris, we had a strike by the firefighters. We also had a strike by some of the employees that handle the baggage systems, and in Amsterdam we had some strikes with the ground employees. To date, the employees of KLM and Air France have really worked hard, quite pleased with how we’ve been able to get good alignment. The stress that we put on them is quite difficult. But what we’re seeing and I’ll have Anne and Marjan continue to add some comments of their own to what I’m going to say here, is with inflation, which is high, we are already starting discussions and negotiations with our key social partners, to ensure that we have a balanced approach going forward that ensures that we maintain competitive position. And as yields go up to match the fuel increase and as yields seem to be holding to handle inflation, I think we can find balanced agreements with our staff going forward. Of course, it is always challenging when we’re trying to keep costs in check. And so far, I think we can be reasonably confident that on a relative basis, we should be okay. Anne?
Anne Rigail
Yes Ben, thank you. On Air France side, what I would say is that our staff is really fully mobilized. We had anticipated, I think, quite well the recovery. As you could see in Steven’s presentation, we had to follow up with our transformation to a minus 16% FTE. But to restart, we anticipate the hiring of our pilots, with 300 pilot recruitment until now. Also mechanics with 250. And then the disruption our customers can face, are not at all in to internal staff shortage, no internal social issues. In terms of salary, you know that we had a social salary moderation for the two years of crisis into 2021 and 2022. Despite this, to have the staff in the period of high inflation, we had an agreement that was signed last March, with the payment of an exceptional purchasing power bonus at the end of last March, to eligible employees that were representing 73% of the employees of the airline. We also increased the commuting allowance by 8%, and we have the next mandatory annual negotiation that will take place next year. But we are fully aware of the high inflation that are impacting our staff. So we will start discussions with our representative unions as of September, to see what we can do.
Benjamin M. Smith
And before I pass it on to Marjan, I’d just like to add that here in Air France-KLM, we are — I think the teams have done an amazing job of ensuring that we plan well ahead to have the right number of pilots, not only hired but also trained for the summer. As you can see, many, many airlines in the U.S. and in Europe had to cancel thousands of flights to make up for lack of staff. As you saw in our figures, the percentage of flights that we completed versus what we planned, I think it’s the best performance in Europe. Marjan, perhaps one or two words about the situation at KLM and staff?
Marjan Rintel
Yes. Thank you, Ben. At Schiphol, as you all know, we had a lot of disruptions the last couple of weeks, months, because of all the security lines and the lack of staff at security at Schiphol airport. This caused a lot of disturbances, mainly for our customers, but also for our employees. And also, we need to attract more workforce, mainly in the baggage and platform handling. We already have 150 employees extra, and we’re still looking for 100, but we accelerated a lot, and we took a lot of measures at least. So there’s more stability and better performance for our customers. If you look at the CLAs, we closed the balance CLA with our ground operations and ground employees are — well, you can call it compensated by the airport authorities these weeks during the summer. Thank you.
Steven Zaat
And so I come back on the other two questions. So if we — yes, so if you look at the cargo, you could say it’s more or less the same development as we have seen in the second quarter. Cargo is very difficult to forecast. Usually the bookings comes in two weeks before the flight. So it’s quite difficult. But we expect that it will be more or less the same development as what we have seen in the second quarter. So of course, an impact on the load factor, but still strong yields there and of course, an increase of capacity related to the daily. And then in relation to the M&A, so I think the slide is quite clear. So we are at 60% and we need to be at 75%. So there is 15% to go on the France [ph] side. On the KLM side, there was no beef in this. Let’s say, KLM paid back all the State loan, but KLM didn’t have, let’s say, energy capitalization. So the measures are on the Air France-KLM and Air France side.
Ruxandra Haradau-Doser
Thank you very much.
Operator
[Operator Instructions]. We will take our next question, James Hollins from BNP Paribas. Your line is open. Please go ahead.
James Hollins
Hi, bonjour. Two from me, please. The first one, just on the yield evolution. And obviously, you’ve done — I think it was as a network airline up about 16% economy, yields up 17% in Q2. Now Southwest yesterday were hammered for effectively calling out June being peak yields and they will effectively taper from here. I obviously fully understand it’s a very different market. Just wondering maybe, Ben, your views on whether we perhaps hit peak yields and most importantly, maybe for Steven, what sort of yield evolution you mean by high through the rest of the year, should we think about Q3 matching Q2, as my start point? And then the second one was just, what does paying back the French State Aid allow you to do unless it’s lost in translation, it sounded like, Steven, you’re talking about looking to do this as soon as possible, with emphasis on soon. I’m just wondering what — if that is right and being what it means, once you’ve paid back the 75% in terms of what you can do? Thank you.
Benjamin M. Smith
So on yields, as you know, we’ve had a request by the Schiphol Airport to reduce capacity, and we were having this ongoing now debate and dispute, and eventually lawsuit around whether we will have to permanently reduce capacity. So they revealed upward pressure in Amsterdam, despite already experiencing very high yields. So I think we can expect that to continue. On here in Paris, we are seeing continued very impressive yields, in part because one of our biggest competitors, Norwegian, who was flying from Paris westbound into some of our biggest markets in the United States, as you know, ceased operations. So that is taking an enormous amount of pressure off of our economy yields on the Transatlantic and we’re enjoying that pressure, and that will continue into the latter half of Q3 and obviously into Q4. So I see a continued improvement in yield versus 2019, helped by a changed competitive environment.
Steven Zaat
Yes. And then on the State Aid, I want to do it as soon as possible, but I need a quasi/equity tool also to be placed, because I don’t want to destroy further my equity. So we are still aiming at the financial markets, to place such a hybrid into the market, due to conditions, let’s say, in the second quarter especially after the right issue were not that fantastic yet, because there was a fear of recession and there is still uncertainty about the interest rates. But when this market will come down on the interest rate side, we will, as soon as possible, launch a hybrid and we will use that to pay back the French State. Your question on Q2 versus Q3, I could not fully make. Of course, we say it’s significantly positive, that is, let’s say, the indication. I guess I won’t give a number, but we have full confidence in our Q3 profitability.
James Hollins
Well, thanks. It was actually more any sort of directional Q3 yields versus what you’ve reported for Q2? And then on that State Aid, what does it allow you to do, once you’ve paid back that you can’t do now, I’ve just forgotten? Thanks.
Steven Zaat
Sorry. That is we are released from the M&A spend, and we are released from the bonus spend. That’s a 75%, we still have the dividend in place.
James Hollins
I guess you’re not talking Q3 yields, okay.
Steven Zaat
Let’s say it this way, we still see the same kind of pricing in the market. So we don’t give a specific number, etcetera. But we see a strong yield environment still currently in the market for the third quarter. As you see, the load factors you can imagine that the revenue management game is full. So that’s all I can say and maybe specifically, you mentioned Southwest, if I heard you correctly, peaking out in June. I think in Q3, we should in July and August, those — we will not be — June is not our peak month in terms of yield.
James Hollins
Okay, great to hear. Thank you.
Operator
We will take our next question…
Benjamin M. Smith
Just to add to that. You can see that in the marketplace, if you look at our fares, it’s clear that throughout Europe and in particular, out of our hubs, that the pricing that’s in place is quite high.
Operator
We will take our next question, Sathish Sivakumar from Citigroup. Your line is open. Please go ahead.
Sathish Sivakumar
Yeah, thank you. Good morning everyone. So I got a couple of questions here. So firstly, on the point-of-sale out of U.S., if you could just share any color on how does it actually look in 2019, and how does it compare today in Q2, as well as based on your forward booking into Q3, where you’re seeing the trends are versus 2019? And the second one is actually around the disruption costs. You did report €77 million, is it kind of peak and as you go into Q3, you should see substantially — partly directionally lower disruption costs? Yes, that will be all for me. Those are my two questions, thank you.
Benjamin M. Smith
Sure. We’re very, very pleased with our point of sale U.S. business. I think it’s helped by the relative strength of the U.S. dollar, in particular, in our premium cabins across all of our capacity. It’s unbelievable. Actually, as you can see the load factors that we’re seeing in our first class and business class cabins, in some cases the highest we’ve ever seen them. And so in the U.S., New York, Los Angeles, Miami, they are all very, very strong markets. And the point of sale is higher than it was in 2019 and the yield is significantly higher and the load factors are much higher than we saw in 2019. So we’re very pleased with that performance, on the transatlantic and in particular, point-of-sale U.S.
Steven Zaat
And on the customer compensation side, the €70 million is mainly coming from, let’s say, the operational problems at the airport of Schiphol, and it’s a big chunk of it. And of course, we took out flights, we expect now that we will stabilize our results let’s say, our operators in the coming period. Of course, we still expect higher customer compensation than what we have in 2019, but not in this amount.
Sathish Sivakumar
Okay, yeah, thank you.
Operator
We will take our next question, Andrew Lobbenberg from HSBC. Your line is open. Please go ahead.
Andrew Lobbenberg
Hi, good morning all. Sorry, long name. Can I ask you about Air France — sorry, about Transavia France. You spoke of some teething troubles, I think, with the rate of growth. And then equally, if we look at the unit revenue that you disclosed, it’s up in the French domestic, but not by that much, given the price of fuel. So can you just give us a little bit of talk about what’s happened at Transavia France and indeed the broader French domestic network? The problem at Amsterdam and the pressure to permanently reduce capacity there, how are you thinking that you would manage the capacity balance agreements you have between Air France and KLM, if that plays out? And my third question would just be, how do you think about the potential reopening of Asia, when you’re flying so much capacity now, would you have to reduce capacity on the North Atlantic, were Asia to open up in 2023, how would you manage that let alone indirect long route?
Benjamin M. Smith
Okay. Hi Andrew. For the French domestic market, we’re still finalizing the last part of our transformation. As you may recall, we’ve pulled out all of our regional operations from all the airports. So that’s Air France hub, we’ve reduced by 50% the size of the fleet of Air France hub and all the — I think 95% of the capacity that Air France hub had at all the airport, was assigned to the domestic markets. So the transformation at Orly, some of those slots are now going to be assigned to domestic services operated by Transavia France and of course, at lower frequencies, but with much lower unit cost. We were losing an enormous amount of money on the French domestic services in 2019. So with a combination of lower capacity as well as lower unit cost vehicle being Transavia France, in our projections, we will reach at least breakeven and hopefully profit in the short to medium term. Some of these routes have been outright canceled such as Bordeaux to Orly, Lyon to Orly, and Nantes to Orly, and that’s an agreement that we made with the French State, that was imposed on us that any destination, with a train option of two hours and thirty minutes or less would be removed. So we’re expecting and we still have — we’re still 100% on track to transform our domestic business. So going through this transformation, you will see some swings in yield, as we ease into it. However, what I must mention is that, a big portion of those slots that were operated by hub in the French domestic market are now being reassigned to a much more profitable European network operation, which of course, will take some time. So the growth is big but if you put it in context with the amount of money we lost in the past versus what we’re putting there, we’re very pleased with how it’s transitioning.
Steven Zaat
Can I add something on this Ben. If you Andrew, if you look at the yield development at Transavia France, it’s still very strong. So despite the growth we are at 18% higher yields than which we were in 2019. So we are able to charge the customers. Of course, with such a growth, you don’t get this historical load factor. So the impact on the unit revenue is coming on the load factors, and not on the yield. It’s 18% at Transavia France, where at the Transavia Netherlands, its 22%. So in the same kind of range of very high double-digit numbers, close to 20%.
Benjamin M. Smith
Just to add just a follow-on on that is Orly Airport, not being able to make money at a swap constrained airport closing to the largest city, the largest metropolitan area in Europe, it was just not possible and for us the opportunity is huge. So as we rebalance the capacity that’s there with long haul, we have eight long-haul flights a day out of Orly operated by Air France. We have a shuttle service to Toulouse, Nice and to Marseille, and flights of course, they will continue to be operated by Air France. However, all the rest of our slots there, which are more than 50%, are now being operated or more shortly be operated by Transavia, with the advantages of Flying Blue, and a cost structure which is similar to the low-cost carriers at Orly. So I think we’ve got a great future transformation plan that is being rolled out, and we expect to see the benefits.
As far as capacity on the rest of our network, if Asia does come back we’ve been lucky that the opportunities on the Atlantic have been great during the summer. And of course, if demand and capacity and if the Russian overfly gets removed and the restrictions of our key markets are relieved, we will rebalance. We’ve got some flights that are still positive, but if the opportunities are more positive in Asia, then we will shift capacity over there. And as I mentioned, we do have 16 777-200s at Air France. We do have eight 330s at KLM, which can — we can activate or we can deactivate, depending on what the opportunities are. So we have quite a bit of flexible opportunity, which are good airplanes from a fuel efficiency perspective relative to some of the four engine airplanes that we’re seeing our competitors bring back. So I think from a position perspective, to adjust the capacity when Asia hopefully does come back, I think we’re well positioned.
Andrew Lobbenberg
Okay, thanks.
Benjamin M. Smith
You also had a question on some internal agreements we have with our various unions. But these are agreements that update many years and of course, we — as usual, we intend to respect all of these agreements. However, there’s quite a number that we have throughout the Group, but we don’t foresee any major issues in staying on one, and we do have a very excellent — we do have very positive and good relationships with both pilot groups. Of course, we always have negotiations with, always had discussions and with inflation that’s going to come up, we do expect negotiations to continue in the near and medium future.
Steven Zaat
Yes. And then, Andrew, I think you had also a question on Asia. I think on Asia, let’s say, you have as much information as I have, because if you look at China and Japan, it all depends on the development of COVID, and all let’s say, the development of the policies that are put in place. You see now everywhere where they have, let’s say, a policy where people still can travel as long as they are vaccinated, or they have a positive or negative COVID test, that is, of course, very helpful. And we have seen now at least in our industry from the — in China, and Japan it is still much restricted, and we always that it will open further, but that is fully related to the COVID situation and maybe the change in policy in those countries.
Andrew Lobbenberg
Great, thank you.
Operator
[Operator Instructions]. We’ll take our next question, Sumit Mehrotra from Societe Generale. Your line is open. Please go ahead.
Sumit Mehrotra
Thank you. I’ll try to ask this question. So Group equity is still negative €3.1 billion and you plan to issue a €1.2 billion hybrid maybe later on. So what are your steps to fill the gap, I noticed you mentioned that you have further asset monetization through quasi equity projects, may I risk asking you from where, because already two projects are in place, MRO in Apollo and CMA-CGM, we have got in cargo, so where do you think, if you can share further asset monetization opportunities might arise? Secondly, your thoughts on the stronger dollar and a weaker euro. So yes, a good news for U.S. point of sales, helpful for summer traffic flows. But how do you plan to address this issue of U.S. sales with a weaker euro winter onwards, so your thoughts on a weaker euro would be welcome here? Thank you.
Steven Zaat
Let’s first start on the equity side. So indeed, we will execute this €1.2 billion. Second, let’s say, we have time to restore that equity and we will build the net result in the coming period, so that will support our equity. And we did actually, at this moment, only one asset monetization with Apollo. It was actually, if you look at the rates, it is an excellent rate we got and we are, let’s say, in further discussions to look — to make use of those kinds of vehicles. So that is actually the plans we have in place, and that is how we are going to restore the equity. What will also help, is that we at KLM didn’t now pay — they put a tax asset on the balance sheet. We didn’t do that yet for Air France. So we will do that in the second quarter, and that will also add at the end of the day, to our equity. If you look at the stronger dollar, yes, that is always — where there is one market as a benefit from the dollar, the other is negatively impacted. So it will probably impact the traffic from Europe to the U.S. But as you know, there is much more flows from the U.S. to Europe. So as long as this dollar stays this strong, I think for the total North Atlantic, it is good for us. There is a stronger pricing in the U.S., with the dollar that is very beneficial for our bottom line at the end of the day.
Sumit Mehrotra
Thank you.
Operator
Thank you. We will take our next question, Johannes Braun from Stifel. Your line is open. Please go ahead.
Johannes Braun
Yes, good morning. Thanks for taking my questions. I have three questions. First question is, you said earlier that you currently need 13% to 14% yield increase to cover the higher fuel costs currently. Now if you look out to 2023 in terms of the fuel spot prices stand, in terms of your hedges for 2023, what would be the yield increase versus 2019, you need next year to cover the further increase in fuel costs? Then back on the U.S. dollar strength, I think you have a net exposure. So taking into account the U.S. dollar revenues, but also the U.S. dollar costs, which is around 5%, just remind us, on the hedging level of that net U.S. exposure, that would be helpful? And then lastly, can you remind us on the timing of the payment of the cargo claim, which I think was €350 million and also the payback of the deferred social charges, which I think were about €2 billion, that would be good? Thank you.
Steven Zaat
Sorry, it is a lot of good questions so we have to be prepared. So let’s first start with your question on the yield. Yes, of course, the hedges will wipe out. But also what you see is actually that the fuel price in the forward is coming down. So we expect still this, let’s say, 15% to be sufficient. And if needed, then of course, we will put — if the oil price stays where it is, let’s say, or the jet fuel price where it stays today, then we put in another increase of [indiscernible] as we did before. And as we are all impacted as airlines, those are quite sticky, we have seen that the competitions are following, we all need to, let’s say, to have a balance of the fuel cost, in relation to the yield. So those are going quite hand-in-hand, and I think the results in Q2 and also what we see the yields in Q3, you see that this is very so in even Q4, we still see the same strong yields.
Then on the hedge for the year ahead, we hedged around 50% of the operation, but operational is not that big actually, because we have revenue income in dollars, and we have — there’s fuel costs and other costs in dollars. You’ve seen that the exposure in our total result was lower than €10 million in this quarter, where we had this big spike of our — of the dollar. So you see that we actually, we are not substantially, let’s say, exposed over there. And then on the fleet side, we have — on the fleet side, we always hedge. When we do an order, we hedge up to the moment, up to the delivery. I think if you look at KLM, they are almost at 100%, because they didn’t put so many new orders yet into place. And I think on the Air France side, we are also around 70% to 80%. So we have already quite a substantial number already in place with it, and so I think let’s say, the impact of the dollar is there but as, again, on the operation, not so much impact, and we have 50% of it hedged.
Then on the, let’s say, the specific items, as you mentioned. So that’s — on the cargo plan, we expect that we will pay that in 2024. We are still in appeal. So that is not coming this year or next year, there is still a time to go. And on the social charges and the salary tax, at KLM we talk about €2.7 billion, which has to be paid, but we always have — let’s say, an outstanding amount in our balance sheet, because we never pay directly, the social charges, etcetera. So I think in general, we talk about around €2 billion of social charges KLM — sorry Air France, it will take five years to pay that back, and we started already in January, and KLM start in October this year to pay back, let’s say, the salary taxes and they also have five years to repay.
Johannes Braun
Can I just come back to the first question, when you say yields should be up 15% versus 2019, should be sufficient to cover the fuel costs. So you are referring to 2019, yes. So that would mean that, if we have this 13% to 14% yield increase this year, we would hardly need any yield increase next year to cover the fuel costs?
Steven Zaat
If you look at the Brent specifically, and you look at the Q3 Brent or the Q2 Brent, we talk about $112 per barrel, and if you look at the current forward for 2003, you talk about $87 per barrel. So there’s still an expectation, that this fuel will come down in the coming period.
Johannes Braun
Thank you.
Steven Zaat
Am I right.
Operator
There are no questions at this time. I will turn the conference back to the speaker for any additional or closing remarks.
Benjamin M. Smith
Thank you, everyone for joining us this morning.
Operator
This concludes today’s call. Thank you for your participation. You may now disconnect.
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