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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 Q3 2025: Stable Margins Amidst Revenue Growth

Air France-KLM reported a stable operating margin of 13.1% in the third quarter of 2025, with revenues increasing by 3% year-over-year to EUR 9.2 billion. The company's earnings per share (EPS) came out at EUR 1.69, significantly beating analyst estimates of EUR 0.302. Passenger traffic rose 5% to 29.2 million passengers, and passenger network unit revenue was up 0.5% at constant currency. Operating income improved by EUR 23 million to EUR 1.2 billion, driven by a strong performance in the maintenance business, which saw a 13% increase in revenues and an operating margin of 6.3%.

Publication Date: Nov -29

📋 Highlights
  • Stable Operating Margin:: Maintained 13.1% operating margin in Q3 2025, with revenues up 3% to EUR 9.2 billion YoY.
  • Operating Income Growth:: Increased operating income by EUR 23 million to EUR 1.2 billion, driven by cost control and productivity.
  • Cash Flow Strength:: Generated EUR 700 million recurring adjusted operating free cash flow year-to-date, with EUR 9.5 billion in cash reserves.
  • Maintenance Business Growth:: Engineering & Maintenance revenue rose 13% YoY to EUR 700 million (approx.), with a 6.3% operating margin.
  • Leverage & Balance Sheet:: Net leverage reduced to 1.6x, with EUR 9.5 billion cash on hand and no immediate debt repayment pressures.

Operational Highlights

The loyalty program, Flying Blue, was named the world's best airline loyalty program for the second year in a row, and Air France-KLM continues to advance its premiumization road map, with new long-haul business cabins rolling out at both Air France and KLM. The group is expanding connectivity across key markets, adding new routes and increasing flights to Morocco, Egypt, and Finland's Lapland region. The company is also strengthening its position in Canada with a 2.3% stake in WestJet.

Financial Performance and Outlook

The company generated a recurring adjusted operating free cash flow of EUR 700 million year-to-date and has a robust balance sheet with EUR 9.5 billion of cash at hand. Air France-KLM guides for continued stability in unit revenues and costs, with a positive trend expected in Q4. The net debt is stable, and the leverage is down to 1.6. Analysts estimate next year's revenue growth at 4.3%. With a current P/S Ratio of 0.09 and EV/EBITDA of 2.02, the market appears to have priced in a relatively stable outlook for the company.

Challenges and Mitigants

The group discussed various external headwinds, including the French ticket tax increase and Schiphol tariff increases, and their potential impacts on demand. The company aims to offset these impacts through productivity measures and cost-cutting efforts, such as the "Back on Track" program for KLM, which is on track to achieve the targeted EUR 450 million improvement this year.

Valuation and Return Metrics

With a ROIC of 6.72% and a ROE of -66.03%, the company's return metrics indicate a mixed performance. The Net Debt / EBITDA ratio stands at 1.5, indicating a manageable debt burden. The current valuation multiples, including a P/E Ratio of 2.69, suggest that the market has a relatively cautious outlook on the company's earnings growth prospects.

3. NewsRoom

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Air France expands network with a new non-stop service between Phuket and Paris

Dec -01

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Britain's IAG joins major European carriers in bidding race for Portugal’s TAP

Nov -24

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British Airways’ Parent IAG Joins Race to Bid for Stake in Portugal’s TAP

Nov -21

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Assessing Air France-KLM (ENXTPA:AF) Valuation After Recent Volatility in Share Performance

Nov -21

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Lufthansa throws hat in ring in bidding for TAP stake

Nov -20

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Lufthansa enters race for TAP stake against Air France-KLM

Nov -20

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Lufthansa Group Expresses Interest in Portugal’s TAP

Nov -20

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Airline to cancel all flights to country over geopolitical instability

Nov -18

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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

Stock-Card
Fraport

A-Score: 5.8/10

Value: 7.2

Growth: 6.4

Quality: 4.7

Yield: 0.0

Momentum: 8.5

Volatility: 7.7

1-Year Total Return ->

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IAG

A-Score: 5.4/10

Value: 7.3

Growth: 4.8

Quality: 5.0

Yield: 1.2

Momentum: 9.0

Volatility: 5.0

1-Year Total Return ->

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easyJet

A-Score: 5.1/10

Value: 8.5

Growth: 6.7

Quality: 4.2

Yield: 2.5

Momentum: 3.5

Volatility: 5.3

1-Year Total Return ->

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Lufthansa

A-Score: 5.1/10

Value: 7.4

Growth: 4.7

Quality: 3.1

Yield: 3.8

Momentum: 6.5

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Air France-KLM

A-Score: 4.4/10

Value: 10.0

Growth: 2.8

Quality: 3.8

Yield: 0.0

Momentum: 8.0

Volatility: 1.7

1-Year Total Return ->

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Stock-Card
Aeroports de Paris

A-Score: 4.4/10

Value: 3.2

Growth: 5.9

Quality: 2.6

Yield: 2.5

Momentum: 4.0

Volatility: 8.0

1-Year Total Return ->

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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

10.99$

Current Price

10.99$

Potential

-0.00%

Expected Cash-Flows