AIR FRANCE KLM IN LATIN AMERICA: A STRATEGIC CHALLENGE FOR AIR FRANCE KLM

Transcription

1 AIR FRANCE KLM IN LATIN AMERICA: A STRATEGIC CHALLENGE FOR AIR FRANCE KLM - 1 -

2 CONTENTS I / FLIGHT SCHEDULE: CAPACITY AND TRAFFIC... p 3 1.AIR FRANCE KLM destinations in Latin America 2. AIR FRANCE KLM: leading carrier between Europe and Latin America with near 20% market share 3. A very buoyant context and an ambitious flight schedule II / AIR FRANCE KLM WELL ESTABLISHED ON MARKETS..... p 7 1. AIR FRANCE KLM teams in Latin America: well established thanks to strong cooperation track record 2. Air France Cargo-KLM Cargo in Latin America 3. Air France Industrie in Latin America III / WINNING AND RETAINING A DIVERSIFIED CUSTOMER BASE.. p 11 1.A diversified customer base 2.AIR FRANCE KLM Group strengths in Latin America Annexes: Background to Latin American services operated by Air France and KLM AIR FRANCE KLM key figures: Latin America AIR FRANCE KLM key figures SkyTeam key figures SkyTeam customer benefits - 2 -

3 I / AIR FRANCE KLM FLIGHT SCHEDULE: CAPACITY AND TRAFFIC 1. Destinations served by the AIR FRANCE KLM Group in Latin America: close to 55,000 seats each week and 208 weekly flights in both directions List of Latin American destinations served non-stop from Paris or (and) Amsterdam with Air France or KLM aircraft (Summer 2007 schedule) COUNTRY CITY SERVED DEPARTURE AIRPORT AIR FRANCE KLM ARGENTINA BUENOS AIRES PARIS DAILY - RIO DE JANEIRO BRAZIL PARIS DAILY - SAO PAULO PARIS/AMS TWICE DAILY DAILY CHILE SANTIAGO PARIS/AMS 6 weekly flights COLOMBIA BOGOTA PARIS DAILY ECUADOR QUITO AMSTERDAM - 6 weekly flights GUAYAQUIL AMSTERDAM - 6 weekly flights FRENCH GUIANA CAYENNE PARIS DAILY - SURINAME PARAMARIBO AMSTERDAM 3 weekly flights MEXICO MEXICO CITY PARIS/AMS TWICE DAILY + daily flight code-shared DAILY with Aeromexico PERU LIMA* AMSTERDAM - 6 weekly flights VENEZUELA CARACAS PARIS/AMS DAILY * New feature of KLM Summer 2007 Schedule: 6 weekly non-stop flights, as from March

4 List of destinations served on a code-share basis with aircraft from partner airlines of Air France (Summer 2007 schedule) AIRLINE DESTINATION VIA COUNTRY AEROMEXICO ACAPULCO CANCUN GUADALAJARA LEON MEXICO MEXICO MERIDA MONTERREY PUERTO VALLARTA DELTA SAN JUAN GUADALAJARA GUATEMALA CITY NASSAU PANAMA CITY SAN JOSE LIMA ATLANTA PUERTO RICO MEXICO GUATEMALA BAHAMAS PANAMA CITY COSTA RICA PERU BRASILIA BELO HORIZONTE CURIBITA FLORIANOPOLIS FORTALEZA GOIANIA TAM IGUASSU FALLS LONDRINA NATAL RIO DE JANEIRO OR SAO PAULO BRAZIL RECIFE PORTO ALEGRE PORTO SEGURO SALVADOR DE BAHIA VICTORIA Note: KLM benefits from a code-share agreement on TAM flights to Rio de Janeiro and Buenos Aires

5 2.AIR FRANCE KLM: leading carrier between Europe and Latin America with near 20% market share Over the past few seasons, we have been improving our service to the main destinations served. Our key asset is to offer our customers at least one daily flight to the main destinations as well as convenient flight times, particularly late in the evening, stated Christian Herzog, Senior VP, CDL Americas. A leading carrier between Europe and Latin America: close to 55,000 seats each week both ways 12 destinations served with AF-KLM aircraft, 208 weekly flights both ways and 28 additional code-shared destinations Close to 21,000 connections at Paris-CDG hub and close to 7,000 connections at Schiphol hub (Jan 2007). AIR FRANCE KLM: the preferred airline for Latin American business travellers (close to 19% of these Premium passengers departing from Latin America have booked tickets with AIR FRANCE KLM.) Leading carrier in terms of bookings made by passengers departing from Latin America to destinations in Asia and Middle East 54% increase in sales share to destinations in Asia (April 2006 Feb. 2007) More than 15 websites, 2 call centers in Rio and Santiago 2 Sales and Service Centres can sell both Air France and KLM brands Some 680 local staff Air France capacity in 2006 and 2007 in Latin America (excluding French Guiana) expressed in Available Seat-Km (ASK) Calendar year Change % % KLM capacity in 2006 and 2007 in Latin America (exc. Suriname and Caribbean expressed in Available Seat-Km (ASK) - 5 -

6 Calendar year Change % % 3. A very buoyant context and an ambitious flight schedule With a 4% increase in GDP in 2005, the Latin American and Caribbean region has just posted its third consecutive year of growth. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) is forecasting an extension of this economic upswing. Whereas Brazil, the region s biggest market, has posted growth of 2%, most of these countries have been more successful: Bolivia, Ecuador, Mexico and Paraguay hover around 3-4%, Colombia is at 5%, Chile at 6.3%, Peru and Uruguay at 6.7%, Argentina at 9% and Venezuela at 9.4%. Europe is the number one investor in Latin America with FDI (Foreign Direct Investment) running at over 300 billion euros last year. It is also the second trading partner with some 100 billion euros in exports in Europe is also a key cultural partner. In this context, French economic presence is continuously expanding and covers all sectors: automotive, food processing, chemicals, retailing, aviation, hotels, energy, telecommunications, railways, etc. France is among the top foreign investors in the region and contributes to its economic growth. With capacity up 11.4% for the AIR FRANCE KLM Group, Latin America is the Group's fastestgrowing market. It is Air France s strongest growth area: up 15.3%. The twice-daily service to São Paulo since January this year, provides an Airbus A daytime flight and a B night flight from Paris-Charles de Gaulle. Santiago retains its non-stop service of three weekly flights, in addition to three weekly flights via Buenos Aires. There are six weekly flights to Chile. For KLM, the main innovation is the launch of a new non-stop service from Amsterdam to Lima featuring six B ER flights weekly. There is now also an additional sixth weekly flight to Quito / Quayaquil

7 II / AIR FRANCE KLM WELL-ESTABLISHED ON MARKETS 1. AIR FRANCE KLM teams in Latin America: well established thanks to strong cooperation track record The networks of the two airlines are highly complementary, as are their teams in each country. This means that either Air France or KLM is present on any one market. The exception is Brazil, the only country where both airlines are present. The Air France Americas Route Center, or CDL, in Central and South America groups six regional managements. However, Guiana and Suriname depend on the French Caribbean, Guiana and Indian Ocean Sector. Their presence in the various countries optimizes the Group s responsiveness and enables teams to adjust their commercial strategy to customer expectations. Only one sales team now sells both the Air France and KLM brands, thanks primarily to the combinable fares of Air France and KLM, available throughout Latin America. They allow passengers to travel one-way with Air France and the other way with KLM (see Air France-KLM Strengths ). The Group s total staff numbers in regional managements is close to 680 sales staff: nearly 560 Air France staff and 120 KLM staff. These six regional managements are: - Brazil (team based in São Paulo), - Southern Andes (the Buenos Aires based team manages five countries: Argentina, Bolivia, Chile, Uruguay, Paraguay), - French Guiana (team based in Cayenne, reporting to the Caribbean/French Guiana/Indian Ocean sector), - Andean countries (team based in Bogotá manages Colombia, Ecuador, Peru and Venezuela), - Mexico (team based in Mexico City manages the Central American countries). - Paramaribo, the capital of Suriname and one of the destinations served by KLM, is managed by the DUTCH CARIBBEAN Regional Division in the CAYENNE and INDIAN OCEAN Sector - 7 -

8 The regional offices in Brazil, the Andean countries and the Southern Andes share a single Air France KLM management (Regional Manager and Sales Vice President). The sales teams of both airlines share the same premises and sell either brand, using a common Sales and Marketing Action Plan, even if the objectives are not the same for all the Group s member airlines. To this end, the AIR FRANCE KLM teams use an increasing number of joint sales applications to simplify the act of selling for the salesperson, and the purchase for the customer. The Marketing Departments have also merged and can now promote both brands

9 2. Air France Cargo-KLM Cargo in Latin America: AIR FRANCE CARGO AND KLM CARGO: AF-KL Cargo As soon as the AIR FRANCE KLM Group was set up, the two airlines strengthened their cooperation in the cargo field. This generated substantial synergies in various areas such as networks, capacity swaps, or schedule coordination. The One roof policy has been applied when technically and legally possible. KLM has also now joined SkyTeam Cargo. The founding principle of the AIR FRANCE KLM Group "one group, two airlines, three businesses" sets the priority on achieving synergies between the two companies. In the cargo sector, joint departments are justified from an economic viewpoint. Since end-2005, therefore, an integrated management team comprising 5 senior executives, referred to as JCMC Joint Cargo Management Committee has been responsible for managing the network, marketing and sales, communication, mass retailing, strategy & development, and related IT resources, while each airline continues to supervise its own operation via their respective cargo hubs, G1XL at Paris- CDG and Amsterdam Schiphol. The JCMC manages an AF-KL Cargo workforce of some 2,200 employees working together in what is known as the JCT Joint Cargo Team. AIR FRANCE CARGO AND KLM CARGO IN LATIN AMERICA The Latin American Cargo market accounts for 12.4% of total activity in the AFKL Cargo network. Air France Cargo's Latin American presence goes back a long way to the pioneering days of the Aéropostale, in fact. Although economic fluctuations in South American economies were instrumental in the closure of stations such as Lima or Quito and Bogotá, where the "all cargo" service was replaced by more frequent "passenger" services (seven weekly A frequencies instead of the previous three), some markets still make a sustained "all cargo" presence economically cost-effective. These are Brazil, where the Group will operate two cargo flights weekly to São Paulo, including one non-stop flight, in the forthcoming schedule, and two weekly services to Buenos Aires also. Montevideo continues to enjoy a weekly service, while Santiago de Chile, given the highly seasonal nature of its agricultural output, sees irregular rotations, when Chilean fruit and vegetable production is in full swing and when European demand is strongest

10 In Latin America, as elsewhere in our network, increased "passenger" services combined with the greater capacity and performance of the aircraft recently brought into the fleet, mean we can offer our customers significant daily capacity. AF-KL Cargo presence in Latin America by total FTK* at end-march 2006 AF-KL Cargo % increase Total FTK 10,830 10, % Latin America 1,346 1, % Contribution 12.4% 12.4% FTK: Freight Tonne-km AIR FRANCE INDUSTRIES AND KLM ENGINEERING &MAINTENANCE By dividing technical and product management responsibilities between Air France Industries and KLM Engineering & Maintenance, the group has simplified its organization and broadened its offer. A unified sales force and a common procurement policy based on a joint strategy with respect to products and suppliers have also been deployed, generating substantial cost savings. In , Air France Industries and KLM E&M won a large number of maintenance contracts for aircraft operated by third-party airlines, and in particular with Chilean flag carrier Lan Chile. Air France Industries key accounts in Latin America are Tam, Aerolinas Argentinas, Air Jamaica and Lan

11 III / WINNING AND RETAINING A DIVERSIFIED CUSTOMER BASE One of the main reasons for our success can certainly be found in the strong emotional attachment between Air France and this region. This area boasts the highest customer satisfaction rate throughout the entire Air France network. To ensure customer satisfaction, we target our crews and station agents with action plans tailored to the various customer segments. Our real challenge is to invest in aircraft to accompany our growth in line with customer expectations, notes Christian Herzog, Senior VP, CDL Americas. 1. A diversified customer base According to the journal America Economía, the Latin American economy grew by 4.9% in 2006, a 0.5 point increase on The figure confirms the buoyant state of the Latin American economy, although we should not forget that these strong figures are largely due to the high prices fetched by commodity exports such as oil, coffee and copper. While the three leading economic locomotives in Latin America are Mexico, Argentina and Brazil in that order, the more special sector of tourism in this region saw further sustained growth in In global terms, with 842 million arrivals and growth of 4.5%, 2006 exceeded forecasts. And as the tourism sector continues to post above-average results, it has seen another record year. The most recent world tourism figures from the UNWTO survey seem to indicate that 2007 will consolidate the results in the fourth successive year of sustained growth. The results from Central America (6.1%) and South America (7.2%) show that Latin America is beginning to consolidate its positive growth of recent years. Chile, Colombia, Guatemala, Paraguay and Peru have all posted double-digit growth. A key feature of 2006 was the persistently positive performance of emerging country destinations, underscoring the link between tourism and economic progress. Three years ago, tourism exceeded the 800 million international arrivals threshold to enter a new historic phase: since that time, growth has been in excess of 20%. Although Latin America s tourist trade is booming, it is also having to adapt to changing demand

12 Tourism indicators for destinations served directly by AIR FRANCE KLM COUNTRY CITY 2004* INCREASE 2005 FORECAST 2006 ARGENTINA BUENOS AIRES 3, % +4.2% BRAZIL RIO DE JANEIRO 4, % +3.5% SÃO PAULO CHILE SANTIAGO 1, % +5.8% COLOMBIA BOGOTÁ % +4% ECUADOR QUITO GUAYAQUIL % +2.8% MEXICO MEXICO CITY 98,659 +3% +3.5% PERU LIMA 1, % +4.5% VENEZUELA CARACAS % +4.5% Source United Nations World Tourism Organization (UNWTO) * in 000s

13 Who are AIR FRANCE KLM customers to and from Latin America? Air France and KLM regularly carry out customer surveys to accurately identify the "profiles" of different types of passenger that the two airlines carry on their routes, and in particular to and from Latin American destinations. The findings of the surveys help us make strategic and commercial choices. Place of residence of AIR FRANCE KLM passengers travelling to and from Latin America (2006) Americas 39% Other 2% France 33% Europe 26%

14 Socio-professional category: a large majority of executives, managers and engineers (2006) Other active 17% Unemployed 12% Executives 22% Managers, engineers, & teachers 29% Professionals 20% Reasons for AIR FRANCE KLM passengers travelling to/from Latin America (2006) Personal: 32% Professional 68%

15 2. AIR FRANCE KLM Group strengths in Latin America A. More and more destinations, a wider choice of flight times, more choice for passengers of both airlines More destinations Air France and KLM have placed their networks at their customers' disposal. This dual network, structured around the hubs at Amsterdam-Schiphol and Paris-Charles-de-Gaulle 2, allows the group to offer passengers nearly 55,000 seats each week on flights between Europe and Latin America. More flights with the most attractive fares For all destinations served by both airlines, fare combinability allows customers to select a journey with KLM via Amsterdam and one with Air France via Paris, by simply adding together the one-way fares to and from the destination. Customers thus benefit from flight connections via either hub on outbound and inbound legs, and gain easier access to the most economical fares available. To increase the possibilities of flights to and from Latin America (and the whole world) via Paris-CDG2 or Amsterdam-Schiphol, the flight times of both airlines are ideally paced throughout the day, with 15 code-shared flights daily. This means that Air France and KLM can offer their customers an attractive link between the two capitals, with a total capacity of almost 4,500 seats each day, in both directions. (Summer season 2006 / 2007 flight times) Paris / Amsterdam Amsterdam / Paris Airline Departs Arrives Airline Departs Arrives AF 06:40 08:00 KL 06:50 08:05 AF 07:20 08:40 KL 07:20 08:40 AF 08:00 09:20 KL 08:00 09:30 KL 09:00 10:20 AF 08:50 10:05 KL 09:40 11:00 AF 09:30 10:45 KL 10:30 11:50 AF 11:05 12:20 AF 11:35 12:55 KL 12:15 13:30 AF 12:45 14:00 AF 13:40 14:55 KL 14:25 15:45 KL 14:10 15:30 AF 15:25 16:40 AF 15:25 16:40 KL 16:25 17:45 KL 16:50 18:05 AF 17:30 18:50 AF 17:50 19:05 AF 18:30 19:45 KL 18:45 20:00 KL 19:30 20:50 AF 20:05 21:20 KL 20:55 22:10 AF 20:50 22:

16 Examples of flight times enabling short flight connections from a major European city: outbound and inbound (Summer Season 2007 schedule) - Stockholm - São Paulo - Stockholm: two possible flight times available to passengers each day Leave in the evening and enjoy a full day in Stockholm: flight AF 1063 leaves Stockholm at 7.15pm and lands at CDG at 9.55pm, allowing passengers to connect with flight AF 454 to São Paulo at 11.15pm, representing a transit time of 1 hour 20 minutes. Flight AF 454 arrives in São Paulo at 5.45am, allowing passengers who so desire the possibility of fully using their day at the destination. Total flying time is 15 hours and 30 minutes. Leave early in the morning and enjoy a full evening in Stockholm: flight KL 1106 leaves Stockholm at 06:30am and lands in Amsterdam at 08:40am, allowing passengers to connect with flight KL 791 to São Paulo at 10:00am, representing a transit time of 1 hour and 20 minutes. Flight KL 791 lands at 5.00pm, enabling passengers to enjoy a full evening at their destination. Total flying time is also 15 hours and 30 minutes. - São Paulo - Stockholm- São Paulo: two possibilities also Leave late afternoon and travel via CDG: flight AF 455 leaves São Paulo at 4.45pm and lands at CDG at 08.50am, allowing passengers to connect with flight AF 2062 to Stockholm at 09:35am, representing a transit time of 45 minutes. As flight AF2062 lands at Stockholm at 12.10pm, passengers are free to accept a lunch invitation. Total flying time is 14 hours and 25 minutes. Leave early evening and travel via Amsterdam: flight KL 792 leaves São Paulo at 6.40pm and lands at Amsterdam at 11.10am, allowing passengers to connect with flight KL 1113 to Stockholm at 12.10pm, representing a transit time of 60 minutes. The 2.10pm arrival of flight KL 1113 allows passengers the benefit of a full afternoon at their destination. Total flying time is 14 hours and 30 minutes

17 Examples of flight schedules offering short transit times on flights departing from the Dutch market, outbound and inbound (Summer season 2007 schedule) - Amsterdam - São Paulo - Amsterdam: three possible flight times available for passengers on the same day Leave early morning transiting via CDG: flight AF 8229 leaves Amsterdam at 08.00am, landing at CDG at 09.30am, allowing passengers to connect with flight AF 456 to São Paulo at 10.15am, representing a 45-minute transit time. The 5.15pm arrival of flight AF 456 means passengers enjoy a full evening at their destination. Total travelling time is 14 hours and 15 minutes. Leave early morning and take a non-stop flight: flight KL 791 takes off from Amsterdam at 10.00am, landing at São Paulo at 5.00pm. The total flight time is 12 hours. Leave at the end of the day, and make the most of a day in Amsterdam: flight AF 2241 leaves Amsterdam at 8.50pm, landing at CDG at 10.05pm. Flight AF 454 takes off from CDG at 11.15pm for a transit time of 1 hour and 10 minutes, landing at São Paulo at 05.45am. With this solution, passengers benefit from a full first day at their destination. Total travelling time is 13 hours and 55 minutes. - São Paulo - Amsterdam - São Paulo: three possible flight times available for passengers Leave at the end of the day, and make the most of a day in São Paulo: flight AF 459 takes off from São Paulo at 7.25pm, landing at CDG at 11.50am, allowing passengers to connect with flight AF 1740 to Amsterdam at 12.45pm, representing a transit time of 55 minutes. Flight AF 1740 arrives at 2.00pm allowing passengers a full afternoon at their destination. Total travelling time is 13 hours and 35 minutes. Leave at the end of the day and take a non-stop flight: flight KL 792 leaves São Paulo at 6.40pm, landing at Amsterdam at 11.10am, representing a total flight time of 11 hours and 30 minutes

18 Leave late afternoon, transiting via CDG: flight AF 455 takes off from São Paulo at 4.45pm, landing at CDG at 08.50am, allowing passengers to connect with flight AF 8224 to Amsterdam at 09.40am, representing a transit time of 50 minutes. As flight AF 8224 lands at 11.00am at Amsterdam, passengers are free to accept a lunch invitation and benefit from a full afternoon at their destination. Total travelling time is 13 hours and 15 minutes. B. AIR FRANCE KLM: an innovative carrier that listens to its customers "Innovating does not simply mean creating something unusual, it also involves constantly integrating new technologies worldwide at every stage in the journey, as soon as it becomes possible, provided the innovation is straightforward and useful," said Patrick Roux, Air France head of Marketing, recently. AIR FRANCE KLM innovates by listening to its customers. To collect customer views, the Company carries out frequent surveys throughout the year. Nearly 500,000 survey forms are handed out inflight each year, providing a real-time "barometer" of the customer satisfaction index that is continuous and reliable, both as regards ground services and those available inflight. Also, through Flying Blue, the Air France-KLM market-leading frequent flyer programme, a panel of customers dubbed FB@HOME has been created. These have agreed to answer questions by in real time concerning the quality of service available. a) Ground services The e-service revolution To satisfy the demands for autonomy, simplicity, transparency and legibility expressed by passengers, the group is extending the use of the very latest technologies. This means mainstreaming electronic ticketing, used by nine out of ten customers on flights departing France, extending check-in at self-service kiosks or using both airlines' websites (see table below). E-services are a great hit with passengers. In , 70% of Air France passengers on the French market and 77% of KLM passengers worldwide travelled with an electronic ticket. The spread of e-services and process simplification offer the group genuine opportunities to improve service quality and customer satisfaction

19 The electronic ticket, combined with internet or self-service kiosk check-in, is a key e-services component. It replaces the paper ticket and abolishes the sources of stress generated by forgetting or losing one's airline ticket. Because it is accessible at the time of booking (on the web, by telephone or at a ticket office), it offers passengers two choices of checking in on a flight that save precious time and bypass any queues at the airport. These are self-service kiosks and internet check-in. Electronic tickets are now available on close to 98% of Air France destinations. They form part of the AIR FRANCE KLM sustainable development policy by cutting down on paper. The self-service kiosks can be used by customers without internet access to check in at a selfservice kiosk on arrival at the airport. They simply insert a card their Flying Blue card or credit card into the machine, which recognizes their name or Flying Blue membership number, and launches a search for the electronic ticket. It takes passengers just 30 seconds to check in any time between five hours before flight departure and up until the latest check-in time. The new services announced for internet check-in are now available at the self-service kiosks. By the end of 2007, with over 500 self-service kiosks distributed among over 70 stations, mainly in France and Europe, Air France will still be a European leader in this field. In a further development, the Mobile Internet + SMS service (63654)* delivers real time personalized information to passengers round the clock, anywhere in the world. All passengers can thus check the exact arrival time of their flight, etc., for example. Websites: more than fifteen web sites in Latin America Air France and KLM have also developed a large number of websites especially for the Latin American market specific to each country and to the expectations of their populations. The world population of web users topped one billion individuals at the end of Latin America is home to over 80 million of these. (source: Journal du Net) *Service available worldwide, depending on contracts with local service providers

20 Main Air France and KLM websites in Latin America Country Local address Start-up Language Argentina Airfrance.com/ar April 2001 Spanish Brazil Airfrance.com/br February 2001 Portuguese Brazil Klm.com/br_en 1998 Portuguese English Chile Airfrance.com/cll December 1999 Spanish Colombia Airfrance.com/co April 2001 Spanish Ecuador Klm.com/ec 1998 Spanish English Mexico Airfrance.com/mx November 1999 Spanish Peru Klm.com/pe_en 1998 Spanish English Venezuela Airfrance.com/ve April 2001 Spanish Available round-the-clock, these websites present many key advantages for Latin-American customers. They provide clear, easy to understand and updated information on all AIR FRANCE KLM offers (a perfectly combinable offer) and customers can purchase tickets on line. Sales and Service Centers AIR FRANCE KLM Group customers also benefit from two Sales and Service Centers (SSC). - The Sales and Service Center in Santiago de Chile processes calls in Spanish from Mexico, Columbia, Venezuela, Ecuador, Peru, Chile and Argentina, - The Sales and Service Center in Rio processes calls in Portuguese

21 These two «Sales and Services Centers» sell both the Air France and KLM brands.. These Sales and Service Centers employ salespersons who handle calls from customers domiciled in all the Latin-American markets. KLM customers also have access to a ticket office in each city served by the Group. These teams of efficient professionals use the most technologically-advanced telephone and IT equipment and speak several foreign languages, allowing them to communicate with passengers in their own language. Objectives: optimise the quality of services by providing customers with an enlarged offer (more destinations, more flexible schedules), propose the AIR FRANCE KLM offer (sales of tickets and car rental, assistance, information, processing, notifying passengers in case of operating irregularities). b) on board Air France flights Flight attendants: professionalism, attitude and expertise To optimise the quality of services provided to customers, Air France and KLM have adopted a cabin crew management strategy based on two main guidelines: Professionalism in the fields of safety and security; The right attitude and expertise, and in particular meeting customers off their plane and looking after them at every stage of their trip. Air France and KLM flight attendants are carefully selected and undergo special training to understand the cultural differences of passengers, particularly those on the Latin-American market. The language skills of our flight attendants are taken into account when organizing the flight crew roster (availability of Spanish-speaking or Portuguese-speaking flight attendants on each flight). Air France employs a total of 3,852 Spanish-speaking flight attendants, including 1,221 agents who are dedicated to the American market, and 473 Portuguese-speaking agents, including 212 agents also dedicated to the American market

22 The cabin crew recruitment campaign launched by Air France in Brazil this year registered a very high response rate: 70 out of more than 1,000 applications received have been selected. These new flight attendants based at Paris-CDG will boost the Portuguesespeaking teams on board flights to Latin America. The Air France Routes and Products service, comprising specialists working in the relevant sector and flight attendants who are familiar with the culture and travel habits of their international customers, publishes a practical guide designed for Air France cabin crew, giving them a clear picture of the right attitude to adopt and helping them to cater to customers needs and expectations. Staff constantly aim to satisfy both the needs of our Latin-American customers who appreciate personalized service and also our international customers who expect a thoughtful and discreet service. The in-flight entertainment programme: new international flavours and cultural diversity Air France and KLM offer an even wider choice of in-flight musical entertainment including classical music, jazz, opera, world music and especially Latin American music. The increasingly international dimension of our customer base is also taken into account when selecting the films screened on board: the channel Version Originale enables international passengers to view films and various programmes in the language of the local or destination country. With over 22,000 individual video screens installed on its long-haul aircraft, Air France offers passengers a selection of 12 films (compared with 6 previously), renewed monthly. Almost all the long-haul fleet is equipped with Video On Demand. Air France is one of the few airlines to offer this service in all cabins. During 2006, 191 films were scheduled, including 26 French films, 64 American films and 101 foreign films in their subtitled versions. As official carrier for the Cannes International Film festival since 1980, Air France has played an active role in promoting the world of cinema, especially French cinema, for over 40 years

23 The integration of leading-edge technology for even greater flying comfort Since 4 November, Air France has been progressively refitting its long-haul Espace Affaires Business cabins with a new seat-bed. The introduction of this 3 rd generation seat is part of the airline s policy to ensure that its customers benefit from the most-advanced technology being developed by seat manufacturers available on the market today. The seat s new features make Air France the only airline in Europe to offer the longest and widest seat on the market. The new successful l Espace Affaires cabin interiors remain unchanged: A rigid shell providing privacy for the passenger, easily accessible storage space, an individual video screen equipped with VOD, a PC power outlet built into every seat, and an integrated massage function. During summer 2007, all aircraft flying to Latin America will be fitted with the New Air France Travel Concept. c) On board KLM flights Flight attendants KLM flight attendants are also carefully selected and undergo special training to understand the cultural differences of passengers, particularly those on the Latin-American market. Over 300 flight attendants speak Spanish and around one hundred speak Portuguese. In-flight entertainment KLM also offers passengers the latest audio, video and interactive entertainment. In-flight entertainment systems vary with the different aircraft. Customers can also check which films will be featured during the flight. Entertainment on board KLM s Boeing 777 and Airbus A330 All KLM s Boeing 777 and Airbus A330 aircraft are equipped with personal video screens and an interactive entertainment system featuring films, television, games as well as text messaging and . On-demand video allows passengers to choose to watch the in-flight program when they want. Seatback screens in all classes offer a wide selection of films, television programmes, video games for all ages and flight tracking

24 Passengers can also use their handset and screen to send text messages to any mobile phone number or address anywhere in the world and receive replies right at their seat. They simply need to flip over their interactive controller, swipe their credit card through for the handset to double as a telephone. Entertainment on board KLM s Boeing 747, Boeing 767 and MD11 World Business Class: Personal in-seat video screens let passengers enjoy the program of their choice. They can choose from popular films and television programs and a wide variety of music on 12 video and 12 audio channels (6 video and 9 audio channels on the Boeing 767). Economy Class: Passengers can enjoy popular films and television series, news and documentaries on the main screen. They can also choose from 12 specially programmed audio channels featuring a selection of music styles (9 audio channels on the Boeing 767). Holland Herald Holland Herald, is KLM s award-winning monthly inflight magazine, available on all KLM aircraft. Launched in 1966, it is the longest running inflight magazine in the world and the largest circulation English-language magazine in the Netherlands. Every month s issue has a different, surprising theme. There are articles on travel, lifestyle, gadgets as well as interesting facts and figures, cultural listings for the Netherlands, destination profiles, inflight entertainment listings and a catalogue of tax-free items for sale on board. Customers can also take part in the KLM/Holland Herald photo competition!

25 C. The Flying Blue frequent flyer program largely approved Since its launch, Flying Blue has been very popular in Latin America; today, AIR FRANCE KLM has 400,000 Flying Blue members in Latin America, whose account activity is constantly increasing. Between April 2006 and January 2007, the number of active Flying Blue members increased by +26%. A Customer Service is open Monday to Friday for Flying Blue members who can request information in Spanish and Portuguese. Moreover, members can log on to the af.com or kl.com website in the Flying Blue section 24/7 to obtain information, book award tickets, request an update of non-credited Miles and update their personal data. Since April 2006, members choosing to receive their Flying Blue communication via the internet have doubled. Note: More and more FFP members are logging on to the internet to consult flight availability when booking tickets with their Miles (award tickets). A new tool is available to help them organize their travel arrangements: members have access to a single screen where they can quickly find suitable travel dates within a two-month period for using their award tickets. This new functionality can also be used for finding alternatives if the initial date requested is not available: alternative dates, alternative cabin classes and the Open Miles scheme giving customers an even greater choice of flights. And the benefits of this new service? Direct access to available flights, a more efficient search function and greater independence when organizing trips. For further information, go to Flying Blue on or

26 C. AIR FRANCE KLM partners in Latin America AEROMEXICO Thanks to Aeromexico, an Air France partner since 1998 and founding member of SkyTeam, Air France passengers benefit from 8 destinations in Mexico. TAM Thanks to TAM, an Air France partner since 1999, Air France passengers benefit from weekly frequencies to 14 destinations in Brazil accessible via Rio de Janeiro and Sao Paulo, and 16 destinations including the above-mentioned cities, representing 98% of the Brazilian market. COPA On 2 February 2007, Copa signed an agreement with SkyTeam to join the alliance as associate member, underlining the Panama-based airline s commitment to meet the standards to be recognized as official SkyTeam Associate Airlines. Once the entry requirements have been met, SkyTeam customers will benefit from an extended network. With a fleet of 24 aircraft, Copa flies to 34 additional destinations in 20 countries in North, Central and South America and the Caribbean. Thanks to Copy and its Panama City Hub, whose strategic importance has already been proven, SkyTeam will considerably strengthen its presence in Latin America stated Mark Erwin, senior vice president-corporate Development for Continental Airlines, which is sponsoring Copa s entry

27 ANNEXES

28 AIR FRANCE IN LATIN AMERICA: KEY DATES May 1930: inauguration of the Aéropostale purely air route between Toulouse and Santiago: the aircraft covered 13,000 kilometres at an average speed of 124 kph, : Aéropostale obtains a contract from the South-American governments to begin a mail service across this route in 1932, - 5 January 1936: Aéropostale begins a weekly air mail service. Mail was flown between France and Brazil in just 2 days, - May 1940: 500th crossing of the South Atlantic, : flights resume after the war. A weekly service is established between Paris and Santiago de Chile, : the airline opens the Paris-Bogota route via Lisbon, French Caribbean and Caracas, : Air France extends its Paris-Bogota route to Quito (Ecuador) and Lima (Peru). In 1960, the B707 flies from Paris to Buenos Aires and Lima in less than 17 hours, : Air France opens its Croix du Sud service, offering the quickest flight time between Europe and Chile, with two stop-overs in Dakar and Buenos Aires : Air France begins operating the Paris-Rio de Janeiro service with the Boeing 747, : the Concorde operates the Paris - Rio de Janeiro service, : Santiago and Bogota are served with three weekly flights out of Paris : Flights from Paris to Buenos Aires are non-stop, operated by the Airbus A 340. Flight time is 13 hours and 17 minutes, : Service between Paris and Sao Paulo and Buenos Aires is inaugurated with the , : the B ER operates three weekly non-stop flights from Paris to Santiago. Flight time is 13 hours and 50 minutes

29 KLM IN LATIN AMERICA: KEY DATES - 15 December 1934: the Fokker F.XVIII PH-AIS Snip equipped with additional petrol tanks, took off from Schipol and landed at Curaçao on 22 nd December stopping at Marseille, Alicante, Casablanca, Porto Praia, Paramaribo and Caracas. The trip took 8 hours with a flight time of 54 hours 27 minutes and the distance flown was 10,490 km : KLM opens a new route to Rio, operated with Douglas DC4; the route is extended to Montevideo the same year, and subsequently to Buenos Aires in 1948, : the southern route to Curaçao via Lisbon, Paramaribo, Port of Spain and Caracas, is inaugurated with the Douglas DC : KLM s Caribbean Division serves a regional network comprising Managua and San Salvador, : KLM begins flights to Santiago de Chile (the flight, operated with the Douglas DC 6, lasts 53 hours and 20 minutes), : KLM begins flights to Guatemala, : KLM begins flights to Guayaquil and Lima, : KLM begins flights to Sao Paulo : the new Dutch Caribbean Airline ALM, founded by the West Indian government with the help of KLM, serves the entire regional network, : KLM begins flights to Quito, : KLM begins flights to San José, - At the present time, KLM operates frequent flights to 16 destinations in 13 countries in Central and South America

30 AIR FRANCE KLM IN LATIN AMERICA: MAIN HIGHLIGHTS Leading carrier between Europe and Latin America: close to 55,000 seats sold weekly in both directions, 12 destinations served with its own aircraft and crew, 208 weekly frequencies in both directions and 28 additional code-shared destinations (summer 2007 schedule) more than 15 websites, 2 call centres in Rio and Santiago, KLM ticket offices in Lima, Quito, Guayaquil, Sao Paulo, Mexico, Buenos Aires and Santiago de Chile, 6 regional managements (including French Guiana and Surinam) 680 sales agents (560 Air France agents and 120 KLM agents)

31 AIR FRANCE KLM: MAIN HIGHLIGHTS The AIR FRANCE KLM Group is pursuing a strategy of profitable growth based on the complementary nature of Air France and KLM with regard to their three core businesses (passenger, cargo and maintenance), which generate significant synergies, and considerable efforts to cut costs. The Group, set up in May 2004, contains a holding company, AIR FRANCE KLM, and two airlines, Air France and KLM, which have retained their corporate identity, logos and core businesses. The Group is global leader in terms of turnover and Europe s leading airline group in terms of traffic. Key figures 575 aircraft comprising 165 long-haul aircraft, 222 medium-haul aircraft and 188 aircraft in the regional fleet, 247 destinations in 104 countries, including 115 long-haul destinations and 126 medium-haul destinations, 2 hubs: Roissy-Charles de Gaulle in Paris, Schipol in Amsterdam, 102, 000 employees, 21.4 bn euros in revenues, 913 m euros in Group net income Breakdown of capital: 18.6% (French State), 14.1% (employees), 1.5% (Treasury), 65.8% (Float)

32 SKYTEAM: HIGHLIGHTS Air France and KLM play a vital role in the SkyTeam alliance, the world s second largest alliance with 19% of market share. The SkyTeam alliance, which encompasses European, American and Asian airlines, helps the Group to respond to the increasingly global needs of the market and strengthens its market position in the face of competition both in terms of passenger and freight traffic. The ten member airlines are constantly seeking to improve their services, particularly by offering customers access to a constantly expanding network thanks to the increasing number of bilateral code-sharing agreements. Partner airlines also share airport lounges, harmonize airport procedures and the benefits of their frequent flyer programmes. SkyTeam was voted Best Airline Alliance in 2005 by the readers of the American monthly Global Traveler magazine. Main figures ( 15,000 daily flights 10 member airlines 373 million passengers 728 destinations / 149 countries 2,018 aircraft (and over 1,190 aircraft in subsidiaries)

33 C. AIR FRANCE KLM: SKYTEAM CUSTOMER BENEFITS Miles and awards on all SkyTeam partner airlines and quicker access to Elite level status Passengers earn Miles on all SkyTeam flights and can claim awards on all Alliance network routes. Members of a SkyTeam member airline s FFP automatically benefit from the corresponding SkyTeam status: SkyTeam Elite: Preferred seating at the time of booking. Priority on waitlists upon reservation. Priority check-in desks. Priority on waitlists at the airport. Priority boarding or boarding at leisure. SkyTeam Elite Plus All the SkyTeam Elite benefits, plus: Access to lounges on the day when the passenger is travelling on a SkyTeam international flight Priority baggage handling, with bags identified by SkyTeam priority baggage labels. Economy class reservation, even when the flight is fully booked (guaranteed reservations must be made 24 hours prior to departure, valid for tickets paid at the full Economy fare). Access to 400 lounges worldwide SkyTeam Elite Plus members (who may be accompanied by a guest) and passengers travelling in first or business class on an international flight operated by a SkyTeam airline have access to 400 SkyTeam airport lounges, on their day of travel. Customers can make use of the services and amenities on offer in these lounges to relax or work

34 A choice of close to 15,000 daily flights to 728 destinations Passengers benefit from a greater choice of flights and destinations through the SkyTeam global network and code-shared flights. Approximately 62% of SkyTeam flights are code-shared between at least two member airlines, thus strengthening the complementary nature of the alliance network. This percentage is higher than that of other alliances. More fare options to more destinations SkyTeam was the first airline alliance with antitrust immunity for both trans-pacific and trans-atlantic service. This enables the alliance to provide passengers with a higher quality of service and more harmonized procedures thanks to a well-integrated network, and better-coordinated flights and more competitive fares. The «SkyTeam Europe Pass» allows SkyTeam customers who purchase a trans-atlantic or intercontinental ticket to Europe to also purchase three or more intra-european flight segments at reduced fares. Moreover, the SkyTeam America Pass allows SkyTeam customers who purchase a trans- Atlantic or trans-pacific ticket to North America to also purchase 3 or more intra-continental flight segments. The SkyTeam Asia Pass allows customers connecting between a long-haul flight and another flight to Asia or the Pacific operated by a Skyeam airline to purchase between 3 and 8 flight segments valid on local routes operated by Air France, Continental Airlines, KLM Royal Dutch Airlines, Korean Air or Northwest Airlines in Asia SkyTeam offers customers around-the-world fare options. Frequent flyers can redeem their Miles and obtain award tickets that are valid for use with multiple SkyTeam carriers. In this way, passengers benefit from an even wider choice of destinations and routes, for fewer Miles. This benefit will shortly be available on Aeroflot routes

35 Through check-in for connecting passengers On international flights, SkyTeam passengers need only to check in once and receive their boarding card and baggage transfer labels for all their flight segments (up to 3 connections with 2 SkyTeam carriers). Simplified connections across a global network The SkyTeam network services the most dynamic areas around the world, where over 80% of airline travellers want to fly. SkyTeam customers have access to the largest airline hubs in the U.S. (Atlanta Hartsfield Airport) and Europe (Paris, Amsterdam, Prague, Milan). SkyTeam s network offers more connections and non-stop flights between Europe and the U.S. than any other alliance. Additionally, SkyTeam s Paris-CDG, Amsterdam-Schipol, Detroit, Minneapolis, Seoul-Incheon hubs are among the only hubs in the world with capacity for growth. SkyTeam member airlines share facilities and ticket offices in over 21 airports worldwide. There are plans to open more sales counters, lounges and agencies in some fifty airports in the near future. SkyTeam co-locations are also expected to open in fifty airports and ticket offices around the world. Passengers enjoy efficient and consistent service throughout the SkyTeam network Customer service is priority number one for SkyTeam airlines, focussing on providing consistently high quality service for their passengers, wherever they fly: Standardized signage facilitating easy orientation around airports, Compliance with the same service quality standards, Consistent customer care policies defining handling procedures in case of operating irregularities (modified reservations, providing amenity kits, lost tickets, responding to customer enquiries), SkyTeam continues to improve the speed and reliability of IT systems with a view to optimizing customer service throughout the alliance s network

36 Passengers can make travel arrangements and obtain information at 2,100 SkyTeam ticket offices Customers can obtain all the information they need at any of the member airlines reservation centres, airport service counters and ticket offices. All SkyTeam airline staff are specially trained to respond to customers needs, irrespective of the member airline they re flying with. For more specific queries, SkyTeam staff are supported by a team, who can be contacted by telephone 24/7. On the SkyTeam website, customers can find information, in several languages, about the alliance and access each member airline s website by clicking on the direct links proposed. The sections include: Practical guide pages - detailed information about airports and destinations, Travel planner pages - flight schedules, practical information on currency exchange rates, local time and weather information, as well as recommendations to ensure that customers enjoy their trip as fully as possible, An interactive guide about SkyTeam customer benefits, specific alliance products, such as the Around the World fare, European AirPass, and flight times, Possibility of downloading SkyTeam airline flight schedules to their PC, Pocket PC or Palm. An in-flight service guaranteeing the optimum comfort and well-being of passengers All SkyTeam partners focus on providing a friendly, welcoming service while offering culturallyspecific products, making each member airline distinctive. Passengers receive accurate and timely in-flight information. English is spoken on every flight and, whenever possible, the language of origin and destination is spoken on long-haul flights. In-flight entertainment programmes are coordinated: passengers travelling on a round-trip with two member airlines enjoy a different video programme on each leg of their trip. All video programmes feature relaxation exercises and other healthy travel trips to help passengers stay comfortable during their flight. SkyTeam member airlines coordinate the special meal service offered on board their flights. All SkyTeam flights are non-smoking flights