AIR FRANCE GROUP TRIPLES NET PROFIT

Bangkok--Jan 6--Air France Group Air France Group announced that the recovery plan for the Group is well ahead of schedule. The first half-year accounts (April to September) released since the merger of Air France and Air France Europe confirm the Group’s continued recovery. The Group’s consolidated net profit tripled compared with the same year-earlier period, amounting to FF 1,762 million. This figure accounts for 5.7% of the Group’s turnover. On a comparable basis after the merger, the Group’s consolidated net profit for the first half-year 1996/97 stood at FF 597 million (pro forma). The Group posted a turnover of FF 31 billion for the first half-year 1997/98, an increase of 8.3% with little change in capacity. The turnover of Air France alone (since the merger) accounted for over 90% of the Group’s operations, and showed 8.8% growth over the previous year on a comparable basis. This increase was due to sustained growth in passenger and baggage revenue, up 9%, and a 13.4% increase in freight revenue The Group achieved this significant upturn in air transport revenue despite more moderate growth in traffic: up 1.6% for passenger operations and 6.4% for cargo. These results are also due to a stabilization of passenger capacity (-0.6%) and a limited increase in freight capacity (4.1%). Load factors stood at 76.1% for passenger traffic (as opposed to 74.5% in the first half-year 1996/97) and 68.1% for cargo (compared with the previous 66.6%). This increase in turnover primarily stems from a more selective approach to traffic, as well as from exchange rate gains. The combined effect of these two factors substantially boosted yield in relation to capacity (9% for both passenger and cargo). Gross profit stood at 14% of the Group’s turnover. Costs rose less rapidly than revenue. Fuel costs saw a substantial rise of 12.7%, due to the stronger dollar, but overall net operating expenditure only increased 5%. The Air France Group posted an operating profit of FF 2.22 billion, accounting for 7.2% of the consolidated turnover, compared with 2.5% in the previous year-earlier period. Net depreciation and reserves were reduced by 15.3%, primarily due to the withdrawal from the fleet of medium-haul wide-body aircraft. Pre-tax profit stood at FF 1.54 billion compared with FF 194 million in 1996-97. Net financial charges rose as a result of the revaluation of currency debts (due to the impact of the rise in the dollar, yen, pound, and Swiss franc), but were nevertheless confined to 2.2% of turnover, compared with 1.8% in the same year-earlier period. Companies consolidated on the equity method, particularly the sector concerned with reservations systems, contributed FF 187 million to the Group’s overall results. The Group’s net debt was reduced by FF 833 million over the six months, and stood at FF 15.35 billion at the end of September. Investments for the first half-year (FF 2 billion) were substantially covered by cash flow (FF 3 billion). Generally speaking, Air France’s operating infrastructure (Paris-Charles de Gaulle hub and domestic network reorganized around the La Navette shuttle concept) has enabled the Company to take advantage of a very buoyant market. It is necessary, however, to underscore the very strong seasonal nature of air transport operations. Hence the Group’s net profit of FF 597 million during the first half-year 1996/97 (pro forma) with an overall loss for the entire fiscal year of FF 268 million (proforma). Where 1997/98 is concerned, there is every likelihood that the results for the full year will be much the same as those posted for the first half-year. In Asia-Pacific, Air France enjoyed a record November, with an increase of 29% in revenue over last year, although there is naturally some concern about the current adverse financial situation in some Asian markets. Air France notes however, that there has been an increase in tourism from European countries as travelers take advantage of the low prices in these markets. Coinciding with the high tourist season in Europe, Air France anticipates that this trend will contribute significantly to passenger traffic on its Asia network for the second half of its fiscal year. Air France operates flights to 15 destinations throughout Asia with daily flights to Bangkok, Tokyo, Hong Kong, Singapore and Osaka (jointly with Japan Airlines). Flights from Bangkok to Paris leave at 22:50 and arrive the following morning at 5:40 am at Paris’ Charles de Gaulle airport. Flights from Paris to Bangkok leave at 19:40 and arrive at Don Muang the following day at 12:50 noon. For more information, contact: Burson-Marsteller Steve Vincent Duangkamon Isarapandh Tel: 252-9871-7 Fax: 254-8353 --End.

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