COMBINED ORDINARY AND EXTRAORDINARY ... - Air France KLM · > Air France-KLM to acquire 31% of...

COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETING

2017

LEGAL

OPENING

PARIS

SHAREHOLDERS’ MEETING AGENDA

C O M B I N E D O R D I N A R Y A N D E X T R A O R D I N A R Y

S H A R E H O L D E R S ’ M E E T I N G 2 0 1 73

SM

Introduction of strategic operations

with Delta Air lines, Inc and China Eastern Airlines

Presentation of the resolutions

Dialogue with the shareholders

Vote on the resolutions

Closing

A I R F R A N C E - K L M

INTRODUCTION OF

OPERATIONS

LJUBLJANA, SLOVENIA

STRENGTHENING AIR FRANCE-KLM ALLIANCES BY CREATING A VERY POWERFUL COMMERCIAL AND EQUITY PARTNERSHIP



SM

Building an enlarged North Atlantic partnership reinforced by equity investments

> Combination of Air France KLM/Delta and Delta/Virgin Atlantic joint-ventures

> Delta to acquire a 10% stake in Air France-KLM

> Air France-KLM to acquire 31% of Virgin Atlantic shares

Securing and strengthening the access to the Chinese market with China Eastern

> Further enhancing commercial cooperation with China Eastern

> China Eastern to acquire a 10% stake in Air France-KLM

€751 million of new equity to reinforce Air France-KLM balance sheet

CREATING THE

MOST POWERFUL

PARTNERSHIP

IMPROVING OUR

FINANCIAL

STRUCTURE


ALLOWING AIR FRANCE-KLM TO BE THE EUROPEAN PILLAR OF THE MOST POWERFUL COMMERCIAL AND EQUITY PARTNERSHIP



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Africa

Asia Pacific

Europe

North America

India

(1)

Latin America

(2)

(3)

10%

10%

Existing Agreements

49%

3.6%

31%

New/expanded agreements + equity partnership

OUR JOINT VENTURE WITH DELTA: A VERY INTEGRATED PARTNERSHIP



$12 billion of annual revenues

250 daily transatlantic flights

500 destinations in Europe and North America

20% of the total transatlantic capacity

A significant operating margin

Common strategy

Network and capacity agreed jointly

International revenue management team

Sales delegation

SM


A POWERFUL

PARTNERSHIP WITH

DELTA

A STRONG

GOVERNANCE

VIRGIN ATLANTIC: A MAJOR PLAYER ON THE NORTH ATLANTIC ROUTES



SM


Second airline in London Heathrow airport

26 daily slot pairs at London Heathrow

Constrained airport capacity supporting yield premium

Efficient joint-venture between Delta and Virgin Atlantic

on the North American routes

Joint marketing and sales, coordinated pricing, revenue management

network planning and scheduling for UK-US routes

5.4 million passengers carried to 30 destinations, with a fleet of 39 aircraft

More than 9,000 employees

4th largest European player on the North Atlantic routes

LEADING AIRLINE

IN THE NORTH

ATLANTIC MARKET

STRATEGIC BASE

AT LONDON

HEATHROW

AIRPORT

HIGH LEVEL OF

INTEGRATION WITH

OUR PARTNER DELTA

STRENGTHENING OF OUR NORTH ATLANTIC JOINT-VENTUREWITH DELTA AND VIRGIN ATLANTIC


S H A R E H O L D E R S ’ M E E T I N G 2 0 1 79 A I R F R A N C E - K L M

AN EXTENDED NORTH ATLANTIC ALLIANCE COMBINING AIR FRANCE-KLM/DELTA AND DELTA/VIRGIN

ATLANTIC JOINT VENTURES*

Unrivalled offer for customers travelling between Continental Europe and the UK,

and the United States, Canada and Mexico

Offering more growth potential, three-parties sharing bottom line value as per relative size

A minimal joint venture duration of 15 years

Expected significant synergies: new code shares, sales coordination, cost synergies…

* Subject to shareholders and regulatory approvals

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CONTINUING TO REINFORCE OUR POSITION IN ASIA



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CODE SHARE AGREEMENT WITH LEADING AIRLINES IN ASIA

Looking for additional opportunities of cooperation to sustain

our presence on growing markets

A STRONG PARTNERSHIP CONNECTING INDIA

TO EUROPE AND NORTH AMERICA

Enlarged code-share partnership with Jet Airways over

the past two years, connecting India and North America

through 3 European hubs

12 daily flights from India to Europe connecting to 81 daily

flights to North America through 3 major hubs

CDG/AMS/LHR

An extended network in the Chinese market

OUR JOINT-VENTURE WITH CHINA EASTERN: ALREADY A SIGNIFICANT PARTNERSHIP



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A JOINT-VENTURE BASEDON OUR ROUTES TO SHANGHAI

Joint-venture with Air France-KLM on the routes Amsterdam / Paris / Shanghai

€530 million revenues in 2016, of which €405 millions for Air France-KLM

Skyteam member

Delta holds a 3.2% stake in China Eastern

STRENGTHENING OUR JOINT VENTURE WITH CHINA EASTERN AIRLINES



SM


Securing Air France-KLM European leadership position in Shanghai, largest business

market in China

Cooperation enhancement: enlarge joint-contracting, network and price coordination,

joint commercial tooling, non commercial synergies

Cement and secure our access in the Chinese market

Consistent with Delta partnership strategy

Preserving the current joint-venture with China Southern

ESTABLISH EQUITY LINKS TO CEMENT OUR COMMERCIAL AGREEMENTS



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49%

3,2%

10%

31%

10%

AN INVESTMENT IN A JOINT-VENTURE PARTNER:VIRGIN ATLANTIC



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31%

Price of £220 million

Brexit put option together with Delta

Same number of Directors as Delta

Closing in 2018, subject to appropriate

regulatory approvals

£220m

TWO RESERVED CAPITAL INCREASES



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10% €375.5m

10% €375.5m

20% €751mTOTAL

Value accretion of 8%* through

the partnership between Air France,

Delta and Virgin

Pre-tax annual synergies increasing

from €35m to €95m

STAKE AMOUNT RAISED

S u b s c r i p t i o n p r i c e €10

Same conditions for Delta and China Eastern

5 year period lock-up and stand-still

* Assuming 37.5m new shares in AF-KLM issued to DL in exchange of a 10% stake (reserved capital increase)- 1.09 USD/EUR exchange rate, 0.86 GBP/EUR exchange rate

A PREMIUM TO THE HISTORICAL AVERAGE OF AIR FRANCE-KLMSHARE PRICE



SM


(€)

3

5

7

9

11

13

15

juil.-16 oct.-16 janv.-17 avr.-17 juil.-17

Average1 year(1)

10.0 €

7.0 €

12.07 €*

7.1€ 4

3

5

7

9

11

13

15

juil.-12 juil.-13 juil.-14 juil.-15 juil.-16 juil.-17

10.0 €

12.07 €*

(€)

7.0 € 2

7.3€ 1

7.0€ 3

42% premium relative to the average

share price over the last 12 months*

11% premium relative to the average

share price since the announcement

of the 2016 annual results

(16th February 2017)*

Air France-KLM share price

performance since 1st January 2017:

+133%

* As at July 26, 2017

Average1 year(1)

Average 2 yars(2)

Average 3 years(3)

Average 5 years(4)

AF-KLM share price performance over the past 12 months

AF-KLM share price performance over the past 5 years

July 12 July 13 July 14 July 15 July 16 July 17

July 16 October 16 January 17 April 17 July 17

A STEP FURTHER TOWARD DELEVERAGING



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(1) Sliding 12 months - Adjusted net debt includes operating leases capitalized at 7x

Adj. net debt/ EBITDAR (1)

3.7

2016 H1 2017

3.0

2.9X

2.7X

3.7

2016 H1 2017

2.5

Adj. net debt/ EBITDAR (1)

2.9X

2.5X

Net debt pre proceeds

(€bn)

Net debt post proceeds

(€bn)

IMPACT ON THE SHAREHOLDING STRUCTURE



SM


Capital distribution

as of 31 July 2017 pre-operation

Projected capital

distribution post-opération

Others

Employees

(FCPE)

French State

Treasury stock

China Eastern

DeltaEmployees (FCPE)

French State

Treasury stock

Others

14.1%

0.3%

4.7%

10.0%

10.0%

60.9%

5.9%

17.6%

0.4%

RENFORCING STRATEGIC POSITIONNING AND ATTRACTIVENESSTO INVESTORS



Reinforcing AF-KLM’s ability to leverage its

access to the largest markets in the world,

Europe and North America

Opportunity to combine strengths

with Virgin and Delta in the UK

Secured access to the rapidly growing

Chinese market

Further positioning AF-KLM as the

airline of choice for customers flying

between Europe and China

Improving strategic positioning

Accelerating the earnings growth

Improving the financial structure

OFFERING

GREATER

OPPORTUNITIES

FOR PROFITABLE

GROWTH

BOSLTERING

THE GROUP’S

ATTRACTIVENESS

SM

MONTPELLIER

PRESENTATION

OF THE

RESOLUTIONS

ORDINARY

BUSINESS(OB)

APPOINTMENT OF NEW BOARD DIRECTORS(RESOLUTIONS 1 & 2)



The Company’s governance will evolve further to the partnership with Delta and China

Eastern and the appointment of two new board directors representing China Eastern

Airlines and Delta Air Lines, Inc.

Further to these appointments, and in accordance with the provisions of Article

L. 225-27-1 of the French Commercial Code and Article 17-3 of Air France-KLM bylaws,

a second board director representing employees shall be appointed by the European

Works Council

OB


APPOINTMENT OF M. BING TANG AS BOARD DIRECTOR(RESOLUTION 1)



Born in1967

Chinese citizen

M. TANG began his career in the civil aeronautic sector in 1993and he progressed in different functions: he served as Presidentof Shanghai Airlines and President of the Beijing branch of China Eastern Airlines Corporation Limited. He is director since June 2012, and vice- President, since February 2010 of China Eastern Airlines Corporation Limited. He is also a member of China Eastern Air Holding Company’s party since May 2011, and vice-Presidentof this same company since December 2016

Expiration of his appointment: Shareholders’ Meetingto be convened in 2021

M. Bing TANG

OB

APPOINTMENT OF DELTA AIR LINES, INC. AS DIRECTOR(RESOLUTION 2)



Corporation formed under the laws of the State of Delaware (USA)

Office: 1030 Delta Boulevard, Atlanta, GA USA 30354

Expiration of its appointment: Shareholders’ Meeting to be convened

in 2021

DELTA AIR LINES, INC

OB



Born in 1966

American citizen

Mr. Mattson joined Delta’s Board on October 1st, 2012. He served as a partner and co-head of the Global Industrials Group in Investment Banking at Goldman, Sachs & Co from 2002 through August 2012, where he served in a variety of positions from 1994 to 2002. He has experience in the areas of mergers and acquisitions, corporate finance and capital markets. He has knowledge of the airline industry, transportation and other global industries acquired during his 18 years at Goldman, Sachs, & Co. Since his retirement from Goldman Sachs, Mr. Mattson has been involved in acquiring and growing middle market industrial businesses

Mr. George N. MATTSON

OB

CURRENT COMPOSITION OF THE BOARD OF DIRECTORS



OB

* Seven independent Board directors within the meaning of the AFEP-MEDEF Code.

Jean-Marc

JANAILLAC

Maryse

AULAGNON*

Isabelle

BOUILLOT*

Jean-Dominique

COMOLLI

Alexander

R. WYNAENDTS*

Jaap

DE HOOP

SCHEFFER*

Hans

N.J. SMITS

Anne-Marie

COUDERC*

Patrick

VIEU

Louis

JOBARD

Isabelle

PARIZE*

François

ROBARDET

Solenne

LEPAGE

Karim

BELABBAS

Leni

BOEREN*

EXTRAORDINARY

BUSINESS(EB)

DELEGATION OF AUTHORITY GRANTED TO THE BOARD OF DIRECTORS

FOR THE PURPOSE OF CAPITAL INCREASES (RESOLUTIONS 3 & 4)



Resolutions 3 and 4 delegate to the Board of Directors all powers to proceed

with the capital increases reserved to China Eastern and Delta

Each of the twp investors, China Eastern Airlines and Delta Air Lines, Inc.

would subscribe 375,274,100 euros worth of shares through a reserved capital

increase for a total nominal amount of 37,527,410 ordinary shares with

a unitary subscription price of €10

This amount will be deducted from the €150 million aggregate nominal cap amount

set under the terms of the 12th resolution of the Shareholders’ Meeting held

on 16 May 2017


EB

CAPITAL INCREASE RESERVED TO THE EMPLOYEES (RESOLUTION 5)



In accordance with the provisions of Articles L.225-129-6 and L225-138-1 of the French Commercial Code and of articles L3332-18 et seq of the French Labor Code, a delegationof authority shall be granted to the Board of Directors for the purpose of carrying out capital increases by the Shareholders’ Meeting, to present a draft resolution allowing for a new capital increase reserved for employees

Resolution 5 aims at granting powers to the Board of Directors for the purpose of carrying out capital increases reserved to members of a company or Group savings scheme without shareholders’ preferential subscription rights

This delegation would be granted within the limit of 2% of the share capital

This amount will be deducted from the €150 million aggregate nominal cap amount set under the terms of the 12th resolution of the Shareholders’ Meeting held on 16 May 2017

This resolution would overwrite resolution n°27 with the same purpose approvedby the Shareholders’ Meeting held on 16 May 2017


EB

POWERS TO ACCOMPLISH FORMALITIES (RESOLUTION 6)



Resolution 6 aims at fully authorizing the Board of Directors, his President,

or any other person to comply ith any legal or administrative requirements

required under applicable legislation following the adoption of the previous resolutions


EB

STATUTORY

AUDITORS’

REPORTS

AMSTERDAM

STATUTORY AUDITORS’ REPORTS



2 reports as regards the Extraordinary Shareholders’ Meeting

> On share capital increases reserved for designated beneficiaries with cancellation of preferential subscription

rights

> On the issuance of new shares or other securities granting rights to the share capital reserved for members

of a company savings plan


EB

REPORTS IN RELATION WITH THE EXTRAORDINARYSHAREHOLDERS’ MEETING (1/2)



EB

Purpose

> Delegation of authority for a 6-month period to decide to proceed to the issuance of sharesin the amount of €37,527,410 each, for a total of €75,054,820, reserved respectively for Eastern Airlines Industry Investment (Luxembourg) Company Limited and Delta Air Lines, Inc. or a Delta group company wholly owned directly or indirectly by Delta Air Lines, Inc.

> These two share capital increases will each result in the issue of 37,527,410 ordinary shares, for a nominal value of one (1) euro, coupled with an issue premium of €9, representing a subscription price of €375,274,100

> Opinion on the fairness of the quantitative information, on the proposed cancellation of preferential subscription rights and on other information about this issuance

Procedures performed by the Statutory Auditors

> Verification of the content of the report of the Board of Directors related to this operationand of methods used to determine the issue price of shares

Conclusion

> The purchase price of issuing and its amount result from negotiations between Air France-KLM, China Eastern Airlines and Delta

> No opinion on the proposed cancellation of preferential subscription rights, definitive conditions of the share capital increases having not yet been finalized

> Additional report, where appropriate, when these delegations are used

On share capital

increases reserved

for designated

beneficiaries

with cancellation

of preferential

subscription rights

(Resolutions 1, 2, 3 et 4)

REPORTS IN RELATION WITH THE EXTRAORDINARYSHAREHOLDERS’ MEETING (2/2)



EB

On the issuance

of new shares

or other securities

granting rights

to the share capital

reserved for members

of a company savings

plan

(Resolution no.5)

Purpose

> Delegation of authority to proceed with increases in the share capital for a 12-month period and limited to 2% of the Company’s share capital replacingdelegation of authority granted by the shareholders’ meeting dated 16 May 2017, pursuant to its 27th resolution

> Opinion on the fairness of the quantitative information, on the proposedcancellation of preferential subscription rights and on other information

Procedures performed by the Statutory Auditors

> Verification of the content of the Board of Directors’ report related to this operation and of methods used to determine the issue price of equity securities

Conclusion

> Subject to subsequent review of the conditions of each equity issuance,no comments to make on the methods used to determine the issue price of equity securities

> No opinion on the price and on the proposed cancellation of preferential subscription rights

> Additional report, where appropriate, when this delegation is used

DIALOGUE WITH

SHAREHOLDERS

MAURITIUS

VOTE ON THE

RESOLUTIONS

NAMIBIA

ORDINARY

BUSINESS(OB)

FIRST RESOLUTION



Appointment of M. Bing TANG as member of the Board of Directors for four (4) years


OB

SECOND RESOLUTION



Appointment of Delta Air Lines, Inc. as member of the Board of Directors

for four (4) years


OB

EXTRAORDINARY

BUSINESS(EB)

THIRD RESOLUTION



Delegation of authority granted to the Board of Directors, for the purpose of issuing,

without shareholders’ preferential subscription rights, for the benefit of Eastern

Airlines Industry Investment (Luxembourg) Company Limited, ordinary shares

of the Company for a total nominal amount of 37,527,410 euros

> This amount will be deducted from the €150 million aggregate nominal cap amount set under the terms

of the 12th resolution of the Shareholders’ Meeting held on 16 May 2017

> Duration of the authorization: 6 months


OB

FOURTH RESOLUTION



Delegation of authority to be granted to the Board of Directors, for the purpose

of issuing, without shareholders’ preferential subscription rights, for the benefit

of Delta Air Lines, Inc. or a 100% subsidiary of the Delta group, ordinary shares

of the Company for a total nominal amount of 37,527,410 euros





OB

FIFTH RESOLUTION



Delegation of authority granted to the Board of Directors for the purpose of carrying

out capital increases reserved to members of a company or Group savings scheme

without shareholders’ preferential subscription rights within a limit of 2% of the share

capital




> Terminates the previous delegation (Shareholders’ Meeting dated 16 May 2017) with the same purpose


OB

SIXTH RESOLUTION



Powers to accomplish formalities


OB

SEVENTH RESOLUTION



Appointment of Air France-KLM Finance SAS as nineteenth member of the Board

of Directors for four (4) years


OB

COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETING

2017

COMBINED ORDINARY AND EXTRAORDINARY ... - Air France KLM · > Air France-KLM to acquire 31% of...

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