Key Concepts & Questions

Key Concepts

• The first effects of Transform 2015 (the 3 year debt reduction strategy) enabled a reduction in the operating loss despite an 890 million rise in the fuel bill. Their three year target is to reduce the net debt by 2 billion euros.

• The Board of Directors decided to waive half their directors fees to participate in the effort required within the framework of the Transform 2015 plan.

• In a difficult economic environment, the group's revenues increased by 5.2%

• The sale of Amadeus shares was a key factor in the company reducing their net debt by 549 million euros at December 31,2012.

• Air France-KLM invested 1.19 billion euros in flight equipment in 2012 making flight equipment their largest asset.

• The Group was confirmed sustainability leader of the airline sector  for 2012.

• The air transport industry generates, directly and indirectly, 57 million jobs and us$2.2 trillion of economic activity and the competition is more intense in Europe than elsewhere in the world.

• The health of the air transport industry is intimately linked to that of the global economy, and to geopolitical and geophysical events.

• In the past few years, fuel has become the main cost item for the airlines, representing 33% in 2012. 

• The passenger business is Air France-KLM's main activity, contributing some 80% of the Group's revenue. Air France-KLM has other businesses including maintenance, cargo, catering & leisure.

• The Air France group fleet comprised 396 aircrafts at December 31,2012 and the KLM group fleet had 119 aircrafts, totalling 515 aircrafts.

• The group is exposed to the general risks associated with air transport and running a business and has consequently implemented a system to identify and monitor risks. Strategic risk mapping and operating risk mapping processes have been established, supervised by internal audit.

• In Air France-KLM's Corporate Social Responsibility Statement, they set out their commitment to environmental protection, the promotion of social equity and local development.

(Captured from the 2012 Annual Report)

Questions 

Q1. Reading through the consolidated income statement for the 3 years, I have realised that under the heading ‘Salaries and Related costs’ the 2011 statement for March 2010 shows -$7434 but the 2010 statement for March 2010 shows -$7388. Shouldn’t this be the same number? Why would they have two different numbers on two different statements? 


Q2. Air France’s financial years change from 9 months to 12 months, like this:
April 2009-March 2010 (9months)
April 2010-March 2011 (9 months)
April 2011-December 2011 (9 months)
January 2012-December 2012 (12 months)
Why would they suddenly change their financial period from 9 months to 12 months?
They have also included in the consolidated income statement for 2012 a ‘12 month pro forma’ period from January 2011-December 2011 which isn’t showing on the 2011 statement. Why would they need this data?

  
Q3.In the below figure the 2010 revenue is 23.31 (23,310) pro forma but this amount is not listed in the consolidated income statement for any of the years. 2010 is showing as $20,994 – how did they come up with 23,310? Have they increased the 9 month financial year in 2010 to a 12 month financial year to get this figure? If so, how would they have worked out this amount?  

 
Q4. In the balance sheet, listed under the company's asset is Goodwill - how is the asset of goodwill given a monetary figure?

Q5. In the Consolidated Income Statement I can see that they have taken away the non controlling interests from the net income period to get the total amount for equity holders of Air France-KLM. Why would they minus the non controlling interests instead of adding this amount on?

Q6. Air France-KLM has a Consolidated statement of recognised income and expenses rather than a consolidated statement of changes in equity. It shows the revenue and expenses that went straight to equity and did not go through the income statement. It does not show transactions with shareholders. Why would they choose not to show the transactions with shareholders?