CONSOLIDATED FINANCIAL STATEMENTS - Air …

1 Air France-KLM Group CONSOLIDATED FINANCIAL STATEMENTS . Prepared in accordance with International FINANCIAL Reporting Standards ( IFRS ) as adopted by the European Commission for use in the European Union January 1, 2017 December 31, 2017. -1- 15/02/2018. Air France-KLM Group Table of contents CONSOLIDATED INCOME - 5 - CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSES .. - 6 - CONSOLIDATED BALANCE - 7 - CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' - 9 - CONSOLIDATED STATEMENT OF CASH FLOWS .. - 10 - 1. BUSINESS DESCRIPTION .. - 13 - 2. RESTATEMENT OF ACCOUNTS 2016 .. - 13 - 3. SIGNIFICANT EVENTS .. - 14 - Events occurring during the period .. - 14 - Subsequent events.

2 - 15 - There have been no significant events since the closing of the FINANCIAL year.. - 15 - 4. ACCOUNTING POLICIES .. - 15 - Accounting - 15 - Use of - 20 - Consolidation principles .. - 21 - Translation of foreign companies' FINANCIAL STATEMENTS and transactions in foreign currencies . - 22 - Business combinations .. - 22 - Sales .. - 23 - Loyalty programs .. - 23 - Distinction between income from current operations and income from operating activities .. - 24 - Aggregates used within the framework of FINANCIAL communication .. - 24 - Earnings per share .. - 24 - FINANCIAL instruments, valuation of FINANCIAL assets and liabilities .. - 24 - Goodwill.

3 - 26 - Intangible - 27 - Property, plant and equipment .. - 27 - Impairment test .. - 28 - - 29 - Treasury shares .. - 29 - Employee benefits .. - 29 - Provisions for restitution of aircraft under operating leases .. - 30 - Other provisions .. - 30 - Emission Trading Scheme .. - 30 - Equity and debt issuance costs .. - 30 - Deferred taxes .. - 30 - Non-current assets held for sale and discontinued operations .. - 31 - 5. CHANGE IN THE CONSOLIDATION SCOPE .. - 32 - 6. INFORMATION BY ACTIVITY AND GEOGRAPHICAL AREA .. - 32 - Information by business segment .. - 34 - Information by geographical area .. - 36 - 7. EXTERNAL EXPENSES .. - 37 - 8. SALARIES AND NUMBER OF EMPLOYEES.

4 - 38 - 9. AMORTIZATION, DEPRECIATION AND PROVISIONS .. - 38 - 10. OTHER INCOME AND EXPENSES .. - 39 - 11. OTHER NON-CURRENT INCOME AND - 39 - 12. OTHER FINANCIAL INCOME AND EXPENSES .. - 41 - 13. INCOME TAXES .. - 42 - Income tax charge .. - 42 - Deferred tax recorded in equity (equity holders of Air France-KLM) .. - 43 - Effective tax rate .. - 43 - Variation in deferred tax recorded during the period .. - 44 - Unrecognized deferred tax assets .. - 45 - 14. NET INCOME FROM DISCONTINUED OPERATIONS .. - 45 - 15. EARNINGS PER SHARE .. - 46 - Income for the period Equity holders of Air France-KLM per share .. - 46 - Non-dilutive instruments .. - 47 - Instruments issued after the closing date.

5 - 47 - 16. GOODWILL .. - 48 - -2- 15/02/2018. Air France-KLM Group Detail of CONSOLIDATED goodwill .. - 48 - Movement in net book value of goodwill .. - 48 - 17. INTANGIBLE ASSETS .. - 49 - 18. - 50 - 19. TANGIBLE ASSETS .. - 51 - 20. CAPITAL EXPENDITURES .. - 52 - 21. EQUITY AFFILIATES .. - 52 - 22. PENSION ASSETS .. - 54 - 23. OTHER FINANCIAL ASSETS .. - 55 - 24. INVENTORIES .. - 57 - 25. TRADE ACCOUNTS RECEIVABLES .. - 57 - 26. OTHER ASSETS .. - 58 - 27. CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS .. - 58 - 28. EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF AIR FRANCE-KLM SA .. - 58 - Issued capital .. - 58 - Additional paid-in capital .. - 60 - Treasury shares.

6 - 60 - Perpetual subordinated bond .. - 60 - Reserves and retained earnings .. - 60 - 29. SHARE-BASED COMPENSATION .. - 61 - 30. RETIREMENT BENEFITS .. - 61 - Characteristics of the main defined benefit plans .. - 62 - Description of the actuarial assumptions and related sensitivities .. - 64 - Evolution of commitments .. - 65 - Asset allocation .. - 67 - Expected cash flows and risks linked to the pension obligations .. - 67 - 31. OTHER PROVISIONS .. - 68 - Provisions .. - 69 - Contingent liabilities .. - 70 - 32. FINANCIAL DEBT .. - 71 - Perpetual subordinated bond .. - 72 - OCEANE .. - 72 - Bonds .. - 73 - Capital lease commitments .. - 73 - Other debt.

7 - 75 - Maturity analysis .. - 75 - Currency analysis .. - 76 - Credit lines .. - 76 - 33. NET DEBT .. - 77 - 34. OTHER LIABILITIES .. - 78 - 35. FINANCIAL INSTRUMENTS .. - 78 - Risk management .. - 78 - Derivative instruments .. - 82 - Market value of FINANCIAL - 88 - Valuation methods for FINANCIAL assets and liabilities at their fair value .. - 89 - 36. LEASE COMMITMENTS .. - 90 - Capital leases .. - 90 - Operating - 90 - 37. FLIGHT EQUIPMENT ORDERS .. - 91 - 38. OTHER COMMITMENTS .. - 93 - Commitments made .. - 93 - Commitments - 93 - 39. RELATED PARTIES .. - 94 - Transactions with the principal executives .. - 94 - Transactions with the other related parties.

8 - 94 - 40. CONSOLIDATED STATEMENT OF CASH FLOW .. - 96 - Other non-monetary items and impairment .. - 96 - Acquisitions of subsidiaries, of shares in non-controlled entities .. - 96 - Disposal of subsidiaries, of shares in non-controlled - 96 - Non cash transactions .. - 96 - 41. STATUTORY AUDITORS' - 97 - 42. CONSOLIDATION SCOPE .. - 97 - CONSOLIDATED entities .. - 98 - -3- 15/02/2018. Air France-KLM Group Equity affiliates .. - 99 - -4- 15/02/2018. Air France-KLM Group CONSOLIDATED INCOME STATEMENT. In millions Period from January 1 to December 31 Notes 2017 2016. Sales 6 25,781 24,844. Other revenues 3 2. Revenues 25,784 24,846. External expenses 7 (14,285) (14,263).

9 Salaries and related costs 8 (7,624) (7,474). Taxes other than income taxes (158) (164). Other income and expenses 10 635 842. (*). EBITDAR 4,352 3,787. Aircraft operating lease costs (1,088) (1,073). EBITDA (*) 3,264 2,714. Amortization, depreciation and provisions 9 (1,776) (1,665). Income from current operations 1,488 1,049. Sales of aircraft equipment 18 21. Other non-current income and expenses 11 (1,925) 46. Income from operating activities (419) 1,116. Cost of FINANCIAL debt 12 (249) (309). Income from cash and cash equivalents 35 49. Net cost of FINANCIAL debt (214) (260). Other FINANCIAL income and expenses 12 116 (33). Income before tax (517) 823.

10 Income taxes 13 229 (294). Net income of CONSOLIDATED companies (288) 529. Share of profits (losses) of associates 21 21 (7). Net income from continuing operations (267) 522. Net income from discontinued operations 14 (8) 270. Net income for the period (275) 792. Non-controlling interests (1) - Net income - Group part (274) 792. Earnings per share Equity holders of Air France-KLM (in euros). - basic 15 ( ) - diluted ( ) Net income from continuing operations - Equity holders of Air France- KLM (in euros). - basic 15 ( ) - diluted ( ) Net income from discontinued operations - Equity holders of Air France-KLM (in euros). - basic 15 ( ) - diluted ( ) The accompanying notes are an integral part of these CONSOLIDATED FINANCIAL STATEMENTS .