DAVY VIEW

Air France KLM delivered an operating loss of €27m (€301m improvement yoy), significantly better than company consensus of a €351m loss. The fuel price increase since the start of the Middle East conflict is not visible in Q1 due to the delay in pricing. The fuel bill is expected to be $9.3bn in FY 2026, which represents an increase of $2.4bn compared to FY 2025 (of which $1.1bn is in Q2 2026). The group is 66% hedged. The group is strategically navigating East-West traffic flows within the context of the supply-demand balance in the short term, including the carrier-imposed surcharge (28% of Europe-Asia/Africa routes held by three Gulf carriers). With this and healthy unit revenues, we expect a significant level of pass through of the higher fuel costs.