2019 Universal Registration Document

UNIVERSAL REGISTRATION

DOCUMENT 2019

Including the annual financial report

0_VA_V10 27/04/2020 19:50 PageI

Selected ﬁnancial information 4

Highlights of the

2019 ﬁnancial year 6

Highlights of the beginning

of the 2020 ﬁnancial year 10

PRESENTATION OF

THE AIR FRANCE - KLM GROUP 11

1.1 Market and environment 13

1.2 Strategic outlook 18

1.3 Activities 24

CORPORATE

GOVERNANCE REPORT 47

2.1 Composition of the Board of Directors 48

2.2 Organization and functioning

of the Board of Directors 75

2.3 Activities and functioning of the Board

of Directors and its Committees 83

2.4 Summary table of the AFEP-MEDEF

Code’s comply or explain

recommendations not applied 93

2.5 Compensation of the company ocers 94

2.6 CEO Committee 116

2.7 Group Executive Committee 117

2.8 Share capital and

shareholder structure 118

RISKS AND RISK MANAGEMENT 129

3.1 Enterprise risk management 130

3.2 Risk factors and their management 132

3.3 Organization and functioning

of internal control 147

CORPORATE SOCIAL RESPONSIBILITY:

EXTRA-FINANCIAL PERFORMANCE

STATEMENT 155

4.1 Creating long - term value for all our

stakeholders 156

4.2 Human resources 164

4.3 Environmental impact 181

4.4 Customer trust 201

4.5 Ethics and compliance 206

4.6 Societal value 209

4.7 Report by one of the Statutory Auditors 216

FINANCIAL REPORT 221

5.1 Investments and ﬁnancing 222

5.2 Comments on the ﬁnancial statements 224

5.3 Key ﬁnancial indicators 228

5.4 Subsequent events

and outlook for 2020 231

Financial statements

5.5 Consolidated ﬁnancial statements 234

5.6 Notes to the consolidated

ﬁnancial statements 241

5.7 Statutory Auditors’ report

on the consolidated ﬁnancial statements 321

5.8 Statutory ﬁnancial statements 327

5.9 Five - year results summary 339

5.10 Statutory Auditors’ report

on the ﬁnancial statements 340

5.11 Statutory Auditors’ special report

on regulated agreements 344

OTHER INFORMATION 347

6.1 History 348

6.2 General information 350

6.3 Information on the agreements

concluded in connection with

the business combination between

Air France and KLM 351

6.4 Legislative and regulatory environment

for the air transport industry 353

6.5 Information and control 356

GLOSSARIES AND TABLES

OF CONCORDANCE 358

Air transport glossary 358

Financial glossary 360

Table of concordance for the Universal

Registration Document 362

Information included by reference 364

Table of concordance for

the Annual Financial Report 365

AFR

1

2

5

6

3

4

The components of the

Annual Financial Report are identiﬁed

in the index by the following pictogram

AFR

0_VA_V10 27/04/2020 19:50 PageII

1

Group proﬁle

In its principal businesses of passenger and cargo transportation, low-cost operations and

aircraft maintenance, AirFrance - KLM is a leading global player.

UNIVERSAL

REGISTRATION

DOCUMENT

2019

AIR FRANCE - KLM

INCLUDING THE ANNUAL FINANCIAL REPORT

This Universal Registration Document is an unocial translation of the French Document d’enregistrement

universel, which was ﬁled with the Autorité des Marchés Financiers on April 17, 2020, as competent authority

under Regulation (EU) 2017/1129, without prior approval pursuant to Article 9 of the said regulation.

The Universal Registration Document may be used for the purposes of a public oer of securities or the

admission of securities to trading on a regulated market if it is approved by the AMF, together with any

amendments if applicable, a transaction memorandum and a summary approved in accordance with

Regulation (EU) 2017/1129. In the event of any ambiguity or discrepancy between this unocial translation

and the French Document d’Enregistrement Universel, the French version shall prevail.

2019 Universal Registration Document — Air France - KLM

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Air France- KLM — 2019 Universal Registration Document2

MESSAGE FROM THE

CHIEF EXECUTIVE OFFICER

Paris, April 17, 2020

Dear Shareholders,

As I write this, the world is experiencing an

unprecedented health crisis. The global ﬁght against

Covid - 19 is underway, and our economies and

societies are reeling. This is an unprecedented

chapter in the history of the Air France - KLM Group,

as well as for the airline industry as a whole.

Our Group is committed to tackling this crisis and

demonstrating that we have all the assets to

overcome it, as we have done time and time again

throughout our history.

Our primary asset is the 83,000employees at the

Air France - KLM Group. Whether at Air France,

KLM, Transavia, Hop! or KLM Cityhopper, on board

our aircraft, at the airports, in our maintenance

hangars, on the runways or in our sales departments

around the world, our employees have shown

exceptional commitment and dedication since the

beginning of this crisis They have worked tirelessly

to transport medical equipment and to repatriate

more than 300,000of our fellow French, Dutch

and European compatriots. It is also in these

moments that we can see the true strength of the

Air France - KLM Group.

Our Group’s assets are plentiful. Throughout 2019,

we have been building the foundations of our

Group’s go forward plan: renewed managerial

governance, simpliﬁcation of our brands, clariﬁcation

of our products, harmonization of our ﬂeet, and

greater trust and stability in our relationships with

our labor partners.

In 2019, we accelerated our ﬂeet renewal plans.

With the order for 38Airbus A350s and 60Airbus

A220s, and the phasing out of our Airbus A380s

and Airbus A340s, Air France is continuing to

simplify while adding greater operational ﬂexibility.

With a future ﬂeet of long - haul aircraft comprising

Boeing 777s and Boeing 787s, and the Boeing 737

for its medium - haul network, KLM will gain a major

competitive advantage thanks to this simplicity.

“ Our Group is committed to tackling this crisis and

demonstrating that we have all the assets to overcome

it, as we have done time and time again throughout

our history. ”

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2019 Universal Registration Document — Air France - KLM 3

AIR FRANCE - KLM

IN 2019

104

MILLION

PASSENGERS

1.1

MILLION TONS

OF CARGO

554

AIRCRAFT

312

DESTINATIONS

116

COUNTRIES SERVED

3,000

AIRCRAFT MAINTAINED

FOR 200 AIRLINE

CUSTOMERS

The introduction of new aircraft into our ﬂeet

is also a lever for accelerating our sustainable

growth. Having been committed to sustainable

transformation for many years, we again

ranked ﬁrst on the Dow Jones Sustainability

Index in 2019, positioning us as the industry

leader in terms of sustainability and overall

Corporate Social Responsibility.

This work on our fundamentals has been a

necessary step to solidify the basis of our

future. In November2019, we presented our

strategic trajectory from 2020 to 2025, along

with four key priorities. Firstly, the optimization

of our operating model, to improve the

eciency of our processes. Secondly, to

increase our revenues by leveraging the

power of our hubs and our development in

the most proﬁtable segments of our three

brands Air France, KLM and Transavia. Thirdly,

the development of the Group’s other

businesses such as maintenance, cargo, our

Flying Blue frequent ﬂyer program, and how

best to leverage our customer data. Our last

strategic focus is pragmatic consolidation

opportunities in our sector.

The world post crisis will no longer be the

same. The fundamentals of our strategy

remain, but in a sector that is likely to

undergo profound changes, we must adapt

and accelerate our transformation.

We are determined to see Air France - KLM

overcome this crisis and become a European

champion. With what we have achieved in

2019 and with the extraordinary commitment

of all our employees, I know that we will

succeed, to the beneﬁt of our employees,

our customers, our shareholders, all our

partners, and indeed for future generations.

Benjamin Smith

Chief Executive Ocer of AirFrance – KLM

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Pursuant to Article 28 of Regulation (EC) No.809/2004 of

April 29, 2004, the following information is incorporated by

reference in this Universal Registration Document (See also

Section5.3–Financial indicators, page 228):

— the consolidated ﬁnancial statements of the Air France - KLM

Group relating to the ﬁnancial year ended December31, 2018

and the relevant Statutory Auditors’ Report, as published in

Sections 5.5to 5.7 in chapter5of the Air France - KLM Group’s

2018 Registration Document;

— the consolidated ﬁnancial statements of the Air France - KLM

Group relating to the ﬁnancial year ended December31, 2017

and the relevant Statutory Auditors’ Report, as published in

Sections 5.5to 5.7 in chapter5of the Air France - KLM Group’s

2017 Registration Document;

— the review of the ﬁnancial situation and results for the ﬁnancial

year ended December31, 2018, as published on pages 4 and

5of the 2018 Registration Document;

— the review of the ﬁnancial situation and the results for the

ﬁnancial year ended December31, 2017, as published on pages

4 and 5of the 2017 Registration Document.

Since January1, 2019, the Air France - KLM Group has applied the

following accounting changes:

Customer compensation: Compensation payments for cancelled

or delayed ﬂights are recognized as variable compensation

components within the meaning of IFRS15 and must be booked

as a reduction of revenue.

Component approach for Life Limited Parts (LLPs): Internal IT

development and historical data analytics have improved the

Group's ability to track LLP accounting management more

precisely. As a result, since January 1, 2019, the Group has applied

the component approach for these spare parts. This means that

their maintenance costs must be capitalized and amortized over

the useful lives of the LLPs which are expressed in cycles.

As a result, the elements of selected ﬁnancial information for 2018 are

presented, ﬁrstly, as initially reported and, secondly, on a restated basis.

Revenues

(in € billion)

Revenues stood at €27.2billion, up

by 3.7% versus 2018 restated, notably

thanks to the strong revenue growth

in the low - cost and maintenance

businesses.

Income from current operations

(in € million)

Income from current operations

stood at €1,141 million, down by

€264million versus 2018 restated.

This decline was due to pressure on

the cargo unit revenue and the

higher fuel bill in 2019.

SELECTED FINANCIAL INFORMATION

Air France- KLM — 2019 Universal Registration Document4

Selected

ﬁnancial information

Revenue breakdown Breakdown of income from current operations

86% Network

(1)

6% Transavia

8% Maintenance

(2)

66% Network

(1)

11% Transavia

23% Maintenance

2019

27.2

2017

restated

25.9

2018

restated

26.2

2018

reported

26.5

2019

1,141

2017

restated

1,923

2018

restated

2018

reported

1,405

1,332

(1) Since 2017, the Passenger and Cargo activities have been regrouped under Network.

(2) Third-party revenues.

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Debt ratio

(at December31)

The net debt/EBITDA ratio stood at

1.5x at December31, 2019, a stable

situation explained by the decline in

EBITDA.

Net debt

(in € billion)

Net debt stood at €6.15billion at

December 31, 2019, broadly

unchanged on the previous year.

Return on Capital Employed (ROCE)

(at December31)

The return on capital employed

(ROCE) was 1.9 points lower at

8.5% at the end of 2019, down

relative to 2018 restated, due to the

decline in income from current

operations for the ﬁnancial year.

Net result, Group part

(in € million)

The net result, Group part stood at

€290million, down by €130million

versus 2018 restated.

Adjusted operating free cash - ﬂow

(in € million)

In 2019, the Group generated

€(385) million of operating free

cash - ﬂow, down by €500 million

relative to the previous year. This

decline is mainly explained by

higher investment in 2019.

2019 Universal Registration Document — Air France - KLM 5

Selected

ﬁnancial information

2017

restated

163

20192018

restated

290

420

2018

reported

409

2019

2018

(385)

115

2017

restated

677

2017

restated

14.4%

2018

reported

9.8%

20192018

restated

8.5%

10.4%

2017

restated

6.36

20192018

6.15

6.16

2017

restated

1.3

2018

reported

1.5

20192018

restated

1.5

1.4

0_VA_V10 27/04/2020 19:50 Page5

Signature of employee agreements and simpliﬁcation

of the brand portfolio at Air France

In January2019, three employee agreements were signed at Air France.

— on January10, an agreement between Air France and its Cabin

Crew sta, improving their working conditions while enabling

better service delivery to customers;

— on January11, the wage agreement signed with the unions

representing Air France Ground Sta, providing for individual

increases and enabling the ﬁnancing of exceptional individual

bonuses, thereby oering additional ways to recognize

performance;

— on February 19, the signature of a Pilot sta category

agreement with the SNPL providing the ﬂexibility required to

support Air France’s new ambition, while foreseeing measures

to improve ﬂight safety, the commercial strategy, operational

robustness, day-to-day life and pilot compensation.

The Cabin Crew agreement also enabled the integration of the

Joon employees and aircraft. The simpliﬁcation of the brand

portfolio is an undeniable asset for our employees, our customers

and all our partners.

In the same spirit of simpliﬁcation, from now on the ﬂights

operated by the regional ﬂeet under the Hop! brand are marketed

under the Air France HOP banner.

The Air France - KLM Group can thus rely on two powerful brands,

Air France and KLM, supplemented by regional brands Air France

HOP and KLM Cityhopper, together with a low - cost proposition

via the Transavia brand.

Reinforced agreements between Air France,

KLM and Virgin Atlantic

On March4, Air France, KLM and Virgin Atlantic announced their ﬁrst

code share agreement, oering their respective customers new

travel options to/from North America, and more opportunities to

earn Miles via their loyalty programs. Thanks to this partnership,

customers of the three airlines can build their ideal journeys

across the Atlantic by choosing from the numerous ﬂight options

operated by Air France, KLM, Virgin Atlantic and Delta.

For customers, these agreements are reﬂected in a wide choice

of additional ﬂights with 24 new routes between the United

Kingdom and North America on ﬂights via, notably, London-

Heathrow and Manchester, and more options between Paris and

New York via Manchester.

Convertible bond issue

On March20, 2019, Air France - KLM successfully placed bonds

convertible into new shares and/or exchangeable for existing

shares (OCEANEs) due in 2026 for a total of around €500million,

representing 27,901,785underlying shares.

Air France, KLM and Delta celebrate a decade

of their transatlantic joint - venture

On June4, 2019, Air France, KLM and Delta Air Lines celebrated

ten years of their successful transatlantic cooperation. Over the

past decade, the three airlines have soared to new heights by

opening up new routes between Europe and North America, and

improving the service oered to their customers. Built around a

network of seven hubs–ﬁve in the United States and two in

Europe–the partnership currently covers Canada, the United

States, Mexico and Europe.

HIGHLIGHTS OF THE 2019 FINANCIAL YEAR

Air France- KLM — 2019 Universal Registration Document6

Highlights of the

2019 ﬁnancial year

0_VA_V10 27/04/2020 19:50 Page6

Air France - KLM and Accor strengthen their partnership

around their loyalty programs with more rewards

for their members

Since June20, 2019, the members of the Flying Blue and Accor

Live Limitless loyalty programs have been able to beneﬁt from

Miles+Points, an innovative opportunity enabling them to earn

points and Miles on both their ﬂights and stays: Miles are earned

on hotel stays while Points are earned for each ﬂight and can be

converted for even more ways to redeem.

2019 - 20Winter season: Air France - KLM increases capacity

by 2.5% compared with the Summer 2019 season and

proposes 32new routes

This capacity increase for the Winter season relative to the

Summer season is distributed as follows:

— +4% for the long - haul passenger network operations;

— -2% for the short and medium - haul passenger network

operations;

— -1.9% for Transavia’s low - cost operations.

KLM celebrates a centenary of aviation

The longest - standing commercial airline in the world still to be

ﬂying under its original name, on October7, 2019 KLM celebrated

its centenary. A true pioneer in aviation, KLM celebrated this

milestone with its customers and partners underlining not just its

remarkable history of the past ten decades but also the evolution

of aviation and that of society as a whole, of innovation and the

alliances.

Investor Day: becoming a European champion

At the Investor Day on November 5, 2019, Air France - KLM

presented its go forward plan around four pillars that are key to the

Group's transformation to become a veritable European champion.

— optimizing the operational model;

— refocusing revenue growth around the most proﬁtable

segments;

— developing initiatives on customer data, the Flying Blue loyalty

program, maintenance and cargo;

— analyzing all the consolidation opportunities.

All these initiatives support the Group’s goal to remain a leader

in the sector’s ecological transition.

Air France - KLM, Delta Air Lines and Virgin Atlantic reinforce

their partnership between Europe and North America

On November 21, 2019, Air France - KLM, Delta Air Lines and

Virgin Atlantic welcomed the US Department of Transportation’s

decision to grant them Antitrust Immunity (ATI) in the framework

of the extension of the transatlantic joint - venture. This regulatory

step now enables the airlines to move forward with their alliance.

In parallel, the partners ﬁnalized the expanded joint - venture’s

governance by agreeing simpliﬁed decision - making processes

that will enable the joint - venture to deliver its full synergy potential.

This partnership is key to strengthening the Group’s leadership

position between Europe and North America and, from

January2020, will oer its customers the best streamlined travel

experience across the Atlantic.

2019 Universal Registration Document — Air France - KLM 7

Highlights of the

2019 ﬁnancial year

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Air France- KLM — 2019 Universal Registration Document8

Highlights of the

2019 ﬁnancial year

Air France - KLM simpliﬁes and improves its managerial

governance

On February19, 2019, the Air France - KLM Board of Directors

unanimously approved the presentation given by Benjamin

Smith, Chief Executive Ocer of Air France - KLM, outlining his

ambitions, the principles of managerial governance and the

strategic decision - making processes at Group level, aimed at

simplifying and improving the Group’s governance to recapture

the airline leadership position in Europe.

The elements key to attaining the Group’s long - term goals are:

— establish a CEO Committee to determine the strategic direction

for all the Group’s airlines and business units. This CEO

Committee is chaired by Benjamin Smith. The other members

of the Committee are Pieter Elbers (President & Chief

Executive Ocer of KLM, and Deputy Chief Executive Ocer

of Air France - KLM), Anne Rigail (Chief Executive Ocer

of Air France and Deputy Chief Executive Ocer of Air France

- KLM) and Frédéric Gagey (Chief Financial Ocer of

Air France - KLM);

— increase collaboration across the Group to better capture

synergies and eciencies, aimed at improving overall Group

proﬁtability;

— celebrate the longstanding heritage, reputation and brand

recognition of Air France, KLM and Transavia within their

respective markets, and reinforce the Group’s position at its

two hubs, Amsterdam Schiphol and Paris-Charles de Gaulle;

— simplify the Group's decision-making processes in the following

areas: ﬂeet and network strategy, alliances and commercial

strategy, human resources, procurement, digital and customer

data management.

In agreement with the Supervisory Board of KLM, the Air France - KLM

Board of Directors proposed the renewal of Pieter Elbers’ mandate

as President & Chief Executive Ocer of KLM. This renewal was

ratiﬁed by the KLM Shareholders’ Meeting of April25, 2019.

Acquisition by the Dutch State of a shareholding

in Air France - KLM

On March 1, 2019, the Dutch State announced that, on

February26, 2019, it had crossed the 5% and 10% thresholds in

Air France - KLM’s share capital and voting rights and held

60,000,000shares, representing the same quantity of voting

rights, i.e. 14.00% of the share capital and 11.91% of the voting

rights in Air France - KLM. The Dutch State stipulated that it had

no plans to purchase more shares in Air France - KLM or a controlling

interest. Following the acquisition of this shareholding, the French

and Dutch States announced the creation of a joint working group

to, notably, investigate changes in the two States’ shareholdings

in Air France - KLM and KLM’s capital structure, together with the

governance rules within the Group.

0_VA_V10 27/04/2020 19:50 Page8

2019 Universal Registration Document — Air France - KLM 9

Next step in the optimization of the Air France - KLM

Group’s long - haul ﬂeet

On June28, 2019, Air France and KLM announced that they were

pursing the optimization of their respective long - haul ﬂeets. To

realize ﬂeet eciencies through harmonization and the growth

of similar aircraft ﬂeets, the airlines will swap the remaining ﬁrm

orders for Boeing 787s and A350s between them.

The implementation of this swap means that, in the 2021 - 23

timeframe, the six Boeing 787s ordered for Air France will be

transferred to KLM, and the current seven Airbus A350 - 900s on

order for KLM will be transferred to Air France.

Air France currently operates nine Boeing 787 - 9s and one

additional aircraft is scheduled to arrive in May 2020, resulting in

a ﬂeet of ten Boeing 787 - 9s. In addition, Air France received its

ﬁrst A350 - 900 in September2019. It already has an additional

20on ﬁrm order to which will be added the seven A350 - 900s

initially intended for KLM, resulting in a total of 28aircraft.

KLM currently operates 13Boeing 787 - 9s and received its ﬁrst

Boeing 787 - 10 in June 2019. This ﬂeet will grow to a total of

21Boeing 787s by the end of 2020 to which will be added the six

Boeing 787s initially intended for Air France, resulting in a total

of 27aircraft.

In parallel, all the options for further ﬂeet development at Air

France within the Air France - KLM Group are currently under

review, in consultancy with all stakeholders.

Air France - KLM accelerates its ﬂeet renewal and orders an

additional 10A350 - 900s for Air France

On December11, 2019, the Air France and Air France - KLM Boards

of Directors reached a decision concerning the replacement of

Air France’s A380s and approved an order for ten A350 - 900s.

With this decision, Air France - KLM is pursuing its ﬂeet

rationalization and simpliﬁcation strategy.

KLM is already well on its way to simplifying its long - haul ﬂeet

which will ultimately consist of only Boeing 777 and 787aircraft,

sharing a common pilot type rating.

At Air France, this upcoming order will bring the total number of

A350 aircraft to 38, including three that have already been

delivered.

This is the next step for Air France as it pursues its ﬂeet

simpliﬁcation strategy. As a result, in 2023, the Air France long - haul

ﬂeet will consist of 116aircraft split amongst only four families:

A330s and A350s, Boeing 777s and 787s. As at KLM, this will bring

Air France greater operational ﬂexibility, as well as the opportunity

to make signiﬁcant economies of scale, thanks in particular to a

reduction in the number of pilot qualiﬁcations required.

These next - generation aircraft will replace the A380s currently

in operation at Air France and which will be retired between now

and the end of 2022. Their arrival will also allow the company

to accelerate the phase - out of the A340s during the ﬁrst quarter

of 2021.

The A350 - 900combines economic eciency and environmental

performance, with 25% less fuel consumed compared to previous -

generation aircraft, i.e., 2.5liters per passenger/100km. It also

boasts a 40% reduction in noise footprint. The Air France A350 - 900

is equipped with a spacious and silent cabin, a latest - generation

in - ﬂight entertainment system and WiFi connectivity for customer

comfort.

Highlights of the

2019 ﬁnancial year

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COVID-19crisis–impact post February2020

As of April17, 2020, as we ﬁnalize this 2019 Universal Registration Document, the COVID-19crisis has continued to spread,

leading many countries to take increasingly strict measures, including restrictions on travel opportunities and border closures.

Faced with these restrictions, the AirFrance – KLM Group has taken strong measures and drastically reduced its ﬂight activity

which, over the next few months, should be less than 10% of last year’s level. As the crisis continues, the conditions for a

recovery remain uncertain and the Group will continue to monitor the unfolding situation on a daily basis to make adjustments

as necessary. The AirFrance – KLM Group, Air France and KLM have entered into in - depth discussions with their respective

governments and ﬁnancial institutions to dispose of the resources that will enable them to secure and sustain adequate levels

of liquidity by all means, notably within the framework of the European Commission’s Temporary Framework on State Aid

published on March19, 2020.

On January6, 2020, the Air France - KLM Group

launched a Tender Oer to repurchase three series

of existing notes subject to the success of a new

issue of senior ﬁxed rate “Benchmark” notes

with a ﬁve - year maturity.

The three series of notes comprised, ﬁrstly, a €600 million

principal amount of senior notes maturing on June18, 2021 and

bearing a ﬁxed coupon of 3.875% (ISIN: FR0011965177), secondly

€400million in senior notes maturing on October12, 2022 and

bearing a ﬁxed coupon of 3.750% (ISIN: FR0013212958) and,

lastly, a €600million initial principal amount of Undated Deeply

Subordinated Fixed Rate Resettable Notes bearing a ﬁxed

coupon of 6.25%, of which €403.3million is outstanding (ISIN:

FR0012650281).

On January10, 2020, after two days of investor road shows, Air

France - KLM successfully placed the new issue of senior notes

(ISIN: FR0013477254) in the amount of €750 million, with a

ﬁve - year maturity and bearing an annual coupon of 1.875%.

The net proceeds from this new issue were used for Air France - KLM’s

general corporate purposes and to fund the repurchase of the

notes subscribed to the cash Tender Oer, which closed on

January 13, 2020 and whose results were announced on

January14, 2020, as follows:

Existing Notes for a total principal amount of €677.7 million

(representing 48.3% of the outstanding Existing Notes) were

tendered to the Tender Oer, of which €350 million were

accepted, composed of €311.2 million in 2021 Notes and

€38.8million in 2022 Notes; no subordinated perpetual notes

were repurchased by the Company.

As a result, the principal amount of outstanding Existing Notes

after completion of the Tender Oer is €1,053.3million, of which

€288.8million in 2021 Notes, €361.2million in 2022 Notes and

€403.3million in subordinated perpetual notes. The settlement

and delivery combined with the net proceeds on the new bonds

issued took place on January16, 2020.

This transaction is part of the Company’s ongoing dynamic

management of its balance sheet structure, contributing to

reducing the overall cost of the Group’s debt and extending its

maturity proﬁle.

Launch of a major international partnership

between Air France, KLM, Delta Air Lines

and Virgin Atlantic: the expanded joint - venture

enables customers to beneﬁt from more destinations

and ways to earn and spend frequent ﬂyer points.

On February3, 2020, Air France, KLM, Delta Air Lines and Virgin

Atlantic launched their expanded joint - venture oering a wider

choice of routes and loyalty options on travel between Europe,

the United Kingdom and North America.

This new partnership enables customers to beneﬁt from more

convenient ﬂight schedules and a shared goal of ensuring a smooth

and consistent travel experience, whichever airline people ﬂy. The

new beneﬁts have been accessible from February13. Loyalty program

customers can earn and use miles or enjoy elite beneﬁts for

ﬂights on any of the four airlines’ worldwide operations, including

a transatlantic trip, intra-European hops or domestic US journey,

oering more opportunities to quickly move up through the

loyalty tiers and reach a higher status. Eligible elite loyalty

program membesrs can enjoy priority boarding and access to

more than 100airport lounges when traveling internationally.

Air France- KLM — 2019 Universal Registration Document10

HIGHLIGHTS OF THE BEGINNING

OF THE 2020 FINANCIAL YEAR

Highlights of the beginning

of the 2020 ﬁnancial year

0_VA_V10 27/04/2020 19:50 Page10

2019 Universal Registration Document — Air France - KLM 11

1

PRESENTATION OF

THE AIR FRANCE - KLM GROUP

1.1 Market and environment 13

1.1.1 The economic environment 13

1.1.2 The industry context and competition 14

1.2 Strategic outlook 18

1.2.1 The AirFrance – KLM Group’s ambition 18

1.2.2 AirFrance – KLM: core assets and unique competitive advantages 18

1.2.3 The value creation model 19

1.2.4 Strategic orientations 22

1.3 Activities in 2019 24

1.3.1 Network business (passenger and cargo):

maintained commercial oensive and growth 24

1.3.2 Low - cost business (Transavia): “We make low - cost feel good” 35

1.3.3 Maintenance business 36

1.3.4 Fleet 42

1_VA_V10 22/04/2020 14:15 Page11

Air France- KLM — 2019 Universal Registration Document12

Presentation of the Air France - KLM Group

1 Impact of COVID-19 post February 2020

Recent events

As of April17, 2020, as we ﬁnalize this 2019 Universal

Registration Document, the COVID-19crisis has continued

to spread.

Since the beginning of the COVID-19public health crisis,

the AirFrance – KLM Group has implemented measures

to ensure the protection of its passengers and sta,

and to preserve the conditions of its ﬁnancial viability.

Faced with the increasingly strict measures taken by many

countries, including restrictions on travel opportunities

and border closures, the AirFrance – KLM Group has

drastically reduced its ﬂight activity which, over the coming

months, should be less than 10% of last year’s level.

The Group has implemented strong measures since the

beginning of the crisis which include, amongst others:

— negotiation with governments of payment deferral for

taxes (civil aviation, solidarity, etc. ), social contributions

and various charges;

— negotiation with lessors and airports of payment

deferral;

— cost reduction measures, estimated at this stage at

€500 million in 2020, an increase of €300 million

compared to previous announcements;

— the possibility of early retirement of certain sub - ﬂeets

of aircraft;

— implementation by Air France of partial activity measures

and application by KLM of the Temporary Emergency

Bridging Measure for Sustained Employment (NOW),

with an impact estimated at this stage at around

€1.1billion for 2020;

— review of the investment plan which will be reduced

by at least €700million in 2020, i.e. €350million more

than in previous announcements, to which will be added

the impact of the decline in own and third - party

activity on the amount of maintenance investments.

In solidarity with all the employees, the members of the

AirFrance – KLM Board Directors, its Chair and the Chief

Executive Ocer will also participate in the eort in line

with the measures applicable to the employees of the

Group, with a similar reduction in their remuneration.

Outlook for 2020

As the crisis continues, the conditions for a recovery

remain uncertain, both in terms of our air operations,

but more generally in terms of the timetable for an

economic and demand recovery.

Currently, our best estimates incorporating all the

aforementioned measures show that, in the absence of

additional ﬁnancing, a liquidity requirement is expected

in the third quarter of 2020.

As a result, the AirFrance – KLM Group, Air France and

KLM are engaged in in - depth discussions with their

respective governments and ﬁnancial institutions to

dispose of the resources that will enable them to

secure and sustain adequate levels of liquidity by all

means, notably within the framework of the European

Commission’s Temporary Framework on State Aid

published on March19, 2020.

At this stage, given the various options currently being

envisaged and the quality of the discussions with the two

States and ﬁnancial institutions, the AirFrance – KLM

Group is conﬁdent that it will be able to obtain additional

ﬁnancing to meet all its future ﬁnancial obligations and

enable it to ensure the recovery of its activity beyond

the current crisis.

Impact of COVID-19post February2020

1_VA_V10 22/04/2020 10:07 Page12

Currency exchange rates

Brent 2018 2018 2018 2018 2019 2019 2019 2019

(US$/bbl) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Average price for the period 66.8 74.5 75.2 67.7 63.2 68.9 61.9 59.0

(Source 1)

Real GDP growth (%) 2018 2019

World 3.1 2.5

European Union 2.0 1.4

of which United Kingdom 1.4 1.3

Euro zone 1.8 1.1

of which France 1.7 1.3

of which Netherlands 2.5 1.7

North America (USMCA countries) 2.8 2.1

of which United States 2.9 2.3

Asia-Paciﬁc 4.9 4.3

of which China 6.6 6.1

of which Japan 0.8 0.8

Middle East 0.7 -0.5

of which Iran -4.7 -9.3

Sub-Saharan Africa 2.6 2.5

Latin America (excl, Mexico and Venezuela) 1.4 0.8

of which Brazil 1.3 1.1

of which Argentina -2.5 -3.0

(source 1)

2019 Universal Registration Document — Air France - KLM 13

1

Presentation of the Air France - KLM Group

Market and environment

1

World GDP growth slowed by 0.6% in 2019 compared to 2018,

while growth in world trade growth witnessed a much sharper

2.8% downturn from 3.7% to 0.9%, mostly due to the trade war

between the US and China (source 2).

European (EU) GDP growth was 0.6% down on its 2018 level,

within a context of slowing global growth and threats of taris

on EU exports to the United States (e.g. cars, aircraft) which

aected business conﬁdence, especially in Germany (source 3).

Brexit also added to the uncertainty in Europe (source 4).

GDP growth in North America slowed by 0.7%, with the United

States having been impacted by the trade war with China, though

to a lesser extent than the latter (source 5).

GDP growth in the Asia-Paciﬁc saw a 0.6% deceleration with

China and its manufacturing partners in the region being

signiﬁcantly aected by the decline in exports to the United

States owing to the new taris (source 6).

Middle Eastern GDP contracted by 0.5% in 2019, aected by

lower oil prices and the prevailing US sanctions on Iranian exports

(source 7).

In the Sub-Saharan Africa region, GDP growth was broadly

unchanged (-0.1pt).

Latin American GDP growth slowed by 0.6% as the recession in

Argentina deepened within a context of a sharp currency

devaluation (source 8). Chile’s social tensions and the political

instability in Bolivia also contributed to this weaker growth

(sources 9 and 10).

1.1 MARKET AND ENVIRONMENT

1.1.1 The economic environment

1_VA_V10 22/04/2020 10:07 Page13

Air France- KLM — 2019 Universal Registration Document14

Presentation of the Air France - KLM Group

1 Market and environment

The strengthening in the US dollar (USD) impacted countries with

a high level of foreign debt like Argentina (source 8), leading to

a weakening in the Argentinian Peso (ARS).

The uncertainty about Brexit and its political ramiﬁcations led to

increased volatility in UK Sterling (GBP), which is now

appreciating against the Euro (source 4).

The Chinese Yuan (CNY) depreciated in the third quarter before

again strengthening in the Q4, in line with the unfolding trade

war negotiations (source 6).

1.1.2 The industry context

and competition

2019 saw a progressive deceleration in worldwide passenger

trac growth (+4.2% in Revenue Passenger-Kilometers forecast

for 2019 versus 7.4% in 2018) and a contraction in cargo (4.1%

decline in Freight Ton-Kilometers during 2019) although the EBIT

margin is forecast to be only slightly below its 2018 level (5.1%

versus 5.7%). Only in North America and Europe were airlines

able to create value for their investors, something which has been

a steady feature since 2015 (sources 12, 13).

European consolidation

In Europe, break - even load factors are amongst the highest in the

industry, owing to low yields in an intensely - competitive open

aviation area and high regulatory costs (source 12); this may

explain the signiﬁcant number of bankruptcies and the current

European consolidation.

Following the collapse of Primera Air, Small Planet Group and

Cobalt Air amongst others last winter, more carriers have since

ﬁled for bankruptcy in Europe: Wow, Germania, Aigle Azur, XL

Airways, Adria Airways and Thomas Cook Group, with the

exception of its German and Danish subsidiaries (Condor &

Sunclass Airlines) which are still ﬂying.

— big European airlines like Alitalia and Condor are under

administration as they await new shareholders, while Norwegian

Airlines has changed its strategy from growth to proﬁtability;

— bankrupt Flybe has been taken over by a consortium led by

Virgin Atlantic and will be rebranded as Virgin Connect;

— outside Europe, the disappearance of Jet Airways in India has

notably had a signiﬁcant impact on their partners;

— the global alliances have been signiﬁcantly challenged with a

tie - up between Delta, a SkyTeam alliance member, and LATAM

(Oneworld alliance). This move was followed by the IAG

purchase oer for Spanish carrier, Air Europa, a member of

the SkyTeam Alliance.

Regarding the European consolidation, Air France – KLM will

pragmatically evaluate the potential opportunities. Looking ahead,

AirFrance – KLM will take advantage of consolidation opportunities

when and where they make sense for the Air France and KLM

networks, while applying strict ﬁnancial discipline.

Competitiveness and constraints of the French

and Dutch markets

The French and Dutch airline markets are facing growing

constraints; making it more challenging to attain a European

leadership position.

For the past three years, airport capacity at Amsterdam-Schiphol

has been limited by a ceiling of 500,000aircraft movements. In

2020, the approval of the conditions for further growth at

Schiphol is expected, together with a decision on the opening of

regional airport Lelystad.

Over the next two years (2020 - 21), an increase of some 15% in

airport charges will be implemented for additional infrastructure.

In addition, as of 2021, a new Aviation Tax yielding an annual

€200million will be levied on all local passengers departing from

Dutch airports.

Currency exchange rates

For one Euro 2018 2018 2018 2018 2019 2019 2019 2019

(average) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

USD 1.23 1.19 1.16 1.14 1.14 1.12 1.11 1.09

GBP 0.88 0.88 0.89 0.89 0.87 0.87 0.90 0.86

CHF 1.17 1.17 1.14 1.14 1.13 1.13 1.10 1.10

BRL 3.99 4.30 4.59 4.35 4.28 4.41 4.42 4.52

ARS 24.2 27.7 36.3 42.3 44.2 49.4 55.2 64.7

CNY 7.81 7.60 7.91 7.89 7.66 7.66 7.80 7.74

JPY 133 130 130 129 125 124 119 118

(source 1)

Oil prices began to fall as of the second quarter 2019 against a

backdrop of slowing global demand for oil (GDP and trade

slowdown) and a steady increase in the supply of US shale oil,

osetting production cuts in the OPEC+ agreement (source 11).

1_VA_V10 22/04/2020 10:07 Page14

2019 Universal Registration Document — Air France - KLM 15

1Market and environment

Presentation of the Air France - KLM Group

1

In France, airport taxes and fees make Roissy-CDG one of the

most expensive airports. Successive French governments have

introduced speciﬁc taxes raising a total of €250million, with a

subsequent negative impact on the competitiveness of the

French ﬂag: e.g. Civil Aviation Tax, Solidarity Tax, Eco - tax to be

implemented in 2020, CDG Express tax to be introduced in 2024

to ﬁnance the future rail shuttle between Roissy-CDG and the

Paris city center. Air France is also signiﬁcantly exposed to French

social charges which are the highest in the industry, something

which is not the case for its pan-European low - cost competitors

operating in France who can base all or a portion of their crews

in the outstation countries.

European medium - haul

2019 witnessed a slowdown in industry growth:

— +2.8% in seats during the Summer 2019 season compared to

+5.2% in seats during Summer 2018;

— +1% in seats during the Winter 2019 season compared to

+5.5% in seats in Winter 2018.

This trend was partly explained by the aforementioned

bankruptcies since Winter 2017, as well as by the signiﬁcant

reduction in capacity at Norwegian Airlines and Eurowings.

In Summer 2019, Ryanair, easyJet, Wizz Air and Vueling remained

the growth drivers while Eurowings witnessed a deceleration after

its 2018 restructuring. Norwegian posted a signiﬁcant decrease

in both international and domestic ﬂows. The grounding of the

Boeing 737 Max aircraft slightly ampliﬁed the reduction in

capacity (an estimated -1.3% impact on growth) that had already

been planned. The Winter 2019 season is seeing contrasting

trends for the six main low - cost carriers. Wizz Air and, to a lesser

extent, Ryanair and Vueling capacity is up, while easyJet’s growth

is ﬂat (and sharply lower in Germany). Norwegian and Eurowings

capacity is down. For the ﬁrst time ever, the top six low - cost

airlines are growing at a similar pace to the legacy airlines.

During the Summer 2019 season, the industry’s medium - haul

capacity growth was driven by international routes, particularly

towards the southern European countries. As in previous years,

growth for most domestic ﬂows lagged that of international

ﬂows, except for Spain. In the Winter 2019 season, the overall

decline in domestic ﬂows is mainly due to the German and

Turkish domestic markets,

Competition remained intense in France over the summer of 2019

(+4.9% growth in seats), continuing to be driven by easyJet, Ryanair

and, to a lesser extent, Vueling. However, industry capacity in

France is lower in the Winter 2019 season due to the reduction

at AirFrance – KLM while Ryanair is still the growth driver. Growth

to/from Netherlands remains limited, owing to slot constraints.

(AirFrance – KLM analysis based on source 14).

European long - haul

Industry growth slowed in 2019:

— +5.2% in seats during the Summer 2019 season compared to

+8.6% in seats during Summer 2018;

— +3.2% in seats during the Winter 2019 season compared to

+8.7% in seats during Winter 2018.

The collapse of airlines like Jet Airways, WOW Air, Thomas Cook,

Aigle Azur and XL Airways contributed to a slowdown in capacity

growth across all regions as of the Summer 2019 season.

In Summer 2019, Norwegian signiﬁcantly reined in its pace of

growth which, together with the bankruptcy of Primera Air, led

to the lowest capacity growth on routes (+3.6% in seats) to North

America since Winter 2014. Over the same period, total capacity

to Latin America saw double - digit growth (+12.6%), capacity to

Asia and Sub-Saharan Africa was up by around 7%, capacity to

the Middle East was some 5% higher and capacity to the

Caribbean and Indian Ocean region remained unchanged.

AirFrance – KLM increased its long - haul capacity (+1.3%) at a

slower pace than Lufthansa Group and IAG, but remained the

largest airline group on long - haul routes from Europe.

In Winter 2019, seat capacity growth is down to only 3.2%, i.e. the

lowest growth in long - haul capacity since Winter 2012. The

low - cost and leisure airlines have reduced their capacity by 11.0%

for Winter 2019, compared to growth of 19.1% in the previous year.

AirFrance – KLM has upped its long - haul capacity by 3.9% for

Winter 2019, outpacing Lufthansa Group’s +1.5% and slightly

short of the growth in IAG’s long - haul capacity (+4.3%).

(AirFrance – KLM analysis based on source 14)

New passenger oers: Virtual Interlining and platforms

The Virtual Interlining (also known as self - connect) concept is no

longer the preserve of the low - cost airlines but has migrated to

full - service carriers like Emirates and Singapore Airlines notably

through easyJet’s “Worldwide by easyJet” platform (sources 15

and 16).

Latterly, Eurowings, Transavia and Jetstar Group/Tigerair Taiwan have

all announced Virtual Interlining options (sources 17, 18 and 19).

The recently - announced partnership between Jetstar Group and

Tigerair Taiwan resolves one of the major pitfalls with traditional

Interlining: passengers no longer have to retrieve their baggage

at the transfer airport but can beneﬁt from seamless transfer to

the ﬁnal destination (source 20). In Europe, Stansted Airport and

Kiwi.com are working on a similar solution (source 21).

Air Asia has started selling tickets for other airlines (even when

Air Asia is not part of the itinerary) on its website with the help

of Kiwi.com’s technology (source 22). The Asian carrier is looking

to become a one - stop travel shop and has realized that it can be

relevant to customers only if it avoids limiting itself to oering

itineraries on partner airlines.

1_VA_V10 22/04/2020 10:07 Page15

Kiwi.com is moving from an Online Travel Agency oering Virtual

Interline itineraries to a much broader platform including

door - to - door itineraries (bus, train, plane). Moreover, it oers

Virtual Fare Types in which it adds ﬂexibility (cancellation,

rebooking etc. ) to tickets that usually do not include such

ﬂexibility (source 23).

Cargo

During 2019, international freight demand measured in Freight-

Ton-Kilometers (FTK) decreased by 4.1% relative to 2018 (versus

+4.0% in 2018 versus 2017), while capacity measured in Available-

Freight-Ton-Kilometers (AFTK) increased by 1.7% (5.4% in 2018)

(sources 13 and 25).

Cargo trac growth turned negative in 2019 for the ﬁrst time

since 2012. The 3.3% annual decline in demand was the steepest drop

since 2009 at the time of the global ﬁnancial crisis. The amount

of air freight carried fell to 61.2million tons from 63.3million tons

in 2018. Cargo trac is expected to experience a modest

rebound with 2.0% growth in 2020, with the number of tons

forecast to reach 62.4million, still short of its 2018 level. Yields

should continue to slide with a 3.0% decline forecast for 2020,

an improvement on the 5.0% decline in 2019. Cargo revenues are

expected to fall for a third successsive year in 2020, to a total of

US$101.2billion, down by 1.1% on their 2019 level (source 24).

All regions posted a decline in trac during 2019, except for

Africa (+13%). One of the positive developments in recent months

has been an apparent thawing in the tone of the US-Chinese

trade negotiations. Scheduled US tari increases have been

delayed, and additional tari exclusions implemented on

October31 for US$300billion of goods. Although this position

could change rapidly, for now this amounts to good news for

world trade and the air cargo outlook (source 24).

Maintenance

According to estimates, the global MRO market, which comprises

the maintenance and modiﬁcation spending by aircraft operators

either directly or through sub - contractors, will be worth US$90billion

in 2020 (source: ICF International).

The trends in this business closely follow those of the commercial

airline ﬂeets globally and their utilization. In the short term, airlines

tend to focus on adjusting their use of older - generation aircraft in

that their costs, and particularly maintenance costs, are the

highest. The MRO operators thus suer from more volatile demand

on older - generation aircraft than on the next - generation models.

The market is also characterized by increased pricing pressure

resulting from ﬁercer competition between maintenance operators

(MROs) and more exacting requirements on the part of customer

airlines. Furthermore, a growing number of airlines are looking to

transfer the ﬁnancing of spare parts to maintenance service

providers within the framework of increasingly - large - scale contracts

(in terms of revenue, duration, complexity, etc. ). Lastly, the

competition from Original Equipment and Engine Manufacturers

(OEMs) and Original Aircraft Manufacturers (OAMs) has considerably

increased in recent years (see 1.3.3.1Business environment).

Sustainable aviation

Customers are increasingly concerned about their environmental

footprint when they travel, in Europe but also in many other parts

of the world, as seen in the “ﬂight - shaming” or Flygskam

phenomenon.

Beyond what is sometimes perceived as a long - term “aspirational”

goal set by the industry, (50% reduction in 2050 emissions

relative to their 2005 level), governments and the general public

expect concrete guarantees on the emission trajectory of aviation,

and on the key initiatives to support this trajectory (technology,

biofuel, etc. ).

In the absence of these guarantees, there is a signiﬁcant risk of

further taxation initiatives (eco - tax in France, tax increase in

Germany, etc. ) aimed at driving down demand and trac. To

counter this risk and reduce their environmental footprints, airlines

are investing massive amounts in measures like ﬂeet renewal and

participating in projects to promote biofuel development, otake

agreements and voluntary carbon osetting ﬁnanced by the

airlines and/or proposed to customers.

Air France- KLM — 2019 Universal Registration Document16

Presentation of the Air France - KLM Group

1 Market and environment

1_VA_V10 22/04/2020 10:07 Page16

Sources

1) Oxford Economics databank 03/01/2019; 2) IATA–Airline Industry semiannual report–December2019 update; 3) Oxford Economics– Germany report–December2019 update;

4) Oxford Economics–UK report–December2019 update; 5) Oxford Economics–US report–December2019 update; 6) Oxford Economics– China report–December2019 update;

7) Oxford Economics–Iran report–December2019 update; 8) Oxford Economics–Argentina report–December2019 update; 9) Oxford Economics– Chile report–December2019

update; 10) Oxford Economics–Bolivia report–December2019 update; 11) Bloomberg: https://www.bloomberg.com/news/articles/2019-12-02/opec-gambles-that-u-s-shale-s-

golden-age-is-over; 12) https://www.iata.org/publications/economics/Reports/Industry-Econ-Performance/Airline-Industry-Economic-Performance-Dec19-Report.pdf;

13) https://www.iata.org/publications/economics/Reports/freight-monthly-analysis/freight-analysis-oct-2019.pdf; 14) OAG analyzer extracts (snapshot Apr 14th, 2019 for IATA

Summer 18&19Medium Haul; snapshot Nov 4th, 2019 for IATA Winter 18&19Medium Haul; snapshot Mar 17th, 2019 for IATA Summer 18&19Long Haul; snapshot Oct 7th, 2019 for

IATA Winter 18&19 Long Haul); 15) https://www.businesstraveller.com/business-travel/2018/11/20/emirates-joins-easyjet-connections-service/; 16) https://www.businesstraveller.com/

business-travel/2018/09/10/singapore-airlines-joins-worldwide-by-easyjet-connections-service/; 17) https://newscloud.eurowings.com/en/press-releases/2019/q2/virtual-

interlining-eurowings-distributes-tickets-of-other-airlines-for-the-ﬁrst-time.html; 18) https://corporate.transavia.com/fr-FR/actualites/transavia-lance-transavia-smart-connect/;

19) https://atwonline.com/airports-routes/jetstar-group-tigerair-taiwan-sign-interline-agreement; 20) https://atwonline.com/airports-routes/jetstar-group-tigerair-taiwan-sign-

interline-agreement; 21) https://partners.kiwi.com/london-stansted-airport-teams-kiwi-com-revolutionise-transfer-trac/; 22) https://skift.com/2019/11/15/airasia-com-starts-

selling-competitors-ﬂights-via-kiwi-com-partnership/; 23) https://partners.kiwi.com/kiwi-com-introduces-virtual-fare-types-on-its-booking-page/; 24) https://www.iata.org/

pressroom/pr/Pages/2019-12-11-01.aspx; 25) https://www.iata.org/publications/economics/Reports/freight-monthly-analysis/freight-analysis-oct-2018.pdf

2019 Universal Registration Document — Air France - KLM

17

1

Presentation of the Air France - KLM Group

Market and environment

1

1_VA_V10 22/04/2020 10:07 Page17

1.2.1 The AirFrance – KLM

Group’s ambition

The Group’s business brings people, economies and cultures

together, and drives economic growth and social progress. The

overarching ambition of the AirFrance – KLM Group is to become

an aviation champion in Europe and one of the most powerful in

the world for its sta, customers and shareholders, while

assuming its role as a pioneer in sustainable aviation. As such,

ﬂight safety is both an absolute imperative that the Group owes

to its customers and sta, and a daily commitment.

The AirFrance – KLM value creation model addresses all of the

Group’s stakeholders, namely employees, shareholders, customers,

suppliers, authorities, institutional and non - governmental

organizations, and other local partners. As part of its day - to - day

activities, the Group interacts with diverse stakeholders, while its

business and operations have multiple impacts (qualitative and

quantitative) on society. The value creation model shows the

impact areas where the AirFrance – KLM Group adds value and

which, thanks to its fundamental strengths and unique competitive

advantages, enables a response to the societal and sustainability

challenges.

1.2.2 AirFrance – KLM:

core assets and unique

competitive advantages

As the European leader for intercontinental trac on departure

from Europe, AirFrance – KLM is a major global air transport player.

Its main businesses are passenger and cargo transportation

through its network activities, low - cost transportation and

aeronautical maintenance.

The Group takes action to reconcile growth with environmental

protection, social value and local development at its hubs and

destinations. By developing state - of - the - art technologies, investing

in R&D and innovation, and partnering with stakeholders, the

Group strives to optimize the use of its dierent forms of capital

and resources. This approach gives AirFrance – KLM a strong

position in the aviation industry’s competitive landscape.

People: 83,000engaged and professional

employees and a diverse culture

Air France – KLM is committed to the value of its workforce

worldwide. Through our employees’ collective dedication,

professionalism and accomplishments, AirFrance – KLM is able to

provide premium services and a caring journey, fostering lasting

relationships with customers while operating in an ecient and

safe manner.

Brands: a portfolio of attractive, strong brands

and a common frequent ﬂyer program

AirFrance – KLM has a portfolio of strong brands, positioned in

complementary markets with their own speciﬁc operating models,

aligned with customer expectations. The common frequent ﬂyer

program, “Flying Blue”, contributes to reinforcing the attractiveness

of the brands.

Partnership: a solid network of suppliers

and partnerships

AirFrance – KLM is pursuing its commercial integration strategy

with its principal partners worldwide, like Delta Air Lines,Inc. and

China Eastern Airlines, and through the SkyTeam alliance, to oer

value - added services and innovations, whilst reinforcing its

network and building mutual trust. Engaging with stakeholders

through sound and regular dialogue is also key for AirFrance – KLM

in terms of identifying emerging issues, tackling upcoming challenges

and better understanding their expectations. AirFrance – KLM

sees this as an opportunity to continue strengthening its

sustainable and local footprint, creating the basis for trust and

long - term acceptance, and developing its activities.

An extensive network operated with an optimized ﬂeet

The AirFrance – KLM Group currently operates one of the largest

networks between Europe and the rest of the world, organized

around the dual intercontinental hubs of Paris-CDG and

Amsterdam-Schiphol, which are two of the four largest connecting

platforms in Europe, and takes advantage of numerous partnerships

to oer its customers a global network. In Summer 2020, it will

serve 308destinations in 116countries. Given its presence in all

the major air transport markets, the Group also has a natural risk

hedge since no one market represents more than a third of

network revenues.

In 2019, Air France – KLM conﬁrmed its leadership position in

terms of trac with just over 104 million passengers carried

between Europe and the rest of the world, and on intra-European

routes on departure from the Group’s natural markets.

Finance: a stable shareholding structure

with the French and Dutch States,

Delta Air Lines and China Eastern

Financial capital not only ensures AirFrance – KLM’s ﬁnancial

sustainability but also its ability to accelerate its transformation

while enabling value creation with all other forms of capital.

Through the combined use of share capital, cash reserves and

debt, the Group is able to fund its infrastructures, optimize its

ﬂeet, develop its sta, innovate through digital investments and

beneﬁt its supply chain and community relationships.

1.2 STRATEGIC OUTLOOK

Air France- KLM — 2019 Universal Registration Document18

Presentation of the Air France - KLM Group

1 Strategic outlook

1_VA_V10 22/04/2020 10:07 Page18

Environment: an experienced and knowledgeable

industry player committed to contributing to

positive change

The Group is endlessly innovating so as to be a reference in

sustainability. Its ground and ﬂight operations have an impact on

the environment, including climate change, noise, air pollution

and waste. The Group strives to continuously improve all aspects

of its activities to reduce its environmental footprint. In particular,

it is contributing to the establishment of a sustainable biofuels

industry for aviation.

1.2.3 The value creation model

The AirFrance – KLM Group’s ambition is to become a European

aviation champion and one of the most powerful in the world for

its sta, customers and shareholders, while assuming its role as a

pioneer in sustainable aviation.

People: be the best place to work

AirFrance – KLM wants to position itself as an employer of choice and

is targeting a leading Employee Promoter Score. Our 83,000people

are our primary asset as they are the face of our company to our

customers and represent our brands across the world. The Group

will continue to invest in training to ensure their skills are top

notch, and further empower them through the use of digital tools,

enabling them to surpass our customers’ expectations.

The relationship linking the Group to its employees is based on the

underlying values of trust, respect, transparency and conﬁdentiality.

Customers: exceed customer expectations

AirFrance – KLM wants to ensure an unrivaled end - to - end customer

experience which exceeds customer expectations at all touchpoints.

The Group is targeting a leading Net Promoter Score by improving

the customer experience through personalized and digitilized

oers and best - in - class operational performance. Thanks to the

professionalism of the Group’s frontline sta, the quality of its

products and services, and an improved operational performance,

Air France, KLM and Transavia maintain a daily focus on customers.

Beyond the satisfaction of our customers on the quality of the

service AirFrance – KLM airlines promise to them, the ﬁnancial

impact of customer satisfaction is huge: it is a key driver of

Air France – KLM market share gains and revenue growth,

increasing customer loyalty and propelling customer growth.

Shareholders

Impact of COVID-19

post February 2020

Despite the measures initially implemented by the Group

in response to the COVID-19crisis, the deterioration in the

environment linked to the epidemic and the resulting

sharp reduction in its activity today lead the Group to

forecast a sharply deteriorated ﬁnancial trajectory

compared to the outlook presented on publication of its

annual results.

As the crisis continues, the conditions for a recovery

remain uncertain, both in terms of our air operations, but

more generally in terms of the timetable for an economic

and demand recovery.

Our current best estimates, incorporating all the measures

taken by the Group since the beginning of the crisis, show

that, in the absence of additional ﬁnancing, a liquidity

requirement is expected in the third quarter of 2020.

As a result, the AirFrance – KLM Group, Air France and

KLM are engaged in in-depth discussions with their

respective governments and ﬁnancial institutions to dispose

of the resources that will enable them to secure and

sustain adequate levels of liquidity by all means, notably

within the framework of the European Commission’s

Temporary Framework on State Aid in force published on

March19, 2020.

At this stage, given the various options currently being

envisaged and the quality of the discussions with the two

States and the ﬁnancial institutions, the AirFrance – KLM

Group is conﬁdent that it will be able to obtain additional

ﬁnancing to meet all its future ﬁnancial obligations and

enable it to ensure the recovery of its activity beyond the

current crisis.

Planet and society: contribute to the United Nations

Sustainable Development Goals

Through the initiatives of its airlines, AirFrance – KLM is committed

to leading the way in terms of sustainable aviation at both ﬂight

and ground operations level. The Group aims to continue its

eorts to reduce its environmental footprint by improving its

operations and processes, partnering and innovating in the

supply chain and mobilizing our sta and the industry.

2019 Universal Registration Document — Air France - KLM 19

1

Presentation of the Air France - KLM Group

Strategic outlook

1

1_VA_V10 22/04/2020 10:07 Page19

Air France- KLM — 2019 Universal Registration Document20

PEOPLE

83,000 engaged

and professional

employees and

a diverse culture

BRANDS

Portfolio of attractive,

strong brands and

a common frequent

ﬂyer program

“Flying Blue”

PARTNERSHIP

A powerful network

of suppliers and

partnerships

FLEET & NETWORK

An extensive network

operated with an

optimized ﬂeet

FINANCIAL

A stable shareholding

structure with the

French and Dutch

States, Delta Air

Lines and China

Eastern

ENVIRONMENTAL

An experienced

and knowledgeable

player in the

industry committed

to contributing

to a positive

change

OUR STRATEGY:

BECOMING A EUROPEAN

CHAMPION

OUR RESOURCES

OUR BUSINESS MODEL

MAKING

LOW COST

FEEL

GOOD

SHOWCASING

THE BEST OF

FRANCE AROUND

THE WORLD

STRONG

INNOVATIVE

GLOBAL

BRAND

With a European base and a global

network of more than 300 destinations,

the Air France-KLM Group

is a global aviation player in the

passenger, cargo and maintenance

businesses, represented by 3 strong

brands, and leading the way in

sustainable aviation

1_VA_V10 22/04/2020 12:13 Page20

2019 Universal Registration Document — Air France - KLM 21

1

LEADING

EMPLOYEE

PROMOTOR

SCORE

EPS

40

HOURS OF

TRAINING PER

EMPLOYEE IN 2019

NPS

104m

CUSTOMERS

IN 2019

NO.1

IN DJSI

CO

2

EFFICIENCY

1.5X

NET DEBT/

EBITDA RATIO

4.2%

OPERATING

MARGIN

SHAREHOLDERS

Reach top ﬁnancial

performance

STRONG

IMPROVEMENT

IN THE GROUP

OPERATING

MARGIN

LEADING

THE WAY IN

SUSTAINABLE

AVIATION

SUSTAINABILITY

Contributing to UN

sustainability goals

CUSTOMERS

Exceed customer

expectations

LEADING NET

PROMOTOR

SCORE

OUR VALUE CREATION 2019 PERFORMANCE

Optimize our Operating Model

Grow Proﬁtable Passenger Revenue

Leverage European Consolidation

Develop Customer Data, Flying Blue,

Cargo and E&M

Commit to Global Sustainability

CONTRIBUTING

TO THE UN SDGs

PEOPLE

Be the best

place to work

for our employees

1_VA_V10 22/04/2020 12:13 Page21

1.2.4 Strategic orientations

Five orientations have been identiﬁed to achieve the

AirFrance – KLM Group’s goals and build on the important 2019

achievements in terms of brand, ﬂeet and product simpliﬁcation.

Safety is paramount, a prerequisite that comes before all else. At

the heart of the trust of customers and sta, safety is key to the

Group’s activity and the sustainability of air transportation.

1.2.4.1 Optimize the AirFrance – KLM

operating model

The optimization of the AirFrance – KLM model will enable a

reduction in operating costs and increased eciency, taking full

advantage of the Group’s assets. Increasing commercial and ﬂeet

ﬂexibility is a Group priority allowed by continuous and trustful

social discussions. A number of changes have already been

approved and launched, enabling ﬂeet, product and cabin

optimization, and oering growth opportunities for Transavia

France.

a. To reach operational excellence, the AirFrance – KLM Group is

focused on optimizing and simplifying internal processes.

– since 2014, KLM has executed a successful transformation of

its organization and processes, through a series of structural

programs like the High Performance Organization (HPO),

the digitalization of operations, increased agility at network

planning and improved ﬂeet utilization. The results are

visible at the level of KLM’s unit cost and operational

eciency. KLM will continue its simpliﬁcation eorts

around ﬁve pillars: Customer & Product, network & Fleet,

Operational Excellence, People & Organization, Innovation

& Sustainability,

– Air France has also begun its transformation through an

ambitious program to simplify its processes and organization,

and redesign the support functions and managerial

structure, to reduce overheads, break silos, empower sta

and streamline processes;

b. Simplifying and renewing the ﬂeet is an important part of

these changes implemented by the Group. By reducing the

number of aircraft types and adjusting cabin layouts the

Group will gain greater operational ﬂexibility (operations,

marketing, catering, maintenance) and economies of scale.

– Air France is targeting a reduction from nine to ﬁve/seven

cockpits in the mid term. The Air France HOP regional ﬂeet

will focus on two aircraft types, the Bombardier CRJ1000

and the EMB170/190, compared with four aircraft types

currently, with around 50 - 60aircraft in the mid term. The

medium - haul ﬂeet will be modernized around the Airbus

A220 and the future replacement of the current

A320 - 321ﬂeet, targeting c.110 - 115aircraft in the mid term.

On long - haul, the Air France ﬂeet will be simpliﬁed around

the A330, A350, Boeing 787-9 and Boeing 777, targeting

around 118 - 123 aircraft in the mid term and two/three

cockpits versus the four currently. The current Air France

A380s will be replaced by new generation A350s,

– KLM is targeting a unique cockpit per haul (short, medium

and long - haul) over the mid term compared with the current

ﬁve. KLM Cityhopper’s regional ﬂeet will see the phase - in

of the Embraer 195, targeting 52 - 54aircraft over the mid

term. The medium - haul ﬂeet will still include the Boeing 737

with a target of 52 - 54aircraft. The long - haul ﬂeet will focus

on the Boeing 787 and 777, phasing out the Boeing 747

and A330,

– the Transavia France and Transavia Netherlands ﬂeet will

remain composed of Boeing 737s. The ﬂeet will reach

80to 115aircraft in the mid term;

The current deliveries of A350 and Boeing 787 aircraft will

contribute to a modernized Air France – KLM ﬂeet with a

stronger economic and operational performance, in addition

to an accelerated aircraft retroﬁt program with the goal of

oering in - ﬂight connectivity and a full - ﬂat Business Class

seats across the ﬂeet as soon as possible.

c. Growth forecasts for Transavia Netherlands and Transavia

France

– Transavia Netherlands will grow its capacity through ﬂeet

renewal, to remain the number one low - cost carrier in the

Netherlands. With demand still growing and slots

constrained, Transavia will consider ﬂying from secondary

and tertiary airports,

– Transavia France aims to become the number one

low - cost carrier in France in terms of based aircraft;

Transavia will thus strengthen its position in the core leisure

and VFR market segments, and diversify its network by

adding destinations in Northern and Eastern Europe.

d. The formation of the Air France – KLM Group oers the

opportunity to capitalize on the international reach of each

airline while continuing to build synergies. Leveraging this

potential will be key in the coming years. Much has already

been accomplished and has proven to be to the beneﬁt of all

our airlines. The synergies have concerned sales, revenue

management, strategic alliances, IT, cargo and maintenance.

Some areas can be further built on and will constitute the

next focus such as Fleet & network, Human Resources,

Commercial & Alliances, Purchasing & Procurement,

Digital & Data Management.

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Presentation of the Air France - KLM Group

1 Strategic outlook

1_VA_V10 22/04/2020 10:07 Page22

1.2.4.2 Grow proﬁtable passenger revenue

In recent years, the AirFrance – KLM Group has built a powerful

asset through its complementary dual hubs in Amsterdam and

Roissy-Charles de Gaulle, increasing the range of destinations,

frequencies and schedules proposed to customers. In the coming

years, the Group’s airlines will focus their growth on the most

proﬁtable segments.

Given its positive proﬁtability, KLM can grow on all segments,

leveraging powerful positions on connecting trac. The brand is

looking to become the best connection carrier to/from Europe,

and will strengthen its leadership at Schiphol.

Air France will optimize its revenue mix towards the more proﬁtable

premium segments:

— in the past, to comply with internal available seat - kilometer

(ASK) production rules, Air France had to reduce the size of

its Premium cabin (Premium Economy and Business) to increase

the oer of Economy seats. Thirteen Premium seats were thus

removed from the Air France 777 - 200ERs between 2014

and 2019.

This constraint prevented Air France from growing on the

higher - margin Premium segment, despite the market demand

growth: the number of industry long - haul Premium seats

increased by 8% between 2014 and 2019 while Air France’s

Premium long - haul capacity grew by only 4% over the same

period;

— a new internal production balance agreement was negotiated

and signed with the unions in 2019. Thanks to this new

agreement, which is no longer ASK-based, Air France can now

optimize cabin conﬁgurations and the ﬂeet, and thus respond

to the market demand by increasing its proportion of

Premium seats;

— Air France will focus more on its main strengths: Paris local

and high - yield connecting trac to extract maximum value

from local and Premium markets, and a redesign of the Orly

strategy together with Transavia to strengthen the Group

position at this airport.

1.2.4.3 Leverage European consolidation

Within a context of a major European consolidation, the

AirFrance – KLM Group will pragmatically evaluate acquisition

opportunities, positioning itself solely on transactions that are

aligned with the Group’s strategy and DNA.

1.2.4.4 Grow non - passenger businesses (Customer

Data, Flying Blue, E&M) and Cargo

Air France – KLM’s strategy is to reinforce and diversify its

portfolio of activities by growing non - passenger businesses on

four pillars: leveraging customer data, the “Flying Blue” loyalty

program, Cargo and Engineering & Maintenance.

— the AirFrance – KLM Group has a signiﬁcant opportunity to

further leverage its commercial footprint, by utilizing its

well - established loyalty program, Flying Blue, and customer

data to personalize the oer to provide a more attractive

customer value proposition at a reduced cost of sale.

AirFrance – KLM will accelerate harnessing the beneﬁt of our

customer database including Flying Blue information, and

data from airport and inﬂight touchpoints, to push the right

oer to the right client on the right channel at the right time;

— Flying Blue is aiming to increase its contribution to Group

sales and margin via the sale of Miles, providing a new digital

experience and enabling payment in Miles;

— AirFrance – KLM has built a very strong position over the past

few years in the Engineering & Maintenance ﬁeld, contributing

positively to the Group’s operating results. The order book has

grown by 36% in less than four years and the Group has

leveraged Air France and KLM ﬂeet renewal to build a strong

presence with Next Gen products and prepare for future

long - term growth.

This will continue in the A220 market. AirFrance – KLM Engineering

& Maintenance has a strong worldwide presence with an

admirable position in the fastest - growing E&M market, Asia, which

represents 41% of sales. AirFrance – KLM will invest in developing

its E&M business by digitalizing its operations to achieve

proﬁtable growth, building on the current solid order book and

major strategic partnerships.

Cargo is by nature a volatile but growing market. After

restructuring, as the number ﬁve global player, AirFrance – KLM

Cargo constitutes a strong foundation that can be further developed.

For 2020 and beyond, the aim is to further increase the Cargo

contribution through innovation and transformation, focus on

high growth segments (for example SMEs, Pharma, fresh

products, e - commerce) and secure eective partnerships.

1.2.4.5 Commit to global sustainability

As a global aviation player, the Group acknowledges the importance

of Corporate Social Responsibility, having headed the Dow Jones

Sustainability World Index for the ﬁfteenth year running.

The AirFrance – KLM strategy is centered around four pillars:

— environment: Reduce our environmental footprint by improving

our operations, by innovating in the supply chain and by

mobilizing our sta and the industry;

— human resources: Maintain a responsible social policy and

encourage personal development to ensure the motivation

and drive of our employees;

— customer trust: Integrate sustainability within the entire value

chain to oer our customers sustainable and innovative

products and services;

— societal value: Create economic and social value, through our

network, at hubs and destinations.

2019 Universal Registration Document — Air France - KLM 23

1

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Strategic outlook

1

1_VA_V10 22/04/2020 10:07 Page23

1.3.1 Network business

(passenger and cargo):

maintained commercial

oensive and growth

The network business corresponds to passenger and cargo

transportation services on the scheduled ﬂights of the network

airlines, Air France and KLM. The network business is

AirFrance – KLM’s principal activity, contributing approaching

87% of the Group’s revenues.

The Group ampliﬁed its growth trajectory by initiating numerous

improvements to its network. Projects around the optimization

of ﬂeet utilization, improved operational performance, simpliﬁed

and harmonized crew rotations, the product, on - board connectivity

and the ﬂeet were thus launched and were subsequently

reﬂected in the customer proposition.

In 2019, network capacity was built based on a combination of

these dierent factors within a changing economic context

(higher oil price, exchange rate ﬂuctuations), and to satisfy the

expectations of the dierent customers (Leisure, Business) for

new destinations, with increasingly exacting requirements in

terms of the quality of operations.

The operational constraints were re - evaluated to optimize

operational eciency and increase levels of customer satisfaction.

Activity grew by taking advantage of new route opportunities

while, when necessary, adjusting the network. 2019 proved to be

a year of signiﬁcant growth, with Air France and KLM serving

116countries and 312destinations.

1.3.1.1 Short and medium - haul operations

at the heart of the Group’s strategy

An expanded network with new routes, oriented towards

the fastest - growing areas in Europe

The short and medium-haul network remains central to the

Group's strategy:

— on the French short - haul network, Air France interlinks the

French regions with daily ﬂights from 31airports. Additionally,

the La Navette product responds to the speciﬁc needs of

Business travelers by serving ﬁve cities to/from Paris-Orly

(Marseilles, Toulouse, Nice, Bordeaux and Montpellier).

To contend with the increased competition from the TGV, the

OuiGo oering and low - cost carriers, Air France adjusted and

restructured its schedule and production capacity ro improve

its operational robustness and the service oered to

customers. Capacity was thus limited by the size of aircraft

module (reduction in the Airbus ﬂeet, gradual phase - out of

the HOP ATRs), the network was restructured, new routes

were opened and the number of seasonal ﬂights increased.

The La Navette product is continuously being improved with

optimized frequencies and a more qualitative ﬂeet.

To complete its proposition, Air France maintains its partnership

with Blablabus: this partnership is an opportunity to become

a player in interoperability, oer passengers more connecting

opportunities and expand the catchment areas. From the

same perspective, the TGV Air product (combined train +

aircraft proposition) is oered to our customers;

— the medium - haul network is constructed around the Paris-CDG

and Amsterdam-Schiphol hubs, oering multiple connecting

opportunities in Europe. It proposes an attractive schedule of

ﬂights accompanied by a fare oer adapted to the needs

of all passengers, thanks to three price ranges irrespective of

when tickets are purchased (Light, the simplest travel

proposition, Standard the best value and Flex the most ﬂexible).

In Summer 2019, the attractiveness of the CDG hub was reinforced

with a more - than - 5% increase in connecting opportunities.

In 2019, Air France introduced new routes on the short and

medium - haul network;

— seven destinations on departure from Paris-Charles de Gaulle

operated by Air France: e.g. Belgrade (Serbia), Tbilissi (Georgia);

— in the seasonal Summer period, the opening of attractive

leisure destinations: Olbia (Italy), Palermo (Italy), Split (Croatia),

Heraklion (Greece);

— new routes on departure from the French regions: Lorient-

Lyon, an oer between the French provinces and Corsica, and

a reinforced oer between the French provinces and Europe;

— in parallel, an increase in capacity on fast - growing markets like

North Africa (Marrakesh), Germany (Munich, Hamburg), Iberia

(Oporto) and Italy (Milan).

Within a context of more intense competition, the Group is thus

demonstrating its ability to adapt to changing trends and seize

opportunities. Agility and pragmatism have become the principles

behind the construction of the oer, in terms of opening new

routes, capacity adaptation and the oer of seasonal destinations.

These principles enable the generation of new opportunities for

growth and proﬁtability.

1.3.1.2 Long - haul operations: capacity growth,

preservation of market share and ﬂeet

renewal

Key principles: capacity growth, preservation of market

share and ﬂeet renewal

In long - haul, the Group increased its activity in 2019. Within an

increasingly complex environment in which industry growth

exceeded trac demand, the Group leveraged its balanced

network by redeploying capacity to growth areas and opening

new destinations in the business and leisure markets.

On the long - haul network, Air France opened two new destinations:

Dallas (United States) and Quito (Ecuador).

1.3 ACTIVITIES IN 2019

Air France- KLM — 2019 Universal Registration Document24

Presentation of the Air France - KLM Group

1 Activities in 2019

1_VA_V10 22/04/2020 10:07 Page24

Change in capacity by geographical region

AirFrance – KLM’s growth was mainly driven by the Americas

and Asia.

North America: capacity reinforced within the framework of the

transatlantic joint - venture

In the United States, Air France opened Dallas with ﬁve ﬂights a

week while reinforcing the Seattle service (addition of two

frequencies a week) over the Summer and Washington (addition

of a new ﬂight four times a week) in the Winter.

In Canada, Air France added a new ﬂight to Toronto three times

a week over the Summer and a weekly frequency to Montreal in

the Winter. It was also on the Toronto route that Air France

decided to launch its new A350 aircraft.

In Mexico, two weekly frequencies were added on Cancun in

Winter to reach a daily ﬂight.

Central and South America, Caribbean-Indian Ocean:

signiﬁcant growth

In South America, Air France opened a Quito service with three

weekly ﬂights.

The service to South America was also reinforced with the

addition of weekly frequencies to Lima (one additional frequency

in Summer and two in Winter), Santiago (three additional

frequencies in the Winter), San José, Panama and Fortaleza, each

with one additional frequency over the Summer.

In the Caribbean-Indian Ocean, the Winter season saw a strong

increase in frequencies to avoid a fall in capacity following

maintenance operations on our 777 - 14J aircraft. Six weekly ﬂights

were thus added to Fort - de-France, four to Pointe - à-Pitre and

two to Réunion Island in the Winter season.

Frequencies were also increased on Saint Martin (one weekly

frequency) and on Mauritius during the school holidays.

Asia and the Middle East: a more mixed picture

At the same time, the Asia-Middle East network saw capacity

growth via increased frequencies to Tokyo-Haneda (+2/7 in the

Summer season and in Winter for a 14/7oer), Osaka in Winter

(+1/7) and Dubai in Winter (+2/7 for a 12/7oer). Bangkok became

a slightly more seasonal destination with the loss of two frequencies

over the Summer for a total of 3/7.

Africa: adapting to the market dynamics

Air France adapted its schedule to take advantage of market

opportunities: a third ﬂight was added on Abidjan (to 19/7per

week) and two frequencies were added to Nairobi (5/7).

The Nouakchott-Conakry route become a circular ﬂight, thereby

oering a direct service to Conakry outbound from CDG.

Fleet and product: towards a modern long - haul ﬂeet,

oering ever - more comfort

AirFrance – KLM’s long - haul ﬂeet is composed of 176aircraft. The

Group is pursuing its strategy of ﬂeet renewal and modernization

involving, notably, cabin upgrades and access to on - board satellite

connectivity enabling an in - ﬂight WiFi oer for customers.

The Air France Group ﬂeet numbers 109long - haul aircraft while

the KLM ﬂeet is composed of 67aircraft.

Fifty - three Boeing aircraft are now equipped with the BEST

Business and Leisure cabins (25777 - 200s, 19777 - 300s and nine

787 - 9s) with, in the Business cabin, the Cirrus full - ﬂat seat from

Zodiac installed in a “four - front - facing” conﬁguration, oering aisle

access for every customer. In Economy, the Zodiac Z300 seat is

ﬁtted with an 11 - inch Panasonic screen enabling customers to

beneﬁt to the full from the video oer. In La Première, on the

777 - 300s, the four suites are now much sought - after by customers.

The 787s joining the Air France ﬂeet since 2017 came

ready - equipped with these BEST cabins with, notably, a signiﬁcantly

improved seat in Premium Economy, oering more space and

enhanced comfort.

In parallel, during 2019, Air France began the BEST retroﬁtting

work on its 15 - strong ﬂeet of A330s, with the installation of a new

Stelia seat in Business. The new conﬁguration includes sixteen

additional seats (36J/ 21W/167Y). The ﬁfteen aircraft will be

completely refurbished over the summer of 2020.

In January2020, Air France continued it ﬂeet renewal and unveiled

the new travel cabins available on board its Boeing 777 - 300s

principally serving destinations in the Caribbean and Indian

Ocean region. On board, the aircraft’s 472seats (14 in Business,

28 in Premium Economy and 430 in Economy) have been

comprehensively redesigned to oer the highest standards of

comfort, with a soft, warm ambiance in the airline’s colors. At the

end of 2020, the ten Boeing 777 - 300s (so - called Caribbean-

Indian Ocean) will be comprehensively refurbished. In January2020,

the oer on board the Economy cabin as harmonized across the

whole long - haul network.

On September27, 2019, Air France took delivery of its ﬁrst A350.

This latest - generation more environmentally - friendly aircraft

oers 324seats, with 34 in the Business cabin, 24 in Premium

Economy and 266 in Economy.

The new conﬁguration in the Business cabin (1 - 2 -1) has 34seats

with direct aisle access which convert into a near - two - meter - long

full - ﬂat seat.

In Premium Economy, the brand new Recliner seat is 48cm wide,

reclines to 124° and has a 96cm seat pitch between each row.

In Economy, the seat has been redesigned for even more comfort,

with a reinforced ergonomic seat cushion, a 118° seat recline and

a 79 - cm seat pitch for more leg room.

The long - haul Business proposition is gaining consistency,

enabling the oer of a full - ﬂat seat on ever - more of the airline’s

aircraft. At the end of 2020, 80% of Air France’s long - haul ﬂeet

will be equipped with full - ﬂat seats.

In 2019, KLM continued its ﬂeet renewal program which is key to

its growth ambitions and its plans to make the aeronautics

industry more sustainable. Between 2015 and 2019 a total of

64 new aircraft entered the ﬂeet, including those for KLM

Cityhopper and Transavia. The cabin upgrade program on

in - service aircraft was pursued. All thirteen Airbus A330s are now

retroﬁtted and boast new seats, new in - ﬂight entertainment and

new cabin interiors.

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Activities in 2019

1

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Three Boeing 747 were retired from the ﬂeet in 2019. They were

replaced by the Boeing 787 - 10, which is the stretched version of

the Boeing 787 - 9with an additional 50seats. KLM will receive an

additional four 787 - 10s in 2020.

The aircraft in the European ﬂeet are being replaced with larger

versions. KLM took delivery of four Boeing 737 - 800aircraft while

two Boeing 737 - 700s were sold. Transavia took delivery of two

Boeing 737 - 800s. KLM also decided to replace part of its EMB190

ﬂeet with the newer and larger Embraer E195-E2, placing an order

for 21leases and purchase rights for a further fourteen aircraft.

Once delivery starts in the ﬁrst quarter of 2021, these aircraft will

be used by KLM Cityhopper on its European destinations.

Furthermore, in 2019, the decision was taken to swap KLM’s A350

orders with Air France’s Boeing 787 orders. This will bring signiﬁcant

eciencies, notably in terms of ﬂight deck crew, cabin crew,

maintenance and day - to - day operations, contributing to further

cost reductions for KLM. Such synergies underscore the strength

of the Air France – KLM Group. The Cargo ﬂeet remained

unchanged at four aircraft. The total consolidated ﬂeet, excluding

training aircraft, grew from 209 to 214 aircraft, of which

67long - haul aircraft.

On its domestic and European network, Air France is

pursuing the upgrade to its customers’ travel experience

Air France is the ﬁrst airline in the world to have chosen Safran

Cabin’s latest ECOS luggage compartments to equip its A320

and A321 single - aisle short and medium - haul aircraft, thereby

oering its customers more space to stow their cabin baggage.

The ECOS “Ecient Cabin Open Space” system oers up to 60%

more storage capacity than the luggage racks currently available.

It consists of new bins, ceiling and cove panels that provide a

lower shelf height for ease of loading and visibility. The new

luggage compartments are also equipped with easy - to - reach

doors which do not encroach on the cabin aisle. Robust,

lightweight and easy to maintain, the ECOS system is simple and

fast to install, requiring no aircraft modiﬁcations. It provides an

easier and smoother boarding experience, greatly reducing the

time spent searching for luggage space on board or the need to

put certain bags in the hold. Aircraft turnaround times will also

be reduced to improve eciency and on - time performance.

In total, Air France plans to gradually equip its 40A320s and

11 A321s with 1,342 new luggage compartments between

September2020 and September2022.

On board connectivity: ongoing roll - out of

the Air France CONNECT oer across the Air France ﬂeet

In 2019, Air France enabled its customers to remain connected

on board by installing the latest satellite connectivity technologies

across the whole of its ﬂeet.

Equipment on the A330 and Boeing 777: Gogo

Equipment on the A320 family (Airbus 318, 319, 320, 321):

Orange/Global Eagle Entertainment

The aircraft joining the ﬂeet arrive already equipped: 787:

Panasonic/A350: Inmarsat

Progressive deployment across the whole ﬂeet by the end of

2020.

At the end of January2020, 95aircraft had been equipped,

51long - haul and 44short/medium - haul.

From their personal devices (smartphone, tablet, computer),

customers can thus:

— use their instant messaging applications free of charge;

— purchase passes to surf the internet;

— beneﬁt from a wide selection of services and entertainment

to watch free of charge, notably on short and medium - haul

ﬂights.

With Air France CONNECT, customers can access three WiFi

passes from their own devices:

— a free “Message” pass for everyone, to send and receive

messages for the duration of the ﬂight;

— a “Surf” pass from €3to €18to surf the internet, and consult

and send emails;

— a “Stream"pass from €10to €30to beneﬁt from high - speed

internet.

The Air France CONNECT proposition is progressively being

expanded to oer customer additional services such as shopping,

exclusive access to the La Cave Air France cellar, a wide range of

activities and a ride - hailing service with Hertz DriveU.

On the short and medium - haul ﬂights, customers without

individual screens can enjoy a wide range of entertainment free

of charge: ﬁlms, TV programs, two live television channels, music,

audio books, newspapers and magazines, and games. Customers

can also ﬁnd all the ﬂight and connecting information they need

thanks to the LEA travel assistant. To respond to the expectations

of passenger and improve connectivity, KLM is equipping more

aircraft with WiFi. In 2019, KLM took delivery of four Boeing 787-10

equipped with WiFi and installed WiFi on ﬁve of its Boeing 777-200s

and ﬁve of its Boeing 777-300s. At the end of 2019, 53% of the

intercontinental ﬂeet had been connected and this percentage is

set to increase to 100% in the spring of 2021. KLM Citihopper’s new

Embraer 195-E2 will also be equipped with the WiFi technology.

Gastronomy on board: new signature dishes in 2019

As an ambassador for ﬁne French cuisine, Air France entrusts its

La Première and Business class menus to renowned chefs. In

2019, in collaboration with the Servair Culinary Studio, the

company welcomed two new French Michelin - starred chefs,

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Andrée Rosier and Emmanuel Renaut. All the talented chefs

working with Air France thus take part in the design of menus,

the choice of products and the creation of gourmet dishes to be

enjoyed in the sky, on ﬂights departing from Paris and numerous

airports worldwide.

Since July2019, Air France has taken its collaboration with chefs

in the Business cabin to another level. Their signature dishes now

account for all of the à la carte options for hot dishes

(1)

.

The signature dishes are also available in Business on board the

medium - haul ﬂights from/to Algiers, Amman, Athens, Bucharest,

Casablanca, Erevan, Istanbul, Kiev, Marrakech, Moscow, Oran, Rabat,

Stockholm, Soﬁa, St Petersburg, Tel Aviv, Tunis and Warsaw.

On departure from Paris in the La Première cabin:

— from January to March2019: Michel Roth;

— from April to June2019: dishes signed by Joël Robuchon, in

hommage to the prestigious Michelin - starred chef who

presided over the Servair Culinary Studio;

— from July to October 2019, Régis Marcon, the legendary

French chef, recognized by his peers – Bocuse d’Or in

1995–and acclaimed by critics with three Michelin stars;

— from November 2019 to February2020, for the ﬁrst time,

Emmanuel Renaut will be creating dishes for Air France’s La

Première menu. Awarded the title of Meilleur Ouvrier de

France, triple - starred Emmanuel Renaut belongs to a new

generation of chefs who are reinventing Savoyard cuisine.

On departure from Paris in the Business cabin:

— from January to March 2019: Anne Sophie Pic. For her

restaurants in Valence, Paris, London and Lausanne she totals

seven Michelin stars, making her the female chef with the most

Michelin stars in the world;

— from April to June2019: Arnaud Lallement, three stars in the

Michelin Guide;

— from July to October2019, there is Savoyard chef, Guy Martin,

a ground - breaking chef of his generation;

— from November to February2020, for the ﬁrst time, Air France

has entrusted its Business class menu to Andrée Rosier, the

ﬁrst female chef to be awarded the title of Meilleure Ouvrier

de France in 2007 and a Michelin - starred chef.

KLM Inﬂight Services continued to reduce the weight of its

product, for example through lighter meal trays. In December 2019,

KLM Inﬂight Services piloted its Closed Loop initiative, aimed at

working with recycled catering supplies, on the Vancouver ﬂights.

KLM is the ﬁrst airline in the world to trial the recycling of dierent

catering items within a closed-loop system.

In 2019, Air France rolled out a number of initiatives on board all

its ﬂights, mainly in the Economy and Premium Economy cabins:

plastic cutlery and stirrers were replaced with wooden items

(FSC-certiﬁed birch from sustainably-managed forests), all the

cups used are in paper and the coee and cutlery kits are now

packaged in eco-responsible materials. To avoid waste, creamer

is provided on request by customers.

1.3.1.3 Acceleration in customer - focused

initiatives to become the number one

for Customer Intimacy

AirFrance – KLM Digital aims to be the travel industry’s

leading sales powerhouse by providing the most relevant

oers and services to our customers and a seamless

experience over the customer journey

Digital and the Group’s customers are one and the same. Digital

channels now enable AirFrance – KLM to sell tickets and satisfy

customers, in their location and at the time of their choice.

In future, technology will give the Group an unprecedented level

of control. With the end of the Full Content Deal, the Group is

now free to remodel its communication and support policy as it

would wish.

The pillars of digital

Digital is one of the Group’s largest sales channels with the direct

online channels accounting for 36% of the total tickets sold.

Digital services also contribute to oering an enhanced customer

experience, with personalized products and services. Every week,

the Group handles 52,000social media messages, with 50% of

the responses supported by Artiﬁcial Intelligence tools.

A powerful digital sales engine

The Group has learned a great deal since the deployment of digital.

Firstly, that digital channels need to be fast, easy to use and

recognizable. Secondly, that direct online channels contribute to

an improved level of customer service, enabling contact to be

personalized and forging long - term relations. Lastly, that the

online journey must also be as convenient and relevant as possible,

whether the customer is comparing ﬂights, searching destinations

or looking for trip ideas. These aspects have become the three

key drivers for our digital sales engine.

Milestones

One important milestone was the roll out of the new digital

platform, merging expertise and back - end platforms to create a

powerful sales and service engine. This enables the Group to

accelerate its product development, thanks to a single

development ﬂow and team for the two brands, leading to one

of the biggest digital platforms in the industry.

As an international Group selling its digital oer in 139markets,

AirFrance – KLM deploys substantial eorts towards an approach

that is both global and local. Within this context, the Group

developed the AFKL Digital platform for the local teams, aligned

performance management and launched a toolkit for

upper - tunnel activities.

2019 Universal Registration Document — Air France - KLM 27

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Presentation of the Air France - KLM Group

Activities in 2019

1

(1) Stockholm, Soﬁa, Bucharest, Algiers, Oran, Tunis, Warsaw, Rabat, Marrakech, Casablanca, Kiev, St Petersburg, Athens, Istanbul, Moscow, Tel Aviv, Erevan, Amman.

1_VA_V10 22/04/2020 10:07 Page27

Key projects for markets in 2020

This year, the Group is planning some major improvements to

underpin growth in direct online sales, targeting a 40% share of

coupons sold in 2022: a new live worldwide digital platform, a

digital marketing dashboard, Business Travel Services and the

ﬁrst personalized bundles under New Oer Management.

Air France – KLM’s goal is to keep on increasing yield and

incrementality, and its planning a move from an e - acquisition

channel to a customer - centric perspective via an omni - channel

approach.

Key successes for AirFrance – KLM Digital

Customer service organization of the future

The Group has never ceased developing and expanding its

dedicated social media team. By digitalizing its services,

Air France – KLM is now able to respond to its customers

24/7across all its channels in ten languages. It is now leveraging

this to build the service organization of the future: a fast and

high - quality service, combining a technological and human

response. Thanks to chatbots and artiﬁcial intelligence, combined

with the expertise of 500agents worldwide, AirFrance – KLM has

increased its Net Promoter Score by 15points, in a context of 30%

growth in the messages received.

This performance has been recognized by the whole industry and

by Facebook which, during the annual worldwide F8 event at San

José in the US, welcomed the Group’s strategy as one of the best

in class for building excellent customer service experiences on

Messenger. The Group plans to pursue the development of its

services on the social media, aimed at assisting and advising

customers, and driving sales.

Personalizing the oers and advertising

As an airline Group, Air France – KLM aims to sell tickets and

additional services but it wants to do this by tapping into the

existing behavior of its passengers in a smart way: personalized,

relevant and ecient. To this end, it uses all the actionable

insights at its disposal, together with its performance mindset

and way of working, to create personalized advertising for its

products and services.

Its in - house Data platform, aggregating the data of 100million

customers, enables the building of a smart personalization strategy:

no dependency on any one data provider, access to real - time

information for frontline sta and a means of personalizing the

messages. Above all it enables the highest - possible level of GDPR

compliance to guarantee the conﬁdentiality of customer data.

The Group’s priority is to be an open, transparent and trusted

party for customers and other stakeholders.

The in - house digital Media Buying platform also enables the

Group to limit marketing pressure, personalize its advertising and

ensure cost control over its media spends.

Since the Group’s approach is pragmatic and “personalization”

extremely important, irrelevant elements are starting to be

removed from its advertising. AirFrance – KLM is looking to move

from an acquisition - channel to a customer - centric perspective.

Using an omni - channel approach means responding to customer

needs on the right channel at the right moment in their journeys.

Memorable experiences

The Group wants to exceed customer expectations by oering

them memorable experiences. It also believes that time spent on

its apps, websites and channels could be reduced if everyone

does their jobs well. It also believes that the moments spent with

AirFrance – KLM can be turned into memorable experiences.

To enhance the customer experience at key moments in their

journeys, the Group has launched functionalities that add value

to its oer: new payment methods (Apple Pay, Money pool, etc. ),

Follow My Bag (customers can track their bags through the three

main stages in their travel, check - in, embarkation and retrieval)

and Walking Timeline (a personalized guide to steer connecting

passengers through the airport). Similarly, in the event of service

disruption (ﬂight delay or cancellation), Air France has developed

massive rerouting solutions (via OPR), enabling customers to be

oered an alternative within record time, together with the

related services (ICoupon, digital format service voucher).

Air France is also the ﬁrst airline to propose a 100% digital

experience for Unaccompanied Minors.

The mobile app is still greatly appreciated by customers with high

satisfaction rates on shopping and nearly 400,000downloads

per month for the Air France and KLM apps.

Better together

The way companies collaborate has changed and the Group sees

new partnerships with digital platforms as key to realizing its

digital transformation as an organization and to oering its

customers more added value.

A technological pioneer

Since its inception, the Group has consistently sought ever - better

solutions to existing problems. That is why it uses new, emerging

technologies like voice assistants, Artiﬁcial Intelligence (AI) and

Augmented Reality (AR), to assist its customers more eectively.

For example, at Roissy-CDG airport, all the connecting routes are

now available in the Air France app. Similarly, Air France is the

ﬁrst European airline to have embedded RFID technology to

facilitate the traceability of baggage at Roissy-CDG, in collaboration

with Paris Aéroport.

Artiﬁcial Intelligence

The AirFrance – KLM strategy is to ﬁnd the best balance between

human interventions and technology, the latter’s continuous

development leading to greater eciency. Thanks to Artiﬁcial

intelligence, the Group is able to assist more customers, more

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eectively and more rapidly. Artiﬁcial intelligence now handles

50% of messages on the social media. In the event of service

disruption (ﬂight delay or cancellation), customers can communicate

with a chatbot for a rapid, interactive response to their requests.

Voice assistance

Voice platforms are the interfaces of tomorrow. Irrespective of

their location, the Group wants to oer its customers the best

possible travel companion. Voice assistants constitute the new,

fourth entry point to date, after apps, websites and the social

media. AirFrance – KLM was one of the ﬁrst airline groups to

propose services on Google Home and Amazon Alexa, on which

it currently has thousands of users.

Contributing to the sustainable development strategy

Digital has made a material contribution to the action plan on the

two major strategic pillars: reducingCO

2

emissions and carbon

osetting. By oering their customers a 100% digital experience,

Air France and KLM can limit their use of paper and prioritize

digital boarding cards.

In terms of carbon osetting, during the ticket booking process,

AirFrance – KLM oers customers the opportunity to voluntarily

oset theirCO

2

emissions via osetting programs or by making

a donation in favor of the planet to ﬁnance forestry plantation

projects selected by the Group.

For its ground operations, Air France is committed to an ambitious

plan to replace 90% of its fossil - ﬁred ramp equipment (baggage

trailers, boarding walkways, etc. ) with electric equipment by

2025. Innovative solutions are being implemented with startups

like Carwatt, implanting batteries recycled from the automotive

industry in baggage conveyor belts.

Key ﬁgures: digital for the Group in 2019

564million visits on the digital touchpoints

–1.5m per day

70% online check - ins

€4,6bn generated online (NTR)

39million fans and followers on social media

550+ agents dedicated to social media: the largest team in the

airline industry

40,000iPads issued to employees and crews

Major industry accolades in 2019

In 2019, both Air France and KLM won some major accolades.

During the Facebook F8 event, Air France won exemplary brand

for the customer experience on Messenger and the award for

Digital empowering sta during the hub Forum in Paris. KLM also

received several awards: Gold for Travel Assistant (Spin), number

one for volume answers via the Social Media (Emerce), and

Bronze for Family Updates and Gold for Travel Assistant (Lovies).

Customer intimacy increasingly anchored

in Air France’s customer relations

In 2019, Customer Intimacy remained at the heart of Air France’s

Customer strategy.

The company continued to oer all customer - facing sta the

option to share their experience around “cross - functional cafés”;

since 2014, this program has reached more than 1,500people.

Remaining within the framework of Customer Intimacy,

cross - cutting targeted training programs were rolled out for La

Première sta, bringing together 60 call - center agents,

1,200ﬂight crew personnel and 150lounge agents. Hub managers

also beneﬁt from the Nouvel Elan de la Relation Attentionnée

training. For the joint Air France and KLM international teams, the

We Care for Our Customers program (international version of

Customer Intimacy) was deployed in 2019. Fifteen call centers,

i.e. 2,400agents and 180 international outstations, beneﬁted

from this.

The customer continuity function was extended to all our

customers (beyond the holders of Flying Blue or Air France

cards). This tool which is accessible to the sales teams, oers an

ever - more - comprehensive vision of our customers in the strict

respect of the data protection regulations. More than 33,000cases

were initiated in 2019, giving contextual information on the

journeys under way for customers, oering at each touch point

the opportunity to use this information eectively for greater

personalization of the journey.

2019 saw the expansion of the Empowerment initiatives that had

been successfully trialed with cabin crews. Within the framework

of the Gift For Care project, 30,000gifts were oered to our

customers across the network. Furthermore, following the very

positive Lab Empowerment experience realized in 2018 with a

sample of hostesses and stewards, this initiative was extended to

all 14,000cabin crew sta in 2019, giving them the possibility of

sending a post - ﬂight personalized gift via the Air France

Shopping platform.

In 2019, the Customer Action Loop initiative rolled out across

Air France’s long - haul ﬂights was extended to all short and

medium - haul ﬂights. All Air France teams can now poll customer

opinions on the experience they have just had in real time. This

customer feedback is now an integral part of crew brieﬁngs and

enables the implementation of management actions to further

enhance the customer experience. Air France crews were thus

able to access some 1,200,000customer feedback data points

in 2019.

Air France also continued to leverage its Club composed of some

100frequent ﬂyer customer members who are regularly asked

to volunteer their input on dierent travel - related issues. Some

twenty co - creation workshops took place in 2019, bringing

together the members of this Club and Air France sta (ﬂight

crews, ground sta, product heads, etc. ) to work on numerous

subjects including La Cave Air France, the content of the amenity

kits distributed on board, sustainable development, etc.

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In 2019, KLM strengthened the fundamentals of its product via

more digital and personalised services, by working more closely

with operational departments and partners and changing the

way in which it handles disruptions. Throughout the customer

journey, services are aligned with customer expectations, thereby

making the company as a whole more customer - centric.

Digital services make it easier for passengers to take control of

their own journeys and manage their time eectively. Frontline

sta are supported by the available digital tools in the provision

of real - time, accurate information to customers and thus deliver

better care. On ﬂights to/from the United States and as part of a

complex proof of concept, KLM began testing biometric

boarding. These digital features, in combination with oine

solutions, are key to making the passenger journey faster, more

comfortable and more ecient.

KLM also opened its ﬂagship Crown Lounge at Schiphol. This

6,800square meter architectonic beauty oers Business class

passengers with KLM and its partners an unforgettable

experience across ﬁve themed zones.

1.3.1.4 Cargo business: AirFrance – KLM,

a major player in air freight

During the 2019 ﬁnancial year, the Group carried 1.1million tons, i.e.

a 2.3% decline, of which 81% in the bellies of passenger aircraft and

19% in the full - freighter ﬂeet over a network of 391destinations

in 158countries.

In 2019, cargo industry capacity additions led to the worst trac

versus capacity trend for the past ten years. Opportunistic

growth strategies were one of the main drivers after two strong

years for the air freight market, leading to substantial (belly)

overcapacity, particularly on the North Atlantic routes. On the

demand side, by the year end global air freight demand had been

in decline for fourteen consecutive months on the back of:

— geo - political uncertainties resulting in weak global air freight

demand;

— trade tensions impacting especially ex-Asia volumes, and a;

— sharp decline in demand from the auto - motive industry.

In this context, the market share of AirFrance – KLM Cargo proved

resilient, with the growth realized in alternative ﬂows partly

mitigating the ex-Asia losses.

The Group’s Cargo strategy is focused on maintaining and increasing

load factors where possible and taking a proactive approach to

new revenue opportunities. A new revenue action plan has been

established for 2020 to deliver incremental revenues.

1.3.1.5 Airline partners and alliances: expanding

the Group’s commercial presence to respond

to global air transport demand

Air transport demand is global and, to respond to this demand,

Air France – KLM is pursuing an ambitious strategy aimed at

expanding its commercial presence in every region of the world.

Airline alliances and partnerships are an integral part of this

strategy. They contribute to meeting customer expectations and

thus creating value for the Group. They reinforce the Group’s

market positioning thanks to an expanded and more diversiﬁed

network, which supplements the Group’s own oer. They may

also enable the generation of operational synergies.

Strategic partnerships

In July2017, AirFrance – KLM announced a further major step in

the reinforcement of its strategic partnerships with, on one hand,

the creation of a single global joint - venture between AirFrance

– KLM, Delta Air Lines,Inc. and Virgin Atlantic and, on the other

hand, the intensiﬁcation of its partnership with China Eastern

Airlines. These two commercial alliances have been consolidated

by equity links. Delta Air Lines,Inc. and China Eastern Airlines

each acquired an 8.8% stake in Air France – KLM within the

framework of reserved capital increases carried out during 2017,

for a total of €751million.

The strategic, commercial and capitalistic reinforcement of these

partnerships positions AirFrance – KLM as the European pillar of

the leading global airline network.

Transatlantic joint - venture with Delta Air Lines and Virgin Atlantic

On January1, 2020, following approval by the US authorities on

November 21, 2019, the Group launched a new transatlantic

joint - venture between AirFrance – KLM, Delta Air Lines and Virgin

Atlantic. As a result, as of December31, 2019 and a decade after

its creation, the Group ended the previously - existing

joint - venture between AirFrance – KLM, Delta and Alitalia. As with

most joint - ventures in the industry, it did not lead to the creation

of a common company but rather the signature of a contract

deﬁning both the mechanism of a common income statement,

governance and organizations to manage all aspects of the

partnership. The existence of an internal common income

statement ensures that the partners implement all the actions

contributing to an improved operating result for the activity, to

their mutual beneﬁt. Each company member of the joint - venture

recognizes the revenues and costs relating to the joint - venture

scope in their respective income statements. If necessary, a

settlement mechanism between joint - venture members will

compensate the imbalances in value creation based on a

mechanism agreed between the parties. This mechanism

contributes to ‘‘metal neutrality’’, enabling the dierent members

to jointly manage capacity and look for overall optimization

rather than the individual interests of each airline, ultimately

increasing value for both partners and customers.

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The governance bodies comprise a CEO Committee, a Steering

Committee and Working Groups.

The scope of this joint - venture is very wide, covering all the ﬂights

between North America, Mexico and Europe through integrated

cooperation and all the ﬂights between North America and

Mexico to and from the Mediterranean basin, Africa, the Gulf

countries and India together with the ﬂights from Europe to and

from Central America, Colombia, Venezuela, Peru and Ecuador

through close coordination.

With revenues exceeding US$13billion and a market share of

23%, this new joint - venture is a major player on the transatlantic,

the leading market for international air transportation. More than

340daily ﬂights link the nine principal hubs: Paris, Amsterdam,

London, Atlanta, New York, Detroit, Minneapolis, Cincinnati and

Salt Lake City. Pricing and revenue management are centralized

within a 60 - strong team based in Amsterdam.

The coordination of the network has been reﬂected in the

strengthening of the hub to hub services, the optimization of aircraft

types assigned on each route and an increase in the number of

destinations served by non - stop ﬂights on both sides of the

Atlantic. The sales forces have been regrouped in each region.

This extended scope marks the expansion and strengthening of

one of the most advanced partnership models in the airline

industry.

Partnerships in China–a consolidated presence

in the Chinese market

Air France and KLM beneﬁt from a historic presence in China,

bolstered by strong partnerships with two of the three largest

Chinese carriers, through joint - venture agreements concluded

during the past two decades. In 2006, KLM was the ﬁrst to sign

a joint - venture agreement with China Southern, thereby beneﬁting

from its partner’s vast domestic network operated on departure

from the Guangzhou and Beijing hubs. This agreement was expanded

to Xiamen Airlines, a subsidiary of China Southern, in 2015. For

its part, in 2010, Air France signed a joint - venture agreement with

China Southern, regrouping the Paris-Guangzhou operations of

the two partners and developing their respective cooperation

beyond their main hubs. In July2018, AirFrance – KLM on one

side, and China Southern and Xiamen Airlines on the other,

committed to a new period of joint - venture cooperation by

forming a single joint - venture which remains in force despite

China Southern’s announcement that it was leaving the SkyTeam

alliance, eective January1, 2019.

In 2012, Air France signed a joint - venture agreement involving

the Paris and Shanghai routes with China Eastern Airlines, a major

player in Chinese air transportation, operating a vast domestic

network and internationally mainly out of its base in Shanghai,

China’s economic lung. This agreement was extended to KLM in 2016,

when China Eastern Airlines inaugurated the Shanghai-Amsterdam

service. The partnership was further reinforced in 2017 when

China Eastern Airlines acquired an 8.8% stake in AirFrance – KLM

via a reserved capital increase. In November2018, AirFrance – KLM

and China Eastern signed an agreement to extend their

joint - venture as of January1, 2019 to two additional routes, Paris-

Wuhan and Paris-Kunming, thereby oering their respective

customers new routes under code share and new connecting

opportunities between Europe and China.

Thanks to these partnerships, Air France – KLM can oer its

customers access to a total of some ﬁfty destinations in China,

completing its own network with eight destinations in Greater

China.

In total, the revenues from routes operated between Europe

and China by airlines participating in joint-venture agreements

represent more than €1 billion.

Strategic partnership with GOL

In 2014, AirFrance – KLM and GOL Linhas Aéreas Inteligentes

signed an exclusive ﬁve - year strategic partnership reinforcing

their commercial cooperation between Brazil and Europe. The

partnership notably foresees the optimization of synergies between

the two groups and, in particular, connecting opportunities in the

major Brazilian cities served by the Group. The partnership led to

a signiﬁcant increase (approaching 25%) in the percentage of Air

France and KLM passengers transferring to GOL ﬂights. Since

April2015, GOL has used its code on AirFrance – KLM ﬂights

between Europe and Brazil, and on European destinations beyond

Paris and Amsterdam. The two partners cooperate on promoting

sales in their home markets and, since November2017, Air France

has been GOL’s GSA for the French market. This GSA agreement

is currently being deployed across the European market.

In May2018, Air France and KLM took a new step in their strategic

development in Brazil with the opening of new routes to

Fortaleza on departure from Paris and Amsterdam. These ﬂights

connect with GOL’s new strategic hub in Fortaleza, oering

increased connectivity for customers to the main cities in

northern and north - eastern Brazil.

On October30, 2019, AirFrance – KLM and GOL renewed this

strategic partnership agreement for a ﬁve - year period, thereby

reinforcing this cooperation. Air France – KLM remains GOL’s

exclusive European partner, reciprocally with some exceptions

granted.

Alitalia

Since January1, 2020, Alitalia has no longer been a member of

the transatlantic joint - venture between AirFrance – KLM, Delta

Air Lines and Virgin Atlantic. However, the US authorities have

prolonged the anti - trust Immunity until May20, 2020, enabling

AirFrance – KLM, Delta and Alitalia to continue their commercial

cooperation until that date, leaving time to explore the dierent

avenues for future collaboration with Alitalia.

Other joint - ventures and code shares

Air France – KLM implements various forms of partnership

agreements, the choice depending on the balance between value

creation for its customers and the Group, and the necessary level

of interaction between the oers of the partners, together with

the regulatory requirements framing the scope of the agreement.

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The ﬁrst level of interline cooperation is Trac and Special

Prorate Agreements (SPA) between the partner airlines, enabling

the combination of their networks while maintaining their

respective IATA codes and setting their own fares.

Within the framework of a code - sharing agreement, two partner

airlines sell tickets on the same ﬂight, each under their own code

and setting their own fares. The operating carrier has operational

control over the aircraft while the marketing partner, for sales

purposes, uses its own ﬂight number on its partner’s ﬂights. Any

such agreement must comply with the safety and regulatory

requirements set forth by the competent authorities.

There are two types of code sharing. In the ﬁrst, under a block

seat agreement, the marketing partner purchases a ﬁxed amount

of capacity from the operating carrier. The marketing partner has

inventory control over the seat block. In the second, known as

free ﬂow, no division of capacity is set, the two partners

potentially selling all the seats on the relevant ﬂights although

inventory control remains the prerogative of the operating carrier.

Access to capacity on the relevant ﬂights is through negotiated

fares for each booking class.

Joint - ventures are the next level of integration in alliances and

participate in the trend towards consolidation when the partners

are seeking a higher level of joint optimization on a sub - scope of

their network without, however, considering a merger.

A joint - venture enables value creation for customers in the

markets where it is implemented and, as a result for the partners

who organize coordination of the commercial activities:

— for customers, they enable access to an expanded oer of

ﬂights and increased connectivity, loyalty program beneﬁts

across a wider perimeter, a harmonized travel experience and

integrated commercial propositions;

— the partners thus improve their market positioning, serving a

higher number of customers and enabling them to capture

market growth.

The partners deﬁne the governance principles and ﬁnancial

sharing mechanisms, enabling decision - making and execution

across the whole value chain, thus responding to the commercial

objectives of the joint - venture.

The ﬁnal stages in cooperation consolidation and integration are

mergers or equity interests, anchoring the development of a

common strategy over the long term.

Joint - ventures, equity interests and mergers must be approved

in the light of the regulations in force in the jurisdictions covering

the scopes of the agreements, particularly with respect to the

competition rules (e.g. Anti - trust Immunity).

1.3.1.6 SkyTeam alliance

The three large alliances, SkyTeam (to which Air France and KLM

belong), Star Alliance and oneworld, represent some 55% of

worldwide trac. Among the top 50airline carriers in the world,

only 15do not belong to a global alliance, including eight low - cost

carriers whose business models make them unlikely to want to

join an alliance.

Since the inception of the global alliances, their capacity in terms

of the available seats oered by member airlines has grown by

more than the industry average, with SkyTeam now being the

second largest alliance, behind Star Alliance and ahead of

oneworld.

SkyTeam: a global alliance

SkyTeam, created in 2000, is a global alliance which numbered

19airline members at December31, 2019: Aeroﬂot, Aerolineas

Argentinas, Aeromexico, Air Europa, Air France, Alitalia, China

Eastern Airlines, China Airlines, Czech Airlines, Delta Air Lines,Inc.,

Garuda Indonesia, Kenya Airways, KLM, Korean Air, Middle East

Airlines, Saudi Arabian Airlines, Tarom, Vietnam Airlines and

Xiamen Airlines.

Belonging to SkyTeam enables its members to strengthen their

brand awareness and extend their oer around the globe,

thereby bolstering their commercial presence. As members of

the SkyTeam alliance, Air France and KLM have access to a global

network of some 15,500daily ﬂights to 1,036destinations in more

than 170countries.

The 676million annual passengers beneﬁt from a seamless travel

experience on the ﬂights of member airlines and have access to

790airport lounges around the world. The 230million passengers

who are members of frequent ﬂyer programs can earn and burn

air miles on all SkyTeam partner ﬂights.

Airlines need to fulﬁl a series of speciﬁc membership requirements

before becoming an alliance member, relating to operations,

technologies and products. Members must be linked by bilateral

agreements covering codesharing, their loyalty programs and

access to airport lounges.

While retaining their separate identities and brands, the airlines

combine their networks to oer their customers a more extensive

range of travel solutions and the related global services, more

rapid earning of miles, access to numerous airport lounges but

also a more seamless customer service during the dierent

stages of their journeys thanks to the SkyPriority and SkyTransfer

programs.

SkyTeam also provides an environment and tools enabling

members to generate operational cost synergies (e.g. co - located

facilities, better use of airport lounges and notably the seven

SkyTeam lounges, a converging IT platform, etc. ).

Airlines must also be able to oer the products and services

exclusive to the alliance. SkyTeam has notably developed

proprietary products such as Passes enabling travel at

competitive fares, global contracts reserved for large companies

or international events and a product dedicated to Marine and

Oshore personnel.

SkyTeam’s main governance body is the Alliance Board,

composed of the Chairs and Chief Executive Ocers of the

19member airlines. The Alliance Board meets twice a year to

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2018 results restated with a similar impact to 2019, following a

change in accounting method for Life Limited Parts and Customer

Compensation. For more detail, see Notes to the consolidated

ﬁnancial statements, paragraph 2, pages 12-15.

In 2019, the passenger business continued its growth, with total

revenue rising by 3.6% and the number of passengers carried up

by 2.3%.

A dynamic commercial strategy and revenue management enabled

the passenger business to limit the impact of the commercial

environment, with the unit revenue remaining broadly stable (-

0.4%) at constant currency.

Passenger Network business

Change

2018 at constant

2019 restated Change currency

Number of passengers (in thousands) 87,624 85,619 +2.3%

Capacity (in ASK million) 299,606 292,184 +2.5%

Trac (in RPK million) 263,499 255,405 +3.2%

Load factor 87.9% 87.4% +0.5pt

Total passenger revenues (in €m) 21,119 20,383 +3.6% +2.5%

Scheduled passenger revenues (in €m) 20,408 19,743 +3.4% +2.1%

Unit revenue per ASK (in € cents) 6.81 6.76 +0.8% -0.4%

2018 results restated with a similar impact to 2019, following a

change in accounting method for Life Limited Parts and

Customer Compensation. For more detail, see Notes to the

consolidated ﬁnancial statements, paragraph 2, pages 12-15.

In the 2019 ﬁnancial year, total revenue for the combined

passenger and cargo businesses stood at €23,272 million,

representing an increase of €600million. This improvement was

mainly due to the capacity growth in 2019.

The operating result was down by 28.1% relative to the previous

year, mainly explained by the higher fuel bill, with a good cost

performance being oset by the decline in cargo unit revenue.

1.3.1.7 Key ﬁgures

Network business

Change

2018 at constant

2019 restated Change currency

Total revenues (in €m) 23,272 22,672 +2.6% +1.5%

Scheduled revenues (in €m) 22,251 21,731 +2.4% +1.1%

Income from current operations (in €m) 749 1,042 -293 -256

deﬁne the strategic orientations of the Alliance such as the

introduction of new members, the deﬁnition of the customer

experience and the positioning of the SkyTeam brand along with

its related investment and operational budget.

The Executive Board, consisting of senior executives with direct

commercial and operational roles, is appointed by the Alliance

Board and translates the approved strategic orientations into

action plans in a wide range of disciplines ranging from

marketing, airport synergies, interface between information

systems, the transfer product between member airlines, cargo

and advertising to the brand.

In parallel with their proprietary development projects, the

member airlines commit to implementing the SkyTeam action

plans by earmarking the required internal resources and

respecting the timelines set.

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Cargo business

Change

at constant

2019 2018 Change currency

Tonnage transported (in thousands) 1,110 1,137 -2.3%

Capacity (in millions of ATK) 14,609 14,365 +1.7%

Trac (in millions of RTK) 8,467 8,657 -2.2%

Load factor 58.0% 60.3% +2.3pt

Total cargo revenues (in €m) 2,153 2,288 -5.9% -7.8%

Scheduled cargo revenues (in €m) 1,843 1,988 -7.3% -9.1%

Unit revenue per ATK (in € cents) 12.62 13.84 -8.9% -10.7%

All the trac indicators were up across the whole network. The

increases in capacity and load factor enabled the Group to improve

its revenues. The economic and political diculties witnessed in

the world in 2019 had a negative impact on these Group revenues.

The long - haul network posted a robust performance with a load

factor up by 0.3of a point to 88.7%. Capacity increased by 2.9%

to 240,774million ASK.

North America remains the Group’s leading network with 28.9%

of capacity and 29.1% of total trac. Since the signature of the

transatlantic joint - venture in 2018, the Group has cooperated with

Delta Air Lines, Inc. on these routes. The dierent airlines

maintained strict capacity discipline to contend with the intense

competition on these lines. The number of passengers increased

strongly by 6.1% for AirFrance – KLM.

Asia-Paciﬁc is the Group’s number two network with 26.6% of

capacity and 27.1% of total trac. The Group carried 6.7million

passengers in its aircraft. AirFrance – KLM has a joint - venture with

China Eastern notably on the Paris/Amsterdam-Shanghai routes.

The Group also cooperates with China Southern and Xiamen

Airlines via a joint - venture on several Chinese routes like Beijing

and Guangzhou. This partnership reinforces AirFrance – KLM’s

European leadership on Shanghai, the largest business center in

China. In 2019, the load factor stood at 90.5%.

AirFrance – KLM’s capacity on the Latin American network rose

by 6.4% in 2019 with a load factor down by one percentage point.

The economic diculties in Brazil and Argentina continued to

impact the Group’s results in 2019.

Capacity on the Africa-Middle East network was down by 2.3%

in 2019. The load factor gained 0.8 of a point to 84.3%. The

rationalization of the network has a positive impact on the

economic results from these routes.

The load factor on the Caribbean-Indian Ocean network

increased by 1.1points in 2019. Capacity was reduced by 0.6%

while trac was up by 0.6%.

The short and medium - haul network beneﬁted from a 1.4 - point

increase in load factor. The Domestic France network was

signiﬁcantly rationalized with capacity down by 7.5% while

medium - haul maintained its growth with a 2.9% increase in

capacity.

No. of

Capacity in ASK Trac in RPK Load factor passengers

(in millions) (in millions) (in %) (in thousands)

Destination region 2019 2018 2019 2018 2019 2018 2019 2018

North America 69,677 66,223 62,245 58,858 89.3% 88.9% 8,760 8,257

Latin America 39,153 36,765 34,753 33,004 88.8% 89.8% 3,664 3,452

Asia-Paciﬁc 64,124 62,079 58,008 56,157 90.5% 90.5% 6,659 6,419

Africa-Middle East 36,955 37,816 31,157 31,575 84.3% 83.5% 5,484 5,581

Caribbean–Indian Ocean 30,883 31,075 27,500 27,325 89.0% 87.9% 3,753 3,726

Total long - haul 240,774 233,957 213,664 206,919 88.7% 88.4% 28,320 27,435

Short and medium - haul 58,832 58,226 49,835 48,486 84.7% 83.3% 59,304 58,184

Total 299,606 292,184 263,499 255,405 87.9% 87.4% 87,624 85,619

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Transavia, the AirFrance – KLM Group’s low - cost business, operates

point - to - point ﬂights to/from the Netherlands and France.

Transavia’s costs structure is strictly aligned with the low - cost

business model: maximizing the utilization of aircraft, simple

products and fares, a strong focus on ancillary revenues, a single

aircraft type, a light organizational structure and the outsourcing

of a signiﬁcant portion of the activities. Its unit costs are thus

comparable to those of the other low - cost operators at around

4.94euro cents per ASK for an average ﬂight distance of around

1,749km.

At December31, 2019, Transavia had an operational ﬂeet of seven

Boeing 737 - 700s and 73Boeing 737 - 800s, of which 42based in the

Netherlands and 38 in France, and more than 3,000 full - time

employees. In 2019, the Transavia network comprised

130destinations in Europe, North Africa and the Middle East.

Flights were operated from six dierent bases: Amsterdam,

Rotterdam, Eindhoven, Paris-Orly, Nantes and Lyon, oering a

network of more than 225routes.

In 2019, Transavia pursued its growth with capacity expansion of

6.5%. The company carried 16.6million passengers, up by 4.8%

relative to 2018. The load factor increased by 0.2of a point to

92.2%. Revenues reached €1.7billion, growth of 9.3% while the

unit revenue per ASK progressed by 3%. The operating margin

stood at 7.5%, with operating income of €131million, €14million

down compared to last year.

In the Netherlands, Transavia continued to focus on the

development of scheduled ﬂights with the opening of nine new

routes, thereby further strengthening its number one low - cost

position. In addition to this core business in point - to - point,

Transavia continued to oer connecting ﬂights thanks to the KLM

hub in Amsterdam. In France, Transavia was the number one

low - cost operator at Paris-Orly and accelerated its growth as

planned, with the opening of 21new routes.

Since April2019, all Transavia ﬂights have been operated from

the new Terminal Orly 3, oering passengers a higher standard

of comfort and ﬂuidity: signage is more visible and clearer, there

are 50self - service kiosks and 45automatic baggage drop - o

points, and the boarding lounge is fully equipped with connected

furniture oering a haven of tranquillity before the departure of

the aircraft. In the arrival area, a new sorting system improves the

delivery time for baggage.

In 2020, the growth in Transavia’s capacity is set to continue with

53new routes planned, leading to a total of 280routes and 4%-

6% growth in ASK. To support this growth, Transavia France

announced the opening of a new base in Montpellier in the south

of France, with 20routes. In parallel, the network to Algeria will

also be extended with twelve new routes from Paris, Lyon and

Montpellier. In April2020, Transavia Netherlands will begin to

operate ﬂights to eight destinations out of Brussels, aimed at

serving the growing demand from the home market in a

slot - constrained environment for all Dutch airports.

In France, Transavia signed an agreement on Quality of life in the

Workplace with all the unions. This agreement addresses three

themes concerning Quality of Life in the Workplace: gender

equality, quality of working relationships and a balance between

professional and personal life. At the end of September, a social

agreement for the Group was signed covering Transavia’s future

development, including an agreement for non - restricted growth

in the number of aircraft. Recently, negotiations were launched

on the new Collective Labor Agreements (for entry into force in

April2020) for Transavia Netherlands.

In both the Netherlands and France, the operational performance

was under pressure in the past year due, for example, to longer

air trac control delays and challenges with ﬂeet availability,

leading to a slight decline in On-Time Performance.

In recent years, Transavia has developed multiple innovations to

the beneﬁt of the user experience. Every month, the Transavia

website welcomes over three million users, of whom 54% from a

mobile device. Transavia has a signiﬁcant presence on the social

media and the company numbers more than 1.2million Facebook

fans (NL) and 1,039,000Instagram followers (NL/FR). The most

popular platform is WhatsApp, which is used for more than 60%

of the contact with the company on the social media. The

company oers an eective and personalized customer service,

handling around 500conversations a day, and is committed to

responding to customer messages within 60minutes. In 2019, the

next steps were taken to give passengers more control during

their journeys with the introduction of self - service options to cancel

bookings or change passenger details. With the introduction of

Tours & Tickets, the separate sales oer was further extended

whilst various trials are ongoing to meet passenger needs more

eectively throughout their journeys.

In October2019, in partnership with Dohop, Transavia launched

a new platform: Transavia Smart-Connect. This platform oers

connections between several ﬂights in its network at attractive

prices and oers full support (provided by Dohop) in the event

of missed connections. Transavia Smart-Connect extends the

range of available travel oers within the entire Transavia network.

All these services are contributing to an improvement in customer

satisfaction. In the Netherlands, 2019 saw Transavia realize a Net

Promoter Score of 37 while the Transavia France cabin crew

reached a customer satisfaction level of 8.5/10. In 2019, Transavia

France received two major awards from Capital magazine: Best

Employer 2020 (2

nd

in the Transport category) and Best low - cost

Airline 2020 (1

st

in the Low Cost Airline category) while Transavia

Netherlands received the Dutch Marketing Award for Internal

Branding.

In 2019, the Transavia Ventures investment fund was founded in

the Netherlands, aimed at generating new revenue streams. The

fund focuses on scalable innovations in the areas of travel,

technology, mobility, logistics, digital retail, hospitality and

sustainability. The ﬁrst investments have been made and more

will follow in 2020.

1.3.2 Low - cost business (Transavia): “We make low - cost feel good”

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Aircraft maintenance is the Air France – KLM Group’s third

business with third - party revenues of €2.1billion. These revenues

generated with external clients represent a little over 46.3% of

the total revenues in this business. In 2019, the AFI KLM E&M

order book increased by US$0.1billion, to a total of US$11.5billion.

In the aircraft maintenance or MRO (Maintenance, Repair and

Overhaul) market, Air France Industries KLM Engineering &

Maintenance (AFI KLM E&M) ranks number two globally amongst

the multi - product players. The role of AFI KLM E&M is to supply

competitive support for the Group’s ﬂeet, while consolidating its

position as a leading MRO in its own market.

The Group operates in three major maintenance segments: airframe

maintenance, engine maintenance and component support

(electronic, mechanical, pneumatic, hydraulic, etc. ). Airframe

maintenance covers three sub- segments: line operations support

which aims to verify the proper day - to - day functioning of systems

and the integrity of the aircraft structure, heavy maintenance for

in - depth checks involving the disassembly of cabins, equipment

and some structural elements, and the realization of modiﬁcation

programs, particularly the retroﬁtting of cabins.

1.3.3.1 Business environment

An attractive market despite the growing constraints

According to estimates, the global MRO market, which comprises

the maintenance and modiﬁcation spending by aircraft operators

either directly or through sub - contractors, will be worth

US$90billion in 2020 (source: ICF International).

The trends in this business closely follow those of the commercial

airline ﬂeets globally and their utilization. In the short term, airlines

tend to focus on adjusting their use of older - generation aircraft

in that their costs, and particularly maintenance costs, are the

highest. The MRO operators thus suer from more volatile demand

on older - generation aircraft than on the next - generation models.

Key ﬁgures

2018

Transavia 2019 restated Change

Number of passengers (in thousands) 16,581 15,828 +4.8%

Capacity (in ASK million) 32,867 30,850 +6.5%

Trac (in RPK million) 30,303 28,392 +6.7%

Load factor 92.2% 92.0% + 0.2pt

Total passenger revenues (in €m) 1,744 1,595 +9.3%

Unit revenue per ASK (in € cents) 5.34 5.18 +3.0%

Unit cost per ASK (in € cents) 4.94 4.71 +4.8%

Income from current operations (in €m) 131 145 -14

1.3.3 Maintenance business

Lastly, Transavia is committed to a Corporate Social Responsibility

(CSR) approach and increasingly focuses on sustainability and

inclusivity via a number of dierent initiatives. In the Netherlands,

Transavia is part of the industry’s Smart & Sustainable initiative

which is committed to reducing the sector’sCO

2

emissions to

their 2005 level by 2030. To reach these goals, Transavia has

deployed a series of measures, such as the installation of split

scimitar winglets, improved engine technology, lighter and more

durable brakes, lighter galleys combined with lightweight trolleys,

and E-Leather

®

seat covers. Currently, Transavia is further researching

the options to participate in a synthetic kerosene initiative in the

Netherlands. Since December2019, Transavia has collaborated

with KLM in their CO2Zero program to oer passengers osetting

options for theCO

2

emissions from their ﬂights. Transavia France

is fully committed to eliminating single - use plastics on all

scheduled ﬂights. At the end of 2019, plastic cutlery, tumblers and

stirrers had been replaced on board with sustainable, certiﬁed

alternatives, Transavia thus becoming the ﬁrst world airline to

become plastic free and use FSC-certiﬁed tumblers. Thanks to

the dierent ﬂight operation optimization initiatives, Transavia

France has achieved a 14% reduction in itsCO

2

emissions per

passenger per kilometer, relative to their 2010 level. Transavia is

strengthening its partnership with the start - ups Open Airlines

and Safety Line, launching new tools which will help to further

reduceCO

2

emissions through the use of big data and optimized

ﬂight operations. Furthermore, in both the Netherlands and

France, the company supports organizations that help sick

children (respectively the Peter Pan and Carlesimo foundations).

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The market is also characterized by increased pricing pressure

resulting from ﬁercer competition between maintenance operators

(MROs) and more exacting requirements on the part of customer

airlines. Furthermore, a growing number of airlines are looking to

transfer the ﬁnancing of spare parts to maintenance service

providers within the framework of increasingly - large - scale contracts

(in terms of revenue, duration, complexity, etc. ). Lastly, the

competition from Original Equipment and Engine Manufacturers

(OEMs) and Original Aircraft Manufacturers (OAMs) has

considerably increased in recent years.

Ever-ﬁercer competition

As with all the players in the aeronautics and air transport industry,

the MRO operators are participating in a vast consolidation

movement to reinforce economies of scale and contend with

pricing pressure.

Against this backdrop, air framers, engine manufacturers and

aircraft component manufacturers are continuing to develop their

after - sales services to oer their customer increasingly - integrated

aircraft maintenance solutions. This positioning corresponds to a

long - term strategy based on leveraging intellectual property by

selling licenses to a limited number of maintenance service

providers seeking to expand their business activity on certain

products. This trend is escalating, especially with the arrival of

new aircraft like the E2, A220, A350, 787, etc. Ultimately, this

trend could result in reduced competition on the MRO market,

with a seriously adverse eect on airline maintenance costs.

Lastly, 2019 was marked by the grounding of the Boeing 737 Max,

although the impact on the MRO market has not been perceptible

in the short term. Nevertheless, the prolonged cessation of the

program risks putting pressure on the OEMs and Boeing who

may look to pass on their losses in the MRO market.

The ability to sustain balanced competitive conditions is a priority

objective, both for AFI KLM E&M’s commercial activity but also

to contain Air France and KLM maintenance costs.

This business is also experiencing a technological change which

is inﬂuencing the products, processes, methods and competencies

within the maintenance activities. This is notably the case with

next - generation aircraft whose avionics dimension is playing an

increasingly important role relative to the mechanical systems:

digital tools, composite structures, connectivity, etc. Innovation

is an integral part of all the business processes.

1.3.3.2 AFI KLM E&M’s position as a world leader

On the strength of its solid position as the number two global

multi - product MRO by total revenue, AFI KLM E&M is pursuing

its targeted development strategy based on its own speciﬁc

features and the Group’s objectives.

This strategy has two pillars: ﬁrstly, cutting costs and maintaining

high standards of quality and performance and, secondly, growing

the customer portfolio in high value - added products and services.

In the past decade, this ambition has been reﬂected in substantial

investment in modernizing AFI KLM E&M’s IT system and industrial

infrastructure at its principal maintenance sites: Toulouse,

Amsterdam, Villeneuve-Le-Roi, Roissy and Orly.

A maintained ambition

As part of its continuous improvement eorts, AFI KLM E&M

arms its ambition of making AFI KLM E&M a benchmark brand

in its market as an airline MRO player supported by a powerful

global network.

In 2019, AFI KLM E&M strengthened its global position on

new - generation aircraft, with strong growth for the A350, 787,

A320neo and 737MAX products. 2019 was also marked by the

ﬁrst so - called Quick Turn services on the LEAP engine equipping

the 737MAX and A320neo. The current order book status indicates

that AFI KLM E&M is able to maintain and even reinforce its

market position with the new aircraft generations, notably by

supporting the development of the Group’s ﬂeet with the A220

and the E2.

This market success is supported by The MRO Lab

®

innovation

program which focuses on strategic areas of the MRO sector,

ranging from technician mobility and the customer experience

through to the Internet of Things, Big Data applications, predictive

maintenance, digitalization, additive manufacturing and Artiﬁcial

Intelligence.

In the digital ﬁeld, PROGNOS

®

constitutes a major building block.

Launched in 2016, it regroups a range of predictive maintenance

solutions based on exploiting the data from aircraft systems with

a view to improving maintenance models and processes. The

PROGNOS

®

range of solutions now includes PROGNOS

®

for

Aircraft, PROGNOS

®

for APU, PROGNOS

®

for Inventory and

PROGNOS

®

for Engines. AFI KLM E&M capitalizes on the vast

amount of data generated by the Air France and KLM ﬂeets to

develop its PROGNOS

®

solutions, and verify their operational

relevance and performance before sharing such innovations with

its customers.

In aircraft maintenance, adaptation projects also continued to

reinforce AFI KLM E&M’s competitiveness. Cost - saving initiatives

were implemented to optimize activity on a site - by - site basis,

strengthen external partnerships and deploy more ecient work

organizations. All this was accompanied by eorts to match resources

to the level of business activity and build new career paths.

Two strategies support the growth in the Engines and Components

segments: positioning on products and services aligned with

market expectations, and the development of a global MRO

network.

In 2018, to support our fast - growing customer base in South-East

Asia, AFI KLM E&M announced the creation of Singapore

Component Solutions, a joint - venture with Sabena, for aircraft

component repair in Singapore.

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In 2019, AFI KLM E&M consolidated its global network by reinforcing

its engineering presence in Asia, notably via its joint - venture with

Sabena and its components shop in Shanghai. The positioning in

Asia was also strengthened via the strategic partnership with

GMF, the Garuda maintenance subsidiary.

Contributing to the Flight Safety

and Operational Eciency programs

AFI KLM E&M’s primary task is to guarantee the airworthiness of

the Group’s ﬂeet and ensure regulatory compliance. To this end,

AFI KLM E&M manages technical data, implements the

maintenance policies, and ensures the permanent availability of

the required skilled sta and technical resources.

AFI KLM E&M pursued the deployment of its Safety Management

System (SMS), enabling the implementation of processes relating

to Flight Safety in a systematic, cross - functional manner. This is

done through regular meetings devoted to event analysis and the

establishment and monitoring of action plans. The SMS is also

based on a system of feedback encouraged by the deployment

of a “safety mind - set” and supported by a network of local Flight

Safety Ocers.

AFI KLM E&M also realized a volunteer - driven oversight evaluation

known as MLOSA (Maintenance Line Operations Safety Assessment)

in its Paris plants. Consisting of a frontline campaign by a network

of observers, this procedure enables the identiﬁcation and

reporting of situations which could present a high risk to Flight

Safety. Given the success of this operation in the Airframe,

Engines and Components division, the approach has been

extended to the Engineering Functions.

Airframe maintenance at the service of airlines

Line Operations support

AFI KLM E&M continues to market its services to customers in

the line maintenance segment and to develop its business in its

main bases as well as internationally.

Light Maintenance operations

Within the framework of AFI KLM E&M’s continuous improvement

eorts, the Light Maintenance operations, which are mostly

executed in Amsterdam, Paris-CDG and Paris-Orly, continued to

implement new processes to further reduce Turn Around Times and

increase aircraft utilization, to the beneﬁt of Air France and KLM.

At the same time, AFI KLM E&M continues its iGO Solutions

joint - venture operations by delivering high - performance support

to its customers; Transavia for its 737ﬂeet and Air Caraïbes/French

Blue for their A330 and A350 ﬂeets.

Heavy Aircraft Maintenance

Heavy maintenance continues to undergo structural change

in a market where prices remain low. A maintenance master plan

has thus been implemented, designed to rationalize the

aircraft maintenance operations by optimizing activity on a

site - by - site basis (Paris-CDG, Amsterdam-Schiphol, Paris-Orly,

Toulouse-Blagnac). The Group’s new ﬂeet plans will enable this

optimization to be continued in coming years.

AFI KLM E&M continued its use of external partners to cut

maintenance costs for the Group’s ﬂeets and obtain, in return,

additional work in the high - growth Engine and Components

segments. The strategic partnership with GMF is an illustration of

this policy.

From engineering to maintenance, AFI KLM E&M provides

continuous support for the Group’s airlines, as well as for an

ever - growing number of customers, by deﬁning and deploying

new cabin products in both short and medium - haul and across

the long - haul oering.

Military Product

In mid - 2015, AFI KLM E&M saw the renewal of the Maintenance

Contract for the four AWACS belonging to the French Air Force

for a ten - year period. In addition, AFI KLM E&M is also designing

and executing the Cockpit Avionic Renovation for the same ﬂeet.

Component Support: managing a global supply chain

Component Support covers the repair of a broad technological

spectrum of aircraft parts, the management of technical and

reliability standards and the management of component shipments

to/from customers’ operating bases. The growth opportunities

for this product are located in far- ﬂung markets. AFI KLM E&M’s

customers are evolving towards service integration, requiring

access to a spares pool. The Group is also deploying appropriate

support services worldwide, with local logistics facilities and asset

management programs.

The success of these oerings is reﬂected in the loyalty of AFI

KLM E&M’s customers. In 2019, a number of airline customers

renewed their trust by prolonging or expanding their contracts

with AFI KLM E&M.For example, Cebu Paciﬁc added component

support on the A320neo to its contract. This was also the case

for AirAsiaX and the expansion to the A330neo. 2019 saw AFI

KLM E&M sign a number of contracts, notably with China

Southern Airlines, Virgin Atlantic and Fidji Airways for the support

of the A350 or Air Tahiti Nui for the 787. Lastly, concerning the

maintenance of APUs via AFI KLM E&M subsidiary EPCOR,

several long - term contracts were signed with Gulf Air, Air Tahiti

Nui and El Al.

Engines: expanded capacity with the LEAP engines

equipping the A320neo and 737MAX

In 2019, AFI KLM E&M pursued the roll - out of its LEAP product

range. The LEAP is the engine equipping the A320neo and

737MAX aircraft, and will be one of the main engines for the

fast - growing narrow - body ﬂeets.

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2019 also saw an expansion in the Engine Maintenance customer

portfolio. The newly - signed contracts included, for example,

WestJet for support on the GEnx and Philippine Airlines for the

CFM56 - 5b.

The Group oers engine support on the following engines:

— CFM56: the Group’s workshops support one of the world’s

largest ﬂeets of CFM56 engines, handling some 400engines

operated by various airlines. AFI KLM E&M is using its

Amsterdam engine shop to position itself on the growing

need for CFM56 - 7B support and the Orly engine shop for the

CFM56 - 5support requirements (5A, 5B and 5C);

— CF6 - 80: by oering full - service maintenance at its Amsterdam

engine shop, AFI KLM E&M is well positioned to support the

CF6 - 80E1 equipping the A330s and the ﬁnal phase in the life

of the CF6 - 80C2. AFI KLM E&M’s long maintenance track

record with these engines means that it currently oers the

most suitable maintenance solutions. The progressive

phase - out from the ﬂeet of the Group’s 747 - 400aircraft gives

AFI KLM E&M access to recycled spare parts and enables the

remaining potential of these engines to be used to support its

customers’ CF6 - 80C2 ﬂeets;

— GE90: on the strength of its state - of - the - art infrastructure,

AFI KLM E&M oers the main alternative to the engine

manufacturer for overhauls to this engine. Since 2012, AFI KLM

E&M has had a new engine test cell at Paris-CDG. This test

facility can test 300engines per year, reducing processing

time and oering a more cost - eective service for customers.

This test facility, combined with signiﬁcant expertise and

proven experience, has attracted the interest of a growing

number of airlines including LATAM, Philippines Airlines and

Vietnam Airlines. AFI KLM E&M has signed major long - term

contracts with Aeroﬂot and Air China.

In addition to its infrastructure, AFI KLM E&M is building its

know - how and can oer customers the beneﬁt of its GE90

operating experience with, for example, On-Site/On-Wing

Support enabling remedial as well as preventive actions

anywhere in the world. This support can be accompanied by

GE90 Engine Monitoring, designed to detect technical

problems upstream thereby limiting potential engine damage.

— GP7200: as of 2013, AFI KLM E&M implemented an investment

program and sta training as part of the GP7200 maintenance

program. The Group can also rely on its CRMA subsidiary in this

respect since it is very well placed on this engine having been

approved as a Primary Repair Source by the manufacturer,

Engine Alliance. CRMA has become the world leader in the

repair of engine combustion chambers and Turbine Center

Frames (TCF);

— GEnx: In 2014, the Air France – KLM Group chose the GE

engine to equip its 787ﬂeet. In parallel, AFI KLM E&M became

a member of the GEnx - 1B repair network. The ramp - up of this

capacity was realized in less than six months, making AFI KLM

E&M the ﬁrst non-OEM supplier to carry out, as of 2015, Quick

Turn checks on this engine. In 2017, the AFI KLM E&M Zephyr

test cell successfully passed the GEnx correlation test,

enabling AFI KLM E&M to also perform engine test runs for its

ten GEnx airline customers;

— LEAP: In 2019, AFI KLM E&M received authorization from the

Civil Aviation Authority of China (CAAC) for maintenance on

the LEAP engine. This authorization from the Chinese

authority enables AFI KLM E&M to carry out all types of

operations (both on - wing and on - site as shop activities) for

LEAP-1A/-1B engines, parts and control units, for all customers

in China (airlines and MROs). Having obtained the same

authorization from the EASA and FAA in 2018, the Group MRO

is extending the scope of its LEAP support services, which are

now within reach for customers on both sides of the globe.

The CAAC authorization came at a time when AFI KLM E&M

had already acquired solid experience with these types of

engines, which can now be shared with its customers in the

Chinese region.

AFI KLM E&M: an international network tailored to local

requirements

AFI KLM E&M is pursuing its growth strategy on proﬁtable markets

and segments by deploying its network of subsidiaries (EPCOR,

CRMA, KLM UK Engineering, Barﬁeld, AFI KLM E&M Components

China) and partnerships (ATI, Beijing LMI, Spairliners, Max MRO

Services, AAF Spares, iGO Solutions, Airfoils Advanced Solutions,

Singapore Component Solutions, AMES and Bonus Tech), and

leveraging the power of its global logistics network. The

development of this MRO network guarantees AFI KLM E&M

customers local access to the Group’s full array of services,

tailored solutions and local spare parts inventories.

AFI KLM E&M subsidiaries and joint - ventures

Engines

Located in the Greater Paris area, CRMA specializes in repairs to

engine parts and, in particular; combustion chambers. Its

positioning on next - generation products has enabled CRMA to

pursue the strong growth in its third - party customer activity.

Following the Apollo project to grow its production capacity,

CRMA was able to respond to its expanding activities and growing

customer demand via the creation of an additional 2,500m2 and

investment in new, state - of - the - art, engineering equipment. The

capacity expansion thus enabled CRMA to optimize its ﬂows by

improving its Turn Around Times and the quality of its operations.

In 2019, signiﬁcant progress was made in the joint - venture

between Safran Aircraft Engines and Air France Industries KLM

Engineering & Maintenance concerning the development of a

joint - venture, Airfoils Advanced Solutions, with the initial successes

from the industrial ramp - up, particularly for the GE90 engine. This

company specializes in the repair of aircraft engine high - pressure

compressor blades and variable pitch stator vanes and is focused

on the CFM International CFM56 engines powering the A320 and

737 and GE’s GE90 engines powering the 777.

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AFI KLM E&M is optimizing and developing its US engine

tear - down unit Bonus Tech. Since 2013, this joint - venture has

operated as part of the MRO global network. Based in Miami, the

partnership combines the know - how and the skills of Bonus Tech

as a major player in the global engine tear - down market, with the

industrial assets of AFI KLM E&M in the United States: equipment,

tooling and support.

Components

Barﬁeld, an AFI KLM E&M subsidiary, is an FAA and EASA

Certiﬁed Repair Station oering maintenance services to major

passenger, cargo and regional airlines, serving mainly North,

South and Central America, together with the Caribbean. Barﬁeld

has 450employees based at its US sites: Miami, Atlanta, Phoenix

and Louisville.

AAF Spares, a joint - venture with AvTrade, is specialized in the

management of spare parts, enabling customer airlines to beneﬁt

from the know - how of the two entities in the management and

optimization of their spares inventories.

Shanghai - based AFI KLM E&M Components China is a 100%-

owned subsidiary initially specializing in A320 and Boeing 737

avionics systems.

EPCOR, based at Amsterdam-Schiphol, provides state - of - the - art

services in Auxiliary Power Unit (APU) maintenance.

Located in India (Mumbai), Max MRO Services Pvt. Ltd is a

market - leading component MRO, in which Air France has a 26%

equity interest.

Singapore Component Solutions, the component repair

joint - venture with Sabena Technic in Singapore, is one of the very

ﬁrst multi - product and multi-ﬂeet MROs to set up a component

repair shop at the Asian hub.

Hamburg - based Spairliners is a joint - venture set up by Air France

and Lufthansa Technik to provide end - to - end component support

for airlines operating the A380 and Embraer E-Jets.

Located in Dubai, the AMES maintenance center (a joint - venture

with Safran Nacelles) handles engine nacelle repair and overhaul

in the Middle East.

Airframe maintenance

In Morocco, Aerotechnic Industries (ATI) is a joint - venture between

Royal Air Maroc (RAM) and Air France. Based at Casablanca airport,

ATI operates three maintenance bays for heavy maintenance on

A320 and Boeing 737aircraft.

At Norwich International Airport in the United Kingdom, KLM UK

Engineering Limited delivers maintenance services for narrow - body

and regional aircraft, together with an aircraft disassembly service.

The iGO Solutions joint - venture provides light maintenance

services for AFI KLM E&M customers at Paris-Orly airport.

Corporate Social Responsibility as a lever in achieving

sustainable levels of performance

As a major contributor to the Group’s Sustainable Development

goals, AFI KLM E&M has made Corporate Social Responsibility

(CSR) an integral part of its management systems. Every process

and project is thus enriched by listening to stakeholders,

technological and other forms of innovation, an ergonomic work

station program and a circular economy approach aimed at

reducing the business’s environmental footprint and gaining

economic eciency. AFI KLM E&M thus leverages this

sustainable performance lever to the beneﬁt of its customers and

other stakeholders.

The MRO Lab

®

ensuring the eectiveness of the oer

Within the framework of The MRO Lab

®

program, AFI KLM E&M

is developing the tools required to become a key player in industry

innovation: relationships with start - up incubators, partnerships

with universities, participative innovation, etc. With its Participatory

Innovation (DPI) and FAB LAB programs supported by the

creativity of its employees, AFI KLM E&M generates signiﬁcant

savings.

In 2019, this momentum enabled the emergence of more than

3,250 “DPI” participatory innovation ideas. At least 1,100were

selected, of which some have already been implemented. Sta

events are organized to showcase their achievements on the

theme of innovation. Bringing together several hundred members

of sta, these events enable them to share their ideas and

envisage the beneﬁts of new technologies for their own working

environment.

Similarly, relations with suppliers are regularly re - evaluated.

The circular economy contributing to high standards of

environmental and ﬁnancial performance

Since 2013, as a member of the French Aviation Industry’s

Strategic Committee on the Circular Economy, Air France

Industries has contributed to the establishment of the industry

roadmap which was submitted to the French government in

May2015.

AFI KLM E&M is constantly seeking to factor the circular

economy into its practices, for example within the framework of

the REVERSE project devoted to cost optimization via the reuse

of materials, recovery by tear down and the recycling of waste

materials.

A material recycling procedure has been developed and, since

2016, has been permanently applicable in the Engines and

Materials & Services businesses. The materials recovered will thus

have ﬁve possible destinations: reuse, disassembly, sale in the

surplus parts market, dismantling and reprocessing for sale within

the framework of an Air France product line (non - aeronautic) and

the reprocessing of waste from reject materials not recovered by

one of the previous measures.

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2018 results restated with a similar impact to 2019, following a

change in accounting method for Life Limited Parts. For more

detail, see Notes to the consolidated ﬁnancial statements,

paragraph 2, pages 12-15.

The maintenance business is the AirFrance – KLM Group’s third

business with third - party revenues of €2.1billion in 2019, growth

of 11.3%.

Key ﬁgures

Change

2018 at constant

2019 restated Change currency

Total revenues (€m) 4,617 4,349 +6.2%

Third - party revenues (€m) 2,138 1,920 +11.3% +5.8%

Income from current operations (€m) 260 214 +46 +27

Operating margin (%) 5.6% 4.9% +0.7pt +0.4pt

This process has thus been applied for the handling of Economy,

Business and La Première seats at the end of their useful lives. It

enriches the Scrap program on the repair of aircraft and engine

parts and has a signiﬁcant environmental impact by, for example,

reducing mineral extraction (titanium, nickel, etc. ) for component

manufacturing. It also generates savings by up - cycling products

and oering them a second life.

Apprenticeship to ensure the perpetuation of know - how

Within the framework of its apprenticeship policy, Air France

Industries oers diverse paths to apprentices in accordance with

their aspirations and training needs.

By passing on their know - how, the apprentice masters enable

young people to acquire valuable experience that can increase

their employability.

As part of its Corporate Social Responsibility approach, Air

France Industries also welcomes “School of the Second Chance”

(École de la deuxième chance) interns who have dropped out of

formal education with no qualiﬁcations and are seeking a

professional direction.

2019 Universal Registration Document — Air France - KLM 41

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Fleet management

AirFrance – KLM is pursuing a proactive policy of ﬂeet renewal

and modernization, thereby contributing to the improvement in

the ﬂeet’s energy eciency and a reduction in its environmental

footprint. 2019 marked the arrival in the Air France ﬂeet of its

three ﬁrst A350 - 900s.

Over the course of 2019, the Air France Group:

— in long - haul, withdrew two A340s from its ﬂeet list, replacing

them with two new Boeing 787 - 9s and three new A350 - 900s;

— in medium - haul, retired one old - generation A319, replacing it

with an A320;

— in HOP!, retired nine ATRs and one EMB145, replacing them

by the entry into the ﬂeet of four new EMB190s;

— for Transavia France, took delivery of four Boeing 737 - 800s.

Air France also placed an order for ten more A350 - 900s and

60A200 - 300s, thereby accelerating the renewal of its ﬂeet and

anticipating the phasing out of less - energy - ecient aircraft.

For its part, KLM welcomed the ﬁrst four Boeing 787 - 10s into its

ﬂeet together with four Boeing 737 - 800aircraft, replacing three

Boeing 747 - 400s and two Boeing 737 - 700s.

Transavia Netherlands took delivery of two new Boeing 737 - 800s.

Over the longer term, the modernization of the ﬂeet will be

reﬂected in the phasing out of KLM’s Boeing 747 - 400s and their

replacement with Boeing 787 - 10s, and in the ongoing growth in

the A350 - 900 ﬂeet within Air France. The introduction of an

A220 - 300 for Air France as of 2021 and the EMB 195E2 for KLM

will also enable the modernization of the Group’s short and

medium - haul ﬂeet. Transavia (France and the Netherlands) will

see its ﬂeet adapt to the growth market in the leisure segment.

The Group will continue to invest substantial sums in cabin

refurbishment, as is currently the case for its A330 - 200s and

Boeing 777 - 300s, as well as in the satellite on board connectivity

proposition, enabling customers to be oered an in - ﬂight WiFi

connection.

Deliveries

Change in the December31, during the New Option December31,

AirFrance – KLM Group order book

(1)

2018 period

(2)

orders conversion 2019

Main ﬂeet 49 13 72 - 108

Regional ﬂeet 0 0 - - -

Total 49 13 72 - 108

(1) Excluding operating leases.

(2) Transfers between the Group’s airlines are excluded.

Exercise Options

Change in the December31, during the cancelled New December31,

AirFrance – KLM Group’s option portfolio

(1)

2018 period or expired options 2019

Main ﬂeet 47 - 19 30 58

Regional ﬂeet - - - - -

Total 47 - 19 30 58

(1) Excluding operating leases.

1.3.4 Fleet

At December 31, 2019, the Air France – KLM Group ﬂeet was

composed of 554aircraft, of which 546 in operation, versus a

respective 548 and 537aircraft at December31, 2018.

The main operational ﬂeet consisted of 428aircraft (416aircraft

at December31, 2018), of which 176were long - haul aircraft (172at

December 31, 2018), six were cargo aircraft (six aircraft at

December31, 2018) and 246were medium - haul aircraft (238at

December31, 2018) including 80aircraft in the Transavia Group

ﬂeet (73aircraft at December31, 2018).

The regional ﬂeet in operation was composed of 118aircraft (121at

December31, 2018).

At December 31, 2019, the average age of the aircraft in the

operational ﬂeet was 11.6 years, of which 11.9 years for the

long - haul ﬂeet, 12.3years for the medium - haul ﬂeet, 16.8years

for the cargo ﬂeet and 9.6 years for the regional ﬂeet. This

compared with 11.3years at December31, 2018, of which 11.9years

for the long - haul ﬂeet, 11.6 years for the medium - haul ﬂeet,

15.8years for the cargo ﬂeet and 9.4years for the regional ﬂeet.

At December31, 2019, 40.4% of the total Group ﬂeet was fully

owned (38.7% at December31, 2018), 15.2% was under ﬁnance

lease (17.0% at December31, 2018), and 44.4% under operating

lease (44.3% at December31, 2018).

Excluding operating leases, there were ﬁrm orders outstanding

for 108 aircraft at December 31, 2019 after the delivery of

13 aircraft wholly owned by the Group. Options stood at

58aircraft (47at December31, 2018).

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AirFrance – KLM Group ﬂeet at December31, 2019

KL

AF (incl. KLC & Transavia Transavia Fully Finance Operating

Type of aircraft (incl. HOP!) Martinair) France NL owned lease lease Total

Long - haul 109 67 0 0 74 32 70 176

Boeing 747 - 400 0 8 0 0 8 0 0 8

Boeing 777 - 300 43 14 0 0 14 21 22 57

Boeing 777 - 200 25 15 0 0 25 1 14 40

A350 - 900 3 0 0 0 1 2 0 3

Boeing 787 - 10 0 4 0 0 3 1 0 4

Boeing 787 - 9 9 13 0 0 7 3 12 22

A380 - 800 10 0 0 0 1 4 5 10

A340 - 300 4 0 0 0 4 0 0 4

A330 - 300 0 5 0 0 0 0 5 5

A330 - 200 15 8 0 0 11 0 12 23

Medium - haul 115 52 38 42 85 21 141 247

Boeing 737 - 900 0 5 0 0 2 0 3 5

Boeing 737 - 800 0 31 38 35 29 10 65 104

Boeing 737 - 700 0 16 0 7 3 5 15 23

A321 20 0 0 0 11 0 9 20

A320 44 0 0 0 3 5 36 44

A319 33 0 0 0 20 0 13 33

A318 18 0 0 0 17 1 0 18

Regional 76 49 0 0 59 31 35 125

ATR72 - 600 3 0 0 0 0 0 3 3

ATR72 - 500 0 0 0 0 0 0 0 0

ATR42 - 500 1 0 0 0 0 0 1 1

CRJ1000 14 0 0 0 14 0 0 14

CRJ700 11 0 0 0 11 0 0 11

EMB190 15 32 0 0 8 13 26 47

EMB175 0 17 0 0 3 14 0 17

EMB170 15 0 0 0 9 1 5 15

EMB145 17 0 0 0 14 3 0 17

Cargo 2 4 0 0 6 0 0 6

Boeing 747 - 400BCF 0 1 0 0 1 0 0 1

Boeing 747 - 400ERF 0 3 0 0 3 0 0 3

Boeing 777-F 2 0 0 0 2 0 0 2

Total AF-KLM 302 172 38 42 224 84 246 554

2019 Universal Registration Document — Air France - KLM 43

1

Presentation of the Air France - KLM Group

Activities in 2019

1

1_VA_V10 22/04/2020 10:07 Page43

The Air France ﬂeet

The Air France ﬂeet was composed of 226 aircraft at

December31, 2019, with 225 in operation (223 and 223 respectively

at December31, 2018). The ﬂeet numbered 109long - haul aircraft,

115medium - haul aircraft and two freighters.

At December31, 2019, the average age of the operational ﬂeet

was 13.7years, with 13.0years for the long - haul ﬂeet, 14.5years

for the medium - haul ﬂeet and 10.9years for the cargo ﬂeet. At

December 31, 2018, the average age of the ﬂeet had been

13.1years, with 12.7years for the long - haul ﬂeet, 13.6years for the

medium - haul ﬂeet and 9.9years for the cargo ﬂeet.

Within the ﬂeet, 96aircraft are fully owned (42.5%), 28are under

ﬁnance lease (12.4%) and 102under operating lease (45.1%).

During the 2019 ﬁnancial year, the company took delivery of three

A350 - 900s, two Boeing 787 - 9s and one A320 - 200, while two

A340 - 300s and one A319 - 100were reconﬁgured. All of the aircraft

in the Joon ﬂeet were reintegrated within the Air France ﬂeet.

The regional ﬂeet, Air France HOP!

At December 31, 2019, the regional ﬂeet was composed of

76 aircraft, of which 69 in operation, with a maximum seat

capacity of 100.

The average age of the ﬂeet in operation is 12years. The ﬂeet is

68.4% wholly owned, 5.3% under ﬁnance lease and 26.3% under

operating lease.

In 2019, four EMB190 aircraft joined the ﬂeet while nine ATRs and

one EMB145 were retired, thus pursuing the modernization and

rationalization strategy for the regional ﬂeet.

The Transavia France ﬂeet

The Transavia France ﬂeet is composed of 38Boeing 737 - 800s

(34aircraft at December31, 2018). The average age of the aircraft

in the ﬂeet is 7.8years. Of this ﬂeet, 23.7% is fully owned, 10.5% is

under ﬁnance lease and 65.8% under operating lease.

1.3.4.1 The Air France Group ﬂeet

At December31, 2019, the Air France Group ﬂeet totaled 340aircraft, of which 264aircraft in the main ﬂeet and 76 in the regional

ﬂeet. The average age of the aircraft in the operational ﬂeet was 12.7years (12.2years at December31, 2018), Firm orders stood at

100aircraft.

Fleet at Aircraft entering

(1)

Aircraft Fleet at

December31, the ﬂeet over withdrawn

(1)

December31,

Air France Group ﬂeet 2018 the period over the period 2019

Long - haul ﬂeet 106 9 6 109

Medium - haul ﬂeet (including Transavia France) 149 18 14 153

Cargo 2 - - 2

Regional ﬂeet 82 4 10 76

Total 339 31 30 340

(1) Owned, operating lease and ﬁnancial lease.

Air France- KLM — 2019 Universal Registration Document

44

Presentation of the Air France - KLM Group

1 Activities in 2019

1_VA_V10 22/04/2020 10:07 Page44

The KLM ﬂeet

At December31, 2019, the KLM ﬂeet comprised 119aircraft (116at

December 31, 2018), of which 67 long - haul aircraft and

52medium - haul aircraft. Of this ﬂeet, 44aircraft were fully owned

(37%), 17aircraft were under ﬁnance lease (14.3%) and 58under

operating lease (48.7%). Of this ﬂeet, 119aircraft are in operation.

At December31, 2019, the average age of the aircraft in revenue

service was 11.1years, with 10.3years for the long - haul ﬂeet and

12.3years for the medium - haul ﬂeet. At December31, 2018, the

average age of the aircraft in the ﬂeet had been 11.3years, with

10.6 years for the long - haul ﬂeet and 12.2 years for the

medium - haul ﬂeet.

During the 2019 ﬁnancial year, the long - haul ﬂeet was

modernized with the arrival of four Boeing 787 - 10s while three

Boeing 747 - 400s were retired. For medium - haul, four 737 - 800s

joined the KLM ﬂeet while two 737 - 700s were retired.

The regional ﬂeet, KLM Cityhopper

The KLM Cityhopper ﬂeet was composed of 49aircraft, all in

operation at December31, 2019. The aircraft in this regional ﬂeet

have an average age of 6.2years. In this ﬂeet, 14.3% of the aircraft

are fully owned, 55.1% are under ﬁnance lease and 30.6% under

operating lease.

The Transavia Netherlands ﬂeet

The Transavia Netherlands ﬂeet consists of 42aircraft, of which

seven are Boeing 737 - 700s and 35are Boeing 737 - 800s.

In this ﬂeet, 9.5% of the aircraft are under ﬁnance lease, 61.9% are

under operating lease (including one aircraft belonging to

Transavia Company) and 28.6% fully owned. The average age of

the aircraft in the ﬂeet is 10.3years.

During the 2019 ﬁnancial year, two Boeing 737 - 800s joined the

ﬂeet.

The Martinair ﬂeet

Martinair has a ﬂeet of four fully - owned freighters. The average

age of the aircraft in this ﬂeet is 19.7years.

1.3.4.2 The KLM Group ﬂeet

The KLM Group ﬂeet totaled 214aircraft at December31, 2019, of which 165 in the main ﬂeet and 49 in the regional ﬂeet.

The average age of the aircraft in the operational ﬂeet was 10years (9.7years at December31, 2018).

Including the operational leases, ﬁrm orders stand at 34aircraft.

Fleet at Aircraft entering

(1)

Aircraft Fleet at

December31, the ﬂeet over withdrawn

(1)

December31,

KLM Group ﬂeet 2018 the period over the period 2019

Long - haul ﬂeet 66 4 3 67

Medium - haul ﬂeet (including Transavia Netherlands) 90 6 2 94

Cargo (including Martinair) 4 - - 4

Regional ﬂeet 49 - - 49

Total 209 10 5 214

(1) Owned, operating lease and ﬁnancing lease.

2019 Universal Registration Document — Air France - KLM

45

1

Presentation of the Air France - KLM Group

Activities in 2019

1

1_VA_V10 22/04/2020 10:07 Page45

Air France- KLM — 2019 Universal Registration Document46

1

1_VA_V10 22/04/2020 10:07 Page46

2019 Universal Registration Document — Air France - KLM 47

2

CORPORATE GOVERNANCE REPORT

2.1 Composition of the Board of Directors 48

2.1.1 Composition of the Board of Directors at December31, 2019 48

2.1.2 Presentation of the Board directors at December31, 2019 52

2.2 Organization and functioning of the Board of Directors 75

2.2.1 Functioning of the Board of Directors 75

2.2.2 Separation of the functions of Chair of the Board of Directors

and Chief Executive Ocer 75

2.2.3 Rules applicable to the appointment and replacement of members

of the Board of Directors 77

2.2.4 Independence of the Board directors 80

2.2.5 Other rules applicable to Board directors 81

2.3 Activities and functioning of the Board of Directors

and its Committees 83

2.3.1 Activities and functioning of the Board of Directors 83

2.3.2 Activities and functioning of the Committees 87

2.4 Summary table of the AFEP-MEDEF Code’s comply

or explain recommendations not applied 93

2.5 Compensation of the company ocers 94

2.5.1 General principles 94

2.5.2 Compensation of the company ocers in 2019 94

2.5.3 Compensation policy for the company ocers in respect of 2020 107

2.6 CEO Committee 116

2.7 Group Executive Committee 117

2.8 Share capital and shareholder structure 118

2.8.1 Share capital 118

2.8.2 Securities conferring entitlement to shares 121

2.8.3 Authorization to buy back AirFrance – KLM’s own shares 121

2.8.4 Reinforcement of the AirFrance – KLM Group’s strategic partnerships

with Delta Air Lines,Inc. and China Eastern Airlines 121

2.8.5 AirFrance – KLM shareholder structure 123

2.8.6 A regular dialogue with individual shareholders and investors 125

2.8.7 Legal and statutory investment thresholds 125

2.8.8 Identiﬁcation of shareholders and statutory provisions

concerning shareholders 126

2.8.9 Information on trading in the stock 127

2

2_VA_V10 22/04/2020 10:08 Page47

This section constitutes the corporate governance report foreseen in the ﬁnal paragraph of Article L.225 - 37of the French Code of

Commerce (Code de Commerce) and includes the information referred to in Articles L.225 - 37 - 2to L.225 - 37 - 5of the Code de Commerce.

Pursuant to the provisions of Article L.225 - 37of the Code de Commerce, a presentation on this report will be made to shareholders

during the forthcoming Annual General Shareholders’ Meeting on May26, 2020.

2.1 COMPOSITION OF THE BOARD OF DIRECTORS

2.1.1 Composition of the Board of Directors at December31, 2019

Air France- KLM — 2019 Universal Registration Document48

Corporate governance report

2 Composition of the Board of Directors

19 Board directors

1

representative of

the French State

appointed by

ministerial order

(3)

16

Board directors

appointed by

the Shareholders’

Meeting

(1)

2

representatives of the

employees, of whom

one appointed by the

Comité de Groupe Français

(2)

and the other by the

European Works Council

(2)

, and

7

independent

directors

(4) (5)

41%

women

(6)

11 French

1 Canadian/British

1 US

5 Dutch

1 Chinese

6

nationalities

(1) Of whom two directors appointed as proposed by the French State and two directors representing the employee shareholders.

(2) In application of the provisions of Article L.225-27-1 of the Code de Commerce and Article 17-3 of the Articles of Incorporation.

(3) Pursuant to Article 4 of Ordinance No. 2014-948 of August 20, 2014 relating to governance and transactions involving the share capital of State-owned companies.

(4) Pursuant to the provisions of Article 9.3 of the AFEP-MEDEF Code, the Board directors representing the employee shareholders and the employees are not taken

into account for the calculation of this percentage.

(5) At December 31, 2019, the percentage of independent directors stood at 47%. This exceptional situation is linked to the entry into the share capital of the Dutch

State and is temporary (see section 2.2.4 Independence of the Board directors).

(6) The Board directors representing the employees, appointed pursuant to Article L. 225-27-1 of the Code de Commerce, are not taken into account for the gender

parity calculation in line with the provisions of the aforementioned Article.

2_VA_V10 22/04/2020 10:08 Page48

2

Corporate governance report

Composition of the Board of Directors

2

Board of Directors Solenne Lepage

(1)

April1, 2019

Martin Vial

(2)

May31, 2019

n/a

Mathi Bouts

(3)

April17, 2019

Karim Belabbas

(4)

May10, 2019

Patrick Vieu

May28, 2019

Astrid Panosyan

May28, 2019

Jean-Dominique Comolli

May28, 2019

Bing Tang

(6)

July30, 2019

Jian Wang

(6)

July30, 2019

n/a

Solenne Lepage

(1)

April1, 2019

Martin Vial

October30, 2019

n/a

Hans N.J. Smits

May28, 2019

Cees ‘t Hart

May28, 2019

Jaap de Hoop Scheer

May28, 2019

Benjamin Smith

(5)

May28, 2019

Audit Committee

n/a n/a Jean-Dominique Comolli

May28, 2019

Appointments and

Governance

Committee

Hans N.J. Smits

May28, 2019

n/a

Jaap de Hoop Scheer

(in the capacity as Chair)

October30, 2019

Isabelle Bouillot

(in the capacity

as interim Chair)

October30, 2019

n/a

Patrick Vieu

May28, 2019

Astrid Panosyan

October30, 2019

Bing Tang

July30, 2019

Jian Wang

October30, 2019

n/a

Remuneration

Committee

Sustainable

Development

and Compliance

Committee

Changes in the composition of the Board of Directors during the 2019 ﬁnancial year

Departure Appointment Re - appointment

(1) In a letter dated March29, 2019, Ms.Solenne Lepage informed the company that she would be stepping down as a Board director representing the French State,

eective April1, 2019.

(2) By a ministerial order of May31, 2019, Mr. Martin Vial was appointed as a Board director representing the French State, replacing Ms.Solenne Lepage.

(3) The mandate of Mr. Mathi Bouts, a Senior Purser on KLM long - haul ﬂights, as a Board director representing the employees, was renewed on April17, 2019 by the

European Works Council for a two - year term of oce expiring at the end of the Shareholders’ Meeting convened to approve the ﬁnancial statements for the

ﬁnancial year ending December31, 2020.

(4) The mandate of Mr. Karim Belabbas, a Support Technician Weight and Balance. CDG H ub Ground Operations, as a Board director representing the employees, was

renewed on May10, 2019, by the Comité de Groupe Français for a two - year term of oce expiring at the end of the Shareholders’ Meeting convened to approve the

ﬁnancial statements for the ﬁnancial year ending December31, 2020.

(5) On May28, 2019, the Shareholders’ Meeting approved the ratiﬁcation of the co - opting decided by the Board of Directors meeting of December5, 2018, together

with the appointment for a four - year term of oce, expiring at the end of the Shareholders’ Meeting convened to approve the ﬁnancial statements for the ﬁnancial

year ending December31, 2022.

(6) On July30, 2019, the Board of Directors noted the resignation of Mr. Bing Tang from his functions as a Board director and, as proposed by the company China

Eastern Airlines, after consultation with the Appointments and Governance Committee, decided to co - opt Mr. Jian Wang as a Board director, eective as of July30,

2019, for his predecessor’s remaining term of oce, i.e. until the end of the Shareholders’ Meeting convened to approve the ﬁnancial statements for the ﬁnancial

year ending December31, 2020.

2019 Universal Registration Document — Air France - KLM

49

2_VA_V10 27/04/2020 18:27 Page49

Air France- KLM — 2019 Universal Registration Document50

Corporate governance report

2 Composition of the Board of Directors

Composition of the Board of Directors at December31, 2019

Personal information

Number

of shares

Board directors Gender Nationality Age held

Board directors appointed by the Shareholders’ Meeting

Anne-Marie Couderc Female French 69 1,000

Benjamin Smith Male Canadian 48 100,000

and British

Maryse Aulagnon Female French 70 1,500

Leni M.T. Boeren Female Dutch 56 2,000

Isabelle Bouillot Female French 70 230

Delta Air Lines,Inc. US 37,527,410

(Represented by George Mattson)

Cees’t Hart Male Dutch 61 3,500

Jaap de Hoop Scheer Male Dutch 71 1,025

Anne-Marie Idrac Female French 68 1,000

Isabelle Parize Female French 62 300

Jian Wang Male Chinese 46 300

Alexander R. Wynaendts Male Dutch 59 1,000

Board directors elected by the Shareholders’ Meeting as proposed by the French State

Jean-Dominique Comolli Male French 71 0

Astrid Panosyan Female French 48 0

Board directors representing the employee shareholders elected by the Shareholders’ Meeting

François Robardet Male French 62 757

Paul Farges Male French 48 816

Board directors representing the French State appointed by ministerial order

Martin Vial Male French 65 0

Board director representing the employees appointed by the Comité de Groupe Français

Karim Belabbas Male French 46 0

Board director representing the employees appointed by the European Works Council

Mathi Bouts Male Dutch 60 0

 Independent directors.

2_VA_V10 22/04/2020 10:08 Page50

2019 Universal Registration Document — Air France - KLM 51

2

Corporate governance report

Composition of the Board of Directors

2

Experience Position within the Board Participation in Committees

Number of Expiry Appointments Sustainable Development

directorships in Date of term Board Audit Remuneration and Governance & Compliance

listed companies appointed of oce experience Committee Committee Committee Committee

2 May19, 2016 2020 AGM 4years X

(Chair)

1 December5, 2023 AGM 1year

2018

2 July8, 2010 2021 AGM 10years X X

(Chair)

2 May16, 2017 2021 AGM 2years X X

1 May16, 2013 2021 AGM 7years X X

(interim Chair)

2 October3, 2021 AGM 3years X X

2017

2 May28, 2019 2023 AGM n/a

1 July7, 2011 2023 AGM 9years X

4 November2, 2021 AGM 3years X

2017 (Chair)

3 March27, 2022 AGM 6years X X

2014

1 July30, 2019 2021 AGM n/a X

3 May19, 2016 2020 AGM 4years X

1 December14, 2023 AGM 10years X X

2010

2 May28, 2019 n/a X

1 December6, 2022 AGM 4years X X

2016

1 May15, 2018 2022 AGM 2years X

3 May31, 2019 2023 AGM n/a X

1 June1, 2017 2021 AGM 3years X

1 October10, 2021 AGM 3years X

2017

2_VA_V10 22/04/2020 10:08 Page51

Air France- KLM — 2019 Universal Registration Document52

Corporate governance report

2 Composition of the Board of Directors

Other directorships and oces

French companies

— Chair of the Société Air France

(G)

Board of

Directors since 2018;

— Board director and Chair of the Remuneration

Committee of Ramsay Générale de Santé since 2014;

— Board director of Transdev since 2012 and

member of the Audit Committee of Transdev SA

since 2017;

— Board director and Chair of the Remuneration and

Nomination Committees of Plastic Omnium

(1)

since 2010;

— Member of the Supervisory Board of Ayming

since December2014;

— Board director of the Veolia Foundation;

— Member of the ESEC Council since

November2015.

Directorships and oces held in the last ﬁve

years and having expired

French companies

— Member of the MEDEF Executive Committee

until 2018;

— Chair of Presstalis Group until June2017;

— Board director and Chair of the Board of Directors

of Presstalis Group until June2017;

Anne-Marie Couderc

Chair of the Board of Directors

Independent director

Chair of the Appointments and Governance Committee

Expertise and professional experience

Born February13, 1950, Anne-Marie Couderc is a graduate in private law and holds a French Professional Lawyer’s

Certiﬁcate (Certiﬁcat d’Aptitude à la Profession d’Avocat).

Ms.Couderc began her career in 1972 as a lawyer with the Paris Bar. She then became Chief Legal Ocer in

Hachette’s industrial division between 1979 and 1982, before fulﬁlling dierent management functions within

the Lagardère Group from 1982 to 1995.

In parallel, Anne-Marie Couderc has pursued a political career: having been elected to the Paris Council in

1983, until 2001 she successively served as Advisor then Deputy to the Mayor of Paris between 1989 and 2001.

Having been elected a Deputy of the French National Assembly in 1993, she subsequently joined the

government in 1995 where she was appointed Secretary of State to the Prime Minister, responsible for

Employment, then Minister for Employment and Social Aairs, responsible for Employment, until 1997.

In 1997, she was named Chief Executive Ocer of Hachette Filipacchi Associés followed, from 2006 to 2010,

by Secretary-General of Lagardère Active (press and audiovisual). From 2011 to 2017, she was Chair of Presstalis

Group (press distribution), Since June30, 2017, Ms.Couderc has been a company director.

Ms.Couderc has been Chair of the AirFrance – KLM Board of Directors since May15, 2018.

Nationality: French

Age: 69years

First appointed

as a Board director:

May19, 2016

Expiry of current term

of oce:

2020 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,000shares

Professional address:

AirFrance – KLM,

2 rue Robert-

Esnault-Pelterie,

75007Paris

2.1.2 Presentation of the Board directors at December31, 2019

Board directors appointed by the Shareholders’ Meeting

(G) Company in the AirFrance – KLM Group.

(1) Listed company.

2_VA_V10 22/04/2020 10:08 Page52

2019 Universal Registration Document — Air France - KLM 53

2

Corporate governance report

Composition of the Board of Directors

2

Other directorships and oces

French companies

— Board director of Société Air France

(G)

since

December12, 2018;

Non-French company

— Member of the Supervisory Board of KLM

(G)

since

April2019.

Directorships and oces held in the last ﬁve

years and having expired

N/A

Benjamin Smith

Chief Executive Ocer

Board director

Expertise and professional experience

Born August27, 1971, Benjamin Smith is a reputed senior airline industry executive at international level, having

spent the past twenty years at Air Canada where he was President Airlines and Chief Operating Ocer.

In 1990, in parallel with his studies, he started out as a customer service agent at Air Ontario before taking an

entrepreneurial path in 1992 when he set up his own retail corporate travel agency which he ran successfully

for eight years. In 1999, he also simultaneously took on a consultancy role for Air Canada before ﬁnally joining

the Group in 2002.

As of his 2002 arrival, Benjamin Smith fulﬁlled a number of high - ranking positions at Air Canada including Head

of network Planning before joining the executive management team as Executive Vice-President and Chief

Commercial Ocer.

In 2014, he was appointed President Airlines (Air Canada, Rouge, Express, Cargo) and Chief Operating Ocer

of Air Canada with overall responsibility for commercial aairs, operations and customer relations for the Group.

He was also responsible for Air Canada’s commercial growth strategy.

On August 16, 2018, Benjamin Smith was appointed Chief Executive Ocer of Air France – KLM. On

December5, 2018, he was appointed as a Board director within the AirFrance – KLM Board of Directors.

Nationality: British and

Canadian

Age: 48years

First appointed

as a Board director:

December5, 2018

Expiry of current term

of oce:

2023 Shareholders’ Meeting

Number of shares held

in the company’s stock:

100,000shares

Professional address:

AirFrance – KLM,

2 rue Robert-

Esnault-Pelterie,

75007Paris

(G) Company in the AirFrance – KLM Group.

2_VA_V10 22/04/2020 10:08 Page53

Air France- KLM — 2019 Universal Registration Document54

Corporate governance report

2 Composition of the Board of Directors

Other directorships and oces

French companies

— Lead Director and Chair of the Remuneration

Committee of Veolia Environnement

(1)

;

— Chair and CEO of MAB-Finances SAS.

Non-French company

— Director of Holdane BV Netherlands (MAB

Finances Group).

Directorships and oces held in the last ﬁve

years and having expired

French companies

Within the Ane Group:

— Chair of Ane R.E

(1)

until December18, 2018;

— Chair of Promane SAS, CEO of ATIT (SC) and

of Transane SAS, representative of Ane, Mab

Finances and Promane within the employee

representative bodies of the various Ane Group

entities until January1, 2017;

— Chair of the Board of GESFIMMO (SA) until

May2017;

— Member of the BPCE group’s (Banques Populaires

Caisses d’Epargne) Supervisory Board and Chair of

the Appointments and Remuneration Committees

until April 2019.

Non-French company

Within the Ane Group:

— Chair of the Board of Banimmo

(1) (2)

. Belgium until

November8, 2018.

Maryse Aulagnon

Independent director

Chair of the Audit Committee and member of the Remuneration Committee

Expertise and professional experience

Born April19, 1949, Maryse Aulagnon, Honorary Master of Petitions at the Conseil d’État, is a graduate of the

Institut des Sciences Politiques de Paris and of the École Nationale d’Administration and holds a post - graduate

degree (DESS) in Economic Sciences.

Having occupied various positions at the French Embassy in the United States and in a number of Ministerial

cabinets (Budget, Industry), Ms.Aulagnon joined the CGE Group (now Alcatel) in 1984 as Director of International

Business. She subsequently joined Euris as Chief Executive Ocer on its creation in 1987. She served as Chair

of the Ane Group SA

(1)

(a real estate company) which she founded in 1990 until December18, 2018 and is

now developing Finestate (MAB Finances), a co - living company.

Ms.Aulagnon was appointed Chair of the Fédération des Sociétés Immobilières et Foncières (FSIF) in April2019.

Nationality: French

Age: 70years

First appointed

as a Board director:

July8, 2010

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,500shares

Professional address:

Finestate,

25rue de Ponthieu,

75008Paris

(1) Listed companies.

(2) Banimmo is controlled by Ane (49.5%).

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Corporate governance report

Composition of the Board of Directors

2

Other directorships and oces

Non-French companies

— Member of the Board of Directors of FCLTGlobal,

USA, since 2019;

— Chair of the Executive Board of Kempen & Co NV

(Netherlands) since 2018;

— CEO of Kempen Capital Management NV

(Netherlands) since 2018;

— Member of the Van Lanschot Kempen N.V.

(1)

(Netherlands) Executive Board since 2018;

— Member of the Supervisory Board of Tata Steel

Nederland BV, Netherlands, since 2014.

Directorships and oces held in the last ﬁve

years and having expired

Non-French companies

— Chair of the Supervisory Board of Transtrend BV,

Netherlands until 2019;

— Within the Robeco Group: Chair of the Management

Board of Robeco Groep NV, Chair of the

Management Board of Robeco Holding BV, Chair

and CEO of the Management Board of Robeco

Institutional Asset Management BV, Chair of the

Management Board of Robeco Nederland BV,

(Netherlands), Chair of the Board of Directors of

Boston Partners Global AdvisorsInc., (USA), Director

of Harbor Capital AdvisorsInc., (USA), Vice-Chair

of RobecoSAM AG (Switzerland) until 2016;

— Chair and member of the Board of DUFAS,

Netherlands, until 2016;

— Member of the Sustainable Asset Management

USAInc. Board of Directors, USA, until 2016.

Leni M.T. Boeren

Independent director

Member of the Audit Committee and of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born December23, 1963, Leni M.T. Boeren holds a Masters degree in Business Management from Erasmus

University in Rotterdam (the Netherlands).

Ms.Boeren started her career in the ﬁnancial sector at Paribas in 1983. She went on to work for Rabobank, where

she held various positions through to 1992. She then moved to Robeco as head of the marketing and product

management department from 1992 to 1997. She subsequently became a member of the Board of Directors

of Amsterdam Exchanges NV followed, in 2000 to 2005, by her appointment as a member of the Executive

Committee of Euronext NV, the result of the merger of the Paris (ParisBourse), Brussels (Brussels Exchanges)

and Amsterdam (Amsterdam Exchanges) stock exchanges.

From January2005 until December2016, Leni Boeren was successively a member. Vice-Chair and Chair of the

Management Board of Robeco Groep NV, an international asset management ﬁrm. She was also responsible

for Robeco’s subsidiaries and held several Board positions. She also served as a member and Chair of the

Board of DUFAS, the Dutch Fund and Asset Management Association (2009 - 2016).

Since February2018, Ms.Boeren has been a member of the Executive Board of Van Lanschot Kempen N.V.

(1)

(Netherlands). She is Chief Executive Ocer of Kempen Capital Management NV (Netherlands), one of Van

Lanschot Kempen’s core activities.

Nationality: Dutch

Age: 56years

First appointed

as a Board director:

May16, 2017

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

2,000shares

Professional address:

AirFrance – KLM,

2 rue Robert-

Esnault-Pelterie,

75007Paris

(1) Listed companies.

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Corporate governance report

2 Composition of the Board of Directors

Other directorships and oces

French companies

— President of China Equity Links since 2006;

— President of IB Finance;

— Member of the Supervisory Board of Gimar & Cie.

Non-French companies

— Board director of Saint Gobain China;

— President of CELPartners Ltd, Hong Kong;

— Board director of Yafei Dendistry Limited

(2)

.

Directorships and oces held in the last ﬁve

years and having expired

French companies

— Board director of Saint-Gobain

(1)

until June2016.

Non-French companies

— Board director of Crystal Orange Hotel Holdings

Limited

(2)

until May2017;

— Board director of JD Holding Inc

(2)

until

December2016;

— Board director of Umicore, Belgium, until

May2015.

Isabelle Bouillot

Independent director

Interim Chair of the Remuneration Committee and member of the Audit Committee

Expertise and professional experience

Born May5, 1949, Isabelle Bouillot holds an advanced degree in Public Law and is a graduate of the Institut

des Études Politiques de Paris and the École Nationale d’Administration.

Having occupied various positions in the French Public Administration, including Economic Advisor to the

President of the Republic between 1989 and 1991 and Budget Director at the Ministry of Economy and Finance

between 1991 and 1995, Ms.Bouillot was Deputy Chief Executive Ocer in charge of the ﬁnancial and banking

activities at the Caisse des Dépôts et Consignations between 1995 and 2000, then Chair of the Management

Board of the Investment Bank of the CDC IXIS Group from 2000 to 2003. Since 2006, Ms.Bouillot has been

President of China Equity Links (SAS).

Nationality: French

Age: 70years

First appointed

as a Board director:

May16, 2013

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

230shares

Professional address:

China Equity Links,

9avenue de l’Opéra,

75001Paris

(1) Listed company.

(2) Unlisted company registered outside France in which China Equity Links holds or held an equity interest.

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Corporate governance report

Composition of the Board of Directors

2

Other directorships and oces

N/A

Directorships and oces held during the last

ﬁve years and having expired

N/A

Delta Air Lines,Inc.

Board director

Member of the Remuneration Committee and of the Audit Committee

Corporation formed under the laws of the State of Delaware having its registered oce sis Delta Bld, Atlanta,

GA, USA 30354.

Nationality: US

First appointed

as a Board director:

October3, 2017

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

37,527,410shares

Professional address:

1030 Delta Boulevard,

Atlanta, GA, USA 30354

Other directorships and oces

Non-French companies

— Board director of Delta Air Lines,Inc.

(1)

, USA;

— Board director of Injection Technologies Inc.,

Canada;

— Board director of Instant ChannelInc., USA;

— Board director of Tropic Ocean Airways, USA;

— Senior advisor of Comvest. Partners, USA;

— Senior advisor of Star Mountain Capital, USA.

Directorships and oces held during the last

ﬁve years and having expired

Non-French companies

— Chair of Wilbanks Energy Logistics LLC, USA, until

October2015.

George N. Mattson

Permanent representative of Delta Air Lines,Inc.

Expertise and professional experience

Born March23, 1966, George Mattson is the permanent representative on AirFrance – KLM’s Board of Directors

of Delta Air Lines,Inc., a corporation formed under the laws of the State of Delaware having its registered

oce at 1030 Delta Bld. Atlanta. GA USA 30354.

George Mattson is a retired partner at Goldman Sachs & Co where he had a 19 - year career. He has extensive

experience in M&A. corporate ﬁnance and the capital markets. During this period, he also acquired extensive

knowledge of the airline sector.

He is now a private investor focused on acquiring and growing private industrial companies. George Mattson

has been a member of Delta’s Board of Directors since 2012, where he chairs the Finance Committee and sits

on the Personnel & Compensation and Corporate Governance Committees.

Nationality: US

Age: 52years

Professional address:

1030 Delta Boulevard,

Atlanta, GA USA 30354

(1) Listed company.

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Corporate governance report

2 Composition of the Board of Directors

Other directorships and oces

Non-French companies

— Member of the Board of the Center for European

Policy Studies based in Brussels. Belgium;

— Member of the Advisory Board of the Dutch

employers’ association VNO-NCW, Netherlands;

— Member of the Board of Trustees of Friends of

Europe based in Brussels, Belgium;

— Co-President of the Security & Defense Agenda,

Brussels. Belgium;

— Member of the European Council on Foreign

Aairs, based in London. United Kingdom;

— President of the Advisory Council on Foreign

Aairs, Netherlands;

— President of the Netherlands Civil Honors

Advisory Committee, Netherlands;

— Member of the Trilateral Commission.

Directorships and oces held in the last ﬁve

years and having expired

Non-French companies

— Chair of the Supervisory Board of the Rijksmuseum,

Netherlands until October2017;

— Member of the International Advisory Board of Royal

Ten Cate NV, Netherlands, until October2016;

— Vice-Chair of the Franco-Dutch Cooperation

Council, Netherlands, until 2015.

Jaap de Hoop Scheer

Board director

(1)

Member of the Remuneration Committee

Expertise and professional experience

Born April3, 1948. Jaap de Hoop Scheer is a law graduate of Leiden University.

Mr. de Hoop Scheer started his diplomatic career in 1976, subsequently becoming Private Secretary to the

Minister of Foreign Aairs (1980 - 1986). He then became a member of the Dutch Parliament (1986 - 2002),

leader of the Christian Democratic Alliance (CDA) (1997 - 2001), Dutch Minister of Foreign Aairs (2002 - 2003)

and Secretary General of NATO (2004 - 2009). Since 2012, Mr. de Hoop Scheer has taught international politics

and diplomacy in the Governance and International Aairs Faculty of Leiden University (Netherlands). Mr. de

Hoop Scheer is a Minister of State.

Nationality: Dutch

Age: 71years

First appointed

as a Board director:

July7, 2011

Expiry of current term

of oce:

2023 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,025shares

Professional address:

AirFrance – KLM,

2 rue Robert-

Esnault-Pelterie,

75007Paris

(1) In view of the acquisition by the Dutch State of a shareholding in AirFrance – KLM on February26, 2019, and on the basis of the report of the Appointments and

Governance Committee, during its meeting of March25, 2019 the Board of Directors considered that Mr. de Hoop Scheer, a Board director appointed as proposed

by the Dutch State, had no longer qualiﬁed as an independent Board director as of that date (see section2.2.4. Independence of the Board directors).

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Corporate governance report

Composition of the Board of Directors

2

(1) Listed companies.

Other directorships and oces

French companies

— Board director of Bouygues

(1)

;

— Board director of Saint-Gobain

(1)

;

— Board director of Total

(1)

;

— Board director of SANEF.

Other

— Board director of the Fondation Robert Schuman;

— High representative of the French government for

the development of autonomous vehicles;

— President of the France Logistique Association.

Directorships and oces held in the last ﬁve

years and having expired

French company

— Member of the Supervisory Board of Vallourec

(1)

until 2015;

— President of the Aéroport de Toulouse-Blagnac

Supervisory Board until May2018.

Anne-Marie Idrac

Independent director

Chair of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born July27, 1951. Anne-Marie Idrac is a graduate of the Institut d’Études Politiques, the École Nationale

d’Administration and the Institut des Hautes Études de Défense Nationale. Ms.Idrac has spent most of her

career in the ﬁelds of the environment, housing, urban development and transport.

She was Chief Executive Ocer at the Public Development Agency of Cergy-Pontoise, Director of Land

Transportation at the Ministry of Equipment and Transport and subsequently Secretary of State for Transport.

She occupied the positions of Chair and CEO of the RATP (Paris Public Transport Authority) from 2002 to

2006, and Chair and CEO of the SNCF (French State Railways) from 2006 to 2008. She was a Member of

Parliament from 1997 to 2002 and Secretary of State for Foreign Trade from 2008 to 2010.

Anne-Marie Idrac is a company director and consultant.

Nationality: French

Age: 68years

First appointed

as a Board director:

November2, 2017

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,000shares

Professional address:

AirFrance – KLM,

2 rue Robert-

Esnault-Pelterie,

75007Paris

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(1) Listed companies.

Air France- KLM — 2019 Universal Registration Document

60

Corporate governance report

2 Composition of the Board of Directors

Other directorships and oces

French companies

— Board director of Robertet

(1)

since June2018;

— Chair of DHI SAS since November2018;

— Chair of Delsey SA since January2019.

Non-French companies

— Associate of Odys SPRL, Belgium;

— Board director of DUSHInc., Delsey LuggageInc.,

Delsey Asia Limited; Delsey Hong Kong Ltd;

Delsey Korea Holding Ltd since the end of 2018;

— Board director of Pandora

(1)

since January2019.

Directorships and oces held in the last ﬁve

years and having expired

French companies

— Within Nocibé/Douglas Group until January2016:

– CEO and Chair of the Managing Board of Al

Perfume France,

– CEO and Chair of the Managing Board of

Parfumerie Douglas France,

– Chair and CEO of Douglas Expansion,

– Chair of Douglas Passion Beauté Achats DPB-

Achats;

— Board director of Auchan Retail International until

October2018.

Non-French companies

— Within Nocibé/Douglas Group until October2017:

– Chair and Chief Executive Ocer of Douglas

Holding AG,

– Member of the Supervisory Board of Douglas

Holding AG. Germany,

– Member of the Managing Board of Douglas GmbH,

Parfümerie Douglas GmbH, Douglas Cosmetics

GmbH, Kirk Beauty One GmbH, Kirk Beauty Two

GmbH, Germany, Parfumerie Douglas Nederland

BV, Douglas Investment BV, Netherlands,

Parfümerie Douglas Ges mbH, Austria, Douglas

Polska Sp.z.o.o, Poland, Douglas Spain SA and

Parfumerie Iberia Holding SL. Spain, Parfümerie

Douglas Portugal LDA. Portugal,

– Member of the Supervisory Board of Beiersdorf

AG

(1)

, Germany until February2016;

— within Nocibé/Douglas until January2016:

– Chief Executive Ocer of Parfumeria Douglas

Portugal SA, Portugal,

– CEO of Parfümerie Douglas GmbH and Douglas

Cosmetics GmbH, Germany,

– CEO of Douglas Monaco, Monaco.

Isabelle Parize

Independent director

Member of the Remuneration Committee and of the Audit Committee

Expertise and professional experience

Born June16, 1957, Isabelle Parize is a graduate of the École Supérieure de Commerce de Paris. Having

occupied various positions within Procter & Gamble between 1980 and 1993 including notably that of

Marketing Manager, Health and Beauty Care, Ms.Parize joined Henkel Group in 1994. She was Managing

Director of Schwarzkopf, Henkel France, from 1994 to 1998, and then Senior Vice-President in charge of Europe,

the Middle East and Africa and of strategic marketing (based in Germany) from 1998 to 2001. She subsequently

became Managing Director of Canal+ Distribution and Chief Executive Ocer of CanalSatellite in 2001. She

then became President of the Fragrance division at Quest International (2005 - 07) and Managing Director

then Vice-Chair of the company Betclic (2007 - 11) before joining Nocibé as President of the Managing Board

(2011 - 16). She was Chair and Chief Executive Ocer of Douglas Holding AG until October2017.

In November2018, Ms.Parize became CEO of Delsey. She is a member of several Boards of Directors.

Nationality: French

Age: 62years

First appointed

as a Board director:

March27, 2014

Expiry of current term

of oce:

2022 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

300shares

Professional address:

Odys SPRL

31, rue des Aduatiques,

1040 Etterbeek

Belgium

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Corporate governance report

Composition of the Board of Directors

2

Other directorships and oﬃces

Non-French companies

—

CEO of Carlsberg Group

(1)

;

— Chair of the Supervisory Board of KLM

(G)

.

Directorships and oﬃces held in the last ﬁve

years and having expired

N/A

Cees ‘t Hart

Board director

Expertise and professional experience

Born in 1958, Mr. ‘t Hart holds an MA in Social Science from Leiden University (Netherlands). He worked for

24years with Unilever

(1)

, starting his career as a management trainee before holding a range of international

management positions in the Netherlands, Hungary, Singapore, Poland and Italy. His last position in Unilever

was as a member of the Unilever Europe Board as SVP Marketing Operations. After seven years as Chief

Executive Oﬃcer of the Dutch dairy cooperative Royal FrieslandCampina, he joined Carlsberg Group as Chief

Executive Oﬃcer in 2015. He has also been a Member of the Supervisory Board at KLM since 2014 and its

Chair since May2019.

Nationality: Dutch

Age: 61years

First appointed

as a Board director:

May28, 2019

Expiry of current term

of oﬃce:

2023 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

3,500shares

Professional address:

NY Carlsberg,

Vej 100, DK-1799,

Copenhagen V, Denmark

(G) Company in the AirFrance – KLM Group.

(1) Listed companies.

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2 Composition of the Board of Directors

Other directorships and oces

Non-French companies:

— Corporate secretary of China Eastern Airlines

Corporation Limited;

— Director, Oce of Board Aairs, China Eastern Air

Holding Company Limited;

— Chair of Eastern Airlines Industry Investment

Company Limited;

— Board member of Eastern Air Logistics

Corporation Limited.

Directorships and oces held in the last ﬁve

years and having expired

Non-French companies:

— Board member and President of Eastern Airlines

Industry Investment Company Limited until

February2019.

Jian Wang

Board director appointed as proposed by China Eastern Airlines

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born August181973, Jian Wang graduated from Shanghai Jiao Tong University with a Bachelor degree in

Engineering. He also holds a postgraduate Master of Business Administration from East China University of

Science and Technology and an Executive Master of Business Administration degree from Tsinghua University.

Jian Wang began his career in the aviation industry in 1995 and has extensive experience of corporate

governance, strategic investment, capital operations and management. He has designed and facilitated a

number of capital and strategic projects in China Eastern.

Since April2012, Jian Wang has been Corporate Secretary of China Eastern Airlines

(1)

, a controlling subsidiary

of China Eastern Air Holding Company Limited. Between November2016 and February2019, he was a Board

member and President of Eastern Airlines Industry Investment Company Limited, a wholly owned subsidiary

of China Eastern Air Holding Company Limited. Since June2017, Mr. Wang has also been Board member of

Eastern Air Logistics Corporation Limited.

Jian Wang is currently Corporate Secretary of China Eastern Airlines Corporation Limited and Chair of Eastern

Air Industry Investment Company Limited.

Nationality: Chinese

Age: 46years

First appointed

as a Board director:

July30, 2019

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

300shares

Professional address:

China Eastern Airlines,

2550 Hongqiao

International Airport

Shanghai 200335P.R.

China

(1) Listed company.

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Corporate governance report

Composition of the Board of Directors

2

Other directorships and oces

Non-French companies

— Board director of CitigroupInc.

(1)

, USA, since 2019;

— Member of the Supervisory Board of Puissance

BV, Netherlands, since 2017;

— Chair and CEO of Aegon N.V.

(1)

, Netherlands, since

2008.

Others

— Board director of the Geneva Association,

Switzerland;

— Chair of the Supervisory Board of the Rijksmuseum

in Amsterdam;

— Member of the Advisory Board of the Vumc

Cancer Center in Amsterdam, Netherlands.

Directorships and oces held in the last ﬁve

years and having expired

Others

— Chair of the Supervisory Board of the Mauritshuis

Museum in The Hague, Netherlands, until 2018;

— Vice-Chair of the PEIF (Pan-European Insurance

Forum) until 2018.

Alexander R. Wynaendts

Independent director

Member of the Appointments and Governance Committee

Expertise and professional experience

Born August1, 1960. Alex Wynaendts, a Dutch national, holds an electrical engineering degree from the École

Supérieure d’Électricité (1984) and an economics degree from the Université Paris-Sorbonne (1983). He has

more than thirty years’ experience of insurance and international ﬁnance.

Mr. Wynaendts began his career in banking with ABN AMRO in 1984, where he was responsible for commercial and

investment banking operations in Amsterdam and London. Between 1992 and 1997, he held various positions

with ABN AMRO in London. In 1997 he joined Aegon within the Group Business Development division. He

joined Aegon’s Executive Board in 2003 and was appointed Aegon’s Chief Operating Ocer in 2007.

Since April23, 2008. Mr. Wynaendts has been Chair and CEO of Aegon N.V.

(1).

Nationality: Dutch

Age: 59years

First appointed

as a Board director:

May19, 2016

Expiry of current term

of oce:

2020 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,000shares

Professional address:

Aegon NV,

Aegonplein 50,

2591 TV La Haye,

Netherlands

(1) Listed companies.

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2 Composition of the Board of Directors

Other directorships and oces

N/A

Directorships and oces held in the last ﬁve

years and having expired

French companies and public institutions

— Director of France Télévisions. representing the

French State.

Jean-Dominique Comolli

Board director appointed by the Shareholders’ Meeting as proposed by the French State

Member of the Appointments and Governance Committee and of the Remuneration Committee

Expertise and professional experience

Born April25, 1948, Jean-Dominique Comolli is a graduate of the Institut d’Études Politiques de Paris and of

the École Nationale d’Administration and holds a Masters degree in Economic Sciences.

Mr. Comolli began his career in 1977 as a civil administrator before becoming a technical advisor at the French

Ministry of Budget under Laurent Fabius, then a member of Prime Minister Pierre Mauroy’s and Laurent Fabius’

sta. He then became Chief of Sta at the French Budget Ministry under Michel Charasse, before being

appointed Director of Customs in 1989. Between 1993 and 2010, he was Chair and Chief Executive Ocer of

Seita, Vice-Chair of Altadis until 2005 and Chair of the Board of Altadis between 2005 and 2010.

In September2010, Mr. Comolli was appointed Commissioner for State Holdings, a position he was to occupy

until October2012.

Mr. Comolli is currently an Honorary Civil Service Administrator.

Nationality: French

Age: 71years

First appointed

as a Board director:

December14, 2010

Expiry of current term

of oce:

2023 Shareholders’ Meeting

Professional address:

AirFrance – KLM,

2rue Robert-

Esnault-Pelterie,

75007Paris

Board directors elected by the Shareholders’ Meeting as proposed by the French State

Pursuant to Article 6of French Ordinance No. 2014 - 948of August20, 2014 concerning governance and transactions involving the share

capital of public sector companies, and in that the French State has a direct holding of between 10% and 50% in the AirFrance – KLM

share capital, one or several seats are reserved within the Board of Directors for members potentially proposed by the French State.

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Composition of the Board of Directors

2

Other directorships and oces

French companies and public institutions

— Board directorships in companies belonging to

the Unibail Radamco-Westﬁeld Group: Chair of

Doria, Unibail Management and Espace Expansion

Immobilière, Chair of Unibail-Rodamco Participations,

Member of the Supervisory Board of Uni-Expos,

Chair of URW Brands, Chair of the Board of

Directors and CEO of Tayninh;

— Member of the Supervisory Board of AP-HP

International;

— Member of the Strategy Committee of Fabernovel

Group.

Non-French companies

— Board director of WCL Management PTY Limited

(2)

.

Directorships and oces held in the last ﬁve

years and having expired

French companies and public institutions

— Member of the Management Board of Unibail-

Radamco SE;

— Board director of Radamco Participations.

Non-French companies

— Board director of U&R Management BV;

— Board director of Rodamco Europe Beheer BV.

Astrid Panosyan

Board director appointed by the Shareholders’ Meeting as proposed by the French State

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born August13, 1971, Astrid Panosyan is a graduate of the Institut d’Études Politiques (IEP) Paris, the École

des Hautes Études Commerciales (HEC) and of Harvard University (Kennedy School of Government).

She began her career at AT Kearney before joining AXA’s Strategy Department in 1998 before moving to the

Department of Business Support & Development for Asia-Paciﬁc region.

In 2002, she joined Groupama where she successively held various senior positions in the International

Department, the Department of Strategy and the Department of Finance. She became General Secretary of

the Group in 2011.

Before joining Unibail-Rodamco SE on September1, 2015, she was previously an advisor and member of the

cabinet of Emmanuel Macron. French Minister of Economy, Industry and Digital Aairs, where she was in

charge of Economic Attractiveness and International Investments.

She is currently Managing Director of the Central Functions of the Unibail-Rodamco-Westﬁeld Group

(1)

(URW)

in charge of Human Resources, Organization, Information Systems, Legal Aairs, Risks & Compliance and Security.

Nationality: French

Age: 48years

First appointed

as a Board director:

May28, 2019

Expiry of current term

of oce:

2023 Shareholders’ Meeting

Professional address:

Unibail-Rodamco-Westﬁeld,

7Place du Chancelier

Adenauer,

75016Paris

(1) Listed company.

(2) Company in the Unibail-Radamco-Westﬁeld Group.

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2 Composition of the Board of Directors

Board director representing the French State appointed by ministerial order

Pursuant to Article 4of French Ordinance No.2014 - 948of August20, 2014 concerning governance and transactions involving the

share capital of public sector companies and Article 2of the decree - law No.2014 - 949of August20, 2014 applying French Ordinance

No.2014 - 948, in that the French State holds more than 10% of Air France - KLM’s share capital, a seat may be reserved for the French

State within the Board of Directors. Martin Vial was appointed Board director representing the French State by a ministerial order

dated May31, 2019.

Other directorships and oces

French companies

— Board director of Bpifrance SA. in the capacity as

representative of the French State;

— Board director of E.D.F.

(1)

. in the capacity as

representative of the French State;

— Board director of Renault Group

(1)

in the capacity

as representative of the French State.

Directorships and oces held in the last ﬁve

years and having expired

— Board director and member of the Strategy and

Governance and Remuneration Committes of

Thales

(1)

until 2017;

— Chair of Sicav Libertés et Solidarité until 2015.

Martin Vial

Board director appointed by the French State

Member of the Audit Committee

Expertise and professional experience

Born February8, 1954. Martin Vial ia a graduate of ESSEC and the École Nationale Supérieure des Postes et

Télécommunications.

He began his career as an administrator of Post Oces and Telecommunications in the Financial Oce of the

French Postal Service (Direction Générale des Postes). In 1986 he joined the Treasury Department at the Ministry

of the Economy and Finance, where he was responsible for overseeing banking activities and stock ﬂotations.

In 1988 he was appointed technical advisor and later Deputy Director of the Oce of the Minister for Post

Oces. Telecommunications and Space, where he was notably responsible for the institutional reform of the

postal service and France Télécom. From 1991 to 1993, he was successively Deputy Director and then director

of the Oce of the Minister of Infrastructure, Housing, Transport and Space, before going on to become

director of the Oce of the Minister for Post Oces and Telecommunications.

In 1993 Martin Vial was appointed Chair and Managing Director of the airline Aéropostale, a joint subsidiary of

Air France, La Poste and TAT. In 1996 he was elected Chair of the CSTA (French air transport association) and

of the FNAM (National Federation of Commercial Aviation).

At the end of 1997, he became CEO of the La Poste Group.

In December2000, he became Chair of the La Poste Group. At the same time he was a member of the

Supervisory Board (1998), then Vice Chair (2002) of the National Welfare Fund (CNP). From 1999 to 2004, he

was also a member of the Economic and Social Council and a member of the Strategic Council on Information

Technologies under the authority of the Prime Minister.

In September2002, Martin Vial joined the Cour des Comptes as counsel. From 2003 to 2014, he served as

CEO of the Europ Assistance Group, the world leader in care services with 44subsidiaries in 33countries, and

CEO of Europ Assistance Holding. He also Chairs several Boards of Directors of the Group’s companies.

In January2015, he founded Premium Care, a senior assistance company with high - tech content and delivering

an end - to - end remote assistance and home services oer.

On August24, 2015, Martin Vial was appointed a Commissioner of State Shareholdings.

Nationality: French

Age: 65years

First appointed

as a Board director:

May31, 2019

Expiry of current term

of oce:

May2023

Professional address:

Agence des

Participations de l’État,

Ministère de l’Économie des

Finances et de l’Industrie,

139rue de Bercy,

75572Paris Cedex 12

(1) Listed companies.

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Composition of the Board of Directors

2

Board directors representing the employee shareholders

Pursuant to Articles L.225 - 23of the French Code of Commerce (Code de Commerce), L.6411 - 9of the French Transport Code (Code des

Transports) and 17 - 2of the AirFrance – KLM Articles of Incorporation, in that the employees of AirFrance – KLM subsidiaries hold more

than 3% of AirFrance – KLM’s share capital, there are two representatives of the employee shareholders within the Board of Directors:

— one representative belonging to the ﬂight deck crew category of sta; and

— one representative belonging to the other employee category of sta.

These Board directors representing the employee shareholders are elected by the Shareholders’ Meeting having been proposed by

the shareholders referred to in Article L.225 - 102of the Code de Commerce. The employee and former employee shareholders are

invited to choose their candidates for each of the two colleges (ﬂight deck crew and other employees), the appointment taking place

based on a majority vote in two rounds of balloting. The candidate having obtained the absolute majority of the votes cast in each

college, in either the ﬁrst or second round, is then proposed to the Shareholders’ Meeting.

Other directorships and oces

N/A

Directorships and oces held in the last ﬁve

years and having expired

— Within the SNPL pilots’ union:

– Vice-President of the Air France section and

Head of International Aairs until October2017,

– Elected member of the Comité d’Etablissement

until March2015.

Paul Farges

Board director representing the ﬂight deck crew employee shareholders

Member of the Audit Committee

Expertise and professional experience

Born February9, 1971, Paul Farges holds two qualiﬁcations from the École Nationale d’Aviation Civile: a degree

in Air Trac Control Engineering and a diploma as an Airline Pilot (ATPL).

He began his career in 1994 as Head of the Aviation Sans Frontière (ASF) mission in Angola before becoming

an air trac controller at the Centre en Route de la Navigation Aérienne Nord from March1995 to June1998.

In 1999 he joined Air France where he was as a Pilot Ocer on the Boeing 737 until 2001, then on the Boeing 747

from 2001 to 2007. He subsequently became a Flight Captain on the A320 in 2007, before becoming an airline

pilot instructor in 2017. Since 2019, Mr. Farges has been assigned to the Boeing 777.

He also holds a Corporate Directors Certiﬁcate (Sciences-Po–IFA).

Nationality: French

Age: 48years

First appointed

as a Board director:

May15, 2018

Expiry of current term

of oce:

2022 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

816shares

Professional address:

Air France,

45rue de Paris,

95747Roissy Charles

de Gaulle Cedex

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2 Composition of the Board of Directors

Other directorships and oces

French entities

— Titular member (elected) of the Supervisory

Board of the Aeropelican employee shareholder

FCPE;

— Titular member (elected) of the Supervisory

Board of the Horizon Epargne Actions diversiﬁed

savings fund;

— Manager of SCI Arcole 3.

Directorships and oces held in the last ﬁve

years and having expired

N/A

François Robardet

Board director representing the current or former Ground Sta and Cabin Crew employee shareholders

Member of the Audit Committee and of the Remuneration Committee

Expertise and professional experience

Born November9, 1957, François Robardet is a graduate of the École Nationale Supérieure des Arts et Métiers.

Mr. Robardet began his career in 1983 as a consulting engineer on management information systems within

Compagnie Générale d’Informatique.

In 1993 he joined Air Inter as an IT project manager before moving to Air France in 1997.

Nationality: French

Age: 62years

First appointed

as a Board director:

December6, 2016

Expiry of current term

of oce:

2022 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

757shares

Professional address:

Air France,

5avenue Maxwell,

31109Toulouse Cedex

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2

Other directorships and oces

N/A

Directorships and oces held in the last ﬁve

years and having expired

N/A

Karim Belabbas

Board director representing the employees

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born July28, 1973, Karim Belabbas is a graduate of the École Supérieure des Métiers de l’Aéronautique in

Montpelier (1998). He holds a university degree in aeronautics from Saint-Denis University (2001).

Having been an Air Trac Operations Coordinator with Aéroport de Paris, Mr. Belabbas joined Air France in

November1999 as an Aircraft Leader.

Since 2005 Karim Belabbas has been a Support Technician Weight and Balance, CDG hub Ground

Operations.

Nationality: French

Age: 46years

First appointed

as a Board director:

June1, 2017

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Professional address:

Air France,

45rue de Paris,

95747Roissy Charles

de Gaulle Cedex

Board directors representing the employees

Pursuant to Article 17 - 3of the AirFrance – KLM Articles of Incorporation and Article L.225 - 27 - 1of the French Code of Commerce

(Code de Commerce), there are two Board directors representing the employees within the AirFrance – KLM Board of Directors:

— on June1, 2017, as stipulated in Article L.2331 - 1of the French Employment Code (Code du Travail), the Comité de Groupe Français

appointed Mr. Karim Belabbas, a Support Technician Weight and Balance CDG hub Ground Operations, as a Board director

representing the employees. His mandate was renewed by the Comité de Groupe Français on May10, 2019.

— on October10, 2017, AirFrance – KLM’s European Works Council appointed Mr. Mathi Bouts, a Senior Purser on KLM long - haul ﬂights,

as a second Board director representing the employees following the realization, on October3. 2017, of the capital increases

reserved to China Eastern Airlines and Delta Air Lines,Inc. His mandate was renewed by the European Works Council on April17, 2019.

Mr. Belabbas and Mr. Bouts were both appointed for two - year terms of oce, expiring at the end of the AirFrance – KLM Annual

General Shareholders’ Meeting to be held during the year in which their terms of oces expire, i.e. at the end of the 2021 Annual

General Shareholders’ Meeting.

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2 Composition of the Board of Directors

Other directorships and oces

Non-French company

— Chair of the Dutch foundation MNO, Netherlands,

since 2011.

Directorships and oces held in the last ﬁve

years and having expired

Non-French company

— Member of the VNC Council Schiphol-Oost,

Netherlands, until 2017.

Mathi Bouts

Board director representing the employees

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born June29, 1959, Mathi Bouts holds a Bachelor in mathematics and philosophy from the Catholic University

of Nijmegen (The Netherlands). He joined KLM in 1987 as a steward. He previously occupied the positions of

Chair of KLM’s Works Council (where he was, in particular, a member of the Financial Economic Committee)

and Vice-Chair of the AirFrance – KLM European Works Council until 2010. Since 2011, he has been Chair of

the Dutch foundation MNO (Stichting MultiNationale Ondernemingsradenoverleg), a network of works Councils

in multinationals.

Mathi Bouts has been a Senior Purser on KLM long - haul ﬂights since 2017.

Nationality: Dutch

Age: 60years

First appointed

as a Board director:

October10, 2017

Expiry of current term

of oce:

2021 Shareholders’ Meeting

Professional address:

KLM, AMS/AF,

PO Box 7700, 1117 ZL

Schiphol Airport,

Netherlands

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2

Other directorships and oces as representative

of the French State

French companies and public institutions

N/A

Directorships and oces held in the last ﬁve

years and having expired

French companies and public institutions

— Board director of ADP Group

(1)

(ex-Aéroports de

Paris) as a representative of the French State until

March2019;

— Board director of SNCF Mobilités (ex SNCF) as a

representative of the French State until

March2019;

— Board director of Régie Autonome des Transports

Parisiens (RATP) as a representative of the French

State until March2019;

— Board director of Réseau Ferré de France (now

SNCF Réseau) until July2015.

Solenne Lepage

Board director representing the French State

Member of the Audit Committee

Expertise and professional experience

Born February7, 1972, Solenne Lepage holds a degree in philosophy and an advanced degree in history, and

is a graduate of the École Nationale des Chartes, the Institut d’Études Politiques de Paris and the École

Nationale d’Administration.

Having started her career in 2002 within the Ministry of the Economy and Finance as a deputy civil

administrator reporting to the heads of various oces (Public Banks, Energy, Chemicals, European

Coordination and Strategy), she was from 2006 to 2009 Client Relationship Manager for Large Companies in

the banking and insurance sector at HSBC France. In 2009 she became Head of the “EDF and Other

Shareholdings” oce in the Agency for State Shareholdings.

Appointed Deputy Director. “Transport and Audiovisual” at the Agency for State Shareholdings in

October2012., Ms.Lepage was Director of Transportation Shareholdings at the Agency for State Shareholdings

from August2014 until October2018. From October2018 until March2019 she was a Project Manager in the

General Management of the Agency for State Shareholdings, reporting to the Commissioner of State

Shareholdings.

Since April2019, she has been Deputy Chief Executive Ocer of the French Banking Federation.

Nationality: French

Age: 47years

First appointed

as a Board director:

March21, 2013

Expiry of current term

of oce:

May2019

Professional address:

Fédération Bancaire

Française,

18rue La Fayette,

75440Paris Cedex 09

Board directors whose terms of oce expired during the 2019 ﬁnancial year

(1) Listed company.

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2 Composition of the Board of Directors

Other directorships and oces

— Board director of the Fund for the Development

of an Intermodal Transportation Strategy in the

Alpine Region since March1. 2019.

Directorships and oces held in the last ﬁve

years and having expired

N/A

Patrick Vieu

Board director appointed by the Shareholders’ Meeting as proposed by the French State

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born December2, 1964, Patrick Vieu holds a history degree and a doctorate in philosophy, having graduated

from the Institut d’Études Politiques de Paris and the École Nationale d’Administration.

Mr. Vieu began his career in 1993 at the French Transport Ministry where he occupied, notably, the functions

of Deputy Director of Motorway and Infrastructure Concessions (1999 - 2004). He served as Director of Rail

and Public Transport (2005 - 2008) then Director of Transport Services (2008 - 2011) at the Ministry of Ecology,

Sustainable Development, Transport and Housing. In summer 2011, he became Project Director reporting to

the Vice-President of the General Council for the Environment and Sustainable Development before being

appointed Environment and Territories Advisor responsible for advising the French President on transport

and sustainability issues in 2012. Since June2014, Mr. Vieu has been Advisor to the Vice-President of the

General Council for the Environment and Sustainable Development.

Nationality: French

Age: 55years

First appointed

as a Board director:

May21, 2015

Expiry of current term

of oce:

2019 Shareholders’ Meeting

Professional address:

Conseil Général

de l’environnement et du

développement durable,

92055Paris-La Défense

Cedex

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2

Other directorships and oces

Non-French companies

— Deputy Secretary-General of the Party for China

Eastern Airlines

(1)

, China, since March2019;

— Board director of China Eastern Airlines

(1)

, China,

since May2019.

Directorships and oces held in the last ﬁve

years and having expired

Non-French companies

— Chair of Shanghai Airlines, China, from

January2012 to January2018;

— Senior executive of China Eastern Air Holding

Company Limited from May 2011 to

February2019;

— Vice-President of China Eastern Airlines

(1)

, China,

from February2010 to March2019;

— Non - executive director of TravelSky Technology

Ltd

(1)

from June2018 to September2019.

Bing Tang

Board director appointed as proposed by China Eastern Airlines until July30, 2019

Member of the Sustainable Development and Compliance Committee

Expertise and professional experience

Born February8, 1967, Bing Tang is an engineer by training and graduated from Nanjing University of Aeronautics

and Astronautics majoring in electrical technology. He obtained a doctoral degree in national economics from

the Graduate School of the Chinese Academy of Social Sciences.

Bing Tang has pursued his career in the civil aviation industry where he served as Executive Vice-President of

MTU Maintenance Zhuhai Co., Limited. Chief of the Administrative Oce of China Southern Air Holding Company

and President of Chongqing Airlines Company Limited. He occupied various managerial positions within China

Southern Airlines from December 2007 until May 2009. He served as Chair of Shanghai Airlines from

January2012 until January2018. He was also Vice-President of China Eastern Airlines Corporation Limited

from February2010 to March2019. He was a senior executive for China Eastern Air Holding Company from

May2011 until February2019.

In February2019, Bing Tang was appointed Vice-President and Deputy Secretary General of the Party at China

Eastern Airlines Holding. Since March2019, Mr. Tang has been Deputy Secretary General of the Party then,

since May2019, a Board director of China Eastern Airlines

(1)

.

Nationality: Chinese

Age: 52years

First appointed as a Board

director:

October3, 2017

Expiry of term of oce:

July30, 2019

Number of shares held in the

Company’s stock:

300shares

Professional address:

China Eastern Airlines,

36Hongxiang Sanlu,

Minhang District,

201100P.R. China

(1) Listed companies.

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2 Composition of the Board of Directors

Other directorships and oces

Non-French company

— Member of the Supervisory Board of Odfjell S.E.

(1)

,

Norway.

Others

— Member of the Supervisory Board of Erasmus

University, Rotterdam, from October 1 to

December1, 2019;

— Interim Chair of the Board of Erasmus University,

Rotterdam, Netherlands, since December2019.

Directorships and oces held in the last ﬁve

years and having expired

Non-French company

— Chair of the KLM NV

(G)

Supervisory Board,

Netherlands, until May2019;

Other

— Chair of the Board of Erasmus University,

Rotterdam, Netherlands, until May2018.

Hans N.J. Smits

Board director

Member of the Remuneration Committee

Expertise and professional experience

Born March13, 1950, Hans Smits holds a degree in civil engineering from the Technical University of Delft in

the Netherlands (1968 - 1973) and an MBA in business administration from Erasmus University in Rotterdam

(1973 - 1975).

Mr. Smits began his career in the Delta Department of the Dutch Ministry of Transport, Public Works and Water

Management where, from 1975 to 1986, he occupied a number of management positions. In 1986, he joined

the Ministry of Economic Aairs as Vice Director-General for Services, Small and Medium-Sized businesses

and Planning. From 1988 to 1992, he continued his career within the Ministry of Transport, Public Works and

Water Management as Director-General for Transport then Secretary-General before being appointed

President and Chief Executive Ocer of Amsterdam-Schiphol Airport (1992 - 98).

Between 1998 and 2002, he was Vice-Chair then Chair of the Board of Directors of Rabobank Nederland. In

2003 - 04, he was a Board director at Arthur D. Little Benelux then, from 2005 to 2014, he was Chair and CEO

of Havenbedrijf Rotterdam NV (“Port of Rotterdam Authority”).

Since 2014, Mr. Smits has been Chair and Chief Executive Ocer of Janssen de Jong Groep

(1)

.

Nationality: Dutch

Age: 69years

First appointed

as a Board director:

May19, 2016

Expiry of current term

of oce:

2019 Shareholders’ Meeting

Number of shares held

in the Company’s stock:

1,000shares

Professional address:

Janssen de Jong Groep BV,

Science Park Eindhoven

50015692 EB, Son en

Breugel. Netherlands

(1) Listed company.

(G) Company in the AirFrance – KLM Group.

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2.2.1 Functioning of the Board

of Directors

Corporate Governance Code

The Board of Directors functions according to the corporate

governance principles in force in France as set forth in the AFEP-

MEDEF Corporate Governance Code (hereinafter the “AFEP-MEDEF

Code”), updated in January2020, and available on the AFEP

(www.afep.com) and MEDEF (www.medef.com) websites.

In application of Article L.225 - 37 - 4, paragraph 8, of the French

Code of Commerce (Code de Commerce) and in line with the

recommendations of the AFEP-MEDEF Code, this section identiﬁes

in a summary table the recommendations of the AFEP-MEDEF

Code that have not been adopted and explains the reasons for

this choice (see Section2.4Summary table of the AFEP-MEDEF’s

Comply or Explain recommendations not applied).

Internal Rules

On June17, 2004, the AirFrance – KLM Board of Directors adopted

a set of Internal Rules based on the corporate governance

principles established by the AFEP-MEDEF Code.

In addition to the respective missions and powers of the Chair of

the Board of Directors and the Chief Executive Ocer, these

Internal Rules specify the modalities for the organization and

functioning of the Board, and establish the prerogatives and

duties of Board directors as regards the rules on reporting,

disclosure, conﬁdentiality and conﬂicts of interest. They also

determine the powers of each of the advisory Committees

established within the Board.

The last update to the Internal Rules took place on March12, 2019.

It concerned the missions of the newly - created Sustainable

Development and Compliance Committee and the changes to

the AFEP-MEDEF Code having taken place in June2018.

The Internal Rules are available on the AirFrance – KLM website

at http://www.airfranceklm.com (Governance section).

2.2.2 Separation of the functions

of Chair of the Board of

Directors and Chief

Executive Ocer

During its meeting of May15, 2018, the Board of Directors decided

to separate the functions of Chair of the Board of Directors

and Chief Executive Ocer. This decision followed

Mr. Jean-Marc Janaillac stepping down as Chair and Chief

Executive Ocer of AirFrance – KLM, and the implementation of

a transitional governance to, notably, enable the Chair of the

Board of Directors to focus on the eective functioning of the

Board and on the search for candidates for the position of

AirFrance – KLM’s Chief Executive Ocer.

On August 16, 2018, the Board of Directors conﬁrmed the

separation of the functions of Chair of the Board of Directors

and Chief Executive Ocer within the framework of the

implementation of the long - term governance with the

appointment of Mr. Benjamin Smith as the new Chief Executive

Ocer of AirFrance – KLM. The conﬁrmation of the separation of

the functions of Chair and Chief Executive Ocer reﬂected the

conclusions of the Board of Directors which considered that this

form of governance was the best choice for the Company at this

stage in its development in that it enables the Company to

beneﬁt from a new dynamic with a Chair of the Board of

Directors who is dedicated to governance matters and a Chief

Executive Ocer with recognized expertise in the air transport

industry, who is focused on the Group’s operations. The

complementarity of their proﬁles and roles optimizes the Group’s

governance and ensures a balanced and respectful division of

their respective missions. It also enables the eective coordination

of the Board of Directors thanks to the presence of a Chair of the

Board of Directors who is exclusively devoted to its functioning

and guarantees a more eective separation between the control

and management functions.

2.2 ORGANIZATION AND FUNCTIONING

OF THE BOARD OF DIRECTORS

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Powers and missions of the Chair

of the Board of Directors

In her capacity as Chair, Ms.Anne-Marie Couderc organizes and

steers the work of the Board of Directors, ensures the preservation

of the corporate interests and oversees the eective functioning

of the corporate bodies (Board of Directors. advisory Committees

and Shareholders’ Meetings) in the respect of the principles of

good governance. She also ensures that the Board of Directors

devotes the time required to issues of interest to the Group’s

future and, in particular, its strategy.

She has no executive responsibility but may represent the Group

in its high - level relations, notably with the public authorities,

major customers and partners, at both national and international

level, in close collaboration with the Chief Executive Ocer. She

devotes her best eorts to promoting the values and image of

the Group in all circumstances. Lastly, the Chief Executive Ocer

keeps her regularly informed of any signiﬁcant events and

situations relating to the life of the Group and she may ask him

for any information relevant to the understanding of the Board

and its Committees

(1)

. Ms. Couderc, an independent Board

director, also retains her role as Chair of the Appointments and

Governance Committee.

Powers and missions of the Chief Executive Ocer

In his capacity as Chief Executive Ocer of AirFrance – KLM, Mr.

Smith is invested with the broadest powers to act in the

Company’s name in all circumstances within the limits of the

corporate purpose and subject to those expressly attributed by

law to the Shareholders’ Meeting and the Board of Directors.

Furthermore, without prejudice to the legal provisions relating to

the authorizations that must be granted by the Board of Directors

(regulated agreements. securities. agreements and guarantees,

divestment of equity interests and real estate, etc. ), the Internal

Rules require prior approval from the Board for operations by the

Company and its Principal Subsidiaries whose amount is equal

to or exceeds €150million as outlined in points (i), (ii) and (iii) of

paragraph (d) on the powers and missions of the Board of

Directors hereinafter.

The Chief Executive Ocer of AirFrance – KLM also chairs both

the CEO Committee and the Group Executive Committee (see

sections 2.6CEO Committee and 2.7Group Executive Committee).

Powers and missions of the Board of Directors

The Board of Directors deliberates on any matters falling within

the powers devolved to it by law and those stipulated by the

Internal Rules or in application of the AFEP-MEDEF Code.

In particular, prior to any decision or deployment by the

Company or a principal subsidiary (Air France, KLM, and any

other subsidiary, as may be decided by the Board of Directors,

hereinafter known as the “Principal Subsidiaries” or individually

“Principal Subsidiary”), the Board of Directors:

a) approves the Group’s strategic directions and reviews them

as a whole at least once a year;

b) approves the budget including the capex plan;

c) without prejudice to the provisions of paragraph (d) below,

approves any signiﬁcant operations that are liable to aect

the Group’s strategy or modify its ﬁnancial structure or scope

of activity; the Chief Executive Ocer is responsible for

determining whether or not an operation is signiﬁcant in

nature;

d) approves the following operations by the Company and its

Principal Subsidiaries when their amount is equal to or in

excess of €150million:

(i) operating lease contracts, investments, the acquisition or

sale of any assets including, speciﬁcally, the ﬂeet, interests

in companies formed or to be formed, participation in the

formation of all companies, groups or organizations,

subscriptions to all issues of shares, units or bonds,

(ii) borrowings, issues of bonds and aircraft ﬁnancing,

(iii) granting of all exchanges with or without balancing cash

adjustments involving the Company’s assets, stocks or

securities;

e) as recommended by the Appointments and Governance

Committee (as provided in Article 8of the Internal Rules),

approves the appointment of the Chair and Chief Executive

Ocer or Chief Executive Ocer of any of the Principal

Subsidiaries; and

f) as recommended by the Remuneration Committee (as provided

in Article 9of the Internal Rules), approves the compensation

of the Chair and Chief Executive Ocer or Chief Executive

Ocer of any of the Principal Subsidiaries.

The Board ensures the proper running of the company and its

Principal Subsidiaries, and approves the acquisition or sale of any

equity interests whenever their amount is equal to or in excess

of €150million.

Air France- KLM — 2019 Universal Registration Document76

Corporate governance report

2 Organization and functioning of the Board of Directors

(1) Article 1.2of the Internal Rules of the Board of Directors.

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Appointment and re - appointment

of members of the Board of Directors

The modalities governing the appointment of Board directors are

set forth in Article 17 of the Air France – KLM Articles of

Incorporation and in the Internal Rules.

The Board of Directors is thus composed of between three and

eighteen members, excluding the Board directors representing

the employee shareholders and the Board directors representing

the employees. The AirFrance – KLM Board directors are appointed

by the Ordinary General Shareholders’ Meeting with the exception

of the Board director representing the French State (appointed by

ministerial order

(1)

) and the two Board directors representing the

employees (appointed, depending on the case, by the Comité de

Groupe Français or the AirFrance – KLM European Works Council)

(2)

.

As proposed by the Appointments and Governance Committee,

the Board of Directors submits for approval by the Shareholders’

Meeting, the appointment, ratiﬁcation of the co - opting and

re - appointment of the Board directors. The proposals for the

appointment, co - opting and re - appointment of Board directors

formulated by the Board of Directors comply with the legal and

regulatory provisions (including, notably, the rules on parity) and

the recommendations formulated by the AFEP-MEDEF Corporate

Governance Code (including, notably, the rules on the independence

of the Board directors)

(3)

.

Pursuant to Article 8.2 of the Internal Rules of the Board of

Directors referring to the provisions of the agreements signed on

October16, 2003 (Framework Agreement) within the framework

of the business combination between Air France and KLM, the

Appointments and Governance Committee submits to the Board

of Directors proposals regarding:

a) the appointment as a Board director of the Chair of the KLM

Supervisory Board;

b) the appointment or re - appointment as Board directors of two

high - proﬁle individuals residing in the Netherlands, chosen

after consultation and on the recommendation of the KLM

Supervisory Board; and

c) the appointment or re - appointment as a Board director of a

high - proﬁle individual residing in the Netherlands, chosen after

consultation and on the recommendation of the Dutch State.

Two Board directors are appointed by the Shareholders’ Meeting as

proposed by the French State, pursuant to Ordinance No. 2014 - 948 of

August20, 2014.

Furthermore, pursuant to Articles L. 225 - 23 of the Code de

Commerce. L.6411 - 9of the Code des Transports and Article 17 - 2of

the AirFrance – KLM Articles of Incorporation, two Board directors

representing the employee shareholders are appointed by the

Shareholders’ Meeting as proposed by the employee (and former

employee) shareholders referred to in Article L.225 - 102of the

Code de Commerce:

— one representative belonging to the ﬂight deck crew category

of sta; and

— one representative belonging to the other employee category

of sta.

The employee and former employee shareholders are invited to

select their candidates for each of the two colleges (Flight Deck

Crew and Other Employees), the appointment taking place based

on a majority vote in two rounds of balloting. The candidate

having obtained the absolute majority of the votes cast in each

college, in either the ﬁrst or second round, is then proposed to

the Shareholders’ Meeting

(4)

.

Lastly, in that the AirFrance – KLM Board of Directors is composed

of more than eight directors, there are two directors representing

the employees in the Board of Directors

(5)

. Pursuant to Article 17 - 3of

the AirFrance – KLM Articles of Incorporation, the ﬁrst Board

director representing the employees is appointed by the Comité

de Groupe Français as stipulated in Article L.2331 - 1of the Code du

Travail, while the second is appointed by the European Works Council

of Air France – KLM. Each Board director representing the

employees is appointed for a two - year term of oce, expiring at

the end of the Annual General Shareholders’ Meeting taking place

during the year in which their mandate expires

(6)

.

Pursuant to the corporate governance principles as stipulated by

the AFEP-MEDEF Corporate Governance Code, the duration of

Board directors’ terms of oce is four years

(7)

and the expiration

dates for these terms of oce are staggered to facilitate the

smooth renewal of the Board of Directors.

Furthermore, every Board director

(8)

must own at least ten shares for

the duration of their term of oce (Article 19of the AirFrance – KLM

Articles of Incorporation).

2.2.3 Rules applicable to the appointment and replacement

of members of the Board of Directors

(1) Pursuant to Article 4of Ordinance No. 2014 - 948of August20, 2014 relating to governance and to transactions involving the share capital of State - owned companies and

Article 2of decree No. 2014 - 949of August20, 2014, in application of Ordinance No. 2014 - 948.

(2) Board directors appointed pursuant to Article L.225 - 27 - 1of the Code de Commerce, in accordance with the modalities foreseen by Article 17 - 3of Air France- KLM’s

Articles of Incorporation.

(3) Article 8.3 of the AFEP-MEDEF Code notably provides that half the members of the Board of Directors must be independent directors (see

Section2.2.4Independence of the Board directors).

(4) The mandates of the two Board directors representing the employee shareholders will expire at the end of the Shareholders’ Meeting convened to approve the ﬁnancial

statements for the ﬁnancial year ending December 31, 2021. The process to select new candidates, whose appointment will be submitted to the Shareholders’

Meeting approving the ﬁnancial statements for the ﬁnancial year ending December31, 2021, will be launched in January2022.

(5) The Board of Directors includes two directors representing the employees pursuant to Article L.225 - 27 - 1of the Code de Commerce, the number of directors representing

the employees being increased to two when the number of directors referred to Articles L.225 - 17 and L.225 - 18of the Code de Commerce is more than eight.

(6) On May10, 2019, Mr. Karim Belabbas, a Support Technician Weight and Balance, CDG hub Ground Operations, was re - appointed by the Comité de Groupe Français

while, on April17, 2019, Mr. Mathi Bouts, a Senior Purser on KLM long - haul ﬂights, was re - appointed by Air France – KLM’s European Works Council as a second

Board director representing the employees. Their mandates will expire at the end of the Shareholders’ Meeting convened to approve the ﬁnancial statements for

the ﬁnancial year ending December31, 2020.

(7) With the exception of the Board directors representing the employees whose term of oce is two years pursuant to Article 17 - 3of the AirFrance – KLM Articles of Incorporation.

(8) With the exception of the Board directors representing the employees and the Board directors representing the employee shareholders (Article L.225 - 25 paragraph 3 of

the Code de Commerce) and the Board directors appointed by the State or the Shareholders’ Meeting as proposed by the State (Article 5paragraphs 5 and 6VI of

Ordinance No. 2014 - 948of August20, 2014).

2019 Universal Registration Document — Air France - KLM

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Diversity policy applicable to the members

of the Board of Directors

As recommended by the Appointments and Governance

Committee, in its meeting of February19, 2020 the Board of

Directors reviewed the criteria in the diversity policy applicable

to the composition of the Board of Directors. The criteria and

targets of this policy set out below take into account the results

of the evaluation of the Board together with the skills matrix of

the Board directors (see below).

Selection criteria for Board directors

Within the framework of the appointment and re - appointment

of Board directors, and to preserve the balanced nature of its

composition, the Board prioritizes the following selection criteria:

— openness to the world, international professional experience

and the diversity of nationalities. AirFrance – KLM was born

from the business combination of two companies with

dierent nationalities having global operations, leading to

numerous international challenges;

— General Management experience acquired within major French

or international companies; the Group numbers more than

80,000employees divided between three major businesses,

Passenger, Cargo and Maintenance, across 116countries;

— knowledge and practical experience of the transport and airline

industries, and of tourism, since these are the businesses in

which the Group has its main businesses;

— the Board of Directors also ensures that the areas of expertise

linked to the Group’s strategic priorities are represented

amongst its members, particularly in the ﬁelds of brand

strategy, digital and customer relations, human resources, and

Corporate Social Responsibility (CSR);

— the selection of proﬁles that oer expertise covering the

strategic areas for the Group (brands, digital, etc).

Implementation of the diversity policy

The Board has set itself clear targets for the implementation of

this diversity policy:

— maintain a balance between the Company’s dierent stakeholders

and the balanced representation of men and women;

— prioritize Board directors with independent mindsets;

— promote adherence to the Group’s fundamental values;

— ensure the availability of the Board directors.

In connection with this policy, the following changes to the

composition of the Board of Directors took place during 2019:

Consolidation of air transport industry expertise:

The Board of Directors welcomed Mr. Wang as the new

representative of China Eastern Airlines, an airline company and

shareholder of the Group. Mr. Wang succeeded Mr. Tang who

stepped down following his promotion within China Eastern. He

brings to the Board, in particular, his aviation expertise and

international experience. Mssrs. Bellabas and Bouts also saw their

mandates renewed as Board directors representing the employees.

They continue to contribute their in - house perspective and

professional skills obtained within the airline industry professions,

the former being a support technician in the Ground Operations

at the Roissy hub and the latter a Senior Purser on long - haul

ﬂights. Lastly, Mr. Smith, the Group’s Chief Executive Ocer, a

recognized air transportation expert, notably as a former Chief

Operating Ocer of Air Canada, saw his Board director mandate

conﬁrmed.

A better balance between nationalities and greater

openness to the world:

The arrival in the Board of Mr. ‘t Hart, a Dutch national appointed

as proposed by KLM to replace Mr. Smits (on expiry of his term

of oce as Chair of the KLM Supervisory Board), enables the

Board to consolidate the diversity of its nationalities.

Five Board directors, Ms. Boeren and Mssers Bouts, ‘t Hart,

Wynaendts and de Hoop Scheer are Dutch nationals within the

Board of Directors. Lastly, Mr. Smith, who holds dual Canadian

and British nationality, was conﬁrmed in his capacity as a Board

director for a four - year term of oce.

The Board thus numbers ﬁve dierent nationalities and eight

non-French Board directors (one Canadian-British director, ﬁve

Dutch directors, one US director and one Chinese director), i.e. a

proportion of 42%. These Board directors bring to the Board of

Directors an in - depth knowledge of their respective markets.

A balance favorable to the exercise

of the missions of the Committees

Based on criteria like gender representation, professional

qualiﬁcations and experience, and nationality, the Board ensures

that there is a balance favorable to the exercise of the missions

of the individual Committees.

Balanced competencies of the Board of Directors

at December31, 2019

The following table shows, by Board director, the competencies

that are key to the eective functioning of the Board in relation

to the matters it addresses. These areas of expertise was the

subject of a speciﬁc review during the evaluation of the Board of

Directors, as part of the analysis of the contributions of the

individual Board directors to the Board’s work.

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Competencies of the Board of Directors at December 31, 2019

Current General Air Gover- Interna- Public

Board director main function Management Transport Transport nance tional Aairs Finance HR CSR

Anne-Marie Couderc Chair of the

AirFrance – KLM

Board of Directors

Company director √ √ √ √

Benjamin Smith Chief Executive Ocer

of AirFrance – KLM √ √ √ √ √ √

Maryse Aulagnon Chair and CEO of

Mab-Finances SAS √ √ √ √

Leni M.T. Boeren Member of the Executive

Board of Van Lanschot

Kempen NV and CEO

of Kempen & Co NV

(Netherlands) √ √ √ √ √ √

Isabelle Bouillot President of China

Equity Links √ √ √ √ √

Delta Air Lines,Inc.

(represented by

George Mattson) Airline company √

√

Cees ‘t Hart CEO of Carlsberg Group

(Denmark)

Chair of the KLM

Supervisory Board

(Netherlands) √ √ √ √

Jaap de Professor at the University

Hoop Scheer of Leiden (Netherlands) √ √ √ √

Anne-Marie Idrac Board director √ √ √ √ √ √ √

√

Isabelle Parize Corporate counsel

and company director √ √ √ √ √

Jian Wang Corporate Secretary

and Chair of Eastern

Airlines Industry

Investment Co., Ltd.

(Luxembourg) √

√

Alexander Chair and CEO of

R. Wynaendts Aegon NV (Netherlands) √ √ √ √ √

Martin Vial Commissoner of

State Shareholdings √ √ √ √ √

Jean-Dominique Honorary Civil Service √ √ √ √ √

Comolli Administrator

Astrid Panosyan Managing Director

of the Central Functions

of the Unibail-Rodamco-

Westﬁeld Group (URW) √ √ √ √ √

François Robardet Air France executive √ √ √

Paul Farges Airline pilot instructor √

Karim Belabbas Support Technician

Weight and Balance,

CDG hub

Ground Operations √ √

Mathi Bouts Senior Purser, KLM

long - haul ﬂights √ √

Total number

of Board directors 14 2 9 13 13 10 10 8 2

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Having examined the situations of the individual Board directors

as at December31, 2019 in the light of the criteria stipulated by

the AFEP-MEDEF Code, and as proposed by the Appointments

and Governance Committee, at its meeting of February 19, 2020,

the Board of Directors considered that:

— seven Board directors (Ms.Aulagnon, Ms.Boeren, Ms.Bouillot,

Ms.Couderc

(1)

, Ms.Idrac, Ms.Parize and Mr. Wynaendts) are

independent in that:

– none of these seven board directors has, directly or

indirectly, a relationship with the company, its Group or its

management that is such as to color their judgement

(aside from the fact that the candidacy of some of these

individuals had been proposed to the Shareholders’

Meeting by KLM pursuant to the agreements signed in

October2003),

– no signiﬁcant business relationships exist between the

Group and each of these independent Board directors,

– in her capacity as Chair of the Board of Directors,

Ms.Anne-Marie Couderc receives only ﬁxed compensation

and no variable compensation in the form of either cash

or shares;

— the other non - independent Board directors are:

– a representative of the French State appointed by

ministerial order: Mr. Vial,

– board directors whose candidature was proposed to the

Shareholders’ Meeting by the French State: Mr. Comolli and

Ms.Panosyan,

– a Board director whose candidature was proposed to the

Shareholders’ Meeting by the Dutch State: Mr. Jaap de

Hoop Scheer

(2)

,

– Delta Air Lines,Inc.

(3)

, whose permanent representative is

George Mattson, and

– a Board director whose candidature was proposed to the

Shareholders’ Meeting by China Eastern Airlines: Mr. Wang

(4)

,

– representatives of the employee shareholders: Mr. Farges

and Mr. Robardet,

– representatives of the employees: Mr. Belabbas and

Mr. Bouts, and

– executive directors of the Air France – KLM Group:

Mr. Smith, Chief Executive Ocer of AirFrance – KLM and

a Board director of Air France and Mr. ‘t Hart, Chair of the

KLM Supervisory Board.

Given the above, and pursuant to the provision of the AFEP-MEDEF

Code wherein Board directors representing employee shareholders

and Board directors representing the employees are not counted

in the calculation of the percentages of independent shareholders

within Boards of Directors and Committees (§9.3 and 15.1of the

AFEP-MEDEF Code), the percentages of independent directors

as of December31, 2019 were:

— 47% of the Board of Directors;

— 67% of the Audit Committee (chaired by an Independent

director);

— 67% of the Appointments and Governance Committee

(chaired by an Independent director);

— 50% of the Remuneration Committee (chaired on an interim

basis by an Independent director).

At December31, 2019, the proportion of independent directors

was thus 47%, i.e. below the 50% threshold recommended by the

AFEP-MEDEF Code for non - controlled companies. This deviation

from the recommendations of the AFEP-MEDEF Code is due to

an exceptional situation linked to the acquisition by the Dutch

State of a shareholding in February2019. Discussions are ongoing

between the Company, the French State and the Dutch State to

re - balance the composition of the Board of Directors. This

situation is thus temporary.

2.2.4 Independence of the Board directors

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(1) Ms.Anne-Marie Couderc, Chair of the AirFrance – KLM Board of Directors is also non - executive Chair of the Air France Board of Directors.

(2) Pursuant to the agreements of October16, 2003 concluded between the Dutch State, Air France and KLM.

(3) Pursuant to the provisions of the Memoranda of Understanding signed by these two companies with AirFrance – KLM on July27, 2017.

(4) Pursuant to the provisions of the Memoranda of Understanding signed by these two companies with AirFrance – KLM on July27, 2017.

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Training for Board directors

Newly - appointed Board directors are encouraged to meet with

the company’s principal executives and are oered site visits to

increase their understanding of the Group’s business environment

and activities. On their appointment, they are also sent a dossier

including, notably, the AirFrance – KLM Articles of Incorporation,

the Internal Rules, the Universal Registration Document, the latest

press releases issued by the company and a reminder of the stock

market Compliance Rules.

On their appointment and during their terms of oce, individual

Board directors (including the Board directors representing the

employees and the employee shareholders) can beneﬁt from the

training that they deem necessary for the exercise of their

mandates. This training is proposed and organized by the Company.

This training, which is paid for by the Company, is mostly carried

out via a program designed by a professional body and is aimed

at gaining a better understanding of the functioning of the Board

of Directors and their roles as Board directors. Accounting and

ﬁnancing modules are also proposed to enable them to improve

their ﬁnancial know - how. A fraction of this training time is carried

out within the Company. Pursuant to the applicable regulation,

during its meeting of February19, 2020, the Board of Directors

decided to terminate the training program in French and English

oered to the Board directors representing the employee

shareholders and the employees.

2.2.5 Other rules applicable

to Board directors

Situation of conﬂict of interests

Pursuant to the recommendations of the AFEP-MEDEF Code and

in application of Article 11of the Internal Rules of the Board of

Directors, any director is bound to report to the Board any conﬂict

of interest, whether actual or potential, because of the position he

or she holds in another company, and must abstain from taking

part in the deliberation and voting on the related resolution. Every

year, the Company sends the Board directors a questionnaire

enabling conﬁrmation that there are no conﬂicts of interest and

the Company to be informed of any potential conﬂicts.

To the Company’s knowledge, none of the Board members are

related and there are no conﬂicts of interest between the duties

of the Board members with regard to the Company and their

private interests and other duties.

With the exception of the agreements listed below, there are no

arrangements or agreements between the main shareholders,

customers, suppliers or other parties, in accordance with which

a member of the Board of Directors has been selected:

(i) the agreements signed on October 16, 2003 between

Air France, KLM and the Dutch government pursuant to

which the appointments of four Board directors are

proposed to the Board of Directors by KLM and the

Dutch State (see Section 2.2.3 Rules applicable to the

appointment and replacement of members of the Board

of Directors–Appointment and re - appointment of members

of the Board of Directors); and

(ii) the agreements signed on July27, 2017 between, ﬁrstly,

AirFrance – KLM and Delta Air Lines,Inc. and, secondly,

between Air France – KLM and China Eastern Airlines

pursuant to which Delta Air Lines,Inc., represented by Mr.

Mattson, and Mr. Wang were appointed to the Board of

Directors (see Section 2.8.4 Reinforcement of the

AirFrance – KLM Group’s strategic partnerships with Delta

Air Lines,Inc. and China Eastern Airlines).

Furthermore, pursuant to the provisions of Ordinance No. 2014 - 948

of August 20, 2014 concerning governance and transactions

involving the share capital of public sector companies and the

application decree - law No. 2014 - 949of August20, 2014, a Board

director representing the French State is appointed by ministerial

order and two Board directors are appointed by the Shareholders’

Meeting as proposed by the French State (see Section2.2.3Rules

applicable to the appointment and replacement of members of

the Board of Directors–Appointment and re - appointment of

members of the Board of Directors);

As of December31, 2019, there were no service level contracts

binding any member of the Board of Directors to AirFrance – KLM

or to one of its subsidiaries and foreseeing the granting of beneﬁts

under the terms of the contract.

With the exception of Delta Air Lines,Inc., (see the Subscription

Agreement signed on July27, 2017 and detailed in Section2.8.4

Reinforcement of the Air France – KLM Group’s strategic

partnerships with Delta Air Lines,Inc. and China Eastern Airlines),

the Board directors have accepted no restrictions concerning the

sale of their shareholdings in AirFrance – KLM, subject to respect

of the rules relating to the prevention of insider trading and the

statutory obligation to own at least ten shares in the Company

during their terms of oce

(1)

.

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(1) This obligation to hold at least ten shares in the company for the duration of their terms of oce is not applicable to directors representing the employee

shareholders, directors elected by the employees and directors representing the employees (Article L. 225 - 25 paragraph 3of the Code de Commerce), nor to

directors appointed by the State or the Shareholders’ Meeting as proposed by the State (Articles 5paragraphs 5 and 6VI of French Ordinance No. 2014 - 948of

August20, 2014).

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Stock market and ethical compliance

The Compliance Code, adopted by the Board of Directors on

March25, 2004, and as amended on November17, 2017, notably

reminds company ocers, senior executives of the Company,

anyone with close personal ties with the latter and certain

employees with access to inside information that they are

required to refrain from trading in the Company’s shares for a

minimum of (i) thirty calendar days prior to the publication of the

full annual and half - year ﬁnancial statements and (ii) a minimum

of ﬁfteen calendar days prior to the publication of the full

quarterly ﬁnancial statements, the day of their publication being

included in these periods. They also reiterate the speciﬁc

obligations (particularly relating to access to inside information)

applying to senior executives, Board directors and anyone with

access to inside information relating to Air France – KLM

concerning the use of this information and their trading in the

shares of AirFrance – KLM pursuant to the applicable laws and

regulations relating to market abuse.

In the past ﬁve years, to the Company’s knowledge, no Board

director has been the subject of a fraud conviction or ocial

public sanction pronounced by the statutory or regulatory

authorities, associated with a bankruptcy, sequestration of goods

or a placing of a company into administrative receivership nor

has, lastly, been prevented by a court from acting as a member

of a management or supervisory body of an issuer or from

involvement in managing the business of an issuer. This

information is conﬁrmed every year via a questionnaire sent to

the Board directors.

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Board activity during the 2019 ﬁnancial year

The minimum number of Board meetings is set at ﬁve per year.

Prior to Board meetings a dossier is circulated containing the

agenda for the meeting together with any summaries or, where

appropriate, full documentation on any issues requiring special

analysis and/or prior consideration. The matters raised in

meetings are usually the subject of presentations, followed by

discussion.

Board meetings are conducted in French; however, individual

directors may speak in French, English or Chinese with

simultaneous interpretation.

During these meetings, the following matters were notably

addressed:

— annual, half - year and quarterly ﬁnancial statements;

— regular status reports on the Group’s activity and ﬁnancial

situation;

— budget including the capex plan;

— ﬁnancing plan;

— ﬁnancial operations;

— presentation on the ﬁnancial, legal, operational, social and

environmental risks;

— report on compliance;

— regular information on Air France and KLM activity and

development;

— information on the alliances;

— discussions concerning potential acquisitions;

— update on ﬂight safety;

— implementation of the partnerships with Delta Air Lines,Inc.

and Virgin;

— governance of the Group and, notably: change in the Group’s

governance following the acquisition by the Dutch State of a

shareholding in AirFrance – KLM, independence of the Board

directors, evaluation of the Board of Directors, appointment

and training of the new Board directors, compensation of the

top executives and the succession plan for the Company

ocers.

In April 2019, the Board of Directors held its annual meeting

devoted to the Group’s strategy, which took the form of a

two - day seminar.

2.3 ACTIVITIES AND FUNCTIONING OF THE BOARD

OF DIRECTORS AND ITS COMMITTEES

2.3.1 Activities and functioning of the Board of Directors

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13 meetings

(19 in 2018)

including

5

extraordinary meetings

(11 in 2018)

89%

average attendance

of Board directors

(91% in 2018)

Lasting on average

4 hours 30’

per meeting

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Board director attendance

The attendance rates for individual directors at meetings of the Board of Directors during 2019 are presented below:

Board director Board meeting attendance

Anne-Marie Couderc Chair of the Board and of the Appointments and Governance Committee 100%

Maryse Aulagnon Chair of the Audit Committee 92%

Karim Belabbas 92%

Leni M.T. Boeren 100%

Isabelle Bouillot Interim Chair of the Remuneration Committee 92%

Mathi Bouts 100%

Jean-Dominique Comolli 100%

Cees ‘t Hart

(1)

100%

Jaap de Hoop Scheer 77%

Delta Air Lines,Inc. (represented by George Mattson) 92%

Paul Farges 100%

Anne-Marie Idrac Chair of the Sustainable Development and Compliance Committee 100%

Solenne Lepage

(2)

80%

Astrid Panosyan

(3)

80%

Isabelle Parize 92%

François Robardet 100%

Benjamin Smith 100%

Martin Vial

(4)

100%

Jian Wang

(5)

67%

Alexander R. Wynaendts 85%

Hans N.J. Smits

(6)

22%

Bing Tang

(7)

70%

Patrick Vieu

(8)

88%

Average attendance 89%

(1) Board director since May28, 2019.

(2) Board director representing the French State until April1, 2019.

(3) Board director appointed by the Shareholders’ Meeting as proposed by the French State since May28, 2019.

(4) Board director representing the French State since May31, 2019.

(5) Board director since July30, 2019.

(6) Board director until May28, 2019.

(7) Board director until July30, 2019.

(8) Board director appointed by the Shareholders’ Meeting as proposed by the French State until May28, 2019.

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Regulated agreements and commitments

Agreements referred to in Article L.225 - 37 - 42 of the Code

de Commerce

Except for agreements covering current operations and entered

into under normal terms and conditions, no agreements were

entered into in 2019, either directly or through an intermediary,

between, on one side, a Board director or shareholder of

AirFrance – KLM holding a fraction of the voting rights greater

than 10% (French and Dutch States) and, on the other, a

corporate shareholder in which more than half the share capital

is held, directly or indirectly, by AirFrance – KLM.

Agreements and commitments referred to in Articles

L.225 - 38 and L.225 - 42 - 1of the Code de Commerce

Agreements and commitments authorized and signed

during the ﬁnancial year

Transatlantic partnership between AirFrance – KLM.

Delta Air Lines,Inc. and Virgin Atlantic

On October 30, 2019, the Board of Directors mandated the

AirFrance – KLM management to ﬁnalize the discussions and

negotiate amendments to the agreements authorized during the

Board meetings of March14 and May15, 2018 (see Section2.8.4

Reinforcement of the AirFrance – KLM Group’s strategic partnerships

with Delta Air Lines,Inc. and China Eastern Airlines), so as to no

longer proceed with the planned investment by AirFrance – KLM

in a 31% equity interest in Virgin Atlantic Limited. This decision

resulted in the amendment of the following agreements:

1. termination of the Share Purchase Agreement (“SPA”) between

AirFrance – KLM Finance SAS and Virgin Investments Limited,

enabling AirFrance – KLM, through its 100%-owned subsidiary

AirFrance – KLM Finance SAS, to acquire a 31% equity interest

in Virgin Atlantic, and termination of agreements ancillary to

the SPA;

2. amendment and updating of the Joint Venture Agreement

between Delta Air Lines,Inc., Virgin Atlantic Airways Limited,

AirFrance – KLM, KLM and Société Air France, aimed at the

implementation of a commercial joint - venture between

AirFrance – KLM, Delta Air Lines,Inc., Virgin Atlantic Airways

Limited, Air France and KLM (signed on January30, 2020 and

eective as per January1, 2020) to reﬂect the termination of

the SPA;

3. amendment and updating of the Implementation Agreement

between Air France – KLM, Air France – KLM Finance SAS,

Société Air France, KLM, Delta Air Lines,Inc., Virgin Investments

Limited, Virgin Atlantic Limited, Virgin Atlantic Airways

Limited and Sir Richard Branson (signed on January9, 2020

and eective as per January1, 2020) to reﬂect, notably, the

termination of the SPA;

4. signature of the agreement between AirFrance – KLM, Delta

Air Lines,Inc. and Virgin Group (signed and eective as per

January30, 2020) granting AirFrance – KLM, subject to speciﬁc

conditions, a right to acquire shares in Virgin Atlantic Limited

in the event of a sale by Virgin Group of shares in Virgin

Atlantic Limited to a third party.

Since Delta Air Lines,Inc. is a Board director of AirFrance – KLM

and of Virgin Atlantic, the aforementioned contracts enter into

the application scope for the regulated agreements procedure

set forth in Article L.225 - 38of the Code de Commerce. Any

agreement, entered into directly or through an intermediary

between, notably, the company and one of its Board directors,

whether this latter has a direct or indirect interest, is subject to

the prior authorization of the Board of Directors. Agreements

between the company and another company are also subject to

prior authorization by the Board of Directors if one of the Board

directors of the company is an owner, an unlimited liability partner,

a manager, a Board director, a member of the Supervisory Board

or, in general, a director of this other company. The termination,

amendment or renunciation of regulated agreements must follow

the same procedure as their signature, which begins with prior

approval by the Board of Directors.

For more information on the July 2017 agreements between

AirFrance – KLM, Delta Air Lines,Inc. and Virgin Atlantic, see

Section 2.8.4 Reinforcement of the Air France – KLM Group’s

strategic partnerships with Delta Air Lines,Inc. and China Eastern

Airlines in this Universal Registration Document.

Agreements and commitments authorized and signed

in previous ﬁnancial years

Commitments relating to the severance payment

to the beneﬁt of Benjamin Smith,

Chief Executive Ocer of AirFrance – KLM

On August16, 2018, pursuant to the provisions of Article L.225 - 42 - 1

of the Code de Commerce, the AirFrance – KLM Board of Directors

authorized the granting of a severance payment to the beneﬁt

of Benjamin Smith, Chief Executive Ocer of AirFrance – KLM,

in some instances of forced termination and, namely, dismissal,

non - renewal of his mandate as Chief Executive Ocer or forced

resignation linked to a change of control.

It is stipulated that the instances of forced termination enabling the

implementation of this severance payment exclude any situation

of serious misconduct on the part of the Chief Executive Ocer.

In accordance with the recommendations of the AFEP-MEDEF

Code, the basis of the severance payment is equivalent to two

years of his annual ﬁxed and variable compensation (based, as

applicable, on the target variable compensation in the event of a

termination during the ﬁrst 24months).

A coecient (between 0 and 100% inclusive) will be applied to

the basis of the severance payment based on the achievement

rate for the performance criteria relating to the annual variable

component of his compensation over the two last ﬁnancial years

of his mandate (or since his appointment, in the event of

termination during the ﬁrst 24months). The Board of Directors

will assess the achievement of these performance criteria.

For more information, please see section2.5.2Compensation of

the executive ocers in this Universal Registration Document.

There were no agreements or commitments authorized and

signed over the course of previous ﬁnancial years whose execution

continued during the last ﬁnancial year.

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Procedure for the qualiﬁcation and regular evaluation

of the current agreements entered into under normal terms

and conditions.

During its meeting of December11, 2019, as recommended by the

Audit Committee, the Board of Directors established a procedure

enabling the qualiﬁcation and regular evaluation of the agreements

relating to current operations entered into under normal terms

and conditions pursuant to the provisions of Article L.225 - 39

paragraph 2of the Code de Commerce. The current and normal

nature of an agreement is evaluated on a case by case basis during

the signature, renewal or amendment of the said agreement, on

the basis of objective criteria deﬁned in the procedure.

Within the framework of this annual evaluation procedure, the

Company:

— draws up an inventory of all the agreements referred to in

Article L.225 - 39paragraph 1of the Code de Commerce;

— reviews all the elements and documents having enabled the

qualiﬁcation of the agreements; and

— as necessary, reviews the qualiﬁcation of any agreements with

interested parties (regulated agreement or free agreement,

depending on the case).

Persons with an interest in one of these agreements, entered into

either directly or through an intermediary, do not participate in

their evaluation.

Evaluation of the functioning

of the Board of Directors and its Committees

At least once a year, the Board of Directors conducts an evaluation

of its functioning and organization, pursuant to Article 10of the

AFEP-MEDEF Code and Article 2of the Board’s Internal Rules.

This evaluation is steered by the Appointments and Governance

Committee. Every three years, this evaluation is entrusted to an

independent external consultant

(1)

.

For 2019, the Board of Directors conducted an auto - evaluation in

the form of a questionnaire submitted to each Board director. The

following topics were addressed through the evaluation questionnaire:

— composition, organization, functioning and dynamic of the

Board of Directors and its Committees;

— relationship between the Board of Directors and the Senior

Management;

— eectiveness of the Board of Directors and its Committees;

— articulation of the work of the Board of Directors with those

of the subsidiaries of AirFrance – KLM;

— the individual contributions of the Board directors to the

Board’s work;

— main changes and areas requiring improvement.

More speciﬁcally, the individual contributions of the Board

directors were analyzed in two areas:

— analysis of the individual areas of expertise and the skills to be

developed within the Board;

— analysis of the obstacles to individual contributions to the

work of the Board.

The results of the evaluation were handled under the seal of

anonymity and gave rise to a presentation and debate during the

Board of Directors meeting of February19, 2020.

By way of a reminder, a series of measures implemented during the

2018 ﬁnancial year were pursued in 2019 on the following themes:

— reinforced coordination between the three AirFrance – KLM,

Air France and KLM Boards;

— clariﬁcation of the respective missions of the AirFrance – KLM,

Air France and KLM Boards and Committees;

— broadening of the themes addressed by the Board to new

operational, business and competition matters;

— development of the deliberations on the strategic options.

During the 2019 ﬁnancial year, the following actions were also

implemented:

— earlier and improved preparation and sharing of the information

circulated to the Board directors, and in a more succinct format;

— more eective Board meetings via an improved balance

between the time allocated to presentations and discussions;

— strengthening of the cohesion within the Board of Directors.

As a general rule, the Board directors considered that the

functioning of the Board of Directors had improved during 2019

since the previous evaluation. The evaluation revealed the

following positive points:

— the separation of powers between the Chair of the Board of

Directors and the Chief Executive Ocer, adapted to the size

and functioning of the Board;

— a marked improvement in the quality of the information on the

competitive environment made available to the Board directors;

— secretarial services to the Board, organization, duration and

logistics of Board meetings, together with the secured digital

tools for the sharing of information;

— satifactory complementarity of the expertise within the Board.

The results of the 2019 evaluation enabled the identiﬁcation of a

number of areas for improvement to be monitored during 2020

and, notably:

— improve the circulation of the work of the Board’s advisory

Committees amongst all the Board directors;

— increase the participation of the Group’s key executives in

meetings of the Board of Directors;

— formalize the follow - up process for decisions taken by the

Board of Directors.

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(1) The last independent evaluation by an independent external consultant was carried out in respect of the ﬁnancial year ended December 31, 2017.

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Composition

At December31, 2019, the Audit Committee was composed of

the following eight members: Maryse Aulagnon (Chair of the

Committee), Leni M.T. Boeren, François Robardet, Paul Farges,

Isabelle Parize, Martin Vial, Isabelle Bouillot and Delta Air

Lines,Inc. represented by George Mattson.

Martin Vial became a member of the Committee on

October30, 2019.

The members of the Audit Committee beneﬁt from ﬁnancial and

accounting competencies enabling them to exercise their

functions.

At its meeting of November 9, 2011, the Board of Directors

adopted the position whereby, pursuant to the provisions of

Article L.823 - 19of the Code de Commerce, the Company’s Audit

Committee includes at least one independent member with

speciﬁc ﬁnance and accounting skills in the person of

Ms. Aulagnon. It deemed that Ms. Aulagnon’s educational

background and professional experience fulﬁll this requirement

for speciﬁc ﬁnancial competence, and that she has no

relationships with the company, its Group or management that

are such as to color her judgment. The seven other Committee

members also have ﬁnancial and/or accounting skills.

The principal executives responsible for accounting, legal aairs,

ﬁnance, internal control and Internal Audit of AirFrance – KLM

also attend meetings in an advisory capacity.

The Statutory Auditors attended all the meetings of the Audit

Committee. At the request of the Chair of the Committee and

pursuant to Article 16.3of the AFEP-MEDEF Code, they were able

to consult with Committee members outside the presence of the

Group’s senior executives on the occasion of the review of the

annual ﬁnancial statements.

Missions

The Audit Committee’s principal missions are to review the

interim and annual consolidated ﬁnancial statements to inform

the Board of Directors of their content, ensure that they are

reliable and exhaustive and that the information they contain,

including the forward - looking information provided to shareholders

and the market, meets high standards of quality. The Committee

also oversees the auditing of the annual ﬁnancial statements. In

particular, the Audit Committee reviews the:

— consolidation scope;

— relevance and consistency of the accounting methods used

to draw up the ﬁnancial statements;

— principal estimates made by the Senior Management of

AirFrance – KLM;

— principal ﬁnancial risks with the Senior Management of

Air France – KLM and the material o - balance - sheet

commitments;

— comments and recommendations made by the Statutory

Auditors and, if applicable, any signiﬁcant adjustments

resulting from audits.

As necessary, the Audit Committee formulates recommendations

to guarantee the integrity of the process to establish the ﬁnancial

information.

The Audit Committee monitors the eectiveness of the Internal

Control and risk management procedures and, as necessary, Internal

Audit, in terms of the processes relating to the establishment and

treatment of the accounting and ﬁnancial information, with no

compromise to its independence. In this capacity, it reviews in

particular the program and results of Internal Audit to ensure,

notably, that, in the event of any malfunctioning, the appropriate

action plans and follow - up monitoring have been implemented.

The Committee discusses with the Statutory Auditors and reviews

their conclusions on the half - year and annual ﬁnancial statements.

It also pays particular attention to the audit points identiﬁed by

the Statutory Auditors and ensures compliance with the legal and

regulatory requirements for ﬁnancial and accounting information.

The Audit Committee is responsible for steering the procedure to

select the Statutory Auditors. It submits a recommendation to the

Board of Directors when their appointment or re - appointment

by the Shareholders’ Meeting is envisaged pursuant to Article

L.823 - 3-1of the Code de Commerce. It proposes the selection

procedure to the Board of Directors and, in particular, whether a

2.3.2 Activities and functioning of the Committees

Audit Committee

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Average duration of

3 hours 30’

per meeting

89%

Board director

attendance

8

members

67%

independent

Board directors

5

meetings

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During the 2019 ﬁnancial year, the Audit Committee met ﬁve

times (as in 2018) with an attendance rate for its members of 89%

(96% in 2018). The duration of the meetings averaged three and

a half hours.

The following matters were notably reviewed by the Audit

Committee during the 2019 ﬁnancial year:

— Review of the ﬁnancial statements.

The Committee reviewed the quarterly, half - year and annual

ﬁnancial statements, and the budget, prior to their presentation

to the Board of Directors. It conducted a detailed examination of

the Statutory Auditors’ summary reports on the half - year and

annual ﬁnancial statements as well as the signiﬁcant points noted

in audits. The main accounting options adopted were the subject

of a special quarterly presentation. In 2019, for example, particular

attention was paid to the impact of oil price movements and the

issuance of a new convertible bond.

The review of the ﬁnancial statements by the Audit Committee

usually takes place the day before their review by the Board of

Directors.

— Review and monitoring of the budget

The Audit Committee reviews the budget prior to its presentation

to the Board of Directors and oversees its tracking on a quarterly

basis. This year the Audit Committee examined the major points

in the 2020 budget prior to its review of the detailed budget.

— Internal control, risk management and Internal Audit

During every meeting of the Audit Committee, Internal Audit

gave a presentation on its quarterly activity report.

The Company applies high standards of ﬁnancial disclosure and

corporate governance, and maintains a rigorous level of internal

control across the Group.

The Audit Committee reviewed the summary sheet of the main

operational and/or strategic risks on a quarterly basis. The

Committee also reviewed the ﬁnancial risks (fuel and emission

quotas, currency exchange rates, ﬁnancing, etc. ).

Activity

Board director Audit Committee attendance

Maryse Aulagnon Chair of the Audit Committee 100%

Leni M.T. Boeren 80%

Isabelle Bouillot 100%

Delta Air Lines,Inc. (represented by George Mattson) 40%

Paul Farges 100%

Solenne Lepage 100%

(1)

Isabelle Parize 80%

François Robardet 100%

Martin Vial 100%

(2)

Average attendance 89%

(1) For the period from January1, 2019 to March31, 2019.

(2) For the period from October30, 2019 to December31, 2019.

call to tender is appropriate. It veriﬁes the independence and

quality of the Statutory Auditors’ work, examines issues relating

to their amount of fees for the execution of statutory audit

assignments, reviews and approves the fees submitted by each

of the Statutory Auditors on an annual basis and ascertains that

the joint system of Statutory Auditors is eective.

The Committee also follows the realization by the Statutory Auditors

of their assignment and notes the comments and conclusions of

the Audit Oce Control Board (Haut Conseil du Commissariat

aux Comptes) following the veriﬁcation carried out pursuant to

Articles L.821 - 9 and following of the Code de Commerce.

The Committee approves the supply of services other than the

certiﬁcation of the ﬁnancial statements pursuant to the

applicable regulation. It rules on this point having ﬁrst analyzed

the risks of any compromise to the independence of the Statutory

Auditors and the safeguarding measures applied by the latter.

The Committee is also responsible for reviewing the Group’s overall

ﬁnancial, accounting and ﬁscal policy and its implementation. It

issues an opinion on the Group’s signiﬁcant ﬁnancial operations.

The Audit Committee has access to the resources required to

fulﬁll its mission and may, notably, be assisted by persons from

outside the Company. Lastly, the Committee regularly reports to

the Board of Directors on the execution of its missions. It also

reports back on events subsequent to the certiﬁcation of the

ﬁnancial statements, on the manner in which this certiﬁcation

process contributed to the integrity of the ﬁnancial information

and on the role it has played in this process.

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— Statutory Auditors

The Audit Committee approved the budget for the Statutory

Auditors’ fees prior to the opening of the ﬁnancial year together

with their ﬁnal amount as of the closing date. The Committee also

addressed the matter of the appointment or re - appointment

of the Statutory Auditors within the framework of the duration

of their mandates and in application of the new requirement

to organize a call to tender on the appointment of a new

Statutory Auditor (Article 16of Regulation (EU) No.537/2014 of

April16, 2014).

— Approval of non - audit services

To execute this mission, the Audit Committee relies on an internal

procedure deployed within the Group in 2004 and updated in

2016, pursuant to the provisions of Ordinance No. 2016 - 315of

March17, 2016 relating to Statutory Auditors, which came into

force on June17, 2016.

As foreseen by its annual work schedule, the Audit Committee

also reviewed the following matters in 2019:

— tracking of the cash and ﬁnancing situation;

— review of the ﬁnancing and capex plan;

— review of the principal litigation, ﬁscal risks and ﬁnancial risks;

— ﬁnancial operations;

— discussions concerning potential acquisitions;

— fraud detection and prevention;

— monitoring of activity in the Group’s subsidiaries;

— review of the management report;

— monitoring of changes in the KLM pension funds’ assets and

liabilities.

— Review of the Financial strategy

The Committee is also tasked wih reviewing the Group's overall

ﬁnancial, accounting and ﬁscal strategy, and its implementation.

It also advises on the Group's signiﬁcant ﬁnancial transactions.

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During the 2019 ﬁnancial year, and in view of the governance

changes, the Remuneration Committee formulated a number of

recommendations for the Board of Directors concerning:

— during its meetings of February18, 2019 and December10,

2019, the modalities for the granting of Board directors’ fees;

— during its meetings of February18, 2019 and March11, 2019,

the 2018 compensation and the compensation policy in

respect of 2019 for the Chief Executive Ocer of AirFrance –

KLM, the Chief Executive Ocer of Air France and the Chief

Executive Ocer of KLM;

— during its meetings of February18, 2019 and March11, 2019,

the compensation for the Chair of the AirFrance – KLM Board

of Directors.

The Committee was also consulted on the 2019 compensation

for the Group’s Chief Financial Ocer. Furthermore. in his

capacity as Chief Executive Ocer, the Committee formulated

recommendations for Mr. Smith concerning the compensation of

the members of the KLM Management Board.

(see Section2.5Compensation of the company ocers hereinafter.

established with the cooperation of the Remuneration Committee).

Board director Remuneration Committee attendance

Isabelle Bouillot Interim Chair of the Remuneration Committee 100%

Maryse Aulagnon 100%

Jean-Dominique Comolli 100%

Delta Air Lines,Inc. (represented by George Mattson) 100%

Jaap de Hoop Scheer 80%

Isabelle Parize 100%

François Robardet 100%

Hans N.J. Smits 67%

Average attendance 94%

Remuneration Committee

Composition

At December31, 2019, the Remuneration Committee was composed

of the following seven members: Isabelle Bouillot (Interim Chair of

the Committee), Jean-Dominique Comolli, Jaap de Hoop Scheer,

Isabelle Parize, François Robardet. Maryse Aulagnon and Delta

Air Lines,Inc. represented by George Mattson.

Isabelle Bouillot has acted as interim Chair of the Remuneration

Committee since October30, 2019.

Missions

The Remuneration Committee is primarily responsible for

formulating recommendations to the Board of Directors on the

level of/changes to the remuneration of the executive ocers. It

may also be asked to comment on the remuneration of the

Group’s senior executives who are members of the Executive

Committee and on the remuneration granted to individuals

recruited for ﬁxed terms, when the level of this remuneration is

exceptionally high. The Remuneration Committee reviews and

issues an option on the policy governing any stock subscription

and share purchase option schemes or any other long - term

incentive programs.

Activity

The Remuneration Committee met ﬁve times during the 2019

ﬁnancial year (six meetings in 2018) and the attendance rate for

members was 94% (94% in 2018).

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94%

Board director

attendance

7

members

50%

independent

Board directors

5

meetings

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The Appointments and Governance Committee notably addressed

the following matters:

— consequences of the acquisition by the Dutch State of a

shareholding on February26, 2019, within the framework of a

working group established between the French and Dutch

States as announced on March 1, 2019 aimed, notably, at

improving the Group’s governance;

— proposals relating to changes in the composition of the Board

of Directors for submission to the Shareholders’ Meeting of

May28, 2019;

— changes in the composition of the Committees, to take into

account the change in the composition of the Board of

Directors during the 2019 ﬁnancial year;

— review and regular updating of the succession plan for the

Group’s principal directors;

— recommendations on the appointment and re - appointment

of members of the Air France Board of Directors and the KLM

Supervisory Board;

— independence of the members of the AirFrance – KLM Board

of Directors;

— diversity and non - discrimination policy with the Group’s

management bodies;

— internal rules for the AirFrance – KLM CEO Committee;

— auto - evaluation of the functioning of the Board of Directors

by the Board directors taking place between December2019

and January2020 (for more details see Section2.3.1Activities

and functioning of the Board of Directors).

Board director Appointments and Governance Committee attendance

Anne-Marie Couderc Chair of the Appointments and Governance Committee 100%

Jean-Dominique Comolli 100%

Alexander R. Wynaendts 100%

Average attendance 100%

Appointments and Governance Committee

Composition

At December 31, 2019, the Appointments and Governance

Committee was composed of the following three members:

Anne-Marie Couderc (Chair of the Committee), Jean-Dominique

Comolli and Alexander R. Wynaendts.

Missions

The Appointments and Governance Committee is responsible for

proposing candidates for the appointment and replacement of

the Chair of the Board of Directors, the other Board directors and

the executive ocers of AirFrance – KLM, and for the succession

plans for the executive ocers, particularly in the event of

unforeseen vacancies. Having initiated, when necessary, the

relevant searches, the Committee may submit any proposals it

deems ﬁt to the Board of Directors regarding the latter’s

composition. The Appointments and Governance Committee

also formulates recommendations for the Board of Directors on

the appointment of the Chief Executive Ocers of the Principal

Subsidiaries. Furthermore, it is consulted by AirFrance – KLM’s

Chief Executive Ocer on the appointment of the other

executive ocers (Executive Vice-Presidents and members of

the Management Board) and members of the Boards of Directors

and Supervisory Boards of the Principal Subsidiaries. It

establishes the succession plan for the executive ocers and also

formulates proposals to the Board of Directors concerning the

diversity and appointment policy for Board directors.

The Appointments and Governance Committee makes

recommendations regarding the governance principles for the

Air France – KLM Group and reviews the consistency of the

governance between the Company and its Principal Subsidiaries.

The Appointments and Governance Committee steers the annual

evaluation of the functioning of the Board of Directors.

Lastly, prior to review by the Board of Directors, the

Appointments and Governance Committee formulates proposals

on the independence of the members of the Board of Directors

in the light of the criteria in the AFEP-MEDEF Code.

Activity

During the 2019 ﬁnancial year, the Appointments and

Governance Committee met thirteen times (twelve in 2018) with

an attendance rate for members of 100% (94% in 2018).

100%

Board director

attendance

3

members

67%

independent

Board directors

13

meetings

2_VA_V10 22/04/2020 10:08 Page91

The Sustainable Development and Compliance Committee

notably addressed the following subjects:

— AirFrance – KLM’s Extra - ﬁnancial performance statement;

— review of the Group’s compliance program;

— anti - corruption plan for the Group;

— Group’s environmental, social and societal ambitions.

Board director Sustainable Development and Compliance Committee attendance

Anne-Marie Idrac Chair of the Sustainable Development and Compliance Committee 100%

Karim Belabbas 100%

Leni Boeren 100%

Mathi Bouts 50%

Bing Tang 100%

Patrick Vieu 100%

Average attendance 92%

Sustainable Development and Compliance Committee

Composition

At December31, 2019, the Sustainable Development and Compliance

Committee was composed of the following six members: Anne-

Marie Idrac (Chair of the Committee), Karim Belabbas, Leni

Boeren, Mathi Bouts, Astrid Panosyan and Jian Wang.

Astrid Panosyan and Jian Wang became members of the

Sustainable Development and Compliance Committee on

October30, 2019.

Missions

The Sustainable Development and Compliance Committee assists

the Board of Directors in reviewing the Group’s policies on

compliance and sustainable development. It ensures that the

Group promotes long - term value creation and takes the social

and environmental issues involved in its activities into account in

the establishment of the Group’s strategy by submitting

recommendations to the Board.

The Sustainable Development and Compliance Committee’s

mission is thus to:

— review the Group’s CSR policy and its implementation;

— examine the extra - ﬁnancial risks and speciﬁcally those relating

to environmental, social and societal matters;

— review the Extra - ﬁnancial performance statement foreseen in

Article L.225 - 102 - 1of the Code de Commerce including, in

particular, the extra - ﬁnancial performance criteria;

— review the Group’s compliance program and monitor its

implementation pursuant to the AFEP-MEDEF Code.

The Sustainable Development and Compliance Committee may

also deal with any matters potentially deemed appropriate by the

Board of Directors.

Activity

During the 2019 ﬁnancial year, the Sustainable Development and

Compliance Committee met twice (ﬁrst year of functioning for

the Committee), with an attendance rate for members of 92%.

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2 Activities and functioning of the Board of Directors and its Committees

92%

Board director

attendance

6

members

50%

independent

directors

2

meetings

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2.4 SUMMARY TABLE OF THE AFEP-MEDEF CODE’S

COMPLY OR EXPLAIN RECOMMENDATIONS NOT

APPLIED

The following table shows the recommendations of the AFEP-MEDEF Code which have not been applied and the reasons for this:

Provisions of the AFEP-MEDEF Code not applied Reasons

Meeting of the non - executive directors outside the presence of the executive or “in - house” ocers

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Summary table of the AFEP-MEDEF Code’s comply or explain recommendations not applied

2

“It is recommended that a meeting not attended

by the Executive Ocers be organised each year”.

(paragraph 11.3of the AFEP-MEDEF Code)

The current practice is that the main matters concerning

executive ocers (such as their appointment, performance and

compensation) are discussed by the Board of Directors outside

the presence of the interested parties, after hearing the opinion

of, as required, the Appointments and Governance or

Remuneration Committees.

“The independent directors should account for half

the members of the Board in widely held corporations

without controlling shareholders.”

(paragraph 9.3of the AFEP-MEDEF Code)

Following the entry into the share capital of the Dutch State in

February 2019, the Board of Directors of AirFrance – KLM no

longer considers Mr. Jaap de Hoop Scheer, a Board director

appointed by the Shareholders' Meeting as proposed by the

Dutch State pursuant to the 2003 governance agreements, to

be independent. As a result, as of December 31, 2019, the

proportion of independent directors stood at 47%, i.e. below

the 50% threshold foreseen by the AFEP-MEDEF Code. The

discussions initiated in 2019 between the Company and the French

and Dutch States are continuing aimed at rebalancing the composition

of the Board of Directors. This situation is thus temporary.

Proportion of independent directors within the Board of Directors

‘’It must not include any executive ocer and must mostly

consist of independent directors.‘’

(paragraph 18.1of the AFEP-MEDEF Code)

Following the entry into the share capital of the Dutch State in

February 2019, the Board of Directors of AirFrance – KLM no

longer considers Mr. Jaap de Hoop Scheer, a Board director

appointed by the Shareholders' Meeting as proposed by the

Dutch State pursuant to the 2003 governance agreements and

a member of the Remuneration Committee, to be independent.

As a result, as of December 31, 2019, the proportion of independent

directors within the Remuneration Committee stood at 50%.

The discussions initiated in 2019 between the Company and the

French and Dutch States are continuing aimed at rebalancing

the composition of the Board of Directors and its Committees.

This situation is thus temporary.

Proportion of independent directors within the Remuneration Committee

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2 Compensation of the company ocers

2.5.1 General principles

Pursuant to the new provisions of Article L.225 - 37 - 2of the French

Code of Commerce (Code de Commerce), the compensation of

Air France – KLM’s company ocers is set by the Board of

Directors, as recommended by the Remuneration Committee,

consistent with the provisions of the AFEP-MEDEF Code. The

company’s Board of Directors thus establishes a compensation

policy aligned with the company’s interest, linked to its commercial

strategy, and which contributes to its long - term sustainability. It

outlines all the components of the ﬁxed and variable compensation

for the company ocers and explains the decision - making process

followed for its establishment, revision and implementation. This

compensation policy is the subject of a draft resolution submitted

for approval by the Shareholders’ Meeting, in the conditions foreseen

in Article L.225 - 98of the Code de Commerce, on an annual basis

and on any signiﬁcant amendment to the compensation policy.

Pursuant to the new provisions of Article L.225 - 37 - 3 and L.225 - 100

of the Code de Commerce, the Shareholders’ Meeting must also

vote, on an annual basis, ﬁrstly on the information referred to in

Article L.225 - 37 - 3I, including notably the total compensation

and beneﬁts of any kind paid in respect of the mandate during

the last ﬁnancial year or granted in respect of the mandate for

the same ﬁnancial year to all the company ocers and, secondly,

on the total compensation and beneﬁts of any kind paid during

the last ﬁnancial year or granted in respect of the same ﬁnancial

year to each executive ocer.

In application of Ordinance No.2019 - 1234 of November27, 2019,

taken in application of Act No.2019 - 486of May22, 2019 relating

to the growth and transformation of businesses (known as the

PACTE Act), the Shareholders’ Meeting of May26, 2020 is thus

convened to approve the:

— information relating to the compensation for each of the

company ocers, provided in application of Articles L.225-37 - 3I

and L.225 - 100II of the Code de Commerce. This information

is presented hereinafter in section 2.5.2 of this Universal

Registration Document (Compensation of the company

ocers in 2019);

— the ﬁxed and variable elements composing the total

compensation and beneﬁts of any kind paid during the 2019

ﬁnancial year or granted in respect of this ﬁnancial year to

Ms.Anne-Marie Couderc, Chair of the Board of Directors and

to Mr. Benjamin Smith, Chief Executive Ocer, in application of

Article L.225 - 100III of the Code de Commerce. This information

is presented hereinafter in Section2.5.2.2of this Universal

Registration Document (Elements of compensation paid during

the 2019 ﬁnancial year or granted to the executive ocers in

respect of this ﬁnancial year and submitted for approval by

the Shareholders’ Meeting of May26, 2020); and the;

— 2020 compensation policy for the company ocers, i.e. the

Board directors, the Chair of the Board of Directors and the

Chief Executive Ocer, as established by the Board of Directors,

in application of Article L.225-37 - 2of the Code de Commerce.

This policy is set forth hereinafter in Section 2.5.3 of this

Universal Registration Document (Compensation policy for

the company ocers in respect of 2020).

Note that, pursuant to the new provisions of Article L.225 - 37 - 2of

the Code de Commerce, to avoid becoming null and void, no

elements of compensation of any kind whatsoever, may be

established, granted or paid by the company, nor any commitment

made corresponding to elements of compensation, fees or

beneﬁts due or potentially due on taking up, stepping down or a

change in their duties or following their exercise, unless it complies

with the approved compensation policy or, in its absence, with

past compensation or practices.

Furthermore, if the Shareholders’ Meeting of May26, 2020 does

not approve the draft resolution referred to in Article L.225 - 100II

of the Code de Commerce, the Board of Directors must submit a

revised compensation policy, taking into account the shareholder

vote, for approval by the next Shareholders’ Meeting. In such a

situation, the payment of the sum allocated to the Board

Directors for the 2020 ﬁnancial year would be suspended until

approval of the revised compensation policy.

Lastly, the elements of variable or extraordinary compensation

attributable to the Chair of the Board of Directors and the Chief

Executive Ocer in respect of the 2019 ﬁnancial year may only

be paid following approval by the Shareholders’ Meeting of

May26, 2020 of the elements of compensation for the relevant

individual under the conditions foreseen in Article L.225-100III

of the Code de Commerce.

2.5.2 Compensation

of the company ocers

in 2019

The information referred to in Article L.225 - 37 - 3I of the Code

de Commerce and the elements of compensation paid during the

2019 ﬁnancial year or granted in respect of this ﬁnancial year to

the various company ocers of AirFrance – KLM, to be submitted

to the vote by shareholders during the Shareholders’ Meeting of

May26, 2020 in application of Article L.225100of the Code de

Commerce, are detailed hereinafter and concern:

— the Company’s Board directors (section2.5.2.1);

— the Chair of the Company’s Board of Directors,

Ms.Anne-Marie Couderc (section2.5.2.2a. ); and

— the Company’s Chief Executive Ocer, Mr. Benjamin Smith

(section2.5.2.2b. ).

2.5 COMPENSATION OF THE COMPANY OFFICERS

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Compensation of the company ocers

2

2.5.2.1 Elements of compensation paid during the 2019 ﬁnancial year or granted to the Board directors in respect

of this ﬁnancial year and submitted for approval by the Shareholders’ Meeting of May26, 2020

The elements of compensation paid during the 2019 ﬁnancial year or granted in respect of this ﬁnancial year to the Board directors

of Air France – KLM, to be submitted to the shareholder vote at the Shareholders’ Meeting of May 26, 2020 pursuant to

Article L.225-100of the Code de Commerce, are detailed hereinafter:

Attendance Amounts Amounts

rate at Board granted in respect granted in respect

and Committee of the 2019 ﬁnancial of the 2018 ﬁnancial

meetings and at the year and paid during year and paid during

Shareholders’ Meeting this ﬁnancial year or this ﬁnancial year or

(2019 ﬁnancial year)

(1)

accounting value (in €) accounting value (in €)

Members of the Board of Directors in function as of the date of this Universal Registration Document

Anne-Marie Couderc

(2)

100% N/A 25,042

Benjamin Smith

(3)

100% N/A N/A

Maryse Aulagnon 98% 55,214 55,797

Karim Belabbas

(4)

96% 43,214 47,500

Leni M.T. Boeren 91% 57,214 60,113

Isabelle Bouillot 95% 49,929 52,500

Mathi Bouts

(5)

75% 50,500 45,684

Jean-Dominique Comolli 100% 50,000 57,500

George Mattson (Permanent representative of Delta Air Lines,Inc. ) 78% 55,214 54,500

Paul Farges

(4) (6)

100% 48,000 32,281

Jaap de Hoop Scheer 79% 21,286 55,910

Anne-Marie Idrac 100% 45,000 43,797

Isabelle Parize 91% 57,214 53,410

Alexander R. Wynaendts 89% 46,643 51,850

François Robardet

(4)

100% 53,000 60,500

Astrid Panosyan

(7)

80% 12,500 N/A

Cees’t Hart

(7)

100% 21,286 N/A

Martin Vial

(8)

100% 15,886 N/A

Jian Wang

(9)

67% 14,857 N/A

Former members of the Board of Directors during the 2018 and 2019 ﬁnancial years

no longer acting in the capacity of Board director as of the date of this Universal Registration Document

Louis Jobard

(4)(10)

N/A N/A 20,042

Solenne Lepage

(11)

91% 14,100 55,500

Patrick Vieu

(12)

89% 25,643 47,500

Hans Smits

(12)

44% 23,414 47,320

Bing Tang

(13)

86% 39,786 40,759

Total 826,417 907,505

(1) In view of the introduction of a variable portion in the compensation policy for Board directors for their attendance at meetings of the Board of Directors’

Committees, the attendance rate presented includes their attendance at meetings of the Board, the Committees and the Shareholders’ Meeting.

(2) Ms.Anne-Marie Couderc received compensation in her capacity as a Board director for the period from January1to May15, 2018.

(3) Mr. Benjamin Smith, Chief Executive Ocer of AirFrance – KLM, was appointed as a Board director on December5, 2018. He does not receive compensation in

respect of his Board director duties.

(4) The Board directors representing the employee shareholders and the Board director representing the French employees appointed by the Comité de Groupe

Français receive compensation in respect of their employment contracts with Air France, with no link to their corporate mandates within Air France – KLM.

Furthermore, their compensation is paid to their unions.

(5) Mr. Mathi Bouts receives compensation in respect of his employment contract with KLM, with no link to his corporate mandate within AirFrance – KLM.

(6) Board director since May15, 2018.

(7) Board director since May28, 2018.

(8) Board director since May31, 2019.

(9) Board director since July31, 2019.

(10)Board director until May15, 2018.

(11) Board director until April1, 2019.

(12)Board director until May28, 2019.

(13)Board director until July30, 2019.

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2 Compensation of the company ocers

In respect of the 2019 ﬁnancial year and paid during this ﬁnancial

year, the Board directors were granted total compensation of

€826,417 (within the framework of the €950,000budget voted

by the Shareholders’ Meeting of May15, 2018).

The compensation for Board directors is composed of a ﬁxed and

variable portion, linked to the diligence of the Board directors,

whose allocation and granting modalities are set by the Board of

Directors, as proposed by the Remuneration Committee. The

number of meetings of the Board of Directors and its Committees

held during the 2019 ﬁnancial year and the attendance rates of

the individual Board directors at the aforementioned meetings is

set forth in in Section2.3of this Universal Registration Document.

The allocation rules, unchanged since the Board of Directors’

resolution of February19, 2014, are set forth in Section2.5.3.1of

this Universal Registration Document.

Note that, during its meeting of December11, 2019, the Board of

Directors decided to introduce a variable element of compensation

granted to the Board directors in respect of their duties within

the Committees:

Audit Committee:

— the Chair now receives a ﬁxed portion of €4,500 and a

variable portion of €7,500based on attendance at Committee

meetings; and

— the members now receive a ﬁxed portion of €3,000 and a

variable portion of €5,000based on attendance at Committee

meetings.

Other Committees:

— the Chair now receives a ﬁxed portion of €3,000 and a variable

portion of €4,500 based on attendance at Committee

meetings; and

— the members now receive a ﬁxed portion of €2,000 and a

variable portion of €3,000based on attendance at Committee

meetings.

Note also that, in view of the very high number of extraordinary

meetings of the Board of Directors taking place during the 2018

ﬁnancial year within the framework of the transitional governance

period and the eorts made by the dierent Board directors to

participate in these meetings, during its meeting of October29,

2018 the Board of Directors granted an additional extraordinary

amount of compensation (within the framework of the budget

voted by the Shareholders’ Meeting) to each of the Board

directors, determined on the basis of a maximum variable

amount of €7,500calculated pro rata temporis based on their

attendance at the extraordinary meetings of the Board of

Directors held during the transition period (i.e. as of May16, 2018),

with the exception of the Chair of the Board of Directors and the

Chief Executive Ocer.

2.5.2.2 Elements of compensation paid during

the 2019 ﬁnancial year or granted to the

executive ocers in respect of this ﬁnancial

year and submitted for approval by the

Shareholders’ Meeting of May26, 2020

a. Compensation of Ms.Anne-Marie Couderc, Chair of the Board

of Directors, for the period from January1to December31, 2019

Presentation of the 2019 compensation structure

for Ms.Couderc, Chair of the Board of Directors

Pursuant to the Board of Directors’ resolutions of March12, 2019,

the compensation of the Chair of the Board of Directors comprised

only a ﬁxed portion of €200,000. There were neither Board directors’

fees nor variable compensation in addition to this compensation.

The 2019 compensation policy for the Chair of the Board

of Directors was approved by the Shareholders’ Meeting of

May28, 2019.

For more details on the compensation policy for the Chair in

respect of the 2019 ﬁnancial year, see Section2.5.2.6of the 2018

Registration Document.

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Compensation of the company ocers

2

Fixed compensation €200,000 €200,000 In her capacity as Chair of the Board of Directors,

Ms.Anne-Marie Couderc’s annual gross ﬁxed

compensation in respect of the 2019 ﬁnancial

year was set at €200,000by the Board of

Directors during its meeting of March12, 2019.

This annual gross ﬁxed compensation is

unchanged on its 2018 level.

Annual variable compensation N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

variable compensation.

Multi - year variable compensation N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

multi - year variable compensation.

Extraordinary compensation N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

extraordinary compensation.

Stock options, performance shares or other

long - term beneﬁt (equity warrants, etc. )

N/A N/A No awards of this type were made during the

2019 ﬁnancial year. Ms.Anne-Marie Couderc

does not beneﬁt from any elements of

long - term compensation.

Compensation granted in respect of a

Board director’s mandate

N/A N/A Ms.Anne-Marie Couderc does not receive

compensation

in respect of her Board director’s mandate.

Beneﬁts of any kind €15,985 €15,985 Ms.Anne-Marie Couderc beneﬁts from a

chaueur - driven company car.

Severance pay N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

severance pay.

Non - compete indemnity N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

a non - compete indemnity.

Supplementary pension scheme N/A N/A Ms.Anne-Marie Couderc does not beneﬁt from

a supplementary pension scheme.

Elements of compensation paid during or granted in respect of the 2019 ﬁnancial year

The elements of compensation paid during the 2019 ﬁnancial year or granted in respect of this ﬁnancial year to Ms.Anne-Marie

Couderc, Chair of the Board of Directors, for the period from January1to December31, 2019, to be submitted to the shareholder vote

during the Shareholders’ Meeting of May26, 2020 pursuant to Article L.225-100of Code de Commerce, are detailed as follows:

Amounts granted

Amounts paid in respect

Elements of compensation during the 2019 of the 2019

submitted to the vote ﬁnancial year ﬁnancial year Presentation

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2 Compensation of the company ocers

b. Compensation of Mr. Benjamin Smith, Chief Executive Ocer,

for the period from January1to December31, 2019

Presentation of the 2019 compensation structure

for Mr. Benjamin Smith, Chief Executive Ocer

As proposed by the Remuneration Committee, the compensation

policy for the Chief Executive Ocer was deﬁned by the Board

of Directors during its meeting of August 16, 2018. The 2019

compensation policy for the Chief Executive Ocer, set pursuant

to the Board of Directors resolutions of February19, 2019 and

March12, 2019, is composed of the following three elements:

1. ﬁxed compensation;

2. annual variable compensation linked to the performance

during the previous ﬁnancial year; and

3. variable long - term compensation.

The 2019 compensation policy for the Chief Executive Ocer

was approved by the Shareholders’ Meeting of May28, 2019.

For more details on the compensation policy for the Chief

Executive Ocer in respect of the 2019 ﬁnancial year, see

Section2.5.2.6of the 2018 Registration Document.

Elements of compensation paid during or granted in

respect of the 2019 ﬁnancial year

The elements of compensation paid during the 2019 ﬁnancial

year or granted in respect of this ﬁnancial year to Mr. Benjamin

Smith, Chief Executive Ocer, for the period from January1to

December31, 2019, to be submitted to the shareholder vote at

the Shareholders’ Meeting of May 26, 2020 in application of

Article L.225 - 100 of the Code de Commerce, are detailed as

follows:

Amounts

Elements of Amounts paid granted in respect

compensation during the 2019 of the 2019

submitted to the vote ﬁnancial year ﬁnancial year Presentation

Fixed compensation €900,000 €900,000 Mr. Benjamin Smith’s annual gross ﬁxed compensation in his capacity

as Chief Executive Ocer was set at €900,000by the Board of

Directors during its meeting of February19, 2019.

This annual gross ﬁxed compensation is unchanged relative

to its 2018 level.

Annual variable

compensation

€366,667 €768,456

The payment

of this

compensation

is subject to its

approval by the

Shareholders’

Meeting of

May26, 2020

Note that, as proposed by the Remuneration Committee, in his capacity

as Chief Executive Ocer for 2018, the amount of Mr. Benjamin Smith’s

annual gross variable compensation was set at €366,667by the Board

of Directors during its meeting of August16, 2018. In that he took up

his duties during the last part of the 2018 ﬁnancial year, this amount

was not subject to performance criteria. Following approval by the

Shareholders’ Meeting of May28, 2019, (ﬁfteenth resolution),

this annual gross variable compensation was paid during the

2019 ﬁnancial year in respect of the 2018 ﬁnancial year

(1)

.

As proposed by the Remuneration Committee, the amount of

Mr. Benjamin Smith’s annual gross variable compensation in his

capacity as Chief Executive Ocer was set at €768,456by the Board

of Directors during its meeting of February19, 2020. This amount

corresponds to 85.4% of his annual gross ﬁxed compensation and is

composed as follows:

— quantitative criteria linked to the Group’s ﬁnancial objectives: 41.6%

(i.e. 30.4% of his annual gross ﬁxed compensation):

– 19% (compared with a target at 61% and a maximum at 79%)

of the ﬁxed compensation in respect of the quantitative

performance linked to AirFrance – KLM’s Current Operating

Income (COI), i.e. an achievement rate of 31.2%. This percentage

takes into account the level of COI achieved by the Group

and the performance relative to the competitors,

– 11.4% (compared with a target at 12% and a maximum at 16%)

of the ﬁxed compensation in respect of the quantitative

performance linked to the adjusted net debt, i.e. an achievement

rate of 96.4%. This percentage takes into account the level of

Adjusted Net Debt achieved by the Group;

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Compensation of the company ocers

2

Amounts

Elements of Amounts paid granted in respect

compensation during the 2019 of the 2019

submitted to the vote ﬁnancial year ﬁnancial year Presentation

— qualitative criteria composed of individual targets: 112.2% (i.e. 55% of

his annual gross ﬁxed compensation):

– 15% (compared with a target at 12% and a maximum at 15%) of the

ﬁxed compensation in respect of the qualitative performance linked

to social stability and dialogue, i.e. an achievement rate of 125%,

This target is evaluated relative to the improvement in the Group’s

Employee Promoter Score

(3) (5)

,

In its evaluation, the Remuneration Committee noted an increase

in this indicator at the end of 2019 and took into account the new

employee dialogue established throughout the ﬁnancial year,

based on transparency and trust,

– 15% (compared with a target at 12% and a maximum at 15%) of

the ﬁxed compensation in respect of the qualitative performance

linked to customer engagement, i.e. an achievement rate of 125%,

This target is evaluated relative to the improvement in the Group’s

Net Promoter Score

(4) (5)

,

In its evaluation, the Remuneration Committee noted a signiﬁcant

improvement of more than 33% in this indicator in 2019 resulting,

notably, from the deployment of the strategic plan to redeﬁne the

commercial oer and the complementary repositioning of the

Group’s brands,

– 13% (compared with a target and a maximum at 13%) of the ﬁxed

compensation in respect of the qualitative performance linked to

the deﬁnition of the strategic orientations to strengthen the

Group’s competitiveness and their initial execution, i.e. an

achievement rate of 100%,

This target takes into account the deﬁnition of the strategic

orientations to strengthen the Group’s competitiveness and their

initial execution,

In its evaluation, the Remuneration Committee took into account

the medium and long - term strategic plan deﬁned and unveiled

during the Investor Day in November2019 together with its

degree of acceptance by the market,

– 12% (compared with a target and a maximum at 12%) of the ﬁxed

compensation in respect of the qualitative performance linked to

the implementation of the managerial governance, i.e. an

achievement rate of 100%,

This target takes into account the implementation of the

managerial governance and notably the promotion of positive working

relationships between the executive teams of AirFrance – KLM,

Air France, KLM and other subsidiaries,

In its evaluation, the Remuneration Committee noted the

implementation of a new governance as of February2019, composed

of a CEO Committee resulting from reinforced strategic and

managerial cooperation within the Group and its subsidiaries.

In application of Article L.225 - 100III of the Code de Commerce, the

payment of the amount of €768,456is subject to prior approval by the

Shareholders’ Meeting of May26, 2020.

In the event of a positive vote by the shareholders during the Shareholders’

Meeting of May26, 2020, authorizing the payment of Mr. Benjamin

Smith’s variable compensation, the company will not have the option

to request its return.

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2 Compensation of the company ocers

Amounts

Elements of Amounts paid granted in respect

compensation during the 2019 of the 2019

submitted to the vote ﬁnancial year ﬁnancial year Presentation

Long - term variable

compensation

N/A 220,506perform

ance units valued

at €2,000,000,

calculated with

reference to the

AirFrance – KLM

opening share

price on

August17, 2018

As proposed by the Remuneration Committee, during its meeting of

March14, 2018, the Board of Directors decided to set up two long - term

compensation plans: a Long - term Incentive Plan and a Speciﬁc

Long - term Incentive Plan.

As proposed by the Remuneration Committee, during its meeting of

March12, 2019, the Board of Directors decided to grant Mr. Benjamin

Smith, in his capacity as Chief Executive Ocer, performance units

within the framework of two long - term plans:

— Long - term Incentive Plan (Phantom Shares): grant of

110,253performance units, payable in 2022 subject to a three - year

presence and performance conditions. Their payment in 2022

(subject to the presence and performance conditions) will be

calculated relative to the share price after the results announcement

for the 2021 ﬁnancial year;

— Speciﬁc Long - term Incentive Plan: grant of 110,253performance

units, payable in AirFrance – KLM shares (one performance unit

conferring the right to one share) in 2022 subject to a three - year

presence and performance conditions;

Note that Mr. Benjamin Smith does not use and has given an

undertaking that he will not use risk hedging transactions within the

framework of this plan until the payment of the performance units.

The main terms and conditions of these two long - term incentive plans

are detailed in Section2.5.2.6of the 2018 Registration Document.

Multi - year variable

compensation

N/A N/A Mr. Benjamin Smith does not beneﬁt from multi - year variable

compensation.

Extraordinary

variable

compensation

N/A N/A Mr. Benjamin Smith does not beneﬁt from extraordinary compensation.

Stock options,

performance shares

or other long - term

beneﬁt (equity

warrants, etc. )

N/A N/A No awards of this type were made during the 2019 ﬁnancial year.

Compensation

granted in respect of

a Board director’s

mandate

N/A N/A Mr. Benjamin Smith does not receive compensation in respect

of his Board director’s mandate.

Beneﬁts of any kind €313,201 €313,201 Mr. Benjamin Smith beneﬁts from a chaueur - driven company car, a

supplementary health and disability scheme beneﬁting all the Group’s

personnel. Given his relocation to France, he also beneﬁts from an

accommodation allowance, free airline tickets, school fees

and advisory fees.

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2015 2016 2017 2018

Financial Year Financial Year Financial Year Financial Year

Chair and Chief Executive Ocer

Ratio with average compensation for the employees in the relevant scope 10.97 17.74 13.99 16.97

Ratio with median compensation for the employees in the relevant scope 14.55 22.55 18.00 22.00

2.5.2.3 Ratios on the multiples of compensation

for the executive ocers in 2019

This section has been realized pursuant to the provisions of

Article L.225 - 37 - 3I, paragraph 6of the Code de Commerce and

sets forth, for the company’s last ﬁve ﬁnancial years, the ratios

between the level of compensation for the executive ocers and,

ﬁrstly, the average remuneration on a Full Time Equivalent basis

for employees of the company other than the company ocers

and, secondly, the median compensation on a Full Time

Equivalent basis for employees of the company other than the

company ocers.

The following multiples have been calculated based on the

annualized ﬁxed and variable compensation paid during the

relevant years.

Since the company Air France – KLM does not include a

representative number of employees during the period in

question, a broader scope has been used (“relevant scope”)

consisting of Air France employees on permanent contracts

(except expatriate and seconded sta) in France, present and

paid throughout the year on a full time basis.

Amounts

Elements of Amounts paid granted in respect

compensation during the 2019 of the 2019

submitted to the vote ﬁnancial year ﬁnancial year Presentation

Severance pay N/A N/A Pursuant to the 2019 compensation policy approved by the Shareholders’

Meeting of May28, 2019 (seventeenth resolution) and the regulated party

agreement referred to in Article L.225-42 - 1of the Code de Commerce

(in force at the time) and approved by the aforementioned Shareholders’

Meeting (ﬁfth resolution), Mr. Benjamin Smith continues to beneﬁt from

the severance payment granted to him by the Board of Directors in its

meeting of August16, 2018 in the event of forced termination linked to

a change of control (excluding any situation of serious misconduct on

the part of the Chief Executive Ocer).

Pursuant to the recommendations of the AFEP-MEDEF Code, the basis

of this severance payment is equivalent to two years of his annual ﬁxed

and variable compensation (based on the speciﬁc calculation modalities

referring, as necessary, to the target variable in the event of

termination in the ﬁrst 24months).

A coecient (between 0% and 100%) will be applied to this amount on

the basis of the performance of the interested party, measured with

reference to the achievement rate of the performance criteria for the

annual variable component of his compensation over the preceding

two ﬁnancial years of his mandate (or since his appointment, in the

event of termination during the ﬁrst 24months). The AirFrance – KLM

Board of Directors is responsible for evaluating the achievement of

these performance criteria.

Non - compete

indemnity

N/A N/A Mr. Benjamin Smith does not beneﬁt from a non - compete indemnity.

Supplementary

pension scheme

N/A N/A Mr. Benjamin Smith does not beneﬁt from a collective supplementary

pension scheme.

(1) For the period from September17to December31, 2018.

(2) For conﬁdentiality reasons, the amount set in the 2019 budget is not disclosed.

(3) EPS = Internal indicator of employee satisfaction

(4) NPS = Customer satisfaction indicator.

(5) The EPS and NPS are internal indicators set each year by company taking into account the histories and performance plans of these companies.

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2 Compensation of the company ocers

2.5.2.4 Change in the compensation policy

This section has been established in application of the provisions of Article L.225 - 37 - 3I, paragraph 7of the Code de Commerce and

shows the annual change in compensation, the performance of the company AirFrance – KLM, the average remuneration on a Full

Time Equivalent basis for employees of the company Air France – KLM other than the Directors and the ratios referred to in

section2.5.2.3of this Universal Registration Document, for the last ﬁve ﬁnancial years:

2015 2016 2017 2018 2019

Financial Year Financial Year Financial Year Financial Year Financial Year

Annual compensation

Chair and Chief Executive Ocer

(1)

Compensation €645,000 €1,065,334 €852,167 €1,100,000 N/A

Change / Y-1 + 65.17% - 20% +29.08%

Ratio with average compensation 10.97 17.74 13.99 16.97 N/A

Change / Y-1 + 6.77 - 3.84 + 2.98

Ratio with median compensation 14.55 22.55 18.00 22.00 N/A

Change / Y-1 + 8.00 - 4.55 + 4.00

Detail on the elements used to calculate the ratios presented

above:

— 2018 Financial Year:

– the compensation of the Chair of the Board of Directors

has been annualized based on Ms.Anne Marie Couderc’s

compensation in her capacity as Chair for the period from

May15to December31, 2018,

– the compensation of the Chief Executive Ocer has been

annualized based on Mr. Benjamin Smith’s compensation in

his capacity as Chief Executive Ocer from September17 to

December31, 2018 (the compensation of Mr. Gagey, interim

Chief Executive Ocer from May15to September17, 2018

has not been included in this calculation since it was

established on the basis of his compensation as Chief

Financial Ocer and not on that of the compensation for

the Chief Executive Ocer);

— 2019 Financial Year:

The annual variable compensation of the Chief Executive

Ocer paid in 2019 in respect of 2018 has been annualized

based on Mr. Benjamin Smith’s compensation in his capacity

as Chief Executive Ocer for the period from September17to

December31, 2018.

2018 Financial Year 2019 Financial Year

Chair of the Board of Directors

Ratio with average compensation for the employees in the relevant scope in the relevant scope 3.09 3.43

Ratio with median compensation for the employees in the relevant scope 4.00 4.43

Chief Executive Ocer

Ratio with average compensation for the employees in the relevant scope 13.89 39.19

Ratio with median compensation for the employees in the relevant scope 18.00 50.66

Detail on the elements used to calculate the ratios presented

above:

— 2016 Financial Year:

The compensation of the Chair and Chief Executive Ocer in

respect of the 2016 ﬁnancial year is composed of:

– Mr. Alexandre de Juniac’s compensation in his capacity as

Chair and Chief Executive Ocer for the period from

January1to July4, 2016 (see 2016 Registration Document,

page 40), and

– Mr. Jean-Marc Janaillac’s compensation in his capacity as

Chair and Chief Executive Ocer for the period from July4

to December31, 2016 (see 2016 Registration Document,

page 41);

— 2018 Financial Year:

The compensation of the Chair and Chief Executive Ocer has

been annualized based on Mr. Jean-Marc Janaillac’s compensation

in his capacity as Chair and Chief Executive Ocer for the

period from January1to May15, 2018.

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2

Chair of the Board of Directors

(1)

Compensation N/A N/A N/A €200,000 €215,985

Change / Y-1 +7.99%

Ratio with average compensation N/A N/A N/A 3.09 3.43

Change / Y-1 + 0.34

Ratio with median compensation N/A N/A N/A 4.00 4.43

Change / Y-1 + 0.43

Chief Executive Ocer

(1)

Compensation N/A N/A N/A €900,000

(2)

€2,470,345

Évolution / Y-1 + 174.47%

Ratio with average compensation N/A N/A N/A 13.89 39.19

Change / Y-1 + 25.3

Ratio with median compensation N/A N/A N/A 18.00 50.66

Change / Y-1 + 32.66

Board directors

(3)

Compensation (formerly directors’ fees) €625,960 €670,615 €720,695 €907,505

(4)

€826,417

Change / Y-1 7.13% 7.47% 25.92% -8.93%

Employees of AirFrance – KLM relevant scope

(5)

Average compensation €58,792 €60,040 €60,914 €64,814 €63,033

Change / Y-1 2.1% 1.5% 6.4% -2.7%

Performance of the Company on the basis of reported ﬁgures

Earnings (in €m) €127 €792 -€247 €419 €290

Change / Y-1 +€665 -€1,066 +€694 -€129

Current Operating Income (COI) (in €m) €816 €1,049 €1,488 €1,332 €1,141

Change / Y-1 +€233 +€439 -€83 -€264

Net debt/EBITDA ratio 3.3x 2.9x 2.1x 1.4x 1.5x

Change/ Y-1 -0.4 -0.8 -0.7 +0.1

(1) The compensation packages of the Chair and Chief Executive Ocer, of the Chair of the Board of Directors and of the Chief Executive Ocer set forth above have

been calculated on the basis of the ﬁxed and variable compensation paid during the relevant ﬁnancial years. These elements have been annualized to enable their

comparison.

(2) The compensation of the Chief Executive Ocer for the 2018 ﬁnancial year includes only the annualized ﬁxed compensation for the Chief Executive Ocer. The variable

portion of the compensation for the Chief Executive Ocer granted in respect of the 2018 ﬁnancial year was paid following the Shareholders’ Meeting of May28, 2019.

(3) Note that, during its meeting of December11, 2019, the Board of Directors decided to introduce a variable portion for the compensation granted to the Board

directors in respect of their duties in the Committees:

Audit Committee:

– the Chair now receives a ﬁxed portion of €4,500 and a variable portion of €7,500based on attendance at Committee meetings; and

– the members now receive a ﬁxed portion of €3,000 and a variable portion of €5,000based on attendance at Committee meetings.

Other Committees:

– the Chair now receives a ﬁxed portion of €3,000 and a variable portion of €4,500based on attendance at Committee meetings; and

– the members now receive a ﬁxed portion of €2,000 and a variable portion of €3,000based on attendance at Committee meetings.

(4) In view of the very high number of extraordinary meetings of the Board of Directors taking place during the 2018 ﬁnancial year within the framework of the transitional

governance period and the eorts made by the diferent Board directors to attend these meetings, during its Meeting of October29, 2018 the Board of Directors

granted an additional extraordinary amount of compensation (within the limits of the budget voted by the Shareholders’ Meeting) to each member of the Board of

Directors. These elements are set forth in Section2.5.2.1of this Universal Registration Document.

(5) Since the company AirFrance – KLM does not have a representative number of employees during the period under observation, a broader scope has been used (“relevant

scope”) composed of Air France employees on permanent contracts (excluding expatriates and sta on secondment), present and paid in France throughout the

year on a full time basis.

2015 2016 2017 2018 2019

Financial Year Financial Year Financial Year Financial Year Financial Year

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2.5.2.5 Additional information concerning the

compensation paid or granted to all the

company ocers in 2019

During the 2019 ﬁnancial year, the amount of compensation paid

to the Board directors did not exceed the maximum budget of

€950,000, approved by the shareholders during the Shareholders’

Meeting of May15, 2018.

During the 2019 ﬁnancial year, the elements of compensation

paid or granted to the Chair and Chief Executive Ocer for the

period from January 1 to May 15, 2018 complied with the

compensation policy for the Chair and Chief Executive Ocer

approved by the shareholders during the Shareholders’ Meeting

of May15, 2018.

Furthermore, Note that following the resignation of the Chair and

Chief Executive Ocer on May15, 2018, the Board of Directors

decided that same day to implement a transitional governance.

Within this framework, the Board of Directors decided to:

— separate the functions of Chair of the Board of Directors and

Chief Executive Ocer of AirFrance – KLM;

— appoint Ms. Anne-Marie Couderc as Chair of the Board of

Directors; and

— appoint Mr. Frédéric Gagey as interim Chief Executive Ocer.

At its meeting of August16, 2018, the Board of Directors appointed

Mr. Benjamin Smith as Chief Executive Ocer, who took up his

duties on September17, 2018, replacing Mr. Frédéric Gagey.

The payment and granting of the elements of compensation in

respect of the 2018 ﬁnancial year to Ms.Anne-Marie Couderc, Mr.

Frédéric Gagey and Mr. Benjamin Smith for their respective duties

were approved by the Shareholders’ Meeting of May28, 2019.

Nonetheless, pursuant to Article L.225 - 37 - 3I, paragraph 8of the

Code de Commerce, Note that, during the 2019 ﬁnancial year,

following the implementation of the new governance, the total

compensation granted or paid to the executive ocers did not

respect the compensation policy for the Chair and Chief

Executive Ocer approved by the shareholders during the

Shareholders’ Meeting of May15, 2018.

In eect, in view of the adoption of the Group’s new governance

during the year and in light of Mr. Benjamin Smith’s proﬁle and

international experience, the Board of Directors considered that

it was necessary to change the compensation framework for the

new Chief Executive Ocer which had initially been foreseen for

the Chair and Chief Executive Ocer. As a result, during the 2019

ﬁnancial year, in addition to the elements of compensation paid

to the Chair and Chief Executive Ocer pursuant to the

compensation policy voted by the Shareholders’ Meeting of

May 15, 2018, for the period from January 1 to May 15, 2018,

variable compensation of €366,667was paid to Mr. Benjamin

Smith in his capacity as Chief Executive Ocer from

September17to December31, 2018. Given that he took up his

duties towards the end of the 2018 ﬁnancial year, this variable

compensation was not subject to performance criteria.

Pursuant to Article L.225 - 37 - 3I, paragraph 10of the Code de

Commerce, Note that, during the 2019 ﬁnancial year, no disparity

or other exemption relative to the procedure for implementing

the compensation policy was applied. It is however stipulated

that, during its meeting of December 11, 2019, the Board of

Directors decided to introduce a variation portion into the

compensation granted to Board directors for their duties

exercised within the Committees.

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2.5.2.6 Elements of compensation for the executive ocers pursuant to AMF recommendation No. 2009 - 16,

as amended on April15, 2015

Summary table of the compensation, options and shares granted to each executive ocer

2019 2018

(in €) Financial Year Financial Year

Ms.Anne-Marie Couderc, Chair of the Board of Directors

Compensation due in respect of the ﬁnancial year 200,000 150,042

(1)

Multi - year variable compensation granted during the ﬁnancial year N/A N/A

Stock options granted during the ﬁnancial year N/A N/A

Performance shares granted during the ﬁnancial year N/A N/A

Total 200,000 150,042

(1) Compensation in her capacity as a Board director for the period from January1to May15, 2018 amounting to €25,042 and paid in 2018 + ﬁxed compensation for

the period from May15to December31, 2018 in her capacity as Chair of the Board of Directors amounting to €125,000 and paid in 2018.

2019 2018

(in €) Financial Year Financial Year

Mr. Benjamin Smith, Chief Executive Ocer

Compensation due in respect of the ﬁnancial year 1,668,456 629,167

(1)

Multi - year variable compensation granted during the ﬁnancial year 2,000,000

(2)

333,000

(3)

Stock options granted during the ﬁnancial year N/A N/A

Performance shares granted during the ﬁnancial year N/A N/A

Total 3,668,456 962,167

(1) Fixed and variable compensation for the period from September17to December31, 2018.

(2) 220,506performance units valued at €2,000,000 and calculated relative to the AirFrance – KLM opening share price on August17, 2018, payable in 2022 subject to

performance and three - year presence conditions.

(3) 36,714performance units valued at €333,000 and calculated relative to the AirFrance – KLM opening share price on August17, 2018, payable in 2021 subject to a

three - year presence condition.

Summary table of the compensation, options and shares granted to each executive ocer

Ms.Anne-Marie Couderc, Chair of the Board of Directors 2019 Financial Year 2018 Financial Year

Amounts Amounts Amounts Amounts

granted paid granted paid

Fixed compensation 200,000 200,000 125,000

(1)

125,000

(1)

Variable compensation N/A N/A N/A N/A

Multi - year variable compensation N/A N/A N/A N/A

Extraordinary compensation N/A N/A N/A N/A

Compensation granted in respect of a Board director’s mandate N/A N/A 25,042

(2)

25,042

(2)

Beneﬁts in kind 15,985

(3)

15,985

(3)

N/A N/A

Total 215,985 215,985 150,042 150,042

(1) For the period from May15to December31, 2018.

(2) Ms.Anne-Marie Couderc received compensation in her capacity as a Board director for the period from January1to May15, 2018, paid in 2018.

(3) Ms. Anne-Marie Couderc beneﬁts from a chaueur - driven company car.

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Loans and guarantees granted to the company ocers

None.

Stock subscription or purchase options granted to the

company ocers of AirFrance – KLM

AirFrance – KLM did not put in place any stock subscription or

purchase option schemes to the beneﬁt of its company ocers

during the ﬁnancial year, nor during the preceding ﬁnancial years.

Stock subscription or purchase option schemes granted to

the compan y ocers of AirFrance – KLM and to the employees

of the AirFrance – KLM Group by the subsidiaries

Air France and KLM have not recently put in place any stock

subscription or purchase option schemes to the beneﬁt of their

employees. The last option plan implemented by KLM in 2007

became null and void in 2012.

Information on stock subscription or purchase option

schemes granted to the employees of the AirFrance – KLM

Group and exercised by them during the ﬁnancial year

None.

Performance shares granted to the company ocers

of AirFrance – KLM

Air France – KLM and its subsidiaries did not establish a

performance share scheme to the beneﬁt of the AirFrance – KLM

company ocers during the ﬁnancial year, nor during the

preceding ﬁnancial years.

Mr. Benjamin Smith, Chief Executive Ocer 2019 Financial Year 2018 Financial Year

Amounts Amounts Amounts Amounts

granted paid granted paid

Fixed compensation 900,000 900,000 262,500

(1)

262,500

(2)

Variable compensation 768,456 366,667

(1)

366,667

(1)

N/A

Long - term variable compensation 2,000,000

(3)

N/A 333,000

(1) (4)

N/A

Multi - year variable compensation N/A N/A N/A N/A

Extraordinary compensation N/A N/A N/A N/A

Compensation granted in respect of a Board director’s mandate N/A N/A N/A N/A

Beneﬁts in kind 313,201

(5)

313,201

(5)

N/A N/A

Total 3,981,657 1,579,868 962,167 262,500

(1) For the period from September17to December31, 2018.

(2) Payment of the ﬁxed compensation in respect of the 2018 ﬁnancial year for the period from September17, 2018 to December31, 2018.

(3) 220,506performance units valued at €2,000,000 and calculated relative to the AirFrance – KLM opening share price on August17, 2018, payable in 2022 subject to

performance and three - year presence conditions.

(4) 36,714performance units valued at €333,000 and calculated relative to the AirFrance – KLM opening share price on August17, 2018, payable in 2021 subject to a

three - year presence condition.

(5) Mr. Benjamin Smith beneﬁts from a chaueur- driven company car, a supplementary health and disability scheme beneﬁting all the Group’s personnel. Given his

relocation to France, he also beneﬁts from an accommodation allowance, free airline tickets, school fees and advisory fees.

Summary table of the situation of the executive ocers

Indemnities or

beneﬁts due or

Supplementary potentially due on Indemnity

Employment pension scheme a cessation or relating to a

contract (see above) change of function non - compete claue

Executive directors Yes No Yes No Yes No Yes No

Ms.Anne-Marie Couderc,

Chair of the Board of Directors

Initiation of mandate: May15, 2018 X X X X

Mr. Benjamin Smith, Chief Executive Ocer

Initiation of mandate: September17, 2018 X X X X

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2.5.3 Compensation policy

for the company ocers

in respect of 2020

This section has been realized pursuant to Articles L.225 - 37 - 2

and R. 225 - 29 - 1 of the Code de Commerce and shows the

elements composing the compensation policy for the company

ocers in respect of 2020.

As recommended by the Remuneration Committee, the Board of

Directors took into account the vote of the Shareholders’ Meeting

of May28, 2019 on the compensation for the executive ocers

in respect of the 2018 ﬁnancial year to determine the

compensation policy for the company ocers in respect of 2020.

Established by the Board of Directors, as recommended by the

Remuneration Committee and consistent with the provisions of

the AFEP-MEDEF Code, the compensation policy for the

company ocers of AirFrance – KLM in respect of 2020 is:

— aligned with the company’s interests in that it enables qualiﬁed

company ocers to be attracted and retained while being

adapted to the responsibilities of the beneﬁciary and

consistent with the practices in comparable companies;

— linked to its commercial strategy in that it is composed, ﬁrstly,

of a long - term variable portion giving the executive directors

an interest in the company’s results and adapted as a function

of the strategic priorities; and

— contributes to the company’s long - term sustainability in that

it is always aligned with the interests of shareholders.

This policy is subject to an annual review by the Remuneration

Committee. The work of the Remuneration Committee takes into

account the examination of benchmarking studies carried out

with the help of external consultants to compare this policy with

the practices in comparable companies. The Committee also

ensures that the compensation policy is aligned with the

company’s strategy. On the basis of this work, the Committee

formulates recommendations for the Board which then sets the

compensation policy on an annual basis. The Remuneration

Committee also formulates recommendations for the Board

regarding its implementation.

As recommended by the Remuneration Committee, during the

establishment of the compensation policy for company ocers,

the Board of Directors takes into account the remuneration and

employment conditions of AirFrance – KLM’s employees. As for

all the employees of AirFrance – KLM, the Board of Directors

ensures the implementation of a fair, simple, transparent and

consistent compensation policy. The Board of Directors takes

particular care that, at their individual level, all the employees and

company ocers have the material resources required for the

fulﬁlment of their respective duties.

Were a new Chair of the Board of Directors or a new Chief

Executive Ocer to be appointed, the elements of compensation

foreseen in the compensation policy for company ocers would

also apply to them. As recommended by the Remuneration

Committee, the Board of Directors will then determine, while

adapting them to the situation of the interested parties, the

targets, levels of performance, parameters, structure and maximum

percentages relative to their annual ﬁxed compensation which may

not be higher than those approved by the Shareholders’ Meeting.

The 2020 compensation policy for the company ocers outlines

all the components of the ﬁxed and variable compensation for

Board directors (Section 2.5.1.2 hereinafter); the Chair of the

Board of Directors (section2.5.3.1a. hereinafter); and the Chief

Executive Ocer (Section2.5.3.1b. hereinafter), and explains the

decision - making process for its establishment, review and

implementation.

This 2020 compensation policy for the company ocers will the

subject of a draft resolution submitted to the Shareholders’

Meeting of May26, 2020 under the conditions foreseen by Article

L. 225 - 98 of the Code de Commerce and on any material

amendment to the compensation policy.

2.5.3.1 Compensation for the Board directors

in respect of 2020

Subject to approval of the 2020 compensation policy for company

ocers by the Shareholders’ Meeting of May 26, 2020, the

AirFrance – KLM Board of Directors will receive, in respect of their

Board directors’ mandates, compensation (formerly directors’

fees) amounting to a maximum which was set at €950,000 for

the entire Board of Directors.

The compensation for Board directors will be composed of a

ﬁxed portion and a variable portion linked to the attendance of

the Board directors, whose modalities for distribution and

granting are set by the Board of Directors, as proposed by the

Remuneration Committee.

These allocation rules have been unchanged since the Board of

Directors’ resolution of February19, 2014, and are as follows:

— €15,000 for the ﬁxed portion;

— €25,000 for the variable portion, mainly based on attendance

at meetings of the Board of Directors and at Shareholders’

Meetings; and

— a sum of additional compensation is also granted to

non - resident Board directors (€7,000).

At its meeting of December11, 2019, the Board also resolved to

introduce a variable element of compensation allocated to the

Board directors for their duties within the Committees:

— for the Audit Committee:

– the Chair will receive €4,500 as a ﬁxed portion and €7,500

as a variable portion based on attendance at Committee

meetings, and

– the members will receive €3,000 as a ﬁxed portion and

€5,000 as a variable portion based on attendance at

Committee meetings; and

– for the other Committees:

– the Chair will receive €3,000 as a ﬁxed portion and €4,500

as a variable portion based on attendance at Committee

meetings, and

– the members will receive €2,000 as a ﬁxed portion and

€3,000 as a variable portion based on attendance at

Committee meetings.

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Note that, relative to the allocation policy voted in 2014, the

introduction of the variable portion for duties exercised within

the Committees (i) does not change the total budget granted for

the duties exercised within the Committees as either member or

Chair, and (ii) has been set based on the same proportions as the

variable portion deﬁned for meetings of the Board of Directors.

For Board directors leaving or joining the Board during the

ﬁnancial year: their amount of compensation is calculated pro

rata temporis based on the number of Board of Directors,

Committee and Shareholders’ Meetings held during the period

the Board director was in function.

In respect of the aforementioned allocation, all the Board

directors, with the exception of the Chair of the Board of

Directors and the Chief Executive Ocer, will receive an amount

of compensation in line with the allocation modalities set by the

Board of Directors.

Note also that, in the event of a high number of extraordinary

meetings of the Board of Directors, the Board of Directors may

decide on an additional extraordinary distribution, within the

limits of the budget allocated by the Shareholders’ Meeting. The

additional amount will be calculated pro rata temporis based on

the attendance rates of individual Board directors at these

extraordinary meetings.

The Board directors (non - executive directors) may not beneﬁt

from:

— a long - term incentive plan or speciﬁc long - term incentive plan;

— beneﬁts in kind which are not linked to their duties;

— an employment contract;

— a non - compete indemnity;

— an award of stock - options or bonus shares.

— Modalities for the granting and payment

of the compensation (formerly directors’ fees)

to representatives of the State and Board directors

appointed as proposed by the French State

The allocation rules for compensation paid to the Board directors

outlined above are applicable to the State representatives and

Board directors appointed as proposed by the French State.

Pursuant to Ordinance No. 2014 - 948 of August20, 2014 and

Article 1 of the ministerial order of December 18, 2014, as

amended by the ministerial order of January 5, 2018, the

following rules apply:

— for Board directors appointed directly by the French State,

100% of the compensation is paid to the State (Art. 5of the

Ordinance);

— for Board directors appointed by the Shareholders’ Meeting

as proposed by the French State (Art. 6of the Ordinance),

there are two dierent cases:

– for public ocials of the French State, 100% of the

compensation is paid to the State,

– for those not acting in the capacity of public ocials, the

payment of the compensation must be shared as follows:

- 15% paid to the State, and

- 85% paid directly to the relevant Board director (with the

application of the social and ﬁscal charges).

— Commitment of the members of the Board

of Directors of AirFrance – KLM

On April 3, 2020, the members of the AirFrance – KLM

Board of Directors decided to reduce their compensation

paid in respect of 2020 by 25%, pro rata temporis for

periods of partial activity applied to all employees.

2.5.3.2 Compensation of the executive ocers

in respect of 2020

As recommended by the Remuneration Committee, the

compensation packages of the Chair of the Board of Directors

and of the Chief Executive Ocer are set by the Board of

Directors, pursuant to the provisions of the AFEP-MEDEF Code.

Pursuant to the Internal Rules, as recommended by the

Remuneration Committee, the Board of Directors also approves

the compensation of the Chief Executive Ocers of the principal

subsidiaries (Air France and KLM). Furthermore, the Remuneration

Committee makes a recommendation to the Chief Executive

Ocer regarding the compensation of the Group’s Chief

Financial Ocer and reviews the compensation of the members

of the KLM Managing Board.

On an annual basis, the Remuneration Committee formulates and

reviews these compensation policies, in relation to the performance

targets. The annual variable portion of the compensation for the

three Chief Executive Ocers (AirFrance – KLM, Air France and

KLM) is thus subject to the achievement of performance criteria:

— quantitative ﬁnancial criteria;

— qualitative criteria relating to the improved performance of

the company and the implementation of its strategy;

— performance relative to the principal competitors.

These compensation policies establish the principles and criteria

for determining, allocating and granting the ﬁxed, variable and

extraordinary components of the total compensation and beneﬁts

of any kind awarded, ﬁrstly, to the Chair of the Board of Directors

and, secondly, to the Chief Executive Ocer, as well as their relative

magnitude. All of these elements are detailed in this section in

points a. relating to the mandate of the Chair of the Board of

Directors and b. relating to the mandate of the Chief Executive

Ocer, pursuant to the provisions of Articles L.225 - 37 - 2 and

R.225 - 29 - 1of the Code de Commerce. Following consultation

with the Remuneration Committee, the Board of Directors will be

able to derogate, on a temporary basis, from these compensation

policies in the event of exceptional circumstances and insofar as

the changes are aligned with the company’s interests and required

to guarantee the Group’s sustainability or viability. The elements

of compensation which may be derogated and the events giving

rise to the use of this derogation are outlined in this section under

points a. relating to the mandate of the Chair of the Board of

Directors and b. relating to the mandate of the Chief Executive

Ocer, pursuant to the provisions of Articles L.225–37–2 and

R.225–29–1of the Code de Commerce.

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Note that, given the adoption of the new Group governance over

the course of 2018, and in view of the proﬁle and international

experience of Mr. Benjamin Smith, Chief Executive Ocer of

AirFrance – KLM from September17, 2018, the AirFrance – KLM

Board of Directors considered it necessary to modify the

framework for the compensation of the Group’s Chief Executive

Ocer which had been approved by the Shareholders’ Meeting

of May15, 2018 and which had de facto become inapplicable.

Within this context, the Board of Directors reviewed the

compensation practices for similar functions at competitor airline

companies internationally and took into account the compensation

paid to Mr. Benjamin Smith in respect of his duties at Air Canada,

as well as his residency of Canada which required him to relocate

to France.

Note that, to determine the elements of compensation for the

Chief Executive Ocer, the AirFrance – KLM Board of Directors

referred to a sample of compensation in place in comparable

international airline groups.

The structure of the compensation set by the Board of Directors

in August2018 remained unchanged for the 2019 ﬁnancial year.

It is also within this framework that the compensation policy was

set for 2020.

a. Compensation of the Chair of the Board of Directors

During its meeting of February19, 2020, as proposed by the

Remuneration Committee, the Board of Directors set the structure

of the compensation attributable to the Chair of the AirFrance – KLM

Board of Directors in respect of the 2020 ﬁnancial year.

Following consultation with the Remuneration Committee, the

Board of Directors will be able to derogate, on a temporary basis,

from the compensation policy for the Chair of the Board of Directors

in the event of exceptional circumstances and insofar as the

changes are aligned with the company’s interests and required

to guarantee the Group’s sustainability or viability. The elements

of compensation to which the derogation may apply are the

annual ﬁxed and variable compensation and the derogations may

consist of an increase or decrease to the relevant compensation.

The events potentially giving rise to the use of this derogation

from the compensation policy shall include, but not be limited to,

a major change in strategy or a public health crisis.

— Annual compensation (ﬁxed and variable)

Description of the annual ﬁxed and variable elements

As recommended by the Remuneration Committee, during its

meeting of February19, 2020 the Board of Directors decided to

increase the annual gross ﬁxed compensation of the Chair, in

respect of her duties, to €220,000.

The Chair of the Board of Directors will not beneﬁt from variable

or multi - year compensation.

Commitment of the Chair of the AirFrance – KLM Board

of Directors

(i) During the meeting of the Board of Directors of March19,

2020, the Chair informed the Board of her decision to waive

the application, in respect of the 2020 ﬁnancial year, of her

new annual ﬁxed compensation set by the Board of Directors

on February19, 2020. Her annual ﬁxed compensation will

thus be €200,000 in respect of her duties for 2020;

(ii) The Chair informed the Board of Directors of her decision

to subject her ﬁxed compensation paid in 2020 to the same

salary terms and conditions as those that will be applied to

all Air France and Air France – KLM SA employees (in

particular to reduce the payment pro rata temporis for

periods of partial employment applied to all employees).

— Annual extraordinary compensation

The Chair of the Board of Directors will not beneﬁt from annual

extraordinary compensation.

— Long - term incentive plan or speciﬁc long - term incentive plan

The Chair of the Board of Directors will not beneﬁt from a

long - term incentive plan or a speciﬁc long - term incentive plan.

— Compensation in the capacity of Board director

The Chair of the Board of Directors will not receive compensation

in respect of her Board director duties.

— Severance pay

The Chair of the Board of Directors will not beneﬁt from

severance pay.

— Beneﬁts in kind

The Chair of the Board of Directors will dispose of material

resources that cannot, in practice, be separated from the

performance of her duties.

— Other

The Chair of the Board of Directors will not beneﬁt from an

employment contract, nor from a top - up pension plan,

non - compete indemnity, stock options or bonus shares.

b. 2020 compensation policy for the Chief Executive Ocer

— Introductory remarks

As recommended by the Remuneration Committee, during its

meeting of February19, 2020, the Board of Directors decided

to maintain the 2019 compensation structure for the 2020

ﬁnancial year.

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— Annual compensation (ﬁxed and variable)

Description of the annual ﬁxed and variable elements

The Chief Executive Ocer will beneﬁt from annual gross ﬁxed

compensation of €900,000 and annual gross variable compensation

potentially reaching between 0% and 122% of the annual gross

ﬁxed compensation on partial achievement of the targets

(calculated on a linear basis), potentially rising to 122% of the

annual gross ﬁxed compensation on achievement of the targets,

and potentially reaching a maximum of 150% should the targets

be exceeded (calculated on a linear basis). Note that the structure

of the annual compensation is unchanged relative to 2019.

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It had been expected to deﬁne the performance criteria linked to

the annual variable compensation, consistent with the priorities

and targets deﬁned in the Group’s strategic plan unveiled in

November2019. These performance criteria were relative to the

Group’s ﬁnancial objectives and to a series of qualitative

objectives, deﬁned as follows:

— 60% linked to the Group’s ﬁnancial objectives, evaluating the

performance based on the three ﬁnancial indicators forming

the pillars of AirFrance – KLM’s strategic plan:

(i) annual COI performance of the AirFrance – KLM Group,

(ii) reduction in the AirFrance – KLM Group’s Net Debt,

(iii)reduction in the AirFrance – KLM Group’s Unit Costs;

— 40% linked to qualitative objectives, evaluating as in previous

years the performance based on four criteria that remained to

be ﬁnalized.

Following consultation with the Remuneration Committee, the

Board of Directors will be able to derogate, on a temporary basis,

from the compensation policy for the Chief Executive Ocer in

the event of exceptional circumstances and insofar as the changes

are aligned with the company’s interests and required to guarantee

the Group’s sustainability or viability. The elements of compensation

to which the derogation may apply are the annual variable

compensation and the derogations may consist of a redeﬁnition

of the performance criteria. The events potentially giving rise to

the use of this derogation from the compensation policy shall

include, but not be limited to, a major change in strategy or a

public health crisis.

During its meeting of March19, 2020, in view of the escalation of

the public health crisis linked to COVID-19, the Board of Directors

ﬁnally decided to revise the performance criteria for the 2020

annual variable portion to align them with the Group’s short - term

priorities and to take into account the management of the crisis,

the cash issues faced by the Group and the challenges linked

to the exit from crisis, and the deﬁnition and execution of a

recovery plan.

In view of the magnitude of this crisis it is currently dicult to

anticipate a recovery date. It can be stipulated here that the

return to the prior compensation policy or a new compensation

policy will be discussed next year within the framework of the

approval of the compensation policy for 2021.

As a result of the decisions taken by the Board of Directors at its

meetings of February 19, March 19 and April 3, 2020, the

compensation structure, comprising the elements of ﬁxed,

variable and long - term compensation and beneﬁts of any kind

for the Chief Executive Ocer of AirFrance – KLM in respect of

the 2020 ﬁnancial year, is set forth below.

Compensation in cash

(75%)

(1) Amounting to €900,000.

(2) 122% of the ﬁxed compensation on achievement of the targets, potentially rising to 150% should the targets be exceeded.

(3) Two long-term compensation plans conferring the right to the granting of performance units, each in the amount of €1 million.

(4) The speciﬁc long-term incentive plan will be paid in Air France - KLM shares.

Long-term

compensation subject

to performance conditions

(3)

(50%)

Compensation in shares

(4)

(25%)

Annual variable

compensation subject

to performance conditions

(2)

(27.5%)

Fixed compensation

(1)

(22.5%)

Structure of the compensation for the Chief Executive Ocer of Air France - KLM in respect of the 2020 ﬁnancial year

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(1) For conﬁdentiality reasons, the amount set in the 2020 budget is not disclosed.

(2) EPS = Internal indicator of employee satisfaction.

(3) NPS = Indicator of customer satisfaction.

(4) The targets for the EPS and NPS indicators are set internally each year by company, taking into account the histories and performance plans of these

companies.

Financial performance

AirFrance – KLM Group cash

(1)

70% The evaluation will consider the eective ﬁnancial situation

at the end of the ﬁnancial year and the ecacy of the

action plans deployed to preserve the AirFrance – KLM

Group’s cash (adjustment of operations, cost reduction,

control over and cancellation of capex, obtaining of support

and ﬁnancing, recovery plan)

Individual performance

Leadership demonstrated in terms of

managing the crisis, the exit from crisis,

and the deﬁnition of a recovery plan

30% The evaluation will consider the actions and results at these

three key moments, in the light notably of the following

fundamental priorities:

1. Social climate and employee engagement (maintained

employee trust and engagement as demonstrated by an

Employee Promoter Score

(2) (4)

remaining in line with its

pre - crisis level; (level of communication; stability of the

social dialogue; management of employment)

2. Customer satisfaction (level of communication and

commercial and operational oers proposed to support

customers; maintained customer trust demonstrated by

the level of the Net Promoter Score

(3) (4)

maintained in line

with its pre - crisis level; trend in the number of passengers

during the recovery of the activities in terms of

performance versus the European competitors)

3. Group cohesion (reinforced cohesion and coordination

between AirFrance – KLM, Air France and KLM within the

framework of strategic decision - making, the preservation

of the interests of the Group and the airlines, and internal

and external communication).

Breakdown of the variable portion

Weight of the Elements

performance criteria of evaluation

In view of the exceptional nature of the COVID-19public

health crisis which is seriously impacting AirFrance – KLM,

in agreement with the AirFrance – KLM management, the

Board of Directors decided to undertake an in - depth

review of the performance criteria for the annual variable

compensation and of the evaluation conditions to be

retained for the 2020 ﬁnancial year.

Having consulted with the Remuneration Committee, during

its meetings of March19 and April3, 2020 the Board of

Directors decided that the achievement of the annual variable

compensation criteria will be evaluated in accordance

with the evaluation of the Group’s ﬁnancial performance

in the light of the management and sustainability of the

cash (cash for 70% of the evaluation), and the individual

performance demonstrated in terms of managing the

crisis, the exit from crisis and the deﬁnition of a strategic

recovery plan (cash for 30% of the evaluation).

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Target grant

in 2020

Assessment of performance conditions over 3 years

Payment in 2023

Subject to the achievement of

performance criteria over

the 3 years and continuous attendance

Payment in cash

(Target grant x achievement

of performance conditions)

Grant of

performance units

in 2020

Grant of

performance units

in 2020

Evaluation of the

Financial and DJSI

performance

criteria over the

ﬁnancial year

Evaluation of the

Financial and CSR

performance

criteria over the

ﬁnancial year

Evaluation of the

Financial and DJSI

performance

criteria over the

ﬁnancial year

Evaluation of the

Financial and CSR

performance

criteria over the

ﬁnancial year

Evaluation of the

Financial and DJSI

performance

criteria over the

ﬁnancial year

Evaluation of the

Financial and CSR

performance

criteria over the

ﬁnancial year

Payment in Air France – KLM shares

(Target grant x achievement

of performance conditions)

2023202220212020

Long-term

incentive plan

“Phantom Shares”

Speciﬁc Long-term

incentive plan

Long-term compensation scheme for Air France - KLM

Upon recommendation of the Remuneration Committee,

the Board of Directors will be able to use its judgement

when determining the variable compensation, if any, of the

Chief Executive Ocer. This provision will enable the

Board to determine the amount composing the variable

compensation for the CEO in line with i) the performance

realized by the Group and the Group’s ﬁnancial situation

at the end of the ﬁnancial year, (ii) the compensation policy

applied to the Group’s employees, (iii) the preservation of

the Group’s interests and those of its shareholders, (iv) any

decisions taken by the governments.

Commitment of the Chief Executive Ocer

of AirFrance – KLM

The Chief Executive Ocer informed the Board of Directors

of his decision to subject his annual ﬁxed and variable

remuneration, paid during the year 2020, to the same

salary terms and conditions as those which will be applied

to all Air France and AirFrance – KLM SA employees (in

particular to reduce the payment pro rata temporis for

periods of partial activity applied to all employees).

— Long - term incentive plan

The compensation policy for the Chief Executive Ocer is primarily

composed of elements of long - term variable compensation so

as to align this compensation with the Group’s performance on

the basis of a long - term perspective, thereby contributing to the

Company’s strategy and sustainability.

These elements of long - term compensation correspond to two

long - term incentive plans whose performance is evaluated over

a three - year period subject to the realization of demanding

performance conditions and covering the interests of the Group,

its employees and its shareholders. Note that the vesting and

payment of these elements of compensation will only take place

at the end of this period.

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In this year of exceptional crisis linked to COVID-19, AirFrance – KLM’s

long - term sustainability and performance together with the

long - term interests of employees and shareholders remain the

common goal.

Given that these elements of compensation are long - term

commitments and it being stipulated that payment is made only

at the end of the three - year vesting period, and to be able to

evaluate over the long term the ecacy of the exit from crisis

and the recovery plan, as recommended by the Remuneration

Committee, during its meetings of February19 and April3, 2020

the Board of Directors decided to maintain, for the 2020 ﬁnancial

year, the long - term compensation policy as deﬁned for the 2019

ﬁnancial year.

The performance criteria and targets to be achieved thus remain

unchanged, in continuation of the goals and the mission stated

prior to the COVID-19 crisis, and the elements of long - term

compensation remain composed as follows:

a) Long - term incentive plan

On an annual basis, the Chief Executive Ocer is granted

performance units equivalent to an amount of €1million, payable

at the end of a three - year period following the grant, subject to

the achievement of performance conditions, evaluated over the

whole of this period. The vesting of the performance units will be

subject to a three - year presence condition, except in the event

of death or disability (without performance conditions), or in

some cases of forced termination (the performance conditions

remaining applicable).

The number of performance units granted in 2020 will be

calculated relative to the AirFrance – KLM opening share price on

April1, 2020. The payment of the performance units from 2023

(subject to performance and presence conditions) will be

calculated relative to the share price following the announcement

of the results for the last ﬁnancial year.

b) Speciﬁc long - term incentive plan

The Group intends to launch targeted strategic actions aimed at

improving the medium and long - term operational performance,

into line with the best international airlines, while taking into

account the environmental and societal issues linked to its

growth. Accordingly, the speciﬁc long - term incentive plan

applicable to the Chief Executive Ocer and a number of the

Group’s other managers and employees has been established

pursuant to the resolutions of the Board of Directors of August16,

2018 and March12, 2019.

This plan provides for the Chief Executive Ocer to be granted,

annually in 2019, 2020 and 2021, performance units equivalent to

an amount of €1 million, payable in shares at the end of a

three - year vesting period following the grant, subject to the

achievement of speciﬁc performance conditions, evaluated over

the whole of this period. Note that one performance unit will

confer the right to one AirFrance – KLM share.

Demanding performance conditions evaluated over a three - year period were set by the Board of Directors during its meeting of

April3, 2020:

KPI Performance Vesting of % of the grant

1. Relative share performance for AirFrance – KLM >120 120%

versus the shares of companies in the sector (30%)

(1)

Between 80 and 100 Between 80% and 120%

<80 0%

2. AirFrance – KLM realized ROCE versus the budget (40%)

(2)

>120 120%

Between 80 and 100 Between 80% and 100%

<80 0%

3. Dow Jones Sustainability Index (30%)

(3)

Position 1 120%

Position 2 100%

Position 3 80%

Position 4 and lower 0%

(1) Deﬁned as the performance of the AirFrance – KLM share in any ﬁnancial year relative to the performance of the sector: Lufthansa (40%), IAG (35%), Ryanair (12.5%),

easyJet (12.5%).

(2) Calculation is based on absolute ROCE.

(3) The results of the Dow Jones Sustainability Index (DJSI) are published in September of each year.

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The performance conditions that were set by the Board of Directors during its meetings of March19 and April3, 2020 are as follows:

Performance Vesting of a % of the grant

1. AF-KLM relative COI (80%) reduction in the performance

gap with IAG and Lufthansa Group over three years (2020,

2021, 2022)

Performance of AirFrance – KLM >

that of Lufthansa and IAG

Reduction in the gap with

Lufthansa and IAG

Reduction in the gap with

Lufthansa and IAG

Increase in the gap with

Lufthansa and IAG

Max (100%)

100% to 50%

(proportionate)

50% to 0%

(proportionate)

0%

2. CSR performance targets (20%) See the evaluation rules below

The CSR performance criteria within the framework of the speciﬁc long - term incentive plan are as follows:

indicators Targets

Environment 1 ReduceCO

2

emissions

(gCO

2

/passenger/km, including the

market - based measures)

Long - term target of -20% reduction

over the 2011 - 2020 period:

to be evaluated yearly and reported in the CSR

report/verify yearly if on track to reach this target

Environment 2 Improve the relationship and dialogue with

the hub environment (notably on noise)

Keep the noise footprint at the same level despite

an increase in the number of movements: Group

noise footprint reported annually

Social 3 Improve the Employee Promoter Score

(EPS)

Improvement in the EPS: monitored for

AirFrance – KLM, Air France and KLM.

Social 4 Increase diversity Increase the percentage of female managers

Societal 5 Increase sustainable management of the

supply chain

Track the risk management indicators for suppliers

in compliance with the due diligence law

(Human Rights and Fundamental Liberties,

Health, Environment)

Societal 6 Sustainable initiatives at destinations Develop environmental and societal initiatives

and sponsorship

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Compensation of the company ocers

2

The payment of the performance units will also be subject to a

three - year presence condition, except in the event of death or

disability (without performance conditions) or in certain cases of

forced termination (the performance conditions remaining

applicable).

The number of performance units granted in 2020 will be calculated

relative to the AirFrance – KLM opening share price on April1, 2020.

Payment of these performance units (subject to performance and

presence conditions) will be made in AirFrance – KLM shares (one

performance unit conferring the right to one share).

Note that Mr. Smith does not use and has given an undertaking

that he will not use risk hedging transactions within the framework

of this plan until the payment of the performance units.

Severance payment and beneﬁts in kind

The Chief Executive Ocer will continue to beneﬁt from the

severance payment granted by the Board of Directors in its

meeting of August16, 2018, as approved by the Shareholders’

Meeting of May28, 2019.

During its meeting of August16, 2018, the Board of Directors

authorized the granting to the Chief Executive Ocer of a

severance payment in some instances of forced termination

(notably dismissal, non - renewal of his mandate as Chief Executive

Ocer or linked to a change of control). Note that the instance

of forced termination enabling the implementation of this

severance pay excludes any situation of serious misconduct on

the part of the Chief Executive Ocer.

In accordance with the recommendations of the AFEP-MEDEF

Code, the basis of the severance payment is equivalent to two

years of his annual ﬁxed and variable compensation (based, as

applicable, on the target variable compensation in the event of a

termination during the ﬁrst 24months).

A coecient (between 0 and 100% inclusive) will be applied to

the basis of the severance payment based on the performance

of the interested party with reference to the level of the

achievement of the performance criteria relating to the annual

variable component of his compensation over the two last ﬁnancial

years of his mandate (or since his appointment, in the event of

termination during the ﬁrst 24months). The Board will be responsible

for evaluating the achievement of these performance criteria.

The Chief Executive Ocer will also beneﬁt from the usual beneﬁts

in kind (company car with chaueur, supplementary pension

scheme beneﬁting all Group employees, supplementary health

insurance and disability coverage, provision of free airline tickets,

Group CEO civil liability insurance–D&O) and beneﬁts consistent

with policies applied within the Group for senior manager

expatriation and mobility.

Other

The Chief Executive Ocer will not beneﬁt from an employment

contract, nor from a top - up pension scheme, non - compete

indemnity, stock options or bonus shares.

These criteria are evaluated in the following manner:

Criterion Performance Vesting as a % of grant

KPIs with the same weight Signiﬁcantly above target Max (100%)

Target achieved 50%

Signiﬁcantly below target 0%

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The CEO Committee is led by Mr. Benjamin Smith, Chief

Executive Ocer of Air France – KLM, and has three other

members reporting directly to Mr. Smith:

— Ms.Anne Rigail, Chief Executive Ocer of Air France;

— Mr. Pieter Elbers, President and Chief Executive Ocer of KLM;

and

— Mr. Frédéric Gagey, Chief Financial Ocer of AirFrance – KLM.

At its meeting of February19, 2019, the AirFrance – KLM Board

of Directors appointed Ms.Anne Rigail and Mr. Pieter Elbers as

Deputy Chief Executive Ocers of the Group.

It is responsible for determining the strategic direction of all the

Group's airlines and business units.

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2 CEO Committee

2.6 CEO COMMITTEE

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Group Executive Committee

2

2.7 GROUP EXECUTIVE COMMITTEE

Chaired by the Chief Executive Ocer of AirFrance – KLM, the Group Executive Committee is composed of twelve members and

secretary of the Executive Committee:

— the Chief Executive Ocer of AirFrance – KLM, the President and Chief Executive Ocer of KLM and the Chief Executive Ocer

of Air France; and

— the nine heads of the Group’s functions.

Relevant professional experience

Age at

Members at December31, 2019 December31, 2019 Sector Experience

Benjamin Smith

Chief Executive Ocer, AirFrance – KLM 48years Air Transport 29years

Pieter Elbers

President and Chief Executive Ocer, KLM 49years Air Transport 27years

Anne Rigail

Chief Executive Ocer, Air France 50years Air Transport 28years

Frédéric Gagey Public service 7years

Chief Financial Ocer, AirFrance – KLM 63years Air Transport 26years

Patrick Alexandre

Executive Vice-President Commercial–Sales & Alliances, AirFrance – KLM 64years Air Transport 38years

Pieter Bootsma

Executive Vice-President Commercial–Strategy, AirFrance – KLM 50years Air Transport 24years

Anne Brachet

Executive Vice-President, Engineering & Maintenance, AirFrance – KLM 56years Air Transport 24years

Angus Clarke

Executive Vice-President, Strategy, AirFrance – KLM 45years Air Transport 18years

Janet Dekker

Executive Vice-President Human Resources, AirFrance – KLM 60years Human Resources 30years

Marcel de Nooijer

(1)

Executive Vice-President Cargo, AirFrance – KLM 51years Air Transport 24years

Jean-Christophe Lalanne Industry. IT Services 22years

Executive Vice-President Information Technology, AirFrance – KLM 58years Air Transport 15years

Anne-Sophie Le Lay 48years Attorney 6years

Corporate Secretary of AirFrance – KLM and Air France Law/Governance, 18years

Automotive Industry

Air Transport 2years

(1) On January1, 2020, Adriaan Den Heijer replaced Marcel de Nooijer as Executive Vice-President Cargo, AirFrance – KLM.

Secretarial services to the Executive Committee are provided by the AirFrance – KLM Chief Executive Ocer’s Chief of Sta.

Information on the way in which the company seeks a balanced representation of men and women within the

AirFrance – KLM Executive Committee

This information is provided in Section4.2.4Fostering diversity and combating discrimination in this Universal Registration Document.

Information on the results for diversity within the top 10% of the positions with the highest level of

responsibility.

This information is provided in Section4.2Human resources in this Universal Registration Document.

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2.8 SHARE CAPITAL AND SHAREHOLDER

STRUCTURE

2.8.1 Share capital

At December31, 2019, the AirFrance – KLM share capital comprised 428,634,035fully paid - up shares with a nominal value of one

euro, held in registered or bearer form according to shareholder preference. Until April2, 2016, each share had one voting right

attached. In application of the Florange Act

(1)

as from April 3, 2016, in the absence of a provision to the contrary in the

AirFrance – KLM Articles of Incorporation, all fully paid - up shares held in registered form in the name of the same shareholder for at

least two years automatically beneﬁt from a double voting right. There are no other speciﬁc rights attached to the shares.

Changes in the share capital over the last three ﬁnancial years

The change in the share capital over the last three ﬁnancial years is as follows:

Financial year ended Total capital (in €) Number of shares

December31, 2017 428,634,035 428,634,035

December31, 2018 428,634,035 428,634,035

December31, 2019 428,634,035 428,634,035

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2 Share capital and shareholder structure

(1) Furthermore, there are no securities not representing the share capital. Article 7of Act No.2014 - 384of March29, 2014 for the Reconquest of the Real Economy.

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Share capital and shareholder structure

2

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 21

st

resolutions,

usable outside the context of a

public tender oer]No.28

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 21

st

resolutions,

usable outside the context of a

public tender oer]

Capital increase (within the context of a public tender oer) without

preferential subscription rights for shareholders but with an

optional priority subscription period (authorization limited to the

Company or one of its subsidiaries’ issuances of securities giving

access to capital securities to be issued in the future and issuances

of shares within the framework of public exchange oers)

€22.5million in nominal (i.e. around

5.25% of the current share capital)

[charged against the cap amount

of the 19

th

and 20

th

resolutions,

usable outside the context of a

public tender oer]No.27

€22.5million in nominal (i.e. around

5.25% of the current share capital)

[charged against the cap amount

of the 19

th

and 20

th

resolutions,

usable outside the context of a

public tender oer]

Capital increase (within the context of a public tender oer)

without preferential subscription rights for shareholders

but with a mandatory priority subscription period

€75million in nominal (i.e. around

17.5% of the current share capital)

[charged against the cap amount

of the 19

th

resolution, usable outside

the context of a public tender oer]

Capital increase (within the context of a public tender oer)

maintaining preferential subscription rights for shareholdersNo.26

€150million in nominal (i.e. around

35% of the current share capital)

[charged against the cap amount

of the 19

th

resolution, usable outside

the context of a public tender oer]

Capital increase (outside the context of a public tender oer) by

capitalization of reserves, proﬁts, issuance premiums, or other

amounts eligible for capitalization

Capital increase (outside the context of a public tender oer) to

compensate contributions in kind granted to the Company

No.25

€30million in nominal

(i.e. around 7%

of the current share capital)No.24

15% of the initial issue (not to

exceed the cap amounts set under

resolutions 19, 20, 21 and 22)

Increase in the number of securities to be issued in the event of a

capital increase (outside the context of a public tender oer) with

or without preferential subscription rights (“greenshoe”)No.23

€30million in nominal

(i.e. around 7%

of the current share capital)

Capital increase (outside the context of a public tender oer)

through private placement with qualiﬁed investors/restricted

group of investorsNo.22

€30million in nominal

(i.e. around 7%

of the current share capital)

Capital increase (outside the context of a public tender oer)

without preferential subscription rights for shareholders but with

an optional priority subscription period (authorization limited to the

Company or one of its subsidiaries’ issuances of securities giving

access to capital securities to be issued in the future and issuances

of shares within the framework of public exchange oers)No.21

€45million in nominal

(i.e. around 10.5%

of the current share capital)

Capital increase (outside the context of a public tender oer)

without preferential subscription rights for shareholders but with a

mandatory priority subscription periodNo.20

€214million in nominal

(i.e. around 50%

of the current share capital)

€75million in nominal (i.e. around

17.5% of the current share capital)

[charged against the cap amount

of the 19

th

resolution, usable outside

the context of a public tender oer]

€150million in nominal (i.e. around

35% of the current share capital)

[charged against the cap amount

of the 19

th

resolution, usable outside

the context of a public tender oer]

€30million in nominal

(i.e. around 7%

of the current share capital)

15% of the initial issue (not to

exceed the cap amounts set under

resolutions 19, 20, 21 and 22)

€30million in nominal

(i.e. around 7%

of the current share capital)

€30million in nominal

(i.e. around 7%

of the current share capital)

€45million in nominal

(i.e. around 10.5%

of the current share capital)

€214million in nominal

(i.e. around 50%

of the current share capital)

Capital increase (outside the context of a public tender oer)

maintaining preferential subscription rights for shareholdersNo.19

The authorizations currently in force are summarized in the following table.

Maximum amount Balance available at

Resolution Delegation of issues in nominal December31, 2019

Authorizations granted by the Combined Ordinary and Extraordinary Shareholders Meeting of May28, 2019

Outside the context of a public tender oer

Within the context of a public tender oer

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Other authorizations in respect of the Ordinary and Extraordinary Shareholders’ Meeting of May28, 2019

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 24

th

resolutions,

usable outside the context of a

public tender oer]

Capital increase (within the context of a public tender oer) to

compensate contributions in kind granted to the CompanyNo.31

15% of the initial issue (charged

against the cap amounts set under

the resolutions 26. 27. 28. 29)

Increase in the number of securities to be issued in the event of a

capital increase (within the context of a public tender oer) with

or without preferential subscription rights (“greenshoe”)No.30

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 22

nd

resolutions,

usable outside the context of a

public tender oer]

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 24

th

resolutions,

usable outside the context of a

public tender oer]

€75million in nominal (i.e. around

17.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 25

th

resolutions,

usable outside the context of a

public tender oer]

Capital increase (within the context of a public tender oer) by

capitalization of reserves, proﬁts, issuance premiums, or other

amounts eligible for capitalizationNo.32

€75million in nominal (i.e. around

17.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 25

th

resolutions,

usable outside the context of a

public tender oer]

15% of the initial issue (charged

against the cap amounts set under

the resolutions 26. 27. 28. 29)

€15million in nominal (i.e. around

3.5% of the current share capital)

[charged against the cap amount

of the 19

th

and 22

nd

resolutions,

usable outside the context of a

public tender oer]

Capital increase (within the context of a public tender oer)

through private placement with qualiﬁed investors/restricted

group of investorsNo.29

10% of the share capital

(not to exceed the cap

amounts set under resolutions

20, 21, 22, 27, 28 and 29)

10% of the share capital

(not to exceed the cap

amounts set under resolutions

20, 21, 22, 27, 28 and 29)

Delegation of authority granted to the Board of Directors, for the

purpose of determining the issue price, within a limit not to exceed

10% of the share capital a year in the event of a capital increase

without shareholders’ preemptive subscription rightsNo.33

2% of the share capital at the

time of each issuance (not to

exceed 1% per year)

2% of the share capital

at the time of each issuance

(not to exceed 1% per year)

Allocation of free existing shares, subject to performance

conditions. to employees and company ocers of the Group

companies (excluding the Group’s company ocers)No.34

2% of the share capital at the time

of each issuance [not to exceed

the cap amount set under the

19

th

resolution] usable outside the

context of a public tender oer]

2% of the share capital at the time

of each issuance [not to exceed

the cap amount set under the

19

th

resolution] usable outside the

context of a public tender oer]

Capital increases reserved for members of a company or group

savings schemeNo.35

Maximum amount Balance available at

Resolution Delegation of issues in nominal December31, 2019

Share capital and shareholder structure

2

Corporate governance report

120 Air France -KLM — 2019 Universal Registration Document

A common sub - cap of €15million applies to resolutions 28to 31 of

the Combined Ordinary and Extraordinary Shareholders’ Meeting

of May28, 2019. A common sub - cap of €22.5million applies to

resolutions 27to 31of the Combined Ordinary and Extraordinary

Shareholders’ Meeting of May28, 2019. A common sub - cap of

€30million applies across resolutions 21to 24of the Combined

Ordinary and Extraordinary Shareholders’ Meeting of May28, 2018.

A common sub - cap of €45million applies across resolutions 20 to

24of the Combined Ordinary and Extraordinary Shareholders’

Meeting of May 28, 2019. A common sub - cap of €75 million

applies across resolutions 26to 32of the Combined Ordinary and

Extraordinary Shareholders’ Meeting of May28. 2019. Lastly, a

common cap amount of €214million applies across resolutions

19to 25of the Combined Ordinary and Extraordinary Shareholders’

Meeting of May28, 2019 and to resolution 35of the Combined

Ordinary and Extraordinary Shareholders’ Meeting of May28, 2019.

The maximum amount of all the aforementioned capital increases

is not autonomous and is charged against the cap amount set in

resolution 19 of the Combined Ordinary and Extraordinary

Shareholders’ Meeting of May28, 2019.

Amendment to AirFrance – KLM’s

Articles of Incorporation

The Extraordinary Shareholders’ Meeting, deliberating with a

majority of two - thirds of the votes held by the shareholders

present or represented, is the only entity authorized to amend

the Articles of Incorporation in all their provisions pursuant to

Article L.225 - 96of the Code de Commerce.

The Air France – KLM Articles of Incorporation can be

found on the website at http://www.airfranceklm.com

(Finance/Publications/Articles of Incorporation).

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2

1212019 Universal Registration Document — Air France -KLM

Modalities for shareholders wishing to participate

in the Shareholders’ Meeting

The modalities for shareholders wishing to participate in

Shareholders’ Meetings are those stipulated by the regulation in

force. They are set out in Article 30 of the Air France – KLM

Articles of Incorporation and the detailed conditions can be

found in the documentation made available to shareholders

ahead of the Shareholders’ Meeting.

2.8.2 Securities conferring

entitlement to shares

Bonds convertible and/or exchangeable

into new or existing shares 0.125% 2026

In March2019. AirFrance – KLM issued bonds convertible into new

shares and/or exchangeable for existing shares, maturing in 2026,

for an amount of €500 million, representing 27,901,785

underlying shares.

The nominal unit value of the bonds is €17.92. The bonds bear a

coupon of 0.125%, payable annually in arrears on March25of

each year.

2.8.3 Authorization to buy back

AirFrance – KLM’s

own shares

Every year, the Air France – KLM Board of Directors asks the

Shareholders’ Meeting for the authorization to buy back the

company’s own shares in the stock market, subject to a number

of conditions.

During the 2019 ﬁnancial year, the Group neither purchased nor

sold Air France – KLM shares within the framework of these

authorizations.

Within the framework of the collective labor agreement reached in

August2015 between KLM and the VNV pilots’ union, AirFrance – KLM

and KLM signed an agreement on December8, 2016 with the

VNV and an independent foundation established by the VNV

for KLM pilots. Under this agreement, and in consideration for

the gains resulting from the August 2015 agreement, on

December 12, 2016 KLM ﬁnanced the acquisition by the

foundation of three million AirFrance – KLM treasury shares at

the market price.

As of December31, 2019, AirFrance – KLM held 1,201,578of its

own shares, i.e. 0.28% of the share capital, of which

1,116,420shares held by KLM in respect of its various stock option

plans. The valuation of the portfolio stood at €11.9 million at

December31, 2019.

2.8.4 Reinforcement of the

AirFrance – KLM Group’s

strategic partnerships with

Delta Air Lines,Inc. and

China Eastern Airlines

During the 2019 ﬁnancial year, Air France – KLM continued to

reinforce its strategic partnerships with Delta Air Lines,Inc. (Delta)

and China Eastern Airlines (CEA), launched in 2017.

On July27, 2017, AirFrance – KLM announced, ﬁrstly, the planned

creation of a joint - venture between AirFrance – KLM, Delta Air

Lines,Inc. and Virgin Atlantic and, secondly, the intensiﬁcation of

its partnership with CEA. These two commercial alliances were

consolidated by equity links in 2017: Delta Air Lines, Inc. and

China Eastern each acquired equity interests in AirFrance – KLM

within the framework of reserved capital increases authorized by

the Combined Ordinary and Extraordinary Shareholders’ Meeting

of September 4, 2017 for a total of €751 million. In addition,

AirFrance – KLM announced its intention to acquire a 31% equity

interest in Virgin Atlantic, in which Delta has a 49% stake, for

around £220million.

Within this framework, on July27, 2017, AirFrance – KLM and CEA

on one hand, and AirFrance – KLM, Delta Air Lines,Inc. and Virgin

Atlantic on the other, signed partnership agreements aimed at

deﬁning the principles of their closer cooperation:

— on July27, 2017, AirFrance – KLM, Delta Air Lines,Inc. and

Virgin Atlantic signed Memoranda of Understanding laying the

foundations for a future combination of the existing joint - ventures

between AirFrance – KLM, Delta Air Lines,Inc. and Alitalia, and

between Delta Air Lines,Inc. and Virgin Atlantic, within a single

joint - venture. Within this framework, Air France – KLM was

expected to acquire a 31% equity interest in Virgin Atlantic,

Delta Air Lines,Inc. having held 49% of the latter since 2013,

with the historic shareholder Richard Branson retaining 20%.

These agreements foresaw speciﬁc conditions intended to

protect the interests of AirFrance – KLM in the event of any

deterioration in the joint - venture’s operating conditions linked

to the United Kingdom’s exit from the European Union;

— AirFrance – KLM and CEA also stepped up their commercial

cooperation and reinforced their partnership within the

framework of the existing joint - venture, through the signature

on July27, 2017, of a Marketing Agreement aimed at deﬁning

the principles of their closer cooperation.

Furthermore, to proceed with the capital increases reserved to

CEA and Delta Air Lines,Inc., on July27, 2017 China Eastern Airlines

and Delta Air Lines,Inc. signed two Subscription Agreements

with AirFrance – KLM, wherein both investors agreed to subscribe

to the new shares in the reserved capital increases and containing

the following commitments:

— lock - ups on the stakes wherein China Eastern Airlines and

Delta Air Lines,Inc. both undertake, during a ﬁve - year period

as of the settlement date (i.e. October3, 2017), not to oer,

sell, pledge or otherwise transfer or dispose of a number of

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37,527 shares in AirFrance – KLM (as this number shall be

adjusted for any share split or share consolidation of the

Company) without the prior written consent of AirFrance – KLM,

and subject to certain exceptions as set out in the Securities

Note for the transaction authorized under No.17 - 441dated

August17, 2017, section E.5;

— a standstill commitment wherein China Eastern Airlines and

Delta Air Lines,Inc. both undertake, during a ﬁve - year period

as of the settlement date (i.e. October3, 2017), not to acquire

or subscribe to any additional shares of the Company or other

equity securities conferring access to the AirFrance – KLM

share capital, directly or indirectly, which would have the

eect of increasing the CEA and Delta stakes to above 10% of

the AirFrance – KLM share capital, without the prior written

consent of AirFrance – KLM, except in the case of (a) any

person announcing their intention to launch a public oer (in

cash. shares or a combination of both) for the Company’s

shares, (b) the announcement by Air France – KLM or any

competent authority of an upcoming change of control for

Air France – KLM, it being speciﬁed that “control” shall be

deﬁned in accordance with Article L.233 - 3of the Code de

Commerce or (c) the replacement of at least the majority of

members of the Board of Directors, in the event this

replacement is not recommended by the Board of Directors;

— an approval clause wherein, for the duration of this Subscription

Agreement, China Eastern Airlines and Delta Air Lines,Inc.

undertake to obtain the formal approval of the Company’s

Board of Directors if they wish to sell their AirFrance – KLM

shares to another airline company. In addition, following the

expiry of the above - mentioned ﬁve - year lock - up undertaking,

in the event of a trade sale of AirFrance – KLM shares to a third

party via an over - the - counter transaction, both CEA and Delta

Air Lines,Inc. have undertaken to ﬁrst give AirFrance – KLM the

option of purchasing these shares, at the same pricing

conditions.

On October 3, 2017, Eastern Airlines Industry Investment

(Luxembourg) Company Limited, a wholly - owned subsidiary of

CEA Global Holdings (Hong Kong) Limited, and Delta Air

Lines,Inc. both subscribed in cash to capital increases without

shareholders’ preferential subscription rights, each for a total

(including issue premium) of €375,274,100, at a subscription price

of €10per share (including issue premium). The acquisition of

these shareholdings was accompanied by the appointment of

two directors to the Air France – KLM Board of Directors

designated, ﬁrstly, by China Eastern Airlines and, secondly, by

Delta Air Lines,Inc.

Lastly, on March14 and May15, 2018, within the framework of the

implementation of the future single joint - venture between

AirFrance – KLM, Delta Air Lines,Inc., and Virgin Atlantic, and

following authorization by the Air France – KLM Board of

Directors (see section2.3.1Activities and functioning of the Board

of Directors – Agreements and commitments referred to in

Articles L.225 - 38 and L.225 - 42 - 1of the Code de Commerce, the

following agreements were signed:

— a Share Purchase Agreement (the “SPA”) between

AirFrance – KLM Finance SAS and Virgin Investments Limited,

allowing AirFrance – KLM, through its 100%-owned subsidiary

Air France – KLM Finance SAS, to purchase a 31% equity

interest in Virgin Atlantic for £220,100,000. Within this

framework, a Disclosure Letter relating to the SPA and

compensation from Virgin Investments to AirFrance – KLM

linked to tax liabilities relating to the Virgin Atlantic Group (the

Tax Deed) were also agreed between the parties;

— a Shareholders’ Agreement) between AirFrance – KLM Finance,

Delta Air Lines,Inc., Virgin Investments Limited, Virgin Atlantic

Limited and Sir Richard Branson organizing the shareholding

in Virgin Atlantic;

— a Put and call Option Deed between AirFrance – KLM Finance,

Virgin Investments and Delta Air Lines,Inc., relating to 31% of

the Virgin Atlantic share capital;

— a joint - venture Agreement aimed at the implementation of a

commercial joint - venture between AirFrance – KLM, Delta Air

Lines,Inc., Virgin Atlantic Airways Limited, Air France and KLM

together with the related bilateral Transition Agreement

signed with Delta Air Lines,Inc.; and

— an Implementation Agreement between Air France – KLM,

AirFrance – KLM Finance SAS, Société Air France, KLM, Delta

Air Lines,Inc., Virgin Atlantic Limited, Virgin Atlantic Airways

Limited and Sir Richard Branson, concerning the realization of

the transaction.

On November21, 2019, the US Department of Transportation

granted anti - trust Immunity (ATI) within the framework of the

extension of the transatlantic joint - venture. This regulatory step

enabled the airlines to move forward with the transatlantic

partnership.

In parallel, the partners ﬁnalized the expanded joint - venture’s

governance, agreeing on simpliﬁed decision - making processes

enabling the joint - venture to deliver its full synergy potential.

Air France – KLM and Virgin thus ﬁnally considered that

Air France – KLM’s acquisition of an equity interest in Virgin

Atlantic was no longer necessary and negotiated an agreement

wherein AirFrance – KLM would not acquire an equity interest in

Virgin Atlantic, with no impact on AirFrance – KLM’s position in

the commercial joint - venture between Delta Air Lines,Inc., Virgin

Atlantic and AirFrance – KLM. The Virgin Group will retain its 51%

majority shareholding in the capital of Virgin Atlantic while Delta

will retain the remaining 49%. This partnership is key to reinforcing

the Group’s leadership position between Europe and North

America and will oer customers a seamless travel experience

across the Atlantic.

As a result, on October30, 2019, the Board of Directors mandated

the AirFrance – KLM management to ﬁnalize the discussions and

negotiate amendments to the relevant agreements so as to no

longer proceed with the planned investment in a 31% equity

interest in Virgin Atlantic. This decision led to the following

amendments to the agreements listed below, whose signature

had been authorized by the Board meetings of March14 and

May15, 2018:

— termination of the Share Purchase Agreement (“SPA”) for the

acquisition of a 31% equity interest in Virgin Atlantic, and

termination of agreements ancillary to the SPA;

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2.8.5 AirFrance – KLM shareholder structure

Changes in the shareholder structure

On March1, 2019, the Dutch State gave notiﬁcation that, on February26, 2019, it had crossed the thresholds of 5% and 10% in

AirFrance – KLM’s share capital and voting rights, and held 60,000,000shares representing the same amount of voting rights, i.e.

14.0% of the AirFrance – KLM share capital and 11.91% of the voting rights. The following table shows the changes in the Company’s

shareholder structure at December31, 2019 relative to December31, 2018.

% of the capital % of exercizable voting rights

(1)

% of theoretical voting rights

(2)

March 26, Dec 31, Dec 31, March 26, Dec 31, Dec 31, March 26, Dec 31, Dec 31,

2020

(4)

2019 2018 2020

(4)

2019 2018 2020

(4)

2019 2018

Number of shares

or voting rights 428,634,035 428,634,035 428,634,035 543,058,020 550,280,634 501,591,608 586,813,856 586,975,522 503,909,602

French State 14.3% 14.3% 14.3% 22.6% 22.3% 22.7% 20.9% 20.9% 22.6%

Dutch State 14.0% 14.0% 0.0% 11.0% 10.9% 0.0% 10.2% 10.2% 0.0%

Delta Air Lines,Inc. 8.8% 8.8% 8.8% 10.7% 10.5% 7.5% 12.8% 12.8% 7.4%

China Eastern Airlines

(3)

8.8% 8.8% 8.8% 10.7% 10.5% 7.5% 12.8% 12.8% 7.4%

Causeway Capital

Management LLC. 6.9% 2.8% 0.0% 4.4% 2.2% 0.0% 5.1% 2.0% 0.0%

Donald Smith & Co.,Inc. 5.2% 5.2% 2.1% 3.9% 4.1% 1.8% 3.8% 3.8% 1.8%

Employees (FCPE) 3.7% 3.8% 3.9% 5.9% 5.9% 6.7% 5.4% 5.5% 6.7%

Treasury stock 0.3% 0.3% 0.3% 0.0% 0.0% 0.0% 0.4% 0.4% 0.5%

Others 38.0% 42.1% 61.9% 30.9% 33.7% 53.8 % 28.6% 31.6% 53.6%

(1) The exercizable voting rights do not include the voting rights on treasury shares or shares that have been stripped of their voting rights given late notiﬁcation of the

crossing of a threshold.

(2) The theoretical voting rights calculation takes into account all of the voting rights including the double voting rights.

(3) Through Eastern Airlines Industry Investment (Luxembourg) Company Limited.

(4) Number of shares and voting rights: declaration on the Autorité des Marchés Financiers website of March 26, 2020 for Donald Smith & Co., Inc. and March 10, 2020

for Causeway Capital Management LLC.

Since April3, 2016, in application of French law, shareholders holding their shares in registered form for more than two years have

beneﬁtted from a double voting right.

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— amendment and updating of the Joint Venture Agreement to

reﬂect the termination of the SPA. This agreement was signed

on January30, 2020, eective as per January1, 2020;

— amendment (reﬂecting the termination of the SPA) and

updating of the Implementation Agreement. This agreement

was signed on January9, 2020 eective as per January1, 2020;

— signature of the agreement between AirFrance – KLM, Delta

and Virgin Group (signed and eective as per January30, 2020)

giving AirFrance – KLM, subject to certain conditions, the right

to acquire Virgin Atlantic Limited shares in the event of a sale

by Virgin Group of Virgin Atlantic Limited shares to a third party.

The overall joint - venture between Air France, KLM, Delta Air Lines

and Virgin Atlantic was launched in early February2020, giving

their customers a wider choice of routes and loyalty options for

travel between Europe, the United Kingdom and North America.

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Shareholder analysis

Pursuant to the obligation for air transport companies to monitor and control their shareholders, AirFrance – KLM has implemented

a procedure for their identiﬁcation on a quarterly basis.

The TPI (identiﬁable bearer shares) analysis was carried out on December 31, 2019 on the basis of the following thresholds:

intermediaries holding a minimum of 100,000shares and shareholders holding a minimum of 500shares. Based on the TPI analysis

of December31, 2019, AirFrance – KLM is more than 50% held by citizens of the European Union Member States and States party to

the European Economic Area Agreement.

Number of shares % of the share capital

Dec. 31, 2019 Dec. 31, 2018 Dec 31, 2017 Dec. 31, 2019 Dec. 31, 2018 Dec 31, 2017

French State 61,241,325 61,241,325 61,241,325 14.3% 14.3% 14.3%

Dutch State 60,000,000 - - 14.0% - -

Delta Air Lines,Inc. 37,527,410 37,527,410 37,527,410 8.8% 8.8% 8.8%

China Eastern Airlines

(1)

37,527,410 37,527,410 37,527,410 8.8% 8.8% 8.8%

Causeway Capital Management L.L.C. 12,012,647 - - 2.8% 0.0% 0.0%

Donald Smith & Co.,Inc. 22,378,429 9,166,172 6,833,227 5.2% 2.1% 1.6%

Employees (FCPE) 16,103,590 16,758,690 16,781,090 3.8% 3.9% 3.9%

Treasury stock 1,201,571 1,201,571 1,201,571 0.3% 0.3% 0.3%

Other European shareholders

(2)

139,298,475 170,387,302 181,774,397 32.5% 39.8% 42.4%

Other non-European shareholders 41,343,178 94,824,155 85,747,605 9.6% 22.1% 20.0%

Total number of shares 428,634,035 428,634,035 428,634,035 100% 100% 100%

(1) Through Eastern Airlines Industry Investment (Luxembourg) Company Limited.

(2) The shares held by United Kingdom nationals have been included in Other European shareholders.

At December31, 2019, AirFrance – KLM was 64.8% owned by European residents, of whom 5.0% were UK nationals.

Shareholder pacts

AirFrance – KLM is not aware of the existence of any shareholder pacts or agreements whose implementation could lead to a change

of control.

Dividend policy

In the past three ﬁnancial years. AirFrance – KLM distributed no dividends.

Earnings per share Dividend paid

Financial year (in €) (in €)

2017 Restated 0.37 -

2018 Restated 0.92 -

2019 0.64 -

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2.8.6 A regular dialogue with

individual shareholders

and investors

The AirFrance – KLM Group keeps the market informed on its

activity through monthly trac ﬁgures and quarterly updates on

the trend in its results and strategic orientations. All its regulated

information is available on the www.airfranceklm.com website in

French and English.

Relations with investors

The Investor Relations department maintains a dialogue with

ﬁnancial analysts and institutional investors. In addition to

conference calls and information meetings scheduled to coincide

with results announcements, the Group’s management regularly

meets with ﬁnancial analysts and institutional investors during

road - shows and conferences in Europe, the United States

and Asia.

Relations with individual shareholders

The Individual Shareholder Relations Department has a pro - active

policy on engaging with individual shareholders. The shareholders’

newsletter, with updates on the Group’s business activity and

objectives, is circulated by email and is available on the website

in French and English.

In partnership with the business press, the Group regularly takes

part in information meetings exclusively for individual shareholders

in the French regions. These are an opportunity for the Group to

review its strategy, results and issues in the airline industry, and

to address shareholder concerns. In 2019, the Group thus met with

shareholders in Lille and Rennes. Site visits are also organized.

The Individual Shareholder Relations Department can be reached

by email at mail.actionnaire@airfranceklm.com.

Lastly, since 2000, the Individual Shareholders’ Committee,

has constituted a forum for discussion and suggestions on

Air France–KLM’s communication aimed at individual shareholders.

Comprising twelve members, the Committee meets several times

a year including one meeting devoted to planning the Shareholders’

Meeting. It also participates in major company events.

In December 2019, for the second year running, Le Revenue

magazine awarded the Air France–KLM Group the Trophée d’Or

for the Best Digital Communication in the SBF120.

2.8.7 Legal and statutory

investment thresholds

Pursuant to the option provided in Article L.233 - 7of the French

Code de Commerce, Article 13of the AirFrance – KLM Articles of

Incorporation stipulates that any private individual or corporate

body, acting alone or in concert, acquiring directly or indirectly

at least 0.5% of AirFrance – KLM’s capital or voting rights or any

multiple thereof, must notify AirFrance – KLM by registered mail

with acknowledgement of receipt no later than four stock market

trading days as of the date on which this threshold is crossed.

The declaration must include all the information required to be

submitted to the French market regulator (Autorité des Marchés

Financiers) in the event of the crossing of a legal threshold, as

well as a certain amount of information referred to in Article 10of

the AirFrance – KLM Articles of Incorporation.

Notice must again be given under the same conditions each time

a further 0.5% of the capital or voting rights is acquired or

disposed up to 50%.

To determine the thresholds foreseen in Article 13of the Articles

of Incorporation, the shares and voting rights deﬁned by the

provisions of Article L.233 - 9of the Code de Commerce and

those of the relevant AMF General Regulation are assimilated in

the share capital and voting rights.

In the event of failure to comply with this notiﬁcation obligation

and at the request of one or more shareholders holding at least

0.5% of the AirFrance – KLM capital or voting rights, the shares

exceeding the reporting thresholds will be stripped of their voting

rights at all Shareholders’ Meetings for a period of two years

following compliance with notiﬁcation procedures.

Furthermore, any shareholder (whether acting alone or in concert)

acquiring more than 5% of AirFrance – KLM’s share capital or

voting rights is required to transfer these securities to registered

form within the legal limit of no more than four stock market

trading days as of the date on which the threshold is crossed

(Article 9.2 of the Articles of Incorporation).

The aforementioned obligations under the Articles of Incorporation

do not replace the legal obligation to inform AirFrance – KLM and

the French market regulator (Autorité des Marchés Financiers –AMF)

no later than four stock market trading days after the capital and

voting right thresholds stipulated by law are exceeded.

Furthermore, if the 5%, 10%, 15%, 20% and 25% capital and voting

right thresholds are exceeded, the shareholder must notify

AirFrance – KLM and the AMF within ﬁve stock market trading

days of its intentions for the next six months. This notiﬁcation is

subject to the conditions and sanctions set forth in Article

L.233 - 14of the Code de Commerce.

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2.8.8 Identiﬁcation of

shareholders and statutory

provisions concerning

shareholders

Identiﬁcation of holders of bearer shares

Pursuant to Articles L.6411 - 2to L.6411 - 5 and L.6411 - 8of the Code

des Transports (French Transport Code), as amended by the

French Act No. 2004 - 734 of July 26, 2004, listed French air

transport companies are authorized to include a provision in their

Articles of Incorporation allowing them to monitor and control

their shareholders and to require certain shareholders to sell all

or part of their interests in the event of a risk relating to their

nationality. This is because, over time, changes in the shareholder

structure of an air transport company whose shares are listed for

trading on a regulated market could jeopardize its operating

license as an EU air transport carrier, the retention thereof being

conditional on EU interests holding a majority of the shares and

maintaining eective control, or the trac rights held by the

Company as a French air transport company, pursuant to bilateral

international agreements concluded between France and other

States outside the European Union.

Identiﬁcation and monitoring of shareholders

Articles 9 and following of the Air France – KLM Articles of

Incorporation set the conditions whereby the Board of Directors

can or must decide either to reduce the 5% threshold above

which shares must be held in registered form to 10,000shares,

or to require all shares in AirFrance – KLM to be held in registered

form. Thus, when the 40% share capital or voting right threshold has

been passed by non-French shareholders, the Board of Directors

can decide to reduce this 5% threshold to 10,000shares.

AirFrance – KLM publishes a notice informing the shareholders

and the public that non-French shareholders as deﬁned by Article

14of the Articles of Incorporation own, directly or indirectly, 45%

of AirFrance – KLM’s share capital or voting rights. If it appears

that non-French shareholders as deﬁned by Article 14of the

Articles of Incorporation represent, directly or indirectly, more

than 45% of Air France – KLM’s capital or voting rights on a

long - term basis, the Board of Directors must decide to make it

mandatory for all AirFrance – KLM shares to be held in registered

form. Following an amendment to the Articles of Incorporation

in 2014, citizens of the European Union Member States and States

party to the European Economic Area Agreement are considered

to be French nationals.

Article 10of the AirFrance – KLM Articles of Incorporation speciﬁes

the information that must be provided to AirFrance – KLM by

shareholders, whether they are private individuals or corporate

bodies, subject to the obligation to hold their shares in registered

form. This information includes the nationality of the shareholder.

Article 11of the Articles of Incorporation speciﬁes the conditions

Declaration Number % of the share Increase

Shareholders date of shares

(1)

capital

(2)

or reduction

The Capital Group Companies,Inc.

(3)

February28, 2019 24 R

Dutch State March1, 2019 60,000,000 14.00 I

China Eastern Airlines

(4)

November26, 2019 37,527,410 8.76 I

Delta Air Lines,Inc.

(5)

January29, 2020 37,527,410 8.76 I

Causeway Capital Management LLC.

(6)

March 3, 2020 21,506,317 5.02 I

Causeway Capital Management LLC.

(7)

March 10, 2020 29,706,816 6.93 I

Donald Smith & Co., Inc

(8)

March 26, 2020 24,493,406 5.71 I

(1) “Number of shares” represents the total number of shares held by the declaring shareholder following the declaration.

(2) “% of the share capital” represents the percentage of the share capital held by the declaring shareholder following the declaration.

(3) Acting as “investment advisor” on behalf of funds. The Capital Group Companies, Inc. aggregates the positions held by Capital Research and Management

Company (CRMC) and Capital Group International.Inc. (CGI).

(4) Through Eastern Airlines Industry Investment (Luxembourg) Company Limited.

(5) Acting in the capacity of general partner in the partnership under Dutch law DAL Foreign Holdings, C.V. The company Delta Air Lines,Inc. controls DAL Foreign

Holdings, C.V. and, in the capacity of general partner of DAL Foreign Holdings, C.V., is the legal owner of the AirFrance – KLM shares.

(6) Acting as “investment adviser” on behalf of funds and clients for which it has no discretionary power to exercise the voting rights attached to the shares held.

Furthermore, the company Causeway Capital Management L.L.C. also manages 12,793,110Air France - KLM shares but does not exercise the voting rights attached

to these shares (these voting rights remaining exercised by its clients). Elements post management report.

(7) Acting as “investment adviser” on behalf of funds and clients for which it has no discretionary power to exercise the voting rights attached to the shares held.

Furthermore, the company Causeway Capital Management L.L.C. also manages 16,939,192 AirFrance – KLM shares but does not exercise the voting rights attached

to these shares (these voting rights remaining exercised by its clients). Elements post management report.

(8) Elements post management report.

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2.8.9.2 Stock market performance

Over the 2019 ﬁnancial year, the share price increased by 4.6% compared with a rise of 26.4% for the CAC40.

2019 2018 2017

Share price high (in €) 12.73 14.30 14.65

Share price low (in €) 7.46 6.78 4.78

Number of shares in circulation 428,634,035 428,634,035 428,634,035

Market capitalization at December31 (in €bn) 4.3 4.1 5.8

under which the Board of Directors may exercise its right to

approve new shareholders.

Formal notice to sell and mandatory sale of shares

Article 14of the AirFrance – KLM Articles of Incorporation stipulates

the information that AirFrance – KLM must publish and circulate

to inform the public that over 45% of the capital or voting rights

is held by shareholders who are not of French nationality. As of

this threshold, Air France – KLM will be entitled to launch

procedures requiring the sale of shares in order to safeguard its

nationality. Articles 15 and 16of the AirFrance – KLM Articles of

Incorporation, respectively, concern formal notices to sell and the

mandatory sale of shares held in breach of regulations pursuant

to the French Civil Aviation Code (Code de l’Aviation Civile) and

the French Transport code (Code des Transports). The terms for

setting the sale price (market price) are foreseen by the Code des

Transports.

2.8.9 Information on trading in

the stock

2.8.9.1 AirFrance – KLM in the stock market

AirFrance – KLM shares are listed for trading on the Paris and

Amsterdam Stock Markets (Euronext Paris and Amsterdam)

under the ISIN code FR0000031122. The stock is a component

of the SBF 120.

Since February 2008, Air France – KLM’s ADR program

(American Depositary Receipt) has been traded on the OTC Pink

Marketplace under the ticker AFLYY.

The Reuters code for the stock is AIRF.PA or AIRF.AS and the

Bloomberg code AF FP.

Pursuant to Article 222 - 1of the Autorité des Marchés Financiers

(AMF) General Regulation, since the registered oce for

AirFrance – KLM is located in France, its Home Member State,

within the meaning of Directive 2004/109/EC of December10,

2004, as amended (Transparency Directive), is France. The AMF

is consequently its competent market authority as regards

ensuring compliance with its regulated information obligations.

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2.8.9.3 Transactions in AirFrance – KLM shares in the last 18months

AirFrance – KLM shares

Trading range (in €)

Trading Average price Amount

Euronext volumes days (in €) High Low Volumes (in €m)

2018

September 20 8.58 9.08 8.04 75,600,100 650.55

October 23 8.34 8.98 7.75 121,177,740 1,012.57

November 22 9.79 10.40 8.51 95,296,056 926.49

December 19 9.29 10.33 8.90 60,801,516 567.24

2019

January 22 9.96 11.35 8.68 78,821,670 780.8

February 20 10.88 12.73 9.85 124,721,545 1,395.5

March 21 10.52 11.68 9.59 60,017,663 633.8

April 20 10.64 11.35 9.81 45,727,132 486.4

May 22 8.40 10.46 7.52 78,971,634 673.5

June 20 8.02 8.51 7.46 72,008,020 577.7

July 23 8.84 9.50 8.34 60,620,319 537.9

August 22 10.26 10.83 9.48 59,823,145 610.8

September 21 9.41 10.43 8.61 61,818,648 573.1

October 23 10.21 11.12 9.23 61,535,071 627.3

November 21 10.45 11.03 9.77 52,978,951 550.4

December 20 10.21 10.92 9.83 44,650,235 457.8

2020

January 22 9.30 10.27 8.26 81,772,012 752.8

Source: NYSE Euronext.

Transactions in the Company’s shares realized by the company ocers

Summary of the transactions referred to in Article L.621 - 18 - 2of the French Monetary and Financial Code (Code Monétaire et Financier)

executed during the 2019 ﬁnancial year:

Relevant individual Date of the transaction Nature of the transaction Number of shares Unit price

Benjamin Smith, May10, 2019 Acquisition 50,000 €8.6134

Chief Executive Ocer

of AirFrance – KLM

Declaration 2019DD606933

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2019 Universal Registration Document — Air France - KLM 129

3

RISKS AND RISK MANAGEMENT

3.1 Enterprise risk management 130

3.1.1 Risk management process: the players and overall organization 130

3.1.2 Identiﬁcation and evaluation of the risks 131

3.2 Risk factors and their management 132

3.2.1 Geopolitical and macro - economic risks 132

3.2.2 Risks relating to the air transportation activity 135

3.2.3 Risks related to the Group’s processes 139

3.2.4 Legal risks 142

3.2.5 Financial market risks 142

3.3 Organization and functioning of internal control 147

3.3.1 Internal Control organization and tools 147

3.3.2 Fundamental components of internal control established within the Group 150

3.3.3 Internal control relating to the establishment and processing

of ﬁnancial and accounting information 152

3

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Audit Committee

The risk management process aims to determine the events

that could potentially impact the Group and prevent it from

achieving its objectives, and to implement a risk management

and reporting system.

The risk management process enables, on one hand, the dierent

divisions and principal subsidiaries and, on the other hand, the

Group Executive Committee and the Audit Committee to monitor

the principal strategic and operational risks, their evolution over

time and the measures in place to manage these risks. It thus

aims to create and preserve value, and to safeguard the Group’s

assets and reputation.

Air France- KLM — 2019 Universal Registration Document130

Risks and risk management

3 Enterprise risk management

The AirFrance – KLM Group is exposed to the general risks associated with the air transport industry and with airline operations, and

has consequently implemented a system to identify, analyze, monitor, manage and control its risks.

3.1.1 Risk management process: the players and overall organization

AirFrance – KLM: the players and governance bodies involved

in the risk management process

3.1 ENTERPRISE RISK MANAGEMENT

Risk Management Committee

Financial Risk Management Operational Risk Management Strategic Risk Management

Business and

Group Management

Business Management

Corporate

Management

& Support

Passenger

Business

Cargo

Business

Engineering

& Maintenance

Business

Group Executive Committee

Board of Directors

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Each Group entity is responsible for managing its risks and for

producing regular reports.

The overall risk management process also serves as a basis for

the Universal Registration Document and makes a major

contribution to establishing the annual audit program.

As a facilitator of risk management, Group Internal Audit regularly

evaluates the risk management process. Its conclusions are the

subject of presentations to the Group Executive Committee and

the Audit Committee.

The Risk Management Committee also monitors the management

of ﬁnancial market risks that could have an impact on the ﬁnancial

statements (fuel price, currency exposure, etc. ) on a quarterly

basis. The risk management process complies with international

regulatory standards including the European Union 8

th

Directive.

In addition to the usual insurance policies covering the industrial

sites, the real estate assets and the ancillary activities, the Group’s

subsidiaries subscribe to speciﬁc airline insurance policies

covering accidental or incidental damage to aircraft and the

resulting costs, liability in relation to their passengers and general

liability to third parties in connection with their activities.

3.1.2 Identiﬁcation and

evaluation of the risks

Risk mapping and risk universe procedures have been

established and are regularly updated by Internal Audit.

The principal risks are ranked by nature and characterized with

respect to their probability of occurrence and potential impact.

The risk management procedures are outlined for each risk,

together with the situation which is likely to result from their

implementation.

Risk monitoring and reporting

Internal Audit produces a biannual report for the Group Executive

Committee and the Audit Committee on the Group’s operational

risks. The Audit Committee may decide to bring speciﬁc points

to the attention of the Board of Directors. Reporting on strategic

risks is part of the Strategic process.

The operational risk reporting process follows a bottom - up

process starting in the dierent Air France and KLM divisions and

the principal sub - subsidiaries. Every half year the Enterprise Risk

Coordinators, who have been designated by the dierent

businesses, entities and subsidiaries, establish the risk sheets and

send them to Internal Audit, the latter being responsible for their

consolidation at airline and Group level.

The risk sheets indicate and describe the inherent material risks

and the action plans implemented for their mitigation or

neutralization, together with an evaluation of their probability of

occurrence and the resulting impact. The risk owners and those

responsible for the procedures to control risks are speciﬁcally

named. To ensure the reliability of the process, the risk sheets for

each entity are systematically reviewed during regular meetings

between Internal Audit and the relevant Executive Vice-Presidents.

The Group’s operational risk sheets (summarizing the operational

risks of the entities), which detail any new risks or those which

have been withdrawn, and the main changes, are the subject of

a presentation to the Group Executive Committee which approves

them prior to their presentation and review by the Audit Committee.

To be able to complete the Extra - ﬁnancial performance statement

(see Section4), the main environmental, social and societal risks,

linked to the Group’s activities across the entire value chain, are

reviewed and assessed annually. The most material extra - ﬁnancial

risks are an integral part of the Group’s operational risk sheet.

Generally speaking, the management of operational risks is at the

heart of the steering procedure for the AirFrance – KLM Group’s

businesses. To this end, the additional contributions from Internal

Control and the Integrated Management System (IMS) enable the

consolidation of an increasingly - prevention - oriented approach.

By virtue of the IMS, a risk - scoring matrix (frequency, gravity), an

analysis methodology and the “Bowtie” tool are thus used, based

on a homogeneous, multi - risk rationale.

Management of risks by the Risks-Insurance

departments

Within Air France and KLM, each of the Risks-Insurance

departments constitutes an integral part of the Internal Control

process. They identify the insurable risks at the level of each

company and their subsidiaries, draw up the insurance policies

and contribute to the prevention recommendations.

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The system for managing risks liable to aect the Group’s activity,

as set out in section3.1, aims to identify and analyze these risks,

and reduce the probability of their occurrence together with their

potential impact on the Group.

This section outlines the main risks to which AirFrance – KLM

considers itself exposed (macro - economic and geopolitical risks,

risks linked to the air transportation activity, risks linked to the

Group’s processes and legal risks), together with the management

procedures implemented to mitigate each of these risks. Other

risks of which the Group is currently not aware, or risks that as of

the date of this document it does not consider to be amongst

the most material, could also negatively aect its activities.

At the date of this document, this section outlines the main risks

potentially impacting the Group’s activity, ﬁnancial situation,

reputation, results and outlook, as notably identiﬁed within the

framework of the establishment of the Group’s risk mapping,

which evaluates their criticality, i.e. their seriousness and the

likelihood of their occurrence, after having taken into account the

action plans in place. Within each of the risk categories set forth

below, the risk factors that the Group deems to be the most

material as of the date of this document are mentioned ﬁrst.

3.2.1 Geopolitical and

macro - economic risks

3.2.1.1 COVID-19 and other epidemics

or threats of epidemics

(1)

Description of the risk

The existence of an epidemic, in particular the current

worldwide COVID-19 coronavirus epidemic, or the

perception that an epidemic could occur, have and could

have a material negative impact on both the Group’s

passenger trac, and thus its revenues, and on the level

of operating expenses and its ﬁnancial situation.

Since February2020, the Group’s activities have thus

been strongly impacted by the COVID-19 coronavirus

epidemic. Characterized as a “pandemic” by the WHO on

March11, 2020, the COVID-19coronavirus epidemic has

resulted in numerous restrictive measures to limit its spread.

The measures put in place by the public authorities in

numerous States have notably led to the temporary

suspension of airline operations and the reduction or

suspension of travel, in particular bound for or near the

many countries where the virus is circulating, thereby having

a material and negative impact on the Group’s activity

in the countries where it operates. Given these travel

restrictions and the collapse in passenger trac and

revenues, in March 2020 the Group was obliged

signiﬁcantly to reduce its capacity and, notably,

drastically curtail its ﬂight activity which, over the next

few months, should be less than 10% of last year’s level.

The Air France-KLM Group has also implemented

substantial cost - saving measures. Given the progressive

spread of the pandemic, the current and forthcoming

measures from the public authorities in many countries

could further disrupt, or even prevent, any activity by the

Group for an indeﬁnite period and, in particular, there is

no certainty on the resumption date for commercial

ﬂights. Based on the current level of visibility and analysis,

and depending on their persistence, these elements could

have a very signiﬁcant negative impact on the Group’s

operating results, ﬁnancial performance and liquidity, and

on those of some of its partners. The health and

availability of the Group’s sta could also be aected.

This situation leads the Group to forecast a sharply

deteriorated ﬁnancial trajectory compared to the outlook

presented on publication of its 2019 annual results.

Lastly, in view of the uncertainties inherent in any health

crisis, the Group cannot guarantee that this situation will

stabilize in the short term.

Mitigating principles and actions

Each airline is supported by a coordination structure

responsible for prevention, crisis management, the

circulation of health advice and liaising with the national

and international authorities on outbreaks of epidemics

or threats of epidemics. As we ﬁnalize this document,

concerning the management of the public health crisis

associated with the COVID-19virus, the airlines are being

supported by a dedicated coordination structure.

Air France permanently refers to the ISO22000norm: to

ensure strict control over the quality of its catering services,

Air France notably carries out some hundred hygiene audits

and around 15,000 in - house microbiological checks

every year.

Beyond that, with the crisis continuing and the conditions

for a recovery remaining uncertain, the Group will continue

to monitor the unfolding situation on a daily basis, to make

adjustments as necessary and deﬁne/deploy protection

resources like the appropriate health measures.

3.2 RISK FACTORS AND THEIR MANAGEMENT

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(1) Risk updated due to the COVID-19public health crisis.

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3.2.1.2 Terrorist attacks, threats of attack

or geopolitical instability

Description of the risk

Since 2016, the security situation resulting from terrorist attacks

perpetrated in France, elsewhere in Europe and in the Group’s

operational zones, together with worldwide politico - security

events (Middle Eastern and African countries) have all

represented a range of security risks negatively impacting the

Group. For example, the fourth quarter results of the ﬁnancial

year ended December31, 2015 were aected by the Paris terrorist

attacks in November2015. The estimated impact in the fourth

quarter revenues of the Group for the ﬁnancial year ended

December31, 2015 amounted to €120million.

The occurrence of geographical instability, terrorist attacks or

threats of attacks, closure of an airspace or military action could

have a negative eect on both the Group’s passenger trac, and

thus its revenues, and on the level of operating expenses.

Mitigating principles and actions

In terms of security, the Group’s airlines comply with European

and international regulations and submit regular reports to the

competent authorities of the measures and procedures in place.

The Group has no hedging in place for air transportation

operating losses but is insured for the consequences of an attack

on one of its aircraft, and has subscribed to war and assimilated

risks insurance.

The Group has implemented a series of safety and security

management processes in line with the sector’s best practices.

Protecting individuals and assets from assault, terrorist attacks

and threatened attacks, and potential threats to their integrity of

any nature, is also a major priority for the Group. The Security

departments in each Air France and KLM company establish the

security policies, analyse the threats and take all the appropriate

measures, particularly in relation to the factors involved in

geopolitical instability.

The Group has also developed emergency plans and temporary

adaptation procedures (e.g. the suspension of ﬂight operations)

enabling an eective response to diverse situations should an

epidemic, geopolitical or other type of event to occur. This aim

of these plans is the eective protection of passengers and sta,

operational and service continuity, and the preservation of the

long - term viability of the Group’s businesses. These plans are

regularly adjusted to take into account the lessons learnt from

events experienced.

3.2.1.3 Competition in the short, medium and

long - haul air passenger transportation

market

Description of the risk

As the leading group in terms of intercontinental trac on

departure from Europe, the Group is a major global air transport

player; in 2019, the Group carried just over 104million passengers

between Europe and the rest of the world as well as on intra-

European routes on departure from its local markets.

The air transport industry is extremely competitive. The liberalization

of the European market in 1997 and the ensuing increased

competition between carriers has led to a reduction in fares.

In short and medium - haul, the Group competes with other

airlines and, in particular, the low - cost carriers which have seen

very rapid growth over the last ﬁfteen years. It also competes

with alternative means of transportation like the high - speed TGV

rail network. An extension to the high - speed rail networks in

Europe is liable to have a negative impact on the Group’s activity

and ﬁnancial results.

In addition, self - connect platforms like Kiwi.com or easyJet

Worldwide enable dierent point - to - point airlines to oer

connecting journeys. Should these platforms be signiﬁcantly

expanded and prove successful, the current hub and spoke

model of hub carriers like Air France or KLM could be aected.

The competition is also very intense in long - haul, particularly on

the routes between Europe and Asia, due to the development of

new, rapidly - growing players like the Gulf State airlines, or on the

transatlantic routes due to the growth of the low - cost, long - haul

carriers.

Mitigating principles and actions

The Group’s dierent strategic plans seek to respond to these risks,

particularly via the restructuring of the point - to - point operations,

the accelerated development of Transavia, cost reduction, the

product move up - market and the development of partnerships

in large high - growth markets. In parallel, the Group is lobbying the

authorities for a legal framework ensuring fair competition between

carriers. (See also Section1.2Strategic outlook, page 133).

Furthermore, within the framework of the Open Skies agreement

between Europe and the United States, European airlines are

authorized to operate ﬂights to the United States from any

European airport. While this agreement potentially opens the

way to increased competition for Paris-CDG and Amsterdam-

Schiphol, it has also enabled Air France and KLM to expand their

networks and strengthen cooperation within the SkyTeam alliance

within the framework, notably, of a transatlantic joint - venture and

their transatlantic partners.

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3.2.1.4 Cyclical nature of the air transportation

industry

Description of the risk

Local, regional and international economic conditions can have

a signiﬁcant negative impact on the Group’s activities and, hence,

its ﬁnancial results. Periods of crisis or post - crisis with an unstable

economic environment are liable to aect demand for

transportation, both for tourism and business travel. Furthermore,

during such periods, the Group may have to accept delivery of

new aircraft or be unable to sell unused aircraft under acceptable

ﬁnancial conditions. For instance, owing to the global ﬁnancial

crisis, 2009 passenger demand decreased by 3.5% with an

average load factor of 75.6% while freight posted a full - year

decline of 10.1% with an average load factor of 49.1% (source:

IATA, January2010).

Mitigating principles and actions

AirFrance – KLM has a balanced international geographical network

enabling it to limit its exposure to risk within a steadily - growing

air transportation environment at global level.

3.2.1.5 Trend in the oil price

Description of the risk

The fuel bill is one of the largest cost items for airlines making oil

price volatility a risk for the air transportation industry. For the

ﬁnancial year ended December 31, 2019, aircraft fuel costs

amounted to €5,511million. A sharp increase in the oil price can

have a very material negative impact on the proﬁtability of

airlines, particularly if the economic environment does not enable

them to adjust their pricing strategies (as an illustration, average

annual oil prices increased by more than 40% between 2016 and

2018). Similarly, a sharp decline in fuel prices is favorable for airline

proﬁtability. However, the way in which airlines pass on a sharp

fall in the fuel price in their fares is a factor of signiﬁcant

uncertainty.

Mitigating principles and actions

In addition to permanent eorts to reduce fuel consumption, the

Group has implemented a policy of systematically hedging the

fuel price risk, as outlined in Section3.2.5–Financial market risks

on page 142.

3.2.1.6 Competition and trends in the aeronautics

maintenance market

Description of the risk

Airframers, engine manufacturers and aircraft component

manufacturers are rapidly expanding their after - sales services to

oer customers increasingly - integrated aircraft maintenance

solutions. This positioning corresponds to a long - term strategy

based on leveraging intellectual property by selling licenses to

maintenance providers seeking to exercise their business activity

on certain products. This competition is putting pressure on the

revenue side of the maintenance business (which represented 8%

of the Group revenue for the ﬁnancial year ended December31,

2019) due to increased competition in the sale of services and,

on the cost side, owing to an aggressive Original Equipment

Manufacturers (OEMs) escalation policy. Ultimately, if it were to

result in reduced competition in the aeronautics maintenance

market, this trend could have a material adverse impact on airline

maintenance costs.

This trend is escalating, especially with the arrival of new aircraft

such as the E-jet, A350, Boeing 787, etc. The ability to maintain

balanced competitive conditions is a priority objective, both for

AirFrance – KLM’s commercial activity in maintenance and to

contain the Group’s maintenance costs.

The Maintenance, Repair, overhaul (MRO) Market is showing

healthy growth although most of this growth is outside the EU

and especially in Asia. To maintain customer proximity and

optimize the supply chain, further development of the AFI KLM

E&M supply chain is needed via the expansion of local service

centers and the regional industrial footprint.

Mitigating principles and actions

AirFrance – KLM is working on a number of initiatives to limit the

impacts inherent to this risk:

— the involvement of the Maintenance teams in ﬂeet renewal

campaigns: procurement of licenses and the securing of

industrial cooperation with OAMs/OEMs to be able to

continue to develop AirFrance – KLM’s commercial activity in

maintenance;

— AirFrance – KLM’s current strong market position has the scale

and scope to serve as a basis for win - win partnerships with

OEMs and other airlines;

— developing repair solutions and the use of Used Serviceable

Materials, thereby reducing the dependence on certain OEMs;

— negotiation of the value added contributed by licenses.

Furthermore, at the request of the airlines, IATA is also

maintaining a watching brief on this issue.

3.2.1.7 BREXIT

Description of the risk

Air France and KLM operated approximately 30,000international

ﬂights on departure from the United Kingdom in 2019. The United

Kingdom’s exit from the European Union is taking place on the

basis of negotiated conditions and after a transition period

ending December31, 2020. There may be a number of adverse

consequences in terms of the economy, market access and

statutory authorizations. Air France – KLM has relatively less

exposure than the other European (LCCs) or British carriers.

Mitigating principles and actions

Air France and KLM have measures in place to ensure that a hard

landing by the UK has no serious consequences for the Group’s

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airlines and is maintaining close, regular contact with the EU and

national authorities. For the General Management of Operations,

Air France has set up a cross - cutting system for identifying risks

and monitoring mitigation actions with all of the businesses in

the event of a hard Brexit. Based on an internal, in - depth

evaluation of the risks, even in the event of a no - deal scenario,

AirFrance – KLM and the Group’s airlines will be able to maintain

their operations and maintenance activities without their being

impacted. In addition, given the number of international ﬂights

outbound from the United Kingdom in 2019, Air France and KLM

have relatively less exposure than the other European (LCCs) or

British carriers. Customs and logistics issues will, however, require

close monitoring and contingency planning.

3.2.2 Risks relating to the air

transportation activity

3.2.2.1 Risks related to airline safety

Description of the risk

Accident risk is inherent to air transportation which is why

airline activities–passenger and cargo transportation, aircraft

maintenance– are regulated by a series of European regulatory

provisions, transposed into French and Dutch law. Compliance

with these regulations governs whether an airline is awarded the

AOC (Air Operator Certiﬁcate) which is valid for three years.

The national Civil Aviation Authority carries out a series of checks

on the proper application of these rules covering notably the:

— designation of a senior executive and managers responsible

for the principal operational functions;

— appropriate organization of the ﬂight, ground, cargo and

maintenance operations;

— deployment of a Safety Management System (SMS);

— implementation of a quality assurance system.

The materialization of this risk could have a signiﬁcant negative

impact on the Group’s reputation and legal or ﬁnancial

consequences.

Mitigating principles and actions

For AirFrance – KLM, Flight Safety is the absolute priority. Safety

is fundamental to maintaining the conﬁdence of customers and

sta and is a day - to - day imperative which determines the Group’s

activity and the long - term future of the air transportation industry.

All of the Group’s businesses are subject to numerous checks and

certiﬁcations, and meet extremely strict standards and the

highest level of regulations in the industry, both at European level

with the European Aviation Safety Agency (EASA), and globally

with the International Air Transport Association (IATA), whose

IOSA Operational Safety Audit is a benchmark within the industry

and leads to certiﬁcation which must be renewed every two years.

The IOSA audits for the renewal of Air France and KLM

certiﬁcation were carried out at the end of 2018, resulting in the

renewal of the certiﬁcates in 2019. The next renewal audit is

planned for 2020, with issuance of the renewed certiﬁcates

scheduled for March2021.

To reach the highest possible level of Flight Safety, each airline

updates and reinforces its SMS which deﬁnes in concrete terms

the conditions for the implementation of its risk management

system. The SMS, which is an integral part of the organization,

procedures and corporate culture, is supported by a commitment

made at the highest level of management, and by training

and awareness - raising programs for all sta (See Section4.4.1–

Flight Safety).

This risk is covered by the aviation insurance policy.

3.2.2.2 Risks related to the environment

Acceptability of air transportation growth

Description of the risk

From the Flygskam or “ﬂight - shaming” movement in the social

media to calls for a tax on kerosene in several countries, air

transportation is having to contend with ever - increasing public

pressure at both local and global level, and which condemns the

industry’s impacts on the environment.

The airline industry must pursue its eorts to reduce its impacts

and step up communication on its commitments and the mitigating

initiatives that are already in place. Airlines accommodate their

customers’ growing need for mobility, while improving their

energy eciency and focusing on containing noise hindrance at

an acceptable level for those living near airports.

In this respect, the actions implemented by AirFrance – KLM to

limit and reduce its environmental impacts directly inﬂuence its

ability to manage and develop its activities (“license to grow”) in

all regions of the world and over the long - term.

The air transport industry is subject to a signiﬁcant level of

environmental legislation governing areas such as the exposure

of people to aircraft noise and local emissions, air quality, the

treatment of waste products, and the introduction of taxes on

airlines and obligations to ensure the compliance of their operations.

For example, from 2020, airline tickets issued by all airlines now

attract a tax on all ﬂights departing from France (but not on ﬂights

arriving), except connecting ﬂights. This tax will raise funds for

investment in greener transportation infrastructure, including rail.

Such legislation may have a signiﬁcant negative impact on the

Group’s operations and growth which could be reﬂected in more

substantial costs, and could lead to competitive distortions between

airlines when applied solely to a speciﬁc geographical area.

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Mitigating principles and actions

The airline industry is amongst the sectors that are mobilizing the

most to reduce their carbon footprints and was the ﬁrst sector

to commit to collectively reducing itsCO

2

emissions. As early as

2009, the International Air Transport Association (IATA) set an

ambitious global commitment to stabilizing theCO

2

emissions

from international aviation at the 2020 level (Carbon Neutral

Growth as of 2020), and to reducingCO

2

emissions by 50% in

2050 relative to their 2005 level.

AirFrance – KLM is a member of the representative associations

for the airline industry (IATA, ATAG, A4E, FNAM) which engage

in lobbying activities directed at the relevant national, European

and international authorities and bodies (ICAO, European Union,

supervisory Ministries in France and the Netherlands) to promote

eective solutions for the environment, but also to ensure that

the measures which are put in place do not lead to any distortion

in competition between the air transportation players. For example,

AirFrance – KLM has always supported the implementation of a

market - based mechanism for carbon emissions considering that,

provided it is equitable, such a system is more eective from an

environmental standpoint than a simple tax.

Within the context of the imposition of an “eco - contribution” tax

on the air transportation industry in France and the possible

imposition of an environmental tax on airline passengers in the

Netherlands as of 2021, it is worth remembering that such

measures lead to additional costs for the Group and reduce its

ability to invest in energy - ecient aircraft. Furthermore, the

AirFrance – KLM Group considers it regrettable that none of the

proceeds of the Eco Tax applicable in France have been allocated

to the airline industry’s energy transition, and notably to research

into sustainable solutions like cleaner aircraft or the development

of biofuels.

In 2019, the Group’s airlines communicated widely, in conjunction

with the industry players, on their commitments, the measures

already in place and the medium and long - term emission

reduction targets. In the 2019 second half, within the framework

of the Group’s environmental strategy, a number of initiatives

were announced to customers and the public at large (introduction

of high - energy - performance ﬂeet, KLM’s investment in the ﬁrst

European plant dedicated to the production of Sustainable

Aviation Fuel, the “Fly Responsibly” commitment, 100% osetting

of emissions on Air France’s domestic ﬂights, partnership with

the Solar Impulse Foundation, etc. ).

In addition, to address all the matters relating to the eects of

air transportation activity around airports, regular discussion

meetings take place with residents’ associations, local elected

representatives and the public authorities.

Climate change

Description of the risk

To meet the requirements relating to the carbon budget and

low - carbon strategy stipulated in Article 173III of Act No. 2015 - 992

of August17, 2015 relating to the Energy Transition for Green

Growth, the Group takes into account the ﬁnancial risks related

to the eects of climate change These risks are both operational

(linked to the physical impacts of climate change) and ﬁnancial

in nature, the latter being linked to the political and regulatory

impacts of the energy transition (e.g. environmental tax).

Climate change will lead to more frequent extreme weather

events that will have a greater or lesser impact on all world regions.

Air operations depend on meteorological conditions and may be

impacted by other natural phenomena (earthquakes, volcanic

eruptions, ﬂoods, etc. ) which may lead to operational disruption

such as ﬂight cancellations or delays and diversions. As a general

rule, the duration of such adverse natural events tends to be short

and their geographical range limited but they may require the

temporary closure of an airport or airspace, such as in

September2017 when Hurricane Irma caused considerable damage

in the Caribbean, mainly on St. Martin. Another emblematic

illustration is the eruption of the Eyjafjallajökull volcano in Iceland

in 2010, during which nearly 100,000ﬂights were cancelled in

eleven European countries, leaving ten million passengers stranded.

Such events may have signiﬁcant operational and ﬁnancial

repercussions for the Group’s activity given the regulations

requiring the Company to assist passengers in the European

Union territory (e.g. passenger repatriation and accommodation).

Mitigating principles and actions

To adapt to the already - visible consequences of climate change

such as more frequent extreme weather events, AirFrance – KLM

has a policy in place to ensure safe operational and passenger

handling conditions, and regularly conducts comprehensive risk

analyses to optimize these arrangements.

Through its international operations, AirFrance – KLM is present

in all continents and operates in dierent weather conditions,

including the most extreme. It regularly reviews the operational

risks to improve the existing procedures. The operation of a

network balanced between the dierent continents and the

ﬂexibility related to the composition of the ﬂeet enable the

ﬁnancial consequences of these impacts to be minimized.

With its partners, the Group has deployed procedures aimed at

guaranteeing its services as far as possible and also minimizing

the consequences of these situations for its customers. In such

circumstances, the Group deploys commercial measures to

enable passengers to defer their travel if they so wish, or change

their destination. The Group has no hedging in place for

operating losses incurred due to such events.

In addition, during a major climate event, its aim is to reestablish

ﬂight operations as soon as possible to fulﬁl its mission of service

continuity and ensure operations and the transportation of

humanitarian assistance to the aected regions.

The Group deploys measures to limit the impact on climate

change via a low - carbon strategy. Air France – KLM’s Climate

Action Plan stipulates the Group’s priorities in terms of reducing

its environmental impacts, like ﬂeet modernization, improved fuel

management, reducing the mass embarked on board aircraft and

optimizing operational procedures.

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The use of sustainable aviation fuel is a proven avenue towards

reducing CO

2

emissions from aviation and a key element in

achieving AirFrance – KLM’sCO

2

emission reduction targets as

well as those of the aviation industry as a whole. On the ground,

the Group is investing in a ﬂeet of electric ground support

equipment and in sources of renewable energy to supply power

to its buildings. In 2019, the Group set itsCO

2

emission reduction

targets for 2030.

AirFrance – KLM engages in lobbying directed at the French and

international authorities – both directly and through

representative bodies–to ensure that they take into account the

eorts already made by the industry to reduce its emissions and

to deliver on its commitments for 2050.

In 2019, the Group adopted the format recommended by the Task

Force on Climate - related Financial Disclosures (TCFD) for the

management of the ﬁnancial risks linked to climate change (see

TCFD concordance table, section4.3.2).

Carbon credit risk

Description of the risk

As an air operator, the Group is an emitter of carbon dioxide

meaning that it has, since 2012, been subject to the European

Union emission quota system (EU-ETS or European Union

Emission Trading Scheme). It is thus required to oset its

emissions by purchasing carbon quotas in the ﬁnancial markets.

For the 2019 ﬁnancial year, the Group’sCO

2

emissions amounted

to 28million tons, of which 6million tons are expected to fall

under the EU-ETS requirement. In addition, for the 2019 ﬁnancial

year, Air France, KLM, Transavia, Air France HOP! and KLM

Cityhopper expect this to have an impact on emission allowances

to be purchased amounting to 3.3million tons ofCO

2

.

As of 2021, the Group will be subject to the global carbon

osetting mechanism, known as CORSIA, adopted by the ICAO

in October2016.

During its 40

th

General Assembly in October 2019, the ICAO

resolved that “CORSIA is the only global market - based measure

applying toCO

2

emissions from international aviation so as to

avoid a possible patchwork of duplicative State or regional MBMs,

thus ensuring that international aviationCO

2

emissions should be

accounted for only once.” In this context, AirFrance – KLM considers

that itsCO

2

emissions are not subject to both the European ETS

and CORSIA at the same time. Furthermore– assuming a change

to the provisions of the European ETS–AirFrance – KLM is calling

for a detailed impact study to be conducted on the envisaged

amendments. In addition, the Group is drawing attention to the

need for the prior design of a carbon adjustment mechanism at

the frontiers of the European Union, to protect the European

airlines from “carbon leakage” which neutralizes or even

aggravates the environmental impacts and beneﬁts their

international competitors.

Mitigating principles and actions

At ﬁnancial level, the Group has implemented a carbon credit risk

hedging strategy in the form of forward purchases, a strategy

whose components are approved by the Risk Management

Committee.

At operational level, the Group is also committed to exploring all

avenues potentially reducing its fuel consumption and carbon

emissions: at its own initiative within the framework of its Climate

Action Plan and in cooperation with the authorities (SESAR

project for the Single European Sky and optimization of air trac

control).

The Group also uses an internal carbon price (price range) when

taking a decision on whether to proceed with investments and

projects, to factor the carbon risk into its decision - making

scenarios.

(For more details on risks linked to the environment see

Section4.3- Environmental impact).

3.2.2.3 Loss of ﬂight slots or lack of access

to ﬂight slots

Description of the risk

Due to the saturation of major European airports, air carriers must

obtain ﬂight slots which are allocated in accordance with the

terms and conditions deﬁned in Regulation 95/93issued by the

EC Council of Ministers. Pursuant to this Regulation, at least 80%

of the ﬂight slots held by air carriers must be used during the

period for which they have been allocated. Unused slots will be

lost by this carrier and transferred into a pool. The Regulation

does not provide for any exemptions to this rule for situations in

which, due to a dramatic drop in trac caused by exceptional

events, air transport companies are required to reduce activity

levels substantially and no longer use their ﬂight slots at the

required 80% level during the period in question. The European

Commission can, however, decide to temporarily suspend

Regulation 95/93governing the loss of unused ﬂight slots, as it

has done on several occasions.

Any loss of ﬂight slots or lack of access to ﬂight slots due to

airport saturation, which is particularly the case at Schiphol

airport where growth capacity is currently limited, could have an

impact in terms of market share, results and even growth.

Mitigating principles and actions

Air France – KLM applies the provisions of the European

Regulation on the allocation of ﬂight slots, guaranteeing an air

carrier the ongoing use of these slots from one season to another

provided they have been used for 80% of the time excluding

exceptional circumstances. Air France and KLM also liaise with

their national authorities to ensure the regular availability at their

principal hubs of the capacity necessary to the Group’s growth.

They also liaise with the national and European Authorities to try

to ensure that no revision of the current European Regulation

takes place that would limit their accessibility to slots.

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3.2.2.4 Reinforcement of passenger

compensation rights

Description of the risk

a. European regulations

Within the European Union, the rights of passengers in the event

of ﬂight delays, cancellation or denied boarding are deﬁned by

Regulation (EC) No.261/2004 of February11, 2004 which came

into force in 2005. It applies to all ﬂights, whether scheduled or

unscheduled, departing from an airport located in a European

Union Member State (including Paris-Charles de Gaulle and

Amsterdam Schiphol, the Group’s two hubs) and establishes the

European rules for compensation and assistance on denied

boarding, substantial delay, ﬂight cancellation and class

downgrading.

Numerous rulings by the European Court of Justice (ECJ) have

contributed to reinforcing passenger rights by reducing the

possibilities for airlines to invoke “extraordinary circumstances”

to exempt them from the compensation foreseen in Regulation

No.261/2004.

The ever - stricter regulations applying to the European airlines,

but only partially applicable to airlines of third - party countries,

only increase the existing distortions to competition. The

emergence of companies specialized in passenger compensation

is increasing the ﬁnancial cost resulting from this risk. The amount

of compensation is, however, the same for Air France – KLM,

whether the customer contacts the company directly or via an

intermediary.

b. US regulations

In the United States, the regulation increasing US airline passenger

protections came into eect on August23, 2011, and its provisions

are now in force.

The US regulations in terms of passenger rights apply to all airlines

operating in the US territory and/or marketing ﬂights to/from the

United States which means that AirFrance – KLM is concerned by

these US protections.

c. National regulations

IATA has collated some ﬁfty national regulations in a database to

be able to monitor changes more eectively.

Mitigating principles and actions

To keep the eects of these regulations as much as possible

within ﬁnancially - acceptable limits, the Group lobbies the

national and European institutions, both directly and indirectly

through the air transportation industry’s professional associations

(IATA, A4E), to obtain reasonable obligations which create no

competitive distortions or major additional costs which could

lead it either to increase its fares or costs. In this respect,

AirFrance – KLM continues to lobby for the revision of Regulation

(EC) No.261/2004 of February11, 2004.

3.2.2.5 Changes in international, national or regional

regulations and legislation

Description of the risk

Air transportation activities remain highly regulated particularly

with regard to the allocation of trac rights for extra - community

services and the conditions relating to operations (standards on

safety, aircraft noise, CO

2

emissions, airport access and the

allocation of slots). Within this context, the EU institutions may

adopt regulations which may prove restrictive for airlines and are

liable to have signiﬁcant organizational and/or ﬁnancial impacts.

Any changes to regulations and legislation may increase the

Group’s operating expenses or reduce its revenues.

Mitigating principles and actions

The AirFrance – KLM Group actively defends its positions with

the French and Dutch governments, and the European

institutions, both directly and through industry bodies such as

the Airlines for Europe association (A4E) regarding changes to

European and national regulations. The AirFrance – KLM Group

is engaged in direct lobbying of the European Commission and

the national authorities to ensure a reasonable and balanced

allocation

of trac rights to non-European airlines. Coordination with

like - minded carriers on this topic takes place within the

framework of the Airline Coordination platform (ACP).

3.2.2.6 Regulatory authorities’ inquiry into the

commercial cooperation agreements

between carriers

Description of the risk

Alliance operations and commercial cooperation are required to

comply with the competition law in force. In certain jurisdictions,

these agreements are liable to be subject to prior investigation

by the competition authorities prior to any implementation. In

other jurisdictions, particularly in Europe, airlines are required to

ensure that their operations are compliant with the applicable

competition rules. At any time, the European Commission also

has the right to open inquiries into any cases of cooperation it

considers of interest to the European Community. For example,

the joint - venture between Air France, KLM, Delta and Alitalia was

the subject of such an inquiry (resulting in a positive decision in

2015). Such inquiries could have a negative eect on the Group’s

results, business, reputation, ﬁnancial position and outlook.

Mitigating principles and actions

In May2015, the Directorate General for Competition (DG COMP)

adopted a favorable decision on the basis of Article 101of the

Treaty on the Functioning of the European Union on the

transatlantic joint - venture (AirFrance – KLM, Delta Air Lines,Inc.,

Alitalia).

In light of the ﬁnal undertakings oered by the transatlantic

joint - venture, the Commission authorized this agreement for a

ten - year period as from the date of its adoption.

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The US and other worldwide authorities had already published

their conclusions, recognizing the beneﬁts for consumers

of this joint - venture. In this regard, the joint - venture between

Air France – KLM, Delta and its transatlantic partners has

beneﬁted from anti - trust immunity (ATI) on departure from the

United States since 2008.

3.2.2.7 Commitments made by Air France and KLM

vis - à - vis the European Commission

Description of the risk

In 2003, for the European Commission to authorize the business

combination between Air France and KLM, the two companies

had to make a number of commitments, notably with regard to

the possibility of making landing and takeo slots available to

competitors at certain airports. These commitments (in

combination with those made within the framework of the

May2015 decision relating to the transatlantic joint - venture) were

recently invoked by Norwegian to access slots at the Amsterdam-

Schiphol hub to be able to operate four ﬂights a week between

Amsterdam and New York as of the Summer 2018 season. Should

these commitments be challenged by the Group’s competitors,

there could be a negative impact on the Group’s results, business,

reputation, ﬁnancial position and outlook.

Mitigating principles and actions

The AirFrance – KLM Group has ascertained that the eventual

consequences of any challenge concerning slot availability is

unlikely to lead to a material ﬁnancial impact.

3.2.3 Risks related to the Group’s

processes

3.2.3.1 Failure of a critical IT system,

IT risks and cyber criminality

The IT and telecommunications systems are of primordial

importance when it comes to the Group’s day - to - day functioning.

The IT applications, deployed in the operating centers or via

cloud computing systems, are accessed via a network comprising

thousands of work positions and a growing number of mobile

devices. The information contained in all these systems is

exposed to a growing number of threats. The information

exchanged with customers and third parties is proliferating while

aircraft are increasingly connected to the Information System.

The number of laws and regulations to be taken into account is

also growing.

Business continuity and regulatory compliance

Description of the risk

The IT systems, including revenue management systems and

booking systems (including Altea) used by the Group, and the

information they contain may be exposed to risks concerning

continuity of functioning, data security and regulatory

compliance. These risks have diverse origins both inside and

outside the Group. The materialization of one of these risks could

have an impact on the Group’s activity, reputation, revenues and

costs, and thus its results.

Mitigating principles and actions

The Group Executive Vice-President, Information Technology,

assisted by the Group IT Committee and the Group Chief

Information Security Ocer, is responsible for managing the risks

relating to their processes and deﬁning, in particular, the IT and

Telecommunications Security policy.

The context requires a high level of security, which is guaranteed

by the mandate of the Head of IT and his sta who are

responsible for System security. Air France and KLM ensure the

allocation of the resources required to counter such threats,

secure the information and guarantee the regulatory compliance

of the information systems.

AirFrance – KLM monitors the secure functioning of the IT systems

on a permanent basis. Dedicated help centers and redundant

networks guarantee the availability and accessibility of data and

IT processing in the event of major incidents.

The infrastructures of the back - up operating centers and business

continuity plans are tested regularly. The access controls to the

IT systems and to the data exchanged within the company are

governed by rules which meet international laws and standards.

Companies specializing in IT security, external auditors, Internal

Audit and Internal Control all regularly evaluate the relevance and

eectiveness of the solutions in place.

The risk of damage to the IT facilities and any resulting business

interruption are covered by an insurance policy.

Data security

Description of the risk

As airline companies, Air France and KLM collect personal data

from their customers and employees. Management of the

Group’s assets is supported by rigorous management of the

required data, whose consistency and integrity presents a

permanent challenge for IT projects, and in the operation of

digital services. Frequent changes to both applications and

processes call for the ongoing adaptation of IT management

tools and methods, in coordination with the businesses and their

regulatory and operational requirements. If the Group fails to

implement such frequent changes or to protect data of a

personal nature pursuant to the relevant laws and regulation, this

could have a negative impact on the Group’s activity, reputation,

revenues and costs, and thus its results.

Mitigating principles and actions

The Group’s IT division implements security rules aimed at

reducing the risks related to new technologies, particularly

mobile data terminals. The access controls to IT applications and

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to the computer ﬁles at each work station together with control

over the data exchanged outside the Company all comply with

rules pursuant to national, European and international standards.

Campaigns to raise the awareness of all sta on the potential

threats and encourage best practices are regularly carried out.

Specialized companies, external auditors and Internal Audit all

regularly evaluate the eectiveness of the solutions in place.

Data security is a priority for the Group, and speciﬁcally the

protection of data of a personal nature pursuant to the relevant

laws and regulations. The new EU General Data Protection

Regulation (GDPR) is being applied via the GDPR and NIS

compliance programs. Within each company, specialist teams

ensure that the processing of personal information by the

company complies with the relevant legislation.

In each Air France and KLM company, the Data Privacy Ocers

deﬁne the applicable policies, promote the data protection culture

and ensure the eective fulﬁlment of the regulatory standards.

Cybercriminality

Description of the risk

As with any business making extensive use of modern

communication and IT data processing technologies, including

revenue management systems and booking systems (including

Altea), the Group is exposed to threats of cyber - criminality.

Cyber - criminality refers to a wide range of dierent activities

related to the improper use of data and the Information System

for personal, ﬁnancial and psychological ends. Their heavy

dependence on IT and communication technologies makes airlines

vulnerable to cyber - criminality. Should AirFrance – KLM fail to

counter such incidents of cyber - criminality, this could have a

negative impact on the Group’s activity, reputation, revenues and

costs, and thus its results.

Mitigating principles and actions

To protect itself against this risk, the Group deploys substantial

resources aimed at ensuring business continuity, data protection,

the security of personal information pursuant to law and the

safeguarding of at - risk tangible and intangible assets.

The Cybercrime program, approved by the Group’s Audit

Committee, covers the prevention and detection procedures such

as Cyber - threat surveillance, evaluations of Information System

security and tests to pinpoint any Information System incursions

via the internet. There are regular awareness - raising campaigns

on IT security for sta across the Company. An audit of this

program was realized in 2017 which conﬁrmed the best practices

in place and the orientations adopted. The recommended

improvements have been added to the program. The Group

complies with the Cyber standards of the Original Aircraft

Manufacturers.

In 2018, the Group subscribed to a cyber insurance policy to

transfer a part of this risk.

3.2.3.2 Non - compliance with regulations, including

competition and anti - bribery laws

Description of the risk

Non - compliance with regulations, like competition laws, anti - bribery

laws, trade sanctions or export control regulations owing to the

unethical behavior of employees can result in a negative impact

on the Group’s reputation, and lead to substantial ﬁnes and

other legal proceedings. The Group is currently involved in

investigations in relation to anti - trust matters in the air - freight

industry and in the passenger sector.

Mitigating principles and actions

Various measures are in place to mitigate the risk of

non - compliance with laws and regulations. The preventive measures

include, for example, guidelines in the form of manuals, policies

and instructions to clarify expected and acceptable behavior,

training in the form of e - learning as well as personal training, and

the ability to report any compliance concerns.

With regard to competition law, AirFrance – KLM has developed

its policy to prevent anti - competitive practices by circulating a

Competition Law Compliance Manual which is available in three

languages.

Other prevention - based tools include dedicated training

modules. Having completed this training and taken an evaluation

test, employees sign an individual declaration promising to

respect the competition rules applying to their functions.

Regarding corruption, further to the anti - bribery campaign at the

end of 2017, ongoing eorts have been deployed to further

strengthen the awareness and knowledge of employees regarding

the prevention of bribery like, for example, presentations and

discussions, improved access to compliance documents and

communication by the Group’s management.

For more detail see Section4.5.3.

3.2.3.3 Operational performance and customer risks

Description of the risk

For customers, operational performance is a cornerstone of the

product. In the day - to - day operations, where there is pressure on

airlines and growing congestion in airports and airlines, and

where regulations are increasingly complex (e.g. security), within

a context of social unrest within the airline industry but also

externally (air trac control and ground handler strikes),

increased trac volume brings with it a risk of sub - optimal

operational performance or a lower standard of customer service,

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leading to an increase in the costs of operational performance

and a reduction in levels of customer satisfaction, which can

result in a negative impact on the Group’s reputation.

Mitigating principles and actions

For both Air France and KLM, the Operations Control Center is

at the heart of operations and any disruption is managed in an

integrated manner. Numerous action plans are deployed on

operational excellence, service disruption management and

recovery, security, network agility, compensation procedure (EU 261),

and crew and other critical resources. The goal is to reduce the

number of distortions, reduce the impact on customers, improve

customer satisfaction and reduce the costs of sub - optimal

performance. In 2019, there was a signiﬁcant fall in the number of

service disruptions while customer satisfaction saw a considerable

increase (regularity, punctuality, baggage handling, etc. ).

3.2.3.4 Working conditions and human capital

development

Description of the risk

Employees are at the heart of AirFrance – KLM and maintaining

their trust is vital to enabling them to attain their highest

standards of performance to the beneﬁt of customers. Employee

engagement and social stability is imperative for the long - term

viability and success of the company.

The sta in the dierent Group entities have dierent (local) HR

contracts and policies which comply with the employment

legislation in force in their respective countries. Strategic changes

and changes impacting the working conditions of sta are

applied pursuant to the legislation and protocols as deﬁned for

each of the entities comprising the Group.

In the past and potentially in future, the Group’s operations may

be disrupted by labor disputes such as strikes, walkouts, industrial

action or other forms of social unrest, which could also have a

negative impact on the Group’s operations, proﬁtability and image.

Mitigating principles and actions

The Group recognizes the constraints and risks to which it is

exposed and the need to adapt to a more rapid pace of change.

At the same time, the Group seeks to preserve cohesion by

fostering a constructive and transparent workplace dialogue and

by pursuing a policy based on respect and responsibility.

To ensure the eective coordination of the workplace dialogue,

responsibilities and accountabilities are deﬁned for each entity

and category of sta. At Group level, coordination takes place

between the dierent entities, speciﬁcally for transverse topics

concerning categories of sta across several entities. Signiﬁcant

changes to the HR policies and collective labor agreements are

approved at the highest level of management within the airlines

and the Group.

Various initiatives aimed at improving the workplace dialogue are

planned and implemented in the dierent Group entities.

In Air France and KLM, an Employee Promotor Score indicator has

been implemented to measure the engagement of employees.

The results feed into local action plans aimed at improving

employee engagement and opening up the dialogue between

managers and their teams. Decreasing the distance between

management and sta is key to understanding the needs and

concerns of sta, tackling any issues in a proactive manner and

avoiding any escalation.

The level of employee engagement is included in the targets for

the highest level of management within Air France – KLM.

Continuous monitoring takes place and the methodology will be

subject to ongoing improvement (See Section 4.2 – Human

Resources).

3.2.3.5 Pension plans

Description of the risk

As of December31, 2019, the Group’s main commitment in terms

of deﬁned beneﬁt schemes was the pension plan for Ground

Sta based in the Netherlands.

Under IAS19, the AirFrance – KLM Group is exposed to changes

in external ﬁnancial parameters (e.g. discount rates, future

inﬂation rate) which could lead to annual ﬂuctuations in its income

statement and equity with no impact on cash. The changes in

pension obligations together with the level of plan assets related

to changes in actuarial assumptions are recognized in equity and

are not taken against proﬁt and loss. The potential volatility is

explained in Note4on “Accounting principles–Employee beneﬁts”

and in Note29 “Other provisions” to the consolidated ﬁnancial

statements for the ﬁnancial year ended December31, 2019.

In particular, the KLM Ground Sta pension plan may create

accounting volatility for the Group’s equity.

Note29 to the consolidated ﬁnancial statements presents the

sensitivity of the deﬁned beneﬁt cost recognized in proﬁt and

loss and the deﬁned beneﬁt obligation to changes in the discount

rate, and the level of increases to salaries and pensions.

Mitigating principles and actions

The cash risk on recovery premiums for the Ground Sta pension

plan is limited based on the funding agreement between the

pension fund and KLM. The regular premium level is ﬁxed.

The current calculations led to the KLM Ground Sta pension

plan ﬁguring as an asset in the balance sheet at December31,

2019, the assets in the funds being higher than the value of the

deﬁned beneﬁt obligations.

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Based on the forward curve at December31, 2019, an increase of

US$10 per barrel over 2020 would give an average price of

US$72.90per barrel and would lead to a US$593million increase

in the fuel bill after hedging, i.e. a total fuel bill of US$6,989million

for the AirFrance – KLM Group. Symmetrically, a fall of US$10per

barrel over 2020 would give an average price of US$52.90per

barrel and would lead to a US$566million reduction in the fuel

bill after hedging, i.e. a total expense of US$5,830million.

Mitigating principles and actions

Risks related to the jet fuel price are hedged within the framework

of a hedging strategy deﬁned by the Risk Management Committee

(the “RMC”) and approved by the Board of Directors.

The hedging strategy sets the time span of the hedges at a rolling

24 - months and the target hedging ratios at 60% during the ﬁrst

three quarters of the time span, decreasing by 10% in each of the

remaing quarters of the time span. The hedging uses simple

futures or option - based instruments, eligible for hedging pursuant

to the accounting standards in force.

In respect of the application of IFRS9, hedging by component has

applied since January1, 2018. Since the Group’s fuel procurement

is strongly correlated to the Jet Kerosene Cargoes CIF NWE

Index, components speciﬁc to this fuel risk are used (Brent ICE,

Gasoil ICE, Jet CIF NWE) to align the fuel hedging accounting

and the Group’s risk management policy more eectively.

Within the framework of a dynamic risk monitoring approach, the

Group tracks indicators capping the potential maximum loss and

the potential maximum gain (value of the portfolio prompting its

restructuring).

Lastly, an indicator enabling the measurement of the extreme risk

of the portfolio has been deployed. The level of this Value at Risk

indicator is calculated and analyzed every week and may also

trigger a restructuring of the portfolio.

3.2.5.2 Currency risk

Most of Air France – KLM’s revenues are generated in euros.

However, because of its international activities, the Group incurs

currency exchange risks.

The Group’s main exposure relates to the US dollar. Since

expenditures on items such as fuel and maintenance exceed the

amount of overall revenues in US dollars, the Group is a net buyer

of US dollars, representing a residual structural risk.

As a result, any signiﬁcant appreciation in the US dollar against the

euro could result in a negative impact on the Group’s ﬁnancial results.

On the contrary, the Group is a net seller of other currencies, the

level of its revenues in currencies other than the US dollar

exceeding its expenditures in the same currencies. This exposure

is, however, much lower than with the US dollar. A signiﬁcant

decline in these currencies against the euro could nevertheless

have a negative eect on the Group’s ﬁnancial results.

3.2.5 Financial market risks

3.2.5.1 Risks relating to the fuel price

Description of the risk

At December31, 2019, the Air France–KLM Group’s fuel exposure, based on futures prices at December31, 2019 ($62.90a barrel for 2020

and $58.90a barrel for 2021), was as follows:

(in US$ million) 2020 2021

Gross expenditure before hedging 6,380 6,179

Hedge percentage 59% 26%

Gain on hedging (16) 3

Net expenditure after hedging 6,396 6,176

3.2.4 Legal risks

During their ordinary course of business, the Group’s companies

could be involved in legal, administrative, criminal, or arbitration

proceedings, especially concerning civil liability, competition,

industrial, ﬁscal, or intellectual property claims, or claims relating

to the environment and discrimination. In some of these

proceedings, signiﬁcant monetary claims have been made or

may be made against one or more Group companies. The

relevant provisions, if any, that the Group may have to record in

its ﬁnancial statements may not be sucient, which could have

a material adverse eect on its business, ﬁnancial position, results

and outlook. As of June30, 2019, the Group’s total provisions for

litigation amounted to €412 million (see Note17to the Group’s

unaudited interim condensed consolidated ﬁnancial statements

for the six - month period ended June30, 2019).

New proceedings, stemming from existing proceedings or

otherwise, related to risks already identiﬁed by the Group or to

new risks, could be initiated against a Group entity. Should these

proceedings result in an unfavorable outcome, there could be a

signiﬁcant adverse eect on the Group’s business, ﬁnancial

position, results and outlook.

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Mitigating principles and actions

The hedging strategy provides for the implementation of a

gradual level of hedging between order and delivery dates of the

aircraft or ﬂight equipment.

Exposure on indebtness

Since the application of IFRS16 as of January1, 2018, the Group’s

aircraft operating leases, which are mostly denominated in US

dollars, have been recognized in the Group’s debt. For airlines

generating US dollar revenues, the revaluation of this debt in US

dollars is neutralized at the accounting level through the

recognition of this debt as a natural hedge against a fraction of

the Group’s US dollar revenues. For airlines not generating US

dollar revenues, US dollar - denominated assets and currency

hedges are in place to mitigate the exchange rate risk.

The exchange rate risk on debt, other than coming from

operating leases, denominated in other currencies than the euro

mostly concerns the yen (10%), the US dollar (6%) and the Swiss

franc (5%).

Investment exposure (“Translation risk”)

Description of the risk

Aircraft are generally purchased in US dollars, meaning that the Group is exposed to an appreciation in the US dollar relative to the

euro in terms of its investment in aircraft and ﬂight equipment.

The net investments in US dollars ﬁguring in the table below reﬂect the contractual commitments as of December31, 2019.

(in US$ million) 2020 2021 2022 2023 2024 2025

Investments (1,880) (1,604) (1,530) (1,401) (952) (853)

Currency hedge 1,315 1,033 709 361 194 21

Hedge ratio 70% 64% 46% 26% 20% 2%

Mitigating principles and actions

The currency risk management for the Group’s airline subsidiaries

is centralized within each airline company while the currency risks

incurred in investments by the Group’s holding company are

managed at holding company level.

The risk management of the Group’s overall currency exposure

is carried out on the basis of a forecast net exposure for each

currency. Currencies highly correlated to the US dollar are usually

aggregated with the US dollar exposure.

For each currency hedged, the time span of the hedging is a

rolling 12 to 24 - month period, the ﬁrst four quarters being

relatively more hedged than the following four. The RMC sets

hedging targets for the US dollar, sterling and the yen on a

quarterly basis.

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3

Operational exposure

2020 operational exposure (“Transaction risk”)

(in millions of currencies at December31, 2019) US Dollar Sterling Yen

Net position before hedging (2,862) 564 45,226

Currency hedge 1,673 (391) (14,750)

Net position after hedging (1,189) 173 30,516

For 2020, the maximum impact on income before tax of a 10% currency variation relative to the euro is shown in the following table.

These results cannot be extrapolated due to the use of option - based instruments.

(in € million) US Dollar Sterling Yen

10% increase relative to the euro (59) 1 2

10% fall relative to the euro 94 (22) (4)

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Mitigating principles and actions

The exchange rate risk on non - operating lease debt (non-IFRS16)

is limited. At December31, 2019, 74% of the Group’s gross debt,

after taking into account derivative instruments, was

euro - denominated, thereby signiﬁcantly reducing the risk of

currency ﬂuctuation on the debt.

3.2.5.3 Counterparty risk exposure

Description of the risk

Except in the event of express dispensation from the RMC,

counterparties must beneﬁt from a minimum rating of BBB+

(S&P) with the exception of mutual funds where the risk is

considered negligible. The maximum commitments by

counterparty are determined based on the quality and ranking

of their ratings. The RMC also monitors the trend in the respective

proportion each counterparty represents in the overall hedging

portfolio (fuel, currency and interest rate) and investments. The

positions of both Air France and KLM, together with those of the

AirFrance – KLM parent company, are taken into account in the

assessment of the overall exposure.

Mitigating principles and actions

The rules concerning counterparty risk management are

established by the RMC and applied within each company.

A monthly report is established and circulated to the members

of the General Management of the two airline companies. It is

supplemented by real time information in the event of any real

risk of a rating downgrading for counterparties.

3.2.5.4 Financing risks

Financing strategy

Air France

To ﬁnance its investments, Air France prioritizes long - term

resources by raising conventional bank debt secured by its

assets (in the form of mortgage debt or ﬁnance leases) and,

when available, by using export credit.

KLM

To ﬁnance its aircraft, KLM uses a number of dierent

structures including traditional bank debt, ﬁnance leases and

export credit.

In view of the application of prudential standards, the banks could

reduce their balance sheets in future years and consequently

make a more limited volume of lending available to businesses.

AirFrance – KLM

AirFrance – KLM has realized several bond issues. While the issues

prior to 2014 beneﬁted from Air France and KLM several

guarantees, the issues since 2014 have been unsecured:

— an issue of plain vanilla bonds with a seven - year maturity

raising €600million in June2014;

— an issue of subordinated perpetual notes raising €600million

in March and April2015. In accordance with IFRS, these securities

were booked as equity. In September2018, a tender oer was

launched for their repurchase and €196.7million of bonds

were presented and accepted. The outstanding subordinated

perpetual notes therefore amount to €403.3million, with a

call feature at par and a coupon step up in 2020;

— an issue of plain vanilla bonds with a six - year maturity raising

€400million in October2016;

— an issue of plain vanilla bonds with a ten - year maturity raising

US$145million via a private placement in December2016;

— an issue of convertible bonds maturing in 2026, raising around

€500million in March2019.

Mitigating principles and actions

The ﬁnancing strategy is decided by the Group in coordination

with the Air France Group and the KLM Group. The

AirFrance – KLM Group’s ﬁnancing is mainly composed of bonds

and debt collateralized by assets. For the bonds, the issuer is

mainly AirFrance – KLM SA

Furthermore, in view of its investment program, particularly in

the ﬂeet, the AirFrance – KLM Group also plans to be active in

the ﬁnancing market. In the current market conditions, the Group

thus intends to ﬁnance its forthcoming aircraft deliveries using

collateralized debt. These ﬁnancing or reﬁnancing operations will,

as usual, be the subject of competitive requests for proposals.

The Group plans to mitigate this risk by adapting its ﬁnancing

strategy:

— more systematic recourse to ﬁnancing in the market via

AirFrance – KLM;

— diversiﬁcation of the ﬁnancing structures;

— diversiﬁcation in the number of banking or ﬁnancial investor

counterparties.

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3

Interest rate exposure

(in € million at December31, 2019)

Financial assets at ﬂoating rates 1,352

Financial liabilities at ﬂoating rates 3,078

Net exposure before hedging 1,726

Hedging (1,417)

Net exposure after hedging 309

Mitigating principles and actions

The Air France-KLM Group, Air France and KLM are

engaged in in - depth discussions with their respective

governments and ﬁnancial institutions to dispose of the

resources that will enable them to secure and sustain

adequate levels of liquidity by all means, notably within

the framework of the European Commission’s Temporary

Framework on State Aid published on March19, 2020.

That being said, given the various options currently being

considered and the quality of the discussions with the

two States and ﬁnancial institutions, the Air France-KLM

Group is conﬁdent that it will be able to obtain additional

ﬁnancing to meet all its future ﬁnancial obligations and

enable it to ensure the recovery of its activity beyond the

current crisis.

3.2.5.6 Interest rate risk

Description of the risk

A portion of the overall debt is linked to ﬂoating rates and therefore

incurs volatility.

After swaps, the AirFrance – KLM Group’s ﬁxed - rate debt exposure

represents 72% of the overall total debt exposure. The interest

rate on the Group’s gross debt after swaps stood at 2.54% at

December31, 2019 (versus 2.96% at December31, 2018).

Description of the risk

As of December31, 2019, the Group disposed of undrawn credit lines amounting to €1,765million. The two main undrawn credit

lines amounted, respectively, to €1.1 billion for the AirFrance – KLM holding company and Air France, and €665million for KLM.

As of the beginning of the public health crisis linked to the COVID-19virus, the Air France-KLM Group implemented measures,

notably ﬁnancial, to limit the impact of the virus on its proﬁtability and preserve its ﬁnancial viability. Within this framework,

the Air France-KLM Group drew down the totality of its revolving credit facility in the amount of €1.1billion and KLM drew

down the totality of its revolving credit facility amounting to €665million. At March12, the Group and its subsidiaries thus had

more than €6billion of cash and cash equivalents.

As the public health crisis continues, the conditions for a recovery remain uncertain, both in terms of the Group’s air operations,

but more generally in terms of the timetable for an economic and demand recovery. Furthermore, within a context of signiﬁcant

market volatility and in view of the situation of the Air France-KLM Group, the external ﬁnancing conditions for the Group

could be signiﬁcantly more dicult than those it has experienced in the past.

At April17, 2020, as we ﬁnalize the 2019 Universal Registration Document, our best estimates incorporating all the measures

taken by the Group show that, in the absence of additional ﬁnancing, a liquidity requirement is expected in the third quarter

of 2020.

3.2.5.5 Liquidity risks

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The Group’s net exposure to interest rates after hedging stands

at €309million. A 100 - basis point increase in interest rates over

twelve months would therefore have an €3 million negative

impact on the results.

Mitigating principles and actions

The interest rate exposure is limited by the fact that ﬂoating rate

debt represents only a small proportion of the total debt. Air

France and KLM both use interest rate swap hedging strategies

through derivatives contracts to convert their ﬂoating - rate debt

exposure into ﬁxed rate exposure.

3.2.5.7 Equity risks

Description of the risk

At December31, 2019, AirFrance – KLM directly or indirectly held

a portfolio of shares in listed companies worth €433million,

principally comprising 1.1% of the Amadeus IT Group SA

(“Amadeus”) share capital. The value of the Amadeus shares was

protected by a collar maturing in November 2019. In

November 2019, the decision was taken to dispose of all the

Amadeus shares in early 2020; to maintain the protection of this

investment value until that date, the existing collar was

restructured into a forward maturing in January2020.

Mitigating principles and actions

Air France and KLM’s cash resources are not directly invested in

the equity market or in equity mutual funds.

3.2.5.8 Investment risks

Description of the risk

The cash resources of AirFrance – KLM, Air France and KLM are

invested so as to maximize the return for a very low level of risk.

They are invested in money market mutual funds, and in debt

securities and term deposits with highly - rated banks.

Mitigating principles and actions

To reduce the currency risk on the debt, a portion of KLM’s liquid

assets is invested in foreign - currency AAA and AA+ rated bonds.

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3

3.3 ORGANIZATION AND FUNCTIONING

OF INTERNAL CONTROL

3.3.1 Internal Control organization and tools

Internal Control network

An AirFrance – KLM Internal Control network has been established, supported by Internal Control Coordinators embedded in the

business units.

The organization within the Group, covering its principal

businesses, can be summarized as follows: Passenger (passenger

transportation), Cargo and Engineering & Maintenance. Due to

the interdependence of each of the businesses, this organization

involves numerous cross - functional processes (sale of passenger

aircraft belly space to the cargo business, Engineering and

Maintenance services relating to the both Passenger and Cargo

aircraft, IT services, etc. ).

— The Board of Directors is the corporate body that determines

the direction of the Group’s activities. To this end, the Board acts

to ensure the successful performance of the AirFrance – KLM

Group, supported by advice from the advisory committees

mentioned in Section2above, Conditions for preparing and

organizing the work of the Board of Directors;

— The CEO Committee is composed of the AirFrance – KLM,

Air France and KLM CEOs and the AirFrance – KLM CFO. It is

the primary executive management decision body for the

Group and has ﬁnal management rights (except when the

approval of the Air France – KLM Board is required) and

accountability on all matters pertaining to both Airline and

Group functions and performance, while respecting the existing

agreements, commitments and bylaws of the relevant airlines.

In particular, it is responsible for setting the strategic direction of

the Group and for the Airlines, and reviewing the performance

of the Airlines and Group functions on an ongoing basis;

— The Group Executive Committee (GEC) puts the Group’s go

forward plan into action, within the framework of the strategy

deﬁned by the Board of Directors and the CEO Committee. In

Audit Committee

Board of Directors

Internal Audit

Internal Control Coordinators

Business Management

Corporate

Management

& Support

Passenger

Business

Cargo

Business

Engineering &

Maintenance

Internal Control Coordination

Control Activities

Insurance

function

Legal

functions

Finance

functions

Other

Assurance

functions

CEO Committee

Group Executive Committee

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December2019, the GEC was composed of twelve members

(the AirFrance – KLM CEO, the CEOs of Air France and KLM,

and the nine heads of Group functions), plus a secretary to

the GEC. The Committee meets every two weeks, alternating

between Amsterdam and Paris. Its purview covers the following

areas: Group Finance; Corporate Secretary, Sustainability, and

Communications; Engineering & Maintenance; Cargo; Information

Technology; Human Resources; Strategy; Commercial &

Revenue.

— Finance functions

A Group Finance division has been constituted around the

Group’s Chief Financial Ocer, staed by some thirty people

(Financial Communication and Investor Relations, Consolidation

& Accounting, Central Management Control and Mergers-

Acquisitions & Financial Operations). This division submits to the

Group Executive Committee and the Board the Group’s overall

ﬁnancial policy and orientations (the latter being applied at the

level of the Group’s two principal companies, which each have

their own ﬁnancial functions) and tracks the Group’s ﬁnancial

performance.

In addition, some operations relating to the Air France – KLM

holding company are entrusted to Air France, via a management

mandate (notably treasury management).

— Insurance functions

The insurance functions are responsible for identifying at - risk

sectors of the Group that might impact the operations and

ﬁnancial results, so as to reduce their potential impact or transfer

them either to insurers through insurance policies, particularly

aviation policies, or to third parties under contractual mechanisms.

They also manage the claims and advise the Group’s entities on

reducing and controlling their risks.

There is an aviation insurance policy in place for the entire

AirFrance – KLM Group to cover civil liability, damage to aircraft

and risks of war, which constitute the major ﬁnancial and legal

risks of any airline.

— Legal functions

The legal departments of AirFrance – KLM, Air France and KLM

perform a consulting mission for their management and

decentralized organizations, notably in the areas of corporate law,

transportation law, contract law and insurance law. They

cooperate to establish the Group’s legal policy.

Legal Aairs draws up a systematic inventory of the disputes

in process, to be able to assess the risks and constitute the

corresponding provisions booked as liabilities.

— Compliance functions

The Compliance Ocers within AirFrance – KLM, Air France and

KLM pursue and monitor the implementation of the compliance

framework components within the Groups. Within Air France and

KLM, Data Privacy Ocers are tasked with strengthening privacy

compliance while Export Control Managers are responsible for

securing trade compliance on the export of goods or technology.

The Compliance Ocers report to the relevant governance

bodies, like the Audit Committee. In addition, the Air France

Compliance Committee and the KLM Compliance Committee

monitor the respective compliance programs. Various legal experts

also provide advice on compliance with laws and regulations.

At the end of 2018, the Board of Directors decided to create a

Sustainable Development & Compliance Committee, whose mission

is to assist in reviewing the Group’s policies.

— Internal Audit

Air France – KLM’s Internal Audit is an independent function

intended to improve the Group’s various processes. It helps the

Group to achieve its stated objectives by providing a systematic

and formalized approach with which to evaluate and strengthen

the eectiveness of the decision - making, risk management, Internal

Control and governance processes. The Internal Audit function

objectively reviews the reliability of the overall Internal Control

procedures implemented by the Group, as well as the controls in

place for the processes speciﬁc to each business.

Given the Group’s governance rules, each company has retained

its own Internal Audit department; the coordination of Internal

Audit at Group level has, nevertheless, been eective since the

beginning of the 2005 - 06ﬁnancial year. The Group’s Head of

Internal Audit function, which is fulﬁlled by a Vice-President from

within the airlines’ Internal Audit departments, is responsible for

overall coordination and has a functional reporting line into the

Group’s Chief Financial Ocer. The Internal Control departments

in the two sub - groups use identical methodologies (Group

Charter, Group Audit Manual, etc. ), while a common tool was

adopted in early 2017 (Nasdaq Bwise).

The Internal Audit function carries out audits at the level of the Group

and its subsidiaries (Air France and KLM). Audits are conducted

in collaboration with the internal auditors of the two airlines.

The number of auditors’ positions average 24 in FTE (excluding

management).

The Internal Audit division reports on its work to the Group

Executive Committee and to AirFrance – KLM’s Audit Committee

in a summary report presented quarterly.

To execute its mission, Internal Audit, which operates within the

framework of the internal Audit Charter established by the Audit

Committee of the AirFrance – KLM Group, either acts on its own

initiative or intervenes at the request of the Group Executive

Committee, the Audit Committee or the Board of Directors.

An annual program of missions is established and submitted for

approval to the Group Executive Committee and to the Group’s

Audit Committee.

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3

The Internal Audit function performs the following actions:

1. assurance Audit:

a. operational Audit: to review the eectiveness, eciency

and general control over processes,

b. information and Communication Technologies or Electronic

Data Processing (EDP) Audit: to assess the eectiveness

and eciency of internal controls related to the information

and communication systems,

c. compliance Audit: to check compliance with laws and

regulations and/or standards, procedures and/or policies

issued by the Group,

d. post audit: to check follow - up on ﬁndings in previous

assurance audits;

2. consulting assignments: advisory services that are performed

at the speciﬁc request of business management. When

performing consulting services, the Internal Auditor must

remain objective and not assume management responsibility;

3. fraud investigations: to prevent, detect and investigate

signiﬁcant suspected internal or external fraudulent activities;

4. enterprise Risk Management: to facilitate and improve the risk

management process.

Once completed, the conclusions of the audits are summarized

in a report highlighting the ﬁndings, the risks and the corresponding

recommendations.

The audited entities then establish corrective action plans and a

follow - up is conducted in the next few months.

The AirFrance – KLM Group’s Internal Audit division has been

awarded professional certiﬁcation by the IFACI (Institut Français

de l’Audit et du Contrôle Interne). This body has certiﬁed that, for

the Group Internal Audit activities, all the procedures required to

comply with the 2012 version of the Internal Audit Professional

Practices Framework (PPF) and thus respect the international

standards for Internal Audit have been implemented. This

certiﬁcation, which was renewed in 2018, is valid until July2021.

Organization of responsibilities

The organization of the individual companies has been deﬁned

to ensure compliance with the principles of secure and eective

operations. It speciﬁcally takes into account the regulatory

requirements governing air transportation, notably with regard

to air operations (See Section3.2.2Risks linked to airline safety),

ground operations and engineering and maintenance, as well as

airline catering and security.

The managers of the relevant entities and subsidiaries are

required to apply these principles and organization at their level,

and ensure that the organizational charts, job descriptions and

procedures deﬁned by business process are up to date. They

must ensure their consistency and adequacy, verify that they are

taken into account in the main information systems and

appropriately integrated within the organization.

Internal Control tools

Charters and manuals

Air France, KLM and their respective subsidiaries have a Social

Rights and Ethics Charter that enshrines their individual

commitments to Corporate Social Responsibility by orienting

their corporate and ethical policy towards respect for individuals

at the professional, social and citizenship levels.

The Air France Group deploys a Charter for the prevention of

harassment in the workplace, which complies with French legislation

and is part of a contractual approach through agreements signed

for the beneﬁt of employees. The legal purpose of this Charter is

to set forth the principles of prevention, deﬁne the actions, stress

everyone’s individual legal and human responsibilities, and

establish internal prevention procedures.

For its part, the KLM Group has published a Code of Conduct

addressing the following principal matters: compliance with

laws and regulations, conﬂicts of interest, conﬁdentiality, the

safeguarding of assets, environmental protection, Corporate

Social Responsibility and intellectual property.

KLM has also implemented a Code of Ethics intended principally

for employees in the ﬁnance function (See also Section4.5.3).

Manuals to prevent non - compliance

Sta have access to a series of manuals and policies on the intranet

sites. With regard to the prevention of bribery, the Anti-Bribery

Manual arms the Air France – KLM Group’s commitment to

conducting business with loyalty, fairness, transparency, honesty

and integrity, and in the strict respect of anti - corruption laws

wherever its companies or subsidiaries exercise their activities.

The Manual establishes the guidelines for preventing corruption,

and for identifying and handling at - risk situations in the light of

the anti - corruption legislation. The related Gift and Hospitality

Policy (“Policy”) sets out the rules and guidelines with regard to

Gifts and Hospitality in more detail.

The Competition Law Compliance Manual emphasizes the

objectives of integrity and transparency, and contains instructions

on the prevention of anti - competitive agreements and the abuse

of market power. For more detail, see section4.5.1.

Internal Audit Charter

The AirFrance – KLM Group’s internal Audit Charter was signed

by the Chairman and Chief Executive Ocer, the Chair of the

Audit Committee and the Head of the Group Internal Audit

Division in 2019. The internal Audit Charter deﬁnes the mission

of the Audit division and guarantees its independence as well as

the conditions by which the division functions.

In accordance with the International Institute of Internal Auditors

(The IIA) rules, the Charter formalizes the position of audit within

the business and deﬁnes its sphere of operation.

Internal Control Charter

The Internal Control Charter deﬁnes the commitments of the

three top executives of AirFrance – KLM, Air France and KLM, and

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stipulates the main components of internal control within the

Group: governance and the most important tools enabling its

exercise, an outline of the overall Internal Control process and the

dierent Internal Control activities (veriﬁcation of the entity’s

environment, transactional controls (process) and overall IT

control).

Procurement Manual

The organization of the Procurement function common to Air

France and KLM is outlined in the Procurement Manual.

The Procurement function regularly updates the Quality

reference system. This reference system comprises, notably, the

purchasing Code of Ethics for Employees, which stipulates the

rules of conduct for AirFrance – KLM buyers when dealing with

suppliers or service providers, and informs all those involved in

the process of the limits that must not be exceeded.

Quality reference system

The Air France and KLM quality assurance systems are based on

the following principal external and internal standards:

— External standards

Operations: national regulations (based on European regulations)

and applicable general laws, international standards (ICAO, IATA,

etc. ) or those that are speciﬁc to aeronautics maintenance (Part

145, etc. ).

Passenger service: European and US regulations (Special Care

Passengers), European commitments of the Association of

European Airlines (AEA), service commitments of those involved

in air transportation (airports).

Management, the environment, documentation, food security,

health and safety in the workplace: ISO series 9001, 14001, 15489,

22000 and OHSAS 18001 / ISO45001.

— Internal standards

These represent the application of the external standards, adapted

to the processes of each company.

Regulatory level: operating, maintenance and safety manuals,

etc., and the related general procedures, which are mostly subject

to formal approval by the administrative authorities issuing the

authorizations (DGAC, IVW-DL, FAA, etc. ).

Management systems: the Air France Integrated Management

System/IMS Manual and the KLM Integrated Safety Management

System/Manual, together with the related general procedures like

the Quality-Safety-Environment manuals of the entities, the

manual on health and safety in the workplace, Flight Safety

management, environmental management, management of the

Company’s food hygiene, together with the related general

procedures.

Passenger service: standards, services signatures, the ﬁve attitudes,

the PAMs (Passenger Airport Manuals), the general sale and after - sales

conditions, together with the other procedures associated with

customer service common to Air France and KLM.

3.3.2 Fundamental components

of internal control

established within

the Group

Based on analysis of the potential major risks, taking into account

the changes inside and outside its operations, the Group has

established and implemented the fundamental components of

Internal Control, aimed at preventing and controlling, insofar as

possible, risks that are both ﬁnancial and non - ﬁnancial in nature,

and evaluating its ability to implement the appropriate remedial

measures.

Operational procedures and processes

Management of the quality system

Both the Air France (Integrated Management System/IMS Manual)

and KLM Integrated Safety Management System/Manual outline

all the general provisions of the quality assurance system applied

in the two companies, i.e. the overall organization, management

processes, and the procedures and resources required to

implement quality management and meet the expectations of

customers and other stakeholders.

In each division of the two companies, an ISM/ISMS review takes

stock of the operation of the ISM/ISMS management systems and

measures the performance of the main steering processes.

In addition to the regulatory approvals enabling each company

to carry out its activities, progress is recognized in the achievement

of certiﬁcation from independent bodies, notably, for example,

for Air France:

— IOSA certiﬁcation (IATA Operational Safety Audit) since

September2005, renewed for a seventh time in the autumn

of 2018;

— Air France global IMS certiﬁcation based on the ISO14001/

Environment, ISO 22000 certiﬁcation for food health and

OHSAS 18001/Vocational Health & Safety (renewed in

autumn 2017);

— ISO9001/Quality certiﬁcation for a growing number of entities.

For KLM:

— the ISO14001/Environment certiﬁcation was renewed in 2018;

— IOSA certiﬁcation (IATA Operational Safety Audit): The audit

was performed in the autumn of 2018 and the renewal of the

certiﬁcate took place in March2019.

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Quality assurance

Control over the operational processes is based primarily on three

monitoring methods:

Internal monitoring is carried out by the quality assurance

departments articulated around:

— an audit and inspection program (covering, in particular,

organization and management, ﬂight operations, in - ﬂight

service, ﬂight planning, ground handling and freight, hazardous

merchandise, engineering and maintenance);

— regular monitoring of operations with incident analysis and

routine use of debrieﬁng;

— proactive prevention processes.

External monitoring is carried out by the Civil Aviation Authorities

(IVW-DL, DGAC, FAA, etc. ) and specialized certiﬁcation bodies,

and takes the form of audits of the operating principles and of the

Group’s proprietary internal monitoring system. Air France and

KLM are also regularly audited by their customers and partners.

Monitoring of partners

Control over sub - contractors and suppliers is undertaken within

the framework of the regulatory monitoring program approved

by the Civil Aviation Authorities.

Code share partnerships are subject to an additional requirement

to comply with IOSA standards that are recognized by the

profession as the ultimate reference in Flight Safety and Security.

The general rule is that partners are IOSA certiﬁed except in the

speciﬁc case when, for example, the size of aircraft excludes the

airline from the IOSA scope. In this case, the partner airline is not

IOSA certiﬁed, Air France and KLM implement a special technical

monitoring process aimed at providing a reasonable assurance

of an equivalent level.

In terms of control over the monitoring process, the supervision

of the eective implementation of preventive/remedial actions

resulting from this overall monitoring is ensured by the quality

assurance departments, coordinated within each airline.

More generally, the sub - contractor control procedure addresses

all the areas of risk. It is reﬂected in the realization of monitoring

activities like audits, inspections and checks, sometimes carried

out by the sub - contractors themselves. Monitoring is ensured on

a quarterly basis. An expanded transverse action plan is in place,

taking into consideration the new legislation on the duty of

vigilance. More globally an action plan covering the monitoring

of sub - contractor activity is deployed in the dierent Air France

entities and coordinated on at the corporate transverse level in

dedicated steering committees.

Information systems

The control procedures cover the information and

telecommunication systems.

These procedures aim to ensure the:

— reliability of the IT and telecommunications systems;

— integrity of the data through the appropriate resources,

infrastructure and checks;

— continuity of IT services and the availability of data at the

production sites through a local contingency strategy, secure

architecture and a security system covering external access

points;

— conﬁdentiality of information within the framework of national

laws and the security of IT infrastructures through the

establishment of secure, monitored and eective accesses.

The managements of the two companies ensure that the

resources and expertise required by the Information systems are

developed within the framework of deﬁned strategic objectives.

Project management and software application development

tools are also deployed: the so - called Symphony method for

common AirFrance – KLM projects was based on the Tempo (Air

France) and Prince2/Steelband (KLM) methods. AirFrance – KLM

has adopted an “Agile” development process based on the

SCRUM and DEVOPS methodologies. The main aims are to

generate business line added value more rapidly, accelerate “Time

to Market”, align IT and business line objectives by prioritizing

value, avoiding the development of rarely - used functionalities,

reducing the risks at the earliest - possible opportunity,

streamlining the development and maintenance processes and

increasing the eectiveness of the teams.

The work carried out in connection with Internal Control projects

and the ongoing project to gradually establish a coordinated and

optimized organization is leading to the launch of action plans

designed to strengthen Internal Control, particularly with regard

to risks like business continuity and personal data protection.

The Group’s Information Technology division deﬁnes the policies

establishing the framework for the functioning, security and

consistency of the information systems deployed and has

published a Security Information Manual (ISM–ISO27001 standard),

establishing a common security policy for information systems.

Procurement

The common AirFrance – KLM Procurement organization has

been operational since September1, 2008, and has been headed

since its inception by a Group Chief Procurement Ocer from KLM,

seconded by an Air France Senior Vice-President, Procurement.

It is structured around seven procurement teams. These

procurement teams act in a transverse and coordinated manner

for each of the AirFrance – KLM Group, Air France and KLM as

well as for, when required, a number of the Group’s airline

subsidiaries.

The activity of the Procurement function aims to supply the

entities with suitable products and services at the required time, at

the best possible cost of ownership and at the lowest possible risks.

This is achieved by applying a procurement policy focused on

the expertise of the buyers, with separate responsibilities (buyer,

prescriber and supplier), the establishment of contracts and the

use of various (electronic) tools.

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Risks and risk management

3 Organization and functioning of internal control

The CPO Board, comprising the Group Chief Procurement Ocer

and Air France’s Senior Vice-President, Procurement, coordinates

the Procurement teams through regular meetings and presents

the procurement performance and developments to the CFOs

on a quarterly basis.

The Heads of Procurement meet on a regular basis in the dierent

structures (e.g. the Quarterly AirFrance – KLM DPO Meeting, a

Quarterly Performance Meeting, direct meeting between Heads

etc. ) to develop joint programs and share best practices.

To assess the risks related to sustainability (environmental, ethics,

procurement, social) vendors are analyzed and evaluated by

EcoVadis, a company mandated by AirFrance – KLM, with the

emphasis on high - risk segments such as production in low - cost

countries, and with a minimum score requirement. In addition, all

procurement - managed vendors are required to commit to a

Code of Conduct, reﬂecting Air France – KLM’s sustainability

requirements.

All new vendors are assessed on their level of ﬁnancial risk on the

basis of the Dun & Bradstreet evaluation. Risk reduction strategies

are required for vendors with a high level ﬁnancial risk.

Lastly, to reduce the risks at AirFrance – KLM level, all contracts

with vendors include clauses on anti - bribery, personal data

handling and other relevant risk areas.

Prevention of ticketing fraud

A fraud prevention unit is responsible for preventing, insofar as

possible, the risks relating to the:

— fraudulent use of illegally - purchased tickets (credit cards and

other means of payment);

— protection of loyalty programs (individual and corporate

clients) in terms of both earn and burn;

— internal fraud.

A fraud prevention activity report was submitted to the Audit

Committee in October2019.

Both Air France and KLM have put in place whistle - blower

procedures and an e - learning anti - fraud training module aimed

mainly at the sales teams.

Prevention of ﬁnancial fraud

Due to the proliferation of cases of attempted fraud, the Group

has strengthened its internal control processes with detailed

instruction notes, e - learning modules and training/information

sessions.

Evaluation and monitoring of Internal Control

When establishing its internal control framework and risk

management process, AirFrance – KLM chose the COSO 2013

(Committee Of Sponsoring Organisation of the Treadway

Commission) standard and the COBIT 5 (Control Objectives for

Information and related Technology) as its starting point. This

COSO reference framework positions Internal Control in the light

of the following three categories of objectives (operations/ﬁnancial

information/compliance) and deﬁnes the latter relative to ﬁve

components:

— control environment;

— risk assessment;

— control activities;

— information and communication;

— monitoring activities.

The COBIT identiﬁes ﬁve processes:

— evaluate, direct and monitor;

— align, plan, and organize;

— build, acquire and implement;

— deliver, service and support;

— monitor, evaluate and assess.

Transactional level ontrols (process) are realized via design

eectiveness testing, followed by operational eectiveness testing.

Similarly, the IT general controls are the subject of a formalized

annual evaluation, followed by monitoring of the ensuing action

and remedial plans.

3.3.3 Internal control relating

to the establishment and

processing of ﬁnancial and

accounting information

Based on an analysis of the signiﬁcant entries in the consolidated

ﬁnancial statements and an assessment of the risks, the Group

has identiﬁed the most important companies and, within these

entities, the processes that make a predominant contribution to

the establishment of the ﬁnancial statements.

For each of these signiﬁcant processes, process documentation

detailing the controls and separation of tasks has been

established, followed by the implementation of existence and

eectiveness testing.

The Group’s major divisions and subsidiaries had thus evaluated

the eectiveness of their Internal Control relating to ﬁnancial

information as at December31, 2019.

Pursuant to Article L.823 - 19of the Code de Commerce, the Audit

Committee oversees the process to establish the ﬁnancial

information and, when necessary, formulates recommendations

to guarantee the integrity of the process to establish the ﬁnancial

information, the eectiveness of the Internal Control and risk

management procedures and, as necessary, of Internal Audit, as

regards the procedures required to establish and process the

accounting and ﬁnancial information, with no compromise to its

independence. It also ensures the realization by the Statutory

Auditors of their mission and respect by the Statutory Auditors

of the conditions for their independence.

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3

Risks and risk management

Organization and functioning of internal control

3

Financial procedures and processes

and the accounting year end

Finance process

Investments are managed at the level of each company and the

decision - making process is coordinated by the Group Investment

Committee (GIC) through decision - making platforms (above

€0.5million) bringing together all the stakeholders (business line

and management controllers at company and Group level). This

Group Investment Committee is composed of AirFrance – KLM’s

Chief Financial Ocer and the Chief Financial Ocers of Air

France and KLM.

All investments of more than €5million, together with operations

relating to the ﬂeet, and shareholding and divestment transactions,

are submitted for approval to the Group Executive Committee

by the Group’s Management Controller and the Group’s Chief

Financial Ocer.

The management of AirFrance – KLM’s market risks is overseen

by the Risk Management Committee (RMC), which meets each

quarter and, after examining the Group reporting, determines the

hedges to be set up during the coming quarters: the hedging

ratios to be achieved, the time period for respecting these targets

and, potentially, the preferred type of hedging instrument.

These decisions are then implemented in each company by the

Treasury Management departments, pursuant to the procedures

for the delegation of powers.

Regular meetings are organized between the Treasury Management

departments of the two companies, to optimize the coordination

of decision implementation (hedging instruments, the strategies

planned and counterparties).

The fuel hedges are covered in a weekly report forwarded to the

General Managements of the AirFrance – KLM Group, Air France

and KLM. A summary of the cash positions of Air France, KLM

and Air France – KLM is communicated weekly to the

AirFrance – KLM Group’s General Management.

The AirFrance – KLM, Air France and KLM cash positions are the

subject of monthly reports to the Finance departments. These

reports include the interest rate and currency positions, the

portfolio of hedging operations, a summary of investments and

ﬁnancing by currency and a tracking statement of the risk

exposure by counterparty. The Risk Management Committee sets

the minimum thresholds in terms of the ﬁnancial quality of

counterparties, determines the maximum amount to be allocated

to a single counterparty and is responsible for monitoring the

quarterly positions.

The hedge strategies aim to reduce the exposure of

AirFrance – KLM and therefore to preserve budgeted margins.

The instruments used are futures, swaps and options. The internal

risk management procedures prohibit instruments characterized

as trading instruments unless expressly authorized by the Chief

Financial Ocer of AirFrance – KLM. All the instruments used

must qualify as hedging instruments pursuant to the IAS/IFRS

accounting rules. Generally speaking, no trading or speculation

is authorized.

Any substantive change in the hedging strategy is the subject of

a systematic presentation to the Audit Committee.

Accounting and ﬁnancial statements process

The consolidated ﬁnancial statements of the AirFrance – KLM

Group are prepared on the basis of the data provided by the

ﬁnance departments of the AirFrance – KLM holding company

and its subsidiaries.

The Group is principally composed of the two operational sub-

Groups, Air France and KLM, which prepare their own consolidated

ﬁnancial statements prior to their consolidation within the

AirFrance – KLM ﬁnancial statements.

It is imperative that the accounting information reported by the

dierent companies complies with the Group’s accounting rules,

methods and standards as deﬁned by the Group, and the

presentation of the ﬁnancial statements must comply with the

format circulated by the Group.

All the companies within the Group refer to the Accounting

Procedures Manual which is based on the International Financial

Reporting Standards governing the establishment of the ﬁnancial

statements of European listed companies.

The consolidated ﬁnancial statements are submitted to the

General Management then presented to the Audit Committee

every quarter. Furthermore, the half - year and annual ﬁnancial

statements are also reviewed by the Statutory Auditors prior to

their formal closure.

The parent company’s ﬁnancial statements are closed annually,

reviewed by the Statutory Auditors and presented to the

Management and the Audit Committee.

Process for reporting passenger and cargo revenues

This process is performed in each of the companies and enables

monthly revenue ﬁgures to be communicated to management.

Furthermore, Air France and KLM have established a procedure

known as the “progressive daily revenue” process making it

possible to know the estimated amount of passenger revenues

for the previous day.

In addition, departments of the Group, Air France and KLM

analyze the results by market and by route (unit revenues per

revenue passenger - kilometer, per available seat - kilometer, per

revenue ton - kilometer etc. ) at the level of the passenger and

cargo businesses.

A monthly presentation on the level of transportation revenues

(passenger and cargo) is also made to the Group Executive

Committee by the senior managers of these entities.

The Shared Services Center (SSC) in Toulouse is in charge of

commercial Passenger revenues for the companies Air France

and KLM, while the Shared Services Center at Amsterdam-

Schiphol is responsible for commercial Cargo revenues for the

Group (Air France, KLM and Martinair).

For these two activities, service level agreements have been

signed between Air France, KLM and AirFrance – KLM.

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Air France- KLM — 2019 Universal Registration Document154

Risks and risk management

3 Organization and functioning of internal control

Management Control reporting process

The Group Corporate Control department coordinates the reporting

process with the Corporate Controllers in the two sub - groups.

In liaison with the Group’s principal divisions and subsidiaries,

these three teams of controllers then analyze the past month’s

ﬁnancial results and estimate the results for the coming months

(forecast adjustment process) through to the end of the current

ﬁnancial year.

Once the accounting result for the month is known, Group

Corporate Control produces a monthly document (known as the

Group management report) that summarizes the monthly key

business, employee - related and ﬁnancial data, both actual and

for the coming months, in order to determine the outcome for

the current ﬁnancial year for the Group, the two sub - groups and

each business line. The same applies to the ﬁgures on cash - ﬂow,

and the cash and debt positions.

This monthly Group management report is presented to the

Group Executive Committee by the Group’s Chief Financial

Ocer or the Group Corporate Controller.

In addition, a monthly report on the main ﬁnancial KPIs is circulated

to the members of the AirFrance – KLM Board of Directors.

In addition, management review meetings take place on at least

a quarterly basis between the CEOs, CFOs and Executive Vice-

Presidents of the Passenger, Cargo, Engineering & Maintenance

and Transavia businesses.

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4

CORPORATE SOCIAL RESPONSIBILITY:

EXTRA-FINANCIAL PERFORMANCE

STATEMENT

4.1 Creating long - term value for all our stakeholders 156

4.1.1 The Group’s business model 156

4.1.2 Identiﬁcation of the key priorities for building long - term relationships 156

4.1.3 Business responsibility at the heart of the strategy 162

4.2 Human resources 164

4.2.1 Working conditions and social dialogue 164

4.2.2 Human capital development 167

4.2.3 Health and safety in the workplace 168

4.2.4 Fostering diversity and equality 170

4.2.5 Social indicators for the Group 174

4.3 Environmental impact 181

4.3.1 Carbon emissions 182

4.3.2 Adaptation to climate change 185

4.3.3 Noise and local pollution 187

4.3.4 Waste and the circular economy 188

4.3.5 Biodiversity 190

4.3.6 Environmental indicators 192

4.4 Customer trust 201

4.4.1 Operational safety for stakeholders 202

4.4.2 Data and IT systems protection 203

4.4.3 Accessibility of products and services 205

4.5 Ethics and compliance 206

4.5.1 Group reference texts 206

4.5.2 Respect of Human Rights 206

4.5.3 Business ethics 207

4.6 Societal value 209

4.6.1 Local development 209

4.6.2 Sustainable procurement 211

4.6.3 Monitoring of Act No. 2017 - 399known as the Duty of Vigilance Law 214

4.7 Report by one of the Statutory Auditors,

appointed as Independent Third Party,

on the consolidated non - ﬁnancial statement 216

2019 Universal Registration Document — Air France - KLM 155

4

4_VA_V10 22/04/2020 14:19 Page155

4.1.1 The Group’s business model

The Group's business brings people, economies and cultures together,

and drives economic growth and social progress. The overarching

ambition of the AirFrance–KLM Group is to become the leading

airline group in Europe and one of the most powerful in the world

for its employees, customers and shareholders, while assuming its

role as a pioneer in sustainable aviation. As such, ﬂight safety is both

an absolute imperative that the Group owes to its customers and

sta, and a daily commitment.

The AirFrance–KLM value creation model addresses all of the Group's

stakeholders, namely employees, shareholders, customers, suppliers,

authorities, institutional and non-governmental organizations, and

other local partners. As part of its day-to-day activities, the Group

interacts with diverse stakeholders, while its activities and operations

have multiple impacts on wider society (qualitative and quantitative).

The value creation model shows the impact areas where the

Air France – KLM Group adds value and which, thanks to its

fundamental strengths and unique competitive advantages, enables

a response to the societal and sustainability challenges.

4.1.2 Identiﬁcation of the key

priorities for building

long - term relationships

Ongoing dialogue and a mutual understanding of the challenges

facing Air France–KLM and its environment are key to building

long - term relationships with stakeholders.

Dialogue with stakeholders

The Group pays a great deal of attention to the expectations of

its stakeholders, in particular its customers, shareholders, employees

and suppliers, and to local communities and players in civil

society like NGOs. A number of initiatives enable their perception

to be evaluated on a regular basis, through notably:

— internal barometers and meetings to gather employee

suggestions;

— customer perception and satisfaction surveys;

— regular dialogue with individual shareholders and investors;

— dialogue and evaluation of supplier CSR performance;

— exchange of best practices and working groups within the

industry and with other large companies;

— discussions with shareholders and Socially Responsible

Investment (SRI) investors together with recommendations

from extra - ﬁnancial ratings agencies;

— opinions and remarks gleaned from the dedicated email

addresses, websites and the social media;

— feedback channels deployed to enable stakeholders (particularly

employees, customers and local residents around airports) to

communicate any comments and potential complaints.

In 2019, the Group carried out a new materiality analysis, enabling

the priorities key to the Group’s activity to be re - evaluated and

the results to be compared with those of the materiality analysis

carried out in 2017. Nearly 130,000stakeholders were invited to

participate in this survey with a response rate of approaching 7%:

national and international corporate and individual customers,

the Group’s employees and managers, shareholders, investors,

suppliers, NGOs, governmental organizations, politicians, local

representatives from the Paris and Schiphol regions, CSR experts

(extra - ﬁnancial rating agencies, certiﬁcation bodies, etc. ), CSR

managers from leading companies and representatives of the airline

sector and the Group’s peers. For each topic, the respondents

ranked the level of priority to be accorded by Air France–KLM

and their perception of the Group’s current level of performance.

4.1 CREATING LONG - TERM VALUE

FOR ALL OUR STAKEHOLDERS

Creating long - term value for all our stakeholders4

Corporate social responsibility: Extra-ﬁnancial performance statement

156 Air France- KLM — 2019 Universal Registration Document

Pursuant to Article L.225-102-1 of the French Code de Commerce,

the AirFrance–KLM group sets forth the main social, societal and

environmental issues relating to its activities, Human Rights and

business ethics across the entire value chain, and stipulates the

policies in force to prevent, identify and mitigate the occurrence

of these risks.

All of this information is reviewed by one of the Group’s Statutory

Auditors, as a designated Independent Third Party. The reporting

scope covers the AirFrance–KLM Group. When the information

relates to a dierent scope, the scope of application is speciﬁed

in the text.

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4

Corporate social responsibility: Extra-ﬁnancial performance statement

Creating long - term value for all our stakeholders

4

4.2.1 Working conditions

and social dialogue

(1)

SDG 8

Risks:

Conﬂictual negotiations on workplace

agreements, social conﬂicts, strikes.

Potential impact on employee

engagement, on customer service

quality, on operations quality of

customer service, on operations, on the

Group’s reputation and its attractiveness

as an employer.

See 3.2.3Working conditions

and human capital development

Foster a constructive and

transparent dialogue to build

mututal trust, pursue a policy

based on respect of individuals

and responsibility towards

customers, in a conﬁdential

manner.

Opportunities:

Employee motivation

and commitment.

Employee Promoter

Score (EPS)

Reporting of the Group’s extra - ﬁnancial risks

In its Extra-ﬁnancial Performance Statement, the Group has opted to report on a number of priorities that it considers important in the

light of its analysis of the extra-ﬁnancial risks, its business activity and the expectations of its stakeholders, and of the regulatory requirements.

The following table summarizes these priorities, the related risks and the opportunities deemed to be the most material, the policies

in force to reduce their impacts, the performance indicators and the Group’s contribution to the United Nations Sustainable

Development Goals (SDGs).

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

Human resources

(1) Priority linked to a major extra - ﬁnancial performance risk.

2019 Universal Registration Document — Air France - KLM

157

This new materiality analysis showed that the priorities deemed to

be the most important for the Group in 2017 remained so in 2019

including, notably, Customer Satisfaction, Operational Safety and

Security, and Financial Performance. Other topics such as Fleet

Development and CO

2

Emissions moved up sharply in the ranking,

into the top three. The detailed results highlight that the Group

and its stakeholders agree on the perception of the priority

nature of these issues.

Within the framework of this analysis, stakeholders also ranked a

list of strategic priorities potentially impacting the sector’s

long - term growth, with the acceptability of the environmental

impacts of aviation, the use of sustainable alternative fuels and

transparency onCO

2

emissions all heading the list.

Analysis of the extra - ﬁnancial risks

The Group reviews its main extra - ﬁnancial risks and opportunities

on an annual basis. The main environmental, social and societal

risks resulting from its activities across the entire value chain have

been evaluated to create a matrix of the extra - ﬁnancial risks, with

the following risks emerging as the most material in 2019:

— carbon emissions;

— sustainable aviation (carbon footprint, responsible catering,

cabin waste, low - carbon solutions);

— local pollution (noise pollution);

— impact of climate change on ﬂight operations;

— working conditions and social dialogue;

— resource consumption (energy consumption and waste

management);

— data privacy;

— talent attraction and retention;

— local and global acceptability.

The risks considered to be the most signiﬁcant mainly relate to

the environmental impacts of Air France–KLM’s operations. The

analysis also illustrates the need for the Group to ﬁnd innovative

solutions to reduce its impacts and respond to the challenge of

the acceptability of its growth. Regarding the main social risks,

working conditions and social dialogue appear the most material.

Lastly, data privacy remains a strategic issue for the Group.

These results are consistent with the results of the materiality

matrix which illustrates the relative perceptions of the internal

and external stakeholders, and as compared with the Sustainable

Development strategy developed by the Group.

These extra - ﬁnancial risks are monitored on a permanent basis

and are an integral part of the Group’s operational risk sheets.

They are outlined in Section3 Risks and risk management. They

are also an integral part of the Group’s Sustainable Development

strategy and are the subject of procedures, monitoring procedures

and action plans.

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Corporate social responsibility: Extra-ﬁnancial performance statement

4 Creating long - term value for all our stakeholders

4.2.2 Human capital

development

(1)

SDG 8

Risks:

Mismatch between employee skills

and the company’s needs, shortage

of people with speciﬁc qualiﬁcations,

diculty in recruiting and/or

retaining talent.

Potential impact on the ability to grow,

capture new market shares and ﬁght

the competition, and on the employer

brand image.

See 3.2.3Working conditions

and human capital development

Oer a training and career

development program to every

employee, giving them the

opportunity to learn and develop

their skills.

Opportunities:

Attract talent, steer skills and

qualiﬁcations in line with the

long - term strategy.

Number of hours

of training per employee.

4.2.3 Health and safety

in the workplace

SDG 8

Risks:

Unsafe working situations (safety and

security), accidents in the workplace

(physical and psychosocial), employee

health measures in keeping with the

working conditions.

Potential ﬁnancial impacts with an

increase in social costs (absenteeism,

loss of working time, insurance and

replacement costs), deterioration in

levels of customer service and in the

company’s reputation as an employer.

Implement a voluntary and

proactive approach towards risk

prevention and protecting

employee health and safety

i.e. the airline safety standards

in force.

Opportunities:

Promotion of a safety - ﬁrst

culture and individual vigilance

supported by all the employees.

Frequency and gravity

rates for accidents

in the workplace.

4.2.4 Promote diversity

and equality

SDG 5

Risks:

Inequitable treatment of employees,

discrimination in recruitment,

compensation and career development

for inappropriate reasons (sex, age,

nationality, sexual orientation,

disability, religion, ethnicity, etc. ).

Potential ﬁnancial impacts with

the increase in social costs (disputes,

absenteeism, resignations), reduced

innovative ability due to a lack of

diversity, deterioration in the company’s

reputation as an employer.

Promote diversity, implement

processes ensuring equal

opportunity and combatting

all forms of discrimination.

Opportunities:

Employee motivation and

commitment, diversity and

inclusion for a more innovative

company and better to reﬂect

society and customers.

% of women in

managerial functions

(1) Priority linked to a major extra - ﬁnancial performance risk.

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

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4

Corporate social responsibility: Extra-ﬁnancial performance statement

Creating long - term value for all our stakeholders

4

4.3.2 Adaptation

to climate change

(operational

impacts)

(1)

SDG 13

Risks:

Operational disruption due to more

frequent extreme climate events

(storms, high winds, ﬂooding, snow,

droughts, etc. ). Deterioration

in customer service.

Potential operational and ﬁnancial

impacts linked to ﬂight cancellations,

delays and re - routing. Additional costs

linked to maintenance and preservation

of assets, passenger compensation.

See 3.2.2Climate change

Implement a policy to secure

operations and operational and

commercial procedures to

guarantee customers service

continuity, in the best conditions.

Opportunities: Development of a

balanced network. Deployment

of a dierentiated Recovery

policy for customers.

4.3.1 CO

2

emissions

(1)

SDG 13, 7, 9

Risks:

Questioning of the acceptability

of air transportation growth potentially

leading to a reduction in operations

and more restrictive regulations.

Customer expectations and growing

pressure from civil society to reduce

environmental impacts.

Potential ﬁnancial impacts

with an increase in operational costs

(new procedures, etc. ) and

compensation potentially leading

to a distortion in competition between

carriers. Decline in customer demand.

Deterioration in the company’s

reputation and that of the industry

as a whole.

See 3.2.2Acceptability

of air transportation growth

ImplementCO

2

emission

reduction policies for the air and

ground operations and identify

ambitious reduction targets

through to 2030. Propose

osetting solutions.

Opportunities: Modernization

of the ﬂeet with the arrival of

more ecient aircraft (reduction

in fuel consumption), energy

transition to electric runway

equipment. Contribution to

the development of low - carbon

energies by supporting the

development of industrial

production for sustainable

alternative fuels. Gain market

share by responding to the

expectations of individual

and corporate customers.

Partnerships to develop

innovative solutions on

the ground and in the air.

CO

2

eciency

per passenger kilometer

CO

2

emissions

from the ground

operations

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

Environment

4.3.3 Noise disturbance

and air quality

(1)

SDG 9

Risks:

Questioning of the acceptability

of air transportation growth potentially

leading to more restrictive regulations

and the limitation of operations.

Potential operational and ﬁnancial

impacts with the implementation

of new regulations and procedures.

See 3.2.2Acceptability of air

transportation growth

Pursue a permanent dialogue

with the representatives of

local - resident associations

around airports and implement

less noise procedures.

Opportunities: Modernization

of the ﬂeet with the arrival of

more ecient, quieter aircraft.

Noise footprint

(1) Priority linked to a major extra - ﬁnancial performance risk.

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Corporate social responsibility: Extra-ﬁnancial performance statement

4 Creating long - term value for all our stakeholders

4.3.4 Waste and the

circular economy

(1)

SDG 12

Risks:

Questioning of the acceptability of

air transportation growth potentially

leading to more restrictive regulations

on resource management and waste.

Potential operational and ﬁnancial

impacts with the implementation

of new procedures, impacts on the

Group’s reputation as a responsible

airline operator.

See 3.2.2Acceptability

of air transportation growth

Develop a policy to reduce,

recycle and upcycle waste.

Opportunities: Respond

to the expectations of customers

by reducing wastefulness and

recycling waste.

Non - recycled waste

4.3.5 Biodiversity Risks:

Impact of air transportation on

biodiversity linked to the eects

of climate change induced

by theCO

2

emissions it generates.

Potential ﬁnancial impacts with

the increase in operating costs

(new procedures, etc. ) and osetting

potentially leading to a distortion in

competition between carriers. Decline

in customer demand. Deterioration

in the company’s reputation and that

of the industry as a whole.

Oer customers osetting

solutions and support

environmental projects.

Opportunities:

Partnerships to develop

innovative solutions on

the ground and in the air.

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

(1) Priority linked to a major extra - ﬁnancial performance risk.

4.4.2 Conﬁdentiality

and data protection

(1)

SDG 12

Risks:

Loss of customer trust in the Group’s

ability to protect and ensure the

conﬁdentiality of their personal data.

Potential ﬁnancial impacts linked

to the loss of market share and to

competition.

See 3.2.3Failure of a critical IT system,

IT risks and cyber criminality.

Implement data privacy policies

and IT systems, and ensure the

conﬁdentiality of personal data.

Opportunities:

Secure customer loyalty

based on their trust in the

Group’s activities.

4.4.1 Operational safety

for stakeholders

SDG 12

Risks:

Loss of customer trust in the Group’s

ability to ensure their safety throughout

their journeys (ﬂight safety, food

security, health, etc. ).

Potential ﬁnancial impacts linked

to the loss of market share and to

competition.

See 3.2.2Risks related to airline safety

Ensure the safety and health

of all stakeholders (customers,

employees and partners)

while improving the customer

experience throughout

their journey.

Opportunities:

Customer loyalty based on trust

in the Group’s activities.

Net Promoter Scores

(NPS)

Customer trust

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4

Corporate social responsibility: Extra-ﬁnancial performance statement

Creating long - term value for all our stakeholders

4

4.4.3 Accessiblity

of the products

and services

SDG 12

Risks:

Loss of customer trust in the Group’s

ability to ensure access to its products

and services, to all of its customers,

throughout their journeys.

Potential ﬁnancial impacts linked

to the loss of market share and to

competition. Reputational impact

on the Group’s image as a responsible

air operator.

Propose assistance services

to passengers with disabilities

or with reduced mobility.

Opportunities:

Gain of market share and

customer loyalty based on their

trust in the Group’s activities.

Contribution to a more

inclusive society.

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

4.5.2 Respect of Human

Rights

Risks:

Non - respect of the fundamental

liberties and social regulations

in the capacity as an employer and

through the supply chain.

Potential ﬁnancial impacts

(substantial ﬁnes, legal proceedings)

on the Group’s reputation.

Implement policies aimed

at ensuring respect of the

fundamental liberties and the

compliance of all the Group’s

activities. Deploy a responsible

procurement policy.

Opportunities:

Image and reputation

as a responsible business.

Ethics

4.5.3 Business ethics Risks:

Non - respect of regulations

(laws on competition and

anticorruption, taxation), commercial

sanctions and regulations relating

to export control, due to unethical

behavior on the part of employees.

Potential ﬁnancial impacts

(substantial ﬁnes, legal proceedings),

on the Group’s reputation.

See 3.2.3Non - compliance with

regulations, including competition

and anti - bribery laws

Implement a process to ensure

the compliance of all the

businesses, and measures

to prevent anti - competitive

practices by employees,

via training and

wareness - raising initiatives.

Opportunities:

Image and reputation

as a responsible business.

Realization rate

of e - learning program

on the prevention

of corruption.

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4.1.3 Business responsibility

at the heart of the strategy

Air France – KLM’s ambition is to achieve high standards of

performance over the long term by reconciling proﬁtable growth,

environmental protection, social progress and the development

of the regions in which it operates.

Governance

Sustainable Development governance is ensured by the

management bodies at the highest level of the Group:

— the Board of Directors approves the strategic orientations and

monitors their implementation;

— within the Board of Directors, the Sustainable Development and

Compliance Committee, established in 2018, assists in reviewing

the policies, by issuing recommendations and ensuring that

issues linked to sustainable development are taken into

account when deﬁning the Group’s strategy;

— the Group Executive Committee determines the sustainable

development policy and ensures that it is an integral part of

the Group’s strategic planning. It reviews the sustainable

development strategy and performance on an annual basis.

The Group’s Corporate Secretary is responsible for sustainable

development and compliance;

— at Air France, the Sustainable Development policy is steered

by the Executive Vice-President, Corporate Secretary, who is

a member of the Air France Executive Committee, supported

by Air France’s Sustainable Development Committee composed

of members of the of the Air France Executive Committee,

which guides and ensures the advancement of Air France’s

sustainability strategy and eorts. At KLM, this role is fulﬁlled by

the Executive Vice-President General Counsel & Corporate

Center and member of the KLM Executive Committee,

supported by KLM’s Sustainable Development Council, which

guides and ensures the advancement of KLM’s sustainability

strategy and eorts;

— Air France’s Environment and Sustainable Development

Department and KLM’s Sustainability Oce are tasked with

proposing and implementing the sustainable development

strategy.

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4 Creating long - term value for all our stakeholders

Priority and related SDGs Description of the risks Policy and opportunities Performance indicator

4.6.1 Local development

(1)

SDG 8

Risks:

Questioning of the Group’s regional

growth due to more restrictive local

and national regulations.

Potential ﬁnancial impacts with the

increase in operating costs potentially

leading to a distortion in competition

between carriers.

See 3.2.2Acceptability

of air transportation growth.

Contribute to local development

by creating direct and indirect

jobs and activity around the

hubs, and in the territories

served by the Group.

Opportunities:

Promote the acceptability

of activity growth.

4.6.2 Responsible

procurement

SDG 12

Risks:

Major break - down in the supply chain

due to non - respect or serious breach

in terms of working conditions

(health and safety), Human Rights

(forced working, child labor), the

environment (pollution) or corruption.

Potential ﬁnancial impacts (substantial

ﬁnes, legal proceedings), on the

Group’s reputation.

See 3.3.2Fundamental components

of internal control established within

the Group

Implement a responsible

procurement policy enshrining

the principles of societal

reponsibility in relations

with suppliers, by reinforcing

the management of ethical,

social, environmental and supply

chain risks.

Opportunities:

Dialogue with suppliers

on the sustainable development

priorities, implementation

of innovative solutions.

% of suppliers having

signed the Sustainable

Development Charter.

Number of suppliers

evaluated by Ecovadis.

Societal value

(1) Priority linked to a major extra - ﬁnancial performance risk.

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Extra - ﬁnancial performance statement

In its Extra-ﬁnancial Performance Statement, the Group has opted to report on a number of priorities that it considers important in

the light of its analysis of the extra-ﬁnancial risks, its business activity and the expectations of its stakeholders, and on the regulatory

requirements.

The following concordance table shows where all the elements presented within the framework of the Extra - ﬁnancial performance

statement (EFPS) can be found:

Elements of the EFPS Chapter/Section

Strategy and business model 1.1 Market and environment

1.2 Strategic outlook

1.2.3 AirFrance–KLM’s value creation model

Identiﬁcation and description of the main extra - ﬁnancial risks 3.1.2 Identiﬁcation and evaluation of the risks

linked to the business 3.2.2 Risks linked to the air transportation activity

3.2.3 Risks linked to the Group’s processes

4.1.2 Identiﬁcation of the key priorities in building

long - term relationships

Description of the policies, results and 4.2 Human resources, Environmental impacts, Customer trust,

performance indicators to 4.6 Ethics and compliance, Societal value

2019 Universal Registration Document — Air France - KLM 163

4

Corporate social responsibility: Extra-ﬁnancial performance statement

Creating long - term value for all our stakeholders

4

The compensation of Benjamin Smith, Chief Executive Ocer of

the AirFrance–KLM Group, includes criteria related to non - ﬁnancial

issues and sustainable development both in the annual variable

compensation and in the long - term variable remuneration (see

section [2.5.2]). The same sustainable development criteria are

also included in the variable part of the compensation of

Anne Rigail, CEO of Air France and Pieter Elbers, President and

CEO of KLM.

Commitments

The Group recognizes its responsibilities as an employer and

places its commitment to responsible and innovative corporate

citizenship at the heart of its strategy. Its commitments are set

forth in its Corporate Social Responsibility Statement, Social

Rights and Ethics Charter and Climate Plan.

Air France–KLM’s Sustainable Development policy enshrines the

respect of fundamental rights as deﬁned in the leading international

principles: Universal Declaration of Human Rights, the International

Labor Organization’s (ILO) Declaration on Fundamental Principles

and Rights at Work, and the Organization for Economic Cooperation

and Development’s (OECD) guiding principles.

Air France–KLM has been a signatory of the United Nations Global

Compact since 2003 and is committed to respecting its ten

principles in the areas of Human Rights, labor, the environment

and anti - corruption, and to promoting this commitment to its

partners. By integrating sustainability into its business and

operations, the Group strives to contribute signiﬁcantly to the UN

Sustainable Development Goals within its scope of inﬂuence.

Extra - ﬁnancial ratings

Air France – KLM’s extra - ﬁnancial performance is assessed

annually, in particular by the RobecoSAM, CDP, Vigeo Eiris,

Sustainalytics and ISS-ESG rating agencies.

In 2019, for the ﬁfteenth year running, the Group ﬁgured in the

Dow Jones Sustainability Indexes (DJSI World and DJSI Europe).

Furthermore, last year the Group retained its position as leader

of the “Airlines” sector, a ranking it has held for thirteen of the

past ﬁfteen years.

The CDP awarded the Group a score of B- (Management level) for

the Climate Change Supplier Engagement Rating questionnaire.

The rating agency ISS-ESG granted Air France–KLM “Prime”

status: the Group is the only airline company to ﬁgure in the

annual ISS ESG ranking of the large global companies deemed

to be achieving the highest standards of ESG performance.

Thanks to its performance, the Group maintains its ranking in the

FTSE4Good Index Series, the Euronext Vigeo Eiris indexes

(Europe 120 and Eurozone 120) and the Ethibel Sustainability

Index (ESI Excellence Europe). The Group is also a component of

the Ethibel Excellence and Ethibel Pioneer Investment Registers.

The Group has been awarded the Gold Medal by the Ecovadis

CSR rating agency.

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4.2.1 Working conditions

and social dialogue

Context and strategy

As an airline company, AirFrance–KLM’s success and growth

relies on the professionalism of its employees, and on their levels

of motivation and commitment. The working conditions and

social dialogue within each entity constitute a key performance

lever for the Group.

The 2019 ﬁnancial year was marked by regained trust between

the social partners and the management. The principles of

respect, transparency, conﬁdentiality and trust were advocated

in all the negotiations. The Group’s ambitions, as reﬂected in a

new strategy and a clariﬁed brand portfolio with three master

brands (Air France, KLM Transavia), were discussed and shared

within the Air France Group. In the interest of simpliﬁcation, the

Joon and Hop! brands were discontinued, by integrating Joon

within Air France and rebranding HOP! as Air France HOP!.

The Group seeks to preserve cohesion by fostering a constructive

and transparent social dialogue and by pursuing a People Strategy

based on mutual respect and responsibility towards employees.

The objective shared by all companies within the AirFrance–KLM

Group is the provision of working conditions enabling employees

eectively to fulﬁl their functions. Due to dierences between

the entities or country legislation, the HR policies are managed

separately.

Measures and performance

Social dialogue and functioning of the representative bodies

AirFrance – KLM

For AirFrance–KLM, the coordination of the workplace dialogue

takes place in each of the airlines comprising the Group and

within the Group’s European Works Council, bringing together

the representatives of sta whose head oces or entities are

based in the European Community.

The Group’s European Works Council was convened three times

during 2019, for two plenary ordinary meetings and one

extraordinary meeting, chaired by AirFrance–KLM’s Executive

Vice-President, Human Resources.

In April 2019, the meeting was attended by Benjamin Smith,

President & CEO of AirFrance–KLM while, within the framework

of the European Works Council, the Group’s Strategic Committee

met four times with AirFrance–KLM’s CEO to discuss the Group’s

strategic orientations.

During 2019, the AirFrance–KLM CEO Benjamin Smith, KLM

President & CEO Pieter Elbers and Air France CEO Anne Rigail

held regular meetings with employees at various locations to

engage in dialogue on current topics.

At Air France, KLM and Transavia, the Employee Experience was

a key element of the People Strategy in 2019 and will remain so

for the foreseeable future. “Our people deliver our customer

experience” and it is through this policy that the company can

For the deﬁnition see Note on the methodology for the reporting of the social performance indicators, section4.2.5.4

(1) NA: Not Available.

Key

Performance Indicator Deﬁnition Results

AirFrance–KLM employees, present all over the world, are the

Group’s main asset; they bring to life the Group’s brands and are

the face with customers. Thanks to their collective commitment

and their professionalism, the Group is able to oer its customers

high - end services and a caring journey, promoting lasting

relationships while operating its activities eciently and safely.

AirFrance–KLM aims to become one of the best places to work,

by creating a safe and motivating environment for its employees,

and by targeting a high result in the Employee Promoter Score

(EPS). The Group continues to invest in human capital development

and training, to develop the skills of employees and empower

them, to enable them to exceed customer expectations.

The relationship that links the Air France–KLM Group to its

employees is based on four values: trust, respect, transparency

and conﬁdentiality.

4.2 HUMAN RESOURCES

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4 Human resources

Employee Promoter Score

(EPS)

Percentage change in the EPS measured among Air France

and KLM employees (between July and December2019)

2018

NA

(1)

2019

+15%

Percentage of women

in managerial functions Top 10% management level for ground sta

Flight deck crew managerial functions

Cabin crew managerial functions

2018

32%

5.1%

65.4%

2019

33%

5.2%

65.5%

Number of hours of training

per employee

Number of hours of training per employee consolidated

at Group level

2018

39.7hours

2019

40.4hours

4_VA_V10 22/04/2020 10:12 Page164

outperform its competitors. Using the Employee Promoter Score

(EPS) as a common engagement and performance indicator,

managers conduct dialogues with their employees, to know what

drives them and to fulﬁl their needs. This in turn helps to build

employee commitment.

The roadmap is deﬁned in a Flight Plan for the company, focusing

notably on an ongoing commitment to sta development, support

for initiatives, the promotion of team spirit and reinforcing levels

of motivation.

To measure employee engagement, both Air France and KLM use

the EPS, the in - house equivalent of the Net Promoter Score

which is used to measure customer satisfaction. In the two

companies, a rotating random group of employees are asked

whether they would recommend Air France or KLM as an

employer. The results are shared with all sta.

In July 2019, KLM and Air France aligned their Employee

Promoter Score distribution and calculation methods.

In 2019, the KLM Employee Promoter Score increased by nine

points (to +70compared with +61 in 2018). Following the roll - out

of the Employee Promoter Score tool in July 2019,

Air France’s EPS increased by 28 points in the second half.

Transavia Netherlands also monitors the EPS, and realized an EPS

score of +44 in 2019.

At Group level, the consolidated EPS increased by 15% between

July and December2019.

The EPS can also be used to facilitate dialogue; in 2019, 534EPS

polls were submitted to KLM teams with a response rate of 67.1%.

EPS polls for AirFrance–KLM’s worldwide commercial teams

have also been introduced.

Air France

Following the new governance structure and the appointment of

Benjamin Smith and Anne Rigail, the negotiations had led to the

signature of an agreement on salary increases at the end of 2018

and a calming in social relations. In 2019 the workplace dialogue

was more serene and saw the signature of more than

25collective agreements across all categories of sta.

2019 was marked by the professional elections in March, conducted

for the ﬁrst time by electronic voting, and by the establishment

of the new representative bodies pursuant to the Macron Act.

The Social and Economic Committee (Comité Social et

Économique) and the Health and Safety at Work Commission

(Commission Santé Securité au Travail) replaced the former bodies,

the employee delegate (Délégué du Personnel –DP), the Works

Council (Comité d’Établissement –CE) and the Health, Safety and

Working Conditions Committee (Comité d’Hygiène Securité et

Conditions de Travail –CHSCT). A speciﬁc agreement setting

forth the functioning modes and resources, notably with the

establishment of local representatives, was signed in the spring.

This major change in the HR landscape involving the organization

of the representative bodies did not prevent the negotiations

proceeding as planned. The HR agenda was duly pursued and

enabled the presentation of corporate projects to the Group

Social and Economic Committee and the Social and Economic

Committees in the companies.

At Air France, the Employee Experience is a strategic priority in

support of the required transformation of the company.

In 2019, a number of dierent initiatives improved the Employee

Experience. For example:

— two thousand Air France employees were invited to take part

in the second round of Citizenship Days (1,000employees in

the ﬁrst round in 2018), during which they dedicated a day of

work to various humanitarian and ecological associations;

— the intrapreneurship program continued for the second year

with the selection of four projects;

— specially - themed weeks, dedicated to various topics–new

technologies, the Digital Factory, Health and Safety, Learning

Week and Sustainable Development–were organized at the

dierent Air France sites.

KLM

KLM renewed the collective labor agreements for Flight Deck

Crews, Cabin Crews and Ground Sta that were set to expire in

June2019 through to February28, 2022. KLM had a signature of

agreements for two CLAs; Ground Sta and Flight Deck Crews

and a negotiation result has been achieved for the CLA Cabin

Crews. In January2020, KLM also had a signature of agreement

for Cabin Crews. These agreements include a salary increase and

various agreements on sustainable employability, learning and

development.

In 2019 the KLM Works Council held its three - yearly elections

followed by an installation meeting for the new Works Council

on June1.

An agreement was also signed by the KLM Works Council and

the KLM Board of Directors on how to modernize employee

participation within KLM.

KLM NV has three pension schemes and three pension funds in

the Netherlands for Pilots, Cabin Crews and Ground Sta. The

pension funds for Pilots and Cabin Crews were de - risked in 2017

(Deﬁned Contribution scheme) while the pension fund for

Ground Sta remains a Deﬁned Beneﬁt scheme. Furthermore, in

2019, a study was conducted into de - risking the Ground Sta

scheme and, in 2020, negotiations will start with the unions to

seek an agreement on a Deﬁned Contribution scheme.

In the meantime, the Dutch government announced a new

pension system for 2022 based on age - independent and

degressive pension accrual. This will be a major reform with a

signiﬁcant impact on all three pension schemes.

KLM’s renewed organization - wide focus on sustainability also

encourage the submission of ideas on how to make KLM a more

welcoming and inspiring employer for every single employee,

with the oer of various opportunities for professional development.

In general, the aim is to motivate sta and facilitate activities that

help them to discover and develop their talents so they can make

better choices in an ever - changing environment.

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4

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Some examples:

— WhatsUpp–a tool that facilitates dialogue within teams and

helps to determine actions to improve the Employee Experience

(empowerment);

— employee events both across the company and in various

divisions to create memorable experiences for individual

employees. The teams were also recognized for their

contributions through various awards in categories like

innovation, customer experience and diversity & inclusion;

— simpliﬁed “people” processes to make day - to - day life easier

for employees.

Employability and mobility

AirFrance – KLM

In terms of Human Resources, employability and professional

mobility are priorities.

AirFrance–KLM’s workforce needs to be ﬁt for today’s jobs but

also those of tomorrow. Demographic changes, digitalization,

changing labor markets and new technologies in the airline

industry mean that the company needs to prepare its employees

to adjust to these changes. Strategic workforce planning with a

combined HR and business approach focuses on insights in the

workforce and scenario planning for the future, while delivering

solutions on mobility, employability, ﬁnding and binding sta and

managing the eects of the digital transformation.

Air France

At Air France, recruitment on permanent contracts continued

in 2019, particularly for ground sta and operational proﬁles for

cabin crews and pilots. A high number of cabin attendants were

recruited, along with mechanics and some expert proﬁles. Internal

mobility is prioritized for recruitment in the support functions.

The company’s proactive approach to internship was pursued

with an increase in the recruitment rate of interns.

Career progression initiatives including the recognition of

employee skills through the Validation of Previous Experience

scheme, recruitment via internal selection, external recruitment

in liaison with actions in favor of local young people, initiatives to

promote vocational integration and the policy to foster

maintained employment of employees with disabilities also

illustrate Air France’s commitment as a responsible company.

Lastly, the ﬁnancial year was marked by the implementation of a

Voluntary Departure Plan which was oered to employees in the

French provincial stations and part of the Commercial France

division: 297departure requests were approved. The employee

departures are staggered between November 2019 and

March2020.

In 2019, Air France was ranked the transportation company leader

in the Epoka-Harris Interactive barometer which recognizes the

most credible companies in terms of communication on a sector

basis. Air France was also amongst the top 10 in the Universum

2019 ranking, which measures the attractiveness of companies

for students and young graduates from engineering and business

schools.

KLM

In 2019, KLM had to contend with numerous internal and external

labor market changes. While an enormous increase in external

vacancies needed to be ﬁlled in the face of a very tight labor

market, KLM nonetheless managing to hire almost 2,000new

people. KLM’s Sourcing Strategy was reviewed to be able to deal

with these changes: for example, implementing special techniques

in the recruitment campaigns and procedures to foster a more

diverse workforce and inclusive corporate culture.

KLM’s ambition to be an attractive employer in a competitive

labor market means that it seeks to facilitate a memorable

experience for candidates, something which is key to attracting

the best talent required to realize KLM’s goal of delivering an

excellent customer experience. 2019 achievements included the

introduction of Employer Branding and recruitment marketing

campaigns (especially in IT, digital, data, technology), the

introduction of a new career website for top talent, recruitment

in speciﬁc target groups ﬁtting the agile transformation of the

Ground Sta team, the implementation of Diversity and Inclusive

methods and the implementation of the Flex Talent program to

attract and retain the right temporary (ﬂex) talent.

For cabin crews, an online platform, MyJourney, was launched to

create insights into talents and possibilities for cabin crew, to

enable them to make informed career choices (c.1,400talent and

career scans completed).

In 2019, KLM won the Intermediair magazine award for the most

attractive employer for highly - educated people in the Netherlands

and was named number one in the for - proﬁt sector by Randstad

Employer Brand Research. In September2019, the Monsterboard

site awarded KLM the Monster Studios Movie award in the “Best

Storytelling” category.

The KLM Transition Center aims to help employees whose jobs

have been made redundant to ﬁnd new careers within KLM or

externally. Since the establishment of the KLM Transition Center

in June2016, KLM has supported 683employees in search of new

jobs either inside or outside KLM, of whom 552succeeded in

ﬁnding a new job either internally or externally (52%/48%).

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4 Human resources

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4.2.2 Human capital

development

Context and strategy

The eective management of skills within an organization makes

a positive contribution to employee engagement, which in turn

helps to achieve the company’s objectives. Training programs are

developed to give employees the opportunity to learn and

develop their skills. Whenever possible, relevant joint training

programs are organized in a cross - cutting manner across

domains or entities for dierent target groups, so as to share

experience and learn from each other. In 2019, the groundwork

was laid for a new training management system to be used by

the dierent entities to manage the development of new skills

within the Group in a standardized manner.

In 2019, a renewed digital landscape supported by a new

Learning Management System (LMS) for Air France and KLM was

developed for launch in early 2020. Air France and KLM

conducted this project together to create one joint system for

both companies but with the ability to maintain their singularity.

The new LMS will improve the User Experience and facilitates

employee development through a personalized learning experience,

alongside the more formal (compliance) training program. The

new LMS is thus a very important prerequisite for continuous

learning: support and encourage employees in their continuous

development by oering them relevant, personalized and

easy - to - ﬁnd development opportunities.

Measures and performance

Continuous Learning

AirFrance – KLM

The Group pursued its training policy: the number of training hours

per employee increased from 39.7hours in 2018 to 40.4hours in

2019. This increase was mainly due to the development of the My

Learning self - service training platform at Air France and KLM.

An example of Continuous Learning is the Sales Excellence

Development Program for Air France and KLM. After oering

classroom training programs to Account Managers worldwide, a

toolkit was developed to continue learning and development in

their daily working lives, to take the next step in their Sales

Excellence journey.

This toolkit was developed in close co - operation with the Sales

Excellence team, and the Air France and KLM HR departments,

and is packed with interesting, inspiring and diverse exercises on

twelve topics to help put into practice what sta have learned in

the previous classroom training sessions. Individual, peer - to - peer

and group exercises were also developed to learn on the job and

together with colleagues.

Air France

At Air France, 95% of employees beneﬁted from training in 2019.

Conditions for access to training were facilitated like access to

My Learning self - service training modules for all employees,

webinars, Massive Open Online Courses, Manager Cafes and days

dedicated to the HR networks and manager labs.

During 2019, the training plan supported all recruitment and

particularly that of ﬂight crews (hostesses, stewards and pilots),

but also executives and technicians.

An ambitious training policy is key to supporting the Employment

policy and the company’s strategy, and is based on a series of

general principles that are rearmed on an annual basis and form

an integral part of the Employee Experience:

— guarantee access to training for everyone;

— ensure the visibility of everyone’s skills, notably by developing

graduate training and certifying diplomas;

— manage the economic balances.

In 2019, the recognition of employee skills via the Validation of

Previous Experience scheme continued through partnership with

a network of prestigious universities and programs at all levels of

the company and its professions.

Support for mobility, vocational retraining and training to meet

the need for advanced professional capabilities are also a priority.

KLM

At KLM, starting in 2018, all ground sta were given the opportunity

to spend the equivalent of 1.93% of their annual salary on

professional development to support Continuous Learning. The

budget has been increased to 3% for the years 2020 and 2021

and, as of 2022, this percentage will be 2%.

In the KLM Ground Services division, traditional classroom training

was replaced by the ultra - modern KLM Ground Services Training

Center at the Regional Training Center (ROCvA) in Hoofddorp,

where technologies, like virtual reality and immersive video, are

deployed to train sta preparing for jobs in Apron Services,

Baggage Services and Passenger Services. The special simulation

areas in the training center enable 1,000recruits on temporary

contracts to be trained every year, in a calmer environment and

within a shorter time period.

In collaboration with MBO Airport College, KLM also provides

vocational education programs for employees with extensive

professional experience but who have never had the opportunity

to gain a degree. In the last ﬁve years more than ﬁve hundred KLM

operational employees graduated with a nationally - recognized

vocational degree as part of this “life - long learning” program. In

2019, the program was also made available to new recruits on

temporary KLM contracts, to strengthen their position in the

labor market after their assignments at KLM.

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Leadership, talent and performance development

AirFrance – KLM

In 2019, Air France and KLM made the transition from exclusive

(targeting a selection of employees) towards inclusive Talent

Management (every employee is a talented individual who must

be given the opportunity to develop his or her skills) by

implementing a Talent development grid jointly created by the

two companies, and by implementing joint development

strategies and actions.

Air France

Air France oers Talent and Leadership programs like the training

and coaching program known as Femmes de Talent aimed at

enabling high - potential women to develop their skills within the

company and occupy senior management positions, joint

ﬁnancial programs with the HEC business school for future

managers and Focus on the Future programs to project talents

into the company’s future.

For some years, Air France has been developing coaching and

mentoring at dierent levels of the company and supporting

employees with training leading to professional diplomas.

In 2019, Air France initiated an individual assessment program for

senior management, which will continue in 2020, as a starting

point for individual development plans to support Air France’s

transformation.

KLM

In a shift from performance management towards performance

development, 2019 saw KLM create a new vision of Performance

Management and adopt a forward - looking approach around

the following points: purpose, connection and the appreciation

of talents.

Regular discussions are held within a team context on the company

and team goals and direction, and on contributions. In individual

performance conversations, KLM puts the emphasis on talent and

development of the expertise and skills needed for high

performance in both current and future roles and activities. The

aim is to help discover employees’ talents and their individual

potential for growth, and thus maximize everyone’s contribution

to the company’s results.

As part of KLM’s People Strategy, which focuses on Diversity &

Inclusion, People Development and Leadership, in 2019 KLM

launched a leadership development program for Senior

Management (Executive level).

This program includes an individual development assessment for

all KLM executives and a diagnosis of the current KLM culture,

followed by feedback sessions and development plans to improve

on KLM’s connecting leadership. KLM has decided to continue

this development assessment for future executives.

In addition to leadership development at executive level, as part

of the KLM Compass, KLM started building a leadership curriculum

for managers at all levels, aimed at supporting managers in creating

a culture of learning and collaboration.

4.2.3 Health and safety

in the workplace

Context and strategy

For the AirFrance–KLM Group, health, safety and the quality of

life in the workplace is a major priority on which there may be no

compromise. Everyone working for or with the AirFrance–KLM

Group has the right to a working environment that guarantees

their health and safety, and takes into account their physical and

mental well - being. To this end, a proactive policy aimed at

preventing risks and potential vocationally - related conditions is

deployed.

Measures and performance

The AirFrance–KLM Group monitors and reports the indicators

related to health and safety at work on an annual basis:

absenteeism, number of workplace accidents, frequency rate and

severity rate of workplace accidents (see sections 4.2.5.2 and

4.2.5.3).

Air France

Management of health, safety and quality of life in the

workplace

Air France’s policy on Health and Safety and Quality of Life in the

Workplace (formalized in 2012) was revised in 2018. It focuses on

ﬁve priority themes which guide the Air France approach:

— prevent serious accidents;

— reinforce compliance with/respect of regulations;

— develop ergonomic approaches;

— improve the quality of life in the workplace and the prevention

of psychosocial risks;

— structure and organize prevention measures around a steering

system deployed in a cross - cutting manner across the

businesses.

The steering and coordination of the health, safety and quality of

life in the workplace networks by the Health, Safety and Quality

of Life in the Workplace division, which numbers representatives

in all the entities, ensures the coordinated deployment of the

policy and its actions and targets, and promotes the exchange

of best practices, priority actions and investment. Accidentology

analysis enables the adjustment of the policy and actions

designed to safeguard human health and safety. The monitoring

of indicators ensures the ongoing adaptation of the initiatives.

Since 2013, the company’s business segments have developed

their approach on the Health and Safety Environment

management reference systems so as to gain overall consistency

while respecting the speciﬁcities of the dierent activities. In

2020, a reference framework common to all the business

segments will be progressively deployed to gain readability and

reinforce the safety - ﬁrst culture, consistent with the company’s

operational requirements.

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Health Safety and the Quality of Life in the Workplace is an

enduring concern for managers and a regular topic accompanied

by mandatory KPIs on the agendas for meetings of the Executive

Committee and Management Committees. To mobilize employees

and raise their awareness, in - ﬁeld checks on safety issues are

regularly carried out by the entity heads. Health Safety and the

Quality of Life in the Workplace is also included in sta appraisals.

All of these measures had enabled Air France to record signiﬁcant

progress in 2018, with a substantial decline in the frequency and

gravity rates for vocational accidents. The indicators did not,

however, show the improvements expected for 2019, meaning

that accidents in the workplace remain a major point of vigilance

for the company.

Prevention of the risks linked to health and safety

and the quality of life in the workplace

To improve the conditions of life in the workplace and the

well - being of sta, action programs are deployed across all the

Air France business divisions. The aim of this approach is to

increase sta motivation by reducing work - induced stress.

To promote a balance between professional and private lives a

number of dierent actions and schemes have been deployed,

in particular remote working, access to special part - time

arrangements and help with parenting (parenthood booklet).

In addition, to support employees who may be contending with

personal or professional diculties more eectively, Air France puts

a network of social assistants at their disposal. The latter also

manage a vacation day donation scheme. In 2019, their expertise

was reinforced with three days of training to supplement their

knowledge on the theme of caregivers and design the basis

of eective communication to all employees and, speciﬁcally,

those facing this issue (information booklets, collective action,

forum, etc. ).

The Human Resources division also launched an

awareness - raising and training program for managers to:

— raise their awareness and knowledge of addictive behaviors;

— prevent the risks linked to incivility for sta in contact with

customers and support sta who are victims of such incivility;

— communicate on internal cases of incivility and prevent the

risks of moral or sexual harassment;

— promote dialogue on workloads and connection - deconnection

practices.

In terms of preventive measures to promote vocational health

and safety, in liaison with the vocational healthcare teams and

the company’s mutual insurance company, information days are

regularly organized, during which sta are able to meet with

health professionals (posturologist, smoking cessation specialist,

dermatologist, etc. ), take part in workshops and beneﬁt from

personalized support based on test results. Awareness - raising

days are also held to prevent more speciﬁc vocational risks like,

malaria, otalgia, night and shift working, etc.

Lastly, to improve risk monitoring, vocational risk evaluation now

takes place via a common tool, ensuring the consistency and

visibility of the risks identiﬁed in every operational unit, followed

by the deployment of prevention measures.

Air France is also pursuing its prevention eorts by reinforcing

its risk management process via the deﬁnition of an appropriate

methodology, the consolidation of its lessons leant process and

higher professional standards with regard to the areas at risk in

accident analysis.

KLM

Occupational health and safety management

Within KLM, safety and compliance are managed via a system of

processes and procedures known as the Integrated Safety

Management System (ISMS). The ISMS ensures that KLM is and

remains compliant, and continuously improves in the areas of

operational, occupational and environmental safety and operational

security. The ISMS identiﬁes hazards, threats and safety issues,

collects and analyses data, assesses safety risks, implements

mitigations and monitors the results. The ISMS supports the

mitigation of risks in order to keep accident and incident rates

below an acceptable level.

In 2019, several initiatives were organized by the divisions and

ISSO, a central independent organization reporting directly to the

Chief Operating Ocer, to promote a healthy way of life and

working environment. The ISSO organized several informative

meetings elaborating on occupation - related subjects such as

Fatigue and Psychosocial Occupational Health. An e - learning

module focusing on Fatigue was also published and implemented

for Flight Deck and Cabin Crews.

The Safety Promotion activities continued on the four major

KLM-wide Safety & Security Themes, i.e. Challenge, Be Fit,

reporting and Just Culture. With the guidance of the ISSO, the

communication, promotion and training on all four themes was

developed and implemented. Several tool boxes and video script

animations were developed to facilitate and support the line

management and their teams on subjects like reporting, SIRA-

requests (Safety Issue Risk Analyses) and Just Culture.

A Safety reporting App was rolled out for Ground Sta, making

it easier to report unsafe situations. This resulted in a 40% increase

in reports compared to the number of reports received in 2018

(previous year). As a result, KLM’s already - excellent reporting

culture was signiﬁcantly improved, enabling the company to be

more proactive and predictive in mitigating safety risks.

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Also in 2019, KLM implemented a Just Culture Toolbox with

videos, assessments and cases for training and inspiration

purposes. The ISMS Training plan was further implemented,

including the launch of a new line facilitator course and the roll

out of Just Culture training in all layers of KLM, using the Just

Culture Toolbox.

In 2018, a structured process was introduced to update and

implement KLM’s Occupational Safety and Health (ARBO) policy.

In accordance with the KLM goals and objectives for 2019, some

ten Occupational Safety (ARBO) policies were drafted including

the recommended implementation provisions and plans. Eight

ARBO policies have already been approved by the Safety Review

Board, agreed by the KLM Works Council and adopted by the

KLM Board.

To further implement these policies and reduce Occupational

Safety and Health risks a mitigation team of occupational experts

was created over the summer to support line management and

their departments as of the fall of 2019, to ensure the correct

implementation of the mitigation measures concerning

Occupational risks and to support business unit eorts to ensure

a safe and healthy work environment. This support will continue

in 2020.

In 2019, KLM introduced the running program, which encourages

employees to exercize in and around the workplace, by

participating in running and walking training, yoga and boot

camp. Various master classes on nutrition, breathing and focus

are also oered. The highlight of the year was the Centennial Run,

a race held in honor of KLM’s 100

th

anniversary with 1,500sta

taking part. Corporate sponsorship of the KLM Urban Trails Series

in the Netherlands also ensured the participation of numerous

KLM employees.

In order to perform optimally, good health is essential in that

it contributes to a vital and happy life both inside and outside

work. To this end, KLM introduced the MyHealth portal in

February 2019, a space where employees can ﬁnd a

comprehensive range of information on vitality and health. This

resulted in more than 1,100employees booking a trial vitality

program through the new portal. In addition, a pilot took place

to oer workshops and coaching on a dedicated e - health platform.

The ﬁrst steps towards a smoke - free KLM were put in place with

the removal of the smoking areas at KLM’s head oce. The rest

of the smoking areas within KLM buildings will be removed in the

coming years.

KLM also continued the “weight loss” program to help employees

adopt a healthier lifestyle and attain a healthier weight. In 2019,

more than 200 employees took advantage of this initiative,

helping them to lose weight and gain ﬁtness.

One of the main goals of the Reintegration center of expertise is

redesigning and simplifying the sick leave process. By implementing

digital tooling (Verea) in this area, KLM oers employees and

managers optimal support. Selected pilot groups were launched

for Verea deployment in 2019 and a more widespread roll out is

planned for 2020.

4.2.4 Fostering diversity

and equality

Context and strategy

As a signatory of the United Nations Global Compact,

Air France–KLM is committed to respecting the universal

principles relating to the respect of human rights.

In the Corporate Social Responsibility Statement and Social

Rights and Ethics Charter, the Group arms its commitment to

fostering a climate of trust and mutual respect in a working

environment where no form of discrimination or harassment is

tolerated. Various initiatives have been implemented at Air France

and KLM to support this commitment.

AirFrance–KLM strongly believes that a diverse and inclusive

workforce has a positive impact on the performance of the

organization and therefore continues to support all forms of

action to encourage equal opportunity, equality between men

and women, LGBTI networks, the vocational integration of young

people, the employment of seniors and transmission of knowledge

and skills, and the maintained employment and recruitment of

persons with disabilities.

Measures and performance

Equal opportunities

AirFrance – KLM

At Air France–KLM Group level the company strives for a

balanced representation of men and women in the Group

Executive Committee. Concretely, in the event of the recruitment

and/or appointment of new members, and in candidates of an

equal level, there is a preference for female candidates. In 2019,

33% of the members of the Group Executive Committee were

women, compared to 27% in 2018.

In 2019, the proportion of women in managerial positions

increased for all categories of sta: ground sta (33% of the 10%

highest levels of management were women compared to 32% in

2018), pilots (5.2% of ﬂight captains were women compared to

5.1% in 2018), cabin crew (65.5% of pursers were women

compared to 65.4% in 2018).

AirFrance–KLM pursued its policy of promoting diversity and

reiterated the need to combat all forms of prejudice and

discrimination by putting the emphasis on the power of diversity

and inclusion via coordinated interventions and an increased

commitment. More diverse and inclusive organizations are known

to attract more talent and to be more customer driven, have

higher levels of employee engagement, take better decisions and

are more innovative and creative. All of these factors are key to

the shared ambition set by the two airlines in terms of equal

opportunity and combating all kinds of prejudice and

discrimination.

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Air France

The commitment to fostering equal opportunity applies to all the

collective recruitment and internal selection processes, and to

professional development.

For Air France, professional gender and wage equality between

women and men is a major business priority and an area in which

the company would like to make progress in terms of human

resources management. This undertaking was reﬂected in the

signature with the unions of a ﬁfth agreement on Professional

Equality between Women and Men.

To ensure equal treatment between women and men, a series of

male - female comparative indicators are tracked annually within

the framework of an audit carried out within each division of the

company (training, careers, vocational safety, remuneration, etc. ).

Special wage equalization and equitable salary management

measures are in place, together with an annual audit of male and

female comparative remuneration.

The internal Women For Tomorrow (WoTo) network, whose goal

is to reinforce the recognition of women within the Group, currently

numbers some 600 members. The 2019 ﬁnancial year was

marked by working groups, meetings with external contributors,

workshops and the launch of the woto-airfrance.com website. Air

France is also a member of the Elles Bougent external network,

composed of female business mentors, to encourage young girls

to join the engineering and technical professions. These mentors

notably participated in a major event at the 2019 Paris Air Show

involving more than 200girls.

Lastly, in the spring of 2019, Air France organized a Rainbow

Morning event with more than 200people from the airline and

seven LGBT associations during the International Day Against

Homophobia, Transphobia and Biphobia. On this occasion the Air

France CEO, Anne Rigail, signed the association L’Autre Cercle’s

LGBT+ commitment Charter. Furthermore, Air France renewed

its support for the Personn’ailes LGBT and Gay Friendly employee

association, which participated in the 2019 Paris Gay Pride. The

company also supported World Aids Day.

A number of initiatives are also supported by Air France in favor

of young people in the airport catchment area to promote their

access to training and employment like Tous En Stage, an

innovative scheme oering children business experience, and

Article 1 and Nos Quartiers Ont Des Talents, mobilizing more than

100mentors from within the company.

To facilitate the long - term vocational integration of young interns

within the company who are unlikely to be recruited on

permanent contracts, various support measures directed at

external employment are organized at the end of their internship

contracts (organization of job - seeking forums, workshops on

how to set up a company and job - seeking techniques, availability

of dedicated job oer websites, etc. ).

KLM

With respect to governance, Diversity and Inclusion (D&I) has

become an integral part of the transformation agenda and thus

a strategic topic for the KLM Board. As of 2018, a Diversity Circle

composed of KLM Executive Committee members, representatives

of the Women on Board network and internal ambassadors

became responsible for deﬁning and executing a clear D&I

strategy for 2019. The D&I circle is a governance structure which

will continue to exist in 2020.

In March2019, the KLM President & CEO signed the Talent to the

Top Charter, a manifesto aimed at increasing the number of

women in management positions. This Charter helps to bring the

right focus to the company’s diversity policy and activate the

right dialogue. The Charter contains guidelines and clear

agreements that help KLM purposefully work towards durable

and eective results. Every year KLM’s progress is monitored

based on six criteria: Leadership, Strategy and Interventions, HR

Management, Communication, Knowledge and Skills and Work

Climate. These criteria are used to frame KLM’s strategy and

governance.

D&I targets with respect to the percentage of women in

management positions have been integrated in the overall Flight

Plan for KLM, thereby becoming the responsibility of all divisions.

At the end of 2019, KLM had attained all the targets with women

occupying 27% of management positions. KLM also launched a

female leadership program involving fourteen highly - qualiﬁed

women to support their personal and career development. In 2020

another group of twelve women will commence this program.

Dashboards based on HR data have been designed to monitor

the number of promotions, and the inﬂow and outﬂow of men

and women. Overall, the KLM Compass links the company’s

purpose to a set of values and shows the balanced need for both

masculine and feminine - labelled behaviour in leadership and

team composition.

The female network Women on Board and the LGBTI Over the

Rainbow network work closely together with the D&I Circle. The

focus of Over the Rainbow has been on increasing awareness and

enhancing discussion. The Women on Board network organizes

inspiring events giving women opportunities to connect and

learn from each other. In 2019, Women on Board numbered more

than 1,000women from all divisions and levels of KLM. Men can

also attend the events. These internal networks, supporting the

importance of Diversity and Inclusion for Women and LGBTI

employees, organized a number of events during 2019:

— KLM hosted the annual Workplace Pride International

Conference around the theme Inclusive Sustainability for more

than 300visitors from all over the world. Workplace Pride is a

non - proﬁt organization dedicated to improving the working

conditions of LGBTI employees worldwide;

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— Fifty years after Stonewall, KLM organized a special Pride

Flight with an all - gay crew. KLM participated in the Workplace

Pride Global Benchmark and emerged as one of the Top

Improvers with an increase of 18points. KLM also reached the

top 3 for network, showing best practice for organization

linked to the company strategy and Executive Committee

sponsorship.

Policy on disability

Air France

Dating back 30years, Air France has deployed a proactive policy

on the employment and vocational integration of employees with

disabilities. This policy is based on three - year inter - category

agreements. On November13, 2019, the Air France CEO Anne

Rigail signed the mandate for the inclusion of people with

disabilities in economic life, which was also signed by a hundred

or so large French companies, thereby rearming Air France’s

commitment to supporting a bona ﬁde societal project.

In 2018, Air France’s employment rate for workers with disabilities

(including both direct employment and indirect employment

through procurement from the sheltered sector) exceeded the

legal threshold of 6% to stand at 6.68%, with 1,950employees

with disabilities present in the company.

In 2019, Air France continued to recruit sta with disabilities

across all divisions. It also ensured the maintained employment

of sta with disabilities through more than 250support programs,

and the adaptation of posts and working conditions.

Within the framework of its societal responsibility policy, the

company supports a number of initiatives in favor of young

people with disabilities to facilitate their access to training and

employment. Thus, within the framework of Tous En Stage, Air France

welcomed 25 teenagers with disabilities on work experience

internships. Air France also partners associations like Tremplin

and Arpejeh.

Air France continues to call on the services of businesses and

organizations in the adapted and sheltered employment sector,

with procurement spending entrusted to this sector amounting

to a little over €20million in 2019.

Awareness - raising actions are conducted throughout the year. In

May 2019, the DuoDay initiatives oered employees the

opportunity to welcome a disabled person for a day to learn

about their profession but also to change their perception of

disability. Awareness - raising events on deafness were organized

and Air France also participated in the European Disability

Employment Week with, notably, events and activities in the

various divisions in cooperation with the Diversity Handicap

representatives, the vocational physicians, social assistants and

associations, and the signature of a partnership with tennis

handisport champion Emmanuelle Morch.

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KLM

To redesign and simplify the sick leave process, KLM rolled out a

digital tool (Verea), to oer employees and managers optimal

support. In 2019, in a pilot scheme, Verea was made available to

selected groups while the longer - term goal is for all KLM

managers, employees and sta to use this tool.

In 2019 a signiﬁcantly higher success rate was achieved in ﬁnding

alternative employment for people who were unable to return to

their original jobs due to disability. This means not only suitable

positions within KLM but also the redeployment of incapacitated

employees outside KLM. This success was due to the dedicated

support of the Reintegration Ocers and a better program with

various providers for a better match on the external labor market.

At KLM, according to Dutch Law, every employee has equal rights

in the workplace. Dierentiating between employees on the basis

of disability or chronic disease is not allowed. Only when people

with a certain handicap or disease are not able to do the essential

tasks necessary to do a job eectively can the employer refuse

to hire them, especially if health or safety is a major issue. It is

also mandatory for an employer to investigate whether a disabled

person can execute the work to be done by adjusting the tasks

or the working environment.

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4.2.5 Social indicators for the Group

4.2.5.1 Consolidated social data for the Air France–KLM Group

AirFrance – KLM Group

2017 2018 2019 19/18

in %

Total sta (Full Time Equivalent) at 12/31 80,595 81,527 83,097 1.9%

Scope of Social reporting 96% 98% 97% -1%

Total sta (headcount, permanent and ﬁxed - term contracts)

(1)

87,312 88,888 90,386 +1.7%

Ground sta 53,185 53,985 54,342 +0.7%

Cabin crew 25,859 26,153 26,684 +2.0%

Flight deck crew 8,268 8,750 9,360 +7.0%

Sta under permanent contract 82,283 83,994 85,442 +1,7%

Recruitment under permanent contract at 12/31

(2)

2,815 4,153 4,384 +5.6%

Recruitment under ﬁxed - term contract at 12/31

(3)

6,289 5,920 5,858 -1.0

Departures at 12/31

(4)

10,156 10,535 8,842 -16.1%

of which redundancies (incl. economic) 247 337 476 +41.2%

Percentage of women at 12/31

(5)

45.3% 45.3% 45.1% -0.4%

Percentage of part - time employees at 12/31 29.7% 29.7% 29.9% +0.7%

Breakdown of sta by age at 12/31

≤ 29years 7,501 9,091 10,275 +13.0%

Between 30 and 39years inclusive 17,145 16,246 15,585 -4.1%

Between 40 and 49years inclusive 32,348 31,758 31,003 -2.4%

50Years and above 30,318 31,793 33,523 +5.4%

Breakdown of sta by geographical area at 12/31

Europe (except France and the Netherlands) 3,041 3,373 3,116 -7.6%

North & South America 1,560 1,634 1,848 +13.1%

Caribbean/Indian Ocean (including French overseas territories)

(6)

718 711 695 -2.3%

Asia/Paciﬁc 1,645 1,625 1,654 +1.8%

Africa/Middle East 1,170 1,167 1,061 -9.1%

The Netherlands 30,217 30,600 31,609 +3.3%

Continental France 48,961 49,778 50,403 +1.3%

Training

Number of training hours by employee

(7)

NA* 39,7 40,4 +1.8%

(a) Air France Group: Air France and Air France subsidiaries.

Air France subsidiaries: Barﬁeld, Blue Connect, Bluelink, Bluelink International CZ, CRMA, Hop!, Sodexi and Transavia France.

(b) KLM Group: KLM and KLM subsidiaries.

KLM subsidiaries: Cygniﬁc, KLM UK Engineering, KLM Cityhopper BV, Transavia Pays-Bas, KLM Catering Services Schiphol BV and Int. Airline Services.

(1) (2) (3) (4) (5) (6) (7): See Note on the Methodology.

NA*: Not Available.

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Air France Group

(a)

KLM Group

(b)

Air France Group of which Air France KLM Group of which KLM

2018 2019 2018 2019 2018 2019 2018 2019

51,707 52,512 44,728 45,850 29,818 30,568 23,147 23,597

99% 99% 100% 97% 97% 100%

54,959 55,292 48,124 48,791 33,929 35,094 28,344 29,157

34,693 34,413 30,903 30,427 19,292 19,929 15,868 16,309

15,147 15,461 13,311 14,147 11,006 11,223 9,517 9,583

5,119 5,418 3,910 4,217 3,631 3,942 2,959 3,265

52,280 52,951 45,819 46,734 31,714 32,491 27,265 27,741

3,241 3,077 1,687 2,410 912 1,307 629 940

4,085 4,341 3,021 3,460 1,835 1,517 798 1,075

8,223 6,971 5,899 5,131 2,312 1,871 1,239 1,186

246 393 92 179 91 83 32 44

45.5% 45.2% 45.9% 45.9% 45.2% 45.0% 44.4% 43.9%

21.6% 21.2% 23.1% 22.6% 42.9% 43.5% 44.0% 44.2%

5,366 5,990 3,911 4,833 3,725 4,285 2,203 2,598

9,714 8,723 7,694 6,986 6,532 6,862 5,125 5,477

22,028 21,726 19,881 19,637 9,730 9,277 8,517 8,097

17,851 18,853 16,638 17,335 13,942 14,670 12,499 12,985

2,071 1,802 1,120 991 1,302 1,314 891 883

1,194 1,416 1,194 975 440 432 436 431

662 649 661 648 49 46 49 46

542 411 541 411 1,083 1,243 733 700

724 618 724 618 443 443 443 443

52 46 52 46 30,548 31,563 25,728 26,601

49,714 50,350 43,832 45,102 64 53 64 53

38,9 42,4 37,1 41,5 41,0 37,2 36,2 39,3

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4.2.5.2 Other social data for the Air France Group (according to local legislation)

Air France (100% of the sta headcount, registered and paid at the end of the calendar year)

(a)

2018 2019 19/18

Absenteeism

(1)

Due to illness 3.80 3.56 -6.3%

Due to work accidents 0.71 0.67 -5.6%

Maternity leave 0.44 0.34 -22.7%

Health and safety

Total workplace accidents

(2)

2,148 2,214 +3.1%

Number of fatal workplace accidents 0 5

Frequency rate of workplace accidents

(3)

29.94% 30.34% +1.3%

Severity rate of workplace accidents

(3)

0.92% 0.89% -3.3%

Disabled sta

(5)

Total sta with disabilities 1,971 1,950 -1.1%

Total sta with disabilities recruited during year 42 40 -4.8%

Yearly spending in the sheltered sector in €m

(6)

19 20 +5.3%

Signed collective agreements 40 48 +20.0%

(a) Data in italics concerns only Air France in Continental France and the French overseas territories.

Air France subsidiaries

2018 2019 19/18

Scope of reporting for Air France subsidiaries 89% 90% +1.1%

Health and safety

Total workplace accidents

(2)

627 391 -37.6%

Number of fatal workplace accidents

(2)

0 0 +0%

Frequency rate of workplace accidents

(3)

58.1% 39.5% -31.9%

Severity rate of workplace accidents

(3)

1.38% 1.2% -35.5%

Disabled sta

(5)

Total sta with disabilities 141 128 -9.2%

Total sta with disabilities recruited during the year 6 1 -83.3%

Signed collective agreements 38 24 -36.8%

(1) (2) (3) (4) (5): See Note on the Methodology.

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4.2.5.3 Other data for the KLM Group (according to local legislation)

KLM (100% of the sta headcount, registered and paid at the end of the calendar year)

(a)

2018 2019 19/18

Absenteeism

(1)

Due to illness 6.86% 6.23% -9.2%

Due to workplace accidents 0.11% 0.11% 0%

Maternity leave 0.37% 0.35% -5.4%

Health and safety

Total workplace accidents

(2)

169 155 -8.3%

Number of fatal workplace accidents 0 0

Frequency rate for workplace accidents

(3)

3.75% 3.36% -10.4%

Severity rate of workplace accidents

(3)

0.20% 0.19% -5.0%

Disabled sta

(5)

Total sta with disabilities 791 799 1.0%

Signed collective agreements 3 2 -33.3%

(a) KLM: data concerns KLM without international sta.

KLM Subsidiaries

2018 2019 19/18

Scope of reporting for KLM subsidiaries 87% 87% +0%

Health and safety

Total workplace accidents

(2)

75 50 -33.3%

Number of fatal workplace accidents 0 0 +0%

Frequency rate for workplace accidents

(3)

6.56% 4.4% -32.9%

Severity rate of workplace accidents

(3)

0.35% 0.22% -37.1%

Disabled sta

(5)

Total sta with disabilities

(6)

89 62 -30.34%

Signed collective agreements 7 5 -28.6%

(1) (2) (3) (4) (5) (6): See Note on the Methodology.

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4.2.5.4 Note on the methodology for the reporting

of the social performance indicators

In 2005 - 06, under the aegis of the Disclosure Committee, and

validated by the college of Statutory Auditors, the Air France–KLM

Group’s social performance indicators were deﬁned to comply

with the requirements of the French New Economic Regulations

law (Les Nouvelles Régulations Économiques, NRE, May15, 2001)

and the European Regulation (EC 809/2004).

Work on optimizing these indicators was undertaken in 2018 to

align the Grenelle II reporting with the new requirements linked

to the transposition of the Directive on the Extra - ﬁnancial

performance statement.

Since the 2007 - 08 ﬁnancial year, the Group has chosen to

appoint one of its Statutory Auditors, KPMG Audit, a department

of KPMG SA, to be responsible for verifying a selection of its

reported social indicators.

As of 2018 and in application of the provisions of Article

L.225 - 102 - 1of the Code de Commerce, it is the responsibility of

our Independent Third Party to determine the compliance of the

Extra - ﬁnancial performance statement and the accuracy of the

published CSR information.

Reporting scope

The AirFrance–KLM Group’s social reporting consolidation scope

is based on the number of employees (expressed as headcount)

on the payroll at the end of the calendar year.

The reporting scope covers 97% of the average employees in the

AirFrance–KLM Group at the end of the 2019 calendar year,

expressed in full - time equivalent.

The subsidiaries of Air France and KLM over which the Group

exercises control at the 50% minimum, whose acquisition dates

back at least one full year and which have at least 250employees,

are included in this social reporting scope.

Note that the number of employees for Air France and KLM and

its subsidiaries comprises their entire workforces including sta

employed internationally:

— for the 2019 ﬁnancial year, the Air France consolidated

subsidiaries are: BarﬁeldInc., Blue Connect, BlueLink, BlueLink

International CZ, CRMA, HOP, Sodexi and Transavia France,

representing 90% of the employees of the subsidiaries in the

Air France Group;

— for the 2019 ﬁnancial year, the KLM consolidated subsidiaries

are: Cygniﬁc, KLM UK Engineering, KLM Cityhopper, Transavia

C.V., KLM Catering Services and Int. Airline Services,

representing 87% of the employees in the subsidiaries of the

KLM Group.

In 2019, BarﬁeldInc. was included in the reporting scope for the

Air France subsidiaries.

The subsidiary Joon was discontinued but all its sta were

transferred to Air France: employees formerly under Joon contract

and having rejoined Air France have been included in Air France

hires. Those not joining Air France have not been counted in the

departures.

The KLM reporting scope did not change compared to 2019 with

no subsidiaries being either included or withdrawn.

The reference number of employees for calculating the coverage

rate of the social reporting is the average number of employees

in Full Time Equivalent during 2019 derived from the Management

Control division’s BFC tool.

The reporting period for the Group’s social information is based

on the calendar year to ensure consistency with the social

performance indicators of other French companies.

Reporting tools

The indicators are compiled and consolidated using the Osyris

(Operating SYstem for reporting on Sustainability) reporting

software at the disposal of contributors from Air France, KLM and

their subsidiaries across the entire reporting scope. Precise

deﬁnitions of each indicator and user guides for contributors

have been produced and are available in the Osyris tool.

Consistency tests have been incorporated within the tool. The data

are veriﬁed and approved locally at the level of each subsidiary

by a manager who is responsible for the HR statistical data.

This system is supplemented by a general coordination to launch

the process and by a general reporting procedure which deﬁnes

the process for compiling, calculating and consolidating the

indicators, based on an instruction memorandum circulated by

the AirFrance–KLM Group’s Finance division.

The consolidation of the AirFrance–KLM Group’s social information

is carried out by Air France’s CSR department.

Details and methodology–Deﬁnition of the key

performance indicators and comments on changes

in the indicators

Deﬁnition of the key performance indicators

Employee Promoter Score (EPS)

Scope: Air France and KLM (employees on French or Dutch

contracts).

The Employee Promoter Score (or EPS) is the score given to

Air France and KLM in their capacity as employers by their

employees. Since July2019, this indicator has been measured at

Air France and KLM on a weekly basis, based on a random group

of 1,500 employees representing all the Air France and KLM

businesses, in the form of a question sent by mail: “How likely are

you to recommend AirFrance–KLM as an employer to friends

and family?”, on a scale of 0to 10. The EPS corresponds to the

dierence between the percentage of employee promoters

(score of 8to 10) of the employer brand and the percentage of

detractors (scores 0to 5).

The indicator measured is the annual change in the consolidated

EPS for AirFrance–KLM. For 2019, the result is the percentage

change between July2019 and December2019.

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Percentage of women in management functions (ground

sta, pilots, cabin crews)

Scope: Air France and KLM employees (expressed as “headcount”)

on both permanent (CDI) and ﬁxed - term (CDD) contracts, on the

payroll as of December31of the reference year.

The indicator measured is the percentage of women in the three

sta categories:

Ground sta: percentage of women in the top 10% management

level. The percentage of women is calculated by combining all

the levels of management, classiﬁed in descending hierarchical

order, until the threshold of 10% of the total salaried workforce of

Air France and KLM is reached. For this last level of management,

the entire workforce is taken into account.

Pilots: percentage of women amongst the pilots exercizing

management functions (captain)

Cabin crews: percentage of women amongst the cabin crews

exercizing management functions (pursuers)

Number of training hours

See Training below (Note7).

Comments on changes in the indicators

“Consolidated social data for the Air France–KLM Group” table

This table presents the indicators relating to the number of

employees, recruitment and departures, the proportion of female

employees and the percentage of sta working part time. These

indicators are consolidated at the level of the AirFrance–KLM

Group.

The notes below refer to the references in the social indicator

tables (Section4.2.1).

Employees

Note1: The number of people employed by the Group (expressed

as headcount) on both permanent (CDI) and ﬁxed - term contracts

(CDD) on December31of the reference year.

Recruitment under permanent contracts

Note2: The indicator concerns employees hired on permanent

contracts (CDI).

For Air France, the calculation of the number of employees recruited

on permanent contracts includes those initially recruited on

ﬁxed - term contracts (CDD) transferring to permanent contracts

(CDI) during the year.

For KLM, only employees recruited directly on permanent contracts

are taken into account.

This year, it was not possible to include the Transavia Netherlands

data on this topic in the Group’s social indicators.

Recruitment under ﬁxed - term contracts

— Air France and Air France subsidiaries

Note3: In 2018, HOP! harmonized its accounting method with

that of Air France: at Hop! and Air France, each new ﬁxed - term

contract now generates a hire.

— KLM subsidiaries

Note3: This year, it was not possible to include the Transavia

Netherlands data on this topic in the Group’s social indicators.

Departures including redundancies

— KLM subsidiaries

Note4: This year, it was not possible to include the Transavia

Netherlands data on this topic in the Group’s social indicators.

Percentage of women–Organization of working time

Note5: These indicators enable the percentage of women to be

evaluated relative to the workforce and the proportion of part - time

employees on both permanent and ﬁxed - term contracts at

December31of the reference year.

Employees by geographical zone at December31

Note6: For 2019, the Air France Group employees in the French

Overseas Departments and Territories, i.e. 596employees, are

included in the Caribbean-Indian Ocean geographical zone.

Training

Note7: The “Number of training hours by employee” indicator is

calculated based on all the training sessions, divided by the

average monthly headcount. For the ﬁrst time in the social

indicators, this indicator is presented at AirFrance–KLM Group

consolidated level.

— Air France and Air France subsidiaries

Note7: For the ﬁrst time this year, the “Number of training hours

by employee” indicator includes the number of hours of training

at Bluelink International CZ (this data was not available the

previous years).

— KLM and KLM subsidiaries

Note7: The hours of external training dispensed to KLM Group

administrative employees and the hours of training given to

employees of the Transavia Netherlands subsidiary (less than 10%

of the AirFrance–KLM Group headcount) are not booked in the

“Training Hours” indicator due to there being no information

population process in place. Measures will be taken to

progressively expand the reporting scope of these indicators in

the coming ﬁnancial years.

“Other social data” tables

The indicators reported in the “Other social data” tables are

subject to dierent qualiﬁcation and legal reporting obligations

in France and the Netherlands, meaning that they are not

comparable and need to be presented separately for Air France

and KLM. The subsidiaries concerned in these tables are listed in

the reporting scope section above.

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Absenteeism–Health and safety in the workplace

A signiﬁcant portion of the work - related accidents reported by

Air France is due to cases of barometric otitis and musculoskeletal

disorders which are recognized as work - related accidents in

France whereas they are recorded as sick leave by KLM in

accordance with Dutch law.

The absenteeism rate is not communicated for the Air France and

KLM subsidiaries (around 15% of the Air France–KLM Group

headcount), the monitoring measures being in the veriﬁcation

process at the level of these entities. Measures will be taken to

progressively expand the reporting scope of this indicator in the

coming years.

— Air France

Note1: The absenteeism rates are calculated based on the hours

of absence expressed as a ratio of the hours theoretically worked

(excluding leave). For Air France ﬂight crew, absenteeism is broken

down into days then converted into hours by multiplying

by ﬁve hours.

The absenteeism rate for accidents in the workplace also takes

into account travel - related accidents.

— KLM and KLM subsidiaries

Note1: Since the 2014 ﬁnancial year, the absenteeism rates due to

work - related accidents or illness have been reported separately.

The absenteeism rates are calculated by expressing the number

of calendar days of absence as a percentage of the calendar days

theoretically worked. Absenteeism is tracked on the basis of

ﬁgures declared by the KLM entities in the Netherlands.

Health and safety–work - related accidents

There are signiﬁcant dierences in the deﬁnition criteria for

work - related accidents between France and the Netherlands (see

also paragraph on absenteeism).

— Air France and Air France subsidiaries together with

KLM and KLM subsidiaries

Note 2: Work - related accidents taken into account are

work - related accidents involving time o work (at least one day

of absence from work). Travel - related accidents are not included

in the indicator but are the subject of speciﬁc monitoring and

action plans.

Frequency and severity rates

— Air France and Air France subsidiaries

Note 3: The frequency and severity rates are calculated in

calendar days:

— for ground sta, based on the actual paid hours worked;

— for ﬂight crews, based on the hours of “commitment”.

For Air France, the number of days of sick leave recorded for the

year corresponds only to the accidents having taken place during

the ﬁnancial year. Part - time working for health reasons is booked

as sick leave. The total period of sick leave is booked in the month

of the accident.

The frequency and severity rates for work - related accidents in

Air France subsidiaries (around 7% of the Air France–KLM

Group’s headcount) have been reported since 2019. The relatively

higher frequency rate for accidents in the workplace at Air France

subsidiaries compared to Air France is explained by:

— the substantial number of cases of barometric otitis within

accidents in the workplace;

— the proportion of ﬂight crew represented across the Air

France subsidiaries. Flight crew on permanent and ﬁxed - term

contracts eectively amount to 39% of the total headcount in

the subsidiaries even though these sta are subject to

barometric otitis which is recognized as an accident in the

workplace in France;

— since the network of airline subsidiaries is focused in particular

on short and medium - haul ﬂights, the ﬂight crews as a whole

have to contend with more pressure changes leading to otitis.

— KLM and KLM subsidiaries

Note3: The frequency and severity rates are calculated for all

sta based on the hours theoretically worked.

The days lost for work - related accidents are tracked based on

ﬁgures declared by the KLM entities in the Netherlands.

Number of disabled employees

— Air France and Air France subsidiaries

Note5: For Air France, the number of disabled employees are

those who, based in Continental France and the French Overseas

Departments and Territories, were present for at least one day

during the year and for whom a valid certiﬁcate, pursuant to French

law (Article L.5212 - 2of the French Labor Code), is available.

Note that the data for international employees is reported based

on local legislation.

The number of disabled employees recruited corresponds to the

number of permanent and ﬁxed - term employment contracts

signed during the year; an employee recruited on a ﬁxed - term

contract who then transfers to a permanent contract during the

year will be reported twice.

Note that the rate of employment of disabled employees for 2019

was not yet known on the date the ﬁgures for the reporting of

the social indicators were produced for the management report

and the Registration Document.

— KLM and KLM subsidiaries

Note5: The deﬁnition of a disabled person varies according to

the local legislation governing the entities in the Netherlands and

the United Kingdom.

For KLM and KLM’s Dutch subsidiaries, an individual is deemed

to be disabled if unable to carry out his or her work or any other

work at an equivalent salary level. This requires the employer and

the employee to look for another position with a salary as near

as possible to the previous level and gives the employee the right

to government beneﬁts to compensate for any dierence.

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Key Performance

Indicator Deﬁnition Results

There is growing international concern about climate change.

Attitudes towards the acceptability of air transportation growth

are changing both at political level and in terms of wider society,

while we are witnessing the occurrence of increasingly - extreme

climate events. Both France and the Netherlands have

implemented policies to ensure the transition to a zero - carbon

society by 2050. AirFrance–KLM’s growth increasingly depends

on its ability to reduce its environmental footprint.

Within a context in which, unlike other modes of transportation,

commercial aviation currently has no viable alternative to fossil

fuels and no disruptive technologies are expected to emerge in

the short term, AirFrance–KLM needs to maintain its eorts in

this area and respond to the expectations of its stakeholders.

See also paragraph 3.2.2 in Section3Risks and risk management.

See Note on the methodology for the reporting of the environmental indicators, section4.3.6.3.

√ Figures veriﬁed by KPMG for 2019 (reasonable level of assurance).

4.3 ENVIRONMENTAL IMPACT

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Environmental impact

4

For KLM’s UK subsidiaries, the reported number of employees

with disabilities refers to the employees on the payroll at

December 31, 2019, for whom a valid certiﬁcate, pursuant to

national legislation, is available.

This year, it was not possible to include Transavia Netherlands

data on this topic in the Group’s social indicators.

— Air France

Note6: “Yearly spending in the sheltered sector” indicator. This

concerns revenues expressed in millions of euros generated with

companies in the protected sector. This is an estimated ﬁgure as

of the date of publication, ahead of the ﬁnal submission of the

declarations within the framework of the DOETH (mandatory

declaration of employees with disabilities).

CO

2

eciency

per passenger kilometer

SpeciﬁcCO

2

footprint

for passenger transportation

2018

80g.CO

2

/passenger/km

2019

79g.CO

2

/passenger/km

CO

2

emissions from the

ground operations

Percentage change in absoluteCO

2

emissions

from the ground operations between 2018 and 2019

2019

-32%

2030 target

Carbon neutrality

Non - recycled waste Percentage change in non - recycled waste

between 2011 and 2019.

2019

-31%

2030 target

50% reduction

compared to 2011

Noise footprint Percentage of variation of global noise energy per movement

(Global Noise Energy calculated in kJ divided by the total

number of movements between 2000 and 2019.

2018

-42%

2019

-43%

Percentage change inCO

2

eciency

(g.CO

2

/passenger/km) between 2005 and 2019

(operational measures only)

2019

-20%

Percentage change inCO

2

eciency

(g.CO

2

/passenger/km) between 2005 and 2019

(operational measures and market - based measures)

2019

-30%

2030 target

50% reduction

compared to 2005

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4.3.1 Carbon emissions

Context and strategy

Aviation is responsible for 2% to 3% of man - made greenhouse

gas emissions. However, given the growth for global air trac

over the coming decades and if no action is taken, this proportion

could increase.

In 2009, the International Air Transport Association (IATA) set

ambitious worldwide targets for reducing theCO

2

emissions from

air transportation:

— 1.5% average annual fuel eciency improvement until 2020;

— carbon neutral growth from 2020 onwards;

— a 50% reduction in net aviationCO

2

emissions by 2050 relative

to 2005 levels.

AirFrance–KLM endorses the IATA targets and the Group has

set itself some proprietary intermediate targets.

The Group’s 2020 target had been to reduce itsCO

2

emissions

by 20% per passenger km compared to 2011 but this objective

was achieved in 2018 with a reduction of 21.6%.

In 2019, Air France–KLM thus set itself a 2030 target of

reducing its CO

2

emissions by 50% compared to 2005

(in g. ofCO

2

/passenger/km including the market - based measures):

in 2019, the Group achieved a 30% reduction in itsCO

2

emissions

compared to 2005 (operational measures and market - based

measures) and a 20% reduction taking into account only the

operational measures.

The Group has established a Climate Action Plan to reduce its

carbon footprint. This Plan is composed of six main mitigating

priorities, on the basis of which targets have been identiﬁed and

action plans implemented:

— ﬂeet modernization and contributing to aeronautical research;

— sustainable Aviation Fuel and participating in research into

renewable energies;

— operational measures;

— supporting the implementation of the global climate

agreement (CORSIA) with a fair contribution for aviation;

— regulatory and proactive osetting;

— supporting environmental programs;

— carbon osetting programs for customers.

Measures and performance

Greenhouse gas emissions: Scopes 1, 2 and 3

Most of the greenhouse gas emissions (GHG) are generated by

AirFrance–KLM’s direct activities (scope 1), and mainly by the

ﬂight operations which represent 99.7% of the Group’s total

direct emissions. The ground operations (testing bench, runway

vehicles, etc. ) represent 0.3%.

The ground operations, like the aircraft maintenance and tertiary

activities, also generate indirect greenhouse gas emissions (scope 2),

through electricity consumption in buildings (electricity and air

conditioning). The Group implements actions to reduce ground

energy consumption.

The indirect Scope 3greenhouse gas emissions mostly come

from the upstream phase (extraction, production, distribution,

etc. ) in aviation kerosene production and carbon emissions from

vehicles and runway equipment. The other scope 3components

are the purchasing of goods and services, passenger road travel

to and from airports, and employee commuting. Air France and

KLM implement measures to reduce scope 3emissions. For the

air operations, scope 3emissions account for around 16% of total

emissions (scopes 1, 2 and 3).

Every year, the Group reports 100% of its scope 1 and 2 CO

2

emissions, and the scope 3emissions resulting from the upstream

phase in aviation kerosene production (according to internal

estimates, these emissions represent approximately half of the

total scope 3emissions). These emissions are reported in the

form of indicators presented in the environmental indicator

tables, accompanied by a deﬁnition of the respective scopes (see

Section4.3.6).

Fuel - saving measures

All possible avenues of fuel - savings are identiﬁed and, when

feasible, implemented, subject to strict respect of the rules on

Flight Safety. All the airlines within AirFrance–KLM are involved

in the Fuel Plan so that the Group can improve its energy

eciency and reduce its carbon footprint.

Fleet modernization

Currently the most impactful way to reduce the carbon footprint

is to invest in a more fuel - ecient ﬂeet. The Group focuses on

simpliﬁcation and rationalization to make the ﬂeet more competitive

while its transformation is being pursued with the arrival of more

modern, high - performance aircraft with a signiﬁcantly - lower

environmental impact. For the long - haul ﬂeet, Air France’s A340s

and A380s and KLM’s Boeing 747 - 400s are gradually being

replaced by Boeing 787 - 9s and 10s and by A350 - 900s. In 2019,

the average age of the ﬂeet was 11.6years. For more information

on the Group’s ﬂeet see Section1.4.

Sustainable aviation fuel

The use of Sustainable Aviation Fuel (SAF) is a promising avenue

for reducing theCO

2

emissions from aviation. Such fuels are key

to achieving AirFrance–KLM’sCO

2

emission reduction targets

as well as those of the aviation industry as a whole.

AirFrance–KLM’s goal is to contribute to the establishment of a

sustainable fuel industry for aviation. Both Air France and KLM

have established innovative partnerships with corporate customers,

suppliers, airports and logistics partners. This is exempliﬁed by

last year’s announcement from KLM and SkyNRG, aimed at

developing Europe’s ﬁrst dedicated plant for the production of

SAF in Delfzijl (the Netherlands). However, strong governmental

support accompanied by incentives are required for both their more

widescale deployment and the creation of economically - viable

production facilities for producers and operators alike.

AirFrance–KLM is very exacting as regards the sustainability

standards of the Sustainable Aviation Fuel it uses, requiring for

example a signiﬁcant reduction inCO

2

emissions, a minimal impact

on biodiversity, no competition with food production or access

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to food resources, and a positive impact on local development.

Air France and KLM have been members of the sustainable

certiﬁcation body Roundtable on Sustainable Biomaterials (RSB)

since 2008, in their capacity as founder members of the Sustainable

Aviation Fuel Users Group (SAFUG).

Stimulating the industry

Air France and KLM are members of working groups and support

research projects aimed at the creation of a Sustainable Aviation

Fuel market. For example:

— Air France has joined forces with the ATAG (Air Transport

Aviation Group) to promote, with the French Civil Aviation

Research Council, greater knowledge of biofuels for aviation

and thus raise public authority awareness of the need to

support a French biofuels industry. Air France is also actively

participating in the establishment of the French national road

map on aviation biofuels managed by the National Alliance

for Coordination of Research on Energy (ANCRE);

— KLM continues to purchase an annual 120,000liters of SAF

for its Växjö (Sweden) ﬂights, equalling 5% of the total fuel

use on all ﬂights to/from that destination. Together with Södra

and the City of Växjö, KLM and SkyNRG are investigating the

feasibility of producing SAF locally;

— in 2017, Air France signed an Engagement for Green Growth

(Engagement pour la Croissance Verte –ECV) with the French

Ministry for the Ecological and Inclusive Transition, the French

Ministry of Transport and the French Ministry of the Economy

and Finance, along with four other major French industrial

companies (Airbus, Safran, Suez and Total). This Engagement

for Green Growth aims to promote the emergence of

sustainable aviation biofuel industries, in economically viable

conditions that fully integrate circular economy principles. Its

conclusions were published in January2020, together with a

French governmental roadmap to set, on the basis of the ECV

recommendations, the principles and ambition for Sustainable

Aviation Fuel incorporation and the launch of a call for

expressions of interest to build production facilities in France.

Supporting regulatory incentives in France

and the Netherlands, and at international level

Air France and KLM are actively involved in the European

Advanced Biofuels Flightpath initiative. They are also members

of the ART Fuels Forum.

Furthermore, Air France is participating in the Ini-FCA French

Future Alternative Fuels Initiative, spearheaded by the French

Civil Aviation Authority (DGAC). Within the CORAC (Council for

Civil Aeronautical Research), the company actively participates in

formulating a sustainable biofuels strategy involving coordinated

actions to further technological research and innovation towards

the attainment of ecological transition objectives within a global

context.

KLM is actively involved in the BioPort Holland, a collaboration

between the Dutch Government and several private parties with

a collective ambition of launching sustainable aviation fuel

production in the Netherlands.

Innovating in the supply chain

KLM is one of the founders of SkyNRG, the current worldwide

market leader for Sustainable Aviation Fuel. Since 2016, all KLM

ﬂights from Los Angeles airport have been operated with SAF

produced by the local World Energy (former AltAir Fuels)

reﬁnery and supplied by SkyNRG. Additionally, KLM has purchased

SAF for ﬂights out of Amsterdam Airport Schiphol. This sustainable

fuel produced by Neste from used cooking oil will bridge the gap

until the coming on stream of the SAF production plant.

In 2019, KLM made a decade - long commitment to developing

and purchasing an annual 75,000tons of Sustainable Aviation

Fuel. KLM is the ﬁrst airline in the world to invest in SAF on this

scale. SkyNRG will develop Europe’s ﬁrst dedicated plant for the

production of SAF. The construction of this facility, which is

scheduled to open in 2022, is a concrete step towards fulﬁlling

KLM’s sustainability ambitions.

In November2019, Air France and Shell signed a memorandum

of undertaking conﬁrming their commitment to fueling the

airline’s ﬂights on departure from San Francisco with a blend of

conventional and sustainable fuel for aviation as of June1, 2020.

This alternative fuel, produced mostly from inedible waste fats

and oils, has obtained RSB certiﬁcation and respects strict

sustainability criteria. Distribution will take place via the airport’s

centralized infrastructure. This initiative will avoid the emission of

around 6,000 tons ofCO

2

over 16months and illustrate’s the

airline’s proactive commitment to reducing its environmental

footprint at every stage of the value chain.

Involving customers and partners

As part of its WWF-Netherlands partnership and the Green Deal

commitment, in 2012 KLM launched the KLM Corporate BioFuel

program, a ﬁrst for aviation. In 2019, the KLM Corporate BioFuel

Programme was partnered by ABN Amro, Accenture, Arcadis BV,

Arcadis NV, Amsterdam Municipality, Loyens & Loe, Air Trac

Control the Netherlands (LVNL), Microsoft, the Ministry of

Infrastructure and the Environment, Neste, the Royal Netherlands

Aerospace Centre (NLR), PGGM, Schiphol Group, SHV Energy,

Södra and the University of Delft.

Air France has long supported the development of a viable industry

for the production of sustainable fuel for aviation. It has been

trialing the use of such fuel on its commercial ﬂights since 2014

and invests substantial sums in innovation alongside research

institutes. In France, Air France mobilizes the partners in the

biofuel value chain around the Engagement for Green Growth.

Operational measures

Weight reduction: the lighter the aircraft, the less fuel it

consumes. All the divisions of AirFrance–KLM are working to

reduce weight on board. This includes, for example, reducing the

weight of seats, galley and service equipment, products such as

paper documentation for cargo and ﬂight decks, magazines and

the loading of drinking water.

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Route and ﬂight path optimization: Improvements in fuel eciency

are made through the optimization of routes, ﬂight paths and

altitudes, and a reduction in aircraft waiting times. AirFrance–KLM

is proactively involved in the SESAR program, which contributes

to the targets of the Single European Sky (SES) directed at better

management of air trac. SESAR aims to contribute to the SES

10%CO

2

reduction target by reducing fuel burn.

Flight operations optimization: For example, pilots are trained to

apply the most - fuel - ecient procedures: Flight Plan precision,

speed adjustments and optimized trajectories, and, on the

ground, taxiing with one engine shut down. New ecient tools

based on artiﬁcial intelligence are being implemented, in

partnership with innovative startups.

MandatoryCO

2

compensation

Since 2012, the Group has been subject to the application of the

European Union Emission Trading Scheme for greenhouse gas

emission quotas (EU-ETS) (for the 2019 ﬁgures, see

Section4.3.6Environmental indicators table). Until the end of

2023, the EU-ETS scope is limited to intra-European ﬂights.

The global market - based mechanism established by ICAO,

known as CORSIA (Carbon Osetting and Reduction Scheme for

International Aviation), aims to limit the CO

2

emissions from

international aviation by targeting carbon neutral growth relative

to the 2020 baseline. Air France, KLM and the other IATA airline

members continue to work actively on the implementation

conditions of this agreement.

For the implementation of CORSIA, the AirFrance–KLM Group

contributed to the calculation of theCO

2

emission reference data

as of January1, 2019 t (average of the 2019 and 2020 emissions).

The implementation of CORSIA osetting will begin with a ﬁrst

phase from 2021 to 2026, based on the States volunteering to

contribute, i.e. currently 81countries, representing around 76% of

international aviation activity.

The EU will implement the ICAO’s CORSIA scheme in the current

EU-ETS regulations for aviation for the scope of international

ﬂights. In this context, AirFrance–KLM considers that itsCO

2

emissions are not simultaneously subject to both the EU-ETS and

CORSIA. Assuming a change to the provisions of the EU-ETS, the

Group is calling for a detailed impact study to be conducted on

the envisaged amendments, and is drawing attention to the need

for the prior design of a carbon adjustment mechanism at the

frontiers of the European Union, to protect the European airlines

from “carbon leakage”

Voluntary carbon osetting and support for environmental

programs

Air France and KLM oer their individual and corporate customers

the opportunity to oset theirCO

2

emissions on a voluntary basis,

by makingCO

2

emission calculators available to customers on

their websites. These calculators are directly linked to an emission

evaluation system, enabling passengers to oset the carbon

emissions associated with their travel, should they so wish.

With the Trip and Tree program, Air France is partnering the A

Tree for You association which brings together, in complete

transparency, contributors and tree - planting projects from all

over the world. When purchasing a ﬂight ticket, customers can

volunteer to help the planet by making a donation in the amount

of their choice to ﬁnance one of the tree - planting projects

supported by the Trip and Tree program.

KLM’s compensation service CO2ZERO also enables passengers

to oset their carbon emissions. Customer contributions are

invested directly in a carbon - osetting project in Panama certiﬁed

by the Gold Standard for the Global Goals label that focuses on

planting new trees, preserving existing forests and supporting

the local community. In 2019, the number of journeys booked

including aCO

2

compensation request doubled on the previous

year, with more than 175,000customers opting to oset their

ﬂight - related emissions. For the ﬁrst time last year, KLM included

the price ofCO

2

compensation prominently in its sales campaigns.

Transavia also oers its customers the opportunity to oset

theirCO

2

emissions on a voluntary basis when booking thanks to

the CO2ZERO program.

Since January1, 2020, Air France has been proactively osetting

100% of theCO

2

emissions generated by its domestic ﬂights. This

represents a daily average of more than 450ﬂights. In cooperation

with its partner EcoAct, this compensation takes the form of

participation in projects certiﬁed by the highest international

standards, and selected for their eective contribution to the

United Nations Sustainable Development Goals (SDGs) and their

signiﬁcant beneﬁts for the local population, to support

reforestation, preserve forests and biodiversity, and develop

renewable energies. Air France is one of the ﬁrst airlines in the

world to oset the emissions generated by its domestic ﬂights.

Lastly, corporate customers can also opt for voluntary compensation

of up to 100% of the emissions generated on their short, medium

and long - haul ﬂights via a dedicated oer.

For more information on these programs see Section 4.3.5

Biodiversity.

Ground energy consumption

Energy consumption in the ground operations, such as fuel use

for ground support equipment, gas for heating purposes and

electricity for aircraft maintenance and tertiary activities, generates

direct and indirect greenhouse gas emissions (scope 1 and scope 2).

Air France and KLM had been targeting a 20% improvement in

ground operation energy eciency by 2020 (relative to the 2011

level), by optimizing energy consumption and increasing the use

of renewable energies. Air France reached this target in 2017, and

is pursuing its initiatives to maintain and improve this achievement,

despite the ﬂuctuations in consumption linked to climate events

(e.g. particularly hot summer in 2018).

In 2019, Air France and KLM set a target of carbon - neutral ground

operations in 2030. The reporting corresponding to this target

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will be put in place in 2020. In 2019, the Group reduced itsCO

2

emissions by 32% compared to 2018.

In 2019, the Group pursued actions to reduce its energy

consumption, in particular by upgrading its equipment and

including this objective in supplier contracts. For example, at Air

France, a new energy - ecient lighting system has replaced the

traditional system in the cargo warehouses and is being deployed

at the maintenance sites, enabling a near - 80% saving (reduction

in energy and maintenance costs) and a saving of 550 tons

ofCO

2

a year.

Other initiatives are based on the increased use of renewable

energies. For example, at Toulouse and Valbonne, in the south of

France where the bulk of the IT servers are located, 100% of the

heating needs of the tertiary buildings are met by recycling the

heat generated by the air conditioning system. Photovoltaic

energy projects will be deployed at the company’s facilities in

Toulouse and the Roissy-CDG head oce: in total, this equipment

will generate power of 1,300KWc.

In 2019, KLM achieved a 59% reduction in greenhouse gas

emissions from its ground operations compared to their 2011

level.This was achieved in part by increasing electricity eciency

by at least 2% per annum as part of a ﬁfth multi - year energy

eciency agreement with the Dutch Ministry of Economic Aairs

running through to 2020. In 2019, KLM took a major step towards

this ambition by switching to green electricity. A further reduction

in greenhouse gas emissions has resulted from increasing the

share of electric ground support equipment to 60%, replacing

diesel with Gas - to-Liquid and reducing gas consumption.

Environmental management/ISO14001certiﬁcation

Air France and KLM’s Environmental Management Systems (EMS)

have been ISO14001certiﬁed, respectively, since 2008 and 1999,

for all air and ground operations in France (metropolitan and

Saint-Denis de La Réunion and Papeete outstations) and the

Netherlands. This certiﬁcation was renewed for a three - year period

in 2017 for Air France and in 2018 for KLM. Internal and external

audits verify the eective implementation of the Environmental

Management System.

In addition to compliance with the regulations in force, the

Environmental Management System is used to drive an improvement

in environmental performance and innovation, both within the

Group and at its suppliers.

4.3.2 Adaptation

to climate change

Context and strategy

For air transportation, the impacts of climate change could have

consequences for the routes and destinations served. The size of

the AirFrance–KLM network, with services balanced between

the dierent continents, and the ﬂexibility obtained through ﬂeet

composition are all valuable assets when it comes to minimizing

the economic consequences of these impacts and adapting ﬂight

schedules to market requirements.

Measures and performance

Contributing to the reduction inCO

2

emissions

To avoid air trac growth contributing to an increase inCO

2

emissions, the aviation industry is the ﬁrst economic sector to

have deﬁned ambitious long - term reduction targets and to have

set up a carbon osetting scheme at global level within the

framework of the International Civil Aviation Organization, to

guarantee carbon - neutral growth in global air transportation

from 2020.

While international aviation is not included in the Paris Climate

Agreement, the industry’s eorts respond to the latter’s target

of limiting the global temperature increase to below 2°C. In its

Energy Technology Perspectives 2017, the International Energy

Agency considers that the airline industry’s target for 2050 is

more ambitious than what would be required for a 2°C scenario

(2°C Scenario– 2DS) and close to a scenario of beyond 2°C

(Beyond 2°C Scenario–B2DS).

In 2019, the Group set itsCO

2

emission reduction targets for 2030

and 2050. In terms of carbon - free energy, the use of Sustainable

Alternative Fuels is a promising avenue towards reducingCO

2

emissions from aviation and a key element in achieving

AirFrance–KLM’sCO

2

emission reduction targets as well as those

of the aviation industry as a whole.

During the Paris Air Show in June2019, Air France rearmed its

commitment, alongside all the French air transportation players–

Groupement des Industries Françaises Aéronautiques et Spatiales

(GIFAS), ADP Group, Fédération Nationale de l’Aviation Marchande,

Union des Aéroports Français –to combatting climate change.

Air France was behind this collective approach shared by all the

stakeholders in the sector.

For the initiatives under way within Air France–KLM, see

section4.3.1

Implementing operational solutions

Since they are present across all continents, the Group’s airlines

already operate in all weather conditions. They have thus already

deployed the procedures and resources to ensure operations in

extreme climate conditions.

The more frequent occurrence of extreme climate events could,

however, aect ﬂight operations (re - routing, ﬂight cancellations

and delays, etc. ). In response, Air France, KLM and Transavia have

developed special training programs for employees on the

management of emergency situations. The companies also work

together with airports to ensure safe operational and passenger

handling conditions and, in such circumstances, deploy commercial

measures to enable passengers to defer their travel should they

so wish, or change their destinations.

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Table of concordance

Sections in the

TCFD principles Universal Registration Document 2019

1. Governance

1.1 Describe the board’s oversight of climate - related risks and opportunities Sections 2.3.2, 3.1.2

1.2 Describe management’s role in assessing and managing climate - related risks and opportunities Section2.3.2

2. Strategy

2.1 Describe the climate - related risks and opportunities the organization has identiﬁed

over the short, medium, and long term Sections 3.2.2, 4.1.2, 4.3.2

2.2 Describe the impact of climate - related risks and opportunities on

the organization’s businesses, strategy and ﬁnancial planning Sections 3.2.2, 4.1.2, 4.3.2

2.3 Describe the resilience of the organization’s strategy, taking into

consideration dierent climate - related scenarios, including a 2°C or lower scenario Section4.3.2

3. Risk management

3.1 Describe the organization’s processes for identifying and assessing climate - related risks Sections 3.2.2, 4.3.2

3.2 Describe the organization’s processes for managing climate - related risks Sections 2.3.2, 3.2.2, 4.3.2

3.3 Describe how processes for identifying, assessing, and managing

climate - related risks are integrated into the organization’s overall risk management Section3.1.2

4. Metrics and targets

4.1 Disclose the metrics used by the organization to assess climate - related

risks and opportunities in line with its strategy and risk management process Sections 4.31, 4.3.2

4.2 Disclose Scope 1, Scope 2 and, if appropriate, Scope 3greenhouse gas (GHG)

emissions, and the related risks Sections 4.31, 4.3.6

4.3 Describe the targets used by the organization to manage climate - related risks

and opportunities, and performance against targets Sections 4.3.1, 4.3.2

Mobilizing partners and supporting research

and development

The Group is mobilizing the industry and is committed to research

and development into innovative solutions, in both design,

aeronautical and engines maintenance and navigation tools, and

in Sustainable Alternative Fuels.

In December 2019, Air France announced the signature of a

partnership with the Solar Impulse Foundation, to promote the

identiﬁcation and rapid implementation of economically and

ecologically - viable solutions for aviation. Air France and the Solar

Impulse Foundation are calling for clean, ecient and proﬁtable

solutions to accelerate the ecological transition of the aviation

sector. The PROGNOS solution, deployed by Air France Industries

KLM Engineering & Maintenance, has already obtained the Solar

Impulse Label. This predictive analysis program is based on

harnessing big data technologies to oer an eective and

innovative aeronautics maintenance service. The environmental

beneﬁts of PROGNOS stem from reducing ﬂight cancellations

leading to extra ﬂights to recover grounded passengers, as well

as reducing the number of Quick Return Flights (return of the

aircraft to its departure airport) on technical alerts, which require

fuel tanks to be emptied prior to landing. It also optimizes overall

aircraft fuel consumption by monitoring the status of equipment

more precisely.

At the end of 2019, Air France invited partners, experts,

high - proﬁle individuals, innovation players and business leaders

to participate in a round table on the theme Acting Together For

Responsible Travel (Agir ensemble pour un voyage responsable).

In a series of ﬁgures and using concrete examples, this meeting

was aimed at outlining the airline’s commitments to reducing the

impact of its activity on the environment and to mobilizing the

players around responsible travel.

Principles of the Task Force on Climate - related Financial

Disclosures (TCFD)

The Task Force on Climate - related Financial Disclosures (TCFD) was

set up by the G20 in December2015 during the United Nations

COP21 conference to draft recommendations for ﬁnancial and

non - ﬁnancial companies to use in the public disclosure of the

impacts of climate - related risks and opportunities. These

recommendations, which are applicable across all sectors and

can be included in existing ﬁnancial reports, aim to increase the

transparency between companies and investors, thereby reducing

investment risks and reconciling short - term ﬁnancial decisions

with the longer - term consequences of climate change.

In 2019, the Group realized the TCDF Climate Maturity Assessment

developed by KPMG, to evaluate the concordance of its

environmental reporting with the principles of the TCDF. The actions

implemented by the Group are presented in the following table.

As a result, AirFrance–KLM has decided to become an ocial

supporter of the TCFD principles with a commitment to continuing

to improve its knowledge and reporting.

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4.3.3 Noise and local pollution

Noise

Context and strategy

Airlines accommodate their customers’ increased demand for

mobility, while maintaining noise hindrance at an acceptable level

for those living near airports. AirFrance–KLM has formalized its

commitment to noise mitigation by making it a requirement

enshrined in its Corporate Social Responsibility Statement.

Fleet modernization and improved operational procedures are

the two pillars of the Group’s noise reduction strategy. All of the

aircraft in the AirFrance–KLM ﬂeet meet the criteria established

by the ICAO Chapter4Noise Standard, the most exacting standard

covering the acoustic quality of civil aircraft. Fleet renewal enabled

a 33% reduction in the AirFrance–KLM Group’s noise footprint

between 2000 and 2019, whereas the number of aircraft

movements increased by 18% over the same period.

Speciﬁc solutions are also sought to reduce the noise emissions

from aircraft. Whenever possible, AirFrance–KLM thus implements

continuous descent or NADP (Noise Abatement Departure

Procedure) procedures which signiﬁcantly reduce noise pollution.

The SESAR program also aims to improve the management of

noise and its impact through precision landing procedures using

satellite navigation and optimized ﬂight paths, including

optimized climb and descent operations.

Measures and performance

Thanks to the actions implemented for several years, the

AirFrance–KLM Group reduced overall noise energy per movement

(takeo and landing) by 43% between 2000 and 2019.

Air France and KLM are committed to ensuring a permanent

dialogue with stakeholders in all territories. They meet with the

representatives of local communities, the airport authorities and

air trac control to identify measures enabling a reduction in

noise hindrance potentially aecting the inhabitants of areas

located near airports.

In the Netherlands, KLM participates in het Regioforum which

addresses issues surrounding noise with the local community. In

France, this dialogue is mainly conducted within the context of

the CCEs (Environmental Consultative Commissions) and CCARs

(Advisory Residents’ Assistance Commissions) in which Air France

participates at all the French airports where it has operations.

Air France has been actively involved in a Night Flights working

Group, overseen by the Prefect of the Paris-Charles de Gaulle

airport region. This working Group notably proposed new “dead

of night” continuous descent procedures and welcomed the

voluntary retirement of noisy aircraft including Air France’s

Boeing 747s. Air France rearmed this commitment with the

announcement of the phase - out from the ﬂeet of the Airbus

A340s. In 2019, during the French National Air Transportation

Debate (Assises du Transport Aérien), the government announced

a commitment to the widespread application of continuous descent

procedures in the medium - term (2023). Lastly, the punctuality of

ﬂights scheduled for late at night or early in the morning is the

subject of a speciﬁc expert monitoring group.

In 2019, the Air France Group’s contribution (Air France, Air

France HOP! and Transavia France) to the Airport Noise Tax

(TNSA) paid to the French State amounted to €18.3million. Its

proceeds are allocated to the ﬁnancing of sound - prooﬁng for

homes located around the main airports. Since the TSNA was put

in place, around €720 million has been allocated to the

sound - prooﬁng of housing, to which the Air France Group has

made a substantial contribution.

Around Schiphol airport, all the noise disturbance measures have

been implemented. Over the past two decades, KLM has

contributed most of the total €754million in noise taxes, devoted

to the sound - prooﬁng and compensation for loss of value in

property around Schiphol airport.

Air quality

Context and strategy

The AirFrance–KLM Group monitors its atmospheric emissions

for both the ﬂight and ground operations, including low altitude

emissions which impact the quality of the air around airports. The

indicators cover emissions ofCO

2

,SO

2

andNO

X

.

Most of these gas and particle emissions come from aircraft

movements. The remainder is produced by the ground operations

and maintenance activities, airport logistics and road travel by

passengers, employees and suppliers.

Measures and performance

AirFrance–KLM reduces its local emissions via a number of levers:

— a modern ﬂeet with more energy - ecient aircraft;

— electric or more ecient ground vehicles and runway

equipment, powered by cleaner fuels;

— optimized operational procedures for the ground operations:

taxiing time, taxiing using just one engine, the use of ground

power units (GPUs) to ensure the functioning of on - board

systems, replacing the Auxiliary Power Units (APUs) on

kerosene - powered aircraft.

At Air France, an increased budget for 2019 enabled investment

in runway equipment meeting the new environmental standards

in force and the development of electrical power. For ground

vehicles, hybrid petrol and electric engines are prioritized when

renewing the ﬂeet.

The replacement of the diesel engines on twelve conveyor belt

vehicles with electric motors powered by a new type of lithium - ion

batteries from recycled car batteries will allowCO

2

emissions to

be reduced by 3 tons per year and per conveyor belt. The

company has set itself a target of 90% of its ramp vehicles and

equipment to be electrically - powered by 2025.

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Similarly, Air France is accelerating the use of electric power

converters (ACUs) for the air conditioning of aircraft on the

ground. This enables a reduction in emissions due to the use of

thermal ACUs, APUs and GPUs.

KLM increased the proportion of full - electric ground support

equipment to 58% in 2019, thereby reducing CO

2

and local

emissions. In summer 2019, diesel was replaced with Gas - to-

Liquid (GTL) in the fuel supply system at Schiphol Airport. This

was initiated by KLM to ensure a substantial reduction in the

related local emissions.

Air France has participated in the Paris Region “Atmosphere

Protection Plan” since 2008 through its Mobility Plan and, at the

outstations in the French provinces, has launched the roll - out of

their own Mobility Plans. In December2019, the Toulouse outstation

received an award at the Eco Mobility Trophies organized by the

region’s public transport organization for its Mobility Plan, drawn

up in collaboration with the airport authorities.

With more than 80% of sta commuting to work by car, the aim

of the Mobility Plan is to reduce the pollutant emissions linked to

their travel. This is thus a major challenge for the company, in terms

of both the environment and health and safety in the workplace.

In 2019, the Mobility Plan was based on the following initiatives:

— promoting public transport;

— encouraging remote working for positions allowing this:

5,692employee teleworkers in France in 2019, i.e. an increase

of more than 100% relative to 2018. These unrealized commutes

to/from work represent approaching 8million kilometers and

a saving of 1,932tons ofCO

2

;

— installing charging terminals for electric vehicles in its car

parks;

— participating in the development of the car share platform

available free of charge to employees of Air France and those

of ten other companies. In the French provinces, car sharing

is also encouraged and supported;

— raising employee awareness of the link between air quality and

methods of commuting to/from work;

— making nomad workspaces available;

— implementing collective initiatives with the other companies

located at each work site to maximize the eectiveness of the

measures.

Other areas are also being studied like carpooling and the

development of environmentally - friendly transportation methods

like cycling.

4.3.4 Waste and the circular

economy

Context and strategy

AirFrance–KLM handles many forms of waste, mostly arising

from ﬂight operations and maintenance, within a context of strict

regulatory obligations. Across the entire supply chain, the Group

strives to minimize waste and increase the proportion that is

recycled or reprocessed. Air France and KLM base their actions

on the four principles of the circular economy: rethink, reduce,

reuse and recycle.

Air France has set itself a target of recycling or processing for

energy recovery 100% of non - hazardous waste and 60% of

hazardous waste by 2020. KLM has already achieved its 2020

objective of reprocessing or recycling 100% of non - hazardous

waste.

In 2019, both Air France and KLM set themselves a target of a

50% reduction in residual waste (non - recycled waste from the

cabin and ground activities) by 2030 compared to 2011. In 2019,

the Group reduced non - recycled waste by 31% compared to the

2011 level.

Measures and performance

Inﬂight waste

Air France and KLM run programs aimed at a constant improvement

in the overall management of ﬂight waste: waste prevention,

increasing the recycled portion, eco - design of products and the

identiﬁcation of appropriate reprocessing facilities, with reducing

residual waste as the main goal. For example, a signiﬁcant

proportion of reusable obsolete equipment, like trays, drawers,

blankets and trolleys, is recycled.

Since October1, 2019, Air France has been selectively sorting its

on - board waste. This sorting, realized on all the short, medium

and long - haul ﬂights bound for Paris, concerns plastic bottles,

cardboard juice cartons and aluminium cans. The articles are

sorted on board by the cabin crews then handled by Servair at

Paris-CDG and Paris-Orly, before being recycled in France or

elsewhere in Europe. Every year, nearly 7million bottles, 3million

juice cartons and 6million cans are consumed on the company’s

ﬂights. The capability to extend the initiative on ﬂights from Paris

is being studied based on a regulatory and operational analysis

at each destination.

At KLM, the use of less product packaging has been a focus of

eorts. On all the European ﬂights, on - board waste is sorted and

trolleys have been adapted to collect plastic and cardboard cups.

Glass, cans, aluminum lids, paper, EPS boxes, PET plastic bottles

and other forms of plastic are also sorted and recycled by the

catering teams. In 2019, KLM introduced the From Drink To Ink

program that collects PET bottles to turn them into ﬁlament for

3D printing in its engine maintenance shop.

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Whether for reasons of hygiene and food safety, or to reduce the

weight embarked, the inﬂight service uses a substantial quantity

of single - use plastic products (SUPs). The AirFrance–KLM Group

is committed to reducing the environmental impact of SUP in its

operations. The Group achieves this by: removing SUPs wherever

possible; replacing these plastics with other materials if more

sustainable alternatives are available (based on Life Cycle

Assessments or other environmental proofs); redesigning SUPs

to decrease material use; using recycled plastic or ensuring SUPs

are recycled where possible.

In 2019, to reduce its environmental footprint, Air France committed

to replacing 80% of single - use plastic items with sustainable

alternatives between now and 2025, while respecting the airline

rules and health requirements. At the end of 2019, Air France

gradually eliminated 210million single - use plastic items, i.e. 1,300tons

(100million plastic cups replaced by cardboard versions, 85million

plastic cutlery items replaced by versions manufactured and

packaged using bio - based materials, 25million plastic stirrers

replaced by wood versions).

In 2019, Transavia also committed to the progressive and signiﬁcant

reduction of single - use plastic items on board its aircraft by

proposing, on its scheduled ﬂights, certiﬁed alternatives to

single - use plastic (Duty Free bags in Kraft paper and cups,

stirrers and cutlery kits of plant origin, etc. ). In total, more than

seven million single - use plastic items are no longer distributed

each year on the scheduled ﬂights, or 41tons of plastic.

Action to combat food waste and food insecurity

Air France–KLM handles the food waste coming from ﬂight

operations in the respect of a permanent commitment to

guaranteeing food safety and security, within a context of strict

regulation. The regulations vary depending on the context of

each station and are often very exacting, like the European

Regulation requiring the incineration of any elements having

been in contact with food on ﬂights arriving from outside the EU.

Two main levers enable a reduction in food waste: the adjustment

of the catering embarked on ﬂights and a strict policy of

merchandise inventory management.

Based on statistics and historic ﬂight load factors, and on

passenger habits, the number of meals actually embarked is

regularly re - evaluated. This re - evaluation prevents waste arising

and reduces both production and transportation costs and

overall waste. This also reduces the onboard weight, resulting in

lowerCO

2

emissions.

Digital innovation enables customer demand to be more

accurately predicted, like for example the pre - selection of hot

dishes in the Air France Business cabin.

Rethinking some oers also contributes to a reduction in food

waste. In 2019, Air France revisited the kit containing a stirrer and

sachets of sugar and creamer. It decided to leave out the creamer

and oer this to passengers on request, thereby avoiding the

embarkation and wastage of around 30 tons of products

per year.

Furthermore, when some foodstus or articles can no longer be

loaded on board, they are donated to charities. The company also

works with the Restos du Cœur soup kitchens and the Food Bank.

AirFrance–KLM Martinair Cargo is active in the perishable goods

transportation segment. The teams maintain a permanent

relationship with all the players in the value chain (producers,

exporters, importers, supermarkets, airport authorities, etc. ) to

promote sustainable development in the agricultural and air

transportation sectors. Numerous initiatives are under way: joint

communication actions with the Paris-CDG plant protection

department and exporter customers, improvement in perishable

goods handling capacity and management of the cold chain, etc.

The Group is also a member of the Cold Chain association and

contributes to its work on reducing food waste. Within this

framework, 2019 saw the deﬁnition of the priority measures to

be implemented for the sustainable development of air - shipped

exports of West African mangoes, at both technical (combatting

fruit ﬂies which degrade the quality of the fruit) and logistical

level (improvement in airport infrastructures at Burkina Faso and

in Senegal notably, and veriﬁcation procedures at Paris-CDG).

Aeronautical waste

Air France and KLM have a procedure in place for recycling metal

aeronautical waste. Wherever possible, the cradle - to - cradle

principle is applied to reintegrate waste in a new production cycle.

The process foresees procedures to reuse and recycle spare

parts. This program has been extended to other types of waste:

furniture, equipment, pallets and blankets.

At Air France, the move up - market for the medium and long - haul

cabins with the installation of new seats has been accompanied

by the implementation of a recycling and dismantling process for

the old seats ranging from the reuse and recycling of

components to the recovery of foams and metals.

Hazardous waste from the maintenance activities is the subject

of a comprehensive tracing system and its management is

harmonized in the dierent maintenance sites. This approach is

also reﬂected in the optimized management of suppliers and

costs, and the search for more relevant solutions in the light of

regulatory changes.

Promoting the principles of the circular economy

The two companies are working on initiatives to up - cycle waste

for new uses like, for example, the recycling of used uniforms.

A permanent recycling system is in place for Air France uniforms

and work clothing. Sta are invited to adopt good recycling

practice by depositing uniforms and work clothing in secure

containers in the Air France premises. Uniforms are collected

(30.2tons of textiles since September2018 at the Roissy site)

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from the various sites and are recovered by dierent partners

including a French Support and Work Assistance Establishment

(ESAT for the employment of disabled workers), before

subsequently being up - cycled. Uniforms are thus up - cycled via

the help of energy recovery in the form of textile pellets. Finally,

these ashes will be used as fuel in the manufacturing of cement.

In addition, employees have launched the 100% Uniforms

initiative to recycle these uniforms into other products such as

the new collection of accessories (pouches etc. ).

To avoid the destruction of products and promote their reuse, in

January2017 Air France signed a framework agreement with the

Agence du Don en Nature (ADN). By donating new, re - modeled

and recycled products like crockery and blankets respectively, Air

France supports the work of the ADN association which collects

and redistributes new non - food everyday products to combat

exclusion in France. In 2019, during the upgrade to Air France’s

cabin decor, more than 25,000 blankets in Business were

donated to AND. In addition, at the end of the Joon operations,

more than 6,500items of Joon uniforms were recycled via a

donation to the SAMU Social organization.

KLM sorts over 14types of waste, with paper, wood, plastic and

metal being its main residual forms. In cooperation with its

partners, KLM for example up - cycles old cargo straps into bags,

pillows and laptop cases, recycles uniform ﬁbers into cabin

carpets, furniture and KLM goodies, and up - cycles old furniture.

4.3.5 Biodiversity

Context and strategy

The impact of air transportation on biodiversity is linked to the

eects of climate change induced by the CO

2

emissions it

generates. The Group supports a number of projects and

initiatives aimed at protecting biodiversity around its hubs and

outstations.

The investment in other projects, aimed at advancing knowledge

and preserving biodiversity, also contributes to a better

understanding of the issues associated with ecosystem services

like sustainable biofuel production. Although certain types of

biofuel for road transportation can have a negative impact on

biodiversity, AirFrance–KLM is committed to guaranteeing the

use of Sustainable Aviation Fuels with the lowest impact on the

food chain and biodiversity, and a positive impact on local

communities.

Measures and performance

Supporting projects through customer osetting

Alongside the French Civil Aviation Authority (Direction Générale

de l’Aviation Civile –DGAC), Air France is a founder member of

the A Tree For You association which brings together, in complete

transparency, donors and tree - planting projects everywhere in

the world.

The Trip And Tree by Air France program became an integral part

of the online ticket sales process in 2019. On purchase of a ﬂight

ticket, customers have the opportunity to make a donation in the

amount of their choice to reduce their environmental footprint

and contribute to a reforestation project in France and across the

world. Having been selected by a committee of recognized and

independent experts, these projects also comprise a citizenship

dimension with the creation of jobs in these countries.

At the end of 2019, six months after its launch, more than

20,500donors had contributed to the comprehensive ﬁnancing

of ten projects across four continents, i.e. more than

160,000trees planted.

Supporting projects via the osetting of domestic ﬂights

Since January1, 2020, Air France customers have been able to

undertake carbon - neutral travel in mainland France thanks to a

proactive scheme to compensate 100% of theCO

2

emissions on

the airline’s domestic ﬂights. In liaison with the United Nations

Sustainable Development Goals, this osetting scheme takes the

form of a contribution to reforestation, forest preservation and

biodiversity projects, and those dedicated to the development

of renewable energies, while guaranteeing the protection of the

most vulnerable populations.

Eight ﬁrst projects across four continents (France, Brazil, Peru,

Cambodia, India and Kenya) were selected and launched with

EcoAct, a pioneer in carbon osetting in France.

For the ninth project, Air France oered its customers the

opportunity to become players in this scheme by voting on line

for their preferred project. Three projects were proposed (a

forestry preservation project in Brazil, a photovoltaic program in

Senegal and a bio - gas from waste production program in

Vietnam). The forestry preservation program received the largest

number of the 27,000votes cast and is now amongst Air France’s

carbon osetting project portfolio.

All the projects selected have received the highest certiﬁcation

standards on the voluntary carbon oset market, the World

Wildlife Fund (WWF) Gold Standard, VERRA’s VCS and CCBA’s

additional CCB standard.

CO2ZERO service

Since 2008, KLM has contributed to preserving and restoring

forests via its CO2ZERO-projects in Panama and a number of

African countries. The Gold Standard for the Global

Goals - certiﬁed project in Panama, CO2OL Tropical Mix, turns

formerly degraded pasture land into mixed forestry by planting

a blend of mainly native tree and some exotic species. In addition

to the numerous environmental beneﬁts such as biodiversity

protection and ecosystem restoration, the project’s activities

enable skills development and the creation of long - term

employment with a sustainable source of income for the local

population which improves their living conditions.

At the end of 2019, Transavia joined the program.

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An association to promote the preservation of biodiversity

in the areas around airports

In June2019, to extend the scope of its initiative launched in 2013

to promote biodiversity around airports, the Hop! Biodiversité

association was renamed Aéro Biodiversité. With preserved

green areas averaging 73% (representing 350km at national

level), aviation can play a role in the preservation of grasslands,

Western Europe’s natural habitat that is now most under threat.

Protected from urban development and from multiple human

activities, these airport grasslands which are generally unsprayed

and untilled favor the reproduction of a ﬂora and fauna often little

known to the wider public. These semi - natural spaces are present

in every French region and it is important to optimize their

managment to be able to protect the species living there.

The association’s eorts take place within a methodological

framework scientiﬁcally approved by the French Natural History

Museum, a founder member of the association. They involve a

diverse local HR resource calling on the participatory sciences. Two

hundred and ﬁfty - two bird species have been numbered on the

land of partners and more than 2,800plant and animal species

recorded. The data amassed supplements the national databases

of knowledge on biodiversity.

While arming its priority of ensuring aeronautical safety, the

French Civil Aviation Authority (Direction Générale de l’Aviation

Civile) is also a very active founder member of the association. It

is possible to enrich the biodiversity of the relevant spaces by, for

example, practicing the appropriate strategies in terms of

mowing and by eliminating crop protection products.

At the end of 2019, the association brought together four airline

members (Air France, HOP!, Air Corsica, Air Saint-Pierre) and

18 French airports. All have included this project in their

sustainable development policies and, since 2016, the in - ﬁeld

engagement has been recognized by the French Minister for

Sustainable Development in respect of the National Biodiversity

Strategy (Stratégie Nationale pour la Biodiversité –SNB).

As an active and founding partner, Air France contributes to

raising awareness of the association’s initiatives amongst its sta

through:

— awareness - raising forums: 720participants in the Environment

forum in September2019;

— citizenship Days proposed to all employees and biodiversity

observations aimed at sta whose area of professional activity

involves the environment and biodiversity: in 2019, more than

50employees participated, most often on a full - day basis, at

Paris-CDG.

Contributing to combating the trac in protected species

Air France and KLM are signatories of the Buckingham Palace

Declaration which formalizes their resolute commitment to

combatting illegal trading in protected species.

For many years, the Group has been committed to combating

this illegal trade. For example, its Cargo division has already

carried out a number of initiatives, notably employee training and

awareness raising for customers, and participates in working

groups with international bodies and associations (World

Organization for Animal Health–OIE, IATA, United for Wildlife).

In 2019, Air France pursued its awareness - raising program for

frontline ground sta to help them spot and report suspicious

behavior or baggage to the relevant authorities. Air France

provides information for its customers, particularly on its

commercial website under Prohibited and Regulated Goods and

also on board its long - haul ﬂights through an awareness - raising

video on illegal tracking.

Air France is behind a working Group set up at the end of 2017,

bringing together Paris Aéroport, the Customs authorities,

Chronopost and WWF, to plan joint, coordinated initiatives at the

Paris-CDG hub. In 2019, the Europe Handling Group joined this

working group.

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4.3.6 Environmental indicators

4.3.6.1 Carbon Emissions

Air France–KLM Group

Unit 2018 2019 19/18

Greenhouse gas emissions

(Scope 1GHG protocol)

(3)

Aviation Fuel √ ktonsCO

2

27,571 28,228 +2.4%

Ground Operations ktonsCO

2

62.3 60.7 -2.6%

Greenhouse gas emissions

(Scope 2GHG protocol) Electricity ktonsCO

2

46.2 7.6 -83.5%

Greenhouse gas emissions Upstream emissions

(Scope 3GHG protocol) from fuel production ktonsCO

2

5,685 5,907 +3.9%

Total carbon Emissions ktonsCO

2

33,365 34,203 +2.5%

Osetting Mandatory ktons

carbon osets CO

2

credits 3,106 3,253 +4.7%

Voluntary carbon osets ktons

CO

2

credits 0 24 n.a.

Customers’ carbon osets ktons

CO

2

credits 0 98 n.a.

√ Figures veriﬁed by KPMG for 2019 (reasonable level of assurance).

(1) Air France Group scope: all ﬂights under AF and A5 code operated by Air France, Joon and HOP!, all ﬂights under TO code operated by Transavia France.

(2) KLM Group scope: all ﬂights operated by KLM, KLM Cityhopper, Martinair and Transavia.

(3) CO

2

emissions represent 98% for air transport (Carbon base at January31, 2020: www.bilans-ges.ademe.fr/).

n.a.: not available.

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4

Air France Group

(1)

KLM Group

(2)

2018 2019 19/18 2018 2019 19/18

15,628 16,195 +3.6% 11,943 12,033 +0.8%

20.7 21.3 +2.9% 41.6 39.4 -5.3%

9.2 7,6 -17.4% 37,0 0 -100%

3,222 3,389 +5.2% 2,463 2,518 +2.2%

18,879 19,613 +3.9% 14,485 14,590 +0.7%

1,632 1,643 +0.7% 1,474 1,610 +9.2%

0 0 n.a. 0 24 n.a.

0 0 n.a. 0 98 n.a.

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4.3.6.2 Flight Operations

Air France–KLM Group

Unit 2018 2019 19/18

Consumption of raw materials

Conventional Aviation Fuel √ ktons 8,753 8,961 +2.4%

Sustainable Aviation Fuel ktons n.a. 6.9 n.a.

Fuel eciency

SpeciﬁcCO

2

footprint gramCO

2

/ 80 79 -1.3%

for passenger transport √ pax km

SpeciﬁcCO

2

footprint gram CO

2

/100kg 45.6 44.5 -2.4%

for cargo transport cargo km

Non - carbon emissions

NO

X

low altitude ktons 9.3 9.5 +2.2%

(<3,000ft)

SO

2

low altitude ktons 0.9 0.8 -3.2%

(<3,000ft)

In - ﬂight fuel jettison

Occurence of fuel jettison nbr 42 47 +11.9%

Fuel jettison tons 1,179 1,511 +28.2%

Noise impact

Global noise energy indicator 10

12

kJ 1.68 1.69 0.6%

(1) Air France and its subsidiaries (Joon, HOP!, Sodexi, CRMA, BlueLink and Transavia France).

(2) KLM and its subsidiaries: KLM Cityhopper BV (KLC), KLM Equipment Services (KES), KLM Catering Services (KCS), KLM Health Services (KHS), Cygniﬁc BV, Transavia NL and Martinair.

n.a.: not available.

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Air France Group

(1)

KLM Group

(2)

2018 2019 19/18 2018 2019 19/18

4,961 5,141 +3.6% 3,792 3,820 0.8%

0 0 n.a. 0 6.9 n.a.

83 82 +0.8% 76 75 -1.3%

47.4 46.6 -1.7% 44.3 42.8 -3.4%

6.1 6.3 +3.3% 3.2 3.2 0.0%

0.5 0.5 0.0% 0.4 0.3 -25.0%

28 28 0.0% 14 19 +35.7%

778 851 +9.4% 401 660 +64.7%

0.99 1.00 1.0% 0.69 0.69 0.0%

r.

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4.3.6.3 Ground Operations

Air France–KLM Group

Unit 2018 2019 19/18

Consumption

Electricity Total consumption MWh 278,724 267,564 -4.0%

of which renewable MWh n.a. 102,359 n.a.

Other energies

Fuels MWh 163,005 159,671 -2.0%

Natural Gas MWh 113,834 111,088 -2.4%

Steam/other heating/cooling MWh 82,603 80,146 -3.0%

of which renewable MWh n.a. 24,848 n.a.

Water Water consumption m 542,570 481,609 -11.2%

Non - carbon emissions

NO

x

ktons 0.495 0.445 -10.1%

SO

2

ktons 0.006 0.006 0.0%

Waste

Non - hazardous industrial waste Total quantity tons 23,221 20,456 -11.9%

Percentage recycled % 37% 38% +1pt

Hazardous industrial waste Total quantity tons 5,427 4,305 -20.7%

Percentage recovered % 71% 54% -17pts

(1) Air France and its subsidiaries (HOP!, Sodexi, CRMA, BlueLink and Transavia France).

(2) KLM and its subsidiaries: KLM Cityhopper BV (KLC), KLM Equipment Services (KES), KLM Catering Services (KCS), KLM Health Services (KHS), Cygniﬁc BV, Transavia NL and Martinair.

(3) Renewable electricity certiﬁcates are bought based on an annual estimation of electricity consumptiom and therefore may vary from actual consumption.

n.a.: not available.

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Air France Group

(1)

KLM Group

(2)

2018 2019 19/18 2018 2019 19/18

198,916 192,193 -3.4% 79,808 75,371 -5.6%

n.a. 26,249 n.a. n.a. 76,110

(3)

n.a.

58,938 61,463 +4.3% 104,067 98,208 -5.6%

31,131 31,989 +2.8% 82,703 79,098 -4.4%

82,603 80,146 -3.0% n.a. n.a. n.a.

n.a. 24,848 n.a. n.a. n.a. n.a.

380,342 321,622 -15.4% 162,228 159,986 -1.4%

0.306 0.276 -9.8% 0.189 0.169 -10.6%

0.002 0.003 +50.0% 0.004 0.003 -25.0%

6,146 5,073 -17.5% 17,075 15,382 -9.9%

71% 65% -6pts 28% 29% +1pt

3,359 2,592 -22.8% 2,068 1,713 -17.2%

57% 45% -12pts 93% 68% -25pts

r.

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4.3.6.4 Note on the methodology for the reporting

of the environmental indicators

In 2005 - 06, under the aegis of the Air France–KLM Group’s

Disclosure Committee, and validated by the college of Statutory

Auditors, the Group’s environmental performance indicators were

deﬁned to comply with the requirements of the French New

Economic Regulations law (Les Nouvelles Régulations Économiques,

NRE, May15, 2001) and the European Regulation (EC 809/2004).

Work on optimizing these indicators was undertaken in 2018 to

align the Grenelle II reporting with the new requirements linked

to the transposition of the Directive on the Extra - ﬁnancial

performance statement.

As of 2018 and in application of the provisions of Article

L.225 - 102 - 1of the Code de Commerce, it is the responsibility of

our Independent Third Party to determine the compliance of the

Extra - ﬁnancial performance statement and the accuracy of the

published CSR information.

Furthermore, the data relating to the “greenhouse gas emissions

(Scope 1GHG protocol) from aviation fuel”, “Consumption of

Conventional aviation fuel”, “SpeciﬁcCO

2

footprint for passenger

transport” indicators linked to the Flight Operations have, since

2007 - 08, been veriﬁed with the highest level of assurance,

reasonable assurance (indicated by the symbols √).

Scope covered and scope N-1

For the ﬂight operations, the environmental consolidation scope

covers:

— all the commercial ﬂights under the AF and A5 codes

operated by Air France, Joon and Air France HOP!, and the

TO codes operated by Transavia France;

— all the commercial ﬂights under the KLM code operated by

KLM and its subsidiaries KLM Cityhopper BV (KLC), Martinair

and Transavia Netherlands.

For the ground operations, the consolidation scope for the

environmental reporting covers nearly 100% of the sites in France

and the Netherlands (some very small subsidiaries being

excluded). The international outstations are not taken into account

(partially for the French Overseas Departments and Territories).

— The Air France consolidated subsidiaries: Air France HOP!,

CRMA, Sodexi, Blue Link and Transavia France.

Furthermore, for Air France, the indicators in the French stations

are not reported when there is no detail available on the charges

invoiced by airports. The contribution from the relevant stations

is, however, marginal compared with the reported data.

— The KLM consolidated subsidiaries: KLC (KLM Cityhopper),

KES (KLM Equipment Services), KCS (KLM Catering Services),

KHS (KLM Health Services), Transavia Netherlands, Martinair

and EPCOR (for a portion of the indicators).

Reporting tools

The environmental indicators are assembled at local level via

dierent reporting tools: Osyris (Enablon software), Tennaxia for

waste, SAP Finance (invoicing) for Air France and CaeSaR for KLM.

The reliability of the reporting process is supported by deﬁnitions

of each indicator and tool user guides made available to the

contributors. Consistency tests have also been implemented.

The consolidation of the AirFrance–KLM Group’s environmental

data is carried out by the Air France CSR department.

Details and methodology–Deﬁnition of the key

performance indicators and comments on changes

in the indicators

At AirFrance–KLM Group level, the regulatory requirements and

the reporting and consolidation principles are outlined in a

common document which is updated annually.

Within the framework of an improvement - based approach,

methodological details are provided on some indicators, and

particularly on their deﬁnitions. When these changes have a

signiﬁcant impact on the data, comparison with the ﬁgures for

previous years is not meaningful.

When the data is not available, the ﬁgure reported for the year (N)

is estimated based on the value reported for the previous year

(N-1).

The reporting period for the Group’s environmental data is based

on a rolling twelve - month period from October 1 N-1 until

September30N.

Deﬁnition of the key performance indicators

CO

2

eciency per passenger kilometer

— SpeciﬁcCO

2

footprint for passenger transportation. Deﬁnition:

refer to the paragraph “Flight operations” “Carbon eciency–

SpeciﬁcCO

2

footprint for passenger transportation”.

— Percentage change inCO

2

eciency (g.CO

2

/passenger/km)

between 2005 and 2019 (operational measures only):

percentage change of speciﬁcCO

2

footprint for passenger

transportation between 2005 and 2019, only considering

operational measures (ﬂeet modernization, optimized

procedures, weight on - board reduction, etc. ).

— Percentage change inCO

2

eciency (g.CO

2

/passenger/km)

between 2005 and 2019 (operational measures and

market - based measures): percentage change of speciﬁcCO

2

footprint for passenger transportation between 2005 and

2019, considering operational measures (ﬂeet modernization,

optimized procedures, weight on - board reduction, etc. ) and

market - based measures (mandatory osetting and voluntary

osetting). The mandatory osetting per calendar year is

based on an estimate since the ﬁnal data are reported after

the publication of this document. To determine the CO

2

osetting, AirFrance–KLM deducts the free allowances from

the totalCO

2

emissions reported under EU ETS.

CO

2

emissions from the ground operations

Percentage change in absoluteCO

2

emissions from the ground

operations between 2018 and 2019. These emissions include all

the scope 1 and 2emissions. Deﬁnition: refer to the paragraph

“Carbon emissions” “Scope 1–Ground operations” and “Scope 2–

Electricity”.

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Non - recycled waste

Percentage change in non - recycled waste between 2011 and

2019. Deﬁnition: refer to the paragraph “Ground operations”

“Waste–Non - hazardous industrial waste, and percentage recycled”.

Noise footprint

Percentage of variation of Global Noise Energy per movement

between 2000 and 2019. Deﬁnition: refer to the paragraph “Flight

operations” “Noise impact–Global noise energy indicator”. The

Global Noise Energy calculated in kJ is divided by the total

number of movements (legs).

Comments on changes in the environmental indicators

Carbon Emissions

The direct and indirectCO

2

emissions are reported in line with

the greenhouse gas Protocol. Since 2017, scope 3emissions have

been reported. These are solely based on the reported scope

3emissions from the ﬂight operations (upstream emissions from

Jet fuel). According to Ademe, theCO

2

emissions correspond to

98% of all the greenhouse gases.

Scope 1–Aviation fuel

The scope 1emissions generated by the combustion of aviation

fuel are reported for all the kerosene used in AirFrance–KLM’s

ﬂight operations. The emission factor used of 3.15kgCO

2

per kg

kerosene is in line with the emission factor from the EU ETS. Note

that there are dierences between the scope of the reportedCO

2

emissions and those in the EU ETS for greenhouse gas emission

quotas, such that comparison is not meaningful.

The increase inCO

2

emissions is due to the growth in activity, in

particular for Transavia and Air France long - haul ﬂights.

Scope 1–Ground operations

The direct emissions from the ground operations are based on

the consumption of energy coming from dierent sources and

their corresponding emission factors. The factors are based on

national standards or are delivered by the energy supplier. In

summer 2019, KLM changed from diesel to Gas - to-Liquid (GTL),

explaining the dierence in consumption and the reduction in

emissions.

Scope 2–Electricity

The emissions resulting from electricity use are based on the

volume of consumption and the corresponding emission factors.

The CO

2

saving from purchasing Certiﬁcates of Origin for

renewable electricity are subtracted from the total.

The decrease in scope 2CO

2

emissions is mainly explained by the

supply of 100% renewable electricity for KLM.

Scope 3–Upstream emissions from kerosene production

These emissions are generated during the production,

transportation and distribution of kerosene. The emission factor

for the scope 3 calculation is the ICAO full life cycle GHG

emissions factor (89gCO2e/MJ for jet fuel A1).

Mandatory carbon osetting (EU-ETS)

The volume of reported mandatory carbon osets is based on

the annual EU ETS reporting and, in future, CORSIA. Free

allowances are excluded.

Voluntary carbon osetting

The volume of voluntary carbon osets is based on the calendar

year. VoluntaryCO

2

compensation paid by our customers is not

included. The reported osets are purchased by Air France and

KLM (e.g. for employee business - related trips or for 100% of

the CO

2

emissions from Air France domestic ﬂights as of

January2020) and are Gold Standard Certiﬁed.

Carbon osetting by customers

The volume of voluntary carbon osets is based on the calendar

year. This regards the voluntary CO

2

compensation paid for

by our customers via the Air France and KLM compensation

programmes.

Flight operations

Consumption of raw materials–Conventional Aviation Fuel

This is the actual consumption of conventional fuel for each ﬂight.

It includes the fuel consumed by APU usage.

The increase in fuel consumption is due to the growth in activity,

in particular for Transavia and Air France long - haul ﬂights.

Consumption of raw materials–Sustainable Aviation Fuel

This is the quantity of Sustainable Aviation Fuel (SAF) purchased

for the reporting period.

Carbon eciency–SpeciﬁcCO

2

footprint for passenger

transportation

Carbon eciency is expressed in grams ofCO

2

per passenger

kilometer. The calculation is based on an allocation of fuel between

passengers and cargo. The fuel consumption for passengers is

divided by RPK (revenue passenger kilometer) and adjusted by

the ratio between the Flight Plan and ground circle distance.

Although activity increased in 2019 relative to its 2018 level, the

carbon footprint for passengers saw a more - than 1% reduction

thanks to the arrival of more - ecient aircraft (Boeing 787), and

an improvement in passenger load factor.

Carbon eciency–SpeciﬁcCO

2

footprint for cargo transport

Energy eciency is expressed in grams of CO

2

per 100kg of

cargo. The calculation is based on an allocation of fuel between

passengers and cargo. The fuel consumption for cargo is divided

by 0.1TK and adjusted by the ratio between the Flight Plan and

ground circle distance.

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Other emissions–low altitudeNO

X

The methodology used for the calculation of low altitude emissions

(i.e. below 3,000feet) is common to Air France and KLM. It is

based on the LTO (Landing-Take O) cycle and on engine data

communicated by the ICAO (International Civil Aviation

Organization). The taxiing time taken into account is the actual

taxiing time, which is more precise than standard values

recommended by the ICAO methodology. Note that, since the

actual taxiing time is not available for Transavia France, the

standard ICAO values have been used for this subsidiary.

Other emissions–low altitudeSO

2

Note: the “low altitude” and “LTO” for Landing-Take O cycle

denominations are equivalent.

The calculation of the SO

2

emissions from ﬂight operations

is based on the average sulfur content of the fuel loaded,

respectively, on the Amsterdam and Paris platforms which is

applied, respectively, to all fuel used during the year by KLM and

its subsidiaries, and by Air France and its subsidiaries.

In - ﬂight fuel jettisons

These are exceptional operations (fewer than one ﬂight in

10,000per year) involving the jettisoning of a quantity of fuel in

ﬂight to avoid an overloaded aircraft on landing whenever a ﬂight

is aborted. Each operation is carried out in close coordination

with air trac control under strict conditions governing geographical

location (avoiding urban zones) and altitude (generally at or

above 1,000m).

Noise impact–Global noise energy indicator

The total noise energy indicator is calculated according to the

methodology deﬁned by the French Civil Aviation Authority

(Direction Générale d’Aviation Civile –DGAC). The ﬂights concerned

are those which are operated, franchised and chartered under

the AF or KLM codes, with the exception of code shares.

Ground operations

Consumption–Electricity, of which renewable

This is the total volume of electricity consumed inMWh. For KLM

the volume of renewable electricity is based on the purchase of

Certiﬁcates of Origin of EU wind energy. Renewable electricity

certiﬁcates are bought based on an annual estimation of electricity

consumptiom and therefore may vary from actual consumption.

The decrease in electricity consumption for both Air France and

KLM is explained by energy - saving measures and best practices.

Consumption–Other energies: Fuel

The total volume of fuel used by the ground operations includes:

— kerosene (Jet fuel A1) for testing engines;

— non - road diesel fuel for the Air France runway equipment;

— gasoline, diesel and GTL for ground support equipment.

Consumption–Other energies: Natural gas

The total volume of natural gas is mainly used for heating

buildings, maintenance hangars and cargo warehouses. The

conversion factor of the quantity of gas consumed in energy

takes into account the characteristics of the gas speciﬁc to

France and the Netherlands.

Consumption–Other energies: Steam/other

heating/cooling, of which renewable

This includes superheated and iced water for climate comfort.

For Air France, superheated and iced water is supplied by ADP

(Aéroports de Paris) for the Orly and Roissy sites. The KLM

facilities do not consume this type of energy;

Water consumption

The consumption of water is taken into account for all the ground

activities. Water used on board ﬂights is not included.

Between 2018 and 2019, the decline in water consumption is

explained by the implementation of water - saving measures.

Non - carbon emissions -NO

X

TheNO

X

emissions related to engine testing are calculated based

on a methodology similar to the one used for the Flight

Operations, which reﬂects the actual testing conditions. Other

sources of NO

X

include fuel combustion by ground support

equipment. For Air France, the calculation is based on the

European standards EURO 1to 6 for light vehicles, and Stage I to

IV for diesel engines (European Directive 97/68/EC for non - road

mobile machinery), setting the emission limits based on engine

power. For KLM, theNO

X

emissions from ramp equipment and

gas - ﬁred installations are determined by direct measurements,

from manufacturer data or external databases.

Non - carbon emissions -SO

2

TheSO

2

emissions are measured based on the sulfur content in

the Jet fuel used for engine testing and in the fuel used to power

the ground support equipment. The variations inSO

2

emissions

are mostly explained by the ﬂuctuation of levels of sulfur content

in fuels from one year to another.

Waste–Non - hazardous industrial waste, and percentage

recycled

Non - hazardous waste is monitored and reported based on data

provided by contracted waste management suppliers. The KLM

scope includes KLM Catering Services and thus includes catering

waste, unlike the Air France scope. The reported percentage of

recycled non - hazardous waste covers all waste that is sorted for

recycling purposes. The recycling percentage does not cover the

waste that is incinerated with energy recovery (EURAL R1 code).

In 2019, the substantial decline in the quantity of waste relative

to its 2018 level is explained by the deployment of measures to

improve waste management by the Air France facility manager,

and a more - than 15% reduction in the waste from KLM ﬂights.

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For AirFrance – KLM, customer satisfaction is a key priority and

the Group is developing numerous initiatives to improve the

customer’s end - to - end travel experience. Customer satisfaction

is notably measured through the Net Promoter Score (NPS), the

reference indicator driving customer recommendations.

Performance indicators and tools have been developed to track

the results on a daily basis.

Customer satisfaction is above all based on their trust in the

Group’s activities. As a responsible airline Group, AirFrance – KLM

must ensure the safety and health of its customers, employees

and partners. This commitment covers ﬂight safety, the safety of

the food services oered on board and in the lounges, the

protection of personal data and also occupational health and

safety (see Section 4.2.3). The Group is also committed to

facilitating access to its products and services, particularly for

passengers with disabilities or those with reduced mobility.

Key

Performance Indicator Deﬁnition Results

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Customer trust

4

4.4 CUSTOMER TRUST

The AirFrance – KLM Group is targeting an increased level of

non - hazardous waste recycling to teach a recycling rate of 50%

of the total waste by 2030.

Waste–Hazardous industrial waste, and percentage recovered

Hazardous industrial waste (HIW) is monitored and reported

based on data provided by contracted waste management

suppliers. If the quantity of hazardous waste has not been

communicated at the end of the reporting period, the quantity

mentioned in the speciﬁcation slip is taken into account. This

quantity is, however, estimated to be marginal. The reprocessing

of hazardous waste complies with the EU Regulation. The

recovery percentage is the ratio between the HIW waste

recycled/recovered (R code) and the total HIW.

Net Promoter Scores (NPS)

Change in the NPS

(expressed as an annual average)

of Air France, KLM, Transavia

(France and the Netherlands)

between 2018 and 2019

Achievement of the 2019 target

Variation

+15pts

-1pt

+1pt

Air France

KLM

Transavia France

Transavia

Netherlands

2019 Target

Yes

No

Deﬁnition

Scope: Air France, KLM, Transavia France and Transavia Netherlands.

The Net Promoter Score (or NPS) is a recommendation indicator given by customers to the products and services of Air France, KLM and Transavia (France and the

Netherlands) in their capacity as airlines, ranging from 0to 10 (0corresponding to “I will deﬁnitively not recommend” and 10to “I will deﬁnitively recommend”. It

corresponds to the dierence between the percentage of promoter customers (scores 9 and 10) and the percentage of customers critical of the brand (scores 0to 6).

This concerns the response to the ﬁrst question asked in AirFrance – KLM’s e-Score online customer satisfaction questionnaire: “Based on your opinion and experience,

how likely are you to recommend Air France/KLM/Transavia to your friends/colleagues?”.

For each brand, the indicator measured is the annual change in the NPS (calculated as an annual average). Note that, since they are reported via two dierent

measurement tools, the Net Promoter Scores for Transavia France and Transavia Netherlands cannot be consolidated.

For each brand, whether or not the annual target has been achieved is also indicated.

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4.4.1 Operational safety

for stakeholders

Flight safety

Context and strategy

Flight Safety is paramount for Air France–KLM. It is key to

retaining the trust of both customers and sta, and imperative

for the long - term viability of its operations and of air

transportation as a whole.

All of the Group’s activities are subject to numerous checks and

certiﬁcations, in particular via the supervisory actions carried out

by the Civil Aviation authorities in each country and via the

International Air Transport Association (IATA), whose IOSA

Operational Safety Audit is a benchmark within the industry. Air

France and KLM’s IOSA certiﬁcations were renewed in 2019; the

next renewal audit is foreseen for 2020, their certiﬁcation being

scheduled for renewal in 2021.

See also Section3.2.2 in Section3Risks and risk management.

Measures and performance

To achieve the highest attainable standard of Flight Safety, each

company updates and reinforces its Safety Management System

(SMS) which concretely deﬁnes the modalities in place to

manage aviation risks.

Management of ﬂight safety risks

Air France and KLM both use the evaluation method for

operational risks recommended by the European Aviation Safety

Agency. They have deployed this method in all the operational

entities and at all levels of the company. The management of ﬂight

safety risks enables, notably though systems compiling ﬂight

parameters and situation reports, threats to be identiﬁed, risks to

be evaluated, the implementation of remedial measures and the

monitoring of the results obtained. It enables proactive management

of the risks to maintain them below the level that is deemed

acceptable. An internal quality assurance procedure continuously

evaluates the proper functioning of ﬂight safety management.

More broadly, Air France develops synergies between an array of

progress - oriented and risk management approaches – Flight

Safety, Health & Safety in the Workplace, Customer Service

Quality, Operational Performance, Environmental and Sustainable

Development, Food Safety & Hygiene. This quality - based

approach is the vector for the steering and management of the

businesses, aimed at a continuous improvement in results.

KLM deploys a similar approach to that of Air France. To reach its

objective of achieving a leadership position on safety, KLM has an

Integrated Safety Management System (ISMS), covering occupational

safety, operational safety and security, and environmental safety.

This ISMS is outlined in KLM’s Integrated Safety Management

Manual (ISMM) and has been approved by the Dutch Civil

Aviation authorities as part of the Air Operator Certiﬁcate.

KLM continuously improves its integrated, performance - based

Safety Management System based on the evaluation of risks and

results, guaranteeing that decisions integrating risks are taken at

all levels of KLM. Its Safety Culture program, which includes

promotional and communication initiatives, theoretical and

practical training and learning interventions, is continuously updated

and deployed throughout the company to enhance safety

awareness and the relevant safe attitude and behavior at all levels.

The Integrated Safety Services Organization (ISSO) further

professionalizes this integrated approach to safety and compliance

throughout the company, increases the level of expertise in all

domains across all the safety and compliance processes, and

advances KLM’s ISMS to the next level.

Governance

Corporate Flight Safety Committees, chaired by the Executive

Vice-Presidents responsible for the operational entities, meet

every quarter in Air France. Their task is to approve the action

plans established to apply the orientations set by the companies,

the results of inquiries and the results of supervisory acts.

These committees are also tasked with sharing information on

the emergence of new Flight Safety issues originating from

feedback or risk analysis, by ensuring that the resources and

action plans in place are adapted to the issues.

Flight Safety Committee meetings are also held four times a year

at the level of each company, to evaluate the eectiveness of the

existing action plans.

At KLM, the Corporate Safety Committee within the KLM Board

of Directors meets every quarter to analyze the Safety Indicators.

In 2019, KLM continued its focus on Occupational Safety Hazards

by renewing the main Occupational Safety Policy to provide

structure for the required mitigating action. After four occupational

policies implemented in 2018, 2019 saw the establishment of ten

Occupational Policies, including the recommended implementation

provisions and plans. In 2019, KLM also initiated fulﬁlment of the

ISO High Level Structure Management System requirements.

Together with the aviation industry stakeholders at Schiphol

Airport (e.g. airport authorities and Dutch Air Trac Control),

KLM carried out a number of joint safety risk assessments during

2019 and conducted mitigating actions to improve safety around

the airport. These activities are performed within the joint sector

Integrated Safety Management System, a unique collaboration

between the aviation players at the airport which had been

established in 2018.

Developing a Safety - ﬁrst culture

Building a company - wide awareness of the prerequisite for a

safety culture across all the operations is a gradual yet ongoing

approach aimed at raising the ambition of the airlines in the

AirFrance–KLM Group. Vocational training is a cornerstone of

this culture and thus primarily takes into account the skills and

expertise to be acquired in matters of safety: safety training for

pilots and cabin crews, training relating to the maintenance

professions and ground operations.

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Air France is targeting the development of an ever - stronger

safety - ﬁrst culture since this is an area in which it must make

continuous progress by accepting no compromise.

Hence the launch of the Safety Attitude program at the end of

2018, aimed at further reinforcing this culture and promoting

industry best practices. The Safety Attitude program began with a

comparative study of ﬁve benchmark companies, supplemented

by a diagnostic phase carried out by an independent body.

22,500employees from all the Air France business lines replied

to a questionnaire and more than 600people were interviewed.

This in-depth diagnostic enabled the identiﬁcation of areas for

work that will federate all employees around a shared Safety - ﬁrst

Culture embedded in operations, based on transparency and

trust. To this end, a three - year program of concrete actions adapted

to each business line has been structured: mobilization of the line

management, a culture of transparency, respect of the procedures,

evaluation of non - technical skills, inter - business - line exchanges.

Food safety

Context and strategy

Every year, the AirFrance–KLM Group serves some 85million

meals and snacks to its customers and ﬂight crews. The company

aims to guarantee food services that are healthy and hazard - free

for the consumer. The related regulations are, moreover, increasingly

exacting. This is why food safety is a key priority for the Group.

Air France and KLM both deploy quality - control procedures to

comply with these requirements.

Measures and action plans

The management system is based on four processes, steered

by a centralized unit within Air France. The ﬁrst process is

cross - cutting and applies to the whole risk area: regulatory

intelligence, risk analysis and deﬁnition of the measures to control

these risks, employee training, establishment and updating of the

reference standards, monitoring of the action plans, etc. The three

other processes are operational and are detailed based on

the activity: on board services, water on board and services

in the lounges.

The management measures are deployed by a Food Safety

contact appointed in each relevant entity: procurement, air

operations, ground services, maintenance, operations, international

stations, logistics and ﬂight product, etc. They are the guarantors

that the measures have been applied within their business lines

and report back on functioning together with the associated

action plans. The management measures are regularly monitored

through indicators and decision - making committees ensuring the

eectiveness of the provisions in place relating to Food Safety.

In addition, within the framework of external resource management,

all food suppliers are referenced based on very strict speciﬁcations

and are the subject of close monitoring. Some hundred hygiene

audits of world - wide caterers and around 15,000 in - house

microbiological checks are carried out every year to monitor food

supplies, together with between 400 and 500annual analyses

of water for a total volume of 19,000tons of water embarked on

departure from Paris.

At KLM, risk control at relating to food safety is managed in several

dierent ways. Firstly, all KLM caterers are audited at least once

a year by an external company, specialized in food safety for

inﬂight catering. These audits are executed by speciﬁcally - trained

auditors, and are unannounced and on - site. The audit veriﬁes

compliance with the QSAI Food Processing Safety and Food

Processing Quality standards, based on the HACCP (Hazard

Analysis and Critical Control Point) principles. E-audits are

conducted to check traceability, completeness and eectiveness

at all KLM caterers.

In addition, all food suppliers are referenced based on very strict

speciﬁcations and are the subject of close microbiological

monitoring, carried out by KLM’s in - house ISO 17025 - accredited

laboratory.

Results and performance

Back in 2006, Air France became the ﬁrst airline in the world to

attain ISO22000certiﬁcation. An annual audit carried out by an

external body veriﬁes that the management system complies

with the standard and with regulatory requirements. Internal

audits are also realized based on a three - year plan across all the

relevant business lines.

A series of key indicators, one per operational process, form part

of a monthly dashboard presented to the Executive Committee.

Any malfunctioning ﬂagged, notably, by ﬂight crews or

customers, is also studied to be able to implement remedial

and/or preventive measures. Throughout the year, numerous

meetings of in - house steering bodies are held, enabling the

monitoring of current events in this area. These bodies also track

performance via indicators and action plans, with a view to

ensuring a continuous improvement.

4.4.2 Data and IT systems

protection

Data and IT systems protection

Context and strategy

Passenger bookings, ﬂight schedule management, baggage

checking, the calculation of ticket prices, aircraft maintenance

and crew information: IT is at the heart of all of AirFrance–KLM’s

activities. Privacy and data protection constitutes a major

operational and ﬁnancial challenge for the business, and for

customer trust.

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Measures and action plans

AirFrance–KLM manages its cybersecurity risks with the national

authorities and cooperates with the relevant European Agencies

(EASA, ENISA). The Group also takes part in the cybersecurity

workshops of the main air transportation professional associations

(IATA, A4E, GIFAS) and contributes to research with associations

specialized in cybersecurity (CLUSIF, CESIN, CIGREF, R2GS,

European Aviation ISAC).

Permanent benchmarking and the work of an independent cyber

rating agency enable AirFrance–KLM to be compared with other

companies in the air transportation industry and, in

December2019, the Group was ranked amongst the leading large

companies. AirFrance–KLM also uses the expertise of leading

consultants in the cybersecurity market and actively cooperates

with companies with which its Information System is connected.

To oer the best level of protection on the ground and in the air,

the AirFrance–KLM Group has developed four major cybersecurity

programs in recent years:

— a program directed at more eective cybersecurity techniques,

to adapt to the unfolding cyber threats;

— an awareness - raising program for all sta;

— a program to ensure regulatory compliance;

— a program to support the digital transformation to oer a

simpliﬁed user experience.

Results and performance

An annual presentation on these programs is made to the

Executive Committee and the Audit Committee, guaranteeing

sponsorship at the highest level of the company. These programs

are supported by Cybersecurity Governance composed of:

— a cybersecurity regulatory framework for ground IT and onboard

systems (safety policy based on a series of international

ISO27000regulations and other standards or regulations

concerning AirFrance–KLM’s activities);

— an annual monitoring plan for risks linked to the digital

technologies (audits) and testing of the Cyber Crisis mechanism

overseen by the Operations Control Center and the authorities;

— three management committees with complementary

perspectives. The Group’s IT Executive Committee evaluates

the coherence between the cyber risks and investment in IT.

The Cyber Plane Committee, chaired by the accountable

manager, decides on the orientations to be adopted to reduce

the potential cyber risks for ﬂights. Lastly, the Safety

Performance Committee, chaired by the Head of Safety,

evaluates the eective mitigation of generic safety risks,

including cybersecurity;

— a report on the residual cybersecurity risk in the major

operational risk sheets managed by Internal Control.

See also section3.2.3 in section3Risks and risk management.

Data privacy

Context and strategy

In force since May25, 2018, the European General Data Protection

Regulation (GDPR) to protect personal data ﬁrstly extended

the rights of data subjects and, secondly, strengthened the

accountability and obligations for data controllers, requiring

proof of compliance on personal data protection. To respond to the

GDPR requirements, in 2018 Air France and KLM chose to deploy

a broad - ranging program to reinforce their already - rigorous

cybersecurity policies and deﬁne a strengthened personal data

management framework to ensure compliance with privacy by

design and by default principles.

While the design and implementation of the governance, policies

and register had been broadly completed in 2018, this program

was pursued throughout 2019 with the focus more on operational

eectiveness,

Measures and action plans

In January 2019, responsibility for privacy compliance was

formally transferred to the Business, represented by the members

of the Air France Executive Committee and the KLM Executive

Committee as Internal Data Controllers. The other roles of Internal

Data Processing Owner and Privacy Coordinator have been

further developed.

In 2019, regular meetings between the Data Privacy Ocer team

and the heads of internal data processing were established, in

further support of eective governance. The second wave of

e - learning was also extended to Air France and KLM employees

who are involved in developments/initiatives relating to the use

of personal data.

Results and performance

The eectiveness of the overall privacy compliance framework is

assessed on a regular basis through a dedicated Internal Audit

program. This framework was improved in 2019, but still needs to

be strengthened hence further enhancements will be implemented

in 2020.

See also paragraph 3.2.3 in Section3Risks and their management.

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4.4.3 Accessibility of products

and services

Context and strategy

The Group oers all its customers the best - possible travel

experience and undertakes to provide comfortable, convenient

and reliable air travel. Passengers with disabilities or reduced

mobility (PDRM) are welcome, providing that air travel is not

counter to medical advice.

This calls for the appropriate assistance involving a degree of

complexity owing to the dierences between EU and US

regulations. In the US, the responsibility falls solely to the airline

and there are no reporting requirements for US citizens and

passengers on ﬂights to/from the US. In the EU, however, it is the

airport authority that is responsible for the end - to - end assistance

of PDRMs during their journeys through airports and passengers

are invited to report to the airline 48hours before departure, the

airline then being responsible for forwarding this information to

the airport authority 36hours prior to departure. At Paris-CDG,

for example, where more than 80% of PDRM passengers are

traveling with Air France, Paris Aéroport (ADP Group) oversees

special assistance for passengers via its Passerelle CDG and

Samsic services. At Amsterdam-Schiphol Airport, Axxicom

Airport Caddy is the supplier.

Measures and action plans

The Air France dedicated assistance service for passengers with

reduced mobility, known as Saphir (Service d’Assistance aux

Personnes Handicapées pour les Informations et la Réservation),

oers an array of adapted services, such as easy - booking

procedures, airport assistance, baggage assistance and special

equipment on board. Based in Nice and Marseilles, with some

twenty dedicated advisors, Saphir ﬁelded around 83,000calls in

2019: phone and online services enable ticket bookings and the

provision of the appropriate assistance. A special phone

assistance service for the hard of hearing or deaf customers is

also oered. Around nineteen other Customer Relations Centers

around the world are able to process requests from our PDRM

customers.

Air France has also long been a partner to multiple associations

dedicated to disability and has forged strong links with the

national and European authorities in this ﬁeld, to design and

develop service improvements.

KLM Cares is a dedicated service assisting customers with the

planning and booking of ﬂights. At the airport and on board, KLM

oers specially - adapted facilities to ensure a seamless travel

experience.

Both Air France and KLM cabin crews are specially trained in the

assistance needs of persons with disabilities.

Results and performance

The number of people with disabilities or reduced mobility ﬂying

with the Group is growing year after year. Nearly 580,000PDRM

customers traveled with Air France in 2019: more than 80% were

looked after by Paris-CDG.

KLM saw a year - on - year increase of 2.3% in the number of

passengers with reduced mobility: to a total of 428,000 in 2019.

The share of PDRM passengers remained equal to 2018. 94% of

all requested PDRM services is wheelchair assistance, of which

the vast majority (70%) is the most basic wheelchair assistance

for customers not able to walk long distances.

For Air France and KLM, the Net Promoter Score, which measures

customer satisfaction, is higher for this category of passengers

than the NPS for other passengers. At Air France, a Key Customer

Club including PDRM passengers has been created to collate

feedback from the latter cohort and help improve certain

services, including a better ﬂow of information, both up - stream

and during the journey, for both customers and frontline sta, in

connection with Air France’s Attentive Relationship.

Other new initiatives have also been deployed, such as the

upgraded pages on Air France’s and KLM’s website pages devoted

to PDRMs, providing a wealth of travel tips and pushing tailored

information to all passengers based on their type of disability.

For customer - facing sta, onboard and at the airport,

awareness - workshops focusing on the appropriate forms of

words and actions to adopt with PDRM customers have been

launched, together with online tools to facilitate their care.

At the IFTM Top Resa trade show, Air France won the 2019 Grand

Prix Marco Polo which for the ﬁrst time recognized the airline with

the highest CSR (Corporate Social Responsibility) commitment.

In particular, Air France was recognized for its action to improve

the travel experience of passengers with disabilities.

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4.5.1 Group reference texts

Social Rights and Ethics Charter

The Group’s Social Rights and Ethics Charter arms the Group’s

commitment to fostering a climate of trust and mutual respect in

the workplace, a safe working environment and social dialogue.

The Charter applies to all Air France and KLM employees, and to

those in their European subsidiaries.

Corporate Social Responsibility Statement

AirFrance–KLM’s commitment to environmental protection, social

equity and local development is set out in its Corporate Social

Responsibility Statement. The Group is committed to fostering

fair practices with all its stakeholders.

Further guidance on business conduct

The importance of respecting ethical principles in everyday

business conduct is underscored in a number of documents. For

issues applying to all employees, like combating corruption and

fair competition, manuals and other forms of information sources

are brought to their attention while there are speciﬁc codes for

certain functions like procurement. The AirFrance–KLM Anti-

Bribery Manual and AirFrance–KLM Gift & Hospitality policy are

publicly available on the airfranceklm.com website.

The Procurement divisions have contributed to the establishment

of a Sustainable Development Charter for suppliers. As the

application of ethical, social and environmental principles

constitutes an important criterion when selecting suppliers, the

latter must conﬁrm their respect of these principles. This Charter

has been supplemented by a Supplier Code of Conduct which

speciﬁes the commitments on Human Rights, health and safety,

the environment and ethics.

4.5.2 Respect of Human Rights

AirFrance–KLM respects and supports the protection of Human

Rights, combats corruption and opposes all forms of child and

forced labor.

These fundamental principles are based on international norms,

including the UN Global Compact, the OECD Guidelines for

Multinational Enterprises, the Core Conventions of the

International Labor Organization (ILO) and the Children’s Rights

and Business Principles.

In its CSR Statement and Social Rights and Ethics Charter,

AirFrance–KLM arms its commitment to fostering a climate of

trust and mutual respect amongst employees.

These values and rights are the foundation for social, economic and

cultural cohesion within each company and across the Group. Every

employee of the AirFrance–KLM Group has the right to working

conditions that respect their health, safety and dignity, and guarantee

a social dialogue. The Charter applies to all the employees of

Air France and KLM, and of their European subsidiaries.

Currently, AirFrance–KLM is working on amending its Social Rights

and Ethics Charter by integrating its Human Rights policy. The aim

is to arrive at a policy document that formulates not only the

rights of Group employees and those of its suppliers, but also

gives instructions for execution and implementation, including

risk assessment. This document is being reviewed in liaison with

the European Works Council, with a view to publishing the

updated version in 2020.

Within the framework of its activities, the Group has identiﬁed

the risk factors relating to Human Rights. The measures put in

place to mitigate these risks fall into a number of dierent areas:

health and safety of individuals, equal opportunity, achieving a

better work/life balance and data protection procedures to

Key

Performance Indicator Deﬁnition Results

As an international Group with operations all over the world and

employing a large number of sta, AirFrance–KLM is committed

to respecting both ethical values and legislation. This includes

respect for Human Rights and the ﬁght against corruption, tax

fraud and tax evasion.

As a signatory of the United Nations (UN) Global Compact, the

Group supports its ten principles and encourages partners and

suppliers to make the same commitment.

4.5 ETHICS AND COMPLIANCE

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Realization rate of the

e - learning program on the

prevention of corruption

Number of employees having completed the entire

training program as of December31, 2019 divided

by the total number of employees invited to undertake

this training

2018

NA

(1)

2019

86%

Deﬁnition

Scope: Target group of AirFrance–KLM Group employees.

For the target group of sta the training is mandatory. The target group is selected based on level of function or exposure to bribery risk.

The measured indicator is the number of employees having completed the entire training program as of December31, 2019 divided by the total number of employees

invited to undertake this training. The training is considered to have been completed if the individual passes the test with a score of at least 70%.

(1) NA: Not Available.

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protect the personal data of customers and employees (see

Sections 4.2, 4.4.1, 4.4.2, 4.4.3, 4.6.3).

In its relationships with suppliers, the Group is committed to

ensuring that the fundamental principles and social rights are

properly respected, everywhere in the world. Suppliers are invited

to sign a Sustainable Development Charter based on the

principles of the United Nations Global Compact (see Sections

4.6.2 and 4.6.3).

In 2019, Air France carried out awareness - raising actions for its

employees on human tracking, to help them to identify at - risk

situations and take action against this form of international

organized crime, comparable with modern - day slavery. Whether

it is tracking for the purpose of forced labor or crime, sexual

exploitation, illegal adoption or forced marriage, child soldiers,

organ tracking or other forms of human exploitation, ground

sta and ﬂight crews must be able to recognize behavior that

may be considered abnormal or worrying and, in the event of

suspected human tracking, report the event as soon as possible

and in accordance with the instructions.

4.5.3 Business ethics

Fair business practice

Context and strategy

The prevention of bribery and anti - competitive behavior is an

important factor in honest and fair business practice. As unethical

or inappropriate behavior can have considerable negative

consequences, both ﬁnancial and in terms of the Group’s

reputation, preventing unfair practices is key.

The AirFrance–KLM Group’s commitment to conducting business

in good faith, founded on equity, transparency, honesty and integrity,

and in the strict respect of the anti - corruption laws in all the

countries where its companies or subsidiaries exercise their

activities, is armed in the Anti-Bribery Manual. This Manual acts as

a Code of Conduct for all employees and establishes the guidelines

for preventing corruption, and for identifying and handling at - risk

situations with regard to the anti - corruption legislation.

Since 2017, the Anti-Bribery Manual has been supplemented by

a Gift & Hospitality Policy. This Policy aims to provide clear

guidelines for sta, including ﬁnancial limits, on giving and

receiving gifts and hospitality. Both the Anti-Bribery Manual and

the Gift & Hospitality Policy documents are available in three

languages and can be consulted by sta via the intranet sites.

In terms of anti - competitive practices, Air France–KLM is

developing its policy aimed at the prevention of anti - competitive

acts by circulating a Competition Law Compliance Manual.

The KLM Group has implemented a Code of Conduct which

contains an overview of the rules governing the KLM Group’s

business conduct and its suppliers. The KLM Code of Conduct

covers the following areas: Safety, Business Integrity, Social

Responsibility and reporting Violations. The KLM Group has also

deployed a Code of Ethics for the Finance Function.

Measures and action plans

Compliance program and governance bodies: the Compliance

activities are based on compliance programs, executed within the

context of a formalized framework. New legislation or requirements

relating, for example, to anti - bribery or data privacy are taken

into account when establishing the compliance programs and

their increased appropriation is ensured via awareness - raising

campaigns. Dedicated processes or projects may also be set up

to secure compliance.

Compliance functions: the Group has deployed an organization

dedicated to compliance. The Compliance Ocers within

AirFrance–KLM, Air France and KLM are tasked with overseeing

the implementation of the Compliance programs within the Group.

They are supported by a network of compliance representatives

in the subsidiaries. Depending on the type of business transactions

and the complexity within the departments or entities, subject

matter experts and compliance representatives facilitate compliance

with speciﬁc legislation and the roll - out of the relevant compliance

program elements.

Training and awareness: one important element of the compliance

program is training and awareness. Matters that require greater

awareness and transcend businesses, like the prevention of bribery

and anti - competitive behavior, are the subject of awareness - raising

campaigns. These campaigns are supplemented by dedicated

training which is available to individual employees. Employees

can also raise questions or concerns with the Compliance Ocers

and legal experts.

Whistle - blower procedure: since all employees are required to

respect these rules, employees in all the Group’s entities are

encouraged to discuss any compliance concerns with their line

managers. They can also contact a Compliance Ocer directly.

Employees also have the option of ﬂagging any issues via the

Whistle Blower procedures. These procedures also include the

possibility of reporting any serious situations relating to the duty

of vigilance (Human Rights, fundamental freedoms, health and

safety, environment), pursuant to the regulation in force.

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Results and performance

An anti - bribery e - learning training campaign was deployed at the

end of 2019 to maintain and further strengthen the anti - bribery

awareness and knowledge of sta (the realization rate of the

e - learning program on the prevention of corruption reached 86%).

Awareness is also reinforced through, for example, information

meetings and discussions, improved access to compliance documents

and communication by the Group’s General Management.

Reports under the Whistleblowing procedures are investigated

and the appropriate corrective actions are taken and implemented.

See also Section 3.2.2 Risks relating to the air transportation

activity.

Tax strategy

Group tax policy

AirFrance–KLM recognises the important role ﬁscal compliance

plays in its strategy and undertakes to act with integrity and

transparency in all tax matters.

AirFrance–KLM’s tax policy aims to act at all times in accordance

with the applicable local and international laws (bilateral tax

treaties, OECD and UN guidelines), and to prevent ﬁscal evasion.

AirFrance–KLM complies with the OECD’s Base Erosion and

Proﬁt Shifting Action Plan and ﬁles all the required transfer

pricing documents, including a Country - by-Country Report.

AirFrance–KLM complies with the letter and spirit of the tax law

and regulations wherever the Group has a taxable presence.

Following the speciﬁc guidelines for the taxation of international

air transportation services, wherein operational income is taxed

in the country of domicile, AirFrance–KLM appropriately reports

most of its airline income in France and the Netherlands. Speciﬁc

local taxation rules require the Group to also report a relatively

small component in foreign jurisdictions where the Group operates.

The ﬁling of tax returns is made in a timely and accurate manner

that meets the ﬁscal obligations of AirFrance–KLM to the tax

authorities and taxes due are paid on time.

Tax is an integral part of the Finance function of Air France and

KLM and supports Air France–KLM in delivering its strategic

ambitions. Tax aairs are managed in a way which takes into account

the Group’s corporate values. AirFrance–KLM seeks to establish

and maintain an open and constructive dialogue with the tax

authorities and other government bodies. The Group participates

in the development of tax policies by contributing constructive

inputs to public consultations. On March 14, 2019, a ﬁscal

partnership was signed between the French tax authorities and

Air France–KLM, the consolidating entity of the French tax group.

Fiscal risk management and the Anti-Tax-Avoidance rules

The Group’s aim is to take sustainable tax positions which are

long - term in nature, in support of the business operations.

Air France–KLM operates with a minimum level of risk with

respect to tax matters and complies with the anti - tax - avoidance

rules in line with the requirements of the European Directive (EU)

2016 - 1164 transposed into French Law on October23, 2018 (Act

No. 2018 - 898).

The Tax Aairs department seeks to anticipate and reduce the

tax risks to a low level. It ensures that reasonable care applies in

relation to all processes that could materially aect its

compliance with its tax obligations and is particularly vigilant in

the application of the rules combating fraud and tax - avoidance.

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4.6.1 Local development

Context and strategy

The Group’s direct and indirect activities contribute to economic

development at national level in France and the Netherlands, and

speciﬁcally around its Paris and Amsterdam hubs. These hubs

oer multiple connections and form an extensive, high - quality

network that generates an attractive business environment.

According to an Opinionway survey of international investors

carried out in 2019, the presence of a hub oering direct and

frequent international connections is the second most important

criterion in choosing a location.

With more than 90% of the Group’s employees based in France

and the Netherlands, AirFrance–KLM is a signiﬁcant contributor

to job creation in the regions where the two hubs are located.

With more than three - quarters of the jobs liked to

sub - contracting located in Europe, the Group’s activities also

generate numerous indirect and induced jobs: assistance and

catering in the outstations, cleaning and sub - contracted services

required for the operation of aircraft.

The hubs create highly - attractive business environments while

airport proximity leads to the development of other activities like

hotels and congresses, company show - rooms, commercial and

marketing functions, business services and activities linked to

innovation.

As the number one air operator carrying international tourists

visiting France, AirFrance–KLM makes a signiﬁcant contribution

towards promoting France and the Netherlands as destinations,

and to the development of tourism.

KLM’s extensive network has contributed to making the

Netherlands an attractive location for both Dutch and

international companies. The Air France Group, with operations

at 44French airports (mainland France and overseas), reinforces

the appeal of the regions and contributes to the growth in local

activity (more than €710million of contractual procurement).

Historically, the Group has also played an active role in promoting

international development worldwide, particularly through its

support of NGOs and projects sponsored by its employees.

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Societal value

4

Key

Performance Indicator Deﬁnition Results

AirFrance–KLM strives to add economic and social value in the

areas where it operates, around its hubs and destinations. By

working together with local partners, the Group creates new

business opportunities and supports projects that contribute to

the future generations and local communities.

As a major purchaser of diverse products and services, the Group

integrates ethical and sustainability criteria in its supply chain by

sourcing products and services that minimize the environmental

footprint and have a positive social impact.

4.6 SOCIETAL VALUE

Suppliers having signed

the Sustainable

Development Charter

Number of Air France and KLM

suppliers under contract who

have signed AirFrance–KLM’s

Sustainable Development Charter

divided by the total number of Air

France and KLM suppliers under

contract at December29, 2019

2019

68%

2018

67%

Target 2020

75%

Number of suppliers

evaluated by Ecovadis

Number of Air France and KLM

suppliers under contract evaluated

by the CSR rating agency EcoVadis

or an equivalent body, at

December29, 2019

2019

414

2018

355

Target 2020

100additional

suppliers

Deﬁnitions

Suppliers having signed the Sustainable Development Charter.

Scope: Suppliers under contract with Air France and KLM, monitored under ARIBA.

As of the initiation of the purchasing process, suppliers are invited to sign the AirFrance–KLM Sustainable Development Charter.

The indicator measured is the number of Air France and KLM suppliers under contract (monitored via ARIBA) who have signed the Charter divided by the number of

suppliers concerned (under contract followed under ARIBA) (beginning of January of the reference year).

Number of suppliers evaluated by Ecovadis

Scope: Suppliers under contract with Air France and KLM, monitored under ARIBA, and scoring under Ecovadis.

As part of its supplier risk policy, AirFrance–KLM has its suppliers evaluated and takes into account their sustainable development performance. In the event of an

elevated or severe risk, suppliers must be assessed by the CSR rating agency EcoVadis or an equivalent body on the following four themes: environmental, social,

ethical and responsible purchasing. All other suppliers are invited to carry out this evaluation on a voluntary basis.

The indicator measured is the number of suppliers evaluated by EcoVadis or an equivalent body (end December of the reference year).

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Measures and action plans

Contributing to national and local development

For many years, AirFrance–KLM has supported the development

of small and medium - sized companies to which the Group

entrusts a signiﬁcant part of its procurement. The Group is

constantly working to support innovation and start - ups via

initiatives such as the creation of an innovation counter, and

participation in special business incubators.

Air France–KLM works alongside its national and local

stakeholders to shape sustainable areas. In 2019, at the Paris Air

Show in particular, Air France coordinated discussions to shape

the future for air transportation, strengthen competitiveness and

deﬁne the strategy for the French ﬂag and ensure its improved

competitiveness.

At local level, Air France and KLM are involved in various initiatives

to promote sustainable development, and build human capital

and the attractiveness of the territories around their hubs.

Air France is working in cooperation with local ocials and

companies as a member of the Board of the Club des Acteurs du

Grand Roissy. This association aims to promote harmonious and

balanced development of the Grand Roissy area, in synergy with

the airport platform, and to promote public transport, housing

and infrastructure projects essential for the development of

this area.

Creating social impact

Air France and KLM support initiatives enabling the development

of skills, the vocational integration of young people and the social

integration of vulnerable individuals. This also includes promoting

access to training leading to professions in the airline industry

through a number of dierent associations and educational

programs for young people.

Air France is a founder member and partner of four organizations

involved in information and training programs on aviation careers

(AirEmploi, Jeremy, AFMAé, and Engineers for Schools). Every

year, to reduce the gap between education and business, Air

France welcomes several hundred students and school children

for their end - of - study training courses and internships to gain

business experience. The company also organizes skills

sponsorship initiatives, by mobilizing its in - house teams and

leveraging the expertise of associations like Mozail RH, the Nos

Quartiers ont du Talent association, Article 1 and Tous En Stage,

an association for which Air France was a founder member. Tous

En Stage organizes multi - company internships for young people

in the regions (mainland France, French Overseas Departments

and Territories) and those with disabilities.

KLM supports a number of education programs to attract and

motivate future talent through collaboration with ROCs, Schiphol

Aviation College, the Amsterdam University of Applied Sciences

and the JINC foundation. The KLM Maintenance division oers

internships to students training in aeronautical mechanics: more

than 100ROC students beneﬁted from internships at KLM in 2019.

KLM also pursued its partnership with Schiphol Aviation College.

Air France and KLM continue to support workers with disabilities

by working with sheltered sector companies on multiple projects

(e.g. within Air France, upkeep of green spaces at some sites,

shipment of packages of uniforms, packaging of headphones

used on board, etc. ), and by entrusting them with highly - critical

services (four sheltered sector suppliers work with the IT

department).

Both Air France and KLM encourage employee solidarity initiatives.

In 2019, a second edition of the Air France Citizenship Day took

place involving 2,000 employees who volunteered to assist

60aid associations in ten French regions around six areas for

action: supporting children in need, education - training - employment,

disability and health, the ﬁght against insecurity, the environment

and intergenerational solidarity. The numerous Air France and

KLM outstations based internationally oered employees the

opportunity to volunteer and donate a working day to sharing

their skills and energy with a non - proﬁt organization in the social

and environmental ﬁelds: in 2019, more than 60Citizenship Days

were organized everywhere in the world. This initiative will be

repeated in 2020.

Social partnerships

Air France provides practical support to development projects

through ﬁve long - standing partnerships: the Air France Corporate

Foundation, the Air France Humanitarian Aid Department, Acting

for Life, Aviation Sans Frontières and Gawad Kalinga.

In 2019, the Air France Foundation supported 63projects across

32countries to the beneﬁt of 155,000children. Since its inception

in 1992, the Foundation has facilitated the realization of

1,480projects in favor of childhood, mostly sponsored by Air

France employees. Furthermore, over 4,000 employees are

involved in volunteer work, skill - sharing and donation projects

within the Friends of the Air France Foundation network.

The Air France Humanitarian Aid Department supported

25NGOs helping children in need of medical care and issued

393 tickets for the transportation of medical teams and the

repatriation of sick children. Free carriage of excess baggage was

also oered to 76NGOs for the transportation of medical and

emergency equipment.

In 2019, Acting for Life, which has been supported by the

company for more than forty years, ran 33development projects

in Africa, Asia, Latin America, the Middle East and Oceania.

Thanks to the ﬁnancial support and transportation facilities

donated by Air France, the emergency aid organization Aviation

Sans Frontières accompanied more than 1,200sick children on

the company’s ﬂights and shipped nearly 8,400 packages of

drugs and minor medical supplies to 26destinations.

Twenth - three years ago, Transavia Netherlands launched the

Peter Pan Holiday Club. This initiative, supported by Transavia

employees, organizes holidays for young people between the

ages of 13 and 20years who are unable to on a “regular” holiday

due to illness or dicult circumstances. Transavia Netherlands also

works closely with JINC, an organization that arranges activities

for children from economically - disadvantaged backgrounds.

Transavia employees are invited and encouraged to actively

participate in initiatives during which children visit companies to

gain valuable insight into the working world and its functioning,

and become familiar with the concept of networking. These

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initiatives illustrate the Transavia Netherlands conviction that

“everybody deserves to be seen” and contribute to a more

inclusive society.

Transavia France supports associations, like Louis Carlesimo,

thereby enabling sick children to enjoy magical moments during

a trip. The airline’s sta are committed to combating diseases like

cancer via the Les Hôtesses de l’Air Contre le Cancer association

and the Movember Foundation, or to promoting diversity with

Personn’ailes, Air France’s LGBT and gay - friendly association.

For many years, Air France has been involved in promoting

sustainable and responsible tourism within the travel profession

ecosystem, especially those involved with Agir Pour Un Tourisme

Responsible (ATR). Air France also acts as an information conduit

notably on the devastation caused by child sex tourism, by

ﬁnancing ECPAT International’s prevention campaign and

handing out literature during long - haul ﬂights.

In the event of environmental disasters, Air France and KLM

Cargo participate in the shipment of emergency equipment.

KLM works in partnership with Wings of Support and six other

organizations: WWF, the Ocean Cleanup, Close the Gap, the Red

Cross, UNICEF and Giro555. In 2019, the Wings of Support

Foundation was the main charity to be backed by KLM. Both KLM

ﬂight crews and ground sta are actively involved in the work of

the Foundation. In 2019, Wings of Support assisted 75projects

in 16countries worldwide.

Lastly, Air France–KLM customers who are members of the

“Flying Blue” loyalty program are oered the opportunity to

donate their Miles to 18NGOs selected by Air France and KLM.

In 2019, 70million Miles were donated to NGOs, i.e. 1,653tickets.

In March2019, exceptional support amounting to three million

Miles was allocated to the French Red Cross in response to the

devastation caused by the cyclone in Mozambique.

Results and performance

National and regional economic impact

In France:

— €40 billion positive economic impact attributable to the

AirFrance–KLM’s activity, representing 1.6% of French GDP;

— 475,000FTE jobs depend on the Group’s activity;

— for every job created by the Group, 8.7jobs are created in the

French economy;

— for every euro invested, the Group generates two euros in the

national economy;

— the Air France–KLM Group’s activity directly generates

€3.6billion (including the taxes and social contributions paid

by the Group and its employees);

— Air France is a leading private sector employer in the Paris region.

In the Netherlands:

— as the third largest private sector employer in the

Netherlands, the KLM Group accounted for 33,000 of the

65,000directly - generated jobs in the Schiphol catchment

area in 2019.

Contribution to the sheltered and adapted sector

In 2019, Air France signed a Manifesto for the vocational integration

of persons with disabilities, consisting of ten concrete measures.

This agreement ring - fences €3.4million to be used in promoting

the employment of persons with disabilities.

The company has invested €20 million in procurement,

subcontracting and service contracts from the sheltered and

adapted sector.

Contribution to community projects

In 2019, AirFrance–KLM supported NGOs and other social and

environmental initiatives by donating €13 million. A key

performance indicator to measure the impact of the sums

allocated is in the development phase.

4.6.2 Sustainable procurement

Context and strategy

As a service company, AirFrance–KLM’s business activity is heavily

dependent on procurement which represented €13.3billion in 2019.

Fuel purchasing amounted to some 38% of this expenditure,

followed by aircraft maintenance and components, airport and

navigation fees and airport handling.

Given the signiﬁcant proportion of external expenses relative to

total revenues, optimizing, innovating and making the supply

chain more sustainable are priorities for the Group and contribute

to improving proﬁtability. The Procurement department deploys

an ambitious policy and encourages the adoption of responsible

practices within its processes. For a number of years, this responsible

procurement policy has aimed to incorporate societal responsibility

principles into relationships with suppliers by reinforcing control

over ethical, social, environmental and supply chain risks.

Measures and action plan

Pursuing a responsible procurement policy throughout

the whole process

Air France–KLM pursues a responsible procurement policy

throughout the process:

— the buyers send suppliers a supplier questionnaire, addressing

a number of themes such as safety, environmental management,

HR policy, etc.;

— suppliers are invited to sign the Sustainable Development

Charter for suppliers based on the principles of the UN Global

Compact or provide their own equivalent document which

may be approved following analysis. Since 2015, this Charter

has been supplemented by a Supplier Code of Conduct;

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— the tender documents frequently list the criteria enabling the

evaluation of the environmental impact of the product or

service, which are then taken into account during the

evaluation of the dierent supplier proposals. This is an

integral part of the assessment of the total cost of ownership

and the life cycle analysis;

— supplier contracts include an ethical and environmental clause

based on the relevant products and services.

To supplement the existing process, the Procurement function uses

the services of EcoVadis, a company specialized in the evaluation

of suppliers based on Corporate Social Responsibility criteria.

The risk mapping process, which takes place at the beginning of

the procurement process, takes into account the dierent sectors of

procurement and the countries in which the suppliers are based:

— buyers must systematically verify the positioning of each

supplier in the risk map. There are six levels of risk;

— in the event of an elevated or severe level of risk, suppliers are

contacted so that they can be evaluated by EcoVadis or an

equivalent organization on the following four themes:

environment, social, ethics and sustainable procurement (as

deﬁned in the EcoVadis system);

— if the risk category of the supplier is lower than “high risk”,

buyers are advised to encourage their supplier to be

evaluated. The latter can then share their scores with other

companies, which may prove a competitive advantage in

terms of winning bids and contracts.

Following their evaluation, suppliers having failed to reach an

acceptable level will need to put in place corrective measures to

meet the Procurement requirements.

At Air France, these cases are discussed during quarterly Steering

Committee meetings, overseen by the Procurement and CSR

departments.

Air France is pursuing its ambitious Purchase Plan launched in 2018,

aimed at capturing more innovation with its suppliers and, in

particular, with small and medium - sized companies and start - ups.

Purchasing from the sheltered and adapted sector rearms Air

France’s values and thus underscores its commitment to Social

and Environmental Responsibility. In 2019, Air France organized

four Purchasing meetings aimed at increasing procurement with

SMEs, the sheltered sector and innovative companies.

The KLM Fuel Procurement Department has made a decade - long

commitment to developing and purchasing 75,000 tons of

sustainable aviation fuel per year. To this end, KLM is contributing,

alongside SkyNRG, the world leader in sustainable aviation fuels

(SAF), to the development of the ﬁrst European plant dedicated

to the production of SAF in Delfzijl. The construction of this

facility, scheduled to open in 2022, is a concrete step towards

achieving KLM’s ambitions for sustainable development and

contributes to the broader “Smart and Sustainable” industrial

plan. As of 2022, the plant will produce 100,000tons of SAF

annually, as well as 15,000tons of bioLPG, as a by - product. This

will mean an annual CO

2

reduction of 270,000 tons for the

aviation sector. This is an important milestone for the industry in

its quest to reduce carbon emissions and meet the growing

demand for sustainable fuel for aviation.

Empowering the buyers

AirFrance–KLM buyers are committed to respecting the Group’s

societalresponsibility commitments. On their ﬁrst day in the oce,

they sign a Code of Ethics outlining the ethical rules to be followed

when dealing with suppliers. In the light of the Anti-Bribery

legislation, a reminder of the Code of Ethics has been sent to the

prescribers. The Procurement Sustainable Development Charter

and the Code of Ethics are available on the Procurement website.

An internal process has also been established to develop the

buyers’ skills, with training modules, seminars and web links

providing more information on best environmental practices. All

Procurement sta have completed an anti - corruption e - learning

module. All new buyers receive training on the department’s CSR

commitments, the duty of vigilance and the anti - bribery

processes, and on how to use a scoring tool (EcoVadis).

The Procurement function encourages the maintenance of a

watching brief on information relating to CSR (news, legislation,

events, conferences, webinars, etc. ) and the sharing of experience.

The Procurement Action Plan sets out the CSR undertakings as

a strategic lever; this Plan has been distributed to the team and

forms part of the induction documentation for new recruits. More

than ever, CSR is a challenge for AirFrance–KLM, which places

sustainable development at the heart of its priorities and projects:

the buyers seek suppliers who can help the Group make progress

on this issue and contribute suggestions and innovative ideas.

Mobilizing and innovating with suppliers

The Supplier Relations Management Program (SRM) is based on

building long - term relationships between AirFrance–KLM and

its strategic suppliers. This program enables issues like Corporate

Social Responsibility to be central to discussions and to move

forward together on these issues.

The Procurement function sees its suppliers as bona ﬁde partners

in mutually - beneﬁcial growth. In this capacity, it supports their

quest for innovative solutions and analysis of the environmental

impact of products. During the drafting of a product speciﬁcation,

the prescriber and buyer work together to identify the environmental

and societal characteristics, thereby encouraging the supplier to

not only develop the environmental performance of its products

but also make in a wider commitment to sustainability.

Air France entrusts a signiﬁcant part of its procurement to SMEs.

Through a formalized action plan, the Procurement function

promotes the development of SMEs and start - ups through

initiatives such as the creation of an innovation counter and

participation in incubators and on speciﬁc themes.

Procurement is committed to building high - quality relationships

with SMEs. To promote and protect this eco system, Air France

is a member of the SME Pact and establishes an action plan on

an annual basis within the context of its relationships with SMEs

(midcaps, start - ups and VSBs). These actions include a reduction

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in payment terms thanks to the extension of Tradeshift

(cloud - based business network and platform for supply chain

payments) and also the strengthening and deployment of

innovation via a “start - up Kit”, enabling the company to work more

nimbly with start - ups and promote POC (“Proof of Concept”).

Air France cooperates with associations and companies in the

sheltered sector on multiple projects which represented

approximately €20 million of the Group’s purchasing in 2019

(e.g. upkeep of green spaces in some sites, shipment of packages

of uniforms, packaging of headphones, etc. ). In 2019, as part

of its laundry services, the ESAT du Centre de la Gabrielle

launched an ecological approach by using eco - responsible

detergents. This same approach will gradually be extended by

the other laundry companies operating in the sheltered and

adapted employment sector.

In 2019, KLM initiated the recycling of plastic waste with its

recycling suppliers, transforming this waste into a material for 3D

printing. KLM collects tons of plastic bottles on ﬂights and then

sorts and recycles them to obtain recycled plastic pellets. This

recycled plastic is used, for example, to print tools for the

maintenance of aircraft.

Taking into account social and environmental priorities

The obligations of suppliers in terms of the environment and

vocational health and safety are stipulated in the product or

service speciﬁcations. To prevent the risks linked to joint - activity

during interventions, the establishment of prevention plans is

systematic. This approach is the subject of a General Occupational

Health and Safety Procedure. For Air France, the accident record

for sub - contractors is tracked in the Company’s annual social

reporting.

Furthermore, an environmental clause ﬁgures in Air France’s

catering contracts which includes measures to reduce the

environmental footprint, such as the sorting and recycling of

waste and the use of seasonal products.

Measures in favor of responsible catering

Air France and KLM are developing the concept of responsible

catering. Indeed, since its airlines serve a total of 85million meals

and snacks every year and given the quantity of food products

required for their production, the Group’s choices can have an

impact on biodiversity.

For catering procurement, in partnership with its dierent

catering suppliers, Air France prioritizes local products which are

responsible and, whenever possible, seasonal. Certiﬁed protected

origin products (produits d’appellation d’origine contrôlée et

protégée –AOC/AOP), particularly cheese, form part of a broad

range of products. Organic food products are also oered,

particularly in the meal trays intended for children.

As of the design of on - board equipment, multiple criteria are

taken into consideration: weight of the articles, materials used,

place of manufacturing, mode of transportation, management of

the material’s end of life. Particular attention is paid to reducing

the amount of packaging and the use of single - use plastics. At

the end of 2019, on board Air France’s aircraft, plastic cups, cutlery

and stirrers, i.e. the equivalent of 1,300 tons of plastic, were

progressively replaced by cardboard cups while cutlery and

stirrers were designed in wood sourced from FSC label forests

and covered in paper wrappers.

Rethinking some food services also contributes to this goal of

reducing single - use plastics. For example, the development of the

Bon Appetit bag distributed on medium and long - haul ﬂights avoids

the use of around 200tons of cutlery and other plastic items.

Whenever feasible, to contribute to the overall objective of

attaining the Sustainable Development Goals, KLM chooses

products and partners that share its values. The company’s

responsible catering policy mainly focuses on environmental

preservation in production areas, Human Rights, working conditions

and animal welfare. It is applied to all ﬂights departing from

Amsterdam Schiphol Airport and elsewhere in Europe and, where

possible, responsible products are included in the catering

products on board ﬂights on departure from other countries. For

KLM, it is important that the ingredients in meals, such as ﬁsh,

chocolate, palm oil and soy, are sourced responsibly. To this end,

KLM is a member of the Responsible Soy (RTRS) and Sustainable

Palm Oil (RSPO) Round Table and oers certiﬁed products on

board its aircraft such as MSC and ASC-certiﬁed ﬁsh, “better life”

egg, chicken and veal and UTZ-certiﬁed coee, tea and chocolate.

The Group donates a number of products from in - ﬂight catering

not distributed to passengers to charitable associations (see

Section4.3.4Action to combat food waste).

Results and performance

Through its website (www.af-klm.com /procurement), the

Procurement department maintains an ongoing dialogue with

suppliers, informing them, amongst other things, on the

function’s commitment to sustainable development.

Right from the inception of the procurement process, suppliers

thus become aware of these issues and are invited to sign the

AirFrance–KLM Sustainable Development Charter. In 2019, 68%

of suppliers signed the Sustainable Development Charter and, in

2020, the goal is to increase this number to 75%.

In 2019, the number of companies evaluated on EcoVadis

or an equivalent body increased by 17% (414suppliers evaluated

in 2019 versus 355 in 2018). Furthermore, as part of a

continuous - improvement process, the company aims to evaluate

100additional suppliers in 2020.

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4.6.3 Monitoring of Act

No. 2017 - 399known as

the Duty of Vigilance Law

The Air France–KLM Group is subject to the obligations

introduced by the Act of March27, 2017 relating to the duty of

vigilance for parent companies and ordering companies.

Since 2018, in response to the regulatory requirements, the Group

has implemented a vigilance plan in compliance with the legal

provisions, it being understood that the Group already had

processes in place enabling it to comply directly or indirectly with

the requirements of the new Act. In particular, having established

veriﬁcation processes in the areas required to be covered by the

vigilance plan, the Group has ensured that it is in a position to

beneﬁt, as eectively as possible, from the contributions of its

various entities. In 2019, AirFrance–KLM pursued these actions

and focused on measuring their eectiveness within the Group

and its subsidiaries.

Identiﬁcation and regular risk evaluation procedures

The identiﬁcation and evaluation of the various risks relating to

the duty of vigilance are part of the overall risk management

process established within the Air France–KLM Group. As a

facilitator of risk management, Group Internal Audit regularly

evaluates the risk management process and its conclusions are

the subject of presentations to the Group Executive Committee

and the Audit Committee.

The AirFrance–KLM Group’s overall sub - contracting management

system applies to all risk areas. It is based on contract reviews,

compliance monitoring and supervision acts such as audits,

inspections and checks, carried out by the sub - contractors

themselves where appropriate.

Every year, the Group conducts a review of the non - ﬁnancial risks

generated by its activities. This analysis veriﬁes the relevance and

comprehensiveness of the measures and action plans aimed at

the eective prevention, control and mitigation of the

non - ﬁnancial risks deemed to be the most material.

See Section 3 Risks and risk management and Section 4.1.2

Identiﬁcation of the key priorities in building long - term

relationships.

Measures deployed to prevent and mitigate the risks

and monitoring mechanisms

AirFrance–KLM’s policy enshrines the respect of fundamental

rights as established in the leading international principles:

Universal Declaration of Human Rights, International Labor

Organization’s (ILO) Declaration on Fundamental Principles and

Rights at Work, and the Organization for Economic Cooperation

and Development’s (OECD) guiding principles.

Air France–KLM has been a signatory of the United Nations

Global Compact since 2003 and is committed to respecting and

promoting its ten principles in the areas of Human Rights, labor,

the environment and anti - corruption. This undertaking is

rearmed each year by the Group’s top management.

The duty of vigilance is a multi - risk approach. The management

of risks is at the heart of the steering of the AirFrance–KLM

Group’s business activities, based on a rational of prevention and

homogeneous management via common methods and tools.

Human Rights and fundamental liberties

In its Corporate Social Responsibility Statement, the Group

undertakes to scrupulously respect Human Rights, oppose child

and forced labor, apply laws and ask its service providers and

suppliers to uphold these principles.

The Social Rights and Ethics Charter arms the Group’s

commitment to fostering a climate of mutual trust and respect

amongst sta, and ensuring a safe working environment. The

Group undertakes to apply the labor legislation of the European

Union and its Member States and all national collective

agreements, and to respect the exercise of trade union rights in

all the relevant countries.

In 2019, the Social Rights and Ethics Charter was reviewed by a

working group bringing together the relevant Group entities and

the European Works Council, to develop its content towards the

formalization of principles fostering the respect of Human Rights.

This new document, for both internal and external use, will be

published during 2020.

In view of its organization, the Group delegates to its subsidiaries

the responsibility of respecting and promoting the content of

these commitments locally, in the respect of the national

provisions and legislation speciﬁc to each country.

See Section4.2Human resources and 4.5.2Respect of Human

Rights.

Health and safety

For AirFrance–KLM, the health and safety of both customers

and sta is an absolute priority.

Flight safety is paramount for the Group. It is key to retaining the

trust of customers and imperative for the long - term viability of

its operations. All the Group’s activities are the subject of multiple

checks and certiﬁcations, comply with extremely strict norms and

achieve the highest standards in the industry.

Both companies deploy Safety Management Systems, which are

integral to their business organizations, processes and corporate

cultures.

See Section 3 Risks and risk management and Section 4.4

Customer trust.

Safeguarding health and safety in the work place is a human

priority to which the Group responds by preventing vocational

risks and improving the quality of life in the workplace.

See Section4.2Human resources.

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The Group must guarantee its customers and ﬂight crew safe

catering services and, to this end, has put in place a Food Hygiene

and Safety process to respond to the regulatory requirements

linked to the preparation and supply of meals.

See Section4.4Customer trust.

Environment

Air France–KLM’s Climate Action Plan embodies the Group’s

strategy and main priorities for reducing its impact on climate

change. In November2019, the Group unveiled its global strategy

through to 2025, based on global environmental sustainability.

The Air France and KLM Environmental Management Systems

(EMS) aim to prevent and mitigate the environmental impacts of

their operations. They have ISO14001certiﬁcation and internal

and external audits enable the veriﬁcation of their eective

deployment.

In 2019, the Group adopted the format recommended by the Task

Force on Climate - related Financial Disclosures (TCFD) for the

management of ﬁnancial risks linked to climate change (TCFD

concordance table, section4.3.2).

See Section4.3Environment.

Supply chain

In its relations with sub - contractors and suppliers, AirFrance–KLM

ensures that the fundamental social rights and principles, and

environmental protection provisions, are properly respected

everywhere in the world.

A supplier selection process has been implemented to respond

to the duty of vigilance requirements. To this end, AirFrance–KLM’s

Procurement function provides awareness training on these risks

for its buyers.

A risk - mapping process is in place with, for each segment and

procurement domain, an evaluation of the environmental, social

and ethical risks. Risk is also evaluated by country.

For all new contracts or contract renewals, the signature of the

Sustainable Development Charter or an equivalent commitment

covering the four areas (environment, social, ethical and supply

chain) is mandatory and is included in the contract’s appendix.

In the segments most exposed to risks, suppliers are asked to

submit an evaluation of their sustainability performance, carried

out by a specialized organization or the equivalent. This evaluation

must address four areas: environment, social, ethics, supply chain.

The “Supplier supply chain” section provides visibility for tier

2suppliers.

Suppliers failing to reach an acceptable level are required to put

in place a remedial action plan. Independent in - situ audits may

also be triggered.

Independently of the level of risk, all suppliers are encouraged to

carry out evaluations of their CSR performance.

In 2019, at the Group’s request, 414suppliers had their sustainability

performance evaluated.

See Section4.6Societal value.

Listening to stakeholders and whistle blower

mechanism

In 2019, AirFrance–KLM realized a new materiality analysis by

questioning a representative panel of internal and external

stakeholders. The comparison of these results with those of the

analysis carried out in 2017 enabled conﬁrmation of the relevance

of AirFrance–KLM’s strategic choices in the light of the issues

deemed to be priorities for its activities and the expectations of

its stakeholders.

Several processes enable the Group to regularly evaluate the

perception of its stakeholders and to understand the related risks.

The Group also has a number of feedback channels in place

enabling stakeholders (particularly employees, customers and

local residents around airports) to communicate any complaints.

See Section4.1.2Identiﬁcation of the key priorities in building

long - term relationships.

The AirFrance–KLM Group has updated the scope of its internal

whistle - blower procedures to enable employees to report any

situations arising within the scope of the Act of March27, 2017

relating to the duty of vigilance of parent companies and ordering

companies. For reports under the Whistleblowing procedure

please see paragraph 4.5.3Business ethics.

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To the Annual General Meeting,

In our capacity as Statutory Auditor of your company (hereinafter

the “entity”) appointed as Independent Third Party, and accredited

by the French Accreditation Committee (Comité Français

d’Accréditation or COFRAC) under number 3 - 1049

(1)

, we hereby

report to you on the consolidated non - ﬁnancial statement for the

year ended 31

st

December2019 (hereinafter the “Statement”),

included in the Group management report pursuant to the

requirements of articles L.225 - 102 - 1, R.225 - 105 and R.225 - 105 - 1of

the French Commercial Code (Code de Commerce).

Responsibility of the entity

The Management Board is responsible for preparing the Statement,

including a presentation of the business model, a description of

the principal non - ﬁnancial risks, a presentation of the policies

implemented considering those risks and the outcomes of said

policies, including key performance indicators.

The Statement has been prepared in accordance with the entity’s

procedures (hereinafter the “Guidelines”), the main elements of

which are presented in the Statement and are available upon

request at the entity’s head oce.

Independence and quality control

Our independence is deﬁned by the requirements of article

L.822 - 11 - 3of the French Commercial Code and the French Code

of Ethics (Code de Déontologie) of our profession. In addition, we

have implemented a system of quality control including documented

policies and procedures regarding compliance with applicable

legal and regulatory requirements, the ethical requirements and

French professional guidance.

Responsibility of the Statutory Auditor appointed

as Independent Third Party

On the basis of our work, our responsibility is to provide a report

expressing a limited assurance conclusion on:

— the compliance of the Statement with the requirements of

article R.225 - 105of the French Commercial Code;

— the fairness of the information provided in accordance with

article R.225 - 105I, 3° and II of the French Commercial Code,

i.e., the outcomes, including key performance indicators, and

the measures implemented considering the principal risks

(hereinafter the “Information”).

Our responsibility is also to provide a report expressing, at the

request of the entity and outside of the scope of accreditation, a

reasonable assurance conclusion that information selected by the

entity, presented in Appendix and identiﬁed with the symbol A in

chapter has been prepared, in all material respects, in accordance

with the Guidelines.

However, it is not our responsibility to comment on the entity’s

compliance with other applicable legal and regulatory requirements,

in particular the French duty of care law and anti - corruption and

tax avoidance legislation nor on the compliance of products and

services with the applicable regulations.

4.7 REPORT BY ONE OF THE STATUTORY

AUDITORS, APPOINTED AS INDEPENDENT

THIRD PARTY, ON THE CONSOLIDATED

NON - FINANCIAL STATEMENT

FOR THE YEAR ENDED 31DECEMBER2019

Air France- KLM — 2019 Universal Registration Document216

Corporate social responsibility: Extra-ﬁnancial performance statement

4 Report by one of the Statutory Auditors

(1) Accreditation scope available at www.cofrac.fr.

4_VA_V10 22/04/2020 10:12 Page216

Nature and scope of our work

The work described below was performed in accordance with

the provisions of Article A.225 - 1 et seq. of the French Commercial

Code, as well as with the professional guidance of the French

Institute of Statutory Auditors (Compagnie Nationale des

Commissaires aux Comptes or CNCC) applicable to such

engagements and with ISAE 3000 (international standard on

assurance engagements other than audits or reviews of historical

ﬁnancial information):

— we obtained an understanding of all the consolidated entities’

activities and the description of the principal risks associated;

— we assessed the suitability of the criteria of the Guidelines with

respect to their relevance, completeness, reliability, neutrality

and understandability, with due consideration of industry best

practices, where appropriate;

— we veriﬁed that the Statement includes each category of

social and environmental information set out in article

L.225 - 102 - 1III, as well as information regarding compliance

with Human Rights and anti - corruption and tax avoidance

legislation;

— we veriﬁed that the Statement provides the information

required under article R.225 - 105II of the French Commercial

Code, where relevant with respect to the principal risks and

includes, where applicable, an explanation for the absence of

the information required under article L. 225 - 102 - 1 III,

paragraph 2of the French Commercial Code;

— we veriﬁed that the Statement presents the business model

and a description of principal risks associated with all the

consolidated entities’ activities, including where relevant and

proportionate, the risks associated with their business

relationships, their products or services, as well as their

policies, measures and the outcomes thereof, including key

performance indicators associated to the principal risks;

— we referred to documentary sources and conducted

interviews to:

– assess the process used to identify and conﬁrm the

principal risks as well as the consistency of the outcomes,

including the key performance indicators used, with

respect to the principal risks and the policies presented,

– corroborate the qualitative information (measures and

outcomes) that we considered to be the most important

presented in Appendix; concerning certain risks

(1)

, our

work was carried out on the consolidating entity, for the

other risks, our work was carried out on the consolidating

entity and on a selection of entities

(2)

;

— we veriﬁed that the Statement covers the scope of

consolidation, i.e. all the consolidated entities in accordance

with article L.233 - 16of the French Commercial Code, within

the limitations set out in the Statement;

— we obtained an understanding of internal control and risk

management procedures the entity has put in place and

assessed the data collection process to ensure the

completeness and fairness of the Information;

— for the key performance indicators and other quantitative

outcomes that we considered to be the most important

presented in Appendix 1, we implemented:

– analytical procedures to verify the proper consolidation of

the data collected and the consistency of any changes in

those data,

– tests of details, using sampling techniques, in order to

verify the proper application of the deﬁnitions and

procedures and reconcile the data with the supporting

documents. This work was carried out on a selection of

contributing entities

(2)

and covers between 40% and 100%

of the consolidated data selected for these tests;

— we assessed the overall consistency of the Statement based

on our knowledge of all the consolidated entities.

We believe that the work carried out, based on our professional

judgment, is sucient to provide a basis for our limited assurance

conclusion; a higher level of assurance would have required us to

carry out more extensive procedures.

2019 Universal Registration Document — Air France - KLM 217

4

Corporate social responsibility: Extra-ﬁnancial performance statement

Report by one of the Statutory Auditors

4

(1) Business ethics, Respect of human rights, Responsible procurement, Adaptation to climate change, Biodiversity, Operational safety for stakeholders, Accessibility

of the products and services, Local development, Conﬁdentiality and data protection.

(2) Social: Air France, Bluelink, HOP!, KLM, Transavia Netherlands.

Environment: Air France in France and KLM Schiphol for ground operations; Air France, HOP!, KLM and KLC for air operations.

4_VA_V10 22/04/2020 10:12 Page217

Paris-La Défense, on February19

th

2020

KPMG SA

Fanny Houlliot Eric Jacquet

Partner Partner

Sustainability Services

Means and resources

Our work was carried out by a team of seven people between

December2019 and February2020 and took a total of ten weeks.

We were assisted in our work by our specialists in sustainable

development and Corporate Social Responsibility. We conducted

interviews with the people responsible for preparing the

Statement.

Conclusion

Based on the procedures performed, nothing has come to our

attention that causes us to believe that the non - ﬁnancial

statement is not presented in accordance with the applicable

regulatory requirements and that the Information, taken as a

whole, is not presented fairly in accordance with the Guidelines,

in all material respects.

Reasonable assurance report on a selection

of non - ﬁnancial information

Nature and scope of our work

With regard to the information selected by the entity presented

in Appendix 1 and identiﬁed with the symbol √ in chapter4, we

conducted the same procedures as those described in the

paragraph “Nature and scope of our work” (for the most

important non - ﬁnancial information). However, these procedures

were more in - depth, particularly regarding the number of tests.

Consequently, the selected sample represents 94% of the

information identiﬁed with the symbol √.

We believe that these procedures enable us to express

reasonable assurance regarding the information selected by the

entity and identiﬁed with the symbol √.

Conclusion

In our opinion, the information selected by the entity and

identiﬁed with the symbol √ in chapter4has been prepared, in

all material respects, in accordance with the Guidelines.

Air France- KLM — 2019 Universal Registration Document218

4

Corporate social responsibility: Extra-ﬁnancial performance statement

Report by one of the Statutory Auditors

4_VA_V10 22/04/2020 10:12 Page218

Annex 1

Qualitative information (actions and results) considered most important

Human resources Information

Support employees toward individual development and professional retraining

Actions in favor of diversity and equal opportunities

Social dialogue and collective agreements

Occupational Safety Policies

Environmental Information

Measures in favor of the circular economy

Projects of reduction of the carbon footprint

Commitments for the preservation of biodiversity

Societal Information

Measures to promote the safety and security of operations

Measures in favor of the accessibility of the products and services

Actions to raise employees’ awareness on Human Rights risks

Tax partnerships

Net Promoter Score

2019 Universal Registration Document — Air France - KLM 219

4

Corporate social responsibility: Extra-ﬁnancial performance statement

Report by one of the Statutory Auditors

4

4_VA_V10 22/04/2020 10:12 Page219

Key performance indicators and other quantitative results considered most important

Human resources key performance indicators and outcomes Level of assurance

Total sta and distribution by age and gender Limited

Number of recruitments and Number of departures Limited

Training hours by employee Limited

Percentage of women at 12/31 Limited

Percentage of women in managerial functions Limited

Total sta with disabilities Limited

Employees Promoter Score (EPS) Limited

Collective agreements signed Limited

Frequency rate of workplace accidents with lost time Limited

Severity rate of workplace accidents Limited

Environmental key performance indicators and outcomes Level of assurance

Air operations

Fuel consumption Reasonable

CO

2

emissions related to fuel consumption Reasonable

SpeciﬁcCO

2

footprint for passenger transport Reasonable

Percentage change inCO

2

eciency between 2005 and 2019 (operational measures) Reasonable

SpeciﬁcCO

2

footprint for cargo transport Limited

Emissions ofNO

X

low altitude Limited

Emissions ofSO

2

low altitude Limited

Global noise energy indicator Limited

Percentage of variation of global noise energy per movement between 2000 and 2019. Limited

Societal key performance indicators and outcomes Level of assurance

Ground operations

DirectCO

2

emissions Limited

Percentage change inCO

2

emissions from the ground operations between 2018 and 2019 Limited

Emissions ofSO

2

Limited

Emissions ofNO

X

Limited

Quantity of hazardous and non - hazardous industrial waste Limited

Percentage change in non - recycled waste between 2011 and 2019. Limited

Percentage of hazardous industrial waste recovered Limited

Key performance indicators and other quantitative societal outcomes Level of assurance

Realization rate of the e - learning program on the prevention of corruption Limited

Number of suppliers evaluated by Ecovadis Limited

Suppliers having signed the Sustainable Development Charter Limited

Air France- KLM — 2019 Universal Registration Document220

Corporate social responsibility: Extra-ﬁnancial performance statement

4 Report by one of the Statutory Auditors

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2019 Universal Registration Document — Air France - KLM 221

5

FINANCIAL REPORT

5.1 Investments and ﬁnancing 222

5.1.1 Investments 222

5.1.2 Financing 222

5.1.3 Structure of the ﬁnancial debt and reimbursement proﬁle 223

5.2 Comments on the ﬁnancial statements 224

5.2.1 Consolidated results at December31, 2019 224

5.2.2 Investments and ﬁnancing of the Group 227

5.2.3 Consolidated equity at December 31, 2019 227

5.2.4 AirFrance – KLM parent company results 228

5.3 Key ﬁnancial indicators 228

5.4 Subsequent events and outlook for 2020 231

5.4.1 Subsequent events 231

5.4.2 Outlook for 2020 231

5.5 Consolidated ﬁnancial statements 234

5.5.1 Consolidated income statement 234

5.5.2 Consolidated statement of recognized income and expenses 235

5.5.3 Consolidated balance sheet 236

5.5.4 Consolidated statement of changes in stockholders’ equity 238

5.5.5 Consolidated statement of cash ﬂows 239

5.6 Notes to the consolidated ﬁnancial statements 241

5.7 Statutory Auditors’ report

on the consolidated ﬁnancial statements 321

5.8 Statutory ﬁnancial statements 327

5.8.1 Income statement 327

5.8.2 Balance sheet 328

5.8.3 Notes 329

5.9 Five - year results summary 339

5.10 Statutory Auditors’ report on the ﬁnancial statements 340

5.11 Statutory Auditors’ special report on regulated agreements 344

5

5_VA_V10 22/04/2020 13:34 Page221

5.1.2 Financing

(in € million) 2019 2018

Capital increase due to new convertible bonds 54 -

Repurchase of perpetual (including premium) - (211)

Issuance of debt 1617 539

Repayment of debt (1,156) (1,400)

Payments on lease debts (1,008) (972)

New loans (89) (195)

Repayment on loans 161 89

Dividends and coupons paid on perpetual (26) (38)

Net cash - ﬂow from ﬁnancing activities (447) (2,188)

Investment in ﬂight equipment included advance payments and

balances on the delivery of aircraft purchases, capitalized aircraft

modiﬁcations, spare parts procurement and maintenance costs

eligible for capitalization. Investment in intangible assets related

to the purchase of software and capitalized IT development.

Other investments in tangible assets mostly included the

acquisition of industrial equipment for the ﬂight operations,

maintenance and IT.

5.1.1 Investments

2018

(in € million) 2019 restated

Acquisition of intangible assets (328) (253)

Investment in ﬂight equipment (2,746) (2,325)

Other property, plant and equipment (298) (266)

Acquisitions of subsidiaries, of shares in non - controlled entities (1) (9)

Loss of control over subsidiaries, disposal of shares in non - controlled entities 13 6

Proceeds on disposal of property, plant and equipment and intangible assets 100 133

Dividends received 14 6

Net decrease (increase) in investments of between 3months and 1year (72) 4

Net cash - ﬂow used in investing activities (3,318) (2,704)

During the 2019 ﬁnancial year, the Air France – KLM Group’s

capital expenditure on tangible and intangible assets amounted

to €3,372million and proceeds on disposals to €100million. With

net cash - ﬂow from operating activities amounting to

€3,895 million, the Group generated positive operating free

cash - ﬂow of €623million.

At December31, 2019, the Group’s cash position amounted to

€4.71billion, including €111million of investments with maturities

of above three months, €300 million of cash pledges and

€585million of bond deposits. In addition, the Group had credit

facilities of €1.765 billion subscribed by Air France, KLM and

AirFrance – KLM, fully available at December31, 2019 (see also

Section3–Liquidity risk, page 144).

Net debt stood at €6.15billion (€6.16 billion at December31,

2018). The detailed net debt calculation can be found in Note33

in the Notes to the ﬁnancial statements, page 298).

5.1 INVESTMENTS AND FINANCING

Air France- KLM — 2019 Universal Registration Document222

Financial Report

5 Investments and ﬁnancing

5_VA_V10 22/04/2020 10:09 Page222

Structure of the ﬁnancial debt

The Group’s gross debt stood at €7.11billion at December31, 2019,

of which €4.43billion is guaranteed by pledged or mortgaged

assets amounting to €5.87billion, representing 36.4% of the net

book value of the relevant assets (see also Note38.1 in the notes

to the consolidated ﬁnancial statements, page 313). After hedging,

71% of the gross debt (excluding lease debt) is at ﬁxed rates and

74% (excluding lease debt) is denominated in euros. The average

cost of the debt is 2.54% (see also Section3.3–Financial market

risks, page 142).

The structure of the debt is as follows:

— market ﬁnancing (bonds and perpetual subordinated loan

stock): €2.09billion;

— capital lease commitments: €3.48billion;

— other borrowings including bank debt and accrued interest:

€1.54billion.

Reimbursement proﬁle for debt

and subordinated securities, excluding lease debt

and KLM perpetuals

The debt reimbursement maturities are progressive over time.

Debt reimbursement proﬁle

(1)

5.1.3 Structure of the ﬁnancial debt and reimbursement proﬁle

2019 Universal Registration Document — Air France - KLM 223

5

Financial Report

Investments and ﬁnancing

5

Air France - KLM Hybrid Unsecured Bond:

AFKL 6.25% Perpetual 2020 (€403m)

(in € million)

Other long-term Debt: AF and KLM Secured Debt:

Mainly “Asset-backed” (Net Deposits)

Bond issued by Air France - KLM

June 2021: Air France-KLM 3.875% (€600m)

October 2022: Air France-KLM 3.75% (€400m)

March 2026: Air France-KLM 0.125% (€500m, Convertible “Océane”)

December 2026: Air France-KLM 4.35% ($145m)

450

2024

400

600

2022

400

2020

850

600

2021

650

2023

500

2025

and

beyond

600

2,000

(1) Excluding operating lease debt payments and KLM perpetual debt.

New 5 year bond issue for €750m with a 1.875% annual coupon and Tender Oer accepted for June 2021 and October 2022 bond issues amounting to €350m,

completed in January 2020.

5_VA_V10 22/04/2020 10:09 Page223

Revenues

Consolidated revenues for the period amounted to €27.2billion,

an increase of 3.7% and 2.2% on a constant currency basis. The

2019 ﬁnancial year was characterized by a 1.2% decrease in unit

revenues on a constant currency basis, due to the performance

of the passenger (-0.4%) and cargo (-10.7%) transportation

activities, both these activities being included in the Network

business, and despite the performance from Transavia (+3.0%).

In addition, AirFrance – KLM increased its overall capacity by 2.9%

(ASK). Air France and KLM increased their passenger capacity

by 2.5% (ASK), and their Cargo capacity by 1.7% (ATK).

Transavia’s capacity growth stood at 6.5% (ASK). Revenues from

the Network business rose by 2.6% while third - party maintenance

revenues increased by 11.3%. Transavia revenues grew by 9.3%.

Operating expenses

Operating expenses increased by 4.9% to €26billion.

External expenses increased by 6.3% to €15.9 billion versus

€14.9billion over the previous twelve months. Excluding fuel,

external expenses were up by 3.9% relative to the previous twelve

months.

2018

(In € million) 2019 restated Change

Revenues 27,189 26,227 962

EBITDA 4,128 4,293 (165)

Income from current operations 1,141 1,405 (264)

Income from operating activities 1,010 1,393 (383)

Net income from continuing operations 293 422 (129)

Net income, Group part 290 420 (130)

Basic earnings per share, Group (in €) 0.64 0.92 (0.28)

Restatement of the 2018 ﬁnancial statements

Since January1, 2019, the Group has applied two new accounting

methods: the Component approach for Life Limited Parts and

the booking of Customer Compensation in contra - revenue

(previously under expenses).

These restatements are outlined in Note2 in the Notes to the

consolidated ﬁnancial statements on page 241.

Scope at December31, 2019

At December31, 2019, the consolidation scope was composed of

75fully consolidated companies, 21companies consolidated using

the equity method and one joint - venture. The two main subsidiaries,

Air France and KLM, represented 91% of revenues and 75% of the

balance sheet. The other subsidiaries are principally involved in

air transportation (Hop!, KLM Cityhopper), maintenance and

low - cost transportation (Transavia).

As far as possible, the changes in the like - for - like ﬁgures have

been estimated on a constant currency basis.

5.2 COMMENTS ON THE FINANCIAL STATEMENTS

5.2.1 Consolidated results at December31, 2019

Air France- KLM — 2019 Universal Registration Document224

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5 Comments on the ﬁnancial statements

5_VA_V10 22/04/2020 10:09 Page224

The main changes were as follows:

— aircraft fuel: fuel expense for the year rose by 5.5% (constant

currency), mainly due to a currency eect (-€265million), a

higher fuel bill after hedging (-€189million) and the increase

in capacity (-€153 million), partially oset by improved

eciency (+€52million);

— chartering costs: the costs incurred in leasing aircraft

capacity from other airlines. Their decrease in 2019 is mainly

explained by lower aircraft chartering and seat block costs at

Air France;

— landing fees and en route charges: these costs are incurred

for air navigation services and the use of airports;

— catering costs: these costs comprise the services supplied on

board the AirFrance – KLM Group’s own aircraft;

— handling charges and other operating costs principally

cover aircraft handling on the ground and the cost of

passenger care for the Group and, to a lesser extent,

third - party customers. The increase in these costs is explained

by the increased costs of handling by third parties in the

stations;

— aircraft maintenance costs: they include maintenance

procurement and consumption for the Group’s aircraft and for

the third - party activity; their progression is in line with the

growth in this activity;

— commercial and distribution costs;

— other external expenses principally comprise rental charges,

telecommunications costs, insurance and fees. Their increase

is mainly explained by the rise in sub - contracting, particularly

at IT level and for training.

Salaries and related costs increased by 4.9% to €8.14billion

versus €7.76billion in 2018 due to the new CLA agreements while

average headcount was up by 1.7% to 86,138employees.

Taxes other than income taxes stood at €154million in 2019

versus €166million in 2018, down by 7.2%.

Other income and expenses stood at net income of

€1,125million versus net income of €937million at December31,

2018. They included:

— capitalized production amounting to €1,122 million in 2019

against €993million in 2018;

— a result from joint - ventures of €(49) million in 2019 against

€(57) million in 2018;

— €64million from currency hedges in 2019 versus €(16) million

at December31, 2018;

— a €(54) million expense booked in respect ofCO

2

quotas

versus €(19) million in the previous ﬁnancial year.

The breakdown of external expenses was as follows:

% ch.

2018 at constant

(in € million) 2019 restated % Ch. currency

Aircraft fuel 5,511 4,958 11.2 5.5

Chartering costs 525 577 (9.0) (11.2)

Landing fees and en route charges 1,933 1,893 2.1 1.0

Catering 822 783 4.4 3.2

Handling charges and other operating costs 1,715 1,673 2.5 1.6

Aircraft maintenance costs 2,628 2,410 9.1 4.1

Commercial and distribution costs 1,029 1,034 (0.5) (2.2)

Other external expenses 1,730 1,618 6.9 6.2

Total 15,893 14,946 6.3 3.1

2019 Universal Registration Document — Air France - KLM 225

5

Financial Report

Comments on the ﬁnancial statements

5

5_VA_V10 22/04/2020 10:09 Page225

The nominal unit cost per ASK (available seat - kilometer) rose by

1.3%. In addition, there was a 1.4% increase on currency variation,

and a fuel price increase of 0.8%. Together this amounted to a

unit cost ex currency ex fuel price eect of -0.9%.

Income from operating activities

The income from operating activities amounted to €1,010million

(€1,393million in 2018).

Over the 2019 ﬁnancial year, the result from operating activities

included, notably:

— the impact of the A380 phase - out amounting to €(126) million;

— restructuring charges of €(36) million.

In 2018, they had included. notably:

— the result on the sale of other assets amounting to €32million;

— restructuring charges amounting to €(19) million;

— an adjustment to the provision for the cargo ﬁne amounting

to €(8) million.

These operations are detailed in Note 11 in the Notes to the

ﬁnancial statements, page 265.

Net cost of ﬁnancial debt

The net cost of ﬁnancial debt fell to €393million versus a net cost

of €426 million during the previous ﬁnancial year. This is

explained by a:

— €23million decline in interest on ﬁnancial debt;

— €10million increase in interest on ﬁnancial assets.

Other ﬁnancial income and expenses

Other net ﬁnancial income and expenses amounted to €(271)

million in 2019 versus €(336) million in 2018. The breakdown was

as follows:

— a foreign exchange loss of €(80) million versus €(224) million

in 2018. At December31, 2019, the foreign exchange result

mainly included a €82million unrealized foreign exchange loss,

composed of a loss of €42million on return obligation liabilities

and provisions on aircraft leased in US dollars and a €36million

EBITDA

EBITDA amounted to €4,128million (versus €4,293million at December31, 2018).

The contributions to EBITDA by business segment were as follows:

2018

(in € million) 2019 restated % Ch.

Network 3,130 3,352 (6.6)

Maintenance 606 534 13.6

Transavia 362 369 (1.8)

Others 30 38 (21.05)

Total 4,128 4,293 (3.8)

Amortization, depreciation and provisions

Amortization, depreciation and provisions totalled €2.99billion in 2019 versus €2.89billion in 2018.

Income from current operations

The result from current operations was positive to the tune of €1,141million (versus €1,405million at December31, 2018).

The contributions to revenues and income from current operations by business segment were as follows:

2019 2018 restated

Income Income

from current from current

(in € million) Revenues operations Revenues operations

Network 23,272 749 22,671 1,042

Maintenance 2,138 260 1,920 214

Transavia 1,744 131 1,595 145

Others 34 1 38 4

Total 27,188 1,141 26,224 1,405

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Financial Report

5 Comments on the ﬁnancial statements

5_VA_V10 22/04/2020 10:09 Page226

foreign exchange loss on the debt in US dollars (€15million)

and Japanese yen (€26million). At December 31, 2018, the

foreign exchange result had mainly included an unrealized

foreign exchange loss of €224 million, composed of a loss of

€133 million on return obligation liabilities and provisions on

aircraft leased in US dollars, and a €101 million foreign

exchange loss mainly on debt in US dollars (€20 million) and

Japanese yen (€56 million);

— a €33million change in fair value of ﬁnancial instruments and

hedged shares revalued through proﬁt and loss in 2019

(positive variation of €55million in 2018), mainly linked to the

Amadeus shares and their collar for €42 million;

— an accretion eect on long - term return obligation liabilities on

aircraft: €(212) million in 2019 versus €(152) million in 2018, the

variation being linked to an increase in the discount rate from

4.6% in 2018 to 6.0% in 2019.

Net result–Group part

Income taxes stood at a charge €(76) million in 2019 versus

€(224) million in 2018. The eective tax rate as of December31, 2019

was 22.0%.

Share of proﬁts/(losses) from associates contributed a proﬁt of

€23million in 2019 versus €15million in the previous year. This

was principally the result from the Servair Group and from

partnerships in the maintenance business.

The net result, Group part stood at income of €290million in 2019

versus income of €420million in 2018.

The contributions to the net result by quarter were, respectively,

€(323) million at March31, 2019, €97million at June30, 2019,

€361 million at September 30, 2019 and €155 million at

December31, 2019.

Basic earnings per share, Group part amounted to €0.64 at

December31, 2019 versus €0.92at December31, 2018.

5.2.2 Investments and ﬁnancing

of the Group

Operating cash - ﬂow was positive to the tune of €3.90billion

(€3.8 billion at December31, 2018).

Capital expenditure on tangible and intangible assets amounted

to €3.37billion over the ﬁnancial year (€2.84billion in 2018), of

which €1,350million of investment in the ﬂeet, €725million in

maintenance, €418million in spare parts, €219million in cabin

refurbishment and €625million in the ground operations and

intangible assets. Proceeds on disposals of tangible and

intangible assets amounted to €100million versus €133million

at December31, 2018.

After taking into account net capital expenditure on tangible and

intangible assets, operating free cash - ﬂow stood at €623million

(€1.09billion in 2018). After the reimbursement of lease debt,

adjusted operating free cash - ﬂow was €(385) million in 2019

(€115million in 2018).

At December31, 2019, the Group had €4.71billion of net cash, of

which €3.71billion in cash and cash equivalents. Furthermore, the

Group has undrawn credit facilities amounting to a total of

€1.8billion.

Net ﬁnancial debt amounted to €6.15billion at December31, 2019

(€6.16billion at December31, 2018).

5.2.3 Consolidated equity

at December 31, 2019

Equity attributable to equity holders of Air France – KLM

amounted to €2,284 million against €1,786 million as of

December31, 2018, after restatement for the change in accounting

treatment for Customer Compensation and the Component

approach for Life Limited Parts. The €498million variation is

mainly explainted by the following items contributing to the

Group part:

— a positive net result of €290million;

— a change in the fair value of the Group’s hedging instruments

amounting to €274million (net of tax); and

— a €(70) million change (net of tax) in the fair value of the

Group’s pension liabilities.

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5

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5.3 KEY FINANCIAL INDICATORS

Restated net result, Group share

The restated net result corresponds to the net result adjusted for exceptional or non - recurring items.

Year

(in € million) 2019 2018

Net income/(loss), Group share 290 420

Unrealized foreign exchange gains and losses, net 82 56

Change in fair value of ﬁnancial assets and liabilities (derivatives) (29) (53)

Non-current income and expenses 131 12

Tax impact on gross adjustments net result (52) (4)

Restated net income/(loss), Group part 422 431

Coupons on perpetual (17) (25)

Restated net income/(loss), group share including coupons

on perpetual (used to calculate earnings per share) 405 406

Restated net income/(loss) per share (in €) 0.95 0.95

Financial cover ratios

Net debt/EBITDA ratio

2018

2019 restated

Net debt (in €m) 6,147 6,164

EBITDA (in €m) 4,128 4,293

Net debt/EBITDA 1.49 1.44

5.2.4 AirFrance – KLM parent

company results

The AirFrance – KLM parent company results were closed on

December31, 2019.

As a holding company. AirFrance – KLM has no operating activity.

Its revenues comprise royalties paid by the two operating

subsidiaries for use of the Air France – KLM logo by the two

operational companies and the supply of services invoiced to Air

France and KLM. Its expenses mostly comprise ﬁnancial

communication expenses, Statutory Auditors’ fees, the expenses

linked to the compensation of company ocers and the sta

made available by Air France and KLM. At December31, 2019,

the operating result was a loss of €7 million (compared with €(1)

million in 2018).

The net result was a €11 million loss, mainly due to the ﬁnancial

costs on the bond issues together with the costs of undrawn

credit lines.

Pursuant to the provisions of Article 39 - 5 and Article 223 quinquies

of the French Tax Code relating to expenses in the statement of

general expenses excluded from non - tax - deductible expenses,

Note that no amount was recognized during the ﬁnancial year.

Pursuant to the provisions of Article 39 - 4 and Article 223quater

of the French Tax Code no excess amortization was recognized.

Information on the maturity of accounts payable

for the company AirFrance – KLM

At December31, 2019, accounts payable stood at €15million of

which €11million outside the Group, mostly not yet due within

45days as of the end of the month.

At December31. 2018, accounts payable stood at €13million of

which €5million outside the Group, mostly not yet due within

45days as of the end of the month.

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Dec 31, Dec 31, 2018 Dec 31, 2018 Dec 31, 2017

(in € million) 2019 restated restated restated

Goodwill and intangible assets 1,522 1,411 1,411 1,338

Flight equipment 11,334 10,308 10,308 9,728

Other property, plant and equipment 1,580 1,503 1,503 1,418

Right - of - use assets 5,173 5,664 5,664 6,216

Investments in equity associates 307 311 311 301

Other ﬁnancial assets excluding shares available for sale,

marketable securities and ﬁnancial deposits 146 133 133 113

Provisions excluding pension, cargo litigation and restructuring (4,058) (3,776) (3,776) (3,456)

WCR, excluding market value of derivatives (6,309) (6,133) (6,133) (5,896)

Capital employed 9,695 9,421 9,421 9,762

Average capital employed (A) 9,558 9,592

Income from current operations 1,141 1,405

Dividends received (2) (2)

Share of proﬁts/(losses) of associates 23 15

Normative income tax (345) (421)

Income from current operations after tax (B) 817 997

ROCE (B/A) 8.5% 10.4%

Return on Capital Employed (ROCE)

Return on capital employed measures the return on invested

capital by expressing a result after tax as a percentage of capital

employed. The calculation methodology is as follows:

— the calculation of the capital employed is based on an additive

method by identifying the relevant balance sheet items. The

capital employed for the year is obtained by taking the

average of the capital employed on the opening and closing

balance sheets;

— the adjusted result after tax corresponds to the sum of the

operating result adjusted for dividends received and the share

of proﬁts/(losses) of associates.

EBITDA/net cost of ﬁnancial debt ratio

2018

2019 restated

EBITDA (in €m) 4,128 4,293

Net cost of ﬁnancial debt (in €m) 393 426

EBITDA/net cost of ﬁnancial debt 10.50 10.08

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2018

2019 restated

Revenues (in €m) 27,188 26,224

Income/(loss) from current operations (in €m) 1,141 1,405

Total operating expense (in €m) (26,047) (24,819)

Network business–other network revenues (in €m) 1,021 940

Third - party revenues in maintenance (in €m) 2,138 1,920

Transavia–other revenues (in €m) (10) (3)

Other businesses (in €m) 34 38

Net cost (in €m) 22,864 21,925

Capacity produced, reported in ASK 332,473 323,034

Net cost, per ASK (in € cents) 6.88 6.79

Gross change +1.3%

Currency eect on net costs (in €m) (304)

Change at constant currencies -0.1%

Fuel price eect (in €m) (188)

Change on a constant currency and fuel price basis -0.9%

Net cost per ASK on a constant currency and fuel price basis 6.88 6.94

Net cost per ASK

To analyze the cost performance of each transportation activity,

the Group divides the net cost of this activity by the capacity

produced, expressed in ASK for the passenger business and

Transavia, and in ATK for the cargo business. To analyze the

company’s overall cost performance, the Group uses the net cost

per ASK. This net cost is obtained by dividing the total net cost

by the capacity produced expressed in available seat - kilometers

(ASK). The net cost is calculated by subtracting the revenues

other than those generated by the three transportation activities

(passenger, cargo and Transavia) from total operating expenses.

The capacity produced by the two passenger transportation

activities is combined by adding the capacity of the passenger

business (in ASK) to that of Transavia (in ASK).

Cost of capital

2019 2018

Cost of stockholders’ equity 9.9% 12.0%

Marginal cost of debt. post tax 2.2% 2.9%

Percentage of stockholders’ equity/target debt

Stockholders’ equity 48% 37%

Debt 52% 63%

Weighted average cost of capital after taxation 5.9% 6.3%

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Recent events

As of April 17, 2020, as we ﬁnalize this 2019 Universal

Registration Document, the COVID-19crisis has continued

to spread.

Since the beginning of the COVID-19public health crisis, the

Air France – KLM Group has implemented measures to

ensure the protection of its passengers and sta, and to

preserve the conditions of its ﬁnancial viability.

Faced with the increasingly strict measures taken by many

countries, including restrictions on travel opportunities and

border closures, the AirFrance – KLM Group has drastically

reduced its ﬂight activity which, over the coming months,

should be less than 10% of last year’s level.

The Group has implemented strong measures since the

beginning of the crisis which include, amongst others:

— negotiation with governments of payment deferral for

taxes (civil aviation, solidarity, etc. ), social contributions

and various charges;

— negotiation with lessors and airports of payment

deferral;

— cost reduction measures, estimated at this stage at

€500 million in 2020, an increase of €300 million

compared to previous announcements;

— the possibility of early retirement of certain sub - ﬂeets

of aircraft;

— implementation by Air France of partial activity measures

and application by KLM of the Temporary Emergency

Bridging Measure for Sustained Employment (NOW),

with an impact estimated at this stage at around

€1.1billion for 2020;

— review of the investment plan which will be reduced

by at least €700million in 2020, i.e. €350million more

than in previous announcements, to which will be

added the impact of the decline in own and third - party

activity on the amount of maintenance investments.

in solidarity with all the employees, the members of the

AirFrance – KLM Board Directors, its Chair and the Chief

Executive Ocer will also participate in the eort within

the framework of the measures applicable to the employees

of the Group, with a similar reduction in their remuneration.

2019 Universal Registration Document — Air France - KLM 231

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Subsequent events and outlook for 2020

5

(1) All ﬂights to China were suspended as of January 30, 2020. AirFrance – KLM’s Mainland China network represents 16.5 billion ASKs, 5.5% of Passenger network activity.

Impact of COVID-19 post February 2020

5.4.1 Subsequent events

There were no signiﬁcant events arising subsequent to the

accounting year end (see Note 3.2 in the Notes to the

consolidated ﬁnancial statements).

5.4.2 Outlook for 2020

The demand outlook was initially stable or even improving based

on projected moderate capacity growth for the industry.

However, the recent developments linked to the Coronavirus have

impacted the demand outlook for the ﬁrst quarter 2020,

especially in the Asian network.

Based on the current data from the passenger network business:

A good performance in January, with positive unit revenues

linked to demand.

The impact of the Coronavirus is negatively impacting forward-

booking load factors for February to May.

Passenger network unit revenues at constant currency are now

expected to be down for the ﬁrst quarter of 2020.

For the cargo business, the Coronavirus impact is expected to

lead to maintained pressure on the load factor and yield in the

ﬁrst part of 2020.

Coronavirus impact on the operating result: estimated at -€150

million to -€200 million for the period through to May 2020,

assuming a progressive resumption in operations to China as of

April 2020

(1)

.

5.4 SUBSEQUENT EVENTS

AND OUTLOOK FOR 2020

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5 Subsequent events and outlook for 2020

Outlook for 2020

As the crisis continues, the conditions for a recovery

remain uncertain, both in terms of our air operations, but

more generally in terms of the timetable for an economic

and demand recovery.

Currently, our best estimates incorporating the aforementioned

measures show that, in the absence of additional ﬁnancing,

a liquidity requirement is expected in the third quarter

of 2020.

As a result, the AirFrance – KLM Group, Air France and

KLM are engaged in in - depth discussions with their

respective governments and ﬁnancial institutions to

dispose of the resources that will enable them to secure and

sustain adequate levels of liquidity by all means, notably

within the framework of the European Commission’s

Temporary Framework on State Aid published on

March19, 2020.

At this stage, given the various options currently being

envisaged and the quality of the discussions with the two

States and ﬁnancial institutions, the Air France – KLM

Group is conﬁdent that it will be able to obtain additional

ﬁnancing to meet all its future ﬁnancial obligations and

enable it to ensure the recovery of its activity beyond the

current crisis.

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Financial Report

Content

5

Note1 Business description 241

Note2 Restatement of

2018 ﬁnancial statements 241

Note3 Signiﬁcant events 245

Note4 Accounting policies 245

Note5 Change in the consolidation scope 257

Note6 Information by activity

and geographical area 258

Note7 External expenses 262

Note8 Salaries and number of employees 263

Note9 Amortization, depreciation

and provisions 264

Note10 Other income and expenses 264

Note11 Other non - current income and expenses 265

Note12 Net cost of ﬁnancial debt and

other ﬁnancial income and expenses 266

Note13 Income taxes 267

Note14 Earnings per share 270

Note15 Goodwill 271

Note16 Intangible assets 272

Note17 Impairment 273

Note18 Tangible assets 274

Note19 Capital expenditures 275

Note20 Right - of - use assets 275

Note21 Equity aliates 276

Note22 Pension assets 277

Note23 Other ﬁnancial assets 278

Note24 Inventories 280

Note25 Trade accounts receivables 280

Note26 Other assets 281

Note27 Cash, cash equivalents

and bank overdrafts 281

Note28 Equity attributable to equity holders

of AirFrance – KLM SA 282

Note29 Retirement beneﬁts 285

Note30 Return obligation liability and provision

for leased aircraft and other provisions 291

Note31 Financial debt 293

Note32 Lease debt 297

Note33 Net debt 298

Note34 Loyalty program 299

Note35 Other liabilities 300

Note36 Financial instruments 300

Note37 Flight equipment orders 312

Note38 Other commitments 313

Note39 Related parties 314

Note40 Consolidated statement of cash ﬂow 316

Note41 Statutory Auditors’ fees 317

Note42 Consolidation scope 318

5.6 Notes to the consolidated ﬁnancial statements

5.5.1 Consolidated income statement 234

5.5.2 Consolidated statement

of recognized income and expenses 235

5.5.3 Consolidated balance sheet 236

5.5.4 Consolidated statement of changes

in stockholders’ equity 238

5.5.5 Consolidated statement of cash ﬂows 239

CONTENT

5.5 Consolidated ﬁnancial statements

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5.5 CONSOLIDATED FINANCIAL STATEMENTS

5.5.1 Consolidated income statement

Period from January1to December31 2019 2018

(in € millions) Notes restated

(1)

Sales 6 27,188 26,224

Other revenues 1 3

Revenues 27,189 26,227

External expenses 7 (15,893) (14,946)

Salaries and related costs 8 (8,139) (7,759)

Taxes other than income taxes (154) (166)

Other income and expenses 10 1,125 937

EBITDA 4,128 4,293

Amortization, depreciation and provisions 9 (2,987) (2,888)

Income from current operations 1,141 1,405

Sales of aircraft equipment 22 4

Other non - current income and expenses 11 (153) (16)

Income from operating activities 1,010 1,393

Cost of ﬁnancial debt (442) (465)

Income from cash and cash equivalents 49 39

Net cost of ﬁnancial debt 12 (393) (426)

Other ﬁnancial income and expenses 12 (271) (336)

Income before tax 346 631

Income taxes 13 (76) (224)

Net income of consolidated companies 270 407

Share of proﬁts (losses) of associates 21 23 15

Net income for the period 293 422

Non - controlling interests 3 2

Net income–Group part 290 420

Earnings per share–Equity holders of AirFrance – KLM (in euros)

— basic 14 0.64 0.92

— diluted 0.61 0.92

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

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Consolidated ﬁnancial statements

5

5.5.2 Consolidated statement of recognized income and expenses

Period from January1to December31 2019 2018

(in € millions) Notes restated

(1)

Net income for the period 293 422

Cash ﬂow hedges and cost of hedging

Eective portion of changes in fair value hedge

and cost of hedging recognized directly in other comprehensive income 435 (231)

Change in fair value and cost of hedging transferred to proﬁt or loss (46) (621)

Deferred tax on items of comprehensive income that will be reclassiﬁed to proﬁt or loss 13.2 (115) 270

Total of other comprehensive income that will be reclassiﬁed to proﬁt or loss 274 (582)

Remeasurements of deﬁned beneﬁt pension plans

(2)

1 (191)

Fair value of equity instruments revalued through OCI (14) (24)

Deferred tax on items of comprehensive income that will not be reclassiﬁed to proﬁt or loss 13.2 (68) 49

Total of other comprehensive income that will not be reclassiﬁed to proﬁt or loss (81) (166)

Total of other comprehensive income, after tax 193 (748)

Recognized income and expenses 486 (326)

Equity holders of AirFrance – KLM 483 (327)

Non - controlling interests 3 1

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

(2) Remeasurement of deﬁned beneﬁt pension plans is composed of €1,290million related to the dierence between the expected and actual return on assets (2018:

€(379) million) and € (1,289) million related to the change in actuarial assumptions (2018: €188million).

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5.5.3 Consolidated balance sheet

Assets December31, December31, January1,

2019 2018 2018

(in € millions) Notes restated

(1)

restated

(1)

Goodwill 15 217 217 216

Intangible assets 16 1,305 1,194 1,122

Flight equipment 18 11,334 10,308 9,728

Other property, plant and equipment 18 1,580 1,503 1,418

Right - of - use assets 20 5,173 5,664 6,216

Investments in equity associates 21 307 311 301

Pension assets 22 420 331 590

Other ﬁnancial assets 23 1,096 1,487 1,242

Deferred tax assets 13.4 523 559 417

Other non - current assets 26 241 264 239

Total non - current assets 22,196 21,838 21,489

Other short - term ﬁnancial assets 23 800 325 421

Inventories 24 737 633 557

Trade receivables 25 2,164 2,191 2,164

Other current assets 26 1,123 1,065 1,243

Cash and cash equivalents 27 3,715 3,585 4,673

Total current assets 8,539 7,799 9,058

Total assets 30,735 29,637 30,547

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

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Consolidated ﬁnancial statements

5

Liabilities and equity December31, January1,

December31, 2018 2018

(in € millions) Notes 2019 restated

(1)

restated

(1)

Issued capital 28.1 429 429 429

Additional paid - in capital 28.2 4,139 4,139 4,139

Treasury shares 28.3 (67) (67) (67)

Perpetual 28.4 403 403 600

Reserves and retained earnings 28.5 (2,620) (3,118) (2,771)

Equity attributable to equity holders of AirFrance – KLM 2,284 1,786 2,330

Non - controlling interests 15 12 12

Total equity 2,299 1,798 2,342

Pension provisions 29 2,253 2,098 2,202

Return obligation liability and other provisions 30 3,750 3,657 3,707

Financial debt 31 6,271 5,733 5,919

Lease debt 32 3,149 3,546 3,940

Deferred tax liabilities 13.4 142 4 -

Other non - current liabilities 35 222 459 361

Total non - current liabilities 15,787 15,497 16,129

Return obligation liability and other provisions 30 714 505 255

Current portion of ﬁnancial debt 31 842 826 1,378

Lease debt 32 971 989 993

Trade payables 2,379 2,454 2,368

Deferred revenue on ticket sales 3,289 3,153 3,017

Frequent ﬂyer programs 34 848 844 819

Other current liabilities 35 3,602 3,566 3,240

Bank overdrafts 27 4 5 6

Total current liabilities 12,649 12,342 12,076

Total liabilities 28,436 27,839 28,205

Total equity and liabilities 30,735 29,637 30,547

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

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5.5.4 Consolidated statement of changes in stockholders’ equity

Equity

Addi- Reserves attributable

tional and to holders Non-

Number Issued paid- in Treasury Perpe- retained of Air controlling Total

(in € millions) of shares capital capital shares tual earnings France - KLM interests equity

December31, 2017 428,634,035 429 4,139 (67) 600 (2,693) 2,408 12 2,420

Change in accounting policy

(1)

(78) (78) - (78)

January1, 2018–restated

(1)

428,634,035 429 4,139 (67) 600 (2,771) 2,330 12 2,342

Gain/(loss) on cash - ﬂow hedges - - - - - (582) (582) - (582)

Fair value of equity instruments

through OCI - - - - - (24) (24) - (24)

Remeasurements of deﬁned

beneﬁt pension plans - - - - - (141) (141) (1) (142)

Other comprehensive income - - - - - (747) (747) (1) (748)

Net result for the period - - - - - 420 420 2 422

Total of income

and expenses recognized - - - - - (327) (327) 1 (326)

Perpetual - - - - (197) (14) (211) - (211)

Dividends paid and coupons

on perpetual - - - - - (25) (25) - (25)

Other - - - - - 19 19 (1) 18

December31, 2018–restated

(1)

428,634,035 429 4,139 (67) 403 (3,118) 1,786 12 1,798

December31, 2018 428,634,035 429 4,139 (67) 403 (3,118) 1,786 12 1,798

Gain/(loss) on cash - ﬂow hedges - - - - - 274 274 - 274

Fair value of equity instruments

through OCI - - - - - (11) (11) - (11)

Remeasurements of deﬁned

beneﬁt pension plans - - - - - (70) (70) - (70)

Other comprehensive income - - - - - 193 193 - 193

Net result for the period - - - - - 290 290 3 293

Total of income

and expenses recognized - - - - - 483 483 3 486

OCEANE - - - - - 35 35 - 35

Coupons on perpetual - - - - - (17) (17) - (17)

Other - - - - - (3) (3) - (3)

December31, 2019 428,634,035 429 4,139 (67) 403 (2,620) 2,284 15 2,299

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

The amounts included in other comprehensive income are presented net of tax

(1) See Note2 in notes to the consolidated ﬁnancial statements.

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Consolidated ﬁnancial statements

5

5.5.5 Consolidated statement of cash ﬂows

Period from January1to December31 2019 2018

(in € millions) Notes restated

(1)

Net income from continuing operations 293 422

Amortization, depreciation and operating provisions 9 2,987 2,888

Financial provisions 12 217 159

Loss (gain) on disposals of tangible and intangible assets (43) (33)

Derivatives–non monetary result 30 (49)

Unrealized foreign exchange gains and losses, net 82 223

Share of (proﬁts) losses of associates 21 (23) (15)

Deferred taxes 13 (21) 201

Other non - monetary items 40.1 238 (254)

Financial capacity 3,760 3,542

(Increase)/decrease in inventories (93) (31)

(Increase)/decrease in trade receivables 61 (39)

Increase/(decrease) in trade payables (133) 57

Change in other receivables and payables 300 269

Change in working capital requirement 135 256

Net cash - ﬂow from operating activities [A] 3,895 3,798

Acquisition of subsidiaries, of shares in non - controlled entities (1) (9)

Purchase of property plant and equipment and intangible assets [B] 19 (3,372) (2,844)

Proceeds on disposal of subsidiaries, of shares in non - controlled entities 13 6

Proceeds on disposal of property plant and equipment and intangible assets [C] 100 133

Dividends received 14 6

Decrease (increase) in net investments, more than 3months (72) 4

Net cash - ﬂow used in investing activities (3,318) (2,704)

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Capital increase due to new convertible bonds 54 -

Perpetual 28.4 - (211)

Issuance of debt 31 1,617 539

Repayment on debt 31 (1,156) (1,400)

Payments on lease debts [D] 32 (1,008) (972)

New loans (89) (195)

Repayment on loans 161 89

Dividends and coupons on perpetual paid (26) (38)

Net cash - ﬂow from ﬁnancing activities (447) (2,188)

Eect of exchange rate on cash and cash equivalents

and bank overdrafts (net of cash acquired or sold) 1 7

Change in cash and cash equivalents and bank overdrafts 131 (1,087)

Cash and cash equivalents and bank overdrafts at beginning of period 27 3,580 4,667

Cash and cash equivalents and bank overdrafts at end of period 27 3,711 3,580

Income tax (paid)/reimbursed (ﬂow included in operating activities) (6) (35)

Interest paid (ﬂow included in operating activities) (436) (465)

Interest received (ﬂow included in operating activities) 25 12

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

Operating free cash - ﬂow

Period from January1to December31 2019 2018

(in € millions) Notes restated

(1)

Net cash - ﬂow from operating activities [A] 3,895 3,798

Purchase of property plant and equipment and intangible assets [B] (3,372) (2,844)

Proceeds on disposal of property plant and equipment and intangible assets [C] 100 133

Operating free cash - ﬂow 33 623 1,087

Payments on lease debts [D] (1,008) (972)

Operating free cash - ﬂow adjusted (385) 115

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

(1) See Note2 in notes to the consolidated ﬁnancial statements.

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Period from January1to December31 2019 2018

(in € millions) Notes restated

(1)

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Since January1, 2019, the AirFrance – KLM Group has made the

two following changes:

— Customer compensations

On September 17, 2019 the IFRS Interpretations Committee

published a clariﬁcation of IFRS 15 concerning customer

compensation for delays or cancellations. Obligations to

compensate customers for delayed or cancelled ﬂights are

required to be recognized as variable compensation components

within the meaning of IFRS 15, thus reducing the amount of

revenue. Previously the Group had recognized these payments

as costs in the income statement and, pursuant to the IFRIC

decision, retrospectively changed the accounting method in the

consolidated ﬁnancial statements as of January1, 2019. It also

adjusted the comparable period.

— Component approach for Life Limited Parts

A Life Limited Part (LLP) is deﬁned as a major engine part whose

failure would jeopardize the engine’s operation. Consequently, as

a precaution, engine manufacturers deﬁne limited useful lives in

cycles beyond which the LLPs must be replaced.

The cost of a complete set of LLPs is signiﬁcant and their useful

lives (depending on the parts) range from 3,000to 40,000cycles

(a cycle corresponds to one take - o and one landing).

Internal IT developments and data analytics have enabled the

Group to improve its ability to track LLP accounting management

more precisely. As a result, as of January1, 2019, the Group has

been able to implement the component approach for these spare

parts. This means that their maintenance costs must be

capitalized and amortized over the useful lives of the LLPs which

are expressed in cycles.

In accordance with IAS 8 “Accounting Policies, Changes in

Accounting Estimates and Errors”, these changes in accounting

policies have been applied retrospectively to each previous

period for which ﬁnancial information is presented.

For comparison purposes, the consolidated ﬁnancial statements

as of December31, 2018 have been restated. The adjusted balance

sheet as of January1 and December31, 2018 is also presented.

The impacts are summarized as follows:

NOTE2 RESTATEMENT OF 2018 FINANCIAL STATEMENTS

As used herein, the term “AirFrance – KLM” refers to AirFrance – KLM

SA, a limited liability company organized under French law. The

term “Group” is represented by the economic deﬁnition of

AirFrance – KLM and its subsidiaries. The Group is headquartered

in France and is one of the largest airlines in the world.

The Group’s core business is network activities which includes

passenger transportation on scheduled ﬂights and cargo activities.

The Group’s activities also include aeronautics maintenance,

“low - cost” passenger transportation (Transavia) and other

air - transport - related activities.

The limited company AirFrance – KLM, domiciled at 2, rue Robert

Esnault-Pelterie 75007Paris, France, is the parent company of

the AirFrance – KLM Group. AirFrance – KLM is listed for trading

in Paris (Euronext) and Amsterdam (Euronext).

The presentation currency used in the Group’s ﬁnancial

statements is the euro, which is also AirFrance – KLM’s functional

currency.

5.6 NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS

NOTE1 BUSINESS DESCRIPTION

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Impact on the consolidated income statement

LLP

Period from January1to December31, 2018 Published componen- Customer Restated

(in € million) accounts tization compensation accounts

Sales 26,515 - (288) 26,227

External expenses (15,224) 3 275 (14,946)

Salaries and related costs (7,759) - - (7,759)

Taxes other than income taxes (166) - - (166)

Other income and expenses 851 86 - 937

EBITDA 4,217 89 (13) 4,293

Amortization, depreciation and provisions (2,885) (16) 13 (2,888)

Income from current operations 1,332 73 - 1,405

Income from operating activities 1,320 73 - 1,393

Net cost of ﬁnancial debt (426) - - (426)

Other ﬁnancial income and expenses (271) (65) - (336)

Income before tax 623 8 - 631

Income taxes (227) 3 - (224)

Net income of consolidated companies 396 11 - 407

Net income in equity aliates 15 - - 15

Net income 411 11 - 422

Earnings per share (basic) 0.90 0.02 - 0.92

Earnings per share (diluted) 0.90 0.02 - 0.92

Impact on the consolidated statement of recognized income and expenses

LLP

Period from January1to December31, 2018 Published componen- Restated

(in € million) accounts tization accounts

Net income for the period 411 11 422

Eective portion of changes in fair value hedge

and cost of hedging recognized directly in other comprehensive income (231) - (231)

Change in fair value and cost of hedging transferred to proﬁt or loss (621) - (621)

Deferred tax on items of comprehensive income that will be reclassiﬁed to proﬁt or loss 270 - 270

Total of other comprehensive income that will be reclassiﬁed to proﬁt or loss (582) - (582)

Remeasurements of deﬁned beneﬁt pension plans (191) (191)

Fair value of equity instruments revalued through OCI (24) - (24)

Deferred tax on items of comprehensive income that will not be reclassiﬁed to proﬁt or loss 49 - 49

Total of other comprehensive income that will not be reclassiﬁed to proﬁt or loss (166) - (166)

Total of other comprehensive income, after tax (748) - (748)

Recognized income and expenses (337) 11 (326)

— Equity holders of AirFrance – KLM (338) 11 (327)

— Non - controlling interests 1 - 1

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Impact on the consolidated balance sheet

Only the balance sheet items impacted by the changes in accounting principles are presented hereafter.

LLP

Balance sheet as of December31, 2018 Published componen- Customer Restated

(in € million) accounts tization compensation accounts

Asset

Flight equipment 10,167 141 - 10,308

Right - of - use assets 5,243 421 - 5,664

Deferred tax assets 544 15 - 559

Other current asset 1,062 3 - 1,065

Equity and liabilities

Return obligation liability and other provisions

(1)

3,527 652 (17) 4,162

Trade payables 2,460 (6) 2,454

Other current liabilities 3,548 1 17 3,566

Equity 1,865 (67) - 1,798

— Holders of AirFrance – KLM 1,853 (67) - 1,786

— Non - controlling interests 12 - - 12

(1) Current and non - current.

LLP

Balance sheet as of January1, 2018 Published componen- Customer Restated

(in € million) accounts tization compensation accounts

Asset

Flight equipment 9,636 92 - 9,728

Right - of - use assets 5,724 492 - 6,216

Equity and liabilities

Return obligation liability and other provisions

(1)

3,285 682 (5) 3,962

Deferred tax liabilities 12 (12) - -

Trade payables 2,365 3 - 2,368

Other current liabilities 3,246 (11) 5 3,240

Equity 2,420 (78) - 2,342

— Holders of AirFrance – KLM 2,408 (78) - 2,330

— Non - controlling interests 12 - - 12

(1) Current and non - current.

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Impact on the consolidated statement of cash ﬂows

Only the cash - ﬂow statement items impacted by the changes in accounting principles are presented hereafter.

LLP

Period from January1to December31, 2018 Published componen- Customer Restated

(in € million) accounts tization compensation accounts

Net income 411 11 - 422

Other items of the ﬁnancial capacity 3,055 78 (13) 3,120

Financial capacity 3,466 89 (13) 3,542

Change in working capital requirement 246 (3) 13 256

Net cash - ﬂow from operating activities 3,712 86 - 3,798

Net cash - ﬂow used in investing activities (2,618) (86) - (2,704)

Net cash - ﬂow from ﬁnancing activities (2,188) - - (2,188)

Eect of exchange rate on cash

and cash equivalents and bank overdrafts 7 - - 7

Change in cash and cash equivalents

and bank overdrafts (1,087) - - (1,087)

Cash and cash equivalents

and bank overdrafts at beginning of period 4,667 - - 4,667

Cash and cash equivalents

and bank overdrafts at end of period 3,580 - - 3,580

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4.1 Accounting principles

Accounting principles used for the consolidated

ﬁnancial statements

Pursuant to the European Regulation 1606/2002 of July19, 2002,

the consolidated ﬁnancial statements of the Air France – KLM

Group as of December31, 2019 were established in accordance

with the International Financial Reporting Standards (“IFRS”) as

adopted by the European Union on the date these consolidated

ﬁnancial statements were established.

IFRS, as adopted by the European Union, dier in certain

respects from IFRS as published by the International Accounting

Standards Board (“IASB”). The Group has, however, determined

that the ﬁnancial information for the periods presented would

not dier substantially if the Group had applied IFRS as published

by the IASB.

The consolidated ﬁnancial statements were approved by the

Board of Directors on February19, 2020.

Change in accounting principles

— IFRS standards which are applicable on a mandatory

basis to the 2019 ﬁnancial statements

Amendment to IFRS9 “Financial Instruments”

This amendment deals with prepayment features with negative

compensations.

The Group opted for the early adoption of this amendment,

concurrently with the implementation of IFRS9.

IFRIC23 “Uncertainty over Income Tax Treatments”

This interpretation applies to any situation of uncertainty

concerning the acceptability of a tax treatment that relates to

income taxes, as regards tax law.

Fiscal treatments applied by the Group in terms of income taxes

during the period do not relate to signiﬁcant amounts.

NOTE4 ACCOUNTING POLICIES

3.1 Events occurring

during the period

Phase - out of the A380 aircraft

On July30, 2019, the Group announced the progressive early

phase - out of the A380 aircraft from the Air France ﬂeet through

to the end of 2022 (10aircraft operating at the end of 2019). At

this stage, the impact of this decision is estimated at around €

(370) million, mainly due to the acceleration in the depreciation

of the aircraft. The €126million impact is accounted for in “other

non - current incomes and expenses” for 2019 (see Note11).

The impact of the change in depreciation slopes will be spread

over the period through to 2022, consistent with the retirement

timetable for the aircraft.

Voluntary Departure Plan

As of December31, 2019, Air France recognized a restructuring

provision amounting to 31 M€, relating to the new Voluntary

Departure Plan initiated on ground sta short - haul (254FTEs).

Convertible bond (OCEANE) issued in 2019

On March20, 2019, AirFrance – KLM issued 27,901,785bonds

convertible and/or exchangeable for new or existing

AirFrance – KLM shares (OCEANE) maturing on March25, 2026

raising a total nominal amount of €500million. Each bond has a

nominal value of €17.92. The annual coupon amounts to 0.125per

cent. The conversion period of these bonds runs from May4, 2019

to the seventh working day preceding the normal or early

reimbursement date. The conversion ratio is one share for

one bond.

Repayment at par, plus accrued interest, will be possible

on March 25, 2024 at the request of the bond holders.

AirFrance – KLM can enforce the cash reimbursement of these

bonds by exercising a call option running from April15, 2022 if

the share price exceeds 130per cent of the nominal, i.e. €23.29,

encouraging OCEANE bond holders to convert their bonds into

AirFrance – KLM shares.

On the issuance date for this convertible debt, AirFrance – KLM

recorded a debt of €446million, corresponding to the present

value of future payments of interest and nominal discounted at

the rate of a similar bond without a conversion option. The option

value was evaluated by deducting this debt value from the total

nominal amount (i.e. €500million) and was recorded in equity.

3.2 Subsequent events

There have been no signiﬁcant events since the closing of the

ﬁnancial year.

NOTE3 SIGNIFICANT EVENTS

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Amendment to IAS28 “Long - term Interests in an Associate

or joint - venture”

This amendment relates to “other interests” in associates or joint

ventures to which the equity method is not applied.

Amendment to IAS19 “Employee Beneﬁts”

This amendment concerns the consequences of a plan

amendment, curtailment or settlement for the current service

cost and the net interest.

Amendment to IAS12 “Income Taxes”

This amendment clariﬁes that the tax eects resulting from

dividend payments on ﬁnancial instruments classiﬁed as equity

are required to be recognized in net income, other comprehensive

income or equity, depending on the accounting item in which

these past events or transactions were recorded initially, at the date

of the recognition of the liability in respect of the dividends payable.

Amendment to IFRS11 “Joint Arrangements”

This amendment clariﬁes the accounting treatment for the

acquisition of an interest in a joint operation.

Amendment to IAS23 “Borrowing Costs”

This amendment clariﬁes the borrowing costs that are eligible for

capitalization.

These amendments and interpretation had no signiﬁcant impact

on the Group’s ﬁnancial statements as of December31, 2019.

— IFRS standards which are applicable on a mandatory

basis to the 2020 ﬁnancial statements

Amendments to IAS1 “Presentation of ﬁnancial statements”

and IAS8 “Accounting policies, changes in accounting

estimates and errors”

The amendments deﬁne the concept of materiality.

— Other texts potentially applicable to the Group,

published by the IASB but not yet adopted by the

European Union

Amendment to IFRS3 “Business Combinations”

(Eective for the accounting periods opening as of

January1, 2020)

This amendment clariﬁes the deﬁnition of a business.

Amendments to IFRS9 “Financial instruments”

and IFRS7 “Financial instruments: Disclosures”

(Eective for the accounting periods opening

as of January1, 2020)

These amendments are designed to support the provision of

useful ﬁnancial information during the period of uncertainty

arising from the phasing out of interest - rate benchmarks (IBORs).

They modify certain hedge accounting requirements. In this

context, the Group pays increased attention to the modalities

deﬁned within the framework of new ﬁnancing.

IBORs continue to be used as reference rates for ﬁnancial

markets and the valuation of ﬁnancial instruments with maturities

that exceed the expected end date of these IBORs.

The Group believes the current market structure supports the

continuation of the hedge accounting as of December31, 2019.

The Group does not opt for the early adoption of these

amendments on the Group’s ﬁnancial statements as of

December31, 2019.

4.2 Use of estimates

The preparation of the consolidated ﬁnancial statements in

conformity with IFRS requires management to make estimates

and use assumptions that aect the reported amounts of assets

and liabilities, the disclosures of contingent assets and liabilities

at the date of the consolidated ﬁnancial statements and the

reported amounts of revenues and expenses. The main areas of

estimates are disclosed in the following notes:

— 4.6. Revenue recognition related to deferred revenue on ticket

sales;

— 4.7. “Flying Blue” frequent ﬂyer program;

— 4.11. Financial instruments;

— 4.13. Intangible assets;

— 4.14. Tangible assets;

— 4.15. Lease contracts;

— 4.19. Pension assets and provisions;

— 4.20. Return obligation liability and provision for leased aircraft;

— 4.21. Other provisions;

— 4.24. Current and deferred tax.

The Group’s management makes these estimates and assessments

continuously on the basis of its past experience and various other

factors considered to be reasonable.

The consolidated ﬁnancial statements for the ﬁnancial year have

thus been established on the basis of the ﬁnancial parameters

available at the closing date. Concerning the non - current assets,

the assumptions are based on a limited level of growth.

These accounting estimates are based upon the most - recently

available, reliable information.

The actual results could dier from these estimates depending

on changes in the assumptions used or dierent conditions.

4.3 Consolidation principles

Subsidiaries

In conformity with IFRS10 “Consolidated Financial Statements”,

the Group’s consolidated ﬁnancial statements comprise the

ﬁnancial ﬁgures for all the entities that are controlled directly or

indirectly by the Group, irrespective of its level of participation in

the equity of these entities. The companies over which the Group

exercises control are fully consolidated. An entity is controlled

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when the Group has power over it, is exposed or has rights to

variable returns from its involvement in this entity, and has the

ability to use its power to inﬂuence the amounts of these returns.

The determination of control takes into account the existence of

potential voting rights if they are substantive, meaning they can

be exercised in time when decisions about the relevant activities

of the entity need to be taken.

The ﬁnancial statements of subsidiaries are included in the

consolidated ﬁnancial statements from the date that control

begins until the date this control ceases.

Non - controlling interests are presented within equity and on the

income statement separately from Group stockholders’ equity

and the Group’s net income, under the line “non - controlling

interests”.

The eects of a buyout of non - controlling interests in a subsidiary

already controlled by the Group and divestment of a percentage

interest without loss of control are recognized in equity. In a

partial disposal resulting in loss of control, the retained equity

interest is re - measured at fair value at the date of loss of control.

The gain or loss on the disposal will include the eect of this

re - measurement and the gain or loss on the sale of the equity

interest, including all the items initially recognized in equity and

reclassiﬁed to proﬁt and loss.

Interest in associates and joint ventures

In accordance with IFRS 11 “Joint Arrangements”, the Group

applies the equity method to partnerships over which it exercises

control jointly with one or more partners (joint - venture). Control

is considered to be joint when decisions about the relevant

activities of the partnership require the unanimous consent of the

Group and the other parties with whom control is shared.

In cases of a joint activity (joint operation), the Group recognizes

assets and liabilities in proportion to its rights and obligations

regarding the entity.

In accordance with IAS28 “Investments in Associates and Joint

Ventures”, companies in which the Group has the ability to

exercise signiﬁcant inﬂuence over ﬁnancial and operating policy

decisions are also accounted for using the equity method. The

ability to exercise signiﬁcant inﬂuence is presumed to exist when

the Group holds more than 20per cent of the voting rights.

The consolidated ﬁnancial statements include the Group’s share

in the net result of associates and joint ventures from the date

the ability to exercise signiﬁcant inﬂuence begins until the date it

ceases, adjusted for any impairment loss.

The Group’s share of losses of an associate exceeding the value

of the Group’s interest and net investment (long - term receivables

for which no reimbursement is scheduled or likely) in this entity

are not accounted for, unless the Group has:

— incurred contractual obligations to recover losses; or

— made payments on behalf of the associate.

Any surplus in investment cost over the Group’s share in the fair

value of the identiﬁable assets, liabilities and contingent liabilities

of the associate company on the date of acquisition is accounted

for as goodwill and included in the book value of the investment

accounted for using the equity method.

Investments in which the Group has ceased to exercise signiﬁcant

inﬂuence or joint control are no longer accounted for by the

equity method and are accounted at their fair value as other

ﬁnancial assets on the date of loss of signiﬁcant inﬂuence or joint

control.

Intra-Group operations

All intra-Group balances and transactions, including income,

expenses and dividends, are fully eliminated. Proﬁts and losses

resulting from intra-Group transactions are also eliminated.

Gains and losses realized on internal sales with associates and

jointly - controlled entities are eliminated, to the extent of the

Group’s interest in the entity, providing there is no impairment.

4.4 Translation of foreign

companies’ ﬁnancial

statements and transactions

in foreign currencies

Translation of foreign companies’ ﬁnancial

statements

The ﬁnancial statements of foreign subsidiaries are translated into

euros on the following basis:

— except for the equity for which historical prices are applied,

balance sheet items are converted on the basis of the foreign

currency exchange rates in eect at the closing date;

— the income statement and the statement of cash ﬂows are

converted on the basis of the average foreign currency

exchange rates for the period;

— the resulting foreign currency exchange adjustment is

recorded in the “Translation adjustments” item within equity;

— Goodwill is expressed in the functional currency of the entity

acquired and is converted into euros using the foreign

exchange rate in eect at the closing date.

Translation of foreign currency transactions

Foreign currency transactions are translated using the exchange

rate prevailing on the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies

are translated at the rate in eect at the closing date.

Non - monetary assets and liabilities denominated in foreign

currencies assessed on an historical cost basis are translated

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using the rate in eect at the transaction date or the hedging

rate, when applicable.

The corresponding exchange rate dierences are recorded in the

income statement. Changes in fair value of the hedging

instruments are recorded using the accounting treatment

described in Note4.11. “Financial instruments”.

4.5 Business combinations

Business combinations completed

on or after April1, 2010

Business combinations completed on or after April1, 2010 are

accounted for using the purchase method in accordance with

IFRS3 “Business Combinations”. In accordance with this standard,

for a ﬁrst consolidation, all assets and liabilities are measured at

fair value at the acquisition date. The time period for adjustments

to goodwill/negative goodwill is limited to 12months from the

date of acquisition (except for non - current assets classiﬁed as assets

held for sale which are measured at fair value less costs to sell).

Goodwill corresponding, at the acquisition date, to the aggregate

of the consideration transferred and the amount of any

non - controlling interest in the acquiree minus the net amounts

(usually at fair value) of the identiﬁable assets acquired and the

liabilities assumed at the acquisition date, is subject to annual

impairment tests or more frequently if events or changes in

circumstances indicate that goodwill might be impaired.

Costs other than those related to the issuance of debt or equity

securities are recognized immediately as an expense when

incurred.

For individual acquisitions, the Group has the option of using the

“full” goodwill method, where goodwill is calculated by taking

into account the fair value of non - controlling interests at the

acquisition date rather than their proportionate interest in the fair

value of the assets and liabilities of the acquiree.

If the fair values of the identiﬁable assets acquired and liabilities

assumed exceed the consideration transferred, the resulting

negative goodwill is recognized immediately in the income

statement.

Contingent considerations or earn - outs are recorded in equity if

the contingent payment is settled by delivery of a ﬁxed number

of the acquirer’s equity instruments (according to IAS 32

“Financial Instruments: Presentation”). In all other cases, they are

recognized in liabilities related to business combinations.

Contingent payments or earn - outs are measured at fair value at

the acquisition date. This initial measurement is subsequently

adjusted through goodwill only when additional information is

obtained after the acquisition date about facts and circumstances

existing on that date. Such adjustments are made only during the

12 - month measurement period that follows the acquisition date

and insofar as the initial measurement had still been presented

as provisional. Any other subsequent adjustments which do not

meet these criteria are recorded as receivables or payables

through the income statement.

In a step acquisition, the previously - held equity interest in

the acquiree is remeasured at its acquisition - date fair value.

The dierence between the fair value and the net book value

must be accounted in proﬁt or loss as well as elements previously

recognized in other comprehensive income.

Business combinations carried out

before April1, 2010

Business combinations carried out before April 1, 2010 were

accounted for using the purchase method in accordance with

IFRS3 (2004) “Business Combinations”. In accordance with this

standard, all assets, liabilities assumed and contingent liabilities

were measured at fair value at the acquisition date. The time

period for adjustments to goodwill/negative goodwill did not

exceed 12months from the date of acquisition.

The goodwill that arose from the dierence between the

acquisition cost (including any equity instruments issued by the

Group to gain control over the acquired entity and other costs

potentially dedicated to the business combination) and the

Group’s interest in the fair value of the identiﬁable assets and

liabilities acquired, were subject to annual impairment tests or

more frequently if events or changes in circumstances indicated

that goodwill might be impaired.

When the fair value of identiﬁable assets acquired and liabilities

assumed exceeded the cost of acquisition, the resulting negative

goodwill was recognized immediately in the income statement.

4.6 Sales

Passenger and freight transportation

Sales related to air transportation operations, which consist of

passenger and freight transportation, are recognized as revenue

when the transportation service is provided, net of any discounts

granted (see Note6 “Information by activity and geographical

area”). The transportation service is also the trigger for the

recognition as external expenses of the commissions paid to

agents (e.g. credit card companies and travel agencies) and the

booking fees.

Both passenger tickets and freight airway bills are consequently

recorded as “Deferred revenue upon issuance date”. The

recognition of the revenue known as “ticket breakage” is deferred

until the transportation date initially foreseen. This revenue is

calculated by applying a statistical rate on tickets issued and

unused. This rate is regularly updated.

The Group applies the exemption provided by IFRS15“Revenue

From Contracts With Customers” which allows the balance of the

outstanding transactions to remain unspeciﬁed as well as their

planned recognition date for the performance obligations related

to contracts with an initial term set at one year or less. If the

tickets are not used, the performance obligations related

to passenger and freight transportation eectively expire within

one year.

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Pursuant to the European Union’s Regulation EC 261the Group

compensates passengers in the event of denied boarding and for

ﬂight cancellations or long delays. This compensation is booked

as contra revenue. The Group recognizes a corresponding

amount in liabilities for future refunds to passengers.

Passenger ticket taxes calculated on ticket sales are collected by

the Group and paid to the airport authorities. Taxes are recorded

as a liability until such time as they are paid to the relevant airport

authority as a function of the chargeability conditions (on ticket

issuance or transportation).

The Group considers that the company that issues the airway bill

acts as principal since the latter has control over the achievement

of the performance obligation. When the Group issues freight

airway bills for its goods carried by another carrier (airline

company or road carrier), the Group acts as principal. Therefore,

at the time of transportation the Group recognizes as revenue

the amount invoiced to the customer in its entirety as well as the

chartering costs invoiced by the other carrier for the service

provision.

Maintenance

The main types of contracts with customers identiﬁed within the

Group are mainly:

— Sales of maintenance and support contracts–

Power by the hour contracts

Some maintenance and support contracts cover the

airworthiness of engines, equipment or airframes, an airframe

being an aircraft without engines and equipment. The invoicing

of these contracts is based on the number of ﬂight hours or

landings of the goods concerned by these contracts.

The dierent services included within each of these contracts

consist of a unique performance obligation due to the existing

interdependence between the services within the execution of

these contracts.

The revenue is recognized: (i) if the level of completion can

reliably be measured; and (ii) if the costs incurred and costs to

achieve the contract can reliably be measured.

As there is a continuous transfer of the control of these services,

the revenue from these contracts is recognized as the costs are

incurred. As long as the margin on the contract cannot be

measured in a reliable manner, the revenue will only be

recognized at the level of the costs incurred.

Forecast margins on the contracts are assessed through the

forecast future cash ﬂows that take into account the obligations

and factors inherent to the contracts as well as other internal

parameters to the contract selected using historical and/or

forecast data.

These forecast margins are regularly reviewed. If necessary,

provisions are recorded as soon as any losses on completion of

contracts are identiﬁed.

Amounts invoiced to customers, and therefore mostly collected,

which are not yet recognized as revenue, are recorded as liabilities

on contracts (deferred revenue) at the year end. Inversely, any

revenue that has been recognized but not yet invoiced is

recorded under assets on the balance sheet at the year end.

— Sales of spare parts repair and labor–

Time & Material contracts

These services which relate to engines, equipment or airframes,

an airframe being an aircraft without engines and equipment, are

generally short term.

They consist of a unique performance obligation. The revenue is

recognized as costs are incurred.

— Third - party procurement

The Group also purchases equipment on behalf of third - parties.

In this situation, the revenue recognition method is as follows:

— when the Group serves as a broker between its suppliers and

end customers, the Group acts as an agent and hence,

recognizes the margin that results from this operation as

revenue;

— when the Group puts in place Sale & Lease back agreements,

the Group recognizes the proceeds on disposal as well as a

net book value.

4.7 Loyalty programs

The airlines of the Group have a common frequent ﬂyer program

“Flying Blue”. This program enables members to acquire Miles as

they ﬂy with Air France, KLM and airline partners and from

transactions with non - airline partners (credit card companies,

hotels, car rental agencies). These Miles entitle members to a

range of beneﬁts such as free ﬂights with Air France, KLM and

their airline partners or other free services with non - airline

partners.

Miles are considered as separate elements of a sale of a ticket

with multiple elements and one part of the price of the initial sale

of the ticket is allocated to these Miles and deferred until the

Group’s commitments relating to these Miles have been met.

The deferred amount due in relation to the acquisition of Miles

by members is estimated:

— according to the fair value of the Miles, deﬁned as the amount

for which the beneﬁts could be sold separately;

— after taking into account the redemption rate, corresponding

to the probability that the Miles will be used by members,

using a statistical method.

With regard to the re - invoicing of Miles between the partners in

the program, the margins realized on sales of these Miles are

recorded immediately in the income statement.

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4.8 Distinction between income

from current operations

and income from

operating activities

The Group considers it relevant to the understanding of its

ﬁnancial performance to present in the income statement a

subtotal within the “income from operating activities”. This subtotal,

entitled “Income from current operations”, excludes unusual

elements that do not have predictive value due to their nature,

frequency and/or materiality, as deﬁned in recommendation No.

2013 - 03from the France’s accounting standards authority.

Such elements are as follows:

— sales of aircraft equipment and disposals of other assets;

— accelerated aircraft phase - out;

— income from the disposal of subsidiaries and aliates;

— restructuring costs when they are signiﬁcant;

— signiﬁcant and infrequent elements such as the recognition of

badwill in the income statement, the recording of an impairment

loss on goodwill and signiﬁcant provisions for litigation.

4.9 Aggregates used within

the framework of ﬁnancial

communication

EBITDA (Earnings Before Interest, Taxes, Depreciation and

Amortization): by excluding the main line of the income

statement which does not involve cash disbursement

(“Amortization, depreciation and provision”) from income from

current operations, EBITDA provides a simple indicator of the

cash generated by the Group’s current operational activities. It is

thus commonly used for the calculation of the ﬁnancial coverage

and enterprise value ratios.

Operating free cash - ﬂow: this corresponds to the net cash - ﬂow

from operating activities net of purchases of property, plant and

equipment and intangible assets, plus the proceeds on the

disposal of property, plant and equipment and intangible assets.

It does not include the other cash ﬂows linked to investment

operations, particularly investments in subsidiaries and other

ﬁnancial assets and net cash - ﬂow from the operating activities

of discontinued operations.

Operating free cash - ﬂow adjusted: this corresponds to operating

free cash - ﬂow net of the payment of lease debts.

4.10 Earnings per share

Earnings per share are calculated by dividing the net income

attributable to the equity holders of Air France – KLM by

the average number of shares outstanding during the period.

The average number of shares outstanding does not include

treasury shares.

Diluted earnings per share are calculated by dividing the net

income attributable to the equity holders of AirFrance – KLM,

adjusted for the eects of dilutive instrument exercise, by the

average number of shares outstanding during the period, adjusted

for the eect of all potentially - dilutive ordinary shares.

4.11 Financial instruments

Valuation of trade receivables

and non - current ﬁnancial assets

Trade receivables, loans and other non - current ﬁnancial assets

are considered to be assets issued by the Group and are initially

recorded at fair value. They are subsequently valued using the

amortized cost method.

Regarding the impairment of trade receivables, the Group has

chosen the simpliﬁed method approach in that the automated

customer invoicing and settlement processes for the Passenger

and Cargo businesses signiﬁcantly limit the credit risk. The Group

also uses credit insurance to reduce the risk of potential default

regarding trade receivables concerning the clients of the

Maintenance activity.

The Group considers that the change in credit risk on the

non - current ﬁnancial assets since their initial recognition is limited

due to the current selection criteria (e.g. type of instrument,

counterparty rating, maturity). The impairment recorded by the

Group consists of the expect credit loss over the 12 months

following the closing date.

Purchases and sales of ﬁnancial assets are booked as of the

transaction date.

Investments in equity instruments

Investments in equity securities qualifying as equity instruments

are recorded at fair value in the Group’s balance sheet. For

publicly - traded securities, the fair value is considered to be the

market price at the closing date. For non - quoted securities, the

valuation is made on the basis of the ﬁnancial statements of the

entity.

The valuation of equity instruments is either in fair value through

the income statement or in fair value through other comprehensive

income:

— when the instrument is deemed to be a cash investment, i.e. it

is held for the purposes of monetary transactions, its revaluations

are recorded in “Other ﬁnancial income and expenses”;

— when the instrument is deemed to be a business investment,

i.e. it is held for strategic reasons (as it mainly consists of

investments in companies whose activity is very close to that

of the Group) its revaluations are recorded in “Other

comprehensive income” non - recyclable. Dividends are

recorded in the income statement.

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Derivative ﬁnancial instruments

The Group uses various derivative ﬁnancial instruments to hedge

its exposure to the risks incurred on shares, exchange rates,

changes in interest rates or fuel prices and the ETS (Emission

Trading Scheme).

Forward currency contracts and options are used to hedge

exposure to exchange rates.

The Group also uses interest rate swaps to manage its exposure

to interest rate risk. Most of the swaps traded convert ﬂoating - rate

debt to ﬁxed - rate debt.

The exposure to fuel risk is hedged by swaps or options on jet

fuel, diesel or Brent.

Finally, the risk related to the ETS is hedged by forwards.

Most of these derivatives are classiﬁed as hedging instruments if

the derivative is eligible as a hedging instrument and if the

hedging relationship are documented as required by IFRS 9

“Financial Instruments”.

These derivative instruments are recorded on the Group’s

consolidated balance sheet at their fair value adjusted for the

market value of the Group’s credit risk (DVA) and the credit risk

of the counterparty (CVA). The calculation of the credit risk follows

a common model based on default probabilities from CDS

counterparties. The method of accounting for changes in fair

value depends on the classiﬁcation of the derivative instruments.

There are three classiﬁcations:

— Derivatives classiﬁed as fair value hedge

Changes in the fair value of the derivative are recorded through

the income statement and oset within the limit of its eective

portion against the changes in the fair value of the underlying

item (asset, liability or ﬁrm commitment), which are also recognized

through the income statement.

— Derivatives classiﬁed as cash - ﬂow hedge

The changes in fair value of the derivative are recorded in other

comprehensive income for the eective portion and are

reclassiﬁed as income when the hedged element aects earnings.

The ineective portion is recorded as ﬁnancial income or losses

until the termination of the derivative. When the termination occurs,

the residual ineective portion is recycled on the hedged item.

— Derivatives classiﬁed as trading

Changes in the fair value of the derivative are recorded as

ﬁnancial income or losses.

For options, only the intrinsic risk can be hedged. The time value

is excluded as it is considered as a cost of hedging. The change

in fair value of the option time value is recognized in other

comprehensive income in so far as it relates to the hedged item.

When the latter occurs (if the hedged item is transaction related),

the change in fair value is then recycled and impacts the hedged

item or is amortized over the hedging period (if the hedged item

is time - related).

The dierence in time value between non - aligned structured

options and the related “vanilla” (“aligned”) options is recognized

in the proﬁt and loss account.

Regarding forward contracts, only the spot component is

considered as a hedging instrument, since the forward element

is considered as a hedging cost and accounted for similarly to

the option time value.

The currency swap basis spread is also excluded from the

hedging instrument and considered to be a hedging cost.

Convertible bonds

Convertible bonds are deemed to be ﬁnancial instruments

comprising two components: a bond component recorded as

debt and a stock component recorded in equity. The bond

component is equal to the discounted value of all the coupons

due on the bond at the rate of a simple bond that would have

been issued at the same time as the convertible bond. The value

of the stock component recorded in the Group’s equity is

calculated by the dierence between this value and the bond’s

nominal value at issuance.

The dierence between the ﬁnancial expense recorded and the

amounts eectively paid out is added, at each closing date, to

the amount of the debt component so that, at maturity, the

amount to be repaid if there is no conversion equals the

redemption price.

Financial assets, cash and cash equivalents

Financial assets at fair value through proﬁt and loss

Financial assets include ﬁnancial assets at fair value through

proﬁt and loss (French mutual funds such as SICAVs and FCPs,

certiﬁcates) that the Group intends to sell in the near term to

realize a capital gain, or that are part of a portfolio of identiﬁed

ﬁnancial instruments managed collectively and for which there

is evidence of a practice of short - term proﬁt taking. They are

classiﬁed in the balance sheet as current ﬁnancial assets.

Furthermore, the Group has opted not to designate any assets

at fair value through the income statement.

Cash and cash equivalents

Cash and cash equivalents are short - term, highly liquid investments

that are readily convertible to known amounts of cash and which

are subject to an insigniﬁcant risk of change in value.

Financial debt

Financial debt is recognized initially at fair value. Subsequent to

the initial measurement, ﬁnancial debt is recorded:

— at its net book value for bonds;

— based on amortized cost calculated using the eective

interest rate for the other ﬁnancial debt.

Under this principle, any redemption and issue premiums, as well

as issue costs, are recorded as debt in the balance sheet and

amortized as ﬁnancial income or expense over the life of the

loans using the eective interest method.

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Fair value hierarchy of the ﬁnancial assets

and liabilities

The table presenting a breakdown of ﬁnancial assets and liabilities

categorized by value (see Note 36.4 “Valuation methods for

ﬁnancial assets and liabilities at their fair value”) meets the amended

requirements of IFRS7 “Financial Instruments: Disclosures”. The

fair values are classiﬁed using a scale which reﬂects the nature of

the market data used to make the valuations.

This scale has three levels of fair value:

Level 1: Fair value calculated from the exchange rate/price

quoted on an active market for identical instruments,

Level2: Fair value calculated from valuation methods based on

observable data such as the prices of similar assets and liabilities

or scopes quoted on an active market,

Level3: Fair value calculated from valuation methods which rely

completely or in part on non - observable data such as prices on

an inactive market or multiple - based valuation for non - quoted

securities.

4.12 Goodwill

Goodwill corresponds, at the acquisition date, to the aggregation

of the consideration transferred and the amount of any

non - controlling interest in the acquiree minus the net amounts

(usually at fair value) of the identiﬁable amounts acquired and

the liabilities assumed at the acquisition date.

For acquisitions prior to April1, 2004, goodwill is included on the

basis of its deemed cost, which represents the amount recorded

under French GAAP. The classiﬁcation and accounting treatment

of business combinations taking place prior to April1, 2004 were

not modiﬁed at the time international standards were adopted,

on April1, 2004, in accordance with IFRS1 “First - time Adoption

of International Financial Reporting Standards”.

Goodwill is valued in the functional currency of the entity

acquired. It is recorded as an asset in the balance sheet.

It is not amortized and is tested for impairment annually and at

any point during the year when an indicator of impairment exists.

As discussed in Note4.16 “Impairment test”, once recorded the

impairment may not subsequently be reversed.

When the acquirer’s interest in the net fair value of the identiﬁable

assets and liabilities acquired exceeds the consideration

transferred, there is negative goodwill which is recognized and

immediately reversed in the Group’s income statement.

At the time of the sale of a subsidiary or an equity aliate, the

amount of the goodwill attributable to the entity sold is included

in the calculation of the income from the sale.

4.13 Intangible assets

Intangible assets are recorded at initial cost less accumulated

amortization and any accumulated impairment losses.

IT development costs are capitalized and amortized over their

useful lives. The Group has the tools required to enable the tracking

by project of all the stages of development, and, in particular, the

internal and external costs directly related to each project during

its development phase.

Identiﬁable intangible assets acquired with a ﬁnite useful life are

amortized over their useful lives from the date they are available

for use.

The KLM and Transavia brands and slots (takeo and landing)

acquired by the Group as part of the acquisition of KLM are

identiﬁable intangible assets with an indeﬁnite useful life. They

are not amortized but tested annually for impairment or whenever

there is an indication that the intangible asset may be impaired.

If necessary, impairment as described in Note4.16is recorded.

Since January 1, 2012, airlines have been subject to the ETS

(Emission Trading Scheme) market regulations as described in

Note4.22 “Emission Trading Scheme” and the “Risks on carbon

credit” paragraph in Note36.1 “Risk management”. As such, the

Group is required to purchaseCO

2

quotas to oset its emissions.

The Group records theCO

2

quotas as intangible assets. These

assets are not depreciable.

Intangible assets with a deﬁnite useful life are amortized on a

straight - line basis over the following periods:

Software 1to 5years

Licenses Duration of contract

Information Technology developments Up to 20years

(1)

(1) IT developments are amortized over the same useful life as the underlying

software. In some cases, they can be amortized over a longer period. This

duration must be documented.

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4.14 Property, plant

and equipment

Principles applicable

Property, plant and equipment are recorded at their acquisition

or manufacturing cost, less accumulated depreciation and any

accumulated impairment losses.

Pursuant to IAS 23 “Borrowing Costs”, the ﬁnancial interest

attributed to advance payments made on account of investments

in aircraft and other signiﬁcant assets under construction is

capitalized and added to the cost of the asset concerned. As

prepayments on investments are not ﬁnanced by speciﬁc loans,

the Group uses the average interest rate on the current

unallocated loans of the period.

Maintenance costs are recorded as expenses during the period

when incurred, with the exception of programs that extend the

useful life of the asset or increase its value, which are then

capitalized (e.g. maintenance on aircraft airframes and engines

including parts with limited useful lives).

Flight equipment

The purchase price of aircraft equipment is denominated in

foreign currencies. It is translated at the exchange rate at the date

of the transaction or, if applicable, at the hedging price assigned

to it. Manufacturers’ discounts, if any, are deducted from the value

of the related asset.

Aircraft are depreciated using the straight - line method over their

average estimated useful life which is between 20 and 25years.

During the operating cycle, and when establishing ﬂeet

replacement plans, the Group reviews whether the amortizable

base or the useful life should be adjusted and, if necessary,

determines whether a residual value should be recognized.

Any major aircraft airframe and engine overhaul including parts

with limited useful lives are treated as a separate asset component

with the cost capitalized and depreciated over the period

between the date of acquisition and the next major overhaul.

Aircraft spare parts (maintenance business) which enable the use

of the ﬂeet are recorded as ﬁxed assets and are amortized on a

straight - line basis over the estimated residual lifetime of the

aircraft/engine type on the world market. The useful life is limited

to a maximum of 30years.

Other property, plant and equipment

Other property, plant and equipment are depreciated using the

straight - line method over their useful lives as follows:

Buildings 20to 50years

Fixtures and ﬁttings 8to 20years

Flight simulators 10to 20years

Equipment and tooling 3to 15years

4.15 Lease contracts

Lease contracts, as deﬁned by IFRS16 “Leases”, are recorded in

the balance sheet and lead to the recognition of:

— an asset representing a right of use of the asset leased during

the lease term of the contract; and

— a liability related to the payment obligation.

Aircraft which are not eligible for an accounting treatment

according to IFRS16“Property, Plant and Equipment” are those:

— which were acquired by the airline or for which the airline took

a major share in the acquisition process from the OEMs

(Original Equipment Manufacturers);

— and which, in view of the contractual conditions, will almost

certainly be purchased at the end of the lease term.

Since these ﬁnancing arrangements are “in substance purchases”

and not leases, the related liability is considered as a ﬁnancial

debt under IFRS9 “Financial Instruments” and the asset, as an

aeronautical asset, according to IAS 16 “Property, Plant and

Equipment”.

Measurement of the right - of use asset

At the commencement date, the right - of - use asset is measured

at cost and comprises:

— the amount of the initial measurement of the lease liability, to

which is added, if applicable, any lease payments made at or

before the commencement date, less any lease incentives

received;

— where relevant, any initial direct costs incurred by the lessee

for the conclusion of the contract. These are incremental costs

which would not have been incurred if the contract had not

been concluded;

— estimated costs for restoration and dismantling of the leased

asset according to the terms of the contract. At the date of

the initial recognition of the right - of - use asset, the lessee adds

to these costs, the discounted amount of the restoration and

dismantling costs through a return obligation liability or

provision as described in Note4.20 “Return obligation liability

and provision on leased aircraft”. These costs also include

maintenance obligations with regard to the engines and

airframes.

Following the initial recognition, the right - of - use asset must be

depreciated over the useful life of the underlying assets (lease

term for the rental component, ﬂight hours for the component

relating to engine maintenance or on a straight - line basis for the

component relating to the airframe until the date of the next

major overhaul).

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Measurement of the lease liability

At the commencement date, the lease liability is recognized for

an amount equal to the present value of the lease payments over

the lease term.

Amounts involved in the measurement of the lease liability are:

— ﬁxed payments (including in - substance ﬁxed payments;

meaning that even if they are variable in form, they are

in - substance unavoidable);

— variable lease payments that depend on an index or a rate,

initially measured using the index or the rate in force at the

lease commencement date;

— amounts expected to be payable by the lessee under residual

value guarantees;

— payments of penalties for terminating the lease, if the lease

term reﬂects the lessee exercising an option to terminate

the lease.

The lease liability is subsequently measured based on a process

similar to the amortized cost method using the discount rate:

— the liability is increased by the accrued interests resulting from

the discounting of the lease liability, at the beginning of the

lease period;

— less payments made.

The interest cost for the period as well as variable payments, not

taken into account in the initial measurement of the lease liability

and incurred over the relevant period, are recognized as costs.

In addition, the lease liability may be remeasured in the following

situations:

— change in the lease term;

— modiﬁcation related to the assessment of the reasonably

certain nature (or not) of the exercise of an option;

— remeasurement linked to the residual value guarantees;

— adjustment to the rates and indices according to which the

rents are calculated when rent adjustments occur.

Types of capitalized lease contracts

— Aircraft lease contracts

For the aircraft lease contracts fulﬁlling the capitalization criteria

deﬁned by IFRS 16, the lease term corresponds to the

non - terminable period of each contracts except in cases where

the Group is reasonably certain of exercising the renewal options

contractually foreseen. For example, this may be the case if

substantial cabin customization has taken place whereas the

residual lease term is signiﬁcantly shorter than the useful life of

the cabins. The accounting treatment of the maintenance

obligations related to leased aircraft is outlined in Note 4.20

“Return obligation liability and provision on leased aircraft”.

Aircraft lease contracts concluded by the Group do not include

guaranteed value clauses for leased assets.

The discount rate used to calculate the lease debt corresponds,

for each aircraft, to the implicit interest rate induced by the

contractual elements and residual market values. This rate is easy

to calculate due to the availability of current and future data

concerning the value of aircraft. It is recalculated on each contract

renewal (prolongation). The implied rate of the contract is the

discount rate that gives the aggregated present value of the

minimum lease payments and the unguaranteed residual value.

This present value should be equal to the sum of the fair value of

the leased asset and any initial direct costs of the lessor.

Since most of the aircraft lease contracts are denominated in US

dollars, starting from January1, 2018 the Group put in place a

cash - ﬂow hedge for its US dollar revenues via the lease debt in

US dollars. Consequently, the revaluation of the Group’s debt at

the closing rate is accounted for in “Other comprehensive income”.

— Real - estate lease contracts

Based on its analysis, the Group has identiﬁed lease contracts

according to the standard concerning surface areas rented in its

hubs, lease contracts on building dedicated to the maintenance

business, customized lounges in airports other than hubs and

lease contracts on oce buildings.

The lease term corresponds to the non - terminable period, with

most of the contracts not including renewal options. The discount

rate used to calculate the lease debt is determined, for each asset,

according to the incremental borrowing rate at the signature

date. The incremental borrowing rate is the rate that the lessee

would pay to borrow the required funds to purchase the asset

over a similar term, with a similar security and in a similar

economic environment. This rate is achieved by the addition of

the interest rate on government bonds and the credit spread. The

coupon on government bonds is speciﬁc to the location,

currency, period and maturity. The deﬁnition of the spread curve

is based upon reference points, each point consisting of asset

ﬁnancing on assets other than aircraft.

— Other - assets lease contracts

The main lease contracts identiﬁed correspond to company cars,

pools of spare parts and engines. The lease term corresponds to

the non - terminable period. Most of the contracts do not provide

renewal options. The discount rate used to calculate the lease

debt is determined, for each asset, according to the incremental

borrowing rate at the signature debt. The incremental borrowing

rate is the rate that the lessee would pay to borrow the required

funds to purchase the asset over a similar term, with a similar

security and in a similar economic environment (for the method

used to determine the incremental borrowing rate, see the “Real

estate lease contracts” paragraph above).

Types of non - capitalized lease contracts

The Group uses the two exemptions foreseen by IFRS16allowing

for non - recognition in the balance sheet: short - term lease

contracts and lease contracts for which the underlying assets

have a low value.

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— Short duration lease contracts

These are contracts whose duration is equal to or less than

12months. Within the Group, they mainly relate to leases of:

— surface areas in our hubs with a reciprocal notice - period equal

to or less than 12months;

— accommodations for expatriates with a notice period equal to

or less than 12months;

— spare engines for a duration equal to or less than 12months.

— Low value lease contracts

Low - value lease contracts concern assets with a value equal to

or less than US$5,000. Within the Group, these include, notably,

lease contracts on printers, tablets, laptops and mobile phones.

Sale and leaseback transactions

The Group qualiﬁes as sale and leaseback transactions, operations

which lead to a sale according to IFRS15. More speciﬁcally, a sale

is considered as such if there is no repurchase option on the

goods at the end of the lease term.

— Sale according to IFRS15

If the sale by the vendor - lessee is qualiﬁed as a sale according to

IFRS15, the vendor - lessee must: (i) de - recognize the underlying

asset, (ii) recognize a right - of - use asset equal to the retained

portion of the net carrying amount of the asset sold.

— Transaction not deemed to be a sale according

to IFRS15

If the sale by the vendor - lessee is not qualiﬁed as a sale according

to IFRS15, the vendor - lessee maintains the goods transferred on

its balance sheet and recognizes a ﬁnancial liability equal to the

disposal price (received from the buyer - lessor).

4.16 Impairment test

In accordance with IAS36 “Impairment of Assets”, tangible ﬁxed

assets, intangible assets, right - of - use assets and goodwill are

tested for depreciation if there is an indication of impairment, and

those with an indeﬁnite useful life are tested at least once a year

on September30.

For this test, the Group deems the recoverable value of the asset

to be the higher of the market value less cost of disposal and its

value in use. The latter is determined according to the discounted

future cash - ﬂow method, estimated based on budgetary

assumptions approved by management, using an actuarial rate

which corresponds to the weighted average cost of the Group’s

capital and a growth rate which reﬂects the market hypotheses

for the appropriate activity.

The depreciation tests are carried out individually for each asset,

except for those assets to which it is not possible to attach

independent cash ﬂows. In this case, these assets are regrouped

within the CGU to which they belong and it is this which is tested.

The CGUs correspond to the Group’s business segments: network,

maintenance, leisure and others which are homogeneous asset

groups whose use generates identiﬁable cash inﬂows.

When the recoverable value of an asset or CGU is inferior to its

net book value, an impairment is recognized. The impairment of

a CGU is charged in the ﬁrst instance to goodwill, the remainder

being charged to the other assets which comprise the CGU,

prorated to their net book value.

4.17 Inventories

Inventories are measured at the lower of their cost and net

realizable value.

The cost of inventories comprises all costs of purchase, costs of

conversion and other costs incurred in bringing the inventories

to their present condition and location. These costs include the

direct and indirect production costs incurred under normal

operating conditions.

Inventories are valued on a weighted average basis.

The net realizable value of the inventories is the estimated selling

price in the ordinary course of business less the estimated costs

of completion and selling expenses.

4.18 Treasury shares

AirFrance – KLM shares held by the Group are recorded as a

deduction from the Group’s consolidated equity at the

acquisition cost. Subsequent sales are recorded directly in equity.

No gains or losses are recognized in the Group’s income

statement.

4.19 Employee beneﬁts

The Group’s obligations in respect of deﬁned beneﬁt pension

plans, including termination indemnities, are calculated in

accordance with IAS19Revised “Employee Beneﬁts”, using the

projected units of credit method based on actuarial assumptions

and considering the speciﬁc economic conditions in each country

concerned. The commitments are covered either by insurance or

pension funds or by provisions recorded on the balance sheet as

and when rights are acquired by employees.

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The Group recognizes in “other comprehensive income” all the

actuarial gains or losses relating to post - employment plans, the

dierential between the actual return and the expected return on

the pension assets, and the impact of any plan curtailment.

The actuarial gains or losses relating to termination beneﬁts

(mainly jubilees) are recognized in the income statement.

The Group recognizes all the costs linked to pensions (deﬁned

contribution pension plans and deﬁned beneﬁt pension plans) in

the income from current operations (salaries and related costs).

— Speciﬁc information related to the recognition

of some pension plan assets

Pension plans in The Netherlands are generally subject to

minimum funding requirements (“MFR”) that can involve the

recognition of pension surpluses.

These pension surpluses constituted by the KLM sub group are

recognized in the balance sheet according to the IFRIC 14

interpretation (IAS19 “The Limit on a Deﬁned Beneﬁt Asset,

Minimum Funding Requirements and their Interaction”).

4.20 Return obligation liability

and provision on leased

aircraft

The Group recognizes return obligation liabilities and provisions

in respect of the required maintenance obligations within the

framework of the leasing of aircraft from lessors. The constitution

of these return obligation liabilities and provisions depends on

the type of maintenance obligations to fulﬁll before returning

these aircraft to the lessors: overhaul and restoration work,

airframe and engine potential reconstitution as well as the

replacement of limited life parts.

Overhaul and restoration works

(not depending on aircraft utilization)

Costs resulting from work required to be performed just before

returning aircraft to the lessors, such as painting of the shell or

aircraft overhaul (“C Check”) are recognized as provisions as of

the inception of the contract. The counterpart of these provisions

is booked as a complement through the initial book value of the

aircraft right - of - use assets. This complement to the right - of - use

asset is depreciated over the lease term.

Airframe and engine potentials reconstitution

(depending on the utilization of the aircraft

and its engines)

The airframe and the engine potentials as well as the limited life

parts are recognized as a complement to the right - of - use assets

since they are considered as fully - ﬂedged components, as distinct

from the physical components which are the engine and the

airframe. These components are the counterparts of the return

obligation liability, recognized in its totality at the inception of the

contract. When maintenance events aimed at reconstituting

these potentials or replacing the limited life parts take place, the

costs incurred are capitalized. These potentials and the limited

life parts are depreciated over the period of use of the underlying

assets (ﬂight hours for the engine potentials component,

straight - line for the airframe potentials component and cycles for

the limited life parts).

4.21 Other provisions

The Group recognizes a provision in the balance sheet when it

has an existing legal or implicit obligation to a third party as a

result of a past event, and it is probable that an outﬂow of

economic beneﬁts will be required to settle the obligation. The

amounts recorded as provisions are discounted when the eect

of the passage of time is material. The eect of the time value of

money is presented as a component of “Other ﬁnancial income

and expenses”.

Restructuring provisions are recognized once the Group has

established a detailed and formalized restructuring plan which

has been announced to the parties concerned.

4.22 Emission Trading Scheme

Since January1, 2012, European airlines have been included in the

scope of companies subject to the Emission Trading Scheme (ETS).

In the absence of IFRS standards or interpretations governing

ETS accounting, the Group has adopted the accounting treatment

known as the “netting approach”.

According to this approach, the quotas are recognized as

intangible assets in the following way:

— free quotas allocated by the State are valued at nil; and

— quotas purchased on the market are accounted at their

acquisition cost.

These intangible assets are not amortized.

If the allocated quotas are insucient to cover the actual

emissions then the Group recognizes a provision. This provision

is assessed at the acquisition cost for the acquired rights and, for

the non - hedged portion, with reference to the market price as of

each closing date.

At the date of the restitution to the State of the quotas

corresponding to actual emissions, the provision is written - o in

exchange for the intangible assets returned.

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— Year ended December31, 2019

No signiﬁcant acquisitions or disposals took place during the

twelve - month period ended December31, 2019.

— Year ended December31, 2018

No signiﬁcant acquisitions or disposals took place during the

twelve - month period ended December31, 2018.

NOTE5 CHANGE IN THE CONSOLIDATION SCOPE

4.23 Capital increase costs

Capital increase costs are deducted from paid - in capital.

4.24 Current and deferred taxes

The Group records deferred taxes using the balance sheet liability

method, providing for any temporary dierences between the

carrying amounts of assets and liabilities for ﬁnancial reporting

purposes and the amounts used for taxation purposes, except

for the exceptions described in IAS12 “Income Taxes”.

The tax rates used are those enacted or substantively enacted at

the balance sheet date.

Net deferred tax balances are determined on the basis of each

entity’s tax position.

Deferred tax assets relating to temporary dierences and tax

losses carried forward are recognized only to the extent it is

probable that a future taxable proﬁt will be available against

which the asset can be utilized at the tax entity level.

Deferred tax assets corresponding to ﬁscal losses are recognized

as assets given the prospects of recoverability resulting from the

budgets and medium - term plans prepared by the Group. The

assumptions used are the same as those used for the impairment

tests on assets (see Note4.16 “Impairment test”).

A deferred tax liability is also recognized for the undistributed

reserves of the equity aliates.

Taxes payable and/or deferred are recognized in the income

statement for the period, unless they are generated by a

transaction or event recorded directly in other comprehensive

income. In such a case, they are recorded directly in other

comprehensive income.

Impact of the Contribution on Added Value of

Enterprises

The CAVE (Contribution on Added Value of Enterprises/Cotisation

sur la Valeur Ajoutée des Entreprises–CVAE) is calculated by the

application of a tax rate to the added value generated by the

company during the year. As the added value is a net amount of

income and expenses, the CAVE meets the deﬁnition of a tax on

proﬁts as set out in IAS12.2. Consequently, the expense relating

to the CAVE is presented under the line “Income taxes”.

4.25 Non - current assets held

for sale and discontinued

operations

Assets or groups of assets held for sale meet the criteria for this

classiﬁcation if their carrying amount is recovered principally

through a sale rather than through their continuing use. This

condition is considered to be met when the sale is highly

probable and the asset (or group of assets intended for sale) is

available for immediate sale in its present condition. Management

must be committed to a plan to sell, with the expectation that

the sale will be realized within a period of twelve months from

the date on which the asset or group of assets were classiﬁed as

assets held for sale.

The Group determines on each closing date whether any assets

or groups of assets meet the above criteria and presents such

assets, if any, as “non - current assets held for sale”.

Any liabilities related to these assets are also presented on a

separate line in liabilities on the balance sheet.

Assets and groups of assets held for sale are valued at the lower

of their book value or their fair value minus exit costs. As of the

date of such a classiﬁcation, the asset is no longer depreciated.

The results from discontinued operations are presented separately

from the results from continuing operations in the income

statement.

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Business segments

The segment information is prepared on the basis of internal

management data communicated to the Executive Committee,

the Group’s principal operational decision - making body.

The Group is organized around the following segments:

Network: The revenues from this segment, which are composed

of Passenger network and Cargo operating revenues primarily

come from passenger transportation services on scheduled

ﬂights with the Group’s airline code (excluding Transavia),

including ﬂights operated by other airlines under code - sharing

agreements. They also include commissions paid by SkyTeam

alliance partners, code - sharing revenues, revenues from excess

baggage and airport services supplied by the Group to

third - party airlines and services linked to IT systems.

The revenues also including income from freight transport on

ﬂights under the companies’ codes, including ﬂights operated by

other partner airlines under code - sharing agreements. Other

cargo revenues are derived principally from sales of cargo

capacity to third parties and transportation of shipments on

behalf of the Goup by other airlines.

Maintenance: Third - party maintenance revenues are generated

through maintenance services provided to other airlines and

customers worldwide.

Transavia: The revenues from this segment come from the

“low - cost” activity realized by Transavia.

Other: The revenues from this segment come from various

services provided by the Group and not covered by the four

segments mentioned above.

The results of the business segments are those that are either

directly attributable or that can be allocated on a reasonable

basis to these business segments. Amounts allocated to business

segments mainly correspond to the EBITDA, current operating

income and to the income from operating activities. Other

elements of the income statement are presented in the

“non - allocated” column.

Inter - segment transactions are evaluated based on normal

market conditions.

Geographical segments

— Activity by origin of sales area

Group activities by origin of sale are broken down into eight

geographical areas:

— Metropolitan France;

— Benelux;

— Europe (excluding France and Benelux);

— Africa;

— Middle East, Gulf, India (MEGI);

— Asia-Paciﬁc;

— North America;

— Caribbean, West Indies, French Guyana, Indian Ocean, South

America (CILA).

Only segment revenue is allocated by geographical sales area.

— Activity by destination

Group activities by destination are broken down into seven

geographical areas:

— Metropolitan France;

— Europe (excluding France) and North Africa;

— Caribbean, West Indies, French Guyana and Indian Ocean;

— Africa (excluding North Africa), Middle East;

— North America, Mexico;

— South America (excluding Mexico);

— Asia and New Caledonia.

NOTE6 INFORMATION BY ACTIVITY AND GEOGRAPHICAL AREA

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The non - allocated assets, amounting to €6.5billion, comprise

cash and cash equivalents of €3.7 billion, pension assets of

€0.4 billion, ﬁnancial assets of €1.1 billion, deferred tax of

€0.5 billion, income taxes of €0.2 billion and derivatives of

€0.5billion.

The non - allocated segment liabilities, amounting to €4billion,

mainly comprise pension provisions for €2.3 billion, tax and

employee - related liabilities of €1.2 billion, deferred tax of

€0.1 billion, income taxes of €0.1 billion and derivatives of

€0.3billion.

Financial debts, lease debts, bank overdrafts and equity are not

allocated.

6.1 Information by business segment

Year ended December31, 2019 Mainte- Non

(in € millions) Network nance Transavia Other allocated Total

Total sales 23,315 4,616 1,747 251 - 29,929

Intersegment sales (43) (2,478) (3) (217) - (2,741)

External sales 23,272 2,138 1,744 34 - 27,188

EBITDA 3,130 606 362 30 - 4,128

Income from current operations 749 260 131 1 - 1,141

Income from operating activities 655 220 130 5 - 1,010

Share of proﬁts (losses) of associates - 3 - 20 - 23

Net cost of ﬁnancial debt and other

ﬁnancial income and expenses - - - - (664) (664)

Income taxes - - - - (76) (76)

Net income from continuing operations 655 223 130 25 (740) 293

Depreciation and amortization for the period (2,359) (326) (230) (26) - (2,941)

Other non - monetary items 179 43 10 18 (12) 238

Total assets 16,679 3,936 1,661 1,996 6,463 30,735

Segment liabilities 10,106 1,857 1,061 209 3,965 17,198

Financial debts, lease debts, bank overdrafts and equity - - - - 13,537 13,537

Total liabilities 10,106 1,857 1,061 209 17,502 30,735

Purchase of property, plant and equipment

and intangible assets 2,761 432 177 2 - 3,372

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The non - allocated assets, amounting to €6.3billion, comprise

cash and cash equivalents of €3.6 billion, pension assets of

€0.3 billion, ﬁnancial assets of €1.1 billion, deferred tax of

€0.6 billion, income taxes of €0.2 billion and derivatives of

€0.5billion.

The non - allocated segment liabilities, amounting to €4.1billion,

mainly comprise pension provisions for €2.1billion, a portion of

other provisions for €0.1billion, tax and employee - related liabilities

of €1.2billion and derivatives of €0.7billion.

Financial debts, lease debts, bank overdrafts and equity are not

allocated.

Year ended December31, 2018 (restated)

(1)

Mainte- Non

(in € millions) Network nance Transavia Other allocated Total

Total sales 22,711 4,349 1,601 247 - 28,908

Intersegment sales (40) (2,429) (6) (209) - (2,684)

External sales 22,671 1,920 1,595 38 - 26,224

EBITDA 3,352 534 369 38 - 4,293

Income from current operations 1,042 214 145 4 - 1,405

Income from operating activities 999 216 145 33 - 1,393

Share of proﬁts (losses) of associates 1 2 - 12 - 15

Net cost of ﬁnancial debt and other

ﬁnancial income and expenses - - - - (762) (762)

Income taxes - - - - (224) (224)

Net income from continuing operations 1,000 218 145 45 (986) 422

Depreciation and amortization for the period (2,297) (316) (223) (34) - (2,870)

Other non - monetary items (190) (3) (84) (30) 53 (254)

Total assets 17,158 4,121 1,585 495 6,278 29,637

Segment liabilities 10,126 1,546 968 34 4,069 16,743

Financial debts, lease debts, bank overdrafts and equity - - - - 12,894 12,894

Total liabilities 10,126 1,546 968 34 16,963 29,637

Purchase of property, plant and equipment

and intangible assets (continuing operations) 2,199 455 190 - - 2,844

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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6.2 Information by geographical area

External sales by geographical area

Year ended December31, 2019

West Indies

Caribbean

Middle- Guyana

Europe Eastern Indian Ocean

(excl. Gulf South

Metropolitan France and India Asia North America

(in € millions) France Benelux Benelux) Africa (MEGI) Paciﬁc America (CILA) Total

Transportation 6,407 2,516 4,751 1,111 567 2,134 3,417 1,348 22,251

Other sales 389 152 169 65 20 128 52 46 1,021

Total network 6,796 2,668 4,920 1,176 587 2,262 3,469 1,394 23,272

Transportation 511 1,020 187 13 5 5 9 4 1,754

Other sales (12) (10) (3) - - - 8 7 (10)

Total Transavia 499 1,010 184 13 5 5 17 11 1,744

Maintenance 1,214 796 24 - - 3 101 - 2,138

Others 8 26--- - - - 34

Total 8,517 4,500 5,128 1,189 592 2,270 3,587 1,405 27,188

Year ended December31, 2018 (restated)

(1)

West Indies

Caribbean

Middle- Guyana

Europe Eastern Indian Ocean

(excl. Gulf South

Metropolitan France and India Asia North America

(in € millions) France Benelux Benelux) Africa (MEGI) Paciﬁc America (CILA) Total

Transportation 6,235 2,446 4,782 1,051 571 2,083 3,143 1,421 21,732

Other sales 308 174 168 55 15 138 45 36 939

Total network 6,543 2,620 4,950 1,106 586 2,221 3,188 1,457 22,671

Transportation 470 936 157 10 13 3 7 3 1,599

Other sales (2) (9) (2) - - - 9 - (4)

Total Transavia 468 927 155 10 13 3 16 3 1,595

Maintenance 1,044 764 26 - - 2 84 - 1,920

Others 10 28--- - - - 38

Total 8,065 4,339 5,131 1,116 599 2,226 3,288 1,460 26,224

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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Trac sales by geographical area of destination

Year ended December31, 2019

Africa

Europe Caribbean, (excl.

(excl. French North South

France) Guyana, Africa) North America, Asia,

Metropolitan North Indian Middle America, (excl. New

(in € millions) France Africa Ocean East Mexico Mexico) Caledonia Total

Network 1,700 4,963 1,668 2,900 4,859 2,182 3,979 22,251

Transavia 23 1,602 - 129 - - - 1,754

Total Transportation 1,723 6,565 1,668 3,029 4,859 2,182 3,979 24,005

Year ended December31, 2018

Africa

Europe Caribbean, (excl.

(excl. French North South

France) Guyana, Africa) North America, Asia,

Metropolitan North Indian Middle America, (excl. New

(in € millions) France Africa Ocean East Mexico Mexico) Caledonia Total

Network 1,734 4,804 1,617 2,860 4,616 2,231 3,870 21,732

Transavia 24 1,459 - 116 - - - 1,599

Total Transportation 1,758 6,263 1,617 2,976 4,616 2,231 3,870 23,331

NOTE7 EXTERNAL EXPENSES

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Aircraft fuel 5,511 4,958

Chartering costs 525 577

Landing fees and air route charges 1,933 1,893

Catering 822 783

Handling charges and other operating costs 1,715 1,673

Aircraft maintenance costs 2,628 2,410

Commercial and distribution costs 1,029 1,034

Other external expenses 1,730 1,618

Total 15,893 14,946

Excluding aircraft fuel 10,382 9,988

(1) See Note2 in notes to the consolidated ﬁnancial statements.

A portion of external expenses, mainly aircraft fuel and maintenance, is sensitive to ﬂuctuations in the US dollar exchange rate. The

hedges covering this currency exposure are presented in Note10.

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Average number of employees

Period from January1to December31 2019 2018

Flight deck crew 8,512 7,983

Cabin crew 22,465 21,973

Ground sta 52,119 51,570

Temporary employees 3,042 3,188

Total 86,138 84,714

The Group pays contributions to a multi - employer plan in France,

the CRPN (public pension fund for crew). Since this

multi - employer plan is assimilated with a French State plan, it is

accounted for as a deﬁned contribution plan in “pension costs

linked to deﬁned contribution plans”.

NOTE8 SALARIES AND NUMBER OF EMPLOYEES

Salaries and related costs

Period from January1to December31

(in € millions) 2019 2018

Wages and salaries 5,585 5,328

Social contributions 1,118 1,097

Pension costs on deﬁned contribution plans 707 670

Pension costs of deﬁned beneﬁt plans 281 219

Cost of temporary employees 253 241

Proﬁt sharing 131 191

Other expenses 64 13

Total 8,139 7,759

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NOTE9 AMORTIZATION, DEPRECIATION AND PROVISIONS

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Amortization

Intangible assets 151 160

Flight equipment 1,238 1,194

Other property, plant and equipment 199 195

Right - of - use assets 1,353 1,321

2,941 2,870

Depreciation and provisions

Inventories 18 2

Trade receivables 16 43

Risks and contingencies 12 (27)

46 18

Total 2,987 2,888

(1) See Note2. in notes to the consolidated ﬁnancial statements.

The amortization variations for intangible and tangible assets are presented in Notes16 and 18 and for right - of - use assets in Note20.

The variations relating to inventories and trade receivables are presented in Notes24, 25 and 26.

The movements in provisions for risks and charges are detailed in Note30.

NOTE10 OTHER INCOME AND EXPENSES

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Capitalized production 1,122 993

Joint operation of routes (49) (57)

Operations - related currency hedges 64 (16)

European carbon emission allowances (ETS) (54) (19)

Other 42 36

Other income and expenses 1,125 937

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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Year ended December31, 2019

Restructuring costs

At December31, 2019, this mainly includes the new provision

relating to a Voluntary Departure Plan for Air France ground sta

(see Note3.1).

Modiﬁcation of pension plans

On February22, 2019, an agreement was signed amending the

retirement indemnities for Air France pilots retiring at 60years

or above, if providing an advanced notice of at least 12months,

increasing the beneﬁt obligation by €11million.

Phase - out of the A380 aircraft

This line corresponds to the impact of the early phase - out of the

A380 aircraft from the Air France ﬂeet (see Note 3.1) for

€126million in 2019. This signiﬁcant non - recurring operation is

considered by the Group to be a disposal of assets and a

restructuring of the business activities. It includes:

— The dierence between the initial depreciation plan, i.e. an

expected 20 - year operational life for this type of aircraft and

the accelerated depreciation following the early phase - out,

amounting to €52 million. Depreciation slopes have been

revised so that the net book value as of the date of the

aircraft’s phase - out converges with the estimated realizable

value;

— Impairment of ﬂeet related assets for €74million (including

notably cabin retroﬁt projects, penalties on contracts and

spare parts).

Year ended December31, 2018

Restructuring costs

These mainly include a new provision relating to the Voluntary

Departure Plan for KLM cabin crew.

Modiﬁcation of pension schemes

In 2018, in the Lloyds Bank case, the UK High Court ruled that UK

pension schemes must equalize Guaranteed Minimum Pension

(GMP) between men and women. The Group has two UK-based

pension schemes for which a best estimate calculation has been

performed by external actuaries. A one - o expense of €5million

was accounted for in 2018 corresponding to an increase of the

Deﬁned Beneﬁt Obligation.

Disposals of other assets

This line mainly includes the sale of Vilgénis real estate in the Paris

area, France and the activities of Jet Center at Amsterdam

Airport Schiphol.

Other

This line mainly includes the adjustment of the cargo claim

provision for a net amount of €(8) million.

NOTE11 OTHER NON - CURRENT INCOME AND EXPENSES

Period from January1to December31

(in € millions) 2019 2018

Restructuring costs (36) (19)

Modiﬁcation of pensions plans (11) (5)

Disposals of subsidiaries and aliates - (1)

Disposals of other assets 6 32

Phase - out of A380 aircraft (126) -

Other 14 (23)

Other non - current income and expenses (153) (16)

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Net cost of ﬁnancial debt

Financial income mainly consists of interest income on ﬁnancial

assets recognized at the eective interest rate and the gain on

the disposal of ﬁnancial assets at fair value recorded through the

income statement.

Foreign exchange gains (losses)

As of December31, 2019, the foreign exchange losses mainly

include an unrealized currency loss of €82million of which a loss

of € 42million on return obligation liabilities and provisions on

aircraft in US dollars and an unrealized €36million currency loss

on debt in US Dollars (€15 million) and in Japanese Yen

(€26million).

As of December31, 2018, the foreign exchange losses mainly

include a currency loss of €224million of which € (133) million

on return obligation liabilities and provisions on aircraft in US

dollars and an unrealized €101million currency loss mainly on

debt in US Dollar (€20million) and in Japanese Yen (€56million).

Financial instruments and change in fair value of

hedged shares

As of December31, 2019, this line mainly includes a gain due to

the change in fair value of the hedged Amadeus shares

amounting to €42million and a loss on the non - aligned time

value of dissymmetrical options with barriers for an amount of

€4million.

As of December31, 2018, this line mainly includes a gain on the

hedged Amadeus shares of €12 million and a gain on the

non - aligned time value of dissymmetrical options with barriers

for an amount of €41million.

Undiscounting of provision

The rate used to undiscount the long term return obligation

liability and provision for leased aircraft and other provisions is

6.0% in 2019 against 4.6% in 2018.

NOTE12 NET COST OF FINANCIAL DEBT AND OTHER FINANCIAL

INCOME AND EXPENSES

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Income from marketable securities 2 3

Other ﬁnancial income 47 36

Financial income 49 39

Interest on ﬁnancial debt (132) (141)

Interest on lease debt (276) (293)

Capitalized interests 23 17

Other non - monetary items (43) (32)

Other ﬁnancial expenses (14) (16)

Gross cost of ﬁnancial debt (442) (465)

Net cost of ﬁnancial debt (393) (426)

Foreign exchange gains (losses), net (80) (224)

Financial instruments and change in fair value of hedged shares 33 55

Net (charge)/release to provisions (5) (5)

Undiscounting of provision (212) (152)

Other (7) (10)

Other ﬁnancial income and expenses (271) (336)

Total (664) (762)

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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13.2 Deferred tax recorded in equity

(equity holders of AirFrance – KLM)

Period from January1to December31

(in € millions) 2019 2018

Coupons on Perpetual 8 13

OCEANE (19) -

Other comprehensive income that will be reclassiﬁed to proﬁt and loss (115) 270

Other comprehensive income that will not be reclassiﬁed to proﬁt and loss (68) 49

Equity instruments 3 -

Pensions (71) 49

Total (194) 332

The current income tax charge relates to the amounts paid or

payable to the tax authorities in the short term for the period, in

accordance with the regulations prevailing in various countries

and any applicable treaties.

— French ﬁscal group

In France, tax losses can be carried forward for an unlimited

period. However, there is a limitation on the amount of ﬁscal loss

recoverable each year to 50per cent of the proﬁt for the period

beyond the ﬁrst million euros. The recoverability of the deferred

tax losses corresponds to a period of seven years, consistent with

the Group’s operating visibility.

The Finance Act 2018, voted through in December2017, provides

for a gradual reduction in the French corporation tax rate to

25.83per cent in 2022. The impact of this change in tax rate was

reﬂected in a reduction in deferred tax assets and thus a deferred

tax charge in 2017.

— Dutch ﬁscal group

In The Netherlands, tax losses can be carried forward over a

period of nine years without limitation in the amount of recovery

allowed each year.

In 2019, it was decided that the Dutch corporation tax rate will

be lowered to 21.7per cent in 2021. The impact of this upcoming

change in tax rate was reﬂected in a reduction in deferred tax

liabilities and thus a deferred tax gain of €6million in 2019.

As of December31, 2019, the Dutch ﬁscal group has no deferred

tax losses.

NOTE13 INCOME TAXES

13.1 Income tax charge

Current income tax expenses and deferred income tax are detailed as follows:

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Current tax (expense)/income (97) (24)

Change in temporary dierences (44) (41)

CAVE impact 3 3

(Use/de - recognition)/recognition of tax loss carry forwards 62 (162)

Deferred tax income/(expense) from continuing operations 21 (200)

Total (76) (224)

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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13.4 Variation in deferred tax recorded during the period

Amounts

January1, recorded in Amounts Amounts Re-

2019 income recorded recorded classiﬁcation December31,

(in € millions) restated

(1)

statement in OCI in equity and other 2019

Flight equipment (1,208) 119 - - (2) (1,091)

Right - of - use assets (1,028) 145 - - - (883)

Pension assets (41) (50) (61) - 60 (92)

Financial debt 727 (94) 3 (11) 2 627

Lease debt 855 (102) 4 - - 757

Deferred revenue on ticket sales 171 (11) - - - 160

Debtors and creditors 135 8 (123) - (34) (14)

Provisions 406 (105) (4) - 21 318

Others (226) 100 (2) - 25 (103)

Deferred tax corresponding to ﬁscal losses 764 11 - - (73) 702

Deferred tax asset/ (liability) net 555 21 (183) (11) (1) 381

(1) See Note2. in notes to the consolidated ﬁnancial statements.

In 2019, the applicable tax rate for the French ﬁscal group is

34.43%.

Deferred tax have been calculated with a tax rate gradually

decreasing to 25.83per cent in 2022 and in accordance with the

timeline of repayment and the tax rate applicable to each period.

The current tax rate applicable in The Netherlands is 25per cent.

The Dutch income tax will be lowered to 21.7per cent in 2021.

The impact of the change in tax rate is presented in the line

“Impact of change in income - tax rate.

13.3 Eective tax rate

The dierence between the standard and eective tax rate applied in France is detailed as follows:

Period from January1to December31 2018

(in € millions) 2019 restated

(1)

Income before tax 346 631

Standard tax rate in France 34.43% 34.43%

Theoretical tax calculated based on the standard tax rate in France (119) (217)

Dierences in French/foreign tax rates 57 84

Non - deductible expenses or non - taxable income (10) 1

Variation in unrecognized deferred tax assets (3) (88)

Impact of change in income - tax rate 6 -

CAVE impact (9) (11)

Other 2 7

Income tax expenses (76) (224)

Eective tax rate 22.0% 35.5%

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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13.5 Unrecognized deferred tax assets

December31, 2019 December31, 2018 restated

(1)

(in € millions) Basis Tax Basis Tax

Temporary dierences 1,022 264 910 235

Tax losses 4,947 1,277 4,947 1,278

Total 5,969 1,541 5,857 1,513

(1) See Note2. in notes to the consolidated ﬁnancial statements.

— French ﬁscal group

The deferred taxes recognized on ﬁscal losses for the French

ﬁscal group amounts to €693 million with a basis of

€5,039million as of December31, 2019 and December31, 2018.

The total deferred - tax position of the French ﬁscal group stands

at a net asset of €497million.

— Dutch ﬁscal group

The Dutch ﬁscal group has no deferred taxes recognized on ﬁscal

losses as of December 31, 2019 versus €60 million as of

December31, 2018 with a base of €241million.

Amounts

January1, recorded in Amounts Amounts Re- December31,

2018 income recorded recorded classiﬁcation 2018

(in € millions) restated

(1)

statement in OCI in equity and other restated

(1)

Flight equipment (1,235) 27 - - - (1,208)

Right - of - use assets (1,650) 102 - - 520 (1,028)

Pension assets (76) (24) 59 - - (41)

Financial debt 740 (24) - 13 (2) 727

Lease debt 1,405 (163) 23 - (410) 855

Deferred revenue on ticket sales 202 18 - - (49) 171

Debtors and creditors (59) (57) 246 - 5 135

Provisions 400 69 (6) - (57) 406

Others (223) 14 (3) - (14) (226)

Deferred tax corresponding to ﬁscal losses 913 (162) - - 13 764

Deferred tax asset/ (liability) net 417 (200) 319 13 6 555

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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NOTE14 EARNINGS PER SHARE

14.1 Income for the period–Equity holders of AirFrance – KLM per share

Reconciliation of income used to calculate earnings per share

The results used to calculate earnings per share are as follows:

— Results used for the calculation of basic earnings per share

As of December31 2018

(in € millions) 2019 restated

(1)

Net income for the period–equity holders of AirFrance – KLM 290 420

Net income from continuing operations–equity holders of AirFrance – KLM 290 420

Coupons on perpetual (net of tax) (17) (25)

Basic net income for the period–equity holders of AirFrance – KLM 273 395

Basic net income from continuing operations–equity holders of AirFrance – KLM 273 395

(1) See Note2. in notes to the consolidated ﬁnancial statements.

The earnings per share before dilution (basic earnings per share) corresponds to the net result divided by the weighted average

number of shares in circulation during the ﬁnancial year, excluding the weighted average number of treasury shares.

— Results used for the calculation of diluted earnings per share

As of December31 2018

(in € millions) 2019 restated

(1)

Basic net income for the period–equity holders of AirFrance – KLM 279 395

Basic net income for the period for continuing operations–equity holders of AirFrance – KLM 279 395

Consequence of potential ordinary shares on net income: interests paid on convertible bonds

and amortization of equity component (after tax) 6 -

Net income for the period–Equity holders of AirFrance – KLM

(taken for calculation of diluted earnings per share) 285 395

(1) See Note2. in notes to the consolidated ﬁnancial statements.

— French ﬁscal group

As of December31, 2019, the cumulative eect of the limitation

of deferred tax assets results in the non - recognition of a deferred

tax asset amounting to €1,532million (corresponding to a basis

of €5,915million), of which €1,272million relating to tax losses

and €260million relating to temporary dierences (non - recognition

of deferred tax assets relating to restructuring provisions and

pensions).

As of December31, 2018, the cumulative eect of the limitation

of deferred tax assets resulted in the non - recognition of a

deferred tax asset amounting to €1,503million (corresponding

to a basis of €5,803million), of which €1,272million relating to

tax losses and €231 million relating to temporary dierences

(non - recognition of deferred tax assets relating to restructuring

provisions and pensions).

— Dutch ﬁscal group

As of December 31, 2019, the Dutch ﬁscal group has no

non - recognized deferred tax assets.

Other unrecognized deferred tax assets mainly correspond to a

portion of the tax loss carry forwards of the Air France and KLM

subsidiaries not belonging to the ﬁscal groups, in particular in the

United States of America and the United Kingdom.

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NOTE15 GOODWILL

15.1 Detail of consolidated goodwill

As of December31

2019 2018

Gross Net Gross Net

(in € millions) value Impairment value value Impairment value

Network 197 - 197 196 - 196

Maintenance 24 (4) 20 25 (4) 21

Total 221 (4) 217 221 (4) 217

15.2 Movement in net book value of goodwill

As of December31

(in € millions) 2019 2018

Opening balance 217 216

Currency translation adjustment - 1

Closing balance 217 217

14.2 Non - dilutive instruments

The AirFrance – KLM Group held no non - dilutive instruments as

of December31, 2019.

14.3 Instruments issued

after the closing date

No instruments were issued subsequent to the closing date.

Reconciliation of the number of shares used to calculate earnings per share

As of December31 2019 2018

Weighted average number of:

— ordinary shares issued 428,634,035 428,634,035

— treasury stock held regarding stock option plan (1,116,420) (1,116,420)

— other treasury stock (85,151) (85,151)

Number of shares used to calculate basic earnings per share 427,432,464 427,432,464

OCEANE conversion 27,901,785 -

Number of ordinary and potential ordinary shares used to calculate

diluted earnings per share 455,334,249 427,432,464

The change in the number of ordinary shares issued is disclosed in Note28.1.

For the calculation of the diluted earnings per share, the weighted

average number of shares in circulation is adjusted for the

potential dilutive eect of all equity instruments issued by the

Group, in particular stock option plans and performance shares.

The dilution resulting from the exercise of stock option plans and

performance shares is based on the IAS33methodology.

Since the perpetual subordinated loan is considered to be

preferred shares, the coupons are included in the basic earnings

per share.

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The intangible assets mainly comprise:

— the KLM and Transavia brands and slots (takeo and landing)

acquired by the Group as part of the acquisition of KLM. These

intangible assets have an indeﬁnite useful life as the nature of

the assets means that they have no time limit;

— software and capitalized IT costs.

As of January1, 2019, AirFrance – KLM extended the useful life of

core Information Technology developments to up to 20years.

This decision has led to a €22 million reduction in the 2019

depreciation charge.

NOTE16 INTANGIBLE ASSETS

Other

Trademarks intangible

(in € millions) and slots assets Total

Gross value

Amount as of December31, 2017 280 1,744 2,024

Additions - 253 253

Disposals - (66) (66)

Reclassiﬁcation - (106) (106)

Amount as of December31, 2018 280 1,825 2,105

Additions - 328 328

Disposals - (319) (319)

Reclassiﬁcation - (23) (23)

Amount as of December31, 2019 280 1,811 2,091

Depreciation

Amount as of December31, 2017 (6) (895) (901)

Charge to depreciation - (160) (160)

Releases on disposals - 44 44

Reclassiﬁcation - 106 106

Amount as of December31, 2018 (6) (905) (911)

Charge to depreciation - (151) (151)

Releases on disposals - 253 253

Reclassiﬁcation - 23 23

Amount as of December31, 2019 (6) (780) (786)

Net value

As of December31, 2018 274 920 1,194

As of December31, 2019 274 1,031 1,305

Including

— Network 256

— Transavia 8

— Maintenance 5

— Other 5

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Year ended December31, 2019

Concerning the methodology followed for the impairment test,

the Group has allocated each item of goodwill and each

intangible ﬁxed asset with an indeﬁnite useful life to Cash

Generating Units (CGUs), corresponding to its business segments

(see “Accounting Policies”).

The recoverable value of the CGU assets has been determined

by reference to their value in use as of December31, 2019. The

tests were realized for all the CGUs on the basis of a three - year

Group plan, approved by the management.

Revenues (network, leisure and maintenance), costs and

investments forecasts are based on reasonable hypothesis and

are the management’s best estimates. They lie on passenger

trac and savings related to pursuance of performance plans set

up by the Group.

The discount rate used for the test corresponds to the Group’s

weighted average cost of capital (WACC). This stood at 5.9per

cent as at December 31, 2019 versus 6.3 per cent as at

December31, 2018.

After the aforementioned test, no impairments were recognized

on the Group’s other CGUs.

A 50 - basis point increase in the WACC would have no impact on

the tests results per Group CGU as of December 31, 2019. A

50 - basis point decrease in the long - term growth rate would also

have no impact on the value of the CGUs as of the same date.

The same holds true for a 50 - basis point decrease in the target

operating margin.

Year ended December31, 2018

As of December31, 2018, no impairment was recognized on the

Group’s CGUs.

NOTE17 IMPAIRMENT

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Aeronautical assets under construction mainly comprise advance

payments, engine maintenance work in progress and aircraft

modiﬁcations.

As of January1, 2019 Air France extended the useful life of its

A330 ﬂeet to 25years.

Previously the useful life had been 20years. This decision led to

a € 9million reduction in depreciation charge in 2019 versus 2018.

Note38details the amount of pledged tangible assets.

Commitments to property purchases are detailed in Notes37 and

38to these ﬁnancial statements.

NOTE18 TANGIBLE ASSETS

Flight equipment Other tangible assets

Equipment

Owned Assets in Land and and Assets in

(in € millions) aircraft progress Other Total buildings machinery progress Other Total Total

Gross value

January1, 2018 restated

(1)

16,263 988 2,021 19,272 2,639 1,251 156 943 4,989 24,261

Acquisitions 389 1,889 35 2,313 24 46 157 47 274 2,587

Disposals (1,156) - (171) (1,327) (60) (25) - (36) (121) (1,448)

Fair value - (159) - (159) - - - - - (159)

Reclassiﬁcation 722 (1,684) 311 (651) 71 35 (126) 24 4 (647)

Currency translation - - - - - 1 - - 1 1

Others (33) - 3 (30) 2 - - 2 4 (26)

December31, 2018 restated

(1)

16,185 1,034 2,199 19,418 2,676 1,308 187 980 5,151 24,569

Acquisitions 407 1,970 376 2,753 27 47 179 40 293 3,046

Disposals (825) (24) (238) (1,087) (88) (206) 1 (58) (351) (1,438)

Fair value - (39) - (39) - - - - - (39)

Reclassiﬁcation 1,346 (1,704) 167 (191) 86 19 (162) 31 (26) (217)

Currency translation - - - - - - - - - -

Others 79 26 (79) 26 7 1 - - 8 34

December31, 2019 17,192 1,263 2,425 20,880 2,708 1,169 205 993 5,075 25,955

Depreciation

January1, 2018 restated

(1)

(8,578) - (750) (9,328) (1,811) (977) - (783) (3,571) (12,899)

Charge to depreciation (1,053) - (94) (1,147) (92) (61) - (42) (195) (1,342)

Releases on disposal 1,079 - 116 1,195 58 24 - 35 117 1,312

Reclassiﬁcation 205 - (1) 204 (1) 3 - - 2 206

Currency translation - - - - - - - - -

Others 50 - (84) (34) - (1) - - (1) (35)

December31, 2018 restated

(1)

(8,297) - (813) (9,110) (1,846) (1,012) - (790) (3,648) (12,758)

Charge to depreciation (1,112) - (128) (1,240) (91) (62) - (46) (199) (1,439)

Releases on disposal 787 - 177 964 87 204 - 58 349 1,313

Reclassiﬁcation (117) - (18) (135) (1) 9 - (4) 4 (131)

Currency translation - - - - - - - - - -

Others 55 - (80) (25) - (1) - - (1) (26)

December31, 2019 (8,684) - (862) (9,546) (1,851) (862) - (782) (3,495) (13,041)

Net value

December31, 2018 restated

(1)

7,888 1,034 1,386 10,308 830 296 187 190 1,503 11,811

December31, 2019 8,508 1,263 1,563 11,334 857 307 205 211 1,580 12,914

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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NOTE19 CAPITAL EXPENDITURES

The detail of capital expenditures on tangible and intangible assets presented in the consolidated cash - ﬂow statements is as follows:

As of December31 2018

(in € millions) 2019 restated

(1)

Acquisition of ﬂight equipment 2,746 2,325

Acquisition of other tangible assets 293 274

Acquisition of intangible assets 328 253

Accounts payable on acquisitions 5 (8)

Total 3,372 2,844

(1) See Note2 in notes to the consolidated ﬁnancial statements.

NOTE20 RIGHT - OF - USE ASSETS

The table below presents the right - of - use assets per category:

Land &

(in € millions) Aircraft Maintenance Real Estate Others Total

Net value

As of January1, 2018 restated

(1)

3,792 1,695 473 246 6,206

New contract 27 147 249 34 457

Change in contract 99 69 2 - 170

Disposals (1) (5) - - (6)

Reclassiﬁcation (3) 132 6 45 180

Amortization (795) (343) (122) (62) (1,322)

Others 18 (13) (23) (3) (21)

As of December31, 2018 restated

(1)

3,137 1,682 585 260 5,664

New contract 165 120 53 34 372

Change in contract 287 (185) 48 9 159

Disposals - - (19) (5) (24)

Reclassiﬁcation (8) 354 4 20 370

Amortization (779) (396) (113) (68) (1,356)

Others (4) - - (8) (12)

As of December31, 2019 2,798 1,575 558 242 5,173

(1) See Note2. in notes to the consolidated ﬁnancial statements.

Information related to lease debt is available in Note32.

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Maintenance

As of December31, 2019 and 2018, the equity aliates in the

maintenance business mainly comprise joint - venture partnerships

entered into by the Group to develop its maintenance activities

worldwide. These partnerships, whose country localizations and

percentages of interest are presented in Note42.2, have been

concluded either with airlines or with independent players in the

maintenance market.

Servair Group

The Servair Group is the French number one in aviation catering.

With about 45establishments in 26countries and approximately

10,000employees, Servair has a leading position in Paris and

Africa. Servair numbers approximately 120air carrier customers

worldwide and proposes a set of services grouped around three

core businesses: inﬂight and collective catering, airport services

and additional services like engineering and the integration of

services.

Following the acquisition of gategroup by HNA on December22,

2016, Air France and gategroup ﬁnalized the agreement for the

sale to gategroup of 49.99% of the Servair share capital. On

conclusion of this transaction, the operational control of Servair

was transferred to gategroup in application of the governance

planned in the agreements between Air France and gategroup.

As a consequence, the Servair group has been consolidated

according to the equity method since December31, 2016.

According to IFRS10, the Servair shares were revalued at their

fair value, the latter having been determined on the basis of

the transaction value and amounted to €218 million as at

December31, 2016.

The table below indicates the rents resulting from lease and service contracts which are not capitalized:

As of December31

(in € millions) 2019 2018

Variable rents 19 27

Short term rents 153 123

Low value rents 22 23

NOTE21 EQUITY AFFILIATES

Movements over the period

The table below presents the movement in investments in associates and joint ventures:

(in € millions) Maintenance Catering Other Total

Carrying value of share in investment as of December31, 2017 56 224 21 301

Share in net income of equity aliates 2 7 6 15

Distributions - - (4) (4)

Other variations - - (2) (2)

Currency translation adjustment 1 - (1) -

Carrying value of share in investment as of December31, 2018 59 231 21 311

Share in net income of equity aliates 3 7 13 23

Distributions - (2) (10) (12)

Change in consolidation scope (2) - (1) (3)

Other variations (4) - 1 (3)

Capital increase - - 1 1

Capital decrease - - (10) (10)

Carrying value of share in investment as of December31, 2019 56 236 15 307

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NOTE22 PENSION ASSETS

As of December31

(in € millions) 2019 2018

Opening balance 331 590

Net periodic pension (cost)/income (138) (96)

Contributions paid to the funds 101 84

Fair value revaluation 126 (247)

Closing balance 420 331

The analysis of these pension assets is presented in Note29.

Other

As of December31, 2019 and 2018, the equity aliates linked to

the Group’s other businesses are mainly joint - venture partnerships

entered into by the Group in the airport business. The localizations

of the activities and the percentages of interest in these partnerships

are presented in Note42.2.

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NOTE23 OTHER FINANCIAL ASSETS

As of December31

2019 2018

(in € millions) Current Non - current Current Non - current

Equity instruments

Equity instruments at fair value through OCI - 73 - 89

Equity instruments at fair value in P&L 360 - - 301

Assets–Debt instruments at fair value in P&L

Marketable securities 73 38 41 32

Cash secured 300 - 265 -

Financial asset–at amortized cost

AAA Bonds 50 535 5 517

Deposit on lease contracts 1 90 - 85

Deposit on lease with bargain option 2 225 2 341

Other loans and deposits 14 159 12 147

Gross value 800 1,120 325 1,512

Impairment at opening date - (25) - (25)

New impairment charge - (11) - (5)

Reversal - 1 - 2

Other - 11 - 3

Impairment at closing date - (24) - (25)

Total 800 1,096 325 1,487

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— Year ended December31, 2018

Following a debt and equity restructuring within Kenya Airways

Ltd., the Group’s capital interest decreased from 26.73per cent

as at December31, 2016 to 7.76per cent as at December31, 2017.

The Group lost its ability to exercise signiﬁcant inﬂuence over

Kenya Airways in November2017. Consequently, Kenya Airways

has been accounted for as a ﬁnancial asset at fair value through

the income statement.

The capital interest in Kenya Airways is considered as a business

investment and the change in the fair value has been recognized

through Other Comprehensive Income.

Transfer of ﬁnancial assets that are not derecognized

in their entirety

Transfer of receivables agreement

The Group entered into a loan agreement secured by Air France’s

one per cent housing loans. For each of the CILs (Comités

Interprofessionnels du Logement), Air France and the bank

concluded, in July 2012, a tripartite receivables delegation

agreement with reference to the loan agreement. Through this

agreement, the CILs commit to repaying the bank directly on

each payment date. These are imperfect delegations: in the event

of non - repayment by the CILs, Air France remains liable to the

bank for repayments of the loan and interest.

As of December31, 2019, the amount of transferred receivables

stood at €98million (versus €101 million as of December31,

2018). The associated loan stood at €78 million as of

December31, 2019 (versus €79million as of December31, 2018).

Loan of shares agreement

In May and June2016, the Group entered into a loan of shares

agreement on Amadeus shares. This loan was linked to the

hedging transaction to protect the value of Amadeus shares. The

entire 1.11 per cent Amadeus shareholding is covered by this

hedge contract.

Equity instruments

Stockholder’s Net

equity income

Fair Value (in billions (in billions Classiﬁcation Stock

(in € millions) % interest of currency) of currency) methodology price Closing date

As of December31, 2019

Amadeus

(1)

360 1.11% NA

(2)

NA

(2)

Income statement 72.80€ December2019

GOL Linhas Aéreas

(1)

35 1.19% NA

(2)

NA

(2)

OCI 36,8BRL December2019

Kenya Airways

(1)

8 7.76% NA

(2)

NA

(2)

OCI 0.02€ December2019

Other 30 - - - - -

Total 433

As of December31, 2018

Amadeus

(1)

301 1.11% 3.2EUR 1EUR Income statement 60.84€ December2018

GOL Linhas Aéreas

(1)

24 1.21% (4.5) BRL (0.8) BRL OCI 25,1BRL December2018

Kenya Airways

(1)

33 7.76% (2.5) KES (7.6) KES OCI 0.07€ December2018

Other 32 - - - - -

Total 390

(1) Listed company.

(2) Not - available.

The Group sold Amadeus shares on January9, 2020 for € 356million.

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NOTE24 INVENTORIES

As of December31

(in € millions) 2019 2018

Aeronautical spare parts 772 654

Other supplies 143 127

Production work in progress 24 14

Gross value 939 795

Opening valuation allowance (162) (159)

Charge to allowance (48) (11)

Use of allowance 7 9

Reclassiﬁcation 1 (1)

Closing valuation allowance (202) (162)

Net value of inventory 737 633

NOTE25 TRADE ACCOUNTS RECEIVABLES

As of December31

(in € millions) 2019 2018

Airlines 553 500

Other clients:

— Network 862 1,002

— Maintenance 804 716

— Other 118 128

Gross value 2,337 2,346

Opening valuation allowance (155) (114)

Charge to allowance (39) (49)

Use of allowance 18 6

Currency translation adjustment - (1)

Reclassiﬁcation 3 3

Closing valuation allowance (173) (155)

Net value 2,164 2,191

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NOTE26 OTHER ASSETS

As of December31

2018

2019 restated

(1)

(in € millions) Current Non - current Current Non - current

Suppliers with debit balances 99 - 97 -

State receivables (including income tax) 224 - 247 -

Derivative instruments 258 238 225 253

Prepaid expenses 221 - 242 -

Other debtors 322 3 255 11

Gross value 1,124 241 1,066 264

Opening valuation allowance (1) - (1) -

Closing valuation allowance (1) - (1) -

Other 1,123 241 1,065 264

(1) See Note2. in notes to the consolidated ﬁnancial statements.

NOTE27 CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS

As of December31

(in € millions) 2019 2018

Liquidity funds (SICAV) (assets–debt instruments) 1,268 874

Bank deposits and term accounts (assets–debt instruments) 1,599 1,923

Cash in hand 848 788

Total cash and cash equivalents 3,715 3,585

Bank overdrafts (4) (5)

Cash, cash equivalents and bank overdrafts 3,711 3,580

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Authorized stock

The Combined Ordinary and Extraordinary Shareholders’ Meeting

of May28, 2019 authorized the Board of Directors, for a period

of 26months from the date of the Meeting of May28, 2019 (i.e.

until July28, 2021), to issue shares and/or other securities conferring

immediate or future rights to AirFrance – KLM’s capital, limited

to a total maximum nominal amount of €214million.

Acquisition by Dutch State

In the ﬁrst quarter of 2019, the Dutch State acquired 60million

AirFrance – KLM shares, representing 14per cent of the Group’s

share capital and, as of December31, 2019, 10.2per cent of the

voting rights in AirFrance – KLM.

NOTE28 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS

OF AIRFRANCE – KLM SA

28.1 Issued capital

As of December31, 2019, the issued capital of AirFrance – KLM comprised 428,634,035fully paid - up shares. Each share with a nominal

value of one euro is entitled to one vote. However, since April3, 2016, shareholders who have owned their shares for at least two years

have beneﬁted from double voting rights.

The number of issued shares held is as follows:

As of December31

(in number of shares) 2019 2018

At the beginning of the period 428,634,035 428,634,035

French State 61,241,325 61,241,325

Dutch State 60,000,000 -

Delta Air Lines 37,527,410 37,527,410

China Eastern Airlines 37,527,410 37,527,410

Employees and former employees 16,103,590 16,758,690

Treasury shares 1,201,571 1,201,571

Others 215,032,729 274,377,629

At the end of the period 428,634,035 428,634,035

Of which:

— number of shares issued and paid up 428,634,035 428,634,035

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In early April2015, the Group issued a perpetual subordinated

bond for a total amount of €600million. These securities, which

have no maturity date and bear an annual coupon of 6.25per

cent, have a ﬁrst repayment option in October 2020, at the

issuer’s discretion.

These securities are classiﬁed as equity, in accordance with the

IFRS rules. The bond is subordinated to all other existing and

future AirFrance – KLM debt.

On September3, 2018, AirFrance – KLM launched a tender oer

to repurchase any and all of this perpetual bond, the ﬁnal results

being announced on September12, 2018. Notes for a nominal

Breakdown of the share capital and voting rights

The breakdown of the share capital and voting rights is as follows:

% of capital % of voting rights

As of December31 2019 2018 2019 2018

French State 14.3 14.3 20.9 22.6

Dutch State 14.0 10.2 -

Delta Air Lines 8.8 8.8 12.8 7.4

China Eastern Airlines 8.8 8.8 12.8 7.4

Employees and former employees 3.8 3.9 5.5 6.7

Treasury shares 0.3 0.3 0.4 0.5

Other 50.0 63.9 37.4 55.4

Total 100 100 100 100

The line “Employees and former employees” includes the shares held by employees and former employees identiﬁed in the “Fonds

Communs de Placement d’Entreprise (FCPE)”.

Other securities giving access to common stock

— OCEANE

For more information please refer to Note31.3.

28.2 Additional paid - in capital

Additional paid - in capital represents the dierence between the nominal value of the equity securities issued and the value of

contributions in cash or in kind received by AirFrance – KLM.

28.3 Treasury shares

Treasury shares

Number In € millions

December31, 2017 1,201,571 (67)

Change in the period - -

December31, 2018 1,201,571 (67)

Change in the period - -

December31, 2019 1,201,571 (67)

All of these treasury shares are classiﬁed as a reduction of equity.

28.4 Perpetual subordinated bond

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Hedging reserves are composed as follows (before the eect of deferred tax):

Recycling in Recycling

December31, Variation of income December31, allocated

(in € millions) 2018 fair value statement 2019 by rubric

Fuel (467) 469 (35) (33) External

expenses

Interest rate (18) (26) 11 (33) Cost of

ﬁnancial

debt

Currency exchange 103 116 (64) 155 Other

income

and

expenses

Change on revenues (120) (56) 42 (134) Sales

European carbon emission allowances (ETS) 80 (68) 12

Total (422) 435 (46) (33)

(1) See Note2. in notes to the consolidated ﬁnancial statements.

As of December 31, 2019, the legal reserve of €70 million

represents 16per cent of AirFrance – KLM’s issued capital. French

company law requires a limited company (société anonyme) to

allocate ﬁve per cent of its unconsolidated statutory net income

each year to this legal reserve until it reaches ten per cent of the

Group’s issued capital. The amount allocated to this legal reserve

is deducted from the distributable income for the current year.

The legal reserve of any company subject to this requirement

may only be distributed to shareholders upon liquidation of the

company.

28.5 Reserves and retained earnings

December31,

December31, 2018

(in € millions) 2019 restated

(1)

Legal reserve 70 70

Pension deﬁned beneﬁt reserves

(2)

(1,590) (1,527)

Derivatives reserves

(2)

(15) (285)

Equity instruments reserves

(2)

(37) (19)

Other reserves (1,338) (1,777)

Net income (loss)–Group share 290 420

Total (2,620) (3,118)

(1) See Note2 in notes to the consolidated ﬁnancial statements.

(2) Net of tax.

amount of €194.5 million were presented and accepted for

repurchase. In addition to this public operation, €2.2million of

perpetual bonds were purchased by “de gré à gré” or

over - the - counter agreement at the same price. As a result, the

nominal amount of the outstanding notes after completion of the

tender oer is €403.3million.

On October1, 2019 and October1, 2018, AirFrance – KLM disbursed

respectively coupons of €25million and €38million, before tax,

relating to this instrument.

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Pension costs are recorded in the line “salary costs”, except for

plan amendments and curtailments with a signiﬁcant impact,

which are recorded under “other non - current income and

expense”. Curtailments of pension plans due to restructuring are

also recorded under “other non - current income and expense”.

The plan amendments, curtailments and settlements in 2019 and

2018 are presented in Note29.3.

29.1 Characteristics of the main

deﬁned beneﬁt plans

The Group has a large number of retirement and other long - term

beneﬁt plans for its employees, several of which are deﬁned

beneﬁt plans. The speciﬁc characteristics (beneﬁt formulas,

funding policies and types of assets held) of the plans vary

according to the regulations and laws in the particular countries

in which the employees are located.

Pension plan related to KLM Ground Sta–

The Netherlands

The pension plan for Ground Sta in the KLM entity is a deﬁned

beneﬁt plan based on average salary with reversion to the spouse

on the beneﬁciary’s death. The retirement age as foreseen by the

plan is 68years.

Since September1, 2018, the Board of the pension fund has been

composed of members appointed by the employer, employees

and an external expert. The Board is fully responsible for the

execution of the plan. KLM can only control the ﬁnancing

agreement between KLM and the pension fund.

To satisfy the requirements of Dutch regulations and the rules set

between the employer and the Board of the pension fund, the

plan imposes a mandatory funding level of approximately 125per

cent of the projected long - term obligation. The projection of

these commitments is calculated according to local funding rules.

The mandatory funding ratio is based on the new Financial

Assessment Framework (nFTK) in force since January1, 2015.

One impact of the nFTK is a requirement for higher minimum

solvency levels. On the other hand, pension funds have more time

to recover from immediate and material shortfalls through a

rolling ten - year recovery plan that also includes the projected

future return on investment.

Based on the criteria under Dutch Pension Law, as set by the

Dutch Central Bank, the funding ratio of the Ground Sta pension

fund is 108.2per cent as of December31, 2019 versus 116.6per

cent as of December31, 2018.

If the coverage ratio is under the funding ratio detailed above,

the pension funds are required to implement a recovery plan that

aims for compliance with the 125per cent threshold within ten

years and includes projected future returns on investment. As a

NOTE29 RETIREMENT BENEFITS

(in € millions) Retirement beneﬁts

Amount as of December31, 2017 2,202

Of which: non - current 2,202

New provision 137

Use of provision (190)

Fair value revaluation (55)

Currency translation adjustment 1

Amount as of December31, 2018 2,098

Of which: non - current 2,098

New provision 143

Use of provision (124)

Fair value revaluation 125

Currency translation adjustment 11

Amount as of December31, 2019 2,253

Of which: non - current 2,253

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consequence, the recovery plan for the Ground Sta plan was

updated as of April1, 2019. If the threshold is not reached within

ten years, additional contributions are payable by the company

and the employee (transitional period of 12years as of 2015).

The amount of regular and additional employer contributions is

not limited. Any additional employee contributions are limited to

two per cent of the pensionable contribution basis.

A reduction in contributions is possible if the pension indexation

is fully funded. Furthermore, according to Dutch Pension Law,

this reduction is not limited and can be realized either by a

reimbursement in contributions, or a reduction in future

contributions. Since 2015, the new Dutch ﬁscal rules have

foreseen a maximum pensionable salary of €107,593 as of

January1, 2019, and a lower future accrual rate for pensions.

The return on plan assets, the discount rate used to value the

obligations and the longevity and characteristics of the active

population are the main factors potentially impacting both the

coverage ratio and the level of the regular contribution for future

pension accrual. The regular contribution for the yearly pension

accrual is limited to 22per cent of the pension base.

The funds, fully dedicated to the KLM Group companies, are

mainly invested in bonds, equities and real estate. The management

of most of the assets is outsourced to a private institution, under

a service contract.

The required funding of this pension plan also includes a buer

against the following risks: interest rate risks, equity risks,

currency risks, credit risks, actuarial risks and real estate risks. For

example, to reduce the sensitivity to a decline in interest rates, a

substantial part of the sensitivity to an interest rate shock on all

maturities is covered by an interest hedge.

Pension plan related to KLM Flight Deck crew

and Cabin crew–The Netherlands

In 2017, the pension plans for KLM Cockpit crew and Cabin crew

in the Netherlands were modiﬁed to collective deﬁned contribution

schemes. The modiﬁcation of these two plans ﬁnalized the

“de - risking” of the pension plans thereby signiﬁcantly reducing

the volatility of the Group’s annual pension contributions and

balance sheet.

Air France pension plan (CRAF)–France

The employees covered by this plan are the Air France ground

sta aliated to the CRAF until December31, 1992.

The participants receive, or will receive on retirement, an

additional pension paid monthly or a lump sum based on the

monthly annuity and deﬁnitively calculated based on the data

known as of December31, 1992 and expressed in the form of

points. The value of each point is adjusted every year based on

the weighted increases seen in the CNAV and ARRCO schemes

over the last twelve months.

Until 2009, the CRAF had the legal form of a supplementary

pension institution (pursuant to the “Code de Sécurité Sociale”).

With this status, the CRAF was responsible, on behalf of the Air

France ground sta employed in France, for managing the

pension plan resulting from the merging of the Air France ground

sta plan with the mandatory pension plan for the private sector.

Following the 2003 law on pension reform foreseeing the

disappearance of supplementary pension institutions as of

December31, 2009, the CRAF’s Board of Directors opted to

transform it into an institution managing supplementary pensions.

The CRAF is now responsible for the administrative functions

linked to the plan.

The pension rights were not amended by this reform. Air France

is directly responsible for the pension obligations.

As of December31, 2009, all the funds managed by the CRAF

had been transferred to two insurance companies.

On December 31, 2012, one of the insurance contracts was

terminated and its funds were transferred to the other, which thus

became the only insurer. This guarantees a capital of 17per cent

equal to the amount of capital invested in units of account in its

collective fund, this percentage being automatically set to increase

over time.

The annual payments made by Air France to the insurance

company are governed by the agreement signed with the

employee representative bodies on December 14, 2009. The

minimum annual payment deﬁned by this agreement amounts

to €32.5million as long as the life annuity guaranteed by the

insurer does not reach 85per cent of the beneﬁts payments for

this plan without future revaluations. If the value of the funds falls

below 50per cent of the total obligations calculated for funding

purposes, Air France is required to make an additional payment

to achieve a minimum 50per cent coverage rate.

The funds are invested in bonds, equities and general assets of

the insurance company. Studies of assets/liabilities allocation are

carried out regularly, to verify the relevance of the investment

strategy.

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Air France end of service beneﬁt plan (ICS)–France

Pursuant to French regulations and the company agreements,

every employee receives an end of service indemnity on retirement.

In France, this indemnity depends on the number of years of

service, the professional category of the employee (ﬂight deck

crew, cabin crew, ground sta, agent, technician and executive)

and, in some cases, on the age of the employee at retirement.

On retirement, employees consequently receive an end of service

indemnity based on their ﬁnal salaries over the last twelve - months

and on their seniority. The indemnity is only payable to employees

on their retirement date.

There is no mandatory minimum funding requirement for this

scheme. Air France has nevertheless signed contracts with three

insurance companies to partly pre - ﬁnance the plan. Air France

has sole responsibility for payment of the indemnities, but

remains free to make payments to these insurance companies.

The relevant outsourced funds are invested in bonds and equities.

As of December31, 2019, the KLM Ground Sta pension plan and

the two French plans presented above represented a respective

72 per cent and 18 per cent of the Group’s deﬁned beneﬁt

obligation and 88per cent and 5per cent of the Group’s pension

plan assets.

29.2 Description of the actuarial

assumptions and related

sensitivities

Actuarial valuations of the Group’s beneﬁt obligation were made

as of December31, 2019 and 2018.

These calculations include:

— assumptions on sta turnover and the life expectancy of the

plan beneﬁciaries;

— assumptions on salary and pension increases;

— assumptions on retirement ages varying from 55to 68years

depending on the localization and applicable laws;

— inﬂation rates determined with reference to the inﬂation swaps

applied to the Group’s cash - ﬂows and based on the duration

of the schemes:

As of December 31 2019 2018

Euro zone–Duration 10to 15years 1.30% 1.60%

Euro zone–Duration 15years

and beyond 1.40% 1.75%

— Discount rates used to determine the actuarial present value

of the projected beneﬁt obligations.

The discount rates for the dierent geographical areas are

thus determined based on the duration of each plan, taking

into account the average trend in interest rates on investment

grade bonds, observed on the main available indices. In some

countries, where the market in this type of bond is not

suciently broad, the discount rate is determined with

reference to government bonds. Most of the Group’s beneﬁt

obligations are located in the Euro zone, where the discount

rates used are as follows:

As of December31 2019 2018

Euro zone–Duration 10to 15years 0.70% 1.45%

to 0.75%

Euro zone–Duration 15years

and beyond 1.15% 1.85%

The duration of between 10 and 15years mainly concerns the

plans located in France while the duration of 15years and

beyond mainly concerns the KLM Ground Sta plan located

in The Netherlands;

— Discount rates used to determine the actuarial present value

of the service cost.

Since January1, 2016, by using adequate ﬂows, the Group has

reﬁned its calculations on the discount rate used for the

service - cost calculation. In the Euro zone, this implies using a

discount rate for the service - cost calculation 15bps higher than

the one used to discount the obligation;

— On average, the main assumptions used to value the liabilities

are summarized below:

The rate of salary increase (excluding inﬂation) is 1.63per cent

for the Group as of December31, 2019 against 1.18per cent as

of December31, 2018;

The rate of pension increase (excluding inﬂation) is 0.85per

cent for the Group as of December31, 2019 against 1.14per

cent as of December31, 2018;

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— The sensitivity of the pension obligations to a change in assumptions, based on actuarial calculations, is as follows:

Sensitivity to changes in the inﬂation rate

Sensitivity of the Sensitivity of the

assumptions for assumptions for

the year ended the year ended

(in € millions) December31, 2019 December31, 2018

25bp increase in the inﬂation rate 277 240

25bp decrease in the inﬂation rate (266) (230)

Sensitivity to changes in the discount rate

Sensitivity of the Sensitivity of the

assumptions for assumptions for

the year ended the year ended

(in € millions) December31, 2019 December31, 2018

100bp increase in the discount rate (2,120) (1,754)

100bp decrease in the discount rate 2,803 2,284

Sensitivity to changes in salary increase (excluding inﬂation)

Sensitivity of the Sensitivity of the

assumptions for assumptions for

the year ended the year ended

(in € millions) December31, 2019 December31, 2018

25bp increase in the salary increase rate 80 67

25bp decrease in the salary increase rate (74) (63)

Sensitivity to changes in pension increase

Sensitivity of the Sensitivity of the

assumptions for assumptions for

the year ended the year ended

(in € millions) December31, 2019 December31, 2018

25bp increase in the pension increase rate 536 439

25bp decrease in the pension increase rate (534) (336)

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29.3 Evolution of commitments

The following table details the reconciliation between the beneﬁts obligation and the plan assets of the Group and the amounts

recorded in the ﬁnancial statements for the years ended December31, 2019 and December31, 2018.

As of December31, 2019 As of December31, 2018

(in € millions) Netherlands France Others Netherlands France Others

Beneﬁt obligation at beginning of year 8,364 2,234 833 8,346 2,277 889

Service cost 154 71 14 120 70 13

Interest cost 152 31 24 155 28 22

Employees’ contribution 32 - 1 64 - 1

Plan amendments and curtailment 2 4 (3) - 5 6

Beneﬁts paid (192) (115) (39) (256) (101) (38)

Transfers of assets/liability through balance sheet - - 18 17 - 3

Actuarial loss/(gain) demographic assumptions (1) (47) (12) (100) 3 (17)

Actuarial loss/(gain) ﬁnancial assumptions 1,013 187 98 54 (41) (29)

Actuarial loss/(gain) experience gap 46 39 (19) (37) (7) (11)

Change in currency exchange rates - - 41 1 - (6)

Beneﬁt obligation at end of year 9,570 2,404 956 8,364 2,234 833

Including beneﬁt obligation resulting

from schemes totally or partly funded 9,339 2,301 896 8,152 2,148 763

Including unfunded beneﬁt obligation 231 103 60 212 86 70

Fair value of plan assets at beginning of year 8,483 589 592 8,667 650 583

Actual return on plan assets 1,319 58 95 (161) (32) 2

Employers’ contributions 76 33 16 84 33 17

Employees’ contributions 32 - 1 64 - 1

Beneﬁts paid (157) (57) (32) (171) (61) (29)

Transfers of assets/liability through balance sheet - - 18 - - 24

Change in currency exchange rates and others 2 (2) 31 - (1) (6)

Fair value of plan assets at end of year 9,755 621 721 8,483 589 592

Amounts recorded in the balance sheet

(1)

Pension asset 418 - 2 330 - 1

Provision for retirement beneﬁts (233) (1,783) (237) (211) (1,645) (242)

Net amount recognized 185 (1,783) (235) 119 (1,645) (241)

Net periodic cost:

Service cost 154 71 14 120 70 13

Net interest cost/(income) (5) 23 6 (10) 20 7

Plan amendments, curtailment and settlement 2 4 (3) - 5 6

Actuarial losses/ (gain) recognized in income statement 14 2 (1) 3 - (1)

Net periodic cost 165 100 16 113 95 25

(1) All the obligations are recorded as non - current liabilities, except for the pension plans for which the balance is a net asset and therefore fully recorded as a

non - current asset.

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The equity portion is mainly invested in active markets in Europe,

the United States and emerging countries. The bonds primarily

comprise government bonds, rated at least BBB, and invested in

Europe, the United States and emerging countries. The real estate

assets are mainly located in Europe and the United States.

The Group’s pension assets do not include assets occupied or

used by the Group.

29.5 Expected cash - out ﬂows

and risks linked to the

pension obligations

The employer contributions relating to the deﬁned beneﬁt

pension plans amount to € 134 million for the year ended

December 31, 2020. The weighted average duration of the

obligation is 18.4years.

The funding, capitalization and matching strategies implemented

by the Group are presented in Note29.1.

As indicated above, the ﬁscal rules for accruing pensions and the

new Financial Assessment Framework, as part of the Dutch

pension law, in The Netherlands changed as of January1, 2015.

Amongst other things, this resulted in a requirement for higher

minimum solvency levels. For the Group, the risk could be that,

in the event of a long term shortfall of KLM ground sta, based

on existing or future ﬁnancing agreements, KLM could be

required to make additional cash payments (the actual funding

ratios are presented in Note29.1).

For 2020, this additional payment risk concerning the KLM

Ground Sta pension plan is mitigated by the solvency levels and

the rolling ten year recovery plan noted since December31, 2019.

29.4 Asset allocation

The weighted average allocation of the funds invested in the Group’s pension and other long - term beneﬁt plans is as follows:

Funds invested as Funds invested as

of December31, 2019 of December31, 2018

The The

(in %) France Netherlands France Netherlands

Equities 26 40 31 38

Bonds 51 50 46 52

Real estate - 10 - 10

Others 23 - 23 -

Total 100 100 100 100

Amendments, curtailment and settlement

of pension plans

— As of December31, 2019

ICS beneﬁts have been increased for the Air France cockpit crew

as part of a retirement at the minimum age of 60, if providing an

advanced notice of at least 12months.

In this case, the cockpit crew member is entitled to the determined

ICS compensation. In this respect, an exceptional expense of 11M€

has been recorded.

A curtailment of the ICS pension plan at Air France is made,

amounting to a proﬁt of 7 M€, within the framework of the

Voluntary Departure Plan for ground sta.

— As of December31, 2018

In 2018, in the Lloyds Bank case, the UK High Court ruled that UK

pension schemes must equalize Guaranteed Minimum Pension

(GMP) between men and women. The Group has two UK-based

pension schemes for which the best estimate calculation has

been performed by external actuaries. The 2018 one - o expense

is a €5million increase of the Deﬁned Beneﬁt Obligation.

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The movements in provisions for litigation and other risks and

charges with an impact on the income statement are charged to

the lines of the income statement corresponding to the nature of

the expenses.

30.1 Provisions

30.1.1 Return obligation liability and

provision on leased aircraft

The movements in return obligation liabilities and provisions

(revaluation of future costs and change in discount rate) are

booked in the components corresponding to the potential and

restoration work performed on leased aircraft and recorded in

the right - of - use assets. The eects of accretion and foreign

exchange translation of return obligation liabilities and provisions

recorded in local currencies are recognized in “Other ﬁnancial

income and expenses” (see Note12).

The discount rate used to calculate these restitution liabilities and

provisions relating to leased aircraft, determined on the basis of

a short - term risk - free rate increased by a spread on risky debt

(used for companies with high ﬁnancial leverage), is 4.5per cent

as of December31, 2019 versus 6.0per cent as of December31, 2018.

30.1.2 Restructuring provisions

The movements in restructuring provisions with a signiﬁcant

impact on the income statement are charged to “Other

non - current income and expenses” (see Note11).

As of December312019 and 2018, the restructuring provisions

mainly concern the Voluntary Departure Plans at Air France and

its regional subsidiaries, and at KLM and Martinair.

NOTE30 RETURN OBLIGATION LIABILITY AND PROVISION

FOR LEASED AIRCRAFT AND OTHER PROVISIONS

Return obligation Maintenance

liability on on leased

(in € millions) leased aircraft aircraft Restructuring Litigation Others Total

Amount as of December31, 2018 restated

(1)

2,902 389 159 406 106 3,962

Of which:

— non - current 2,851 391 - 383 82 3,707

— current 51 (2) 159 23 24 255

New provision - 29 34 26 24 113

Use of provision (44) (15) (140) (33) (30) (262)

Reversal of unnecessary provisions - - (5) (6) (1) (12)

New lease contract/Change in lease contract 85 1 - - - 86

Currency translation adjustment 112 17 - - - 129

Accretion impact 132 14 - - 6 152

Reclassiﬁcation - - - - (6) (6)

Amount as of December31, 2018 restated

(1)

3,188 434 48 393 99 4,162

Of which:

— non - current 3,119 425 - 47 65 3,657

— current 69 8 48 346 34 505

New provision - 15 49 32 61 157

Use of provision (5) (10) (30) (9) (41) (95)

Reversal of unnecessary provisions - - (4) (5) - (9)

New lease contract/Change in lease contract (121) 19 - - - (102)

Currency translation adjustment 48 (6) - - - 42

Accretion impact 186 24 - - 2 212

Reclassiﬁcation 80 10 - 1 6 97

Amount as of December31, 2019 3,376 486 63 412 127 4,464

Of which:

— non - current 3,209 410 - 59 72 3,750

— current 167 76 63 353 55 714

(1) See Note2. in notes to the consolidated ﬁnancial statements.

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30.1.3 Litigation

An assessment of litigation risks with third parties has been

carried out with the Group’s attorneys and provisions have been

recorded whenever circumstances require.

Provisions for litigation with third parties also include provisions

for tax risks. Such provisions are set up when the Group considers

that the tax authorities, within the framework of tax audits, could

reasonably challenge a tax position adopted by the Group or one

of its subsidiaries.

In the normal course of its activities, the AirFrance – KLM Group,

its subsidiaries Air France and KLM and their subsidiaries are

involved in litigation cases, some of which may be signiﬁcant.

30.1.4 Litigation concerning anti - trust

laws in the air - freight industry

Air France, KLM and Martinair, a wholly - owned subsidiary of KLM

since January1, 2009, have been involved, since February2006,

with up to twenty - ﬁve other airlines in investigations initiated by

the antitrust authorities in several countries, with respect to

allegations of anti - competitive agreements or concerted actions

in the air freight industry.

As of December31, 2019, most of these investigations had been

terminated following the entry into plea agreements between Air

France, KLM and Martinair and the appropriate competition

authorities providing for the payment of settlement amounts or

ﬁnes, with the exception of the proceedings initiated by the

European Commission, and by the Swiss antitrust authority,

which are still pending.

In Europe, the decision of the European Commission of 2010

against eleven air cargo carriers, including the companies of the

Group, Air France, KLM and Martinair, was annulled by the

General Court of the European Union on December 16, 2015

because it contained a contradiction regarding the exact scope

of the practices sanctioned. On March17, 2017, the European

Commission issued a new decision against the aforementioned

cargo carriers, including Air France, KLM and Martinair. The total

amount of ﬁnes imposed in respect of this decision at the

AirFrance – KLM Group level was €339million. This amount was

slightly reduced by €15.4 million as compared to the initial

decision owing to a lower ﬁne for Martinair due to technical

reasons. On May29 and 30, 2017 the Group companies ﬁled an

appeal against this decision before the General Court of the

European Union. The Group has maintained a provision covering

the total amount of these ﬁnes.

In Switzerland, Air France and KLM are challenging a decision

imposing a €4million ﬁne before the relevant court. The Group

has provisioned the totality of this ﬁne.

As of December 31, 2019, the total amount of provisions in

connection with proceedings which have yet to give rise to

deﬁnitive decisions amounts to €343million.

30.1.5 Other provisions

Other provisions relate principally to provisions for onerous

contracts, provisions for the portion ofCO

2

emissions not covered

by the free allocation of quotas and provisions for the dismantling

of buildings.

30.2 Contingent liabilities

The Group is involved in several governmental, judicial and

arbitration procedures for which in most cases provisions have

not been recorded in the ﬁnancial statements in accordance with

the applicable accounting rules. Indeed, with respect to most

cases the Group is not in a position at this stage in these

procedures to give a reliable estimate of the potential loss that

would be incurred in connection with these disputes.

30.2.1 Litigations concerning anti - trust

laws in the air - freight industry

Following the initiation of various investigations by the

competition authorities in 2006 and the European Commission

decision in 2010, several collective and individual actions were

brought by forwarders and air - freight shippers in the civil courts

against Air France, KLM and Martinair, and other cargo operators,

in a number of jurisdictions.

Under these civil lawsuits, shippers and freight forwarders are

claiming for damages to compensate alleged higher prices due

to alleged competition law infringement.

Although signiﬁcant amounts have been reported by the media,

plaintis are mostly claiming for unspeciﬁed and/or insuciently

substantiated damages against defendants taken as a whole (and

not individually) and the EU decision to which the plaintis refer

to is still not deﬁnitive.

The Group companies and the other airlines involved in these

lawsuits continue to vigorously oppose all such civil claims. For

Air France, KLM and Martinair the main civil claims still pending

are those in the Netherlands and in Norway.

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NOTE31 FINANCIAL DEBT

As of December31

2019 2018

Non Non

(in € millions) current Current Total current Current Total

Perpetual subordinated loan in Yen 164 - 164 239 - 239

Perpetual subordinated loan in Swiss francs 345 - 345 333 - 333

OCEANE (convertible bonds) 454 - 454 - - -

Bonds 1,128 - 1,128 1,131 - 1,131

Debt on ﬁnancial lease with bargain option 2,938 547 3,485 2,907 640 3,547

Other debt 1,242 252 1,494 1,123 140 1,263

Accrued interest - 43 43 - 46 46

Total–Financial debt 6,271 842 7,113 5,733 826 6,559

30.2.2 Litigations concerning anti - trust

laws in the passenger sector

Canada

A civil class action was reinitiated in 2013 by claimants in Ontario

against seven airlines including Air France and KLM. The plaintis

allege that the defendants participated in a conspiracy in the

passenger air transport service from Canada on the cross-Atlantic

routes, for which they are claiming damages. Air France and KLM

strongly deny any participation in such a conspiracy.

30.2.3 Other litigations

Rio-Paris AF447 ﬂight

Following to the crash in the South Atlantic ocean of the Rio-Paris

AF447 ﬂight, a number of legal actions for damages have been

brought by heirs of the victims in the United States and Brazil

and, more recently, in France.

Damages to heirs of the victims are covered by third - party

liability insurance subscribed by Air France.

In 2011, Air France and Airbus were indicted as legal entities for

unintentional manslaughter and therefore are exposed to

applicable ﬁnes under the French criminal code. Air France is

challenging its implication in this criminal case.

US Department of Justice investigation related

to United States Postal Service

In March2016, the US Department of Justice (DOJ) informed Air

France and KLM of a civil inquiry regarding contracts with the

United States Postal Service for the international transportation

of mail by air. In September2016, a Civil Information Demand

from the DOJ has been received seeking certain information

relating to these contracts. The DOJ has indicated it is

investigating potential violations of the False Claims Act. Air

France and KLM are cooperating with the DOJ investigation.

Case brought against KLM by (former) Martinair Cargo pilots

In 2015, a case was brought against KLM by 152 (former) Martinair

airline pilots on the basis that the cargo department of Martinair

was transferred to KLM and that all former cockpit crew are

entitled to remuneration from KLM, taking into account the

Martinair seniority. The lower Court in 2016 and the Court of

appeal in 2018 rejected all claims made against KLM. The

Martinair airline pilots appealed the 2018 judgment. In

November2019, the Supreme Court ruled that the judgement of

the court of appeal lacked sucient motivation and referred the

case to another Court of appeal. This Court will have to

reconsider certain arguments that were brought forward by the

airline pilots.

Except for the matters speciﬁed under the paragraphs 30.1 and

30.2, the Group is not aware of any governmental, judicial or

arbitration dispute or proceedings (including any proceedings of

which the issuer is aware, or that are pending or threatened

against it) that could have a signiﬁcant impact on the Group’s

ﬁnancial position, earnings, assets, liabilities or proﬁtability, for a

period covering at least the past twelve months.

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31.1 Perpetual subordinated debt

31.1.1 KLM Perpetual subordinated debt

in Japanese Yen

The perpetual subordinated loan in Japanese Yen was provided

to KLM in 1999 for a principal amount of JPY 30billion. The total

amount outstanding is JPY 20 billion, i.e. €164 million as of

December31, 2019.

As per August 28, 2019 KLM has partially redeemed JPY

10billion, leaving the residual outstanding principal amount to

JPY 20billion. As from this date, the ﬁxed JPY interest was reset

to 4% per annum applicable on residual notional amount.

This perpetual loan can be redeemed at KLM’s discretion on each

ﬁfth anniversary of the ﬁrst interest payment date, August28,

1999. The next repayment option date at Par is therefore set on

August28, 2024. Note that an indemnity is due if the JPY loan is

redeemed in another currency than JPY.

This loan debt is subordinated to all other existing and future

debt at KLM.

31.1.2 KLM Perpetual subordinated

debt in Swiss francs

The perpetual subordinated bond debt in Swiss francs was issued by

KLM in two tranches, one in 1985 and one in 1986. The initial nominal

amount for these two perpetual bonds combined was CHF 500 million.

Over the years, KLM has proceed several partial buy back transactions

to partially redeem debt. The total amount now outstanding is

CHF 375million, i.e. €345million as of December31, 2019.

Concerning the perpetual bond debt issued in 1985, KLM is entitled

to early redeem at par the outstanding residual amount on each

tenth anniversary of the interest payment date. The next “call

date” is February12, 2025. The coupon reset date is fully aligned

with the above mentioned frequency. If not called, the next

coupon reset date is set on February 12, 2025. The current

outstanding coupon is 0.75% per annum.

Concerning the perpetual bond debt issued in 1986, KLM is entitled

to early redeem at Par the outstanding residual amount on each

ﬁfth anniversary of the interest payment date. The next “call date”

is May15, 2021. The call price amount in 2001 was 101.75per cent of

the notional face value, and thereafter with a premium declining

by 0.25per cent on each ﬁfth anniversary of the interest payment

date. Therefore from May15, 2036, the call price amount will be

set at Par. The ﬁxed interest coupon is 5.75% per annum.

Change in ﬁnancial debt

New Non Reimbur- Currency

December31, ﬁnancial monetary sement of translation December

(in € millions) 2018 debt change ﬁnancial debt adjustment Other 31, 2019

Perpetual subordinated loan 572 - - (83) 20 - 509

OCEANE - 446 8 - - - 454

Bonds 1,131 - (1) - (2) - 1,128

Debt on ﬁnancial lease

with bargain option 3,547 566 6 (619) 25 (40) 3,485

Other long - term debt 1,263 629 3 (454) 2 89 1,494

Accrued interest 46 - 13 - - (16) 43

Total 6,559 1,641 29 (1,156) 45 33 7,113

New Non Reimbur- Currency

December31, ﬁnancial monetary sement of translation December

(in € millions) 2017 debt change ﬁnancial debt adjustment Other 31, 2018

Perpetual subordinated loan 544 - - - 27 1 572

Bonds 1,628 1 - (500) 16 (14) 1,131

Debt on ﬁnancial lease

with bargain option 3,778 426 4 (735) 74 - 3,547

Other long - term debt 1,272 140 4 (165) 3 9 1,263

Accrued interest 75 - - - - (29) 46

Total 7,297 567 8 (1,400) 120 (33) 6,559

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Mortgage debt is a debt secured by a mortgage on an aircraft.

The mortgage is ﬁled with the national Civil Aviation Authority

(the DGAC in France) in order to be publicly available to third

parties. A mortgage grants to the mortgage a right to enforce

the security (by order of a judge), the sale of the asset and a

priority claim on the sale proceeds in line with the amount of the

loan, the balance reverting to the other creditors.

Other debt mainly corresponds to bank borrowings. This also

includes €20million related to issuance expenses on ﬁnancial

debt.

31.4 Other debt

Other debt breaks down as follows:

As of December31

(in € millions) 2019 2018

Reservation of ownership clause and mortgage debt 1,072 646

Other debt 422 617

Total 1,494 1,263

31.3 OCEANE

On March20, 2019, AirFrance – KLM issued 27,901,785bonds

convertible and/or exchangeable for new or existing AirFrance –

KLM shares (OCEANE) with a maturity date ﬁxed at March25,

2026 for a total nominal amount of €500million. Each bond has

a nominal value of €17.92. The annual coupon amounts to

0.125per cent. The conversion period of these bonds runs from

May4, 2019 to the seventh working day preceding the normal or

early reimbursement date. The conversion ratio is one share for

one bond.

Repayment at par, plus accrued interest, will be possible on

March25, 2024 at the request of the bond holders. AirFrance – KLM

can enforce the cash reimbursement of these bonds by exercising

a call option running from April15, 2022 if the share price exceeds

130per cent of the nominal, i.e. €23.29, encouraging OCEANE

bond holders to convert their bonds into AirFrance – KLM shares.

Upon issue of these convertible bonds, AirFrance – KLM recorded

a debt of €446million, corresponding to the present value of

future payments of interest and nominal discounted at the rate

of a similar bond without a conversion option. The option value,

calculated by deducting this debt value from the total nominal

amount of the issue (i.e. €500million), was recorded in equity.

As of December31, 2019, the debt value amount to €454million.

31.2 Bonds

Amount

Issuing issued Maturity Reimbursement

Bond date (inmillions) date date Coupon

Bond issued in 2014 4June2014 € 600 18June2021 - 3.875%

€ Bond issued in 2016 5Oct. 2016 € 400 5Oct. 2022 - 3.75%

$ Bond issued in 2016

(1)

12Dec. 2016 $ 145 15Dec. 2026 - 4.35%

(1) Bonds issued to Asian institutional investors via an unlisted private placement.

The bond debt is subordinated to all other existing and future

KLM debts.

The two CHF perpetual bond debts are ranked “pari passu” with

the JPY perpetual loan debt.

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As of December31, 2019, the Group holds undrawn credit lines

amounting to €1,765 million. The two undrawn revolving

credit lines facilities amount for respectively €1,100million for

Air France – KLM holding company and Air France, and

€665million for KLM standalone.

After having exercised a ﬁrst extension option in November2018,

AirFrance – KLM and Air France exercised their second extension

option on their joint revolving credit facility in November2019.

Following this exercise, the two tranches of the revolving credit

facility, amounting respectively to €550million and €550million,

have now same duration and maturity date in November2022.

31.6 Currency analysis

The breakdown of ﬁnancial debt by currency after impact of derivative instruments is as follows:

As of December31

(in € millions) 2019 2018

Euro 5,247 4,820

US Dollar 691 541

Swiss franc 355 341

Yen 820 857

Total 7,113 6,559

31.7 Credit lines

As of December31, 2019, the expected ﬁnancial costs amount to

€128million for the 2020 ﬁnancial year, €369million for the 2021

to 2024 ﬁnancial years, and €291million thereafter.

As of December 31, 2019, it has been considered that the

perpetual subordinated loan would be reimbursed according to

their most probable maturities (probable exercise date of the

issuer call).

The bonds issued in 2014 and 2016 will be reimbursed on their

contractual maturity date (see Note31.2).

31.5 Maturity analysis

The ﬁnancial debt maturities break down as follows:

As of December31

(in € millions) 2019 2018

Maturities in

Y+1 970 1,077

Y+2 1,456 897

Y+3 1,071 1,548

Y+4 570 683

Y+5 964 828

Over 5years 2,870 2,335

Total 7,901 7,368

Including:

—principal 7,113 6,559

— interest 788 809

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NOTE32 LEASE DEBT

2019 2018

As of December31 Non Non

(in € millions) current Current Total current Current Total

Lease debt–aircraft 2,338 789 3,127 2,657 821 3,478

Lease debt–real estate 618 107 725 654 119 773

Lease debt–other 193 56 249 234 30 264

Accrued interest - 19 19 1 19 20

Total–Lease debt 3,149 971 4,120 3,546 989 4,535

Change in lease debt

New contracts Currency

December31, and renewals Reimbur- translation December31,

(in € millions) 2018 of contracts sement adjustment Others 2019

Lease debt–aircraft 3,478 435 (807) 24 (3) 3,127

Lease debt–real estate 773 88 (141) - 5 725

Lease debt–others 264 66 (60) 2 (23) 249

Interests 20 - - - (1) 19

Total 4,535 589 (1,008) 26 (22) 4,120

New contracts Currency

December31, and renewals Reimbur- translation December31,

(in € millions) 2017 of contracts sement adjustment Others 2018

Lease debt–aircraft 3,993 129 (781) 146 (9) 3,478

Lease debt–real estate 674 251 (136) - (16) 773

Lease debt–others 266 59 (55) 9 (15) 264

Interests - - - 1 19 20

Total 4,933 439 (972) 156 (21) 4,535

These revolving credit facility lines are subject to ﬁnancial

covenants calculated based on the Air France – KLM Group’s

consolidated ﬁnancial statements. These ﬁnancial covenants

were respected as of December31, 2019.

On May 17, 2018, KLM signed a €665 million revolving credit

facility with twelve banks. This new credit facility holds a ﬁve - year

tenor, with two one - year extension options. In 2019, the ﬁrst

one - year extension was granted extending the revolving credit

facility maturity date to May 17, 2024. The ﬁnancial covenant

ratios are calculated based on the KLM Group’s consolidated

ﬁnancial statements, and are respected as of December31, 2019.

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The lease debt maturity breaks down as follows:

As of As of

December31, December31,

(in € millions) 2019 2018

Y+1 1,231 1,236

Y+2 1,058 1,090

Y+3 868 921

Y+4 631 744

Y+5 391 490

Over 5years 1,025 1,124

Total 5,204 5,605

Including:

—principal 4,120 4,535

—interest 1,084 1,070

NOTE33 NET DEBT

As of December31,

(in € millions) Note 2019 2018

Current and non - current ﬁnancial debt 31 7,113 6,559

Current and non - current lease debt 32 4,120 4,535

Accrued interest 31 and 32 (62) (67)

Deposits related to ﬁnancial debt 23 (227) (343)

Deposits related to lease debt 23 (91) (85)

Derivatives impact on debt 4 7

Gross ﬁnancial debt (I) 10,857 10,606

Cash and cash equivalents 27 3,715 3,585

Marketable securities

(1)

23 111 74

Cash secured

(1)

23 300 265

Triple A bonds

(1)

23 585 522

Other 3 1

Bank overdrafts 27 (4) (5)

Net cash (II) 4,710 4,442

Net debt (I-II) 6,147 6,164

(1) Included in “other ﬁnancial assets”.

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As of December31,

2018

(in € millions) Note 2019 restated

(1)

Opening net debt 6,164 6,359

Operating free cash, cash - ﬂow excluding discontinued activities (623) (1,087)

Perpetual 28.4 - 197

Coupons paid on perpetual paid 28.4 26 38

Disposal of subsidiaries, of shares in non - controlled entities (13) (6)

Acquisition of subsidiaries, of shares in non - controlled entities 1 9

New lease debts (new and renewed contracts) 32 589 439

Unrealized exchange gains and losses on lease ﬁnancial debts through OCI 13 121

Currency translation adjustment 48 66

Capital increase 31.3 (54) -

Amortization of OCEANE optional part 8 -

Reclassiﬁcation (5) 3

Other (7) 25

Closing net debt 6,147 6,164

(1) See Note2 in notes to the consolidated ﬁnancial statements.

NOTE34 LOYALTY PROGRAM

Within Air-France-KLM, there are two loyalty programs: “Flying Blue” and BlueBiz.

As of December31, 2019 the deferred revenues relating to the outstanding miles of the “Flying Blue” customer loyalty program

amounts €774million. This will be recognized as revenue once the miles are redeemed. The Group expects that 53per cent of the

miles will be recognized as revenue over the next ﬁve years.

The breakdown of the “Flying Blue” program is as follows:

“Flying Blue”–Deferred revenues

(in € millions) 2019 2018

As of January1 763 747

Accumulation 319 302

Redemption (308) (286)

As of December31 774 763

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36.1 Risk management

— Market risk management

The aim of the AirFrance – KLM Group’s risk management strategy

is to reduce its exposure to such risks. Market risk coordination

and management is the responsibility of the Risk Management

Committee (RMC) which is composed of the Chief Financial Ocer

and Senior Vice-President Financial Operations of AirFrance – KLM

and the Chief Financial Ocers of Air France and of KLM.

The RMC meets each quarter to review Group reporting of the

risks relating to the fuel price, the principal currency exchange

rates and counterparties. During these meetings, it decides on

the hedging to be implemented: targets for hedging ratios, the

time periods for the respect of these targets and the types of

hedging instrument to be prioritized. The decisions taken by the

RMC are formalized then implemented by the Treasury

Management departments within each company, in compliance

with the procedures governing the delegation of powers.

Each company centralizes the management of the market risks

of its subsidiaries.

Regular meetings are organized between the Treasury

Management departments of the two companies on the hedging

instruments used, strategies planned and counterparties.

In order to implement the strategy most appropriate to each

circumstance, any type of instrument may be used provided it

qualiﬁes as hedging within IFRS. Any exception to this rule must

be approved by the Risk Management Committee. As a general

rule, no trading or speculation is allowed.

The treasury management departments of each company

circulate weekly information on the level of cash and cash

equivalents to their respective General Managements. The level

of the Group’s consolidated cash is communicated every week

and the end on the month to the Group’s General Management.

Every month, a detailed report including, amongst other information,

the interest rate and currency positions, the portfolio of hedging

instruments, a summary of investments and ﬁnancing by

currency and the monitoring of risk by counterparty is send to

the General Managements.

The hedging strategy on fuel and emission permits is fully under

the responsibility of the Treasury Management departments. The

General Managements receive a weekly fuel report, mainly

covering the transactions carried out during the week, the

valuation of the positions, the percentages hedged as well as the

breakdown of the instruments and underlying used, the average

hedge levels and the resulting net prices. All this data covers

rolling 24months. Furthermore, a weekly AirFrance – KLM Group

report (known as the Fuel Hedge report) consolidates the ﬁgures

from the two companies relating to fuel hedging and carries out

a budget update.

NOTE35 OTHER LIABILITIES

As of December31,

2019 2018 restated

(in € millions) Current Non - current Current Non - current

Tax liabilities 892 - 825 -

Employee - related liabilities 1,033 - 1,059 -

Non - current asset payables 96 - 93 -

Derivative instruments 154 107 329 339

Deferred income 739 17 632 18

Prepayments received 469 1 434 -

Other 220 98 194 102

Total 3,602 222 3,566 459

Non - current deferred income mainly relates to long - term contracts in the maintenance business.

NOTE36 FINANCIAL INSTRUMENTS

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— Fuel price risk

The fuel bill is one of the largest cost items for airlines making oil

price volatility a risk for the air transport industry. A sharp increase

in the oil price can have a very material negative impact on the

proﬁtability of airlines, particularly if the economic environment

does not enable them to adjust their pricing strategies. Similarly,

a sharp decline in fuel prices is favorable for airline proﬁtability.

However, the way in which airlines pass on a sharp fall in the fuel

price in their fares is a factor of signiﬁcant uncertainty.

Risks linked to the jet fuel price are hedged within the framework

of a hedging strategy deﬁned by the RMC for the whole of the

AirFrance – KLM Group.

The hedging strategy, approved by the Board of Directors, sets

the time span of the hedges at two years (a rolling 24months)

and the target hedging ratio at 60per cent. Furthermore, the

hedging is based on the use of simple futures or option - based

instruments. These hedging instruments must also be compatible

with IFRS9.

With the application of IFRS9 as of January1, 2018, the hedging

strategy of the Group has evolved and involves now component

on non - ﬁnancial item (crude oil and gasoil oil are speciﬁed as

components of jet fuel prices). These components are considered

as separately identiﬁable and reliably measurable as required by

IFRS9.

Main characteristics of the hedge strategy

Hedge horizon: two years rolling

Minimum hedge percentage, to reach at the end

of the current quarter:

— quarter underway: 60% of the volumes consumed;

— quarter 1to quarter 3: 60% of the volumes consumed;

— quarter 4: 50% of the volumes consumed;

— quarter 5: 40% of the volumes consumed;

— quarter 6: 30% of the volumes consumed;

— quarter 7: 20% of the volumes consumed;

— quarter 8: 10% of the volumes consumed.

Increment of coverage ratios: 10% by quarter

Underlyings: Brent, Gas Oil and Jet Fuel

Instruments: Swap, call, call spread, three ways, four ways and

collar.

Implementation of monitoring indicators on positions:

To ensure more eective monitoring of the marked - to - market

positions and a dynamic management of its exposure, the Group

uses the VAR (Value at Risk) metric to help measure the risk

incurred by its portfolio. This monitoring is also reinforced by

taking into account the maximum loss and maximum gain which

limit the scale of variation of this same portfolio and enable the

appropriate reaction.

— Currency risk

Most of the AirFrance – KLM Group’s revenues are generated in

euros. However, because of its international activities, the Group

incurs a foreign exchange risk. The management of the currency

risk for the subsidiaries of the two companies is centralized by

each company. The principal exposure relates to the US dollar.

Since the expenditure on items such as fuel and components

exceeds the amount of revenues in dollars, the Group is a net

buyer of US dollars. As the result, any signiﬁcant appreciation in

the dollar against the euro could result in a negative impact on

the Group’s activity and ﬁnancial results.

Inversely AirFrance – KLM Group is a net seller of other currencies,

the level of revenues in these currencies exceeding its expenditure.

This exposure is far less signiﬁcant than with the US dollar. As a

result, any signiﬁcant decline in these currencies against the euro

would have a negative eect on the Group’s ﬁnancial results.

The management of the Group’s exchange rate risk is carried out

on the basis of the forecast net exposure for each currency.

Currencies which are highly correlated to the US dollar are

aggregated with the US dollar exposure.

For each currency hedged, the time span of the hedging is a

rolling 24 - month period, the ﬁrst four quarters having more

hedging than the following four. The RMC sets the hedging

targets for the dollar, sterling and the yen.

Air France uses some zero - cost structured options, as hedging

instruments. These generate volatility in the ﬁnancial result

because on their non - aligned time value, unlike vanilla options

whose time value is aligned. Changes in aligned time values are

recorded in the consolidated statement of comprehensive

income in accordance with IFRS9.

Aircraft are purchased in US dollars, meaning that the Group is

exposed to an appreciation in the dollar relative to the euro in

terms of its investment in ﬂight equipment.

The hedging strategy provides for the implementation of a

graduated level of hedging between the date aircraft are ordered

and their delivery.

The exchange rate risk on the Group’s ﬁnancial debt is limited. At

December31, 2019, 74% of the Group’s debt, after taking into

account derivative instruments, was euro - denominated, thereby

signiﬁcantly reducing the risk of currency ﬂuctuation on the debt.

The exchange rate risk on debt denominated in other currencies

mostly concerns the Yen 11%, the US dollar 10% and the Swiss

franc 5%.

As of January1, 2018, the Group has applied IFRS16 meaning that

aircraft leases mostly denominated in US dollars, are accounted for

in the Group’s debt. These loans have been requaliﬁed as hedging

for the network’s future revenues in US dollars. Consequently, the

impact of foreign exchange dierences in US dollars is accounted

in other comprehensive income. For both Transavia and KLM

Cityhopper which have no US dollar revenues, hedging programs

speciﬁc to these commitments have been deﬁned.

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— Interest rate risk

A portion of the debt is contracted at ﬂoating rates. However, to

limit its volatility Air France and KLM have used option and swap

strategies involving the use of derivatives to convert a signiﬁcant

proportion of their ﬂoating - rate debt into ﬁxed rates; after swaps,

the Air France – KLM Group’s debt contracted at ﬁxed rates

represents 71per cent of the overall total. The interest rate on the

Group’s gross debt after swaps stood at 2.54 per cent at

December31, 2019 versus 2.96per cent at December31, 2018.

— Risks on carbon credit

To meet its regulatory obligations, the CO

2

emission quota

acquisition strategy has been monitored and reviewed during

every RMC meeting since October2011. Its implementation led

to the progressive hedging of the future requirement through the

use of forwards contracts meaning that the 2019 requirement and

a portion of the 2020 requirement are hedged.

Underlyings: EUA, EUAA and CER quotas.

Instruments: Forwards, delivery and payment during the quarter

preceding the compliance application date.

— Investment risks

The cash resources of Air France, KLM and AirFrance – KLM are

currently invested over a short - term time horizon, primarily

deposits, money market mutual funds and certiﬁcates mainly

rated A1/P1, the other lines being rated A2/P2.

Lastly, in order to reduce the currency risk on the debt, a portion

of KLM’s liquid assets is invested in high - quality foreign - currency

denominated bonds.

— Equity risks

The AirFrance – KLM Group holds a limited number of shares

which are listed for trading. The value of these investments may

vary during their period of ownership. These investments are

accounted for using either the equity method (associates) if the

Group has the ability to exercise signiﬁcant inﬂuence, or at their

fair value. If the fair value cannot be determined from a practical

point of view, the value of the investment is measured at its

acquisition cost.

As of December31, 2019, the Group continues to own 4.95million

shares in Amadeus IT Holding SA, the totality of these shares

being covered by a hedging transaction. This hedge transaction

(collar) enables the Group to protect the value of these shares.

In November 2019, Air France – KLM rolled over a hedging

transaction in the form of a forward to protect the value of the

totality of these shares.

The treasury shares held by AirFrance – KLM are not deemed to

be investments. Furthermore, the treasury shares are not deemed

to be exposed to risk, since any variation in the value of these

shares is only recognized directly in equity when they are sold in

the market, with no impact on the net result.

— Counterparty risk management

The rules concerning the management of counterparty risk are

established by the RMC and applied by the companies.

Except in the event of express dispensation from the RMC,

counterparties must beneﬁt from a minimum rating of BBB+ (S&P)

with the exception of mutual funds where the risk is considered

negligible. The maximum commitments by counterparty are

determined based on the quality of their rating. The RMC also

monitors the trend in the respective proportion each counterparty

represents of the overall hedging portfolio (fuel, currency and

interest rate) and investments. The positions of both Air France

and KLM, together with those of the AirFrance – KLM parent

company, are taken into account in the assessment of the overall

exposure. A monthly report is established and circulated to the

members of the General Management in the two companies. It is

supplemented by real time information in the event of any real

risk of a rating downgrade for counterparties.

The transactions involving potential counterparty risk are as

follows:

— ﬁnancial investments;

— derivative instruments;

— trade receivables;

– counterparty risk linked to ﬁnancial investments and

derivative instruments is managed by the Risk Management

Committee which establishes limits by counterparty, for all

instruments except investments in money market funds

(OPCVM) for which the counterparty risk is deemed not

to be signiﬁcant. The Group’s counterparty - risk reporting

is circulated each month to the executive managements,

the risk being measured at the fair market value of the

various instruments. Any exceeding of a limit immediately

results in the implementation of corrective measures,

– the counterparty risk linked to derivative instruments is

taken into account in the valuation of their market value

as described in Note 4.11. Derivative instruments are

governed by the ISDA and FBF compensation master

agreements. Within the framework of these agreements,

compensation (in the event of default) must be made by

counterparty for all the derivatives governed by each type

of agreement,

– counterparty risk relating to trade receivables is limited

due to the large number and geographical diversity of the

customers comprising the trade receivables portfolio.

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The Group has identiﬁed the following exposure to counterparty risk:

Total exposure (in € millions)

LT Rating (Standard & Poors) As of December31, 2019 As of December31, 2018

AAA 242 -

AA 393 135

A 2,280 2,429

BBB 16 17

Total 2,931 2,581

This presentation does not include money market funds (OPCVM) and current accounts.

— Liquidity risk

The liquidity risk relates to the credit lines held by the Group, as described in Note31.7.

36.2 Derivative instruments

As of December31, 2019, the fair value of the Group’s derivative instruments and their expected maturities are as follows:

(in € millions) Total Y+1 Y+2 Y+3 Y+4 Y+5 > Y+5

Commodities derivative instruments Asset 75 55 20

Liability (100) (86) (14)

Interest rate derivative instruments Asset 16 - 9 5 2

Liability (49) (12) (8) (5) (4) (5) (15)

Currency exchange derivative instruments Asset 388 186 96 64 26 15

Liability (104) (51) (35) (3) (1) (3) (12)

Amadeus instrument Asset

Liability (4) (4)

Carbon credit derivative instruments Asset 17 17

Liability (4) (1) (3)

Total Asset 496 258 125 64 31 15 2

Liability (261) (154) (60) (8) (5) (8) (27)

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No ineciencies on fuel hedging have been recognized because

of the hedging by component.

The price after hedge of the total fuel expenses is equal to the

market price, to which unitary into - plane costs and hedge results

have been added. The hedge results reﬂects the payout of

the hedging strategy based on the forward curve as of

December 31, 2019. The hedge results include realized

over - eectiveness, option premiums, results of unwound

structures and exclude time value.

As of December31, 2018, the fair value of the Group’s derivative instruments and their expected maturities were as follows:

(in € millions) Total Y+1 Y+2 Y+3 Y+4 Y+5 > Y+5

Commodities derivative instruments Asset 78 52 26 - - - -

Liability (542) (297) (245) - - - -

Interest rate derivative instruments Asset 21 1 1 8 - 8 3

Liability (35) (5) (4) (9) (5) (2) (10)

Currency exchange derivative instruments Asset 285 95 82 41 42 14 11

Liability (89) (25) (16) (12) (6) - (30)

Amadeus shares derivative instrument Asset 13 13 - - - - -

Liability (1) (1) - - - - -

Carbon credit derivative instruments Asset 81 64 17 - - - -

Liability (1) (1) - - - - -

Total Asset 478 225 126 49 42 22 14

Liability (668) (329) (265) (21) (11) (2) (40)

36.2.1 Commodity risk linked to fuel prices

The Group’s commitments on Brent, Gas Oil and Jet CIF are presented below, at their nominal value:

As of December31, 2019

Maturity

Maturities between 1 and 5 years

Fair

(in € millions) Nominal below 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Commodity risk (cash - ﬂow

hedging operating ﬂows)

Swap 1,111 909 203 - - - - (10)

Options 3,405 2,239 1,166 - - - - (15)

Total 4,516 3,148 1,369 - - - - (25)

Price after hedge USD/ Metric Tons 697 667 - - - - -

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As of December31, 2018

Maturity

Maturities between 1 and 5 years

Fair

(in € millions) Nominal below 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Commodity risk (cash - ﬂow

hedging operating ﬂows)

Swap 869 632 237 - - - - (80)

Options 3,311 2,148 1,163 - - - - (384)

Total 4,180 2,780 1,400 - - - - (464)

Price after hedge USD/ Metric Tons 650 662 - - - - -

Fuel hedge sensitivity

The impact on “income before tax” and on “gains/(losses) taken to equity” of a variation in the fair value of the fuel hedges following

a +/- USD 10variation in the price of a barrel of Brent is as follows:

As of December31

2019 2018

Increase of Decrease of Increase of Decrease of

USD 10per USD 10per USD 10per USD 10per

(in € millions) barrel of Brent barrel of Brent barrel of Brent barrel of Brent

Gains/(losses) taken to equity 577 (584) 563 (564)

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36.2.2 Exposure to interest rate risk

To manage the interest rate risk on its short and long - term borrowings, the Group uses instruments with the following nominal values:

As of December31, 2019

Balance

sheet item of Maturity

underlying below

Maturities between 1 and 5years

Fair

(in € millions) Nominal items 1year 1 - 2years 2-3 years 3-4 years 4-5 years +5 years value

Operations qualiﬁed

as cash - ﬂow hedging 1,742 8 254 52 189 144 1,095 (41)

Rate swaps 1,592 Financial 8 254 52 189 144 945 (41)

debt

Options 150 Financial - - - - - 150 -

debt

Operations qualiﬁed

as fair value hedging - - - - - - - -

Rate swaps - - - - -

Operations qualiﬁed

as fair value through

proﬁt and loss 325 - 209 - 24 - 92 8

Rate swaps 125 Financial - 9 - 24 - 92 9

debt

Options 200 Financial - 200 - - - - (1)

debt

Total 2,067 8 463 52 213 144 1,187 (33)

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As of December31, 2019 and December31, 2018, without - rate

ﬁnancial assets mainly include cash and the revaluation of

Amadeus shares at their fair value.

Interest rate sensitivity

The Group is exposed to the risk of interest rate variation. A

100 - basis point variation (increase or decrease) in interest rates

would have an impact of €22million on the ﬁnancial income for

the year ended December31, 2019 versus €19million for the year

ended December31, 2018.

As of December31, 2018

Balance

sheet item of Maturity

underlying below

Maturities between 1 and 5years

Fair

(in € millions) Nominal items 1year 1 - 2years 2-3 years 3-4 years 4-5 years +5 years value

Operations qualiﬁed

as cash - ﬂow hedging 1,768 136 75 67 39 226 1,225 (28)

Rate swaps 1,618 Financial 136 75 67 39 226 1,075 (29)

debt

Options 150 Financial - - - - - 150 1

debt

Operations qualiﬁed

as fair value hedging 200 - - 200 - - - 6

Rate swaps 200 Financial - - 200 - - - 6

debt

Operations qualiﬁed

as fair value through

proﬁt and loss 147 22 23 20 18 12 52 8

Rate swaps 147 22 23 20 18 12 52 8

Total 2,115 158 98 287 57 238 1,277 (14)

In 2019, given the perfect economic relationship between hedging instruments and hedged items, no ineectiveness has been

recognized on interest rate hedging strategies.

Taking into account the hedging operations, the Group’s exposure to interest rate risks breaks down as follows:

2019 2018

Before hedging After hedging Before hedging After hedging

Average Average Average Average

As of December31 interest interest interest interest

(in € millions) Base rate Base rate Base rate Base rate

Fixed - rate ﬁnancial assets

and liabilities

Fixed - rate ﬁnancial assets 2,393 1.2% 2,393 1.2% 2,662 1.4% 2,662 1.4%

Fixed - rate ﬁnancial liabilities 8,203 4.5% 9,101 3.8% 7,702 5.0% 8,765 4.5%

Floating - rate ﬁnancial assets

and liabilities

Floating - rate ﬁnancial assets 1,352 0.4% 1,352 0.4% 1,247 0.1% 1,247 0.1%

Floating - rate ﬁnancial liabilities 3,078 1.4% 2,195 1.5% 3,384 1.4% 2,321 1.7%

Without - rate ﬁnancial assets 1,758 - 1,531 - 1,495 - 1,497 -

Without - rate ﬁnancial liabilities - - - - 7 - 9 -

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36.2.3 Exposure to exchange rate risk

The nominal amounts of futures and options linked to exchange rates are detailed below given the nature of the hedging operations:

As of December31, 2019

Hedged item

Maturity

Balance

below

Maturities between 1 and 5years

Fair

(in € millions) Nominal sheet item 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Exchange risk

(cash - ﬂow hedging

of operating ﬂows) 3,871 2,233 1,501 7 - - 129 59

Exchange rate options 2,115 N/A 1,259 856 - - - - 22

Forward purchases 994 N/A 577 413 4 - - - 69

Forward sales 633 N/A 397 232 3 - - - (20)

Debt 129 Debt - - - - - 129 (12)

Exchange risk

(fair value hedging

of ﬂight equipment

acquisition) 4,435 1,626 1,326 1,020 268 196 - 210

Exchange rate options 159 Other 14 107 38 - - 28

commitments

Forward purchases 3,198 Other 1,289 955 630 190 134 - 234

commitments

Forward sales 1,078 Other 337 357 283 40 62 - (52)

commitments

Exchange risk (trading) 153 109 44 - - - - 15

Forward purchases 153 109 44 - - - - 15

Forward sales - - - - - - - -

Total 8,459 3,968 2,871 1,027 268 196 129 284

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As of December31, 2018

Hedged item

Maturity

Balance

below

Maturities between 1 and 5years

Fair

(in € millions) Nominal sheet item 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Exchange risk

(cash - ﬂow hedging

of operating ﬂows) 3,927 2,418 1,382 - - - 127 47

Exchange rate options 1,948 N/A 1,208 740 - - - - 20

Forward purchases 1,419 N/A 897 522 - - - - 47

Forward sales 433 N/A 313 120 - - - - (2)

Debt 127 Debt - - - - - 127 (18)

Exchange risk

(fair value hedging

of ﬂight equipment

acquisition) 4,646 1,373 1,268 1,025 587 256 137 133

Exchange rate options 159 Other 14 107 38 - 18

commitments

Forward purchases 3,523 Other 1,175 909 757 410 179 93 122

commitments

Forward sales 964 Other 198 359 254 70 39 44 (7)

commitments

Exchange risk (trading) 215 90 95 30 - - - 16

Forward purchases 215 90 95 30 - - - 16

Total 8,788 3,881 2,745 1,055 587 256 264 196

Unaligned time value of options with - barrier is booked under other ﬁnancial income and expenses in the income statement for a loss

of €4million.

Currency hedge sensitivity

The value in euros of the monetary assets and liabilities is presented below:

As of December31

Monetary assets Monetary liabilities

(in € millions) 2019 2018 2019 20 18

US dollar 1,231 1,442 4,035 3,680

Pound sterling 67 38 34 30

Yen 17 25 805 841

Swiss francs 13 15 354 330

Others 239 272 104 131

The amounts of monetary assets and liabilities disclosed above do not include the eect of the revaluation of assets and liabilities

documented in fair value hedge.

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The impact on “income before tax” and on “gains/(losses) taken to equity” of a 10per cent appreciation in foreign currencies relative

to the euro is presented below:

As of December31

US dollar Pound sterling Yen

(in € millions) 2019 2018 2019 2018 2019 2018

Income before tax (134) (84) (37) 5 (91) (93)

Gains/(losses) taken to equity 240 251 (49) (62) (3) (6)

The impact of the change in fair value of currency derivatives on “income before tax” and on “gains/ (losses) taken to equity” of a

10per cent depreciation in foreign currencies relative to the euro is presented below:

As of December31

US dollar Pound sterling Yen

(in € millions) 2019 2018 2019 2018 2019 2018

Income before tax 91 43 1 (5) 78 81

Gains/(losses) taken to equity (100) (130) 50 48 11 12

36.2.4 Carbon credit risk

As of December31, 2019, the Group has hedged its future purchases ofCO

2

quotas as follow:

As of December31, 2019

Maturity

Maturities between 1 and 5 years

Fair

(in € millions) Nominal below 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Operating ﬂows

as cash - ﬂow hedging 151 88 63 - - - - 13

Forwards 151 88 63 - - - - 13

Total 151 88 63 - - - - 13

As of December31, 2018

Maturity

Maturities between 1 and 5 years

Fair

(in € millions) Nominal below 1year 1-2 years 2-3 years 3-4 years 4-5 years +5 years value

Operating ﬂows

as cash - ﬂow hedging 170 109 61 - - - - 80

Forwards 170 109 61 - - - - 80

Total 170 109 61 - - - - 80

These contracts mostly expire within three years.

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2019 2018

Estimated Estimated

As of December31 Net book market Net book market

(in € millions) value value value value

Financial assets

Loans 694 694 612 594

Financial liabilities

Bonds 1,586 1,659 1,131 1,171

OCEANE 2019 454

464 - -

Bond 2014 604

631 604 626

Bond € 2016 400

430 400 412

Bond $ 2016 128

134 127 133

Perpetual subordinated loans 541 489 572 527

Other borrowings and ﬁnancial debt 1,955 2,002 1,641 1,771

36.3 Market value of ﬁnancial

instruments

Market values are estimated for most of the Group’s ﬁnancial

instruments using a variety of valuation methods. However, the

methods and assumptions used to provide the information set

out below are theoretical in nature. They include the following

inherent limitations:

— the estimated market values of ﬁnancial instruments are

estimated on the basis of the market price as of December31,

2019 and December31, 2018;

— the estimated amounts as of December 31, 2019 and

December31, 2018 are not indicative of gains and/or losses

potentially arising on maturity or in the event of cancellation

of a ﬁnancial instrument.

The application of alternative methods and assumptions may,

therefore, have a signiﬁcant impact on the estimated market values.

The methods used are as follows:

— cash, trade receivables, other receivables, short - term bank

facilities, trade payables and other payables:

The Group considers that, due to their short - term nature, net

book value can be deemed a reasonable approximation of

their market value;

— marketable securities, investments and other securities:

The market value of securities is determined based mainly on

the market price or the prices available on other similar

securities. Securities classiﬁed under equity instruments are

recorded at their stock market value.

Where no market comparable exists, the Group uses their

book value, which is deemed a reasonable approximation of

their market value in this instance;

— borrowings, other ﬁnancial debts and loans:

The market value of ﬁxed and ﬂoating - rate loans and ﬁnancial

debts is determined based on discounted future cash ﬂows at

market interest rates for instruments with similar features;

— derivative instruments:

The market value of derivative instruments corresponds to the

amounts that would be payable or receivable were the

positions to be closed out as of December 31, 2019 and

December31, 2018, calculated using the year - end market rate.

Only the ﬁnancial assets and liabilities whose fair values diers

from their net book values are presented in the following table:

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These commitments mainly relate to amounts in US dollars,

converted into euros at the closing date exchange rate. All these

amounts are hedged.

The number of aircraft under ﬁrm order as of December31, 2019

increased by 59units compared with December31, 2018 and

stood at 108aircraft.

This change is explained by the delivery of 13 aircraft and

72aircraft on order.

Long - haul ﬂeet (passenger)

The Group took delivery of six Boeing Boeing 787s and three

Airbus A350s.

Medium - haul ﬂeet

The Group took delivery of four Boeing Boeing 737s.

Regional ﬂeet

The Group did not take delivery of an aircraft.

36.4 Valuation methods for ﬁnancial assets

and liabilities at their fair value

The breakdown of the Group’s ﬁnancial assets and liabilities is as follows based on the three classiﬁcation levels (see Note4.11):

As of December31

Level 1 Level 2 Level 3 Total

(in € millions) 2019 2018 2019 2018 2019 2018 2019 20 18

Financial asset equity instruments 432 377 1 13 - - 433 390

Asset debt instruments

Marketable securities and cash secured 19 11 392 327 - - 411 338

Cash equivalents liquidity funds (JV/P&L) 1,260 479 1,607 2,318 - - 2,867 2,797

Derivative instruments assets

Interest rate derivatives - - 16 21 - - 16 21

Currency exchange derivatives - - 386 285 - - 386 285

Commodity derivatives - - 74 78 - - 74 78

ETS derivatives - - 17 81 - - 17 81

Others - - 3 13 - - 3 13

Financial liabilities at fair value comprise the fair value of interest rate and foreign exchange. These valuations are classiﬁed as level2.

NOTE37 FLIGHT EQUIPMENT ORDERS

Due dates for commitments to ﬁrm orders with a view to the purchase of ﬂight equipment are as follows:

As of December31

(in € millions) 2019 2018

Y+1 1,469 1,274

Y+2 1,203 914

Y+3 1,266 1,279

Y+4 1,153 831

Y+5 768 913

> Year Y+5 1,210 344

Total 7,069 5,555

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Beyond

Aircraft type To be delivered in Y+1 Y+2 Y+3 Y+4 Y+5 Y+5 Total

Long - haul ﬂeet–passenger

A350 As of December31, 2019 6 7 5 7 4 6 35

As of December31, 2018 3 3 7 5 7 3 28

Boeing 787 As of December31, 2019 5 3 3 - - 11

As of December31, 2018 6 4 4 2 1 - 17

Boeing 777 As of December31, 2019 2 - - - - - 2

As of December31, 2018 - - - - - - -

Medium - haul ﬂeet

A220 As of December31, 2019 - 6 15 15 12 12 60

As of December31, 2018 - - - - - - -

Boeing 737 As of December31, 2019 - - - - - - -

As of December31, 2018 4 - - - - - 4

Regional ﬂeet

Total As of December31, 2019 13 16 23 22 16 18 108

As of December31, 2018 13 7 11 7 8 3 49

NOTE38 OTHER COMMITMENTS

38.1 Commitments made

As of December31

(in € millions) 2019 2018

Order on leased aircraft, not yet in operation 490 -

Call on investment securities 142 143

Warranties, sureties and guarantees 364 381

Secured debts 4,431 4,213

Other purchase commitments 140 350

The restrictions and pledges as of December31, 2019 are as follows:

NBV of balance

Amount sheet entry Corresponding

(in € millions) pledged concerned %

Intangible assets - 1305 -

Tangible assets 4889 12915 37.9%

Other ﬁnancial assets 984 1896 51.9%

Total 5873 16116

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The compensation of the non - executive Chariman of the Board

amounts to €0.20million.

Directors fees booked in expenses amount to €0.8million as of

December31, 2019, versus €0.9million as of December31, 2018.

NOTE39 RELATED PARTIES

39.1 Transactions with the principal executives

The total compensation recorded as costs for the members of the Group Executive Committee in respect of their functions within the

Group breaks down as follows:

Period from January1to December31

(in € millions) 2019 2018

Short - term employee beneﬁts 8.5 6.4

Post - employment beneﬁts 0.4 0.4

Termination beneﬁts – 1.2

Share - based payment 1.5 0.6

Total 10.4 8.6

The warranties, sureties and guarantees principally comprise

letters of credit from ﬁnancial institutions.

The Group disposes of the following put options on Servair

shares:

— as of each ﬁrst quarter between 2020 and 2025 inclusive: put

options on a number of shares enabling gategroup to reach

80% of Servair’s share capital (initial option);

— one year after the exercise of the initial put option, in each ﬁrst

quarter between 2021 and 2025: put options on all the shares

still held by the Group.

If the Group does not exercise the initial option, in each ﬁrst

quarter between 2020 and 2025: Gategroup disposes of call

options on a number of Servair shares enabling Gategroup to

reach 80% of the Servair share capital.

38.3 Order book

Long term contracts of maintenance business

The future revenues from long - term contracts in the maintenance

business amount to €8,706million. The Group expects 60% of

the order book will be recognized as revenue over the next ﬁve

years.

Passenger and freight transportation

As indicated in Note 4.6, the Group applies the exemption

provided by IFRS15.

Loyalty program

The redemption of the liability on the loyalty program is

presented in Note34.

38.2 Commitments received

As of December31

(in € millions) 2019 2018

Warranties, sureties and guarantees 274 235

Put option on shares

(1)

240 241

(1) Estimation based on the price for the disposal of 49.99% of Servair at the end of 2016.

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As a part of its normal business, the Group enters into transactions

with related parties including transactions with State - owned and

governmental entities such as the French Defense Ministry, the

Paris Airport Authority (“Aéroports de Paris”, or “ADP”), Schiphol

Airport, and the French civil aviation regulator (“DGAC”).

AirFrance – KLM considers that such transactions are concluded

on terms equivalent to those on transactions with third parties.

The most signiﬁcant transactions are described below:

Aéroports de Paris (ADP)

— land and property rental agreements;

— airport and passenger - related fee arrangements.

In addition, ADP collects airport landing fees on behalf of the

French State.

Total expenses incurred by the Group in connection with the

afore - mentioned arrangements amounted to a respective

€325 million and €323 million for the periods ended

December31, 2019 and December31, 2018.

Amsterdam Airport Schiphol (AAS)

— land and property rental agreements;

— airport and passenger - related fee arrangements.

In addition, AAS collects airport fees on behalf of the Dutch State.

Total expenses incurred by the Group in connection with the

afore - mentioned arrangements amounted to €204million for the

periods ended December31, 2019.

French Defense Ministry

Air France – KLM has entered into contracts with the French

Defense Ministry concerning the maintenance of aircraft in the

French Air Force. The net revenue derived from this activity

amounts to €37million for the year ended December31, 2019

versus €61million as of December31, 2018.

39.2 Transactions with the other related parties

The total amounts of transactions with related parties are as follows:

As of December31

(in € millions) 2019 2018

Assets

Net trade accounts receivable 181 189

Other current assets 18 20

Other non - current assets 9 9

Total 208 218

Liabilities

Trade accounts payable 196 165

Other current liabilities 164 188

Other long - term liabilities 1 2

Total 362 356

As of December31

(in € millions) 2019 2018

Net sales 192 243

Landing fees and other rents (339) (349)

Other selling expenses (22) (21)

Passenger service (414) (442)

Other (87) (79)

Total (670) (648)

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NOTE40 CONSOLIDATED STATEMENT OF CASH FLOW

40.1 Other non - monetary items and impairment

Other non - monetary items and impairment can be analyzed as follows:

As of December31

(in € millions) Notes 2019 2018

Variation of provisions relating to restructuring plan 30 10 (111)

Variation of provisions relating to pension 22 & 29 85 (13)

Changes to the KLM pension plans 29 - (74)

Phase out of A380 aircraft 126 -

European carbon emission allowances (ETS) 53 19

Change in fair value of hedged shares (59) (4)

Other 23 (71)

Total 238 (254)

Direction Générale de l’Aviation Civile (DGAC)

This civil aviation regulator is under the authority of the French

Ministry of Transport, which manages security and safety in the

French air space and at airports. As a result, the DGAC charges

fees to AirFrance – KLM for the use of installations and services

which amounts to €92million as of December31, 2019 versus

€96million for the year ended December31, 2018.

China Eastern Airlines

The net revenue derived by the Group in connection with the

afore - mentioned arrangement amounted to a respective

€20million and €12million for the periods ended December31,

2019 and December31, 2018.

Delta Air Lines

The net revenue derived by the Group in connection with the

afore - mentioned arrangement amounted to a respective €58million

and €62million for the periods ended December31, 2019 and

December31, 2018.

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NOTE41 STATUTORY AUDITORS’ FEES

KPMG:

2019 2018

As of December31

Statutory auditor Network Statutory auditor Network

(in € millions) Amount % Amount % Amount % Amount %

Statutory audit, certiﬁcation,

review of stand - alone

and consolidated accounts 2.0 95% 0.9 90% 2.1 81% 0.9 69%

— AirFrance – KLM SA 0.5 - 0.6 -

— Consolidated subsidiaries 1.5 0.9 1.5 0.9

Other services 0.1 5% 0.1 10% 0.5 19% 0.4 31%

— AirFrance – KLM SA 0.1 - 0.1 -

— Consolidated subsidiaries - 0.1 0.4 0.4

Total AirFrance – KLM 2.1 1.0 2.6 1.3

Deloitte & Associés:

2019 2018

As of December31

Statutory auditor Network Statutory auditor Network

(in € millions) Amount % Amount % Amount % Amount %

Statutory audit, certiﬁcation,

review of stand - alone

and consolidated accounts 1.9 100% 0.8 89% 2.0 83% 0.8 73%

— AirFrance – KLM SA 0.5 - 0.6 -

— Consolidated subsidiaries 1.4 0.8 1.4 0.8

Other services - 0% 0.1 11% 0.4 17% 0.3 27%

— AirFrance – KLM SA - - - -

— Consolidated subsidiaries - 0.1 0.4 0.3

Total AirFrance – KLM 1.9 0.9 2.4 1.1

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42.1 Consolidated entities

Entity Country Segment % interest % control

AIR FRANCE SA France Multisegment 100 100

KONINKLIJKE LUCHTVAART MAATSCHAPPIJ NV Netherlands Multisegment 100 49

BLUE CONNECT Mauritius Passenger 70 70

BLUELINK France Passenger 100 100

BLUELINK INTERNATIONAL France Passenger 100 100

BLUELINK INTERNATIONAL AUSTRALIA Australia Passenger 100 100

BLUELINK INTERNATIONAL CZ S.R.O. Czech Rep. Passenger 100 100

BLUELINK INTERNATIONAL MAURITIUS Mauritius Passenger 100 100

BLUELINK INTERNATIONAL CHILE Chile Passenger 100 100

BLUELINK INTERNATIONAL STRASBOURG France Passenger 100 100

CONSTELLATION FINANCE LIMITED Ireland Passenger 100 100

CYGNIFIC BV Netherlands Passenger 100 49

HOP! France Passenger 100 100

HOP! TRAINING France Passenger 100 100

IASA INCORPORATED Philippines Passenger 100 49

INTERNATIONAL AIRLINE SERVICES EUROPE LIMITED United Kingdom Passenger 100 49

INTERNATIONAL AIRLINE SERVICES LIMITED United Kingdom Passenger 100 49

INTERNATIONAL MARINE AIRLINE SERVICES LIMITED United Kingdom Passenger 100 49

KLM CITYHOPPER BV Netherlands Passenger 100 49

KLM CITYHOPPER UK LTD United Kingdom Passenger 100 49

KLM EQUIPMENT SERVICES BV Netherlands Passenger 100 49

KLM LUCHTVAARTSCHOOL BV Netherlands Passenger 100 49

STICHTING STUDENTENHUISVESTING VLIEGVELD EELDE Netherlands Passenger 100 49

BLUE CROWN BV Netherlands Cargo 100 49

MARTINAIR HOLLAND NV Netherlands Cargo 100 49

MEXICO CARGO HANDLING Mexico Cargo 100 100

SODEXI France Cargo 65 65

AFI KLM E&M TEARDOWN MANAGEMENT SAS France Maintenance 100 100

AIR FRANCE INDUSTRIE US United States Maintenance 100 100

As of December31, 2019, the scope includes 74fully - consolidated

entities, 21equity aliates and 1joint operation.

Based on the AirFrance – KLM ownership in terms of both voting

rights and equity interest and on the functioning mode of the

Group’s Executive Committee, AirFrance – KLM has the power to

manage the KLM Group’s ﬁnancial and operational strategies and

controls KLM. As a result, KLM is fully consolidated in

AirFrance – KLM’s consolidated ﬁnancial statements.

The interest percentage in KLM is calculated based on the

ordinary shares.

NOTE42 CONSOLIDATION SCOPE

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Entity Country Segment % interest % control

AIR FRANCE KLM COMPONENT SERVICES CO LTD China Maintenance 100 100

AIR ORIENT SERVICES France Maintenance 100 100

BARFIELD INC United States Maintenance 100 100

CRMA France Maintenance 100 100

EUROPEAN PNEUMATIC COMPONENT

OVERHAUL AND REPAIR (EPCOR) BV Netherlands Maintenance 100 49

KLM E&M MALAYSIA SDN BHD Malaysia Maintenance 100 49

KLM UK ENGINEERING Limited United Kingdom Maintenance 100 49

REGIONAL JET CENTER BV Netherlands Maintenance 100 49

BLUE TEAM III SAS France Transavia 100 100

TRANSAVIA AIRLINES BV Netherlands Transavia 100 49

TRANSAVIA AIRLINES C.V. Netherlands Transavia 100 49

TRANSAVIA COMPANY SAS France Transavia 100 100

TRANSAVIA FRANCE SAS France Transavia 100 100

TRANSAVIA SERVICES GMBH i.L. Germany Transavia 100 49

TRANSAVIA VENTURES BV Netherlands Transavia 100 49

AIR FRANCE FINANCE IRELAND Ireland Other 100 100

AIR FRANCE FINANCE SAS France Other 100 100

AIR FRANCE KLM E&M PARTICIPATIONS SAS France Other 100 100

AIR FRANCE KLM FINANCE SAS France Other 100 100

AIRPORT MEDICAL SERVICES BV Netherlands Other 80 39

AIRPORT MEDICAL SERVICES C.V. Netherlands Other 80 39

ASP BEHEER BV Netherlands Other 60 49

AMSTERDAM SCHIPHOL PIJPLEIDING C.V. Netherlands Other 76 49

BIGBLANK France Other 100 100

BLUE TEAM V SAS France Other 100 100

BLUE YONDER IX BV Netherlands Other 100 49

BLUE YONDER XIV BV Netherlands Other 100 49

BV KANTOORGEBOUW MARTINAIR Netherlands Other 100 49

CELL K16 INSURANCE COMPANY United Kingdom Other 100 0

EXECUTIVE HEALTH MANAGEMENT BV Netherlands Other 100 49

INTERNATIONALE FINANCIERING

EN MANAGEMENT MAATSCHAPPIJ BV Netherlands Other 100 49

KLM AIR CHARTER BV Netherlands Other 100 49

KLM CATERING SERVICES SCHIPHOL BV Netherlands Other 100 49

KLM HEALTH SERVICES BV Netherlands Other 100 49

KLM INTERNATIONAL CHARTER BV Netherlands Other 100 49

KLM OLIEMAATSCHAPPIJ BV Netherlands Other 100 49

MARTINAIR VESTIGING VLIEGVELD LELYSTAD BV Netherlands Other 100 49

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Entity Country Segment % interest % control

ORION-STAETE BV Netherlands Other 100 49

PELICAN Luxembourg Other 100 100

PYRHELIO-STAETE BV Netherlands Other 100 49

RIGEL-STAETE BV Netherlands Other 100 49

STICHTING GARANTIEFONDS KLM LUCHTVAARTSCHOOL Netherlands Other 100 49

TRAVEL INDUSTRY SYSTEMS BV Netherlands Other 100 49

TREASURY SERVICES KLM BV Netherlands Other 100 49

WEBLOK BV Netherlands Other 100 49

42.2 Equity aliates

Entity Country Segment % interest % control

ADM BLUE Madagascar Passenger 40 40

AAF SPARES Ireland Maintenance 50 50

AEROSTRUCTURES MIDDLE EAST SERVICES United Arab Maintenance 50 50

AEROTECHNIC INDUSTRIES Morocco Maintenance 50 50

AFI KLM E&M BGAC LINE MANAGEMENT CO LTD China Maintenance 60 60

IGO SOLUTIONS SAS France Maintenance 40 40

MAX MRO SERVICES India Maintenance 26 26

SHS TECHNICS Senegal Maintenance 49 50

SINGAPOUR COMPONENT SOLUTIONS PTE Singapore Maintenance 50 50

SPAIRLINERS Germany Maintenance 50 50

TRADEWINDS ENGINE SERVICES LLC United States Maintenance 50 50

TURBINE SUPPORT INTERNATIONAL LLC United States Maintenance 50 50

AIR ANTWERP BV Belgium Other 25 25

AIRCRAFT CAPITAL LTD United Kingdom Other 40 40

INTERNATIONAL AEROSPACE MANAGEMENT COMPANY S.C.R.L. Italy Other 25 25

MAINPORT INNOVATION FUND BV Netherlands Other 25 25

MAINPORT INNOVATION FUND II BV Netherlands Other 24 24

SCHIPHOL LOGISTICS PARK C.V. Netherlands Other 53 45

SERVAIR France Other 50 50

SKYNRG BV Netherlands Other 20 20

TERMINAL ONE GROUPE ASSOCIATION United States Other 25 25

42.3 Joint operations

Entity Country Segment % interest % control

AIRFOILS ADVANCES SOLUTIONS SAS France Maintenance 49 49

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To the Shareholders’ Meeting of AirFrance – KLM SA,

1. Opinion

In compliance with the engagement entrusted to us by your

Shareholders’ Meetings, we have audited the accompanying

consolidated ﬁnancial statements of AirFrance – KLM for the year

ended December31, 2019.

In our opinion, the consolidated ﬁnancial statements give a true

and fair view of the assets and liabilities and of the ﬁnancial

position of the Group as at December31, 2019, and of the results

of its operations for the year then ended in accordance with

International Financial Reporting Standards as adopted by the

European Union.

The audit opinion expressed above is consistent with our report

to the Audit Committee.

2. Basis for opinion

Audit framework

We conducted our audit in accordance with professional standards

applicable in France. We believe that the audit evidence we have

obtained is sucient and appropriate to provide a basis for our

opinion.

Our responsibilities under those standards are further described

in the Statutory Auditors’ Responsibilities for the Audit of the

Consolidated Financial Statements section of our report.

Independence

We conducted our audit in compliance with independence rules

applicable to us, for the period from January1, 2019 to the issue

date of our report and in particular we did not provide any

prohibited non - audit services referred to in Article 5 (1)

paragraph 1of Regulation (EU) no. 537/2014 or in the French

Code of Ethics for Statutory Auditors.

3. Emphasis of matter

We draw your attention to the Note2of the consolidated ﬁnancial

statements which describes the change in accounting method

related to the capitalization of limited life parts by component

and the change in accounting method related to compensations

paid to customers for delays or cancellations (“customer

compensations”).

4. Justiﬁcation of Assessments–

Key Audit Matters

In accordance with the requirements of Articles L.823 - 9 and

R.823 - 7of the French Commercial Code (Code de commerce)

relating to the justiﬁcation of our assessments, we inform you of

the key audit matters relating to risks of material misstatement

that, in our professional judgment, were of most signiﬁcance in

our audit of the consolidated ﬁnancial statements of the current

period, as well as how we addressed those risks.

These matters were addressed in the context of our audit of the

consolidated ﬁnancial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate opinion on

speciﬁc items of the consolidated ﬁnancial statements.

5.7 STATUTORY AUDITORS’ REPORT ON THE

CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER31, 2019

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Network revenue amounts to €23 315 million and essentially

corresponds to passenger transport services, and to a lesser

extent to cargo. The revenue related to passenger transportation

is recognized when the transportation service is provided and,

consequently, passenger tickets recorded when issued as “Deferred

revenue on ticket sales” for a liability amounting to €3,289million

as at December31, 2019. However, a portion of these sales, relating

to tickets that have been issued but which will never be used, is

recognized as revenue at the theoretical date of the transport,

based on a statistical rate regularly updated. The rate is

determined by the AirFrance – KLM Group based on historical data

taken from the information systems and adjusted for non - recurring

and speciﬁc events of the periods considered.

We considered revenue recognition for issued but unused passenger

tickets to be a key audit matter due to the importance of the

Group judgment in determining the recognition assumptions.

We tested the key controls implemented by the Group that we

considered the most relevant in determining the statistical rates

for “Deferred revenue on ticket sales.”

Our procedures primarily consisted in:

— assessing the appropriateness of the methodology adopted

by the Group;

— corroborating the historical database with the databases used;

— corroborating the statistical rate calculations;

— comparing actual revenue from unused passenger tickets with

prior year - end estimates;

— analyzing the age of deferred revenue on ticket sales

presented on the consolidated balance sheet to assess the

appropriateness of the revenue recognized in the period.

Revenue recognition for issued but unused passenger tickets

(Note4.6to the consolidated ﬁnancial statements)

Risk identiﬁed Our response

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AirFrance – KLM is involved in several governmental, judicial or

arbitration procedures and litigations, particularly concerning anti - trust

laws. The outcome of these procedures and litigations depends

on future events, and the Company’s estimates are inherently

based on the use of Group assumptions and assessments.

We considered the measurement of the litigation provisions to be

a key audit matter due to the uncertainty surrounding the outcome

of current procedures, the high degree of Group estimates and

judgment and the potentially material nature of the impact of

provision amounts on consolidated net income and equity should

these estimates change.

We speciﬁcally assessed the estimates and assumptions adopted

by the Group in determining the need to recognize a provision

and, where applicable, its amount.

Based on discussions with the Group, we familiarized ourselves

with the latter’s analysis of the risks and status of each signiﬁcant

litigation, whether reported or potential.

We assessed the items justifying the recognition or not of a

provision. We analyzed the lawyers’ replies to your enquiries,

familiarized ourselves with the exchanges between the Company,

its lawyers and other parties to the suits and considered any new

developments up to the issue date of our report.

Based on these items, we conducted a critical review of the

estimates and positions adopted by the Group.

We also assessed the appropriateness of the disclosures in the

Note30to the consolidated ﬁnancial statements.

Provisions for litigations and contingent liabilities

(Notes4.21, 30.1 and 30.2to the consolidated ﬁnancial statements)

Risk identiﬁed Our response

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5 Statutory Auditors’ report on the consolidated ﬁnancial statements

Deferred tax assets for a net amount of €523 million are

recognized in the consolidated balance sheet. This balance comprises

€693million in deferred tax assets for French tax group tax loss

carry - forwards mainly compensated by 201million deferred tax

liabilities on temporary dierences. These deferred tax assets are

recognized based on their likelihood of recovery pursuant to

budgets and medium - term plans prepared by the Group. The

recovery horizons for these deferred tax assets are seven years for

the French tax Group.

We identiﬁed this issue as a key audit matter due to the importance

of the Group judgment in the recognition of these assets and the

particularly high level of tax loss carry - forwards of which only a

portion has been capitalized due to recoverability prospects.

Our audit approach consisted in assessing the probability of the

Company making future use of the tax loss carry - forwards

generated to date, particularly in regard to:

— deferred tax liabilities in the same tax jurisdiction, where the

base could be oset against deferred tax assets with the same

maturity; and

— the Group’s ability to generate future taxable proﬁts in the

French tax jurisdiction in order to use prior - year tax losses

recognized as deferred tax assets.

We assessed the appropriateness of the methodology adopted

by the Group to identify existing tax losses carried forward that

will be utilized, either by oset against deferred tax liabilities or

future taxable proﬁts.

To assess future taxable proﬁts, we appraised the reliability of the

preparation process for the mid - term business plan underlying

the assessment of the probability that deferred tax assets will be

recovered. Our work consisted in assessing the future growth

assumptions used to prepare the mid - term business plan by:

— comparing income forecasts for prior years with actual results

for the years concerned;

— comparing these assumptions with the ones adopted for

non - current asset impairment tests.

We also assessed the consistency of Group assumptions used to

prepare income forecasts for the period beyond the mid - term

business plan particularly with the economic data for the Group’s

operating sector and the information gathered during discussions

with the Group.

Recognition of deferred tax assets

(Notes4.24 and 13to the consolidated ﬁnancial statements)

Risk identiﬁed Our response

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5

2019 Universal Registration Document — Air France - KLM 325

5. Speciﬁc Veriﬁcations

We have also veriﬁed in accordance with professional standards

applicable in France the information concerning the Group

presented in the Board of Directors’ management report.

We have no matters to report as to its fair presentation and its

consistency with the consolidated ﬁnancial statements.

We attest that the consolidated non - ﬁnancial statement required

by Article L.225 - 102 - 1of the French Commercial Code is included

in the Group management report, being speciﬁed that, in

accordance with the provisions of Article L.823 - 10of the code,

we have not veriﬁed the fair presentation and the consistency

with the consolidated ﬁnancial statements of the information

contained therein and should be reported on by an independent

insurance services provider.

6. Report on Other Legal

and Regulatory Requirements

Appointment of the Statutory Auditors

We were appointed as Statutory Auditors of AirFrance – KLM by

the Shareholders’ Meeting of September25, 1998 for Deloitte &

Associés and September25, 2002 for KPMG Audit.

As of December31, 2019, Deloitte & Associés and KPMG were

respectively in the 22

nd

year and 18

th

year of total uninterrupted

engagement, which are the 21

st

year and 18

th

year since securities

of the Company were admitted to trading on a regulated market.

7. Responsibilities of Management and

those charged with Governance for the

Consolidated Financial Statements

Management is responsible for the preparation and fair presentation

of the consolidated ﬁnancial statements in accordance with

International Financial Reporting Standards as adopted by the

European Union, and for such internal control as Management

determines is necessary to enable the preparation of consolidated

ﬁnancial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the consolidated ﬁnancial statements, Management

is responsible for assessing the Company’s ability to continue as

a going concern, disclosing, as applicable, matters related to

going concern and using the going concern basis of accounting

unless it is expected to liquidate the Company or to cease its

operations.

The Audit Committee is responsible for monitoring the ﬁnancial

reporting process and the eectiveness of internal control and risk

management systems and, where applicable, its Internal Audit,

regarding the accounting and ﬁnancial reporting procedures.

The consolidated ﬁnancial statements have been approved by

the Board of Directors.

8. Statutory Auditors’ Responsibilities

for the Audit of the Consolidated

Financial Statements

Objectives and audit approach

Our role is to issue a report on the consolidated ﬁnancial

statements. Our objective is to obtain reasonable assurance about

whether the consolidated ﬁnancial statements as a whole are free

from material misstatement. Reasonable assurance is a high level

of assurance, but is not a guarantee that an audit conducted in

accordance with professional standards will always detect a

material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or

in the aggregate, they could reasonably be expected to inﬂuence

the economic decisions of users taken on the basis of these

ﬁnancial statements.

As speciﬁed by Article L.823 - 10 - 1of the French Commercial Code,

the scope of our statutory audit does not include assurance on

the future viability of the Company or the quality with which the

Company’s Management has conducted or will conduct the

aairs of the entity.

As part of an audit in accordance with professional standards

applicable in France, the Statutory Auditors exercise professional

judgment throughout the audit and furthermore:

— identify and assess the risks of material misstatement of the

ﬁnancial statements, whether due to fraud or error, design and

perform audit procedures responsive to those risks, and

obtain audit evidence that is sucient and appropriate to

provide a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher than for

one resulting from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of

internal control;

— obtain an understanding of internal control relevant to the

audit in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an

opinion on the eectiveness of the internal control;

— evaluate the appropriateness of accounting policies used and

the reasonableness of accounting estimates and related

disclosures made by Management in the consolidated ﬁnancial

statements;

— assess the appropriateness of Management’s use of the going

concern basis of accounting and, based on the audit evidence

obtained, whether a material uncertainty exists related to events

or conditions that may cast signiﬁcant doubt on the Company’s

ability to continue as a going concern. Our conclusions are

based on the audit evidence obtained up to the date of our

audit report. However, future events or conditions may cause

the Company to cease to continue as a going concern. If the

Statutory Auditors conclude that a material uncertainty exists,

we draw attention in our audit report to the related disclosures

in the consolidated ﬁnancial statements or, if such disclosures

are not provided or inadequate, we modify our opinion;

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Paris-La Défense, February19, 2020

The Statutory Auditors

KPMG Audit Deloitte & Associés

Division of KPMG SA

Eric Jacquet Guillaume Troussicot Pascal Colin

Partner Partner Partner

This is a translation into English of the Statutory Auditors’ report on the consolidated ﬁnancial statements of the Company issued in

French and it is provided solely for the convenience of English speaking users.

This Statutory Auditors’ report includes information required by European Regulation and French law, such as information about the

appointment of the Statutory Auditors or veriﬁcation of the information concerning the Group presented in the management report.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards

applicable in France.

— evaluate the overall presentation of the ﬁnancial statements

and whether the ﬁnancial statements represent the underlying

transactions and events in a manner that achieves fair

presentation;

— obtain sucient appropriate audit evidence regarding the

ﬁnancial information of the entities included in the consolidation

scope to express an opinion on the consolidated ﬁnancial

statements. The Statutory Auditors are responsible for the

direction, supervision and performance of the audit of the

consolidated ﬁnancial statements and for the opinion expressed

on these consolidated ﬁnancial statements.

Report to the Audit Committee

We submit a report to the Audit Committee which includes in

particular a description of the scope of the audit and the audit

program implemented, as well as signiﬁcant audit ﬁndings. We

also bring to its attention any signiﬁcant deﬁciencies in internal

control regarding the accounting and ﬁnancial reporting procedures

that we have identiﬁed.

Our report to the Audit Committee includes the risks of material

misstatement that, in our professional judgment, were of most

signiﬁcance in the audit of the consolidated ﬁnancial statements

of the current period and which are therefore the key audit

matters, that we are required to describe in this report.

We also provide the Audit Committee with the declaration referred

to in Article 6of Regulation (EU) no. 537/2014, conﬁrming our

independence pursuant to the rules applicable in France as

deﬁned in particular by Articles L.822 - 10to L.822 - 14of the

French Commercial Code and in the French Code of Ethics for

Statutory Auditors. Where appropriate, we discuss with the Audit

Committee the risks that may reasonably be thought to bear on

our independence, and where applicable, the related safeguards.

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5.8 STATUTORY FINANCIAL STATEMENTS

5.8.1 Income statement

Year ending December31,

(in € millions) Notes 2019 2018

Operating income 3 52 49

External expenses 4 (50) (46)

Salaries and related costs 5 (8) (3)

Other expenses (1) (1)

Total operating expenses (59) (50)

Income from current operations (7) (1)

Financial income 59 54

Financial expenses (80) (103)

Net ﬁnancial income 6 (21) (49)

Earnings before tax and non - recurring items (28) (50)

Non - recurring income - -

Non - recurring expenses - -

Non - recurring income/-(loss) 7 - -

Income tax 8 17 12

Net income/(loss) (11) (38)

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5.8.2 Balance sheet

Assets December31 December31

(in € millions) Notes 2019 2018

Long - term investments 9.2 4678 4668

Loans & receivables related to long - term investment 9.3 468 563

Fixed assets 9.1 5146 5231

Trade receivables 13 14 37

Other receivables 13 206 141

Marketable securities 10 1820 1222

Cash and cash equivalent 307 247

Prepaid expenses 2 4

Current assets 2349 1651

Issue costs 9 9

Bond redemption premium 1 1

Total Assets 7505 6892

Liabilities & equity December31 December31

(in € millions) Notes 2019 2018

Capital 11.1 429 429

Additionnal paid - in capital 11.2 4139 4139

Legal reserve 70 70

Reserves (52) (14)

Income for the year 11.2 (11) (38)

Shareholder’s equity 11.2 4575 4586

Other equity 12 403 403

Provision for risks & liabilities 12–17 1 1

Financial debts 12 1652 1148

Trade payables and related accounts 13 15 13

Tax and social debts 13 4 2

Other liabilities 13 847 728

Liabilities 13 2518 1891

Unrealized foreign exchange gain 8 11

Total Liabilities & Equity 7505 6892

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5.8.3 Notes

The following information constitutes the notes to the ﬁnancial

statements for the year ended December31, 2019.

It is an integral part of the ﬁnancial statements.

AirFrance – KLM SA, a public limited company (société anonyme)

with registered oce at 2rue Robert Esnault Pelterie 75007Paris,

is the parent company of the AirFrance – KLM Group. It is listed

for trading in Paris (Euronext) and Amsterdam (Euronext).

1. Accounting policies and procedures

Generally accepted accounting policies have been applied,

consistent with the prudence principle and in accordance with

the legal and regulatory provisions applicable in France and to

the base assumptions whose aim is to provide a true and faithful

representation of the company:

— going concern;

— consistent accounting methods from year to year;

— independence of ﬁnancial periods.

and in accordance with the general rules for establishing and

presenting annual ﬁnancial statements.

The basic method used to value items recorded in the ﬁnancial

statements is the historical cost method.

The main accounting methods used

are the following:

Long - term investments

Investments in equity securities are presented on the balance

sheet at their acquisition cost net of impairment, if any. A

provision for impairment is recorded as soon as the fair value falls

below the acquisition value. The fair value of securities is

determined by taking into account the share of shareholders’

equity, the outlook for proﬁtability and the stock market values

that can be used as a reference.

Transfer taxes, fees or commissions and legal fees related to the

acquisition of securities are expensed, according to the option

oered by the regulations.

Treasury shares not allocated to employees or to a capital

decrease are booked in long - term investments. They are shown

at the lower of their acquisition cost or fair value. The fair value is

determined based on the average market price for the last month

of the ﬁnancial year.

Trade receivables

Trade receivables are valued at their nominal value. They are

valued on a case - by - case basis and a provision is set up as

required based on the assessed risks.

Marketable securities

Marketable securities are shown on the balance sheet at the lower

of their acquisition cost and their market value. In the case of

listed shares, this market value is determined based on the

market price at the end of the ﬁnancial year.

Treasury shares invested as part of a liquidity agreement are

valued at the lower of their acquisition price and fair value. The

fair value is determined based on the last month average market

price at the end of the ﬁnancial year.

Negotiable debt securities (certiﬁcates of deposits, and bills issued

by ﬁnancial companies) are booked at their acquisition cost.

Interest is booked as ﬁnancial income, on a - prorata temporis basis.

Foreign currency transactions

Operating expense and income transactions in foreign currencies

are recognized at the average exchange rate for each relevant

month.

Trade payable and receivable in foreign currencies are valued at

the exchange rate in eect at December31, 2019.

Unrealized losses and gains are recognized as assets and

liabilities on the balance sheet. Provisions are established for

unrealized losses, except for the following cases:

— transactions where the currency and the term contribute to

an overall positive currency position; and

— currency hedging contracts concerning the payment of future

investment deliveries.

Debts

Debts are valued at their nominal amount. The debt in foreign

currency is valued at the closing rate Euro/Dollar.

Financial instruments

Financial derivative instruments are used to reduce exposure to

interest rates risk and to foreign exchange. They are over the counter

instruments with ﬁrst class counterpart. Group management

policy bans subscription of trading instruments.

Dividends received

Dividends are recognized as income–when they are approved

by the competent bodies in the companies (i.e.: the Board of

Directors or the General Shareholders’ Meeting depending on the

local regulations)–or according to the terms of the bylaws.

2. Signiﬁcant events of the period

Since February2019, the Dutch government has purchased 14%

of the capital of Air France KLM. (See Note11.1)

For the general ﬁnancing needs of the company, AirFrance – KLM

issued bonds convertible into and/or exchangeable for new or

existing shares (OCEANE) dated March25, 2019 for a nominal

amount of € 500million.(See Note12.2)

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5. Compensation of the company ocers

The gross remuneration of the company ocers, recognized as

an expense in 2019, amounts to €2.62 million compared to

€1.26million in 2018. For 2019, it corresponds to that of Benjamin

Smith over the entire period. For 2018, this remuneration includes

those of Jean-Marc Janaillac from January to mid-May, Frédéric

Gagey from mid-May to mid-September and Benjamin Smith

from mid-September to the end of December.

The remuneration of the non - executive Chair of the Board of

Directors amounts to €0.20million.

3. Other income

Period

(in € million) 2019 2018

Management fees 32 28

of which Air France 18 17

of which KLM 14 11

Royalties 20 21

of which Air France 12 12

of which KLM 8 9

Total 52 49

4. External expenses

Period 2019 2018

Fees and surveys 19 19

Insurance 1 1

Sub-Contracting and rent re - invoiced by Air France and KLM 25 21

Financial communication 1 2

Other 4 3

Total 50 46

During the ﬁnancial year 2019, the teams assigned to AirFrance – KLM holding company represent 74Full Time Equivalent seconded

from Air France and 25full - time equivalent seconded from KLM.

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9. Long-Term Investments

9.1 Net book value

Beginning Increase/ Decrease/ End

(in € millions) Notes of year allocation reversal of year

Equity investments 9.2 4668 - 10 4678

Loans & receivables related to long term investment 9.3 563 23 (117) 468

Net amount - 5231 23 (107) 5146

7. Non - recurring income

None.

8. Income tax

Air France – KLM has beneﬁted from the tax consolidation

scheme since April1, 2002.

The consolidation scope, for which AirFrance – KLM is the parent

company, mainly includes Air France, HOP! and Transavia France

Companies.

The tax consolidation agreement is based on the so - called

neutrality method and puts each member company of the tax

group in the situation in which it would have been in without

consolidation.

AirFrance – KLM has a tax losses carried forward of € 824million.

The Group’s cumulative tax losses, which can be carried forward

indeﬁnitely, amount to € 7037million.

The subsidiaries recording a net earning, generated a tax

consolidation gain of € 17million to AirFrance – KLM for this

ﬁnancial year (€ 12million on the previous ﬁnancial year).

6. Net ﬁnancial Income

This section regroups interest paid or received, currency losses and gains, and allocations and reversal of ﬁnancial provisions. The

break - down is as follows.

Period Notes 2019 2018

Interest on loans and other ﬁnancial expenses (75) (103)

of which related companies commission on the guarantees granted by Air France and KLM

& interests on current account (1) (11)

of which interest on OCEANE 12.2 - -

of which interest on bonds 12.2 (38) (43)

of which interest on perpetual subordinated loan 12.1 (25) (34)

of which premium included in tender price of perpetual subordinated loan - (14)

of which others (12) (11)

Interest on loans 25 38

of which related companies 25 38

Other ﬁnancial income 24 10

of which related companies 2 2

of which investment in mutual funds and certiﬁcates of deposit 4 4

Allocation to provisions 5 6

of which provision for risks & liabilities (4) -

of which AirFrance – KLM Finance shares 9 6

Total (21) (49)

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9.2 Equity investments

December, 31 December, 31

(in € millions) Notes 2019 2018

Gross value

Air France 3821 3821

KLM 824 824

AirFrance – KLM Finance 31 31

Transavia Company 4 4

AirFrance – KLM Mobility - -

Big Blank - -

Total gross 4680 4680

Impairment

Air France - -

KLM - -

AirFrance – KLM Finance (2) (11)

Transavia Company - -

AirFrance – KLM Mobility - -

Big Blank - -

Total impairment (2) (11)

Net

Air France 3821 3821

KLM 824 824

AirFrance – KLM Finance 29 20

Transavia Company 4 4

AirFrance – KLM Mobility - -

Big Blank - -

Total Net 9.1 4678 4668

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9.3 Loans & receivables related to long term investment

Gross value Beginning Increase/ Decrease/ End

(in € millions) Note of year allocation reversal of year

Air France 392 21 (16) 397

KLM 99 2 (101) -

AirFrance – KLM Finance 71 1 - 72

BigBlank 1 3 - 4

Total gross 563 27 (117) 473

Impairment Impairment

Impairment beginning of year Allocation Reversal end of year

Air France - - - -

KLM - - - -

AirFrance – KLM Finance - - - -

BigBlank - (4) - (4)

Total impairment - (4) - (4)

Net value at Increase/ Decrease/ Net value

Net beginning of year allocation reversal end of year

Air France 392 21 (16) 397

KLM 99 2 (101) -

AirFrance – KLM Finance 71 1 - 72

BigBlank 1 (1) - -

Total Net 9.1 563 23 (117) 469

10. Marketable securities

December31, December31,

(in € millions) 2019 2018

Gross Value

Mutual funds, certiﬁcates of deposit & marketable term notes 1820 1222

Securities Compagnia Aerea Italiana 355 355

Total Gross value 2175 1577

Depreciation

Securities Compagnia Aerea Italiana (355) (355)

Total Depreciation (355) (355)

Total 1820 1222

The net carrying amount for the marketable securities, mutual funds and certiﬁcates of deposit is the market value.

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11. Shareholders’equity

11.1 Distribution of share capital and voting rights

The issued capital comprises 428,634,035fully paid - up shares with a nominal value of one euro. Each share is entitled to one voting

right. However since April3, 2016, any shareholder who has been owning registered shares for more than two years is entitled to

double voting rights, raising the number of voting rights to 586,975,522 as at December31, 2019. Distribution is as follows:

% of capital % of voting rights

December31 December31 December31 December31

2019 2018 2019 20 18

French State 14% 14% 21% 23%

Dutch State 14% - 10% -

Delta Air Lines 9% 9% 13% 7%

China Eastern Airlines 9% 9% 13% 7%

Employees and former employees

(1)

4% 4% 6% 7%

Public 50% 64% 37% 56%

Total 100% 100% 100% 100%

(1) The line “Employees and former employees” includes the shares held by employees and former employees in the “Fonds Communs de Placement d’Entreprise (FCPE)”.

11.2 Statement of changes in shareholders’ equity

Additional Earnings for Shareholders’

(in € millions) Capital paid - in capital Reserves the year equity

At December31, 2017 429 4139 86 (30) 4624

Allocation of earnings - - (30) 30 -

Earnings for the period - - - (38) (38)

At December31, 2018 429 4139 56 (38) 4586

Allocation of earnings - - (38) 38 -

Earnings for the period - - - (11) (11)

At December31, 2019 429 4139 18 (11) 4575

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On June4, 2014, AirFrance – KLM issued € 600million of bonds

maturing on June18, 2021 with an annual coupon of 3.875%.

In August2015, an amount of € 200million has been hedged and

converted to a ﬂoating rate through a swap and is connected to

a ﬂoor. On December31, 2018, the fair value of the ﬂoor is €

0.7million leading to a provision for risks and liabilities of the

same amount (see Note17).

On October5, 2016, AirFrance – KLM issued € 400million of

bonds with a 6years maturity. The annual coupon arises 3.75%.

On December12, 2016, AirFrance – KLM issued -fully hedged-

USD 145million senior notes by way of unlisted private placement

to Asian institutional investors. Maturity is December15, 2026 and

annual coupon arises 4.35%. This loan is the object of a complete

cover. (See Note17).

On March25, 2019, AirFrance – KLM issued a bond in the form of

a bonds convertible into and/or exchangeable for new or existing

shares (OCEANE) of € 500million with a 6 - year maturity. The

coupon rate is 0,125%.

12.2 Bonds

Amount

Issuing issued Maturity

Bond date (in millions) date Coupon

Bond issued in 2014 4June 2014 €600 18June2021 3.875%

€ Bond issued in 2016 5Oct. 2016 €400 5Oct. 2022 3.75%

$ Bond issued in 2016

(1)

12Dec. 2016 $145 15Dec. 2026 4.35%

€ Bond in 2019 25mars 2019 €500 25mars 2026 0,125%

(1) Issuance bonds with Asian institutional investors by way of unlisted private placement.

12.1 Perpetual subordinated loan

Between April1 and April 17, 2015, Air France – KLM issued a

€600million perpetual subordinated loan, presented as other

equity. These securities, which have no maturity date, have a ﬁrst

repayment option in October2020 at AirFrance – KLM discretion.

They carry an annual coupon of 6.25%.

On September14, 2018, a partiel repurchased reduced the debt

by € 196.7million.

12. Financial debt and other equity

December31 December31

(in € millions) Notes 2019 2018

Other equity

Perpetual subordinated loan 12.1 403 403

Total Other equity 403 403

Non - current ﬁnancial debt

Bonds 12.2 1629 1126

Total non - current debt 1629 1126

Current Financial Debt

Accrued interest 22 22

Total current debt 22 22

Total ﬁnancial debt 1652 1148

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13. Maturity of receivables and debt

As of December31, 2019

Receivables Gross Up to More than Related

(in € millions) amount one year one year companies

Non - current assets

Loans and receivables related to long - term investment (Note9.1) 473 83 390 461

Current assets

Trade receivables and related accounts 14 14 - 14

Other receivables (including tax receivables)

(1)

206 145 61 63

Total 693 242 451 538

Debt Gross Up to More than Related

(in € millions) amount one year one year companies

Financial debt (Note12) 1652 22 1629 -

Trade payables and related accounts 15 15 - 4

Tax and social debts 4 4 - -

Other liabilities

(1)

847 847 - 829

Total 2518 888 1629 833

(1) Other liabilities comprise, mainly, a ﬁnancial current account with Air France including cash pooling for € 699million as of December31, 2019.

14. List of subsidiaries and equity investments

(in € millions) Loans & Amount of Revenues Dividends

Shareholders’ Share advances security (excl. tax) Net proﬁt booked

Companies equity other of Carrying granted and gua- for or loss for during

or Groups of than capital capital amount of and not rantees ﬁnancial ﬁnancial ﬁnancial

companies Capital after earnings held shares held reimbursed given year year year

Gross Net

Detailed information about individual investment whose gross value exceeds €15million

1. Subsidiaries

(held at more than 50%)

Société

Air France (France)

(1)

- - 100% 3820 3820 390 19 15557 53 -

KLM (Netherlands)

(1)

- - 99,7% 824 824 0 44 9936 460 18

AirFrance – KLM

Finance

(1)

- - 100% 31 29 71 - - 3 -

(1) Statutory ﬁnancial statements at December31, 2019.

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15. Items concerning related companies

As of December31, 2019

(in € millions) Amount

Trade receivables & related accounts of which:

— Air France 6

— KLM 7

— AirFrance – KLM Finance 1

Other receivables of which:

— Air France 62

— KLM 1

Trade payable and related accounts of which:

— Air France 2

— KLM 2

Other payables of which:

— Air France- Cash pooling 829

— Other members of the tax group 17

16. Commitments

— KLM shares

During the business combination of the Air France and KLM

groups, the Dutch government undertook to reduce its stake in

KLM proportionally to any reduction by the French government

of its stake in AirFrance – KLM’s capital. To this end, the Dutch

government had to sell its cumulative preferred shares to

AirFrance – KLM or to a Dutch foundation in the name of and on

behalf of AirFrance – KLM, if the transfer had occurred during the

ﬁrst three years following the business combination.

In the latter case, the foundation would have issue, to the beneﬁt

of Air France – KLM, share certiﬁcates corresponding to the

cumulative A preferred shares transferred to the foundation.

These share certiﬁcates would have conferred to AirFrance – KLM

all of the economic rights attached to the said shares, the voting

rights attached to the said shares being exercised by the

foundation until Air France exchanges the share certiﬁcates

against the said shares.

At the end of the initial three - year period, AirFrance – KLM had

the option to exchange the share certiﬁcates against the

cumulative A preferred shares, which it could hold directly. As

AirFrance – KLM decided in 2007 to maintain SAK I and SAK II

foundations, AirFrance – KLM did not carry out this exchange.

Furthermore, Air France – KLM can decide to dissolute the

foundations at any time and at its sole discretion.

Moreover, the Dutch government has the right to sell to

AirFrance – KLM at any time as many cumulative A preferred

shares as it wants.

After the sale of 5,103,885 shares to Air France – KLM in

April 2005 for €11.6 million, the acquisition price of the

3,708,615cumulative A preferred shares still held by the Dutch

government amounts to €8.4million (i.e. a unit price of €2.27per

cumulative A preferred share, which has to be paid pro rata

during any sale or transfer under the conditions above).

— Hedges

The € 600million bond dated June18, 2014, is hedged for a

nominal value of € 200million converting ﬁx rate to a ﬂoating

rate through a swap connected to a ﬂoor - isolated open position.

On December31, 2019, the fair value of the swap is € 6.3million

and the fair value of the ﬂoor amounts to € (0.8) million. (See

Note12.2).

The $ 145million bond is fully hedged by a cross currency swap.

As of December 31, 2019 the fair value of this derivative

instrument is € (12) million. (See Note12.2).

— Other

Since January2009, AirFrance – KLM has acted as a guarantor

for Air France Company within the framework of its commitments

to Aéroport de Paris in respect of civil leases. This guarantee

has been renewed in July 2014 and more recently on

23September2019 for a period of 5years. The guarantee is now

expressly limited to €19,362,446million (and, cumulatively, at a

maximum of 3months’ rent per contract).

AirFrance – KLM guarantees a debt that KLM holds on the Airline

GOL for an amount of USD50million.

AirFrance – KLM guarantees the payment by Transavia Holland

to a lessor, of outstanding operational leases until 2024 for an

amount of USD50million at December31, 2019.

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17. Litigation

Litigation concerning anti - trust laws

in the air - freight industry

AirFrance – KLM, as parent company of Air France, KLM and

Martinair, is involved, since February 2006, in investigations

initiated by the antitrust authorities in several countries, with

respect to allegations of anti - competitive agreements or

concerted actions in the air freight industry with up to twenty - ﬁve

other airlines.

As of December31, 2017, most of these investigations have been

terminated following the entry into plea agreements between Air

France, KLM and Martinair and the appropriate competition

authorities providing for the payment of settlement amounts or

ﬁnes, with the exception of the proceedings initiated by the

European Commission, and by the Swiss antitrust authority,

which are still pending.

In Europe, the decision of the European Commission of 2010

against eleven air cargo carriers, including the companies of the

Group, Air France, KLM and Martinair, was annulled by the

General Court of the European Union on 16December2015. On

17March2017, the European Commission issued a new decision

against eleven air cargo carriers, including Air France, KLM

and Martinair. The total amount of ﬁnes imposed on the

AirFrance – KLM Group is €339million. This amount has been

reduced by €15million as compared to the initial decision owing

to a lower ﬁne for Martinair due to technical reasons. On 29 and

30May2017 the Group companies ﬁled an appeal against this

decision before the General Court of the European Union. The

Group has maintained a provision covering these ﬁnes.

In Switzerland, Air France and KLM are challenging a decision

imposing a €4 million ﬁne before the relevant court. The

subsidiaries of the Group have provisioned the totality of this ﬁne.

Those provisions are booked by each airlines and do not have

any impact in the ﬁnancial statements of AirFrance – KLM.

18. Contingent liabilities

Following the initiation of various investigations by the

competition authorities in 2006 and the European Commission

decision in 2010, several collective and individual actions were

brought by forwarders and airfreight shippers in the civil courts

against Air France, KLM and Martinair, and other cargo operators,

in a number of jurisdictions.

Under these civil lawsuits, AirFrance – KLM is involved as the

parent company of the airlines. Shippers and freight forwarders

are claiming for damages to compensate alleged higher prices

due to alleged competition law infringement.

Air France, KLM and/or Martinair remain defendants, either as

main defendants (in particular in The Netherlands, Norway) or as

third party interveners brought in these cases by other main

defendants under “contribution proceedings”. Where Air France,

KLM and/or Martinair are the main defendants, they have also

initiated contribution proceedings against other airlines.

Although signiﬁcant amounts have been reported by the media,

plaintis are mostly claiming for unspeciﬁed and/or insuciently

substantiated damages against defendants taken as a whole (and

not individually) and the EU decision to which the plaintis refer

to is still not deﬁnitive.

The Group companies and the other airlines involved in these

lawsuits continue to vigorously oppose all such civil claims

Except for the matters speciﬁed under the paragraphs 18 and 19,

the company is not aware of any governmental, judicial and

arbitration dispute or proceedings (including any proceedings of

which the issuer is aware, or that are pending or threatened

against it) that could have a signiﬁcant impact on the company’s

ﬁnancial position, earnings, assets, liabilities or proﬁtability, for a

period covering at least the past twelve months.

19. Subsequent events

A new bond issue was issued on January 16, 2020 for

750million euros.

€ 311million was allocated to the redemption of the 2014 bond

issue and € 39million to the 2016 bond issue. The remaining

balance is intended to ﬁnance the operating requirements of the

business.

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5.9 FIVE - YEAR RESULTS SUMMARY

December December December December December

Year ended 31 2019 2018 2017 2016 20 15

12months 12months 12months 12months 12months

1. Share capital at year end

Share capital (in €) 428,634,035 428,634,035 428,634,035 300,219,278 300,219,278

Number of ordinary shares outstanding 428,634,035 428,634,035 428,634,035 300,219,278 300,219,278

Number of shares with a priority dividend - - - - -

Maximum number of shares that may be created:

— by bond conversion 27,901,785 - - - 53,386,532 74,449,544

— by exercise of subscription rights - - - - -

2. Transactions and results for the year

(in € thousand)

Net revenues - - - - -

Net income/(loss) before income tax,

employee proﬁt- sharing, net depreciation,

amortization and provisions (32,516) (56,742) (73,163) (204,605) (134,768)

Income tax (17,173) (12,182) (35,980) (11,343) (10,484)

Employee proﬁt - sharing for the year -

Net income/(loss) after income tax,

employee proﬁt- sharing, net depreciation,

amortization and provisions (11,051) (38,406) (29,668) (160,569) (125,192)

Distributed net income - - -

3. Per share data (in €)

Net income/(loss) after income tax and employee

proﬁt- sharing but before net depreciation,

amortization and provisions (0.04) (0.10) (0.09) (0.64) (0.41)

Net income/(loss) after income tax,

employee proﬁt- sharing, net depreciation,

amortization and provisions (0.03) (0.09) (0.07) (0.53) (0.42)

Dividend per share - - - - -

4. Employees

Average number of employees during the year 1.9 - - - -

Total payroll costs 825 - - - -

Employee welfare contributions and similar charges

(Social Security, employee organizations, etc. ) 299 - - - -

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To the Shareholders,

1. Opinion

In compliance with the engagement entrusted to us by your

Shareholders’ Meetings, we have audited the accompanying

ﬁnancial statements of Air France – KLM for the year ended

December31, 2019.

In our opinion, the ﬁnancial statements give a true and fair view

of the assets and liabilities, and of the ﬁnancial position of the

Company as at December 31, 2019 and of the results of its

operations for the year then ended in accordance with the

accounting rules and principles applicable in France.

The audit opinion expressed above is consistent with our report

to the Audit Committee.

2. Basis for opinion

Audit Framework

We conducted our audit in accordance with professional standards

applicable in France. We believe that the audit evidence we have

obtained is sucient and appropriate to provide a basis for our

opinion.

Our responsibilities under those standards are further described

in the “Statutory Auditors’ Responsibilities for the Audit of the

Financial Statements” section of our report.

Independence

We conducted our audit in compliance with independence rules

applicable to us, for the period from January1, 2019 to the issue

date of our report and in particular we did not provide any

prohibited non - audit services referred to in Article 5 (1) of

Regulation (EU) No 537/2014 or in the French Code of ethics for

Statutory Auditors.

3. Justiﬁcation of assessments–

Key Audit Matters

In accordance with the requirements of articles L. 823 - 9 and

R.823 - 7of the French Commercial Code (Code de commerce)

relating to the justiﬁcation of our assessments, we bring your

attention to the key audit matters relating to risks of material

misstatement that, in our professional judgment, were of most

signiﬁcance in the audit of the ﬁnancial statements of the current

period, as well as our responses to those risks.

These matters were addressed in the context of our audit of the

ﬁnancial statements as a whole, and in forming our opinion

thereon. We do not provide a separate opinion on speciﬁc

elements, accounts or items of the ﬁnancial statements.

Equity interests

(Notes1 (long term investments),

9, 14to the statutory ﬁnancial statements)

Risk identiﬁed

As of December31, 2019, equity interests represented a net value

of €4,678 million compared to a total balance sheet of

€7,505 million. They are recorded as of their entry date at

acquisition cost and impaired based on their fair value by taking

into account the share of equity, earnings outlooks and stock

market values that can be used as a reference.

The fair value estimate of these long - term investments requires

management to exercise judgment in its choice of items to

consider according to the nature of the investments concerned.

Such items may correspond, as the case may be, to historical

items (for certain entities, equity, and for others, average stock

market prices over the last month), or forecast items (earnings

outlooks and economic situation in the countries considered).

We considered the determination of the fair value of equity

interests to be a key audit matter because of i) the uncertainties

inherent to certain assumptions and speciﬁcally the probability

of forecasts, and ii) the potential importance of a reversal or

impairment of an equity interest provision in the Company’s

accounts.

Our response

To assess the reasonableness of the fair value estimate of equity

interests, based on the information communicated to us, our

work mainly consisted in verifying that the estimate of these values,

as determined by management, is based on an appropriate

justiﬁcation of the valuation method and the ﬁgures used, and

according to the securities concerned:

For the valuations based on historical items:

— verifying that the equity retained is consistent with the

accounts of the entities that were the subject of an audit or

analytical procedures and that any equity adjustments are

based on probative documentation.

5.10 STATUTORY AUDITORS’ REPORT

ON THE FINANCIAL STATEMENTS

YEAR ENDED DECEMBER31, 2019

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For the valuations based on historical items:

— obtaining the ﬁnancial proﬁtability outlooks for the entities

concerned;

— verifying the consistency of the assumptions adopted with the

economic environment on the dates the accounts were

prepared and closed;

— comparing the forecasts adopted for preceding periods with

the corresponding realizations in order to assess the

achievement of past objectives;

— verifying that the value resulting from cash - ﬂow forecasts was

adjusted for the debt of the entity considered.

— verifying the arithmetical accuracy of the computed fair values

In addition to assessing the fair values of equity interests, our

work also consisted in evaluating the recoverability of related

receivables with respect to the equity interest analysis.

Provisions and contingent liabilities

concerning anti - trust laws

(Notes17 and 18to the ﬁnancial statements)

Risk identiﬁed

AirFrance – KLM is involved in a number of governmental, legal

or arbitration proceedings and litigation, speciﬁcally in terms of

anti - trust laws. The outcome of these procedures and litigations

depends on future events and the Company’s estimates are

inherently based on the use of management assumptions and

assessments.

We considered the provisions for litigation to be a key audit

matter due to the uncertainty over the outcome of current

proceedings, the high level of management estimates and

judgments and, the potentially material nature of the impact of

provision amounts on net income and equity should these

estimates change.

Our response

We speciﬁcally assessed the estimates and assumptions adopted

by the Group in determining the need to recognize a provision

and where applicable its amount.

Based on discussions with the Group, we familiarized ourselves

with the latter’s analysis of the risks and status of each signiﬁcant

litigation, whether reported or potential.

We assessed the items justifying the recognition or not of a

provision. We thus analyzed the lawyers’ replies to your enquiries,

familiarized ourselves with the exchanges between the Company,

its lawyers and other parties to the suits and considered any new

developments preceding the issue date of our report.

Based on these items, we conducted a critical review of the

estimates and positions adopted by management.

We also assessed the appropriateness of the disclosures in

Notes17 and 18to the ﬁnancial statements.

4. Speciﬁc veriﬁcations

We have also performed, in accordance with professional

standards applicable in France, the speciﬁc veriﬁcations required

by French law.

Information given in the management report

and in the other documents provided to

shareholders with respect to the ﬁnancial position

and the ﬁnancial statements

We have no matters to report as to the fair presentation and the

consistency with the ﬁnancial statements of the information

given in the management report of the Board of Directors and in

the other documents provided to shareholders with respect to

the ﬁnancial position and the ﬁnancial statements.

We attest the fair presentation and the consistency with the

ﬁnancial statements of the information related to payment terms

mentioned in Article D. 441 - 4of the French Commercial Code

(Code de commerce).

We attest that extra - ﬁnancial performance declaration required

under article L.255 - 102 - 1of the French Commercial Code (Code

de commerce) is included in the management report, it being

clariﬁed that, in compliance with the terms of Article L.823 - 10of

this Code, we have not veriﬁed the fair presentation and the

consistency with the ﬁnancial statements of the information

contained therein and should be reported on by an independent

insurance services provider.

Information related to the governance

We attest that the section related to the governance of the

management report of the Board of Directors contains the

information required by Articles L.225 - 37 - 3 and L.225 - 37 - 4of

the French Commercial Code (Code de commerce).

Concerning the information given in accordance with the

requirements of Article L.225 - 37 - 3of the French Commercial

Code (Code de commerce) relating to remunerations and

beneﬁts received by the Directors and any other commitments

made in their favor, we have veriﬁed its consistency with the

ﬁnancial statements, or with the underlying information used to

prepare these ﬁnancial statements and, where applicable, with

the information obtained by your company from controlling and

controlled companies. Based on this work, we attest the accuracy

and fair presentation of this information.

Concerning the information relating to the items that your

Company considered likely to have an impact in the event of a

tender or exchange oer, provided pursuant to Article L.225 - 37 - 5of

the French Commercial Code (Code de commerce), we have

veriﬁed their compliance with the underlying documents which

have been communicated to us. Based on our work, we have no

comment to make on this information.

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5. Report on other legal and regulatory

requirements

Appointment of the Statutory Auditors

We were appointed as Statutory Auditors of AirFrance – KLM by

the Shareholders’ Meeting of September25, 1998 for Deloitte &

Associés and September25, 2002 for KPMG Audit.

As of December31, 2019, Deloitte & Associés and KPMG were

respectively in the 22

th

year and 18

th

year of total uninterrupted

engagement, which are the 21

th

year and 18

th

year since securities

of the Company were admitted to trading on a regulated market.

6. Responsibilities of management

and those charged with governance

for the ﬁnancial statements

Management is responsible for the preparation and fair presentation

of the ﬁnancial statements in accordance with French accounting

principles, and for such internal control as management determines

is necessary to enable the preparation of ﬁnancial statements

that are free from material misstatement, whether due to fraud

or error.

In preparing the ﬁnancial statements, management is responsible

for assessing the Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless it is expected

to liquidate the Company or to cease its operations.

The Audit Committee is responsible for monitoring the ﬁnancial

reporting process and the eectiveness of internal control and

risk management systems and, where applicable, its Internal

Audit, regarding the accounting and ﬁnancial reporting procedures.

The ﬁnancial statements have been approved by the Board of

Directors.

7. Statutory Auditors’ responsibilities for

the audit of the ﬁnancial statements

Objective and audit approach

Our role is to issue a report on the ﬁnancial statements. Our objective

is to obtain reasonable assurance about whether the ﬁnancial

statements as a whole are free from material misstatement.

Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with professional

standards will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could

reasonably be expected to inﬂuence the economic decisions of

users taken on the basis of these ﬁnancial statements.

As speciﬁed in Article L.823 - 10 - 1of the French Commercial Code

(Code de commerce), our statutory audit does not include assurance

on the viability of the Company or the quality of management of

the aairs of the Company.

As part of an audit conducted in accordance with professional

standards applicable in France, the statutory auditor exercises

professional judgment throughout the audit and furthermore:

— identiﬁes and assesses the risks of material misstatement of

the ﬁnancial statements, whether due to fraud or error, designs

and performs audit procedures responsive to those risks, and

obtains audit evidence considered to be sucient and

appropriate to provide a basis for his opinion. The risk of not

detecting a material misstatement resulting from fraud is

higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations,

or the override of internal control;

— obtains an understanding of internal control relevant to the

audit in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an

opinion on the eectiveness of the internal control;

— evaluates the appropriateness of accounting policies used and

the reasonableness of accounting estimates and related

disclosures made by management in the ﬁnancial statements;

— assesses the appropriateness of management’s use of the

going concern basis of accounting and, based on the audit

evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast signiﬁcant doubt

on the Company’s ability to continue as a going concern. This

assessment is based on the audit evidence obtained up to the

date of his audit report. However, future events or conditions

may cause the Company to cease to continue as a going

concern. If the statutory auditor concludes that a material

uncertainty exists, he draws attention in the audit report to the

related disclosures in the ﬁnancial statements or, if such

disclosures are not provided or inadequate, he expresses a

qualiﬁed or an adverse opinion;

— evaluates the overall presentation of the ﬁnancial statements

and whether the ﬁnancial statements represent the underlying

transactions and events in a manner that achieves fair

presentation.

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Paris La Défense, February19, 2020

The Statutory Auditors

KPMG Audit Deloitte & Associés

A division of KPMG SA

Éric Jacquet Guillaume Troussicot Pascal Colin

Partner Partner Partner

Report to the Audit Committee

We submit a report to the Audit Committee which includes in

particular a description of the scope of the audit and the audit

program implemented, as well as signiﬁcant audit ﬁndings. We

also report, if any, signiﬁcant deﬁciencies in internal control

regarding the accounting and ﬁnancial reporting procedures that

we have identiﬁed.

Our report to the Audit Committee includes the risks of material

misstatement that, in our professional judgment, were of most

signiﬁcance in the audit of the ﬁnancial statements of the current

period and which are therefore the key audit matters that we are

required to describe in this report.

We also provide the Audit Committee with the declaration provided

for in Article 6of Regulation (EU) N°537/2014, conﬁrming our

independence within the meaning of the rules applicable in

France such as they are set in particular by Articles L.822 - 10to

L.822 - 14of the French Commercial Code (Code de commerce)

and in the French Code of Ethics (Code de déontologie) for

Statutory Auditors. Where appropriate, we discuss with the Audit

Committee the risks that may reasonably be thought to bear on

our independence, and the related safeguards.

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5 Statutory Auditors’ special report on regulated agreements

To the Shareholders’ Meeting of the company AirFrance – KLM SA,

In our capacity as Statutory Auditors of your company, we hereby

present to you our report on regulated agreements.

The terms of our engagement require us to communicate to you,

based on the information provided to us, the principal terms,

conditions and justiﬁcations of interest for the company of

agreements brought to our attention, or that may have been

discovered during the course of our audit, without expressing an

opinion on their usefulness and appropriateness, and without

identifying the existence of other agreements if any. It is your

responsibility, pursuant to Article R. 225 - 31 of the French

Commercial Code (Code de commerce), to assess the interest

related to the conclusion of those agreements for approval

purposes.

Our role is also to provide you with the information stipulated in

Article R.225 - 31of the French Commercial Code relating to the

implementation during the past year of agreements previously

approved by the Shareholders’ Meeting.

We conducted the procedures we deemed necessary in

accordance with the professional guidelines of the French

National Institute of Statutory Auditors (Compagnie Nationale

des Commissaires aux comptes) relating to this engagement.

These procedures consisted in verifying the consistency of the

information provided to us with their underlying documentation.

Agreements submitted to the approval

of the Shareholders’ Meeting

Agreements authorized and/or concluded during the year

In accordance with the provisions of article L. 225 - 40of the

French Commercial Code (Code de commerce), we have been

advised of the following agreements which have been subject to

the preliminary authorization by your Board of Directors.

Modiﬁcation of the transatlantic partnership

between AirFrance – KLM, Delta Air Lines

and Virgin Atlantic

Common directors concerned:

Delta Airlines Inc.: member of the Board of Directors of

AirFrance – KLM, represented by M.George N.Mattson, and Virgin

Atlantic

Nature, purpose and terms:

AirFrance – KLM (AF-KLM), Delta Air LinesInc. (Delta) et Virgin

Atlantic (VAL) announced on February3, 2020, the implementation

of the an expanded transatlantic partnership (the “Partnership”),

as well as the conﬁrmation that AF-KLM would no longer proceed

with the acquisition of a 31% equity interest in VAL. This decision

resulted in the amendment of the Partnership agreements concluded

in May15, 2018, and authorized by your Board of Directors during

meetings held in March14 and May15, 2018, without aecting the

AF-KLM position in the commercial joint - venture involving Delta,

VAL and AF-KLM. Those agreements had been approved by the

Shareholders’ Meeting held in May28, 2019, on the special report

of the Statutory Auditors dated Mach 29, 2019.

5.11 STATUTORY AUDITORS’ SPECIAL REPORT

ON REGULATED AGREEMENTS

SHAREHOLDERS’ MEETING HELD TO APPROVE THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER31, 2019.

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Paris-La Défense, April7, 2020

The Statutory Auditors

KPMG Audit Deloitte et Associés

A division of KPMG SA

Éric Jacquet Guillaume Troussicot Pascal Colin

Associé Associé Associé

This is a free translation into English of the Statutory Auditors’ special report on regulated agreements with third parties that is issued

in the French language and is provided solely for the convenience of English speaking readers. This report on regulated agreements

should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in

France. It should be understood that the agreements reported on are only those provided by the French Commercial Code and that

the report does not apply to those related party transactions described in IAS24 or other equivalent accounting standards.

The following signed agreements, authorized by your Board of

Directors dated October30, 2019, lead to the implementation of

the Partnership:

1. termination of the Share Purchase Agreement (“SPA”)

between AirFrance – KLM Finance SAS (“AFKL Finance”)

and Virgin Investments Limited, related to the purchase of

31% stake in VAL, and termination of other agreements

ancillary to the SPA;

2. amendment and updating of the joint - venture Agreement

between Delta, Virgin Atlantic Airways Limited, AF-KLM,

KLM and Société Air France (signed on January30, 2020

and eective as per January1, 2020), in order to reﬂect

the termination of the SPA;

3. amendment and updating of the Implementation Agreement

between AFKL Finance, Société Air France, KLM, Delta, VAL,

Virgin Investments Limited, Virgin Atlantic Airways Limited

and Sir Richard Branson (signed on January9, 2020 and

eective as per January1, 2020), in order to reﬂect the

termination of the SPA;

4. signature of an agreement between AF-KLM, Delta et

Virgin Group (signed and eective as per January30, 2020)

granting AF-KLM, subject to speciﬁc conditions, a right to

acquire shares in VAL in the event of a sale by Virgin Group

of shares in VAL to a third party (the “Agreement”).

Justiﬁcation of the interest of the agreement for the company

Your Board of Directors considered:

— the amendment of the joint - venture agreement and of the

Implementation agreement has been concluded in order to

reﬂect, among other interests, the AF-KLM decision not to

proceed with the acquisition of a 31% equity interest in VAL,

without aecting AF-KLM commercial position within the

joint - venture, as approved on May15, 2018;

— following the AF-KLM decision not to proceed with the

acquisition of a 31% equity interest in VAL, Virgin Group

maintains its majority interest by 51% in VAL, with Delta

owning 49%. AF-KLM beneﬁts from a right to acquire shares

in VAL from Virgin Group subject to speciﬁc conditions

deﬁned in the Agreement.

Agreements previously approved

by the Shareholders’ Meeting

Agreements approved in prior years which remained

current during the year

We hereby inform you that we have not been advised of any

agreement previously approved by the Shareholders’ Meeting

which remained in force during the year.

2019 Universal Registration Document — Air France - KLM 345

5

Financial Report

Statutory Auditors’ special report on regulated agreements

5

5_VA_V10 22/04/2020 13:34 Page345

Air France- KLM — 2019 Universal Registration Document346

5

5_VA_V10 22/04/2020 10:11 Page346

347

6

OTHER INFORMATION

6.1 History 348

6.2 General information 350

6.3 Information on the agreements concluded in connection

with the business combination between Air France and KLM 351

6.3.1 Agreements relating to the KLM shareholding structure 351

6.3.2 Agreements with the Dutch State 352

6.3.3 Assurances given to KLM 353

6.4 Legislative and regulatory environment

for the air transport industry 353

6.4.1 Freedoms of the air and international conventions 353

6.4.2 European legislation 354

6.4.3 Other legal aspects of AirFrance – KLM’s activities 355

6.5 Information and control 356

6.5.1 Person responsible for the Universal Registration Document

and for the Annual Financial Report 356

6.5.2 Certiﬁcation by the person responsible 356

6.5.3 Statutory Auditors 357

6.5.4 Head of Investor Relations 357

6.5.5 Documents available to the public 357

Glossaries 358

Air transport glossary 358

Financial glossary 360

Table of concordance for the Universal Registration Document 362

Information included by reference 364

Table of concordance for the Annual Financial Report 365

2019 Universal Registration Document — Air France - KLM

6_VA_V10 22/04/2020 10:12 Page347

Two companies born on the same day

October7, 1919

KLM, Koninklijke Luchtvaartmaatschappij, is founded, Royal

Dutch Airline for the Netherlands and its colonies.

October7, 1933

Air France is born from the combination of ﬁve French airlines

(Air Union, Air Orient, Société Générale de Transport Aérien

(SGTA), CIDNA and Aéropostale).

Air France and KLM jointly operate the Amsterdam-Rotterdam-

Paris route within the framework of a commercial agreement.

1934

First KLM transatlantic ﬂight from Amsterdam to Curaçao in a

Fokker F-XVIII Snip.

Air transportation and

the two companies take o

1945 - 46

Air France is nationalized.

KLM ﬂights, interrupted by the war, resume service.

Introduction of scheduled ﬂights to New York in DC-4s, from

Paris with Air France and from Amsterdam with KLM. At this time,

the ﬂight takes nearly 24hours.

Air France and KLM are equipped with Constellations and

engage in mutual assistance.

1958

Air France and KLM inaugurate the polar route, ﬂying from Paris

and Amsterdam to Tokyo via the North Pole.

1959 - 1960

Arrival of the jet era: Air France brings the ﬁrst Caravelles and

Boeing 707s into service, reducing the duration of the Paris-New

York ﬂight to eight hours. KLM brings its ﬁrst DC-8aircraft into

service.

1961

Air France bases its operations and maintenance at Orly Sud.

1967

First KLM ﬂight takes o from the new Schiphol airport.

1970 - 71

The Boeing 747 is ﬁrst used on long - haul routes by Air France in

1970 and by KLM in 1971.

1974 - 1982

Air France operations move, in 1974, to the new Terminal 1at

Paris-Charles de Gaulle, then to CDG 2 in 1982.

1976

The supersonic airplane, Concorde, is brought into service, ﬁrst

on the Paris-Rio, Paris-Caracas and Paris-Washington routes then,

in 1977, on Paris-New York, connecting the two cities in three

hours 45minutes.

Development of the two majors

1989

Conclusion of an alliance, the ﬁrst in the history of air

transportation, between KLM and the US company Northwest

Airlines.

1990

Air France acquires UTA (Union des Transports Aériens), founded

in 1963.

1991

KLM founds a regional company, KLM Cityhopper, by merging

NLM Cityhopper and NetherLines, and reinforces its shareholding

in Transavia from 40% to 80%.

1992

Air France and UTA merge, giving Air France a 72% stake in Air

Inter after combining its own shareholding in that company with

that of UTA.

KLM establishes the ﬁrst European medium - haul/long - haul

transfer platform at Schiphol airport.

First Open Skies agreement between the Netherlands and the

United States.

1993

All KLM and Northwest Airlines ﬂights between Europe and the

United States are operated within a joint - venture.

1996

Air Inter becomes Air France Europe.

Establishment of Air France’s medium - haul/long - haul transfer

platform at Paris-CDG.

6.1 HISTORY

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Other information

6 History

6_VA_V10 22/04/2020 10:12 Page348

1997

Air France Europe is merged with Air France.

1999

Air France is listed for trading on the Monthly Settlement Market of

the Paris Stock Exchange for the ﬁrst time on February22, 1999.

2000

Air France, Aeromexico, Delta Air Lines,Inc. and Korean Air found

the SkyTeam and SkyTeam Cargo alliances.

Creation of the Air France regional division following the acquisition

of Régional Airlines, Flandre Air, Proteus, Brit Air and CityJet.

2001

Open Sky agreement signed between France and the United

States.

Alitalia and CSA Czech Airlines join SkyTeam.

Creation of AirFrance – KLM, the leading

European air transport group

2003

September30: Air France and KLM announce their intention to

merge through a public exchange oer.

2004

May: Air France – KLM shares are listed for trading on the

Euronext Paris and Amsterdam markets as well as on the New

York Stock Exchange. Privatization of Air France with the transfer

of the majority of its shares to the private sector involving the

dilution of the French State’s shareholding.

September: Finalization of the Group’s organizational structure

with the creation of the Air France – KLM holding company,

regrouping the two airline subsidiaries, Air France and KLM. KLM

and its US partners Northwest Airlines and Continental join the

SkyTeam alliance.

December: The French State reduces its shareholding from 44%

to 23% by selling shares in the market.

2005 - 06

The French State reduces its shareholding in AirFrance – KLM

from 23% to 18.6% by selling shares within the framework of the

share oer (ORS) reserved to Air France employees.

2006 - 07

Signature of the Open Skies agreement between Europe and the

United States to come into force in March2008.

2008 - 09

The US Department of Transportation grants Air France, KLM,

Delta Air Lines,Inc. and Northwest anti - trust immunity with the

obligation to establish a single transatlantic joint - venture between

these four airlines before the end of 2009.

AirFrance – KLM acquires a 25% equity interest in Alitalia.

2009 - 10

In April, AirFrance – KLM and Delta Air Lines,Inc. implement the

joint - venture on the North Atlantic joined, in July2010, by Alitalia.

2012

Launch of the “Transform 2015” plan targeting a €2billion reduction

in net debt, the restoration of the Group’s competitiveness and a

turnaround in the short and medium - haul network.

2014

In early September, the Group unveils its new strategic plan,

“Perform 2020”, foreseeing an on going improvement in

competitiveness and an increase in the Group’s exposure to

growth markets.

2015

The Boeing 787 enters the KLM ﬂeet.

2016

AirFrance – KLM returns to the oensive with the launch of the

new “Trust Together” strategic project.

2017

AirFrance – KLM takes a further major step in the reinforcement

of its strategic partnerships when China Eastern Airlines and

Delta Air Lines,Inc. become shareholders.

2018

Anne-Marie Couderc is appointed Chair of the AirFrance – KLM

Board of Directors. Benjamin Smith is appointed Chief Executive

Ocer.

2019

The longest - standing commercial airline in the world still to be

ﬂying under its original name, on October7, 2019 KLM celebrates

its centenary.

The Dutch State acquires 14% of the Air France – KLM share

capital.

2019 Universal Registration Document — Air France - KLM 349

6

Other information

History

6

6_VA_V10 22/04/2020 10:12 Page349

Corporate name

AirFrance – KLM

Trade name

AirFrance – KLM Group

Registered oce

2rue Robert Esnault-Pelterie, 75007Paris

Tel:+ 33 (0)1 43 17 21 96

Mailing address

BP 9011275326Paris Cedex 07

Website

www.airfranceklm.com

The Company information ﬁguring on the website is not an integral

part of this document excepting incorporation by reference.

Legal status

French public company (société anonyme) with a Board of

Directors

Legislation

French law.

AirFrance – KLM is governed by the French Code de Commerce

and the provisions of the Civil Aviation and Transport Codes

relating to air transport companies and notably to Air France. The

Transport Code contains a provision designed to safeguard the

nationality of air transport companies whose shares are listed for

trading on a regulated market.

Incorporation and expiry dates

Incorporated on: April23, 1947.

Due to expire on: July 3, 2045 barring early liquidation or

extension.

Corporate purpose (Article 2of the Articles of

Incorporation)

The primary purpose of Air France–KLM is to hold direct or

indirect interests in the capital of air transport companies and,

more generally, in any companies in France or elsewhere whose

purpose is related to the air transport business.

Trade register

Paris Trade and Company Register: 552,043,002

APE code: 6420Z

Legal Entity Identiﬁer

969500AQW31GYO8JZD66 (LEI Code)

Consultation of legal documents

The legal and corporate documents relating to AirFrance – KLM

may be consulted at 45 rue de Paris, Tremblay en France,

95737Paris-CDG Cedex.

Financial year

The ﬁnancial year begins on January1 and ends on December31.

Appropriation of income

After approving the ﬁnancial statements and taking due note of

the income available for distribution, the shareholders vote in the

Shareholders’ Meeting on the total or partial distribution of such

income (with, in the latter case, the appropriation of the

undistributed balance to one or more reserve accounts), or the

appropriation of all distributable income to one or more reserve

accounts.

Relations between AirFrance – KLM and its

subsidiaries

Air France–KLM and its subsidiaries Air France and KLM have

signed agreements whose aim is to deﬁne the conditions under

which Air France and KLM, at the request of Air France–KLM,

provide technical and administrative support services to Air

France – KLM (intra - group accounting, administrative, legal,

ﬁnancial and IT services).

6.2 GENERAL INFORMATION

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Other information

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6.3.1 Agreements relating

to the KLM shareholding

structure

Holding of shareholder voting rights

by two Dutch foundations

In order to continue to comply with speciﬁc regulatory

requirements relating to KLM air transport operations, a system

to separate the rights attached to KLM shares and the exercise

of the voting rights attached to these shares by two Dutch

foundations (SAK I and SAK II) was put in place in 2004.

Pursuant to this system which is still in force, Air France–KLM

held, as at December31, 2019, 93.84% of KLM’s economic rights,

99.70% of KLM’s dividend rights and 49% of KLM’s voting rights,

while the two Dutch foundations held, together, 44.84% of KLM’s

voting rights.

Furthermore, as at December31, 2019, the Dutch State held 5.92%

of KLM’s voting rights and the remaining minority shareholders

held 0.24% of KLM’s voting rights and 0.30% of its dividend rights.

In KLM Shareholders’ Meetings, the two Dutch foundations, SAK

I and SAK II, exercise the voting rights they hold in accordance

with decisions taken unanimously by the three Board directors

constituting their respective Boards of Directors, it being

speciﬁed that these Board directors must act in accordance with

the corporate governance principles deﬁned in the agreements

relating to the business combination between KLM and Air

France, and in the best interests of KLM, Air France- KLM and its

shareholders. If a unanimous decision cannot be reached by the

three Board directors in the Board of Directors for each of the

Dutch Foundations, no resolution may be passed by the Board

of the relevant Foundation, which consequently cannot then vote

on the relevant resolutions in the KLM Shareholders’ Meeting.

Amongst the three Board directors for each of the foundations,

one member is appointed by Air France–KLM, one by KLM and

the third, acting in the capacity of Chair of the Foundation, is

appointed by the ﬁrst two directors, it being speciﬁed that the

majority of the members of the Boards of Directors of each

Foundation, including the Chair, must be Dutch residents.

6.3 INFORMATION ON THE AGREEMENTS CONCLUDED

IN CONNECTION WITH THE BUSINESS

COMBINATION BETWEEN AIR FRANCE AND KLM

In connection with the business combination taking place in 2004 between Air France and KLM for the creation of the AirFrance –

KLM holding company, agreements were entered into with various stakeholders, some of whose provisions continue to apply as of

the date of this Universal Registration Document.

2019 Universal Registration Document — Air France - KLM 351

6

Other information

Information on the agreements concluded in connection with the business combination between Air France and KLM

6

AirFrance

99.70% of the dividend rights

and 49% of the voting rights

100% of the share capital

and voting rights

AirFrance - KLM

Dutch Foundations

SAK I and SAK II

44.84% of

the voting rights

Dutch State

5.92% of the voting rights

Other shareholders

0.24% of the voting rights

0.30% of the dividend rights

KLM

6_VA_V10 22/04/2020 10:12 Page351

Unilateral termination option

for Air France–KLM at any time

Initially incorporated in 2004 for a three - year period, the two SAK

I and SAK II foundations were however extended for an unlimited

period by a 2007 agreement. Nevertheless, this agreement

provides that Air France–KLM may, at any time as of May6,

2007 and at its sole discretion, terminate this administered

shareholding structure for KLM shares through SAK I and SAK II

and proceed to regroup the economic and voting rights attached

to the KLM shares, thereby holding 93.84% of KLM’s voting rights.

6.3.2 Agreements

with the Dutch State

To enable the completion of the business combination and

safeguard KLM’s trac rights, airline status and the scale of its

network and operations at Schiphol, Air France and KLM entered

into the following agreements with the Dutch State.

Agreement for the acquisition of cumulative

preference A shares held by the Dutch State

On October16, 2003, Air France, KLM and the Dutch State signed

an agreement pursuant to which the Dutch State agreed to

decrease its interest in KLM proportionately to any reduction by

the French State of its stake in Air France–KLM. To this end, the

Dutch State will sell its cumulative preferential A shares to Air

France–KLM or to SAK I on behalf of Air France–KLM as long

as this foundation is maintained. In such case, SAK I will issue share

certiﬁcates to the beneﬁt of Air France–KLM corresponding to

the cumulative preferential A shares transferred to SAK I. These

share certiﬁcates confer to Air France–KLM the economic right

attached to the transferred cumulative preferential A shares, i.e.

a right to a dividend, the corresponding voting rights being

exercised by SAK I until the share certiﬁcates have been

exchanged by Air France–KLM against the said shares.

In March2005, pursuant to the agreement, 5,103,885cumulative

preference A shares were transferred by the Dutch State to SAK

I on behalf of Air France–KLM, which received, in return, SAK I

share certiﬁcates.

At the end of the initial three - year period (2004 to 2007), Air

France–KLM had the option to exchange the share certiﬁcates

against cumulative preferential A shares, and to directly hold the

cumulative preferential A shares. Having decided, in 2007, to

maintain the SAK I and SAK II foundations, Air France–KLM did

not proceed with this exchange but could still do so at any time,

in whole or in part. In addition, Air France–KLM is free to decide

to dissolve the foundations at any time and at its sole discretion.

Furthermore, the Dutch State beneﬁts from the right to transfer,

at any time, as many cumulative preferential A shares as it wishes

to Air France–KLM.

These agreements relating to the cumulative preferential A

shares remain in force.

Option for the Dutch State to subscribe for

preferential KLM B shares

This option granted to the Dutch State lapsed in May2010.

Assurances given to the Dutch State

Nature and duration of the assurances–

unilateral termination option

Within the framework of the 2004 business combination, Air France

and KLM granted the Dutch State, for an initial eight - year period

starting from the completion of the business combination (i.e.

expiring in 2012), various assurances as to KLM’s airline status, its

air services and the scale of its passenger and cargo operations

at Schiphol airport with a view to maintaining the quality of KLM’s

network at Schiphol which, according to the Dutch State, is of

public interest, while at the same time taking into account the

interests of the Air France–KLM Group and its shareholders (the

“Assurances”).

In return for these Assurances, the Dutch State undertook to take

the importance of KLM’s activities at Schiphol into consideration

when deﬁning its civil aviation policy. Furthermore, the Dutch

State agreed to:

— maintain the existing portfolio of trac rights granted to KLM,

other than those that have not been used by KLM over a

cumulative period of twelve months;

— continue to review any future request submitted by KLM

for the allocation of new trac rights on a fair and

non - discriminatory basis.

Pursuant to an agreement entered into on May 25, 2010, the

Dutch State, Air France–KLM and KLM agreed to extend the

Assurances given to the Dutch State, with the exclusion, however,

of an assurance foreseeing that the combined growth should not

negatively impact KLM’s operations in the passenger and cargo

segment, beyond May5, 2012 for an indeﬁnite period, subject to

Air France–KLM’s right to terminate these Assurances, at its sole

discretion, with prior notice of nine months. This agreement was

conﬁrmed by a meeting between, inter alia, the Minister for

Transportation of the Netherlands, the Chairman and Chief

Executive Ocer of Air France–KLM and the President of the

Management Board of KLM which took place on March12, 2015.

Mechanism to ensure compliance with the Assurances

Air France and KLM set up a Dutch foundation, known as the KLM

Assurances Foundation (Stichting Assurances KLM –duration

extended in 2010) to facilitate the provision of binding advice

(bindend advise) on the interpretation of the Assurances granted

to the Dutch State (the “Advice”). These advices are issued by a

KLM Assurances Foundation Committee in the event that a

decision taken by the KLM Supervisory Board, KLM Management

Board or Air France–KLM Board of Directors is considered to be

in conﬂict with the Assurances given to the Dutch State.

When giving its Advice, the KLM Assurances Foundation must

act in the best interests of KLM, the Air France–KLM Group and

its shareholders.

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Commercial air transport is governed by eight freedoms, national

and supranational legislation, and various international conventions

that each State undertakes to apply in its air space after their

ratiﬁcation.

6.4.1 Freedoms of the air and

international conventions

In addition to the eight freedoms of the air established by the

Chicago Agreements relating to transit and transport (1944),

three main treaties establish the legal and regulatory framework

for commercial aviation: the Chicago Convention (1944), the

Montreal Convention (1999) and the Tokyo Convention (1963). A

fourth treaty, the Rome Convention (1952), covers damage

caused to third parties on the ground.

Freedoms of the air

Under a bilateral treaty, an air carrier has freedoms that allow it

to operate in the air space and the territory of a State other than

its State of origin. These eight freedoms are as follows:

— 1

st

freedom–A carrier that leaves from its State of origin has

the right to overﬂy the air space of a foreign State;

— 2

nd

freedom–A carrier that leaves from its State of origin has

the right to make a technical layover without unloading or

loading passengers in a foreign State. This freedom is the

“transit right”;

— 3

rd

freedom–A carrier that leaves from its State of origin has

the right to unload passengers from its State of origin in a

foreign State;

— 4

th

freedom–A carrier that leaves from a foreign State has the

right to load passengers in this foreign State and unload them

in its State of origin;

— 5

th

freedom–A carrier that leaves from its State of origin has

the right to unload and load passengers in two successive

foreign States;

— 6

th

freedom–A carrier that leaves from a foreign State has the

right to load passengers in that State and unload them in its

State of origin, then in another foreign State;

— 7

th

freedom–A carrier that leaves from a foreign State has the

right to load passengers in that State to unload them in

another foreign State, without going through its State of

origin;

— 8

th

freedom–A carrier that leaves from its State of origin has

the right to load passengers in a foreign State, to unload them

in another city in this same foreign State.

The Chicago Convention (1944)

The Convention relating to international civil aviation, known as

the Chicago Convention, sets out the legal, regulatory and

technical rules governing commercial aviation and its Member

State signatories are required to implement a common legal

framework governing their domestic air space and their relations

with one another.

Signed on December7, 1944, the Chicago Convention established

the International Civil Aviation Organization (ICAO) as the

instrument of cooperation between the 193signatory States in

all areas of civil aviation.

6.4 LEGISLATIVE AND REGULATORY ENVIRONMENT

FOR THE AIR TRANSPORT INDUSTRY

The Committee is composed of three members:

— one member appointed by Air France–KLM;

— one member appointed by the Dutch State; and

— one member jointly appointed by the ﬁrst two members as

well as by a Board member of the KLM Assurances Foundation

appointed by KLM who is not a Committee member; it being

speciﬁed that the member appointed by Air France–KLM has

a double voting right for the appointment of the third

Committee member.

The ﬁling of a case with the Foundation’s Committee relating to a

decision taken by the KLM Supervisory Board, the KLM

Management Board or the Air France–KLM Board of Directors

can be made by the Dutch State only in relation to the

Assurances given to it.

If the KLM Assurances Foundation Committee issues an Advice

indicating that the decision submitted to it contravenes the

Assurances given to the Dutch State, the KLM Supervisory Board,

the KLM Management Board or the Air France–KLM Board of

Directors will be required to cancel or amend its decision as soon

as possible and nullify the eects of any measure taken in

connection with the said decision, in accordance with the issued

Advice. The Committee’s decisions are adopted by majority vote

of its members.

As at December31, 2019, no Advice had been rendered by the

KLM Assurances Foundation Committee.

6.3.3 Assurances given to KLM

The assurances granted to KLM have been null and void since

May6, 2009.

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Legislative and regulatory environment for the air transport industry

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The Montreal Convention (1999)

The Montreal Convention of May 1999, ratiﬁed to date by

136 States, aims to provide better protection for passengers

suering damages. This convention entered into force on

June28, 2004. It is based on several fundamental provisions,

notably the principle of the unlimited liability of air transport

companies in the event of physical injury with the implementation

of a two - tier system:

— a ﬁrst tier that sets an objective liability for the air transport

company of up to 128,821Special Drawing Rights (SDR);

— a second tier, based on a presumption of fault for the air

transport company, for which the airline may be exempt if it

proves that it or its agents or ocials have not been negligent

in any way or that the damages result exclusively from the acts

of a third party.

The Rome Convention (1952)

The Rome Convention, signed in 1952, covers damages caused

to third parties on the ground by foreign aircraft. This convention

has not been ratiﬁed by France, the Netherlands or the United

States. The ICAO’s legal commission is currently involved in a

major initiative to redraft the wording which would facilitate its

ratiﬁcation by making a distinction between everyday risk and

terrorist risk.

The Convention relating to compensation for damage caused to

third parties following acts of unlawful interference with aircraft,

signed in Montreal on May2, 2009 by thirteen States, for the

most part African, is still not applicable. It has only been ratiﬁed

by three of the 35States required for its entry into force.

The Tokyo Convention (1963)

The Tokyo Convention, in force since December4, 1969, sets out

the principles and establishes the procedures for handling oences

against penal law (except those of a political nature and based

on racial or religious discrimination) and acts endangering the

safety of the aircraft or that of the persons and property on board.

One of the speciﬁc characteristics of this Tokyo Convention is

that it recognizes certain powers and immunities of aircraft

commanders, exonerating them, under certain conditions, from

responsibility for any harm potentially caused to individuals

committing such unlawful acts.

This Tokyo Convention (ratiﬁed by France in 1970) is currently

the subject of a revision process within the ICAO.

A Protocol to amend the Tokyo Convention was adopted

in Montreal on April 4, 2014. It gathered the minimum of

22 ratiﬁcations required for its entry into force and is thus

applicable in the States having ratiﬁed it. The ratiﬁcation process

is currently under way in France.

This Montreal Protocol expands the jurisdiction by recognizing,

under certain conditions, the jurisdiction of the State of Landing

and the State of the Operator over oences and acts committed

on board aircraft. The establishment of such jurisdiction over

oences is mandatory if the criteria stipulated in the Protocol are

respected. Furthermore, the Protocol grants legal recognition

and some protections to in - ﬂight security ocers. It also contains

provisions covering matters such as intra-State coordination, due

process of law and fair treatment.

6.4.2 European legislation

Single European air space

Within the European Union, these eight freedoms have been

supplemented, since April1, 1997, by common legislation that

creates a homogeneous regulatory situation for all European

carriers. All European airlines may freely operate and, in particular,

perform cabotage operations within a single European air space.

Furthermore, any resident of an EU Member State may hold a

stake in the shares of any EU-registered airline, without limit,

provided that the shareholder is not acting as a front for a

beneﬁcial owner who is not a citizen of an EU Member State. The

existence of this legislation eliminates the need for bilateral

agreements between EU Member States and does not prevent

them from participating in the ICAO, nor does it conﬂict with the

principles and regulations of the Chicago Convention.

Open Skies agreement between Europe

and third - party countries

Based on mandates issued by the Council of Ministers, the

European Union and its Member States have signed air transport

agreements with the following third - party countries:

— United States: the agreement signed in April 2007 was

amended by a protocol of June 2010 enabling, notably,

European airlines to operate an unlimited number of ﬂights,

aircraft and routes to the United States from any European

airport with the freedom to set prices, and to operate their

services within the framework of cooperation agreements

with partners of their choice. This agreement does not change

the US rules on ownership and control and, similarly, cabotage

remains forbidden;

— Canada: the agreement signed in December2009 oers EC

carriers similar opportunities to those ﬁguring in the agreement

with the United States and also includes the same restrictions;

— European Union neighboring countries: the agreement

signed with Morocco in December2006 was the ﬁrst in a

series of agreements signed with European Union neighboring

countries: Georgia and Jordan in December2010, Moldavia in

June2012 and Israel in June2013. These agreements foresee

the liberalization of bilateral air relations subject to the relevant

countries adopting the EU aviation - related acquis;

— Balkan States (Albania, Bosnia, Macedonia, UNMIK, Montenegro,

Serbia): the agreement signed in June2006 aims to create a

common air space. At the end of transition periods that vary

by country, the Balkan airlines will beneﬁt in Europe from the

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same trac rights as EC airlines. At this stage, only the 3

rd

and

4

th

freedom rights have been liberalized.

In April2002, the European Union also signed an air transport

agreement with Switzerland giving Swiss carriers, which are

assimilated with EU carriers, access to all the intra-Community

rights with the exception of cabotage.

Access to the market between France and States other than

those mentioned above for which there are existing agreements

at European Community level remains governed by bilateral aviation

agreements signed between France and these third - party States.

Community air transport policy

The regulation applicable to air transport within the European

Union is primarily of European Community origin. The aims as

outlined in the work programs of the European Commission are

to reinforce the competitiveness of European Community airlines

while insisting on the need to reduce the air transport industry’s

environmental impact and oer a high degree of passenger

protection

(1)

. The principal positive measures consist of establishing

a legal framework favoring fairer competition between EU and

third - party carriers, the eective implementation of the Single

European Sky and a commitment to developing biofuels. The

European Commission also proposed a series of measures known

as the “Better Airports” package, aimed at reducing the cost of

infrastructure use within the European Union. The latter initiatives

have only come to very partial fruition due to persistent

disagreements within the European institutions. A new European

Commission Aviation Strategy was published on December7, 2015

but the concrete consequences of the proposed measures

remain to be evaluated. This strategy should notably be reﬂected

in the adoption of a new EC commercial defense instrument

aimed at protecting European airlines against competition from

subsidised air carriers from third - party countries.

6.4.3 Other legal aspects

of AirFrance – KLM’s

activities

Allocation of slots

Access to the main international airports is subject to the prior

allocation of time slots. A European Regulation covers access to

most so - called coordinated European airports (London, Paris,

Frankfurt, Milan, Madrid, Amsterdam, etc. ). Elsewhere in the

world, the allocation of slots is generally done on the basis of

recommendations issued by IATA in a Worldwide Slot Guidelines

reference document. Countries nonetheless retain sovereignty

for deﬁning the modalities of slot allocation and may apply rules

that dier slightly from the IATA recommendations (e.g. China,

Japan, United States, Dubai, etc. ).

For airports within the European Union, each Member State with

coordinated airports under its responsibility, after consulting

the airlines that regularly use the airports concerned, their

representative organizations and the airport authorities, must

designate a coordinator or an entity to be responsible for the

allocation of slots and the monitoring of their use. Such individuals

or entities must have specialized knowledge of coordinating

aircraft routes for air transport companies.

Slots are allotted twice a year by the designated airport

coordinator, at the same time as the airline ﬂight schedules for

the relevant IATA season.

The allocation procedure is as follows:

— airlines ﬁle their slot applications with the coordinator ﬁve

months prior to the beginning of each season;

— the coordinator ﬁrst allocates slots to airlines that already had

slots the previous season (known as grandfather rights) for

past operations;

— a pool is then created that regroups, for each coordination

period, all the available slots, whether they are newly created,

unused, abandoned by a carrier or have become available for

any other reason;

— ﬁnally, the coordinator allocates half of the pooled slots to

newcomers and the other half to the other operators.

Since slots are ﬁrst allocated to existing long - standing operators,

and given the expansion plans of all the airlines, requests for new

slots are rarely satisﬁed at saturated airports.

At the end of this preliminary allocation (pre - coordination)

process, a conference attended by virtually all airport coordinators

and airlines is organized in order to enable the airlines to:

— simultaneously coordinate the slots they are allocated on

dierent airports so that when they operate ﬂights between

two coordinated airports they are granted compatible slots

by each of them; and

— exchange slots among themselves in the event that the

slots originally allocated by the airport coordinators are

unsatisfactory.

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(1) The passenger compensation rules are detailed in section3.2.2Risks relating to the air transportation activity, page 135.

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Benjamin Smith

Chief Executive Ocer of Air France–KLM

6.5.1 Person responsible for the

Universal Registration

Document and for the

Annual Financial Report

Benjamin Smith, Chief Executive Ocer of Air France–KLM.

6.5.2 Certiﬁcation by the person

responsible

I hereby declare that, to the best of my knowledge and having

taken all reasonable precautions to this eect, the information

contained in this Universal Registration Document reﬂects reality

and that nothing has been omitted that would be likely to change

the signiﬁcance thereof.

I further declare that, to the best of my knowledge, the ﬁnancial

statements have been prepared in accordance with the applicable

accounting standards and give a true and fair view of the assets,

financial position and results of the Company and all the companies

within the consolidation scope, and that the information contained

in the management report ﬁguring on pages 6 to 108,

33 to 413, 118 to 128, 129 to 154, 155 to 220 and 339 of this

Universal Registration Document provides a true and fair view of

the changes in the business, results and ﬁnancial position of the

Company and all the companies within the consolidation scope,

and that it outlines the main risks and uncertainties that they face.

I have obtained a completion letter from the Statutory Auditors

conﬁrming that they have veriﬁed the information regarding the

ﬁnancial position and the ﬁnancial statements contained in this

Universal Registration Document and reviewed the entire

Universal Registration Document.

The consolidated ﬁnancial statements for the ﬁnancial year

ended December31, 2019 included in this Universal Registration

Document are the subject of a Statutory Auditors’ report ﬁguring

on pages 321 to 345.

The consolidated ﬁnancial statements for the ﬁnancial year

ended December31, 2018 included in the Registration Document

ﬁled with the AMF on April8, 2019 under the registration number

D.19 - 0285 were the subject of a Statutory Auditors’ report

ﬁguring on pages 302 to 326.

The consolidated ﬁnancial statements for the ﬁnancial year

ended December31, 2017 included in the Registration Document

ﬁled with the AMF on March29, 2018 under registration number

D.18 - 0232 were the subject of a Statutory Auditors’ report

ﬁguring on pages 257 and 258.

6.5 INFORMATION AND CONTROL

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6.5.3 Statutory Auditors

Incumbent Statutory Auditors

Deloitte et Associés

6place de la Pyramide, 92908Paris-La Défense Cedex, France

Represented by Guillaume Troussicot and Pascal Colin

Starting date of ﬁrst mandate: September25, 1998

Renewed for a six - year period by the Shareholders’ Meeting

of May19, 2016.

KPMG Audit

A division of KPMG SA

Tour EQHO, 2avenue Gambetta,

CS 60006, Paris-La Défense Cedex

Represented by Eric Jacquet

Starting date of ﬁrst mandate: September25, 2002

Renewed for a six - year period by the Shareholders’ Meeting

of May20, 2014.

Deputy Statutory Auditors

BEAS

7/9Villa Houssaye, 92200Neuilly - sur-Seine

Starting date of ﬁrst mandate: September25, 1998

Renewed for a six - year period by the Shareholders’ Meeting of

May19, 2016.

KPMG ID Audit

A division of KPMG SA

Tour EQHO, 2avenue Gambetta,

CS 60006, Paris-La Défense Cedex

Starting date of ﬁrst mandate: May20, 2014

First appointed for a six - year period by the Shareholders’

Meeting of May20, 2014.

6.5.4 Head of Investor Relations

Olivier Gall

Mailing address: Air France–KLM/AFKL.FI

95737Paris-CDG Cedex

6.5.5 Documents available

to the public

Amongst the documents available on the Company’s website

(www.airfranceklm.com) ﬁgure, notably:

— the 2019 Universal Registration Document;

— 2019 ﬁrst-half ﬁnancial report;

— the 2018, 2017, 2016, 2015, 2014, 2013, 2012 and 2011

Registration Documents ﬁled with the Autorité des Marchés

Financiers;

— the ﬁnancial press releases (trac, quarterly, half - year and

annual results);

— the oering memoranda;

— the ﬁnancial presentations;

— the Company’s Articles of Incorporation.

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Air transport glossary

A4E

Airlines for Europe. On January20, 2016, at the European Aviation

Summit, the ﬁve largest European airline groups–Air France–KLM,

easyJet, International Airlines Group, Lufthansa Group and

Ryanair–announced the creation of the new association.

The ﬁve groups, which carry more than 50% of passengers in

Europe, chose to join forces with the aim of inﬂuencing European

aviation policy.

A4E aims to replace the AEA in lobbying the European

Commission eectively on at least three major measures:

— reducing European airport charges;

— ensuring a safe and ecient air space by reducing the cost of

air trac control (ATC);

— stimulating increased economic activity and employment by

creating an appropriate regulatory framework.

AEA

Association of European Airlines. Created in 1952, notably by Air

France and KLM, the AEA represents the interests of its members

within the European Union institutions, the European Civil

Aviation Conference and other organizations and associations.

Available seat - kilometers (ASK)

Total number of seats available for the transportation of

passengers multiplied by the number of kilometers traveled.

Available ton - kilometers (ATK)

Total number of tons available for the transportation of cargo,

multiplied by the number of kilometers traveled.

Biometry

Technique enabling the identity of an individual to be veriﬁed,

while crossing a national border for example, through the

automatic recognition of certain pre - recorded physical

characteristics.

Coordinated airport

Airport where a coordinator has been appointed to allocate

landing and take - o slots according to rules established in

advance. All large European Union airports are coordinated.

Cabotage

Airline cabotage is the carriage of air trac that originates and

terminates within the boundaries of a given country by an air

carrier of another country.

Capacity

Capacity is measured in available seat - kilometers.

Catering

In - ﬂight catering involves the planning and preparation of meals

and the assembly of meal trays destined to be served on board

an aircraft.

Codeshare

In accordance with a codeshare agreement, two partner airlines

oer services on the same aircraft, each under their own brand,

their own IATA code and their own ﬂight number. Codesharing

may take two forms. In the ﬁrst case, the two airlines purchase

and sell seats to and from each other at an agreed price. The

airline which has purchased the seats then markets them under

its brand and at its fares. In the second case, under the system

known as free ﬂow, the two airlines are allowed to sell all the seats

on the ﬂights involved. Each airline retains the revenues

generated on the ﬂight it operates and remunerates the other

airline for the number of seats the latter has sold on its aircraft.

Combi

Aircraft whose main deck is equipped for the transportation of

both passengers and cargo. The freight is stored at the back of

the aircraft and is accessed by a specially - ﬁtted cargo door.

Connecting trac

Trac between two destinations which are not linked by a direct

ﬂight.

DGAC

Direction Générale de l’Aviation Civile. Under the authority of the

French Ministry of Transport, the DGAC is in charge of the

security of air transport and of air space in France.

DGTL

Directoraat-Generaal Transport en Luchtvaart.

Under the authority of the Dutch Ministry of Trac and Public

Works, the DGTL is in charge of the security of air transport and

of air space in the Netherlands.

E-services

Range of ground services oered by Air France and KLM to their

passengers, based on the new information technologies. E-

services notably enable passengers to check in using self - service

kiosks or via the airlines’ websites as well as the use of electronic

tickets.

EASA

European Aviation Safety Agency. EASA develops safety and

environmental protection expertise in civil aviation in order to

assist the European institutions to establish legislation and

implement measures regarding aircraft security, organizations

and associated sta.

GLOSSARIES

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Electronic ticket

All the journey information for one or several passengers which,

instead of being printed, is recorded in an airline’s IT database,

once the reservation has been made and paid for. An electronic

or e - ticket replaces a traditional paper ticket.

FAA

Federal Aviation Administration. Body responsible for civil

aviation security in the United States.

Handling

Preparation of the aircraft, involving loading and unloading, as

well as the associated logistics such as management and storage

of hotel products.

Hub

Term used for a transfer platform where departures and arrivals

are scheduled to minimize transit times. Air France – KLM

disposes of two of the four major European hubs: Paris-CDG and

Amsterdam-Schiphol. The Air France and KLM hubs are

organized into successive waves for arrivals and departures each

day in order to increase the transfer opportunities for customers.

IATA

International Air Transport Association. Created in 1945, IATA

establishes regulations for the air transport industry and provides

its members with a framework for the coordination and proper

implementation of taris, together with various commercial and

ﬁnancial support services.

ICAO

The International Civil Aviation Organisation, a UN Specialized

Agency, promotes the safe, secure and sustainable development

of civil aviation worldwide. It establishes the standards and

regulations required to ensure the safety, security, eciency and

continuity of aviation operations as well as the protection of the

environment.

Joint - venture

Joint company with two partners, often held equally with 50%

each. This type of shareholder structure notably allows the

implementation of technological or industrial alliances in order to

undertake speciﬁc projects common to both partner companies.

Load factor

Revenue passenger - kilometers (RPK) divided by available

seat - kilometers (ASK). In the cargo activity this is revenue

ton - kilometers (RTK) divided by available ton - kilometers (ATK).

Multi - hub

System linking several hubs, allowing customers to access the

networks developed from each hub, thus multiplying the

round - trip oer to and from worldwide destinations.

Premium

Fare classes corresponding to business or ﬁrst class.

Over - reservation or over - booking

Over - reservation or over - booking consists of accepting more

bookings than seats available. Practiced by all airline companies

and permitted by European legislation, over - booking enables

management of the fact that some passengers cancel their trips

but not their reservations. It thus allows many passengers to ﬁnd

a seat on board ﬂights that could have departed with available

seats. Airlines usually have a passenger compensation policy.

Point - to - point trac

Trac between two airports, excluding passengers prolonging

their trip with a connecting ﬂight.

Revenue management

Technique designed to optimize revenue on ﬂights, by constantly

seeking a better balance between the load factor and the fares

oered.

Revenue passenger - kilometer (RPK)

Total number of paying passengers carried multiplied by the

number of kilometers traveled.

Revenue ton - kilometer (RTK)

Total number of tons of paid cargo multiplied by the number of

kilometers that this cargo is carried.

Safety and security

Airline safety includes all the measures implemented by air

transport professionals aimed at ensuring the reliable operation

and maintenance of aircraft.

Airline security involves all the measures taken by air transport

professionals to prevent any illicit or malicious act. Air transport

is particularly exposed to terrorist acts due to the considerable

media impact oered by such activity. Airline security notably

includes baggage screening, and the screening and questioning

of passengers.

Self - service check - in kiosk

Self - service check - in kiosks, available in airport departure halls,

allow passengers to check in and print their own boarding cards,

without having to go to a check - in counter.

Segment

Section of a ﬂight between two destinations. The number of

passengers is calculated by segment carried.

Slot

A slot represents clearance given for a carrier to land at or take

o from an airport at a speciﬁed time and date.

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Sub - ﬂeet

All the aircraft of the same type, with identical technical and

commercial characteristics (engines, cabin conﬁguration, etc. ).

Summer season

Deﬁned by IATA as the period running from the last Saturday in

March to the last Saturday in October. The summer season

corresponds to a schedule of summer ﬂights over a period of

seven months.

Trac

Trac is measured in revenue passenger - kilometers (RPK).

Unit revenue

In the passenger business, corresponds to the revenue for one

available seat or for one paying passenger transported over one

kilometer. In the cargo business, corresponds to the revenue for

one available ton or one ton transported over one kilometer.

Winter season

Deﬁned by IATA as the period running from the ﬁrst Sunday

following the last Saturday in October to the Friday before the

last Saturday in March. The winter season corresponds to a

schedule of winter ﬂights over ﬁve months.

Financial glossary

Adjusted net interest charges

The net ﬁnancial charges are adjusted for the portion of

operating leases (34%) deemed to be interest charges.

Adjusted net debt

Adjusted net debt comprises net debt and the amount resulting

from the capitalization of operating leases (7x the annual charge).

ADR

American Depositary Receipt. ADRs are negotiable certiﬁcates

representing a speciﬁc number of shares with a nominal value in

dollars. The Air France–KLM level1ADR program is traded on

the OTC Pink Open Marketplace.

Earnings per share

Net income divided by the average number of shares for the

period.

EBITDA

Earnings before interest, taxation, depreciation and amortization.

Fuel hedging

Financial mechanism aimed at protecting Air France–KLM from

the risk of a rise in the fuel price. Involves purchasing ﬁnancial

instruments, mostly in the form of options, whose value ﬂuctuates

as a function of the jet fuel price and the related oil products (oil,

diesel). The hedging strategy is detailed in Note36.1, page 300.

IFRS

International Financial Reporting Standards. International

accounting standards used by European Union listed companies

to establish their consolidated ﬁnancial statements. Adopted on

January 1, 2005, they allow investors to compare European

companies more easily.

ISIN

International Securities Identiﬁcation Number. Attributed to

securities listed for trading on the Euronext market.

Market capitalization

The market capitalization corresponds to the share price multiplied

by the number of shares comprising the Company’s capital.

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Net result, Group part

Corresponds to the net result, minus the share reverting to the

minority shareholders in fully consolidated subsidiaries.

Result from current operations

The result from current operations corresponds to the dierence

between revenues and the operating expenses incurred (external

expenses, salaries and related costs, and amortization,

depreciation and provisions). It represents what the Company

earns from its main activity before the impact of ﬁnancial and

exceptional items.

Return on Capital Employed (ROCE)

A measure of the returns that a company is making on the capital

employed to ensure its business activity. The calculation method

is detailed in Section5.3, page 228.

Revenues

Revenues correspond to the total sales generated by the Air

France – KLM Group in its three core businesses (passenger,

cargo, maintenance) and in its ancillary activities. The revenues

from airline operations are recognized on realization of the

transportation, net of any potential discounts granted.

Consequently, when passenger and cargo tickets are issued, they

are recorded in balance sheet liabilities under deferred revenue

on ticket sales (see Note4.6, page 248).

Share capital

Corresponds to the total contributions either ﬁnancial or in kind

made by the shareholders either at the time the company is

created or during capital increases. It is equal to the number of

shares multiplied by the nominal value of the share.

Stockholders’ equity

Stockholders’ equity represents accounting value of the capital

contributed by the shareholders to establish the company or

subsequently, or left at the disposal of the company as income

not distributed in the form of dividends. Corresponds to total

balance sheet assets, net of total debt.

TPI

Titre au Porteur Identiﬁable or identiﬁable bearer shares. TPI

analysis enables a company to identify its shareholders holding

stock in bearer form.

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TABLE OF CONCORDANCE FOR THE UNIVERSAL

REGISTRATION DOCUMENT

This concordance table is based on the main headings required by the Delegated Regulation (EU) 2019/980of March14, 2019 (“the

Regulation”), supplementing the provisions of Regulation (EU) 2017 - 1129 of June14, 2017, and provides the page numbers in this

Universal Registration Document on which the relevant information can be found.

No. Information based on Annex 1of the regulation Pages

1 Persons responsible, information from a third party, from experts’

reports and approval by the competent authority

1.1 Persons responsible p.356

1.2 Information from a third party, from experts’ reports and declarations of interest Not applicable

2 Statutory Auditors p.357

3 Risk factors p.129to 154

4. Information about the issuer p.350

5. Business overview

5.1 Principal activities p.24to 41

5.2 Principal markets p.24to 41

5.3 Important events in the development of the issuer’s business p.7to 10

5.4 Strategy and objectives p.18to 23

5.5 Dependence on patents, licenses, contracts or manufacturing processes Not applicable

5.5 Competitive position p.13to 17

5.6 Principal investments p.42to 45, p.222to 223, p.274to 277, p.181to 201

6 Organizational structure

6.1 Brief description of the Group p.20 and 21, p.147to p.154, p. 224, p.351to 353

6.2 List of signiﬁcant subsidiaries p.224, p.318to 320, p.336

7 Review of the ﬁnancial situation and results

7.1 Financial situation p.4, p.222to 223, p.224to p.227, p.228to 230

7.2 Operating result p.4, p.224to 227, p.228to 230

8 Capital resources

8.1 Information on the Group’s capital resources p.118to 128 and p.282to 285 and p.334

8.2 Sources and amounts of cash ﬂows p.142to 146, p.222to 223, p.239to 240 and p.316

8.3 Information on borrowing requirements and funding structure p.143to 146, p.223, p.226 and p.227, p.228to 231,

p.294to 297, p.299, p.306to p.311 and p.334to 336

8.4 Restrictions on the use of capital resources having materially aected

or potentially materially aecting the Group’s activities p.142to 146, p.294to 297 and p.283

8.5 Anticipated sources of funding p.8, p. 142to 146 and p.223

9 Regulatory environment p.353to 356

10 Information on trends p.10

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Update on recent events linked to COVID-19 p.10and p.231

11 Proﬁt forecasts or estimates Not applicable

12 Administrative, management and supervisory bodies, and the Senior Management p.50to 74

12.1 Information relating to members of the Board and the Senior Management p.48to 74

12.2 Conﬂicts of interest aecting members of the Board of Directors and the Senior Management p.81

13 Compensation and beneﬁts

13.1 Compensation and beneﬁts in kind p.94to 115

13.2 Amounts set aside or accrued to provide pension, retirement or similar beneﬁts p.115 and p.314

14 Functioning of the administrative and management bodies p.75to 76

14.1 Mandates of the members of the Board of Directors p.48to 74

14.2 Service contracts binding the members of the management bodies p.81

14.3 Information on the Audit Committee and the Remuneration Committee p.87to 90

14.4 Statement of compliance with a Corporate Governance regime p.75 and p.93

14.5 Potential material impacts on Corporate Governance p.93

15 Employees p.164to 180

15.1 Number of employees and breakdown of persons employed p.174to 175, p.263

15.2 Shareholdings and stock options held by members

of the Board of Directors and the Senior Management p.50to 74, p.106, p.121to 124, p. 282to 284

15.3 Employee shareholding in the issuer’s share capital Not applicable

16 Major shareholders

16.1 Identiﬁcation of the main shareholders p.121to 124

16.2 Existence of speciﬁc voting rights p.118

16.3 Control of the issuer Not applicable

16.4 Agreements known to Air France–KLM which could lead to a change in control p.124

17 Related party transactions p.314to 316

18 Financial information concerning the issuer’s assets and liabilities, ﬁnancial position and results

18.1 Historical ﬁnancial information p.4 and 5, p.234to 320, p.327to 338 and p.364,

p.321to 326, p.340to 343

18.2 Interim and other ﬁnancial information Not applicable

18.3 Auditing of historical annual ﬁnancial information p.321to 326, p.340to 343

18.4 Pro forma ﬁnancial information Not applicable

18.5 Dividend policy p. 124

18.6 Legal and arbitration proceedings p. 142, p. 291to 293

18.7 Signiﬁcant change in the issuer’s ﬁnancial position p. 6to 10 and p.241to 320

19 Additional information

19.1 Share capital p.118to 120, p.282to 283, p.334, p.339

19.2 Memorandum and Articles of Incorporation p.125to 127, p.350, p.118to 120

20 Material contracts Not applicable

21 Documents available to the public p.75, p.357

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Other information

Table of concordance for the Universal Registration Document

6

No. Information based on Annex 1of the regulation Pages

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Pursuant to Article 19 of Regulation (EU) 2017 - 1129 of the

European Parliament and of the Council of June14, 2017, the

following information is included by reference in this Universal

Registration Document:

2018 Financial Year

The Registration Document for the 2018 ﬁnancial year was ﬁled

with the Autorité des Marchés Financiers on April8, 2019 under

the registration number D. 19 - 0285. The consolidated ﬁnancial

statements are presented on pages 200 to 301 and the related

Statutory Auditors’ report on pages 302 to 307. The full statutory

ﬁnancial statements can be found on pages 308 to 320 and the

related Statutory Auditors’ certiﬁcation on page 321 to 324. The

selected ﬁnancial information is presented on pages 4 and 5 of

the Registration Document. The management report ﬁgures on

pages 6 to 8, pages 10 to 42, 43 to 111, pages 30 to 32, pages

39 to 42, pages 125 to 146, pages 126 to 148, pages 148 to 166,

pages 167 to 176, pages 204 to 219 and pages 118 to 121.

2017 Financial Year

The Registration Document for the 2017 ﬁnancial year was ﬁled

with the Autorité des Marchés Financiers on March29, 2018 under

the registration number D. 18 - 0232. The consolidated ﬁnancial

statements are presented on pages 200 to 286 and the related

Statutory Auditors’ report on pages 287 to 292. The full statutory

ﬁnancial statements can be found on pages 293 to 305 and the

related Statutory Auditors’ certiﬁcation on page 307 to 310. The

selected ﬁnancial information is presented on pages 4 and 5 of

the Registration Document. The management report ﬁgures on

pages 6 to 8, pages 10 to 54, 66 to 73, 87 to 89, pages 83 to 89,

pages 96 to 99, pages 102 to 125, pages 128 to 148, pages 149 to

157, pages 157 to 179, pages 190 to 198, page 306 and pages

55 to 62.

INFORMATION INCLUDED BY REFERENCE

Air France- KLM — 2019 Universal Registration Document364

Other information

6 Information included by reference

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Other information

Table of concordance for the Annual Financial Report

6

TABLE OF CONCORDANCE

FOR THE ANNUAL FINANCIAL REPORT

This Universal Registration Document contains all the elements of the ﬁnancial report as referred to in Article L.451 - 1-2of the French

Monetary and Financial Code (Code Monétaire et Financier) and required by Article 222 - 3of the AMF’s General Regulation. The table

below resumes the elements of the ﬁnancial report.

Elements required Pages of the Universal Registration Document

The annual statutory ﬁnancial statements p.327 to p.338

The Group’s consolidated ﬁnancial statements p.234 to 320

Corporate governance report p.47 to 128

— update on the shareholder structure at March26, 2020, p.123

— update on the declarations on the crossing of thresholds since

December31, 2019, p.126;

— update relating to the 2020 compensation policy decided

by the Board of Directors on April3, 2020 linked

to the COVID-19crisis, p.111 to 113.

Management report p.6 to 108, p.33 to 413, p.118 to 128, p.129 to 154, p.155 to 220, p.339

Following the COVID-19public health crisis, the elements in the

blue boxes relate to a comprehensive update of the paragraphs in

the management report relating to the health and liquidity risks on,

respectively, p.132 - 133 and p.145

Certiﬁcation by the person responsible

for the Annual Financial Report

p.356

Statutory Auditors’ report

on the statutory ﬁnancial statements

p.340 to p.343

Statutory Auditors’ report on the consolidated ﬁnancial

statements

p.321 to 326

Statutory Auditors’ fees p.317

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