##### Table of Contents

As filed with the Securities and Exchange Commission on July 20, 2005

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 20-F



| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------



or



| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2005
| | - | -----------------------------------------------------------------------------------------------------------------------------



or



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 to
| | - | ---------------------------------------------------------------------------------------------------------------------------



Commission file number: 1-32139



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Air France-KLM

(Exact name of registrant as specified in its charter)



|                                                |  |                                                   |  |                                                
|----------------------------------------------- |  | ------------------------------------------------- |  | -----------------------------------------------
|Not applicable                                  |  | 2, rue Robert Esnault-Pelterie 75007 Paris France |  | France                                         
|(Translation of registrants name into English) |  | (Address of principal executive offices)          |  | (Jurisdiction of incorporation or organization)



---



Securities registered or to be registered pursuant to Section 12(b) of the Act



|                                                                                                                                                                                                                                               |  |                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------
|Title of each class                                                                                                                                                                                                                            |  | Name of each exchange on which registered                                                         
|Ordinary shares, nominal value 8.50 per share* American Depositary Shares, each representingone ordinary share Warrants to purchase ordinary shares** American Depositary Warrants, each representing one warrant to purchase ordinary shares |  | New York Stock Exchange* New York Stock Exchange New York Stock Exchange** New York Stock Exchange

---

|* | Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Not for trading, but only in connection with the registration of the American Depositary Warrants pursuant to the requirements of the Securities and Exchange Commission.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Securities registered or to be registered
pursuant to Section 12(g) of the Act:

None



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None



Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the
Annual Report:



Ordinary shares, nominal value
8.50             269,383,518



---



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days: Yes x    No ̈



Indicate by check mark which financial statement item the registrant has
elected to follow: Item 17 ̈Item 18 x



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##### Table of Contents

Presentation of Information



On May 3, 2004, Air France combined with KLM Royal Dutch Airlines. The financial condition and results of operations of KLM
are included in those of Air France-KLM from May 1, 2004. On September 15, 2004, Air France transferred its assets, liabilities, businesses and operations to a French wholly-owned subsidiary in the hive down and was renamed Air
France-KLM. In addition, the French wholly-owned subsidiary of Air France-KLM was renamed société Air France on such date. See Item 4: Information on the CompanyHistory of Air France-KLMThe Hive Down.
Accordingly, prior to March 31, 2004, we have given this information for Air France only. Investors are advised that any information regarding Air France given in this annual report, including, without limitation, any information on Air France
contained in Item 5: Operating and Financial Review and Prospects are neither comparable to nor representative of the operations and results of operations and financial condition of Air France-KLM.



In this annual report, unless the context otherwise requires:



| |  |  | Air France-KLM, we, us and our mean Air France and KLM after completion of the exchange offer but before the hive down, and Air
France-KLM and the combined operating companies after the hive down.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Air France refers to société Air France or Air France and its consolidated subsidiaries, as the context requires, either before or after the hive down, as
the context requires.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | KLM refers to KLM Royal Dutch Airlines or the KLM group, as the context requires.
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the combination refers to the combination of the business and operations of Air France and KLM, the principal terms of which were set forth in a framework agreement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exchange offer refers to the offer launched on April 5, 2004 and completed on May 3, 2004 by Air France to acquire all of the outstanding common shares of KLM in
exchange for Air France shares and Air France warrants, including Air France shares in the form of American Depositary Shares (ADSs) and Air France warrants in the form of American Depositary Warrants (ADWs).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the framework agreement refers to the framework agreement, including its schedules, entered into by Air France and KLM on October 16, 2003 setting forth the principal
terms of the combination and the exchange offer, including the new corporate governance arrangements for Air France-KLM.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the hive down refers to the transfer, as approved on September 15, 2004, by Air France of its assets, liabilities, businesses and operations to Air France Compagnie
Aérienne (which was renamed société Air France on such date).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the privatization refers to the effective transfer of a majority of Air Frances share capital on May 6, 2004 to the private sector upon the dilution of the French
States shareholding upon the creation of 45,938,857 new Air France shares and 41,762,597 new Air France warrants to compensate the tender of KLM common shares in the exchange offer.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | United States or U.S. are to the United States of America, references to France are to the Republic of France and references to the
Netherlands are to the Kingdom of the Netherlands.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Unless otherwise indicated, statements in this annual report relating to market share, ranking and data are derived from management estimates based, in part, on independent industry publications, reports by market research firms or other
published independent sources.



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##### Table of Contents

In this annual report, references to euro or  are to the unified currency
that was introduced in connection with the European Economic and Monetary Union in the participating member states of the European Union on January 1, 1999. References to USD, dollars or $ are to the currency of
the United States of America.



For your convenience, this
annual report contains translations of euro amounts into dollars at specified exchange rates. These translations have been made at the indicated noon buying rate in New York City for cable transfers in euro as certified for customs purposes by the
Federal Reserve Bank of New York. These translations are not representations that the euro amounts actually represent these dollar amounts or could be converted to dollars at the rates indicated.



For your convenience, we have rounded some financial data. As a result, the
totals of the data presented may vary slightly from the actual arithmetic totals of that data.



Cautionary Statement Concerning Forward-Looking Statements



This annual report contains or incorporates by reference forward-looking statements regarding the intent, belief or current expectations of
Air France-KLM and its respective directors and officers about Air France-KLM and its businesses. Generally, words such as may, will, expect, intend, estimate, anticipate,
believe, plan, seek, continue or similar expressions identify forward-looking statements.



We caution that these statements are further qualified by the risk factors disclosed in this annual report that could cause actual results to differ
materially from those in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. See Item 3: Key
InformationRisk Factors.



These forward-looking
statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict,
that may cause actual results or developments to differ materially from any future results or developments expressed or implied from the forward-looking statements. Factors that could cause actual results to differ materially from those contemplated
by the forward-looking statements include, among other factors:



| |  |  | our ability to develop an integrated strategy for Air France-KLM,
| | - |  | -----------------------------------------------------------------



| |  |  | the future level of air travel demand,
| | - |  | --------------------------------------



| |  |  | competitive pressure among companies in our industry,
| | - |  | -----------------------------------------------------



| |  |  | changes in the cost of fuel or the exchange rate of the euro to the dollar and other currencies,
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | actions or decisions by courts and regulators or changes in applicable laws or regulations (or their interpretations), including the laws and regulations governing the structure of
the combination, the right to service current and future markets and laws and regulations pertaining to the formation and operation of airline alliances,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our future load factors and yields,
| | - |  | -----------------------------------



| |  |  | the effects of terrorist attacks, the possibility or fear of such attacks and the threat or outbreak of epidemics, hostilities or war, including the adverse impact on general
economic conditions, demand for travel, the costs of security, the cost and availability of aviation insurance coverage and war risk coverage and the price of jet fuel,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | the impact on our financial condition and results of operations of our transition to reporting under International Financial Reporting Standards,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | industrial actions or strikes by our employees or employees of our suppliers or airports, and
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | changing relationships with customers, suppliers and strategic partners.
| | - |  | ------------------------------------------------------------------------



We also caution that the information given in this annual report with respect to Air France, including, without limitation, any information on Air France
contained in Item 4: Information on the Company and Item 5: Operating and Financial Review and Prospects is neither comparable to nor representative of the operations and results of operations and financial condition of
Air France-KLM.



3



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##### Table of Contents

TABLE OF CONTENTS



|                                                                                      |  |    
|------------------------------------------------------------------------------------- |  | ---
|Item 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  | 5  
|                                                                                      | 
|Item 2: OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  | 5  
|                                                                                      | 
|Item 3: KEY INFORMATION                                                               |  | 5  
|                                                                                      | 
|Item 4: INFORMATION ON THE COMPANY                                                    |  | 19 
|                                                                                      | 
|Item 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 59 
|                                                                                      | 
|Item 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 95 
|                                                                                      | 
|Item 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  | 114
|                                                                                      | 
|Item 8: FINANCIAL INFORMATION                                                         |  | 118
|                                                                                      | 
|Item 9: THE OFFER AND LISTING                                                         |  | 119
|                                                                                      | 
|Item 10: ADDITIONAL INFORMATION                                                       |  | 121
|                                                                                      | 
|Item 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 169
|                                                                                      | 
|Item 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 173
|                                                                                      | 
|Item 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 174
|                                                                                      | 
|Item 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 175
|                                                                                      | 
|Item 15: CONTROLS AND PROCEDURES                                                      |  | 176
|                                                                                      | 
|Item 16: [Reserved]                                                                   |  | 177
|                                                                                      | 
|Item 16A: AUDIT COMMITTEE FINANCIAL EXPERT                                            |  | 177
|                                                                                      | 
|Item 16B: CODE OF ETHICS                                                              |  | 177
|                                                                                      | 
|Item 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      |  | 177
|                                                                                      | 
|Item 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  |  | 178
|                                                                                      | 
|Item 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      |  | 178
|                                                                                      | 
|Item 17: FINANCIAL STATEMENTS                                                         |  | 179
|                                                                                      | 
|Item 18: FINANCIAL STATEMENTS                                                         |  | 180
|                                                                                      | 
|Item 19: EXHIBITS                                                                     |  | 181



4



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##### Table of Contents

Part 1



Item 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not applicable.



Item 2: OFFER STATISTICS AND EXPECTED TIMETABLE



Not applicable.



Item 3: KEY INFORMATION



Selected Financial
Data



Presented below are selected
consolidated financial data of Air France-KLM as of and for the financial year ended March 31, 2005 and of Air France as of and for each of the financial years in the four -year period ended March 31, 2004. The financial condition and results of
operations of KLM are included in those of Air France-KLM from May 1, 2004. The selected consolidated financial data have been derived from the audited consolidated financial statements of Air France-KLM or Air France, as the case may be. Air
France-KLMs consolidated financial statements for the year ended March 31, 2005 have been audited by Deloitte & Associés and KPMG S.A. its statutory auditors, as indicated in their report appearing elsewhere in this annual report.
Air Frances consolidated financial statements as of and for the years ended March 31, 2003 and 2004 have been audited by Deloitte & Associés (formerly Deloitte Touche Tohmatsu) and KPMG S.A. Air Frances consolidated financial
statements as of and for the year ended March 31, 2002 have been audited by Deloitte & Associés (formerly Deloitte Touche Tohmatsu).



The audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in France (French GAAP).
French GAAP differs in important respects from generally accepted accounting principles in the United States (U.S. GAAP). For a discussion of the principal differences between French GAAP and U.S. GAAP relevant to the consolidated financial
statements, together with a reconciliation of net income and shareholders equity under French GAAP to net income and shareholders equity under U.S. GAAP, see notes 35 to 37 to the consolidated financial statements.



In the course of implementing IFRS, which we are required to follow in France
as of April 1, 2005 for purpose of satisfying French regulatory requirements, we identified an error in the financial information prepared in accordance with U.S. GAAP as of and for the years ended March 31, 2004, 2003 and 2002 (including our April
1, 2001 opening balance sheet). As a result, we determined that it was necessary to restate our previously issued U.S. GAAP financial information. However, this restatement did not have any impact on our French GAAP financial statements. The
restatement relates to the accounting for deferred taxes related to two perpetual loans contracted on 1989 and 1992, respectively, and that were not accounted for in accordance with SFAS 109, Accounting for Income Taxes. For the main impact
of the restatement on net income and shareholders equity, under U.S. GAAP, see note 35 to the consolidated financial statements included elsewhere in this annual report.



Air France-KLMs results of operations are not directly comparable to those of Air France because of the completion of
the exchange offer. Air Frances results of operations for the financial years ended March 31, 2004 and 2003 are not directly comparable to those for the financial year ended March 31, 2002 because of changes to its accounting principles under
French GAAP described in note 2.1 to the consolidated financial statements.



You should read the following selected consolidated financial data together with the consolidated financial statements and Item 5: Operating and Financial Review and Prospects included elsewhere in this
annual report.



5



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|                                                       |  |                                                 |  |         |  |         |  |         |  |         |  |        
|------------------------------------------------------ |  | ----------------------------------------------- |  | ------- |  | ------- |  | ------- |  | ------- |  | -------
|                                                       |  | Year ended March 31,                           
|                                                       |  | 2005(1)                                         |  | 2004(2) |  | 2003(2) |  | 2002(2) |  | 2001   
|                                                       |  | (in millions, except shares and per share data)
|                                                       |  | ()                                             |  | ($)(3)  |  | ()    
|Amounts in accordance with French GAAP:                |  |                                                 |  |         |  |         |  |         |  |         |  |        
|Stockholders equity                                   |  | 5,161                                           |  | 6,693   |  | 4,062   |  | 3,994   |  | 3,961   |  | 3,874  
|Total assets                                           |  | 21,507                                          |  | 27,892  |  | 12,959  |  | 12,608  |  | 13,364  |  | 12,457 
|Long-term debt and capital leases                      |  | 8,005                                           |  | 10,382  |  | 4,091   |  | 3,730   |  | 4,244   |  | 3,667  
|Common stock                                           |  | 2,290                                           |  | 2,970   |  | 1,868   |  | 1,868   |  | 1,868   |  | 1,868  
|Operating revenues                                     |  | 19,078                                          |  | 24,742  |  | 12,337  |  | 12,687  |  | 12,528  |  | 12,280 
|Operating income                                       |  | 497                                             |  | 645     |  | 139     |  | 192     |  | 235     |  | 443    
|                                                       |  |                                                 |  |         |  |         |  |         |  |         |  |        
|Net income                                             |  | 351                                             |  | 455     |  | 93      |  | 120     |  | 153     |  | 421    
|                                                       |  |                                                 |  |         |  |         |  |         |  |         |  |        
|Earnings per share(4)                                  |  |                                                 |  |         |  |         |  |         |  |         |  |        
|Basic                                                  |  | 1.36                                            |  | 1.76    |  | 0.43    |  | 0.55    |  | 0.70    |  | 1.93   
|Diluted                                                |  | 1.36                                            |  | 1.76    |  | 0.43    |  | 0.55    |  | 0.70    |  | 1.93   
|Dividend declared per share (in )                     |  | 0.15                                            |  |        |  | 0.05    |  | 0.06    |  | 0.10    |  | 0.22   
|Dividend declared per share (in dollars)(3)            |  |                                                |  | 0.19    |  | 0.06    |  | 0.07    |  | 0.12    |  | 0.26   
|Average number of shares outstanding (in thousands)(4) |  |                                                 |  |         |  |         |  |         |  |         |  |        
|Basic                                                  |  | 258,705                                         |  |         |  | 216,909 |  | 217,269 |  | 217,688 |  | 218,515
|Diluted                                                |  | 258,705                                         |  |         |  | 216,909 |  | 217,269 |  | 217,688 |  | 218,515

---

|Notes: | 
|------ | 

|(1) | Including results of operations of KLM from May 1, 2004.
|--- | --------------------------------------------------------

|(2) | As a result of the changes to its accounting principles under French GAAP described in note 2.1 to the consolidated financial statements, for Air Frances consolidated
financial statements for the financial year ended March 31, 2003 and subsequent periods, Air France decided to adopt, with retrospective application as of April 1, 2002, an individual component approach whereby it recognizes or capitalizes costs
attributable to major airframe inspections and engine maintenance of aircraft held under full ownership and capital leases measured under French GAAP. Prior to April 1, 2002, Air France recorded a provision for costs related to major airframe
inspections and directly expensed engine maintenance costs under French GAAP. The adoption of the component approach also requires the recording of net provisions for major overhauls of aircraft held under operating leases.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Translated solely for convenience at the noon buying rate on March 31, 2005 of $1.2969 per 1.00
|--- | ------------------------------------------------------------------------------------------------

|(4) | Excluding shares held by Air France-KLM.
|--- | ----------------------------------------



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|                                                       |  |                                                 |  |                   |  |                   |  |                   |  |         
|------------------------------------------------------ |  | ----------------------------------------------- |  | ----------------- |  | ----------------- |  | ----------------- |  | --------
|                                                       |  | Year ended March 31,                           
|                                                       |  | 2005(1)                                         |  | 2004(restated)(2) |  | 2003(restated)(2) |  | 2002(restated)(2)
|                                                       |  | (in millions, except shares and per share data)
|                                                       |  | ()                                             |  | ($)(3)            |  | ()              
|Amounts in accordance with U.S. GAAP(4)                |  |                                                 |  |                   |  |                   |  |                   |  |         
|Stockholders equity                                   |  | 5,778.7                                         |  | 7,494.4           |  | 4,123.5           |  | 3,928.8           |  | 3,873.3 
|Total assets                                           |  | 23,402.8                                        |  | 30,351.2          |  | 14,575.0          |  | 13,924.5          |  | 14,358.5
|Long-term debt and capital leases                      |  | 8,710.3                                         |  | 11,296.5          |  | 4,932.8           |  | 4,605.1           |  | 4,931.9 
|Common stock                                           |  | 2,276.4                                         |  | 2,952.3           |  | 1,857.8           |  | 1,868.0           |  | 1,868.0 
|Operating revenues                                     |  | 19,066.7                                        |  | 24,727.6          |  | 12,295.6          |  | 12,669.2          |  | 12,544.4
|Operating income                                       |  | 1,403.7                                         |  | 1,820.6           |  | 190.9             |  | 192.6             |  | 169.8   
|                                                       |  |                                                 |  |                   |  |                   |  |                   |  |         
|Net income                                             |  | 754.8                                           |  | 978.9             |  | 172.8             |  | 154.3             |  | 79.3    
|                                                       |  |                                                 |  |                   |  |                   |  |                   |  |         
|Net income per share(5)                                |  |                                                 |  |                   |  |                   |  |                   |  |         
|Basic                                                  |  | 2.92                                            |  | 3.78              |  | 0.80              |  | 0.71              |  | 0.36    
|Diluted                                                |  | 2.92                                            |  | 3.78              |  | 0.80              |  | 0.71              |  | 0.36    
|Dividend declared per share (in )                     |  | 0.15                                            |  |                  |  | 0.05              |  | 0.06              |  | 0.10    
|Dividend declared per share (in dollars)(3)            |  |                                                |  | 0.19              |  |                  |  | 0.07              |  | 0.12    
|Average number of shares outstanding (in thousands)(4) |  |                                                 |  |                   |  |                   |  |                   |  |         
|Basic                                                  |  | 258,705                                         |  |                   |  | 216,909           |  | 217,269           |  | 217,688 
|Diluted                                                |  | 258,895                                         |  |                   |  | 216,909           |  | 217,269           |  | 217,688 

---

|Notes: | 
|------ | 

|(1) | Including results of operations of KLM from May 1, 2004.
|--- | --------------------------------------------------------

|(2) | In the course of implementing IFRS, we identified an error in the financial information prepared in accordance with U.S. GAAP as of and for the years ended March 31, 2004, 2003 and
2002 (including our April 1, 2001 opening balance sheet). As a result, we determined that it was necessary to restate our previously issued U.S. GAAP financial information. However, this restatement did not have any impact on our French GAAP
financial statements. The restatement relates to the accounting for deferred taxes related to two perpetual loans contracted on 1989 and 1992, respectively, and that were not accounted for in accordance with SFAS 109, Accounting for Income
Taxes. For the main impact of the restatement on net income and shareholders equity, see note 35 to our Consolidated Financial Statements included elsewhere in this annual report. Risks Related to our Securities
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Translated solely for convenience at the noon buying rate on March 31, 2005 of $1.2969 per 1.00.
|--- | -------------------------------------------------------------------------------------------------

|(4) | We have provided amounts in accordance with U.S. GAAP as of and for the years ended March 31, 2005, 2004, 2003 and 2002. Air France was not required to issue financial statements in
accordance with U.S. GAAP for any period prior to April 1, 2001. Accordingly, amounts for the financial year March 31, 2001 have been omitted from the table above.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Excluding shares held by Air France-KLM.
|--- | ----------------------------------------



Exchange Rate Information



The following tables set forth, for the periods indicated, information concerning the noon buying rate expressed in dollars per euro. Such rates are
provided solely for your convenience. No representation is made that the euro could have been, or could be, converted into dollars at the rates indicated below:



|     |  |                      |  |        |  |        |  |               
|---- |  | -------------------- |  | ------ |  | ------ |  | --------------
|     |  | Year ended March 31,
|     |  | Average(1)           |  | High   |  | Low    |  | Period-endrate
|2001 |  | 0.906875             |  | 0.9648 |  | 0.8270 |  | 0.8794        
|2002 |  | 0.879708             |  | 0.9310 |  | 0.8370 |  | 0.8717        
|2003 |  | 1.003283             |  | 1.1062 |  | 0.8750 |  | 1.0900        
|2004 |  | 1.180396             |  | 1.2845 |  | 1.0628 |  | 1.2289        
|2005 |  | 1.2653               |  | 1.3625 |  | 1.1801 |  | 1.2969        

---

|Note: | 
|----- | 

|(1) | The average of the noon buying rates on the last day of each month during the period.
|--- | -------------------------------------------------------------------------------------



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|           |  |        |  |       
|---------- |  | ------ |  | ------
|Month      |  | High   |  | Low   
|March 2005 |  | 1.2445 |  | 1.2099
|April 2005 |  | 1.2366 |  | 1.1825
|May 2005   |  | 1.2264 |  | 1.1822



The noon buying rate
on July 19, 2005 was $1.2001 per euro.



Fluctuations in the
dollar/euro exchange rate will affect the dollar equivalent of the euro price of our shares and warrants on Euronext Paris and Euronext Amsterdam. As a result, the dollar/euro exchange rate is likely to affect the market price of our ADSs and ADWs
in the United States. These fluctuations will also affect the dollar amounts received by holders of our ADSs on conversion by the ADS depositary of any cash dividends paid in euro on our shares.



8



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##### Table of Contents

RISK FACTORS



In addition to the other information included in this annual report, the considerations listed below could have a material adverse effect on our
business, financial condition or results of operations, resulting in a decline in the trading price of our ordinary shares, warrants, ADSs or ADWs. The risks set forth below comprise all material risks currently known to us. However, there may be
additional risks that we do not currently know of or that we currently deem immaterial based on the information available to us. These factors should be considered carefully, together with the information and financial data set forth in this
document.



Risks Related to the Airline Industry



Future terrorist attacks, the threat of attacks or regional instability,
medical epidemics or threats or fears of epidemics may worsen conditions in the airline industry.



The terrorist attacks in the United States on September 11, 2001 had a significant negative effect on the global economy, political stability and market
conditions around the world. Airlines, in particular, experienced significant revenue losses and incurred substantial additional costs, principally as a result of a decrease in demand for air travel, significantly higher costs of insurance and
passenger and aircraft security, and decreases in the resale prices of some types of aircraft. Regional instability following hostilities in Iraq has also had a material adverse effect on the airline industry. Any future terrorist attack, military
action, or the threat of attacks or action, in the Middle East or elsewhere, could result in a general reduction in airline passenger traffic and prices for airline travel, newly imposed air traffic restrictions in affected regions and an increase
in fuel or insurance costs, all of which could have a material adverse effect on our business. Additionally, passenger volumes may significantly decrease in the event of a medical epidemic or threat or fear of an epidemic. For example, the outbreak
of SARS in 2003 resulted in a sharp reduction in air traffic and revenue related to Asia. The prolonged existence of a medical epidemic, or the perception that an outbreak has not been contained or may occur again in the future, may have a material
adverse effect on the demand for our air services to or from affected countries.



Insurance costs increased significantly after September 11, 2001, and may increase in the future, and the amount of available insurance coverage may be further limited as the result of similar events.



Following the terrorist attacks on September 11, 2001,
insurance premiums for airlines increased significantly, especially for risks relating to terrorism. In addition, in the immediate aftermath of September 11, 2001, insurance companies renegotiated insurance coverage for certain risks relating to war
and other hostilities, charging substantially higher rates and limiting coverage to a uniform amount of $50 million. As a result, the European Commission authorized European governments to offer coverage to airlines, at a charge, for loss amounts
that exceeded the insurance coverage available in the market for war and other hostilities. In the event of further terrorist attacks or acts of war, government support similar or comparable to the coverage that was made available in the immediate
aftermath of September 11, 2001 may not be made available, insurance premiums may be increased further or insurance may be made available only with additional limitations on coverage. Any failure to obtain adequate insurance coverage or insurance
coverage at financially acceptable terms in the future would materially adversely affect our business, financial condition and results of operations.



Government support of airlines may have a distorting effect on competition in the airline industry.



Following the events of September 11, 2001, a number of countries took
measures to help airlines extend coverage for damage caused to third parties on the ground as a result of terrorist acts, since the coverage available in the insurance market was limited. The French State and the Netherlands offered airlines, for a
charge, an extension of coverage for loss amounts that exceeded the insurance coverage available in the market. From November 1, 2002, France and the Netherlands phased out this additional coverage at the direction of the European Commission, and
European airline companies were required to obtain insurance coverage from private insurance companies. The United States, however, passed legislation permitting federal authorities to maintain government guarantees in favor of U.S. airline
companies covering damage caused to third parties on the ground, passengers, crew and aircraft, at cost levels substantially below those borne by European airlines. In addition, in



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February 2005, the U.S. government took over US Airways pensions for machinists and attendants in exchange for a financial stake in US Airways. Further, in
May 2005, the U.S. government agreed to take over United Airlines pensions in exchange for a financial stake in its parent company, UAL Corp. Added to the substantial subsidies received from U.S. federal authorities and the costs of new security
measures assumed by the U.S. federal authorities following the events of September 11, 2001, the reduced insurance costs paid by U.S. airlines have offered, and continue to offer, U.S. airlines a significant competitive advantage over their European
competitors, particularly on routes over the North Atlantic. Similar measures taken by governmental authorities in the future may have a material adverse effect on our business.



High fixed costs and low profit margins may limit profitability in the airline industry.



The airline industry is characterized by low gross profit margins and high
fixed costs. The expenses of each flight do not vary significantly with the number of passengers or amount of cargo carried and, therefore, a relatively small change in the number of passengers or in the pricing or traffic mix could have a
significant effect on operating and financial results. Accordingly, a minor shortfall from expected business levels could have a material adverse effect on our financial performance.



The airline industry is by nature cyclical and seasonal, which may cause our results to vary widely.



Our businesses are highly sensitive to local, regional and international
economic conditions. Our business, financial condition and results of operations are subject to changing economic and political conditions prevailing from time to time in the principal markets throughout the world. Because both business and leisure
airline travel is discretionary, our business tends to experience severe adverse financial results during general economic downturns. In addition, during an economic downturn, we may also be required to accept delivery of new aircraft that we have
agreed to purchase even if the new aircraft are not required for our current operations, or may be unable to dispose of unnecessary aircraft on financially acceptable terms.



The airline industry tends to be seasonal in nature. The demand for scheduled airline services is lowest during the winter
months, which generally results in seasonal fluctuations in revenues and results of operations. Our results of operations for the interim periods of any financial year may not be indicative of our results of operations for the full year.



Changes in international, regional and local regulation and legislation
could significantly increase our costs of operations or reduce our revenues.



Our operations are subject to a high degree of international, European and national regulation covering most aspects of its operation, including traffic rights, fare setting, operating standards (the most important of
which relate to safety, security and aircraft noise), airport access and slot availability.



Additional laws and regulations and additional or increased taxes, airport and navigation rates and charges have been proposed from time to time that could significantly increase our cost of operations or reduce our
revenues. The ability of European carriers to operate international routes is subject to change because the applicable arrangements between European and foreign governments may be amended from time to time, or because appropriate slots are not
available. Laws or regulations enacted in the future may adversely affect our business.



Risks Related to the Business



The
integration of Air France and KLM may be difficult and may not result in the benefits that we currently expect.



The development of Air France-KLM requires the integration of two major and complex activities that were run separately until the beginning of the
financial year ended March 31, 2005. Air France-KLM may encounter difficulties with the integration of the activities of Air France and KLM and may not be able to achieve all of the objectives of and the synergies expected to result from the
combination.



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Regulatory authorities have imposed conditions and may impose additional conditions that could reduce
the expected benefits of the combination.



Air France and
KLM, in order to secure the approval of the combination by the European Commission on February 11, 2004, agreed to make a number of concessions in respect of the operations of Air France-KLM, including a commitment to release take-off and landing
slots to competitors at certain airports. While we do not believe that compliance with these undertakings has had or will have a material adverse effect on our operations, the financial impact on us is difficult to predict with certainty.



Substantial competition from other major airlines,
high-speed rail travel and low-cost airlines may harm our business.



The airline industry is highly competitive and prone to price discounting. The air travel market in the European Union has been fully liberalized and any European airline is able to compete with Air France and KLM in
their domestic and European markets. Liberalization of the European market and the resulting competition among carriers has led to a general decrease of airfares and an increase in the number of competitors in many lines of business. We currently
face substantial competition from other carriers. This competition is likely to increase further.



With respect to short-haul and medium-haul flights in or from France, the Netherlands and other European countries, we currently face competition from
providers of alternative forms of transportation. In particular, we compete directly with the French high-speed train system (the TGV) on transportation to major French cities, which are the targeted market for Air Frances La Navetteshuttle services. The Eurostar train service to London competes directly with Air Frances flights to London. An expansion of the TGV system within France or high-speed rail service within Europe generally could have a significant adverse
effect on our business, financial condition and results of operations.



In addition, we face increasing competition from low-cost airlines that have become significant competitors in the European airline industry in recent years. The percentage of routes on which we compete with carriers having substantially
lower operating costs has grown significantly over the past decade. Such competition is likely to continue at this level or intensify in the future. Moreover, the increase in pricing transparency resulting from the use of the Internet has enabled
consumers to more easily obtain the lowest fare on any given route. Continued or increased competition from other carriers, including low-cost airlines, could have a material adverse effect on our business, financial condition, and results of
operations.



We may be adversely affected by high jet fuel
prices.



After labor costs, fuel costs constitute the
single largest portion of our operating costs and have a major impact on our results of operations. For the year ended March 31, 2005, fuel costs represented 14.3% of our operating expenses, an increase of 33.3% from the prior year on a pro forma
basis. The price of jet fuel is usually correlated to the price of petroleum. The average price of Brent IPE petroleum for the financial year ended March 31, 2005 was $42.70 per barrel and between January and March 2005 was $47.88 per barrel, and
between April and June 2005 was $52.85 per barrel. The price of Brent IPE petroleum on July 19, 2005 was U.S.$56.63 per barrel. The average price of jet fuel for the financial year ended March 31, 2005 was $440.42 per ton and between January and
March 2005 was $487.30 per ton. These rates are very high by historical standards. Jet fuel costs may be affected by a number of factors, including fluctuations in the euro/dollar exchange rate, political events, war or the threat of war, and the
coordinated pricing decisions of producer cartels such as OPEC. We seek to reduce this risk by hedging against the price of petroleum. We have additionally introduced a fuel surcharge per flight leg as from May 2004 which we increased in August
2004, October 2004, April 2005, and again in July 2005 due to the increasing price of fuel. We have also introduced a fuel surcharge on cargo operations. Notwithstanding the application of hedging policies, the introduction of a fuel surcharge and
possible adjustments in fares across the industry during periods of sustained high fuel prices, high jet fuel costs have had a



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material adverse effect on our business, financial condition and results of operations in the past, and may have such an effect on us in the future. In
addition, while we purchase our fuel in dollars, our reporting currency is the euro. Adverse fluctuations in foreign exchange rates may further exacerbate the effects of high fuel prices.



Fluctuations in foreign exchange rates and increases in interest rates may negatively affect our results.



Given the international nature of our business, we receive a large part of
our revenues and incur an even larger part of our expenses in certain foreign currencies, particularly dollars, and will be exposed to fluctuations in the exchange rates between those currencies and the euro. Our dollar revenues are less than our
dollar costs, such as fuel costs and payments under aircraft operating leases. As a result, the sharp decline of the dollar against the euro has had a positive impact on our profitability by decreasing our costs more rapidly than its revenues.
However, if the dollar were to increase in value against the euro, our costs would rise more rapidly than revenues, negatively affecting profitability. We estimate that Air France-KLMs net exposure to the dollar (dollar costs minus dollar
revenues) for the current financial year is approximately $2.2 billion. We seek to reduce this risk by hedging against currency fluctuations. With respect to the British pound and Japanese yen, we currently have more revenues than costs in those
currencies, so that a decrease in their value would have a negative effect on our profitability. As a result, significant increases in the value of the dollar or, to a lesser extent, decreases in the value of the pound or yen, could have a material
adverse effect on our business, financial condition and results of operations, despite our efforts to hedge against these fluctuations.



We are also exposed to increases in interest rates. At March 31, 2005, 20% of Air France-KLMs net debt had variable rates of interest. A significant
rise in interest rates could substantially increase the cost of this debt, reducing our net income.



The failure of an alliance to develop or the decision by other members not to participate fully or to withdraw from an alliance could have a material
adverse effect on our business.



Maintenance and
development of alliances and other strategic relations are critical to our business. Air France and KLM are members of the SkyTeam alliance with Aeroméxico, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, Korean Air and
Northwest Airlines. We also have a joint venture with Alitalia. The success of these alliances depends in part on the actions and strategic plans of the other airlines over which we have little control. The failure of an alliance to develop or the
decision by other members not to participate fully or to withdraw from the alliance altogether could have a material adverse effect on our business.



In addition, we believe that further industry consolidation is likely, whether through additional alliances or otherwise. A failure to maintain or develop
strategic alliances could adversely affect our business, financial condition and results of operations.



Our development of new routes depends on access to a limited number of slots at international airports that may be withdrawn if not
sufficiently used.



Our ability to add additional flights
to the existing schedules of Air France and KLM will be constrained, in part, by the availability of slots at the worlds main airports. In the European Union, air carriers must generally use an allocated slot at a minimum of 80% of the level
of use during the period the slot was assigned. Air France and KLM may lose flight slots granted to them should they not use those slots at an 80% level. In addition, Air France and KLM have committed to the European Commission to make slots
available to competitors on certain routes under certain circumstances.



Compliance with environmental regulations may affect our existing or future operations and result in additional costs.



The airline industry is subject to environmental laws and regulations and will be subject to further environmental laws and regulations in the future.
These environmental laws and regulations relate to, among



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other things, aircraft noise and aircraft engine emissions, the use and handling of hazardous materials, air emissions and environmental contamination
clean-up. In recent years, French, Dutch, E.U. and U.S. regulatory authorities have issued a number of directives and other regulations including regulations relating to aircraft noise and age. These requirements impose high fees, taxes and
substantial ongoing compliance costs on airlines, particularly as new aircraft brought into service will have to meet the environmental requirements during their entire service life. We expect to incur expenditures on an ongoing basis to comply with
such regulations. Compliance with these laws could restrict our ability to modify or expand facilities or continue operations, or could require us to install costly pollution control equipment or incur other significant expenses, including
remediation costs. See Item 4: Information on the CompanyRegulation of Air France-KLMOther Regulatory and Legal IssuesEnvironmental Protection and Anti-Noise Standards.



The assurances to KLM and the State of the Netherlands could limit our
ability to take certain actions.



In connection with the
combination, Air France and KLM granted certain assurances to the State of the Netherlands. The assurances granted to the State of the Netherlands have a term of five or eight years from completion of the offer, depending on the assurance in
question. The State assurances are intended to preserve the network quality of KLM at Schiphol airport, which, according to the State of the Netherlands, is a matter of public interest for the Netherlands, and include certain binding commitments by
both Air France and KLM. In addition, Air France and KLM agreed to certain assurances designed to preserve basic principles underlying the business combination. These assurances could limit our ability to respond to changes in the competitive or
economic environments in which it will operate, and could therefore have a material adverse effect on our business and financial condition.



Financing may not be available to us on acceptable terms in the future.



Because the airline industry is by its nature capital intensive, Air France and, in particular, KLM have incurred
significant indebtedness and capital commitments to finance their ongoing operations. Air France and KLM have been able to finance their operations and capital needs in part because their main assets, aircraft, have been attractive as security to
lenders and other financiers. However, there can be no assurance that aircraft or any other assets held by Air France or KLM will continue to provide attractive security for lenders. Any prolonged restriction on the ability to raise money in the
market in the future could adversely affect our ability to borrow, which could in turn have an adverse impact on its business and results of operations.



Unfavorable outcomes of lawsuits may weaken our liquidity position.



We are involved in various legal actions for which we have not recorded provisions because management believes they are
without merit. Unfavorable outcomes of such actions could have a material adverse effect on the results of operations and weaken our liquidity position. See Item 4: Information on the CompanyBusinessLegal Proceedings.



High labor costs or an inability to conclude future
collective labor agreements on satisfactory terms may result in a decrease in our operating margins.



Wage rates have a significant effect on our operating results. Our profitability could suffer if it is not able to conclude future collective labor
agreements on satisfactory terms with our employees. For the year ended March 31, 2005, labor costs represented 31.8% of our operating expenses.



Labor disruptions could result in reduced revenues and increased costs.



If we are not able in the future to renew our collective labor agreements or other key agreements with our employees in a
satisfactory way, or if any strike, work stoppage or work slowdown occurs, our business, financial condition and results of operations could be adversely affected.



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Disruption of air traffic control and other airport services may have a material adverse effect on our
business.



Our operations rely upon the services of third
parties such as those provided by air traffic controllers and public safety officials, and we use the services of third parties such as handling and private security agents in the ordinary course of its business. We have no direct control over the
activities of these third parties and could be directly affected by any change, interruption or termination of their activities. Any interruption in the normal business activities of these third parties, such as operational malfunctioning or a
series of prolonged strikes, or an increase in airport or rental fees charged in connection with the use of these services, could have a material adverse effect on our business, financial condition and results of operations.



The closure of terminal 2E at Roissy-CDG may affect our existing or future
operations and result in additional costs.



Air France
terminated operations in terminal 2E at Roissy-CDG on May 23, 2004, following the collapse of part of the roof of the newly built terminal. Terminal 2E was constructed and is owned by Aéroports de Paris (ADP) and was used primarily for Air
France long- and medium-haul flights. Air France flights have been rerouted to the five other terminals at Roissy-CDG. Despite the unavailability of the facilities in terminal 2E, Air France has maintained its schedule as originally planned by
relying on the remainder of the airports facilities. Certain Air France-KLM and SkyTeam flights have been reassigned to other terminals and certain long-haul flight times have been revised to accommodate the longer time required for
ground services such as check-in, boarding and connections. In spite of the diminished service offerings available at terminal 2E and the increased costs associated with reassigning flights to other terminals, we believe these events have had
no significant impact on our results of operations.



Although
we are currently seeking compensation from the entities or persons liable for damages and the supplemental costs incurred in connection with the collapse of terminal 2E, there can be no guarantee that all of these costs will be reimbursed.
Additionally, there can be no guarantee that Roissy-CDGs remaining facilities will be sufficient to accommodate our regularly scheduled flights or that we will be able to maintain its flight schedule without incurring additional costs due to
the rerouting of passengers or corresponding delays, which could have an adverse affect on our business, results of operations and financial condition.



We are obliged to adopt new accounting standards that may materially change our financial statements and financial
reporting.



We currently prepare our consolidated financial
statements in accordance with French GAAP and prepare a reconciliation of stockholders equity, net income and certain other disclosures to U.S. GAAP. E.U. regulations require that all companies whose securities are listed in the European
Union, including Air France-KLM, must apply International Financial Reporting Standards (IFRS) in preparing their financial statements for financial years beginning on or after January 1, 2005. Our financial statements for the first quarter of the
financial year ending on March 31, 2006 will be published in accordance with IFRS.



In order to establish comparative information for our IFRS financial statements to be published for the year ended March 31, 2006, we have prepared an opening balance sheet as at April 1, 2004, the date at which the
impact of the transition will be recorded in shareholders equity. In accordance with the recommendations of the Autorité des Marchés Financiers (AMF) relative to financial communication during the transition period, we
decided to present the quantifiable impact of the transition to IFRS on our financial position and performance for the year ended March 31, 2005, on the basis of currently available estimates. These transition accounts have been submitted to the SEC
on Form 6-K on June 29, 2005. The preliminary IFRS information is based on IRFS standards and interpretations of the International Accounting Standards Board (IASB) that are currently known, as well as assumption regarding the future
interpretation of IFRS by the IASB in areas where there is not yet any definitive interpretation. As a result, the definitive IFRS financial data for the year ended March 31, 2005



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that we will publish with our March 31, 2006 financial statements may differ from the IFRS transition accounts as submitted. For a discussion of the main
impacts of the transition to IFRS on our consolidated financial statements, see Form 6-K submitted to the SEC on June 29, 2005.



Applying these standards to our financial statements have an effect on a number of areas, including, among others, accounting for share-based
compensation, goodwill and intangible assets, asset depreciation and classification of balance sheet positions as debt or equity. Principal differences in accounting methods relate particularly to the first application of international financial
information standards (IFRS 1), deferred taxes (IAS 12), investments in associates (IAS 28), consolidation and separate financial statements (IAS 27) and business combinations (IFRS 3). Because our financial statements prepared in accordance
with IFRS differ from financial statements prepared in accordance with French GAAP, the methods used by the financial community to assess our financial performance and value publicly-traded securities, such as price-to-earnings ratios and
debts-to-equity ratios, could be affected.



Risks Related to our Securities



Substantial sales of our shares or ADSs, or the
issuance by us of equity-linked securities, could cause the price of our shares, ADSs, warrants and ADWs to decline.



The number of our shares available for sale or trading in the public markets has increased or may increase as a result of the exchange offer and the
following other factors:



| |  |  | on December 9, 2004, the French State sold part of its shareholding in Air France-KLM, which, together with the completion of the related employee offering in April 2005, reduced
its stake in the capital of Air France-KLM to less than 20%, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | shares representing 9.4% of the current share capital of Air France-KLM held in Air France-KLM savings plans on behalf of employee shareholders became eligible for sale from May
2004 by those employee shareholders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
addition, on April 19, 2005, Air France completed an offering of 449,999,989.50 principal amount of 2.75% bonds due April 1, 2020 convertible into and exchangeable for new and/or existing shares of Air France-KLM. See Item 4: Information
on the CompanyOther Significant Developments After March 31, 2005. A total of 21,951,219 Air France-KLM shares may be issued upon conversion or exchange.



The increase in the number of our shares eligible for sale or trading, or the perception that sales may occur, could
adversely affect the market or the market price of our shares, ADSs, warrants and ADWs. In addition, we may in the future issue equity-linked securities to finance its operations. This could adversely affect the market for, or the market price of,
our shares, ADSs, warrants and ADWs.



Fluctuations in the
exchange rate between the dollar and the euro may reduce the dollar market value of our ADSs as well as the dollar value of any dividends that we may pay.



We will pay any cash dividends on our shares in euro, and the ADS depositary will convert such euro amounts into dollars to pay any dividends on the
ADSs. Exchange rate movements will affect the dollar value of these dividends as well as any other dollar distributions paid to you if you hold ADSs. Exchange rate movements will also affect the market value of our ADSs and ADWs.



Our interest in KLM may be diluted.



The State of the Netherlands may exercise an option to acquire the number of
KLM preference shares B necessary to provide the State of the Netherlands with 50.1% of the capital stock and voting rights of KLM,



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irrespective of the total issued share capital of KLM at any given moment in the event that any key country served by KLM restricts, terminates or will
restrict or terminate KLMs operation of scheduled air services because of that countrys view that:



| |  |  | a substantial part of the share capital of KLM is not demonstrably Dutch-owned, or
| | - |  | ----------------------------------------------------------------------------------



| |  |  | KLM is not effectively controlled by Dutch nationals.
| | - |  | -----------------------------------------------------



If the State of the Netherlands exercises this option, it will have the power, acting alone, to influence matters submitted for a vote of KLM
shareholders. The amended state option has an initial duration of three years from completion of the offer but may be renewed by the State of the Netherlands up to three times for periods of 12 months each.



The State of the Netherlands agreed to exercise the voting rights attached to
the preference shares B acquired upon any exercise of the amended state option in accordance with the best interests of KLM and the best interests of Air France-KLM and our shareholders. However, any determination made by the State of the
Netherlands as to the best interests of KLM, us and our shareholders might not correspond to our views or the views of our shareholders as to such interests.



In addition, any dispute involving the State of the Netherlands, France and a government of a key country served by KLM under the relevant bilateral
treaty over Dutch ownership or under certain bilateral treaties, effective control of KLM, could divert management attention and have an impact on our business.



Because we are subject to nationality-based ownership and control restrictions, non-European Union nationals, and in some cases, European Union
nationals, may be compelled to sell our shares or ADSs.



To
hold a license and an Air Operator Certificate allowing them to operate scheduled airline services on European routes, European airlines, including Air France and KLM, must at all times be majority owned and effectively controlled by E.U. nationals.
In addition, applicable bilateral air traffic treaties with non-E.U. countries typically require that the air carriers designated by each country to operate the routes covered by the relevant bilateral treaty be substantially- or majority-owned and
effectively controlled by that country or its nationals. Either country that is a party to a bilateral treaty may withdraw or amend the terms and conditions of the operating authorization of an air carrier designated by the other country if the air
carrier does not satisfy these ownership and control requirements.



Our interest in KLM may be diluted as a consequence of the application of these requirements to KLM as explained in this annual report under the heading Risks Related to the BusinessOur interest in KLM may be
diluted. In addition, in order to protect our authority to operate airline services in Europe and under relevant bilateral treaties, our articles of association, and the deposit agreement relating to our ADSs, contain compulsory transfer
provisions whereby non-E.U. and, in certain cases, E.U. nationals, may be forced to sell all or part of their Air France-KLM shares or ADSs if 45% or more of our share capital or voting rights are held, directly or indirectly, by non-French
nationals. See Item 10: Additional InformationForm and Holding of SharesCompulsory Transfer of Shares and Item 10: Additional InformationAmerican Depositary SharesLimitations on the Right to Own, Transfer or
Vote Air France-KLM ADSs; Compulsory Transfer of Air France-KLM Shares.



If you fail to comply with the notification requirements under French law and our articles of association, you could be deprived of some or all of your voting rights and be subject to a fine.



Holders of our shares, including shares represented by ADSs, are subject to
various notification requirements under our articles of association and French law. Under the French Commercial Code, any individual or entity, acting alone or in concert with others that becomes the owner, directly or indirectly, of more



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than 5%, 10%, 20%, 33.3%, 50% or 66.6% of our outstanding shares or voting rights must notify Air France-KLM and the French Authority for Financial Markets
within five trading days of crossing any of these thresholds. This notification requirement also applies to shareholders when their holding of shares or voting rights falls below any of these thresholds.



If you fail to comply with these notification requirements, your shares,
including shares represented by ADSs, in excess of the relevant notification threshold may be deprived of voting rights for up to two years on the demand of any shareholder or group of shareholders holding a minimum of 5% of our outstanding shares
or voting rights. In addition, all or part of your voting rights may be suspended for up to five years by a French commercial court, and you may be subject to a fine of 18,000 at the request of the chairman of our board of directors, any Air
France-KLM shareholder or the French Authority for Financial Markets.



In addition, under our articles of association, any individual or entity, acting alone or in concert with others that becomes the owner, directly or indirectly, of more than 0.5% of our outstanding shares or voting rights or a multiple
thereof up to 50% must notify us within 15 calendar days of crossing the ownership threshold. If you fail to comply with this notification requirement, your shares, including shares represented by ADSs, may be deprived of voting rights for up to two
years on the demand of any one or more shareholders owning, together, at least 0.5% of our share capital.



For a more detailed description of these notification requirements, see Item 10: Additional InformationRequirements Applicable to
Shareholdings Exceeding Certain Percentages and Item 10: Additional InformationAmerican Depositary SharesRequirements Applicable to Shareholders Exceeding Certain Percentages.



Holders of our ADSs may have difficulty exercising some of their rights as
shareholders.



The ADS depositary may use discretion to
take action or exercise rights on behalf of each ADS holder in a number of circumstances, including the exercise of rights that holders of ADSs may have to subscribe for or acquire new Air France-KLM shares. In addition, holders of our ADSs will
only be able to exercise their voting rights by instructing the ADS depositary to vote on their behalf, and, therefore, the process for exercising voting rights will take longer for holders of our ADSs than for holders of our shares. For this
reason, a deadline will be set by the ADS depositary by which it must receive voting instructions from all our ADS holders. The ADS depositary will not exercise voting rights with regard to any ADSs for which it does not receive voting instructions
by the deadline. See Item 10: Additional InformationAmerican Depositary SharesVoting Rights.



Under French law, holders of our securities have limited rights to call shareholders meetings or to submit shareholder proposals, which could
adversely affect their ability to participate in our governance.



In general, under French law, only our board of directors may call a meeting of shareholders. In limited circumstances, a shareholders meeting may be called by an attorney appointed by a court at the request of the holders of 5% or
more of Air France-KLMs capital stock or a duly qualified group of shareholders who have held their shares in registered form for at least two years and together hold at least 1% of Air France-KLMs voting rights. In addition, only
shareholders or groups of shareholders representing at least 5% of Air Frances share capital may submit proposed resolutions for meetings of shareholders. As a result, the ability of holders of our shares to participate in and influence our
governance is limited.



As a foreign private issuer, we are
permitted to file less information with the SEC, which may limit the information available to holders of our securities.



As a foreign private issuer, we are exempt from rules under the Exchange Act that impose certain disclosure and procedural requirements for the
solicitation of proxies for shareholder meetings. In addition, our officers,



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directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act
and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act
are required to file their reports. Therefore, there may be less publicly available information about Air France-KLM than is regularly published by or about other public companies in the United States.



Our ADS and ordinary share price could be volatile and could drop
unexpectedly and investors may not be able to sell their ADRs or ordinary shares at or above the price they paid.



The price at which our ADSs and ordinary shares trade may be influenced by a large number of factors, some of which will be related to the airline
industry and equity markets generally. As a result of these factors, investors may not be able to resell their ADSs or ordinary shares at or above the price which they paid for them. In particular, the following factors, in addition to other risk
factors described in this section, may have a significant impact on the market price of our ADSs or ordinary shares:



| |  |  | Announcements by us of intended acquisitions, disposals or financings or speculation about such acquisitions, disposals or financings;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of blocks of our shares by significant shareholders;
| | - |  | ----------------------------------------------------------



| |  |  | Potential litigation involving us or the airline industry generally;
| | - |  | --------------------------------------------------------------------



| |  |  | Changes in recommendations by securities research analysts;
| | - |  | -----------------------------------------------------------



| |  |  | Fluctuations in foreign exchange rates and fuel prices;
| | - |  | -------------------------------------------------------



| |  |  | The performance of other companies in the airline sector;
| | - |  | ---------------------------------------------------------



| |  |  | Regulatory developments in the principal markets in which we operate;
| | - |  | ---------------------------------------------------------------------



| |  |  | International political and economic conditions, including the effects of terrorist attacks, military operations and other developments stemming from such events and the uncertainty
related to these developments; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General economic and market conditions.
| | - |  | ---------------------------------------



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Item 4: INFORMATION ON THE COMPANY



History of
Air France-KLM



The key dates in the Air France-KLM
combination were:



|                   |  |                                                                                                                                                                                                                                                                                                                                                                                      
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|September 30, 2003 |  | Air France and KLM officially announce their combination by means of an exchange offer for all outstanding KLM common shares in exchange for Air France shares and Air France warrants,
including Air France shares in the form of ADSs and Air France warrants in the form of ADWs.                                                                                                 
|                   | 
|October 16, 2003   |  | Air France and KLM finalize the combination agreements including specific agreements between Air France and the former shareholders of KLM, including the Dutch State.                                                                                                                                                                                                               
|                   | 
|February 11, 2004  |  | Approvals for the combination are granted by the European and American antitrust authorities.                                                                                                                                                                                                                                                                                        
|                   | 
|March 29, 2004     |  | Approval for the combination is granted by the French Commission on Holdings and Transfers (Commission des participations et des transferts).                                                                                                                                                                                                                                        
|                   | 
|April 5, 2004      |  | Air France commences its exchange offer for all outstanding KLM common shares.                                                                                                                                                                                                                                                                                                       
|                   | 
|May 5, 2004        |  | Air France shares are admitted to official listing on Euronext Amsterdam. Air France ADSs and ADWs are listed on the New York Stock Exchange.                                                                                                                                                                                                                                        
|                   | 
|September 15, 2004 |  | Hive down to transfer all the assets and liabilities of Air France, with the exception of treasury shares and Alitalia and KLM shares, to Air France-Compagnie Aérienne, a subsidiary
company that changed its name to Air France. Reorganization of the group structure under Air France-KLM, a holding company for two principal operating subsidiary airlines, Air France and KLM.



Our corporate
existence will continue, subject to dissolution or prolongation, until July 3, 2045.



Our registered office is located at 2, rue Robert Esnault-Pelterie, 75007 Paris, France and our telephone number is +33 1 41 56 75 14. Our postal address is 45, rue de Paris, 75747 Roissy CDG Cedex, France. We have
designated Air France as our agent in the United States located at 125 West 55th Street, New York, NY 10019.



The Combination with KLM and the Exchange Offer



On October 16, 2003, Air France entered into the framework agreement with KLM in which Air France agreed to combine with KLM around the concept of
one group, two airlines. The framework agreement provided for, among other things, an exchange offer for all KLM common shares, the establishment of an administered shareholding structure intended to protect KLMs international air
traffic rights during an interim period of three years, the conduct of a hive down, whereby Air France has incorporated a wholly-owned subsidiary into which the assets, liabilities, businesses and operations of société Air
France have been transferred, KLMs admission into the SkyTeam alliance and corporate governance arrangements for Air France-KLM. As a result of the combination, the French State no longer owns a majority of our share capital.



On April 5, 2004, Air France commenced its exchange offer for all of the
outstanding KLM common shares, including KLM common shares in the form of ordinary shares and New York registry shares.



Upon closing of the subsequent offer period on May 21, 2004, holders of KLM common shares had tendered a total of 45,093,299 KLM common shares,
representing approximately 96.33% of KLMs common



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shares. Air France was effectively privatized as a result of the issuance of new Air France shares in the exchange offer, as the ownership of the French
State was reduced to 44.7%. A limited number of KLM common shareholders who had not tendered in the exchange offer subsequently contacted us offering to sell their shares. We have entered into a number of privately negotiated transactions after
which we currently hold 97.3% of the economic rights and 49% of the nominal share capital and voting rights in KLM. Pursuant to the framework agreement, Air France also purchased all of KLMs outstanding priority shares, which give Air France
certain special governance rights in KLM, and purchased depositary receipts representing all of KLMs cumulative preference shares C. In addition, Air France entered into agreements entitling Air France-KLM to acquire cumulative preference
shares A in KLM at the same time and in the same proportion that the French State reduces its shareholding in Air France-KLM, or more rapidly at the discretion of the State of the Netherlands.



The Administered Shareholding



To permit the combination and with the aim of preserving KLMs air
traffic rights during an interim period of three years, Air France and KLM entered into administered shareholding arrangements with the State of the Netherlands. Under these arrangements, our direct ownership of, and voting rights in, KLM are, for a
period of three years, limited to 49% of KLMs nominal share capital. Air France-KLM currently directly owns all of KLMs priority shares and a number of KLM common shares representing, together with the KLM priority shares, 49% of
KLMs nominal share capital and voting rights.



In
addition, Air France-KLM owns depositary receipts representing KLM common shares tendered in the exchange offer in excess of 49% of the nominal share capital and voting rights of KLM. These depositary receipts carry the economic rights, but not the
voting rights, of the underlying KLM common shares. The underlying KLM common shares are held by Stichting Administratiekantoor KLM (SAK I), a foundation incorporated under Dutch law. Air France-KLM also owns depositary receipts representing
KLMs cumulative preference shares C. These depositary receipts carry the economic rights, but not the voting rights, of the underlying cumulative preference shares C. The underlying cumulative preference shares C are held by Stichting
Administratiekantoor Cumulatief Preferente Aandelen C KLM (SAK II), another foundation incorporated under Dutch law. Each of SAK I and SAK II are managed by a board of three independent persons, one of whom was appointed by Air France, one by
KLM and a chairman was appointed jointly by the appointees of Air France and KLM. A majority of the board members of each foundation, including the chairman, are Dutch nationals and residents. The decisions of each foundations board must be by
unanimous consent.



As of the date of this annual report, the
State of the Netherlands owns KLM cumulative preference shares A equal to 5.9% of the voting rights in KLM. The State of the Netherlands has agreed to decrease its ownership in KLM proportionally to any decrease of the French States ownership
in Air France-KLM, by selling and transferring the relevant cumulative preference shares A to Air France-KLM or, if the transfer occurs before May 6, 2007, to SAK I, which in turn shall issue the corresponding depository receipts to Air France-KLM.
If it chooses, the State of the Netherlands may sell and transfer, and Air France-KLM will be obligated to buy, cumulative preference shares A in addition to those required by any decrease in the French State shareholding. After May 6, 2007, Air
France-KLM will be able to purchase cumulative preference shares A from the State of the Netherlands directly.



Air France-KLM may, at its sole discretion, retain this or a different form of administered shareholding arrangements after May 6, 2007.



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The following chart sets forth the current structure of Air France-KLM at the date of this annual report:



LOGO



The Hive Down



On September 15, 2004, Air France transferred its assets, liabilities,
businesses and operations to a wholly-owned subsidiary in the hive down. In the same meeting, Air France changed its corporate name to Air France-KLM. Immediately thereafter, shareholders of the wholly-owned subsidiary approved the transfer of such
assets, liabilities, businesses and operations to it and approved the issuance of shares to Air France-KLM in connection therewith. In the same meeting, the wholly-owned subsidiary changed its corporate name to société Air France. The
hive down enables the wholly-owned subsidiary (under its new name société Air France) to carry out the businesses and operations previously conducted by Air France prior to the hive down.



We envisage that the combined group will ultimately be structured as one
listed holding company, Air France-KLM, holding 100% of the nominal share capital and voting rights in two principal operating subsidiaries, Air France and KLM, as set forth in the chart below:



LOGO



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Intergovernmental Declaration of Understanding



The French State and the State of the Netherlands signed an intergovernmental
declaration of understanding on October 16, 2003 acknowledging the importance of Roissy-CDG and Schiphol airports and declaring that the two countries will take into account the establishment of Air France-KLM in formulating airport policy and, more
broadly, civil aviation policy. The two States have agreed to inform each other of air services negotiations of common interest with non-E.U. countries, consult with each other on developments of common interest in European civil aviation policy
(specifically air transport relations with non-E.U. countries) and provide mutual assistance in the event of major difficulties with non-E.U. countries, particularly where airline traffic rights could be jeopardized due to changes in capital
structure or due to an obstacle to commercial market access. According to the declaration, a committee chaired by the French and Dutch Directors-General of Civil Aviation will meet regularly to supervise the process of mutual information and
coordination.



In the declaration, the French State committed,
among other things, to reduce its shareholding in Air France-KLM, in one or more stages, to less than 20%, as soon as market conditions permit. The French State also undertook to vote its Air France-KLM shares in favor of the nomination to the Air
France-KLM board of directors of a representative of the State of the Netherlands as long as it will have its own representative(s) on the Air France-KLM board of directors. In addition, both countries have agreed to reduce their equity
participation in Air France-KLM, in the case of the French State, and in KLM, in the case of the State of the Netherlands, by a similar proportion over time, although the State of the Netherlands may reduce its shareholding more rapidly. KLM, Air
France and the State of the Netherlands have agreed separately that Air France and KLM shall ensure that the place of effective management of KLMs existing transport enterprise will be retained in the Netherlands for purposes of Dutch tax and
the France-Netherlands double taxation convention at least until the bilateral treaty is ratified or the current convention is amended.



Assurances and Assurances Foundation



Air France and KLM granted assurances to the State of the Netherlands to preserve the network quality of KLM at Schiphol airport, while taking into
account the best interests of Air France-KLM and its shareholders. The assurances granted to the State of the Netherlands have a term of five or eight years from May 6, 2004, depending on the assurance in question. In particular, the State of the
Netherlands has agreed that each of Air France and KLM will remain an airline company operating from its home base in France and the Netherlands respectively and that each will retain its air operation certificate and operating licenses and will
continue to fulfill the conditions necessary to maintain such licenses. In addition the State of the Netherlands has agreed to maintain KLMs current portfolio of air traffic rights, other than those that have not been used by KLM for a period
of 12 months.



Air France and KLM also agreed to various
assurances to preserve their respective long-term interests, while taking into account the best interests of Air France-KLM and its shareholders. These assurances have a term until May 6, 2009, but will be evaluated after May 6, 2007. In particular,
the combined group has committed to maintain and ensure a fair long-term development of international and intercontinental services on overlapping routes to and from both Roissy-CDG and Schiphol airports. Air France and KLMs commitment to fair
capacity development of both hubs includes a commitment that neither Air France nor KLM will change a unique passenger destination into a destination served by both hubs, unless certain conditions are met. In addition, Air France and KLM agreed to
make investments, when economically justified, in both the cargo and passenger businesses at both Roissy-CDG and Schiphol airports.



Air France and KLM have established a foundation in the Netherlands to facilitate compliance with both sets of assurances. The foundation will, if
requested to do so, render binding advice regarding possible contraventions of the assurances by Air France or KLM.



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Tripartite Alliance Coordination Agreement



On September 30, 2003, Air France, KLM and Alitalia entered into a tripartite
agreement listing the conditions and principles under which Air France, KLM and Alitalia will conduct a three-way commercial alliance. Air France, Alitalia and KLM intend to establish a cargo partnership to integrate their cargo business and
activities. Discussions among the parties are currently ongoing.



Corporate Governance Arrangements



In the
framework agreement, Air France and KLM agreed to an extensive set of principles that will apply to the corporate governance and organization of Air France-KLM, including the establishment of the strategic management committee. For further
information on our management structure, see Item 6: Directors, Senior Management and Employees.



History of Air France



The main stages in the development of Air France were:



|          |  |                                                                                                                                                                                                                                                                
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1933      |  | Air France is born out of the combination of five French airlines.                                                                                                                                                                                             
|          | 
|1945      |  | Air France is nationalized.                                                                                                                                                                                                                                    
|          | 
|1946      |  | The Paris-New York service is inaugurated with a DC4 and a flight time of 23 hours and 45 minutes.                                                                                                                                                             
|          | 
|1959-1960 |  | The first Caravelle and Boeing 707 aircraft are brought into service, with the latter model reducing the time of the Paris-New York service to 8 hours.                                                                                                        
|          | 
|1976      |  | Concorde is commissioned, first on the Paris-Rio, Paris-Caracas and Paris-Washington routes and then Paris-New York the following year, connecting the two cities in 3 hours and 45
minutes.                                                                   
|          | 
|1990      |  | Air France acquires UTA, founded in 1963.                                                                                                                                                                                                                      
|          | 
|1992      |  | Air France and UTA merge, giving Air France a 72% stake in Air Inter after combining its own interest in this company with that of UTA.                                                                                                                        
|          | 
|1996      |  | Air Inter becomes Air France Europe.                                                                                                                                                                                                                           
|          | 
|1997      |  | Air France Europe is merged with Air France.                                                                                                                                                                                                                   
|          | 
|1999      |  | Air France is successfully floated, with the participation of 2.4 million private individuals, international institutional investors and 72% of staff. Air France is listed on the Monthly
Settlement Market for the first time on February 22, 1999.          
|          | 
|2000      |  | SkyTeam and SkyTeam Cargo are launched. Air France is a founding member of these alliances alongside Aéromexico, Delta and Korean. The regional division is created following the
acquisition of Régional Airlines, Flandre Air, Porteus, Brit Air and CityJet.
|          | 
|2001      |  | The Open Sky agreement is concluded between France and the United States. Alitalia and CSA join the SkyTeam.                                                                                                                                                 
|          | 
|2002      |  | SkyTeam is the only alliance in the world to benefit from anti-trust immunity on its transatlantic and transpacific flights.                                                                                                                                   
|          | 
|2003      |  | Air France celebrates its 70th anniversary.                                                                                                                                                                                                                    
|          | 
|2004      |  | The Air France-KLM group is created, cementing its position as the European air transport market leader. Air France is privatized following the transfer of the majority of its shares to the
private sector as a result of the public exchange offer on KLM.  



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History of KLM



The main stages in the development of KLM were:



|     |  |                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1919 |  | KLM is founded as the royal Dutch airline for the Netherlands and its Colonies.                                                                                                                   
|     | 
|1924 |  | KLM runs its first intercontinental flight from Amsterdam to Jakarta.                                                                                                                             
|     | 
|1934 |  | KLM offers its first transatlantic service from Amsterdam to Curaçao using a Fokker FXVIII Snip.                                                                                                  
|     | 
|1946 |  | KLM inaugurates a regular service between Amsterdam and New York.                                                                                                                                 
|     | 
|1958 |  | KLM completes its first flight to Japan flying over the North Pole.                                                                                                                               
|     | 
|1989 |  | KLM concludes an alliance with Northwest Airlines.                                                                                                                                                
|     | 
|2002 |  | KLM announces the renewal of its fleet, with the arrival of the Boeing B747-400ER Freighter, the Boeing B777-200ER and the Airbus A330-200.                                                       
|     | 
|2004 |  | KLM and Air France announce the conclusion of an agreement to create Europes leading Airline group. KLM, Northwest Airlines and Continental Airlines join the SkyTeam alliance in
September 2004.



Key events of Air France-KLM during
the financial year ended March 31, 2005



Our financial year
ended March 31, 2005 was marked by the following key events:



| |  |  | The combination of Air France and KLM took effect on May 3, 2004. The structure of the new group was finalized on September 15, 2004, with the establishment of Air France-KLM.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The financial year ended March 31, 2005 was characterized by strong activity within a difficult but improving economic context which was marked by a continuing appreciation of the
euro against our other principal currencies, particularly the dollar.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The price of oil rose continually during the financial year ended March 31, 2005 to reach historic levels, with a price per barrel of U.S.$55.65 (International Petroleum Exchange
(IPE) price for Brent crude) at March 31, 2005. Air France and KLM each implemented fuel surcharges to offset a portion of the additional fuel costs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The departure area in terminal 2E at Roissy-CDG collapsed on May 23, 2004, forcing Air France to reroute its flights to the other five terminals at Roissy-CDG. Despite the
unavailability of the facilities in terminal 2E, Air France maintained its flight schedule as originally planned by relying on the remainder of the airports facilities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In September 2004, KLM and its two American partners, Northwest Airlines and Continental Airlines, became members of the SkyTeam alliance, making the alliance the second largest in
the world for passengers, with a market share of 22% (International Air Transport Association (IATA), December 2003) and the worlds leading alliance in cargo.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other Significant Developments After March 31, 2005



Amadeus GTD



During the financial year ended March 31, 2005, Air France, Iberia Líneas Aéreas de España S.A., Deutsche Lufthansa AG (through its
subsidiary Lufthansa Commercial Holdings GmbH) and Amadelux Investment S.A.



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initiated negotiations with private equity funds in order to launch a public offer for class A shares of Amadeus Global Travel Distribution, S.A. through a
newly incorporated company, Wam Acquisition S.A. The offer commenced on May 25, 2005 and closed on June 27, 2005. The offer was accepted by 94.73% of the shares to which the bid was addressed, resulting in Wam Acquisition, S.A. holding a total of
95.08% of the class A shares and 98.74% of the total share capital of Amadeus GTD. Following the offer, Air France, through Wam Acquisition S.A., indirectly holds 22.96% and Air France together with Iberia Líneas Aéreas de
España S.A., Deutsche Lufthansa AG (through its subsidiary Lufthansa Commercial Holdings GmbH), through Wam Acquisition S.A., indirectly hold 45.92% of Amadeus GTD.



The consideration offered by Wam Acquisition S.A. amounts to 7.35 per class A share of Amadeus. This price represents
a 49.4% premium with regard to the closing price of Amadeus shares on the last trading day prior to August 17, 2004, the date on which the first relevant fact informing the market on the interest of several investors in Amadeus was published.



This transaction will allow Air France to remain a shareholder
of Amadeus and to earn gross cash income of approximately 800 million.



Air FranceKLM Share Plan for Employees



In February 2005, the French State sold 8,414,273 Air FranceKLM shares to eligible employees, in an offering reserved exclusively for such employees, and 12,612,671 Air FranceKLM shares to the employees of
Air France in a shares-for-salary exchange. These shares were delivered in March 2005 and April 2005, respectively. See Item 6: Directors, Senior Management and EmployeesEmployeesAir FranceEmployee Share Arrangements
and Item 7: Major Shareholders and Related Party TransactionsOwnership of our SharesSignificant Changes.



Sale of KLM Shares by the State of the Netherlands



In accordance with the terms of intergovernmental declaration of understanding between the French State and the State of the Netherlands signed on October
16, 2003, the State of the Netherlands executed a deed to transfer 5,103,855 KLM cumulative preference shares A to SAK I on April 5, 2005. See History of Air France-KLMIntergovernmental Declaration of Understanding above.



Offering by Air France of bonds due April 1, 2020
convertible into and/or exchangeable for new and/or existing shares of Air France-KLM



On April 22, 2005, Air France placed 450 million of bonds convertible and/or exchangeable for Air France-KLM shares (OCEANE). The 21,951,219 Air France bonds, with a unit face value of 20.50, give the
right to the allotment of new and/or existing shares of Air France-KLM on the basis of one share per bond. This allotment may be made at any time from June 1, 2005 until March 25, 2020. The bonds will mature on April 1, 2020 and may be redeemed at
par. The bonds have been listed for trading on the Eurolist market of Euronext Paris since April 22, 2005.



Business of Air France-KLM



For the financial year ended March 31, 2005, we prepared our financial information and presented our measures of operating performance on an Air France-KLM consolidated basis including the financial condition and results of operations or
operating performance of KLM for 11 months, whereas, prior to the business combination with KLM, for the financial years ended March 31, 2004 and 2003, such information was compiled separately by Air France and by KLM. To the extent financial
information or operating data is presented for the financial year ended March 31, 2004, we have, where indicated, presented such information on a pro forma basis to enable a better appreciation of the financial or operating results that might have
been achieved if the



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closing date of the Air France-KLM exchange offer had taken effect on May 1, 2003. This information is included solely for illustrative purposes and,
accordingly, does not necessarily reflect the combined operating data that Air France-KLM could have recorded on the dates or for the periods indicated. To the extent financial information or operating data is presented for the financial year ended
March 31, 2003, such information is for Air France only.



Introduction



We are one of the largest airline
groups in the world, ranking first worldwide in terms of international passengers carried as of December 31, 2003, according to IATA, and first among airlines in Europe in terms of traffic (revenue passenger-kilometers) for the financial year ended
March 31, 2005, according to the Association of European Airlines (AEA), with an overall market share of 27.7%.



The combination of Air France and KLM has also created a European and global leader in cargo activities. We currently rank second in the world (excluding
integrators) in cargo activity, according to IATA. Air France and KLM are also active in the field of aircraft maintenance and are one of the worlds leading suppliers of maintenance services.



Air France and KLM organize their networks around two main hubs at Roissy-CDG
and Amsterdam Schiphol airports.



Our core business of
passenger transportation accounted for 78.6% of our total operating revenues of 19,078 million for the financial year ended March 31, 2005. Cargo activities were 13.1% of total operating revenues for the financial year ended March 31, 2005,
industrial maintenance activities were 4.1% of total operating revenues for the financial year ended March 31, 2005 and other air transport-related activities were 4.2% of total operating revenues for the financial year ended March 31, 2005.



The financial year ended March 31, 2005 was marked by
continued difficulties for the air transport sector. After unprecedented crises including the terrorist attacks on September 11, 2001, the geopolitical tensions surrounding the war in Iraq, and the SARS epidemic in 2003, the sector worldwide has
been affected by the sharp increase in oil prices since the spring of 2004.



Despite the continued recovery in traffic in 2004, with growth worldwide of about 11% according to IATA, increased fuel costs have resulted in losses in the air transport sector of U.S.$5 billion during 2004. The air
transport sector spent U.S.$62 billion on jet fuel in 2004, counteracting most cost-cutting efforts of individual airlines and the impact of the general economic recovery. According to IATA, the total losses of the international airline industry for
the period 2001 to 2004 are expected to reach U.S.$36 billion, the equivalent of the total profits created from 1978 to 2000.



Recent airline industry trends in the three main geographic zones  Europe, the United States and Asia  have nevertheless differed
significantly.



Asian airlines, after having suffered
significantly diminished growth in 2003 as a result of the SARS epidemic, have strongly recovered due to the economic growth in this region.



In the United States, most airlines have not been profitable since 2001. Confronted with structural problems, including significant wage increases in 2000
and 2001 and competition from low-cost companies which have conquered nearly 30% of the North American domestic market, U.S. airlines are facing higher fuel prices without the ability to implement hedging policies as in general their financial
positions are too weak. According to IATA, between 2000 and 2002, debt of the leading American air carriers doubled from $27 billion to $56 billion. Despite federal assistance of several billion dollars and drastic cost-cutting plans and wage
concessions, the U.S. air carriers accumulated $7 billion in losses in 2004 and experienced new record losses in the first quarter of 2005.



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In Europe, airlines that are members of the AEA have benefited from the recovery in traffic after the
SARS epidemic. During 2004, traffic grew 9.0% with a 7.3% increase in capacity. Slightly more than 307 million passengers, representing an increase of 4.8% over 2003, traveled to and from the 49 countries included within Europe as defined by the
AEA. In 2003, the recovery differed depending on the airline in question. Non-U.S. airlines have also had some protection from rising fuel prices because of the weakness of the U.S. dollar, particularly against the euro. In recent years, the airline
industry has seen the emergence of low-cost air carriers that typically engage in aggressive marketing and compete with all transportation carriers. In Europe, there were over 35 low-cost airlines in 2004, but there are two dominant low-cost
airlines  Ryanair and easyJet  which have over 50% market share of the low-cost market segment. We believe that the growth of low-cost airlines has not occurred through a transfer of traffic from scheduled airlines but through the
creation of a new market and the winning by low-cost airlines of a large percentage of the general growth in traffic among price-sensitive passengers. The European low cost airlines are present in the five major domestic markets (but unevenly so)
and on intra-European routes, primarily from Great Britain to Germany, France and Italy. In the winter season 2004, 30% of low-cost flights were on domestic routes (16% in the United Kingdom, 8% in Germany and 1% in France) and 70% on intra-European
routes, primarily from Great Britain to Germany, France and Italy.



While low-cost airlines are present in the French domestic market, the strong presence of the French high speed rail network, as well as the Air France domestic shuttle, has limited the interest and impact of low cost airlines. easyJet is
the only low-cost airline to operate flights from Paris to Toulouse and to Nice, where the high-speed trains market share is less than 20%. In March 2005, easyJet terminated flights from Paris to Marseille, where the high-speed trains
market share is approximately 60%.



Notwithstanding the
continuing, difficult economic context in which we operate, we realized net income of 351 million for the financial year ended March 31, 2005. We believe that these results in a difficult environment evidence the efficient pursuit of our goal
of profitable growth built around exploiting the synergies offered by the business combination of Air France and KLM, and controlling costs and improving productivity.



Strategy



Our strategy is based on the implementation of the synergies between Air France and KLM and on strict cost control.



Exploiting the synergies offered by the business combination of Air
France and KLM



Air France and KLM have combined their
businesses around the concept of one group, two airlines. The objective of this concept is to respect the identity, brand and cultures of the two airlines while achieving common results of operations. We believe that the similar business
approaches of Air France and KLM to each of their core businesses of passengers, cargo and maintenance operations serve as a firm foundation for Air France-KLM.



Prior to the business combination, we valued the synergies of the combination at 385 million to 495 million per year after five years
following completion of the offer. The coordination of the operations and teams of Air France and KLM have accelerated the development of these synergies, which we revised upwards in September 2004. Initially estimated at 65 million to
75 million for the financial year ended March 31, 2005, the synergies were re-estimated at 90 million in September 2004. For the financial year ended March 31, 2005, the amount realized was 115 million.



Each business segment has contributed to the generation of synergies for the
financial year ended March 31, 2005. Passenger activity has generated approximately 73 million in synergies, primarily as a result of adjustments in the long- and medium-haul networks and the implementation of combinable fares. Cargo has
generated 12 million in synergies through an exchange of capacities and a streamlined network. Maintenance synergies totaled approximately 15 million and are related to savings on purchasing, growth in revenues, and the return of
maintenance operations that were previously outsourced.



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For the financial year ended March 31, 2006, the total amount of synergies is currently estimated at
280 million, compared with our initial estimate of a maximum of 135 million. At the end of the fifth year, we currently estimate that synergies should total 580 million, divided equally between cost synergies and revenue synergies.



Complementary Hubs



We expect to achieve substantial further synergies by coordinating flights at
our two hubs, Roissy-CDG and Schiphol airports. We believe that the potential to expand capacity at the two airports will constitute a significant competitive advantage for Air France-KLM because customers will be able to select more destinations
with better schedules and Air France and KLM will derive cost advantages from increased economies of scale.



Complementary Passenger Operations



We believe that Air Frances and KLMs passenger operations are highly complementary, especially with respect to long-haul and medium-haul
routes. Of a total of 101 long-haul destinations served by Air France and KLM as of March 31, 2004, only 31 were common to both Air France and KLM. We have retained most of these common long-haul destinations, as they are routes with significant
traffic flow and can therefore be served by both Air France from Paris and KLM from Amsterdam. We have improved and intend to further improve service to passengers by improving the schedule and the frequencies of the flights. The combination has
added 43 long-haul destinations to KLMs network and 27 long-haul destinations to Air Frances network. With respect to the European market, Air France has a stronger presence in Southern Europe while KLM has a stronger presence in
Northern Europe. We have improved and intend to further improve our business in Eastern Europe by taking advantage of synergies and efficiencies with respect to our passenger operations to Eastern European destinations.



We believe that the combination of the Air France and KLM networks offers our
passengers more destinations and better connections through full code sharing and the harmonization of flight schedules, the introduction of fare compatibility and the launching of a common frequent flyer program. We believe that, by coordinating
the marketing efforts and sales structures of Air France and KLM, we have an enhanced global presence capable of targeting and serving a larger pool of potential passengers.



Air Frances and KLMs existing partnerships also complement each other, particularly in the United States, where
SkyTeam partner Delta Airlines has an alliance with SkyTeam partners Northwest Airlines and Continental Airlines.



Complementary Cargo Businesses



As in passenger operations, we believe that the combination enables us to create and benefit from an extensive network for our cargo services. We believe
that as a result of the combination, we are the European leader in this sector. In addition, we believe that we benefit from significant efficiencies and cost savings in the cargo business through coordinated freighter planning and more efficient
hub handling in the cargo sector.



Complementary Aircraft
Maintenance Activities



Having combined Air France and
KLMs respective expertise and capabilities in aircraft maintenance, repair and overhaul services, we are one of the worlds largest maintenance, repair and overhaul service providers in terms of operating revenues. Air France and KLM each
enjoy strong relationships with major manufacturers of aircraft parts, including Airbus, Boeing and General Electric. We believe that we have sufficient scale and capacity to build on those relationships and meet the maintenance requirements of the
major global airlines, with capabilities to service the principal Airbus and Boeing products.



28



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##### Table of Contents

Controlling Costs and Improving Productivity



To meet the challenges of an industry in which unbalanced cost structures
have adversely affected a number of airlines, we continue to place a major strategic focus on controlling costs and improving productivity. To this end, Air France has implemented a series of three-year cost-saving programs and KLM has implemented a
continuing restructuring plan.



Air Frances first
cost-savings program was implemented in 1998 and succeeded in reducing operating costs by an aggregate approximately 457 million over a three-year period. In April 2001, Air France implemented its second program, the Performance 2003 Plan
(Plan Performance 2003), which ended on March 31, 2004. The Performance 2003 Plan aimed at reducing unit costs over a three-year period by 5% (operating costs in an aggregate of 280 million). This goal was exceeded as operating costs
were reduced by 300 million. Air France implemented its latest three-year cost cutting program in April 2004. The objective of the new cost-savings plan (Compétitivité Major 2007) is to improve unit costs over a three-year
period by 6% (operating costs in an aggregate of 600 million). The Compétitivité Major 2007cost-savings program focuses on distribution costs, the introduction of a new European medium-haul product and enhanced
productivity. As at March 31, 2005, Air France achieved its goal of 200 million in savings principally through the reorganization of the medium-haul fleet (47 million) and the optimization of purchasing and external costs (100
million). A target of 590 million in savings has been set which should be derived from the continued restructuring of the medium-haul product (for an estimated 45 million in savings), the reorganization of the medium-haul network (for an
estimated 50 million in savings) and the changeover to zero commission paid to travel agencies (for an estimated 260 million in savings), a portion of which will be passed on to passengers in the form of fare reductions. Finally,
measures will also be taken to boost productivity, including, for example, the development of automatic check-in, improved productivity related to the gradual implementation of the Nouveau Espaces de Voyages (New Travel Spaces) on long-haul
flights and optimizing the ratio of number of seats per cabin crew member.



During the financial year ended March 31, 2005, KLM continued the restructuring plan that it initiated in the financial year ended March 31, 2004, with a target of 650 million in savings for the financial year
ended March 31, 2006. The plan includes changes in procedures, improved productivity (in particular, with the replacement of the long-haul fleet), savings on purchases and the elimination of 4,500 jobs. Under the restructuring plan, KLM achieved
savings of 200 million for the financial year ended March 31, 2004. KLM achieved further savings of 520 million for the financial year ended March 31, 2005, 50 million below the amount budgeted for the year.



Additionally, we continued our oil hedging policy which enabled us to achieve
hedging gains of 375 million during the financial year ended March 31, 2005. For the financial years ended March 31, 2006 and 2007, we have already hedged 81% and 45%, respectively, of our estimated consumption on the basis of a fuel price of
U.S.$565 and U.S.$562 per ton.



Organizational Structure



Our significant subsidiaries are as follows:



|                   |  |                             |  |                             |  |               |  |                  
|------------------ |  | --------------------------- |  | --------------------------- |  | ------------- |  | -----------------
|Subsidiary         |  | Jurisdiction ofOrganization |  | Head Office                 |  | % of Interest |  | % of VotingRights
|société Air France |  | France                      |  | Roissy-CDG, France          |  | 100           |  | 100              
|KLM                |  | the Netherlands             |  | Amstelveen, the Netherlands |  | 97.3          |  | 49               



29



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##### Table of Contents

société Air Frances significant subsidiaries are as follows:



|                                       |  |                             |  |                    |  |               |  |                  
|-------------------------------------- |  | --------------------------- |  | ------------------ |  | ------------- |  | -----------------
|Subsidiary                             |  | Jurisdiction ofOrganization |  | Head Office        |  | % of Interest |  | % of VotingRights
|Air France Finance                     |  | France                      |  | Roissy-CDG, France |  | 100           |  | 100              
|Brit Air                               |  | France                      |  | Morlaix, France    |  | 100           |  | 100              
|CityJet                                |  | Ireland                     |  | Dublin, Ireland    |  | 100           |  | 100              
|Régional Compagnie Aerienne Européenne |  | France                      |  | Bouguenais, France |  | 100           |  | 100              
|Servair                                |  | France                      |  | Roissy-CDG, France |  | 98            |  | 98               



None of KLMs
subsidiaries qualifies as a significant subsidiary as defined in SEC Regulation S-X.



Principal Activities of Air France-KLM



Our
three main businesses are passenger transportation, cargo operations and maintenance operations. Our other activities are related to air transport, and include principally catering and KLMs charter subsidiary transavia.com.



The charts below show the division of our operating revenues for the
financial years ended March 31, 2005, 2004, on a pro forma and published basis, and 2003 (Air France only) from the different parts of the business:



|            |  |                                     |  |       |                |  |        |                         |      |   |                         |        |  |      |   |  |        |  |       |  
|----------- |  | ----------------------------------- |  | ----- | -------------- |  | ------ | ----------------------- | ---- | - | ----------------------- | ------ |  | ---- | - |  | ------ |  | ----- | -
|            |  | Year ended March 31,                | 
|            |  | 2005Air France-KLM                  |  |       | 2004 Pro forma |  |        | 2004Air Francepublished |      |   | 2003Air Francepublished |       
|            |  | (in  millions, except percentages) | 
|Passenger   |  | 15,004                              |  | 80.0  | %              |  | 14,044 |                         | 78.6 | % |                         | 10,260 |  | 83.2 | % |  | 10,527 |  | 83.0  | %
|Cargo       |  | 2,492                               |  | 12.8  | %              |  | 2,277  |                         | 13.1 | % |                         | 1,412  |  | 11.4 | % |  | 1,479  |  | 11.7  | %
|Maintenance |  | 777                                 |  | 4.2   | %              |  | 747    |                         | 4.1  | % |                         | 508    |  | 4.1  | % |  | 540    |  | 4.3   | %
|Other       |  | 805                                 |  | 4.0   | %              |  | 714    |                         | 4.2  | % |                         | 157    |  | 1.3  | % |  | 141    |  | 1.1   | %
|            |  |                                     |  |       |                |  |        |                         |      |   |                         |        |  |      |   |  |        |  |       |  
|Total       |  | 19,078                              |  | 100.0 | %              |  | 17,782 |                         | 100  | % |                         | 12,337 |  | 100  | % |  | 12,687 |  | 100.0 | %
|            |  |                                     |  |       |                |  |        |                         |      |   |                         |        |  |      |   |  |        |  |       |  



Passenger Operations



Air transport services for passengers are our largest
revenue source, generating revenues of 15,004 million for the financial year ended March 31, 2005, representing 78.6% of consolidated revenues, an increase of 6.8% compared to the previous years 14,044 million on a pro forma basis
(10,260 million on a published basis), despite a negative currency impact of 1.4%. Operating income grew 13.9% from 274 million for the financial year ended March 31, 2004 on a pro forma basis (67 million on a published basis) to
312 million for the financial year ended March 31, 2005.



Our scheduled passenger operations generated revenues of 14,085 million for the financial year ended March 31, 2005. The remainder of the groups revenues from passenger operations are provided by commissions from sales of
SkyTeam alliance members flights and revenues from code sharing revenues, and receipts from baggage handling and information systems services.



During the financial year ended March 31, 2005, we operated an average of 2,350 flights per day to 225 destination cities and carried 64.1 million
passengers. Through our membership in SkyTeam and its partnerships with approximately 30 airlines, our customers may access a global network of approximately 18,000 flights and 900 destinations.



30



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##### Table of Contents

The following table shows the breakdown of passenger transportation on scheduled flights between
long-haul and medium-haul, together with the load factors, for the financial years ended March 31, 2005, 2004, on a pro forma and published basis, and 2003 (Air France only) and the change between such periods:



|                      |  |                                                                    |  |               |   |  |        |   |  |                          |  |                          |  
|--------------------- |  | ------------------------------------------------------------------ |  | ------------- | - |  | ------ | - |  | ------------------------ |  | ------------------------ | -
|                      |  | Year ended March 31,                                               | 
|                      |  | 2005 Air France-KLM                                                |  | 2004Pro forma |   |  | Change |   |  | 2004 Air Francepublished |  | 2003 Air Francepublished |  
|                      |  | (in millions, except percentages and point changes in load factor) | 
|Long-haul:            |  |                                                                    |  |               |   |  |        |   |  |                          |  |                          |  
|Capacity (ASK)(1)     |  | 163,216                                                            |  | 151,662       |   |  | 7.6    | % |  | 97,317                   |  | 95,483                   |  
|Traffic (RPK)(2)      |  | 134,331                                                            |  | 122,163       |   |  | 10.0   | % |  | 77,682                   |  | 76,721                   |  
|Load factor (RPK/ASK) |  | 82.3                                                               |  | 80.5          | % |  | 1.8    |   |  | 79.8                     |  | 80.4                     | %
|Medium-haul:          |  |                                                                    |  |               |   |  |        |   |  |                          |  |                          |  
|Capacity (ASK)(1)     |  | 51,390                                                             |  | 49,086        |   |  | 4.7    | % |  | 37,127                   |  | 35,764                   |  
|Traffic (RPK)(2)      |  | 34,667                                                             |  | 32,975        |   |  | 5.1    | % |  | 23,962                   |  | 23,239                   |  
|Load factor (RPK/ASK) |  | 67.5                                                               |  | 67.2          | % |  | 0.3    |   |  | 64.5                     |  | 65.0                     | %
|Total:                |  |                                                                    |  |               |   |  |        |   |  |                          |  |                          |  
|Capacity (ASK)(1)     |  | 214,606                                                            |  | 200,748       |   |  | 6.9    | % |  | 134,444                  |  | 131,247                  |  
|Traffic (RPK)(2)      |  | 168,998                                                            |  | 155,138       |   |  | 8.9    | % |  | 101,644                  |  | 99,960                   |  
|Load factor (RPK/ASK) |  | 78.7                                                               |  | 77.3          | % |  | 1.5    |   |  | 75.6                     |  | 76.2                     | %

---

Notes:

|(1) | Available seat-kilometers. See Definitions and industry terms.
|--- | -----------------------------------------------------------------

|(2) | Revenue passenger-kilometers. See Definitions and industry terms.
|--- | --------------------------------------------------------------------



The following table below shows scheduled passenger revenues by destination and the percentage of total scheduled passenger
revenues by destination for the financial years ended March 31, 2005, 2004, on a pro forma and published basis, and 2003 (Air France only) and the change between such periods:



|                             |  |                                            |  |           |                |  |        |                         |           |   |                         |         |    |  |        |  |           |   |  |        |  |           |  
|---------------------------- |  | ------------------------------------------ |  | --------- | -------------- |  | ------ | ----------------------- | --------- | - | ----------------------- | ------- | -- |  | ------ |  | --------- | - |  | ------ |  | --------- | -
|                             |  | Scheduled Passenger Revenue by Destination | 
|                             |  | Year ended March 31,                       | 
|                             |  | 2005Air France-KLM                         |  |           | 2004 Pro forma |  |        | 2004Air Francepublished |           |   | 2003Air Francepublished |        
|                             |  | (in  millions, except percentages)        | 
|                             |  |                                            |  | % oftotal |                |  |        |                         | % oftotal |   |                         | %change |    |  |        |  | % oftotal |   |  |        |  | % oftotal |  
|Europe and North Africa      |  | 6,044                                      |  | 42.9      | %              |  | 5,794  |                         | 44.0      | % |                         | 4.3     | %  |  | 4,525  |  | 47.8      | % |  | 4,481  |  | 46.2      | %
|Caribbean and Indian Ocean   |  | 1,124                                      |  | 8.0       | %              |  | 1,215  |                         | 9.2       | % |                         | (7.5    | )% |  | 1,023  |  | 10.8      | % |  | 994    |  | 10.2      | %
|Africa and Middle East       |  | 1,920                                      |  | 13.6      | %              |  | 1,752  |                         | 13.3      | % |                         | 9.6     | %  |  | 1,058  |  | 11.2      | % |  | 1,098  |  | 11.3      | %
|North and Latin America      |  | 2,939                                      |  | 20.9      | %              |  | 2,708  |                         | 20.6      | % |                         | 8.5     | %  |  | 1,850  |  | 19.5      | % |  | 1,966  |  | 20.2      | %
|Asia                         |  | 2,058                                      |  | 14.6      | %              |  | 1,687  |                         | 12.9      | % |                         | 22      | %  |  | 1,009  |  | 10.7      | % |  | 1,174  |  | 12.1      | %
|                             |  |                                            |  |           |                |  |        |                         |           |   |                         |         |    |  |        |  |           |   |  |        |  |           |  
|Scheduled passenger revenues |  | 14,085                                     |  | 100.0     | %              |  | 13,156 |                         | 100.0     | % |                         | 7.1     | %  |  | 9,465  |  | 100.0     | % |  | 9,713  |  | 100.0     | %
|                             |  |                                            |  |           |                |  |        |                         |           |   |                         |         |    |  |        |  |           |   |  |        |  |           |  
|Other passenger revenues     |  | 919                                        |  |           |                |  | 889    |                         |           |   |                         | 2.3     | %  |  | 795    |  |           |   |  | 814    |  |           |  
|                             |  |                                            |  |           |                |  |        |                         |           |   |                         |         |    |  |        |  |           |   |  |        |  |           |  
|Total passenger revenues     |  | 15,004                                     |  |           |                |  | 14,045 |                         |           |   |                         | 6.8     | %  |  | 10,260 |  |           |   |  | 10,527 |  |           |  
|                             |  |                                            |  |           |                |  |        |                         |           |   |                         |         |    |  |        |  |           |   |  |        |  |           |  



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##### Table of Contents

The table below shows scheduled passenger revenues by area of sale and the percentage of total scheduled
passenger revenues by area of sale for the financial years ended March 31, 2005, 2004, on a pro forma and published basis, and 2003 (Air France only) and the change between such periods:



|                             |  |                                                |  |           |                |  |        |                         |           |   |                         |         |   |  |        |  |           |   |  |        |  |           |  
|---------------------------- |  | ---------------------------------------------- |  | --------- | -------------- |  | ------ | ----------------------- | --------- | - | ----------------------- | ------- | - |  | ------ |  | --------- | - |  | ------ |  | --------- | -
|                             |  | Scheduled Passenger Revenue by Area of Sale(1) | 
|                             |  | Year ended March 31,                           | 
|                             |  | 2005Air France-KLM                             |  |           | 2004 Pro forma |  |        | 2004Air Francepublished |           |   | 2003Air Francepublished |        
|                             |  | (in  millions, except percentages)            | 
|                             |  |                                                |  | % oftotal |                |  |        |                         | % oftotal |   |                         | %change |   |  |        |  | % oftotal |   |  |        |  | % oftotal |  
|Europe (including France)    |  | 9,711                                          |  | 68.8      | %              |  | 9,078  |                         | 69.0      | % |                         | 64.7    | % |  | 6,734  |  | 71.1      | % |  | 6,689  |  | 68.8      | %
|Caribbean and Indian Ocean   |  | 348                                            |  | 2.5       | %              |  | 390    |                         | 2.9       | % |                         | 2.8     | % |  | 348    |  | 3.7       | % |  | 340    |  | 3.5       | %
|Africa and Middle East       |  | 937                                            |  | 6.7       | %              |  | 895    |                         | 6.8       | % |                         | 6.4     | % |  | 577    |  | 6.1       | % |  | 598    |  | 6.2       | %
|North and Latin America      |  | 1,994                                          |  | 14.2      | %              |  | 1,785  |                         | 13.6      | % |                         | 12.7    | % |  | 1,169  |  | 12.4      | % |  | 1,329  |  | 13.7      | %
|Asia                         |  | 1,095                                          |  | 7.8       | %              |  | 1,008  |                         | 7.7       | % |                         | 7.2     | % |  | 637    |  | 6.7       | % |  | 757    |  | 7.8       | %
|                             |  |                                                |  |           |                |  |        |                         |           |   |                         |         |   |  |        |  |           |   |  |        |  |           |  
|Scheduled passenger revenues |  | 14,085                                         |  | 100       | %              |  | 13,156 |                         | 100.0     | % |                         | 73.7    | % |  | 9,465  |  | 100.0     | % |  | 9,713  |  | 100.0     | %
|                             |  |                                                |  |           |                |  |        |                         |           |   |                         |         |   |  |        |  |           |   |  |        |  |           |  
|Other passenger revenues     |  | 919                                            |  |           |                |  | 889    |                         |           |   |                         | 6.3     | % |  | 795    |  |           |   |  | 814    |  |           |  
|                             |  |                                                |  |           |                |  |        |                         |           |   |                         |         |   |  |        |  |           |   |  |        |  |           |  
|Total passenger revenues     |  | 15,004                                         |  |           |                |  | 14,045 |                         |           |   |                         | 100.0   | % |  | 10,260 |  |           |   |  | 10,527 |  |           |  
|                             |  |                                                |  |           |                |  |        |                         |           |   |                         |         |   |  |        |  |           |   |  |        |  |           |  

---

Notes:

|(1) | Origin of sale is determined on the basis of ticket issuing locations.
|--- | ----------------------------------------------------------------------



The Long-Haul Network



Our long-haul network consists of 112 destinations in 89 countries, including 27 destinations operated by KLM alone and 43 operated by Air France alone.
One-third of the destinations have sufficiently high volume traffic that they are served by both Air France and KLM. During the financial year ended March 31, 2005, the long-haul network reported strong growth, with an increase of 9.7% on a pro
forma basis in passengers carried to 18.8 million. During the same period, the long haul network represented 76.0% of capacities (as compared to 75.5% on a pro forma basis during the financial year ended March 31, 2004) and approximately 80% of
traffic (as compared to approximately 79% on a pro forma basis during the financial year ended March 31, 2004). For the financial year ended March 31, 2005, revenues from our long-haul passenger traffic were 8.04 billion, an increase of 9.5%
on a pro forma basis over such revenues during the financial year ended March 31, 2004, and represented 57.1% of total scheduled passenger revenues, an increase of 1.3% on a pro forma basis compared to the financial year ended March 31, 2004. During
the same period, total long-haul capacity grew by 7.6% on a pro forma basis and traffic rose 10.0% on a pro forma basis, while the load factor increased 1.8 points to 82.3%.



The table below shows the volume of long-haul capacity, traffic and load factor by geographical area during the financial
year ended March 31, 2005, and the change in these operating measures as compared to the previous financial year on a pro forma basis:



|                           |  |                                   |  |           |            |  |        |                |           |    |  |      |   |  |          
|-------------------------- |  | --------------------------------- |  | --------- | ---------- |  | ------ | -------------- | --------- | -- |  | ---- | - |  | ---------
|                           |  | Capacity(1)                       |  |           | Traffic(2) |  |        | Load factor(3)
|                           |  | Volume                            |  | Change(4) |            |  | Volume |                | Change(4) |    |  | %    |   |  | Change(4)
|                           |  | (in millions, except percentages)
|North and South America    |  | 62,646                            |  | 5.0       | %          |  | 53,584 |                | 8.5       | %  |  | 85.5 | % |  | 2.8      
|Asia                       |  | 43,323                            |  | 21.1      | %          |  | 35,306 |                | 23.1      | %  |  | 81.5 | % |  | 1.3      
|Africa and Middle East     |  | 28,831                            |  | 7.0       | %          |  | 22,459 |                | 8.5       | %  |  | 77.9 | % |  | 1.0      
|Caribbean and Indian Ocean |  | 28,416                            |  | (2.9      | )%         |  | 22,983 |                | (1.7      | )% |  | 80.9 | % |  | 1.0      



32



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##### Table of Contents

---

Notes:

|(1) | Available seat-kilometers (ASK).
|--- | --------------------------------

|(2) | Revenue passenger-kilometers (RPK).
|--- | -----------------------------------

|(3) | RPK/ASK.
|--- | --------

|(4) | On a pro forma basis.
|--- | ---------------------



North and South America



During the financial year ended March 31, 2005, routes to the Americas represented operating revenues of 2,939 million, or 20.9% of scheduled
passenger revenue, 29% of total passenger capacity and 32% of total traffic. We serve 20 destinations in North America and 11 destinations in eight countries in South America. During the financial year ended March 31, 2005, 7.3 million passengers
traveled on these routes, an increase of 9.0% as compared to during the financial year ended March 31, 2004 on a pro forma basis. Despite the fact that the financial year ended March 31, 2005 continued to present exceptional challenges for the air
transport industry in North America, passenger traffic and load factors increased as compared to the previous year. Through the SkyTeam alliance, which expanded in September 2004 to include KLM and its American partners Continental and Northwest,
more than 150 destinations are offered in North and South America.



Asia



During the financial year ended March 31,
2005, Asian routes generated operating revenues of 2,058 million, or 14.6% of our scheduled passenger revenue (as compared to 12.8% on a pro forma basis for the financial year ended March 31, 2004), 20% of the total passenger capacity and 21%
of the groups total traffic. We serve 20 destinations in 11 countries in Asia directly. During the financial year ended March 31, 2005, 4 million passengers traveled on these routes, an increase of 23.1% as compared to 3.2 million during the
financial year ended March 31, 2004 on a pro forma basis.



Africa and the Middle East



During the
financial year ended March 31, 2005, routes to Africa and the Middle East generated operating revenues of 1,920 million or 13.6% of our scheduled passenger revenue, 13.0% of the total passenger capacity and 14.0% of the groups total
traffic. We serve approximately 46 destinations in 31 countries in its Africa and Middle East network. During the financial year ended March 31, 2005, 4.3 million passengers traveled on these routes, an increase of 10.3% as compared to 3.9 million
during the financial year ended March 31, 2004 on a pro forma basis.



Caribbean and Indian Ocean



During the
financial year ended March 31, 2005, routes to the Caribbean and Indian Ocean generated revenues of 1,124 million, or 8.0% of our scheduled passenger revenue (as compared to 9.2% during the financial year ended March 31, 2004), 14.0% of total
passenger capacity offered and 13.0% of the groups total traffic. Air France flights comprise approximately 80% of this geographic sector and serve 15 destinations in seven countries and four French overseas territories in its Caribbean and
Indian Ocean network and operates a regional network that links Miami, Port-au-Prince, Pointe-à-Pitre, Fort-de-France, and Cayenne. During the financial year ended March 31, 2005, 3.15 million passengers traveled on these routes, as decrease
of 2.6% as compared to during the financial year ended March 31, 2004 on a pro forma basis.



This region has predominantly tourist, family and government traffic, especially in the West Indies and Reunion Island.



33



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##### Table of Contents

The Medium-Haul Network



The table below shows the volume of medium-haul capacity traffic and load factor for our medium haul network during the financial year ended March 31,
2005 and the change in these operating measures as compared to the previous financial year on a pro forma basis:



|                        |  |                                   |  |           |            |  |        |                |           |   |  |      |   |  |          
|----------------------- |  | --------------------------------- |  | --------- | ---------- |  | ------ | -------------- | --------- | - |  | ---- | - |  | ---------
|                        |  | Capacity(1)                       |  |           | Traffic(2) |  |        | Load factor(3)
|                        |  | Volume                            |  | Change(4) |            |  | Volume |                | Change(4) |   |  | %    |   |  | Change(4)
|                        |  | (in millions, except percentages)
|Europe and North Africa |  | 51,390                            |  | 4.7       | %          |  | 34,667 |                | 5.1       | % |  | 67.5 | % |  | 0.3      

---

|Notes: | 
|------ | 

|(1) | Available seat-kilometers (ASK).
|--- | --------------------------------

|(2) | Revenue passenger-kilometers (RPK).
|--- | -----------------------------------

|(3) | RPK/ASK.
|--- | --------

|(4) | On a pro forma basis.
|--- | ---------------------



The international medium-haul network covers Europe (including France) and North Africa. Air France and its regional subsidiaries Régional, Brit
Air and CityJet, and KLM and its regional subsidiaries KLM cityhopper and KLM UK serve 122 destinations in 30 countries.



Since April 2004, Air France has begun to simplify and redefine its medium-haul offerings in response to strong competition and structural changes in
customer demand in the European market. By simplifying and standardizing onboard services, such as meals, and optimizing the space used within individual aircraft, Air France expects to reduce costs per passenger and staffing needs per flight,
resulting in reduced prices for passengers and increased traffic on medium-haul flights. In addition, KLM has expanded its capacity to France from Amsterdam, Rotterdam and Eindhoven. Air France and KLM have also begun to streamline their common
medium-haul network. Air France has stopped its flights to Bristol and Aberdeen in favor of KLM, while KLM has stopped flights to Casablanca and Turin in favor of Air France.



During the financial year ended March 31, 2005, European medium-haul routes generated operating revenues of 6,044
million, or 42.9% of our scheduled passenger revenue, 24.0% of the total passenger capacity and approximately 20% of the groups total traffic. During the financial year ended March 31, 2005, 45.3 million passengers traveled on these routes, a
decrease of 4.1% as compared to during the financial year ended March 31, 2004 on a pro forma basis.



Marketing and Retail Sales Network



Approximately 80% of Air Frances passenger revenue and 89% of KLMs passenger revenue for the financial year ended March 31, 2005 came from sales made through the external retail sales network of travel
agencies. From January 1, 2005 for KLM and from April 1, 2005 for Air France, the two companies no longer pay commissions to travel agents, which will represent an amount of 260 million of savings. Part of these savings amount will be
transferred to passengers through a reduction of fares.



Cargo



Air France and KLM combined their capacities and
synchronized their cargo networks around their respective hubs at Roissy-CDG and Amsterdam Schiphol. Excluding integrators (companies devoted exclusively to cargo), Air France-KLM became the second largest cargo company in the world in terms of
scheduled freight tons carried as of December 31, 2003, according to IATA. Cargo revenues are subdivided into freight transportation and other cargo revenues. Revenues from freight transportation consist of the transportation of cargo on flights
that have an Air France-KLM code, including flights that are operated by other airlines pursuant to code sharing agreements. Other cargo revenues derive principally from sales of cargo capacity to third parties.



34



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##### Table of Contents

Our total revenues from cargo were 2,492 million for the financial year ended March 31, 2005, an
increase of 9.4% compared with the previous financial year on a pro forma basis, and represented 13.1% of Air France-KLMs operating revenue. Capacity (ATK) during the year ended March 31, 2005 increased by 9.4%, while traffic (RTK) increased
8.8% compared to the year ended March 31, 2004 as calculated on a pro forma basis. As a consequence, the load factor decreased slightly to 68.2% from 68.6% for the previous financial year on a pro forma basis.



Cargo may be carried either on a cargo-only fleet or in the bays of passenger
aircraft. Of our total offered capacity, approximately half is typically carried in the holds of our cargo fleet and approximately half is typically carried in the holds of our passenger fleet. Air France and KLM together maintain a fleet of 15
cargo aircraft and 17 combination passenger-cargo aircraft. Introduction of the B747-400 ERF aircraft has contributed to the profitability of cargo activities, as their increased flight range results in lower unit operating costs than the B747-200F
aircraft they are replacing.



During the year ended March 31,
2005, we carried over 1.33 million tons of cargo, representing 10,078 million revenue ton-kilometers, half of which was carried in our cargo fleet, and half of which was carried in the holds of passenger aircraft.



In 2000, Air France obtained ISO 9002 certification for its cargo depots at
Roissy-CDG.. KLM possesses ISO 9001:2000 certification for its cargo depots at Amsterdam Schiphol.



The table below shows cargo revenues by destination and the percentage of cargo revenues by destination for the financial years ended March 31, 2005,
2004, on a pro forma and published basis, and 2003 (Air France only) and the change between such periods:



|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|-------------------------- |  | ----------------------------------- |  | --------- | -------------- |  | ----- | ------------------------- | --------- | - | ------------------------- | ------- | -- |  | ----- |  | --------- | - |  | ----- |  | --------- | -
|                           |  | Cargo Revenue by Destination        | 
|                           |  | Year ended March 31,                | 
|                           |  | 2005 Air France-KLM                 |  |           | 2004 Pro forma |  |       | 2004 Air France published |           |   | 2003 Air France published |        
|                           |  | (in  millions, except percentages) | 
|                           |  |                                     |  | % oftotal |                |  |       |                           | % oftotal |   |                           | %change |    |  |       |  | % oftotal |   |  |       |  | % oftotal |  
|Europe and North Africa    |  | 192                                 |  | 8.3       | %              |  | 206   |                           | 9.9       | % |                           | (6.8    | )% |  | 181   |  | 14.3      | % |  | 141   |  | 10.7      | %
|Caribbean and Indian Ocean |  | 178                                 |  | 7.7       | %              |  | 169   |                           | 8.1       | % |                           | 5.3     | %  |  | 153   |  | 12.1      | % |  | 154   |  | 11.7      | %
|Africa and Middle East     |  | 279                                 |  | 12.1      | %              |  | 255   |                           | 12.2      | % |                           | 9.4     | %  |  | 154   |  | 12.2      | % |  | 157   |  | 11.9      | %
|North and South America    |  | 652                                 |  | 28.3      | %              |  | 575   |                           | 27.6      | % |                           | 13.4    | %  |  | 342   |  | 27.1      | % |  | 386   |  | 29.4      | %
|Asia                       |  | 999                                 |  | 43.5      | %              |  | 879   |                           | 42.2      | % |                           | 13.7    | %  |  | 434   |  | 34.3      | % |  | 476   |  | 36.2      | %
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Scheduled cargo revenues   |  | 2,300                               |  | 100.0     | %              |  | 2,084 |                           | 100.0     | % |                           | 10.4    | %  |  | 1,264 |  | 100.0     | % |  | 1,314 |  | 100.0     | %
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Other cargo revenues       |  | 192                                 |  |           |                |  | 193   |                           |           |   |                           |         |    |  | 148   |  |           |   |  | 165   |  |           |  
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Total cargo revenues       |  | 2,492                               |  |           |                |  | 2,277 |                           |           |   |                           |         |    |  | 1,412 |  |           |   |  | 1,479 |  |           |  
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  



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The table below shows cargo revenues by sales region and the percentage of cargo revenues by sales region
for the financial years ended March 31, 2005, 2004, on a pro forma and published basis, and 2003 (Air France only) and the change between such periods:



|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|-------------------------- |  | ----------------------------------- |  | --------- | -------------- |  | ----- | ------------------------- | --------- | - | ------------------------- | ------- | -- |  | ----- |  | --------- | - |  | ----- |  | --------- | -
|                           |  | Cargo Revenue by Sales Region       | 
|                           |  | Year ended March 31,                | 
|                           |  | 2005 Air France-KLM                 |  |           | 2004 Pro forma |  |       | 2004 Air France published |           |   | 2003 Air France published |        
|                           |  | (in  millions, except percentages) | 
|                           |  |                                     |  | % oftotal |                |  |       |                           | % oftotal |   |                           | %change |    |  |       |  | % oftotal |   |  |       |  | % oftotal |  
|Europe and North Africa    |  | 1,081                               |  | 47.0      | %              |  | 1,038 |                           | 49.8      | % |                           | 4.1     | %  |  | 676   |  | 53.5      | % |  | 687   |  | 52.3      | %
|Caribbean and Indian Ocean |  | 41                                  |  | 1.8       | %              |  | 43    |                           | 2.1       | % |                           | (4.7    | )% |  | 40    |  | 3.2       | % |  | 45    |  | 3.4       | %
|Africa and Middle East     |  | 157                                 |  | 6.8       | %              |  | 143   |                           | 6.9       | % |                           | 9.8     | %  |  | 86    |  | 6.8       | % |  | 97    |  | 7.4       | %
|North and South America    |  | 266                                 |  | 11.6      | %              |  | 236   |                           | 11.3      | % |                           | 12.7    | %  |  | 134   |  | 10.6      | % |  | 141   |  | 10.7      | %
|Asia                       |  | 755                                 |  | 32.8      | %              |  | 624   |                           | 29.9      | % |                           | 21.0    | %  |  | 328   |  | 25.9      | % |  | 344   |  | 26.2      | %
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Scheduled cargo revenues   |  | 2,300                               |  | 100.0     | %              |  | 2,084 |                           | 100.0     | % |                           | 10.4    | %  |  | 1,264 |  | 100.0     | % |  | 1,314 |  | 100.0     | %
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Other cargo revenues       |  | 192                                 |  |           |                |  | 193   |                           |           |   |                           |         |    |  | 148   |  |           |   |  | 165   |  |           |  
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  
|Total cargo revenues       |  | 2,492                               |  |           |                |  | 2,277 |                           |           |   |                           |         |    |  | 1,412 |  |           |   |  | 1,479 |  |           |  
|                           |  |                                     |  |           |                |  |       |                           |           |   |                           |         |    |  |       |  |           |   |  |       |  |           |  



The table below shows
the volume of cargo capacity, traffic and load factor during the financial year ended March 31, 2005 and the change in these operating measures as compared to the previous financial year as calculated on a pro forma basis:



|               |  |             |  |            |  |                |  |        |  |       |  |       
|-------------- |  | ----------- |  | ---------- |  | -------------- |  | ------ |  | ----- |  | ------
|               |  | Capacity(1) |  | Traffic(2) |  | Load Factor(3)
|               |  | Volume      |  | Change     |  | Volume         |  | Change |  | %     |  | Change
|Cargo activity |  | 14,774      |  | 9.4%       |  | 10,078         |  | 8.8%   |  | 68.2% |  | (0.4) 

---

Notes:

|(1) | Available seat-kilometers (ASK)
|--- | -------------------------------

|(2) | Revenue passenger-kilometers (RPK)
|--- | ----------------------------------

|(3) | RPK/ASK
|--- | -------



In September 2000, the SkyTeam alliance was extended to include cargo services, resulting in the formation of SkyTeam Cargo. On August 29, 2001, Alitalia Cargo joined the SkyTeam Cargo alliance, allowing SkyTeam Cargo
to offer the largest global cargo network out of Europe. KLM Cargo was admitted as a member of the SkyTeam Cargo alliance on September 13, 2004.



With the SkyTeam Cargo alliance, we and our partners are able to offer single point of contact sales and a one roof policy for shipping
products and services, resulting in increased efficiency of operations from synergies such as group purchases and shared support resources. The SkyTeam Cargo alliance offers cargo services to more than 500 locations in 114 countries.



Products



Air France Cargo, KLM Cargo and SkyTeam Cargo alliance offer a common range of four products  Equation, Variation,
Cohesion, and Dimension. Equation offers express shipment and guarantees priority handling for shipments that are loaded without prior reservation on the first available departing flight.. Variation offers solutions for the transportation of one-off
merchandise such as live animals, valuable artworks, heavy equipment and hazardous materials. Cohesion is a custom product intended for businesses making regular just



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in time shipments. Cohesion offers customers guaranteed regular access to shipping capacity and integrated shipping solutions through a tri-partite
contract between the shipper, the cargo agent and the groups cargo division. Dimension is the standard product offering airport-to-airport cargo shipping services to cargo agents.



Industrial Logistics and Aircraft Maintenance Activities



The business combination of Air France and KLM has allowed us to strengthen our position as the world leader in
multi-product aircraft maintenance by combining the complementary features of the maintenance activities of Air France (Air France Industries (AFI)), and those of the KLM Engineering & Maintenance division. In addition to maintaining the
groups two fleets, they provide maintenance for the fleets of approximately 100 clients.



We recorded third party revenues for maintenance activities of 777 million, despite a negative currency effect of 2.6%. This represented an increase of 4.0% on a pro forma basis as compared to the financial year
ended March 31, 2004. Operating income for maintenance activities was 48 million for the financial year ended March 31, 2005 as compared to 55 million (a decrease of 10.9%) for the financial year ended March 31, 2004, on a pro forma
basis.



All aircraft are subject to technical reviews and
regular maintenance stipulated by manufacturers and the regulations in force in the country in which an aircraft is registered. MRO activities consist of regularly scheduled MRO activities (preventive maintenance) and supplementary MRO activities
(curative maintenance) performed on an as-needed basis. Regularly scheduled MRO activities includes line maintenance  whole aircraft inspections undertaken after each flight, and on a daily and weekly basis; light maintenance 
systematic, detailed inspections and functional tests undertaken at specified calendar and engine-hour intervals; and heavy maintenance  overhaul of airframe and certain components performed at six to 10-year intervals, depending on the
aircraft.



Our maintenance operating facilities are located at
six main sites: four sites at Air France Industries and two sites belonging to KLM. Additionally, separate maintenance units are located at 200 airports for Air France Industries and 50 airports for KLM.



Air France Industries



Air France Industries provides a full range of maintenance, repair and
overhaul (MRO) aircraft services, including wide body and narrow body heavy maintenance, engine overhaul, component repair and spare parts provision, light maintenance, thrust reversers, customized fleet service and special projects (modifications
to military transport or private aircraft, major cabin modifications and conversion of combined cargo-passenger aircraft to passenger-only or cargo-only).



Air France Industries, which at March 31, 2005 employed approximately 10,000 people, has operating facilities at four sites: Roissy-CDG, Orly, Toulouse,
and Le Bourget. The Toulouse Blagnac site is used for heavy maintenance of small carriers, the Orly site is used for heavy maintenance of large carriers, engines and equipment, the Roissy site is used for regular maintenance, and the Le Bourget site
is used for servicing special fleets.



Air France Industries is
the world leader for major maintenance of the Airbus A319, A320 and A321, for equipment support on the range of Airbus A320, A330, A340 and the Boeing B777. It is also the world leader for services on the CFM56-5 engines for the airbus A320 and
A340. During the financial year ended March 31, 2005, Air France opened its new industrial center in Blagnac to replace its Montaudran plant and opened an equipment, logistics, operations and maintenance (E.O.L.E.) plant in Villeneuve-le-Roi. The
Blagnac industrial center, with an area of 35,700 square meters, is devoted to major maintenance of small carriers. The E.O.L.E. plant, with an area of 41,000 square meters, integrates avionics technologies, surface treatments as well as hydraulics
and pneumatics services.



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In June 2005, Air France Industries entered into a 50/50 joint venture with Lufthansa Technik to launch
Spairliners GmbH. Spairliners will offer support services for components to all A380 operators worldwide, including component support for the 25 A380 currently ordered by Air France and Lufthansa. Spairliners will offer a comprehensive range of
services including overhaul, repair, management of the spare parts pool and related logistics.



KLM Engineering & Maintenance



KLMs Engineering & Maintenance business offers a complete package of maintenance services, ranging from engine, component and airframe overhaul to total aircraft care. It is one of the three largest aircraft
maintenance companies affiliated to an airline in Europe. The division, which employs approximately 5,300 people, specializes in the maintenance of Boeing B747 and B737 planes and General Electric CF6 engines. The Engineering & Maintenance
businesss main customer is KLM, which accounts for approximately 60% of its operating revenues.



KLMs maintenance operations are located at two principal sites: Schiphol, the Amsterdam airport, and Norwich in Great Britain. In 2004, KLM opened a
new plant to service engines allowing the handling of 350 inspections per year, compared with 200 in the prior facility. This operation was completed in cooperation with General Electric, the supplier of the three engine classes most used by KLM and
Air France.



Other Activities



Our other activities primarily include KLMs charter business through
its subsidiary transavia.com and our catering activity.



KLM
Charter Business



KLM operates a charter business through
its subsidiary transavia.com.



For the financial year ended
March 31, 2005, transavia.com has a fleet of 17 aircraft and carried 4 million passengers, an increase of 6% as compared to the financial year ended March 31, 2004 on a pro forma basis. During the same period, revenues totaled 419 million, an
increase of 5.8% as compared to the financial year ended March 31, 2004 on a pro forma basis.



Catering



We provide
catering services through Servair (97.6% owned subsidiary of Air France) and KLM Catering Services Schiphol B.V. (100% owned subsidiary of KLM). Our catering revenues increased by 386 million as compared with the previous year on a pro forma
basis. Each of Servair and KLM Catering Services Schiphol B.V. provides a wide range of services tailored to the needs of Air France, KLM and other airlines: food preparation and catering, aircraft resupply, cabin cleaning and service, ramp and
baggage services, and airport logistics. Servair and KLM Catering Services Schiphol B.V. had 7,724 and 1,350 employees, respectively, as of March 31, 2005. Servair and KLM Catering Services Schiphol B.V. collectively provide approximately
164,000 meals per day.



Amadeus



Amadeus GTD



Amadeus Global Travel Distribution S.A., 23.4% owned by Air France, is an
information technology company providing IT solutions for the global travel and tourism industry. Amadeus operations are centered around the Global Distribution System, or GDS, the worlds largest international electronic marketing and
sales system for travel, covering approximately 47,000 terminals in more than 215 markets at June 1, 2005. Amadeus connected travel providers, airlines, hotels, car rental agencies, rail, tour, insurance, ferry and cruise operators with
approximately 72,000 travel agencies worldwide at June 1, 2005.



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In addition to its electronic marketing and sales business, Amadeus provides a platform for
travel-oriented e-commerce systems for online travel retailers and corporations. Amadeus e-travel offerings are available in 20 languages and are supported around the world.



Amadeus is also a provider of IT systems for airlines, with its GDS system serving as the sole internal sales system of
approximately one quarter of the worlds airlines. In addition, Amadeus offers airlines an innovative and flexible passenger service system, which manages critical airline IT functions such as inventory, sales and departure control.



During the financial year ended March 31, 2005, Air France and a number of
other shareholders of Amadeus initiated negotiations with private equity funds to launch, through a company in which they will be shareholders, a public offer for shares of Amadeus. The offer closed on June 27, 2005, following which Air France
indirectly holds 22.96% of Amadeus GTD. See Other Significant Developments After March 31, 2005Amadeus GTD.



Amadeus GTD purchased Air Frances 66% interest in Amadeus France for 85 million in December 2004.



Amadeus GTD owns 74.2% of the share capital of Opodo Limited, an online
travel agent offering flights, insurance, car and hotel products. Air France-KLM currently owns 8.3% of Opodos share capital. The remainder of Opodos share capital is owned by British Airways, Aer Lingus, Alitalia, Austrian Airlines,
Finnair, Iberia and Lufthansa.



Support Operations



Frequent Flyer Programs



Flying Blue



On June 1, 2005, we merged the Air France Fréquence Plus
and the KLM Flying Dutchman programs into one frequent flyer program called Flying Blue. With ten million members, Flying Blue is the basic tool by which the customer relations divisions of both airlines may recognize their
loyal customers and provide them with high quality service, regardless of the airline they travel on.



In cooperation with more than 30 partner airlines, as well as the member airlines of SkyTeam, Flying Blue enables customers to earn and redeem miles for
travel on one of 18,000 daily flights to 900 destinations. The ability to earn and redeem miles has been further increased with the participation of approximately 100 non-airline partners in the program.



SkyTeam Elite



SkyTeam Elite is a joint frequent flyer program developed by the SkyTeam
alliances partners that offers advanced customer services to certain categories of passengers on select routes of the SkyTeam network. For example, members of the SkyTeam Elite Frequent Flyer program may benefit from a priority reservation
waitlist, priority check-in, extended lounge access, priority boarding, preferred seating and priority airport standby. In addition, members of the SkyTeam Elite Plus Frequent Flyer program may benefit from guaranteed reservations on sold-out
flights and priority baggage handling. Elite members accrue reward miles on all SkyTeam flights and may redeem their miles for award tickets on any SkyTeam airline.



Airport Lounges



Customers of Air France and KLM have access to more than 390 airport lounges (including those of SkyTeam members) worldwide.



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Principal Raw Materials Suppliers



The principal raw material we use in our business is fuel. Air France obtains fuel from approximately 60 oil companies or
retailers, with six large international oil companies providing approximately 75% of its supplies, and KLM pursuant to various local fuel supply contracts. The prices of fuel set forth in these contracts fluctuate with market indicators and are
subject to periodic adjustment. Air France and KLM each pay for approximately 100% of their jet fuel in dollars.



Refueling contracts with oil companies are generally renegotiated annually through standard tendering procedures. The Air Frances standard contract
is for one year, except in certain isolated cases when Air France and KLM are also implementing joint fuel purchase programs in conjunction with SkyTeam alliance partners in order to benefit from increased purchasing leverage.



The price of jet fuel is historically volatile and is susceptible to
geopolitical instability and has recently been at historically high levels. See Item 3: Key InformationRisk FactorsRisks Related to the BusinessAir France-KLM may be adversely affected by high jet fuel prices. Air
France and KLM employ a variety of risk management tools for oil and fuel purchasing, including swaps and options with or without premiums, and by purchasing jet fuel in various stages of production and refinement in order to exploit price
differentials between such stages. See Item 11: Quantitative and Qualitative Disclosure about Market RiskMarket Risk.



In response to the increase in the price of jet fuel, both Air France and KLM have introduced a series of fuel surcharges on their passenger and cargo
flights. See Item 5: Operating and Financial Review and ProspectsAirline Industry TrendsIncreased Fuel Prices.



Competition



Air France and KLM face competition on point-to-point traffic from different national carriers serving these destinations. In addition, for connecting
traffic, we compete with other major international airlines operating hub facilities with connections to France or Holland.



In the European market, Air France and KLM also face competition from low-cost airlines, principally easyJet and Ryanair, as well as alternative means of
transportation, in particular the TGV, the French high-speed rail link and the Eurostar. Air France has code-sharing arrangements with the TGV network, offering rail/air transfers at the Roissy-CDG Terminal 2 and rail/air links from five regional
cities to Roissy-CDG, thereby feeding hub traffic and allowing TGV passengers to access Air Frances international network. Similarly, Air France has a code-sharing arrangement with Thalys International, a high-speed rail network with a
Brussels-Paris link. Passengers may purchase combined train/air tickets and travel on any one of five direct trips per day between Brussels-Midi station and Roissy-CDG.



Our competitors in cargo transport are principally Lufthansa, CARGOLUX, Singapore Airlines and Korean Air as well as freight
integrators.



The Fleet



The Air France-KLM fleet



As of March 31, 2005, our fleet consisted of 568 aircraft, including 551
planes in operation. At the same date, we had orders for 48 planes and options on 32 aircraft. 212 planes (37% of the fleet) were fully owned, while 136 aircraft (24% of the fleet) were under financial leases and 220 planes (39% of the fleet) were
under operating leases. In addition to the main fleet, Air Ivoire operates four aircraft.



Both Air France and KLM have placed orders for the Boeing B747-400ERF cargo, the Boeing B777-200 and Airbus A330-200 for their long-haul fleet. Although Air France and KLM continue to manage separate fleets, these
joint choices enable both companies to define common technical specifications for future aircraft in



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terms of flight decks, engines and avionics. Only the cabins will be specific to each company. Joint specifications facilitate the transfer of ownership or
operational leasing of aircraft between the two companies, harmonize industrial strategies by preventing duplication of skills and reducing inventories of maintenance parts, improve training resources for flight deck crews as well as ensure more
attractive commercial terms from suppliers.



During the year
ended March 31, 2005, we undertook a review of our regional fleet and the decision was made to lease certain KLM regional planes to City Jet (two BAE 146) and BritAir (two Fokker 100) in order to optimize the capacities of the Air France and KLM
fleets. We have also undertaken a review of the future needs of the regional fleets of Air France and KLM and is currently in the process of implementing a coordinated action plan for future relationships with other aircraft companies as well as
with, engine and other parts manufacturers.



Air France and KLM
are accelerating the renewal of their fleets in response to the combined effects of very high oil prices and a weak dollar. Air France decided to replace the B 747-200 and 300 aircraft used in its Caribbean and Indian Ocean network with B 777-300ER,
which consume 50% less fuel, and the cargo B 747-200 aircraft with B747-400ERF and B 777F. KLM decided to replace its B 767-300ER with A330 and B777-200. It is currently contemplated that Air France will complete these replacements in the summer of
2010 and KLM in the summer of 2009.



The Air France Group
Fleet



As at March 31, 2005, the Air France group fleet
consisted of 387 planes, including 254 in the Air France fleet, 133 in the regional fleet plus four at Air Ivoire. 43% of the Air France group fleet is owned, 15% is under financial leases, and 42% is operated under operating leases.



The Air France fleet



Air France operates a fleet of 254 aircraft, with 249 in operation, including
147 medium-haul, 90 long-haul and 12 cargo aircraft. The aircraft in the fleet have an average age of 8.6 years, with 6.6 for the long-haul fleet, 9.4 for the medium-haul fleet and 13.9 for the cargo fleet.



During the financial year ended March 31, 2005, 23 aircraft were added to the
fleet and 14 were withdrawn.



In the medium-haul fleet, four
Airbus A318, four Airbus A319, two Airbus A320 and one Airbus A321 were added. One Airbus A320 and nine Boeing B737 (three B737-300 and six B737-500) were withdrawn. In the long-haul fleet, four Boeing 747-200 were withdrawn (two passenger planes
and two cargo planes) and 12 aircraft were added, including one Boeing B747-400 passenger plane, one Boeing B747-400 cargo, nine Boeing B777-300 and one Airbus A330-200.



Investments in flight equipment over the year amounted to 1.39 billion (including advances on orders and capital
maintenance operations). At March 31, 2005, there were firm orders for 31 aircraft and options on 21.



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The following table sets forth the Air France fleet as at March 31, 2005 and 2004:



|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|----------------------- |  | ------------- |  | ---------------- |  | ---------------- |  | ----- |  | ------------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|Type of Aircraft        |  | Company owned |  | Financial leases |  | Operating leases |  | Total |  | In Operation
|                        |  | 2005          |  | 2004             |  | 2005             |  | 2004  |  | 2005         |  | 2004 |  | 2005 |  | 2004 |  | 2005 |  | 2004
|Long-haul fleet         |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|A340-300                |  | 8             |  | 8                |  | 6                |  | 6     |  | 8            |  | 8    |  | 22   |  | 22   |  | 22   |  | 22  
|A330-200                |  | 4             |  | 3                |  | 1                |  | 1     |  | 9            |  | 9    |  | 14   |  | 13   |  | 13   |  | 12  
|B777-200/300            |  | 16            |  | 14               |  | 4                |  | 2     |  | 14           |  | 9    |  | 34   |  | 25   |  | 34   |  | 25  
|B747-400                |  | 8             |  | 9                |  | 1                |  | 1     |  | 7            |  | 5    |  | 16   |  | 15   |  | 16   |  | 15  
|B747-200/300            |  | 7             |  | 7                |  |                 |  |      |  |             |  | 2    |  | 7    |  | 9    |  | 5    |  | 9   
|B767-300                |  | 1             |  | 1                |  |                 |  |      |  |             |  |     |  | 1    |  | 1    |  |     |  |    
|B747-200 Cargo          |  | 5             |  | 5                |  | 1                |  | 1     |  | 2            |  | 4    |  | 8    |  | 10   |  | 8    |  | 10  
|B747-400 Cargo          |  | 1             |  | 1                |  |                 |  |      |  | 3            |  | 2    |  | 4    |  | 3    |  | 4    |  | 3   
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Long-haul fleet   |  | 50            |  | 48               |  | 13               |  | 11    |  | 43           |  | 39   |  | 106  |  | 98   |  | 102  |  | 96  
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Medium-haul fleet       |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|A318-200                |  | 9             |  | 5                |  |                 |  |      |  |             |  |     |  | 9    |  | 5    |  | 9    |  | 5   
|A319-100                |  | 8             |  | 17               |  | 4                |  | 4     |  | 21           |  | 18   |  | 43   |  | 39   |  | 43   |  | 39  
|A320-100/200            |  | 49            |  | 44               |  | 3                |  | 5     |  | 15           |  | 17   |  | 67   |  | 66   |  | 67   |  | 65  
|A321-100/200            |  | 11            |  | 8                |  |                 |  | 2     |  | 2            |  | 2    |  | 13   |  | 12   |  | 13   |  | 12  
|B737-300/500            |  | 4             |  | 6                |  | 3                |  | 3     |  | 9            |  | 16   |  | 16   |  | 25   |  | 15   |  | 23  
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Medium-haul fleet |  | 91            |  | 80               |  | 10               |  | 14    |  | 47           |  | 53   |  | 148  |  | 147  |  | 147  |  | 144 
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Air France fleet  |  | 141           |  | 128              |  | 23               |  | 25    |  | 90           |  | 92   |  | 254  |  | 245  |  | 249  |  | 240 
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     



The Air France
regional fleet



The Air France regional division has a
fleet of 133 planes with 100 seats or fewer, with 121 aircraft in operation and ten leased from third-party companies. This fleet is primarily organized around four aircraft: the Régional Embraer, the Brit Air Bombardier, the Régional
and BritAir Fokker (capacity of 79 and 100 seats), and the CityJet BAE.



During the financial year ended March 31, 2005, Brit Air added one CRJ 700 to its fleet. In addition, two BAE 146-300 were added to the CityJet fleet from the Air France group fleet. Régional added two Fokker 70, one Fokker 100 and
one ERJ 145 and withdrew one EMB 120 from its fleet.



The
average age of aircraft in the regional operating fleet is 7.4 years for Brit Air, 18.4 years for CityJet and 8.5 years for Régional.



Investments in flight equipment amounted to 61.1 million for the year. There were firm orders for eight aircraft at March 31, 2005, without options.



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The following table sets forth the Air France regional fleet as at March 31, 2005 and 2004:



|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|-------------------- |  | ------------- |  | ---------------- |  | ---------------- |  | ----- |  | ------------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|Type of Aircraft     |  | Company owned |  | Financial leases |  | Operating leases |  | Total |  | In Operation
|                     |  | 2005          |  | 2004             |  | 2005             |  | 2004  |  | 2005         |  | 2004 |  | 2005 |  | 2004 |  | 2005 |  | 2004
|Brit Air Fleet       |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Canadair Jet 100     |  | 2             |  | 2                |  | 11               |  | 11    |  | 6            |  | 6    |  | 19   |  | 19   |  | 19   |  | 19  
|Canadair Jet 700     |  | 2             |  | 1                |  | 9                |  | 9     |  |             |  |     |  | 11   |  | 10   |  | 11   |  | 10  
|F100-100             |  | 1             |  | 1                |  |                 |  |      |  | 9            |  | 9    |  | 10   |  | 10   |  | 10   |  | 10  
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Brit Air fleet |  | 5             |  | 4                |  | 20               |  | 20    |  | 15           |  | 15   |  | 40   |  | 39   |  | 40   |  | 39  
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Régional fleet       |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Embraer RJ 145       |  | 2             |  | 1                |  | 8                |  | 9     |  | 8            |  | 17   |  | 28   |  | 27   |  | 28   |  | 27  
|Embraer RJ 135       |  | 2             |  | 3                |  | 3                |  | 2     |  | 4            |  | 4    |  | 9    |  | 9    |  | 9    |  | 9   
|Embraer 120          |  | 7             |  | 3                |  | 3                |  | 3     |  | 3            |  | 8    |  | 13   |  | 14   |  | 10   |  | 12  
|Fokker 100           |  | 1             |  |                 |  |                 |  |      |  | 6            |  |     |  | 7    |  |     |  | 6    |  |    
|Fokker 70            |  |              |  |                 |  |                 |  |      |  | 5            |  | 9    |  | 5    |  | 9    |  | 5    |  | 9   
|Beech 1900           |  | 6             |  | 6                |  | 1                |  | 1     |  | 1            |  | 1    |  | 8    |  | 8    |  |     |  |    
|SAAB 2000            |  |              |  |                 |  |                 |  |      |  | 6            |  | 6    |  | 6    |  | 6    |  | 6    |  | 6   
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Régional fleet |  | 18            |  | 13               |  | 15               |  | 15    |  | 43           |  | 45   |  | 76   |  | 73   |  | 64   |  | 63  
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|CityJet fleet        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|BAE 146-200          |  | 5             |  | 1                |  |                 |  |      |  | 12           |  | 14   |  | 17   |  | 15   |  | 17   |  | 15  
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total CityJet fleet  |  | 5             |  | 1                |  |                 |  |      |  | 12           |  | 14   |  | 17   |  | 15   |  | 17   |  | 15  
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total regional fleet |  | 28            |  | 18               |  | 35               |  | 35    |  | 70           |  | 74   |  | 133  |  | 127  |  | 121  |  | 117 
|                     |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     



Other fleets



Air Ivoire, a subsidiary of Air France, serves Africa
from Abidjan with three Fokker 28. During the financial year ended March 31, 2005, Air Ivoire added an Airbus A321 to its fleet to serve the Abidjan-Paris route. Following the events in the Ivory Coast, however, this line was suspended and the plane
was subleased in March 2005.



The KLM Group fleet



As at March 31, 2005, the KLM group fleet consisted of 181
aircraft, all of which were operational. There were orders for eight aircraft and options on 11. 24% of the planes are owned in full, 43% under financial leases, and 33% under operating leases. The average age of the aircraft in the fleet is 9.6
years; with 9.5 years for the long-haul fleet and seven years for the medium-haul fleet.



The KLM fleet



The KLM fleet has 128 aircraft in operation, with 57 long-haul planes, including 17 B747 passenger/freight combos and three cargo B747-400 FR planes and 71 medium-haul planes



During the financial year ended March 31, 2005, six planes were added to the fleet and one was withdrawn. In the medium-haul
fleet, one B737-400 was removed and one B737-800 and B737-900 each were added. In the long-haul fleet, four B777-200 were added. Investments in flight equipment over the year amounted to 261 (including advances on orders and capital
maintenance operations). At March 31, 2005, there were firm orders for nine aircraft and options on 11.



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##### Table of Contents

The following table sets forth the KLM fleet as at March 31, 2005 and 2004:



|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|----------------------- |  | ------------- |  | ---------------- |  | ---------------- |  | ----- |  | ------------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|Type of Aircraft        |  | Company-owned |  | Financial leases |  | Operating leases |  | Total |  | In operation
|                        |  | 2005          |  | 2004             |  | 2005             |  | 2004  |  | 2005         |  | 2004 |  | 2005 |  | 2004 |  | 2005 |  | 2004
|Long-haul fleet         |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|B777-200                |  |              |  |                 |  | 4                |  | 3     |  | 6            |  | 3    |  | 10   |  | 6    |  | 10   |  | 6   
|B747-400                |  | 6             |  | 6                |  | 16               |  | 16    |  |             |  |     |  | 22   |  | 22   |  | 22   |  | 22  
|B767-300                |  |              |  |                 |  |                 |  |      |  | 12           |  | 12   |  | 12   |  | 12   |  | 12   |  | 12  
|MD11                    |  |              |  |                 |  | 8                |  | 8     |  | 2            |  | 2    |  | 10   |  | 10   |  | 10   |  | 10  
|B747-400 Cargo          |  |              |  |                 |  | 3                |  | 3     |  |             |  |     |  | 3    |  | 3    |  | 3    |  | 3   
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total long-haul fleet   |  | 6             |  | 6                |  | 31               |  | 30    |  | 20           |  | 17   |  | 57   |  | 53   |  | 57   |  | 53  
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Medium-haul fleet       |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|B737-300                |  | 6             |  | 6                |  | 1                |  | 1     |  | 7            |  | 7    |  | 14   |  | 14   |  | 14   |  | 14  
|B737-400                |  | 6             |  | 5                |  |                 |  | 2     |  | 7            |  | 7    |  | 13   |  | 14   |  | 13   |  | 14  
|B737-700                |  |              |  |                 |  | 4                |  | 4     |  | 5            |  | 5    |  | 9    |  | 9    |  | 9    |  | 8   
|B737-800                |  | 6             |  | 6                |  | 20               |  | 19    |  | 4            |  | 4    |  | 30   |  | 29   |  | 30   |  | 29  
|B737-900                |  |              |  |                 |  | 2                |  | 1     |  | 3            |  | 3    |  | 5    |  | 4    |  | 5    |  | 5   
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total Medium-haul fleet |  | 18            |  | 17               |  | 27               |  | 27    |  | 26           |  | 26   |  | 71   |  | 70   |  | 71   |  | 70  
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total KLM fleet         |  | 24            |  | 23               |  | 58               |  | 57    |  | 46           |  | 43   |  | 128  |  | 123  |  | 128  |  | 123 
|                        |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     



The KLM regional
fleet



KLMs regional fleet consists of 53
aircraft divided between two aircraft: Fokker and BAE. The average age of aircraft in operation is 12.6 years.



During the financial year ended March 31, 2005, one Fokker 70 and one Fokker 100 were added to the regional fleet and five BAE 146-100/300 were withdrawn
from the regional fleet. No investments in aircraft equipment were made over the period. At March 31, 2005, there were no options on aircraft. The following table sets forth the KLM regional fleet as at March 31, 2005 and 2004:



|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|----------------------------- |  | ------------- |  | ---------------- |  | ---------------- |  | ----- |  | ------------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|Type of Aircraft              |  | Company-owned |  | Financial leases |  | Operating leases |  | Total |  | In operation
|                              |  | 2005          |  | 2004             |  | 2005             |  | 2004  |  | 2005         |  | 2004 |  | 2005 |  | 2004 |  | 2005 |  | 2004
|KLM Cityhopper fleet          |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Fokker 70                     |  | 18            |  | 16               |  | 0                |  | 1     |  | 3            |  | 3    |  | 21   |  | 20   |  | 21   |  | 20  
|Fokker 50                     |  |              |  |                 |  | 6                |  | 6     |  | 4            |  | 4    |  | 10   |  | 10   |  | 10   |  | 10  
|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total KLM Cityhopper fleet    |  | 18            |  | 16               |  | 6                |  | 7     |  | 7            |  | 7    |  | 31   |  | 30   |  | 31   |  | 30  
|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|KLM Cityhopper UK Fleet       |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Fokker 50                     |  |              |  |                 |  |                 |  |      |  | 6            |  | 6    |  | 6    |  | 6    |  | 6    |  | 6   
|Fokker 100                    |  | 1             |  | 1                |  | 14               |  | 14    |  | 1            |  |     |  | 16   |  | 15   |  | 16   |  | 15  
|BAE 146 100/300               |  |              |  |                 |  |                 |  |      |  |             |  | 5    |  |     |  | 5    |  |     |  | 5   
|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total KLM Cityhopper UK fleet |  | 1             |  | 1                |  | 14               |  | 14    |  | 7            |  | 11   |  | 22   |  | 26   |  | 22   |  | 26  
|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     
|Total KLM regional fleet      |  | 19            |  | 17               |  | 20               |  | 21    |  | 14           |  | 18   |  | 53   |  | 56   |  | 53   |  | 56  
|                              |  |               |  |                  |  |                  |  |       |  |              |  |      |  |      |  |      |  |      |  |     



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Property



The following description sets forth our principal properties in addition to our fleet of aircraft.



Air France Properties



|                                |  |                                           |  |                 |  |                      
|------------------------------- |  | ----------------------------------------- |  | --------------- |  | ---------------------
|Principal Properties            |  | Description                               |  | Nature of Title |  | ApproximateGross Size
|                                |  |                                           |  |                 |  | (square meters)      
|CDG  Roissy Airport            |  |                                           |  |                 |  |                      
|Terminals A-F                   |  | passenger terminal                        |  | leased          |  | 56,072               
|Maintenance Areas               |  | hangars, workshops                        |  | leased          |  | 723,375              
|Equipment Area                  |  | open storage area                         |  | leased          |  | 60,271               
|Equipment Area/Runway Buildings |  | protected storage area/offices, workshops |  | leased          |  | 63,952               
|45 rue de Paris                 |  | head offices                              |  | leased          |  | 65,020               
|                                |  | parking garage                            |  | leased          |  | 86,000               
|Terminal 1                      |  | passenger terminal                        |  | leased          |  | 26,129               
|                                |  |                                           | 
|Orly Airport                    |  |                                           |  |                 |  |                      
|Aérogare Orly                   |  | flight operations terminal                |  | leased          |  | 77,418               
|Paray Vieille Poste             |  | hangars, workshops, offices               |  | leased          |  | 166,737              
|1 avenue du Maréchal Devaux     |  | offices (central building)                |  | owned           |  | 13,150               
|                                |  | warehouses/restaurant                     |  | owned           |  | 20,447               
|                                |  |                                           |  | owned           |  | 2,400                
|Le Bourget Airport              |  |                                           |  |                 |  |                      
|Maintenance Areas               |  | hangars, offices, parking area, workshops |  | leased          |  | 97,395               
|Toulouse                        |  |                                           |  |                 |  |                      
|Maintenance Areas               |  | hangars, offices                          |  | owned           |  | 80,090               
|                                |  | leased                                    |  |                 |  | 4,692                
|Montreuil                       |  |                                           |  |                 |  |                      
|2 Gaumont                       |  | offices                                   |  | leased          |  | 29,031               
|                                |  |                                           | 
|Vilgénis                        |  |                                           |  |                 |  |                      
|Domaine de Vilgénis             |  | instruction center                        |  | owned           |  | 6,849                



Air France also has
other freehold and leasehold interests in real estate in numerous countries throughout the world that collectively are less significant. See note 15 to our consolidated financial statements.



In April 2004, Air France opened its new industrial centre in Blagnac,
Toulouse to replace the Montaudran plant. Construction began in October 2002 and the center was completed in December 2003, representing a total investment of approximately 40 million. This centre is dedicated to major maintenance for small
carriers.



The Roissy-CDG and Orly airports are operated by
ADP, a state-owned entity which has a concession to operate and manage the airports in the Paris area. Air France rents technical, administrative and commercial premises within the airport, parking strips for the aircraft and industrial premises and
hangars for cargo and maintenance that are often located on the side areas of the runways.



In certain cases, Air France is the tenant of equipped premises (commercial premises within the terminals) or empty premises that it equips (for example, lounges for passengers at Roissy-CDG). Regarding terminal 2F at
Roissy-CDG, Air France is responsible for completely equipping, remodeling and decorating the private areas in the interior of the terminal. This was also true of terminal 2E which has been closed following the collapse of



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##### Table of Contents

part of the roof on May 23, 2004. Air Frances expenses in connection with the work on terminal 2E were estimated to total 48 million, of which
40 million had already been spent prior to its closure. With respect to industrial premises and hangars, Air France is usually the tenant of the land and the owner of the buildings that it has constructed. This is also the case for Air
Frances corporate head offices, where Air France has a long-term construction lease of 70 years (from 1994) with the landowner, ADP. On January 28, 2004, Air France entered into a 12-year sale and leaseback agreement with a syndicate of banks
covering the building and Air Frances rights under the construction lease.



Air France also occupies premises and land in the airports outside the Paris region, pursuant to the same temporary occupation regime. In foreign airports, Air France is subject, as are the other airline companies, to
applicable local law. Air Frances largest leased area outside of France is at New Yorks John F. Kennedy airport.



KLM Properties



|                     |  |                    |  |                 |  |                      
|-------------------- |  | ------------------ |  | --------------- |  | ---------------------
|Principal Properties |  | Description        |  | Nature of Title |  | ApproximateGross Size
|                     |  |                    |  |                 |  | (square meters)      
|Amstelveen           |  |                    |  |                 |  |                      
|                     |  | Head office        |  | owned           |  | 39,830               
|                     |  | Parking Space      |  | owned           |  | 10,668               
|Schiphol Airport     |  |                    |  |                 |  |                      
|                     |  | Hangars            |  | owned           |  | 226,448              
|                     |  | Parking Space      |  | owned           |  | 27,569               
|                     |  | Freight buildings  |  | owned           |  | 99,523               
|                     |  | Terminal buildings |  | leased          |  | 35,060               
|                     |  | Crewcenter         |  | leased          |  | 6,494                
|                     |  | Engine shop        |  | owned           |  | 80,043               
|                     |  | Catering buildings |  | owned           |  | 58,764               
|                     |  | Warehouses         |  | owned           |  | 38,796               
|                     |  | Offices            |  | owned           |  | 129,115              
|                     |  | Other              |  | owned           |  | 41,953               



KLM owns its head
office buildings in Amstelveen where its corporate management and various staff bureaus and divisions are located.



In addition, KLM maintains and operates facilities at Amsterdam Airport Schiphol for the servicing, overhauling and repair of aircraft, engines, parts and
accessories. These facilities include hangars, engine, communications and other workshops, engine test cells and warehousing facilities. KLM houses its operations, engineering and purchasing personnel at Schiphol airport. All of these engineering
and maintenance facilities are either leased or constructed on leased land. The land leases typically have a term varying from 25 to 75 years.



Schiphol airport is operated by a corporation owned jointly by the State of the Netherlands, the City of Amsterdam, the Province of Noord-Holland and the
City of Rotterdam.



Environmental Policy



Air France and KLM are each individually responsible for environmental
management of their operations.



Air France has established an
Environment and Sustainable Development Department which is responsible for the environmental policy of Air France. This department is responsible for enforcing the environmental policy at the air operations level as well as overseeing the
enforcement of the environmental policy for ground operations as carried-out by other departments. Both the Environment and Sustainable Development Department and the departments responsible for ground operations are responsible for ensuring
regulatory compliance and for limiting the environmental impact of operations.



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KLMs environmental policy is established at the board level and put into practice through annual
environmental programs. One member of the board of managing directors is designated as responsible for environmental issues. Each organizational unit within KLM has an environmental liaison officer responsible for coordinating environmental issues
and advising management. The Environmental Services Department assists the board of managing directors and the individual organizational units. It also monitors internal and external developments relating to the environment.



KLMs management is responsible for ensuring that sufficient information
and training opportunities on environment issues are available. This is verified annually as part of KLMs ISO 14001 certification. Air France is currently undertaking steps to harmonize this local training throughout the company.



Environmental evaluation or certification programs



Air France is committed to environmental management following the ISO 14001
rules, applied consistently with its Quality-Safety- Environment (QSE) program.



The Orly (engineering and maintenance department) and Le Bourget sites of Air France Industry are already ISO 14001 certified. Air France Industries aims to have 70% of its sites ISO 14001 certified by 2006. Air
France Operations is currently undertaking a preliminary audit of sites in continental France.



Air France Cargo is currently reviewing its various sites with the goal of establishing environmental assessments by the summer of 2005. The ISO 14001 standard will continue to be the benchmark guiding the deployment
of the environmental program in accordance with the QSE program.



Air France Industries CRMA subsidiary has been ISO 14001 certified since 1999. Servair (catering) has deployed a system of preliminary environmental diagnostics at its sites. Its ACNA cleaning subsidiary has also embarked on an ISO
14001 certification program.



KLM is ISO 14001 and EMAS
certified.



Compliance with legal and regulatory requirements



As operators of passenger and cargo aircraft, Air France
and KLM are subject to a wide range of French, Dutch, E.U. and international regulations. See Regulation of Air France-KLMEnvironmental Protection and Anti-Noise Standards. At present, Air France and KLM each monitor
regulatory developments with respect to issues directly concerning them.



To ensure greater consistency within Air France and guarantee exhaustive coverage of applicable regulations, Air France has decided to set up a centralized monitoring tool, to be overseen by the environmental law
specialist consultancy firm of Huglo Lepage.



As part of its
ISO 14001 system, KLM has extensive procedures to identify amendments to applicable environmental legislation or regulations. When KLM implements process changes, it notifies the competent authorities are notified to ensure the current environmental
licenses do not need revision.



Environmental Risk Management



In January 2003, Air France established a Risk Management
and Environmental Protection Unit within the QSE Department. This unit is responsible for drafting three-year action plans to monitor maintenance activities that could have a significant environmental impact. These three-year actions plans are
designed to stay abreast or ahead of regulatory developments. Risks are initially identified through audits or inventory programs.



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##### Table of Contents

KLM has two systems designed to manage environmental risk. First, ISO 14001 pro-actively identifies risks
and required action through the execution of audits, management reviews and the regular update of all environmental registers. Additionally, KLM applies a company-wide risk management system where, every quarter, risks are inventoried, the
likelihood and impact assessed and the proposed action is discussed at board level.



Repairing environmental damage



We are liable for the noise tax at Amsterdams Schiphol airport and Frances ten main airports.



For the financial year ended March 31, 2005,Air France paid out 8.5 million in noise tax, of which 7.9 million was for its
activities in the Paris region.



Air France is a member of the
CCE/CCAR (Environmental Advisory Committee/Advisory Committee for Resident Assistance), responsible for ensuring that funds collected under the noise tax are put to the most effective use and that residents in designated noise areas are properly
sound-proofed as rapidly as possible. The Committee seeks to optimize protection around airport zones, while restricting the inflow of additional residents in zones where noise pollution from airports is deemed penalizing.



Air France continues the clean-up of the Air France Industry Montaudran site,
which has been vacated after more than five decades of maintenance activity. In conjunction with the Toulouse DRIRE (Regional Industry, Research and Environmental Agency), Air France carried out preliminary studies and is financing soil
rehabilitation work. During the financial year ended March 31, 2005, Air France carried out studies on pollution identified on the northern part of the maintenance site and the possible related risks. The overall clean-up program, describing the
technical solutions to deal with the problems identified, was presented to the DRIRE in April 2005. In parallel, the water table is being continually monitored in the southern area of the site. The measured content of the main pollutants is, to
date, below regulatory thresholds.



KLM publishes annually on
the internet (www.klm.com/sustainability) an overview of its environmental costs. A detailed overview of the financial year ended March 31, 2005 will become available in June 2005. For the financial year ended March 31, 2004, KLMs
environmental costs totaled 1.4 million (excluding contribution to noise insulation programs). The main costs items included extra fuel consumption due to noise procedures, waste disposal and costs of KLMs environmental staff.



As we believe we are in compliance with all applicable
environmental regulations, no provisions have been recorded in respect of such regulations.



Legal Proceedings



We
and our subsidiaries are involved in various disputes, for which we have not necessarily been required to book provisions in our financial statements.



A class action has been filed against Air France, KLM and several U.S. airlines, by five travel agencies based in the United States and their professional
association (Association of Retail Travel Agents) for collusion. The damages claimed against the airlines represents a total of U.S.$17.5 billion, and this amount may be tripled under U.S. collusion legislation. An initial ruling was handed down on
October 30, 2003 in favor of the airlines. In a ruling announced on December 9, 2004, the Court of Richmond (Virginia) confirmed the decision taken on October 30, 2003. Subject to a possible appeal, the airlines, including Air France and KLM, have
been definitively cleared in this case. No provisions had been booked in connection with this dispute.



A similar suit is currently being reviewed by the federal courts in Ohio. Approximately 150 travel agents, which were initially plaintiffs in the case
mentioned above, but later withdrew, have filed a case on the same grounds (collusion) against Air France, KLM and other European and U.S. airlines. The amount of damages alleged has not yet been determined. Neither Air France nor KLM have booked
any provisions in connection with these proceedings.



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In December 2004, IAP Intermodal filed charges against several airlines including Air France in a federal
court in Texas, alleging that the flight-time scheduling software used by these airlines infringes on three patents held by IAP Intermodal. On the basis of legal advice given by a firm specializing in these matters in the United States, Air France
believes that these claims have no grounds, and does not plan on booking any provisions.



During the calendar years 2000 and early 2001, a number of Servair employees initiated a lawsuit before the French Labor Court seeking payment of back wages. The plaintiffs argued that time spent eating meals in the
company cafeteria constituted time during which the employee is under the control of the employer and should thus be compensated as normal working hours. Servair has taken the position that time spent eating meals is an interruption in working hours
that is not entitled to remuneration. In its definitive ruling dated November 8, 2001, the Court of Appeal of Paris sided with the position argued by Servair. Other suits representing a total of 471 individual claims initiated by Servair employees
over this same issue are still pending before the courts. In a ruling handed down on October 29, 2004, the court dismissed a case filed by approximately 30 employees. In a ruling handed down on June 7, 2005, the court dismissed actions brought by
122 employees. A decision is expected to be handed down on the actions of a further 150 employees on September 26, 2005.



Regulation of Air France-KLM



The International Regulatory Framework



International commercial air transport is regulated by international conventions that each participating country undertakes to ratify and directly apply
within its national airspace. Three principal conventions, together with subsequent modifications, establish the legal and regulatory framework governing international commercial air transport: the Convention for the Unification of Certain Rules
Relating to International Carriage by Air (1929) known as the Warsaw Convention, the Convention on international civil aviation (1944) known as the Chicago Convention, and the Convention on damage caused by foreign aircraft to third parties on the
surface (1952) known as the Rome Convention.



The Warsaw
Convention, modified by the Montreal Convention



The
Warsaw Convention (1929), later modified by the Hague Protocol (1955), established the principle of limited liability of air transport companies based on a presumption of fault. Under the Warsaw Convention, the financial limits on liability could be
extended only if the victim proved gross negligence on the part of the air transport company or if certain conditions (principally related to ticketing) were not met.



On May 28, 1999, the Montreal Convention was adopted by more than 50 countries, and entered into force in the E.U. on June
28, 2004 after ratification on April 29, 2004 by France and 12 other E.U. Member States. This treaty provides for increased protection for victims who have suffered loss, and combines the presumption of fault principle of the Warsaw convention with
strict liability for damages deriving from accidents, up to a specified threshold amount, which amount is to be reviewed periodically.



Following the entry into the force of the Montreal Convention, a new European Regulation, No. 889/2002, voted on May 13, 2002, now applies within the E.U.
creating a uniform system of liability for international air transport.



The Chicago Convention



The Chicago
Convention (1944) sets out the legal and technical principles governing international civil aviation. In addition, the Chicago Convention subjects participant countries, which include substantially all the member countries of the United Nations, to
a common legal framework governing international air transport that participant countries are required to implement in their respective national air space and apply in their relations with one another. In summary, the Chicago Convention laid down
the general principle that each signatory state



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should have sovereignty over its air space and should have the right to control the operation of scheduled international air services over or into its
territory. As a result, international air transport is founded on a collection of transport rights which the participant states apply to each other (often referred to as traffic rights) by entering into:



| |  |  | multilateral air transport agreements between states, such as the International Air Services Transit Agreement of 1944, which gives airlines based in the contracting states general
rights for their scheduled flights to over-fly the territories of other contracting states and to make non-traffic stops in such territories, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | bilateral treaties based more or less closely on the standard agreements set forth in the Chicago Convention and through which the states grant each other one or more of the
designated Air Freedoms.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Chicago
Convention permits non-scheduled flights, both charter and cargo, to fly-over the territories of signatory states and gives rights for non-scheduled flights to make stops for non-traffic purposes in the territories of such states, subject to certain
restrictions which may be imposed by the individual states. Traffic rights for non-scheduled flights are generally unilaterally granted by each participant state in relation to its own air space directly to the airline carriers. The home states of
the relevant airline carriers are only involved in the event of disputes.



France and the Netherlands are each currently a party to the Chicago Convention, the International Air Services Transit Agreement and the two protocols amending the Chicago Convention relating to airline industry
regulations. In addition, France and the Netherlands are each a party to a number of bilateral treaties.



These bilateral treaties generally contain provisions governing the designation of airline carriers for the operation of specified routes, and may contain
rules regulating the capacity offered by such airline carriers and procedures for the agreement of tariffs. Many bilateral treaties require the combined approvals of the aviation authorities of both states involved.



The system established by the Chicago Convention presumes a formal connection
between airline companies and their aircraft on the one hand, and individual states on the other. Consequently, with many exceptions, each aircraft is usually registered in the same state as the airline company that operates it. In the case of
airline companies, foreign ownership or effective control cannot exceed certain thresholds.



Air Frances rights to operate air travel services on non-E.U. routes depend in many instances on being majority or substantially owned and effectively controlled by French or E.U. nationals. In many instances,
KLMs rights similarly depend on being majority or substantially owned and effectively controlled by Dutch or E.U. nationals. Bilateral treaties incorporate, and sometimes reinforce, these provisions.



Air Frances amended articles of association provide that certain
shareholders may be obligated to sell all or a part of their Air France shares if 45% or more of the share capital or voting rights of Air France are held, directly or indirectly, by non-French persons. See Item 10: Additional
InformationForm and Holding of SharesCompulsory Transfer of Shares. In addition, the State of the Netherlands has an option, which has been amended in connection with the combination, to acquire preference shares B of KLM if a
country imposes or will impose restrictions or conditions on KLM as a consequence of a substantial part of KLMs share capital not being demonstrably Dutch owned or KLM not being effectively controlled by Dutch nationals.



The Chicago Convention also provides for aircraft noise control and engine
emission control regulations, set forth in Annex 16 thereof. As an operator of passenger and cargo aircraft, Air France and KLM are subject to compliance with these provisions.



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Finally, the Chicago Convention established the International Civil Aviation Organization (ICAO) which in
1947 became the aviation division of the United Nations. Within the framework of the ICAO, participant states establish the international technical regulations applicable to civil aviation.



The Rome Convention



The Rome Convention (1952) regulates third party damages. The Netherlands has
not ratified the Rome Convention and regulation of third party damages is governed in the Netherlands by general negligence rules in accordance with Article 162 of Book 6 of the Dutch Civil Code. France has not ratified the Rome Convention and
regulation of third party damages is governed in France in accordance with the principles of article L.141 of the French Civil Aviation Code (Code de laviation civile). Following the events of September 11, 2001, certain members of the
ICAO advocated the amendment and modernization of the Rome Convention. As of the date of this annual report, no such amendment or modernization had been implemented.



IATA



In addition to the inter-state regulatory framework, scheduled air transport companies created IATA in 1945 in Havana, Cuba. This organization holds a
mandate to establish resolutions for the air transport profession and to supply participant members with a forum for matters concerning regulation of its members on international routes (on-board service, travel documentation safety, security,
navigation and flight operations, the development of communication standards, and administrative procedures).



Open Sky Agreements



Air traffic with the U.S. has been liberalized by several states, including France, the Netherlands and a number of other E.U. Member States, by way of
so-called open sky agreements. Discussions arose between the E.U. and its Member States on whether it was lawful for them to enter into these agreements. The European Commission sued some Member States before the European Court of Justice (the ECJ)
and the ECJ delivered a judgment on November 5, 2002, stating that Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany had infringed upon the European Communitys powers with respect to the conclusion of certain international
agreements that are binding upon the European Community. In addition, these Member States and the United Kingdom were also found to have violated the rules on the right of establishment embodied in Article 43 of the Treaty of Rome by excluding, in
their open sky agreements with the U.S., air carriers established in the other Member States but not majority-owned and effectively controlled by nationals of such States from the benefit of national treatment in the host Member State. The European
Commission believes that the November 5, 2002 judgments have implications not only for the specific agreements concerned, but for all existing bilateral air services agreements and for the negotiation of new agreements. On July 20, 2004, the
Commission announced that it was not satisfied that the Member States were complying with the judgments of the ECJ and that, accordingly, it had issued letters of formal notice to the eight Member States over their failure to comply with the
judgments.



In 1992, the United States and the State of the
Netherlands had agreed to expand their bilateral Air Transport Agreement to create an open sky agreement. That agreement permitted KLM to obtain antitrust immunity in the United States for joint action with Northwest Airlines. Following challenges
raised by the European Commission, the ECJ ruled that certain provisions of similar open sky agreements between other E.U. Member States and the U.S. were in violation of the Commissions exclusive external competence. As a result, on July 20,
2004, the Commission announced that it had decided to bring a case before the ECJ against the State of the Netherlands challenging the allegedly discriminatory language in its open skies agreement with the U.S.



In 2001, the United States and the French State entered into an open sky
agreement, which liberalized air traffic with the U.S. and permitted Air France to obtain antitrust immunity in the United States for joint action with Delta Air Lines. On July 20, 2004, the Commission announced that it had decided to initiate new



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proceedings against three Member States, including the French State, for failure to fulfill their obligations under the Treaty through having bilateral
agreements with the U.S., which contain allegedly discriminatory language similar to that in agreements condemned by the ECJ in November 2002.



Following the November 5, 2002 judgments, in June 2003, the 15 E.U. Member States gave the European Commission a mandate to negotiate with the United
States the creation of an open aviation area providing freedom of access on both sides of the Atlantic. Representatives from the United States and Europe thereafter conducted negotiations and prepared a draft package for submission to the Member
States. In June 2004 the Member States decided that the draft package negotiated with the U.S. authorities was unacceptable. At March 31, 2005, negotiations had not resumed between the United States and Europe on these matters. The Member States
also gave the European Commission a so-called horizontal mandate to negotiate a European nationality clause in bilateral agreements and with third countries on behalf of the E.U. Member States, and talks have begun with several non-E.U. States.



European Regulation



Liberalization



In 1987, the European Commission undertook to create common European air
transport regulations. These consist of three sets of measures known as the First, Second and Third Packages. The Third Package (1992) included measures aimed at putting an end to certain aspects of the monopolies of various national airline
companies. As a result, airlines licensed by any EEA Member State, including Air France and KLM, now have free access to all routes (subject to certain limited technical exceptions) within the EEA, and capacity restrictions on such routes are no
longer permissible. On April 1, 1997, a single European airspace was established within which any European airline may freely operate on any routes within the E.U. Member States. In particular, European airlines may freely practice cabotage (i.e.,
transporting passengers or cargo from one city to another, either within a Member State or between Member States other than the airlines home country). In addition, any resident of an E.U. Member State may hold an interest in the share capital
of any E.U. registered airline company, provided such interest holder is not acting as a front for a beneficial owner who is not a citizen of an E.U. Member State.



This European regulatory framework does not prevent the E.U. Member States from participation in the ICAO, nor does it
conflict with the principles and regulations established under the Chicago Convention. Rather it aims at creating a homogeneous regulatory framework for all European air transporters within the international regulatory framework. Additionally, E.U.
Member States remain subject to all their international obligations in relation to air transport outside the E.U.



The E.U. regulations establish the following principles:



| |  |  | satisfaction of the criteria established by the European authorities (Regulation No. 2407/92) prior to obtaining an air operator certificate and a license,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | freedom of access to routes within the E.U. Member States to Community carriers (Regulation No. 2408/92), and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | the ability of airlines to fix their own fares (Regulation No. 2409/92).
| | - |  | ------------------------------------------------------------------------



Competition



Relevant E.U. regulations have for several years established the uniform application of the European competition rules (Articles 81 and 82 of the Treaty
of Rome) for all airlines operating air transport services within the E.U. as well as the rules concerning the granting of State-aid (Articles 87 and 89 of the E.C. Treaty).



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The European Commissions jurisdiction to apply Articles 81 and 82 to air transport between Community airports and third countries was extended with
effect May 1, 2004 and, using these new powers, the Commission is currently reviewing the impact of the SkyTeam alliance on competition.



The European regulatory framework also enables the European Commission to grant block exemptions from E.U. competition rules for certain kinds of
agreements, decisions and concerted practices concerning the following:



| |  |  | the joint planning and coordination of flight schedules between E.U. airports;
| | - |  | ------------------------------------------------------------------------------



| |  |  | consultations on tariffs for the carriage of passengers, baggage and freight on scheduled air services;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | joint operations on new, less heavily traveled air services;
| | - |  | ------------------------------------------------------------



| |  |  | slot allocation and airport scheduling; and
| | - |  | -------------------------------------------



| |  |  | joint purchase, development and operation of computerized reservation systems relating to timetabling, reservations and ticketing by air transport undertakings.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



Single European Sky



On October 10, 2001, the European Commission adopted a package of proposals
on air traffic management designed to create a Single European Sky by December 31, 2004. This package sets out the objectives of the Single European Sky and its operating principles, based on six main lines of action: joint management of
airspace; establishment of a strong Community regulator; gradual integration of civilian and military airspace management; institutional integration of the E.U. regulatory bodies and Eurocontrol; introduction of appropriate modern technology; and
better coordination of human resources policy in the air traffic control sector. In order to accelerate the creation of the Single European Sky, the Commission also adopted three specific measures relating to the provision of air navigation
services, organization and use of airspace and interoperability of equipment. The creation of a Single European Sky should optimize use of European airspace, with improvements in such areas as air traffic delays, flight safety, security and growth.



On December 5, 2002, the Council of E.U. Transport Ministers
reached an agreement on the Single European Sky Package. Following a conciliation procedure between the Council of E.U. Transport Ministers and the European Parliament, an agreement was reached on December 9, 2003 covering the package of legislation
laying down the objectives and operating principles for the Single European Sky. The implementation of the Single European Package continued during spring 2005.



Miscellaneous



European regulations address a variety of aviation-related issues other than those concerning competition, including air traffic noise, denied boarding,
take-off and landing slots and air carrier liability, as described in this annual report. See Other Regulatory and Legal Issues Relating to Air Frances Operations.



Air Transport Regulation and Legislation



French Regulation



Air transport in France is governed by the French Civil Aviation Code (Code de lAviation Civile) of 1948, as amended, which contains the
legal and regulatory provisions applicable to aircraft, airports, regular air transport and flight personnel. In addition, set forth in the French Civil Aviation Code are the provisions applicable to Air France and ADP as well as those governing
aviation fees. The French Civil Aviation Code has



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been frequently revised to harmonize French law with international and European regulations. Therefore the applicable regulatory regime in France is the
result of (i) national law; (ii) the application of regulations promulgated by the European Council and the European Commission; (iii) European directives incorporated into French law; (iv) air service agreements to which Air France is a party and
(v) the international conventions to which France is a party.



In particular, with respect to third party liability, article L. 141 of the French Civil Aviation Code applies because France has not ratified the Rome Convention. This article provides the following: (i) no special regime is established to
determine the liability of a pilot, or of the person or entity operating an aircraft, for damage caused by an aircraft in flight to another aircraft also in flight (therefore general French law applies to determine liability); and (ii) the person or
entity operating an aircraft is strictly liable for damage caused by the aircrafts movements, or by any object originating from the aircraft, to any person or goods on the ground. This liability can only be reduced or eliminated where there is
proof that the victim was at fault.



Dutch Regulation



Air transport in the Netherlands is governed by two main
legislative acts applicable to aviation, the Aviation Law (Wet Luchtvaart) and the Dutch Aviation Act (Luchtvaartwet). The Ministry of Transport, Public Works and Water Management administers both of these pieces of legislation which
define the nature and extent of the regulation of airports and of civil aircraft operating within and/or registered in the Netherlands. These pieces of legislation additionally provide the framework for safety regulation, air traffic control rules,
aircraft airworthiness, pilot competency certificates, airport and air navigation standards and environmental protection measures.



Other Regulatory and Legal Issues



Cooperation Agreement with Alitalia



On July 27, 2001, Air France and the Italian air carrier Alitalia entered into a number of cooperation agreements. The agreements pursue the double aim of
integrating Alitalia into the world-wide SkyTeam alliance created by Air France, Aéromexico, Delta Air Lines and Korean Airlines in 2000 (and since expanded to include Continental, CSA Czech Airlines, KLM Royal Dutch and Northwest), and of
building a far-reaching, long-term strategic bilateral alliance based on close cooperation between the parties principally on services between France and Italy. The agreements also interconnect the two airlines respective hubs at Roissy-CDG,
Rome Fiumicino and Milan Malpensa airports.



On April 7, 2004,
the European Commission adopted a decision formally exempting the cooperation agreements as notified from the Article 81(1) prohibition from November 12, 2001 to November 11, 2007, subject to compliance with certain commitments annexed to the
Commissions decision. These commitments included, notably, a commitment to release take-off and landing slots to competitors at certain airports in specified circumstances. In July 2004, easyJet Ltd announced that it had initiated proceedings
before the European Court of First Instance against the European Commission challenging its decision to exempt the Air France/Alitalia cooperation agreements. The proceedings are currently pending as of the date of this annual report.



Allocation of Slots



Access to the worlds main international airports is regulated by the
allotment of time slots. Slots correspond to the ability of a carrier to land at, or take-off from, an airport at a specified time and date. Access to many European and Asian airports is regulated through slots, including airports in London, Paris,
Frankfurt, Milan, Madrid, Amsterdam, Bangkok, Tokyo, Hong Kong and Singapore. In the United States, access to airports is controlled by regulations based on the allotment of boarding gates (e.g., Los Angeles, San Francisco) with the exception of New
Yorks John F. Kennedy airport and Chicagos OHare airport, to which access is regulated by slots.



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Due to saturation at several major European airports (primarily at peak hours), all air carriers must
obtain flight slots, which are allocated in accordance with the terms and conditions defined in European Council Regulation No. 95/93 of January 18, 1993 most recently amended by Regulation No. 793/2004. Under Regulation No. 95/93, each Member
State, in relation to all airports for which it is responsible, is required to designate an individual or an entity responsible for coordinating the allocation of the slots and the monitoring of their use. Such individual or entity must have
specialized knowledge in the area of coordinating aircraft routes and of the operational environment of air transport companies, and is designated after consultation between the relevant Member State, the airline companies which use the airports in
question, their representatives and the airport authorities.



As a general rule, a slot that has been operated by an air carrier entitles that air carrier to claim the same slot in the next equivalent scheduling period (grandfather rights). Slots are allotted twice a year, at the time airline flight
schedules for the relevant IATA season are prepared by the airport coordinator. New or unused slots are generally allocated on a 50-50% basis among historic airline operators and new entrants at that airport.



At the close of this preliminary allotment (pre-coordination) process, a
conference with virtually all the airport coordinators and airline companies is organized, in order to enable airline companies to:



| |  |  | coordinate the slots they are allotted in different airports, so that when a flight links two airports, the slots granted on each platform are compatible with one another, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | exchange slots among themselves in the event that those originally allotted by the coordinators are unsatisfactory.
| | - |  | -------------------------------------------------------------------------------------------------------------------



Pursuant to Regulation No. 95/93, air carriers must continue to use allocated
slots at a minimum of 80% of their level of use during the period such slots were attributed. Slots not used at such levels are transferred to a pool where they become available to other carriers and are lost to the carrier to whom they
were initially assigned. Regulation No. 95/93 also provides that exceptional circumstances, namely unforeseeable and irresistible cases outside the air carriers control, may affect the use of slots.



Environmental Protection and Anti-Noise Standards



Under both French and Dutch law, an aircraft operator is subject to liability
for damages caused by noise emissions from its aircraft. In France, an independent administrative body, the French Airport Noise Control Authority (Autorité de Contrôle des nuisances aéroportuaires), may recommend
restrictions on the operation of certain aircraft and impose administrative fines (of up to 12,196) on aircraft operators or owners for non-compliance with anti-noise rules at take-off or landing to or from French airports. In compliance with
E.U. directive no. 2002/30 of March 26, 2002, restrictions on the operation of the so-called Chapter 3 noisiest aircraft (as defined by French regulations) were decided at Roissy-CDG. At March 31, 2005, 15 of Air Frances aircraft were
potentially affected by these restrictions, and they are scheduled to be gradually withdrawn from the fleet by 2008 or modified to be in compliance.



Aircraft engine emissions, including emission of greenhouse gases, are also regulated by national and international rules. Aircraft engines are required
to meet the engine certification standards of Annex 16 of the Chicago Convention. The Kyoto protocol, which has not yet entered into force, requires industrialized countries that are listed in Annex I to the Chicago Convention to reduce their
national emissions of six greenhouse gases, the most relevant to aviation being carbon dioxide (CO2). In
anticipation of the possible application of the Kyoto protocol to international aviation through an international or European regulation, Air France and KLM have implemented a fuel conservation plan, which, together with fleet renewal, is intended
to reduce jet fuel consumption throughout flight, and to contribute to reducing gaseous emissions. The action plan also provides for instructions concerning taxiing on arrival, and limiting the use of auxiliary power units.



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Air France and KLMs operations on industrial and maintenance sites, including the handling,
storage, and disposal of raw materials and wastes, are subject to comprehensive laws and regulations relating to the generation, storage, handling, and transportation of hazardous materials, air emissions and waste-water discharges, and hazardous
substance pollution clean-up and remediation. Air France and KLM are also subject to regulations regarding the control and removal of asbestos-containing material, and the indemnification of potential exposure of employees to asbestos.



Air Frances industrial operations in France, and in particular its
maintenance activities, are subject to French laws and regulations applicable to classified industrial sites (installations classées), which require users of such classified industrial sites to notify authorities or obtain
authorization prior to beginning operations. Among other obligations, the operator of a classified industrial site remains liable for any remediation of the site. Air France Industries has moved to a new hanger in Toulouse Blagnac and will no longer
operate the Montaudran site, which will be completely cleaned before it is turned over. Air France has undertaken renovation work at its Toulouse Montaudran and Vilgénis sites to remove old pollution detected in these locations.



Insurance and Air Carrier liability



In the aftermath of the September 11, 2001 terrorist attacks in the United
States, governmental insurance schemes in many Member States took on insurance cover which was lost when insurance companies cancelled their policies based on war risk clauses.



In order to restore confidence both in the aviation and in the insurance sectors, the European Commission put forward a
legislative proposal on September 24, 2002 to introduce into E.U. law minimum insurance requirements applicable to all air carriers and aircraft operators flying within, into, out of or over the European Union. This proposal incorporates the main
rules foreseen in various international conventions into E.U. law, harmonizing the rules applicable in the E.U. territory and making them compulsory for any carrier operating in Europe. It also aims at improving the current rules on third party
liability.



Air Transport Taxes



Airlines are subject to a certain number of air transport taxes which are
divided into air navigation taxes and airport taxes. Air navigation taxes include routing taxes (for over-flights) and terminal taxes (for air navigation within a 20 kilometer radius of a departure or destination airport). Airport taxes include
aircraft taxes (in particular landing fees) and passenger taxes. During the financial year ended March 31, 2005, Air France paid a total of 913 million in landing fees and en route charges. During the financial year ended March 31, 2005, KLM
paid a total of 547 million in landing fees and en route charges. Following the attacks of September 11, 2001, air transport taxes rose sharply to offset costs resulting from enhanced security procedures. In addition, substantial fee increases
were approved by air traffic control organizations and airport authorities in April 2002 and January 2003 to offset lost revenues associated with reduced traffic levels following the war in Iraq and the outbreak of SARS.



Legal and Regulatory Matters in Connection with the Exchange Offer



Air France and KLM made certain commitments to the European Commission to
secure its approval of the combination. On February 11, 2004, the European Commission adopted a formal decision declaring the combination compatible with the common market subject to full compliance with the Undertakings. In May 2004, easyJet
announced that it had initiated proceedings before the European Court of First Instance against the European Commission approving the combination. Those proceedings are pending as of the date of this annual report.



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Definitions and Industry Terms



|                                 |  |                                                                                                                                                                                                         
|-------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ADP                              |  | Aéroports de Paris.                                                                                                                                                                                     
|                                 | 
|AEA                              |  | Association of European Airlines.                                                                                                                                                                       
|                                 | 
|Available seat kilometers (ASKs) |  | the total number of seats available for the transportation of passengers multiplied by the number of kilometers those seats are flown.                                                                  
|                                 | 
|Available ton kilometers (ATKs)  |  | the number of tons of capacity available for cargo multiplied by the kilometers flown.                                                                                                                  
|                                 | 
|Cargo                            |  | freight and mail.                                                                                                                                                                                       
|                                 | 
|Cargo load factor                |  | revenue ton-kilometers for cargo expressed as a percentage of available cargo ton-kilometers.                                                                                                           
|                                 | 
|DGAC                             |  | Direction Générale de lAviation Civile, the French civil aviation authority.                                                                                                                           
|                                 | 
|Domestic flights                 |  | short- and medium-haul flights between destinations within France.                                                                                                                                      
|                                 | 
|EEA                              |  | European Economic Area, which includes the 25 E.U. member states plus Norway, Iceland and Liechtenstein.                                                                                                
|                                 | 
|Freedoms                         |  | the right of an airline, obtained through a bilateral treaty, to operate in the airspace and on the territory of a country other than its home country. The eight freedoms can be summarized as
follows:
|                                 | 
|                                 |  | (1)    Departure from home country, right to fly over airspace of foreign country;                                                                                                                      
|                                 | 
|                                 |  | (2)    Departure from home country, right to make a stopover in foreign country for technical reasons, without
passenger embarkation or disembarkation (right of transit);                              
|                                 | 
|                                 |  | (3)    Departure from home country, right of disembarkation for passengers from the home country;                                                                                                       
|                                 | 
|                                 |  | (4)    Departure from foreign country, right of embarkation for passengers traveling to the home
country;                                                                                               
|                                 | 
|                                 |  | (5)    Departure from home country, right of embarkation and disembarkation of passengers in two successive foreign
countries;                                                                          
|                                 | 
|                                 |  | (6)    Departure from home country, right of embarkation for passengers traveling to the home country, then on to a
third country;                                                                      



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|                                  |  |                                                                                                                                                                                                                 
|--------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                  |  | (7)    Departure from foreign country, right of embarkation for passengers traveling to a third country, without a
stopover in the home country; and                                                            
|                                  | 
|                                  |  | (8)    Departure from home country, right of embarkation of passengers from foreign country traveling to another
destination in the same foreign country (cabotage).                                            
|                                  | 
|IATA                              |  | International Air Transport Association. Its membership includes schedule and non-scheduled airlines.                                                                                                           
|                                  | 
|Long-haul flights                 |  | intercontinental flights between destinations in Europe, North, Central and South America, the Far East and Australia and the Middle East and Sub-Saharan Africa.                                               
|                                  | 
|Medium-haul flights               |  | flights between destinations in Europe and North Africa.                                                                                                                                                        
|                                  | 
|Load factors                      |  | revenue ton-kilometers expressed as a percentage of available ton-kilometers.                                                                                                                                   
|                                  | 
|Passenger load factor             |  | revenue passenger-kilometers expressed as a percentage of available seat-kilometers.                                                                                                                            
|                                  | 
|Revenue passenger-kilometer (RPK) |  | one fare paying passenger transported one kilometer; revenue passenger-kilometers are computed by multiplying the number of revenue passengers by the kilometers they are
flown.                                
|                                  | 
|Revenue ton-kilometer (RTK)       |  | one ton of paid cargo traffic transported one kilometer; revenue ton-kilometers are computed by multiplying metric ton of revenue traffic (passenger, foreign and mail) by the kilometers this
traffic is flown.
|                                  | 
|Slot                              |  | authorization given by an airport operator to take off or land at a particular airport during a specified time period.                                                                                          
|                                  | 
|Summer season                     |  | as defined by IATA: typically runs from the last Saturday in March to the last Saturday in October.                                                                                                             
|                                  | 
|Winter season                     |  | as defined by IATA: typically runs from the first Sunday after the last Saturday in October to the Friday before the last Saturday in March.                                                                    
|                                  | 
|Yield                             |  | passenger yield means unit revenue per passenger-kilometer; corresponds to total revenues from scheduled passengers divided by the total number of revenue
passenger-kilometer.                                 



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Item 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS



The following discussion should be read in conjunction with our consolidated financial statements as of and for the financial year ended March 31, 2005 and the Air France consolidated financial statements as of and
for the financial years ended March 31, 2004 and 2003, together with the notes thereto, in each case, included elsewhere in this annual report. The consolidated financial statements are presented in euro and have been prepared in accordance with
French GAAP.



We will apply International Financial
Reporting Standards, or IFRS, to prepare our consolidated financial statements for financial years and interim periods beginning on or after April 1, 2005. See Adoption of International Financial Reporting Standards to Air
France-KLM.



Basis of Presentation



Air France successfully completed its exchange offer for all the outstanding
common shares of KLM on May 3, 2004 and Air France-KLM was created in September 2004. As of the date of this annual report, we hold 97.3% of the economic rights and 49% of the share capital and voting rights in respect of KLMs common shares.
Air France-KLMs consolidated financial statements for the financial year ended March 31, 2005 include the financial condition and results of operations of KLM for 11 months and are not directly comparable to the consolidated financial
statements of Air France as of and for the financial years ended March 31, 2004 and 2003.



Accordingly, in order to provide for a more meaningful comparison of our consolidated financial statements for the financial years ended March 31, 2005 and 2004, we have prepared unaudited consolidated pro forma
financial information in accordance with French GAAP for the financial year ended March 31, 2004, which includes the results of our business combination with KLM and the exchange offer as if they had taken place on May 1, 2003. We have published
this pro-forma financial information as part of our consolidated financial statements in order to satisfy our reporting requirements with our primary French regulator, the Autorité des marchés financiers. The pro forma financial
information is included in this annual report for illustrative purposes only and does not necessarily reflect the combined operating results or financial position that we could have recorded on such dates or for such periods. The discussion of the
results of operations contained in this Operating and Financial Review and Prospects includes a discussion of our published results for the financial year ended March 31, 2005 compared to our pro-forma and actual (Air France only)
results for the financial year ended March 31, 2004 as well as the results of Air France for each of the financial years ended March 31, 2004 and 2003.



Overview



Air France-KLM is one of the largest airline groups in the world, ranking first worldwide in terms of international passengers carried as of December 31, 2003, according to IATA, and first among airlines in Europe in
terms of traffic (revenue passenger-kilometers) for the financial year ended March 31, 2005, according to the Association of European Airlines (AEA), with an overall market share of 27.7%.



The combination of Air France and KLM has also created a European and global
leader in cargo activities. We currently rank second in the world (excluding integrators) in cargo activity, according to IATA. Air France and KLM are also active in the field of aircraft maintenance and are one of the worlds leading suppliers
of maintenance services.



Although Air France-KLM continued to
operate in a difficult international environment during the financial year ended March 31, 2005, total operating revenues were 19,078 million, an increase of 7.3% from the prior year on a pro forma basis. In addition to the continuing impact
of the attacks of September 11, 2001, the consequences of the war in Iraq in 2002 and the SARS epidemic commencing in 2003, the airline industry has been facing a sharp increase in fuel prices since the spring of 2004. While the recovery in airline
traffic first witnessed in the second half of 2003 has continued in 2004 and the first half of 2005, with growth of



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approximately 11% in 2004, according to IATA, the air transport sector has had to face soaring oil prices, which have generated industry-wide losses of
approximately $5 billion according to IATA, which had been estimating industry losses of approximately $3 billion for 2004. The air transport sector spent $62 billion on jet fuel in 2004, which had the effect of counterbalancing most cost-cutting
efforts of individual airlines and the impact of a general economic recovery. Including the losses for 2004 estimated by IATA, the total losses from 2001 to 2004 are expected to reach approximately $36 billion, which exceeds the total value created
within the air transport sector from 1978 to 2000. These trends have nevertheless affected Europe, Asia and the United States differently as explained below under Airline Industry TrendsGeographic Trends.



The various sources of our operating revenues are described below.



Air Transport



We generate operating revenues mainly from air transport operations, which
consist of passenger and cargo operations.



Passenger



Passenger revenues consist of scheduled passenger and
other passenger revenues. Scheduled passenger operating revenues are derived from passengers transported on flights that have the Air France-KLM code, including flights that are operated by other airlines pursuant to code-sharing agreements. Other
passenger operating revenues are derived from commissions from SkyTeam alliance partnership arrangements, revenue from block-seat sales and information systems revenues.



Cargo



Cargo revenues are subdivided into freight transportation and other cargo revenues. Revenues from freight transportation consist of the transportation of
cargo on flights that have the Air France-KLM code, including flights that are operated by other airlines pursuant to code-sharing agreements. Other cargo revenues derive principally from sales of cargo capacity to third parties.



Maintenance



Maintenance revenues are generated principally by the Air France Industries
division and the KLM Engineering & Maintenance division which perform aircraft maintenance for the Air France-KLM groups two fleets and provide maintenance services to more than 100 third-party clients throughout the world.



Other



Other revenues principally consist of revenues from KLMs charter
business through its subsidiary transavia.com and from the catering activities of the Servair subsidiaries of Air France and KLM Catering.



Geographic Mix



Air France-KLM has defined five geographical regions into which passenger and cargo revenues are separately subdivided on the basis of origin of sale and
destination. These regions are Europe and North Africa, Caribbean, French Guiana and Indian Ocean, Africa and Middle East, Americas and Polynesia, and Asia and New Caledonia.



Airline Industry Trends



Increased Fuel Prices



As noted above, since spring 2004 the airline industry has faced sharp increases in fuel prices, which IATA expects to increase. In response, in May 2004,
Air France introduced a surcharge of 3 per ticket and KLM a



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surcharge of 4 per ticket. In August 2004, each airline introduced a further surcharge based on destination, which varied between 2 and 12
per Air France ticket and 2 and 3 per KLM ticket. A further surcharge for long-haul flights was introduced in October 2004 of 11 per Air France long-haul ticket and 7 per long-haul KLM ticket. An additional surcharge was
introduced in April 2005 of between 1 and 8 per Air France ticket and between 3 and 6 per KLM ticket. A new surcharge was announced on July 4, 2005 with effect from July 19, 2005 of 1 on Air France domestic routes,
2 on Air France medium-haul routes and 4 on Air France long-haul routes for all tickets issued in France and 14 per KLM long-haul ticket. Air France and KLM have also introduced a fuel surcharge on their cargo operations.



In keeping with their strategy of implementing the synergies
from their business combination, and because the surcharges have only partially covered the increased fuel prices, each Air France-KLM group business has generated synergies exceeding those which were estimated at the time of the exchange offer and
have implemented, in the case of Air France, a three-year savings plan, and in the case of KLM, a 2003 restructuring plan. See Item 4: Information on the CompanyBusiness of Air France-KLMStrategyControlling Costs and
Improving Productivity.



The impact of the increase in
the cost of jet fuel on our results of operations has been partially offset by the application of our hedging policies, which resulted in a gain of 372 million or 14% of our jet fuel expenses for the financial year ended March 31, 2005. We
nevertheless do not hedge all of our exposure to increases in fuel costs. See Item 11: Quantitative and Qualitative Disclosures about Market Risk.



The Impact of September 11, 2001 Terrorist Attacks, the War in Iraq and the Outbreak of SARS



The terrorist attacks in the U.S. on September 11, 2001 have had a
significant negative impact on economic, political and market conditions around the world. Notwithstanding the recovery in traffic first witnessed in the second half of 2003 and continuing through 2004 and the first half of 2005, following the
attacks, airline companies have experienced significant losses and incurred substantial additional costs, due principally to significantly higher costs of insurance, significantly higher costs of passenger and aircraft security, and decreases in
demand for air travel. Airlines have also experienced declines in the value of their aircraft assets.



The global economy during the year ended March 31, 2004 and, to a lesser extent, the year ended March 31, 2005, was strained, and the airline industry
disrupted, by geopolitical tensions surrounding the war in Iraq, which put downward pressure on worldwide passenger traffic. U.S. airline companies, which are largely dependent on U.S. domestic demand, particularly suffered from the September 11
attacks and from the war in Iraq.



Finally, the outbreak of
SARS had the effect of sharply reducing airline traffic to and from Asia in the last month of the financial year ended March 31, 2003 and during the first half of the financial year ended March 31, 2004, with traffic plummeting between 40-50% at the
height of the crisis. In response to the crisis facing the airline industry following the events of September 11, 2001, the war in Iraq and the outbreak of SARS, as well as increased fuel costs, airlines have been forced to implement new cost-saving
measures, reorganize their network capacities to reply to shifting demand and overall reduced traffic and implement new growth and fleet strategies to allow for increased adaptability to volatile economic and industry conditions.



Geographic Trends



Recent airline industry trends in the three main geographic zones 
Europe, the United States and Asia  have nevertheless differed significantly.



Asian airlines, after having suffered significantly diminished growth in 2003 and 2004 as a result of the SARS epidemic, have generally grown strongly.



In the United States, most airlines have not been profitable since 2001. Confronted with structural problems, including
significant wage increases in 2000 and 2001 and competition from low-cost companies which have



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conquered nearly 30% of the North American domestic market, U.S. airlines are facing higher fuel prices without the ability to implement hedging policies as
in general their financial positions are too weak. According to IATA, between 2000 and 2002, debt of the leading American air carriers doubled from $27 billion to $56 billion. Despite federal assistance of several billion dollars and drastic
cost-cutting plans and wage concessions, the U.S. air carriers accumulated $7 billion in losses in 2004 and recorded new record losses in the first quarter of 2005.



In Europe, airlines that are members of the AEA have benefited from the recovery in traffic after the SARS epidemic. During
2004, traffic grew 9.0% with a 7.3% increase in capacity. Slightly more than 307 million passengers, representing an increase of 4.8% over 2003, traveled to and from the 49 countries included within Europe as defined by the AEA. In 2003, the
recovery differed depending on the airline in question. Non-U.S. airlines have also had some protection from rising fuel prices because of the weakness of the U.S. dollar, particularly against the euro.



Low-Cost Air Carriers



In recent years, the airline industry has seen the emergence of low-cost air
carriers that typically engage in aggressive marketing and compete with all transportation carriers. In Europe, there were over 35 low-cost airlines in 2004, but there are two dominant low-cost airlines  Ryanair and easyJet  which have
over 50% market share of the low-cost market segment. We believe that the growth of low-cost airlines has not occurred through a transfer of traffic from scheduled airlines but through the creation of a new market and the winning by low-cost
airlines of a large percentage of the general growth in traffic among price-sensitive passengers. The European low cost airlines are present in the five major domestic markets (but unevenly so) and on intra-European routes, primarily from Great
Britain to Germany, France and Italy. While low-cost airlines are present in the French domestic market, the strong presence of the French high speed rail network, as well as the Air France domestic shuttle, has limited the interest and impact of
low cost airlines.



The presence and growth of low-cost
airlines in Europe are likely to continue to heighten demand and increase competition for travelers who are price, but not time, sensitive. We have been responding to this increased demand by modifying our European product offering to suit customer
demand for a simplified service offering the lowest possible fares on short routes.



Cyclicality



Both the
airline passenger and freight industries are highly sensitive to general economic conditions. Our business and results of operations are subject to changing economic and political conditions prevailing from time to time in France and in our other
principal markets worldwide. Because a substantial portion of airline travel (both business and leisure) is discretionary, the industry tends to experience severe adverse financial results during general economic downturns. Downturns in the airline
industry are characterized by excess capacity and lower prices. In such downward cycles, we may also be required to take delivery of new aircraft that we have agreed to purchase (even if they are not required for their current operations), or may be
unable to dispose of unnecessary aircraft under financially acceptable terms. International air freight traffic is characterized by short cycles and extreme sensitivity to the economic environment.



Seasonality



The airline industry tends to be seasonal in nature. The demand for scheduled
passenger services is strongest in the summer months and weakest during the winter months. The reverse is true for cargo operations. This generally results in seasonal fluctuations in revenues. Therefore, our results for the first half of any
financial year (April 1 to September 30) are not necessarily indicative of its results for the full financial year.



High Level of Fixed Costs



The nature of the airline business is such that a substantial percentage of a carriers operating expenses are fixed costs that do not vary
proportionally based on its load factors, the number of passengers or cargo carried,



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the number of flights flown or aircraft utilization rates. Thus, a minor change in a carriers unit revenues by available seat kilometer and load
factors can have a major effect on a carriers results of operations, and the operating results can also be substantially affected by relatively minor changes in aircraft utilization rates. This high operating leverage further accentuates
revenue fluctuations prevailing in the airline industry. In addition, we may face difficulty in adjusting its cost structure to respond to fluctuations in operating revenues. While we are continuously trying to improve our cost structure, there can
be no assurance that the factors described above will not have a negative influence on our future results of operations.



Critical Accounting Policies



Our accounting policies are described in note 2 to our consolidated financial statements. Critical accounting policies are those policies that reflect
significant estimates, judgments and uncertainties and potentially result in materially different results under different assumptions of conditions. We evaluate our estimates and judgments on an ongoing basis. We base our estimates and judgments on
historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about revenue, expenses and the carrying values of assets and liabilities that are
not readily apparent from other sources. Published results may differ from these estimates under different assumptions or conditions.



We use the following critical accounting policies in the preparation of our consolidated financial statements:



Revenue Recognition



We recognize revenue and any related commissions for both passenger and cargo
operations when transportation is provided or, for passenger operations, when a ticket expires unused. The amount of passenger ticket sales and commissions not yet recognized as revenue is reflected as deferred revenue in Advance ticket
sales in our consolidated balance sheet. We perform monthly evaluations of this amount to assess the adequacy of the deferred revenue. Any adjustments, which can be significant, are included in results of operations for the periods in which
the evaluations are completed.



For purposes of revenue
recognition, unused tickets generally expire 18 months following the issuance date. As a result, we make estimates of tickets that will expire unused based on historical trends in order to estimate the amount of unused ticket revenue to be
recognized at the time of sale. Changes to these estimates could have a material effect on our financial results.



Accounting for Pension Plans and Lump Sum Retirement Payments



We calculate our obligations in respect of pension plans and lump-sum retirement payments using the projected credit method,
taking into consideration specific economic conditions prevailing in the various countries concerned. These obligations are covered either by pension and/or plan assets.



Provisions for these plans and schemes are accounted for in a manner substantially identical to International Accounting
Standards No. 19 Employee Benefits (IAS 19). Under IAS 19, pension expense is recorded over the service lives of the employees participating in the plans. Pension expense as determined by IAS 19 is generally independent of any pension
funding decisions made by us. We recognized pension expenses related to defined benefit pension plans of 282 million for the financial year ended March 31, 2005 and 64 million on a published basis for the financial year ended March 31,
2004.



Our accounting for pension plans requires us to make a
number of assumptions that affect the consolidated financial statements. We believe the most critical are the assumed discount rate and the expected long-term rate of return on plan assets.



We determine our assumed discount rate on the measurement date for each plan
(generally December 31). This rate is determined primarily by review of the interest rates on high-quality long-term bonds in the



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appropriate jurisdictions (generally bonds rated AA or higher by a recognized rating agency). Nominal interest rates vary widely worldwide due to exchange
rates and local inflation factors. The weighted average assumed discount rate for Air France-KLMs worldwide defined benefit plans was 4.5% at March 31, 2005.



The fair value of Air France-KLMs plan assets for total funded plans increased to 10,781 million as of March 31,
2005 from 1,023 million on a published basis at March 31, 2004. This increase was due to the combination with KLM (8,912 million), historical return on plan assets of 912 million, lowered by the effects of normal contributions and
benefit payment amounts of 52 million, and to exchange rate impacts of approximately 14 million for non-euro denominated plan assets. The expected long- term rate of return on plan assets for Air France-KLMs funded defined benefit
plans is based primarily on plan-specific investment studies performed by outside consultants and consideration of recent and historical returns on the assets of each plan. For Euro-zone funded plans, lowering Air France-KLMs expected
long-term rate of return (5.3% as of the March 31, 2005 measurement date) by 25 basis points would increase estimated pension expense for the financial year ended March 31, 2006 by approximately 26 million, including required amortization of
actuarial losses.



Frequent Flyer Accounting



We use a number of estimates in accounting for the Air France
Fréquence Plus and the KLM Flying Dutchman frequent flyer programs which we believe are consistent with industry practice. As noted below, we have combined these two programs as of June 1, 2005.



We reduce revenue and record a liability for the estimated incremental cost
of providing travel awards based on a database of all program participants and consideration of each individuals outstanding awards balance. Not all program members redeem accumulated miles for flight awards under the plan, and some program
members may never redeem accumulated miles. Accordingly, we compute our program liability based on the analysis of previous experience under the program, anticipated behavior of customers, expectations of future awards to be issued, and analysis of
current accumulated mileage balances. During the financial years ended March 31, 2003 and 2004, we revised our estimates for computing Fréquence Plus liabilities based on our experience to better reflect anticipated behaviors of our
customers. These changes in estimates had a positive impact of 40 million and 23 million on earnings for the financial year ended March 31, 2003 and 2004, respectively. We believe that our estimates are reasonable; however, the published
redemption behaviors of program members may differ from those estimates.



In anticipation of the combination of Fréquence Plus and KLM Flying Dutchman and the valuation of the new air miles redemption assumptions as of June 1, 2005, we have adjusted the estimate of the
corresponding obligations of these programs. These changes in estimates had a positive impact of 10 million after tax on earnings for the financial year ending March 31, 2005.



Determination of the liability for the costs of providing travel awards also includes the consideration of the incremental
costs of fuel, meals, passenger insurance and ticketing. Costs such as aircraft maintenance, labor or overhead allocations are not considered incremental costs, and are not included in our estimates. As of March 31, 2005, the liability for
outstanding but unissued awards was 118 million. A change to these costs estimates or assumptions regarding redemption of miles awards under the program could have a significant effect on our liability in the year of change as well as future
years. Furthermore, a change to our policy regarding the number of miles required for specific awards could have a significant impact on measurement of this liability.



We assess incremental cost estimates and award redemption assumptions on a periodic basis throughout the year. Any known or
expected trends in individual components are considered in developing estimates of the expected future incremental costs of awards to be issued under the program.



We also sell mileage credits in the Fréquence Plus and the KLM Flying Dutchman programs to participating partners,
such as credit card companies and hotels. Income from the sale of mileage is deferred and recognized as



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passenger revenue at the time when transportation is provided, based on estimates of the fair value of tickets to be redeemed. Proceeds from
sales of mileage credits in excess of the incremental cost of awards to be issued are recognized in income immediately.



Accounting for Major Maintenance Operations



French GAAP Accounting Policy



Our accounting policy for major maintenance operations is described at note 2.1 to the consolidated financial statements. Until March 31, 2002, Air France
recorded a provision for maintenance in respect of major airframe inspections, while major engine maintenance, including the substitution of parts with limited useful lives, was recorded as an expense.



French GAAP was changed during the financial years 2002 and 2003 to permit
and encourage companies to anticipate the adoption of international financial reporting standards in respect of accounting for major maintenance operations. Accordingly, we decided to adopt, for Air Frances financial statements for the
financial year ended March 31, 2003 and subsequent periods and with retrospective application as of April 1, 2002, an individual component approach consistent with international financial reporting standards for the recognition of major maintenance
operations on airframes and engines (excluding parts with limited useful lives) under full ownership and capital leases. As a result of this change, estimated major airframe and engine maintenance costs for aircraft under full ownership or capital
leases are separated from aircraft acquisition costs and amortized over the period until the next scheduled major maintenance operation. The impact of the change in accounting method on our consolidated financial statements is set forth in note 2.1
to the consolidated financial statements. The income statement items affected by the change in accounting method are aircraft maintenance expenses, salaries and related costs, net charge to depreciation and amortization, provisions, gains on
disposal of flight equipment, and income tax.



The individual
component approach requires us to make estimates with respect to the anticipated costs and timing of major airframe and engine operations, changes to which could have a material effect on our financial position and results of operations.



In addition, our operating lease agreements typically require us either to
return an airframe and engine in a certain condition, known as the contractual potential, or to pay or receive a fee based on the actual condition of the airframe and engine upon its return. Consistent with the change in accounting method described
above, we changed our accounting policies regarding anticipated restitution of aircraft under operating leases. We record a provision or asset for restitution depending on our estimate of the difference between current airframe and engine condition
and the contractual potential.



Changes to our estimation of
the future actual airframe and engine potential, restitution costs and the time at which such costs would be incurred could have a material effect on our financial position and results of operations.



U.S. GAAP Accounting Policy



Under U.S. GAAP, all maintenance costs are expensed as incurred. Provision
for restitution of aircraft under operating leases is recorded at the time restitution costs are probable and can be reasonably estimated.



Impairment of Tangible Long Lived Assets



French GAAP Accounting Policy



Under French GAAP, when events and circumstances indicate that the assets may be impaired, we assess the existence of impairment losses for our entire
aircraft fleet under full ownership or capital leases and capitalized spare parts on the basis of their recoverable values.



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U.S. GAAP Accounting Policy



Under U.S. GAAP, when impairment indicators are identified, we make judgments about the level of assets to be grouped for
purposes of impairment according to our segment level. We estimate future net cash flows related to the asset group, and record impairment losses on long lived assets held and used when events and circumstances indicate that the undiscounted cash
flows estimated to be generated by those assets are less than the carrying amounts of those assets. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Impairment is generally assessed and measured at the
segment level.



We estimate the undiscounted future cash flows
for our asset groups based on models that we also use in making fleet scheduling decisions. These models use projections of passenger yield, fuel costs, labor costs and other relevant factors for the markets where the specific aircraft will operate.
Fair values of aircraft is estimated based on information that may be available under the circumstances, including published information from third party sources, current market conditions, the value of similar asset groups and assessment of net
present value.



Deferred Tax Assets



Deferred tax assets relating to temporary timing
differences and tax loss carry forwards are recorded to the extent that the taxable entity is likely to generate sufficient taxable income to absorb such temporary differences. We assess the likelihood based on our business plans and reasonable
expectations of taxable income and reversals of temporary differences for future years.



We had unrecorded deferred tax assets of 388 million as of March 31, 2005 and 251 million as of March 31, 2004. Our net recorded deferred tax assets as of March 31, 2005 and 2004 were 90 million and
96 million, respectively.



Changes to our estimation and
forecasts of future taxable income could result in material changes to the amount of deferred tax assets recorded.



Scope of Consolidation



Our consolidated income statement includes the income statements of all companies acquired during the year from the date of acquisition. It also includes
the income statements of any companies disposed of during the year up to the date of disposal. As of March 31, 2005, the Air France-KLM group comprised 159 companies, of which 134 are fully consolidated, 3 proportionally consolidated and 21 recorded
as equity affiliates. For a full list of companies within the scope of consolidation, see note 34 to our consolidated financial statements for the financial year ended March 31, 2005 included elsewhere in this annual report.



As the exchange offer for KLM common shares closed in May 2004, the Air
France-KLM financial statements for the year ended March 31, 2005 include KLMs results over a period of 11 months (May 2004 to March 2005). As at March 31, 2005, Air France-KLM holds 97.3% of the common shares of KLM stock.



On December 30, 2004, Air France transferred its stake in Amadeus France to
Amadeus GTD. The net income of Amadeus France and its subsidiary Amadeus France Service had been consolidated within Air France-KLM until this transfer.



Measures of Operating Performance



We use measures of operating performance in our business which are described below. The operating performance data are unaudited. For the financial year
ended March 31, 2005, we have presented our measures of operating performance on a consolidated basis, whereas, prior to the business combination, for the financial years ended March 31, 2004 and 2003, such information was compiled separately by Air
France and by KLM. To the extent operating data is presented for the financial year ended March 31, 2004, we have, where indicated, presented such information on a pro forma basis to enable a better appreciation of the operating performance data
that might have been achieved if the closing date of the exchange offer had taken effect on May 1, 2003. This



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information is included solely for illustrative purposes and, accordingly, does not necessarily reflect the combined operating data that we could have
recorded on the dates or for the periods indicated. To the extent operating data is presented for the financial year ended March 31, 2003, such information is for Air France only.



Traffic (RPK and RTK)



Passenger traffic, or the number of fare-paying passengers transported, is measured in terms of revenue per passenger-kilometers (RPK), which correspond
to the total number of paying passengers multiplied by the total number of kilometers flown.



Cargo traffic, or the amount of freight transported, is measured in terms of revenue ton-kilometers (RTK), which correspond to total metric tons of paid cargo carried multiplied by the total number of kilometers
flown.



Capacity (ASK and ATK)



Passenger capacity, or the number of seats offered, is measured in terms of
available seat-kilometers (ASK), which correspond to the total number of seats available for paying passengers multiplied by the number of kilometers flown.



Cargo capacity is measured in terms of available ton-kilometers (ATK), which correspond to the total amount of tons of cargo that could be transported
multiplied by the number of kilometers flown.



Load Factor



The ratio between revenue passenger kilometers and
available seat-kilometers is the passenger load factor. The ratio between revenue ton-kilometers and available ton-kilometers is the cargo load factor.



Unit Revenues



Unit revenue per available seat kilometer (ASK) corresponds to total revenues from scheduled passenger activity divided by the total number of ASK in a
given period.



Yield



Unit revenue per passenger-kilometer, or yield, corresponds to total revenues
from scheduled passengers divided by the total number of RPK in a given period.



Network Mix and Passenger Mix



Our unit revenue per ASK for our scheduled passenger operations varies mainly due to the global economy and competitive pressures affecting price, exchange rates, load factors and the mix of long-haul to medium-haul and short-haul flights,
or network mix. Unit revenues on long-haul flights are proportionately lower than those on medium-haul flights. Thus, in period-to-period comparisons, a change in the proportion of long-haul to medium-haul and domestic flights, or a
network mix effect, will tend to have a positive or negative effect on revenues depending on the increase or decrease of long-haul flights relative to medium-haul and domestic flights. Unit revenue per ASK is also affected by the ratio
of high contribution passengers to low contribution passengers, or passenger mix.



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Results of Operations



Comparison of Financial Years Ended March 31, 2005 and March 31, 2004



Where indicated, the following discussion of our results of operations is based on both pro forma and published (Air
France only) results for the financial year ended March 31, 2004. Pro forma results of operations reflect the effect of the business combination with KLM as if it had occurred on May 1, 2003.



Total Operating Revenues



The following table sets forth operating revenues by type of activity for the
financial years ended March 31, 2005 and March 31, 2004 (on a pro forma and published basis), and the percentage change between the 2005 revenues and the pro forma 2004 revenues:



|                         |  |                                     |  |               |  |        |    |  |                         
|------------------------ |  | ----------------------------------- |  | ------------- |  | ------ | -- |  | ------------------------
|                         |  | Year ended March 31,               
|                         |  | 2005 Air France-KLM                 |  | 2004Pro forma |  | Change |    |  | 2004 Air Francepublished
|                         |  | (in  millions, except percentages)
|Scheduled passenger      |  | 14,085                              |  | 13,156        |  | 7.1    | %  |  | 9,465                   
|Other passenger          |  | 919                                 |  | 888           |  | 3.5    | %  |  | 795                     
|                         |  |                                     |  |               |  |        |    |  |                         
|Total passenger          |  | 15,004                              |  | 14,044        |  | 6.8    | %  |  | 10,260                  
|                         |  |                                     |  |               |  |        |    |  |                         
|Scheduled cargo          |  | 2,300                               |  | 2,084         |  | 10.4   | %  |  | 1,264                   
|Other cargo              |  | 192                                 |  | 193           |  | (0.5   | )% |  | 148                     
|                         |  |                                     |  |               |  |        |    |  |                         
|Total cargo              |  | 2,492                               |  | 2,277         |  | 9.4    | %  |  | 1,412                   
|                         |  |                                     |  |               |  |        |    |  |                         
|Maintenance              |  | 777                                 |  | 747           |  | 4.0    | %  |  | 508                     
|Other                    |  | 805                                 |  | 714           |  | 12.7   | %  |  | 157                     
|                         |  |                                     |  |               |  |        |    |  |                         
|Total Operating Revenues |  | 19,078                              |  | 17,782        |  | 7.3    | %  |  | 12,337                  
|                         |  |                                     |  |               |  |        |    |  |                         



Our total operating
revenues for the financial year ended March 31, 2005 increased 7.3% compared to the previous financial year, increasing to 19,078 million from 17,782 million on a pro forma basis (12,337 million on a published basis) for the
financial year ended March 31, 2004. For the financial year ended March 31, 2005, revenues from passenger and cargo operations, which represented 91.7% of our consolidated revenues, increased by 7.2% compared to revenues from passenger and cargo
operations for the financial year ended March 31, 2004 on a pro forma basis.



Revenues from passenger operations (78.6% of total operating revenues) increased 6.8% compared to such revenues for the prior period on a pro forma basis, with a 7.1% increase in scheduled passenger revenues and an
increase of 3.5% in other passenger revenues. The increases were principally due to the recovery from the negative effects of the war in Iraq and the SARS epidemic during the financial year ended March 31, 2004 as well as the imposition of fuel
surcharges described herein by both Air France and KLM to partially offset the substantial increase in oil prices.



Revenues from cargo operations (13.1% of total operating revenues) increased by 9.4% compared to such revenues for the financial year ended March 31, 2004
on a pro forma basis with a 10.4% increase in scheduled cargo revenues and a 0.5% decline in other cargo revenues. The overall increase in total cargo revenues resulted primarily from the increase in traffic following the recovery from the effects
of the war in Iraq and the SARS epidemic during the financial year ended March 31, 2004, the imposition of such fuel surcharges, the progressive weakening of the U.S. dollar versus the euro and the end of certain textile industry quotas in Asia.



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Maintenance revenues increased 4.0% compared to such revenues for the financial year ended March 31, 2004
on a pro forma basis primarily as a result of the general recovery in the airline industry. Other revenues increased by 12.7% compared to such revenues for the prior period on a pro forma basis due to increases in revenues from catering services and
from KLM charter subsidiary transavia.com.



Passenger
Activity



For the reasons discussed above under the heading
Overview, operating revenues from passenger activity for the financial year ended March 31, 2005 increased 6.8% compared to such revenues for the prior period on a pro forma basis, while scheduled passenger revenues increased 7.1%
compared to such revenues for the prior period on a pro forma basis.



The following table shows passenger capacity, traffic and load factor for the financial year ended March 31, 2005 and the change in these operating measures as compared to such operating measures for the previous financial year on a pro
forma basis:



|            |  |                |  |          |               |  |               |                      |          |   |  |        |  |          |    
|----------- |  | -------------- |  | -------- | ------------- |  | ------------- | -------------------- | -------- | - |  | ------ |  | -------- | ---
|            |  | Capacity (ASK) |  |          | Traffic (RPK) |  |               | Load factor(RPK/ASK) |         
|            |  | (in millions)  |  | (change) |               |  | (in millions) |                      | (change) |   |  | (in %) |  | (change) |    
|Long-haul   |  | 163,216        |  | 7.6      | %             |  | 134,331       |                      | 10.0     | % |  | 82.3   |  | 1.8      | pts
|Medium-haul |  | 51,390         |  | 4.7      | %             |  | 34,667        |                      | 5.1      | % |  | 67.5   |  | 0.3      | pts
|            |  |                |  |          |               |  |               |                      |          |   |  |        |  |          |    
|Total       |  | 214,606        |  | 6.9      | %             |  | 168,998       |                      | 8.9      | % |  | 78.7   |  | 1.5      | pts
|            |  |                |  |          |               |  |               |                      |          |   |  |        |  |          |    



Capacity during the
financial year ended March 31, 2005 increased 6.9% over the prior period presented on a pro forma basis. Compared to the financial year ended March 31, 2004 presented on a pro forma basis, growth in capacity was strongest over the long-haul network,
which rose 7.6%, while medium-haul capacity increased by 4.7%.



Passenger activity reported a steady increase over the financial year ended March 31, 2005 after a difficult previous year marked by the SARS epidemic. For the financial year ended March 31, 2005, Air France-KLM traffic increased 8.9% from
the previous financial year ended March 31, 2004 on a pro forma basis, while capacity increased 6.9%, resulting in an increase in load factor of 1.5 points to 78.7%.



Traffic on the long-haul network reported strong recovery, with an increase of 9.7% in passengers carried (18.8 million), as
compared to the previous financial year ended March 31, 2004 on a pro forma basis. With an increase of 7.6% in capacity, traffic rose 10% generating a 1.8 point gain in load factor to 82.3%. Long-haul revenue for the financial year ended March 31,
2005 totaled 8.04 billion, an increase of 9.5% over the financial year ended March 31, 2004 on a pro forma basis, despite strong negative currency effects.



Activity on the European medium-haul network also improved for the financial year ended March 31, 2005 compared to the
previous year. Traffic increased 5.1% from the previous financial year ended March 31, 2004 on a pro forma basis, while capacity increased 4.7%, generating a stable load factor of 67.5% (an increase of 0.3 points). The number of passengers carried
increased 4.1% to 45.3 million, as compared to the previous financial year ended March 31, 2004 on a pro forma basis. This was the case notwithstanding strong competition and changes in customer demand in Europe. This competition and changes led us,
beginning in April 2004, to implement policies to introduce greater flexibility and efficiency in our ground operations simplify and standardize our products and prices and optimize capacity. KLM expanded capacity to France from Amsterdam, Rotterdam
and Eindhoven and Air France and KLM began to streamline their respective medium-haul networks.



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The table below shows scheduled passenger revenues by destination and by sales region for the year ended
March 31, 2005, and the change in these revenues compared to the year ended March 31, 2004 as calculated on a pro forma basis:



|                           |  |                             |  |                 |  |          |    |  |          |  |                |  |          |   
|-------------------------- |  | --------------------------- |  | --------------- |  | -------- | -- |  | -------- |  | -------------- |  | -------- | --
|                           |  | Scheduled Passenger Revenue | 
|                           |  | By destination              |  | By area of sale | 
|                           |  | (in  m)                    |  | (in % oftotal)  |  | (change) |    |  | (in  m) |  | (in % oftotal) |  | (change) |   
|Caribbean and Indian Ocean |  | 1,124                       |  | 8.0             |  | (7.5     | )% |  | 348      |  | 2.5            |  | (10.8    | )%
|Europe and North Africa(1) |  | 6,044                       |  | 42.9            |  | 4.3      | %  |  | 9,711    |  | 68.8           |  | 6.9      | % 
|Africa and Middle East     |  | 1,920                       |  | 13.6            |  | 9.6      | %  |  | 937      |  | 6.7            |  | 4.7      | % 
|North and Latin America    |  | 2,939                       |  | 20.9            |  | 8.5      | %  |  | 1,994    |  | 14.2           |  | 11.7     | % 
|Asia                       |  | 2,058                       |  | 14.6            |  | 22       | %  |  | 1,095    |  | 7.8            |  | 8.6      | % 
|                           |  |                             |  |                 |  |          |    |  |          |  |                |  |          |   
|Total                      |  | 14,085                      |  | 100.0           |  | 7.1      | %  |  | 14,085   |  | 100.0          |  | 7.1      | % 
|                           |  |                             |  |                 |  |          |    |  |          |  |                |  |          |   

---

Note:

|(1) | For the year ended March 31, 2005, Europe and North Africa includes France, whereas in previous financial years revenues for France were reported separately.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



Scheduled passenger revenues by destination and
area of sale increased for each region with the exception of the Caribbean and the Indian Ocean, which was marked by intense competition affecting both revenues and traffic until the fourth quarter when changes in the competitive environment,
notably the termination of services by one competitor, permitted a partial recovery. Traffic on Caribbean and Indian Ocean network fell by 1.7% for the year and capacity by 2.9%, which generated a one point gain in the load factor to 80.9%. A total
of 3.15 million passengers used our Caribbean and Indian Ocean network, a decrease of 2.6%. Our sub-networks in Africa and the Middle East, which are dedicated to industry travel to oil production and construction sites, were very successful posting
increases in traffic of 8.5% and capacity of 7.0%. The load factor for Africa and Middle East was 77.9%, an increase of one point. Traffic in North and South America increased by 8.5%, representing strong activity in both North America and South
America (where Air France and KLM began to streamline their flights). As capacity rose only 5.0%, the load factor increased 2.8 points to 85.5%. The increase in revenues was notwithstanding a negative currency effect linked to the weak dollar. Asian
traffic increased substantially by 23.1% and capacity by 21.1%. The load factor increased 1.3 points to 81.5%. These increases, together with a substantial increase in revenues, reflect the recovery from the SARS epidemic which adversely affected
the first quarter of the financial year ended March 31, 2004.



The following table shows a breakdown of total passenger revenues, scheduled passenger revenues, passenger unit revenue per ASK and yield (passenger unit revenue per RPK) for the years ended March 31, 2005 and 2004 on a pro forma and
published basis, and the percentage change between these 2005 figures and pro forma 2004 figures:



|                                             |  |                      |  |               |  |        |    |  |                         
|-------------------------------------------- |  | -------------------- |  | ------------- |  | ------ | -- |  | ------------------------
|                                             |  | Year ended March 31,
|                                             |  | 2005 Air France-KLM  |  | 2004Pro forma |  | Change |    |  | 2004 Air Francepublished
|Total passenger revenues (in  millions)     |  | 15,004               |  | 14,044        |  | 6.8    | %  |  | 10,260                  
|Scheduled passenger revenues (in  millions) |  | 14,085               |  | 13,156        |  | 7.1    | %  |  | 9,465                   
|Unit revenue per ASK (in  cents)            |  | 6.56                 |  | 6.55          |  | .1     | %  |  | 7.02                    
|Yield (unit revenue per RPK) (in  cents)    |  | 8.33                 |  | 8.48          |  | (1.7   | )% |  | 9.29                    



Cargo Activity



Operating revenues from total cargo activity for the
financial year ended March 31, 2005 increased 9.4% to 2,492 million from 2,277 million on a pro forma basis (1,412 million on a published basis) for the financial year ended March 31, 2004. The increase in revenues from cargo
activities resulted primarily from the recovery



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from the effects of the war in Iraq and the SARS epidemic during the financial year ended March 31, 2004, the imposition of fuel surcharges, the progressive
weakening of the U.S. dollar against the euro and the end of certain textile industry quotas in Asia.



The following table shows cargo capacity, traffic and load factor for the financial year ended March 31, 2005 and the change in these operating measures
as compared to the previous financial year as calculated on a pro forma basis.



|               |  |          |               |  |                       |  |          |  |        |  |          |  
|-------------- |  | -------- | ------------- |  | --------------------- |  | -------- |  | ------ |  | -------- | -
|Capacity (ATK) |  |          | Traffic (RTK) |  | Load factor (RTK/ATK) | 
|(in millions)  |  | (change) |               |  | (in millions)         |  | (change) |  | (in %) |  | (change) |  
|14,774         |  | 9.4      | %             |  | 10,078                |  | 8.8      |  | 68.2   |  | (0.4     | )



During the financial
year ended March 31, 2005, cargo activity recorded strong growth despite the high increase in oil prices (which were partially offset by fuel surcharges and our hedging policies) and negative currency effects due to the strength of the euro,
particularly in our Asia business. Our Asian business was negatively affected by the strength of the euro which exacerbated the cost advantages which our Asian competitors enjoy. Cargo capacity increased 9.4% compared to the financial year ended
March 31, 2004 on a pro forma basis, while traffic increased 8.8% resulting in a slight decline of 0.4% in the load factor to 68.2% for the financial year ended March 31, 2005.



The following table shows the geographic mix of our scheduled cargo operating revenue for the financial year ended March 31,
2005 and the percentage change in this mix from the previous financial year as calculated on a pro forma basis:



|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   
|-------------------------- |  | ----------------------- |  | -------------- | --------------- | -------- | -- |  | -------- |  | -------------- |  | -------- | --
|                           |  | Scheduled cargo revenue | 
|                           |  | By destination          |  |                | By sales region |         
|                           |  | (in  m)                |  | (in % oftotal) |                 | (change) |    |  | (in  m) |  | (in % oftotal) |  | (change) |   
|Europe and North Africa    |  | 192                     |  | 8.4            |                 | (6.8     | )% |  | 1,081    |  | 47.0           |  | 4.1      | % 
|Caribbean and Indian Ocean |  | 178                     |  | 7.7            |                 | 5.3      | %  |  | 41       |  | 1.8            |  | (4.7     | )%
|Africa-Middle East         |  | 279                     |  | 12.1           |                 | 9.4      | %  |  | 157      |  | 6.8            |  | 9.8      | % 
|North and Latin America    |  | 652                     |  | 28.3           |                 | 13.4     | %  |  | 266      |  | 11.6           |  | 12.7     | % 
|Asia                       |  | 999                     |  | 43.5           |                 | 13.7     | %  |  | 755      |  | 32.8           |  | 21.0     | % 
|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   
|Total                      |  | 2,300                   |  | 100.0          |                 | 10.4     | %  |  | 2,300    |  | 100.0          |  | 10.4     | % 
|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   



The North and Latin
American network represented 35% of traffic and capacity for the financial year ended March 31, 2005. Traffic on this network increased 8.7% from the previous financial year ended March 31, 2004 on a pro forma basis, while capacity increased 4.7%,
resulting in an increased load factor of 2.6 points to 69.7%. The Asian network recorded a decline of 4.1 points in the load factor to 73.8% as an increase in traffic of 10.1% was less than the 16.2% increase in capacity. The African and Middle East
network, which represented 9.0% of traffic and 10.3% of capacity, performed very well after the war in Iraq and related international tension which heavily impacted the financial year ended March 31, 2004. Traffic rose 7.3% with a 4.2% increase in
capacity, resulting in a 1.8 point increase in load factor to 61.8% compared to the financial year ended March 31, 2004 on a pro forma basis. The Caribbean and Indian Ocean network remained stable with an increase of 2.1% in capacity and 1.2% in
traffic compared to the financial year ended March 31, 2004 on a pro forma basis.



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The following table sets forth total cargo revenue, revenue from scheduled cargo, unit revenue per
available ton-kilometer (ATK) of scheduled cargo and unit revenue per revenue ton-kilometer (RTK) of scheduled cargo for the financial year ended March 31, 2005 and the financial year ended March 31, 2004 on a pro forma and published basis, as well
as the percentage change between the 2005 figures and the pro forma 2004 figures:



|                                             |  |                      |  |               |  |        |   |  |                         
|-------------------------------------------- |  | -------------------- |  | ------------- |  | ------ | - |  | ------------------------
|                                             |  | Year ended March 31,
|                                             |  | 2005 Air France-KLM  |  | 2004Pro forma |  | Change |   |  | 2004 Air Francepublished
|Total cargo revenue (in  millions)          |  | 2,492                |  | 2,277         |  | 9.4    | % |  | 1,412                   
|Revenue from scheduled cargo (in  millions) |  | 2,300                |  | 2,084         |  | 10.4   | % |  | 1,264                   
|Unit revenue per ATK (in  cents)            |  | 15.58                |  | 15.42         |  | 1.0    | % |  | 14.89                   
|Unit revenue per RTK (in  cents)            |  | 22.83                |  | 22.48         |  | 1.6    | % |  | 23.27                   



Unit revenue per
available ton-kilometer increased by 1.0% on a pro forma basis, reflecting a negative currency impact of 2.5%. Unit revenue per revenue ton-kilometer increased 1.6% on a pro forma basis.



Maintenance Activity



Operating revenues of Air France-KLMs maintenance activity for the financial year ended March 31, 2005 increased 4.0% to 777 million from
747 million for the financial year ended March 31, 2004 on a pro forma basis (508 million on a published basis) despite a negative currency effect of 2.6%. The increase in revenues resulted primarily from the general recovery of the
airline sector.



Other Activity



Operating revenues for Air France-KLMs other activities increased 12.7%
for the year ended March 31, 2005 compared to the year ended March 31, 2004 on a pro forma basis, to 805 million from 714 million (157 million on a published basis). Revenues from other activities included 15 months of Servair
revenues over the period January 2004 to March 2005. This was to eliminate a one-quarter discrepancy in Servair reporting which had existed until March 31, 2004 as we decided to align Servairs financial year with our own. Excluding the impact
of this 15-month consolidation, the increase would have been 6.2%. This increase was primarily due to the strong performance of the charter activities of KLM subsidiary transavia.com, and of Servair over the first half of the financial year.



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External Expenses



External expenses for the financial year ended March 31, 2005 increased 9.3% over the previous year on a pro forma basis,
increasing to 10,687 million from 9,779 million (6,754 million on a published basis) for the year ended March 31, 2004. The increase in external expenses resulted principally from the increase in fuel costs of 33.3%. Excluding
increases due to fuel costs, the increase in external expenses was limited to 3.1%.The following table shows a breakdown of our external expenses for the financial years ended March 31, 2005 and the financial year ended March 31, 2004, on a pro
forma and published basis, as well as the percentage change between the 2005 external expenses and the pro forma 2004 external expenses:



|                                           |  |                                     |  |               |  |        |    |  |                         
|------------------------------------------ |  | ----------------------------------- |  | ------------- |  | ------ | -- |  | ------------------------
|                                           |  | Year ended March 31,               
|                                           |  | 2005 Air France-KLM                 |  | 2004Pro forma |  | Change |    |  | 2004 Air Francepublished
|                                           |  | (in  millions, except percentages)
|Jet fuel                                   |  | 2,653                               |  | 1,990         |  | 33.3   | %  |  | 1,302                   
|Chartering costs                           |  | 558                                 |  | 502           |  | 11.2   | %  |  | 414                     
|Aircraft operating lease costs             |  | 630                                 |  | 608           |  | 3.6    | %  |  | 458                     
|Landing fees and en route charges          |  | 1,460                               |  | 1,373         |  | 6.3    | %  |  | 913                     
|Catering                                   |  | 402                                 |  | 376           |  | 6.9    | %  |  | 296                     
|Handling charges and other operating costs |  | 1,067                               |  | 1,078         |  | (1.0   | )% |  | 756                     
|Aircraft maintenance costs                 |  | 621                                 |  | 616           |  | 0.8    | %  |  | 381                     
|Commercial and distribution costs          |  | 1,399                               |  | 1,439         |  | (2.8   | )% |  | 1,051                   
|Other external expenses                    |  | 1,897                               |  | 1,797         |  | 5.6    | %  |  | 1,183                   
|                                           |  |                                     |  |               |  |        |    |  |                         
|Total                                      |  | 10,687                              |  | 9,779         |  | 9.3    | %  |  | 6,754                   
|                                           |  |                                     |  |               |  |        |    |  |                         



Jet fuel



Jet fuel expenses increased 33.3% for the financial year
ended March 31, 2005 as compared to the financial year ended March 31, 2004 on a pro forma basis to 2,653 million from 1,990 million (1,302 on a published basis) due principally to the substantial increase in oil prices. The
application of our hedging policies in respect of fuel costs resulted in a gain of 375 million. The increase in fuel costs was due to a 5.2% increase in volume of purchases and a 44.6% increase in prices, which were partially offset by a
favorable currency effect of 6.5% and the gain of 12.4% due to the application of our hedging policies.



Chartering Costs



Aircraft charter costs rose 11.2% to 558 million for the financial year ended March 31, 2005, from 502 million for the previous year on a pro
forma basis (414 million on a published basis), due to greater use of code shares with some of our partners (such as Korean Air, Japan Airlines and Vietnam Airlines) as a result of the offer of Air Frances new Dedicate
product. The offer of this product required the chartering of special A321 aircraft.



Aircraft Operating Lease Costs



For the year ended March 31, 2005, aircraft operating lease costs increased by 3.6% compared to the previous period on a pro forma basis, increasing to 630 million from 608 million (458 million on a published basis).



Landing Fees and en Route Charges



Landing fees and en route charges increased 6.3% to 1,460 million for
the financial year ended March 31, 2005 from 1,373 million (913 million on a published basis) during the previous financial year on a pro forma basis. This increase principally reflects the increase in traffic and route fees in Africa
and landing fees in Africa and France.



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Catering



For the financial year ended March 31, 2005, catering expenses increased 6.9% to 407 million compared to 376 million (296 million on
a published basis) for the year ended March 31, 2004 on a pro forma basis. The increase was mainly due to the impact of the increase in passenger activity.



Handling Charges and Other Operating Expenses



Handling charges and other operating expenses totaled 1,067 million for the financial year ended March 31, 2005, decreasing 1.0% from 1,078
million on a pro forma basis (756 million on a published basis) for the year ended March 31, 2004.



Aircraft Maintenance Costs



Aircraft maintenance costs increased slightly by 0.8% for the year ended March 31, 2005, to 621 million from 616 million on a pro forma basis
(381 million on an actual basis) for the prior year.



Commercial and Distribution Costs



Commercial
and distribution costs decreased by 2.8% for the financial year ended March 31, 2005, decreasing to 1,399 million from 1,439 million on a pro forma basis (1,051 on a published basis) for the prior year. The decrease in commercial
and distribution expenses resulted primarily from a decrease in travel agency commissions.



Other External Expenses



Other external expenses increased 5.6% for the financial year ended March 31, 2005, rising to 1,897 million from 1,797 million on a pro forma basis (1,183 million on a published basis) for the financial year ended March
31, 2004. The increase in other external expenses resulted mainly from increases in expenses related to our business combination.



Salaries and Related Costs



Salaries and related costs increased 4.2% for the financial year ended March 31, 2005, rising to 5,922 million from 5,685 million on a pro
forma basis (4,079 million on a published basis) for the financial year ended March 31, 2004. The 4.2% increase was principally due to the reduction in allowances for costs that had been granted in France in connection with the implementation
of the 35-hours work week. Additionally, an employers contribution charge of 17 million was made by Air France in connection with the share offering reserved for employees following the sale by the French State of a portion of its
shareholding in Air France-KLM in December 2004. Payroll costs increased by 3.4% and social security contributions by 7.4% on a pro forma basis due to the factors noted above. The average number of employees of the Air France-KLM group decreased
slightly compared to the average number of Air France and KLM employees for March 31, 2004.



Taxes Other than Income Tax



Taxes and duties, other than income tax, consist principally of the French business tax (taxe professionnelle) and taxes based on employee salaries. The taxe professionnelle is charged by local French
authorities to companies and takes into account the rental value of the companys premises and the value of its fixed assets. Taxes other than income tax increased by 7.6% to 226 million for the financial year ended March 31, 2005 from
210 million on a pro forma basis (186 million on a published basis) for the prior year.



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##### Table of Contents

Gross Operating Result



Gross operating result for the financial year ended March 31, 2005 increased 6.4% to 2,243 million from 2,108
million on a pro forma basis (1,318 million on a published basis) for the financial year ended March 31, 2004. Gross operating result represented 11.8% of Air France-KLMs total operating revenues, compared to 11.9% of such revenues on a
pro forma basis (10.7% on a published basis) for the financial year ended March 31, 2004.



Charge to Depreciation, Amortization, Net



Depreciation and amortization charges remained stable, decreasing to 1,586 million for the financial year ended March 31, 2005 from 1,587 million on a pro forma basis (1,184 million on a published
basis) for the financial year ended March 31, 2004.



Charge to Operating Provisions, Net



Charges to operating provisions amounted to 134 million for the financial year ended March 31, 2005 compared to 88 million on a pro forma basis (46 million on a published basis) for the previous financial year. This
increase is principally a result of increased provisions for doubtful debts of 15 million and increased provisions for pensions of 17 million.



Gain on Disposal of Flight Equipment, Net



Air France recorded a slight gain on aircraft disposals, net of 8 million for the year ended March 31, 2005 compared
to a gain of 9 million on a pro forma basis (7 million on a published basis) during the financial year ended March 31, 2004.



Other Operating Income and Charges, Net



Other charges amounted to 34 million for the financial year ended March 31, 2005, compared to 28 million on a pro forma basis (44
million on a published basis) for the prior financial year. Other charges for the financial year ended March 31, 2005 corresponded mainly to a charge of 61 million resulting from the joint operation of passenger and cargo activities and a
decrease of 43 million in the compensation received for slot swaps to 7 million for the financial year ended March 31, 2005 compared to 50 million on a pro forma basis for the financial year ended March 31, 2004.



Operating Income



General



Operating income for the financial year ended March 31, 2005 amounted to 497 million, increasing 20.0% from 414
million on a pro forma basis (139 million on a published basis) for the year ended March 31, 2004.



By Activity



For the financial year ended March 31, 2005, operating income from passenger activity increased 13.9%, rising to 312 million, compared to 274
million on a pro forma basis (67 million on a published basis) for the prior financial year. Operating income from cargo activities increased as well, rising to 95 million from 59 million on a pro forma basis (15 million on a
published basis) for the financial year ended March 31, 2004. Operating income from maintenance declined for the financial year ended March 31, 2005, declining to 48 million from 55 million on a pro forma basis (50 million on a
published basis) for the prior period.



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The following is a table showing a breakdown of operating revenues, operating income and tangible fixed
assets by activity for the years ended March 31, 2005 and 2004 (on both a pro forma and published basis):



|            |  |                      |  |                 |  |                           |  |                   |  |                 |  |                   |  |                 |  |                    
|----------- |  | -------------------- |  | --------------- |  | ------------------------- |  | ----------------- |  | --------------- |  | ----------------- |  | --------------- |  | -------------------
|            |  | Year ended March 31,
|            |  | 2005 Air France-KLM  |  | 2004 Pro forma  |  | 2004 Air France published
|            |  | Operatingrevenues    |  | Operatingincome |  | Tangiblefixedassets       |  | Operatingrevenues |  | Operatingincome |  | Operatingrevenues |  | Operatingincome |  | Tangiblefixedassets
|            |  | (in  millions)     
|Passenger   |  | 15,004               |  | 312             |  | 9,262                     |  | 14,044            |  | 274             |  | 10,260            |  | 67              |  | 6,688              
|Cargo       |  | 2,492                |  | 95              |  | 972                       |  | 2,277             |  | 59              |  | 1,412             |  | 15              |  | 371                
|Maintenance |  | 777                  |  | 48              |  | 1,300                     |  | 747               |  | 55              |  | 508               |  | 50              |  | 759                
|Other       |  | 805                  |  | 42              |  | 1,230                     |  | 714               |  | 26              |  | 157               |  | 7               |  | 88                 
|            |  |                      |  |                 |  |                           |  |                   |  |                 |  |                   |  |                 |  |                    
|Total       |  | 19,078               |  | 497             |  | 12,754                    |  | 17,782            |  | 414             |  | 12,337            |  | 139             |  | 7,906              
|            |  |                      |  |                 |  |                           |  |                   |  |                 |  |                   |  |                 |  |                    



Restructuring
Costs



Restructuring costs for the financial year ended
March 31, 2005 amounted to 21 million, compared to 22 million on a pro forma and published basis for the previous financial year. During the financial year ended March 31, 2005, KLM decided to outsource to third parties part of its
traffic registration, interline registration and sales control activities, as well as its maintenance activities with respect to the KLM regional Fokker fleet. Additionally, KLM decided to choose the Schiphol hub as a base for their operations in
Great Britain, requiring part of the operation of KLMs 100% subsidiary KLM Cityhopper to be relocated to the Netherlands. KLM accordingly accounted for a restructuring provision of 11 million.



As of March 31, 2003, KLM recorded a restructuring provision of 75
million to cover redundancy costs associated with the execution of KLMs cost cutting program. As of May 1, 2004, the provision related to this program amounted to 56 million, of which 39 million was utilized in the period May 1,
2004 through March 31, 2005 to cover redundancy costs incurred under KLMs social plan. As of March 31, 2005, the remaining provision, amounting to 17 million, is expected to be utilized within one year.



Restructuring charges also include a restructuring project to improve
Servairs performance.



During the financial year ended
March 31, 2004, restructuring costs (22 million on a pro forma and published basis) primarily related to costs of the second progressive early-retirement plan implemented by Air France.



Net Financial Charges



Net financial charges amounted to 219 million for the financial year
ended March 31, 2005, an increase of 17.1% from the 187 on a pro forma basis (60 million on a published basis) recorded during the previous financial year. Net interest expense amounted to 202 million for the financial year ended
March 31, 2005, a decrease of 11.4% from the 228 on a pro forma basis (101 million on a published basis) recorded during the previous financial year due to the lower interest rates applicable over the period (3.80% for the year ended
March 31, 2005 compared to 4.10% for the year ended March 31, 2004). Foreign exchange losses for the financial year ended March 31, 2005 include an unrealized net gain of 1 million, compared to a net gain of 31 million on a pro forma
basis for the year ended March 31, 2004. Additionally, for the financial year ended March 31, 2005, we recognized a financial gain in other financial income of 37.9 million arising from the financing of two Air France aircraft. Other financial
income also included dividends received from non-consolidated companies in the amount of 8 million for the year ended March 31, 2005 compared with 3 million on a pro forma basis for the year ended March 31, 2004.



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Gains on Disposals of Subsidiaries and Affiliates, Net



Gains on disposals of subsidiaries and affiliates amounted to 67
million for the financial year ended March 31, 2005, compared to 5 million on a pro forma basis (5 million on a published basis) for the previous financial year. The gain are mainly due to the transfer of Amadeus France and its
subsidiary Amadeus France Service to Amadeus GTD on December 30, 2004.



During the financial year ended March 31, 2004, disposals of subsidiaries and affiliates essentially involved the sale of Société immobilière 3F shares held by Air France.



Pre-tax Income



Pre-tax income amounted to 324 million for the financial year ended
March 31, 2005, up 54.3% from 210 million on a pro forma basis (62 million on a published basis) for the financial year ended March 31, 2004.



Net Income of Equity Affiliates



The net income of equity affiliates for the financial year ended March 31, 2005 remained stable at 73 million compared to the previous year on a pro
forma basis (an increase of 37.7% from 53 million on a published basis).



Amortization of Goodwill



For the financial year ended March 31, 2005, amortization of goodwill remained stable at 58 million compared to the previous year on a pro forma basis (increased from (15) on a published basis).



Income Tax



For the financial year ended March 31, 2005, we had a total tax charge of
96 million, compared to a tax charge of 40 million on a pro forma basis (2 million on a published basis) for the previous period due to increased pre-tax income and taxes payable upon our sale of Amadeus France.



Net Income



Net income for the financial year ended March 31, 2005 increased 20.2%, to
351 million from 292 million on a pro forma basis (93 million on a published basis) for the financial year ended March 31, 2004.



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Comparison of Financial Years Ended March 31, 2004 and March 31, 2003



The following discussion is of Air Frances results of operations for
the financial year ended March 31, 2004 compared to the financial year ended March 31, 2003.



Total Operating Revenues



The following table sets forth operating revenues by type of activity of Air France for the financial years ended March 31, 2004 and March 31, 2003, and
the percentage change between the two financial years:



|                         |  |                                     |  |        |  |        |   
|------------------------ |  | ----------------------------------- |  | ------ |  | ------ | --
|                         |  | Year ended March 31,                |  |        | 
|                         |  | 2004                                |  | 2003   |  | Change |   
|                         |  | (in  millions, except percentages) | 
|Scheduled passenger      |  | 9,465                               |  | 9,713  |  | (2.6   | )%
|Other passenger          |  | 795                                 |  | 814    |  | (2.3   | )%
|                         |  |                                     |  |        |  |        |   
|Total passenger          |  | 10,260                              |  | 10,527 |  | (2.5   | )%
|                         |  |                                     |  |        |  |        |   
|Scheduled cargo          |  | 1,264                               |  | 1,314  |  | (3.8   | )%
|Other cargo              |  | 148                                 |  | 165    |  | (10.3  | )%
|                         |  |                                     |  |        |  |        |   
|Total cargo              |  | 1,412                               |  | 1,479  |  | (4.5   | )%
|                         |  |                                     |  |        |  |        |   
|Maintenance              |  | 508                                 |  | 540    |  | (5.9   | )%
|Other                    |  | 157                                 |  | 141    |  | 11.3   | )%
|                         |  |                                     |  |        |  |        |   
|Total Operating Revenues |  | 12,337                              |  | 12,687 |  | (2.8   | )%
|                         |  |                                     |  |        |  |        |   



Air Frances
total operating revenues for the financial year ended March 31, 2004 decreased 2.8% compared to the previous financial year, declining to 12,337 million from 12,687 million. For the financial year ended March 31, 2004, revenues from
passenger and cargo operations, which represented 94.6% of Air Frances consolidated revenues, decreased by 2.8% compared to revenues from passenger and cargo operations for the financial year ended March 31, 2003. Revenues from passenger
operations (83.2% of total operating revenues) decreased 2.5% compared to such revenues for the prior period, with a 2.6% decrease in scheduled passenger revenues in addition to a decline of 2.3% in other passenger revenues principally due to the
continued weakness of the European economy, the effect of the war in Iraq, the effect of SARS and a series of air traffic control strikes. Revenues from cargo operations (11.4% of total operating revenues) decreased by 4.5% compared to such revenues
for the prior period with a 3.8% decrease in scheduled cargo revenues in addition to a 10.3% decline in other cargo revenues resulting primarily from the depreciation of the dollar against the euro. Maintenance revenues decreased slightly primarily
as a result of the depreciation of the dollar against the euro. Other revenues increased by 11.3%. In addition, as mentioned under the heading Critical Accounting Policies above, we changed our estimates for computing the
Fréquence Plus liability in 2003 to more adequately reflect the expected behavior of our customers. This change in estimates had a positive impact on revenues of approximately 23 million.



Passenger Activity



Operating revenues from passenger activity for the financial year ended March
31, 2004 decreased 2.5%, while scheduled passenger revenues decreased 2.6% due to negative exchange rate effects.



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##### Table of Contents

The following table shows passenger capacity, traffic and load factor for the financial year ended March
31, 2004 and the change in these operating measures as compared to the previous financial year:



|                          |  |                |  |          |               |  |              |                       |          |    |  |        |  |          |     
|------------------------- |  | -------------- |  | -------- | ------------- |  | ------------ | --------------------- | -------- | -- |  | ------ |  | -------- | ----
|                          |  | Capacity (ASK) |  |          | Traffic (RPK) |  |              | Load factor (RPK/ASK) |         
|                          |  | (inmillions)   |  | (change) |               |  | (inmillions) |                       | (change) |    |  | (in %) |  | (change) |     
|Long-haul                 |  | 97,317         |  | 1.9      | %             |  | 77,682       |                       | 1.3      | %  |  | 79.8   |  | (0.5     | )pts
|International medium-haul |  | 22,080         |  | 6.2      | %             |  | 14,047       |                       | (4.5     | )% |  | 63.6   |  | (1.0     | )pts
|Domestic medium-haul      |  | 15,047         |  | 0.5      | %             |  | 9,915        |                       | 1.5      | %  |  | 65.9   |  | 0.4      | pts 
|                          |  |                |  |          |               |  |              |                       |          |    |  |        |  |          |     
|Total                     |  | 134,444        |  | 2.4      | %             |  | 101,644      |                       | 1.7      | %  |  | 75.6   |  | (0.5     | )pts
|                          |  |                |  |          |               |  |              |                       |          |    |  |        |  |          |     



Capacity during the
financial year ended March 31, 2004 increased slightly, rising 2.4% over the prior period. Compared to the financial year ended March 31, 2003, growth in capacity was strongest over the international medium-haul network, which rose 6.2% for the year
ended March 31, 2004, while long-haul capacity increased slightly by 1.9% and domestic medium-haul capacity by 0.5%.



The first six months of the financial year ended March 31, 2004, and in particular the first quarter, were affected by the weak European economy, the SARS
epidemic, and by a series of air-traffic controller strikes related to pension reform. The first signs of recovery were recorded in June 2004 and continued into the second quarter, although traffic in the Asia-Pacific region remained below the
levels before the SARS crisis. At September 30, 2003, traffic was down 0.5% from the first half of the financial year ended March 31, 2003, while capacity increased 0.7%, resulting in a decline in load factor of 0.9 points to 76.4%. Passenger
traffic remained relatively stable at 22.4 million passengers during the six months ended September 30, 2003 as compared to the first six months of the preceding financial year.



For the financial period ended September 30, 2003, traffic on the long-haul network was impacted as well by the weakness of
the European economy, the effect of the war in Iraq and the SARS epidemic. Traffic declined 1.1% with relatively stable capacity, increasing 0.5%, resulting in a load factor of 79.7%. The two sectors most affected were Asia and the Middle East.



On the medium-haul network for the financial period ended
September 30, 2003, traffic and capacity increased 1.7% and 4.8%, respectively, resulting in a 2 point decline in the load factor to 68.1%. Traffic in the domestic market stabilized, increasingly only 0.8%, while capacity declined 3.3%. The load
factor improved by 2.7 points to 67.8%.



In the second six
months of the financial year ended March 31, 2004, recovery continued with an increase in traffic and capacity of 4.1% and 4.2%, respectively. The load factor remained stable at 74.8% compared to the second half of the previous year. Air France
carried 21.3 million passengers during this period compared with 19.5 million passengers in the second half of the previous year, representing an increase of 9.2%. Long-haul traffic grew in line with capacity, growing 3.4% and 3.7%, respectively,
returning to a load factor of 80%. On the international medium-haul segment, in contrast to last year, the second six months saw an increase in traffic and grew 7.9% compared to the second six months of the previous financial year. The load factor
stabilized at 59.5% taking into account a capacity increase of 7.6%. On domestic routes, traffic was up 2.2% with capacities up 4.6%.



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##### Table of Contents

The table below shows scheduled passenger revenues by destination and by sales region for the year ended
March 31, 2004, and the change in these revenues compared to the previous period:



|                           |  |                             |  |                |                 |          |    |  |          |  |                |  |          |   
|-------------------------- |  | --------------------------- |  | -------------- | --------------- | -------- | -- |  | -------- |  | -------------- |  | -------- | --
|                           |  | Scheduled Passenger Revenue | 
|                           |  | By destination              |  |                | By area of sale |         
|                           |  | (in  m)                    |  | (in % oftotal) |                 | (change) |    |  | (in  m) |  | (in % oftotal) |  | (change) |   
|France                     |  | 2,024                       |  | 21.4           |                 | 5.7      | %  |  | 4,635    |  | 48.9           |  | 0.8      | % 
|Caribbean and Indian Ocean |  | 1,023                       |  | 10.8           |                 | 2.9      | %  |  | 348      |  | 3.7            |  | 2.4      | % 
|Europe and North Africa    |  | 2,501                       |  | 26.4           |                 | (2.6     | )% |  | 2,099    |  | 22.2           |  | 0.3      | % 
|Africa and Middle East     |  | 1,058                       |  | 11.2           |                 | (3.6     | )% |  | 577      |  | 6.1            |  | (3.5     | )%
|North and Latin America    |  | 1,850                       |  | 19.5           |                 | (5.9     | )% |  | 1,169    |  | 12.4           |  | (12.0    | )%
|Asia                       |  | 1,009                       |  | 10.7           |                 | (14.1    | )% |  | 637      |  | 6.7            |  | (15.9    | )%
|                           |  |                             |  |                |                 |          |    |  |          |  |                |  |          |   
|Total                      |  | 9,465                       |  | 100.0          |                 | (2.6     | )% |  | 9,465    |  | 100.0          |  | (2.6     | )%
|                           |  |                             |  |                |                 |          |    |  |          |  |                |  |          |   



The following table
shows a breakdown of total passenger revenues, scheduled passenger revenues, passenger unit revenue per ASK and yield (passenger unit revenue per RPK) for the years ended March 31, 2004 and 2003, and the percentage change between these periods:



|                                             |  |                      |  |        |   
|-------------------------------------------- |  | -------------------- |  | ------ | --
|                                             |  | Year ended March 31, | 
|                                             |  | 2004                 |  | Change |   
|Total passenger revenues (in  millions)     |  | 10,260               |  | (2.5   | )%
|Scheduled passenger revenues (in  millions) |  | 9,465                |  | (2.6   | )%
|Unit revenue per ASK (in  cents)            |  | 7.02                 |  | (5.0   | )%
|Yield (unit revenue per RPK) (in  cents)    |  | 9.29                 |  | (4.3   | )%



Cargo Activity



Operating revenues from total cargo activity for the
financial year ended March 31, 2004 decreased 4.5% to 1,412 million from 1,479 million for the financial year ended March 31, 2003. The decrease in revenues from cargo activities resulted primarily from the depreciation of the dollar
against the euro and the weakened international economy.



The
following table shows cargo capacity, traffic and load factor for the financial year ended March 31, 2004 and the change in these operating measures as compared to the previous financial year.



|               |  |          |               |  |               |                       |          |    |  |        |  |          |  
|-------------- |  | -------- | ------------- |  | ------------- | --------------------- | -------- | -- |  | ------ |  | -------- | -
|Capacity (ATK) |  |          | Traffic (RTK) |  |               | Load factor (RTK/ATK) |         
|(in millions)  |  | (change) |               |  | (in millions) |                       | (change) |    |  | (in %) |  | (change) |  
|8,487          |  | 1.8      | %             |  | 5,432         |                       | (0.2     | )% |  | 64.0   |  | (1.3     | )



During the financial
year ended March 31, 2004 cargo activity remained relatively stable, in spite of the weakened international economy and the weakness of the dollar against the euro. Cargo capacity increased 1.8% compared to the financial year ended March 31, 2003,
while traffic decreased 0.2%, resulting in a decline of 1.3% in the load factor to 64.0% for the financial year ended March 31, 2004. This decrease was primarily due to the negative foreign exchange effects, particularly the weak dollar.



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##### Table of Contents

The following table shows the geographic mix of Air Frances scheduled cargo operating revenue for
the financial year ended March 31, 2004 and the percentage change in this mix from the previous financial year:



|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   
|-------------------------- |  | ----------------------- |  | -------------- | --------------- | -------- | -- |  | -------- |  | -------------- |  | -------- | --
|                           |  | Scheduled cargo revenue | 
|                           |  | By destination          |  |                | By sales region |         
|                           |  | (in  m)                |  | (in % oftotal) |                 | (change) |    |  | (in  m) |  | (in % oftotal) |  | (change) |   
|France and Europe          |  | 181                     |  | 14.3           |                 | 28.4     | %  |  | 676      |  | 53.5           |  | (1.6     | )%
|Caribbean and Indian Ocean |  | 153                     |  | 12.1           |                 | (0.6     | )% |  | 40       |  | 3.2            |  | (11.1    | )%
|Africa-Middle East         |  | 154                     |  | 12.2           |                 | (1.9     | )% |  | 86       |  | 6.8            |  | (11.3    | )%
|North and Latin America    |  | 342                     |  | 27.1           |                 | (11.4    | )% |  | 134      |  | 10.6           |  | (5.0     | )%
|Asia                       |  | 434                     |  | 34.3           |                 | (8.8     | )% |  | 328      |  | 25.9           |  | (4.7     | )%
|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   
|Total                      |  | 1,264                   |  | 100.0          |                 | (3.8     | )% |  | 1,264    |  | 100.0          |  | (3.8     | )%
|                           |  |                         |  |                |                 |          |    |  |          |  |                |  |          |   



Revenue from scheduled
cargo activity for the financial year ended March 31, 2004 declined in North America as a result of the weakened international economy and the weakness of the dollar against the euro, which fell 11.4% from the previous financial year. Scheduled
cargo revenue from France and Europe, which are euro-based, experienced significant growth, increasing 28.4% from the previous financial year.



The following table sets forth total cargo revenue, revenue from scheduled cargo, unit revenue per available ton-kilometer (ATK) of scheduled cargo and
unit revenue per revenue ton-kilometer (RTK) of scheduled cargo for the financial years ended March 31, 2004 and March 31, 2003, as well as the percentage change between such periods:



|                                             |  |                      |  |       |  |        |   
|-------------------------------------------- |  | -------------------- |  | ----- |  | ------ | --
|                                             |  | Year ended March 31, |  |       | 
|                                             |  | 2004                 |  | 2003  |  | Change |   
|Total cargo revenue (in  millions)          |  | 1,412                |  | 1,479 |  | (4.5   | )%
|Revenue from scheduled cargo (in  millions) |  | 1,264                |  | 1,314 |  | (3.8   | )%
|Unit revenue per ATK (in  cents)            |  | 14.89                |  | 15.74 |  | (5.4   | )%
|Unit revenue per RTK (in  cents)            |  | 23.27                |  | 24.11 |  | (3.6   | )%



Unit revenue per
available ton-kilometer decreased by 5.4%, reflecting a negative currency impact of 6.1%. Unit revenue per revenue ton-kilometer decreased 3.6% reflecting such currency impact.



Maintenance Activity



Operating revenues of Air Frances maintenance activity for the financial year ended March 31, 2004 decreased 5.9% to 508 million from
540 million for the financial year ended March 31, 2003. The decline in revenues resulted primarily from the depreciation of the dollar against the euro.



Other Activity



Consolidated revenues for Air Frances other activities increased 11.3% for the year ended March 31, 2004 compared to the year ended March 31, 2003,
to 157 million from 141 million.



External
Expenses



External expenses for the financial year
ended March 31, 2004 declined 5.9% over the previous year, falling to 6,754 million from 7,174 million for the year ended March 31, 2003. The decline in external expenses resulted principally from favorable exchange rate fluctuations and
the continued implementation of our cost-savings program.



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##### Table of Contents

The following table shows a breakdown of Air Frances external expenses for the financial years
ended March 31, 2004 and March 31, 2003 as well as the percentage change between such periods:



|                                           |  |                                     |  |       |  |        |   
|------------------------------------------ |  | ----------------------------------- |  | ----- |  | ------ | --
|                                           |  | Year ended March 31,                |  |       | 
|                                           |  | 2004                                |  | 2003  |  | Change |   
|                                           |  | (in  millions, except percentages) | 
|Jet fuel                                   |  | 1,302                               |  | 1,369 |  | (4.9   | )%
|Chartering costs                           |  | 414                                 |  | 415   |  | (0.2   | )%
|Aircraft operating lease costs             |  | 458                                 |  | 522   |  | (12.3  | )%
|Landing fees and en route charges          |  | 913                                 |  | 934   |  | (2.2   | )%
|Catering                                   |  | 296                                 |  | 319   |  | (7.2   | )%
|Handling charges and other operating costs |  | 756                                 |  | 768   |  | (1.6   | )%
|Aircraft maintenance costs                 |  | 381                                 |  | 477   |  | (20.1  | )%
|Commercial and distribution costs          |  | 1,051                               |  | 1,157 |  | (9.2   | )%
|Other external expenses                    |  | 1,183                               |  | 1,213 |  | (2.5   | )%
|                                           |  |                                     |  |       |  |        |   
|Total                                      |  | 6,754                               |  | 7,174 |  | (5.9   | )%
|                                           |  |                                     |  |       |  |        |   



Jet fuel



Jet fuel expenses decreased 4.9% as a result of three
principal factors: a relatively stable fuel consumption rate, a favorable average U.S. currency exchange rate effect of 15.7%, and a 10.5% increase in fuel purchase prices after hedging. Despite the sharp rise in fuel prices during the financial
year ended March 31, 2004 linked to the war in Iraq, Air France was able to control fuel costs through its hedging policy. See Item 3: Key InformationRisk FactorsRisks Related to the BusinessAir France-KLM may be adversely
affected by high jet fuel prices.



During the year ended
March 31, 2004, jet fuel expenses were 10.6% of Air Frances operating revenues. In contrast, jet fuel expenses were 10.8% of operating revenues for the year ended March 31, 2003.



Chartering Costs



Chartering costs remained relatively stable decreasing 0.2% during the year ended March 31, 2004, falling to 414 million from 415 million
during the year ended March 31, 2003.



Aircraft Operating
Lease Costs



For the year ended March 31, 2004, aircraft
operating lease costs decreased by 12.3% compared to the previous period, decreasing to 458 million from 522 million. The decrease resulted primarily from the depreciation of the dollar against the euro.



Landing Fees and en Route Charges



Landing fees and en route charges decreased 2.2% to 913 million for the
financial year ended March 31, 2004 from 934 million during the previous financial year.



Catering



For the
financial year ended March 31, 2004, catering expenses decreased 7.2% to 296 million compared to 319 million for the year ended March 31, 2003. The decrease was mainly due to the impact of the decline in passenger activity and the
implementation of cost reduction programs.



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##### Table of Contents

Handling Charges and Other Operating Expenses



Handling charges and other operating expenses totaled 756 million for
the financial year ended March 31, 2004, decreasing 1.6% from 768 million for the year ended March 31, 2003. Handling charges decreased despite the increases in capacity over the year, particularly corresponding to the opening of terminal 2E
at Roissy-CDG. This decrease resulted from increased charges we incurred during the financial year ending March 31, 2003 relating to strikes by security companies at Roissy-CDG and Orly airports.



Aircraft Maintenance Costs



Aircraft maintenance costs decreased 20.1% during the year ended March 31,
2004, falling to 381 million from 477 million for the prior year. This decrease was primarily due to the depreciation of the dollar against the euro, lower levels of activity and the termination of the Concorde service.



Commercial and Distribution Costs



Commercial and distribution costs decreased by 9.2% for the financial year
ended March 31, 2004, declining to 1,051 million from 1,157 during the prior year. The decrease in commercial and distribution expenses resulted primarily from a reduction in travel agency commissions and spending on advertising.



Other External Expenses



Other external expenses decreased 2.5% for the year ended March 31, 2004,
declining to 1,183 million from 1,213 million for the year ended March 31, 2003. The decrease in other external expenses resulted mainly from a decrease in insurance premiums (down 22.7% for société Air France). Air France
renegotiated its insurance coverage in December 2002 and benefited from the full-year effect of the decreased premiums during the financial year ended March 31, 2004.



Salaries and Related Costs



Salaries and related costs increased 5.8% for the year ended March 31, 2004, rising to 4,079 million from 3,856
million for the prior year. The 5.8% increase derived principally following an increase in social security contributions linked to the reform of subsidies for the transition to the 35-hour week. Payroll costs increased by 5% and social security
contributions by 8.8%. The average workforce remained relatively stable with a slight increase of 0.2%.



Taxes Other than Income Tax



Taxes and duties, other than income tax, consisting principally of the French business tax (taxe professionnelle) and taxes based on employee salaries,
remained stable, decreasing by 0.5% to 186 million for the financial year ended March 31, 2004 from 187 million for the prior year.



Gross Operating Result



Gross operating result for the financial year ended March 31, 2004 decreased 10.3%, decreasing to 1,318 million from 1,470 million for the
year ended March 31, 2003. Gross operating results represented 10.7% of Air Frances total operating revenues, compared to 11.6% of such revenues for the prior financial year.



Charge to Depreciation, Amortization, Net



Depreciation and amortization charges decreased 0.9%, decreasing to 1,184 million from 1,195 million for the
financial year ended March 31, 2003.



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##### Table of Contents

Charge to Operating Provisions, Net



Charges to operating provisions amounted to 46 million for the
financial year ended March 31, 2004 compared to 115 million for the previous financial year. This decrease is principally a result of a one-time charge of 59 million taken during the financial year ended March 31, 2003 following the
decision to terminate Concorde flights effective as of June 1, 2003.



Gain on Disposal of Flight Equipment, Net



Air France recorded a net gain on aircraft disposals of 7 million for the year ended March 31, 2004 compared to 30 million during the prior financial year. The net gain on aircraft disposals during the year ended March 31, 2004
resulted from the sale of one Airbus A320, one Airbus A330, one Boeing 737, one Boeing 777-200 and three Boeing 747-400 as well as three regional aircraft.



Other Operating Income and Charges, Net



Other income amounted to 44 million for the financial year ended March 31, 2004, compared to 2 million for the prior period. For the financial
year ended March 31, 2004, other income included gains of 5 million from the joint operation of passenger and cargo lines (compared to 5 million during the previous financial year), 7 million in software fees (compared to 8
million during the previous financial year), 50 million in income linked to financial compensation from other airlines corresponding to an exchange of slots at Londons Heathrow airport, net losses on abandoned fixed assets and aircraft
replacements in the amount of 2 million and other expenses in the amount of 2 million.



Operating Income



General



Operating income for the financial year ended March 31, 2004 amounted to 139 million, decreasing 27.6% from 192 million for the year ended
March 31, 2003. For the year ended March 31, 2004, operating income represented 1.1% of consolidated revenues. Air France contributed 108 million to operating income, while the operating income from regional subsidiaries contributed 17
million after such subsidiaries contributed an operating income of 6 million during the prior year. The balance came from other subsidiaries.



By Activity



During the financial year ended March 31, 2004, operating income from passenger activity decreased 33.7%, falling to 67 million, compared to
101 million during the prior period. Operating income from cargo activities decreased as well, declining to 15 million from 48 million during the financial year ended March 31, 2003. Operating income from maintenance declined
during the financial year ended March 31, 2004, declining to 50 million from 67 million for the prior period.



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The following is a table showing a breakdown of the operating revenues, operating income and tangible
fixed assets by activity for the years ended March 31, 2004 and 2003:



|            |  |                      |  |                 |  |                     |  |                   |  |                 |   |  |                    
|----------- |  | -------------------- |  | --------------- |  | ------------------- |  | ----------------- |  | --------------- | - |  | -------------------
|            |  | Year ended March 31,
|            |  | 2004                 |  | 2003           
|            |  | Operatingrevenues    |  | Operatingincome |  | Tangiblefixedassets |  | Operatingrevenues |  | Operatingincome |   |  | Tangiblefixedassets
|            |  | (in  millions)     
|Passenger   |  | 10,260               |  | 67              |  | 6,688               |  | 10,527            |  | 101             |   |  | 6,978              
|Cargo       |  | 1,412                |  | 15              |  | 371                 |  | 1,479             |  | 48              |   |  | 508                
|Maintenance |  | 508                  |  | 50              |  | 759                 |  | 540               |  | 67              |   |  | 580                
|Other       |  | 157                  |  | 7               |  | 88                  |  | 141               |  | (24             | ) |  | 96                 
|            |  |                      |  |                 |  |                     |  |                   |  |                 |   |  |                    
|Total       |  | 12,337               |  | 139             |  | 7,906               |  | 12,687            |  | 192             |   |  | 8,162              
|            |  |                      |  |                 |  |                     |  |                   |  |                 |   |  |                    



Restructuring
Costs



Restructuring costs for the financial year ended
March 31, 2004 amounted to 22 million, compared to 13 million for the previous financial year, and resulted in part from costs of the second progressive early-retirement plan implemented at Air France during the financial year ended
March 31, 2004. This plan provides for the progressive retirement of 1,000 people and the hiring of 500 new members of staff. This plan, offered to full-time employees aged 55 and over, involves an adjustment to the working time of employees for the
duration of the plan while complying with an average working time of 50%. Over this period, employees receive 80% of their initial salary, with 50% paid by Air France and 30% by the Fonds National pour lEmploi (FNE). Air France
contributes to the financing of the FNE and pays higher contributions into the supplementary pension funds for the duration of the plan.



During the financial year ended March 31, 2003, these restructuring costs (13 million) primarily corresponded to the closure of the Nouméa
base for commercial cabin crew, following the decision by Air France to stop operating flights between New Caledonia and Japan using its own resources.



Net Financial Charges



Net financial charges amounted to 60 million for the financial year ended March 31, 2004, a decrease of 29.4% from the 85 million recorded
during the previous financial year. Net interest expense amounted to 101 million for the financial year ended March 31, 2004, a decrease of 9% from the 111 million recorded during the previous financial year due to the lower interest
rates applicable over the period and the reimbursement of loans with higher interest rates. The net release of financial provisions of 6 million for the financial year ended March 31, 2004 includes 34 million in provisions released
relating to the shares held by Air France and the commitments taken in connection with stock options granted to pilots (19 million) following the increase in the Air France share price, the settlement of a tax dispute with the German tax
authorities for which late payment penalty provisions had been made (8 million), losses on foreign exchange options maturing (7 million) and an allowance for the impairment in value of Air Frances interest in Opodo (26
million).



In addition, included in net financial charges are
foreign exchange gains amounting to 35 million for the financial year ended March, 31 2004 (of which 31 million were unrealized as of March 31, 2004).



Gains on Disposals of Subsidiaries and Affiliates, Net



Gains on disposals of subsidiaries and affiliates amounted to 5 million
for the financial year ended March 31, 2004, compared to 4 million for the previous financial year. The gain resulted from the sale of HLM Immobilière 3F shares held by Air France.



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Pre-tax Income



Pre-tax income amounted to 62 million for the financial year ended March 31, 2004, down 36.7% from 98 million
for the previous period.



Net Income of Equity Affiliates



The net income of equity affiliates for the financial
year ended March 31, 2004 was 53 million, increasing 82.8% from 29 million during the financial year ended March 31, 2003. The increase primarily reflects income from Air Frances 23.4% stake in Amadeus GTD as well as income from
Air France Partnairs Leasing (AFPL) through which Air France leases aircraft through various operating leases. See Item 4: Information on the CompanyOther Air France HoldingsAmadeus.



Amortization of Goodwill



For the financial year ended March 31, 2004, amortization of goodwill
amounted to 15 million, a decrease of 6.3% from 16 million for the previous period.



Income Tax



For the financial year ended March 31, 2004, Air France had a total tax charge of 2 million, compared to a tax credit of 13 million for the
previous period. For the financial year ended March 31, 2004, Air France recorded an income of 31 million (corresponding to the release of the income tax provision of 33 million, the recognition of income tax expenses of 17 million
and a deferred tax asset of 14 million) related to the settlement of the tax dispute with the German tax authorities on the sale of the Amadeus KG securities. A compromise was reached by the joint French-German commission, in which the German
tax authorities agreed to reduce their demand to 50% of the tax initially claimed and to cancel all late penalties to be paid by Air France.



Net Income



Net income for the year ended March 31, 2004 decreased 22.5%, declining to 93 million from 120 million for the prior year.



Liquidity and Capital Resources



Liquidity



We believe that our liquidity position exceeds the minimum required to
sustain our business adequately and that our working capital is sufficient for our present requirements. We also believe that additional sources of liquidity are available to us if they are needed. Our liquidity position is strongly affected by
aircraft purchases, which under their terms may provide for payments to the aircraft manufacturer in advance of delivery and therefore before the aircraft can be used to generate revenue.



Our principal source of liquidity is operating cash flows, mainly from passengers, who pay for their tickets in advance of
receiving transport. Cash flows from operations increase in the summer season (between April and October), when there is greater passenger activity, and decline in the winter, when passenger activity decreases. Cash flows from operations are also
affected by the factors that increase or decrease passenger activity generally.



As of March 31, 2005, we had 2,254 million in marketable securities. In addition, Air Frances external sources of funding include a 1 billion syndicated credit facility established in August 2001 and
renewed and increased in April 2005 to 1.2 billion for a period of five years with an option to extend to seven years (which, as of the date of this annual report is undrawn). Air France has a medium-term credit line in the amount of 52
million, of which 28 million was drawn as at March 31, 2005, with maturity dates between April 2004 and



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October 2006. Air France has additionally 198 million in other lines of credit, capital leases, other bank loan facilities and bonds. There are no
unusual provisions including, without limitation, those relating to changes in credit rating or ratings outlook (or the inability to achieve changes), in any of our debt, lease or other arrangements that could trigger a requirement for an early
payment, additional collateral support, changes in terms, acceleration of maturity or the creation of additional financial obligations to any material extent. Finally, on April 19,2005, Air France completed an offering of 449,999,989.50
principal amount of 2.75% bonds due April 1,2020 convertible into and/or exchangeable for new and/or existing shares of Air France-KLM. As of March 31, 2005, 125 million of Air Frances debt was subject to financial covenants, which are
limited to coverage of interest expense and the ratio of unencumbered assets to unsecured debt. Air Frances 1.2 billion undrawn syndicated credit facility noted above also contains financial covenants, although coverage extends to
operating lease rental expenses as well as interest expense in this facility.



KLMs external sources of liquidity consist of its 500 million commercial paper program, mortgages secured by aircraft and non-fleet assets, and sale-and-lease back transactions of aircraft and non-fleet
assets. As of March 31, 2005, no amounts were outstanding under KLMs commercial paper program. Currently there are no unusual provisions in any of KLMs financial guarantees, debt or lease agreements or other arrangements that could
trigger a requirement for an early payment, additional collateral support, changes in terms, acceleration of maturity, or the creation of additional financial obligations to any material extent.



We believe that it would be possible to increase liquidity, if necessary, by
entering into additional sale and lease-back transactions with respect to unencumbered fully-owned aircraft and additional bank facilities.



Cash Flows



Cash flows from Operating Activities



For the financial year ended March 31, 2005, cash flows from operating activities were 1,955 million. For the financial year ended March 31, 2004,
for Air France only, cash flows from operating activities were 1,201 million. The increase in cash flows from operating activities resulted from an increase in our gross operating results as a result of the inclusion of the results of
operations of KLM in our financial statements from May 1, 2004, and slight positive change in working capital.



For the financial year ended March 31, 2004, cash flows from operating activities increased by 7.7%, to 1.20 billion from 1.12 billion for the
prior period. The increase in cash flows from operating activities resulted from positive changes in working capital which returned to customary levels during the financial year ended March 31, 2004 after an exceptional period the previous year.



Cash Flows from Investing Activities



Cash flows used in investing activities for the financial year ended March
31, 2005 amounted to 1,358 million. For the financial year ended March 31, 2004, for Air France only, cash flows from investing activities were 849 million. This increase was principally due to the inclusion of the results of operations
of KLM in our financial statements from May 1, 2004 including KLM cash acquired at the date of the business combination in an amount of 575 million as well as increases of purchases of tangible and intangible fixed assets (principally
aircraft) and the acquisition of treasury shares in an amount of 32 million in connection with Air France pilots stock option plan.



Net cash used in investing activities for the financial year ended March 31, 2004 amounted to 849 million, a decrease of 20.9% compared to
1,074 million for the financial year ended March 31, 2003. Cash flows used in investing activities were financed 141% by cash flows from operating activities, which totaled 1.2 billion, permitting a reduction of Air France group debt.



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Cash Flows from Financing Activities



Cash flows from financing activities amounted to a net inflow of 266
million for the financial year ended March 31, 2005. For the financial year ended March 31, 2004, for Air France only, cash flows from financing activities amounted to a net inflow of 386 million. This decrease was principally as a result of
an increase in repayments of capital lease obligations of 360 million. Other repayment of debt amounted to 385 million for the financial year. New debt amounted to 858 million.



Cash flows from financing activities increased to a net inflow of 386
million for the financial year ended March 31, 2004, from a net outflow of 415 million for the previous period. To ensure its refinancing needs, Air France raised 901 million over the year ended March 31, 2004. Debt repayments over the
period totaled 497 million and primarily covered financial debt in the amount of 345 million, including a bond payment in June 2003 for 169 million as well as debts on financial lease agreements of 152 million.



In July 2003, Air France finalized the securitization of aircraft assets in
the amount of 435 million (including 337 million over the financial year ended March 31, 2003 and 98 million corresponding to a pre-financing of assets to be received in the financial year ending March 31, 2005). This financing
arrangement was secured by 16 aircraft. During the financial year ended March 31, 2004, Air France refinanced its corporate headquarters for an amount of 137 million under a financial lease and issued a loan syndicated with credit
institutions.



Capital Expenditure



Air France-KLMs total capital expenditures on tangible and intangible
fixed assets and acquisitions of subsidiaries and affiliates amounted to 2.1 billion for the financial year ended March 31, 2005. For the financial year ended March 31, 2004, for Air France only, total capital expenditures amounted to
1.28 billion. Capital expenditures for the financial years ended March 31, 2005 and 2004 principally involved aircraft purchases.



Acquisitions of aircraft and flight equipment in the year ended March 31, 2005 included nine Boeing 777-300 aircraft added to Air Frances fleet as
well as four B777-200 aircraft added to KLMs fleet. See Item 4: Information on the CompanyBusiness of Air France-KLMThe Fleet. Other significant capital expenditures included payments for our new E.O.L.E. plant,
construction of our new building for flight operation at Roissy-CDG, CitePN, and investments in our information technology systems..



Air France-KLM funds its capital expenditures through cash flows from the operations, debt, capital leases, and proceeds from the sale of subsidiaries and
from the sale of aircraft. Air France-KLMs commitments for capital expenditures are principally to purchase aircraft under aircraft acquisition agreements. As of March 31, 2005, Air France-KLMs commitments relating to the purchase of
aircraft (in terms of firm orders) was 2,962 million. As of March 31, 2004, Air Frances commitments relating to the purchase of aircraft (in terms of firm orders) was 3,176 million. These commitments are denominated in dollars and
are converted into euro at the close of each relevant financial year.



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Capital Resources



The following table presents the amounts of short-term and long-term debt and capital lease obligations for
Air France-KLM at March 31, 2005 and for Air France only at March 31, 2004:



|                                                          |  |                     |  |                          
|--------------------------------------------------------- |  | ------------------- |  | -------------------------
|                                                          |  | At March 31,       
|                                                          |  | 2005 Air France-KLM |  | 2004 Air France published
|                                                          |  | (in  millions)    
|Perpetual subordinated loan securities (TDI)              |  | 571                 |  | 116                      
|Bonds                                                     |  |                    |  | 18                       
|Capital lease obligations                                 |  | 4,482               |  | 1,453                    
|Other long-term loans                                     |  | 2,873               |  | 2,461                    
|Accrued interest not yet due                              |  | 79                  |  | 43                       
|Bond redemption premium                                   |  |                    |  |                         
|Long-term debt and capital leases(1)                      |  | 8,005               |  | 4,091                    
|Borrowings with short-term original maturities            |  |                     |  |                          
|Commercial paper                                          |  |                    |  |                         
|Short-term bank finance facilities and similar facilities |  | 263                 |  | 289                      
|Short-term debt                                           |  | 263                 |  | 289                      
|                                                          |  |                     |  |                          
|Total short- and long-term debt and capital leases        |  | 8,268               |  | 4,380                    
|                                                          |  |                     |  |                          

---

Note:

|(1) | Includes long-term debt maturing in less than one year (1,056 million at March 31, 2005 and 429 million on a published basis at March 31, 2004).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



Air France-KLM had commitments relating to
mortgaged or secured assets (which relate principally to aircraft mortgages) totaling 1,750 million as of March 31, 2005 and 1,650 million as of March 31, 2004 on a published basis.



Air France-KLMs long-term debt and capital lease obligations include
obligations with fixed and variable exchange rates. As of March 31, 2005, 47.4% of such obligations had variable rates, compared to 54% as of March 31, 2004 on a published basis.



In order to meet its financing needs, Air France and KLM incurred additional indebtedness of 858 million for the year
ended March 31, 2005, compared to 901 million for the prior comparable period on a published basis. During the financial year ended March 31, 2005, Air France-KLM reimbursed 645 million of prior indebtedness.



The following table shows a breakdown by currency of long-term debt and
capital leases taking into account the effects of derivative financial instruments for Air France-KLM at March 31, 2005 and for Air France only at March 31, 2004:



|                   |  |                     |  |                          
|------------------ |  | ------------------- |  | -------------------------
|                   |  | At March 31,       
|                   |  | 2005 Air France-KLM |  | 2004 Air France published
|                   |  | (in  millions)    
|Euro (EUR)         |  | 6,997               |  | 3,720                    
|U.S. dollar (USD)  |  | 619                 |  | 366                      
|Swiss franc (CHF)  |  | 280                 |  |                         
|Japanese yen (JPY) |  | 29                  |  |                         
|Pound Sterling     |  | 76                  |  |                         
|Other currencies   |  | 4                   |  | 5                        
|                   |  |                     |  |                          
|Total              |  | 8,005               |  | 4,091                    
|                   |  |                     |  |                          



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Net Debt



Pursuant to SEC rules, we have provided below a reconciliation of net debt to short- and long-term debt and capital leases for the financial years
ended March 31, 2005 (Air France-KLM) and 2004 (Air France only). Net debt is a non-GAAP financial measure, and we believe that short- and long-term debt and capital leases is the most directly comparable financial measure presented in accordance
with generally accepted accounting principles. We define net debt as short- and long-term debt and capital leases less cash and marketable securities. We have also provided below a ratio of net debt to stockholders equity and minority
interests.



We believe that our net debt and ratio of net debt
to stockholders equity and minority interests are useful to investors as a measure of our liquidity and ability to serve and incur debt. However, net debt and such ratio should not be considered as measures of financial performance or leverage
under French or U.S. GAAP and thus should be evaluated together with other financial ratios calculated in accordance with French or U.S. GAAP and the various components of short- and long-term debt and capital leases. In addition, our definition of
net debt may not be comparable to similarly titled financial measures used by other companies. The following table shows a breakdown of net debt and stockholders equity and minority interests of Air France-KLM at March 31, 2005 and of Air
France only at March 31, 2004:



|                                                     |  |                     |  |                          
|---------------------------------------------------- |  | ------------------- |  | -------------------------
|                                                     |  | At March 31,       
|                                                     |  | 2005 Air France-KLM |  | 2004 Air France published
|                                                     |  | (in  millions)    
|Short- and long-term debt and capital leases         |  | 8,268               |  | 4,380                    
|Cash                                                 |  | 386                 |  | 330                      
|Marketable securities                                |  | 2,254               |  | 1,478                    
|                                                     |  |                     |  |                          
|Net debt                                             |  | 5628                |  | 2,572                    
|                                                     |  |                     |  |                          
|Stockholders equity and minority interests          |  | 5,226               |  | 4,085                    
|                                                     |  |                     |  |                          
|Net debt/stockholders equity and minority interests |  | 1.08                |  | 0.63                     



Off-Balance Sheet
Arrangements



During the financial
year ended March 31, 2003, Air Frances warranties, sureties and guarantees corresponded primarily to the guarantee given by Air France to financial institutions relative to the leasing of five Fokkers by Air Littoral. Pursuant to this
agreement, if Air Littoral were to default on payments, Air France would cover the payment of the leasing fees due by Air Littoral, and in return, would be entitled to use these planes. The guarantee given, which corresponds to the minimum amount of
future lease charges for the five Fokkers in the event of failure to meet payments by Air Littoral, totaled 23 million at March 31, 2003 (37 million at March 2002). As Air Littoral was declared bankrupt during the financial year ended
March 31, 2004, Air France has taken on Air Littorals commitments relative to the leasing agreements for the five Fokkers, with three of the them brought into service on its own lines between November 2003 and March 2004. The remaining two
aircraft will enter into service in May and July 2004.



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Contractual Commitments Tables



The following table sets out Air France-KLMs contractual commitments and payments due by period at March 31, 2005:



|                                  |  |                       |  |                 |  |           |  |           |  |           |  |           |  |         
|--------------------------------- |  | --------------------- |  | --------------- |  | --------- |  | --------- |  | --------- |  | --------- |  | --------
|                                  |  | Payment due by period
|Contractual                       |  | Total                 |  | Less than1 year |  | 1-2 years |  | 2-3 years |  | 3-4 years |  | 4-5 years |  | 5+ years
|                                  |  | (in  millions)      
|Long-term debt obligations        |  | 8,005                 |  | 1,056           |  | 1,087     |  | 983       |  | 849       |  | 573       |  | 3,457   
|Of which aircraft capital leases  |  | 4,310                 |  | 417             |  | 707       |  | 745       |  | 423       |  | 333       |  | 1,685   
|Of which buildings capital leases |  | 170                   |  | 15              |  | 17        |  | 15        |  | 15        |  | 15        |  | 93      
|Operating leases                  |  | 2,851                 |  | 648             |  | 548       |  | 449       |  | 354       |  | 263       |  | 589     
|Other contractual commitments     |  | 167                   |  | 167             |  |          |  |          |  |          |  |          |  |        
|Flight equipment orders           |  | 2,962                 |  | 1,157           |  | 608       |  | 422       |  | 537       |  | 121       |  | 117     
|                                  |  |                       |  |                 |  |           |  |           |  |           |  |           |  |         
|Total                             |  | 13,985                |  | 3,028           |  | 2,243     |  | 1,854     |  | 1,740     |  | 957       |  | 4,163   
|                                  |  |                       |  |                 |  |           |  |           |  |           |  |           |  |         



In addition to through
our operating cash flows and cash balances as of March 31, 2005, we may finance our contractual commitments, including principally the purchases of flight equipment, through various methods, including entering into finance leases, issuing
equity-linked securities and entering into secured or unsecured bank facilities. We also may reduce our need for liquidity by decreasing our capital expenditure plan, as we did following the events of September 11, 2001, entering into sale and lease
back transactions and considering the disposing of non-strategic assets.



U.S. GAAP Reconciliation



We prepare our
consolidated financial statements in accordance with French GAAP, which differs in certain significant aspects from U.S. GAAP. The principal differences between French GAAP and U.S. GAAP as they relate to us are discussed in note 35 to our
consolidated financial statements. Note 36 to our consolidated financial statements contains a reconciliation of net income and stockholders equity under French GAAP to net income and stockholders equity under U.S. GAAP, as well as a
summary of the adjustments to our income statements and stockholders equity that would have been required had we applied U.S. GAAP instead of French GAAP. Differences in net income and stockholders equity under French GAAP and U.S. GAAP
primarily result from goodwill amortization, impairment of long lived assets, application of the equity method of accounting, stock-based compensation, accounting for leases (including sale-leaseback transactions), accounting for maintenance,
restitution costs, derivative instruments and hedging activities and credit memos and related aircraft depreciation. Further information on such differences and adjustments is set forth in the notes to our consolidated financial statements mentioned
above.



Net income under U.S. GAAP increased to 754.8
million for the financial year ended March 31, 2005 from 172.8 million on a published restated basis for the previous period. This corresponds to a 336.8% increase in net income under U.S. GAAP as compared to a 277.4% increase in net income
under French GAAP. This difference in trend is primarily related to derivative instruments and hedging activities accounting, which differ under French and U.S. GAAP. The U.S. GAAP adjustment for derivative instruments and hedging activities
resulted in a gain of 687.8 million for the financial year ended March 31, 2005 as compared to a gain of 158.6 million for the previous period. The gain for the financial year ended March 31, 2005 is primarily associated with the effect
of favorable fuel contracts when marked to market (833 million) partially offset by the unfavorable effect of the change in fair value of foreign exchange derivative contracts (138 million).



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New Accounting Pronouncements under U.S. GAAP



Share-based paymentFASB Statement No. 123 (Revised 2004)



In December 2004, the FASB issued SFAS No. 123(R) that will require
compensation costs related to share-based payment transaction to be recognized in the financial statements based on the grant-date fair value of the equity or liability instruments issued. This statement is effective as of the beginning of the first
annual reporting period that begins after June 15, 2005. We do not expect that the adoption of the provisions of SFAS No. 123(R) will have a material impact on our financial position or results of operations.



Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003



In January 2004, the FASB issued FASB Staff Position (FSP) SFAS No. 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP
106-1). Beginning in 2006, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act) will introduce a federal subsidy to sponsors of healthcare benefit plans under certain circumstances and
prescription drug benefits to eligible participants under Medicare. We have determined that the federal subsidy to be provided under the Medicare Act will not have an impact on our postretirement benefit plans. We believe, however, that the new
prescription drug benefits under Medicare will reduce our future claims costs under our postretirement benefit plans.



Exchanges on nonmonetary assetsFASB Statement No. 153, an amendment of APB Opinion No. 29



In December 2004, the FASB issued SFAS No. 153, which exempts from fair value
measurement the exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.



This statement shall be applied prospectively and is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We do not expect that the adoption of this statement will have a material impact on our financial position or results of operations.



Effect of Contingently Convertible Debt on Diluted Earnings per Share



In September 2004, the Emerging Issues Task Force
(EITF) reached a consensus on EITF Issue 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share (EITF 04-08). This EITF requires shares of common stock issuable upon conversion of
contingently convertible debt instruments to be included in the calculation of diluted earnings per share whether or not the contingent conditions for conversion have been met, unless the inclusion of these shares is anti-dilutive. Previously,
shares of common stock issuable upon conversion of contingently convertible debt securities were excluded from the calculation of diluted earnings per share.



Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments



In September 2004, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position (FSP) Emerging Issues Task Force (EITF) Issue 03-1-1, Effective Date of Paragraphs 10 20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,
which delays the effective date for the recognition and measurement guidance in EITF Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further application guidance is necessary for securities analyzed for impairment
under EITF Issue No. 03-1. We continue to assess the potential impact that the adoption of the proposed FSP could have on our financial statements.



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FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations



In March 2005, the FASB issued Interpretation 47. This
Interpretation clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in
which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is conditional even though uncertainty exists about the
timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists to make a
reasonable estimate of the fair value of the obligation.



Interpretation 47 is effective for fiscal years ending after December 15, 2005. We do not anticipate that the implementation of the provisions of FIN 47 will have a material effect on our financial position or on the results of operations.



SFAS No. 154, Accounting Changes and
Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3



In May 2005 the FASB published SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and applies to
all voluntary changes in accounting principle and also to changes required by an accounting pronouncement only when it does not include specific transition provisions.



Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income
of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement
requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.



This Statement carries forward without change the guidance contained in Opinion 20: (i) for reporting the correction of an error in previously issued
financial statements, (ii) for a change in accounting estimate, and (iii) requiring justification of a change in accounting principle on the basis of preferability.



We believe that the initial application of the provisions of this Interpretation will not have a material impact on our
financial position, cash flows or results of operations.



Adoption of International Financial Reporting Standards by Air France-KLM



Regulation (EC) No. 1606/2002 of the European Parliament and the Council of July 19, 2002 concerning the application of international accounting standards
harmonizes the financial information required to be published by companies traded on a regulated market in the European Union guaranteeing transparency and comparability in financial statements. These accounting standards are known as International
Financial Reporting Standards (IFRS).



Under the regulation,
publicly traded European companies are required to use IFRS to prepare their consolidated financial statements for financial years beginning on or after January 1, 2005. Air France-KLM will apply IFRS as of April 1, 2005.



Adoption of IFRS will require us to publish a restated balance sheet as of
April 1, 2004. This information has been submitted to the SEC on Form 6-K on June 29, 2005.



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We have prior experience with the IFRS as well as the changes to the accounting standards. During the
financial year ended March 31, 1999 Air France adopted procedures to comply with the original IFRS during its initial public offering (excluding the treatment of convertible bonds and the publication of certain information in the notes to the
financial statements). Additionally, during the financial year ended March 31, 2002, Air France closely monitored the impact of the new standards and the standards revised in 1999 on its financial statements. During the financial year ended March
2003, Air France analyzed its financial information and the problems arising from standard IAS 39. During the financial year ended March 31, 2004 Air France reconciled its accounts to U.S. GAAP in connection with the filing of the Form F-4 with the
SEC during the business combination with KLM.



We have
established procedures to convert our consolidated financial statements to IFRS. We have additionally identified the principal differences in accounting methods which relate to the first application of international financial information standards
(IFRS 1), deferred taxes (IAS 12), investments in associates (IAS 28), consolidation and separate financial statements (IAS 27) and business combinations (IFRS 3).



In recent years, we have anticipated the application of certain IFRS provisions and adopted certain of them ahead of
schedule when they were compatible with French accounting rules. This was the case at the time the approach by components was adopted for recording tangible assets or valuing pension commitments. See notes 2.15 and 2.20 to our consolidated financial
statements.



In order to ensure consistency in our policies and
their application, our IFRS conversion project is led by a centralized team for the consolidated group.



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Item 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



General



Pursuant to French law, each Air
France-KLM director, excluding the directors appointed to represent the French State, is required to hold at least one Air France-KLM share. Pursuant to our articles of association, each director, excluding the directors appointed to represent the
French State, is required to hold at least 10 Air France-KLM shares (in registered form only) for the duration of its term.



Board of Directors



The membership of our board of directors and that of Air France prior to the hive down has changed following our privatization, the hive down, and
pursuant to the agreements on corporate governance signed in the context of the Air France-KLM business combination:



| |  |  | on June 24, 2004, the board of directors of Air France consisted of 26 members, with 10 members elected by the general shareholders meeting and eight members representing the
French State. In addition, pursuant to the provisions of the Law of April 9, 2003, the six representatives previously elected by the employees and the two members representing employee shareholders remained in office until the general
shareholders meeting held September 15, 2004;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on September 15, 2004, the general shareholders meeting, upon the recommendation of Air France-KLM, following an election process involving employee participation, elected two
new employee shareholder representatives to the board of directors of Air France-KLM;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | since September 15, 2004, pursuant to the provisions of the Law of July 26, 2004 and after the hive down, six representatives were elected by the employees to the board of directors
of Air France.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At its meeting on June 24, 2004
and in accordance with the framework agreement, the board of directors of Air France appointed Leo van Wijk as vice chairman of the board of directors. After the hive down on September 15, 2004, Mr. van Wijk became vice chairman of the board of
directors of Air France-KLM. Under the framework agreement, the Air France-KLM board of directors includes two directors proposed by the KLM supervisory board and the State of the Netherlands is entitled to propose a director for so long as the
French State is represented on our board. Under the agreements entered into as part of the Air France-Alitalia alliance, Alitalia has the right to propose one representative to our board of directors.



On September 15, 2004, the board of directors of Air France-KLM was reduced
from 26 to 20 members: 12 directors elected by the general shareholders meeting, who include the two employee shareholder representatives, and eight directors appointed by the French State. The number of directors appointed by the French State
must be proportional to the shareholding of the French State in Air France-KLM.



On January 18, 2005, following the sale by the French State of part of its shareholding in Air France-KLM, the board of directors of Air France-KLM was further reduced from 20 to 15 members. The Air France-KLM
articles of association permit the board of directors to be comprised of up to 18 members. Pursuant to French law, on January 20, 2005, our board of directors decided to add one board member. This decision was ratified by our general
shareholders meeting held on July 12, 2005.



Directors are appointed for six-year terms.



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The table below shows the composition of our board of directors as of the date of this annual report:



|                                                                                                                             |  |                            |  |                                                                                    
|---------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- |  | -----------------------------------------------------------------------------------
|Name                                                                                                                         |  | Date of InitialAppointment |  | Term Expires                                                                       
|Members Appointed by General Shareholders Meeting                                                                           |  |                            |  |                                                                                    
|                                                                                                                             |  |                           
|Jean-Cyril Spinetta Chairman of the board and chief executive officer                                                        |  | September 23, 1997         |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Leo van Wijk Vice chairman of the board of directors and chairman of the management board and chief executive officer of KLM |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Patricia Barbizet CEO and director of Artémis                                                                                |  | January 3, 2003            |  | General Meeting approving the accounts for the financial year ending March 31,2010 
|                                                                                                                             |  |                           
|Giancarlo Cimoli CEO and deputy director of Alitalia                                                                         |  | July 19, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Jean-François Dehecq Chairman and CEO of sanofi-aventis                                                                      |  | January 25, 1995           |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Willem F. Duisenberg Member of the supervisory board of Rabobank                                                             |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Jean-Marc Espalioux Chairman of the management board of Accor Group                                                          |  | September 14, 2001         |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Cornelius J.A. van Lede President of INSEAD                                                                                  |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Floris Maljers Chairman of the supervisory board of the Rotterdam School of Management                                       |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Pierre Richard CEO and chairman of the management board of Dexia (administrateur délégué)                                    |  | October 20, 1997           |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Members Appointed by the General Shareholders Meeting toRepresent Employee Shareholders                                     |  |                            |  |                                                                                    
|                                                                                                                             |  |                           
|Christian Magne Executive appointed to represent ground staff and cabin crew employee shareholders                           |  | September 14, 2001         |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                                             |  |                           
|Members Added by the Board of Directors and Ratified by the General Shareholders Meeting                                    |  |                            |  |                                                                                    
|                                                                                                                             |  |                           
|Pierre-Henri Gourgeon Deputy chief executive officer of Air France-KLM                                                       |  | January 20, 2005           |  | General Meeting approving the accounts for the financial year ending March 31, 2011



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|                                                                                                |  |                            |  |                                                                                    
|----------------------------------------------------------------------------------------------- |  | -------------------------- |  | -----------------------------------------------------------------------------------
|Name                                                                                            |  | Date of InitialAppointment |  | Term Expires                                                                       
|Members Appointed to Represent the French State                                                 |  |                            |  |                                                                                    
|                                                                                                |  |                           
|Pierre-Mathieu Duhamel Director of the budget, Ministry of Economy, Finance and Industry        |  | January 15, 2003           |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                |  |                           
|Jean-Louis Girodolle Deputy director of treasury, Ministry of Economy, Finance and Industry     |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010
|                                                                                                |  |                           
|Claude Gressier President of the Economic Section of the Conseil général des Ponts et Chaussées |  | June 24, 2004              |  | General Meeting approving the accounts for the financial year ending March 31, 2010



Christian
Paris, a board member appointed by the general shareholders meeting on September 14, 2001 to represent employee shareholders, resigned from our board of directors at our general shareholders meeting held on July 12, 2005 with
immediate effect. As of the date of this annual report, no replacement has been appointed.



The secretary of Air France-KLM is Jean-Marc Bardy, general counsel of Air France.



During the financial year ended March 31, 2005, the Air France-KLM board of directors held ten meetings with an average attendance rate of 80.7% (86%
during the financial year ended March 31, 2004). Matters dealt with at the meetings included the review and approval of the interim and final corporate and consolidated financial statements, the budget, investments in the long-haul fleet, the oil
hedging policy, significant operations including changes to the structures of the Air France group, the capital increase reserved for KLM shareholders, the appointment and remuneration of corporate officers and regulated agreements.



The following is a brief biography of each of the members of our board of
directors:



Members Appointed by the General
Shareholders Meeting



Jean-Cyril Spinetta was
named chairman of the board of directors and chief executive officer on October 22, 1997. Prior to joining Air France, Mr. Spinetta was with the French Ministry of Education, charged with evaluating employment opportunities in the French educational
system. In 1996, Mr. Spinetta was a member of the cabinet of the European Commissioner for Science, Research and Education, and later that year he joined the Inspectors Office in the French Ministry of Education. In 1994 and 1995, Mr. Spinetta
held various positions in the French government, including chargé de mission to the President of the French Republic. From 1990 to 1993, Mr. Spinetta was chairman and chief executive officer of Air Inter. In addition to his position as
chairman of the board and chief executive officer of Air France-KLM, Mr. Spinetta is also chairman and chief executive officer of Air France and a member of the board of directors of Alitalia and Saint-Gobain. Mr. Spinetta is a graduate of the
Institut dEtudes Politiques de Parisand the Ecole Nationale dAdministration.



Leo van Wijk was elected to the Air France-KLM board of directors in 2004. In addition to being vice chairman of the Air France-KLM board of
directors, Mr. van Wijk is chairman of the management board of KLM and chief executive officer of KLM. He is also a member of the board of directors of Northwest Airlines, a member of the advisory committee of ABN AMRO Holding and Kennemer Gasthuis,
and a member of the supervisory boards of Martinair, Aegon N.V. and Randstad Holding N.V.. He holds a masters degree in economics.



Patricia Barbizet was elected to the Air France board of directors in 2003. In addition to being a member of the Air France-KLM board of directors,
Ms. Barbizet has been chief executive officer and a member of the



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board of directors of Artemis SA since 1992, as well as chief operating officer of Financière Pinault since 2000. She is also chairman of the board of
directors of Christies International, a member of the board of directors of Bouygues SA, TF1 and chairman of the supervisory board of Pinault-Printemps Redoute. She is a graduate of the Ecole Supérieure de Commerce de Paris.



Giancarlo Cimoli was elected to the Air France board of
directors in 2004. In addition to being a member of the Air France-KLM board of directors, Mr. Cimoli is chairman and deputy director of Alitalia and a director of Enia S.p.A. and EnerTAD S.p.A.. He is a graduate of the Polytechnic Institute of
Milan.



Jean-François Dehecq was elected to the
Air France board of directors in 1995. In addition to being a member of the Air France-KLM board of directors, Mr. Dehecq is chairman and chief executive officer of Sanofi-Aventis. He is also chairman and director of Sanofi-Synthelabo, Daiichi
Pharmaceuticals Co. and a director of Sanofi-Synthelabo Inc. and Fujisawa-Sanofi-Synthelabo. He is a graduate of the Ecole Nationale des Arts et Métiers.



Willem F. Duisenberg was elected to the Air France board of directors in 2004. In addition to being a member of the
Air France-KLM board of directors, Mr. Duisenberg is also a member of the supervisory board of Rabobank and a former president of the European Central Bank.



Jean-Marc Espalioux was elected to the Air France board of directors in 2001. In addition to being a member of the Air France-KLM board of
directors, Mr. Espalioux is chairman of the management board of the Accor Group. He is also a director of Veolia Environnement and Accor UK, a member of the supervisory board of Club Méditerranée and the permanent Accor representative
on the supervisory board of Groupe Lucien Barrière SAS. He is a graduate of the Institut dEtudes Politiques de Parisand theEcole Nationale dAdministration.



Cornelius J.A. van Lede was elected to the Air France board of
directors in 2004. In addition to being a member of the Air France-KLM board of directors, Mr. van Lede is the president of INSEAD, as well as chairman of the supervisory board of Heineken, a member of the supervisory board of Akzo Nobel, Philips
Electronics and Air Liquide, and a director of Reed Elsevier and Sara Lee Corp. Mr. van Lede was the former chairman of the board of Akzo Nobel.



Floris Maljers was elected to the Air France board of directors in 2004. In addition to being a member of the Air France-KLM board of directors,
Mr. Maljers is chairman of the supervisory board of the Rotterdam School of Management, member of the preferred stock committee of DSM and member of the executive committee of Rand Europe. Mr. Maljers is also the retired chairman and CEO of
Unilever.



Pierre Richard was elected to the Air France
board of directors in 1997. In addition to being a member of the Air France-KLM board of directors, Mr. Richard has been chairman and chief executive officer of Dexia since 1999. He is also chairman and managing director of the supervisory board of
Dexia Crédit Local, vice chairman of the board of directors of Dexia Banque Belgium and Dexia Banque Internationale Luxembourg and a member of the board of directors of Dexia Banque, FSA Holding, Crédit du Nord, the European Investment
Bank, Le Monde and Generali France Holding. He is also vice chairman of the French Association of Banks and a member of the executive committee of the French Banking Federation. He is a graduate of the Ecole Polytechnique.



Members Appointed by the General Shareholders Meeting to Represent
Employee Shareholders



Christian Magne, a
representative of the ground staff and cabin crew employee shareholders of the company, was elected to the Air France board of directors in 2001. In addition to being a member of the Air France-KLM board of directors, Mr. Magne is a finance
executive of Air France-KLM.



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Member Added by the Board of Directors and Ratified by the General Shareholders Meeting



Pierre-Henri Gourgeon was named chief operating
officer of Air France on April 2, 1998, deputy chief executive officer of Air France-KLM on May 17, 2004 and deputy chief executive officer of Air France on September 15, 2004. Mr. Gourgeon had been Executive vice president - development and
international affairs for Air France since December 1997. From March 1996 to November 1997, he served as chairman and chief executive officer of Amadeus France/Estérel, and he has been on the board of Amadeus Global Travel Distribution since
1996 and is currently the chairman thereof. From 1993 to 1996, he served as chairman and chief executive officer of Servair and a number of its subsidiaries. From 1990 to 1993, Mr. Gourgeon was director general of the French Civil Aviation
Authority. Prior to that time, he held various positions in the French government and French State-owned enterprises. Mr. Gourgeon is a graduate of the Ecole Polytechnique and the Ecole Nationale Supérieure de
lAéronautique and holds a masters degree in science from the California Institute of Technology. In addition, Mr. Gourgeon is a member of the board of directors of Autoroutes du Sud de la France and Stéria, as
well as the Air France-KLM representative on the board of directors of Air France.



Members Appointed to Represent the French State



Pierre-Mathieu Duhamel was elected to the Air France board of directors in 2003. In addition to being a member of the Air France-KLM board of directors, Mr. Duhamel is director of the budget in the French
Ministry of Economy, Finance and Industry. He is also a member of the board of directors of France Telecom, EDF and SNCF, and an official member of the CEA. He is a graduate of the Institut dEtudes Politiques de Parisand theEcole
Nationale dAdministration.



Jean-Louis
Girodolle was elected to the Air France board of directors in 2004. In addition to being a member of the Air France-KLM board of directors, Mr. Girodolle is the deputy director of treasury in the French Ministry of Economy, Finance and Industry.
He is also a member of the board of directors of Renault, RATP, Autoroutes du Sud de la France and Aéroports de Paris. He is a graduate of the Institut dEtudes Politiques de Parisand theEcole Nationale
dAdministration.



Claude Gressier was elected
to the Air France board of directors in 2004. In addition to being a member of the Air France-KLM board of directors, Mr. Gressier is the president of the Economic Section of the Conseil général des Ponts et Chaussées. He
is a graduate of the Institut dEtudes Politiques de Paris and theEcole Polytechnique and is qualified as a general public works engineer.



Air France-KLM Board Committees



Audit committee



The audit committee is in charge of recommending our statutory auditors for appointment and reviewing our consolidated financial statements, principal
financial risks, results and scope of the internal audit, our audit program and the conclusions and the recommendations of the statutory auditors. The audit committee also supervises the procedures designed to ensure compliance with relevant stock
exchange regulations.



The audit committee is composed of five
board members. Pursuant to the resolutions of the general shareholders meeting held on June 24, 2004, the current members of our audit committee are Pierre Richard as its chairman, Jean-François Dehecq, Jean-Louis Girodolle, Floris
Maljers and Christian Magne. The meetings of the audit committee are also attended by the chief financial officer of Air France-KLM, the chief financial officer of KLM, the internal audit directors of each of Air France and KLM and the statutory
auditors of Air France-KLM.



The audit committee has been
tasked to review our consolidated financial statements, our principal financial risks, our results of internal audits, our work program, and the conclusions and recommendations of our statutory



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auditors. The audit committee also supervises our compliance with applicable stock market regulations. The audit committee approves the amount of our
statutory auditors fees and approves certain services provided by our statutory auditors.



In addition, the audit committee reviews our interim and annual consolidated financial statements before they are submitted to our board of directors,
and:



| |  |  | reviews the scope of consolidation;
| | - |  | -----------------------------------



| |  |  | reviews the relevance and permanence of the accounting methods used to prepare our financial statements;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | reviews the principal estimates made by management;
| | - |  | ---------------------------------------------------



| |  |  | considers the comments of our statutory auditors and, if applicable, any significant adjustments resulting from audits;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | conducts a periodic review, together with our management, of the principal financial risks and off-balance sheet commitments of Air France-KLM and, where necessary, issues an
opinion on the significant financial transactions of Air France-KLM; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews the scope and results of internal audits conducted by each of Air France and KLM.
| | - |  | -----------------------------------------------------------------------------------------



The audit committee met on May 12, 2004 to review our annual financial statements as of and for the financial year ended
March 31, 2004, on November 15, 2004 to review the six month financial statements as of and for the six months ended September 30, 2004 and on February 14, 2005 to review the quarterly financial statements as of and for the quarter ended December
31, 2004. The audit committee also met on September 21, 2004 with an attendance rate of 80% to review our annual report as of and for the financial year ended March 31, 2004 on Form 20-F filed with the U.S. Securities and Exchange Commission and the
process to reconcile our annual financial statements to U.S. GAAP. This meeting also addressed the application of the Sarbanes-Oxley Act to Air France-KLM. At its meeting on February 14, 2005, the audit committee considered the progress of the
internal control action plan and internal audit work program. The average attendance rate at such meetings was 81.7% (87.5% during the financial year ended March 31, 2004).



The audit committee additionally met on May 13, 2005 to review our annual financial statements as of and for the financial
year ended March 31, 2005. Finally, the audit committee met on June 20, 2005 to review our fuel and exchange rate hedging policy as well as our internal control procedures. This meeting also was dedicated to reviewing this annual report on Form
20-F.



Strategy committee



The strategy committee is in charge of reviewing the strategic decisions
concerning our activities, changes in the structure of our fleet or subsidiaries, the purchase or sale of aircraft-related or other assets, and the air sub-contracting and alliance policy.



The strategy committee is composed of seven board members. The current
members of our strategy committee are Jean-Cyril Spinetta as its chairman, Patricia Barbizet, Pierre-Mathieu Duhamel, Leo van Wijk, Claude Gressier and Christian Magne. The meetings of the strategy committee are also attended by the deputy chief
executive officer, the chief financial officer and the secretary of the board of directors of Air France-KLM. Christian Paris, a member of our strategy committee during the financial year ended March 31, 2005, resigned from our board of directors at
our general shareholders meeting held on July 12, 2005 with immediate effect. As of the date of this annual report, no replacement has been appointed.



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The strategy committee met on November 8, 2004. This meeting addressed the future of Air Frances
stake in Amadeus and our fuel policy. During its meeting on February 7, 2005, the strategy committee reviewed the changes in the Air France long-haul fleet plan. The attendance rate for members was 100% (87.5% for meetings during the financial year
ended March 31, 2004).



Remuneration committee



The remuneration committee is responsible for formulating
proposals as to the level of and modifications to the chairman of the board of directors and chief executive officers compensation. The remuneration committee may also be called upon to give an opinion on compensation paid to senior executives
as well as on any stock subscription or option plan policy.



The remuneration committee is composed of three board members. The current members of our remuneration committee are Jean-Marc Espalioux as its chairman, Cornelis J.A. van Lede and Pierre Richard. The remuneration committee met on June 15,
2004 and November 23, 2004 to provide an opinion to the board of directors on the variable portion of the compensation of the chairman and chief executive officer for the financial year ended March 31, 2004 and to prepare for the boards
discussions on the compensation of the chairman and chief executive officer and the deputy chief executive officer for the financial year ended March 31, 2005. The attendance rate of members at each meeting was 100%.



Appointments committee



In connection with our privatization, the regulations regarding the
nomination of directors and officers and the agreements entered into with KLM, we have an appointments committee composed of three board members. The current members of our appointments committee are Jean-Marc Espalioux as its chairman, Patricia
Barbizet and Jean-François Dehecq, as well as one substitute member. The internal rules of the appointments committee were approved by the board of directors on March 4, 2004.



The appointments committee proposes candidates to serve as members of the board of directors, which approves these
recommendations and submits them for election to the general shareholders meeting of Air France-KLM. The appointments committee also appoints the members of the strategic management committee after consulting with the chairman and chief
executive officer of Air France-KLM for the members that represent Air France and with the KLM supervisory board for the members that represent KLM.



The appointments committee met in April 2004 to make recommendations to the board of directors for the election of new board members by the general
shareholders meeting of June 24, 2004. The attendance rate at the committee meeting was 100%.



Senior Management of Air France-KLM



At its meeting on June 24, 2004, our board of directors voted not to separate the functions of the chairman and chief executive officer. The chairman is appointed by the board of directors and has full powers to
manage Air France-KLM, except for certain limitations set out in the internal rules of the board. These rules stipulate that the chairman and chief executive officer must obtain prior approval from the board of directors to carry out the following
operations, when the value thereof exceeds 150 million:



| |  |  | the acquisition or sale of any interests in any companies formed or to be formed, participation in the establishment of any companies, groups or organizations, subscription to any
issue of stock, shares or bonds; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the grant of any security interest, with or without a cash payment, in Air France-KLMs assets, stock or securities.
| | - |  | --------------------------------------------------------------------------------------------------------------------



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The chairman and chief executive officer of Air France-KLM at the date of this report is Jean-Cyril
Spinetta.



At its meeting of June 24, 2004, the board of
directors decided to appoint a deputy chief executive officer to assist the chairman and chief executive officer. The deputy chief executive officer must however submit agreements valued at more than 50 million for signature by the chairman
and chief executive officer.



The deputy chief executive
officer of Air France-KLM at the date of this report is Pierre-Henri Gourgeon.



Compensation of Directors and Officers



The
board of directors meeting held on May 17, 2004 approved the allocation of 12,000 as fixed compensation and 12,000 as variable compensation to be paid subject to shareholders authorization. The general shareholders
meeting held on June 24, 2005 approved the allocation of compensation to the directors within a limit of 800,000. Members of our board of directors may also be reimbursed for travel expenses or expenses incurred on behalf of Air France-KLM.
Members of the audit, strategy and compensation committees of Air France-KLM may receive a special financial compensation for their membership on such committees. For the financial year ending March 31, 2005, 10,000 has been paid to the
chairman of our audit committee, 7,000 to the chairmen of all other committees, 6,000 to each member of our audit committee and 4,000 to each member of all other committees. The individual directors received the following
compensation, directly or indirectly, for services in all capacities:



|                                                    |  |                                       |    
|--------------------------------------------------- |  | ------------------------------------- | ---
|Directors                                           |  | Directors fees paid byAir France-KLM |    
|                                                    |  | (in )                                |    
|Jean-Cyril Spinetta                                 |  | 31,000                                |    
|Leo van Wijk                                        |  | 22,060                                |    
|Patricia Barbizet                                   |  | 28,727                                |    
|Giancarlo Cimoli                                    |  | 9,091                                 |    
|Jean-François Dehecq                                |  | 35,818                                |    
|Pierre-Mathieu Duhamel                              |  | 29,500                                | (1)
|Willem F. Duisenberg                                |  | 15,878                                |    
|Jean-Marc Espalioux                                 |  | 30,364                                |    
|Jean-Louis Girodolle                                |  | 19,560                                | (1)
|Pierre-Henri Gourgeon                               |  | 4,849                                 |    
|Claude Gressier                                     |  | 16,969                                | (1)
|Cornelis J.A. van Lede                              |  | 17,878                                |    
|Christian Magne                                     |  | 32,500                                |    
|Floris A. Maljers                                   |  | 21,469                                |    
|Christian Paris(2)                                  |  | 26,909                                |    
|Pierre Richard                                      |  | 29,636                                |    
|Directors who left office during the financial year |  | 180,820                               |    
|                                                    |  |                                       |    
|Total                                               |  | 553,028                               |    
|                                                    |  |                                       |    

---

|Note: | 
|----- | 

|(1) | Amount paid directly to the French Treasury
|--- | -------------------------------------------

|(2) | Christian Paris resigned from our board of directors at our general shareholders meeting held on July 12, 2005, with immediate effect. As of the date of this annual report, no
replacement has been appointed.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Pursuant to our articles of association, the board of directors has authority to determine the
compensation of our chairman, our chief executive officer and our deputy chief executive officer upon a proposal of the remuneration committee. Under an agreement approved by the board of directors on November 23, 2004, the compensation of the
chairman and chief executive officer and the deputy chief executive officer of Air France-KLM is invoiced to Air France for the responsibilities that they undertake for Air France.



The compensation for chairman and chief executive officer Jean-Cyril Spinetta, for the financial year ended March 31, 2005,
consisted of:



| |  |  | a base annual compensation of 550,000; and
| | - |  | -------------------------------------------



| |  |  | an objectives-based bonus of up to 60% of the base compensation, with 50% linked to the achievement of new strategic objectives (market share increases, preservation of financial
equilibrium) and 50% linked to the achievement of objectives relating to Air France-KLMs results as set forth in the budget.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The total compensation paid to Jean-Cyril Spinetta for the financial year ended March 31, 2005 was 710,000 (up from 425,200 for the financial
year ended March 31, 2004), including a bonus of 160,000 for full achievement of objectives for the financial year ended March 31, 2004. For the financial year ending March 31, 2006, Jean-Cyril Spinetta will receive an annual base compensation
of 750,000 and an objective-based bonus of up to 60% of the base compensation, with 50% linked to the achievement of new strategic objectives (market share increases, preservation of financial equilibrium) and 50% linked to the achievement of
objectives relating to Air France-KLMs results as set forth in the budget. Jean-Cyril Spinetta is a beneficiary of the pension plan set up in 2003 for 39 executives of Air France that guarantees an annual pension of between 35% and 40% of his
average annual compensation for his last three years of service, based his years of service. No severance package is planned in the event Mr. Spinetta leaves Air France-KLM.



The compensation for deputy chief executive officer Pierre-Henri Gourgeon for the financial year ended March 31, 2005,
consisted of:



| |  |  | a base annual compensation of 370,000; and
| | - |  | -------------------------------------------



| |  |  | an objectives-based bonus of up to 50% of the base compensation, with 50% linked to the achievement of new strategic objectives (market share increases, preservation of financial
equilibrium) and 50% linked to the achievement of objectives relating to Air France-KLMs results as set forth in the budget.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The total compensation paid to Pierre-Henri Gourgeon for the financial year ended March 31, 2005 was 505,975, including a bonus of 142,300.
For the financial year ending March 31, 2006, Pierre-Henri Gourgeon will receive an annual base compensation of 550,000 and an objective-based bonus of up to 60% of the base compensation, with 50% linked to the achievement of new strategic
objectives (market share increases, preservation of financial equilibrium) and 50% linked to the achievement of objectives relating to Air France-KLMs results as set forth in the budget. Pierre-Henri Gourgeon is also a beneficiary of the
pension plan set up in 2003 for 39 executives of Air France that guarantees an annual pension of between 35% and 40% of his average annual compensation for his last three years of service, based on his years of service. No severance package is
planned in the event Mr. Gourgeon leaves Air France-KLM.



Mr.
Spinetta and Mr. Gourgeon have each participated in the offer to Air France employees to exchange salary for shares in Air France-KLM. As a result of their participation in the offer, the shareholding of each of Mr. Spinetta and Mr. Gourgeon in Air
France-KLM has substantially increased and their compensation has, as of May 1, 2005, been reduced. In the case of Mr. Spinetta, this reduction is in an amount of 12,480 per month for a period of six years. In the case of Mr. Gourgeon, this
reduction is in an amount of 8,400 per month for a period of six years.



The compensation of the Chairman of the KLM management board is decided by the KLM supervisory board and is paid by KLM.



The total compensation paid to Leo van Wijk for the financial year ended March 31, 2005 was 1,083,440, including a bonus of 429,731, for
partial achievement of objectives. Mr. van Wijk also benefits from a pension



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plan managed in accordance with Dutch law. KLM contributed 228,278 to this plan for the financial year ended March 31, 2005. Additionally, Leo van Wijk
may benefit from a severance package equal to his final salary plus an amount equal to the average of his bonuses for the prior three years if his contract is not renewed when it expires in January 2007.



Stock options granted to the personnel of Air France-KLM



We do not currently provide our directors, executives or officers with a
stock option plan.



For information on the stock option schemes
established by Air France and KLM for their own executives, officers or employees which entitled the holders to shares of Air France-KLM, see EmployeesAir France Employment PolicyEmployee Share Arrangements and
EmployeesKLM Work Force and Employment PolicyEmployee Incentive Plan.



Share Ownership



As of
March 31, 2005, none of our directors or senior executives beneficially owned, or held options to purchase, 1% or more of our ordinary shares. The following table sets forth the share ownership, as of March 31, 2005, of the members of our board of
directors, excluding shares held in the Fonds Commun de Placement dEntreprise(the collective employee shareholding fund), of Air France-KLM shares:



|                        |  |                     
|----------------------- |  | --------------------
|Name                    |  | Number ofshares held
|Jean-Cyril Spinetta     |  | 65,240              
|Leo van Wijk            |  | 500                 
|Patricia Barbizet       |  | 2,000               
|Giancarlo Cimoli        |  | 10                  
|Jean-François Dehecq    |  | 523                 
|Willem Duisenberg       |  | 100                 
|Jean-Marc Espalioux     |  | 601                 
|Pierre-Henri Gourgeon   |  | 44,769              
|Cornelis J. A. van Lede |  | 1,000               
|Floris Maljers          |  | 500                 
|Pierre Richard          |  | 401                 
|Christian Magne         |  | 172                 
|Christian Paris(1)      |  | 28,000              
|                        |  |                     
|Total                   |  | 143,816             
|                        |  |                     

---

Note:

|(1) | Christian Paris resigned from our board of directors at our general shareholders meeting held on July 12, 2005, with immediate effect. As of the date of this annual report, no
replacement has been appointed.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
representatives of the French State on our board of directors are not required to hold shares in Air France-KLM.



Strategic management committee



Pursuant to the terms of the framework agreement, on May 6, 2004, Air France and KLM established a strategic management committee. The decision of the
strategic management committee represents the common position of Air France and KLM with respect to all major strategic decisions relating to commercial, financial, technical and operational matters, including but not limited to:



| |  |  | strategy regarding our competitive environment, partners and public authorities;
| | - |  | --------------------------------------------------------------------------------



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| |  |  | strategic orientation with respect to network management, including hub growth, significant changes in network structure, introduction of overlapping routes, agreements with other
operators, sharing between KLM and Air France of traffic rights in the event of a decision to lift the national origin restrictions at the European level;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | funding, debt issuances and significant investments in fleet, information systems and major projects;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | significant financial investments and strategic airline partnerships or cooperation agreements and alliances;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | purchasing policies;
| | - |  | --------------------



| |  |  | mid-term planning and budgets to ensure compatibility with the strategy agreed by the strategic management committee;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | appointments of key personnel in Air France and KLM to be selected from lists prepared by Air France and KLM, respectively;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | inclusion of other airlines in Air France-KLM;
| | - |  | ----------------------------------------------



| |  |  | human resources policies covering multi-company issues;
| | - |  | -------------------------------------------------------



| |  |  | any decision regarding the Dutch airline Martinair, of which KLM is a shareholder; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | any reserved or consultation matters (which are discussed below).
| | - |  | -----------------------------------------------------------------



The framework agreement provides that operational subcommittees may be established under the supervision of the strategic management committee. Thus far
the strategic management committee has established 13 operational subcommittees, in the following areas: commercial, marketing, revenue management and network, cargo, engineering and maintenance, fleet, information technology, corporate purchasing,
human resources/culture, communication, finance, hubs and grounds services, flight operations and brand and product.



The strategic management committee also mediates differences that may arise regarding the application of bilateral agreements or the management of
entities that are owned or operated together by Air France and KLM.



The strategic management committee makes binding recommendations with respect to the matters above to the board of directors of Air France, the KLM management board and the KLM supervisory board. The chief executive officer of KLM, the
chairman of the board of directors of Air France and any chairman, board member or key officer of the combined operating companies or their subsidiaries may not make or implement any major strategic decisions before the strategic management
committee has been consulted and are required to implement any such decision in accordance with the binding recommendation of the committee. The strategic management committee makes its decisions by majority vote, except in respect of the following
reserved matters, which require the unanimous consent of all committee members:



| |  |  | any decision proposing an amendment to the KLM assurances;
| | - |  | ----------------------------------------------------------



| |  |  | any decision whose purpose or effect is:
| | - |  | ----------------------------------------



| |  |  | to combine or create common activities among the Air France and KLM operating activities existing as of the date of the framework agreement (such as the integration into a joint
structure of catering or cargo activities) or any global reorganization of any such operating activities by way of discontinuation or disinvestment for both Air France and KLM;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | to alter the allocation of key management personnel or of an entire operating activity between Air France and KLM; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | related to the timing, phasing in and structure of any decision relating to the two matters noted immediately above; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | any decision to enter into an intercompany agreement other than at arms length.
| | - |  | --------------------------------------------------------------------------------



Any rejection by the strategic management committee of a proposed action on one of these reserved matter will be binding.



On all matters requiring a majority vote, the chairman of the
strategic management committee has the deciding vote in the event of a tie, except that until May 6, 2007, the chairman is required to consult with KLMs chief executive officer prior to exercising his deciding vote with respect to the
following consultation matters:



| |  |  | the coordination of Air France and KLM capacities, schedules and days of operation relating to joint destinations;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the coordination in order to avoid unfair behavior of any partner in alliance with Air France against KLM or any partner in alliance with KLM against Air France; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the scheduling of passenger services between France and the Netherlands.
| | - |  | ------------------------------------------------------------------------



The strategic management committee will remain in place until May 6, 2007, unless the chairman of the board of directors of Air France-KLM decides to
maintain the committee or decides to create an equivalent body after that date. As of the date of this annual report, the strategic management committee consisted of the following eight members:



| |  |  | Jean-Cyril Spinetta, chairman of the board of directors and chief executive officer of Air France-KLM and Air France, as chairman;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Leo van Wijk, vice chairman of the board of directors of Air France-KLM, the chairman of the KLM management board and chief executive officer of KLM;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pierre-Henri Gourgeon, deputy chief executive officer of Air France-KLM and Air France and chief operating officer of Air France;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | Philippe Calavia, vice president - finance of Air France-KLM and chief financial officer of Air France;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Peter Hartman, member of the KLM management board and chief operating officer of KLM;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Bruno Matheu, senior vice president of marketing and network management of Air France;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Michael Wisbrun, executive vice president of KLM cargo; and
| | - |  | -----------------------------------------------------------



| |  |  | Cees van Woudenberg, member of the KLM management board and chief human resources officer of KLM.
| | - |  | -------------------------------------------------------------------------------------------------



The following is a brief biography of each of the members of the strategic management committee:



Jean-Cyril Spinetta. See Members Appointed by the General
Shareholders Meeting above.



Leo van Wijk.
See Members Appointed by the General Shareholders Meeting above.



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Pierre-Henri Gourgeon. See Members Added by the Board of Directors and Ratified by the
General Shareholders Meeting above.



Philippe
Calavia was named chief financial officer of Air France on August 14, 1998. Prior to joining Air France, from 1992 to 1998, Mr. Calavia was president and chief executive officer of several entities of the Natexis Group, including Natexis S.A.
and Natexis Banque. Prior to that time, Mr. Calavia held various positions in the French government, including advisor to the French Prime Minister, Laurent Fabius. He is a director of Amadeus GTD. Mr. Calavia is a graduate of the Ecole Nationale
dAdministration.



Peter Hartman is managing
director and chief operations officer of KLM and was appointed to the KLM management board in 1997. He is also a member of the supervisory board of RAI Amsterdam B.V., member of the supervisory board of Martinair Holland B.V. He is a graduate in
mechanical engineering of the Polytechnic Institute of Amsterdam and a graduate in management from the University of Rotterdam.



Bruno Matheu was named executive vice president of marketing and network management of Air France on April 2, 1998. Prior to taking up his current
position, Mr. Matheu had been director of network optimization, responsible for flight programs, price/yield management and partnership resources (franchising and charter flights) since September 1997. Mr. Matheu joined UTA (which was merged with
Air France in 1990) in 1986 and held various positions, including head of the Economic Synthesis section of the Programming Department and head of the Department of Economic Planning. He is a director of Régional, Brit Air, CityJet and
Amadeus GTD. Mr. Matheu is a graduate of the Ecole Centrale de Paris.



Michael Wisbrun is the executive vice president of KLM cargo. Mr. Wisbrun holds a masters degree in engineering from the University of Delft.



Cees van Woudenberg is managing director and chief human resources officer of KLM and was appointed to the KLM
management board in 1997. He is also a member of the supervisory board of DSM N.V., Aalsmeer Flower Auction, Transavia Airlines B.V. and Mercurius Groep Wormerveer B.V., and a member of the Advisory Board of Deloitte & Touche Human Capital Group
until March 2004. Mr. van Woudenberg is a graduate in law of the University of Leiden.



The Framework Agreement provides that, if we acquire or merge into a third airline prior to May 6, 2007, the chairman will continue to have the deciding vote on the strategic management committee in the event of a
tie, except with respect to the reserved matters relating to KLM, over which the KLM members of the strategic management committee will have a veto right.



The members of the strategic management committee are compensated directly by either Air France or KLM.



Employees



Employees of Air France-KLM



As at the date of this annual report, Air France-KLM had no direct employees other than the chairman and chief executive officer and deputy chief
executive officer. Pursuant to the service agreement entered into between Air France-KLM, Air France and KLM on September 15, 2004 and a decision of the president and chief executive officer of Air France-KLM on May 23, 2005, executives and staff of
Air France and KLM serve in such capacities at Air France-KLM, such as in the functions of accounting, financial and treasury services, internal inspections and controls, legal and administrative, and office property services.



Each of Air France and KLM retains responsibility for managing its work
force, based on applicable legislation in France and the Netherlands. However, a program has been instituted to promote a joint culture, for example, by an exchange of managers.



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The weighted average number of employees for the financial year ended March 31, 2005, for Air France-KLM
was 102,163. The following table gives further details on the employees of Air France-KLM for the financial year ended March 31, 2005.



|             |  |               
|------------ |  | --------------
|             |  | Air France-KLM
|Ground staff |  | 74,462        
|Cabin crew   |  | 19,829        
|Cockpit crew |  | 7,786         
|             |  |               
|Total        |  | 102,077       
|             |  |               



Board
Representation



Employee representation on the Air
France-KLM board of directors is governed by a provision of the French Civil Aviation Code (Code de laviation civile). As of the date of this annual report, the Air France-KLM board of directors comprises two employee representatives
elected or appointed for a six-year term. These two representatives are appointed among the employee shareholders by the general shareholders meeting, including one appointed among the flight deck crew and one appointed among any of the other
categories of personnel, provided that each of the flight deck crew and other categories holds at least 2% of Air Frances share capital. The two representatives of the employee shareholders were initially appointed by the general
shareholders meeting held on September 14, 2001 and were reelected by the general shareholders meeting held on September 15, 2004.



Pursuant to French law no. 2004-734 of July 26, 2004, the six employee representatives elected by the employees now sit on the board of directors of Air
France.



Employment Policy



Due to the differences between Dutch and French social legislation, and under
the terms of the business combination, each of Air France and KLM pursue their own human resources management policy while facilitating cooperation through a limited number of common initiatives including intercultural training sessions, group-wide
dialogues with the works council representative bodies, continual monitoring of employees assessment of the combination and a manager exchange program for talented young managers to gain experience in different positions at both airlines.



Air France Employment Policy



Following the events of September 11, 2001, Air France decided to implement a
hiring freeze and not to renew temporary and fixed-term employment contracts. These measures, which affected some 2,000 jobs, enabled Air France to maintain its workforce throughout a period of interrupted growth. Because of the impact of SARS and
the Iraq war on air travel, Air France froze hiring during the year ended March 31, 2004 and is currently conducting only limited hiring. During the financial year ended March 31, 2005, the total Air France workforce fell from 59,458 to 59,296 full
time equivalent employees. The Air France workforce as at March 31, 2005 comprised 37,100 ground staff (including 36,587 permanent employees), 12,406 cabin crew and 4,089 flight deck crew. Local personnel represented 5,701 people. Ground staff
retirement increased during the financial year ended March 31, 2005 to 737 compared to 317 for the financial year ended March 31, 2004.



Labor Regulations



The status of Air Frances personnel is established by its board of directors and is subject to French ministerial approval after review by the
relevant labor unions.



Prior to and for a transition period of
up to two years after May 6, 2004, the date on which the French State ceased to hold a majority of Air Frances share capital, Air France has been subject to a statutory regime applicable to its employees covering such matters as conditions of
employment, hiring, promotion, dismissal,



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remuneration, discipline, transfers, unpaid leave, medical care, union rights and pensions. After the transition period, Air Frances employees will be
subject to collective bargaining agreements and general French labor law rather than a particular statutory regime. The principal effects of this change will be:



| |  |  | at present, Air France employees are entitled to the same unemployment benefits as employees of the private sector, but with benefits paid by Air France and managed by UNEDIC, the
French national unemployment insurance system. Following the end of the transition period, Air France will be required to pay unemployment insurance premiums directly to UNEDIC, which will then assume responsibility for making payments to Air France
employees who are laid off. This change is expected to result in increased expenses of 149 million per year by Air France once the transition period ends. In addition, in May 2004, Air France began paying an estimated 7 million per year
in salary guarantee insurance (AGS), which protects employees in the event of an employer bankruptcy;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | under Air Frances current statutory regime, employees must give advance notice of work stoppages, while revolving strikes are prohibited. Once the statutory regime ends,
procedures for handling collective conflicts will no longer be specified by law and are likely to be negotiated between trade unions and Air France;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the law of July 26, 1983 relating to the democratization of the public sector no longer applies to Air France following the privatization. As a result, Air France is no longer
legally bound to negotiate the terms of exercise of union rights, although Air France expects that such negotiations will continue to take place; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the 2003 Air Carrier Law provides for the possibility for early retirement by members of the cabin crew. This law has been supplemented by French Decree n° 2004-1427 of December
23, 2004 and modified by French Law n° 2004-734 of July 26, 2004, which provide for a new retirement age of 55.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Air France believes that the statutory regime governing collective labor relations for Air France currently in place is largely compatible with the regime
under general French law that will apply for the transition period noted above and does not expect significant difficulties in the transition.



Workers Committees



Since 1985, employee representatives of Air France and its subsidiaries are brought together in Workers Committees (Comités
dentreprise). During the financial year ended March 31, 2005, Air France reorganized its Workers Committees based on the organization of Air France rather than on geographic location. There are currently eight Workers
Committees corresponding to the major divisions of Air France  France Commercial Affairs, International Commercial Affairs, Ground Operations, Air Operations, Industrial, Air France Cargo, Information Systems and Headquarters and Support.
Union elections of March 10, 2005 were held based on this new organizational structure.



In addition, the Central Workers Committee (Comité central dentreprise), which Air France is required by law to consult on specified matters of significance, is composed of members designated
by the eight Workers Committees, of which three represent flight personnel pursuant to the provisions of the French Civil Aviation Code.



Pursuant to the E.U. directive of September 22, 1994 and the law implementing the directive into French law of November 12, 1996, a European Group
Workers Committee was created in order to enhance the exchange of information, consultation and labor discussions at a European level. This committee is composed of 30 employee representatives. Under the terms of the framework agreement, Air
France and KLM created an ad hoc committee to ensure representation of Air France and KLM employees at the European level. This committee comprises 14 members, four representatives appointed by each of the central workers committee of Air
France and KLM and three by each of the European Group Workers Committee of Air France and KLM.



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Employee Policy



For the past several years, Air Frances employee policies have been based primarily on the signing of multi-year agreements, recruitment and
training, and a profit-sharing plan covering all employees.



All the significant French labor unions are present within Air France, including professional union organizations for flight personnel.



Air France has entered into three important multi-year agreements providing a framework for Air Frances partnership with its employees: the
2003-2005 Flight Deck Crew Agreement, the 2002-2005 Ground Staff Agreement and the 2003-2008 Cabin Crew Agreement.



The Flight Deck Crew Agreement principally relates to: salary increases indexed to the rate of inflation until 2005; higher remuneration during continuing
qualification training; remuneration on a per flight basis; and specific conciliation procedures to be followed in the event of disagreement between the pilots and the company. The Ground Staff Agreement emphasizes internal resource value and is
structured around a framework of sustainable development, focusing on workplace health and safety issues, integration of disabled employees, professional equality between male and female workers, and youth integration through work-study programs.



The Cabin Crew Agreement addresses issues such as promotion,
career development, remuneration, the creation of a preventive health service, sick leave, work scheduling matters, reclassification of employees no longer serving as cabin crew and dismissal indemnities. The agreement also covers flex-time work
arrangement and vacation time. In addition, procedures for mediation in the event of labor conflict and for changes in the event of a crisis are set out in the agreement. In July 2003, the agreement was amended to provide in particular for a
merit-based, rather than seniority-based, advancement system for management.



In the financial year ended March 31, 2005, Air France entered into nine agreements with its flight crew, including amendments to the cabin and flight deck crew agreements, as well as two agreements with ground staff.
On March 8, 2004, Air France signed a 2004-2007 protocol for the exercise of union rights for all ground and flight employees.



Employee Share Arrangements



Offering Reserved to Employees



Pursuant to French law applicable to companies in which the French State holds more than 20% of its share capital, when the French State sells shares in a
company, it must give eligible employees of that company the opportunity to purchase a portion of those shares at a reduced price. On December 9, 2004, the French State held 23.2% of our share capital and sold part of its shareholding in Air
France-KLM enabling eligible employees to acquire 21.6 million shares through an employee share offering and a shares-for-salary exchange. The subscription period ran from February 1, 2005 through February 21, 2005. The employee share offering was
1.4 times oversubscribed and the shares-for-salary exchange was slightly more than 93% subscribed. The employee shareholding has increased by approximately 7.7%: 3.2% through the employee share offering and 4.5% through the shares-for-salary
exchange. Following the delivery of shares pursuant to the employee share offering, and the shares-for-salary exchange in March 2005 and April 2005, respectively, the French States shareholding in Air France-KLM was reduced to 18.6%.



As is customary for companies whose shares are being sold by
the French State, we contributed in such employee offering, and intend to contribute for similar future offerings, to eligible employees to permit them to participate. The amount of our contribution was 16 million for the 2005 employee share
offering. The precise amount of the expense from these contributions in the future cannot reasonably be estimated at this time since the expense will vary as a function of the number of shares for which employees subscribe, the total volume of
shares and the offering price. Employees acquiring Air France-KLM shares in this manner are prohibited by law from reselling the shares for a period of two years or, if they have received a company contribution, five years.



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Shares-for-salary Exchange



Pursuant to French Law no. 98-546 of July 2, 1998, the French State was authorized at the time of Air Frances initial
public offering in February 1999 to grant a portion of its Air France shares to Air France employees in exchange for voluntary reductions in salary (a shares-for-salary exchange). Most recently, following the sale of Air France-KLM shares by the
French State in December 2004, the French State sold 12,612,671 shares to qualified employees pursuant to the shares-for-salary exchange in February 2005. Under an agreement reached on September 18, 2003 between Air France and several of its labor
unions, all Air France employees were able to participate in the shares-for-salary exchange by agreeing to salary reductions for a period of six years.



Because the French State provided all of the Air France-KLM shares given to employees pursuant to the shares-for-salary exchange but shares the benefits
of the salary reductions with our other shareholders, an agreement has been signed in July 2003 between Air France and the French State whereby we will compensate the French State for the cost to it of the shares-for-salary exchange. Under this
agreement, we will pay to the French State an amount that will vary depending on the number of Air France-KLM shares transferred by the French State, and the proportion of our total share capital held by the French State, but that will, in any
event, not exceed the savings to us resulting from the shares-for-salary exchange.



We generally have two years from the date that the French State sells in an employee offering in which to make our compensation payment, although interest
will accrue after 90 days. The French State and we may decide that the compensation payment be will made either in cash or by the provision by us of the shares to be transferred to employees (in the place of the French State) or by the transfer by
us of our shares to the French State. With respect to the shares-for-salary exchange of February 2005 to Air France employees, we expect to pay the French State a total of 109.7 million in cash.



Stock Option Plan



Air France has in place a stock option plan for pilots who accepted the
original shares-for-salary exchange in 1999. This stock option plan has the following characteristics:



| |  |  | number of beneficiaries: 2,787 flight deck crew,
| | - |  | ------------------------------------------------



| |  |  | maximum number of options: 3,516,596,
| | - |  | -------------------------------------



| |  |  | maximum number of shares that may be purchased: 3,516,596,
| | - |  | ----------------------------------------------------------



| |  |  | option exercise price: 15.75, and
| | - |  | ----------------------------------



| |  |  | exercise conditions: between May 30, 2005 and May 30, 2007 at a rate of one share per option.
| | - |  | ---------------------------------------------------------------------------------------------



Under this plan, the 10 largest beneficiaries hold a total of 79,465 options to acquire Air France-KLM.



Profit Sharing and Benefits



In September 2002, employee profit-sharing and incentive agreements were
signed for a period of three years, renewing agreements originally signed in 1999. An amendment to the incentive agreement was signed on September 30, 2004. These profit-sharing and incentive agreements cover all employees of Air France in France
and abroad, including local employees. The level of employee profit-sharing is linked to Air Frances operational and financial performance. The benchmark calculation for financial performance is operating income corrected for aircraft
dispositions not corresponding to actual removals from the Air France fleet. This operating income previously had to surpass a minimum threshold of 100 million prior to any employee participation in profits, but this threshold was reduced to
zero in September 2003 in order to not penalize employees for challenging conditions in the airline industry that are beyond their control. Air Frances overall operational performance is also taken into consideration and is measured according
to four criteria: timeliness, productivity, customer satisfaction and workplace safety.



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Air France employees have the option of receiving benefits (including, without limitation, Air France-KLM
shares) under these plans in cash or may have their benefits invested in one of the following five funds of Air Frances company savings plan (Plan dEpargne Entreprise):



| |  |  | an Air France share fund,
| | - |  | -------------------------



| |  |  | an Air France share fund providing matching contributions averaging 50% of employee contributions up to a given limit,
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | a fixed income diversified fund,
| | - |  | --------------------------------



| |  |  | a mixed fixed income and equity diversified fund, and
| | - |  | -----------------------------------------------------



| |  |  | an equity diversified fund.
| | - |  | ---------------------------



Retirement



Ground
Staff



In France, social charges and levies are based on
the salaries paid and cover social security benefits and pension entitlements. Contributions are made both by the employer and the employee. The Air France groups employees, in relation to pensions, are covered by the general French social
security pension system and supplemental mandatory systems.



Since January 1, 1993, Air Frances ground staff have been covered by supplemental pension plans (ARRCO and AGIRC) which are subject to French general law. Previously, ground staff participated in a pension plan created in 1951 that
was exclusive to members of Air Frances ground staff (Caisse de Retraite du Personnel au Sol dAir France or CRAF). On January 1, 1993, ground staff began participating in the ARRCO and AGIRC pension plans. A system of
differentials was then put into place in order to guarantee the vested pension rights (up to December 31, 1992) of those already retired under the CRAF and the validation of pension rights for past services under the CRAF regime for those persons
still working. This system of differentials was implemented pursuant to an inter-ministerial order of June 1, 1993. The CRAF pays the differential to the beneficiaries without reduction if the beneficiary elects retirement at age 60. The financing
of the differential system, which is expected to end in 2060, is guaranteed by (i) the reserve fund of the CRAF (for 50% of the differential) and (ii) an undertaking by Air France (for 50% of the differential, and 100% once the CRAF no longer has
any funds). At March 31, 2005, Air France recorded provisions of 335 million for estimated total CRAF pension commitments of 981 million, with a market value of plan assets of 620 million.



Retirement age is set by French general law and is in no event later than the
age of 65.



Flight Personnel



Flight deck crew and cabin crew in France are mandatorily registered with a
specific retirement pension fund for civil aviation flight personnel (Caisse de Retraite du Personnel Navigant Professionel de lAviation Civile, or CRPNPAC). Under the rules of this pension fund, retirement age is fixed for the cabin
crew at 55 (with the possibility of early retirement at 50) and at 60 for the flight deck crew. All flight personnel are eligible for the retirement pension at the maximum rate once 25 years of contributions to the fund have been made, as long as
the sum of the employees age and the number of years the employee contributed to the fund is equal to 75 years.



Foreign Pension Schemes



In addition to defined benefit pension schemes for employees in France, Air France grants various defined pension benefits to its employees abroad and
termination benefit schemes.



The major foreign employee
benefit liabilities of Air France are located in the United States, where Air France currently has two overfunded defined benefit pension plans, in the United Kingdom, where employees of



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the local representation office and local subsidiaries are granted a supplemental pension benefit administered through a specific pension fund, and in Japan,
where employees benefit from a supplemental pension plan and lump-sum termination payments. At March 31, 2005, Air France recorded provisions of 359 million for projected benefit obligations of 857 million, with a market value of plan
assets of 404 million.



In addition,
almost all other foreign representation offices grant termination benefits or lump-sum payments to their employees.



Progressive Early Retirement Plan



A progressive early retirement plan was offered to employees beginning April 1, 2003 to full-time employees over 55 years of age. This plan, which was
signed with the French State, provides for up to 1,000 beneficiaries, and is expected to result in the recruitment of 500 replacement employees. Employees accepting the plan reduce their working hours over five years and receive up to 80% of their
salary, with half of the initial salary being paid by Air France and the remainder coming from a public fund.



KLM Employment Policy



As of December 31, 2004, KLM employed 28,105 people, including approximately 25,000 in the Netherlands. Of the 25,000 employees in the Netherlands, 10,151 are women and 35% are part-time employees.



In the financial year ended March 31, 2004, KLM initiated an extensive
cost-cutting program affecting all employees. The objectives for lower costs and higher productivity resulted in the implementation of organizational changes in cooperation with the unions and employee consultation boards. The implementation of this
cost-cutting program has resulted in the elimination of 4,500 jobs, in large part by implementing fixed-term and temporary employment. KLM has also set up a center dedicated to retraining the employees concerned. As of January 1, 2005, this
retraining center had assisted 548 people, more than two-thirds of which have been relocated either internally or externally.



On June 14, 2004, a new collective agreement was signed with the unions for the period from April to December 2004. Under the terms of this new agreement,
a bonus of 1% of the annual salary was paid to KLM ground staff in August 2004. As the budget objectives for the first half of the financial year ended March 31, 2005 were achieved, a further bonus equal to 0.75% of annual salary was paid in
November 2004.



In the context of the Air France-KLM
combination, a job protection plan was signed with the unions. Under the terms of this agreement, the proposed cooperation between KLM and Air France must not result in any lay-offs in the Netherlands for five years after the date of the
combination, subject to the following conditions:



| |  |  | The employees concerned must do everything in their power to facilitate their reclassification to an appropriate position. The search for his position will first be within KLM in
the Netherlands, but may also be at Air France. Within this framework, employees must be flexible, on the understanding that the type and status of the position and personal situations will be taken into consideration;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The employees concerned must undergo reclassification training or any additional training that may be necessary;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | If necessary, KLM may use fixed-term and temporary contracts to meet any labor needs.
| | - |  | -------------------------------------------------------------------------------------



The terms of this agreement may be amended only in the case of force majeure (outside events such as war, threat of
war, epidemics and terrorist attacks) or if KLMs productivity differs substantially from the average productivity achieved by the principal air carriers in Europe.



Employee Incentive Plan



KLM does not offer an incentive plan for its employees.



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Item 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



Ownership of our Shares



As of the date of this
annual report, our share capital was 2,289,759,903 divided into 269,383,518 fully paid-up shares at a nominal value of 8.50 each. Each outstanding Air France-KLM share is entitled to one vote.



The following table sets forth, to the best of our knowledge, certain
information with respect to the beneficial ownership of Air France-KLM shares and voting rights as of May 31, 2005.



|                             |  |                 |  |                     |   |  |                            |  
|---------------------------- |  | --------------- |  | ------------------- | - |  | -------------------------- | -
|                             |  | Number ofshares |  | Percentage ofshares |   |  | Percentage ofvoting rights |  
|French State                 |  | 50,015,397      |  | 18.6                | % |  | 19.0                       | %
|Current and former employees |  | 43,875,215      |  | 16.3                | % |  | 16.7                       | %
|Public                       |  | 169,051,188     |  | 62.7                | % |  | 64.3                       | %
|Treasury shares              |  | 6,441,718       |  | 2.4                 | % |  |                           |  
|                             |  |                 |  |                     |   |  |                            |  
|Total                        |  | 269,383,518     |  | 100.0               | % |  | 100.0                      | %
|                             |  |                 |  |                     |   |  |                            |  



As of May 31, 2005,
KLM held 1,659,268 of our public shares. As of May 31, 2005, to the best of our knowledge, there are no other shareholders, other than those listed above, whose beneficial ownership represents 5% or more of our capital or voting rights. In addition,
to the best of our knowledge, as of May 31, 2005, other than the following entities, no individual or group of shareholders held, directly or indirectly, individually or in the aggregate, 0.5% or more of our share capital or voting rights: the
French State, the Barclays Group, the BNP Paribas Group, the Caisse Nationale des Caisses dEpargne (CNCE), Alitalia, the Société Générale Group and CIP-Paribas.



Shares Held in the United States



To the best of our knowledge, as of March 31, 2005, residents in the United
States held 18,376,622 of our ordinary shares, including 9,019,294 million ADSs, representing 6.8% of our share capital.



Significant Changes



In connection with the exchange offer for KLM common shares, Air France issued 45,938,857 new shares and 41,762,597 warrants at the end of the initial
offering period on May 6, 2004 which lead to the effective privatization of Air France by reducing the stake held by the French State to 44.7%. At the end of the subsequent offering period on May 24, 2004, Air France issued an additional 3,663,772
new shares and 3,330,702 warrants.



On December 9, 2004, the
French State sold shares of Air France-KLM, reducing its shareholding to 23.2% of our share capital.



Eligible employees were able to acquire Air France-KLM shares as part of the sale by the French State through two employee offerings conducted in the
first quarter of 2005: an offering reserved to employees and a shares-for-salary exchange. See Item 6: Employee Share Arrangements. The subscription period was from February 1, 2005 through February 21, 2005 and employee shareholding
increased by approximately 7.7% (3.2% through the offering reserved for employees and 4.5% through the shares-for-salary exchange). Following the delivery of shares pursuant to the employee share offering and the shares-for-salary exchange in March
2005 and April 2005 noted below, respectively, the French States shareholding in Air France-KLM was reduced to 18.6%.



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The following table shows Air Frances share capital prior to and following the issuance of new Air
France shares in connection with the exchange offer for KLM shares, and following the sale by the French State, the offering reserved for employees and the shares-for-salary exchange:



|                             |  |                    |   |  |                   |   |  |                  |  
|---------------------------- |  | ------------------ | - |  | ----------------- | - |  | ---------------- | -
|                             |  | As atMarch 31,2004 |   |  | As atJune 30,2004 |   |  | As atMay 31,2005 |  
|French State                 |  | 54.0               | % |  | 44.1              | % |  | 18.7             | %
|Current and former employees |  | 12.8               | % |  | 10.0              | % |  | 17.7             | %
|Public                       |  | 32.1               | % |  | 43.9              | % |  | 60.8             | %
|Treasury shares              |  | 1.1                | % |  | 2.0               | % |  | 2.0              | %
|                             |  |                    |   |  |                   |   |  |                  |  
|Total                        |  | 100.0              | % |  | 100.0             | % |  | 100.0            | %
|                             |  |                    |   |  |                   |   |  |                  |  



Related Party Transactions



Relationship with the French State



As a consequence of Air France issuing shares to the holders of KLM common
shares in the exchange offer, the shareholding of the French State in Air France was automatically diluted to 43.7% beneficial ownership of Air France and 44.1% of the voting rights of Air France. The French State further reduced its shareholding in
Air France-KLM in December 2004 and in the related employee offerings in March and April 2005. The following is a description of the statutory regime applicable to Air France and to Air France-KLM following the effective privatization of Air France
on May 6, 2004.



Following the privatization, the oversight of
the Minister of Transportation over Air Frances air transport operations and the economic and financial oversight of the French State over Air France and its majority owned affiliates was repealed by the 2003 Air Carrier Law. The Law of July
26, 1983 relating to the democratization of the public sector no longer applies. Air France also ceased to be subject to the authority of the Court of Accounts (Cour des comptes) and to parliamentary review.



Pursuant to Décret-Loi of October 30, 1935, as amended by Law
no. 2001-420 of May 15, 2001, the French State is entitled to designate a number of candidates for the board of Air France-KLM in proportion to its shareholding in Air France-KLM (which may not be lower than two members), provided that it holds at
least 10% of our share capital. Board members elected by the employees are not counted for the purpose of determining the proportion of the French States representation. The French State is currently entitled to designate three members to our
board of directors.



The 2003 Air Carrier Law does not permit
the French State to hold a golden share in Air France-KLM since such a mechanism would be inconsistent with the June 4, 2002 rulings of the European Court of Justice. As a result, we are solely responsible for ensuring compliance with applicable
rules relating to the maintenance of our operating license and the protection of our traffic rights, in accordance with the 2003 Air Carrier Law. In this context, the Air France articles of association were amended, effective as of the transfer of a
majority of Air Frances share capital to the private sector, to ensure such compliance and protection.



Relationship with KLM



Air France is party to agreements with KLM related to the governance of Air France-KLM. See Item 4: Information on the CompanyHistory of Air
France-KLMThe Combination with KLM and the Exchange Offer.



Air France is also party to agreements with KLM in relation to certain commercial issues including agreements relating to cargo capacity, engine, component and aircraft maintenance, code share frequent flyer program, lounge access and
special pro-rate agreements.



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Air France is party to a number of ordinary course commercial agreements with KLM relating to, among
other things, ground engineering assistance and the exterior painting and weighing of aircraft. Such agreements are entered into by both Air France and KLM with airlines throughout the world in the ordinary course of their businesses. Each of these
agreements was entered into on an arms-length basis in circumstances unrelated to the framework agreement or the exchange offer. None of such agreements is individually, nor are such agreements in the aggregate, material to Air France-KLM.



Relationship with the Dutch State



From 1929 to March 1986, the State of the Netherlands owned a majority of
KLMs outstanding share capital. In August 1998, the role of the State of the Netherlands as holder of KLM common shares ended with the conversion of its remaining 8,470,723 common shares into cumulative preference shares C, which were
subsequently transferred to Stichting Luchtvaartbelangen Nederland, an independent foundation whose purpose is to promote Dutch aviation in general as well as to promote KLM as designated carrier in international aviation.



Prior to the exchange offer, the State of the Netherlands continued to own a
majority of KLMs outstanding priority shares, which gave it rights of governance including the right to approve, among other things, the issuance of shares, the limitation or exclusion of pre-emptive rights, the payment of dividends in shares,
the sale or transfer of priority shares, any changes to KLMs articles of association and our dissolution.



In connection with the interest held by the State of the Netherlands in KLMs share capital, KLM and the State of the Netherlands have entered into
an option agreement. Since 1994 the State of the Netherlands has had a right (the Option) to acquire sufficient 2.00 preference shares B to ensure that the Dutch State would be able to obtain an interest of up to 50.1% in
KLMs issued capital. The framework agreement amended the Option. The Option may now be exercised only in the event that any key country served by KLM restricts or terminates, or gives written notice that it will restrict or terminate,
KLMs operation of scheduled air services because of that countrys view that a substantial part of KLMs share capital is not demonstrably Dutch-owned, or KLM is not effectively controlled by Dutch nationals. As amended, the Option
has an initial duration of three years, but may be renewed by the State of the Netherlands up to three times for periods of 12 months each. The State of the Netherlands is entitled to renew the amended Option if it deems renewal necessary to avoid
traffic rights operated and enjoyed by KLM in certain key countries from being restricted or terminated.



On October 16, 2003, Air France, the State of the Netherlands and KLM entered into the Air FranceDutch StateKLM agreement in which they agreed
the terms and conditions relating to renewal of the amended Option, procedures on notification and discussion regarding the exercise by the State of the Netherlands of the amended Option, the exercise of voting rights by the State of the Netherlands
after the exercise of the amended Option and procedures on the redemption of the shares issued to the State of the Netherlands in the context of the State of the Netherlands exercising the amended Option.



Relationship among Air France-KLM, Air France and KLM



In connection with the hive down and the creation of Air France-KLM, the
boards of directors of Air France-KLM and Air France decided at a meeting on September 15, 2004, for an interim period, to enter into one or more service agreements between Air France-KLM and Air France, pursuant to which Air France, which received
all of the resources of société Air France in the hive down, renders services to Air France-KLM at its request in order to enable Air France-KLM to operate.



The interim arrangements provide that key senior executives of Air France, such as the chief financial officer and the
investor relations officer, serve in such capacities at Air France-KLM, and that staff seconded from Air France perform administrative services of Air France-KLM, such as in the functions of accounting, financial and treasury services, internal
inspections and controls, legal and administrative services and office property services. Even though each of the services above, considered separately, could be viewed as an



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agreement entered into in the normal course of business under normal terms and conditions, given the global scope of these services, the board of directors
has authorized these service agreements.



Other
Relationships



Various agencies of the French State are
customers of Air France, but we do not view these agencies as a single customer and believe such business with such agencies is conducted under normal commercial terms.



In addition, as part of its normal business, Air France enters into transactions, which we believe to be at arms
length, with state-owned and governmental entities such as ADP, the French Ministry of Defense and the French Civil Aviation Authority (Direction Générale de lAviation Civile, or DGAC).



Air France has various arrangements with ADP, including, but not limited to,
land and property rental arrangements and airport and passenger regulated fee arrangements. In addition, ADP collects landing airport taxes on behalf of the French State. Air France incurred total expenses in connection with these arrangements of
446.2 million, 414.9 million and 443.7 million, respectively, for the financial years ended March 31, 2005, 2004 and 2003.



Air France has also entered into arrangements with the French Ministry of Defense to maintain French military aircraft. Net revenues from these
arrangements were 165.6 million, 204.0 million and 116.6 million for the financial years ended March 31, 2005, 2004 and 2003, respectively.



As the French civil aviation regulator, the DGAC charges Air France fees for the use of installations and services operated by the French State, including
radio communications and meteorological services. Air France incurred total expenses in connection with these installations and services of 112.0 million, 88.3 million and 82.6 million for the financial years ended March 31, 2005,
2004 and 2003, respectively.



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Item 8: FINANCIAL INFORMATION



Financial
Statements



See Item 18. Financial Statements
for a list of financial statements and other financial information filed with this annual report. Our financial year ends on March 31.



Legal Proceedings



See Item 4. Information on the CompanyBusiness of Air France-KLM and note 30.3 to the notes to our consolidated financial statements.



Dividend Policy



A dividend of 0.15 will be paid to stockholders in respect of the
financial year ended March 31, 2005. The previously existing tax credit mechanism (avoir fiscal) was repealed for dividends paid as from January 1, 2005 and replaced with a limited tax credit that may be claimed under certain circumstances by
taxpayers. See Item 10: Additional InformationTaxation-French Tax ConsiderationsFrench Tax Consequences of Owning and Holding Air France-KLM Shares or ADSs, or Air France-KLM warrants or ADWsTaxation of
DividendsTax Credit.



Dividends of 0.05
(0.075 including the tax credit), 0.06 (0.09 including the tax credit), 0.10 (0.15 including the tax credit) and 0.22 (0.33 including the tax credit) were paid to stockholders in respect of the financial
years ended March 31, 2004, 2003, 2002 and 2001, respectively. Future payments of dividends, if any, will depend on our operating results and our investment policy at that time.



Significant Change



Except as otherwise disclosed in this annual report, there has been no material adverse change in our financial position
since March 31, 2005.



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Item 9: THE OFFER AND LISTING



Market
Information



General



The table below sets forth, for the periods indicated, the reported high and
low sales prices per share for Air France-KLM shares on Euronext Paris and for Air France-KLM ADSs on the New York Stock Exchange:



|                   |  |                                  |  |                      |  |       |  |      
|------------------ |  | -------------------------------- |  | -------------------- |  | ----- |  | -----
|                   |  | Euronext Parisprice per share(1) |  | NYSE priceper ADS(2)
|                   |  | High                             |  | Low                  |  | High  |  | Low  
|                   |  | ()                              |  | ($)                 
|                   |  |                                  |  |                     
|Year ended         |  |                                  |  |                      |  |       |  |      
|                   |  |                                  |  |                     
|March 31, 2001     |  | 27.01                            |  | 15.31                |  |      |  |     
|March 31, 2002     |  | 22.58                            |  | 8.70                 |  |      |  |     
|March 31, 2003     |  | 20.77                            |  | 7.09                 |  |      |  |     
|March 31, 2004     |  | 17.77                            |  | 8.17                 |  |      |  |     
|March 31, 2005     |  | 15.33                            |  | 11.28                |  | 19.81 |  | 14.26
|                   |  |                                  |  |                     
|Quarter ended      |  |                                  |  |                      |  |       |  |      
|                   |  |                                  |  |                     
|June 30, 2003      |  | 12.59                            |  | 8.17                 |  |      |  |     
|September 30, 2003 |  | 15.44                            |  | 11.10                |  |      |  |     
|December 31, 2003  |  | 14.17                            |  | 12.04                |  |      |  |     
|March 31, 2004     |  | 17.77                            |  | 12.18                |  |      |  |     
|June 30, 2004      |  | 15.33                            |  | 12.21                |  | 17.80 |  | 14.80
|September 30, 2004 |  | 14.24                            |  | 11.28                |  | 17.23 |  | 14.26
|December 31, 2004  |  | 15.00                            |  | 12.52                |  | 19.81 |  | 15.42
|March 31, 2005     |  | 15.14                            |  | 13.36                |  | 19.44 |  | 17.44
|                   |  |                                  |  |                     
|Month ended        |  |                                  |  |                      |  |       |  |      
|December 31, 2004  |  | 15.00                            |  | 13.86                |  | 19.81 |  | 18.42
|January 31, 2005   |  | 14.27                            |  | 13.36                |  | 19.20 |  | 17.44
|February 28, 2005  |  | 15.14                            |  | 13.98                |  | 19.44 |  | 18.27
|March 31, 2005     |  | 14.66                            |  | 13.53                |  | 19.41 |  | 17.84
|April 30, 2005     |  | 14.02                            |  | 11.98                |  | 17.90 |  | 15.62
|May 31, 2005       |  | 13.39                            |  | 12.00                |  | 16.62 |  | 15.63
|June 30, 2005(3)   |  | 13.34                            |  | 12.13                |  | 16.28 |  | 14.92

---

Notes:

|(1) | Air France shares were first listed on Euronext Paris on February 22, 1999.
|--- | ---------------------------------------------------------------------------

|(2) | American Depositary Receipts representing Air France ADSs were first listed on the New York Stock Exchange on May 5, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | On July 19, 2005, the closing price of Air France-KLM shares on Euronext Paris was 13.53 and the closing price of Air France-KLM ADSs on the New York Stock Exchange was
$16.39.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Markets



Our shares are listed on Euronext Amsterdam and Euronext Paris. American Depositary Shares representing our shares and American Depositary Warrants
representing our warrants are listed on the New York Stock Exchange.



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Item 10: ADDITIONAL INFORMATION



General



Air France-KLM is a société anonyme, a form
of limited liability company, organized and existing under French law, registered under the number 552 043 002 RCS Bobigny and subject to the provisions of the French Civil Aviation Code (Code de laviation civile) and to French
corporate law to the extent it does not conflict with the French Civil Aviation Code. Our financial year begins on April 1 and ends on March 31 of each calendar year.



The following paragraphs describe certain provisions of Air France-KLMs articles of association as adopted on
September 15, 2004 and applicable French law. Such information and descriptions do not purport to be complete and are qualified in their entirety by reference to the articles of association of Air France-KLM.



Air France-KLMs Objects and Purposes



Our objects are:



| |  |  | The acquisition of direct or indirect shareholdings in the capital of airline companies or of companies holding a majority of the share capital and voting rights of a company with
an air transport operating license issued pursuant to Article L. 330-1 of the French civil aviation code.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The acquisition of direct or indirect shareholdings and any interest in any French or foreign companies whose activities are related to the air transportation business or in any
other business tending to further its development, whether directly or indirectly, either alone or in the context of an association, cooperation, grouping or venture with any other persons or companies, and the carrying out, in any manner
whatsoever, of the operations pertaining to its corporate purpose.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The management of shares and securities, investment for its won account or for the account of third parties, by any means whatsoever, including by way of acquisition, capital
increase, absorption or merger.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The management of its own moveable and immoveable property, or of any property, regardless of the composition thereof, belonging to any individual or legal entity.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



Generally, we may also engage in any and all
such financial, commercial and industrial transactions concerning personal and real property as may be related directly or indirectly, in whole or in part, to the above purpose or to any other similar or related purposes likely to further our
expansion or development.



Attendance and Voting at Shareholders
Meetings



General



Under French law, there are two types of general shareholders meetings:
ordinary and extraordinary. Ordinary general shareholders meetings are called to deal with matters such as the election, replacement and removal of the members of the board of directors, the appointment of statutory and independent auditors,
the approval of annual financial statements, the declaration of cash dividends or the authorization to have such dividends paid in shares and the issuance of debt securities.



Extraordinary general shareholders meetings must be called to seek approval on matters such as the amendment of our
articles of association, a change in our name or corporate purpose, increases or decreases in share capital (including waiver of the shareholders preferential subscription rights), an extension of our statutory term, mergers and significant
divestitures, the creation of a new class of shares, the authorization of the issuance



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of investment certificates, securities exchangeable or convertible into equity securities, the transformation of Air France-KLM into another corporate form,
and the voluntary liquidation of Air France-KLM before the end of its statutory term.



Our general shareholders meetings are held at our registered office or at any other location specified in the notice of meeting. The chairman of the board of directors (or, in the chairmans absence, a
director appointed by the chairman specifically for this purpose) chairs the general meetings.



If the board of directors fails to convene any shareholders meeting, our statutory auditors or a court-appointed agent may call the meeting. The court may be requested to appoint such agent by (i) one or several
shareholders holding, in the aggregate, at least 5% of our share capital, (ii) any interested party or the works council in an emergency or (iii) a duly qualified association of shareholders holding their shares in registered form for at least two
years and holding, in the aggregate, at least 1% of our voting rights. The notice calling a general meeting must state the agenda for the meeting and, with the exception of the removal and replacement of directors (which may be discussed at any
meeting), no action may be taken at any meeting which was not included on the agenda for such meeting.



Annual Meetings



The board of directors is required to hold an annual ordinary general shareholders meeting no later than six months following the end of our
financial year (currently ending on March 31 of each year) for approval of the annual financial statements, unless such period is extended by an order of the President of the Tribunal de commerce. The board of directors may also convene an ordinary
or extraordinary meeting upon proper notice at any time during the year.



Notice of Shareholders Meetings



French law requires that a preliminary notice of a general shareholders meeting (avis de réunion) be published in the Bulletin des Annonces Légales Obligatoires(BALO) at least 30
days before the date set for the meeting. The preliminary notice must first be sent to the Autorité des Marchés Financiers (AMF) with an indication of the date of its publication in the BALO. The AMF also recommends that such
preliminary notice be published in a newspaper of national circulation in France. Such preliminary notice must include, among other things, the agenda of the meeting, the draft resolutions that are proposed for voting by the shareholders, and
information regarding voting by mail. Within 10 days of such publication, one or more shareholders holding a specified percentage of shares determined on the basis of a formula relating to capitalization and representing currently, in the aggregate,
0.5% of our share capital, or a duly authorized association of shareholders holding their shares in registered form for at least two years and holding, in the aggregate, at least 1% of our voting rights or our works council may propose additional
resolutions on which votes are to be taken at such meeting. At least 15 days before the date set for any general meeting on first call, and at least six days before any second call, a final notice (avis de convocation) must be sent by mail to
all holders of registered shares who have held such shares for more than one month prior to the date of publication of the notice, and notice of the meeting must also be given by publication in the BALO and in a newspaper authorized to publish legal
announcements in the local administrative department (département) in which we are registered, with prior notice to the AMF. Such notice must include, among other things, a description of the type, final agenda, place, date and time of
the meeting.



Attendance and Voting Rights



Attendance and exercise of voting rights at both ordinary and
extraordinary general shareholders meetings are subject to certain conditions. There is no requirement that a shareholder have a minimum number of shares in order to be able to attend, or be represented at, a general meeting or to vote by
mail. Pursuant to our articles of association, in order to participate in any general meeting, a holder of registered shares must have such shares registered in his or her name in our register of shareholders or a shareholder account maintained by
an accredited financial intermediary (intermédiaire financier habilité) at least five days prior to the meeting. Similarly, a holder of bearer shares must obtain from the accredited financial intermediary with whom such holder
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shares, a certificate (certificat dimmobilisation) indicating the number of bearer shares owned by such holder and stating that these shares are
not transferable until the date of the meeting. Such certificate must be deposited at the place specified in the notice of the meeting at least five days before the meeting.



Subject to the foregoing, all shareholders who have properly registered their shares have the right to participate in
general meetings, either in person or by proxy, and to vote, either in person, by proxy or by mail, according to the number of shares they hold. Proxies may be granted by a shareholder to his or her spouse, to another shareholder or, if the
shareholder is a company, to a legal representative (or by such representative to a proxy, who must present a specific power in his or her name) or to us by returning a blank proxy. In the latter case, the chairman of the shareholders meeting
will exercise the voting rights attached to the shares concerned by the blank proxy in favor of all resolutions proposed and agreed by the board of directors and against all others. Proxy forms will be sent to any shareholder upon request. In order
to be counted, proxies must be received at our registered office or at such other address indicated in the notice convening the meeting prior to the date of the relevant general meeting. With respect to voting by mail, we must send our shareholders
upon request a form for such vote and the form must be received by us at least three days prior to the date of the relevant general meeting. Pursuant to French corporate law, shares held by entities controlled, directly or indirectly, by us are not
entitled to voting rights and do not count for quorum or majority purposes.



Quorum and Majority



Under French law and our articles of association, the presence in person (or voting by mail, proxy, video conference or by any other means of telecommunication where the nature and conditions of use comply with regulatory provisions) of
shareholders having not less than 25% (in the case of any ordinary general meeting or an extraordinary general meeting deciding upon any capital increase by incorporation of reserves, profits or share premium) or 33.33% (in the case of any other
extraordinary general meeting) of the shares entitled to vote is necessary for a quorum. If no quorum is present at a meeting, the meeting is adjourned. There is no quorum requirement when an ordinary general meeting is reconvened, but only
questions which were on the agenda of the adjourned meeting may be discussed and voted upon. When an extraordinary general meeting is reconvened, the presence in person or by proxy (including those voting at a distance) of shareholders having not
less than 25% of the shares entitled to vote is required for a quorum (except when an increase in our share capital is proposed through incorporation of reserves, profits or share premium, in which case the quorum requirements are those applicable
to ordinary general meetings). If such a quorum is not present, the reconvened meeting may be adjourned for a maximum of two months, but no deliberation may take place without such a quorum.



At an ordinary general meeting (or an extraordinary general meeting to vote
upon any capital increase by incorporation of reserves, profits or share premium), a simple majority of votes cast by the shareholders present or represented at such meeting is required to pass a resolution. At any other extraordinary general
meeting, a two-thirds majority of votes cast is required to pass a resolution. A unanimous vote, however, is required to increase the liabilities of shareholders. Abstention from voting by those present or represented by proxy, or voting at a
distance, is counted as a vote against the resolutions submitted to a vote.



Financial Statements and Other Communications with Shareholders



In connection with any shareholders meeting, we must provide a set of documents, including our annual report and a summary of the results of the
five previous financial years, to any shareholder who so requests. French corporate law requires that a special report be provided to the ordinary shareholders meeting regarding stock options authorized or granted by us.



Company Results



The board of directors is required to maintain proper accounts of all
transactions conducted by us and shall draw up annual financial statements, consolidated financial statements, as well as half-year consolidated financial statements and shall provide certain financial information at the end of each financial
quarter in compliance with the law, regulations and standards in force.



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Dividend and Liquidation Rights



Net profit in each financial year (after deduction for depreciation and reserves) as increased or reduced, as the case may
be, by our profit or loss carried forward from prior years, less any contributions to legal reserves, constitutes the distributable profits (bénéfice distribuable) available for distribution to our shareholders as dividends,
subject to requirements of French law and with Title VII and other applicable provisions of our articles of association.



Legal Reserve



Under French law, each société anonyme (our corporate form), is required to allocate 5% of its unconsolidated statutory net profits
(after reduction for any losses carried forward from previous years) in each financial year to a legal reserve fund until the amount in such reserve fund is equal to 10% of the aggregate nominal value of the share capital. This restriction of
payment of dividends also applies to each of our French subsidiaries on an unconsolidated basis. The legal reserve is distributable only upon our liquidation. As of the date hereof, we have not yet fully funded our legal reserve.



Approval of Dividends



After approving the accounts and formally noting the existence of a profit
available for distribution, the general shareholders meeting may resolve to allocate such profit to one or more reserve funds, the assignment and use of controls to carry over this profit to future years, or to distribute it. Any surplus
distributed shall be shared among the shareholders in proportion to their equity rights in Air France-KLM. General shareholders meetings are empowered to grant any shareholder, all or part of the dividend paid out, and for interim dividends, a
choice between payment of such final or interim dividend in cash or in shares. No distribution may be made to shareholders if the shareholders equity would become, as a result of the distribution, less than the amount of the share capital
increased by the reserves, the distribution of which is prohibited by law or our articles of association. The methods of payment of dividends are determined by the general shareholders meeting or by the board of directors, in the absence of a
decision by the shareholders. According to our articles of association, the general shareholders meetings are empowered to give each shareholder the option of receiving all or part of its annual or interim dividend payments in either cash or
shares.



If we have earned a distributable profit since the end
of the preceding financial year (as shown on an interim balance sheet certified by our statutory auditors), the board of directors has the authority, subject to French law and regulations, prior to the approval of the annual financial statements by
the shareholders, to distribute interim dividends to the extent of the distributable profits for the period covered by the interim income statement.



Distribution of Dividends



Subject to the statement above regarding interim dividends, the payment of dividends is fixed at the ordinary general meeting of shareholders at which the
annual accounts are approved, upon the recommendation of the board of directors. Under French law, dividends are distributed to shareholders pro rata to their respective holdings of shares. Dividends are payable to holders of shares outstanding on
the actual dividend payment dates as determined at the shareholders meeting approving the distribution of dividends or, in the case of interim dividends, on the actual dividend payment date, as determined by the meeting of the board of
directors approving the distribution of interim dividends. The actual dividend payment date is decided by the shareholders in an ordinary general meeting or by the board of directors in the absence of such decision by the shareholders. Annual
dividend payments must be made within nine months of the end of our financial year, unless otherwise authorized by court order. Under French law, dividends not claimed within five years of the date of payment revert to the French State.



Our board of directors may, at any time and for any reason, propose to an
extraordinary general meeting of shareholders the early dissolution of Air France-KLM, and we may be placed in liquidation in compliance with the relevant provisions of the French Commercial Code. If we are liquidated, those of our assets remaining
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payment of our debts, liquidation expenses and all of our remaining obligations will be distributed first to repay in full the nominal value of the shares,
and the surplus, if any, will be distributed among the shareholders in proportion to the nominal value of their shareholdings.



Changes in Share Capital



Article 7 of our articles of association provides that our share capital may be increased, reduced or redeemed subject to the conditions established by
law. Our articles of association do not impose any additional conditions.



Increases in Share Capital



Increases in our share capital may be effected by either the issuance of additional securities that give access, immediately or in the future, to a portion of the share capital, the increase of the nominal value of existing shares or the
issuance of investment certificates or a new class of shares. Additional shares, investment certificates or a new class of shares may be issued for cash or for assets contributed in kind, upon the conversion, exchange or redemption of debt
securities convertible, redeemable or exchangeable into Air France-KLM shares previously issued by us, by capitalization of reserves, profits or issuance premiums upon the exercise of stock options, share warrants or other similar securities
comprising the right to subscribe for or acquire equity securities, or, subject to certain conditions, in satisfaction of our indebtedness or any combination thereof. As any increase in share capital requires modification of our articles of
association, our share capital may be increased only with the approval of the shareholders at an extraordinary general meeting, upon the recommendation of the board of directors.



A capital increase through incorporation of reserves, profits or issuance premiums may be decided at an extraordinary
general meeting by the shareholders, acting under the quorum and majority requirements of ordinary general meetings. See Attendance and Voting at Shareholders Meetings. Share dividends may be distributed, as described under
Dividend and Liquidation Rights. French law permits different classes of shares to have different liquidation, voting and dividend rights.



The shareholders may delegate the right to carry out any capital increase (other than by way of an in-kind contribution) to the board of directors,
provided that this increase has been previously authorized by the shareholders. The board of directors may further sub-delegate this right to our general manager. Each time the shareholders decide on a capital increase or decide to delegate to the
board of directors the right to carry out a capital increase, they must also determine whether or not to proceed with a capital increase reserved for our employees and our subsidiaries or whether to delegate to the board of directors the right to
carry out such reserved capital increase.



Paying-up of
Shares



Cash shares issued to increase our share capital
must be paid-up, at the time of their subscription, in an amount at least equal to one quarter of their nominal value and in the full amount of their premium, if a premium is due. The difference will be called up, on one or more occasions, by a
resolution of the board of directors, which will determine the amount to be called up and the venue and date of the payments to be made. Shareholders will be notified of the capital call one month before the date set for each payment by means of an
announcement placed in a publication authorized to carry legal notices and with a circulation including the location of our registered office, or by individually addressed registered letter. Any delay in payment of the amounts due will automatically
lead, without requirement of formal notice, to the accrual of interest at the statutory rate plus 2% per annum, calculated daily with effect from the due date, without prejudice to personal actions at law which we may bring against the defaulting
shareholder and to the enforcement measures available by law. Any shares on which payment due has not been made at the time of their subscription may be considered null and void eight days following the dispatch of notice by registered letter, where
such notice has not elicited a satisfactory response.



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Decreases in Share Capital



An extraordinary general shareholders meeting is also empowered to authorize and implement a decrease in share
capital, which may be effected either by decreasing the nominal value of the existing shares or by reducing the number of outstanding shares. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and
cancellation by us of our own shares. In accordance with French company law, all holders of shares in each class of shares must be treated equally with respect to a share capital reduction, unless the consent of the affected shareholders is
obtained. If the reduction is not attributable to losses incurred by us or part of a program to purchase our own shares, each shareholder will be offered the opportunity to participate in such capital reduction, unless each affected shareholder
agrees otherwise.



Preemptive Subscription Rights



Under French law, holders of shares have preferential, pro rata subscription
rights when we issue, for cash, additional shares or other securities (i) that can be exchanged, converted or redeemed for shares or (ii) to which there are warrants attached to subscribe for or acquire new shares. Any shareholder may waive its
preferential rights in respect of any particular offering. A two-thirds majority of the shares entitled to vote at an extraordinary general meeting may also decide to waive the preferential rights of all shareholders with respect to any particular
offering. Preferential subscription rights, if not previously waived, are transferable during the subscription period relating to a particular offering and may be quoted on Euronext Paris. In the event that the preferential rights of shareholders
are withdrawn, the shareholders meeting has the power to grant, or to authorize the board of directors to grant, existing shareholders a non-transferable priority right to subscribe for or acquire new shares issued during a limited period.



Trading by Air France-KLM in its Own Shares



Under French law, we may not subscribe for our own shares, but may, either
directly or through a financial intermediary acting on its behalf, purchase our own shares (i) to reduce our share capital by canceling such acquired shares under certain circumstances, with shareholder approval at an extraordinary general meeting,
(ii) to obtain shares for distribution to employees under a profit-sharing plan or stock option plan and (iii) subject to the filing of a note dinformation that has received the visa of the AMF and after obtaining approval from the
shareholders at an ordinary general meeting, to acquire up to 10% of our share capital in connection with a corporate share repurchase program for a maximum period of 18 months. In the latter case, we may decide (i) to keep the shares acquired, (ii)
to sell or transfer them (including to employees under a profit-sharing plan or stock option plan) or (iii) with the approval of the shareholders at an extraordinary meeting, to cancel them, subject to a maximum amount of canceled shares equal to
10% of the outstanding share capital over any 24-month period. In addition, all repurchases are subject to certain limitations, including as to timing, price and quantity, so as not to disrupt the normal trading of the shares.



Under French law, a company may not, directly or through an intermediary
acting on his behalf, own more than 10% of its total capital or more than 10% of any class of its outstanding share capital. The shares repurchased by us must be held in registered form and be fully paid up. Such shares are deemed to be outstanding
under French law, but are not entitled to dividends (these are carried forward to the next financial year as distributable profits) or voting rights and we may not itself exercise preferential subscription rights attached to them. The shareholders,
at an extraordinary general meeting, may decide not to take such shares into account in determining the preferential subscription rights attached to the other shares; in the absence of such a decision, the rights attached to shares held by us must
be either sold on Euronext Paris before the end of the subscription period or distributed to the other shareholders on a pro rata basis. A direct subsidiary of a company is generally prohibited by French law from holding shares and, in the event it
becomes a holder of shares, such subsidiary must transfer the shares within one year following the date on which it becomes the holder thereof. An indirect subsidiary of a company may only acquire shares if such subsidiary demonstrates a business
purpose for holding the shares, but in no event will it be entitled to vote such shares.



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Form and Holding of Shares



Form of Shares



Until they are fully paid up, all shares will be registered in the name of the holder. Our articles of association provide that fully paid-up shares may
be held in either registered or bearer form, at the option of the shareholder, subject to certain provisions. Where the threshold of 2% of the voting rights or share capital is reached, shares must be registered in the names of the holders. Pursuant
to the 2003 Air Carrier law and the Decree of June 27, 2003, Air Frances articles of association were amended at a general meeting of the shareholders of Air France on July 10, 2003 to allow for measures to protect the nationality of Air
France, as required under rules governing the granting of aircraft operating licenses and traffic rights. The corresponding amendments became effective as of the privatization of Air France on May 6, 2004. Pursuant to these amendments, the shares
must be held in registered form in the following situations:

|
|

| |  |  | Holding 2% or more of Air France-KLMs shares or voting rights.
| | - |  | ---------------------------------------------------------------



| |  | A shareholder, acting alone or in concert with others, who holds 2% or more of our shares or voting rights, must request from its financial intermediary (within five trading days of
crossing the 2% threshold) that its shares be recorded in registered form, and provide us (within 15 calendar days) with a copy of such request. This request must contain the concerned shareholders name and address, the number and purchase
date of the shares held or, if it is a legal entity, its legal name, registered office and the identity and nationality of its controlling persons. Non-French individuals or legal entities must also disclose the identity of any accredited financial
intermediary that holds their shares on their behalf.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Holding more than 10,000 shares
| | - |  | -------------------------------



| |  | Our board of directors may at any time decide to lower the above threshold from a holding of 2% of the shares to a holding of 10,000 shares. Further, the board of directors is
compelled to lower the 2% threshold to a threshold of 10,000 shares in the event 40% or more of our share capital or voting rights are held by non-French persons (as defined below). The board will publish any such decision in the BALO and in at
least one French language and one English language financial newspaper.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Shares exclusively held in registered form
| | - |  | ------------------------------------------



| |  | Our board of directors may also, at any time, upon reviewing available information, resolve that all shares be recorded exclusively in registered form. The board must make this
determination if 45% or more of our share capital or voting rights are held, directly or indirectly, by non-French persons (as defined below). The boards decision to impose a requirement that our shares be in registered form (or any subsequent
decision to the contrary) must be published in the same manner as described in the preceding paragraph. Holders of bearer shares must require that their shares be recorded in registered form within 15 days of the boards decision.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the purposes of the articles of association,
French persons are defined as individuals having French nationality, or legal persons or other entities or groups that are majority held or effectively controlled by French individuals or interests.



We may use the procedure of titres au porteur identifiables (TPI) to
obtain, at its own expense from Euroclear France, information regarding each of its shareholders, including their name, nationality, address and the number of shares held in bearer form. If, upon reviewing the requested information, we believe that
our shares are held for the account of other persons, we may request similar information regarding these other persons either from Euroclear France or directly from each concerned financial intermediary. No information may be requested by or
communicated to third parties under the TPI procedure.



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Holding of Shares



In accordance with French law concerning the dematerialization of securities, the ownership rights of holders of
shares are represented by book entries instead of share certificates. Registered shares are entered into an account maintained by us ourselves or by a representative nominated by us, while shares in bearer form must be held in an account maintained
by an accredited financial intermediary on the shareholders behalf.



We maintain a share account with Euroclear France in respect of all shares held in registered form. This account is administered by Société Générale. We also maintain accounts in the name
of each shareholder either directly or, at the shareholders request, through such shareholders accredited intermediary in separate accounts. Each account shows the name of the shareholder, the number of shares held, and the fact that
such shares are registered through an accredited financial intermediary, if such is the case. Société Générale issues a confirmation to each person in whose name the shares are registered, in relation to their respective
account. These confirmations do not constitute documents of title.



Shares held in bearer form are held and registered on the shareholders behalf in an account maintained by an accredited financial intermediary and credited to an account maintained by such intermediary with Euroclear France. Each
accredited financial intermediary maintains a record of shares held through it and will issue certificates in respect thereof. Transfers of shares held in bearer form may only be effected through accredited financial intermediaries and Euroclear
France. As noted above, our articles of association allow us to request from Euroclear France, at any time, details concerning the identity of holders of shares in bearer form.



Non-French Residents



Pursuant to our articles of association, any shareholder (i) that does not have its domicile or registered office (as defined in article 102 of the French
Civil Code) in France and (ii) that is required to have its shares recorded in registered form under the procedure referred to above, must register a domicile (faire élection de domicile) with an accredited financial intermediary in
France and must inform us without delay by registered or certified mail with return receipt requested. If a shareholder fails to do so satisfactorily, the concerned shares will be deprived of voting rights in any general shareholders meeting,
and the payment of the corresponding dividends will be deferred until these requirements are fully complied with.



Transfer of Shares



Registered shares must be converted into bearer form before being traded on Euronext Paris and, accordingly, must be credited to an account maintained by
an accredited financial intermediary. Dealings in shares are initiated by the owner, who gives instructions (through an agent, if appropriate) to the relevant accredited financial intermediary. For dealings on Euronext Paris, a tax assessed on the
price at which the securities were traded (impôt sur les opérations de bourse) is payable, at a rate of 0.3% on transactions up to 153,000 and at a rate of 0.15% thereafter, subject to a rebate of 23 per transaction
and a maximum assessment of 610 per transaction. Transactions between non-French residents are not subject to the payment of such tax. In addition, a fee or commission is payable to the French broker, accredited financial intermediary or other
agent involved in the transaction (whether within or outside France).



For transactions completed prior to and including December 31, 2005, a 1% registration duty (subject to a maximum duty of 3,049 per transfer) applies to certain transfers of shares in French companies. This duty will increase to 1.1%
(subject to a maximum duty of 4,000 per transfer) for transactions completed after January 1, 2006. The duty does not apply to transfers of shares in listed companies that are not evidenced by a written agreement, or if any such agreement is
executed outside France.



Pursuant to our articles of
association, any transfer of shares may be subject to the prior approval of our board of directors if:



| |  |  | upon reviewing available information, the board of directors determines that more than 45% of our share capital or voting rights are held, directly or indirectly, by non-French
nationals, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the proposed transfer would prompt the acquirers obligation to file a statement in respect of the 0.5% threshold referred to below (or any multiple thereof).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



Compulsory Transfer of Shares



Pursuant to our articles of association, we are authorized to require that
certain shareholders transfer all or part of their shares if 45% or more of our share capital or voting rights is held, directly or indirectly, by non-French nationals. French nationals, for purposes of our articles of association, are individuals
with French nationality and legal entities or other entities and groups whose equity is not majority-held by, or effectively controlled by, non-French individuals or interests. The compulsory transfer procedure is intended to safeguard our rights to
operate passenger air travel services on international routes, which depend, in many instances, on it being substantially- or majority-owned and effectively controlled by French nationals or, in some cases, nationals of an E.U. member state or a
state that is party to the EEA (or any other agreement whose scope is equivalent in terms of air transport). See Item 4: Information on the CompanyRegulation of Air France-KLMThe International Regulatory FrameworkThe Chicago
Convention and Item 4: Information on the CompanyRegulation of Air France-KLMEuropean RegulationLiberalization. We will publish an announcement in the Bulletin des Annonces Légales Obligatoires
(BALO) and a press release in the form of a financial notice in a newspaper of national circulation in France and in an English-language financial publication when the percentage of share capital or voting rights held, directly or indirectly, by
shareholders other than French nationals reaches 45% or falls below this level.



Under this compulsory transfer procedure, we will issue a formal request (mise en demeure) as a matter of priority to shareholders who are not nationals of a E.U. member state or a state that is party to the
EEA (or any other agreement whose scope is equivalent in terms of air transport) requiring them to transfer all or a portion of their shares. The formal request will apply to shares based on the order they were registered in our share register,
beginning with the most recently registered shares.



Following
the issuance of a formal request to nationals other than nationals of an E.U. member state or a state that is party to the EEA (or nationals of other states party to any other agreement whose scope is equivalent in terms of air transport), if our
share capital or voting rights remain at least 45% held, directly or indirectly, by non-French nationals, we may issue a formal request to its shareholders who are nationals of an E.U. member state or a state that is party to the EAA. This formal
request will also apply to shares based on the order they were registered, beginning with the most recently registered shares.



In the event that more than one shareholder holds shares registered at the same date in our records exceeding the balance of the shares to which the same
formal demand procedure applies, the balance will be split between those shareholders in proportion to the shares concerned.



The formal request for compulsory transfer of stock may be implemented in one or more phases for so long as, in the light of the information available to
us and the transfers already effected, the portion of the share capital or voting rights held, directly or indirectly, by shareholders other than French nationals continues to equal at least 45%.



A formal request will be deemed to have been duly issued when it is in the
form of a letter sent registered or certified mail, return receipt requested, or by any equivalent means, to the holder appearing in our register, including cases where the shares are registered in the name of an intermediary on behalf of the owner
of the shares, and to the address appearing in this register or, where applicable, to the address where domicile has been elected.



The formal request will indicate the number of shares that the shareholder is required to transfer within two months from the date of the formal request.
Shareholders receiving a formal request must inform us without delay of the execution of the transfers required of them.



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If at the end of the two-month period following our formal request the concerned shareholder has taken no
action, our chairman may seek a writ of summons appointing a financial institution to sell the concerned shares on Euronext Paris. From the date of this appointment, the concerned shares will be deprived of voting rights and will only be authorized
for sale under the procedure laid out in the 2003 Air Carrier Law and our articles of association.



At the end of an additional two-month period, any unsold shares may be repurchased by us or, if we fail to do so, will regain their voting rights. The net
proceeds of any sale of the concerned shares under this procedure will be paid to the holder whose shares are subject to the compulsory transfer procedure.



For a description of the restriction applicable to holders of ADSs, see American Depositary SharesLimitations on the Right to Own,
Transfer or Vote Air France-KLM ADSs; Compulsory Transfer of Air France-KLM Shares. We intend to treat all of the shares underlying ADSs as shares held by nationals other than nationals of an E.U. member state or a state that is party to the
EEA (or any other agreement whose scope is equivalent in terms of air transport), unless it has received satisfactory evidence as to why they should not be so treated.



Requirements Applicable to Shareholdings Exceeding Certain Percentages



Pursuant to Article L.233-7 of the French Commercial Code (Code de commerce), any individual or entity, acting alone or in
concert with others, that becomes the owner directly or indirectly, of more than 5%, 10%, 20%, 33.3%, 50% or 66.6% of the outstanding shares or voting rights of Air France-KLM must notify us within five trading days of crossing any such threshold of
the number of shares and warrants it holds or is entitled to hold and of the number of voting rights attached thereto. Such individual or entity must also notify the AMF within five trading days. The AMF makes such report available to the public. In
addition, if such thresholds are reached due to a reduction in the holding, notification according to the conditions above must be given to us and the AMF, respectively.



In addition to the provisions of the French Commercial Code, our articles of association provide that any individual or
legal entity, acting alone or in concert with others, which holds directly or indirectly at least 0.5% of the share capital or voting rights of Air France-KLM or a multiple thereof up to a maximum of 50%, must notify us within 15 calendar days by
certified mail with return receipt. Additionally, if such a threshold is reached due to a reduction in the holding, notification according to the conditions above must be given to us. Failure to adhere to these notification requirements will lead to
disqualification of the stock for voting under Article L.223-14 of the French Commercial Code at the request of one or more shareholders holding together at least 0.5% of our share capital.



In addition, any person acquiring more than 10% or 20% of our outstanding
shares or voting rights must file a report within 10 trading days with us and the AMF, which makes such report available to the public by means of a notice. This report must state whether the acquirer is acting alone or in concert with others and
indicate its intention for the following 12-month period, including whether or not it intends to continue its purchases, to acquire the control of us or to seek nomination (for itself or for others) to our board of directors. The acquirer must also
publish a press release stating its intentions in a financial newspaper nationally circulated in France. The acquirer may modify its initial intentions in a new statement, provided that this is done on the basis of significant changes in its own
situation or those of its shareholders. Upon any change in intention, it must file a new report. These requirements also apply to accredited intermediaries that hold shares on behalf of shareholders who are non-French persons. Under the regulations
of the AMF, and subject to limited exemptions, any person, or persons acting in concert, who comes to own more than 33.3% of our share capital or voting rights must initiate a public tender offer for the remainder of our share capital.



In order to permit holders of shares or intermediaries to give notice as
required by law, we are obligated to publish in the BALO, no later than 15 calendar days after our annual ordinary general meeting of shareholders,



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information with respect to the total number of votes outstanding as of the date of such meeting. In addition, if we are aware of a change of at least 5% in
the number of available votes in the period between two annual ordinary general meetings, it is required to publish in the BALO, within 15 calendar days of such change, the number of votes then available and provide the AMF with written notice
thereof.



If any shareholder fails to comply with the
above-mentioned notification requirements, the shares in excess of the relevant threshold will be automatically deprived of voting rights until the end of a two-year period following the date of compliance by the owner with the notification
requirements. Furthermore, any shareholder who fails to comply with the above-mentioned requirements may have all or part of its voting rights (and not only those attached to the shares in excess of the relevant threshold) suspended for up to five
years by court order at the request of our chairman or any shareholder or the AMF, and, in some cases, may be subject to criminal penalties.



Ownership of Shares by Non-French Residents



Under French law, there is no specific limitation on the right of non-French residents or non-French companies to own or, where applicable, vote
securities of a French company. A non-resident of France, a non-French company or any group of non-French residents or non-French companies acting in concert or any foreign controlled resident must file a déclaration administrative, or
administrative notice, with French authorities if such acquisition would result in (i) the acquisition of more than 33.33% of our share capital or voting rights or (ii) the increase above 33.33% of our share capital or of the voting rights, unless
such non-French resident, group of non-French residents or non-French company or group of non-French companies already controls more than half of our share capital or voting rights prior to such increase. Under existing administrative rulings,
ownership by a French corporation, in which 33.33% or more of the share capital or voting rights is held by a foreign national, of 33.33% or more of a French companys share capital or voting rights gives rise to an obligation to file a
déclaration administrative with the French authorities.



However, because of the regulatory regime applicable to airline carriers, shareholders who are not French citizens could, under certain circumstances, be required to sell all or a portion of their shares if 45% or more of our share capital
or voting rights is held, directly or indirectly, by non-French persons. See Compulsory Transfer of Shares.



In accordance with its articles of association, we will inform shareholders and the general public, through an announcement published in the BALO and a
press release in the form of a financial notice published in a journal with national coverage in France and in an English-language financial publication, when 45% of the share capital or voting rights is held, directly or indirectly, by shareholders
other than French nationals, and when the share in the equity or voting rights held by such shareholders falls below this level. The term French national(s) refers to private individuals and legal entities or other entities and groups whose equity
is not held in the majority or effectively controlled by foreign private individuals or interests. The notice must specify the share of equity or voting rights thus held, directly or indirectly, by shareholders other than French nationals and will
indicate whether we are envisaging the use of the formal demand procedure provided for in Article L.360-2 of the Code of Civil Aviation. See Compulsory Transfer of Shares.



Warrants



Exercise Price and Rights Attached to Air France-KLM Warrants



Three Air France-KLM warrants entitle their holder to subscribe for or
acquire, subject to adjustment upon the occurrence of certain events described below, two new or existing Air France-KLM shares at an exercise price of 20 per Air France-KLM share. Holders of Air France-KLM warrants may elect to receive
delivery of Air France-KLM shares or Air France-KLM share represented by ADSs upon exercise of Air France-KLM warrants.



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Exercise Period and Expiration of Air France-KLM Warrants



The Air France-KLM warrants have a maturity of three and a half years from
May 6, 2004 and can be exercised starting November 6, 2005, subject to the restrictions on exercisability set forth below under Restrictions on Exercisability. Air France-KLM warrants not exercised during the exercise period will
become automatically void at the end of the exercise period.



Restrictions on Exercisability



We are entitled
to suspend the right to exercise Air France-KLM warrants for a period not exceeding three months, in the event of:



| |  |  | an increase in our share capital,
| | - |  | ---------------------------------



| |  |  | the issuance of securities convertible or exchangeable into, or otherwise giving access to, our equity capital, or
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | a merger (fusion) or split (scission) or any other financial operations that include a preferential subscription right or reserve a priority subscription period for the benefit of
our existing shareholders.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In such event, notice
of the suspension will be published in:



| |  |  | the BALO,
| | - |  | ---------



| |  |  | a financial newspaper having general circulation in France,
| | - |  | -----------------------------------------------------------



| |  |  | a Dutch national newspaper,
| | - |  | ---------------------------



| |  |  | the Daily Official List of Euronext Amsterdam,
| | - |  | ----------------------------------------------



| |  |  | the Wall Street Journal,
| | - |  | ------------------------



| |  |  | the Financial Times, and
| | - |  | ------------------------



| |  |  | a Euronext notice.
| | - |  | ------------------



The notice of suspension will be published not less than 15 days prior to the commencement of the suspension and will mention both the date on which the
suspension comes into force and the date on which the suspension will end.



Exercise Procedure



Subject to adjustment as described below, Air France-KLM warrants may be exercised by deposit of an exercise notice with the authorized financial intermediary together with payment of the exercise price. Warrants will only be accepted for
exercise in multiples of three.



There can be no assurance that
Air France-KLM shares delivered upon the exercise of Air France-KLM warrants will be transferred to the person exercising such Air France-KLM warrants within three business days of exercise.



Upon exercise of an Air France-KLM warrant, we may deliver, at our option,
newly issued Air France-KLM shares, existing Air France-KLM shares or a combination of newly issued and existing Air France-KLM shares.



The Air France-KLM shares issued upon the exercise of Air France-KLM warrants will be either in bearer book entry form or registered form, at the option
of the holder of the warrant.



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We will periodically make application to list newly issued shares delivered upon exercise of Air
France-KLM warrants on Euronext Paris and Euronext Amsterdam. Air France-KLM shares issued upon the exercise of Air France-KLM warrants will be listed on Euronext Paris and Euronext Amsterdam on the same line as the existing shares if they carry
full dividend rights from the same date as existing shares. If not, the shares issued upon the exercise of the Air France-KLM warrants will initially be listed on a separate line. See DividendsEntitlements to Dividends on
Exercise.



The existing Air France-KLM shares delivered
upon exercise of the Air France-KLM warrants will be immediately tradable.



Fractions Arising on Exercise



If, as a result of an adjustment to entitlement as discussed above, the entitlement of a holder of warrants to Air France-KLM shares on exercise includes a fraction of an Air France-KLM share, the fraction will not be issued but the holder
will be entitled, at his option, to receive in respect of the fraction either:



| |  |  | payment by us of an amount in euro equal to the appropriate fraction of the market price for one share based on the opening share price (premier cours coté) on
Euronext Paris on the trading day immediately preceding the date on which the Air France-KLM warrant was exercised, or on the last stock exchange trading day preceding the date of exercise of the Air France-KLM warrant during which the Air
France-KLM share price was quoted; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | one additional Air France-KLM share, subject to the holder having paid to us an amount in euro equal to the market price for one Air France-KLM share as described in the preceding
bullet point, less the value of the fraction of the share determined in accordance with the preceding bullet point.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Entitlements to Dividends on Exercise



The new Air France-KLM shares delivered upon exercise of Air France-KLM warrants will be subject to all provisions of our articles of association and will
carry full rights as of the first day of the financial year in which exercise takes place. Such shares will give holders the right in respect of that financial year and the following financial years to the same dividend (on the basis of the same
nominal value) as that paid in respect of other shares with equivalent dividend rights. As a result, they will be fully fungible with such shares from the date of payment of the dividend relating to the preceding financial year, or if none were
distributed, following the annual general meeting called to approve the accounts of that financial year.



Existing Air France-KLM shares subscribed for or acquired through the exercise of the Air France-KLM warrants shall be existing ordinary shares carrying
for their holders, from the date of delivery, all the rights attached thereto, and it is understood that, in the event that a detachment of dividend right occurs between the exercise date of an Air France-KLM warrant and the delivery date of the Air
France-KLM shares, the holders of Air France-KLM warrants shall not be entitled to such dividend nor to any compensation thereof.



Protection of Warrantholders Rights: Adjustments



In the event that, at any time or from time to time while any Air France-KLM warrants are outstanding, we:



| |  |  | issue securities providing preferential subscription rights,
| | - |  | ------------------------------------------------------------



| |  |  | (a) increase our corporate capital by the incorporation of reserves, profits or share premia and a free distribution of shares, (b) subdivide or consolidate Air France-KLM shares,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | capitalize reserves, earnings or share premia by an increase of the nominal value of the Air France-KLM shares,
| | - |  | ---------------------------------------------------------------------------------------------------------------



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| |  |  | distribute reserves or premia in cash or in portfolio securities,
| | - |  | -----------------------------------------------------------------



| |  |  | carry out a merger, takeover or demerger,
| | - |  | -----------------------------------------



| |  |  | repurchase our own shares at a price higher than the market price,
| | - |  | ------------------------------------------------------------------



| |  |  | distribute to shareholders any bonus financial instruments other than shares in Air France-KLM, or
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | distribute an exceptional dividend,
| | - |  | -----------------------------------



then the number of Air France-KLM shares to be issued or delivered upon the exercise of an Air France-KLM warrant will be adjusted so as to entitle its holder to
subscribe for or acquire the number of Air France-KLM shares having the same aggregate value immediately following such event as the number of Air France-KLM shares that could have been subscribed or purchased upon exercise of the warrant
immediately prior to such event.



In the event that we carry
out transactions in respect of which an adjustment under one of the bullet points above has not been carried out and where later French law or regulations would require an adjustment, we will carry out such an adjustment in accordance with the
applicable laws and regulations and relevant French market practices in effect in France at such time.



In the event of:



| |  |  | a merger between Air France-KLM and another company as a result of which the other company is the surviving entity (absorption),
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | a merger of Air France-KLM with one or more other companies to form a new company (fusion), or
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | a demerger of Air France-KLM into one or more companies (scission),
| | - |  | -------------------------------------------------------------------



the Air France-KLM warrants will give the right, upon exercise, to subscribe for or acquire shares of the surviving or new companies or beneficiary companies of a
demerger. In that instance, the number of shares to be issued upon exercise of the Air France-KLM warrants will be determined on the basis of the number of Air France-KLM shares that would have been issued upon the exercise of Air France-KLM
warrants prior to such event and the ratio of exchange of the shares of Air France-KLM with respect to shares of the surviving or new company or beneficiary companies of the demerger, as the case may be.



Form and Transfer of Air France-KLM Warrants



Air France-KLM warrants will be delivered only in bearer form and will be
held on behalf of their holders by an authorized financial intermediary selected by each holder. In accordance with the provisions of Article L.211-4 of the French Monetary and Financial Code (Code monétaire et financier), the rights
of a holder of warrants will be evidenced by an inscription in his or her name in an account maintained by an authorized financial intermediary (inscription en compte). Each authorized financial intermediary will maintain a record of Air
France-KLM warrants held through it and will issue confirmations in respect of such warrants. A holder of warrants will be able to transfer Air France-KLM warrants by giving instructions to his authorized financial intermediary.



The Air France-KLM shares (including Air France-KLM shares represented by Air
France-KLM ADSs) and the Air France-KLM warrants (including Air France-KLM warrants represented by Air France-KLM ADWs) are separately transferable.



Under certain circumstances, we may request the identification of a holder of Air France-KLM warrants. See Capital Structure of Air
France-KLMShare Capital.



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Notices to Warrantholders



In the event that we issue securities with preferential subscription rights or a priority subscription period, we will
provide notice of that transaction to the holders of Air France-KLM warrants prior to the commencement of such issue by publication in the BALO, a financial newspaper having general circulation in France, a Dutch national newspaper, the Daily
Official List of Euronext Amsterdam, the Wall Street Journal and the Financial Times and by means of a Euronext notice.



Where any operation results in an adjustment to the rights of holders of Air France-KLM warrants, the holders will be notified of such event by a notice
published in the BALO, a financial newspaper having general circulation in France, a Dutch national newspaper, the Daily Official List of Euronext Amsterdam, the Wall Street Journal, the Financial Times and by means of a Euronext notice.



Undertakings of Air France-KLM



We will undertake that, so long as any warrants remain outstanding, we will
not:



| |  |  | redeem or reduce its capital by repayment (except in accordance with French law to take account of losses sustained),
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | modify the allocation of its profits or the distribution of its earnings, or
| | - |  | ----------------------------------------------------------------------------



| |  |  | distribute reserves,
| | - |  | --------------------



unless in any such case we take whatever action as is necessary to protect the rights of the holders of Air France-KLM warrants.



Listing of the Warrants



The Air France-KLM warrants are listed on Euronext Paris under the symbol AIRF.PA and on Euronext Amsterdam under the symbol
AIRF.PA and the ADWs are listed under the symbol AKH WS on the NYSE.



Option to Repurchase the Warrants



We reserve the right at any time to repurchase the warrants or ADWs representing the warrants, through stock market or off-market purchases or by public tender, buyback or exchange offers, to the extent permitted by
applicable law. Such repurchases by us shall have no impact on the exercise period of the warrants that remain outstanding.



Warrants acquired by us in this manner shall be cancelled. ADWs acquired by us in this manner shall be cancelled by the ADW depositary upon our request,
and the underlying warrants shall be delivered to us or our designee for cancellation.



Miscellaneous



The Air
France-KLM warrants do not confer upon the warrantholders any of the rights of the Air France-KLM shares, any voting or pre-emption rights, or any rights otherwise attributable to a shareholder of Air France-KLM. The only right conferred by the Air
France-KLM warrants is the right to exercise such Air France-KLM warrants to subscribe or purchase Air France-KLM shares, subject to the restrictions described above and to adjustments to Warrantholders rights. See Restrictions on
Exercisability and Protection of Warrantholders Rights: Adjustments.



Persons required under French law to inform us and the AMF of the number of Air France-KLM shares held by them must also include in such reports the
number of Air France-KLM shares which they would have the right to subscribe or acquire upon exercising any Air France-KLM warrants which they may hold.



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Société Générale is warrant agent for the warrants in France, and ABN AMRO is
the warrant agent for the warrants in the Netherlands.



The Air
France-KLM warrants are governed by French law.



Taxation



See Taxation for information about the
tax treatment of Air France-KLM warrants and Air France-KLM shares received upon exercise of Air France-KLM warrants.



American Depositary Shares



General



Citibank, N.A. has agreed to act as the depositary bank for the American Depositary Shares of Air France-KLM. Citibanks depositary bank offices are
located at 111 Wall Street, New York, New York 10005. American Depositary Shares are referred to as ADSs and represent ownership interests in securities that are on deposit with the depositary bank. ADSs may be represented by certificates that are
commonly known as American Depositary Receipts or ADRs. The depositary bank typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank, N.A.  Paris, located at
Citicenter, 19 Le Parvis, 92073 Paris La Défense, Cedex 36, France.



Citibank has agreed to act as depositary bank for the ADSs pursuant to an ADS deposit agreement (the ADS deposit agreement). A copy of the ADS deposit agreement is on file with the SEC under cover of a Registration
Statement on Form F-6. You may obtain a copy of such ADS deposit agreement from the SECs website (www.sec.gov) or from the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.



We are providing you with a summary description of the material terms of the
ADSs and of the material rights of an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that a holders rights and obligations as an owner of ADSs will be determined by reference
to the terms of the ADS deposit agreement and not by this summary. We urge you to review the ADS deposit agreement in its entirety, as well as the form of ADR attached to the ADS deposit agreement.



Each ADS represents the right to receive one Air France-KLM share on deposit
with the custodian bank. An ADS also represents the right to receive any other property received by the depositary bank or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal
restrictions or practical considerations.



As an owner of ADSs,
you are a party to the ADS deposit agreement and therefore are bound by its terms and, if your ADS is represented by a certificate, to the terms of the ADR that represents your ADSs. The ADS deposit agreement and the ADR specify our rights and
obligations as well as your rights and obligations as owner of ADSs and those of the depositary bank. As an ADS holder you appoint the depositary bank to act on your behalf in certain circumstances. The ADS deposit agreement and the ADRs are
governed by New York law. However, our obligations to the holders of Air France-KLM shares continue to be governed by the laws of France, which may be different from the laws of the United States.



As an owner of ADSs, you may hold your ADSs either by means of an ADR
registered in your name, through a third party brokerage or safekeeping account, or through an account held at the depositary bank reflecting the registration of your uncertificated ADSs directly on the books of the depositary bank (commonly
referred to as the direct registration system). The direct registration system reflects the uncertificated (book-entry) registration of ownership of securities by the depositary bank. Under the direct registration system, ownership of ADSs is
evidenced by periodic statements issued by the depositary bank to the holders of the



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ADRs. The direct registration system includes automated transfers between the depositary bank and the Depositary Trust Company (DTC), the central book-entry
clearing and settlement system in the United States. If you decide to hold your ADSs through a third party brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADS owner. Please consult
with your broker or bank to determine what those procedures are. This summary description assumes you have opted to own the ADSs registered in your name and, as such, we will refer to you as the holder. When we refer to you,
we assume the reader owns ADSs and will own ADSs at the relevant time.



Dividends and Distributions



As a holder of
ADSs, you generally have the right to receive the distributions we make on the securities deposited with the custodian bank. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of
ADSs receive such distributions under the terms of the ADS deposit agreement in proportion to the number of ADSs held as of a specified record date.



Distributions of Cash



Whenever we make a cash distribution for the securities on deposit with the custodian, we will notify the depositary bank and deposit the funds with the
custodian. Upon receipt of confirmation of the deposit of the requisite funds, the depositary bank will arrange for the funds to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders, subject to French laws and
regulations.



The conversion into U.S. dollars will take place
only if practicable. The amounts distributed to holders will be net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the ADS deposit agreement. The depositary will apply the same method for distributing the
proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.



Distributions of Shares



Whenever we make a dividend in, or free distribution of, Air France-KLM shares for the securities on deposit with the custodian, we will notify the
depositary bank and deposit the applicable number of Air France-KLM shares with the custodian. Upon receipt of such deposit, the depositary bank will either distribute to holders new ADSs representing the Air France-KLM shares deposited or modify
the ADS-to-Air France-KLM share ratio, in which case each ADS you hold will represent rights and interests in the additional Air France-KLM shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements will be sold and the
proceeds of such sale will be distributed as in the case of a cash distribution.



The distribution of new ADSs or the modification of the ADS-to-Air France-KLM shares ratio upon a distribution of Air France-KLM shares will be made net of the fees, expenses, taxes and governmental charges payable by
holders under the terms of the ADS deposit agreement. In order to pay such taxes or governmental charges, the depositary bank may sell all or a portion of the new Air France-KLM shares so distributed.



No such distribution of new ADSs will be made if it would violate a law,
including the U.S. securities laws, or if it is not operationally practicable. If the depositary bank does not distribute new ADSs or modify the ADS-to-Air-France-KLM share ratio as described above, it may sell the Air France-KLM shares received
upon the terms described in the ADS deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.



Distributions of Rights



Whenever we intend to distribute rights to purchase additional Air France-KLM shares, we will give prior notice to the depositary bank and we will assist
the depositary bank in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to all or certain holders.



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The depositary bank will establish procedures to distribute rights to purchase additional ADSs to holders
and to enable such holders to exercise such rights to the extent it is lawful and reasonably practicable to make the rights available to all or certain holders of ADSs, and if we provide all of the documentation contemplated in the ADS deposit
agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights.



The depositary bank is not obligated to establish procedures to facilitate
the distribution and exercise by holders of rights to purchase new Air France-KLM shares other than in the form of ADSs.



The depositary bank will not distribute the rights to you if:



| |  |  | we do not timely request that the rights be distributed to you or we request that the rights not be distributed to you,
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | we fail to deliver satisfactory documentation to the depositary bank, or
| | - |  | ------------------------------------------------------------------------



| |  |  | it has determined that it is not reasonably practicable to distribute the rights to you.
| | - |  | ----------------------------------------------------------------------------------------



If the depositary bank has distributed rights to purchase additional Air France-KLM shares to all or certain holders, then
upon instruction from such holder to exercise such rights, upon payment by such holder to the depositary bank for the account of such holder of an amount equal to the purchase price of the Air France-KLM shares to be received upon the exercise of
the rights, and upon payment of the fees and expenses of the depositary bank and any other charges as set forth in the terms and conditions of such rights, the depositary bank shall, on behalf of such holder, exercise the rights and purchase the Air
France-KLM shares, and we shall cause the Air France-KLM shares so purchased to be delivered to the depositary banks custodian on behalf of such holder. As agent for such holder, the depositary bank will cause the Air France-KLM shares so
purchased to be deposited pursuant to the ADS deposit agreement and shall execute and deliver ADSs to such holder.



The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such
sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it will allow the rights to lapse.



If registration under U.S. or other securities laws may be required to distribute the rights to you, the depositary bank
will not make such distribution unless a registration statement is in effect or we have furnished the depositary bank with an opinion of counsel that the distribution of the rights is exempt from such registration. We have not undertaken to file any
registration in respect of any distribution of rights. There can be no assurances that you will have the opportunity to exercise these rights on the same terms as the holders of our shares in France or at all.



Elective Distributions



Whenever we intend to distribute a dividend payable at the election of
shareholders either in cash or in additional shares, we will give prior notice thereof to the depositary bank and will indicate whether we wish the elective distribution to be made available to you. In such case, we will assist the depositary bank
in determining whether such distribution is lawful and reasonably practicable.



The depositary bank will make the election available to you only if we have timely requested that the elective distribution be made available to shareholders, it is reasonably practicable to make such a distribution
and if we have provided all of the documentation contemplated in the ADS deposit agreement. In such case, the depositary bank will establish procedures to enable you to elect to receive either cash or additional ADSs, in each case as described in
the ADS deposit agreement.



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If the election is not made available to you, you will receive either cash or additional ADSs, depending
on what a shareholder in France would receive upon failing to make an election, as more fully described in the ADS deposit agreement. If the depositary bank does not receive timely instructions from you as to your election, the depositary bank shall
make no election with respect to the Air France-KLM shares represented by your ADSs and shall distribute such Air France-KLM shares or cash as it receives, if any, in respect of the Air France-KLM shares you hold in accordance with the terms of the
ADS deposit agreement.



The depositary bank is not obligated to
make any process available to you to receive an elective distribution of our shares rather than ADSs. There can be no assurances that you will have the opportunity to receive elective distributions on the same terms as the holders of our shares in
France or at all.



Other Distributions



Whenever we intend to distribute property other than
cash, Air France-KLM shares or rights to purchase additional Air France-KLM shares, we will notify the depositary bank in advance and will indicate whether we wish such distribution to be made to you. If so, we will assist the depositary bank in
determining whether such distribution to holders is lawful and reasonably practicable.



If we shall have requested to the depositary bank to make such distribution to you, the depositary bank shall have determined that it is reasonably practicable to distribute such property to you, and if we provide all
of the documentation contemplated in the ADS deposit agreement, the depositary bank will distribute the property to the holders in a manner it deems equitable and practicable.



The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of
the ADS deposit agreement. In order to pay such taxes and governmental charges, the depositary bank may sell all or a portion of the property received.



The depositary bank will not distribute the property to you and will sell or cause to be sold the property (in public or private sale), and shall
distribute the proceeds in accordance with the terms of the ADS deposit agreements if:



| |  |  | we do not request that the property be distributed to you or if we ask that the property not be distributed to you,
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | we do not deliver satisfactory documentation to the depositary bank, or
| | - |  | -----------------------------------------------------------------------



| |  |  | the depositary bank determines that all or a portion of the distribution to you is not reasonably practicable.
| | - |  | --------------------------------------------------------------------------------------------------------------



The proceeds of such a sale will be distributed to holders as in the case of
a cash distribution.



Redemption



Whenever we decide to redeem any of the securities on deposit with the
custodian, we will notify the depositary bank in advance. If the depositary bank is timely notified, and it has determined that it is reasonably practicable and if we provide all of the documentation contemplated in the ADS deposit agreement, the
depositary bank will mail notice of the redemption to the holders.



The custodian will be instructed to surrender the Air France-KLM shares being redeemed against payment of the applicable redemption price. The depositary bank will convert the redemption funds received into U.S. dollars upon the terms of
the ADS deposit agreement and will establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their ADSs to the depositary bank. You may have to pay



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fees, expenses, taxes and other governmental charges upon the redemption of your ADSs. If less than all outstanding ADSs are being redeemed, the ADSs to be
retired will be selected by lot or on a pro rata basis, as the depositary bank may determine.



Changes Affecting Air France-KLM Shares



The Air France-KLM shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, a split-up, cancellation, consolidation or reclassification of such Air
France-KLM shares or a recapitalization, reorganization, merger, consolidation or sale of assets.



If any such change were to occur, your ADSs would, to the extent permitted by law, represent the right to receive the property received or exchanged in
respect of the Air France-KLM shares held on deposit. The depositary bank may in such circumstances deliver new ADSs to you or call for the exchange of your existing ADSs for new ADSs. If the depositary bank may not lawfully distribute such property
to you, the depositary bank may sell such property and distribute the net proceeds to you as in the case of a cash distribution.



Issuance of ADSs upon Deposit of Air France-KLM Shares



The depositary bank may create ADSs on your behalf if you or your broker deposit Air France-KLM shares with the custodian. The depositary bank will
deliver these ADSs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the Air France-KLM shares to the custodian. Your ability to deposit Air France-KLM shares and receive
ADSs may be limited by U.S. and French legal considerations applicable at the time of deposit and the terms of the ADS deposit agreement.



The issuance of ADSs may be delayed until the depositary bank or the custodian receives satisfactory confirmation that all required approvals have been
given by the applicable governmental agency in the Republic of France and that the corresponding number of Air France-KLM shares have been duly transferred to the custodian. The depositary bank will only issue ADSs in whole numbers.



When you make a deposit of Air France-KLM shares, you will be responsible for
transferring good and valid title to the depositary bank. As such, you will be deemed to represent and warrant that:



| |  |  | the Air France-KLM shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained,
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | all preemptive (and similar) rights, if any, with respect to such Air France-KLM shares have been validly waived or exercised,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | you are duly authorized to deposit the Air France-KLM shares,
| | - |  | -------------------------------------------------------------



| |  |  | the Air France-KLM shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADSs issuable
upon such deposit will not be, restricted securities (as defined in the ADS deposit agreement), and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Air France-KLM shares presented for deposit have not been stripped of any rights or entitlements.
| | - |  | -----------------------------------------------------------------------------------------------------



If any of the representations or warranties are incorrect in any way, we and the depositary bank may, at your cost and
expense, take any and all actions necessary to correct the consequences of the misrepresentations.



Partial Entitlement ADSs



If any Air France-KLM shares are deposited which entitle the holders thereof to receive a per-share distribution or other entitlement in an amount
different from all other Air France-KLM shares then on deposit,



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the depositary bank shall (i) cause its custodian to hold Air France-KLM shares with partial entitlements separate and distinct from the Air France-KLM
shares with full entitlements, and (ii) subject to the terms of the ADS deposit agreement, issue and deliver partial entitlement ADSs representing Air France-KLM shares with partial entitlements that are separate and distinct from the ADSs
representing Air France-KLM shares with full entitlements by means of separate CUSIP numbering and legending, as applicable. If and when Air France-KLM shares with partial entitlements become fully assimilated with the Air France-KLM
shares outstanding, the depositary bank shall (a) cause its custodian to transfer Air France-KLM shares with partial entitlements into the depositary banks account containing Air France-KLM shares with full entitlements, (b) take such actions
as are necessary to remove the distinctions between (i) the partial entitlement ADSs and ADRs, on the one hand, and (ii) the ADSs and ADRs with full entitlements, on the other hand and (c) give notice thereof to holders of partial entitlement ADSs
and give holders of partial entitlement ADRs the opportunity to exchange their partial entitlement ADRs for ADRs with full entitlements. Holders and beneficial owners of partial entitlement ADSs shall be limited to the entitlements of those Air
France-KLM shares with partial entitlements.



Transfer,
Combination and Split Up of ADRs



As an ADR holder, you
will be entitled to transfer, combine or split up your ADRs and the ADSs evidenced thereby. For transfers of ADRs, you or your duly authorized attorney will have to surrender and deliver the ADRs to be transferred to the depositary bank and also
must:



| |  |  | ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer,
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | provide such proof of identity and genuineness of signatures as the depositary bank deems appropriate,
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | provide any transfer stamps required by the State of New York or the United States, and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the terms of the ADS deposit agreement, upon the transfer of ADRs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To have your ADRs either combined or split up,
you must surrender the ADRs in question to the depositary bank with your request to have them combined or split up, and you must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the terms of the ADS deposit agreement
upon a combination or split up of ADRs.



Withdrawal of
Shares upon Cancellation of ADSs



As a holder of ADSs, you
will be entitled to present your ADSs to the depositary bank for cancellation and then receive the corresponding number of underlying Air France-KLM shares at the custodians offices. In order to withdraw the Air France-KLM shares represented
by your ADSs, you will be required to pay to the depositary the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the Air France-KLM shares being withdrawn. You assume the risk for delivery of all funds and
securities upon withdrawal. Once canceled, the ADSs will not have any rights under the ADS deposit agreement.



If you hold ADSs registered in your name, the depositary bank may ask you to provide proof of identity and genuineness of any signature and such other
documents as the depositary bank may deem appropriate before it will cancel your ADSs. The withdrawal of the Air France-KLM shares represented by your ADSs may be delayed until the depositary bank receives satisfactory evidence of compliance with
all applicable laws and regulations. Please keep in mind that the depositary bank will only accept ADSs for cancellation that represent a whole number of securities on deposit.



You will have the right to withdraw the securities represented by your ADSs at any time except for:



| |  |  | temporary delays that may arise because (i) the transfer books for the Air France-KLM shares or ADSs are closed, or (ii) Air France-KLM shares are immobilized on account of a
shareholders meeting or a payment of dividends,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | obligations to pay fees, taxes and similar charges, and
| | - |  | -------------------------------------------------------



| |  |  | restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of Air France-KLM shares.
| | - |  | ------------------------------------------------------------------------------------------------------------------



The ADS deposit agreement may not be modified to impair your right to
withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.



Voting Rights



As a holder of ADSs, you generally will have the right under the ADS deposit agreement to instruct the depositary bank to exercise the voting rights for
the Air France-KLM shares represented by your ADSs. The voting rights of holders of Air France-KLM shares are described in Attendance and Voting of Shareholders MeetingsAttendance and Voting Rights.



At our request, the depositary bank will distribute to you any notice of
shareholders meeting received from us together with information explaining how to instruct the depositary bank to exercise the voting rights of the securities represented by ADSs.



If the depositary bank timely receives voting instructions from a holder of ADSs in accordance with the terms of the ADS
deposit agreement, it will endeavor insofar as practicable and permitted under any applicable provisions of French law and our articles of association and the terms and conditions of the Air France-KLM shares to cause to be voted the securities
represented by the holders ADSs in accordance with such voting instructions.



If you wish to exercise your voting rights with respect to ADSs representing Air France-KLM shares in bearer form you must comply with one of two procedures, depending on whether your ADSs are recorded in your own
name on the books of the depositary bank or you hold the ADS in a brokerage or safekeeping account. If your ADSs are recorded in your name on the books of the depositary bank, you may exercise your voting rights by (a) instructing the depositary
bank to block the transfer of your ADSs until the completion of the shareholders meeting, (b) timely returning to the depositary bank voting instructions (in the manner acceptable to us and the depositary bank), and (c) instructing the
depositary bank to (i) furnish the custodian with any information required in accordance with French law or our articles of association, (ii) notify the custodian that the transfer of such ADSs has been blocked, (iii) request that the custodian
issue a certificate prohibiting the transfer of your Air France-KLM shares, and (iv) request that the custodian deposit such certificate together with your voting instructions with us at least five (5) calendar days prior to the date of the meeting
and give notice to us of your intention to vote.



With respect
to your ADSs which are not recorded in your name on the books of the depositary bank, if you wish to exercise your voting rights you must (x) deposit your ADSs in a blocked account established by the depositary bank for a specified period of time
(which period shall commence at least five (5) days prior to the date of the stockholders meeting and finish upon the completion of such meeting), (y) timely return to the depositary bank voting instructions (in the manner acceptable to us and
the depositary bank), and (z) instruct the depositary bank to (i) furnish the custodian with any information required in accordance with French law or our articles of association, (ii) notify the custodian that the transfer of such ADSs has been
blocked, (iii) request that the custodian issue a certificate prohibiting the transfer of your Air France-KLM shares and (iv) request that the custodian deposit such certificate together with your voting instructions with us at least five (5)
calendar days prior to the date of the meeting and give notice to us of your intention to vote.



Only upon timely receipt by the depositary bank of (i) proper voting instructions (in the manner acceptable to us and to the depositary bank), and (ii)
evidence satisfactory to the depositary bank that each of the requisite conditions to exercise your voting rights have been met, may the depositary bank, to the extent practicable and



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permitted under any French law and our articles of association, cause the Air France-KLM shares represented by such ADSs to be voted in accordance with any
non-discretionary instructions set forth in such voting instructions subject to the terms and conditions set forth in the ADS deposit agreement. Neither the depositary bank nor the custodian shall under any circumstances exercise any discretion as
to voting and neither the depositary bank nor the custodian shall vote, attempt to exercise the right to vote, or in any way make use of the Air France-KLM shares represented by ADSs, except pursuant to and in accordance with the voting instructions
timely received from holders. Your ADSs shall not be voted if timely voting instructions are not received by the depositary bank.



Please note that the ability of the depositary bank to carry out voting instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting instructions to the depositary bank in a timely manner. Securities for which no voting instructions have been received will
not be voted.



Limitations on the Right to Own, Transfer or
Vote Air France-KLM ADSs; Compulsory Transfer of Air France-KLM Shares



The Air France-KLM shares on deposit with the depositary bank and the ADSs are subject to restrictions on ownership as described under Form and Holding of Shares  Compulsory Transfer of Shares.
Holders and beneficial owners of ADSs agree to be bound by such restrictions. The depositary bank has agreed to take certain actions in enforcing these restrictions. The depositary bank will forward to the holders of ADSs or to Air France-KLM, as
the case may be, communications furnished to it relating to the application of such provisions.



We intend to treat all of the shares held by the depositary bank as shares held by nationals other than nationals of an E.U. member state or a state that
is party to the EEA (or a state party to any other agreement whose scope is equivalent in terms of air transport), unless we have received satisfactory evidence as to why they should not be so treated. We are entitled to assume that each holder of
ADSs with a registered address outside of the European Union or EEA countries is or holds on behalf of a non-E.U. or non-EEA country national, respectively. An ADS holder that is a national of an E.U. member state or a state that is party to the EEA
(or a state party to any other agreement whose scope is equivalent in terms of air transport) and who wishes to provide us with evidence of such status must open an account directly with the depositary bank and provide such evidence as we may
require to establish that the Air France-KLM shares underlying such holders ADSs are held by a national of an E.U. member state or a state that is party to the EEA (or a state party to any other agreement whose scope is equivalent in terms of
air transport).



Since some or all holders of ADSs or holders
of an interest therein may be deemed to be nationals of a country other than an E.U. member state or a state that is party to the EEA (or a state party to any other agreement whose scope is equivalent in terms of air transport), as the case may be,
in the event of a determination by us (as described in Form and Holding of SharesCompulsory Transfer of Shares) that 45% or more of its share capital or voting rights is held, directly or indirectly, by non-French nationals,
you may not be entitled to direct the voting of some or all of the Air France-KLM shares on deposit with the depositary bank and underlying your ADSs. Should we make such a determination, we will issue a formal request (mise en demeure) as a
matter of priority to shareholders who are not nationals of an E.U. member state or a state that is party to the EEA (or a state party to any agreement whose scope is equivalent in terms of air transport) requiring them to transfer all or a portion
of their shares. The formal request will apply to shares based on the order they were registered in our share register, beginning with the most recently registered shares. Thereafter, should we determine that 45% or more of our share capital or
voting rights remains in the ownership of non-French nationals, we may issue such a formal request to nationals of an E.U. member state (including France) or a state that is party to the EEA (or a state party to any other agreement whose scope is
equivalent in terms of air transport), on the same basis as described in the preceding sentence. The formal request for assignment of stock may be implemented in one or more phases for so long as, in light of the information available to us and the
transfers already effected, the fraction of the share capital or voting rights held, directly or indirectly, by shareholders other than French nationals continues to equal at least 45%.



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In addition, there may be a forced sale by us of some or all of our shares on deposit with the depositary
bank and underlying your ADSs, if we have made a formal demand for the transfer of these Air France-KLM shares and you have not effected such transfer within the two months following the formal request to the depositary bank requiring such disposal.



If the depositary bank receives such a formal request or writ
of summons, under the circumstances described in the preceding paragraphs, concerning Air France-KLM shares held on deposit by it and in which a national other than a national of an E.U. member state or a state that is party to the EEA (or of a
state party to any agreement whose scope is equivalent in terms of air transport), as the case may be, is believed or deemed to be interested, the depositary bank will (i) refuse to register any issuance of Air France-KLM ADSs relating to the named
shares and will refuse to register any transfer on the register of the depositary bank of the related Air France-KLM ADSs, in each case, other than under the procedure laid down in the 2003 Air Carrier Law and our articles of association, or until
such formal request or writ of summons is withdrawn by us, (ii) not exercise the voting rights normally attached to such Air France-KLM shares, to the extent that the voting rights of such Air France-KLM shares are denied to the depositary bank in
such formal request or writ of summons until such formal request or writ of summons is withdrawn by us, (iii) give notice to such holder, who is not a national of an E.U. member state or a state that is party to the EEA (or of a state party to any
agreement whose scope is equivalent in terms of air transport) (as appropriate), of the particular Air France-KLM shares or ADSs of the actions described in (i) and (ii) above and promptly forward the above-mentioned formal request or writ of
summons and accompanying documents to such holder and (iv) state that the related Air France-KLM shares are to be sold.



In addition, if the depositary bank receives a formal request or writ of summons concerning Air France-KLM shares held on deposit by it and in which a
national of an E.U. member state (including France) or a state that is party to the EEA (or of a state party to any agreement whose scope is equivalent in terms of air transport), as the case may be, is believed or deemed by us to be interested, the
depositary bank will (i) refuse to register any issuance of the related Air France-KLM ADSs and refuse to register any transfer on the register of the depositary bank of the related Air France-KLM ADSs to any holder, in each case, other than under
the procedure laid down in the 2003 Air Carrier Law and our articles of association, or until such formal request or writ of summons is withdrawn by us, (ii) not exercise the voting rights normally attached to such Air France-KLM shares, to the
extent that the voting rights of such Air France-KLM shares are denied to the depositary bank in such formal request or writ of summons until such formal request or writ of summons is withdrawn by us, (iii) give notice to such holder of the
particular Air France-KLM shares or ADSs of the actions described in (i) and (ii) above and promptly forward the above-mentioned formal request or writ of summons and accompanying documents to such holder and (iv) state that the related Air
France-KLM shares are to be sold. The notice mentioned in clause (iii) of this and the preceding paragraph and given by the depositary bank will also state that if any forced sale of the related Air France-KLM shares has occurred, the related ADS
will represent only the right to receive the cash proceeds of such sale, net of any taxes and expenses incurred or paid in distributing such proceeds.



Any denial of voting rights or sale of deposited Air France-KLM shares may be attributed to specific holders of ADSs or, in certain circumstances, pro
rata to all holders of ADSs. Any fractional ADSs held by holders of ADSs following the sale of deposited Air France-KLM shares in accordance with the terms hereof will be sold and the proceeds of such sale will be distributed as in the case of a
cash distribution. Any holder of an ADS holding through a nominee should be aware that such nominee may be required to provide us with certain information as to the identity of such nominees beneficial holders and that, to the extent that such
nominee does not provide such information, such holders may be deemed to be in violation of the restrictions on ownership and voting described above.



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Fees and Charges



As an ADS holder, you will be required to pay the following service fees to the depositary bank:



|                                                                                 |  |                                                          
|-------------------------------------------------------------------------------- |  | ---------------------------------------------------------
|Service                                                                          |  | Fees                                                     
|Issuance of ADSs                                                                 |  | Up to U.S. 5¢ per ADS issued                             
|                                                                                 | 
|Cancellation of ADSs                                                             |  | Up to U.S. 5¢ per ADS canceled                           
|                                                                                 | 
|Exercise of rights to purchase additional ADSs                                   |  | Up to U.S. 5¢ per ADS issued                             
|                                                                                 | 
|Distributions of cash proceeds (i.e., upon sale of rights or other entitlements) |  | Up to U.S. 2¢ per ADS held                               
|                                                                                 | 
|Distribution of securities other than ADSs or rights to purchase additional ADSs |  | Up to U.S. 5¢ per share (or fraction thereof) distributed



As an ADS holder you
will also be responsible for paying certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:



| |  |  | fees for the transfer and registration of Air France-KLM shares in France charged by the registrar and transfer agent for the Air France-KLM shares (i.e., upon deposit and
withdrawal of Air France-KLM shares),
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses incurred for converting foreign currency into U.S. dollars,
| | - |  | --------------------------------------------------------------------



| |  |  | expenses for cable, telex and fax transmissions and for delivery of securities,
| | - |  | -------------------------------------------------------------------------------



| |  |  | taxes (including applicable interest and penalties) and duties upon the transfer of securities (i.e., when Air France-KLM shares are deposited or withdrawn from deposit),
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses incurred by the depositary bank, the custodian or any nominee in connection with the delivery or servicing of Air France-KLM shares on deposit, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses incurred by the depositary bank in connection with exchange control regulations and other regulatory requirements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



We have agreed to pay certain other charges and expenses of the depositary
bank. Note that the fees and charges you are required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes.



Amendments and Termination



We may agree with the depositary bank to modify the ADS deposit agreement at any time without your consent. We will not consider to be materially
prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADSs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the
fees and charges you are required to pay. In addition, we may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.



You will be bound by the modifications to the ADS deposit agreement if you
continue to hold your ADSs after the modifications to such ADS deposit agreement become effective. The ADS deposit agreement cannot be amended to prevent you from withdrawing the Air France-KLM shares represented by your ADSs except as permitted by
law.



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We have the right to direct the depositary bank to terminate the ADS deposit agreement. Similarly, the
depositary bank may in certain circumstances on its own initiative terminate such ADS deposit agreement. In either case, the depositary bank must give notice to the holders at least 30 days before termination.



Upon termination, the following will occur under such ADS deposit agreement:



| |  |  | For a period of six months after termination, upon the payment of the charges of the depositary bank, and upon payment of any applicable taxes and governmental charges, you will be
able to request the cancellation of your ADSs and the withdrawal of the Air France-KLM shares represented by your ADSs and the delivery of all other property held by the depositary bank in respect of those Air France-KLM shares on the same terms as
prior to the termination. During such six months period the depositary bank will continue to collect all distributions received on the Air France-KLM shares on deposit (e.g. dividends) but will not distribute any such property to you
until you request the cancellation of your ADSs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | After the expiration of such six months period, the depositary bank may sell the securities held on deposit. The depositary bank will hold the proceeds from such sale and any
other funds then held for the holders of ADSs uninvested in an unsegregated account. At that point, the depositary bank will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still
outstanding.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Books of Depositary



The depositary bank will maintain ADS holder records at
its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the ADS deposit agreement.



The depositary bank will maintain in New York facilities to
record and process the issuance, cancellation, combination, split-up and transfer of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.



Limitations on Obligations and Liabilities



The ADS deposit agreement limits our obligations and the depositary banks obligations to you. Please note the
following:



| |  |  | We and the depositary bank are obligated only to take the actions specifically stated in such ADS deposit agreement without negligence or bad faith.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The depositary bank disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts
in good faith and in accordance with the terms of such ADS deposit agreement.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on our behalf
or for the accuracy of any translation of such a document, for the investment risks associated with investing in Air France-KLM shares, for the validity or value of the Air France-KLM shares, for any tax consequences that result from the ownership
of ADSs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of such ADS deposit agreement, for the timeliness of any of our notices or for our failure to give notice.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the ADS deposit agreement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We and the depositary bank disclaim any liability if we are prevented or forbidden from acting on account of any law or regulation, any provision of our articles of association, any
provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond our control.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for such ADS deposit agreement or in our articles of
association or in any provisions of securities on deposit.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person
presenting Air France-KLM shares for deposit, any holder of ADSs or authorized representatives thereof, or any other person believed by either of us in good faith to be competent to give such advice or information.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to
holders of Air France-KLM shares but is not, under the terms of such ADS deposit agreement, made available to you.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the
proper parties.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank also disclaim liability for any consequential or punitive damages for any breach of the terms of the ADS deposit agreement.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



Pre-Release Transactions



The depositary bank may, in certain circumstances, issue ADSs before
receiving a deposit of Air France-KLM shares or release Air France-KLM shares before receiving ADSs for cancellation. These transactions are commonly referred to as pre-release transactions. The ADS deposit agreement limits the aggregate
size of pre-release transactions and imposes a number of conditions on such transactions (e.g., the need to receive collateral in an amount equal to the market value of such ADSs as calculated on a daily (marked to market) basis, the type of
collateral required, the representations required from brokers, etc.). The depositary bank may retain the compensation received from the pre-release transactions.



Taxes



You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We, the depositary
bank and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any
deficiency if the sale proceeds do not cover the taxes that are due.



The depositary bank may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities on deposit until all taxes and charges are paid by the applicable holder. The depositary bank and the custodian may take
reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary bank and to the custodian proof of taxpayer status and residence and
such other information as the depositary bank and the custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax benefit obtained
for you.



Foreign Currency Conversion



The depositary bank will arrange for the conversion of all foreign currency
received into U.S. dollars if such conversion is practicable, and it will distribute the U.S. dollars in accordance with the terms of the ADS deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as
fees and expenses incurred in complying with currency exchange controls and other governmental requirements.



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If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied
or not obtainable at a reasonable cost or within a reasonable period, the depositary bank may take the following actions in its discretion:



| |  |  | convert and distribute the foreign currency to the extent practical and lawful to the holders for whom the conversion, transfer and distribution is lawful and practical,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | distribute the foreign currency to holders for whom the distribution is lawful and practical, and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | hold the foreign currency (without liability for interest) for the applicable holders.
| | - |  | --------------------------------------------------------------------------------------



Requirements Applicable to Shareholders Exceeding Certain Percentages



Notwithstanding any other provision of the ADS deposit agreement, each holder
or other person with an interest in ADSs will agree to be bound by, and subject to, applicable provisions of the laws of France, our articles of association and any regulations governing shares quoted on Euronext Paris to the same extent as holders
of Air France-KLM shares.



The obligation of a holder or other
person with an interest in Air France-KLM shares to disclose certain information pursuant to the laws of France and our articles of association also applies to you and any other person with an interest in the ADSs and, in certain circumstances (as
described in  Requirements Applicable to Shareholdings Exceeding Certain Percentages), to us. The consequences for failure to comply with these provisions will be the same for you and any other persons with an interest in Air
France-KLM shares as for a holder thereof. By holding ADSs, you acknowledge that we, the depositary bank and the custodian, may take any and all actions contemplated under French law in respect of the Air France-KLM shares represented by your ADSs
in the event you fail to observe the disclosure obligations under French law and our articles of association, as described in  Requirements Applicable to Shareholdings Exceeding Certain Percentages.



In order to facilitate compliance with such disclosure obligations, you and
any other person with an interest in the ADSs may deliver any disclosure notification with respect to Air France-KLM shares represented by ADSs to the depositary bank. The depositary bank will, to the extent practicable, forward such notification to
us.



At our request, the depositary bank will forward to any
holders of ADSs any request by us for information and comply with our instructions, to the extent practicable, given in connection with the foregoing. If we request information from the depositary bank or the custodian, as registered owners of Air
France-KLM shares, pursuant to the laws of France or our articles of association, the obligations of the depositary bank or the custodian, as the case may be, shall be limited to disclosing to us such information relating to the Air France-KLM
shares in question as has in each case been recorded by it pursuant to the terms of the ADS deposit agreement.



American Depositary Warrants



General



Citibank, N.A. has agreed to act as
the depositary bank for the American Depositary Warrants of Air France-KLM. Citibanks depositary offices are located at 111 Wall Street, New York, New York 10005. American Depositary Warrants are referred to as ADWs and represent ownership
interests in Air France-KLM warrants that are on deposit with the depositary bank. ADWs may be represented by certificates that are commonly known as American Depositary Warrant Receipts or ADWRs. The depositary bank typically appoints a custodian
to safekeep the securities on deposit. In this case, the custodian is Citibank, N.A.  Paris, located at Citicenter, 19 Le Parvis, 92073 Paris La Défense, Cedex 36.



Citibank has agreed to act as depositary bank for the ADWs pursuant to a deposit agreement (the ADW deposit agreement). A
copy of the ADW deposit agreement is on file with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the ADW deposit agreement from the SECs website (www.sec.gov) or from the SECs Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549.



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We are providing you with a summary description of the material terms of the ADWs and of the material
rights of an owner of ADWs. Please remember that summaries by their nature lack the precision of the information summarized and that a holders rights and obligations as an owner of ADWs will be determined by the ADW deposit agreement and not
by this summary. We urge you to review the ADW deposit agreement in its entirety as well as the form of ADWR attached to the ADW deposit agreement.



Each ADW represents the right to receive one Air France-KLM warrant on deposit with the custodian bank. An ADW will also represent any other property
received by the depositary bank or the custodian on behalf of the owner of the ADW but that has not been distributed to the owners of ADWs because of legal restrictions or practical considerations.



If you become an owner of ADWs, you will become a party to the ADW deposit
agreement and therefore will be bound to its terms and, if your ADWs are represented by a certificate, to the terms of the ADWR that represents your ADWs. The ADW deposit agreement and the ADWR specify our rights and obligations as well as your
rights and obligations as owner of ADWs and those of the depositary bank. As an ADW holder you appoint the depositary bank to act on your behalf in certain circumstances. The ADW deposit agreement is governed by New York law. However, our
obligations to the holders of Air France-KLM warrants will continue to be governed by the laws of The Republic of France, which may be different from the laws in the United States.



As an owner of ADWs, you may hold your ADWs by means of an ADWR registered in your name through a third party brokerage or
safekeeping account or through an account at the depositary bank reflecting the registration of your uncertificated ADWs on the books of the depositary bank (commonly referred to as the direct registration system). The direct
registration system reflects the uncertificated (book-entry) registration of ownership of securities by the depositary bank. Under the direct registration system, ownership of ADWs is evidenced by periodic statements issued by the depositary bank to
the holders of the ADWs. The direct registration system includes automated transfers between the depositary bank and DTC, the central book-entry clearing and settlement system in the United States. If you decide to hold your ADWs through a third
party brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADW owner. Please consult with your broker or bank to determine what those procedures are. This summary description assumes you
have opted to own the ADWs registered in your name and, as such, we will refer to you as the holder. When we refer to you, we assume the reader owns ADWs and will own ADWs at the relevant time.



Exercise of ADWs



Holders of ADWs may exercise the Air France-KLM warrants represented by their
ADWs on any New York and French business day prior to the expiration of the Air France-KLM warrants, subject in each case to the terms and conditions of the Air France-KLM warrants and the ADW deposit agreement. Warrants will only be accepted for
exercise in multiples of three.



Any holder of ADWs wishing to
exercise the underlying Air France-KLM warrants represented by the ADWs will need to take the following actions:



| |  |  | deliver the applicable ADWs to the depositary bank, together with instructions to cancel such ADWs and to deliver the corresponding Air France-KLM warrants to the Air France-KLM
warrant agent, and pay to the depositary bank the applicable ADW cancellation fees, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | deliver to the custodian a duly completed ADW exercise form together with the applicable warrant exercise price (in euro).
| | - |  | --------------------------------------------------------------------------------------------------------------------------



Holders of ADWs who duly exercise the Air France-KLM warrants represented by
their ADWs will have the opportunity to elect to receive Air France-KLM shares or Air France-KLM ADSs, subject in each case to the terms of the Air France-KLM warrants and in the case of Air France-KLM ADSs to the terms of the Air France-KLM ADS
deposit agreement. See American Depositary Shares for a summary description of the Air France-KLM ADS deposit agreement.



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A holder who exercises the Air France-KLM warrants represented by their ADWs will become the owner of Air
France-KLM shares only upon receipt by the Air France-KLM warrant agent of (i) the requisite Air France-KLM warrants (upon cancellation of ADWs), (ii) the duly completed exercise instructions, and (iii) the applicable exercise price. The form
exercise instructions to be delivered to the Air France warrant-KLM agent may be obtained from the depositary bank.



Under the terms of the Air France-KLM warrants, Air France-KLM shares issued upon exercise of Air France-KLM warrants will entitle holders to all
distributions on Air France-KLM shares made in respect of the Air France-KLM financial year in which the Air France-KLM warrants are exercised and in respect of all subsequent periods. Holders of Air France-KLM warrants who validly exercise the Air
France-KLM warrants and become the owners of Air France-KLM shares before the distribution of a prior year distribution will not be entitled to receive the distribution relating to our prior financial year.



If a holder of ADWs duly exercises the underlying Air France-KLM warrants,
elects to receive the Air France-KLM shares in the form of Air France-KLM ADSs and the Air France-KLM shares are issued before the distribution of prior year distribution the Air France-KLM ADSs issued in respect of such shares will be
Partial Entitlement ADSs until we inform the depositary bank that the Air France-KLM shares have been fully assimilated with the Air France-KLM shares outstanding at the time the Air France-KLM warrants were exercised. See
American Depositary Shares for a description of Partial Entitlement ADSs.



If we suspend the right to exercise Air France-KLM warrants at any time, we will give notice thereof to the depositary bank setting forth the term and reason for such suspension. Upon receipt of such notice, the
depositary bank shall give notice thereof to the holders of ADWs and shall refuse during the period of such suspension to accept instructions to cancel ADWs for the purpose of exercising Air France-KLM warrants.



Distributions in Respect of ADWs



As a holder of ADWs, you generally have the right to receive the
distributions the depositary bank receives in respect of the warrants deposited with the custodian bank. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of ADWs will receive
such distributions under the terms of the ADW deposit agreement in proportion to the number of ADWs held as of a specified record date.



Distributions of Cash



Whenever the depositary bank receives cash in respect of the securities on deposit with the custodian, the depositary bank will arrange for the funds to
be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders.



The conversion into U.S. dollars will take place only if practicable. The amounts distributed to holders will be net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the ADW
deposit agreement. The depositary bank will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.



Distributions of Warrants



In the event that any distribution on any deposited securities consists of a
free distribution of Air France-KLM warrants, the depositary bank may (with our consent) and shall (if we so request) either distribute to holders new ADWs representing the Air France-KLM warrants deposited or modify the ADW-to-Air France-KLM
warrant ratio, in which case each ADW you hold will represent rights and interests in the additional Air France-KLM warrants so deposited. Only whole new ADWs will be distributed. Fractional entitlements will be sold and the proceeds of such sale
will be distributed as in the case of a cash distribution.



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The distribution of new ADWs or the modification of the ADW-to-Air France-KLM warrant ratio upon a
distribution of Air France-KLM warrants will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the ADW deposit agreement. In order to pay such taxes or governmental charges, the depositary bank
may sell all or a portion of the new Air France-KLM warrants received.



No such distribution of new ADWs will be made if it would violate a law, including the U.S. securities laws, or if it is not operationally practicable. If the depositary bank does not distribute new ADWs or modify the ADW-to-Air France-KLM
warrant ratio as described above, it will use its best efforts to sell the Air France-KLM warrants received and will distribute the proceeds of the sale as in the case of a distribution of cash.



In the event that holders of Air France-KLM warrants are granted the option
to receive distributions in the form of additional Air France-KLM warrants, the depositary bank will make such distribution available to holders of ADWs only with our prior consent.



Other Distributions



In the event the depositary bank or the custodian receives in respect of the deposited securities any distribution other than cash or Air France-KLM
warrants, the depositary bank shall distribute the securities or property so received to holders of ADWs in proportion to the number of ADWs held in any manner the depositary bank may deem equitable and practicable. In the event the depositary bank
determines such distribution cannot be made proportionately or that such distribution is not practicable, the depositary bank shall adopt any method deemed equitable and practicable to effectuate distribution (including by means of a sale of the
securities and property so received and the distribution of the net cash proceeds).



Redemption



Whenever we
decide to redeem any of the securities on deposit with the custodian, we will notify the depositary bank in advance. If the depositary bank is timely notified, and it has determined that it is reasonably practicable and if we provide all of the
documentation contemplated in the ADW deposit agreement, the depositary bank will mail notice of the redemption to the holders.



The custodian will be instructed to surrender the Air France-KLM warrants being redeemed against payment of the applicable redemption price. The
depositary bank will convert the redemption funds received into U.S. dollars upon the terms of the ADW deposit agreement and will establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their ADWs to
the depositary bank. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your ADWs. If less than all outstanding ADWs are being redeemed, the ADWs to be retired will be selected by lot or on a pro rata
basis, as the depositary bank may determine.



Changes
Affecting Air France-KLM Warrants



In the event that any of
the terms of the Air France-KLM warrants are modified (i.e., upon the occurrence of a change in the number of Air France-KLM shares to be issued upon exercise of Air France-KLM warrants), we will give notice thereof to the depositary bank with
instructions to provide notice thereof to holders of ADWs and will cooperate with the depositary bank in taking all reasonably necessary actions under the ADW deposit agreement.



Upon any split-up, consolidation, cancellation or reclassification of Air France-KLM warrants or in the event of any
recapitalization, reorganization, merger or consolidation or sale of assets that affect us or to which we are a party, we will notify the depositary bank and the depositary bank will give notice thereof to the holders of ADWs. After the occurrence
of such event, the ADWs will, to the maximum extent permitted by law, represent the right to receive the securities received by the custodian in exchange or conversion for the Air France-KLM warrants. In any such event, additional ADWs may be issued
or existing ADWs may be called for surrender and exchange into new ADWs.



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Issuance of ADWs upon Deposit of Air France-KLM Warrants



The depositary bank may create ADWs on your behalf if you or your broker
deposit Air France-KLM warrants with the custodian. The depositary bank will deliver these ADWs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the Air France-KLM
warrants to the custodian. Your ability to deposit Air France-KLM warrants may be limited by U.S. and French legal considerations applicable at the time of deposit and the terms of the ADW deposit agreement.



The issuance of ADWs may be delayed until the depositary bank or the
custodian receives satisfactory confirmation that all required approvals have been given by the applicable governmental agency in the Republic of France and that the Air France-KLM warrants have been duly transferred to the custodian. The depositary
bank will only issue ADWs in whole numbers.



When you make a
deposit of Air France-KLM warrants, you will be responsible for transferring good and valid title to the depositary bank. As such, you will be deemed to represent and warrant that:



| |  |  | the Air France-KLM warrants are validly issued, fully paid, and non-assessable,
| | - |  | -------------------------------------------------------------------------------



| |  |  | you are duly authorized to deposit the Air France-KLM warrants,
| | - |  | ---------------------------------------------------------------



| |  |  | the Air France-KLM warrants presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADWs
issuable upon such deposit will not be, restricted securities (as defined in the ADW deposit agreement), and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Air France-KLM warrants presented for deposit have not been stripped of any rights or entitlements.
| | - |  | -------------------------------------------------------------------------------------------------------



If any of the representations or warranties are incorrect in any way, we and the depositary bank may, at your cost and
expense, take any and all actions necessary to correct the consequences of the misrepresentations.



Withdrawal of Warrants upon Cancellation of ADWs



As a holder of ADWs, you will be entitled to present your ADWs to the depositary bank for cancellation and then receive the underlying Air France-KLM
warrants at the custodians offices. In order to withdraw the Air France-KLM warrants represented by your ADWs, you will be required to pay to the depositary the fees for cancellation of ADWs and any charges and taxes payable upon the transfer
of the Air France-KLM warrants being withdrawn. You assume the risk for delivery of all funds and securities upon withdrawal. Once canceled, the ADWs will not have any rights under the ADW deposit agreement.



If you hold ADWs registered in your name, the depositary bank may ask you to
provide proof of identity and genuineness of any signature and such other documents as the depositary bank may deem appropriate before it will cancel your ADWs. The withdrawal of the Air France-KLM warrants represented by your ADWs may be delayed
until the depositary bank receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary bank will only accept ADWs for cancellation that represent a whole number of securities on
deposit.



You will have the right to withdraw the securities
represented by your ADWs at any time except for:



| |  |  | temporary delays that may arise because (i) the transfer books for the Air France-KLM warrants or ADWs are closed, or (ii) Air France-KLM warrants are immobilized on account of a
shareholders meeting or a payment of dividends,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | obligations to pay fees, taxes and similar charges, and
| | - |  | -------------------------------------------------------



| |  |  | restrictions imposed because of laws or regulations applicable to ADWs or the withdrawal of securities on deposit.
| | - |  | ------------------------------------------------------------------------------------------------------------------



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The ADW deposit agreement may not be modified to impair your right to withdraw the securities represented
by your ADWs except to comply with mandatory provisions of law.



Voting Rights



In the event we establish a
meeting at which holders of Air France-KLM warrants may vote or wish to seek the consent of holders of Air France-KLM warrants, as a holder of ADWs, you generally will have the right under the ADW deposit agreement to instruct the depositary bank to
exercise the voting or consent rights for the Air France-KLM warrants represented by ADWs you own as of the applicable record date.



At our request, the depositary bank will mail to you any notice of meeting of Air France-KLM warrant holders or of Air France-KLM warrant holder consent
solicitation received from us together with information explaining how to instruct the depositary bank to exercise the voting or consent rights applicable to Air France-KLM warrants represented by your ADWs.



If the depositary bank timely receives instructions from a holder of ADWs, it
will endeavor, insofar as practicable and permitted by law, our articles of association and the terms and conditions of the Air France-KLM warrants, to instruct the custodian to exercise voting or the consent rights with respect to the Air
France-KLM warrants represented by the holders ADWs in accordance with such instructions.



Please note that the ability of the depositary bank to carry out instructions as to voting or a consent solicitation may be limited by practical and legal
limitations and the terms of the securities on deposit. We cannot assure you that you will receive voting or consent solicitation materials in time to enable you to return instructions to the depositary bank in a timely manner. No consent will be
granted and no vote cast with respect to any securities for which instructions have not been received from ADW holders.



Fees and Charges



As an ADW holder, you will be required for paying the following service fees to the depositary bank:



|                                                                |  |                           
|--------------------------------------------------------------- |  | --------------------------
|Service                                                         |  | Fees                      
|Issuance of ADWs                                                |  | Up to 5¢ per ADW issued   
|                                                                | 
|Cancellation of ADWs                                            |  | Up to 5¢ per ADW canceled 
|                                                                | 
|Exercise of right to purchase ADSs                              |  | Up to 2¢ per ADW exercised
|                                                                | 
|Exercise of right to purchase shares                            |  | Up to 5¢ per ADW exercised
|                                                                | 
|Distribution of cash upon sale of rights and other entitlements |  | Up to 2¢ per ADW held     



As an ADW holder you
will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:



| |  |  | fees for the transfer and registration of Air France-KLM warrants charged by the registrar and transfer agent for the Air France-KLM warrants in France (i.e., upon deposit and
withdrawal of Air France-KLM warrants),
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses incurred for converting foreign currency into U.S. dollars,
| | - |  | --------------------------------------------------------------------



| |  |  | expenses for cable, telex and fax transmissions and for delivery of securities,
| | - |  | -------------------------------------------------------------------------------



| |  |  | taxes (including applicable interest and penalties) and duties upon the transfer of securities (i.e., when Air France-KLM warrants are deposited or withdrawn from deposit),
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | fees and expenses incurred by the depositary bank, the custodian or any nominee in connection with the delivery or servicing of Air France-KLM warrants on deposit, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses incurred by the depositary bank in connection with exchange control regulations and other regulatory requirements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



We have agreed to pay certain other charges and expenses of the depositary
bank. Note that the fees and charges you are required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes.



Amendments and Termination



We may agree with the depositary bank to modify the ADW deposit agreement at any time without your consent. We will not consider to be materially
prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADWs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the
fees and charges you are required to pay. In addition, we may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.



You will be bound by the modifications to the ADW deposit agreement if you
continue to hold your ADWs after the modifications to the ADW deposit agreement become effective. The ADW deposit agreement cannot be amended to prevent you from withdrawing the Air France-KLM warrants represented by your ADWs except as permitted by
law.



The ADW deposit agreement shall terminate automatically
as of the date the Air France-KLM warrants expire. We have the right to direct the depositary bank to terminate the ADW deposit agreement. Similarly, the depositary bank may in certain circumstances on its own initiative terminate the ADW deposit
agreement. In either case, the depositary bank must give notice to the holders at least 30 days before termination.



Upon termination, the following will occur under the ADW deposit agreement:



| |  |  | For a period of six months after termination; upon the payment of charges to the depositary bank, and upon payment of any applicable taxes and governmental charges, you will be able
to request the cancellation of your ADWs and the withdrawal of the Air France-KLM warrants represented by your ADWs and the delivery of all other property held by the depositary bank in respect of those Air France-KLM warrants on the same terms as
prior to the termination. During such six months period the depositary bank will continue to collect all distributions received on the Air France-KLM warrants on deposit (e.g., dividends) but will not distribute any such property to you until
you request the cancellation of your ADWs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | After the expiration of such six months period, the depositary bank may sell the securities held on deposit. The depositary bank will hold the proceeds from such sale and any
other funds then held for the holders of ADWs uninvested in an unsegregated account. At that point, the depositary bank will have no further obligations to holders other than to account for the funds then held for the holders of ADWs still
outstanding.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Books of Depositary



The depositary bank will maintain ADW holder records at
its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADWs and the ADW deposit agreement.



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The depositary bank will maintain in New York facilities to record and process the issuance,
cancellation, combination, split-up and transfer of ADWs. These facilities may be closed from time to time, to the extent not prohibited by law.



Limitations on Obligations and Liabilities



The ADW deposit agreement limits our obligations and the depositary banks obligations to you. Please note the following:



| |  |  | We and the depositary bank are obligated only to take the actions specifically stated in the ADW deposit agreement without negligence or bad faith.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The depositary bank disclaims any liability for any failure to carry out instructions to vote or exercise consent rights, for any manner in which a vote is cast or consent is given
or for the effect of any vote or consent, provided it acts in good faith and in accordance with the terms of the ADW deposit agreement.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on our behalf
or for the accuracy of any translation of such a document, for the investment risks associated with investing in Air France-KLM warrants, for the validity or worth of the Air France-KLM warrants, for any tax consequences that result from the
ownership of ADWs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the ADW deposit agreement, for the timeliness of any of our notices or for our failure to give notice.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the ADW deposit agreement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank disclaim any liability if we are prevented or forbidden from acting on account of any law or regulation, any provision of our articles of association, any
provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond our control.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for the ADW deposit agreement or in our articles of
association or in any provisions of securities on deposit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person
presenting Air France-KLM warrants for deposit, any holder of ADWs or authorized representatives thereof, or any other person believed by either of us in good faith to be competent to give such advice or information.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to
holders of Air France-KLM warrants but is not, under the terms of the ADW deposit agreement, made available to you.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the
proper parties.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We and the depositary bank also disclaim liability for any consequential or punitive damages for any breach of the terms of the ADW deposit agreement.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



Pre-Release Transactions



The depositary bank may, in certain circumstances, issue ADWs before
receiving a deposit of Air France-KLM warrants or release Air France-KLM warrants before receiving ADWs. These transactions are commonly



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referred to as pre-release transactions. The ADW deposit agreement limits the aggregate size of pre-release transactions and imposes a number of
conditions on such transactions (i.e., the need to receive collateral in an amount equal to the market value of such ADWs as calculated on a daily (marked to market) basis, the type of collateral required, the representations required from brokers,
etc.). The depositary bank may retain the compensation received from the pre-release transactions.



Taxes



You will be responsible for the taxes and other governmental charges payable on the ADWs and the securities represented by the ADWs. We, the depositary
bank and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any
deficiency if the sale proceeds do not cover the taxes that are due.



The depositary bank may refuse to issue ADWs, to deliver, transfer, split and combine ADWRs or to release securities on deposit until all taxes and charges are paid by the applicable holder. The depositary bank and the custodian may take
reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary bank and to the custodian proof of taxpayer status and residence and
such other information as the depositary bank and the custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax benefit obtained
for you.



Foreign Currency Conversion



The depositary bank will arrange for the conversion of all foreign currency
received into U.S. dollars if such conversion is practicable, and it will distribute the U.S. dollars in accordance with the terms of the ADW deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as
fees and expenses incurred in complying with currency exchange controls and other governmental requirements.



If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within
a reasonable period, the depositary bank may take the following actions in its discretion:



| |  |  | convert and distribute the foreign currency to the extent practical and lawful to the holders for whom the conversion, transfer and distribution are lawful and practical,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | distribute the foreign currency to holders for whom the distribution is lawful and practical, and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | hold the foreign currency (without liability for interest) for the applicable holders.
| | - |  | --------------------------------------------------------------------------------------



Miscellaneous



Persons required under the laws of the Republic of France or our articles of association to inform us or the Autorité des Marchés
Financiers of the number of Air France-KLM shares held by them must also include in such reports the number of Air France-KLM shares that they would have the right to acquire upon exercising all Air France-KLM warrants (including Air France-KLM
shares represented by ADSs issued upon the exercise of ADWs). See Requirements Applicable to Shareholdings Exceeding Certain Percentages.



Material Contracts



The Framework Agreement



On October 16, 2003, Air France entered into the framework agreement with KLM pursuant to which Air France and KLM agreed to combine. The framework agreement sets forth the terms and conditions of the



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exchange offer, Air Frances agreements to acquire KLMs outstanding priority shares, depositary receipts for cumulative preference shares A held
by the State of the Netherlands and depositary receipts for cumulative preferences shares C.



In addition, Air France and KLM agreed in the framework agreement on the corporate structure of the combined group after completion of the exchange offer, on certain corporate governance arrangements of Air
FranceKLM, on the assurances that have been agreed by Air France and KLM we well as the assurances that Air France and KLM have given to the State of the Netherlands. The framework agreement also addresses the hive down and KLMs
admission to the SkyTeam alliance.



For details of the material
terms and conditions of the framework agreement, see Item 4: Information on the CompanyHistory of Air France-KLMThe Combination with KLM and the Exchange Offer.



Aircraft Purchase Agreements



Air France has entered into aircraft purchase agreements with Airbus Industrie relating to Model A330-200 and Model A318 aircraft and with The Boeing
Company relating to Model 777-200/300 and Model 747-400 aircraft which we consider material.



Copies of these aircraft purchase agreements, which are the subject of a request for confidential treatment that has been granted, were filed with the SEC on April 30, 2004 as exhibits to the registration statement on
Form F-4.



Exchange Controls



Under current French foreign exchange control regulations, there are no
limitations on the amount of cash payments we may remit to residents of the United States. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a
non-resident be handled by an accredited financial intermediary. In France, all registered banks and substantially all credit establishments are accredited financial intermediaries.



Holders of Air France-KLM shares, including shares represented by ADSs, are subject to various notification requirements
under our articles of association and French law. Under the French Commercial Code, any individual or entity, acting alone or in concert with others that becomes the owner, directly or indirectly, of more than 5%, 10%, 20%, 33.3%, 50% or 66.6% of
our outstanding shares or voting rights must notify us and the French Authority for Financial Markets within five trading days of crossing any of these thresholds. This notification requirement also applies to shareholders when their holding of
shares or voting rights falls below any of these thresholds.



If you fail to comply with these notification requirements, your shares, including shares represented by ADSs, in excess of the relevant notification threshold may be deprived of voting rights for up to two years on the demand of any
shareholder. In addition, all or part of your voting rights may be suspended for up to five years by a French commercial court, and you may be subject to a fine of 18,000 at the request of the chairman of our board of directors, any Air
France-KLM shareholder or the French Authority for Financial Markets.



In addition, under our articles of association, any individual or entity, acting alone or in concert with others that becomes the owner, directly or indirectly, of more than 0.5% of our outstanding shares or voting rights or a multiple
thereof up to 50% must notify us within 15 calendar days of crossing the ownership threshold. If you fail to comply with this notification requirement, your shares, including shares represented by ADSs, may be deprived of voting rights for up to two
years on the demand of any one or more shareholders owning, together, at least 0.5% of our share capital.



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See Item 3: Key InformationRisk FactorsIf you fail to comply with the notification
requirements under French law and our articles of association, you could be deprived of some or all of your voting rights and be subject to a fine.



Taxation



French Tax Considerations



The following describes the material French tax consequences of the ownership and disposal of Air France-KLM shares or ADSs, or Air France-KLM warrants or ADWs by a U.S. holder (as defined below).



This discussion is not a complete description of all the tax consequences of
the ownership and disposition of Air France-KLM shares or ADSs, or Air France-KLM warrants or ADWs. It is based on the current tax law of the Republic of France as well as the Convention between the United States and the Republic of France for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to taxes on Income and Capital dated August 31, 1994 (the Treaty), all as in effect on the date of this prospectus and all subject to change, possibly with retroactive
effect.



For the purpose of the Treaty, U.S. owners of Air
France-KLM ADSs will be treated as owners of Air France-KLM shares underlying those ADSs. There is currently no procedure available for holders that are not U.S. residents to claim tax treaty benefits in respect of dividends received on Air
France-KLM ADSs or shares registered in the name of a nominee. Such holders should consult their own tax advisor about the consequences of owning and disposing of Air France-KLM ADSs.



As used herein, the term U.S. holder means a beneficial owner of Air France-KLM shares or ADSs and Air
France-KLM warrants or ADWs that is, for U.S. federal income tax purposes, (i) a citizen or resident of the United States, (ii) a corporation created or organized under the laws of the United States or any State thereof, (iii) an estate the income
of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for U.S. federal income tax purposes. A Non-U.S. holder is a holder that is not a U.S. holder.



This discussion does not address the treatment of Air France-KLM shares or
ADSs, or Air France-KLM warrants or ADWs that are held by a resident of France (except for purposes of describing related tax consequences for other holders) or in connection with a permanent establishment or fixed base through which a holder
carries on business or performs personal services in France. It does not address the treatment of Air France-KLM shares or ADSs that are held by a U.S. holder that owns 5% or more of the voting stock of Air France-KLM.



Your individual circumstances may affect the tax consequences of the
ownership and disposal of Air France-KLM shares or ADSs, or Air France-KLM warrants or ADWs to you, and your particular facts or circumstances are not considered in the discussion below. You should consult your own tax advisor regarding the French
tax consequences of the ownership and disposition of Air France-KLM shares or ADSs, or Air France-KLM warrants or ADWs in light of your particular circumstances. In particular, you should confirm whether you are eligible for the benefits of the
Treaty with your advisor and should discuss any possible consequences of failing to be so eligible.



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French Tax Consequences of Owning and Holding Air France-KLM Shares or ADSs, or Air France-KLM warrants or ADWs



Taxation of Dividends  Withholding Tax



France generally imposes a 25% withholding tax on
dividends distributed in cash or in the form of shares by a French corporation (such as Air France-KLM) to shareholders who is not a resident of France for French tax purposes.



However, the Treaty generally reduces the withholding tax rate to 15% on dividends paid in cash or in the form of shares to
an eligible U.S. holder.



Under the Treaty, an eligible U.S.
holder is a U.S. holder whose ownership of Air France-KLM shares or ADSs is not attributable to a permanent establishment or fixed base in France and who is:



| |  |  | an individual or other non-corporate holder, or
| | - |  | -----------------------------------------------



| |  |  | a corporation that does not own, directly or indirectly, 10% or more of the capital of Air France-KLM, provided in each case that such holder:
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | is a resident of the United States under the Treaty,
| | - |  | ----------------------------------------------------



| |  |  | is entitled to Treaty benefits under the limitation on benefits provisions in Article 30 of the Treaty, and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | complies with the procedural rules described below.
| | - |  | ---------------------------------------------------



The dividends paid by Air France-KLM to an eligible U.S. holder may be immediately subject to the reduced withholding tax rate, subject to compliance with
the filing requirements described below under Taxation of Dividends  Procedure to Obtain Treaty Benefits.



Taxation of Dividends  Tax credit



When shareholders resident in France receive dividends from French companies, they historically were entitled to a tax credit, known as the avoir
fiscal. However, the Finance Act for 2004 (loi de finances pour 2004) has significantly modified the distribution tax regime and provided for the repeal of the avoir fiscal mechanism and the related précompte
mechanism, an equalization tax payable by French corporations in respect of certain amounts distributed.



As a result, under French domestic law, the avoir fiscal tax credit is no longer available for dividends paid after January 1, 2005 to individual
shareholders and corporate shareholders may not use the avoir fiscal tax credit to pay corporation tax as from January 1, 2005. Besides, no précompte will be payable in respect of distributions made as from January 1, 2005.



However, under the new distribution tax regime, French
individual residents are entitled to a tax credit equal to 50% of the dividend received as from January 1, 2005, (the 50% Tax Credit). The 50% Tax Credit is capped at 230 for married couples and for members of a civil union
agreement (pacte civil de solidarité as defined under Article 515-1 of the French Civil Code) who are subject to joint taxation and 115 for single persons, widows or widowers, divorcees or married persons subject to separate
taxation.



Dividends distributed in 2004



For the purposes of this sub-section, the term dividends means distributions
which have the characteristics of dividends within the meaning of the French administrative instruction 4-J-2-01 dated December 14, 2001.



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According to that instruction, the avoir fiscal is exclusively attached to distributions that are duly made pursuant to a decision of the competent
corporate bodies in accordance with the French laws and regulations applicable to dividend distributions. Only those distributions could give rise, as the case may be, to a payment of the précompte.



The précompte was an equalization tax that was payable by a
French corporation in respect of any amounts distributed as a dividend out of profits which:



| |  |  | have not been subject to French corporate income tax at the standard corporate income tax rate,
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | are distributed from the long-term capital gains reserve, or
| | - |  | ------------------------------------------------------------



| |  |  | were earned and taxed more than five years before the distribution,
| | - |  | -------------------------------------------------------------------



The précompte was generally equal to 50% of the net dividend distributed. The amount of any précompte would be charged to
shareholders equity as part of the dividend distribution.



Under French domestic law, including the provisions of the Finance Act for 2004 (loi de finances pour 2004):



| |  |  | French individual residents were entitled to a tax credit, known as the avoir fiscal, equal to 50% of the dividend paid in cash or in the form of shares by a French
corporation;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | French non-individual residents were generally entitled to an avoir fiscal equal to 10% of the dividend (plus an additional payment equal to 80% of any
précompte actually paid in cash.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under French domestic law, shareholders who are not resident in France were not eligible for the avoir fiscal.



However, under the Treaty, an eligible U.S. holder who received dividends paid by a French company (such as Air France-KLM) that, if received by a
resident of France, would entitle such U.S. holder to an avoir fiscal was generally entitled to a payment from the French Treasury that is the equivalent of an avoir fiscal. That payment was made by the French Treasury not earlier than
the January 15 following the close of the calendar year in which the related dividend is paid, and only after receipt by the French tax administration of a claim for that payment in accordance with the procedures described below under the section
Taxation of Dividends  Procedure to Obtain Treaty Benefits - Refund of the avoir fiscal or précompte in respect of dividends paid in 2004.



The following are certain limitations to the availability of the avoir fiscal under the Treaty:



| |  |  | An avoir fiscal is generally only granted if the eligible U.S. holder is subject to U.S. federal income tax on both the dividend and the avoir fiscal.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A partnership or a trust (other than a pension trust, a real estate investment trust or a real estate mortgage investment conduit), in its capacity as an eligible U.S. holder, is
entitled to an avoir fiscal only to the extent that its partners, beneficiaries or grantors, as applicable, are themselves eligible U.S. holders (other than a regulated investment company) and are themselves subject to U.S. federal income tax
on their respective shares of both the dividend and the avoir fiscal.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The eligible U.S. holder, where required by the French tax administration, must show that he or she is the beneficial owner of the dividends received from Air France-KLM and that
the holding of the Air France-KLM shares or ADSs does not have as one of its principal purposes to allow another person to take advantage of the grant of an avoir fiscal under the Treaty.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | If the eligible U.S. holder is a regulated investment company, it should not own, directly or indirectly, 10% or more of our capital. This rule only applies if less than 20% of the
shares of the regulated investment company are beneficially owned by persons who are neither citizens nor residents of the United States under the Treaty.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, under the Treaty, an eligible U.S. holder that is not entitled to the refund of the avoir fiscal
generally may obtain from the French tax authorities a refund of any précompte paid by us with respect to the dividends distributed, subject to the 15% French withholding tax applicable to dividends.



The French tax authorities have published an administrative instruction
4-J-2-05 of April 28, 2005 commenting inter alia the possibility for shareholders who are not resident in France to benefit from the refund of the avoir fiscal or the précompte in respect of distributions made in 2004.
According that instruction:



| |  |  | U.S. eligible individual holders are entitled under the Treaty to a payment from the French tax authorities equal to the avoir fiscal or, as the case may be, the
précompte (less, in each case, a 15% withholding tax) in respect of dividends that we paid in 2004; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | U.S. eligible non-individual holders may be entitled to the refund of the avoir fiscal in respect of dividends that we paid in 2004 provided that such U.S. holders have
included those dividends within the taxable profits of a fiscal year ended before January 1, 2005 and that the full amount of the U.S. federal income tax in respect of that fiscal year has been paid to the U.S. Treasury before January 1, 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Where such a holder is not entitled to that
refund, it is generally entitled to the refund of the précompte that we may have paid in respect of those dividend distributions. In each case, those payments are subject to the 15% withholding tax.



Dividends distributed in 2005



Under French domestic law, shareholders who are not resident in France are
not eligible for the 50% Tax Credit.



However, under the
Treaty, an eligible individual U.S. holder receiving dividends from Air France-KLM should be able to receive a payment from the French Treasury corresponding to the 50% Tax Credit he or she would have been entitled to if he or she had been a
resident of France. The same limitations as applicable to the transfer of the avoir fiscal, as described above, should be applicable and the payment of the 50% Tax Credit should be subject to the 15% dividend withholding tax. Investors should
note that the French tax authorities have not yet published any guideline confirming the possibility for an eligible U.S. holders to receive such a payment or the procedure to be followed.



U.S. non-individual holders should not be entitled to the refund of the 50%
Tax Credit in respect of dividends that we may pay.



No
avoir fiscal or précompte will be refunded in respect of distributions made as from January 1, 2005.



Taxation of Dividends  Procedure to Obtain Treaty Benefits



Reduced withholding tax rate



Eligible U.S. holders must follow certain procedures in order to be eligible for the 15% dividend withholding tax under the Treaty.



An eligible U.S. holder who wishes to obtain a reduced withholding rate at
source must:



| |  |  | complete a certificate (the Certificate), as provided under Schedule III to the administrative instruction 4 J-1-05 of February 14, 2005,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | have it certified by the U.S. financial institution that is responsible for the administration of the Air France-KLM shares or ADSs of that eligible U.S. holder, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | file the Certificate with Air France-KLM or the French person in charge of the payment of dividends on the Air France-KLM shares, such as the French paying agent, in the case of Air
France-KLM shares, or with the depositary in the case of Air France-KLM ADSs,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



before the date of payment of the relevant dividend. An eligible U.S. holder that is a regulated investment company must also be identified as such on a list provided annually by the U.S. Internal Revenue Service.
However, if an eligible U.S. holder is not able to complete, have certified and file the Certificate before the date of payment of the dividend, that eligible U.S. holder may still benefit from the reduced 15% withholding tax rate if the U.S.
financial institution that is responsible for the administration of that holders Air France-KLM shares or ADSs provides us or the French paying agent with certain information with respect to that eligible U.S. holder and his or her holding of
Air France-KLM shares or ADSs before the date of payment of the relevant dividend.



If either of the procedures described above has not been followed before a dividend payment date or is not available to an eligible U.S. holder, we or the French paying agent will withhold tax from the dividend at the
normal French rate of 25%, and the eligible U.S. holder will be entitled to claim a refund of the excess withholding tax by filing a form RF1 A E.U. no. 5052 with the depositary or the French paying agent early enough to enable them to forward that
application to the French tax administration before December 31 of the year following the calendar year in which the related dividend was paid.



Refund of the avoir fiscal or précompte in respect of dividends paid in 2004



Eligible U.S. holders must follow certain procedures in order to receive, where applicable, a refund of the avoir
fiscal or précompte (less the 15% withholding tax on that amount) under the Treaty.



An eligible U.S. holder who wishes to receive a refund of the avoir fiscal must claim a refund of the excess withholding tax by having a form RF1 A
E.U. no. 5052 entitled Application for Refund certified by the U.S. financial institution that is responsible for the administration of the Air France-KLM shares or ADSs of that eligible U.S. holder, and file it with Air France-KLM or
the French person in charge of the payment of dividends on the Air France-KLM shares, such as the French paying agent, in the case of Air France-KLM shares, or with the depositary in the case of Air France-KLM ADSs early enough to enable them to
forward that application to the French tax administration before December 31, 2004. In addition, such an eligible U.S. holder will need to provide additional documents evidencing that the specific conditions regarding the payment of U.S. federal
income tax in 2004 and, as described above under section Taxation of Dividends  Tax Credit, are fulfilled.



An eligible U.S. holder entitled to the refund of the précompte in respect of dividends paid in 2004 must have applied for the refund by
filing a French Treasury form RF 1 B E.U. no. 5053 before December 31, 2004.



The depositary will provide to all U.S. holders of Air France-KLM ADSs the applications or certificates, together with instructions, and will arrange for the filing with the French tax authorities of all applications
and certificates completed by U.S. holders of Air France-KLM ADSs and returned to the depositary in sufficient time to effect the filing.



The Certificate, forms RF 1 A E.U. no. 5052 and RF 1 B E.U. no. 5053 and their respective instructions are available at the centre des impôts des
non-résidents (9, rue dUzès, 75094 Paris Cedex 2, France).



The French tax authorities have not yet issued any guidance in respect of the refund of the 50% Tax Credit to individuals who are not French resident for tax purposes. It is expected that the procedure to obtain such
a refund would imply cumbersome filing requirements.



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Special Rules for Certain Tax-Exempt Shareholders



Under the Treaty, special rules apply to:



| |  |  | any eligible pension fund, which is a tax-exempt entity established in, and sponsored or established by a resident of, the United States, the exclusive purpose of which is to
provide retirement or employee benefits and which does not own, directly or indirectly, 10% or more of our capital,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any eligible not-for-profit organization, which is a tax-exempt entity organized in the United States, the use of whose assets is limited under U.S. federal or state laws, both
currently and upon liquidation, to the accomplishment of the purposes that serve as the basis of its exemption from income taxation in the United States and which does not own, directly or indirectly, 10% or more of our capital, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any individual holding shares in a retirement plan, meaning an individual who is a resident of the United States under the Treaty and who owns Air France-KLM shares or ADSs through
an individual retirement account, a Keogh plan or any similar arrangement and who does not own, directly or indirectly, 10% or more of our capital. (Eligible pension funds, eligible not-for-profit organizations and individuals holding shares in a
retirement plan are referred to collectively as eligible tax-exempt holders.)
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Eligible tax-exempt holders are generally entitled under the Treaty to a reduced withholding tax rate of 15% on dividends distributed by us, but they are not entitled to the refund of the avoir fiscal or
précompte that may be attached to distributions made in 2004.



Eligible tax-exempt holders generally must follow the procedures set forth above under Taxation of DividendsProcedure to Obtain Treaty BenefitsReduced withholding tax rate. Certain
eligible tax-exempt holders may also be required to provide written evidence certified by the U.S. Internal Revenue Service of their status under U.S. federal income tax law. As a consequence, eligible tax-exempt holders are urged to contact their
own tax advisors with respect to the procedures to be followed to obtain Treaty benefits.



Tax on Sale or Redemption of Air France-KLM Shares or ADSs and Air France-KLM Warrants or ADWs



Under the Treaty, no French tax is levied on any capital gain derived from the sale of Air France-KLM shares or ADSs, and/or Air France-KLM warrants or
ADWs by a U.S. holder who:



| |  |  | is a resident of the United States under the Treaty,
| | - |  | ----------------------------------------------------



| |  |  | is entitled to Treaty benefits under the limitation on benefits provisions of Article 30 of the Treaty, and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | does not have a permanent establishment in France to which the Air France-KLM shares or ADSs, and/or Air France-KLM warrants or ADWs are attributable or, in the case of an
individual, who does not maintain a fixed base in France to which the Air France-KLM shares or ADSs, and/or Air France-KLM warrants or ADWs are effectively connected.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under French domestic tax law, any gain realized by a shareholder on a redemption of Air France-KLM shares by Air France-KLM
generally will be treated as a dividend and will be subject to French dividend withholding tax as described above under Taxation of DividendsWithholding Tax, unless all our accumulated earnings and profits, as determined for
French tax purposes, have been distributed to our shareholders before such redemption.



French Transfer and Stamp Taxes



Transfers of Air France-KLM shares or ADSs, and/or Air France-KLM warrants or ADWs will not be subject to French transfer taxes unless, in the case of Air France-KLM shares and/or ADSs, the transfer is



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effected by means of a written agreement that is executed or enforced in France. Should such written agreement be executed or enforced in France, it would be
subject to transfer taxes at the rate of 1% (this rate being increased to 1.1% for transactions entered into as from January 1, 2006), up to a maximum of 3,049 per transaction where entered into until December 31, 2005, and 4,000 per
transfer for transactions entered into thereafter.



In certain
cases, a stock exchange stamp tax may also be payable.



French Estate, Gift and Wealth Taxes



Transfers of Air France-KLM shares or ADSs, and/or Air France-KLM warrants or ADWs by gift by, or by reason of death of, a U.S. holder that would be subject to French gift or inheritance tax under French domestic tax law will not be subject
to such French tax by reason of the Convention between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Estates, Inheritances and Gifts, dated
November 24, 1978 unless:



| |  |  | the donor or decedent is domiciled in France within the meaning of that Convention at the time of making the gift, or the time of his or her death, or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Air France-KLM shares or ADSs, and/or Air France-KLM warrants or ADWs were used in, or held for use in, the conduct of business through a permanent establishment or a fixed base
in France.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under French tax law and the Treaty,
the French wealth tax generally does not apply to U.S. holders that are not individuals or in the case of natural persons, who own alone or with their parents, directly or indirectly, Air France-KLM shares or ADSs representing the right to less than
25% of Air France-KLMs profits.



U.S. Federal Income
Tax Considerations



The following describes the material
U.S. federal income tax consequences of the acquisition, ownership and disposition of Air France-KLM shares or ADSs and Air France-KLM warrants or ADWs by a U.S. holder (as defined above in French Tax Considerations). This
discussion deals only with U.S. holders that hold Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs as capital assets. The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual
tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs by particular investors, and does not address state, local, foreign or
other tax laws. In particular, this summary does not address tax considerations applicable to investors that currently or during the past five years own or have owned directly, or indirectly by attribution, 10% or more of our voting stock, nor does
this summary discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws (such as financial institutions, insurance companies, investors liable for the
alternative minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers in securities or currencies, investors that will hold the Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs as
part of straddles, hedging transactions or conversion transactions for U.S. federal income tax purposes or investors whose functional currency is not the U.S. dollar). Moreover, this description does not address the U.S. federal estate and gift tax
consequences of the ownership and disposition of the Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs.



The U.S. federal income tax treatment of a partner in a partnership that holds Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs will
depend on the status of the partner and the activities of the partnership. Prospective purchasers that are partnerships should consult their tax advisers concerning the U.S. federal income tax consequences to their partners of the acquisition,
ownership and disposition of Air France-KLM shares or ADSs or Air France-KLM warrants or ADWs by the partnership.



This discussion assumes that Air France-KLM is not a passive foreign investment company (a PFIC) for U.S. federal income tax purposes, which we believe to
be the case. Our possible status as a PFIC must be determined annually and therefore may be subject to change. If we were to be a PFIC in any year, materially adverse consequences could result to U.S. holders.



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The summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986,
as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, as well as on the income tax treaty between the United States and France (the Treaty), all as currently in effect
and all subject to change at any time, possibly with retroactive effect.



The discussion of U.S. federal income tax consequences set forth below is not tax advice. All prospective purchasers should consult their tax advisors as to the particular tax consequences to them of owning the Air
France-KLM shares or ADSs or Air France-KLM warrants or ADWs, including their eligibility for the benefits of the Treaty, the applicability and effect of state, local, foreign and other tax laws and possible changes in tax law.



U.S. Holders of ADSs



For U.S. federal income tax purposes, a U.S. holder of ADSs will be treated
as the owner of the corresponding number of Air France-KLM ordinary shares held by the depositary, and references herein to Air France-KLM shares refer also to the ADSs representing the Air France-KLM shares.



Dividends on Shares or ADSs



General



Distributions (including the amount of any avoir fiscal, précompte, or the 50% Tax Credit) paid by us
out of current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), before reduction for any French withholding tax paid by us with respect thereto, will generally be taxable to a U.S. holder as foreign source
dividend income, and will not be eligible for the dividends received deduction allowed to corporations. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the
U.S. holders basis in the shares and thereafter as capital gain.



For taxable years beginning before 2009, dividends paid by us will be taxable to a non-corporate U.S. holder at the special reduced rate normally applicable to capital gains, provided the shares are readily tradable on a U.S. securities
market or we qualify for the benefits of the Treaty. A U.S. holder will be eligible for this reduced rate only if it has held the shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.



Foreign Currency Dividends



Dividends on Air France-KLM shares paid in euro will be included in income in
a U.S. dollar amount calculated by reference to the exchange rate in effect on the day the dividends are received by the U.S. Holder or, in the case of ADSs, by the depositary, regardless of whether the euro are converted into U.S. dollars at that
time. If dividends received in euro are converted into U.S. dollars on the day they are received, the U.S. holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income.



Effect of French Withholding Taxes



As discussed above in French Tax Consequences of Owning and
Holding Air France-KLM Shares and ADSs, or Air France-KLM warrants or ADWsTaxation of DividendsWithholding Tax, U.S. holders will be subject to French withholding taxes on dividends and, if applicable, payments of related avoir
fiscal, précompte, or the 50% Tax Credit. Under the Treaty, the rate of withholding tax applicable to U.S. holders that are eligible for benefits under the Treaty (eligible U.S. holders) is reduced to a maximum of 15%. For the
procedure for claiming treaty benefits, please see French Tax Consequences of Owning and Holding Air France-KLM Shares or ADSs, or Air France-KLM warrants or ADWsTaxation of DividendsProcedure to Obtain Treaty Benefits.



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A U.S. holder will generally be entitled, subject to certain limitations, to a credit against its U.S.
federal income tax liability, or a deduction in computing its U.S. federal taxable income, for any French tax withheld from a dividend or payment of avoir fiscal, précompte, or the 50% Tax Credit. Eligible U.S. holders will not
be entitled to a foreign tax credit for the amount of any French taxes withheld in excess of the 15% maximum rate, and with respect to which the holder can obtain a refund from the French taxing authorities. For purposes of the foreign tax credit
limitation, foreign source income is classified in one of several baskets, and the credit for foreign taxes on income in any basket is limited to U.S. federal income tax allocable to that income. Dividends paid by us generally will constitute
foreign source income in the passive income basket. If a U.S. holder receives a dividend from us that qualifies for the reduced rate described above under Dividends on Shares of ADSs-General, the amount of the dividend taken into account
in calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. In certain circumstances, a U.S. holder may be
unable to claim foreign tax credits (and may instead be allowed deductions) for foreign taxes imposed on a dividend if the U.S. holder has not held the shares for at least 16 days in the 31-day period beginning 15 days before the ex-dividend date.



A U.S. holder should read the Section entitled French
TaxationTaxation of DividendsTax Credit for a description of the avoir fiscal, précompte, the repeal of these provisions and the holders eligibility for the 50% Tax Credit.



For taxable years beginning before 2005, U.S. Holders that are accrual basis
taxpayers must translate French taxes into U.S. dollars at a rate equal to the average exchange rate for the taxable year in which the taxes accrue, while all U.S. Holders must translate taxable dividend income into U.S. dollars at the spot rate on
the date received. This difference in exchange rates may reduce the U.S. dollar value of the credits for French taxes relative to the U.S. Holders U.S. federal income tax liability attributable to a dividend. However, for taxable years
beginning after 2004, U.S. Holders that are accrual basis taxpayers may elect to translate French taxes into U.S. dollars using the exchange rate in effect on the day the taxes were paid. Any such election will apply for the taxable year in which it
is made and all subsequent taxable years, unless revoked with the consent of the IRS.



Prospective purchasers should consult their tax advisers concerning the foreign tax credit implications of the payment of French taxes and receiving a dividend from us that is eligible for the special reduced rate
described above under Dividends on Shares or ADSs-General.



Exchange of Air France-KLM ADSs for Shares



In the case of a U.S. holder that elects to withdraw shares from the deposit arrangement, no gain or loss will be recognized upon the exchange of Air France-KLM ADSs for the U.S. holders proportionate interest in shares. A U.S.
holders tax basis in the withdrawn shares will be the same as the U.S. holders tax basis in the Air France-KLM ADSs surrendered, and the holding period of the shares will include the holding period of the Air France-KLM ADSs.



Sale or Other Disposition of Air France-KLM Shares or ADSs



Upon a sale or other disposition of Air France-KLM
shares or ADSs (other than an exchange of ADSs for shares), a U.S. holder generally will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount realized on the sale or other
disposition and the U.S. holders adjusted tax basis in the Air France-KLM shares or ADSs. This capital gain or loss will be long-term capital gain or loss if the U.S. holders holding period in the Air France-KLM shares or ADSs exceeds
one year. However, in the case of Air France-KLM shares or ADSs regardless of a U.S. holders actual holding period, any loss will be long-term capital loss to the extent the U.S. holder receives a dividend that qualifies for the reduced rate
described above under Dividends on Shares or ADSsGeneral, and exceeds 10% of its basis in the Air France-KLM shares or ADSs. For a non-corporate U.S. holder, the maximum long-term capital gains rate for taxable years that begin
before 2009 is 15%.



Any gain or loss will generally be U.S.
source.



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Exercise, Lapse or Sale or Other Disposition of Air France-KLM Warrants or ADWs



Upon exercise of an Air France-KLM warrant or ADW, a U.S. holder will not
recognize any gain or loss for U.S. federal income tax purposes. A U.S. holders holding period for the Air France-KLM shares or ADSs received upon exercise of the Air France-KLM warrant or ADW generally will not include the period during which
such U.S. holder owned the Air France-KLM warrants or ADWs. The U.S. federal income tax consequences of owning Air France-KLM shares or ADSs acquired pursuant to the exercise of Air France-KLM warrants or ADWs will generally be as described above.



If a U.S. holders Air France-KLM warrants or ADWs lapse,
then the U.S. holder will generally be entitled to a capital loss equal to the U.S. holders adjusted tax basis in the Air France-KLM warrants or ADWs. The sale, exchange or other disposition of an Air France-KLM warrant or ADW will generally
result in the recognition of capital gain or loss to a U.S. holder in an amount equal to the difference between the amount realized and such U.S. holders adjusted tax basis in the Air France-KLM warrant or ADW. This capital gain or loss will
be long-term capital gain or loss if the U.S. holders holding period in Air France-KLM warrants or ADWs exceeds one year.



A U.S. holders adjusted tax basis in an Air France-KLM warrant or an ADW will generally be equal to the cost of the Air France-KLM warrant or ADW
or, in the case of a holder that received the warrant or ADW pursuant to the exchange of KLM ordinary shares or KLM New York Registry Shares, the fair market value of such warrant or ADW at the time of the exchange.



Backup Withholding and Information Reporting



Payments of dividends and other proceeds with respect to Air France-KLM
shares and ADSs will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding may apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or
certification of exempt status or fails to report all interest and dividends required to be shown on its U.S. federal income tax returns. Certain U.S. holders (including, among others, corporations) are not subject to backup withholding.



Payments of dividends and other proceeds with respect to Air France-KLM
shares and ADSs to a Non-U.S. holder will not be subject to backup withholding tax and information reporting requirements if appropriate certification (Form W-8BEN or some other appropriate form) is provided by the holder to the payor and the payor
does not have actual knowledge that the certificate is false.



All holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.



Documents on Display



Our files annual and special reports and other information with the SEC. You may read and copy any reports or other information on file at the SECs
public reference room at the following location:



Public
Reference Room

450 Fifth Street, N.W.

Room 1024

Washington, D.C. 20549



Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC filings are also available to the public from
commercial document retrieval services. Our SEC filings may also be obtained electronically via the EDGAR system on the website maintained by the SEC at http://www.sec.gov.



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Statement on Corporate Governance as Required by Section 303A-11 of the New York Stock Exchanges Listed Company
Manual



The following is a brief explanation of the
principal ways in which our corporate governance practices differ from the New York Stock Exchange corporate governance rules applicable to U.S. domestic companies listed on the NYSE.



Air France-KLM has securities publicly listed and traded on markets in France (Euronext Paris), in the Netherlands (Euronext
Amsterdam) and in the United States (the NYSE).



Air
France-KLMs Board of Directors currently comprises 16 members. Contrary to the laws applicable to U.S. companies, the term independent director does not have a legal definition under French law. The Bouton Report of 2003 on
Corporate Governance defines a non-executive director as a director who has no relations of any kind with the Air France-KLM group or its management, which could impede the free exercise of his/her judgment. The Board of Directors has
not yet designated as non-executive directors the directors who meet the criteria of the Bouton Report, although we believe that six of the current 16 directors meet the criteria of the Bouton Report. The French State currently has the right to
appoint three directors to our board of directors. The French State is entitled to designate a number of candidates for our board of directors in proportion to its shareholding in Air France-KLM, (which may not be lower than two members) provided it
holds at least 10% of our share capital. The Air France-KLM board of directors also includes two directors proposed by the KLM supervisory board and the State of the Netherlands is entitled to propose a director for so long as the French State is
represented on our board. Finally, under the agreements entered into as part of the Air France-Alitalia alliance, Alititalia has the right to propose one representative to our board.



Air France-KLM has several specialized committees to support the decision-making process of the board of directors,
including a remuneration and appointments committee each consisting of three members, an audit committee consisting of five members (including one director appointed by the French State) and a strategy committee consisting of seven members
(including two directors appointed by the French State). Under French law, board committees are advisory only, while under the NYSE rules, specific committees are vested with certain powers that in France remain with the board. Under French
corporate law, shareholders must appoint Air France-KLMs auditors at annual shareholder meetings. Air France shareholders receive the proposals for such appointments from the board of directors, who in turn receive recommendations from the
audit committee. We believe that the requirements of French law, including the requirement that two statutory auditors must be appointed by the shareholders, achieve the NYSEs objectives for auditor independence.



In order to emphasize our commitment to promoting transparency and compliance
with rules and regulations, and in line with the NYSE Listed Company Manual, we have adopted a written Code of Ethics applicable to the Chief Executive Officer, the Deputy Chief Executive Officer, Vice President  Finance and Accounting Officer
as well as a Compliance Code for market transactions applicable to all directors. Following discussion at its meeting on June 22, 2005, our board of directors has initiated a self-assessment of its operations.



Air France-KLM is currently in the process of determining its final
management structure. It is contemplated that for an interim period, key senior executive positions, including chief financial officer and investor relations officer will be occupied by full time or part time secondments of Air France or KLM
employees to Air France-KLM. For further details on the current management structure of Air France-KLM, see Item 6: Directors, Senior Management and EmployeesEmployeesEmployees of Air France-KLM.



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Item 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market Risk



General



We are inevitably exposed to price and currency
fluctuations given the international nature of our business. We hedge our expected exposure to fluctuations in foreign exchange and interest rates on a case-by-case basis and seek to hedge a significant part of our expected exposure to fluctuation
in fuel prices. The decision to hedge is taken by our management on a centralized basis based on the nature and significance of the potential risks involved. Our objective with respect to hedging transactions is to safeguard budgeted margins.



We have defined strict policies and procedures to measure,
manage and monitor our market risk exposures. We have instituted management rules based on a segregation of operations, financial and administrative control and risk measurement. We have also instituted, for all operations managed at corporate
level, an integrated system that permits real time monitoring of hedging strategies.



As part of our treasury and fuel risk management program, we selectively use derivative financial and commodity instruments in order to reduce our exposure to fluctuations in market rates and prices. We use
derivatives only for the purposes of hedging identified exposures and do not invest in derivatives for trading or speculative purposes. The instruments used include swaps, forward contracts, and options in the currency, interest rate and fuel
markets.



Exchange Rate Risk



We seek to reduce our foreign exchange exposure arising from:



| |  |  | Current Operations
| | - |  | ------------------



Although our reporting currency is the euro, part of our cash flow is denominated in other currencies, such as the U.S. dollar, the Japanese yen, the
British pound sterling and the Swiss franc. Our commercial activities also generate and incur income and expenses in foreign currency. Our policy is to hedge against exchange risks relating to forecast cash surpluses or shortfalls in various
currencies (e.g. the U.S. dollar, the Japanese yen, the British pound and non-euro European currencies). Hedging takes the form of forward sales or purchases and/or option-based strategies.



| |  |  | Acquisitions of Flight Equipment
| | - |  | --------------------------------



Capital expenditure for flight equipment is denominated in U.S. dollars. We hedge on the basis of projected fluctuations in the U.S. dollar via forward
sales and purchases and/or option-based strategies.



| |  |  | Long-Term Debt and Capital Leases
| | - |  | ---------------------------------



A number of loans are denominated in foreign currency so as to diversify sources of funding and take into account cash surpluses generated in various
currencies. In order to safeguard against the risk of exchange rate fluctuations on debt and capital leases currency swaps are used. This is a micro-hedging mechanism matched specifically to the borrowing to which it relates.



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##### Table of Contents

The table below provides information about Air France-KLMs foreign exchange derivatives as at March
31, 2005 and presents such information in euro equivalents. The table presents the notional amounts by contractual maturity dates. These notional amounts are generally used to calculate the contractual payments to be exchanged under the contract.



|                              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|----------------------------- |  | -------------------------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | --------- |  | ----- |  | --------- | -
|                              |  | At March 31, 2005                      | 
|                              |  | Maturities of notional contract values | 
|                              |  | 2005                                   |  | 2006 |  | 2007 |  | 2008 |  | 2009 |  | > 5 years |  | Total |  | FairValue |  
|                              |  | (in  millions)                        | 
|Foreign Exchange Derivatives  |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Forward contract purchases    |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|U.S. dollar (USD)             |  | 1,020                                  |  | 450  |  | 333  |  | 337  |  | 123  |  | 0         |  | 2,263 |  | (178.8    | )
|Forward contract sales        |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|British pound (GBP)           |  | 183                                    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 183   |  | (1.0      | )
|Japanese yen (JPY)            |  | 76                                     |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 76    |  | 1.6       |  
|Swiss franc (CHF)             |  | 36                                     |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 36    |  | (0.4      | )
|Other                         |  | 162                                    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 162   |  | 0.5       |  
|                              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Total                         |  | 457                                    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 457   |  | 0.7       |  
|                              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Currency options              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|US dollar (USD)               |  | 863                                    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 863   |  | (17.6     | )
|British pound (GBP)           |  | 66                                     |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 66    |  | (0.3      | )
|Japanese yen (JPY)            |  | 58                                     |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 58    |  | 10.4      |  
|Swiss Franc (CHF)             |  | 22                                     |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 22    |  | 1.1       |  
|                              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Total                         |  | 1,009                                  |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 1,009 |  | (6.4      | )
|                              |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Currency swaps                |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Japanese yen (JPY)            |  | 234                                    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0         |  | 234   |  | (36.0     | )
|Cross interest currency swaps |  |                                        |  |      |  |      |  |      |  |      |  |           |  |       |  |           |  
|Japanese yen (JPY)            |  | 61                                     |  | 195  |  | 278  |  | 121  |  | 77   |  | 282       |  | 1,014 |  | 7.4       |  



Interest Rate Risk



To manage interest rate risk on short-term and long-term borrowings, we
use instruments with certain nominal and fair values as of the balance sheet dates.



The table below provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For
debt obligations, the table presents principal cash flows by expected maturity dates and related weighted average interest rates. For interest rate swaps, the table presents notional amounts by contractual maturity dates and related weighted average
fixed interest rates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average floating rates are based on effective rates at March 31, 2005.



|                      |  |                                        |   |  |       |  |       |  |      |  |      |  |      |  |          |  |       |  |          
|--------------------- |  | -------------------------------------- | - |  | ----- |  | ----- |  | ---- |  | ---- |  | ---- |  | -------- |  | ----- |  | ---------
|                      |  | At maturity March 31, 2005            
|                      |  | Maturities of notional contract values
|                      |  | AverageRate                            |   |  | 2006  |  | 2007  |  | 2008 |  | 2009 |  | 2010 |  | > 5years |  | Total |  | FairValue
|                      |  | (in  millions)                       
|Liabilities           |  |                                        |   |  |       |  |       |  |      |  |      |  |      |  |          |  |       |  |          
|Long-term debt        |  | 4.3                                    | % |  | 1,056 |  | 1,087 |  | 983  |  | 849  |  | 573  |  | 3,457    |  | 8,005 |  | 8,153    
|Fixed rate portion    |  | 6.6                                    | % |  | 388   |  | 516   |  | 537  |  | 354  |  | 198  |  | 1,633    |  | 3,626 |  | 3,775    
|Floating rate portion |  | 2.6                                    | % |  | 668   |  | 571   |  | 446  |  | 495  |  | 375  |  | 1,824    |  | 4,379 |  | 4,379    
|Short-term borrowings |  | 2.1                                    | % |  | 263   |  |      |  |     |  |     |  |     |  |         |  | 263   |  | 263      



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|                                                 |  |                                        |   |  |      |  |      |  |      |  |      |  |      |  |          |  |       |  |              |  
|------------------------------------------------ |  | -------------------------------------- | - |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | -------- |  | ----- |  | ------------ | -
|                                                 |  | At maturity March 31, 2005             |  
|                                                 |  | Maturities of notional contract values |  
|                                                 |  | AverageRate                            |   |  | 2006 |  | 2007 |  | 2008 |  | 2008 |  | 2010 |  | > 5years |  | Total |  | FairValue(1) |  
|                                                 |  | (in  millions)                        |  
|Interest rate swaps                              |  |                                        |   |  |      |  |      |  |      |  |      |  |      |  |          |  |       |  |              |  
|Pay fixed rate (euro)                            |  | 4.6                                    | % |  | 197  |  | 317  |  | 141  |  | 432  |  | 104  |  | 702      |  | 1,894 |  | (84          | )
|Receive fixed rate (euro)                        |  | 6.3                                    | % |  | 31   |  | 77   |  | 48   |  | 186  |  | 26   |  | 178      |  | 546   |  | 71           |  
|Pay variable rate / Receive variable rate (euro) |  | 2.5                                    | % |  | 0    |  | 0    |  | 0    |  | 0    |  | 0    |  | 216      |  | 216   |  | (44          | )
|Interest Rate Options                            |  |                                        |   |  |      |  |      |  |      |  |      |  |      |  |          |  |       |  |              |  
|Collars (euro)                                   |  | N/A                                    |   |  | 7    |  | 0    |  | 0    |  | 0    |  | 0    |  | 0        |  | 7     |  | 0            |  

---

|Note: | 
|----- | 

|(1) | The fair values of the swaps have been calculated using the marked-to-market value provided by the banks.
|--- | ---------------------------------------------------------------------------------------------------------



Interest rate swaps have different objectives:



| |  |  | Hedging price risk relating to fixed-rate short- and long-term debt and capital leases
| | - |  | --------------------------------------------------------------------------------------



By contracting for a fixed-rate debt, we are exposed to an opportunity risk if the rate falls. Given the current position of
market rates in comparison with fixed contractual rates on certain of its short- and long-term debt and capital leases, we have entered into a number of fixed- to floating-rate swaps; and



| |  |  | Hedging of cash flow risk relating to floating-rate short- and long-term debt and capital leases
| | - |  | ------------------------------------------------------------------------------------------------



We have sought to fix the rate of certain floating-rate debt and thus have entered into a number of floating- to fixed-rate
swaps.



Commodity Risk  Fuel Prices



The impact of fuel price changes on us and our competitors is dependent upon
various factors, including hedging strategies. We have a fuel hedging program in which we enter into jet fuel, heating oil and crude swap and option contracts to protect against increases in jet fuel prices. These instruments generally have maturity
of up to 36 months. The table below provides information about Air France-KLMs swaps and options to manage commodity risks as at March 31, 2005.



|        |  |                        |  |                        |  |       |  |           
|------- |  | ---------------------- |  | ---------------------- |  | ----- |  | ----------
|        |  | At March 31, 2005     
|        |  | Maturingbefore oneyear |  | Maturingafter one year |  | Total |  | Fair Value
|        |  | (in  millions)       
|Swaps   |  | 1,179                  |  | 533                    |  | 1,712 |  | 387       
|Options |  | 916                    |  | 1,658                  |  | 2,574 |  | 796       



Insurance Risk



Air France has a civil liability insurance policy on behalf of itself and its
French and European airline subsidiaries, covering damage to aircraft, liability for passengers and general liability to third parties resulting from its air transport activities. The policy covers liability up to a maximum of $1.5 billion.
Société Air France and its French subsidiaries have also subscribed for additional insurance coverage for liability to third parties up to $500 million and for specific guarantees for damage caused to third parties resulting from war
or terrorist acts in the amount of $1 billion.



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Finally, as part of its risk management strategy, Air France has insured its industrial sites, equipment
and ancillary air transport activities for amounts based on coverage levels available in the market and its ability to quantify risks reasonably. Air France also has a number of specific or local policies as required by regulations in various
countries in which it maintains a representative office.



KLM
has a civil liability insurance policy on behalf of itself and its airline subsidiaries, covering damage to aircraft, liability for passengers and general liability to third parties resulting from its air transport activities The policy covers civil
liability up to a maximum of $1.5 billion. KLM has also subscribed for additional insurance coverage for civil liability up to an additional $500 million beyond such amount.



Moreover, as part of its risk management and financing policy, KLM has insured its industrial sites, equipment and ancillary
air transport activities for amounts based on coverage levels available in the market and its ability to quantify risks reasonably.



Counterparty Risk



We are exposed to credit risk in the event of a counterpartys default. We attempt to limit our exposure to counterparty risk by rigorously selecting
the counterparties with which we trade, through regularly monitoring the ratings assigned by credit rating agencies as well as the nature and maturity of operations with them. We believe we have no material concentration of risk with any
counterparty and do not anticipate any third party default that might have a significant impact on our financial position and results of operations.



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Item 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not applicable.



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Item 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



Not applicable.



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Item 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Not applicable.



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##### Table of Contents

Item 15: CONTROLS AND PROCEDURES



| | (a) | We have carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer (who is also the
chief financial officer of Air France), of the effectiveness of the design and operation of Air France-KLMs disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual
report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2005 Air Frances disclosure controls and procedures were effective to provide reasonable assurance that information
required to be disclosed by Air France-KLM in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Not applicable for this annual report, which covers a fiscal year ended prior to July 15, 2006.
| | --- | -----------------------------------------------------------------------------------------------



| | (c) | Not applicable for this annual report, which covers a fiscal year ended prior to July 15, 2006.
| | --- | -----------------------------------------------------------------------------------------------



Other than as disclosed below, there has been no change in Air France-KLMs internal control over financial reporting
that occurred during the financial year ended March 31, 2005 that has materially affected Air France-KLMs or is reasonably likely to materially affect Air France-KLMs internal control over financial reporting.



In the course of implementing IFRS, which we are required to follow in France
as of April 1, 2005 for purpose of satisfying French regulatory requirements, we identified an error in the financial information prepared in accordance with U.S. GAAP which impacts the years ended March 31, 2004, 2003 and 2002 (including the April
1, 2001 opening balance sheet). As a result, we determined that it was necessary to restate our previously issued U.S. GAAP financial information. However, this restatement did not have any impact on the French GAAP financial statements. The
restatement relates to the accounting for deferred taxes related to two perpetual loans contracted on 1989 and 1992, respectively, and that were not accounted for in accordance with SFAS 109, Accounting for Income Taxes. For the main impact of the
restatement on net income and shareholders equity, see note 35 to the consolidated financial statements included elsewhere in this annual report.



We believe that these errors relate to the misapplication of very technical accounting principles. In relation to the errors regarding our U.S. GAAP
financial information, we have strengthened our corporate accounting department and dedicated employees with relevant expertise to enhance the control relating to our U.S. GAAP financial reporting process.



On April 20, 2005, Air France-KLM formed a disclosure committee which assists
our chairman of the board and chief executive officer and chief financial officer (who is also the chief financial officer of Air France) in ensuring that the Air France-KLM complies with its disclosure obligations to investors, the public,
regulatory authorities and relevant securities markets. Specifically, the disclosure committee coordinates the collection and review of information included in reports filed with stock exchange and securities regulatory authorities, organizes
periodic evaluations of the effectiveness of Air France-KLMs disclosure controls and procedures and proposes corrective measures to remedy any deficiencies that might become apparent.



In order to meet new requirements under French law and the additional
requirements of the rules implemented under the Sarbanes-Oxley Act of 2002, a new group internal control function has been created within Air France-KLM to manage and coordinate internal control procedures at both Air France and KLM.



Pursuant to the French Financial Security Act of August 1, 2003 (loi de
sécurité financière), the chairman of the board of directors of Air France-KLM is required to deliver a special report to the general shareholders meeting regarding corporate governance practices, the status of the
internal control procedures implemented by Air France-KLM and the restrictions that the Air France-KLM board of directors has placed on the powers granted to the chief executive officer. The French report is not the equivalent of the report we will
be required to file under the Sarbanes-Oxley Act of 2002 beginning with the annual report on Form 20-F to be filed for the year ending March 31, 2007.



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Item 16: [Reserved]



Item 16A: AUDIT COMMITTEE FINANCIAL EXPERT



The Board of Directors has determined that Pierre Richard, Floris Maljers and Jean-François Dehecq are each an audit committee financial expert as defined in the instructions to Item 16A of Form 20-F.



Item 16B: CODE OF ETHICS



We have
a code of ethics that applies to our chief executive officer, chief operating officer, chief financial officer and chief accounting officer. A copy of our code of ethics is available on our website at www.airfranceklm-finance.com.



Item 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES



Deloitte & Associés (formerly Deloitte Touche Tohmatsu) and KPMG S.A. have served as Air France-KLMs independent registered Public Accounting firms for each of the financial years in the three-year
period ended March 31, 2005, for which audited financial statements appear in this annual report.



The following table presents the aggregate fees for professional services rendered by Deloitte & Associés and KPMG S.A. for each of the
financial years ended March 31, 2005, and March 31, 2004:



|                      |  |                    |  |       |  |                    |  |      
|--------------------- |  | ------------------ |  | ----- |  | ------------------ |  | -----
|                      |  | 2005               |  | 2004 
|                      |  | Deloitte &Associés |  | KPMG  |  | Deloitte &Associés |  | KPMG 
|Audit Fees(1)         |  | 2,815              |  | 5,138 |  | 4,053              |  | 3,889
|Audit-Related Fees(2) |  | 767                |  | 984   |  | 223                |  | 143  
|Tax Fees(3)           |  |                   |  | 515   |  | 13                 |  |     
|All Other Fees        |  |                   |  |      |  |                   |  |     
|                      |  |                    |  |       |  |                    |  |      
|Total                 |  | 3,582              |  | 6,637 |  | 4,289              |  | 4,032
|                      |  |                    |  |       |  |                    |  |      

---

|Notes: | 
|------ | 

|(1) | In 2005, audit fees consist of (i) fees for assurance and related services to the performance of the audit or limited review of the financial statements conducted in accordance with
auditing standards applicable in France for the year ended March 31, 2005 and (ii) fees for assurance and related services to the performance of the audit or review of financial statements conducted in accordance with auditing standards applicable
in the United States of America for the year ended March 31, 2005, 2004, 2003 and 2002 in connection with the financial statements to be included in an annual report on Form 20-F.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of March 31, 2005 and 2004, audit related fees comprised primarily fees incurred in connection with internal control reviews carried out in connection with French law
requirements (the Loi de Sécurité financière) and in connection with the transition to International Financial Reporting Standards (IFRS).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax Fees include services rendered in connection with tax compliance service work.
|--- | ----------------------------------------------------------------------------------



Audit Committee Pre-approval Policies and Procedures



Our audit committee is responsible, to the extent permitted by French law, for reviewing our consolidated financial
statements, principal financial risks, the results and scope of the internal audit, as well as reviewing the audit program, the conclusions and the recommendations of the statutory auditors. The audit committee also supervises the procedures
designed to ensure compliance with stock exchange regulations.



On September 21, 2004, our audit committee adopted a policy for the approval and tracking of auditor services which entered into effectiveness on September 30, 2004. This policy identifies the guiding principles that must be considered by
the audit committee in approving services to ensure that the independent auditors independence is not impaired; describes the audit, audit related, tax and other non-audit services that may and may not be provided; and sets forth the
pre-approval requirements for all permitted services. The policy provides for general pre-approval of certain audit-related services up to 150,000 and certain tax services up to 50,000. Specific pre-approval is required for engagements
exceeding that amount and for all other permitted services. A copy of this policy is available on our website at www.airfranceklm-finance.com.



177



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##### Table of Contents

Item 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not applicable.



Item 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



At our annual meeting of shareholders held on September 15, 2004, our shareholders approved a resolution authorizing us, for a period of 18 months, to
purchase our shares and to hold up to 5% of our share capital. This resolution superseded a similar resolution approved by our shareholders at the annual shareholders meeting held in July 10, 2003. The current share repurchase program is
described in the share repurchase program prospectus (note dinformation), which received approval (visa) no. 04-737 of the AMF on August 27, 2004. As of March 31, 2005, we held directly 6,483,270 of our ordinary shares.



A new resolution was approved by the annual shareholders meeting on
July 12, 2005 to authorize us to purchase our shares and to hold up to 5% of our share capital. This share repurchase program is described in the share repurchase program prospectus (note dinformation), which received approval (visa)
no. 05-584 of the AMF on June 23, 2005.



The
following table sets forth information concerning our purchases of Air FranceKLM ordinary shares for each month included in the period covered by this annual report:



|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        
|----------------------------- |  | ------------------------------ | --- |  | ---------------------------------- |  | ------------------------------------------------------------------------- |  | -----------------------------------------------------------------------
|                              |  | Total Numberof SharesPurchased |     |  | Average PricePaid perShare in euro |  | Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms |  | MaximumNumber ofShares thatMay Yet BePurchasedUnder thePlans orPrograms
|April 2004(1)                 |  | 85,066                         |     |  | 14.73                              |  | 85,006                                                                    |  | 3,457,234                                                              
|May 2004(1)                   |  | 3,063,579                      | (2) |  | 13.42                              |  | 238,971                                                                   |  | 5,956,901                                                              
|June 2004(1)                  |  | 346,528                        |     |  | 13.11                              |  | 346,528                                                                   |  | 5,872,911                                                              
|July 2004(1)                  |  | 340,350                        |     |  | 13.26                              |  | 340,350                                                                   |  | 5,830,866                                                              
|August 2004(1)                |  | 268,111                        |     |  | 12.35                              |  | 268,111                                                                   |  | 5,851,178                                                              
|September 2004(1)(3)          |  | 183,357                        |     |  | 13.17                              |  | 183,357                                                                   |  | 5,844,104                                                              
|October 2004(3)               |  | 134,412                        |     |  | 12.85                              |  | 134,412                                                                   |  | 5,879,911                                                              
|November 2004(3)              |  | 186,561                        |     |  | 14.09                              |  | 186,561                                                                   |  | 5,879,911                                                              
|December 2004(3)              |  | 169,186                        |     |  | 14.12                              |  | 169,186                                                                   |  | 6,982,413                                                              
|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        
|Total (April  December 2004) |  | 4,777,150                      |     |  | 13.31                              |  | 1,952,482                                                                 |  | 6,982,413                                                              
|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        
|January 2005(3)               |  | 153,212                        |     |  | 13.78                              |  | 153,212                                                                   |  | 7,040,251                                                              
|February 2005(3)              |  | 258,060                        |     |  | 14.62                              |  | 258,060                                                                   |  | 6,978,293                                                              
|March 2005(3)                 |  | 172,042                        |     |  | 13.90                              |  | 172,042                                                                   |  | 6,985,905                                                              
|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        
|Total (January  March 2005)  |  | 583,314                        |     |  | 14.19                              |  | 583,314                                                                   |  | 6,985,905                                                              
|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        
|Total                         |  | 5,360,464                      |     |  | 13.51                              |  | 2,535,796                                                                 |  | 6,985,905                                                              
|                              |  |                                |     |  |                                    |  |                                                                           |  |                                                                        

---

|Notes: | 
|------ | 

|(1) | Shares purchased as part of the 2003 program approved by the shareholders meeting on July 10, 2003.
|--- | ----------------------------------------------------------------------------------------------------

|(2) | Includes 2,824,608 KLM treasury shares held by KLM and converted in Air France-KLM shares at the time of the business combination.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(3) | Shares purchased as part of the 2004 program approved by the shareholders meeting on September 15, 2004.
|--- | ---------------------------------------------------------------------------------------------------------



178



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##### Table of Contents

Item 17: FINANCIAL STATEMENTS



Not
applicable.



179



---

##### Table of Contents

Item 18: FINANCIAL STATEMENTS



The
consolidated financial statements appear on pages F-1 to F-237 and include:



|                                                                                        |  |      
|--------------------------------------------------------------------------------------- |  | -----
|Consolidated Financial Statements of Air France-KLM                                     |  |      
|                                                                                        | 
|Index to Consolidated Financial Statements                                              |  | F-1  
|                                                                                        | 
|Report of Independent Registered Public Accounting Firms                                |  | F-2  
|                                                                                        | 
|Consolidated Income Statements                                                          |  | F-3  
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-4  
|                                                                                        | 
|Consolidated Statement of Changes in Stockholders Equity                               |  | F-6  
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-7  
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-8  
|                                                                                        | 
|Consolidated Financial Statements of Amadeus Global Travel Distribution, S.A.           |  |      
|                                                                                        | 
|As of and for the years ended December 31, 2003 and 2002                                |  | F-139
|                                                                                        | 
|Independent Auditors Report                                                            |  | F-140
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-141
|                                                                                        | 
|Consolidated Statements of Income                                                       |  | F-143
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-144
|                                                                                        | 
|Consolidated Statements of Changes in Shareholders Equity                              |  | F-145
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-146
|                                                                                        | 
|Unaudited Consolidated Financial Statements of Amadeus Global Travel Distribution, S.A. |  |      
|                                                                                        | 
|As of and for the years ended December 31, 2004 and 2003                                |  | F-191
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-192
|                                                                                        | 
|Consolidated Statements of Income                                                       |  | F-194
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-195
|                                                                                        | 
|Consolidated Statements of Changes in Shareholders Equity                              |  | F-196
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-197



180



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##### Table of Contents

Item 19: EXHIBITS



The following
instruments and documents are included as Exhibits to this annual report.



|              |   |  |                                                                                                                                                                                                                                                                                                                                                                                               
|------------- | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |   |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                           
|1.1           |   |  | English translation of Articles of Association of Air France-KLM, as amended to date.(1)                                                                                                                                                                                                                                                                                                      
|              |  
|2.1           |   |  | Form of American Depositary Receipt representing Air France-KLMs American Depositary Shares, each evidencing the right to receive one Air France-KLM ordinary share (nominal value
8.50 per share).(2)                                                                                                                                                                                      
|              |  
|2.2           |   |  | Form of ADS Deposit Agreement among Air France, Citibank N.A., as Depositary, and the Holders and Beneficial Owners from time to time of American Depositary Shares issued thereunder
(incorporated by reference to Exhibit (a) to the Registration Statement on Form F-6 (SEC File no. 333-114197) filed by Air France with the Securities and Exchange Commission on April 5, 2004).(3)     
|              |  
|2.3           |   |  | Form of American Depositary Warrant Receipt representing Air France-KLMs warrants, each evidencing the right to receive one Air France-KLM warrant.(4)                                                                                                                                                                                                                                       
|              |  
|2.4           |   |  | Form of ADW Deposit Agreement among Air France, Citibank N.A., as Depositary, and the Holders and Beneficial Owners from time to time of American Depositary Warrants issued thereunder
(incorporated by reference to Exhibit (a) to the Registration Statement on Form F-6/A (SEC File no. 333-114204) filed by Air France with the Securities and Exchange Commission on April 27, 2004).(3)
|              |  
|4.1           |   |  | Framework Agreement, dated as of October 16, 2003, by and between Air France and KLM.(3)                                                                                                                                                                                                                                                                                                      
|              |  
|4.2           |   |  | Purchase Agreement No. 337.0022/00 between Airbus Industrie and Air France relating to Model A330-200 aircraft (Air France has requested that the Commission grant confidential treatment for
certain portions of this document).(3)                                                                                                                                                          
|              |  
|4.3           |   |  | Purchase Agreement No. 337.0023/99 between Airbus Industrie and Air France relating to Model A318 aircraft (Air France has requested that the Commission grant confidential treatment for
certain portions of this document).(3)                                                                                                                                                              
|              |  
|4.4           |   |  | Purchase Agreement No. 337.0033/01 between Airbus Industrie and Air France relating to Model A380 aircraft (Air France has requested that the Commission grant confidential treatment for
certain portions of this document).(3)                                                                                                                                                              
|              |  
|4.5           |   |  | Purchase Agreement No. 1966 between The Boeing Company and Air France relating to Model 777-200/300 aircraft (Air France has requested that the Commission grant confidential treatment for
certain portions of this document).(3)                                                                                                                                                            
|              |  
|4.6           |   |  | Purchase Agreement No. 2344 between The Boeing Company and Air France relating to Model 747-400 aircraft (Air France has requested that the Commission grant confidential treatment for certain
portions of this document).(3)                                                                                                                                                                
|              |  
|4.7           |   |  | Form of Employment Agreement between KLM and members of its Board of Management.(5)                                                                                                                                                                                                                                                                                                           
|              |  
|8.1           |   |  | Subsidiaries of Air France (included in note 32 to the consolidated financial statements of Air France).                                                                                                                                                                                                                                                                                      
|              |  
|12.1          | * |  | Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                     
|              |  
|12.2          | * |  | Certification of Vice President - Finance.                                                                                                                                                                                                                                                                                                                                                    
|              |  
|13.1          | * |  | Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                     
|              |  
|13.2          | * |  | Certification of Vice President - Finance.                                                                                                                                                                                                                                                                                                                                                    

---

|Notes: | 
|------ | 

|* | Filed herewith.
|- | ---------------

|(1) | Incorporated by reference to the annual report on Form 20-F, filed with the Securities and Exchange Commission on September 29, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Rule 424(b)(3) filing filed with the Securities and Exchange Commission on September 20, 2004 in respect of the registration statement on Form F-6
(Registration No. 333-114197).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to the registration statement on Form F-4 (Registration No. 333-114188), filed with the Securities and Exchange Commission on April 30, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Rule 424(b)(3) filing filed with the Securities and Exchange Commission on September 20, 2004 in respect of the registration statement on Form F-6
(Registration No. 333-114204).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to KLM Royal Dutch Airlines annual report on Form 20-F for the financial year ended March 31, 2003, filed with the Securities and Exchange Commission
on June 19, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



181



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##### Table of Contents

SIGNATURES



The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.



|                                                                            
|----------------------------------------------------------------------------
|AIR FRANCE-KLM                                                              
|                                                                            
|/s/    Jean-Cyril Spinetta                                                  
|Name: Jean-Cyril Spinetta Title: Chief Executive Officer Date: July 20, 2005



182



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                        |  |      
|--------------------------------------------------------------------------------------- |  | -----
|Consolidated Financial Statements of Air France - KLM                                   |  |      
|                                                                                        | 
|Index to Consolidated Financial Statements                                              |  | F-1  
|                                                                                        | 
|Report of Independent Registered Public Accounting Firms                                |  | F-2  
|                                                                                        | 
|Consolidated Income Statements                                                          |  | F-3  
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-4  
|                                                                                        | 
|Consolidated Statement of Changes in Stockholders Equity                               |  | F-6  
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-7  
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-8  
|                                                                                        | 
|Consolidated Financial Statements of Amadeus Global Travel Distribution, S.A.           |  |      
|                                                                                        | 
|As of and for the years ended December 31, 2003 and 2002                                |  | F-139
|                                                                                        | 
|Independent Auditors Report                                                            |  | F-140
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-141
|                                                                                        | 
|Consolidated Statements of Income                                                       |  | F-143
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-144
|                                                                                        | 
|Consolidated Statements of Changes in Shareholders Equity                              |  | F-145
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-146
|                                                                                        | 
|Unaudited Consolidated Financial Statements of Amadeus Global Travel Distribution, S.A. |  |      
|                                                                                        | 
|As of and for the years ended December 31, 2004 and 2003                                |  | F-191
|                                                                                        | 
|Consolidated Balance Sheets                                                             |  | F-192
|                                                                                        | 
|Consolidated Statements of Income                                                       |  | F-194
|                                                                                        | 
|Consolidated Statements of Cash Flows                                                   |  | F-195
|                                                                                        | 
|Consolidated Statements of Changes in Shareholders Equity                              |  | F-196
|                                                                                        | 
|Notes to the Consolidated Financial Statements                                          |  | F-197



F-1



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS



To the Shareholders and the Board of Directors of Air France -KLM S.A.:



We have audited the accompanying consolidated balance sheets of Air France-KLM S.A.and its subsidiaries (the Company) as of March 31, 2005, 2004 and 2003 and the related consolidated statements
of income, cash flows and changes in stockholders equity, for the years then ended, all expressed in euros. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Air France-KLM S.A. and its
subsidiaries as of March 31, 2005, 2004 and 2003 and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in France.



Without qualifying the conclusion expressed above, we draw attention to the
following points:



(i) the changes in
accounting principles under French Generally Accepted Accounting Principles described in Note 2.1 to the consolidated financial statements that relate to:



| |  |  | the adoption as of April 1, 2002 of the approach by component for the recognition of costs related to major airframe inspections and engine maintenance;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the adoption as of April 1, 2002 of the percentage of completion method with respect to the revenue recognition of all long-term contracts whose term exceed six months;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the accounting for certain long-service awards following the recommendation of the French National Accounting Board (Conseil National de la Comptabilité) as of
April 1, 2003.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(ii) the change
in accounting estimates described in Note 2.2 to the consolidated financial statements that relates to the frequent flyers loyalty programs.



(iii) Note 3.2 discloses the main assumptions used in KLMs purchase price allocation and the fair value determination of its assets
and liabilities at the acquisition date. Such note highlights that the Company is awaiting for some further clarification from the International Accounting Interpretation Committee (IFRIC) in connection with the recognition of pension
asset surplus. In the meantime, the group decided not to amortize from the second quarter of the year ended March 31, 2005 the portion of the negative goodwill resulting from the recognition of KLMs pension asset surplus. The effects of the
final decision of the IFRIC on the recognition or not of the pension asset surplus are disclosed in note 22.2.



Accounting principles generally accepted in France vary in certain significant respects from accounting principles generally accepted in the United States
of America. Information relating to the nature and effect of such differences is presented in notes 35 to 37 to the consolidated financial statements. As explained in Note 35, certain 2004 and 2003 financial statement information prepared in
accordance with accounting principles generally accepted in the United States of America, has been restated.



|                 |  |                             
|---------------- |  | ----------------------------
|/s/ for KPMG S.A |  | /s/ for DELOITTE & ASSCOCIES

Paris, La Défense and Neuilly-sur-seine, France

June 21, 2005 except for Notes 35 to 37 for which the date is July 19, 2005



F-2



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



CONSOLIDATED FINANCIAL STATEMENTS



Consolidated Income Statements



|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|----------------------------------------------------- |  | ------------ |  | --------------------- | - |  | -------------- | - |  | ------ | - |  | ------ | -
|                                                      |  |              |  | Years ended March 31, |  
|                                                      |  |              |  | 2005                  |   |  | 2005           |   |  | 2004   |   |  | 2003   |  
|                                                      |  |              |  | (in $million)(a)      |   |  | (in  million) |  
|Operating revenues                                    |  | Note 4       |  | 24,742                |   |  | 19,078         |   |  | 12,337 |   |  | 12,687 |  
|External expenses                                     |  | Note 5       |  | (13,860               | ) |  | (10,687        | ) |  | (6,754 | ) |  | (7,174 | )
|Salaries and related costs                            |  | Note 6       |  | (7,680                | ) |  | (5,922         | ) |  | (4,079 | ) |  | (3,856 | )
|Taxes other than income tax                           |  |              |  | (293                  | ) |  | (226           | ) |  | (186   | ) |  | (187   | )
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Gross operating result                                |  |              |  | 2,909                 |   |  | 2,243          |   |  | 1,318  |   |  | 1,470  |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Charge to depreciation/amortization                   |  | Note 7       |  | (2,057                | ) |  | (1,586         | ) |  | (1,184 | ) |  | (1,195 | )
|Charge to operating provisions, net                   |  | Note 7       |  | (174                  | ) |  | (134           | ) |  | (46    | ) |  | (115   | )
|Gain on disposal of flight equipment, net             |  |              |  | 10                    |   |  | 8              |   |  | 7      |   |  | 30     |  
|Other operating income and charges, net               |  | Note 8       |  | (44                   | ) |  | (34            | ) |  | 44     |   |  | 2      |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Operating Income                                      |  |              |  | 645                   |   |  | 497            |   |  | 139    |   |  | 192    |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Restructuring costs                                   |  | Note 9       |  | (27                   | ) |  | (21            | ) |  | (22    | ) |  | (13    | )
|Net financial charges                                 |  | Note 10      |  | (284                  | ) |  | (219           | ) |  | (60    | ) |  | (85    | )
|Gain on disposals of subsidiaries and affiliates, net |  | Note 11      |  | 87                    |   |  | 67             |   |  | 5      |   |  | 4      |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Pre-tax income                                        |  |              |  | 420                   |   |  | 324            |   |  | 62     |   |  | 98     |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Share in net income of equity affiliates              |  | Note 16      |  | 95                    |   |  | 73             |   |  | 53     |   |  | 29     |  
|Amortization of goodwill                              |  | Note 14 & 22 |  | 75                    |   |  | 58             |   |  | (15    | ) |  | (16    | )
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Income before income tax and minority interests       |  |              |  | 590                   |   |  | 455            |   |  | 100    |   |  | 111    |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Income tax                                            |  | Note 12      |  | (125                  | ) |  | (96            | ) |  | (2     | ) |  | 13     |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Income before minority interests                      |  |              |  | 466                   |   |  | 359            |   |  | 98     |   |  | 124    |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Minority interests                                    |  |              |  | (10                   | ) |  | (8             | ) |  | (5     | ) |  | (4     | )
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Net Income                                            |  |              |  | 455                   |   |  | 351            |   |  | 93     |   |  | 120    |  
|                                                      |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Earnings per share                                    |  |              |  |                       |   |  |                |   |  |        |   |  |        |  
|Basic                                                 |  | Note 13      |  | 1.76                  |   |  | 1.36           |   |  | 0.43   |   |  | 0.55   |  
|Diluted                                               |  |              |  | 1.76                  |   |  | 1.36           |   |  | 0.43   |   |  | 0.55   |  

---

Note:

|(a) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an
integral part of these financial statements



F-3



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



Consolidated
Balance Sheets



|                                 |  |         |  |                       |  |                |  |        |  |       
|-------------------------------- |  | ------- |  | --------------------- |  | -------------- |  | ------ |  | ------
|                                 |  |         |  | Years ended March 31,
|                                 |  |         |  | 2005                  |  | 2005           |  | 2004   |  | 2003  
|                                 |  |         |  | (in $ million)(a)     |  | (in  million)
|Consolidation goodwill           |  | Note 14 |  | 108                   |  | 83             |  | 95     |  | 112   
|Intangible fixed assets          |  | Note 14 |  | 206                   |  | 159            |  | 149    |  | 171   
|Flight equipment                 |  | Note 15 |  | 14,158                |  | 10,917         |  | 6,951  |  | 7,284 
|Other property and equipment     |  | Note 15 |  | 2,382                 |  | 1,837          |  | 955    |  | 878   
|Investments in equity affiliates |  | Note 16 |  | 731                   |  | 564            |  | 336    |  | 316   
|Other investments                |  | Note 16 |  | 711                   |  | 548            |  | 268    |  | 260   
|                                 |  |         |  |                       |  |                |  |        |  |       
|Total fixed assets, net          |  |         |  | 18,297                |  | 14,108         |  | 8,754  |  | 9,021 
|                                 |  |         |  |                       |  |                |  |        |  |       
|Inventory                        |  | Note 17 |  | 504                   |  | 389            |  | 151    |  | 220   
|Trade accounts receivable        |  | Note 18 |  | 2,947                 |  | 2,272          |  | 1,651  |  | 1,432 
|Income tax receivable            |  | Note 19 |  | 126                   |  | 97             |  | 101    |  | 111   
|Other accounts receivable        |  | Note 18 |  | 2,595                 |  | 2,001          |  | 494    |  | 592   
|Marketable securities            |  | Note 20 |  | 2,923                 |  | 2,254          |  | 1,478  |  | 1,039 
|Cash                             |  |         |  | 501                   |  | 386            |  | 330    |  | 193   
|                                 |  |         |  |                       |  |                |  |        |  |       
|Total current assets             |  |         |  | 9,596                 |  | 7,399          |  | 4,205  |  | 3,587 
|                                 |  |         |  |                       |  |                |  |        |  |       
|Total assets                     |  |         |  | 27,892                |  | 21,507         |  | 12,959 |  | 12,608
|                                 |  |         |  |                       |  |                |  |        |  |       

---

Note:

|(a) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an
integral part of these financial statements



F-4



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|------------------------------------------------------------- |  | ------- |  | --------------------- | - |  | -------------- | - |  | ------ | - |  | ------ | -
|                                                              |  |         |  | Years ended March 31, |  
|                                                              |  |         |  | 2005                  |   |  | 2005           |   |  | 2004   |   |  | 2003   |  
|                                                              |  |         |  | (in $million)(a)      |   |  | (in  million) |  
|Common stock                                                  |  | Note 21 |  | 2,970                 |   |  | 2,290          |   |  | 1,868  |   |  | 1,868  |  
|Additional paid-in capital                                    |  | Note 21 |  | 506                   |   |  | 390            |   |  | 261    |   |  | 261    |  
|Treasury stock                                                |  | Note 21 |  | (25                   | ) |  | (19            | ) |  | (18    | ) |  | (25    | )
|Retained earnings                                             |  | Note 21 |  | 3,254                 |   |  | 2,509          |   |  | 1,960  |   |  | 1,887  |  
|Cumulative translation adjustment                             |  |         |  | (12                   | ) |  | (9             | ) |  | (9     | ) |  | 3      |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Stockholders equity                                          |  |         |  | 6,693                 |   |  | 5,161          |   |  | 4,062  |   |  | 3,994  |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Minority interests                                            |  |         |  | 84                    |   |  | 65             |   |  | 23     |   |  | 33     |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Stockholders equity and minority interests                   |  |         |  | 6,778                 |   |  | 5,226          |   |  | 4,085  |   |  | 4,027  |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Provisions for liabilities and charges                        |  | Note 22 |  | 2,937                 |   |  | 2,265          |   |  | 1,039  |   |  | 1,095  |  
|Short and long-term debt and obligations under capital leases |  | Note 23 |  | 10,723                |   |  | 8,268          |   |  | 4,380  |   |  | 4,147  |  
|Trade payables                                                |  |         |  | 2,471                 |   |  | 1,905          |   |  | 1,226  |   |  | 1,375  |  
|Income tax liability                                          |  | Note 24 |  | 105                   |   |  | 81             |   |  | 21     |   |  | 5      |  
|Advance ticket sales and loyalty program                      |  | Note 25 |  | 2,148                 |   |  | 1,656          |   |  | 1,008  |   |  | 901    |  
|Other payables                                                |  | Note 26 |  | 2,731                 |   |  | 2,106          |   |  | 1,200  |   |  | 1,058  |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Total liabilities                                             |  |         |  | 21,115                |   |  | 16,281         |   |  | 8,874  |   |  | 8,581  |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  
|Total liabilities and stockholders equity                    |  |         |  | 27,892                |   |  | 21,507         |   |  | 12,959 |   |  | 12,608 |  
|                                                              |  |         |  |                       |   |  |                |   |  |        |   |  |        |  

---

Note:

|(a) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an
integral part of these financial statements



F-5



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



Consolidated
Statements of Changes in Stockholders Equity



|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|---------------------------------------- |  | --------------------------------------------------- |  | ------------------------ |  | --------------------------- | - |  | ---------------- | - |  | ------------- | - |  | ----------------------------------- | - |  | ---------------------------- | - |  | ----------------- | - |  | -------------------------------------------------- | -
|Before allocation ofincome               |  | Number of shares comprisingcommon stock             |  | Common Stock (par value) |  | Addit-ional paid-in capital |   |  | Retainedearnings |   |  | Treasurystock |   |  | Cumu-lative trans-lationadjust-ment |   |  | Total Stock- holders equity |   |  | Minorityinterests |   |  | Total Stock- holdersequity and minority interests |  
|                                         |  | (in  million, except shares and per share amounts) | 
|March 31, 2002                           |  | 219,780,887                                         |  | 1,868                    |  | 261                         |   |  | 1,813            |   |  |              |   |  | 19                                  |   |  | 3,961                        |   |  | 29                |   |  | 3,990                                              |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|Dividends paid                           |  |                                                    |  |                         |  |                            |   |  | (28              | ) |  |              |   |  |                                    |   |  | (28                          | ) |  | (2                | ) |  | (30                                                | )
|Treasury stock                           |  |                                                    |  |                         |  |                            |   |  |                 |   |  | (25           | ) |  |                                    |   |  | (25                          | ) |  |                  |   |  | (25                                                | )
|Impact of changes in accounting policies |  |                                                    |  |                         |  |                            |   |  | (18              | ) |  |              |   |  |                                    |   |  | (18                          | ) |  |                  |   |  | (18                                                | )
|Translation differences                  |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  | (16                                 | ) |  | (16                          | ) |  | (1                | ) |  | (17                                                | )
|Current year net income                  |  |                                                    |  |                         |  |                            |   |  | 120              |   |  |              |   |  |                                    |   |  | 120                          |   |  | 4                 |   |  | 124                                                |  
|Changes in scope of consolidation        |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  |                                    |   |  |                             |   |  | 3                 |   |  | 3                                                  |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|March 31, 2003                           |  | 219,780,887                                         |  | 1,868                    |  | 261                         |   |  | 1,887            |   |  | (25           | ) |  | 3                                   |   |  | 3,994                        |   |  | 33                |   |  | 4,027                                              |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|Dividends paid                           |  |                                                    |  |                         |  |                            |   |  | (17              | ) |  |              |   |  |                                    |   |  | (17                          | ) |  | (3                | ) |  | (20                                                | )
|Treasury stock                           |  |                                                    |  |                         |  |                            |   |  | 1                |   |  | 7             |   |  |                                    |   |  | 8                            |   |  |                  |   |  | 8                                                  |  
|Impact of changes in accounting policies |  |                                                    |  |                         |  |                            |   |  | (4               | ) |  |              |   |  |                                    |   |  | (4                           | ) |  |                  |   |  | (4                                                 | )
|Translation differences                  |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  | (12                                 | ) |  | (12                          | ) |  | (3                | ) |  | (15                                                | )
|Current year net income                  |  |                                                    |  |                         |  |                            |   |  | 93               |   |  |              |   |  |                                    |   |  | 93                           |   |  | 5                 |   |  | 98                                                 |  
|Changes in scope of consolidation        |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  |                                    |   |  |                             |   |  | (9                | ) |  | (9                                                 | )
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|March 31, 2004                           |  | 219,780,887                                         |  | 1,868                    |  | 261                         |   |  | 1,960            |   |  | (18           | ) |  | (9                                  | ) |  | 4,062                        |   |  | 23                |   |  | 4,085                                              |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|Issuance of common stock                 |  | 49,602,631                                          |  | 422                      |  | 346                         |   |  |                 |   |  |              |   |  |                                    |   |  | 768                          |   |  |                  |   |  | 768                                                |  
|Contribution of assets                   |  |                                                    |  |                         |  | (206                        | ) |  | 206              |   |  |              |   |  |                                    |   |  |                             |   |  |                  |   |  |                                                   |  
|Exchange offer costs                     |  |                                                    |  |                         |  | (11                         | ) |  |                 |   |  |              |   |  |                                    |   |  | (11                          | ) |  |                  |   |  | (11                                                | )
|Dividends paid                           |  |                                                    |  |                         |  |                            |   |  | (17              | ) |  |              |   |  |                                    |   |  | (17                          | ) |  | (1                | ) |  | (18                                                | )
|Treasury stock                           |  |                                                    |  |                         |  |                            |   |  | 9                |   |  | (1            | ) |  |                                    |   |  | 8                            |   |  |                  |   |  | 8                                                  |  
|Translation differences                  |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  |                                    |   |  |                             |   |  |                  |   |  |                                                   |  
|Current year net income                  |  |                                                    |  |                         |  |                            |   |  | 351              |   |  |              |   |  |                                    |   |  | 351                          |   |  | 8                 |   |  | 359                                                |  
|Changes in scope of consolidation        |  |                                                    |  |                         |  |                            |   |  |                 |   |  |              |   |  |                                    |   |  |                             |   |  | 35                |   |  | 35                                                 |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|March 31, 2005                           |  | 269,383,518                                         |  | 2,290                    |  | 390                         |   |  | 2,509            |   |  | (19           | ) |  | (9                                  | ) |  | 5,161                        |   |  | 65                |   |  | 5,226                                              |  
|                                         |  |                                                     |  |                          |  |                             |   |  |                  |   |  |               |   |  |                                     |   |  |                              |   |  |                   |   |  |                                                    |  
|Proposed dividends                       |  |                                                    |  |                         |  |                            |   |  | 40               |   |  |              |   |  |                                    |   |  | 40                           |   |  |                  |   |  |                                                   |  



The accompanying notes
are an integral part of these financial statements



F-6



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES



Consolidated
Statements of Cash Flows



|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|---------------------------------------------------------------------------- |  | --------------------- | - |  | -------------- | - |  | ------ | - |  | ------ | -
|                                                                             |  | Years ended March 31, |  
|                                                                             |  | 2005                  |   |  | 2005           |   |  | 2004   |   |  | 2003   |  
|                                                                             |  | (in $million)(a)      |   |  | (in  million) |  
|Gross operating result                                                       |  | 2,909                 |   |  | 2,243          |   |  | 1,318  |   |  | 1,470  |  
|Other income (expenses)                                                      |  | (132                  | ) |  | (102           | ) |  | (23    | ) |  | (50    | )
|Foreign exchange gains (losses)                                              |  | 3                     |   |  | 2              |   |  | 3      |   |  | (9     | )
|Changes in working capital                                                   |  | 235                   |   |  | 181            |   |  | 54     |   |  | (150   | )
|Restructuring expenditure                                                    |  | (64                   | ) |  | (49            | ) |  | (18    | ) |  | (12    | )
|Interest paid                                                                |  | (457                  | ) |  | (352           | ) |  | (163   | ) |  | (189   | )
|Interest received                                                            |  | 73                    |   |  | 56             |   |  | 36     |   |  | 58     |  
|Income tax paid (received)                                                   |  | (31                   | ) |  | (24            | ) |  | (6     | ) |  | (3     | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Cash flows from operating activities                                         |  | 2,535                 |   |  | 1,955          |   |  | 1,201  |   |  | 1,115  |  
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Acquisitions of subsidiaries and affiliates, net of cash acquired(note 31.2) |  | 656                   |   |  | 506            |   |  | (10    | ) |  | (46    | )
|Purchase of tangible and intangible fixed assets                             |  | (2,764                | ) |  | (2,131         | ) |  | (1,269 | ) |  | (1,410 | )
|Disposals of subsidiaries and affiliates                                     |  | 141                   |   |  | 109            |   |  | 24     |   |  | 8      |  
|Proceeds on disposal of tangible and intangible assets                       |  | 170                   |   |  | 131            |   |  | 391    |   |  | 357    |  
|Dividends received                                                           |  | 35                    |   |  | 27             |   |  | 15     |   |  | 17     |  
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Cash flows from investing activities                                         |  | (1,761                | ) |  | (1,358         | ) |  | (849   | ) |  | (1,074 | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Issuance of common stock                                                     |  |                      |   |  |               |   |  |       |   |  | 5      |  
|New debts                                                                    |  | 1,113                 |   |  | 858            |   |  | 901    |   |  | 834    |  
|Repayments of debts                                                          |  | (370                  | ) |  | (285           | ) |  | (345   | ) |  | (745   | )
|Repayments of capital lease obligations                                      |  | (467                  | ) |  | (360           | ) |  | (152   | ) |  | (508   | )
|Net decrease (increase) in loans                                             |  | (102                  | ) |  | (79            | ) |  | (29    | ) |  | (29    | )
|Net decrease (increase) in short-term investments                            |  | 150                   |   |  | 116            |   |  | 35     |   |  | 62     |  
|Dividends paid                                                               |  | (31                   | ) |  | (24            | ) |  | (24    | ) |  | (34    | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Cash flows from financing activities                                         |  | 293                   |   |  | 226            |   |  | 386    |   |  | (415   | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Translation differences                                                      |  | (5                    | ) |  | (4             | ) |  | (5     | ) |  | (1     | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Increase (decrease) in cash and cash equivalents (Note 31.1)                 |  | 1,062                 |   |  | 819            |   |  | 733    |   |  | (375   | )
|                                                                             |  |                       |   |  |                |   |  |        |   |  |        |  
|Opening cash and cash equivalents                                            |  | 1,822                 |   |  | 1,405          |   |  | 672    |   |  | 1,047  |  
|Closing cash and cash equivalents                                            |  | 2,884                 |   |  | 2,224          |   |  | 1,405  |   |  | 672    |  

---

Note:

|(a) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an
integral part of these financial statements



F-7



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements



1  Business description



As used herein, the term Air France KLM refers to
Air France - KLM, a limited liability company organized under French law, without its consolidated subsidiaries. The terms the Company or the Group refer to Air France-KLM together with its consolidated subsidiaries.



The Company is headquartered in France and is
one of the largest airlines in the world. The Companys core business is passenger transportation. The Companys activities also include cargo, industrial maintenance and other air-transport related activities, including principally
catering and air transport on demand.



2  Accounting policies



The consolidated financial statements of
the Company are prepared in accordance with French accounting regulations as applicable for the years ended March 31, 2005, 2004 and 2003.



The accompanying consolidated financial statements incorporate certain additional disclosures and reclassifications to conform to
accounting principles generally accepted in the United States of America and Securities and Exchange Commission rules and regulations.



2.1  Changes in accounting methods



No changes in accounting methods were made during the fiscal year.



Changes in accounting principles for the year ended March 31, 2004



Accounting for long-service awards



The French National Accounting Board (Conseil National de la
Comptabilité) issued a recommendation on April 1, 2003, which excluded employee long-service awards (médailles du travail) from the scope of rules governing pension accounting, thereby associating them with regulation
2000-06 on liabilities. Companies were required to record a provision in their statutory and consolidated accounts corresponding to the expected payments to be made as of January 1, 2004 with early application recommended. Air France-KLM applied the
provisions of regulation 2000-06 effective April 1, 2003. The application of this recommendation resulted in an adjustment to retained earnings of  4 million, net of tax.



Changes in accounting principles for the year ended March 31, 2003



Adoption of the approach by component for the
recognition of maintenance operations on airframes and engines



Until March 31, 2002, the Company accrued in advance for estimated costs of major airframe maintenance. Engine maintenance, including the change of parts with limited useful lives, was expensed as incurred.



In accordance with the CNC (Conseil
National de la Comptabilité) statements of July 25, 2002 and January 15, 2003 following the CRC (Comité de la Réglementation Comptable) regulation on liabilities (applicable to fiscal years beginning
on January 1, 2002) and the regulation on the



F-8



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



depreciation, amortization and write-down of assets (applicable to fiscal years beginning January 1, 2003) the Company (Air France SA and its air transport
subsidiaries) adopted the component approach for the recognition of maintenance operations on airframes and engines (excluding parts with limited useful lives) under full ownership and capital leases. This change in accounting principle also
resulted in the recognition of provisions for the restitution for aircraft and engines under operating leases. Consequently, the accrual for airframe maintenance was eliminated as of March 31, 2003 and the accrual recognized as of March 31, 2002 was
reversed to retained earnings. The component approach consists of allocating a portion of the cost of the aircraft to capitalized maintenance costs and amortizing this capitalized cost over the period between maintenance operations. The application
of this change in accounting principle resulted in a decrease in stockholders equity as of April 1, 2002 of 18 million and an increase in net income of 13 million for the year ended March 31, 2003.



Adoption of the percentage of completion method for certain maintenance
revenues



In connection with maintenance operations
performed by the Company for third parties, the Company now recognizes revenue using the percentage-of-completion method for all significant long-term contracts whose term exceeds six months. The change in method had no impact on net income for the
period ended March 31, 2003.



2.2  Change in
estimate



During the year ended March 31,
2005, because Air France and KLM combinated their frequent flyers loyalty programs starting June 2005 and the valuation of new air miles redemption assumptions (cf 2.8) the Company adjusted the estimated liability. Had the Company not changed
this estimate, the liability associed with the Flying Blue program would have been approximately 130 million at March 31, 2005.



During the year ended March 31, 2004, the Company performed studies which focused on the behavior of members of the Frequence Plus loyalty
program and implemented changes in the program. These activities caused Air France to change its estimated liability for the loyaltiy program. Had the Company not changed this estimate, the liability associated with the Frequence Plus program would
have been approximately  103 million at March 31, 2004.



During the year ended March 31, 2003, the Company changed the estimates used for computing the Frequence Plus liability to more adequately reflect the expected behaviors of its customers. Had the Company not
changed this estimate, the liability associated with the Frequence Plus program would have been approximately 130 million at March 31, 2003.



2.3  Consolidation principles



Companies under the Companys control are fully consolidated.



Companies jointly controlled by a limited number of parties including the Company are proportionally
consolidated.



Companies over which the Company
has significant influence in terms of management and finance policy are accounted for under the equity method. Significant influence is deemed to exist where the Company holds 20% or more of the voting rights.



F-9



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Companies which meet the criteria above, but which are unlikely to be held for any
significant length of time, are not consolidated. Companies in liquidation and/or located in countries where fund transfers to the parent company are prohibited are also excluded from the scope of consolidation. The Companys investment in such
companies is stated at cost, net of any impairment provision where appropriate.



Affiliates over which the Company no longer has significant influence are deconsolidated at the lower of their carrying value at the date
of deconsolidation and their fair value to the Company.



All intercompany transactions, including significant asset and liability transfers between fully-consolidated companies, are eliminated. The same treatment applies to internal Company items such as dividends and capital gains. Gains and
losses on internal transfers between equity affiliates are eliminated up to the effective percentage interest of the Company in such affiliates.



The fiscal year of certain subsidiaries and affiliates, which are listed in note 34, ends on December 31. Those subsidiaries and
affiliates are consolidated by the Company with a three-month lag, with the exception of Amadeus GTD. There have been no significant transactions for such subsidiaries for the period from January 1, to March 31 for any of the periods presented.



The consolidated income statements include the
income statements of all companies acquired during the year from the date of the acquisition. They also include the income statements of companies disposed of during the year up to the date of disposal.



Minority interests



The portion of the earnings or losses of consolidated
subsidiaries that represent ownership interests other than those of Air France (i.e. subsidiaries that are not wholly-owned) is reflected as a deduction from the determination of consolidated net income as minority interests.



The portion of the consolidated stockholders equity
that is attributable to outside owners of subsidiaries that are not wholly-owned is reflected in the consolidated balance sheets as minority interests.



2.4  Translation of financial statements of foreign operations



The Companys functional currency is the euro.



The financial statements of foreign subsidiaries with a
non-euro functional currency, the activities of which are not an integral part of those of the reporting enterprise, are translated into Euros on the following basis:



  the balance sheet is translated using the exchange rate prevailing at year-end,



  the income statement is translated at the average exchange
rate for the year,



  translation differences
resulting from differences between the opening and closing exchange rates, as well as between the closing rate and the average exchange rate for the year, are recorded as translation differences within stockholders equity.



The financial statements of foreign branches, the activities
of which are an integral part of the reporting enterprise, are translated into Euros at historical rates of exchange. Resulting translation differences are recorded in the income statement.



F-10



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



2.5  Foreign currency transactions



Foreign currency transactions are translated at the exchange
rate prevailing on the date of the transaction or at the hedging rate.



Assets and liabilities denominated in foreign currencies are translated at the year-end rate or, where applicable, at the hedging rate. All corresponding translation differences are reflected in the income statement.



2.6  Exchange rate and interest rate financial
instruments



The Company uses a number of
financial instruments to limit its exposure to interest and exchange rate risks and for commodities risks related to the purchase of aircraft fuel. These instruments are traded on organized markets or on an over-the-counter basis.



Gains and losses arising on financial instruments used for
hedging purposes are recognized in symmetrical fashion to the items hedged.



Financial instruments used to hedge future transactions that are certain or likely to materialize are considered hedging instruments.



2.7  Operating revenues



For air transportation operations, revenues are recognized when transportation is completed. Transportation
is also the trigger for the recognition of external charges such as commissions paid to agents. These revenues include a fuel surcharge paid by passengers to offset the increase in fuel price.



Upon issue, both passenger and cargo tickets are recorded as
liabilities under Advance tickets sales.



Revenues representing the value of tickets that have been issued, but which will never be used, are recognized as operating income at the date the tickets are issued. The amounts recognized are based on a statistical analysis, which is
regularly updated.



Revenues related to hour
maintenance operations on airframes and engines are recorded based on the flight time declared by the customer.



For maintenance contracts other than those described above, the Company recognizes revenues using the percentage-of-completion method.
Since April 1, 2004, the flat-rate contracts for engine flight time have been recorded as costs are incurred instead of on the basis of flight hours; the impact of the change is not significant.



2.8  Frequent flyer program



As of March 31, 2005, both Air France and KLM offer their own
frequent flyer loyalty programs (respectively Fréquence Plus and Flying Dutchman) which enable members to accumulate air miles when travelling on Air France flights, KLM flights and certain airline partners. These air
miles entitle members to a variety of benefits such as free Air France or KLM flights.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Due to the combination of Air France and KLM, a new joint program will be launched in
June 2005, which will accumulate air miles from both current programs.



The probability of converting air miles into Award tickets is estimated according to a statistical method.



The value of air miles is estimated on the basis of the specific terms and conditions of use of free tickets. This estimate takes into
consideration the marginal cost of the passenger concerned (ie catering, fuel, ticket administration and issue costs, etc.) and discounted cost of the miles used on participating partner companies.



The estimated value of air miles is recorded as a deduction
from revenues and is recorded under the caption Advance ticket sales and loyalty program of the balance sheet, at the same time the qualifying flight for which air miles are awarded is recognized.



We also sell mileage credits in our frequent flyer program to
participating partners such as credit card companies, hotels and car rental agencies. We defer a portion of this representing the value of the subsequent travel award to be provided, in a manner consistent with our determination of the liability for
earned flight awards discussed above. The remainder is recognized as revenue immediately.



2.9  Information by activity and geographical area



The Companys activities involve three sectors: passenger activities, cargo services and aircraft maintenance.



The Company has defined six discrete geographical sectors, in
which revenues are segregated on the basis of origin of sale and destination.



  Origin of sale:



Revenues from air transport operations are segregated by geographical area, based on ticket issuing locations.



Where a third party is responsible for the issuance of the ticket, revenues are allocated to the location of the issuing airline.



  Destination:



Revenues for air transport operations are segregated on the
following basis:



  Non-stop
flights: revenues are allocated to the geographical network to which the route belongs.



  Stop-over flights: revenues are split between the various sections of the route in accordance with IATA standards (based on a weighting of passenger-kilometers).



The Companys fixed assets mainly consist of flight
equipment based in Europe.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



2.10  Calculation of earnings per share



Basic earnings per share (before dilution) is obtained by
dividing attributable net income for the year by the average number of shares outstanding during the year. The average number of shares outstanding during the current and prior years does not include treasury stock, and is adjusted retrospectively
in the event bonuses or discount shares are issued.



2.11  Distinction between net income on ordinary activities and extraordinary items



Net income on ordinary activities includes all income and expenses arising within the Companys ordinary activities, whether such
income and expenses are recurring or non-recurring. Unusual items defined as non-recurring income and expenses by virtue of their incidence, nature and amount (such as restructuring costs), are recorded as non-operating expenses.



The definition of extraordinary items is restricted narrowly
to unusual income and expenses of major significance.



2.12  Goodwill and negative goodwill



Goodwill is recognized upon acquisition of subsidiaries and affiliates after allocation of purchase price to the various identifiable assets and liabilities.



Goodwill is amortized on a straight-line basis over periods
determined in each case, not to exceed 20 years.



Negative goodwill is recognized in the income statement over the period of time that the Company deems reasonable considering the expected synergies and the costs incurred in achieving them.



2.13  Other intangible fixed assets



Business goodwill (Fonds de commerce)
acquired in conjunction with the acquisition of UTA in 1990 is being amortized on a straight-line basis over a period of 20 years.



Costs related to software and licenses are amortized on a straight-line basis over periods of between one and four years.



2.14  Impairment of goodwill and other intangible assets



The Company records impairment charges on
goodwill and other intangible assets when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount. The amount of the impairment is
based on discounted cash flows.



2.15  Tangible
fixed assets



Tangible fixed assets are
stated at historical cost.



Effective April 1,
1997, interest incurred in connection with the financing of capital expenditures (including flight equipment) during the period prior to commissioning is capitalized as part of the cost of the asset. The interest rate used in determining the amount
to be capitalized is equivalent to the



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



average interest rate on outstanding debt instruments as of the end of the year, unless the capital expenditure or advance payments are funded by specific
loans, in which case the specific rate is utilized.



The Company accounts for a lease arrangement as a capital lease if the arrangement includes a bargain purchase option provision. The related assets are recorded in the balance sheet at historical cost. Obligations arising under the lease
are recorded as liabilities in the consolidated balance sheet.



Maintenance costs are expensed as incurred, with the exception of those major maintenance programs which extend the useful life of the asset or increase its overall value, which are capitalized (maintenance on
airframes and engines excluding parts with limited useful lives).



(A)  Flight equipment



Flight equipment is acquired in foreign currency (generally the U.S. dollar) and translated at prevailing exchange rates or hedging rates where a hedging instrument has been used. Manufacturers discounts are usually deducted from the
value of the asset.



Aircraft are depreciated
using the straight-line method over their average estimated useful life.



From April 1, 1997, this useful life has been estimated at 18 years, with an estimated residual value of 10% of original cost. Aircraft fixtures and fittings acquired from April 1, 1997 are separated from the total
acquisition cost of the aircraft and depreciated using the straight-line method over a period of five years, corresponding to their average useful lives.



Fixtures and fittings related to aircraft acquired prior to April 1, 1997 are depreciated over the same period as the aircraft to which
they relate (22 years).



As discussed in note
2.1, the Company changed its method of accounting for major maintenance programs and lease restitution obligations effective April 1, 2002.



Following this change in accounting method, the airframe and engine overhaul component (excluding parts with limited useful lives) has
been separated from the acquisition cost of the aircraft and amortized over the period between the date of acquisition and the next scheduled maintenance operation.



In addition, the estimated costs of major maintenance operations (airframes and engines excluding parts
with limited useful lives) to be performed according to specifications and schedules defined by manufacturers and government authorities are capitalized and amortized over the period between maintenance operations.



Spare parts, other than consumables, are recorded in the
consolidated balance sheet as fixed assets. Useful lives vary from three to 18 years depending on the technical characteristics of each. The Company may revise the useful life as facts and circumstances related to the estimated use or retirement of
a specific fleet to which the spare parts relate become known.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(B)  Other property and equipment



Other property, plant and equipment is depreciated on a
straight-line basis over its estimated useful life as follows:



|                      |  |               
|--------------------- |  | --------------
|Buildings             |  | 30 years      
|Fixtures and fittings |  | 8 to 15 years 
|Equipment and tooling |  | 5 to 15 years 
|Flight simulators     |  | 10 to 20 years



(C)  Impairment of flight equipment



The Company assesses potential impairment losses, when events and circumstances indicate that an impairment may exist, at the entire aircraft fleet level (full ownership, capital leases and capitalized spare parts) on
the basis of recoverable value.



2.16  Investments



Investments in non-consolidated companies
and other long-term equity investments are stated at cost, net of provisions for impairment in value. A provision for impairment is recorded where the fair value at the reporting date is lower than acquisition cost. Increases and decreases in this
provision are recorded in the consolidated income statements.



The fair value of investments corresponds to the value in use to the Company. This value is determined based on the Companys share of net equity (subject to fair value adjustments), profitability forecasts and,
for listed companies, stock prices.



Other
financial assets, which are primarily comprised of deposits, are valued at the lower of cost or market value.



2.17  Inventories



Inventories consist primarily of expendable parts related to flight equipment and are initially recorded at cost. A provision is recorded
to reduce inventory values to the lower of cost or realizable value.



Cost represents acquisition cost or manufacturing and assembly costs, the latter including direct and indirect production costs incurred under normal operating conditions.



Inventories are valued on a weighted average basis. A
provision for obsolescence is recorded based on respective inventory ages.



2.18  Marketable securities



Marketable securities are stated in the consolidated balance sheet at the lower of cost or market value. For listed securities, market value is determined using the stock market price at the balance sheet date.



Investments in debt securities are recorded
upon acquisition at nominal value, adjusted for any issue premium or discount. Accrued interest receivable is also recorded under this heading.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Investments in mutual funds (SICAVs) are recorded at acquisition cost
excluding any entrance charges. Thereafter, they are stated at net realizable value as of the reporting date. If the net realizable value is lower than acquisition cost, a provision is recorded to reduce the acquisition cost to net realizable value.



Negotiable debt securities (deposit
certificates and bonds from financial companies) are recorded at acquisition cost. Interest income is recognized using an effective interest rate method.



2.19  Treasury stock



The acquisition cost of interests in the common stock of Air France-KLM held, on an other-than-temporary basis, by consolidated
subsidiaries, is deducted from consolidated stockholders equity. Gains and losses on disposal of such securities are recorded as increases or decreases in stockholders equity.



Treasury stock held for purpose of satisfying future obligations under the Companys stock option and
stock compensation plans is recorded at cost in marketable securities. A provision is recorded through net income to reduce these shares to the lower of cost or market value.



2.20  Retirement benefit and similar obligations



The Companys obligations related to defined benefit
pension plans and lump-sum termination payments on retirement are calculated using the projected credit method, taking into consideration specific economic conditions prevailing in the related countries. These obligations are covered either by
provision or plan assets.



Provisions for these
plans are valued and recorded in accordance with IAS 19, Employee Benefits.



2.21  Provisions for restitution for aircraft under operating leases



Following the change in accounting method described in note 2.1, the Company accrues for restitution costs related to aircraft under
operating leases as soon as the asset does not meet the return to condition criteria set forth in the related lease arrangement. When the condition of the aircraft exceeds this return to condition criteria, the Company capitalizes the excess amount.
This amount is amortized on a straight-line basis over a period ending when the restitution criteria is met.



2.22  Other provisions for contingencies



The Company accounts for provisions for contingencies when it is probable that a loss has been incurred and its amount can be reliably
estimated. The Company evaluates provisions based on facts and circumstances known at the closing date, from past experience and other information available to the best of its knowledge.



2.23  Equity and debt issuance costs - redemption premiums



Debt issuance costs are amortized over the
term of the debt using the effective interest rate method. Common stock issuance and merger costs are deducted from additional paid-in capital.



Debt is recorded at redemption value. Redemption and issue premiums are recorded as a component of debt in the consolidated balance sheets
and charged to income as a component of net financial charges over the term of the debt.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



2.24  Deferred taxes



The Company records deferred taxes using the liability method for all timing differences between the tax and
book values of assets and liabilities shown in the consolidated balance sheet, with the exception of consolidation goodwill and UTA purchased goodwill.



Deferred tax balances are determined based on each entitys jurisdictional tax position, taking into consideration consolidated tax
returns when applicable.



Net deferred tax
assets relating to timing differences and carry forward losses are only recognized to the extent that the tax entity is expected to generate sufficient taxable income in the future to absorb such carry-forward losses or timing differences.



No tax is provided on the undistributed
reserves of consolidated entities unless a distribution is expected in the near term or the Company has no control over the distribution of reserves.



2.25  Cash and cash equivalents



Cash and cash equivalents include cash, short-term deposits and bank overdrafts with original maturities of less than three months.



2.26  Use of estimates



The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.



2.27  Convenience translation



The consolidated balance sheets, statements of income and
cash flows include the presentation of amounts as of and for the year ended March 31, 2005, denominated in million of US dollars. These amounts are presented for the convenience of the reader and have been prepared using an exchange rate of 1
to 1.2969 US dollars, which was the Noon Buying Rate of the Federal Reserve Bank of New York on March 31, 2005. Such translation should not be construed as a representation that the euro amount has been, could have been or could in the future be
converted into US dollars at that or any other exchange rate.



3  Changes in the scope of consolidation



3.1  Scope of consolidation



As of March 31, 2005, the Company was comprised of 159 companies, of which 135 were fully consolidated, three were proportionally consolidated and 21 were recorded as equity affiliates. A list of the companies included within the scope of
consolidation is presented in note 34.



3.2  Comparability



On the basis of the (still provisional) fair value estimate of the assets and liabilities at the date of acquisition, the first consolidation of the KLM group shows negative goodwill of 915 million. This



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



has been determined based on an acquisition price of 798 million less that portion of net assets acquired of 1,713 million. Shareholders
equity specifically includes the adjustment to fair market value of KLMs fleet of (924) million and the recognition of a prepaid pension asset of an amount of 976 million.



As some valuations are still in process, this negative
goodwill may be adjusted during the purchase price allocation period, which expires at the end of the fiscal year following the year of acquisition.



This is the case for the value of the funds allocated to cover pension commitments. An in-depth review of the applicable accounting
standard is currently being carried out in order to determine whether this item may be recorded on the balance sheet.



Pending the definitive position from the International Accounting Interpretation Committee to whom the issue was sent, the Company
considers that according to accounting standards, this surplus may be recognized. However the Company has, as a precautionary measure, chosen not to amortize the portion of negative goodwill relative to the excess fund value, after the first quarter
of the fiscal year ended as of March 31, 2005.



The estimated amount of this portion is 622 million at March 31, 2005. Had this portion been amortized in the second, third and fourth quarters of fiscal 2005, the Company would have recorded an increase of approximately 93
million in net income. The amortization period is five years, reflecting the length of time that the Company considers reasonable for implementing the anticipated synergies, and the costs incurred in achieving them.



Negative goodwill is accounted for in the caption
Provisions for liabilities and charges of the consolidated balance sheets.



4  Information by activity and geographical area



4.1  Information by sector of activity



The various sources of the Companys operating revenues are described below.



Passenger



Passenger operating revenues consist of scheduled passenger
and other passenger revenues. Scheduled passenger operating revenues are derived from passengers transported on flights which have the Companys code, including flights that are operated by other airlines pursuant to code-sharing agreements.
Other passenger operating revenues are derived from commissions from SkyTeam alliance partnership arrangements, revenue from block-seat sales, information systems revenues and revenues from airport services.



Cargo



Cargo operating revenues are subdivided into freight
transportation and other cargo operating revenues. Operating revenues from freight transportation consist of the transportation of cargo on flights which have the Companys code, including flights that are operated by other airlines pursuant to
code sharing agreements. Operating revenues from other cargo transportation are derived principally from sales of cargo capacity to third parties.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Maintenance



Maintenance operating revenues generated by the Company principally correspond to aircraft maintenance
operations provided to third parties.



Other



Other operating revenues consist of
catering and handling revenues provided by Servair Group to non-affiliated companies and the on request air transport mainly made by Transavia.



|            |  |                       |  |                    |  |                          |  |                      |  |                    |  |                          |  |                      |  |                    |   |  |                         
|----------- |  | --------------------- |  | ------------------ |  | ------------------------ |  | -------------------- |  | ------------------ |  | ------------------------ |  | -------------------- |  | ------------------ | - |  | ------------------------
|            |  | Years ended March 31,
|            |  | 2005                  |  | 2004               |  | 2003                    
|            |  | Operat- ing revenues  |  | Operat- ing income |  | Property and Equip- ment |  | Operat- ing revenues |  | Operat- ing income |  | Property and Equip- ment |  | Operat- ing revenues |  | Operat- ing income |   |  | Property and Equip- ment
|            |  | (in  million)       
|Passenger   |  | 15,004                |  | 312                |  | 9,262                    |  | 10,260               |  | 67                 |  | 6,688                    |  | 10,527               |  | 101                |   |  | 6,978                   
|Cargo       |  | 2,492                 |  | 95                 |  | 972                      |  | 1,412                |  | 15                 |  | 371                      |  | 1,479                |  | 48                 |   |  | 508                     
|Maintenance |  | 777                   |  | 48                 |  | 1,300                    |  | 508                  |  | 50                 |  | 759                      |  | 540                  |  | 67                 |   |  | 580                     
|Others      |  | 805                   |  | 42                 |  | 1,220                    |  | 157                  |  | 7                  |  | 88                       |  | 141                  |  | (24                | ) |  | 96                      
|            |  |                       |  |                    |  |                          |  |                      |  |                    |  |                          |  |                      |  |                    |   |  |                         
|Total       |  | 19,078                |  | 497                |  | 12,754                   |  | 12,337               |  | 139                |  | 7,906                    |  | 12,687               |  | 192                |   |  | 8,162                   
|            |  |                       |  |                    |  |                          |  |                      |  |                    |  |                          |  |                      |  |                    |   |  |                         



4.2  Analysis of operating revenues by geographical area of sale



The Company has defined five discrete geographical regions into which passenger and cargo revenues are separately subdivided on the basis
of origin of sale. As a result of the business combination with KLM, the Company no longer considers France Metropolitan as a separate geographical region and as such has combined it within the Europe North Africa region. The Company has restated
the related comparative geographical information. Following is a summary of revenue by region and the respective percentage of total revenue.



|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|-------------------- |  | ------------------------- |  | ---- | -------------------------------- |  | --- | ----------------- | --- | - | ----------------- | ----- |  | ----------------- | - |  | ----- |  | ---- | - |  | ----- |  | ---- | - |  | ------
|                     |  | Year ended March 31, 2005
|                     |  | Europe North Africa       |  |      | CaribbeanFrenchGuianaIndianOcean |  |     | AfricaMiddle East |     |   | AmericasPolynesia |       |  | Asia NewCaledonia |   |  | Total
|                     |  | (in  million)           
|Scheduled passengers |  | 9,711                     |  | 68.8 | %                                |  | 348 |                   | 2.5 | % |                   | 937   |  | 6.7               | % |  | 1,994 |  | 14.2 | % |  | 1,095 |  | 7.8  | % |  | 14,085
|Other passengers     |  | 672                       |  | 73.1 | %                                |  | 57  |                   | 6.2 | % |                   | 36    |  | 3.9               | % |  | 54    |  | 5.9  | % |  | 100   |  | 10.9 | % |  | 919   
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total passengers     |  | 10,383                    |  | 69.2 | %                                |  | 405 |                   | 2.7 | % |                   | 973   |  | 6.5               | % |  | 2,048 |  | 13.6 | % |  | 1,195 |  | 8.0  | % |  | 15,004
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                  
|Scheduled cargo      |  | 1,081                     |  | 47.0 | %                                |  | 41  |                   | 1.8 | % |                   | 157   |  | 6.8               | % |  | 266   |  | 11.6 | % |  | 755   |  | 32.8 | % |  | 2,300 
|Other cargo          |  | 132                       |  | 68.7 | %                                |  | 4   |                   | 2.1 | % |                   | 7     |  | 3.6               | % |  | 22    |  | 11.5 | % |  | 27    |  | 14.1 | % |  | 192   
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total cargo          |  | 1,213                     |  | 48.6 | %                                |  | 45  |                   | 1.8 | % |                   | 164   |  | 6.6               | % |  | 288   |  | 11.6 | % |  | 782   |  | 31.4 | % |  | 2,492 
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Maintenance          |  | 769                       |  | 99.0 | %                                |  |    |                   |    |   |                   |      |  |                  |   |  |      |  |     |   |  | 8     |  | 1.0  | % |  | 777   
|Others               |  | 773                       |  | 96.0 | %                                |  | 21  |                   | 2.6 | % |                   | 11    |  | 1.4               | % |  |      |  |     |   |  |      |  |     |   |  | 805   
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total                |  | 13,138                    |  | 68.9 | %                                |  | 471 |                   | 2.5 | % |                   | 1,148 |  | 6.0               | % |  | 2,336 |  | 12.2 | % |  | 1,985 |  | 10.4 | % |  | 19,078
|                     |  |                           |  |      |                                  |  |     |                   |     |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|-------------------- |  | ------------------------- |  | ---- | -------------------------------- |  | --- | ---------------- | ---- | - | ----------------- | --- |  | ----------------- | - |  | ----- |  | ---- | - |  | ----- |  | ---- | - |  | ------
|                     |  | Year ended March 31, 2004
|                     |  | EuropeNorthAfrica         |  |      | CaribbeanFrenchGuianaIndianOcean |  |     | AfricaMiddleEast |      |   | AmericasPolynesia |     |  | Asia NewCaledonia |   |  | Total
|                     |  | (in  million)           
|Scheduled passengers |  | 6,734                     |  | 71.1 | %                                |  | 348 |                  | 3.7  | % |                   | 577 |  | 6.1               | % |  | 1,169 |  | 12.4 | % |  | 637   |  | 6.7  | % |  | 9,465 
|Other passengers     |  | 633                       |  | 79.7 | %                                |  | 28  |                  | 3.5  | % |                   | 40  |  | 5.0               | % |  | 56    |  | 7.0  | % |  | 38    |  | 4.8  | % |  | 795   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total passengers     |  | 7,367                     |  | 71.8 | %                                |  | 376 |                  | 3.7  | % |                   | 617 |  | 6.0               | % |  | 1,225 |  | 11.9 | % |  | 675   |  | 6.6  | % |  | 10,260
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Scheduled Cargo      |  | 676                       |  | 53.5 | %                                |  | 40  |                  | 3.2  | % |                   | 86  |  | 6.8               | % |  | 134   |  | 10.6 | % |  | 328   |  | 25.9 | % |  | 1,264 
|Other cargo          |  | 115                       |  | 77.7 | %                                |  | 5   |                  | 3.4  | % |                   | 4   |  | 2.7               | % |  | 15    |  | 10.1 | % |  | 9     |  | 6.1  | % |  | 148   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total cargo          |  | 791                       |  | 55.9 | %                                |  | 45  |                  | 3.2  | % |                   | 90  |  | 6.4               | % |  | 149   |  | 10.6 | % |  | 337   |  | 23.9 | % |  | 1,412 
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Maintenance          |  | 501                       |  | 98.6 | %                                |  |    |                  |     |   |                   |    |  |                  |   |  |      |  |     |   |  | 7     |  | 1.4  | % |  | 508   
|Others               |  | 143                       |  | 91.1 | %                                |  | 11  |                  | 7.0  | % |                   | 3   |  | 1.9               | % |  |      |  |     |   |  |      |  |     |   |  | 157   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total                |  | 8,802                     |  | 71.3 | %                                |  | 432 |                  | 3.5  | % |                   | 710 |  | 5.8               | % |  | 1,374 |  | 11.1 | % |  | 1,019 |  | 8.3  | % |  | 12,337
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|                     | 
|                     |  | Year ended March 31, 2003
|                     |  | EuropeNorthAfrica         |  |      | CaribbeanFrenchGuianaIndianOcean |  |     | AfricaMiddleEast |      |   | AmericasPolynesia |     |  | Asia NewCaledonia |   |  | Total
|                     |  | (in  million)           
|Scheduled passengers |  | 6,689                     |  | 68.8 | %                                |  | 340 |                  | 3.5  | % |                   | 598 |  | 6.2               | % |  | 1,329 |  | 13.7 | % |  | 757   |  | 7.8  | % |  | 9,713 
|Other passengers     |  | 647                       |  | 79.5 | %                                |  | 26  |                  | 3.2  | % |                   | 39  |  | 4.8               | % |  | 63    |  | 7.7  | % |  | 39    |  | 4.8  | % |  | 814   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total passengers     |  | 7,336                     |  | 69.6 | %                                |  | 366 |                  | 3.5  | % |                   | 637 |  | 6.1               | % |  | 1,392 |  | 13.2 | % |  | 796   |  | 7.6  | % |  | 10,527
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Scheduled Cargo      |  | 687                       |  | 52.3 | %                                |  | 45  |                  | 3.4  | % |                   | 97  |  | 7.4               | % |  | 141   |  | 10.7 | % |  | 344   |  | 26.2 | % |  | 1,314 
|Other cargo          |  | 92                        |  | 55.7 | %                                |  | 10  |                  | 6.1  | % |                   | 9   |  | 5.5               | % |  | 34    |  | 20.6 | % |  | 20    |  | 12.1 | % |  | 165   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total cargo          |  | 779                       |  | 52.7 | %                                |  | 55  |                  | 3.7  | % |                   | 106 |  | 7.2               | % |  | 175   |  | 11.8 | % |  | 364   |  | 24.6 | % |  | 1,479 
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Maintenance          |  | 533                       |  | 98.7 | %                                |  |    |                  |     |   |                   |    |  |                  |   |  |      |  |     |   |  | 7     |  | 1.3  | % |  | 540   
|Others               |  | 122                       |  | 86.5 | %                                |  | 18  |                  | 12.8 | % |                   | 1   |  | 0.7               | % |  |      |  |     |   |  |      |  |     |   |  | 141   
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total                |  | 8,770                     |  | 69.0 | %                                |  | 439 |                  | 3.5  | % |                   | 744 |  | 5.9               | % |  | 1,567 |  | 12.4 | % |  | 1,167 |  | 9.2  | % |  | 12,687
|                     |  |                           |  |      |                                  |  |     |                  |      |   |                   |     |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       



4.3  Analysis of scheduled passenger and cargo operating revenues by geographical area of destination



|                     |  |                           |  |                                  |  |                    |  |                   |  |                   |  |         |  |       |  |         |  |       |  |         |  |       
|-------------------- |  | ------------------------- |  | -------------------------------- |  | ------------------ |  | ----------------- |  | ----------------- |  | ------- |  | ----- |  | ------- |  | ----- |  | ------- |  | ------
|                     |  | Year ended March 31, 2005
|                     |  | Europe North Africa       |  | CaribbeanFrenchGuianaIndianOcean |  | Africa Middle East |  | AmericasPolynesia |  | Asia NewCaledonia |  | Total  
|                     |  | (in  million)           
|Scheduled passengers |  | 6,044                     |  | (42.9)%                          |  | 1,124              |  | (8.0)%            |  | 1,920             |  | (13.6)% |  | 2,939 |  | (20.9)% |  | 2,058 |  | (14.6)% |  | 14,085
|Scheduled Cargo      |  | 192                       |  | (8.4)%                           |  | 178                |  | (7.7)%            |  | 279               |  | (12.1)% |  | 652   |  | (28.3)% |  | 999   |  | (43.5)% |  | 2,300 
|                     |  |                           |  |                                  |  |                    |  |                   |  |                   |  |         |  |       |  |         |  |       |  |         |  |       
|Total                |  | 6,236                     |  | (38.1)%                          |  | 1,302              |  | (7.9)%            |  | 2,199             |  | (13.4)% |  | 3,591 |  | (21.9)% |  | 3,057 |  | (18.7)% |  | 16,385
|                     |  |                           |  |                                  |  |                    |  |                   |  |                   |  |         |  |       |  |         |  |       |  |         |  |       



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                     |  |                           |  |      |                                  |  |       |                  |      |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|-------------------- |  | ------------------------- |  | ---- | -------------------------------- |  | ----- | ---------------- | ---- | - | ----------------- | ----- |  | ----------------- | - |  | ----- |  | ---- | - |  | ----- |  | ---- | - |  | ------
|                     |  | Year ended March 31, 2004
|                     |  | EuropeNorthAfrica         |  |      | CaribbeanFrenchGuianaIndianOcean |  |       | AfricaMiddleEast |      |   | AmericasPolynesia |       |  | Asia NewCaledonia |   |  | Total
|                     |  | (in  million)           
|Scheduled passengers |  | 4,525                     |  | 47.8 | %                                |  | 1,023 |                  | 10.8 | % |                   | 1,058 |  | 11.2              | % |  | 1,850 |  | 19.5 | % |  | 1,009 |  | 10.7 | % |  | 9,465 
|Scheduled Cargo      |  | 181                       |  | 14.3 | %                                |  | 153   |                  | 12.1 | % |                   | 154   |  | 12.2              | % |  | 342   |  | 27.1 | % |  | 434   |  | 34.3 | % |  | 1,264 
|                     |  |                           |  |      |                                  |  |       |                  |      |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total                |  | 4,706                     |  | 43.9 | %                                |  | 1,176 |                  | 11.0 | % |                   | 1,212 |  | 11.3              | % |  | 2,192 |  | 20.4 | % |  | 1,443 |  | 13.4 | % |  | 10,729
|                     |  |                           |  |      |                                  |  |       |                  |      |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|                     | 
|                     |  | Year ended March 31, 2003
|                     |  | EuropeNorthAfrica         |  |      | CaribbeanFrenchGuianaIndianOcean |  |       | AfricaMiddleEast |      |   | AmericasPolynesia |       |  | Asia NewCaledonia |   |  | Total
|                     |  | (in  millions)          
|Scheduled passengers |  | 4,481                     |  | 46.2 | %                                |  | 994   |                  | 10.2 | % |                   | 1,098 |  | 11.3              | % |  | 1,966 |  | 20.2 | % |  | 1,174 |  | 12.1 | % |  | 9,713 
|Scheduled Cargo      |  | 141                       |  | 10.8 | %                                |  | 154   |                  | 11.7 | % |                   | 157   |  | 11.9              | % |  | 386   |  | 29.4 | % |  | 476   |  | 36.2 | % |  | 1,314 
|                     |  |                           |  |      |                                  |  |       |                  |      |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       
|Total                |  | 4,622                     |  | 41.9 | %                                |  | 1,148 |                  | 10.4 | % |                   | 1,255 |  | 11.4              | % |  | 2,352 |  | 21.3 | % |  | 1,650 |  | 15.0 | % |  | 11,027
|                     |  |                           |  |      |                                  |  |       |                  |      |   |                   |       |  |                   |   |  |       |  |      |   |  |       |  |      |   |  |       



5  External expenses



|                                           |  |                       |  |       |  |      
|------------------------------------------ |  | --------------------- |  | ----- |  | -----
|                                           |  | Years ended March 31,
|                                           |  | 2005                  |  | 2004  |  | 2003 
|                                           |  | (in  million)       
|Aircraft fuel                              |  | 2,653                 |  | 1,302 |  | 1,369
|Chartering costs                           |  | 558                   |  | 414   |  | 415  
|Aircraft operating lease costs             |  | 630                   |  | 458   |  | 522  
|Landing fees and en route charges          |  | 1,460                 |  | 913   |  | 934  
|Catering                                   |  | 402                   |  | 296   |  | 319  
|Handling charges and other operating costs |  | 1,067                 |  | 756   |  | 768  
|Aircraft maintenance costs                 |  | 621                   |  | 381   |  | 477  
|Commercial and distribution costs          |  | 1,399                 |  | 1,051 |  | 1,157
|Other external expenses                    |  | 1,897                 |  | 1,183 |  | 1,213
|                                           |  |                       |  |       |  |      
|Total                                      |  | 10,687                |  | 6,754 |  | 7,174
|                                           |  |                       |  |       |  |      



Other external
expenses primarily consist of other rents expenses, insurance costs and miscellaneous expenses.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



6  Salaries and number of employees



6.1  Salaries and related costs



|                              |  |                       |  |       |  |      
|----------------------------- |  | --------------------- |  | ----- |  | -----
|                              |  | Years ended March 31,
|                              |  | 2005                  |  | 2004  |  | 2003 
|                              |  | (in  million)       
|By cost category              |  |                       |  |       |  |      
|Wages                         |  | 4,402                 |  | 2,955 |  | 2,815
|Pension expense               |  | 429                   |  | 248   |  | 236  
|Social security contributions |  | 1,091                 |  | 876   |  | 805  
|                              |  |                       |  |       |  |      
|Total                         |  | 5,922                 |  | 4,079 |  | 3,856
|                              |  |                       |  |       |  |      



6.2  Average number of employees



|                      |  |                       |  |        |  |       
|--------------------- |  | --------------------- |  | ------ |  | ------
|                      |  | Years ended March 31,
|                      |  | 2005                  |  | 2004   |  | 2003  
|Total                 |  | 102,077               |  | 71,654 |  | 71,525
|                      |  |                       |  |        |  |       
|Flight deck crew      |  | 7,786                 |  | 5,041  |  | 4,929 
|Cabin crew            |  | 19,829                |  | 13,044 |  | 12,938
|Groundstaff           |  | 74,462                |  | 53,569 |  | 53,658
|Management            |  | 12,996                |  | 9,159  |  | 8,980 
|Supervisors           |  | 29,364                |  | 21,126 |  | 20,217
|Other staff           |  | 23,102                |  | 23,284 |  | 24,461
|                      |  |                       |  |        |  |       
|Pilots and cabin crew |  | 25,995                |  | 17,140 |  | 16,910
|Instructors           |  | 956                   |  | 620    |  | 644   
|Management            |  | 664                   |  | 325    |  | 313   



The
above number of employees is calculated on a weighted average basis based on actual paid presence.



6.3  Compensation paid to members of the board of directors and executive committee



For the year ended March 31, 2005



The total compensation of the three main executives of the
Company was 2.5 million for the year ended as of March 31, 2005.



No compensation was paid to Board Members for attendance at Board Meetings for the year ended March 31, 2005.



For the years ended March 31, 2004 and 2003



The compensation of the Executive Committee consisted of direct and indirect remuneration paid by the Company. For the year ended March
31, 2004, compensation totaled 3.6 million and covered 15 people, 13 of which were present during the full fiscal period and two present during six months of the fiscal period. For the year ended March 31, 2003, compensation totaled 3.6
million and covered 14 people which were present during the full fiscal period.



The members of the Board of Directors did not receive any fees for their duties as directors.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



7  Depreciation and amortization expenses and changes to operating provisions



|                                        |  |                       |  |       |  |       |  
|--------------------------------------- |  | --------------------- |  | ----- |  | ----- | -
|                                        |  | Years ended March 31, | 
|                                        |  | 2005                  |  | 2004  |  | 2003  |  
|                                        |  | (in  million)        | 
|Net charge to depreciation/amortization |  | 1,586                 |  | 1,184 |  | 1,195 |  
|Intangible fixed assets                 |  | 48                    |  | 37    |  | 37    |  
|Flight equipment                        |  | 1,300                 |  | 996   |  | 1,017 |  
|Other property, plant and equipment     |  | 238                   |  | 151   |  | 141   |  
|Net charge to operating provisions      |  | 134                   |  | 46    |  | 115   |  
|Fixed assets                            |  | 3                     |  | 3     |  | 57    |  
|Inventories                             |  |                      |  |      |  | (9    | )
|Trade receivable                        |  | 6                     |  | 12    |  | 5     |  
|Liabilities and charges                 |  | 125                   |  | 31    |  | 62    |  
|                                        |  |                       |  |       |  |       |  
|Total                                   |  | 1,720                 |  | 1,230 |  | 1,310 |  
|                                        |  |                       |  |       |  |       |  



As
described in note 2.1, effective April 1, 2002, the Company adopted the component approach in its consolidated financial statements for the recognition of maintenance operations on airframes and engines (excluding parts with limited useful lives)
under full ownership and capital leases. Consequently, the accrual for airframe maintenance was eliminated as of March 31, 2003 and the accrual recognized as of March 31, 2002 was reversed to retained earnings. The component approach consists of
capitalizing maintenance costs and amortizing them over the period between two maintenance operations. The retrospectively assessed impact of this change in method was recorded in retaining earnings at the beginning of the periods. The impact of
this change in accounting principle resulted in a decrease in stockholders equity as of April 1, 2002 of 18 million and an increase in net income for the year ended March 31, 2003 of 13 million.



Due to severe economic downturn and the view of Airbus that
technical support for the Concorde was no longer economically viable, the Company made a strategic decision to cease the operations of its supersonic fleet, consisting of five Concordes. As a result, as of March 31, 2003, the Company recorded a
provision of 59 million to write down the remaining book value of its Concorde inventories, spare parts and deferred charges. The operations of the Concorde ceased on May 31, 2003. These assets were written off during the year ended March 31,
2004.



8  Other operating income and charges, net



|                                                                                       |  |                       |   |  |      |   |  |      |  
|-------------------------------------------------------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                                                       |  | Years ended March 31, |  
|                                                                                       |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                                                       |  | (in  million)        |  
|Joint operations of passenger and cargo lines                                          |  | (67                   | ) |  | 5    |   |  | 5    |  
|Software fees                                                                          |  |                       |   |  | (7   | ) |  | (8   | )
|Sale of land                                                                           |  |                      |   |  |     |   |  | 5    |  
|Financial compensation corresponding to exchange of slots at Londons Heathrow airport |  | 7                     |   |  | 50   |   |  |     |  
|Other, net                                                                             |  | 26                    |   |  | (4   | ) |  |     |  
|                                                                                       |  |                       |   |  |      |   |  |      |  
|Total                                                                                  |  | (34                   | ) |  | 44   |   |  | 2    |  
|                                                                                       |  |                       |   |  |      |   |  |      |  



F-23



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



During the years ended March 31, 2005 and 2004, Air France exchanged some of its
winter and summer slots at Heathrow Airport with other airline companies. These exchanges resulted in a net gain of 7 million and 50 million respectively, which has been recorded as other operating income under the caption
Financial compensation corresponding to exchange of slots at Londons Heathrow Airport.



9  Restructuring costs



During the fiscal year ended March 31, 2005, KLM decided to outsource a portion of its traffic registration, interline registration and sales control activities to third parties, including their maintenance activities
with respect to the regional Fokker fleet. In addition, KLM decided to relocate the operations of its wholly-owned subsidiary KLM Cityhopper from the United Kingdom to the Schipol hub in the Netherlands. As a result, KLM recorded a restructuring
reserve of 11 million as of March 31, 2005 related to these activities.



As of March 31, 2003, KLM recorded a restructuring provision of 75 million to cover redundancy costs associated with the execution of KLMs cost cutting program. As of May 1, 2004, the remaining provision
related to this program was 56 million, of which 39 million was utilized in the period May 1, 2004 through March 31, 2005, to cover redundancy costs incurred under KLMs social plan. As of March 31, 2005, the remaining reserve is
17 million. Restructuring charges also include a Servair restructuring project which encompasses three main objectives for improving overall performance. At the work shop level, the project is intended to optimize the organisation and to
improve production management. At the functional level, the project is intended to optimize task rationalisation and to outsource some functions. Lastly, the project is expected to produce some savings through strengthened coordination
of staff and the establishment of a more aggressive negotiation policy. The provision totaled 8 million as at March 31, 2005.



Restructuring costs for the year ended March 31, 2004 of 22 million primarily relate to the second early retirement plan (Plan
de Retraite Progressive or PRP) implemented at Air France 15.5 million. This plan provides for the progressive retirement of 1,000 employees and the hiring of 500 new employees. This plan was offered to full time employees
over the age of 55, and provides for a 50% reduction in workload for the duration of the plan. Over the period of the plan, the employees receive approximately 80% of their salaries.



Restructuring costs for the year ended March 31, 2003 of 13 million primarily relate to termination
benefits and various severance payments incurred in connection with the closing of the Nouméa site on March 31, 2003, which covered 110 cabin crew members. As of March 31, 2003, the accrual related to the closing of the Nouméa site
amounted to 7.6 million, of which approximately 7 million was utilized during the year ended March 31, 2004.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



10  Net financial charges



|                                        |  |                       |   |  |      |   |  |      |  
|--------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                        |  | Years ended March 31, |  
|                                        |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                        |  | (in  million)        |  
|Financial expenses                      |  | (308                  | ) |  | (139 | ) |  | (161 | )
|Loan interest                           |  | (136                  | ) |  | (98  | ) |  | (108 | )
|Interest on financing lease obligations |  | (193                  | ) |  | (52  | ) |  | (72  | )
|Capitalized interest                    |  | 26                    |   |  | 20   |   |  | 25   |  
|Other financial expenses                |  | (5                    | ) |  | (9   | ) |  | (6   | )
|Financial income                        |  | 106                   |   |  | 38   |   |  | 50   |  
|Interest on securities                  |  | 3                     |   |  | 3    |   |  | 23   |  
|Net gains on securities                 |  | 33                    |   |  | 24   |   |  | 15   |  
|Other financial income                  |  | 70                    |   |  | 11   |   |  | 12   |  
|                                        |  |                       |   |  |      |   |  |      |  
|Net charges                             |  | (202                  | ) |  | (101 | ) |  | (111 | )
|                                        |  |                       |   |  |      |   |  |      |  
|Foreign exchange gains (losses), net    |  | 3                     |   |  | 35   |   |  | 62   |  
|Net (charge) release to provisions      |  | (20                   | ) |  | 6    |   |  | (36  | )
|                                        |  |                       |   |  |      |   |  |      |  
|Total                                   |  | (219                  | ) |  | (60  | ) |  | (85  | )
|                                        |  |                       |   |  |      |   |  |      |  



For
the year ended March 31, 2005, the largest component of the  20 million net charge to provisions related to 11 million in depreciation for the Companys investment in Opodo and  6 million in depreciation for the Companys
investment in Alitalia.



In addition,
Other financial income includes a gain of 37.9 million realized in relation to two aircraft loan agreements entered by Air France on September 15, 1986 and March 11, 1988, respectively. The realization of such gains was depending
on a final agreement with the lendor. Air France came to final agreements with the lendor on July 21, 2004 and March 31, 2005, respectively and as a result recognized such gain in Companys net income during the year ended March 31, 2005. Other
financial income includes dividends received from investments in non-marketable securities accounted for at cost of 8 million for the year ended March 31, 2005, (compared with 3 million for the years ended March 31, 2004 and 2003).



For the year ended March 31, 2004, the 6
million net release to provisions (compared to a net charge to provisions of 36 million for the year ended March 31, 2003) included (i) a  19 million release related to treasury stock held by Air France in connection with the pilot call
option, driven by an increase in the Companys stock price during the year, (ii) a 8 million release of accrued interest for late payment following a tax dispute settlement with the German Tax authorities (see note 12.2), (iii) a  7
million release related to incurred losses on foreign exchange options that matured during the year, and (iv) a  26 million in depreciation related to the Companys investment in Opodo.



The interest rate used in the calculation of capitalized
interest for the year ended March 31, 2005 was 3.8% (4.1% and 5.51% for the year ended March 31, 2004 and 2003, respectively), representing the weighted average rate of borrowings. The Company capitalizes interest related to deposits and progress
payments associated with future aircraft deliveries.



Foreign exchange gains for the period include an unrealized net gain of 1 million (a net gain of  31 million and 71 million for the year ended March 31, 2004 and 2003, respectively).



F-25



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



11  Disposals of subsidiaries and investments



During the year ended March 31, 2005, gains on disposals of
subsidiaries and affiliates (67 million) are mainly due to the transfer of Amadeus France and its subsidiary Amadeus France Service to Amadeus GTD on December 30, 2004.



During the year ended March 31, 2004, a gain on the disposal of the 3-F real estate company was recognized
for approximately  5 million.



During the
year ended March 31, 2003, disposals of investments primarily related to a 4 million gain on the sale of SITA Telecom shares.



12  Income tax



The Company elected to file a consolidated tax return for Group tax consolidation as from April 1, 2002. The consolidated return mainly
includes Air France-KLM, Air France SA, Air France Finance and French regional airline subsidiary companies. The scope includes the French subsidiaries of the Servair Group beginning January 1st, 2005



12.1  Analysis of the income tax charge



|                                |  |                       |   |  |      |   |  |      |  
|------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                |  | Years ended March 31, |  
|                                |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                |  | (in  million)        |  
|Current tax benefit/(expense)   |  | (8                    | ) |  | 10   |   |  | (9   | )
|Deferred tax benefit (expense)  |  | (88                   | ) |  | (12  | ) |  | 22   |  
|                                |  |                       |   |  |      |   |  |      |  
|Total net tax benefit (expense) |  | (96                   | ) |  | (2   | ) |  | 13   |  
|                                |  |                       |   |  |      |   |  |      |  



The
current tax expense relates to amounts paid or payable in the short-term to tax authorities related to the current year, in accordance with the regulations prevailing in various countries and applicable international tax treaties.



12.2  Effective tax rate



The reconciliation between the statutory rate in France and
the effective rate is:



|                                                                  |  |                       |    |  |       |    |  |        |   
|----------------------------------------------------------------- |  | --------------------- | -- |  | ----- | -- |  | ------ | --
|                                                                  |  | Years ended March 31, |   
|                                                                  |  | 2005                  |    |  | 2004  |    |  | 2003   |   
|                                                                  |  | (in  million)        |   
|Pre-tax income, as published                                      |  | 324                   |    |  | 62    |    |  | 98     |   
|                                                                  |  |                       |    |  |       |    |  |        |   
|Statutory tax rate                                                |  | 34.93                 | %  |  | 35.43 | %  |  | 35.43  | % 
|Theoretical tax (expense)                                         |  | (113                  | )  |  | (22   | )  |  | (35    | ) 
|                                                                  |  |                       |    |  |       |    |  |        |   
|Permanent differences                                             |  |                      |    |  | (24   | )  |  | (4     | ) 
|Income taxed at non-current tax rates                             |  | 11                    |    |  | 5     |    |  | 4      |   
|Previously unrecognized tax assets recognized during current year |  | 7                     |    |  | 15    |    |  | 45     |   
|Unrecognized tax assets                                           |  | (6                    | )  |  | (4    | )  |  |       |   
|Differences in France/foreign tax rates                           |  | 7                     |    |  |      |    |  | 3      |   
|Settlement of tax dispute                                         |  | 2                     |    |  | 33    |    |  |       |   
|Other                                                             |  | (4                    | )  |  | (5    | )  |  |       |   
|Consolidated tax credit (expense)                                 |  | (96                   | )  |  | (2    | )  |  | 13     |   
|                                                                  |  |                       |    |  |       |    |  |        |   
|Effective tax rate                                                |  | (29.63                | )% |  | (3.23 | )% |  | (13.27 | )%
|                                                                  |  |                       |    |  |       |    |  |        |   



F-26



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



During the year ended March 31, 2004, the company settled its dispute with the German tax authorities. The settlement
of the tax dispute concerns the territoriality of taxation of the capital gain generated on the disposal Amadeus KG, which was taxed in France, in accordance with the analysis that had previously been confirmed by the French tax authorities (Service
de la Législation Fiscale). The german tax authorities claimed that this capital gain should have been taxed in Germany. The case was submitted to the combined French-German commission and a compromise was found in the second half of the
year. The German tax authorities agreed to scale their request down to 50% of the amount claimed initially and cancelled all interest for late payment charged to air France. The impact on the consolidated financial statements represents a  38
million profit that can be analysed as follows :



| |  | A  41 million reversal of provision for liabilities :  33 corresponding to the initial tax and  8 million corresponding to interests for late payment;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A  17 million tax charge corresponding to tax to be paid in Germany;
| | - | ---------------------------------------------------------------------



| |  | A  14 million deferred income tax adjustment corresponding to the recognition of deferred tax asset on the tax charge to be paid to the German State and for which the French
State granted deductibility retroactively.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12.3  Deferred tax recorded on balance sheet



|                                                                         |  |                       |   |  |      |   |  |      |  
|------------------------------------------------------------------------ |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                                         |  | Years ended March 31, |  
|                                                                         |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                                         |  | (in  million)        |  
|Tax losses                                                               |  | 375                   |   |  | 383  |   |  | 243  |  
|Long-term capital losses                                                 |  | 2                     |   |  | 15   |   |  | 10   |  
|Pension provisions and other employee benefits                           |  | 228                   |   |  | 214  |   |  | 198  |  
|Deferred charges                                                         |  | (66                   | ) |  | (64  | ) |  | (53  | )
|Maintenance overhaul provisions                                          |  | (239                  | ) |  | (263 | ) |  |     |  
|Provisions for restitution for aircraft under operating leases           |  | 87                    |   |  | 97   |   |  |     |  
|Capital gains on intra-group disposals                                   |  | 30                    |   |  | 32   |   |  | 35   |  
|Tax-driven provisions                                                    |  | (370                  | ) |  | (367 | ) |  | (388 | )
|Fixed assets                                                             |  | 41                    |   |  | 35   |   |  | 44   |  
|Other                                                                    |  | 2                     |   |  | 14   |   |  | 17   |  
|                                                                         |  |                       |   |  |      |   |  |      |  
|Net deferred tax assets (note 19)                                        |  | 90                    |   |  | 96   |   |  | 106  |  
|                                                                         |  |                       |   |  |      |   |  |      |  
|Tax losses                                                               |  | (90                   | ) |  |     |   |  |     |  
|Long-term capital losses                                                 |  |                      |   |  |     |   |  |     |  
|Pension provisions                                                       |  | 310                   |   |  |     |   |  |     |  
|Deferred charges                                                         |  |                      |   |  |     |   |  |     |  
|Maintenance overhaul provisions                                          |  | 37                    |   |  |     |   |  |     |  
|Capital gains on intra-group disposals                                   |  |                      |   |  |     |   |  |     |  
|Tax-driven provisions                                                    |  |                      |   |  |     |   |  |     |  
|Difference between the tax bases and consolidated values of fixed assets |  | (136                  | ) |  |     |   |  |     |  
|Other                                                                    |  | (48                   | ) |  |     |   |  |     |  
|                                                                         |  |                       |   |  |      |   |  |      |  
|Net deferred tax liabilities (note 24)                                   |  | 73                    |   |  |     |   |  |     |  
|                                                                         |  |                       |   |  |      |   |  |      |  



Net
tax assets are restricted according to the capacity of each tax entity to recover its assets in the near future.



F-27



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



12.4  Unrecorded tax assets



The Company has recorded loss carry forwards and deferred tax
assets to the extent it believes that such amounts are realizable in the near future. The Company has unrecorded tax assets as follows:



|                                         |  |                       |  |      |  |      |  
|---------------------------------------- |  | --------------------- |  | ---- |  | ---- | -
|                                         |  | Years ended March 31, | 
|                                         |  | 2005                  |  | 2004 |  | 2003 |  
|                                         |  | (in  million)        | 
|Unrecorded temporary differences, net    |  | 15                    |  | 7    |  | 5    |  
|                                         |  |                       |  |      |  |      |  
|Carry forward tax losses for utilization |  |                      |  |     |  | 211  |  
|                                         |  |                       |  |      |  |      |  
|Y+1 - Y+3                                |  |                       |  |      |  | 127  |  
|Y+4 - Y+5                                |  |                       |  |      |  | 84   |  
|6 years and beyond                       |  |                       |  |      |  |      |  
|Tax losses not subject to expiration     |  | 373                   |  | 244  |  | 50   |  
|                                         |  |                       |  |      |  |      |  
|Total at statutory rate                  |  | 388                   |  | 251  |  | 266  |  
|                                         |  |                       |  |      |  |      |  
|Reduced rate tax credit                  |  | 106                   |  | 114  |  | (4   | )
|                                         |  |                       |  |      |  |      |  



These
unrecognized tax assets represent future tax savings and, as of March 31, 2005, correspond primarily to loss carry forwards of subsidiaries prior to the tax consolidation of Air France as well as the loss carryforwards of KLMs UK subsidiaries.



In accordance with Article 89 of the 2004
French Finance Law, approved on December 18, 2003, tax losses may be carried forward for an unlimited period of time. These new provisions were applicable to financial years beginning January 1, 2004, as well as to losses to be carried forward at
the end of the financial year preceding January 1, 2004.



13  Earnings per share



|                                                                       |  |                       |   |  |             |   |  |             |  
|---------------------------------------------------------------------- |  | --------------------- | - |  | ----------- | - |  | ----------- | -
|                                                                       |  | Years ended March 31, |  
|                                                                       |  | 2005                  |   |  | 2004        |   |  | 2003        |  
|                                                                       |  | (in number of shares) |  
|Weighted average of                                                    |  |                       |   |  |             |   |  |             |  
|Ordinary shares issued                                                 |  | 264,898,897           |   |  | 219,780,887 |   |  | 219,780,887 |  
|Treasury stock held regarding stock option plan                        |  | (4,440,889            | ) |  | (1,249,464  | ) |  | (1,249,464  | )
|Treasury stock held to regulate stock market price                     |  | (1,752,865            | ) |  | (1,621,935  | ) |  | (1,262,371  | )
|                                                                       |  |                       |   |  |             |   |  |             |  
|Number of shares used in the calculation of basic earnings per share   |  | 258,705,143           |   |  | 216,909,488 |   |  | 217,269,052 |  
|                                                                       |  |                       |   |  |             |   |  |             |  
|Number of shares used in the calculation of diluted earnings per share |  | 258,705,143           |   |  | 216,909,488 |   |  | 217,269,052 |  
|                                                                       |  |                       |   |  |             |   |  |             |  



There
were no securities outstanding that were considered to be dilutive for purposes of computing earnings per share during the three years ended March 31, 2005, 2004 and 2003.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Income used to calculate earnings per share is as follows:



|                                                        |  |                       |  |      |  |     
|------------------------------------------------------- |  | --------------------- |  | ---- |  | ----
|                                                        |  | Years ended March 31,
|                                                        |  | 2005                  |  | 2004 |  | 2003
|                                                        |  | (in  million)       
|Income used to calculate basic net earnings per share   |  | 351                   |  | 93   |  | 120 
|                                                        |  |                       |  |      |  |     
|Income used to calculate diluted net earnings per share |  | 351                   |  | 93   |  | 120 
|                                                        |  |                       |  |      |  |     
|Basic and diluted earnings per share                    |  | 1.36                  |  | 0.43 |  | 0.55
|                                                        |  |                       |  |      |  |     



14  Goodwill and
intangible fixed assets



|                        |  |                       |  |                                 |  |                |  |             |  |                                 |   |  |                |  |             |  |                                 |   |  |               
|----------------------- |  | --------------------- |  | ------------------------------- |  | -------------- |  | ----------- |  | ------------------------------- | - |  | -------------- |  | ----------- |  | ------------------------------- | - |  | --------------
|                        |  | Years ended March 31,
|                        |  | 2005                  |  | 2004                            |  | 2003          
|                        |  | Gross value           |  | Amorti- zation & depreci- ation |  | Net book value |  | Gross value |  | Amorti- zation & depreci- ation |   |  | Net book value |  | Gross value |  | Amorti- zation & depreci- ation |   |  | Net book value
|                        |  | (in  million)       
|Business goodwill       |  | 364                   |  | 264                             |  | 100            |  | 363         |  | (246                            | ) |  | 117            |  | 365         |  | (229                            | ) |  | 136           
|Consolidation goodwill  |  | 218                   |  | 135                             |  | 83             |  | 214         |  | (119                            | ) |  | 95             |  | 216         |  | (104                            | ) |  | 112           
|Other intangible assets |  | 181                   |  | 122                             |  | 59             |  | 157         |  | (125                            | ) |  | 32             |  | 148         |  | (113                            | ) |  | 35            
|                        |  |                       |  |                                 |  |                |  |             |  |                                 |   |  |                |  |             |  |                                 |   |  |               
|Total                   |  | 763                   |  | 521                             |  | 242            |  | 734         |  | (490                            | ) |  | 244            |  | 729         |  | (446                            | ) |  | 283           
|                        |  |                       |  |                                 |  |                |  |             |  |                                 |   |  |                |  |             |  |                                 |   |  |               



Consolidated goodwill relates to the
regional airlines acquired between March and September 2000 and is amortized over a ten-year period, with accelerated amortization of  47 million for the year ended March 31, 2001.



The movements in the net book value of goodwill and intangible fixed assets are as follows:



|                                                        |  |                       |   |  |      |   |  |      |  
|------------------------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                        |  | Years ended March 31, |  
|                                                        |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                        |  | (in  million)        |  
|Opening balance                                         |  | 244                   |   |  | 283  |   |  | 315  |  
|                                                        |  |                       |   |  |      |   |  |      |  
|Additions                                               |  | 27                    |   |  | 17   |   |  | 21   |  
|Charge to amortization of goodwill                      |  | (15                   | ) |  | (15  | ) |  | (16  | )
|Charge to amortization of other intangible fixed assets |  | (48                   | ) |  | (37  | ) |  | (37  | )
|Disposals                                               |  |                      |   |  | (3   | ) |  | (2   | )
|Impact of changes in scope of consolidation             |  | 34                    |   |  |     |   |  |     |  
|Transfers                                               |  |                      |   |  | (1   | ) |  | 2    |  
|                                                        |  |                       |   |  |      |   |  |      |  
|Closing balance                                         |  | 242                   |   |  | 244  |   |  | 283  |  
|                                                        |  |                       |   |  |      |   |  |      |  



F-29



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



15  Property and equipment



|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|--------------------------------------------- |  | ---------------- | - |  | ---------------------------- | - |  | ----- | - |  | ------ | - |  | ---------------- | - |  | ----------------------- | - |  | ----- | - |  | ----- | - |  | ------ | -
|                                              |  | Flight equipment |   |  | Other property and equipment |  
|                                              |  | Owned aircraft   |   |  | Leased aircraft              |   |  | Other |   |  | Total  |   |  | Landandbuildings |   |  | Equip- ment andfittings |   |  | Other |   |  | Total |   |  | Total  |  
|                                              |  | (in  million)   |  
|Gross value as of March 31, 2004              |  | 7,688            |   |  | 2,060                        |   |  | 1,791 |   |  | 11,539 |   |  | 1,165            |   |  | 594                     |   |  | 757   |   |  | 2,516 |   |  | 14,055 |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Additions                                     |  | 439              |   |  | 168                          |   |  | 1,176 |   |  | 1,783  |   |  | 100              |   |  | 80                      |   |  | 169   |   |  | 349   |   |  | 2,132  |  
|Disposals                                     |  | (454             | ) |  | (68                          | ) |  | (358  | ) |  | (880   | ) |  | (65              | ) |  | (66                     | ) |  | (41   | ) |  | (172  | ) |  | (1,052 | )
|Changes in scope of consolidation             |  | 1,026            |   |  | 2,022                        |   |  | 540   |   |  | 3,588  |   |  | 551              |   |  | 150                     |   |  | 95    |   |  | 796   |   |  | 4,384  |  
|Exchange fluctuations                         |  |                 |   |  |                             |   |  |      |   |  |       |   |  |                 |   |  | (3                      | ) |  | (1    | ) |  | (4    | ) |  | (4     | )
|Transfers                                     |  | 327              |   |  | 172                          |   |  | (500  | ) |  | (1     | ) |  | 85               |   |  | 7                       |   |  | (95   | ) |  | (3    | ) |  | (4     | )
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Gross Value as of March 31, 2005              |  | 9,026            |   |  | 4,354                        |   |  | 2,649 |   |  | 16,029 |   |  | 1,836            |   |  | 762                     |   |  | 884   |   |  | 3,482 |   |  | 19,511 |  
|Accumulated depreciation as of March 31, 2004 |  | 3,463            |   |  | 689                          |   |  | 436   |   |  | 4,588  |   |  | 640              |   |  | 436                     |   |  | 485   |   |  | 1,561 |   |  | 6,149  |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Charge to depreciation                        |  | 546              |   |  | 399                          |   |  | 372   |   |  | 1,317  |   |  | 103              |   |  | 69                      |   |  | 66    |   |  | 238   |   |  | 1,555  |  
|Releases on disposal                          |  | (406             | ) |  | (59                          | ) |  | (327  | ) |  | (792   | ) |  | (38              | ) |  | (55                     | ) |  | (33   | ) |  | (126  | ) |  | (918   | )
|Changes in scope of consolidation             |  |                 |   |  |                             |   |  |      |   |  |       |   |  | (2               | ) |  |                        |   |  | (22   | ) |  | (24   | ) |  | (24    | )
|Transfers                                     |  | 147              |   |  | (197                         | ) |  | 49    |   |  | (1     | ) |  |                 |   |  | (1                      | ) |  | (3    | ) |  | (4    | ) |  | (5     | )
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Accumulated depreciation as of March 31, 2005 |  | 3,750            |   |  | 832                          |   |  | 530   |   |  | 5,112  |   |  | 703              |   |  | 449                     |   |  | 493   |   |  | 1,645 |   |  | 6,757  |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Net book value as March 31, 2005              |  | 5,276            |   |  | 3,522                        |   |  | 2,119 |   |  | 10,917 |   |  | 1,133            |   |  | 313                     |   |  | 391   |   |  | 1,837 |   |  | 12,754 |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Gross value as of March 31, 2003              |  | 7,788            |   |  | 2,229                        |   |  | 1,802 |   |  | 11,819 |   |  | 1,049            |   |  | 593                     |   |  | 731   |   |  | 2,373 |   |  | 14,192 |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Additions                                     |  | 405              |   |  | 94                           |   |  | 527   |   |  | 1,026  |   |  | 118              |   |  | 34                      |   |  | 90    |   |  | 242   |   |  | 1,268  |  
|Disposals                                     |  | (863             | ) |  | (86                          | ) |  | (371  | ) |  | (1,320 | ) |  | (28              | ) |  | (17                     | ) |  | (54   | ) |  | (99   | ) |  | (1,419 | )
|Changes in scope of consolidation             |  |                 |   |  |                             |   |  |      |   |  |       |   |  |                 |   |  | 2                       |   |  |      |   |  | 2     |   |  | 2      |  
|Transfers                                     |  | 358              |   |  | (177                         | ) |  | (167  | ) |  | 14     |   |  | 26               |   |  | (18                     | ) |  | (10   | ) |  | (2    | ) |  | 12     |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Gross Value as of March 31, 2004              |  | 7,688            |   |  | 2,060                        |   |  | 1,791 |   |  | 11,539 |   |  | 1,165            |   |  | 594                     |   |  | 757   |   |  | 2,516 |   |  | 14,055 |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Accumulated depreciation as of March 31, 2003 |  | 3,340            |   |  | 691                          |   |  | 504   |   |  | 4,535  |   |  | 600              |   |  | 435                     |   |  | 460   |   |  | 1,495 |   |  | 6,030  |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Charge to depreciation                        |  | 556              |   |  | 155                          |   |  | 285   |   |  | 996    |   |  | 59               |   |  | 34                      |   |  | 58    |   |  | 151   |   |  | 1,147  |  
|Releases on disposal                          |  | (538             | ) |  | (62                          | ) |  | (370  | ) |  | (970   | ) |  | (18              | ) |  | (16                     | ) |  | (53   | ) |  | (87   | ) |  | (1,057 | )
|Changes in scope of consolidation             |  |                 |   |  |                             |   |  |      |   |  |       |   |  |                 |   |  | 2                       |   |  |      |   |  | 2     |   |  | 2      |  
|Transfers                                     |  | 105              |   |  | (95                          | ) |  | 17    |   |  | 27     |   |  | (1               | ) |  | (19                     | ) |  | 20    |   |  |      |   |  | 27     |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Accumulated depreciation as of March 31, 2004 |  | 3,463            |   |  | 689                          |   |  | 436   |   |  | 4,588  |   |  | 640              |   |  | 436                     |   |  | 485   |   |  | 1,561 |   |  | 6,149  |  
|                                              |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                  |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Net book value asMarch 31, 2004               |  | 4,225            |   |  | 1,371                        |   |  | 1,355 |   |  | 6,951  |   |  | 525              |   |  | 158                     |   |  | 272   |   |  | 955   |   |  | 7,906  |  



F-30



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|------------------------------------------------------- |  | ---------------- | - |  | ---------------------------- | - |  | ----- | - |  | ------ | - |  | ----------------- | - |  | ----------------------- | - |  | ----- | - |  | ----- | - |  | ------ | -
|                                                        |  | Flight equipment |   |  | Other property and equipment |  
|                                                        |  | Owned aircraft   |   |  | Leased aircraft              |   |  | Other |   |  | Total  |   |  | Land andbuildings |   |  | Equip- ment andfittings |   |  | Other |   |  | Total |   |  | Total  |  
|                                                        |  | (in  million)   |  
|Gross value as of March 31, 2002                        |  | 7,295            |   |  | 2,524                        |   |  | 1,888 |   |  | 11,707 |   |  | 1,002             |   |  | 567                     |   |  | 686   |   |  | 2,255 |   |  | 13,962 |  
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Impact of changes in accounting policies (cf. Note 2.1) |  | 215              |   |  | 61                           |   |  | (46   | ) |  | 230    |   |  |                  |   |  |                        |   |  |      |   |  |      |   |  | 230    |  
|Additions                                               |  | 516              |   |  | 102                          |   |  | 549   |   |  | 1,167  |   |  | 27                |   |  | 29                      |   |  | 114   |   |  | 170   |   |  | 1,337  |  
|Disposals                                               |  | (773             | ) |  | (126                         | ) |  | (386  | ) |  | (1,285 | ) |  | (6                | ) |  | (14                     | ) |  | (41   | ) |  | (61   | ) |  | (1,346 | )
|Changes in scope of consolidation                       |  |                 |   |  |                             |   |  |      |   |  |       |   |  | 2                 |   |  | 5                       |   |  | 7     |   |  | 14    |   |  | 14     |  
|Exchange fluctuations                                   |  |                 |   |  |                             |   |  |      |   |  |       |   |  |                  |   |  |                        |   |  | (1    | ) |  | (1    | ) |  | (1     | )
|Transfers                                               |  | 535              |   |  | (332                         | ) |  | (203  | ) |  |       |   |  | 24                |   |  | 6                       |   |  | (34   | ) |  | (4    | ) |  | (4     | )
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Gross Value as of March 31, 2003                        |  | 7,788            |   |  | 2,229                        |   |  | 1,802 |   |  | 11,819 |   |  | 1,049             |   |  | 593                     |   |  | 731   |   |  | 2,373 |   |  | 14,192 |  
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Accumulated depreciation as of March 31, 2002           |  | 2,984            |   |  | 705                          |   |  | 572   |   |  | 4,261  |   |  | 554               |   |  | 415                     |   |  | 439   |   |  | 1,408 |   |  | 5,669  |  
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Impact of changes in accounting policies (Cf. Note 2.1) |  | 127              |   |  | 75                           |   |  | (34   | ) |  | 168    |   |  |                  |   |  |                        |   |  |      |   |  |      |   |  | 168    |  
|Charge to depreciation Concorde                         |  |                 |   |  |                             |   |  | 45    |   |  | 45     |   |  |                  |   |  |                        |   |  |      |   |  |      |   |  | 45     |  
|Charge to depreciation                                  |  | 554              |   |  | 158                          |   |  | 305   |   |  | 1,017  |   |  | 50                |   |  | 32                      |   |  | 59    |   |  | 141   |   |  | 1,158  |  
|Releases on disposal                                    |  | (339             | ) |  | (233                         | ) |  | (384  | ) |  | (956   | ) |  | (5                | ) |  | (13                     | ) |  | (40   | ) |  | (58   | ) |  | (1,014 | )
|Changes in scope of consolidation                       |  |                 |   |  |                             |   |  |      |   |  |       |   |  |                  |   |  | 2                       |   |  | 4     |   |  | 6     |   |  | 6      |  
|Transfers                                               |  | 14               |   |  | (14                          | ) |  |      |   |  |       |   |  | 1                 |   |  | (1                      | ) |  | (2    | ) |  | (2    | ) |  | (2     | )
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Accumulated depreciation as of March 31, 2003           |  | 3,340            |   |  | 691                          |   |  | 504   |   |  | 4,535  |   |  | 600               |   |  | 435                     |   |  | 460   |   |  | 1,495 |   |  | 6,030  |  
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  
|Net book value as March 31, 2003                        |  | 4,448            |   |  | 1,538                        |   |  | 1,298 |   |  | 7,284  |   |  | 449               |   |  | 158                     |   |  | 271   |   |  | 878   |   |  | 8,162  |  
|                                                        |  |                  |   |  |                              |   |  |       |   |  |        |   |  |                   |   |  |                         |   |  |       |   |  |       |   |  |        |  



The
net book value of aircraft acquired subject to a reservation of ownership clause was 380 million as of March 31, 2005 (358 million and 356 million as of March 31, 2004 and 2003, respectively).



The net book value of property and equipment financed under
capital lease was 152 million as of March 31, 2005 (172 million and 78 million as of March 31, 2004 and 2003, respectively). During the year ended March 31, 2004, the Company sold and leased back its head office and accounted for
the leaseback as a capital lease. The building is included in property and equipment for an amount, net of the gain realized on the transaction, of 98 million. The related liability of 137 million is accounted for as an obligation under
capital leases.



F-31



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



16  Investments



|                                                 |  |                       |   |  |      |   |  |      |  
|------------------------------------------------ |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                 |  | Years ended March 31, |  
|                                                 |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                 |  | (in  million)        |  
|Investments in equity affiliates                 |  | 564                   |   |  | 336  |   |  | 316  |  
|                                                 |  |                       |   |  |      |   |  |      |  
|Investments in non-consolidated companies        |  | 138                   |   |  | 128  |   |  | 125  |  
|Loans and receivables relating to investments(1) |  | 143                   |   |  | 142  |   |  | 107  |  
|Other financial assets                           |  | 380                   |   |  | 89   |   |  | 98   |  
|Other investments, gross                         |  | 661                   |   |  | 359  |   |  | 330  |  
|                                                 |  |                       |   |  |      |   |  |      |  
|Provisions for impairment                        |  | (113                  | ) |  | (91  | ) |  | (70  | )
|Other investments, net                           |  | 548                   |   |  | 268  |   |  | 260  |  
|                                                 |  |                       |   |  |      |   |  |      |  
|Of which less than one year                      |  | 309                   |   |  | 11   |   |  | 25   |  

---

|(1) | Of which 1,600,000 Air France  KLM shares loaned to a third party for a net book value of 24 million as of March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------



Investments in non-consolidated companies consist of
securities which the Company considers of strategic interest and which it intends to hold on a long-term basis and equity interests in companies over which the Company does not exercise significant influence.



The item Other financial assets is comprised of
the fair value of KLM hedges in existence at the acquisition date which have not been unwound as of March 31, 2005, for an amount of 279 million, as well as guarantee and loan collateral (i.e. 1% construction contributions, the Companys
Central Employee Committee, personnel).



The
increase in loans between March 31, 2003 and 2004 results from the securitization of the aircraft assets (see Note 23).



F-32



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



16.1  Equity affiliates



The carrying value and share in net income of equity
affiliates is as follows:



|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|------------------------------------- |  | -------------- | - |  | --------- | - |  | --------- |  | ------ | - |  | ----- | -
|                                      |  | Amadeus GTD    |   |  | Alpha PLC |   |  | Martinair |  | Others |   |  | Total |  
|                                      |  | (in  million) |  
|As of March 31, 2002                  |  | 203            |   |  | 48        |   |  |          |  | 52     |   |  | 303   |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Translation adjustments               |  |               |   |  | (5        | ) |  |          |  | (9     | ) |  | (14   | )
|Distributions                         |  | (9             | ) |  | (3        | ) |  |          |  |       |   |  | (12   | )
|Share of net income/(Loss) of entity  |  | 36             |   |  | 4         |   |  |          |  | (11    | ) |  | 29    |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Transfers                             |  |               |   |  |          |   |  |          |  | 10     |   |  | 10    |  
|As of March 31, 2003                  |  | 230            |   |  | 44        |   |  |          |  | 42     |   |  | 316   |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Translation adjustments               |  |               |   |  | (6        | ) |  |          |  | (3     | ) |  | (9    | )
|Distributions                         |  | (7             | ) |  | (2        | ) |  |          |  | (9     | ) |  | (18   | )
|Acquisition/Disposition               |  |               |   |  |          |   |  |          |  | (2     | ) |  | (2    | )
|Share of net income /(Loss) of entity |  | 45             |   |  | 2         |   |  |          |  | 6      |   |  | 53    |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Transfers                             |  |               |   |  |          |   |  |          |  | (4     | ) |  | (4    | )
|As of March 31, 2004                  |  | 268            |   |  | 38        |   |  |          |  | 30     |   |  | 336   |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Translation adjustments               |  |               |   |  | (1        | ) |  |          |  | 1      |   |  |      |  
|Distributions                         |  | (8             | ) |  | (2        | ) |  |          |  | (6     | ) |  | (16   | )
|Acquisition/Disposition               |  |               |   |  |          |   |  | 146       |  | 27     |   |  | 173   |  
|Share of net income /(Loss) of entity |  | 50             |   |  | 0         |   |  | 9         |  | 14     |   |  | 73    |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  
|Transfers                             |  |               |   |  | 2         |   |  |          |  | (4     | ) |  | (2    | )
|As of March 31, 2005                  |  | 310            |   |  | 37        |   |  | 155       |  | 62     |   |  | 564   |  
|                                      |  |                |   |  |           |   |  |           |  |        |   |  |       |  



Amadeus GTD SA, through its subsidiaries, markets, develops and manufactures a computerized reservation system.



As of March 31, 2005, the ownership structure of the Amadeus Group was as follows: Air France (23.4%), Iberia (18.3%), Lufthansa (5%) and
the public (53.3%).



Alpha Ltd is a UK Company
held 27% by Servair, (31% by institutional investors and 42% by the public). It specializes in providing retail and catering delights for traveling consumers.



Martinair is a Dutch Company held 50% by KLM, (50% by P&O Nedlloyd). It is an airline company.



16.2  Condensed accounts of equity affiliates



A summary of the published accounts of the major equity
affiliates is presented below.



As part of the
consolidation of the Companys financial statements, adjustments are made to the accounts of equity affiliates, mainly in respect of internal transactions within the Company.



Amadeus GTD (condensed consolidated accounts prepared in accordance with IFRS)



The condensed consolidated accounts include Amadeus Global
Travel Distribution SA, domiciled in Spain and its consolidated subsidiaries (the Group Amadeus).



F-33



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The Group Amadeus serves the marketing, sales and distribution needs of a global
travel and tourism industry. Its worldwide data network and database of travel information are used by travel agencies and airlines sales offices. Today, travel agencies and airline offices can make bookings with airlines, hotel chains, car rental
companies and newer groups of providers such as ferry, rail, cruise, insurance and tour operators.



The Group Amadeus provides the above-mentioned services trough a computerized reservation system (CRS). Additionally, the
Group Amadeus provides services through its new e-commerce channel of distribution and through information technology (IT) services and solutions to the airline industry which includes inventory management and passenger departure control.



|                                                                   |  |                          |   |  |       |   |  |       |  
|------------------------------------------------------------------ |  | ------------------------ | - |  | ----- | - |  | ----- | -
|                                                                   |  | Years ended December 31, |  
|Income statement                                                   |  | 2004                     |   |  | 2003  |   |  | 2002  |  
|                                                                   |  | (in  million)           |  
|Operating revenues                                                 |  | 2,057                    |   |  | 1,929 |   |  | 1,856 |  
|Operating income                                                   |  | 343                      |   |  | 321   |   |  | 307   |  
|Including net charges to depreciation, amortization and provisions |  | (206                     | ) |  | (212  | ) |  | (184  | )
|Net income                                                         |  | 208                      |   |  | 160   |   |  | 147   |  
|                                                                   | 
|                                                                   |  | Years ended December 31, |  
|Balance sheet                                                      |  | 2004                     |   |  | 2003  |   |  | 2002  |  
|                                                                   |  | (in  million)           |  
|Fixed assets                                                       |  | 1,037                    |   |  | 998   |   |  | 913   |  
|Current assets                                                     |  | 638                      |   |  | 539   |   |  | 567   |  
|                                                                   |  |                          |   |  |       |   |  |       |  
|Total assets                                                       |  | 1,675                    |   |  | 1,537 |   |  | 1,480 |  
|                                                                   |  |                          |   |  |       |   |  |       |  
|Stockholders equity                                               |  | 942                      |   |  | 759   |   |  | 623   |  
|Short and long-term debt and capital lease obligations             |  | 210                      |   |  | 280   |   |  | 326   |  
|Other liabilities                                                  |  | 523                      |   |  | 498   |   |  | 531   |  
|                                                                   |  |                          |   |  |       |   |  |       |  
|Total liabilities and stockholders equity                         |  | 1,675                    |   |  | 1,537 |   |  | 1,480 |  
|                                                                   |  |                          |   |  |       |   |  |       |  



Alpha Airports PLC (condensed consolidated accounts prepared in accordance with UK GAAP)



The condensed consolidated accounts include Alpha Airport PLC, domiciled in England, and its consolidated subsidiaries (the Group
Alpha Airports).



The Group Alpha
Airports provides retailing and catering services for airlines and airports in over 150 retailing and catering outlets in 74 airports located in 13 countries and across five continents.



The Group Alpha Airports flight services serves airline companies by offering a comprehensive range of
catering logistics, flight catering and management services for over 100 airlines. The Group Alpha Airports also provides in-flight retail management services. The Group Alpha Airports serves airport customers by offering purpose-designed retailing
and catering services through its operation of 12 stores in 26 UK airports, two airports in North America, three airports in the Indian Sub-Continent and two airports in Turkey.



F-34



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                                   |  |                        |   |  |      |   |  |      |  
|------------------------------------------------------------------ |  | ---------------------- | - |  | ---- | - |  | ---- | -
|                                                                   |  | Years endedJanuary 31, |  
|Income statement                                                   |  | 2005                   |   |  | 2004 |   |  | 2003 |  
|                                                                   |  | (in  million)         |  
|Operating revenues                                                 |  | 746                    |   |  | 662  |   |  | 608  |  
|Operating income                                                   |  | 23                     |   |  | 33   |   |  | 33   |  
|Including net charges to depreciation, amortization and provisions |  | (15                    | ) |  | (15  | ) |  | (15  | )
|Net income                                                         |  | 6                      |   |  | 14   |   |  | 19   |  
|                                                                   | 
|                                                                   |  | Years endedJanuary 31, |  
|Balance sheet                                                      |  | 2005                   |   |  | 2004 |   |  | 2003 |  
|                                                                   |  | (in  million)         |  
|Fixed assets                                                       |  | 114                    |   |  | 107  |   |  | 102  |  
|Current assets                                                     |  | 122                    |   |  | 89   |   |  | 76   |  
|                                                                   |  |                        |   |  |      |   |  |      |  
|Total assets                                                       |  | 236                    |   |  | 196  |   |  | 178  |  
|                                                                   |  |                        |   |  |      |   |  |      |  
|Stockholders equity                                               |  | 83                     |   |  | 83   |   |  | 74   |  
|Short and long-term debt and capital lease obligations             |  | 45                     |   |  | 11   |   |  | 10   |  
|Other liabilities                                                  |  | 108                    |   |  | 102  |   |  | 94   |  
|                                                                   |  |                        |   |  |      |   |  |      |  
|Total liabilities and stockholders equity                         |  | 236                    |   |  | 196  |   |  | 178  |  
|                                                                   |  |                        |   |  |      |   |  |      |  



Martinair (condensed consolidated accounts prepared in accordance with Dutch GAAP)



Simplified consolidated financial statements presented hereunder include the Martinair entity, located in the Netherlands, and its
subsidiaries. Martinairs core business is the air transport of passengers and freight from Amsterdam.



|                                                                   |  |                         |   |  |      |   |  |      |  
|------------------------------------------------------------------ |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                                                                   |  | Years endedDecember 31, |  
|Income statement                                                   |  | 2004                    |   |  | 2003 |   |  | 2002 |  
|                                                                   |  | (in  million)          |  
|Operating revenues                                                 |  | 959                     |   |  | 894  |   |  | 789  |  
|Operating income                                                   |  | 23                      |   |  | 21   |   |  | 22   |  
|Including net charges to depreciation, amortization and provisions |  | (101                    | ) |  | (80  | ) |  | (80  | )
|Net income                                                         |  | 13                      |   |  | 9    |   |  | 3    |  
|                                                                   | 
|                                                                   |  | Years endedDecember 31, |  
|Balance sheet                                                      |  | 2004                    |   |  | 2003 |   |  | 2002 |  
|                                                                   |  | (in  million)          |  
|Fixed assets                                                       |  | 499                     |   |  | 621  |   |  | 728  |  
|Current assets                                                     |  | 183                     |   |  | 161  |   |  | 150  |  
|                                                                   |  |                         |   |  |      |   |  |      |  
|Total assets                                                       |  | 682                     |   |  | 782  |   |  | 878  |  
|                                                                   |  |                         |   |  |      |   |  |      |  
|Stockholders equity                                               |  | 318                     |   |  | 303  |   |  | 288  |  
|Short and long-term debt and capital lease obligations             |  | 104                     |   |  | 150  |   |  | 247  |  
|Other liabilities                                                  |  | 260                     |   |  | 329  |   |  | 343  |  
|                                                                   |  |                         |   |  |      |   |  |      |  
|Total liabilities and stockholders equity                         |  | 682                     |   |  | 782  |   |  | 178  |  
|                                                                   |  |                         |   |  |      |   |  |      |  



F-35



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



16.3  Companys transactions with equity affiliates



The major transactions by the Company with equity affiliates
were as follows:



|                               |  |                |  |           |  |            |  |           
|------------------------------ |  | -------------- |  | --------- |  | ---------- |  | ----------
|                               |  | 2005           |  | 2004      |  | 2003      
|                               |  | (in  million)
|In the accounts of the Company |  | AmadeusGTD     |  | Martinair |  | AmadeusGTD |  | AmadeusGTD
|Income statement               |  |                |  |           |  |            |  |           
|Operating revenues             |  | 100            |  | 60        |  | 115        |  | 118       
|External expenses              |  | 226            |  | 70        |  | 189        |  | 188       
|Balance sheet                  |  |                |  |           |  |            |  |           
|Other accounts receivable      |  | 10             |  |          |  | 25         |  | 23        
|Other payables                 |  | 33             |  | 3         |  | 34         |  | 34        



Fees paid and
received in respect of reservation systems (AMADEUS):



Amadeus GTD SA, through its subsidiaries, markets, develops and manufactures a computerized reservation system. The Company receives fees for the distributor services performed on behalf of Amadeus and for on-line
assistance and travel agency training. These services are rendered by the Companys subsidiary Amadeus France, a distributor on the French market. Furthermore, the Company receives commissions from Amadeus for issuances made with its own
agencies. These fees and commissions totaled 100 million for the year ended March 31, 2005 (115 million and 118 million for the years ended March 31, 2004 and 2003, respectively).



The Company pays Amadeus GTD SA booking fees in connection
with the use of the Amadeus reservation system. These fees totaled  226 million for the year ended March 31, 2005 (compared to  189 million and 188 million for the years ended March 31, 2004 and 2003, respectively).



Operations between the Company and
Martinair :



The Company and Martinair have
mutual aeronautical maintenance operations. The Company also delivers Martinair with jet fuel.



16.4  Investments in non-consolidated companies



The net book value of investments in non consolidated companies (73 million) is summarized as follows:



|                  |  |                |  |          |                   |  |        |   |  |                  |   |  |         
|----------------- |  | -------------- |  | -------- | ----------------- |  | ------ | - |  | ---------------- | - |  | --------
|                  |  | Years ended   
|                  |  | March 31, 2005 |  |          | December 31, 2004
|                  |  | Net bookvalue  |  | %holding |                   |  | Equity |   |  | Net income(loss) |   |  | Yearend 
|                  |  | (in  million)
|Opodo             |  | 15             |  | 8.3      | %                 |  | (4     | ) |  | (50              | ) |  | Dec  04
|Alitalia          |  | 16             |  | 2.0      | %                 |  | 1,264  |   |  | (520             | ) |  | Dec  03
|Austrian Airlines |  | 9              |  | 1.5      | %                 |  | 631    |   |  | 40               |   |  | Dec  04
|Voyages Fram      |  | 9              |  | 8.7      | %                 |  | 142    |   |  | (15              | ) |  | Dec  03
|Others            |  | 23             |  |         |                   |  |       |   |  |                 |   |  |        



F-36



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                  |  |                |  |          |                   |  |        |   |  |                  |   |  |         
|----------------- |  | -------------- |  | -------- | ----------------- |  | ------ | - |  | ---------------- | - |  | --------
|                  |  | Years ended   
|                  |  | March 31, 2004 |  |          | December 31, 2003
|                  |  | Net bookvalue  |  | %holding |                   |  | Equity |   |  | Net income(loss) |   |  | Yearend 
|                  |  | (in  million)
|Opodo             |  | 26             |  | 22.9     | %                 |  | (17    | ) |  | (65              | ) |  | Dec  03
|Alitalia          |  | 23             |  | 2.0      | %                 |  | 1,264  |   |  | (520             | ) |  | Dec  03
|Austrian Airlines |  | 9              |  | 1.5      | %                 |  | 604    |   |  | 46               |   |  | Dec  03
|Voyages Fram      |  | 9              |  | 8.7      | %                 |  | 159    |   |  | 4                |   |  | Dec  02
|Others            |  | 14             |  |         |                   |  |       |   |  |                 |   |  |        
|                  | 
|                  |  | Years ended   
|                  |  | March 31, 2003 |  |          | December 31, 2002
|                  |  | Net bookvalue  |  | %holding |                   |  | Equity |   |  | Net income(loss) |   |  | Yearend 
|                  |  | (in  million)
|Opodo             |  | 48             |  | 22.9     | %                 |  | 31     |   |  | (88              | ) |  | Dec  02
|Alitalia          |  | 23             |  | 2.0      | %                 |  | 1,675  |   |  | 93               |   |  | Dec  02
|Austrian Airlines |  | 11             |  | 1.5      | %                 |  | 514    |   |  | 43               |   |  | Dec  02
|Voyages Fram      |  | 9              |  | 8.7      | %                 |  | 153    |   |  | 5                |   |  | Dec  01
|Others            |  | 15             |  |         |                   |  |       |   |  |                 |   |  |        



17  Inventory



|                            |  |                       |   |  |      |   |  |      |  
|--------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                            |  | Years ended March 31, |  
|                            |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                            |  | (In  million)        |  
|Aeronautical spare parts    |  | 305                   |   |  | 136  |   |  | 172  |  
|Other supplies              |  | 127                   |   |  | 60   |   |  | 61   |  
|Production work in progress |  | 60                    |   |  | 3    |   |  | 52   |  
|                            |  |                       |   |  |      |   |  |      |  
|Gross value                 |  | 492                   |   |  | 199  |   |  | 285  |  
|                            |  |                       |   |  |      |   |  |      |  
|Valuation allowance         |  | (103                  | ) |  | (48  | ) |  | (65  | )
|                            |  |                       |   |  |      |   |  |      |  
|Net book value              |  | 389                   |   |  | 151  |   |  | 220  |  
|                            |  |                       |   |  |      |   |  |      |  



F-37



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



18  Trade and other receivables



|                                |  |                       |   |  |       |   |  |       |  
|------------------------------- |  | --------------------- | - |  | ----- | - |  | ----- | -
|                                |  | Years ended March 31, |  
|                                |  | 2005                  |   |  | 2004  |   |  | 2003  |  
|                                |  | (in  million)        |  
|Passenger operations            |  | 977                   |   |  | 693   |   |  | 618   |  
|Cargo operations                |  | 330                   |   |  | 200   |   |  | 231   |  
|Maintenance operations          |  | 382                   |   |  | 401   |   |  | 271   |  
|Airlines                        |  | 439                   |   |  | 308   |   |  | 291   |  
|Other trade receivables         |  | 246                   |   |  | 143   |   |  | 110   |  
|Valuation allowance             |  | (102                  | ) |  | (94   | ) |  | (89   | )
|                                |  |                       |   |  |       |   |  |       |  
|Total trade receivable          |  | 2,272                 |   |  | 1,651 |   |  | 1,432 |  
|                                |  |                       |   |  |       |   |  |       |  
|Suppliers with debit balances   |  | 153                   |   |  | 120   |   |  | 150   |  
|State                           |  | 87                    |   |  | 56    |   |  | 83    |  
|Company and associates          |  | 14                    |   |  | 5     |   |  | 10    |  
|Other                           |  | 419                   |   |  | 169   |   |  | 177   |  
|Prepayment and accrued income   |  | 1,333                 |   |  | 149   |   |  | 176   |  
|Provision                       |  | (5                    | ) |  | (5    | ) |  | (4    | )
|                                |  |                       |   |  |       |   |  |       |  
|Total other accounts receivable |  | 2,001                 |   |  | 494   |   |  | 592   |  
|                                |  |                       |   |  |       |   |  |       |  



All
above receivables have maturities of less than one year with the exception of 1,178 million relating to KLMs pension gross surplus included in Prepayment and accrued income (see note 22).



The caption Other accounts receivable includes
220 million related to the Companys employee stock purchase plans (ORS and ESA) initiated during the year ended March 31, 2005 (see notes 26 & 33 for further details on these two stock purchase plans).



19  Income tax receivable



|                         |  |                       |  |      |  |     
|------------------------ |  | --------------------- |  | ---- |  | ----
|                         |  | Years ended March 31,
|                         |  | 2005                  |  | 2004 |  | 2003
|                         |  | (in  million)       
|Current tax              |  | 7                     |  | 5    |  | 5   
|Deferred tax (note 12.3) |  | 90                    |  | 96   |  | 106 
|                         |  |                       |  |      |  |     
|Total                    |  | 97                    |  | 101  |  | 111 
|                         |  |                       |  |      |  |     
|Portion > 1 year         |  | 90                    |  | 96   |  | 104 



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



20  Marketable securities and cash equivalents



|                                                                              |  |                       |  |       |  |      
|----------------------------------------------------------------------------- |  | --------------------- |  | ----- |  | -----
|                                                                              |  | Years ended March 31,
|                                                                              |  | 2005                  |  | 2004  |  | 2003 
|                                                                              |  | (in  million)       
|Original maturity more than three months and/or subject to exchange rate risk |  |                       |  |       |  |      
|Treasury shares (note 21.3)                                                   |  | 27                    |  | 19    |  | 11   
|Negotiable debt securities                                                    |  | 29                    |  | 2     |  | 279  
|Options                                                                       |  | 10                    |  |      |  |     
|Mutual funds (Sicav)                                                          |  | 2                     |  |      |  |     
|Bank deposits                                                                 |  | 85                    |  | 93    |  | 3    
|                                                                              |  |                       |  |       |  |      
|Sub-total                                                                     |  | 153                   |  | 114   |  | 293  
|                                                                              |  |                       |  |       |  |      
|                                                                              | 
|                                                                              |  | Years ended March 31,
|                                                                              |  | 2005                  |  | 2004  |  | 2003 
|                                                                              |  | (in  million)       
|Original maturity less than three months with no exchange rate risk           |  |                       |  |       |  |      
|Negotiable debt securities                                                    |  | 31                    |  | 30    |  | 44   
|Mutual funds (Sicav)                                                          |  | 1,416                 |  | 1,332 |  | 672  
|Bank deposits                                                                 |  | 654                   |  | 2     |  | 30   
|                                                                              |  |                       |  |       |  |      
|Sub-total cash equivalents                                                    |  | 2,101                 |  | 1,364 |  | 746  
|                                                                              |  |                       |  |       |  |      
|Total                                                                         |  | 2,254                 |  | 1,478 |  | 1,039
|                                                                              |  |                       |  |       |  |      



As of
March 31, 2005, treasury shares are comprised of (i) 1,924,464 Air France-KLM shares acquired by Société Air France to serve a stock option plan granted to a certain category of Air France personnel and approved by the general
shareholders meeting on September 28, 1999 and (ii) 1,659,268 Air France-KLM shares acquired by KLM to serve stock option plans for members of KLMs board of managing directors and KLMs senior officers.



Investments in money market mutual funds (ie which include
monetary Societe dInvestissement a Capital Variable (SICAV)) are considered to be cash equivalents.



The market value of marketable securities is disclosed in note 27.5 below.



21  Stockholders equity



Net change in shareholders equity for the year ended March 31, 2005 mainly relates to the increase in share capital of an amount of
768 million, net income for the year of 351 million, dividends distribution of 17 million and the acquisition of treasury shares of an amount of 8 million. As of March 31, 2005, the Companys net shareholders
equity amounted to 5,161 million.



21.1  Common stock



The public exchange offer for KLM shares to Air France-KLM shares took place in May 2004 (the Exchange Offer) and resulted in the issuance of 49,602,631 new shares representing a capital increase of 422 million, paid-in
capital of 346 million against which were charged the costs incurred in the public exchange offer of 11 million. At March 31, 2005, the share capital of Air France-KLM was divided into 269,383,518 shares. Each share is entitled to one
vote.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



As of March 31, 2004 and 2003, the common stock of the Company totaled 1,868
million, comprising fully paid 219,780,887 shares at a par value of 8.50 a share.



21.2  Breakdown of stock and voting rights



|                                  |  |                 |  |                    |  |      |  |      |  |      |  |     
|--------------------------------- |  | --------------- |  | ------------------ |  | ---- |  | ---- |  | ---- |  | ----
|                                  |  | As of March 31,
|                                  |  | % stock         |  | % of voting rights
|                                  |  | 2005            |  | 2004               |  | 2003 |  | 2005 |  | 2004 |  | 2003
|French state                      |  | 23.2            |  | 54.0               |  | 54.4 |  | 23.8 |  | 54.6 |  | 55.1
|Employees and former employees(1) |  | 11.7            |  | 12.8               |  | 12.9 |  | 11.7 |  | 12.9 |  | 13.1
|Treasury shares(2)                |  | 2.4             |  | 1.1                |  | 1.3  |  |     |  |     |  |    
|Other                             |  | 62.7            |  | 32.1               |  | 31.4 |  | 64.5 |  | 32.5 |  | 31.8
|                                  |  |                 |  |                    |  |      |  |      |  |      |  |     
|Total                             |  | 100             |  | 100                |  | 100  |  | 100  |  | 100  |  | 100 
|                                  |  |                 |  |                    |  |      |  |      |  |      |  |     

---

Note:

|(1) | Personnel and former employees identified in funds or by a Sicovam code
|--- | -----------------------------------------------------------------------

|(2) | The general shareholders meeting from September 28, 1999 has adopted a plan authorizing the Company to purchase its own shares in order to provide certain categories of its
personnel with incentive plans. The maximum number of shares authorized to be purchased is 3,525,000. Within this authorization, the Company purchased 1,249,464 of its own shares during the period ended March 31, 2000 and 2,275,000 during the fiscal
year 2004/05 that are classified as marketable securities. As of March 31, 2005 KLM held 1,659,268 of the Company shares in order to provide members of the Board of Managing Directors and senior officers with incentive plan, that are also classified
as marketable securities. As of March 31, 2005, the Company also held 1,299,538 of its own shares (0.5% of common stock) in accordance with the share buyback program authorized by the General Meeting of September 15, 2004, which are classified as a
reduction of shareholders equity (see note 21.3)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of March 31, 2005, 2004 and 2003, the percentage of shares and voting rights owned by members of the Companys executive committee was to the best of our knowledge less than 0.5% of the outstanding shares.



21.3  Treasury stock



As of March 31, 2005, the Company held 1,299,538 of its own
shares (0.5% of common stock) in accordance with the share buyback program authorized by the General Meeting of September 15, 2004.



|                    |  |                         |  |           |  |            |   |  |                          
|------------------- |  | ----------------------- |  | --------- |  | ---------- | - |  | -------------------------
|                    |  | Year endedMarch 31,2002 |  | Purchase  |  | Sale       |   |  | Year ended March 31, 2003
|Number of shares    |  | 172,324                 |  | 1,474,900 |  | (12,190    | ) |  | 1,635,034                
|Value (in million) |  | 2.6                     |  | 22.2      |  | (0.2       | ) |  | 24.6                     
|                    |  |                         |  |          
|                    |  | Year endedMarch 31,2003 |  | Purchase  |  | Sale       |   |  | Year endedMarch 31,2004  
|Number of shares    |  | 1,635,034               |  | 822,939   |  | (1,272,126 | ) |  | 1,185,847                
|Value (in million) |  | 24.6                    |  | 10.8      |  | (17.7      | ) |  | 17.7                     
|                    |  |                         |  |          
|                    |  | Year endedMarch 31,2004 |  | Purchase  |  | Sale       |   |  | Year endedMarch 31,2005  
|Number of shares    |  | 1,185,847               |  | 113,691   |  |           |   |  | 1,299,538                
|Value (in million) |  | 17.7                    |  | 1.4       |  |           |   |  | 19.1                     



F-40



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



21.4  Other securities giving access to common stock



Following the Exchange Offer, 45,093,299 Equity Warrants for
new or existing shares were issued. 3 warrants will give the right to purchase and/or subscribe to 2 new or existing shares of Air France-KLMs stock, with a par value of 8.50, at an exercise price of 20 per Air France-KLM share.
Warrants holders will have the option, at any time during a 24-month period beginning November 2005, to obtain new or existing shares, at the companys discretion, in exchange for the warrants. The maximum potential increase in the equity
capital of Air France-KLM is limited to 601 million. As of March 31, 2005, because the exercise price of the warrants exceeds the Air France - KLM stock price, they are not taken into account for the calculation of the diluted earning per
share.



21.5  Additional paid-in capital



Additional paid-in capital represents the
difference between the nominal value of equity securities issued and the value of contributions in cash or in kind received by the Company.



21.6  Retained earnings



|                       |  |                       |  |       |  |      
|---------------------- |  | --------------------- |  | ----- |  | -----
|                       |  | Years ended March 31,
|                       |  | 2005                  |  | 2004  |  | 2003 
|                       |  | (in  million)       
|Distributable reserves |  | 1,129                 |  | 366   |  | 599  
|Other reserves         |  | 1,029                 |  | 1,501 |  | 1,168
|Net income             |  | 351                   |  | 93    |  | 120  
|                       |  |                       |  |       |  |      
|Total                  |  | 2,509                 |  | 1,960 |  | 1,887
|                       |  |                       |  |       |  |      



Distributable reserves mainly comprise that part of parent company reserves appropriated to reserves by annual stockholder meetings and special reserves of long-term capital gains taxed at reduced rates.



Other reserves include the aggregate results of consolidated
subsidiaries and the legal reserves of the Company.



French company law requires that Air France - KLM allocate 5% of its unconsolidated statutory net profit (as determined on a parent company basis) for each year to its legal reserves before dividends may be paid with respect to that year.
Net profits must be so allocated until the amount in the legal reserve equals 10% of the aggregate nominal value of the issued and outstanding share capital of Air France - KLM. This restriction on the payment of dividends also applies to each
of our French subsidiaries on an individual unconsolidated basis. As of March 31, 2005, Air France - KLMs legal reserve was  45.7 million, or 2% of the aggregate nominal value of issued and outstanding capital. The legal reserve of any
company subject to this requirement may only be distributed to shareholders upon liquidation of the company.



F-41



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



22  Provisions for liabilities and charges



|                                                                   |  |                       |  |       |  |      
|------------------------------------------------------------------ |  | --------------------- |  | ----- |  | -----
|                                                                   |  | Years ended March 31,
|                                                                   |  | 2005                  |  | 2004  |  | 2003 
|                                                                   |  | (in  million)       
|Provisions for pensions and for termination payments on retirement |  | 823                   |  | 636   |  | 581  
|Provisions for restitution for aircraft under operating leases     |  | 354                   |  | 275   |  | 307  
|Restructuring provisions                                           |  | 71                    |  | 13    |  | 11   
|Provisions for third party litigations                             |  | 26                    |  | 23    |  | 39   
|Other provisions for liabilities and charges                       |  | 149                   |  | 92    |  | 157  
|Negative goodwill(1)                                               |  | 842                   |  |      |  |     
|                                                                   |  |                       |  |       |  |      
|Total                                                              |  | 2,265                 |  | 1,039 |  | 1,095
|                                                                   |  |                       |  |       |  |      
|Of which short-term                                                |  | 173                   |  | 261   |  | 193  

---

|(1) | Details of this item are given in paragraph 3.2  Comparability
|--- | ---------------------------------------------------------------



The movement in the book value of provisions for liabilities and charges are as follows:



|                                          |  |                       |   |  |       |   |  |       |  
|----------------------------------------- |  | --------------------- | - |  | ----- | - |  | ----- | -
|                                          |  | Years ended March 31, |  
|                                          |  | 2005                  |   |  | 2004  |   |  | 2003  |  
|                                          |  | (in  million)        |  
|Beginning of year                         |  | 1,039                 |   |  | 1,095 |   |  | 937   |  
|Charges                                   |  |                       |   |  |       |   |  |       |  
|Operating                                 |  | 302                   |   |  | 248   |   |  | 206   |  
|Gain on disposal of flight equipment      |  | 6                     |   |  |      |   |  |      |  
|Financial                                 |  | 1                     |   |  |      |   |  | 22    |  
|Restructuring                             |  | 17                    |   |  | 10    |   |  | 8     |  
|Releases for consumption                  |  |                       |   |  |       |   |  |       |  
|Operating                                 |  | (116                  | ) |  | (228  | ) |  | (151  | )
|Other operating income and charges        |  | (49                   | ) |  |      |   |  |      |  
|Financial                                 |  |                      |   |  | (8    | ) |  | (1    | )
|Restructuring                             |  | (45                   | ) |  | (8    | ) |  | (7    | )
|Tax                                       |  |                      |   |  | (17   | ) |  |      |  
|Releases of provisions no longer required |  |                       |   |  |       |   |  |       |  
|Operating                                 |  | (61                   | ) |  | (10   | ) |  | (19   | )
|Financial                                 |  |                      |   |  | (20   | ) |  |      |  
|Tax                                       |  |                      |   |  | (16   | ) |  |      |  
|Negative goodwill amortization            |  | (73                   | ) |  |      |   |  |      |  
|Impact of changes in accounting policies  |  |                      |   |  |      |   |  | 82    |  
|Transfers                                 |  |                       |   |  | (7    | ) |  | 21    |  
|Translation difference                    |  | 7                     |   |  |      |   |  |      |  
|Change in Company structure(1)            |  | 1,237                 |   |  |      |   |  | (3    | )
|                                          |  |                       |   |  |       |   |  |       |  
|End of year                               |  | 2,265                 |   |  | 1,039 |   |  | 1,095 |  
|                                          |  |                       |   |  |       |   |  |       |  

---

|(1) | Including negative goodwill :  915 million.
|--- | --------------------------------------------



During the year ended March 31, 2004, Air France settled its dispute with the German tax authorities. Details of this settlement and the related effects
on the consolidated financial statements have been disclosed in note 12.2.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



22.1  Pension schemes for employees in France



The Company previously maintained an independent pension plan
for its ground staff administered by the Caisse de Retraite Air France (CRAF). This plan was terminated and incorporated into the AGIRC-ARCCO national retirement fund effective January 1, 1993. Upon incorporation, current pensions and entitlements
were made subject to a formal Company agreement, in accordance with the following terms:



  Retirees as of December 31, 1992 continue to benefit from an overall guarantee of income, revalued in terms of Air France pension points, from which external pensions are deducted at actual value
(social security, as well as ARCCO and AGIRC at their reconstituted values).



  Employees and former employees in service as of December 31, 1992 were granted an additional pension benefit, expressed in terms of Air France pension points, independent from all other external
pension plans.



CRAF is therefore still
responsible for the benefits with respect to employees who contributed up to December 31, 1992. As the pension fund created by the Company was insufficiently funded, a top-up plan was introduced. This plan, administered by CRAF, is jointly funded by
the Company and CRAF, under the following terms:



From January 1, 1993 and until the existing pension fund is exhausted, CRAF bears 50% of the cost of any shortfall between pensions paid and fund revenues.



The Company undertakes to offer an identical contribution and, as soon as the existing pension fund has been
used up, to bear the full cost of pensions payable under the initial CRAF pension plan.



The Company is under no additional obligation with regard to entitlements for the period after January 1, 1993.



In addition, a supplemental pension plan was set up during
the fiscal year ending March 31, 2005 for 39 executives of Air France, which represents a charge of 14 million.



The following table shows a reconciliation between the valuation of pension commitments of CRAF and the executive plan and the provisions
recorded in the consolidated financial statements:



|                                                         |  |                       |   |  |      |   |  |      |  
|-------------------------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                         |  | Years ended March 31, |  
|                                                         |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                         |  | (in  million)        |  
|Actuarial present value of projected benefit obligations |  | 981                   |   |  | 911  |   |  | 877  |  
|Fair value of plan assets                                |  | (620                  | ) |  | (613 | ) |  | (590 | )
|Projected benefit obligation in excess of plan assets    |  | 361                   |   |  | 298  |   |  | 287  |  
|                                                         |  |                       |   |  |      |   |  |      |  
|Unrecognized net actuarial gains                         |  | (26                   | ) |  | 21   |   |  | 25   |  
|Provisions for pensions                                  |  | 335                   |   |  | 319  |   |  | 312  |  
|                                                         |  |                       |   |  |      |   |  |      |  
|Of which short-term                                      |  | 7                     |   |  | 18   |   |  | 17   |  



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The charge with respect to obligations of the CRAF is  27 million for the year
ended March 31, 2005, 14 million for the year ended March 31, 2004 and 10 million for the year ended March 31, 2003 and can be analyzed as follows:



|                                               |  |                       |   |  |      |   |  |      |  
|---------------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                               |  | Years ended March 31, |  
|                                               |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                               |  | (in  million)        |  
|Interest cost on projected benefit obligations |  | (44                   | ) |  | (44  | ) |  | (45  | )
|Amortization of actuarial gains (losses)       |  |                      |   |  |     |   |  | 3    |  
|Amortization of prior services cost            |  | (14                   | ) |  |      |   |  |      |  
|Expected return on plan assets                 |  | 31                    |   |  | 30   |   |  | 32   |  
|                                               |  |                       |   |  |      |   |  |      |  
|Net charge                                     |  | (27                   | ) |  | (14  | ) |  | (10  | )
|                                               |  |                       |   |  |      |   |  |      |  



The
actual return on the CRAF plan assets was 9.7% for the year ended March 31, 2005 (13.2% for the prior year).



Amounts paid by the Company to the CRAF totaled 11 million and 8 million for the year ended March 31, 2005 and 2004,
respectively.



The assumptions used in the
valuation of pension commitments are as follows:



|                                      |  |                       |   |  |      |   |  |      |  
|------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                      |  | Years ended March 31, |  
|                                      |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                      |  | (in  million)        |  
|Gross discount rate                   |  | 4.50                  | % |  | 5.00 | % |  | 5.25 | %
|Gross rate of increase of CRAF points |  | 1.40                  | % |  | 1.20 | % |  | 1.20 | %



22.2  Foreign pension schemes and termination benefit schemes in France and abroad



A  KLM subgroup



1- Funding status



The projected benefit obligations of the KLM group amounted to 8.5 billion at March 31, 2005, which are covered by funds contributed
in accordance with Dutch regulations and the companys collective agreement.



With regard to the level of funding of the projected benefit obligations, particularly for the pilots program, significant
safeguard constraints force the company to be always in a surfunding position.



The value of the plan assets was 9.7 billion at March 31, 2005.



The funds surplus, amounted to 1.2 billion at March 31, 2005 and 1.4 billion on the date KLM was
acquired by the Company, i.e. May 1, 2004.



2- Applicable
accounting literature



The Companys
projected benefit obligation and plan assets are valued and accounted for in accordance with international accounting standard IAS 19, which the Company will be required to follow in France as of April 1, 2005 for purpose of satisfying French
regulatory requirements.



F-44



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



With respect to recording the value of the funds surplus in the balance sheet, IAS
19, is subject to interpretation.



IFRIC (The
International Accounting Standard Boards technical body) responsible for interpretation of standards is currently reviewing the accounting treatment of funds surplus under IFRS, especially for certain Dutch companies.



The Company is waiting for the IFRIC final position on this
matter.



3-  Accounting followed by the Company
for the asset surplus as of and for the year ended March 31 2005



The Company believes that a surplus is to be recognized in the balance sheet.



The amount recorded on the balance sheet is limited to the present value of any economic benefits available in the form of refunds from
the plans or reductions in future contributions to the plans (asset ceiling rule).



The amount of unrecognized assets on the acquisition date is 0.4 billion.



However, pending clarification and as a conservative measure,
the Company decided to defer all the effects induced by this recognition on the balance sheet (amortization of the negative goodwill attributable to it, change in the asset ceiling related to the change in the value of the funds during the year).



The accounting consequences, depending on
whether IFRIC confirms or rejects the recognition of the value of the funds surplus in the balance sheet, are described below:



3.1  Recognition of the asset surplus



The portion of negative goodwill related to this surplus value was 622 million at March 31, 2005.



Confirmation of the recognition of the surplus on the
balance sheet would have resulted in an additional reversal of negative goodwill, increasing net income by 93 million.



The actuarial assumptions used as of March 31, 2005 have changed since the KLM acquisition date (primarily the discount rate) impacting
(i) the amount of the assets ceiling and (ii) the value of the pension obligations.



Actuarial differences are amortized over the expected residual average working life of employees affected by these regimes.



The change in actuarial assumptions would
have resulted in an increase of approximately 138 million in operating income and an increase in net income of 94 million after the tax impact.



The total of these operations would be reflected by an increase in the net income of 187 million.



3.2  Non-recognition of the asset surplus



The portion of negative goodwill related to this surplus
value would be netted against the value of the assets recorded.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



This would result in the reversal of the amortization of negative goodwill taken
over the first quarter of fiscal year 2005 (the freeze on the operation occurred at the closing of the half-year accounts, or September 2005), which would reduce net income by 25 million.



In addition, the annual pension charge accounted for in the
income statement, which reflects the normative charge pursuant to IAS 19, would be increased in order to match the amount paid during the year by KLM to the fund management institutions.



This would result in an additional operating charge of 50 million, thereby reducing net income by
33 million.



The total of these
operations would be reflected by a decrease in the net income of 58 million.



4- Pension asset surplus accounting for the coming years



The Company believes that IFRICs interpretation will not be known until the third quarter of fiscal 2006.



When the interpretation is issued, the accounting treatment
will be applied retrospectively.



The Company
will re-estimate the acquisition balance sheet, which may impact the value of negative goodwill and an adjustment to the financial results for the period ended March 31, 2005; the financial statements for the year ending March 31, 2006 will not bear
these adjustments.



The following table shows
the amount recorded in the balance sheet:



|                                                         |  |                          |  
|-------------------------------------------------------- |  | ------------------------ | -
|                                                         |  | Year endedMarch 31, 2005 |  
|                                                         |  | (in  million)           |  
|Fair value of plan assets                                |  | 9,757                    |  
|Defined benefit obligation                               |  | (8,496                   | )
|                                                         |  |                          |  
|Plan assets in excess over projected benefit obligations |  | 1,261                    |  
|                                                         |  |                          |  
|Unrecognized net actuarial (gains) losses                |  | 229                      |  
|Unrecognized asset surplus                               |  | (452                     | )
|                                                         |  |                          |  
|Net asset                                                |  | 1,038                    |  
|                                                         |  |                          |  



In
addition, the Company recorded three accruals relating to other KLMs benefit plans totaling 129 million as of March 31, 2005 corresponding to the following:



| |  | 99 million for health insurance related to retired employees. 68% relates to domestic staff with the remainder related to former employees in the United States and Canada. The
provision for health care insurance is calculated in accordance with IAS 19 using a discount ranging from 4.5% to 6.25% and an annual increase rate of benefits ranging from 2% to 5%.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 16 million retirement indemnity accrual for employees located in Italy and Japan.
| | - | ----------------------------------------------------------------------------------



| |  | 14 million for an early retirement plan.
| | - | -----------------------------------------



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



B  Air France subgroup



In addition to defined benefit pension schemes for employees in France, the Company grants various defined
pension benefits to its employees abroad and termination benefit schemes.



The major foreign employee benefit liabilities of the Company are located:



  in the USA, linked to two defined benefit pension plans which are overfunded;



  in the UK, where employees of the local representation
office and local subsidiaries are granted a supplemental pension benefit administered through a specific pension fund;



  in Japan, where employees benefit from a supplemental pension plan and lump-sum termination payments.



In addition to this, almost all other foreign representation
offices grant termination benefits or lump-sum payments to their employees.



Employees in France benefit from two specific schemes:



  a retirement lump-sum scheme for all employees;



  an additional retirement indemnity scheme.



The French law 2003-775 dated August 21st, 2003 which amends the pensions system set the retirement age at the age of 65. This change implies that lump-sum schemes paid for retirement prior to that age would be subject to social security
taxes, unless a sector agreement including counterparts in terms of employment grants this involuntary retirement.



In conjunction with the privatization of Air France on May 5, 2004, current statutory regulations must be adapted and aligned with those
applicable under common law. Air France has a period of two years in which to accomplish this alignment, during which the statutory regulations are still applied.



All staff are entitled to a statutory retirement indemnity calculated on the basis of seniority, which may
be allocated at or after the age of 55 for cabin crew members and 60 for other employees. This indemnity is not subject to social security taxes.



Cabin crew members are also entitled to a special retirement indemnity subject to social security taxes, and available under certain
conditions at or after the age of 50.



Starting
May 6, 2006, redundancy and involuntary retirement conditions of the National Aeronautical Transport Sector Agreement shall apply to the ground staff of Air France.



Based on an agreement signed on April 13, 2005, new conditions of redundancy and involuntary retirement
prior to the age of 65 have been defined in the sector agreement. According to the agreement, the retirement indemnity is not subject to social security taxes (for either the employee or employer) when the retirement is involuntary.



Furthermore, the new law stipulates that pilots must retire
at 60 and cabin crew at 55.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The new law, in Article L.421.9 of the civil aviation code, does not change the
retirement age but may if the reclassification of ground staff fails, change the type of redundancy previously classified as a case of force majeure.



This type of redundancy is usually exempt from the Delalande tax.



Were this not the case, the impact of this additional commitment would be booked as an actuarial variance of
approximately 39 million and would be recognised over the average residual period of the employees term of employment, representing 3 million a year.



For all schemes identified as material, an actuarial valuation as of March 31, 2005 was performed, using the
projected unit credit method. The mains assumptions used in the calculation are as follows:



  turn-over rates for active employees, mortality rates, salary increase scales;



  retirement age assumptions ranging from 51 to 65 for French employees, and at various ages in accordance with local economic and
demographic contexts for employees of foreign entities;



  discount rates: 4.5% for French entities and ranging from 1.75% to 18% for foreign entities;



  long term expected rates of return on pension plan assets ranging from 4% to 12%.



The following table shows the amounts recorded in the balance
sheet:



|                                                      |  |                       |   |  |      |   |  |      |  
|----------------------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                                      |  | Years ended March 31, |  
|                                                      |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                                      |  | (in  million)        |  
|Present value of projected benefit obligations        |  | 857                   |   |  | 772  |   |  | 650  |  
|Fair value of plan assets                             |  | (404                  | ) |  | (10  | ) |  | (371 | )
|                                                      |  |                       |   |  |      |   |  |      |  
|Projected benefit obligation in excess of plan assets |  | 453                   |   |  | 362  |   |  | 279  |  
|                                                      |  |                       |   |  |      |   |  |      |  
|Unrecognized net actuarial gains (losses)             |  | (88                   | ) |  | (40  | ) |  | (37  | )
|Unrecognized past service cost                        |  | (25                   | ) |  | (24  | ) |  | 18   |  
|Assets                                                |  | 19                    |   |  | 19   |   |  |     |  
|Net obligation in the balance sheet of subsidiaries   |  |                      |   |  |     |   |  | 9    |  
|                                                      |  |                       |   |  |      |   |  |      |  
|Net obligation in the balance sheet                   |  | 359                   |   |  | 317  |   |  | 269  |  
|                                                      |  |                       |   |  |      |   |  |      |  



Retirement charges include the following components:



|                                         |  |                       |   |  |      |   |  |      |  
|---------------------------------------- |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                         |  | Years ended March 31, |  
|                                         |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                         |  | (in  million)        |  
|Current service cost                     |  | (39                   | ) |  | (37  | ) |  | (29  | )
|Interest cost                            |  | (41                   | ) |  | (37  | ) |  | (35  | )
|Amortization of actuarial gains (losses) |  | (2                    | ) |  | (1   | ) |  | 1    |  
|Amortization of past service cost        |  | (1                    | ) |  | (2   | ) |  | 34   |  
|Expected return on plan assets           |  | 28                    |   |  | (3   | ) |  |     |  
|Net retirement charge of subsidiaries    |  |                      |   |  |     |   |  | (9   | )
|                                         |  |                       |   |  |      |   |  |      |  
|Net retirement charge                    |  | (55                   | ) |  | (50  | ) |  | (38  | )
|                                         |  |                       |   |  |      |   |  |      |  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The assumptions used in the valuation of retirement benefit obligations are as
follows:



|                                   |  |                       |   |  |            |   |  |            |   |  |         |   |  |            |   |  |         |  
|---------------------------------- |  | --------------------- | - |  | ---------- | - |  | ---------- | - |  | ------- | - |  | ---------- | - |  | ------- | -
|                                   |  | Years ended March 31, |  
|                                   |  | 2005                  |   |  | 2004       |   |  | 2003       |  
|                                   |  | France                |   |  | Abroad     |   |  | France     |   |  | Abroad  |   |  | France     |   |  | Abroad  |  
|Gross discount rate                |  | 4.50                  | % |  | 1,75 to 18 | % |  | 5.00       | % |  | 2 to 9  | % |  | 5.25       | % |  | 2 to 10 | %
|Gross rate of increase in salaries |  | 1.5 to 5.1            | % |  | 3 to 18.5  | % |  | 1.5 to 4.5 | % |  | 2 to 12 | % |  | 2.8 to 5.1 | % |  | 2 to 9  | %



22.3  Restructuring provision



|                                     |  |                       |   |  |      |   |  |      |  
|------------------------------------ |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                     |  | Years ended March 31, |  
|                                     |  | 2005                  |   |  | 2004 |   |  | 2003 |  
|                                     |  | (in  million)        |  
|Opening balance                      |  | 13                    |   |  | 11   |   |  | 4    |  
|                                     |  |                       |   |  |      |   |  |      |  
|Change in scope of consolidation     |  | 82                    |   |  |     |   |  |     |  
|Charge                               |  | 17                    |   |  | 10   |   |  | 13   |  
|Release                              |  | (45                   | ) |  | (8   | ) |  | (6   | )
|Translation difference               |  | 4                     |   |  |     |   |  |     |  
|                                     |  |                       |   |  |      |   |  |      |  
|Restructuring reserve as of March 31 |  | 71                    |   |  | 13   |   |  | 11   |  
|                                     |  |                       |   |  |      |   |  |      |  



The
change in restructuring provisions primarily reflects the result of KLMs business combination. As of March 31, 2005, KLMs restructuring reserves amounted to 53 million.



23  Short and long-term debt and capital lease obligations



|                                                             |  |                       |  |       |  |      
|------------------------------------------------------------ |  | --------------------- |  | ----- |  | -----
|                                                             |  | Years ended March 31,
|                                                             |  | 2005                  |  | 2004  |  | 2003 
|                                                             |  | (in  million)       
|Perpetual subordinated loan securities                       |  | 571                   |  | 116   |  | 169  
|Bonds payable                                                |  |                      |  | 18    |  | 187  
|Long-term loans                                              |  | 2,873                 |  | 2,461 |  | 1,914
|Capital-lease obligations                                    |  | 4,482                 |  | 1,453 |  | 1,413
|Accrued interest                                             |  | 79                    |  | 43    |  | 47   
|                                                             |  |                       |  |       |  |      
|Long-term debt and capital lease obligations*                |  | 8,005                 |  | 4,091 |  | 3,730
|                                                             |  |                       |  |       |  |      
|Borrowings with short-term original maturities               |  |                      |  |      |  |     
|Commercial paper                                             |  |                      |  |      |  | 150  
|Short-term bank finance facilities and similar facilities    |  | 263                   |  | 289   |  | 267  
|                                                             |  |                       |  |       |  |      
|Short-term debts                                             |  | 263                   |  | 289   |  | 417  
|                                                             |  |                       |  |       |  |      
|Total short and long-term debt and capital lease obligations |  | 8,268                 |  | 4,380 |  | 4,147
|                                                             |  |                       |  |       |  |      
|*  Amounts maturing within one
year                          |  | 1,056                 |  | 429   |  | 548  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



23.1  Perpetual subordinated loan securities (TDI)



The long-term debt includes two subordinated loans of KLM
(Japanese Yen and Swiss Franc) amounting to 495 million. Both loans have a fixed interest coupon after swaps. In certain circumstances, KLM has the right to redeem the loans, with or without payment of a premium. These loans are subordinated
to all other existing and future KLM debts and the subordinations are equal in rank. The loan denominated in Swiss Franc was created in two tranches (1985 and 1986); the weighted average cost of this perpetual loan was 4.45 % for the period ended
March 31, 2005. The loan in Japanese Yen was created in 1999.



Air France issued two TDI perpetual subordinated loan securities, one in June 1989 and a second in May 1992, for 381 million and 395 million, respectively.



The first issuance was restructured in the fiscal year 1999,
with the loan securities being replaced by the original issuers with perpetual non-subordinated loan issued under the same financial conditions (Euribor + 0.38% for the first tranche of 114 million and a fixed rate of 10% for the second
tranche of 267 million). Under the terms of the new issue, holders will receive a nominal amount of interest from June 23, 2004. The lender securitized this loan in the form of units in a mutual debt fund of which the remaining units could be
bought by the Company at any time.



The TDIs
issued in 1992 bear interest at a fixed rate of 10.06%. Payment of interest is not subordinated, although the Board of Directors may decide to suspend payment thereof if net consolidated losses exceed 30% of stockholders equity and no dividend
is paid. The securities were designated as subordinated financing following the conclusion of an issue agreement with certain trusts. The trusts undertook, via a series of separate subscriber agreements, to buy back the securities after a period of
15 years, requiring an initial payment from the Company of 94 million. The agreements also stipulate that the trusts will only receive a nominal interest from the sixteenth year onwards.



TDIs, including the perpetual loan which replaced the 1989
issuance, were recorded at the date of their issue under short and long-term debt, net of issue costs for 281 million for the 1989 issuance and 301 million for the 1992 issuance.



Interest receivable on the zero-coupon bonds is credited to
the interest charge and debited to the outstanding balance on the debts. The net balance of the loan is being written down over a period of 15 years.



As of March 31, 2005, the TDI 89 was fully amortized and the TDI 92 represented a debt of 76 million.



The tax regime for perpetual subordinated loan securities was
approved by the Tax Authorities and interest is henceforth deductible for the portion effectively received.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



23.2  Bonds



|                             |  |                            |  |      |  |      |  |     
|---------------------------- |  | -------------------------- |  | ---- |  | ---- |  | ----
|                             |  | Years ended March 31, 2003
|                             |  | Nominal                    |  | 2005 |  | 2004 |  | 2003
|                             |  | (in  million)            
|Bonds denominated in        |  |                            |  |      |  |      |  |     
|1993 bond at 7.5%            |  | 229                        |  |     |  |     |  | 167 
|Other bonds                  |  |                            |  |      |  | 18   |  | 20  
|                             |  |                            |  |      |  |      |  |     
|Total bonds denominated in  |  |                            |  |      |  | 18   |  | 187 
|                             |  |                            |  |      |  |      |  |     
|Accrued interest payable     |  |                            |  |     |  |     |  | 9   
|                             |  |                            |  |      |  |      |  |     
|Total bonds                  |  |                            |  |      |  | 18   |  | 196 
|                             |  |                            |  |      |  |      |  |     



23.3  Long-term loans



In July 2003, Air France finalized the securitization of aeronautical assets for an amount of  435 million. This financing arrangement was secured by 16 aircraft.



Three ten-year debt tranches were issued: a senior floating rate A1 tranche of  98.4 million with an
average maturity of 5.6 years, a second senior outstanding fixed rate A2 tranche of  194 million with a maturity of 10 years (both tranches are secured by MBIA Assurance S.A and were given Aaa and AAA ratings by the Moodys and Fitch
rating agencies respectively) and a mezzanine floating rate B tranche of  142.6 million with an average maturity of 5.6 years (given a Baa1 and A- ratings by Moodys and Fitch respectively).



During the fiscal year ended March 31, 2004, 13 aircraft were
delivered for an amount of 337 million. Three additional aircraft were delivered during the year ended March 31, 2005 for an amount of 98 million.



In addition to this transaction, the figure for other long-tem loans includes  1,966 million in debt linked to sales with
reservation of title and mortgaged loans. The net book value of the assets pledged as security (primarily 62 aircraft) is 1,947 million as at March 31, 2005. In addition, the Company has contracted other long-term loans with financial
institutions, primarily to finance flight equipment. The aggregate amount of these loans was  198 million at March 31, 2005 and include a loan of  125 million maturing in September 2008, of which 72 million bears interest at a
variable rate (based on three months Euribor) and 53 million bears interest at a fixed rate of 4.7%, and a loan of  73 million maturing in April 16, 2009 and having a currently floating interest rate of 3.08%.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



23.4  Analysis of long-term debts and capital lease obligations by maturity date



|           |  |                       |  |       |  |      
|---------- |  | --------------------- |  | ----- |  | -----
|           |  | Years ended March 31,
|           |  | 2005                  |  | 2004  |  | 2003 
|           |  | (in  million)       
|Matures in |  |                       |  |       |  |      
|Y + 1      |  | 1,056                 |  | 429   |  | 548  
|Y + 2      |  | 1,087                 |  | 523   |  | 354  
|Y + 3      |  | 983                   |  | 600   |  | 489  
|Y + 4      |  | 849                   |  | 312   |  | 538  
|Y + 5      |  | 573                   |  | 435   |  | 270  
|> 5 years  |  | 3,457                 |  | 1,792 |  | 1,531
|           |  |                       |  |       |  |      
|Total      |  | 8,005                 |  | 4,091 |  | 3,730
|           |  |                       |  |       |  |      



23.5  Analysis by currency



The breakdown of all long-term debt and capital leases taking into account the effects of derivative financial instruments is as follows:



|                 |  |                       |  |       |  |      
|---------------- |  | --------------------- |  | ----- |  | -----
|                 |  | Years ended March 31,
|                 |  | 2005                  |  | 2004  |  | 2003 
|                 |  | (in  million)       
|Euro             |  | 6,997                 |  | 3,720 |  | 3,252
|USD              |  | 619                   |  | 366   |  | 374  
|CHF              |  | 280                   |  |      |  | 68   
|GBP              |  | 76                    |  |      |  |     
|JPY              |  | 29                    |  |      |  | 29   
|Other currencies |  | 4                     |  | 5     |  | 7    
|                 |  |                       |  |       |  |      
|Total            |  | 8,005                 |  | 4,091 |  | 3,730
|                 |  |                       |  |       |  |      



23.6  Credit lines



On August 8, 2001, the Company signed the opening of a revolving, syndicated multi-currency credit line in the amount of 1 billion for a period of five years. No amounts had been drawn under this credit line as of March 31, 2005. The
company must pay an annual commitment fee of 0.11% on the unused portion of the commitment. The credit line agreement also includes certain covenant provisions. Such credit line was renewed on April 2005 for an amount of 1.2 billion and a five
year period. The annual commitment fee has been fixed to 0.07% of the unused portion of the commitment.



In addition, the Company has a medium-term credit line in the amount of 52 million (28 million drawn as of March 31, 2005),
with a repayment schedule from April 2005 through October 2006.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



24  Income tax liability



|                         |  |                       |  |      |  |     
|------------------------ |  | --------------------- |  | ---- |  | ----
|                         |  | Years ended March 31,
|                         |  | 2005                  |  | 2004 |  | 2003
|                         |  | (in  million)       
|Current tax              |  | 8                     |  | 21   |  | 5   
|Deferred tax (note 12.3) |  | 73                    |  |     |  |    
|                         |  |                       |  |      |  |     
|Total                    |  | 81                    |  | 21   |  | 5   
|                         |  |                       |  |      |  |     
|Of which > 1 year        |  | 73                    |  |     |  |    



25  Advance ticket sales
and loyalty program



|                       |  |                       |  |       |  |     
|---------------------- |  | --------------------- |  | ----- |  | ----
|                       |  | Years ended March 31,
|                       |  | 2005                  |  | 2004  |  | 2003
|                       |  | (in  million)       
|Unused tickets         |  | 1,328                 |  | 781   |  | 693 
|Frequent Flyer Program |  | 118                   |  | 80    |  | 90  
|Other                  |  | 210                   |  | 147   |  | 118 
|                       |  |                       |  |       |  |     
|Total                  |  | 1,656                 |  | 1,008 |  | 901 
|                       |  |                       |  |       |  |     



During
the year ended March 31, 2005, because of Air France and KLM combinated their frequent flyers loyalty programs starting June 2005 and the valuation of new air miles redemption assumptions (cf 2.8) the Company adjusted the estimated
liability. Had the Company not changed this estimate, the liability associed with the Flying Blue program would have been approximately 130 million at March 31, 2005.



During the year ended March 31, 2004, the Company performed studies which focused on the behavior of members
of the Frequence Plus loyalty program and implemented changes in the program. This activities caused Air France to change its estimated liability for the loyalty program. Had the Company not changed this estimate, the liability associated with the
Frequence Plus program would have been approximately 103 million at March 31, 2004.



During the year ended March 31, 2003, the Company changed the estimates used for computing the Frequence Plus liability to more
adequately reflect the expected behaviors of its customers. Had the Company not changed this estimate, the liability associated with the Frequence Plus program would have been approximately 130 million at March 31, 2003.



26  Other payables



|                                                       |  |                       |  |       |  |      
|------------------------------------------------------ |  | --------------------- |  | ----- |  | -----
|                                                       |  | Years ended March 31,
|                                                       |  | 2005                  |  | 2004  |  | 2003 
|                                                       |  | (in million)        
|Employee-related liabilities                           |  | 742                   |  | 491   |  | 467  
|Tax liabilities                                        |  | 234                   |  | 193   |  | 166  
|Deferred income on transactions with equity affiliates |  | 85                    |  | 70    |  | 70   
|Other                                                  |  | 1,045                 |  | 446   |  | 355  
|Total                                                  |  | 2,106                 |  | 1,200 |  | 1,058
|                                                       |  |                       |  |       |  |      



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Other payables consist, for the most part, of salaries and other amounts owed to
employees, including the corresponding social security contributions.



In addition, during 1997 and 1998, the Company sold its investment in Amadeus Data Processing (a subsidiary which had been consolidated) and 33% of its investment in Amadeus France (which remains a consolidated
subsidiary of the Company) to Amadeus GTD, an equity affiliate. On December 30, 2004, Air France sold its entire stake in Amadeus France to Amadeus GTD. The gains on disposal of these investments have been eliminated to the extent of Air
Frances continuing investment in Amadeus GTD. These amounts will continue to be deferred until such time as the Air France investment in Amadeus GTD is reduced by sale or other means.



As of March 31, 2005, the item Other includes
other operating liabilities of the KLM group of 355 million, including 77 million for layover services and aircraft fees, and 51 million for maintenance.



Also included in this line item are 207 million in liabilities to the French State under the
Offer Reserved for Employees and the Wage for Share Exchange (see notes 18 and 33).



27  Financial instruments



27.1  Exposure to interest rate risk



In order to manage interest rate risk on short- and long-term borrowings, the Company uses instruments with the following nominal values
as of the balance sheet date:



|                             |  |                       |  |       |  |      
|---------------------------- |  | --------------------- |  | ----- |  | -----
|                             |  | Years ended March 31,
|                             |  | 2005                  |  | 2004  |  | 2003 
|                             |  | (in  million)       
|Fixed to variable-rate swaps |  | 762                   |  | 172   |  | 181  
|Variable to fixed-rate swaps |  | 1,894                 |  | 1,105 |  | 1,209
|Interest rate collars        |  | 7                     |  |      |  |     



These instruments have
different objectives:



  Hedging fair value
risk relating to fixed-rate short and long-term debt and capital leases:



By contracting a fixed-rate debt, the Company is exposed to an opportunity risk if the rate falls.



Given the current position of market rates in comparison with fixed contractual rates on certain of its short and long-term debt and capital leases, the
Company entered into a number of fixed to variable-rate swaps.



  Hedging of cash-flow risk relating to variable-rate short and long-term debt and capital leases:



The Company has sought to fix the rate of certain variable-rate debts and thus entered into a number of variable to fixed-rate swaps.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Based on the above hedging arrangements, the Companys interest rate exposure
can be summarized as follows:



Financial assets and
liabilities at fixed rates:



|                                        |  |                                 |  |                          |  |       |  |      |   |  |       |   |  |       |  
|--------------------------------------- |  | ------------------------------- |  | ------------------------ |  | ----- |  | ---- | - |  | ----- | - |  | ----- | -
|                                        |  | Years ended March 31,           | 
|                                        |  | Financial instrumentsbook value |  | Average rate of interest | 
|                                        |  | 2005                            |  | 2004                     |  | 2003  |  | 2005 |   |  | 2004  |   |  | 2003  |  
|                                        |  | (in  million)                  |  |                          |  |       |  |      |   |  |      
|Fixed-rate financial assets             |  | 36                              |  | 13                       |  | 15    |  | 4.54 | % |  | 9.30  | % |  | 7.02  | %
|                                        |  |                                 |  |                          |  |       |  |      |   |  |       |   |  |       |  
|Perpetual subordinated loan securities  |  | 571                             |  | 97                       |  | 144   |  | 5.32 | % |  | 10.04 | % |  | 10.04 | %
|Bonds                                   |  |                                |  |                         |  | 99    |  |     |   |  | 6.54  | % |  | 6.88  | %
|Other long-term debt and capital leases |  | 3,822                           |  | 1,800                    |  | 1,628 |  | 6.05 | % |  | 5.18  | % |  | 4.82  | %
|                                        |  |                                 |  |                          |  |       |  |      |   |  |       |   |  |       |  
|Fixed-rate financial liabilities        |  | 4,393                           |  | 1,897                    |  | 1,871 |  | 5.96 | % |  | 5.46  | % |  | 6.36  | %
|                                        |  |                                 |  |                          |  |       |  |      |   |  |       |   |  |       |  



Variable-rate
assets and liabilities:



|                                                          |  |                                 |  |                          |  |       |  |      |   |  |      |   |  |      |  
|--------------------------------------------------------- |  | ------------------------------- |  | ------------------------ |  | ----- |  | ---- | - |  | ---- | - |  | ---- | -
|                                                          |  | Years ended March 31,           | 
|                                                          |  | Financial instrumentsbook value |  | Average rate of interest | 
|                                                          |  | 2005                            |  | 2004                     |  | 2003  |  | 2005 |   |  | 2004 |   |  | 2003 |  
|                                                          |  | (in  million)                  |  |                          |  |       |  |      |   |  |     
|Variable-rate financial assets                            |  | 805                             |  | 163                      |  | 403   |  | 2.26 | % |  | 2.25 | % |  | 2.84 | %
|                                                          |  |                                 |  |                          |  |       |  |      |   |  |      |   |  |      |  
|Perpetual subordinated loan securities                    |  |                                |  | 19                       |  | 25    |  | 2.70 | % |  | 2.70 | % |  | 3.74 | %
|Bonds                                                     |  |                                |  | 18                       |  | 88    |  | 1.62 | % |  | 1.16 | % |  | 1.57 | %
|Other long-term debt and capital leases                   |  | 3,533                           |  | 2,114                    |  | 1,699 |  | 2.85 | % |  | 3.12 | % |  | 4.31 | %
|Short-term bank finance facilities and similar facilities |  | 263                             |  | 289                      |  | 417   |  | 2.06 | % |  | 2.04 | % |  | 2.80 | %
|                                                          |  |                                 |  |                          |  |       |  |      |   |  |      |   |  |      |  
|Variable-rate financial liabilities                       |  | 3,796                           |  | 2,440                    |  | 2,229 |  | 2.78 | % |  | 2.93 | % |  | 3.96 | %
|                                                          |  |                                 |  |                          |  |       |  |      |   |  |      |   |  |      |  



27.2  Exchange rate risk



Current operations:



Although
the Companys reporting currency is the euro (), part of its cash flow is denominated in other currencies, such as the US dollar (USD), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF).



Commercial activities also generate and incur income and
expenses in foreign currency. The Companys policy is to hedge against exchange risks relating to forecasted cash surpluses or shortfalls in various currencies. Hedging takes the form of forward sales or purchases and/or option-based
strategies.



Acquisitions of flight
equipment:



Capital expenditures for flight
equipment is denominated in US dollars. The Company hedges on the basis of projected fluctuations in the US dollar via forward sales and purchases and/or option-based strategies.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Long-term debt and capital leases:



A number of loans are denominated in foreign currency so as
to diversify sources of funding and take into account cash surpluses generated in various currencies. In order to safeguard against the risk of exchange rate fluctuations on debt and capital leases, currency swaps are used. This is a micro-hedging
mechanism matched specifically to the borrowing to which it relates.



The nominal amounts of forward currency hedges and swaps are shown below, based on the nature of the hedging instrument used:



|                                             |  |                       |  |            |  |               
|-------------------------------------------- |  | --------------------- |  | ---------- |  | --------------
|                                             |  | Years ended March 31,
|                                             |  | 2005                  |  | 2004       |  | 2003          
|                                             |  | (in  million)       
|Operating hedges                             |  |                       |  |            |  |               
|Forward sales                                |  |                       |  |            |  |               
|JPY                                          |  | 76                    |  | 124        |  |              
|GBP                                          |  | 183                   |  | 57         |  | 102           
|CHF                                          |  | 36                    |  |           |  |              
|NOK                                          |  | 77                    |  |           |  |              
|SEK                                          |  | 62                    |  |           |  |              
|SGD                                          |  | 14                    |  |           |  |              
|PLN                                          |  | 9                     |  |           |  |              
|Maturity        - min                        |  | April 2005            |  | April 2004 |  | April 2003    
|-
max                                        |  | March 2006            |  | April 2006 |  | October 2006  
|Forward purchases                            |  |                       |  |            |  |               
|USD                                          |  | 290                   |  | 182        |  | 37            
|Maturity        - min                        |  | April 2005            |  | April 2004 |  | April 2003    
|-
max                                        |  | March 2006            |  | March 2005 |  | September 2003
|Exchange rate options                        |  |                       |  |            |  |              
|USD                                          |  | 647                   |  | 227        |  |              
|GBP                                          |  | 66                    |  | 45         |  | 106           
|JPY                                          |  | 58                    |  |           |  | 4             
|CHF                                          |  | 22                    |  |           |  |              
|Maturity        - min                        |  | April 2005            |  | April 2004 |  | April 2003    
|-
max                                        |  | May 2006              |  | March 2005 |  | September 2004
|Flight equipment acquisition hedging         |  |                       |  |            |  |               
|Forward purchases                            |  | 1,973                 |  | 1,091      |  | 30            
|Put options                                  |  | 216                   |  |           |  | 200           
|Maturity        - min                        |  | April 2005            |  | April 2004 |  | April 2003    
|-
max                                        |  | February 2010         |  | May 2008   |  | November 2003 
|Hedging of long-term debt and capital leases |  |                       |  |            |  |               
|Currency swaps                               |  | 234                   |  |           |  | 276           
|Cross currency interest rate swap (CIRS)     |  | 1,014                 |  |           |  |              
|Maturity        - min                        |  | April 2005            |  |            |  | June 2003     
|-
max                                        |  | August 2019           |  |            |  | January 2004  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



27.3  Commodity risk - fuel prices



In the normal course of business, the Company conducts
transactions on the petroleum products markets in order to effectively manage the risks related to its purchases of aircraft fuel.



The Companys commitments on the crude and refined oil markets are shown below (nominal amounts):



|                      |  |                       |  |            |  |           
|--------------------- |  | --------------------- |  | ---------- |  | ----------
|                      |  | Years ended March 31,
|                      |  | 2005                  |  | 2004       |  | 2003      
|                      |  | (in  million)       
|Petroleum swaps       |  | 1,712                 |  | 25         |  | 202       
|Petroleum options     |  | 2,574                 |  | 842        |  | 764       
|Maturity        - min |  | April 2005            |  | April 2004 |  | April 2003
|-
max                 |  | March 2009            |  | June 2007  |  | March 2005



27.4  Counterparty risk management



Transactions which potentially generate counterparty risk for the Company are as follows:



  temporary financial investments



  derivatives



  trade receivables



Financial investments are diversified investments in blue-chip securities negotiated with leading banks.



Company transactions in derivatives are aimed at reducing
overall exposure to exchange rate and interest rate risks to which the Company is exposed in the normal course of business. Such transactions are limited to organized markets or over-the-counter transactions with reputable counterparties with
negligible counterparty risk.



Counterparty
risk relating to trade receivables is limited due to the large number and geographical diversity of customers comprising the trade receivables portfolio.



As of March 31, 2005, the Company had not identified any specific counterparty risks relating to trade receivables.



27.5  Market value of financial instruments



Market values of financial instruments are determined using a
variety of valuation methods, including discounted future cash flows. However, the methods and assumptions used to provide the information set out below are subject to the following inherent limitations:



  market values do not take into
consideration the effect of subsequent fluctuations in interest or exchange rates,



  estimated amounts as of March 31, 2005, 2004 and 2003 are not indicative of gains and/or losses arising upon maturity or
in the event of cancellation of a financial instrument.



Application of alternative methods and assumptions may, therefore, have a significant impact on the estimated market values shown.



F-57



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The methods used are as follows:



  Cash, trade receivables, other receivables, short-term
bank finance, trade payables and other payables.



The Company believes that, due to the short-term nature of the above, net book value can be deemed a reasonable approximation of market value.



  Marketable securities, investments and other securities.



The market value of securities is determined based on the market price or the prices available on other
similar securities markets. Where no benchmark exists, net book value is used, which is deemed a reasonable approximation of market value in this instance.



  Loans and other long-term debts and capital leases.



The exchange and interest rate swaps are specifically used to hedge against long-term debt and capital
leases. The market value of these long-term debt and capital lease obligations and loans has been determined after having taken the swaps into account. Variable-rate loans and other long-term debt and capital leases are recorded at net book value.
The market value of fixed-rate loans and other long-term debt and capital leases is determined based on discounted future cash flows at market interest rates for instruments with similar features.



  Off-balance sheet instruments.



The market value of off-balance sheet
instruments corresponds to the amounts payable or receivable assuming the positions were closed out on March 31, 2005, 2004 and 2003, respectively, calculated using the year-end market rate.



F-58



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Market values calculated in this way are shown in the table below:



|                                                             |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|------------------------------------------------------------ |  | -------------------- |  | -------------------- | ---- |  | ------------- |  | -------------------- |  | ------------- |  | -------------------- | -
|                                                             |  | Years ended March 31 | 
|                                                             |  | 2005                 |  |                      | 2004 |  | 2003          | 
|                                                             |  | Net bookvalue        |  | Estimatedmarketvalue |      |  | Net bookvalue |  | Estimatedmarketvalue |  | Net bookvalue |  | Estimatedmarketvalue |  
|                                                             |  | (in  million)       | 
|Balance sheet                                                |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|Investment securities                                        |  | 73                   |  | 70                   |      |  | 81            |  | 76                   |  | 104           |  | 90                   |  
|Loans                                                        |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|fixed-rate                                                   |  | 3                    |  | 3                    |      |  | 4             |  | 4                    |  | 4             |  | 4                    |  
|variable-rate                                                |  | 3                    |  | 3                    |      |  | 36            |  | 36                   |  | 11            |  | 11                   |  
|Marketable securities                                        |  | 2,254                |  | 2,254                |      |  | 1,478         |  | 1,478                |  | 1,039         |  | 1,039                |  
|Bonds                                                        |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|fixed-rate                                                   |  |                     |  |                     |      |  |              |  |                     |  | 99            |  | 105                  |  
|variable-rate                                                |  |                     |  |                     |      |  | 18            |  | 18                   |  | 88            |  | 88                   |  
|Perpetual subordinated loan securities                       |  | 571                  |  | 550                  |      |  | 116           |  | 155                  |  | 169           |  | 182                  |  
|Other loans and long-term debt and capital leases            |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|fixed-rate                                                   |  | 3,822                |  | 4,048                |      |  | 1,800         |  | 1,822                |  | 1,628         |  | 1,723                |  
|variable-rate                                                |  | 3,533                |  | 3,533                |      |  | 2,114         |  | 2,114                |  | 1,699         |  | 1,697                |  
|Other short-term loans and long-term debt and capital leases |  | 263                  |  | 263                  |      |  | 289           |  | 289                  |  | 417           |  | 417                  |  
|                                                             |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|Off-balance sheet                                            |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|Treasury management instruments                              |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|exchange rate options                                        |  |                     |  | (6                   | )    |  |              |  | 5                    |  |              |  | (2                   | )
|forward currency contracts                                   |  |                     |  | (178                 | )    |  |              |  | 21                   |  |              |  | (14                  | )
|currency swaps                                               |  |                     |  | (36                  | )    |  |              |  |                     |  |              |  | 28                   |  
|Interest rate swaps                                          |  |                     |  | (57                  | )    |  |              |  |                     |  |              |  |                     |  
|Commodity instruments                                        |  |                      |  |                      |      |  |               |  |                      |  |               |  |                      |  
|petroleum swaps                                              |  |                     |  | 1,183                |      |  |              |  | 154                  |  |              |  | 29                   |  



28  Leases



28.1  Capital leases



|                                   |  |                       |  |       |  |      
|---------------------------------- |  | --------------------- |  | ----- |  | -----
|                                   |  | Years ended March 31,
|                                   |  | 2005                  |  | 2004  |  | 2003 
|                                   |  | (in  million)       
|Aircraft                           |  |                       |  |       |  |      
|Minimum lease payments by maturity |  |                       |  |       |  |      
|Y + 1                              |  | 609                   |  | 161   |  | 202  
|Y + 2                              |  | 881                   |  | 134   |  | 162  
|Y + 3                              |  | 882                   |  | 281   |  | 134  
|Y + 4                              |  | 525                   |  | 172   |  | 258  
|Y + 5                              |  | 411                   |  | 100   |  | 174  
|> 5 years                          |  | 1,729                 |  | 591   |  | 644  
|                                   |  |                       |  |       |  |      
|Total                              |  | 5,037                 |  | 1,439 |  | 1,574
|                                   |  |                       |  |       |  |      
|Of which interest                  |  | 727                   |  | 185   |  | 229  
|Aircraft capital leases            |  | 4,310                 |  | 1,254 |  | 1,345
|                                   |  |                       |  |       |  |      



F-59



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                   |  |                       |  |       |  |      
|---------------------------------- |  | --------------------- |  | ----- |  | -----
|                                   |  | Years ended March 31,
|                                   |  | 2005                  |  | 2004  |  | 2003 
|                                   |  | (in  million)       
|Buildings                          |  |                       |  |       |  |      
|Minimum lease payments by maturity |  |                       |  |       |  |      
|Y + 1                              |  | 21                    |  | 20    |  | 11   
|Y + 2                              |  | 21                    |  | 21    |  | 11   
|Y + 3                              |  | 19                    |  | 22    |  | 11   
|Y + 4                              |  | 18                    |  | 21    |  | 11   
|Y + 5                              |  | 18                    |  | 19    |  | 10   
|> 5 years                          |  | 102                   |  | 127   |  | 21   
|                                   |  |                       |  |       |  |      
|Total                              |  | 199                   |  | 230   |  | 75   
|                                   |  |                       |  |       |  |      
|Of which interest                  |  | 29                    |  | 34    |  | 11   
|Building capital leases            |  | 170                   |  | 196   |  | 64   
|Equipment capital leases           |  | 2                     |  | 3     |  | 4    
|                                   |  |                       |  |       |  |      
|Total capital leases               |  | 4,482                 |  | 1,453 |  | 1,413
|                                   |  |                       |  |       |  |      



In
fiscal 2005, the Company exercised a purchase option on a financial lease contract, and sold a building in Ivry.



28.2  Operating leases



|                                   |  |                       |  |       |  |      
|---------------------------------- |  | --------------------- |  | ----- |  | -----
|                                   |  | Years ended March 31,
|                                   |  | 2005                  |  | 2004  |  | 2003 
|                                   |  | (in  million)       
|Aircraft                           |  |                       |  |       |  |      
|Minimum lease payments by maturity |  |                       |  |       |  |      
|Y + 1                              |  | 648                   |  | 502   |  | 465  
|Y + 2                              |  | 548                   |  | 467   |  | 466  
|Y + 3                              |  | 449                   |  | 388   |  | 404  
|Y + 4                              |  | 354                   |  | 319   |  | 328  
|Y + 5                              |  | 263                   |  | 241   |  | 257  
|> 5 years                          |  | 589                   |  | 370   |  | 439  
|                                   |  |                       |  |       |  |      
|Total                              |  | 2,851                 |  | 2,287 |  | 2,359
|                                   |  |                       |  |       |  |      



For
practical reasons, it is not the Companys policy to disclose the schedule of minimum payments for other operating leases.



F-60



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



29  Flight equipment orders



Due dates for commitments related to flight equipment orders are as follows:



|          |  |                       |  |       |  |      
|--------- |  | --------------------- |  | ----- |  | -----
|          |  | Years ended March 31,
|          |  | 2005                  |  | 2004  |  | 2003 
|          |  | (in  million)       
|Y + 1     |  | 1,157                 |  | 779   |  | 661  
|Y + 2     |  | 608                   |  | 839   |  | 1,065
|Y + 3     |  | 422                   |  | 332   |  | 849  
|Y + 4     |  | 537                   |  | 375   |  | 530  
|Y + 5     |  | 121                   |  | 590   |  | 301  
|> 5 years |  | 117                   |  | 261   |  | 740  
|          |  |                       |  |       |  |      
|Total     |  | 2,962                 |  | 3,176 |  | 4,146
|          |  |                       |  |       |  |      



These
commitments relate to the amounts in USD which are converted into euro at the year-end exchange rate.



Air France had 31 aircraft on order as of March 31, 2005, including 20 Airbus and 11 Boeing, which is nine aircraft less than as of March
31, 2004.



This change reflects the continued
rolling out of delivery schedules for new aircraft and the new orders booked.



KLM and its subsidiaries had nine aircraft on order as of March 31, 2005, including six Airbus and three Boeing.



Below is a summary of the fleet movements during the year ended March 31, 2005:



Long-haul fleet



Air France subgroup



Nine Boeing 777-300ER, a 310 seater three-class aircraft,
were added to Air Frances fleet between May 2004 and the end of March 2005. Four of the nine Boeing 777-300ER were part of an order of 10 aircraft in November 2000 (two owned outright by the Company and two held under financial leases); the
other five are held under operating leases. This fleet, which will be increased to 10 aircraft during the summer 2005 following an additional delivery in April 2005, will be operated on long-haul routes where there are a significant number of
business travellers.



Air France has also
confirmed its interest in this type of fleet by converting four options to purchase such aircraft into four firm orders. Such aircraft will be dedicated to the Caribbean-Indian Ocean routes starting with the fiscal year ending March 31, 2007.



As a result, there are 10 777-300ER on order
as of March 31,2005.



The other orders for
long-haul aircraft have not seen any major changes over the year. The commitments for firm flight equipment orders include two A330-200, which will be delivered in April 2005. However, they do not include the last A330-200, which is still in storage
further to the operation carried out in fall 2002 to defer the delivery. This plane is owned by NOGUES, a financing company that is now consolidated within the Air France Group. This aircraft will enter into service in April 2005. Upon delivery of
this aircraft, the A330-200 fleet of Air France will total 16 aircraft.



F-61



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The order for ten A380-800 has not changed, with the first three deliveries still
scheduled for spring 2007.



Lastly, a final
order has been made for one 747-400ERF, which is due to be delivered in June 2005, supplementing the current fleet of four aircraft.



KLM subgroup



KLM finalized Phase I of its Fleet Renewal Program with the delivery of the remaining four B777-200ER aircraft in April 2004, October
2004, December 2004 and January 2005. Three of these aircraft are under operating leases and one is under a financial lease.



For Phase II of the Fleet Renewal Program, the replacement of twelve B767-300, KLM purchased six Airbus A330-200 aircraft. The first
A330-200 aircraft is scheduled for delivery in August 2005. Additionally, KLM has ordered two B777-200ER aircraft from Boeing, to be delivered early 2006. A combination of two B777-200ER and two A330-200 aircraft will be leased in May 2006 (first
B777) and early 2007 (others) from ILFC. The first B767-300 was scheduled for restitution to the lessor in April 2005.



Medium-haul fleet



Air France subgroup



The process to rationalize the A320 fleet has continued, with eight planes brought into service (four A318, two A320, one A321 and one
A319) during the year ended March 31, 2005.



The four A318 delivered represent the sixth to ninth aircraft of an order of 15 units signed in December 1999, with this module intended to replace the 737-500 in time on the starter segment for the medium-haul fleet (110-120 seats).



The delivery of the other four A320 fleet type
aircraft, brought into service between April and July 2004, was initially deferred due to the air transportation downturn. The upturn in traffic seen in 2003 and confirmed in 2004 allowed the Company to put to an end this deferral.



KLM subgroup



In May 2004, KLM replaced one B737-300 on operating lease by
a B737-900 under a financial lease. One owned B737-400 was written-off following the Barcelona incident on November 28,2004. There are no orders outstanding related to medium-haul fleet as of March 31, 2005.



Transavia purchased a B737-800 and leased a B737-700 in April
2004. One order was placed with Boeing for an additional B737-700.



Regional company fleet



Air France
subgroup



The regional companies took
delivery of one CRJ 700 and one Embraer 145.



KLM
subgroup



KLM Cityhopper has recently
added one used Fokker-70 and one used Fokker-100 to its fleet. Both are owned aircraft. Furthermore, four Fokker-50 aircraft were sold and leased back in November 2004.



F-62



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Following is a summary of the Companys aircraft commitments:



|              |  |                |  |                    |  |     |  |     |  |     |  |     |  |     |  |          
|------------- |  | -------------- |  | ------------------ |  | --- |  | --- |  | --- |  | --- |  | --- |  | ---------
|Aircraft type |  | As of          |  | To be delivered in |  | Y+1 |  | Y+2 |  | Y+3 |  | Y+4 |  | Y+5 |  | > 5 years
|A 318         |  | March 31, 2005 |  | Firm orders        |  | 3   |  | 3   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 5   |  | 2   |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 4   |  | 3   |  | 3   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 5   |  | 2   |  |    |  | 3        
|              |  | March 31, 2003 |  | Firm orders        |  | 5   |  | 3   |  | 4   |  | 3   |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 3   |  | 4   |  | 3   |  |         
|A 319         |  | March 31, 2005 |  | Firm orders        |  | 2   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 1   |  | 2   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 6   |  | 4   |  | 1   |  |    |  | 6        
|A 320         |  | March 31, 2005 |  | Firm orders        |  |    |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 2   |  | 1   |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 2   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 1   |  | 2   |  | 1   |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  | 2   |  | 2   |  | 1   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|A 321         |  | March 31, 2005 |  | Firm orders        |  |    |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 1   |  |    |  | 1   |  |         
|A 330         |  | March 31, 2005 |  | Firm orders        |  | 6   |  | 2   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 1   |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  |    |  | 3   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 1   |  | 2   |  | 2   |  |    |  | 1        
|              |  | March 31, 2003 |  | Firm orders        |  | 3   |  | 1   |  | 1   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 1   |  | 3   |  | 2   |  |    |  |         
|A 380         |  | March 31, 2005 |  | Firm orders        |  |    |  |    |  | 3   |  | 5   |  | 1   |  | 1        
|              |  |                |  | Options            |  |    |  |    |  |    |  | 1   |  | 1   |  | 2        
|              |  | March 31, 2004 |  | Firm orders        |  |    |  |    |  |    |  | 3   |  | 5   |  | 2        
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  | 2   |  | 2        
|              |  | March 31, 2003 |  | Firm orders        |  |    |  |    |  |    |  | 3   |  | 2   |  | 5        
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  | 2   |  | 2        
|B 737         |  | March 31, 2005 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  | 2   |  | 4   |  | 4   |  | 1   |  |         
|B 747         |  | March 31, 2005 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  |    |  | 1   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  |    |  |    |  | 1   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|              |  |                |  |                    |  |     |  |     |  |     |  |     |  |     |  |          
|------------- |  | -------------- |  | ------------------ |  | --- |  | --- |  | --- |  | --- |  | --- |  | ---------
|Aircraft type |  | As of          |  | To be delivered in |  | Y+1 |  | Y+2 |  | Y+3 |  | Y+4 |  | Y+5 |  | > 5 years
|B 777         |  | March 31, 2005 |  | Firm orders        |  | 5   |  | 5   |  | 2   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 2   |  | 4   |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 3   |  | 5   |  | 2   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  | 2   |  | 4   |  | 3   |  | 1        
|              |  | March 31, 2003 |  | Firm orders        |  |    |  | 4   |  | 6   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  | 3   |  | 7        
|Embraer 145   |  | March 31, 2005 |  | Firm orders        |  | 5   |  | 2   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 1   |  | 5   |  | 2   |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  | 2   |  | 3   |  | 3   |  | 2   |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|CRJ 700       |  | March 31, 2005 |  | Firm orders        |  | 1   |  |    |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2004 |  | Firm orders        |  | 1   |  | 1   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         
|              |  | March 31, 2003 |  | Firm orders        |  | 3   |  | 1   |  |    |  |    |  |    |  |         
|              |  |                |  | Options            |  |    |  |    |  |    |  |    |  |    |  |         



30  Other commitments



30.1  Commitments provided



|                                    |  |                       |   |  |       |   |  |       |  
|----------------------------------- |  | --------------------- | - |  | ----- | - |  | ----- | -
|                                    |  | Years ended March 31, |  
|                                    |  | 2005                  |   |  | 2004  |   |  | 2003  |  
|                                    |  | (in  million)        |  
|Call on investment securities       |  | 23                    |   |  | 13    |   |  | 9     |  
|Put on investment securities        |  | (2                    | ) |  | (2    | ) |  | (2    | )
|                                    |  |                       |   |  |       |   |  |       |  
|Total                               |  | 21                    |   |  | 11    |   |  | 7     |  
|                                    |  |                       |   |  |       |   |  |       |  
|Warranties, sureties and guarantees |  | 105                   |   |  | 16    |   |  | 35    |  
|Mortgaged or secured assets         |  | 1,749                 |   |  | 1,650 |   |  | 1,311 |  
|Other purchase commitments          |  | 167                   |   |  | 215   |   |  | 189   |  



As of
March 31, 2003, warranties, sureties and guarantees consisted primarily of a guarantee provided by Air France to financial institutions in connection with Air Littorals lease agreements of five Fokker aircraft. Pursuant to this agreement Air
France has agreed to pay the rentals for the five aircraft if the Company is notified that Air Littoral is not able to fulfill its obligation. In exchange, Air France would be able to use those aircraft for the remaining lease term. The
guarantee given, which corresponds to the minimum amount of future lease obligations for the five Fokkers, amounted to 23 million as of March 31, 2003.



Air Littoral was declared bankrupt during the year ended March 31, 2004. As a result, Air France has assumed Air Littorals
commitments Fokker aircraft described above. Three of these aircraft were brought into service on Air Frances own lines between November 2003 and March 2004. The other two entered in service in May and July 2004.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



30.2  Commitments received



|                                    |  |                       |  |      |  |     
|----------------------------------- |  | --------------------- |  | ---- |  | ----
|                                    |  | Years ended March 31,
|                                    |  | 2005                  |  | 2004 |  | 2003
|                                    |  | (in  million)       
|Warranties, sureties and guarantees |  | 145                   |  | 106  |  | 151 
|Other                               |  | 3                     |  | 9    |  | 6   



Warranties, sureties and guarantees are comprised primarily of letters of credit received from financial institutions.



30.3  Litigation and court action



Air France  KLM and its subsidiaries are involved in various disputes, potential losses for which they have not necessarily been
required to record in the consolidated financial statements.



More specifically, a class action has been filed against Air France, KLM and several US airlines, by five travel agencies based in the United States and their professional association (Association of Retail Travel
Agents) for collusion. The damages claimed were for 17.5 billion US dollars, an amount that could have been tripled under US collusion legislation. An initial ruling was handed down on October 30, 2003 in favor of the airlines. In a ruling announced
on December 9, 2004, the Court of Richmond (Virginia) confirmed the decision taken on October 30, 2003. Subject to a possible appeal, the airlines, including the Company, have been definitively cleared in this case. No provisions had been booked in
connection with this dispute.



A similar suit
is currently being reviewed by the federal courts in Ohio. Approximately 150 travel agents, which were initially plaintiffs in the case mentioned above but later withdrew, have filed a case on the same grounds (collusion) against the Company and
other European and US airlines. The amount of damages alleged by these 150 agents has not yet been determined.



The Company has not booked any provisions in connection with these proceedings.



In December 2004, IAP Intermodal, a US based company, filed
charges against several airlines including the Company with a federal court in Texas accusing them of using flight-time scheduling software that infringe on three patents that IAP intermodal claims to hold.



The Company believes that these claims have no basis, and, as
such, has not recorded any provisions in connection with the suit.



In 2000 and 2001, several Servair employees opened proceedings against their employer claiming that their mealtimes at the place of work should be paid in the same way as working time since they were still available
for their employer. Servair on the other hand considered that mealtimes represented an interruption in working time and as such should not be paid. The Paris court of appeals ruled in favor of Servair on November 8, 2001. Other suits focusing on the
same issue have been filed by an additional 471 Servair employees and are currently being reviewed. In a ruling handed down on October 29, 2004, the court dismissed a similar case filed by approximately 30 employees. A verdict on similar claims
filed by 393 members of staff is expected for June 7, 2005.



No provisions have been recorded in the consolidated financial statements for these cases as Servair believes them to be unfounded.



F-65



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



None of the other disputes that are currently underway, for which Air France and KLM
may not have set aside reasonably sufficient provisions, are likely to have a significant impact on the activities, financial position or operating results of the Company.



Tax Risk



In the normal course of business, the Company faces various tax related litigations. The Company believes
that it has properly accrued for such tax risks.



31  Cash flow
statement



31.1  Cash and cash equivalents



|                                                         |  |                       |   |  |       |   |  |      |  
|-------------------------------------------------------- |  | --------------------- | - |  | ----- | - |  | ---- | -
|                                                         |  | Years ended March 31, |  
|                                                         |  | 2005                  |   |  | 2004  |   |  | 2003 |  
|                                                         |  | (in  million)        |  
|Cash at bank                                             |  | 386                   |   |  | 330   |   |  | 193  |  
|Cash equivalents (Note 20)                               |  | 2,101                 |   |  | 1,364 |   |  | 746  |  
|Short-term bank finance and similar facilities (note 23) |  | (263                  | ) |  | (289  | ) |  | (267 | )
|                                                         |  |                       |   |  |       |   |  |      |  
|Cash and cash equivalents                                |  | 2,224                 |   |  | 1,405 |   |  | 672  |  
|                                                         |  |                       |   |  |       |   |  |      |  



31.2  Acquisition of subsidiaries, affiliates and other investments



During the year ended March 31, 2005, the Company acquired subsidiaries and other ownership interest. These acquisitions relate primarely
to KLM, which had 575 million in cash at the acquisition date and the acquisition of self-controlling shares for an amount of 32 million. Additional interest in Servair and Air Chef were purchased for 3 and 4 million,
respectively.



During the year ended March 31,
2004, 6 million were invested in the acquisition of additional Servair securities and 4 million on the Opodo capital increase.



Investment during the year ended March 31, 2003 was mainly comprised of the acquisition of 2% of the capital of Alitalia for 23
million and the additional investment in Opodo for 21 million.



32.  Other significant events of the year ended March 31, 2005



In connection with the disposition of a portion of the French States stake in Air France  KLMs share capital on December
9, 2004, the employees of Air France and its subsidiaries have had the opportunity to purchase Air France  KLM shares under two employee stock purchase plans.



As a result, a total of 21.6 million Air France-KLM shares (excluding bonus shares), representing 8% of Air
France-KLMs common stock, were offered to employees on February 1st, 2005 through two stock purchase plans: an
offer reserved for employees (ORS) and a salary-share swap (ESA).



The ORS enabled employees to purchase 9 million Air France  KLM shares and, depending on the formula chosen by the employee,
benefited from the following preferential terms:



| |  | a 20% discount on Air France  KLM stock market price;
| | - | ------------------------------------------------------



F-66



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



| |  | the attribution of free shares;
| | - | -------------------------------



| |  | a matching contribution from the employer limited to 40% of the total amount subscribed by the employees;
| | - | ---------------------------------------------------------------------------------------------------------



| |  | some credit facilities.
| | - | -----------------------



The employers matching contribution referred to above and paid by Air France of an amount of 16 million during the year ended
March 31, 2005, was accounted for as a compensation expense.



On February 1, 2005, Air France-KLM offered Air France employees working under a permanent French employment contract to reduce their salaries over a 6 years period in exchange for Air France-KLM shares. Such share
would be delivered by the French State, within a limit of 13,186,853 Air France  KLM shares. At the closing date of the offer period (February 21, 2005), 12.6 million shares of Air France-KLM shares had been subscribed by the employees of
Air France. The vesting period of such plan will effectively start in May 2005. As a result, such stock purchase plan had no impact on the Companys financial statements for the year ended March 31, 2005.



In addition, and in connection with the ESA stock purchase
plan, Air France  KLM has to reimburse the French State for the cost of implementing such plan. The related liability is accounted for an amount of 107 million as of March 31, 2005.



33  Subsequent Events



In April 2005, Air France issued a 15-year Convertible Bond
with an option to convert to new or existing Air France-KLM stock (OCEANEs) for a total of 450 million euros.



The sums borrowed through this convertible bond issue will be used to finance capital investments for the Company, especially fleet
modernization, at a lower financing cost compared with traditional borrowing facilities over a similar period and without mortgaging planes as would normally be the case when financing aircraft.



During the year ended March 31, 2005, Air France and the
other airline shareholders of Amadeus initiated negotiations with investment funds (known as private equity funds) to launch, through a company they will hold, a tender offer for GTD at a price of 7.35 euros per share. This Leveraged Buy Out
(LBO) will allow Air France to realize its potential gain, while remaining a shareholder of Amadeus GTD, and to receive cash of an amount of 800 million. The documents required to obtain approval of the offer were filed with the Spanish
market authorities on April 8, 2005. The tender offer opened on May 26 and will continue until June 27.



F-67



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                               |  |                                                                                                    |  |             |  |                |  |           |  |          |  |                   |  |         
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ----------- |  | -------------- |  | --------- |  | -------- |  | ----------------- |  | --------
|                                               |  | Address                                                                                            |  | Siren(1)    |  | Capital        |  | %Interest |  | %control |  | Method            |  | Year end
|AIR France SA Group                            |  |                                                                                                    |  |             |  |                |  |           |  |          |  |                  
|AIR France SA                                  |  | 45, rue de Paris 95747 Roissy CDG Cedex                                                            |  | 420 495 178 |  | 1,901,231,625 |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|AIR FRANCE SERVICES LTD                        |  | Room 229 - Terminal 2 Office Block London Heathrow Airport - Hounslow MDDX TW6 1RR - GREAT BRITAIN |  | Foreign     |  | £7,000,000     |  | 100       |  | 100      |  | Fullyconsolidated |  | Dec-31  
|AMADEUS GLOBAL TRAVEL DISTRIBUTION             |  | Salvador de Madariaga 1 28046 Madrid -
SPAIN                                                       |  | Foreign     |  | 23,044,000    |  | 23        |  | 43       |  | Equitymethod      |  | Dec-31  
|CRMA                                           |  | ZA de la Clef de Saint-Pierre BP 10F 78996 Elancourt                                               |  | 312 139 215 |  | 1,300,000     |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|GIE ITAB 320                                   |  | 45, rue de Paris 95747 Roissy CDG Cedex                                                            |  | 347 907 636 |  |               |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|HEATHROW CARGO HANDLING                        |  | Building 558-Shoreham road West Heathrow Airport - Hounslow MDDX TW6 3RN - GREAT BRITAIN           |  | Foreign     |  | £800,000       |  | 50        |  | 50       |  | Equitymethod      |  | Dec-31  
|NOGUES                                         |  | 5 Harbourmaster Place, Dublin 1,
Irelande                                                          |  | Foreign     |  | $1             |  | 0         |  | 100      |  | Fullyconsolidated |  | Dec-31  
|SODEXI                                         |  | 14 rue des Voyelles - BP 10301 Bat. AFE 3512 - Zone Fret
4 95703 Roissy CDG Cedex                  |  | 347 960 825 |  | 2,400,000     |  | 60        |  | 60       |  | Fullyconsolidated |  | Mar-31  
|                                               |  |                                                                                                    |  |             |  |               
|REENTON DEVELOPMENT LTD sub group              |  |                                                                                                    |  |             |  |                |  |           |  |          |  |                  
|                                               |  |                                                                                                    |  |             |  |                | 
|REENTON DEVELOPMENT LIMITED                    |  | Room 901, 9th Floor, Tien Cheung Hong Building - 77-81 Jervois Street - Sheung Wan - Hong Kong     |  | Foreign     |  | hkd10,000      |  | 51        |  | 51       |  | Fullyconsolidated |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|HANGXIN HITECH RESOURCES HOLDING LTD           |  | Room 901, 9th Floor, Tien Cheung Hong Building - 77-81 Jervois Street - Sheung Wan - Hong Kong     |  | Foreign     |  | hkd77,984      |  | 41        |  | 80       |  | Fullyconsolidated |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|HARBIN HANGXIN AVIONICS CO. LTD                |  | N°8, Bohaiyi Road, Jizhongqu, Hapin Road Harbin Economic Development Zone Harbin 150060 - China    |  | Foreign     |  | cny1,283,865   |  | 41        |  | 80       |  | Fullyconsolidated |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|GUANGZHOU HANGXIN AVIONICS CO. LTD             |  | N° 2, Kexin Road, TIANHE, 510630 Guangzhou -
China                                                 |  | Foreign     |  | cny26,944,758  |  | 41        |  | 80       |  | Fullyconsolidated |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|SHANGHAI HANGXIN AERO MECHANICS CO. LTD        |  | N° 12-C, Jinwen Road, Zhuqiao, Nanhui District,
201323 Shanghai - China                            |  | Foreign     |  | cny3,476,424   |  | 41        |  | 80       |  | Fullyconsolidated |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|SINGAPORE HANGXIN AVIATION ENG. PTE            |  | N° 66, Loyang Way Singapore 508756                                                                 |  | Foreign     |  | sgd16,000      |  | 12        |  | 30       |  | Equitymethod      |  | Dec-31  
|                                               |  |                                                                                                    |  |             |  |                | 
|SHANGDONG XIANGYU AERO-TECHNOLOGY SERVICES
LTD |  | Yaoqiang International Airport, Jinan 250107, Shandong -
China                                     |  | Foreign     |  | cny3,380,000   |  | 8         |  | 20       |  | Equitymethod      |  | Dec-31  



F-68



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                     |  |                                                                                   |  |          |  |         |  |           |  |          |  |                   |  |         
|------------------------------------ |  | --------------------------------------------------------------------------------- |  | -------- |  | ------- |  | --------- |  | -------- |  | ----------------- |  | --------
|                                     |  | Address                                                                           |  | Siren(1) |  | Capital |  | %Interest |  | %control |  | Method            |  | Year end
|                                     |  |                                                                                   |  |          |  |        
|UILEAG HOLDING COMPANY sub group     |  |                                                                                   |  |          |  |         |  |           |  |          |  |                  
|                                     |  |                                                                                   |  |          |  |         | 
|UILEAG HOLDING COMPANY LTD           |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|OFIONNAGAIN HOLDING COMPANY LIMITED |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 1 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 2 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 3 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 4 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 5 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 6 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 7 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 8 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 9 LIMITED                    |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 10 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 11 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 12 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 13 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 14 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 15 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|                                     |  |                                                                                   |  |          |  |         | 
|TAKEOFF 16 LIMITED                   |  | 5 Harbourmaster Place, International Financial Services Center, Dublin 1, Ireland |  | Foreign  |  | 1      |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  



F-69



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                       |  |                                                          |  |             |  |                  |  |           |  |          |  |                            |  |         
|-------------------------------------- |  | -------------------------------------------------------- |  | ----------- |  | ---------------- |  | --------- |  | -------- |  | -------------------------- |  | --------
|                                       |  | Address                                                  |  | Siren(1)    |  | Capital          |  | %Interest |  | %control |  | Method                     |  | Year end
|AIR FRANCE FINANCE sub group           |  |                                                          |  |             |  |                  |  |           |  |          |  |                           
|                                       |  |                                                          |  |             |  |                  | 
|AIR FRANCE FINANCE                     |  | 45, rue de Paris 95747 Roissy CDG Cedex                  |  | 341 178 697 |  | 200,000,000     |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|AIR AUSTRAL                            |  | BP 611 97473 Saint Denis de la Réunion                   |  | 323 650 945 |  | 1,984,000       |  | 30        |  | 30       |  | Equitymethod               |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|AIR FRANCE FINANCE IRELAND             |  | 69/71 st Stephens Green Dublin 2 IRELAND                |  | Foreign     |  | $3,502,508       |  | 100       |  | 100      |  | Fullyconsolidated          |  | Dec-31  
|                                       |  |                                                          |  |             |  |                  | 
|AIR FRANCE PARTNAIRS LEASING NV        |  | 130 Schottegativeg Oost Curaçao - DUTCH WEST
INDIES      |  | Foreign     |  | $26,209,180      |  | 45        |  | 45       |  | Equitymethod               |  | Dec-31  
|                                       |  |                                                          |  |             |  |                  | 
|ALL AFRICA AIRWAYS                     |  | Les Cascades, Edith Cavell Street Port-Louis - Mauritius |  | Foreign     |  | $6,697,487       |  | 51        |  | 51       |  | Fullyconsolidated          |  | Dec-31  
|                                       |  |                                                          |  |             |  |                  | 
|BRIT AIR                               |  | Aéroport BP 156 29204 Morlaix                            |  | 927 350 363 |  | 23,483,376      |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|CITY JET                               |  | Swords Campus, Balheary Road Swords Co. Dublin - IRLANDE |  | Foreign     |  | 5,079,968       |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|FREQUENCE PLUS SERVICES                |  | 51/59 avenue Ledru Rollin 94 200 Ivry sur Seine          |  | 347 944 259 |  | 2,288,000       |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|GIE JEAN BART                          |  | 260 Bd Saint Germain 75007 Paris                         |  | 430 337 766 |  |                 |  | 10        |  | 10       |  | Fullyconsolidated          |  | Dec 31  
|                                       |  |                                                          |  |             |  |                  | 
|GIE SCHIPHOL                           |  | 260 Bd Saint Germain 75007 Paris                         |  | 452 912 488 |  | 20,000          |  | 0         |  | 100      |  | Fullyconsolidated          |  | Dec 31  
|                                       |  |                                                          |  |             |  |                  | 
|GIE SURCOUF                            |  | 260 Bd Saint Germain 75007 Paris                         |  | 432 655 785 |  |                 |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|ICARE                                  |  | Aéroport BP 156 29204 Morlaix                            |  | 380 582 346 |  | 1,035,488       |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|LYON MAINTENANCE                       |  | Aéroport Lyon Saint Exupery BP 386 69125 Lyon            |  | 421 812 595 |  | 80,000          |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|REGIONAL COMPAGNIE AERIENNE EUROPEENNE |  | Aéroport de Nantes Atlantique 44340
Bouguenais           |  | 335 351 920 |  | 50,000,000      |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|SOCIETE DEXPLOITATION AERONAUTIQUE    |  | 45, rue de Paris 95747 Roissy CDG Cedex                  |  | 379 316 276 |  | 38,112          |  | 100       |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                       |  |                                                          |  |             |  |                  | 
|SOCIETE NOUVELLE AIR IVOIRE            |  | Place de la République - Abidjan Côte dIvoire           |  | Foreign     |  | xof3,600,000,000 |  | 39        |  | 76       |  | Fullyconsolidated          |  | Dec-31  
|                                       |  |                                                          |  |             |  |                  | 
|TEAMTRACKERS SA                        |  | 57 rue Ledru Rollin 94 200 Ivry sur
Seine                |  | 449 171 222 |  | 1,000,000       |  | 49        |  | 49       |  | Proportionallyconsolidated |  | Dec 31  
|                                       |  |                                                          |  |             |  |                  | 
|TEAMTRACKERS SRO                       |  | Olivova 4/2096 -11000 Praha 1 Czech
republic             |  | Foreign     |  | czk17,500,000    |  | 49        |  | 49       |  | Proportionallyconsolidated |  | Dec-31  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                             |  |                                                                                                |  |             |  |                |  |           |  |          |  |                            |  |         
|------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------- |  | ----------- |  | -------------- |  | --------- |  | -------- |  | -------------------------- |  | --------
|                                                             |  | Address                                                                                        |  | Siren(1)    |  | Capital        |  | %Interest |  | %control |  | Method                     |  | Year end
|SERVAIR sub group                                            |  |                                                                                                |  |             |  |                |  |           |  |          |  |                           
|SERVAIR(Cie dexploitation des services auxiliaires aériens) |  | 4 place de Londres Roissypole 95726 Roissy CDG Cedex                                           |  | 722 000 395 |  | 52,386,208    |  | 98        |  | 98       |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|ACNA                                                         |  | Bat. 3416 Modules 100 et 200 BP 10605 95724 Roissy CDG Cedex                                   |  | 382 587 558 |  | 250,000       |  | 98        |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|ACSAIR                                                       |  | Le Ronsard - Paris Nord 2 22 avenue des Nations - BP 50379 Villepinte - 95942 Roissy CDG Cedex |  | 437 568 702 |  | 1,500,000     |  | 50        |  | 51       |  | Fullyconsolidated          |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|AEROFORM                                                     |  | Le Ronsard - Paris Nord 2 22 avenue des Nations - BP 50379 Villepinte - 95942 Roissy CDG Cedex |  | 448 568 702 |  | 8,000         |  | 98        |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|AEROSUR                                                      |  | Le Ronsard - Paris Nord 2 22 avenue des Nations - BP 50379 Villepinte - 95942 Roissy CDG Cedex |  | 432 219 940 |  | 40,000        |  | 98        |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|AFRIQUE CATERING                                             |  | 4 place de Londres Roissypole BP 10701 95726 Roissy CDG Cedex                                  |  | 403 236 714 |  | 450,000       |  | 50        |  | 51       |  | Fullyconsolidated          |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|AIR CHEF                                                     |  | Via Venezia Guilia 5/a Milano ITALY                                                            |  | Foreign     |  | 2,000,000     |  | 49        |  | 50       |  | Equitymethod               |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|ALPHA AIRPORTS GROUP PLC                                     |  | Europa House - 804 Bath road Cranford Middlesex TW5 9US GREAT BRITAIN                          |  | Foreign     |  | £17,068,000    |  | 26        |  | 27       |  | Equitymethod               |  | Jan-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|BRUNEAU PEGORIER                                             |  | 15 rue de la Grande Borne 77
990 Le Mesnil Amelot                                              |  | 572 129 377 |  | 1,365,500     |  | 93        |  | 95       |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|CENTRE DE PRODUCTION ALIMENTAIRE                             |  | 16 rue de la Grande Borne 77990 Le Mesnil
Amelot                                               |  | 380 885 129 |  | 1,500,000     |  | 98        |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|CULINAIR PARIS                                              |  | 8 rue des acacias 77230 Villeneuve sous Dammartin                                              |  | 430 048 959 |  | 914,760       |  | 55        |  | 56       |  | Fullyconsolidated          |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|DAKAR CATERING                                               |  | PO Box 8431 Aéroport de Dakar Yoff Dakar - SENEGAL                                             |  | Foreign     |  | cfa250,000,000 |  | 49        |  | 51       |  | Fullyconsolidated          |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|EUROPEAN CATERING SERVICES                                   |  | The Corporation Trust Company 1209 Orange Street Wilmington DE 19801 USA                       |  | Foreign     |  | $4,860,000     |  | 98        |  | 100      |  | Fullyconsolidated          |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|FLYING FOOD CATERING                                         |  | 1209 Orange Street - City of Wilmington 400 - State of Delaware USA                            |  | Foreign     |  | $920,000       |  | 48        |  | 49       |  | Equitymethod               |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|FLYING FOOD MIAMI                                            |  | 1650 N.W - 70 th Avenue Miami, Florida 33299
USA                                               |  | Foreign     |  | $6,462,131     |  | 48        |  | 49       |  | Equitymethod               |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|FLYING FOOD SAN FRANCISCO                                    |  | 810 Malcom Road Burlingame California 94010 USA                                                |  | Foreign     |  | $6,926,328     |  | 43        |  | 44       |  | Equitymethod               |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|FLYING FOOD SERVICES                                         |  | 1209 Orange Street - City of Wilmington 400 - State of Delaware USA                            |  | Foreign     |  | $450,000       |  | 48        |  | 49       |  | Equitymethod               |  | Dec-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|JET CHEF                                                     |  | Zone daviation daffaires 93350
Aéroport du Bourget                                           |  | 382 587 541 |  | 380,000       |  | 98        |  | 100      |  | Fullyconsolidated          |  | Mar-31  
|                                                             |  |                                                                                                |  |             |  |                | 
|LOGAIR                                                       |  | 4 place de Londres Roissypole 95726 Roissy CDG Cedex                                           |  | 443 014 527 |  | 40,000        |  | 49        |  | 50       |  | Proportionallyconsolidated |  | Dec-31  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                  |  |                                                                                         |  |             |  |                |  |           |  |          |  |                   |  |         
|--------------------------------- |  | --------------------------------------------------------------------------------------- |  | ----------- |  | -------------- |  | --------- |  | -------- |  | ----------------- |  | --------
|                                  |  | Address                                                                                 |  | Siren(1)    |  | Capital        |  | %Interest |  | %control |  | Method            |  | Year end
|LOME CATERING SA                  |  | Aéroport de Lomé BP 3688 TOGO                                                           |  | Foreign     |  | cfa100,000,000 |  | 17        |  | 35       |  | Equitymethod      |  | Dec-31  
|LYON AIR TRAITEUR                 |  | 4 place de Londres Roissypole BP 10701 95726 Roissy CDG
Cedex                           |  | 451 329 916 |  | 455,000       |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|MACAU CATERING SERVICES           |  | Catering Building Macau International Airport Pac On Taipa - MACAU                      |  | Foreign     |  | mop16,000,000  |  | 17        |  | 34       |  | Equitymethod      |  | Dec-31  
|MALI CATERING                     |  | Aéroport de Bamako Sénou BP E3803 - Bamako MALI                                         |  | Foreign     |  | cfa350,000,000 |  | 70        |  | 99       |  | Fullyconsolidated |  | Dec-31  
|MARTINIQUE CATERING               |  | 4 place de Londres Roissypole BP 10701 95726 Roissy CDG
Cedex                           |  | 451 329 932 |  | 505,000       |  | 100       |  | 100      |  | Fullyconsolidated |  | Mar-31  
|ORLY AIR TRAITEUR                 |  | 1 rue du Pont des Pierres 91320 Wissous                                                 |  | 384 030 680 |  | 5,700,000     |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|PASSERELLE                        |  | Route du Midi Bat. 3441 - BP 10605 95724 Roissy CDG Cedex                               |  | 433 032 828 |  | 7,500         |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|PRESTAIR                          |  | 1 rue du Pont de Pierre BP 61 - Wissous 91422 Morangis Cedex                            |  | 429 723 737 |  | 7,500         |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|PMAIR                             |  | Bat. 3416 - Route du Midi 93290 Tremblay                                                |  | 437 927 882 |  | 8,000         |  | 50        |  | 51       |  | Fullyconsolidated |  | Dec-31  
|SEREP                             |  | PO Box 8431 Aéroport de Dakar Yoff Dakar - SENEGAL                                      |  | Foreign     |  | cfa30,600,000  |  | 38        |  | 39       |  | Equitymethod      |  | Dec-31  
|SERVAIR EUREST                    |  | Avenida 11 de Septiembre Poligono Mas Blau 08820 El Prat de Llobregat Barcelona - SPAIN |  | Foreign     |  | 710,797       |  | 34        |  | 35       |  | Equitymethod      |  | Dec-31  
|SERVAIR SATS                      |  | PO Box 3 Singapoure Changi Airport 918141 SINGAPORE                                     |  | Foreign     |  | sgd1,040,000   |  | 50        |  | 51       |  | Fullyconsolidated |  | Dec-31  
|SERVANTAGE                        |  | 12 chemin des glirettes 95000 Le Thillay                                                |  | 424 657 179 |  | 37,500        |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|SESAL                             |  | Aéroport Léon Mba PO Box 20303 Libreville
- GABON                                       |  | Foreign     |  | cfa250,000,000 |  | 39        |  | 40       |  | Equitymethod      |  | Dec-31  
|SOCIETE IMMOBILIERE AEROPORTUAIRE |  | 4 place de Londres Roissypole BP 10701 95726 Roissy CDG Cedex                           |  | 722 003 795 |  | 1,905,000     |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|SKYCHEF                           |  | International Airport PO Box 450 Victoria - Point Larue Mahé - SEYCHELLES               |  | Foreign     |  | scr312,500     |  | 54        |  | 55       |  | Fullyconsolidated |  | Mar-31  
|SKYLOGISTIC                       |  | BP 121 69125 Lyon St Exupéry Aéroport                                                   |  | 423 049 089 |  | 547,500       |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  
|SOGRI                             |  | Aéroport de Cayenne Rochambeau 97351 Matoury                                            |  | 320 750 763 |  | 225,000       |  | 95        |  | 97       |  | Fullyconsolidated |  | Mar-31  
|SORI                              |  | Zone de fret Nord Aéroport Pôle Caraïbes 97139 Abymes                                   |  | 322 055 187 |  | 50,000        |  | 49        |  | 50       |  | Fullyconsolidated |  | Dec-31  
|SPECIAL MEALS CATERING            |  | 16 rue de la Grande Borne 77990 Le Mesnil
Amelot                                        |  | 429 627 474 |  | 7,622         |  | 98        |  | 100      |  | Fullyconsolidated |  | Mar-31  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                          |  |                                                                                                               |  |          |  |              |  |           |  |          |  |                   |  |         
|----------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | -------- |  | ------------ |  | --------- |  | -------- |  | ----------------- |  | --------
|                                          |  | Address                                                                                                       |  | Siren(1) |  | Capital      |  | %Interest |  | %control |  | Method            |  | Year end
|KLM N.V. Group                            |  |                                                                                                               |  |          |  |              |  |           |  |          |  |                   |  |         
|KLM N.V.                                  |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 125,347,000 |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AIRGO B.V.                                |  | Amsterdamseweg 55, AMS /DJ 1182 GP Amstelveen - Netherlands                                                   |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AIRPORT MEDICAL SERVICES B.V.             |  | Stationsplein 236, 1117 CJ Schipol Netherlands                                                                |  | Foreign  |  | 16,000      |  | 78        |  | 47       |  | Fullyconsolidated |  | Mar-31  
|AMA HOLDING B.V.                          |  | Hangar 10, 1117 AA Schipol Netherlands                                                                        |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AIRCRAFT MAINTENANCE AMSTERDAM B.V.       |  | Hangar 10, 1117 AA Schipol Netherlands                                                                        |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AMSTERDAM SCHIPOL PIJPLEIDING BEHEER B.V. |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 10,861      |  | 58        |  | 35       |  | Fullyconsolidated |  | Mar-31  
|AMSTERDAM SCHIPOL PIJPLEIDING C.V.        |  | Oude Vijfhuizerweg 6, 1118 LV Luchthaven Schipol -
Netherlands                                                |  | Foreign  |  | 98,935      |  | 70        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AQUILA INVEST B.V.                        |  | Amsterdamseweg 55, AMS / DJ, 1182 GP Amstelveen - Netherlands                                                 |  | Foreign  |  | 22,689      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE CROWN B.V.                           |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER II B.V.                       |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER IX B.V.                       |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER X B.V.                        |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER XI B.V.                       |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER XII B.V.                      |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER XIII B.V.                     |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|BLUE YONDER XIV B.V.                      |  | Amsterdamseweg 55, 1182 GP Amstelveen - Netherlands                                                           |  | Foreign  |  | 18,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|CELL K16 INSURANCE COMPANY                |  | Heritage Group Limited, Polygon Hall Le Marchant Street - St Peter Port Guernsey GY1 4HY Iles anglo-normandes |  | Foreign  |  | $2,147       |  | 97        |  | 0        |  | Fullyconsolidated |  | Mar-31  
|CSC INDIA                                 |  | 301-303 Rangoli, Opp. Air Cargo Complex Andheri (East), Mumbai Inde                                           |  | Foreign  |  | BHT9,883,175 |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|CYGNIFIC B.V.                             |  | Koningin Wilhelminaplein 29TRN 3 12 FI 1062 HJ Amsterdam - Netherlands                                        |  | Foreign  |  | 500,000     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|CYGNIFIC (UK) LIMITED                     |  | New Reservation Building, Amsterdam way, Norwich, NR6 6EP Grande Bretagne                                     |  | Foreign  |  | £2           |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|HEESWIJK HOLDING B.V.                     |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                           |  | Foreign  |  | 19,173,575  |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                       |  |                                                                                                       |  |          |  |              |  |           |  |          |  |                   |  |         
|-------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | -------- |  | ------------ |  | --------- |  | -------- |  | ----------------- |  | --------
|                                       |  | Address                                                                                               |  | Siren(1) |  | Capital      |  | %Interest |  | %control |  | Method            |  | Year end
|KES AIRPORT EQUIPMENT FUELLING B.V.    |  | Pakhuisstraat 1, 1118 DJ Luchthaven Schipol - Netherlands                                             |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KES AIRPORT EQUIPMENT LEASING B.V.     |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLEUR INVEST B.V.                      |  | Amsterdamseweg 55, AMS / DJ, 1182 GP Amstelveen - Netherlands                                         |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM AIR CHARTER B.V.                   |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 113,445     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM ARBO SERVICES B.V.                 |  | Stationsplein 236, 1117 CJ Schipol Netherlands                                                        |  | Foreign  |  | 689,494     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM CATERING SERVICES SCHIPOL B.V.     |  | Havenmeesterweg 1, 1118 CB Luchthaven Schipol - Netherlands                                           |  | Foreign  |  | 13,613,406  |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM CITYHOPPER B.V.                    |  | Stationsplein 102, Convair Geb., 1117 BV Luchthaven Schipol Netherlands                               |  | Foreign  |  | 90,756      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM CITYHOPPER UK LTD                  |  | North Suite, Skyway House, Parsonage Road, Takely, Bishops Stortford, Herts CM22 6CPU United Kingdom |  | Foreign  |  | £1           |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM EQUIPMENT SERVICES B.V.            |  | Pakhuisstraat 1, Gebouw 565, 1118 DJ Luchthaven Schipol Netherlands                                   |  | Foreign  |  | 1,361,341   |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM FINANCIAL SERVICES B.V.            |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 123,101,974 |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM FLIGHT CREW SERVICES GMBH          |  | Siemensstrasse 9, 63263 Neu - Isenburg -
Germany                                                      |  | Foreign  |  | 25,565      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM GROUND SERVICES LIMITED            |  | Station Management, Terminal 4, Heathrow Airport London, Hounslow, Middlesex, TW6 3XQ United Kingdom  |  | Foreign  |  | £500,000     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM INTERNATIONAL CHARTER B.V.         |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 17,713,220  |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM INTERNATIONAL FINANCE COMPANY B.V. |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 46,294      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM LUCHTVAART SCHOOL B.V.             |  | Burgemeester J.G. Legroweg 43, 9761 TA Eelde -
Netherlands                                            |  | Foreign  |  | 18,151      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM OLIEMAATSCHAPPIJ B.V.              |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                   |  | Foreign  |  | 510,503     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM UK ENGINEERING LIMITED             |  | Liberator Road, Norwich Airport Norwich, Norfolk, NR6 6
ER United Kingdom                             |  | Foreign  |  | £100         |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KROONDUIF B.V.                         |  | Amsterdamseweg 55, AMS /DK 1182 GP Amstelveen -
Netherlands                                           |  | Foreign  |  | 113,445     |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|MICOPA B.V.                            |  | Manitobadreef 6 - E, 3565 CH Utrecht -
Netherlands                                                    |  | Foreign  |  | 50,000      |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                                      |  |                                                                                                                |  |          |  |                  |  |           |  |          |  |                   |  |         
|--------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | -------- |  | ---------------- |  | --------- |  | -------- |  | ----------------- |  | --------
|                                                                      |  | Address                                                                                                        |  | Siren(1) |  | Capital          |  | %Interest |  | %control |  | Method            |  | Year end
|OCCABOT BEHEER B.V.                                                   |  | Amsterdamseweg 55, afd. AMS /DJ 1182 GP Amstelveen -
Netherlands                                               |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|ORION-STAETE B.V.                                                     |  | Amsterdamseweg 55, TAV. AMS /BB, 1182 GP Amstelveen - Netherlands                                              |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|PYRHELIO-STAETE B.V.                                                  |  | Amsterdamseweg 55, TAV. AMS /BB, 1182 GP Amstelveen - Netherlands                                              |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|QUASAR-STAETE B.V.                                                    |  | Amsterdamseweg 55, TAV. AMS /BB, 1182 GP Amstelveen - Netherlands                                              |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|RIGEL-STAETE B.V.                                                     |  | Amsterdamseweg 55, TAV. AMS /BB, 1182 GP Amstelveen - Netherlands                                              |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|ROAD FEEDER MANAGEMENT B.V.                                           |  | Amsterdamseweg 55, 1182 GP Amstelveen -
Netherlands                                                            |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|SPICA-STAETE B.V.                                                     |  | Amsterdamseweg 55, TAV. AMS /BB, 1182 GP Amstelveen - Netherlands                                              |  | Foreign  |  | 18,151          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|TRANSAVIA AIRLINES C.V.                                               |  | Westelijke Randweg 3, 1118CR Luchthaven Schipol -
Netherlands                                                  |  | Foreign  |  | 0               |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|WEBLOK B.V.                                                           |  | Amsterdamseweg 55, AMS/BY, 1182 GP Amstelveen -
Netherlands                                                    |  | Foreign  |  | 2,817,518       |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|MARTINAIR HOLLAND N.V.                                                |  | Havenmeesterweg 201, 1118 CD Luchthaven Schipol -
Netherlands                                                  |  | Foreign  |  | 32,247,866      |  | 49        |  | 29       |  | Equitymethod      |  | Dec-31  
|KENYA AIRWAYS LIMITED                                                 |  | Kenya Airways Headquarters and Base, Airport North Road,
Embakasi, Nairobi PO Box 19002, 00501 Nairobi - Kenya |  | Foreign  |  | KES1,198,971,429 |  | 25        |  | 15       |  | Equitymethod      |  | Mar-31  
|INTERNATIONAL AEROSPACE MANAGEMENT COMPANY S.C.R.L.                   |  | Via Mestrina 123, 30172 Venice Italy                                                                           |  | Foreign  |  | 51,650          |  | 19        |  | 12       |  | Equitymethod      |  | Mar-31  
|EUROPEAN PNEUMATIC COMPONENT OVERHAUL AND REPAIR (EPCOR) B.V.         |  | Bellsingel 41, 1119 NT Schipol-Rijk Netherlands                                                                |  | Foreign  |  | 3,778,583       |  | 48        |  | 29       |  | Equitymethod      |  | Mar-31  
|INTERNATIONALE FINANCIERING EN MANAGEMENT MAATSCHAPPIJ B.V. sub group |  |                                                                                                                |  |         
|INTERNATIONALE FINANCIERING EN MANAGEMENT MAATSCHAPPIJ B.V.           |  | Keesomstraat 38, 1171 AN Badhoevedorp - Netherlands                                                            |  | Foreign  |  | 45,378          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|PHK FREIGHT SERVICES B.V.                                             |  | Amsterdamseweg 55, AMS /DJ, 1182 GP Amstelveen - Netherlands                                                   |  | Foreign  |  | 22,689          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|TRAVEL INDUSTRY SYSTEMS B.V.                                          |  | Amsterdamseweg 55, AMS /BIJ, 1182 GP Amstelveen - Netherlands                                                  |  | Foreign  |  | 226,890         |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                                |  |                                                                                                                    |  |          |  |               |  |           |  |          |  |                   |  |         
|--------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | -------- |  | ------------- |  | --------- |  | -------- |  | ----------------- |  | --------
|                                                                |  | Address                                                                                                            |  | Siren(1) |  | Capital       |  | %Interest |  | %control |  | Method            |  | Year end
|INTERNATIONAL AIRLINE SERVICES LIMITED sub group                |  |                                                                                                                    |  |          |  |               |  |           |  |         
|INTERNATIONAL AIRLINE SERVICES LIMITED                          |  | Bridge House, 4 Borough High Street, London SE1 9QQ - United Kingdom                                               |  | Foreign  |  | £200          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|INTERNATIONAL AIRLINE SERVICES EUROPE LIMITED                   |  | Bridge House, 4 Borough High Street, London SE1 9QQ - United Kingdom                                               |  | Foreign  |  | £100          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|IAS ASIA INCORPORATED                                           |  | 25th Floor, RCBC Plaza, Ayala Avenue corner with Sen. Gil Puyat Avenue Makati City 1200, Metro Manilla Philippines |  | Foreign  |  | PHP250,000    |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|IASA INCORPORATED                                               |  | 25th Floor, RCBC Plaza, Ayala Avenue corner with Sen. Gil Puyat Avenue Makati City 1200, Metro Manilla Philippines |  | Foreign  |  | PHP10,947,500 |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|INTERNATIONAL MARINE AIRLINE SERVICES LIMITED                   |  | Bridge House, 4 Borough High Street, London SE1 9QQ United Kingdom                                                 |  | Foreign  |  | £1            |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|INTERNATIONAL MARINE AIRLINE SERVICES LIMITED LIABILITY COMPANY |  | Fullbright & Jaworski LLP, 1301 Mc Kinney, Suite 5100, Houston Texas 77010 - United States                         |  | Foreign  |  | $10,000       |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|INTERNATIONAL AIRLINE SERVICES OFFSHORE LIMITED                 |  | Bridge House, 4 Borough High Street, London SE1 9QQ United Kingdom                                                 |  | Foreign  |  | £1            |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM UK HOLDINGS LIMITED sub group                               |  |                                                                                                                    |  |          |  |               |  |           |  |         
|KLM UK HOLDINGS LIMITED                                         |  | North Suite, Skyway House, Parsonage Road,
Takely, Bishops Stortford, Herts CM22 6 PU United Kingdom              |  | Foreign  |  | £112,007,902  |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|ROSC LIMITED                                                    |  | North Suite, Skyway House, Parsonage Road,
Takely, Bishops Stortford, Herts CM22 6 PU United Kingdom              |  | Foreign  |  | £100          |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|KLM UK LIMITED                                                  |  | North Suite, Skyway House, Parsonage Road, Takely, Bishops Stortford, Herts CM22 6 PU United Kingdom              |  | Foreign  |  | £46,900,000   |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AIR UK LEASING LIMITED                                          |  | North Suite, Skyway House, Parsonage Road, Takely, Bishops Stortford, Herts CM22 6 PU United Kingdom              |  | Foreign  |  | £50,000       |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  
|AIR UK (Jersey) LIMITED SERVICES LIMITED                        |  | North Suite, Skyway House, Parsonage Road, Takely, Bishops Stortford, Herts CM22 6 PU United Kingdom              |  | Foreign  |  | £6,871        |  | 97        |  | 49       |  | Fullyconsolidated |  | Mar-31  

---

|(1) | Siren represents the registration number of French entities.
|--- | ------------------------------------------------------------



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



35  Summary of differences between accounting principles followed by the Company and U.S. GAAP



The Companys Consolidated Financial
Statements have been prepared in accordance with accounting principles generally accepted in France (French GAAP) (see note 2).



Elements of the Companys accounting policies which differ significantly from accounting principles generally accepted in the United
States (U.S. GAAP) are described below.



Restatement of
previously issued U.S. GAAP financial information



In the course of implementing International Financial Reporting Standards (IFRS), which Air France-KLM will be required to follow in France as of April 1, 2005 for purpose of satisfying French regulatory requirements, the
Company identified an error in the financial information prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for the years ended March 31, 2004 and 2003 (including stockholders
equity as of April 1, 2002). As a result, the Company determined that it was necessary to restate its previously issued U.S. GAAP financial information. However, this restatement did not have any impact on the French GAAP financial statements as
previously filed with the Securities and Exchange Commission (SEC).



This restatement relates to the accounting for deferred taxes related to two perpetual loans contracted in 1989 and 1992, respectively and
that were not accounted for in accordance with Statement of Financial Accounting Standards SFAS 109, Accounting for Income Taxes (SFAS 109).



The impact of the restatement on net income and shareholders equity is detailed in the following table
(summary table).



|                                     |  |                                    |   |  |          |   |  |                    |  |          |  
|------------------------------------ |  | ---------------------------------- | - |  | -------- | - |  | ------------------ |  | -------- | -
|                                     |  | 2004                               |   |  | 2003     |  
|                                     |  | PreviouslyReported                 |   |  | Restated |   |  | PreviouslyReported |  | Restated |  
|                                     |  | In  million except per share data |  
|At March 31,                         |  |                                    |   |  |          |   |  |                    |  |          |  
|Deferred tax liabilities non-current |  | 29.0                               |   |  | 109.1    |   |  | 35.6               |  | 100,0    |  
|Stockholders equity                 |  | 4,203.6                            |   |  | 4,123.5  |   |  | 3,993.2            |  | 3,928.8  |  
|                                     |  |                                    |   | 
|For the year ended March 31          |  |                                    |   |  |          |   |  |                    |  |          |  
|Income tax (expense) income          |  | (50.1                              | ) |  | (65.8    | ) |  | 3.0                |  | (10.5    | )
|Net Income                           |  | 188.5                              |   |  | 172.8    |   |  | 167.8              |  | 154.3    |  
|                                     |  |                                    |   | 
|Basic Earnings Per Share             |  | 0.87                               |   |  | 0.80     |   |  | 0.77               |  | 0.71     |  
|Diluted Earnings per share           |  | 0.87                               |   |  | 0.80     |   |  | 0.77               |  | 0.71     |  



(a)  Differences in accounting for Business Combination



(i)  Acquisition of KLM



As noted in Note 21 to the financial statements, on April 5, 2004, Air France proposed a public offer to holders of KLM ordinary shares. The exchange ratio was set at 11 Air France



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



shares and 10 warrants for 10 KLM shares and 11 Air France American Depositary shares (ADS), and 10 Air France American Depositary Warrants (ADW) for 10 KLM
ADSs. Consequently, Air France launched a first offer that ended on May 3, 2004.



In accordance with Dutch law, Air France decided to launch a supplementary offer period, under the same conditions, which started on May
4, 2004 and was completed on May 21, 2004. As of this date, holders of KLM common shares had tendered a total of 45,093,299 KLM common shares representing approximately 96.33% of KLMs ordinary shares. After shares acquisition post consummation
date, Air France  KLM held 97.30% of KLMs ordinary shares.



Under French GAAP, the acquisition of KLM was accounted for under the purchase method which differs significantly from the purchase method of accounting under U.S. GAAP. Summarized below are the significant
differences identified by the Company.



  Purchase price of KLM



Under French GAAP, the consideration for the acquisition of 96.33% of KLMs common shares by Air France was based on the quoted market price as of the two closing dates of the exchange offer (i.e. May 3, 2004 at
 14.65 per share and May 21, 2004 at 12.81 per share). Under U.S. GAAP Air France-KLM has complied with the provisions of EITF 99-12 Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a
Purchase Business Combination and used the market price for a reasonable period before and after the date the terms of the transaction were agreed to and announced in determining the fair value of securities issued. Accordingly, under U.S. GAAP,
Air France shares issued in consideration for the merger of KLM were determined based on a weighted average share price for the six trading days between September 25, 2003 and October 2, 2003, which was  13.34 per share.



The warrants issued as part of the transaction have also
been valued at different dates under French GAAP and US GAAP. Under U.S. GAAP, the fair value of the warrants issued was determined using a Black-Scholes valuation model. The calculation was based on the number of warrants to be issued by Air
France. Assumptions were also made based on the expected volatility of the share of the combined entity (40%), expected dividend of the combined companies during the exercise period (0.096, 0.144 and 0.188), expected average life
of the warrants (maturity of 42 months) and the discount rate (a risk free rate of return at maturity of 2.89% per year).



Under both French GAAP and U.S. GAAP, incremental costs directly related to the acquisition of KLM have been included as part of the
purchase price. Those costs mainly include fees paid to consultants for accounting, legal, appraisals or banking services. Under French GAAP, those costs are to be included in the purchase price net of tax. Under US GAAP, the costs are presented
gross of tax.



Under French GAAP, stock
options are not to be considered as part of purchase price in a business combination. Under U.S. GAAP, vested stock options issued by an acquirer in exchange for outstanding awards held by employees of the acquiree shall be considered to be part of
the purchase price paid by the acquirer for the acquiree. Accordingly, Air France - KLM has followed



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



the provisions of FASB Interpretation 44, Accounting for Certain Transactions involving Stock Compensation (FIN 44) and has determined
that the fair value of the options issued included as part of the purchase price was  7.0 million.



The table below presents the difference in determining the purchase price consideration under both French GAAP and U.S. GAAP:



|                                                         |  |                     |  |              |           |                              |   |  |            |  |              |  |                              |  
|-------------------------------------------------------- |  | ------------------- |  | ------------ | --------- | ---------------------------- | - |  | ---------- |  | ------------ |  | ---------------------------- | -
|                                                         |  | French GAAP         |  |              | U.S. GAAP |                             
|                                                         |  | Shares              |  | Price (in ) |           | Consideration (in  million) |   |  | Shares     |  | Price (in ) |  | Consideration (in  million) |  
|Air France - KLM shares issued: May 3, 2004 May 21, 2004 |  | 45,938,8573,663,774 |  | 14.6512.81   |           | 673.046.9                    |   |  | 49,602,631 |  | 13.34        |  | 661.7                        |  
|                                                         |  |                     |  |              |           |                             
|Warrants issued: May 3, 2004 May 21, 2004                |  | 41,762,5973,330,702 |  | 1.070.98     |           | 44.73.3                      |   |  | 45,093,299 |  | 1.57         |  | 70.8                         |  
|Shares acquired post consummation date                   |  |                     |  |              |           | 5.1                          |   |  |            |  |              |  | 5.1                          |  
|Preferred and priority shares                            |  |                     |  |              |           | 14.9                         |   |  |            |  |              |  | 14.9                         |  
|Transaction costs                                        |  |                     |  |              |           | 10.1                         |   |  |            |  |              |  | 13.5                         |  
|Other                                                    |  |                     |  |              |           | (0.7                         | ) |  |            |  |              |  | (0.7                         | )
|Stock Options                                            |  |                     |  |              |           |                             |   |  |            |  |              |  | 7.0                          |  
|Purchase price                                           |  |                     |  |              |           | 797.3                        |   |  |            |  |              |  | 772.3                        |  



The
total amount of transaction costs was  30.3 million, of which  16.8 million was netted against additional paid-in capital arising on the share issues.



  Allocation of purchase price to assets acquired and liabilities assumed



French GAAP does not permit the recognition of intangible
assets as part of a business combination if the purchase price allocation results in a negative goodwill situation. Under U.S. GAAP, SFAS 141, Business Combinations(SFAS 141) requires that the acquiring enterprise identify and
allocate purchase price to intangible assets acquired in a business combination if the intangible assets meet certain criteria.



Therefore, under U.S. GAAP, the Company has recognized certain intangible assets such as trademarks, slots and customer contracts for a
total amount of  395 million. The useful lives of these assets were considered as indefinite for both trademarks and slots and ranging from 5 to 12 years for customer contracts.



In addition to intangible assets, the Company has re-measured the projected benefit obligation of
KLMs pension plan and the fair value of plan assets. The difference in those two amounts represents an asset at the acquisition date. Under French GAAP, the amount of net asset that can be recognized is limited to the present value of any
economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans (the asset ceiling rule). The accounting for such asset under French GAAP is further detailed in note 22.2 to the
consolidated financial statements. Under U.S. GAAP, no such limitation exists and therefore the pension asset is increased under U.S. GAAP by  393 million. Consequently, the pension net asset to be recognized in the Companys US GAAP
balance sheet amounts to  1,353 million.



Finally, under U.S. GAAP, Air France-KLM concluded that its ability to cast the deciding vote for majority matters of the strategic management committee, combined with its ownership of 49% of the voting share capital of KLM, and its
ownership of all of the outstanding depositary receipts related to the administered shareholdings provides Air France-KLM with a controlling financial interest in KLM, and that consolidation of KLM provides the most meaningful presentation of the
combined financial position and results of operations of Air France-KLM. As a



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



result, all assets, liabilities and non-controlling interests of KLM have been measured at their fair values at the date of completion of the exchange offer.
KLMs operations have been consolidated starting May 1, 2004.



The detail of the allocation of the purchase price under U.S. GAAP is as follows:



|                                                                                               |  |              |  
|---------------------------------------------------------------------------------------------- |  | ------------ | -
|                                                                                               |  | In  million |  
|Purchase price paid                                                                            |  | 772.3        |  
|KLM French GAAP net assets acquired                                                            |  | 1,759.9      |  
|                                                                                               | 
|Increase in pension assets at fair value                                                       |  | 393.0        |  
|                                                                                               | 
|Intangible assets identified                                                                   |  |              |  
|  Trademarks                                                                                  |  | 203.0        |  
|  Slots                                                                                       |  | 85.0         |  
|  Customer relationships (Corporate contracts)                                                |  | 32.0         |  
|  Customer relationships (Cargo)                                                              |  | 36.0         |  
|  Customer relationships (Engineering and Maintenance)                                        |  | 20.0         |  
|  Frequent flyer program                                                                      |  | 19.0         |  
|Less treasury shares                                                                           |  | (33.8        | )
|Accounting for maintenance as cost as incurred (see note (k) for GAAP differences explanation) |  | (35.8        | )
|Deferred tax liabilities arising from the above items                                          |  | (259.4       | )
|Minority interests                                                                             |  | (59.6        | )
|Negative goodwill identified                                                                   |  | (1,387.0     | )



The
differences in the determination of the negative goodwill between French GAAP and U.S. GAAP are reflected as follows:



|                                                                                                  |  |              |  
|------------------------------------------------------------------------------------------------- |  | ------------ | -
|                                                                                                  |  | In  million |  
|Negative goodwill under French GAAP as of May 1, 2004                                             |  | (915.4)      |  
|                                                                                                  | 
|Differences related to the determination of KLMs acquisition cost :                              |  |              |  
|  Measurement date of securities issued                                                          |  | (35.4        | )
|  Employee stock options                                                                         |  | 7.0          |  
|  Tax on transaction costs                                                                       |  | 3.4          |  
|                                                                                                  | 
|Differences related to the allocation of purchase price:                                          |  |              |  
|  Intangible assets identified                                                                   |  | (395.0       | )
|  Pension asset                                                                                  |  | (393.0       | )
|  Treasury shares                                                                                |  | 33.8         |  
|  Accounting for maintenance as cost as incurred (see note (k) for GAAP differences explanation) |  | 35.8         |  
|  Deferred tax liabilities arising from the above                                                |  | 259.4        |  
|  Minority interests                                                                             |  | 12.4         |  
|                                                                                                  | 
|Negative goodwill under U.S. GAAP                                                                 |  | (1,387.0)    |  



  Accounting for negative goodwill



The acquisition of KLM by Air France resulted in a negative goodwill under both French GAAP and U.S. GAAP. Under French GAAP, the negative goodwill is allocated to income statements on a straight line basis over a
period reflecting the length of time that the Company considers reasonable for implementing the anticipated synergies, and the costs incurred in



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



achieving them. Under U.S. GAAP the acquiring enterprise should reduce proportionately the purchase price allocated to the acquired assets for the amount of
negative goodwill. However, the purchase price allocated to certain assets such as prepaid pension asset and financial assets (excluding investments in equity method investees) is not reduced because they are viewed as having a more reliably
determinable fair value.



Consequently, under
US GAAP the negative goodwill has been allocated on a pro rata basis as a reduction of the reported amounts of certain assets, namely fixed assets (including flight and ground equipment), intangible assets, other non current assets and investments
accounted for under the equity method.



The
effect of the allocation of the negative goodwill on the assets is presented as follows:



|                                                                                            |  |              |  
|------------------------------------------------------------------------------------------- |  | ------------ | -
|                                                                                            |  | In  million |  
|Decrease in fleet assets at fair value                                                      |  | (1,229.1     | )
|Decrease in other tangible assets (land and buildings) at fair value                        |  | (283.9       | )
|Decrease in other assets                                                                    |  | (119.7       | )
|Decrease in equity method investments                                                       |  | (70.8        | )
|Decrease in intangible assets identified                                                    |  |              |  
|  Trademarks                                                                               |  | (77.1        | )
|  Slots                                                                                    |  | (32.3        | )
|  Customer relationships (Corporate contracts)                                             |  | (12.1        | )
|  Customer relationships (Cargo)                                                           |  | (13.7        | )
|  Customer relationships (Engineering and Maintenance)                                     |  | (7.6         | )
|  Frequent flyer program                                                                   |  | (7.2         | )
|Decrease in software                                                                        |  | (15.4        | )
|Deferred tax asset arising from the above reconciling items                                 |  | 644.7        |  
|Valuation allowance on deferred tax assets generated by the allocation of negative goodwill |  | (162.8       | )
|                                                                                            | 
|Amount of negative goodwill allocated under U.S. GAAP                                       |  | (1,387.0     | )



The
allocation of negative goodwill caused differences between the financial statement values and tax bases of assets acquired. Therefore, deferred taxes have been recognized on temporary differences between the assigned values (after allocation of
negative goodwill) and the tax basis of identifiable assets acquired and liabilities assumed.



After allocation of negative goodwill, there is a net deferred tax asset position of  323.8 million, on which the Company has
recorded for a valuation allowance of  162.8 million.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



  Income statement and equity reconciliation between French GAAP and U.S. GAAP
following the acquisition of KLM



Income
statement and equity reconciliation as of and for the year ended March 31, 2005 between French GAAP and US GAAP following the acquisition of KLM (before income taxes) :



|                                                                                               |  |              |   |  |                      |  
|---------------------------------------------------------------------------------------------- |  | ------------ | - |  | -------------------- | -
|                                                                                               |  | Net income   |   |  | Stockholders equity |  
|                                                                                               |  | In  million |  
|Reversal of negative goodwill recorded under French GAAP and of amortization thereof           |  | (73.6        | ) |  | 841.8                |  
|Fleet asset fair value after negative goodwill allocation                                      |  | 82.5         |   |  | (1,146.7             | )
|Other tangible assets at fair value after negative goodwill allocation                         |  | 14.7         |   |  | (269.2               | )
|Equity investments after negative goodwill allocation                                          |  |             |   |  | (70.8                | )
|Intangible assets after negative goodwill allocation                                           |  | (9.1         | ) |  | 235.9                |  
|Other assets after negative goodwill allocation                                                |  |             |   |  | (119.7               | )
|Software at fair value after negative goodwill allocation                                      |  | 3.5          |   |  | (11.8                | )
|Treasury shares                                                                                |  | 1.1          |   |  | (23.0                | )
|Difference in acquisition costs                                                                |  | 10.4         |   |  | (4.6                 | )
|Elimination of the pension asset ceiling effect                                                |  | 59.4         |   |  | 452.4                |  
|Accounting for maintenance as cost as incurred (see note (k) for GAAP differences explanation) |  | (33.0        | ) |  | (68.7                | )
|                                                                                               |  |             
|Total                                                                                          |  | 55.9         |   |  | (184.4               | )



Under
French GAAP, negative goodwill related to the acquisition of KLM is amortized over 5 years. Under US GAAP, KLM negative goodwill was proportionately allocated to intangible assets, fixed assets, other non current assets and equity investments.
Therefore the amortization income, in an amount of  73.6 million, was reversed for US GAAP purposes.



Under French GAAP, treasury shares are classified as marketable securities. Under U.S. GAAP, treasury shares are accounted for as a
reduction of stockholders equity at acquisition cost, and no further recognition is given for subsequent changes in fair value. When treasury shares are sold, any differences between cost and fair value are generally recorded directly to
stockholders equity. Accordingly, the  1.1 million income recognized for the year ended March 31, 2005 under French GAAP was reversed for purposes of determining the U.S. GAAP net income. The impact on KLM stockholders equity was a
decrease of  23.0 million as of March 31, 2005.



The Company has re-measured the projected benefit obligation of KLMs pension plan and the fair value of plan assets. Under French GAAP, the amount of net asset that can be recognized is limited to the present value of any economic
benefits available in the form of refunds from the plans or reductions in future contributions to the plans (the asset ceiling rule). Under US GAAP, no such limitation exists and therefore the pension asset was increased under US GAAP by
393 million in the opening balance sheet of KLM. Under French GAAP, a charge of  59.4 million related to this asset ceiling was recognized during the year ended March 31, 2005. This difference in GAAP, related to KLMs pension schemes,
resulted in an increase in the Companys net income before tax of  59.4 million.



Other impacts on the income statements primarily relate to differences in the amortization charge to be recognized between French and US
GAAP.



Additional disclosures required by SFAS
141 are provided in Note 37(1) to the consolidated financial statements.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(ii)  Other business combinations reconciling items



  Amortization of Goodwill and Other Indefinite-lived
Assets



Under French GAAP, consolidation
and business goodwill arising from previous transactions have been amortized over the expected period of benefit, which does not exceed 20 years.



Under U.S. GAAP, the Company accounts for goodwill and other indefinite-lived assets in accordance with SFAS No. 142, Goodwill and
Other Intangible Assets (SFAS 142). Under SFAS 142, goodwill and indefinite life intangible assets are no longer amortized but are required to be reviewed annually (or more frequently if impairment indicators arise) for impairment.
Identifiable intangible assets with finite lives continue to be amortized over their useful lives.



The Company performs the annual test for goodwill and indefinite-lived assets impairment during the first quarter of each fiscal year.
When performing its impairment tests, the Company allocates existing goodwill balances to its reporting units, and then evaluates the reporting units for impairment using a two-step test.



The first step of the goodwill impairment evaluation is used to identify potential impairment by comparing
the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired, and the second step of the test is unnecessary. If the carrying
value of the reporting unit exceeds its fair value, the second step of the goodwill impairment test compares the implied fair value of the reporting units goodwill with the carrying value of that goodwill. If the carrying amount of the
reporting units goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill that is recognized in a
business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been currently acquired in a business
combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.



The Company determined its reporting units in a manner generally consistent with the operating segments. The Companys individual
assets and liabilities, including existing goodwill on the date of adoption, were allocated to each of the reporting units. The Company calculated the fair value of each reporting unit by using a present value technique and compared this value to
each reporting units carrying value. The present value technique is based on an evaluation of future discounted cash flows, which are consistent with the information used in the Companys internal planning and budgeting process. The
Companys discounted cash flow evaluation used discount rates that correspond to the credit and risk profile for each reporting unit. Certain other key assumptions utilized, including revenue and operating expenses, are based on management
estimates, are consistent with those utilized in the Companys annual planning process, and take into account the specific and detailed operating plans and strategies of each reporting unit.



As of March 31, 2005, 2004 and 2003, the Company has not
recorded any impairment on goodwill.



Intangible assets subject to amortization are reviewed for impairment whenever events and circumstances indicate that the intangible asset may not be recoverable.



Intangible assets with an indefinite life are tested for impairment on an annual basis, or more frequently
if events or changes in circumstances indicate that the asset might be impaired.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The impact of goodwill no longer being amortized under U.S. GAAP was to increase
U.S. GAAP pre-tax income by  33.1 million,  33.1 million and  33.1 million as compared to French GAAP pre-tax income for the years ended March 31, 2005, 2004 and 2003, respectively.



Additionally, goodwill on equity method investments is no
longer amortized, however, it is still to be tested for impairment in accordance with Accounting Principles Board Opinion No.18, The Equity Method of Accounting for Investments in Common Stock(APB 18). The impact of eliminating
the amortization of goodwill on equity method investments was to increase U.S. GAAP income by  2.2 million,  2.2 million and  2.0 million for the years ended March 31, 2005, 2004 and 2003, respectively.



A summary of the adjustments to net income and
stockholders equity before tax from French to US GAAP relating to goodwill and other indefinite-lived assets is disclosed below:



|                                                      |  |                       |  |                      |  |      |  |       |  |       |  |     
|----------------------------------------------------- |  | --------------------- |  | -------------------- |  | ---- |  | ----- |  | ----- |  | ----
|                                                      |  | Net Income            |  | Stockholders equity
|                                                      |  | 2005                  |  | 2004                 |  | 2003 |  | 2005  |  | 2004  |  | 2003
|                                                      |  | (in million of euros)
|Amortization of goodwill                              |  | 33.1                  |  | 33.1                 |  | 33.1 |  | 134.3 |  | 100.9 |  | 67.8
|Amortization of goodwill on equity method investments |  | 2.2                   |  | 2.2                  |  | 2.0  |  | 8.1   |  | 5.8   |  | 4.0 
|                                                      |  |                       |  |                      |  |      |  |       |  |       |  |     
|Amortization of goodwill (a)                          |  | 35.3                  |  | 35.3                 |  | 35.1 |  | 142.4 |  | 106.7 |  | 71.8
|                                                      |  |                       |  |                      |  |      |  |       |  |       |  |     



  Allocation of purchase price to assets and liabilities acquired for acquisitions other than KLM



Under French GAAP, certain acquired assets and liabilities assumed were not adjusted at fair value at the time of the acquisition, or in
the case of step acquisitions, their related fair values were assessed during the initial step of the acquisition.



Under U.S. GAAP, Accounting Principles Board Opinion No. 16, Business Combinations applicable for business combinations initiated
through June 30, 2001, and SFAS No 141 Business Combinations applicable for business combinations initiated after that date, require that the Company allocates the purchase price over the assets acquired and liabilities assumed, and in case
of step acquisitions, require that any additional interest acquired be fair valued at the date of the acquisition of the additional interest. As a consequence of this difference, the recorded amounts of goodwill and tangible fixed assets differ
under French GAAP and U.S. GAAP.



At March 31,
2003, goodwill was reduced by  22.7 million and tangible fixed assets were increased by  30.1 million as compared to French GAAP. The impact on net income before tax was an additional charge of  13.2 million under U.S. GAAP.



At March 31, 2004, goodwill is reduced by
 22.7 million and tangible fixed assets are increased by  27.6 million as compared to French GAAP. The impact on net income before tax is an additional charge of  2.5 million under U.S. GAAP.



At March 31, 2005, goodwill is reduced by  22.7
million and tangible fixed assets are increased by  27.5 million as compared to French GAAP. The impact on net income before tax is nil, resulting from offsetting impacts due to the disposal of one fully amortized aircraft during the year
ended March 31, 2005.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



A summary of the adjustments to net income and stockholders equity before tax
from French to US GAAP is disclosed below:



|                            |  |                       |  |      |                      |  |       |   |  |       |   |  |       |   |  |       |  
|--------------------------- |  | --------------------- |  | ---- | -------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                            |  | Net Income            |  |      | Stockholders equity | 
|                            |  | 2005                  |  | 2004 |                      |  | 2003  |   |  | 2005  |   |  | 2004  |   |  | 2003  |  
|                            |  | (in million of euros) | 
|Reduction of goodwill       |  |                      |  |     |                      |  |      |   |  | (22.7 | ) |  | (22.7 | ) |  | (22.7 | )
|Increase in tangible assets |  |                      |  | (2.5 | )                    |  | (13.2 | ) |  | 27.5  |   |  | 27.6  |   |  | 30.1  |  
|                            |  |                       |  |      |                      |  |       |   |  |       |   |  |       |   |  |       |  
|Business combinations (a)   |  |                      |  | (2.5 | )                    |  | (13.2 | ) |  | 4.8   |   |  | 4.9   |   |  | 7.4   |  
|                            |  |                       |  |      |                      |  |       |   |  |       |   |  |       |   |  |       |  



(b)  Impairment of tangible long-lived assets



Under French GAAP, when events and circumstances indicate that the assets may be impaired, Air France - KLM assesses the existence of impairment losses at the entire aircraft fleet level under full ownership and
capital leases and capitalized spare parts on the basis of their recoverable values as a whole.



Under U.S. GAAP, long-lived assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is
recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs
to sell, and are no longer depreciated. The assets and liabilities of an asset group classified as held for sale are presented as separate assets and liabilities in the U.S. GAAP balance sheet.



As a result of the July 2000 Concorde crash, the Company
reviewed its Concorde fleet for impairment as of and for the year ended March 31, 2001. Management determined that the estimated net undiscounted future cash flows generated by its Concorde fleet were less than the carrying value of the related
assets. Management estimated the undiscounted future cash flows with models used by the Company in making fleet and scheduling decisions. Under U.S. GAAP, the Concorde aircraft and their related long-lived assets were therefore written down to their
fair value, which has been determined to be nil due to the lack of any resale market for the Concorde fleet. Under French GAAP, the Company determined that, due to the contribution of Concorde to Air France - KLM commercial policy and corporate
image, Concorde related assets were tested at the Companys entire fleet level. As a result of this test no impairment charges were recorded on such assets under French GAAP. As of March 31, 2004, the Concorde assets had been completely
written-off from Air France - KLMs consolidated financial statements prepared in accordance with French GAAP as the Company stopped operations of these aircraft on May 31, 2003. There was therefore no GAAP difference in relation to these
aircraft as of March 31, 2004 and 2005.



As a
result of the events of September 11, 2001 and their related effects on the airline industry, Air France - KLM reviewed its fleet for impairment as of September 30, 2001. Management determined that the estimated net undiscounted future cash flows
generated by its Beech 1900 were less than their carrying value. Management estimated the undiscounted future cash flows with models used by the Company in making fleet and scheduling decisions. Under U.S. GAAP, the Beech 1900 aircraft and the
related long-lived assets were therefore written down to their fair values, based on the present



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



value technique method. Under French GAAP, the Company did not recognize any impairment on the Beech 1900 due to the Company testing impairment at the entire
fleet level. In addition, the Company disposed of one of the Beech 1900 during the year ended March 31, 2004. As a result, as of March 31, 2004, the impairment reconciling item resulting in a decrease in stockholders equity of 2.8
million relates solely to the remaining six Beech 1900. The effect of the impairment reconciling item on net income before tax for the year ended March 31, 2004 was an increase of 3.4 million.



The total effect of the above mentioned differences in GAAP
resulted in an increase (decrease) in the Companys U.S. GAAP net income before tax, as compared to French GAAP, by 0 million, 3.4 million and 53.9 million for the years ended March 31, 2005, 2004 and 2003, respectively. The
U.S. GAAP related stockholders equity decreased by 2.7 million, 2.8 million and 6.2 million as of March 31, 2005, 2004 and 2003, respectively, as compared to French GAAP.



(c)  Accounting for investments in marketable securities



Under French GAAP, the Company accounts
for its investments in debt and equity securities at the lower of historical cost or fair value, as assessed on an individual basis. As described in note 2.16, the fair value of investment corresponds to the utility value to the Company. Any impact
of changes in provisions for investments is recorded in earnings. Provisions previously recorded may be reversed based on subsequent recoveries in fair values.



Under U.S. GAAP, the Company is required to apply the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities.(SFAS 115). SFAS 115 requires that investments in marketable securities be divided into three categories: trading securities (investments that are bought and held principally for the purpose of selling them in the
near term), held-to-maturity securities (debt securities that the Company has a positive intent and ability to hold to maturity), and available-for-sale investments (all other securities). Under SFAS 115, the Company classifies its investments in
marketable debt and equity securities as available-for-sale with unrealized gains and losses excluded from earnings and reported as a component of stockholders equity (other comprehensive income). Unrealized losses that are determined to be
other than temporary are charged to income to reduce the cost basis of the assets. Such losses cannot be reversed.



Under U.S. GAAP, the amount of net unrealized gains (losses) amounted to  0.4 million,  2.9 million and (7.5) million as
of March 31, 2005, 2004 and 2003, respectively.



The Company also invests its excess of cash in mutual funds (SICAV) which are held for trading purposes. Realized and unrealized gains and losses on these investments are recognized immediately in financial income (expense).



Other than temporary impairment



Austrian Airlines



Prior to April 1, 2002, the Company determined that its
investment in Austrian Airlines (which is considered as an available-for-sale security) was impaired. As a result, under U.S. GAAP, the Company recorded an expense of 6.0 million corresponding to the other-than-temporary decline in fair value
of its investment in Austrian Airlines.



During
the year ended March 31, 2004, the Company recorded an impairment charge of  2.0 million under French GAAP. Under U.S. GAAP this impairment charge had already been recognized and therefore was reversed for the purpose of the reconciliation
from French GAAP to U.S. GAAP.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



During the year ended March 31, 2005, under French GAAP, the Company reversed 
0.4 million of impairment charge related to its investment in Austrian Airlines. Under US GAAP, the Company determined that its investment in Austrian Airline had incurred an additional other-than- temporary decline in value of  1 million. The
combination of the above mentioned effects resulted in a decrease of net income before tax between French and US GAAP of  1.4 million for the year ended March 31, 2005.



Alitalia



During the year ended March 31, 2004, the Company determined that its investment in Alitalia which is considered as an available for sale
investment was impaired for U.S. GAAP purposes. As a result, the Company recorded an impairment charge of  4.0 million under U.S. GAAP, corresponding to the decline in fair value of its investment in Alitalia. During the year ended March 31,
2005, the Company recorded an impairment charge, which was calculated based on its share in Alitalias equity, of  6.5 million under French GAAP related to its investment in Alitalia. Under US GAAP,  4 million of this impairment
charge had already been recognized in 2004. The company determined that under US GAAP, it had not incurred additional other than temporary declines in fair value. Therefore, the impairment charge of  6.5 million was reversed for the purpose of
the reconciliation from French to US GAAP.



A
summary of the adjustments to net income and stockholders equity before tax from French to US GAAP is disclosed below:



|                                                     |  |                       |  |                      |   |  |      |  |      |   |  |      |   |  |       |  
|---------------------------------------------------- |  | --------------------- |  | -------------------- | - |  | ---- |  | ---- | - |  | ---- | - |  | ----- | -
|                                                     |  | Net Income            |  | Stockholders equity |  
|                                                     |  | 2005                  |  | 2004                 |   |  | 2003 |  | 2005 |   |  | 2004 |   |  | 2003  |  
|                                                     |  | (in million of euros) | 
|Unrealizable gains (losses) on marketable securities |  |                      |  |                     |   |  |     |  | 0.4  |   |  | 2.9  |   |  | (7.5  | )
|Other than temporary impairment                      |  | 5.1                   |  | (2.0                 | ) |  |     |  | (2.9 | ) |  | (8.0 | ) |  | (6.0  | )
|                                                     |  |                       |  |                      |   |  |      |  |      |   |  |      |   |  |       |  
|Marketable securities (c)                            |  | 5.1                   |  | (2.0                 | ) |  |     |  | (2.5 | ) |  | (5.1 | ) |  | (13.5 | )
|                                                     |  |                       |  |                      |   |  |      |  |      |   |  |      |   |  |       |  



(d)  Consolidation



During the year ended March 31, 2003, the Company entered into certain agreements in which it deferred delivery of aircraft by transferring the aircraft into two newly-created special-purpose entities (SPE), Nogues and Investima. Under
French GAAP, the Company was not required to consolidate these SPEs until April 1, 2004. Under U.S. GAAP and based on the provisions of FASB EITF D-14, Transactions involving Special-Purpose Entities(EITF D-14), the Company
consolidated these SPEs during the year ended March 31, 2003. During the year ended March 31, 2004, the Company had transferred all assets and liabilities of the Investima SPE into the Companys assets and liabilities. A new French regulation
required the Company to consolidate special-purpose entities from April 1, 2004. Accordingly, the Company consolidated Nogues during the year ended March 31, 2005 thus eliminating the related difference between French and US GAAP.



In addition, during the year ended March 31, 2004, the
Company entered into a securitization transaction, described in note 23.3 to the consolidated financial statements, in which Air France - KLM held a variable interest. The Company had considered the provisions of FIN 46R and was required to
consolidate this entity under U.S. GAAP. This resulted in an increase of financial debt and cash and cash equivalents of 98.0 million at March 31, 2004. As of March 31, 2005, all aircraft have been



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



delivered and recorded in the Companys balance sheet. As a result, there is no reconciling item for this topic as of March 31, 2005.



In addition, as of March 31, 2005, the Company concluded that
no other entity was to be consolidated in accordance with FIN 46R.



(e)  Equity method investments



(i)  U.S. GAAP reconciliation



Under French GAAP, the Company has accounted for several of its investments by the equity method, using net income as determined under
accounting principles generally accepted in France.



Under U.S. GAAP, as required by APB 18, the results of operations of these investees must be determined in accordance with U.S. GAAP prior to the Companys recognition of its share in income of companies accounted for under the equity
method. The adjustments to present investees under U.S. GAAP relate primarily to the Companys investment in Amadeus GTD and mainly reflect differences in accounting for business combination. Those differences resulted in an increase in net
income of 3.1 million, 5.3 million and 7.3 million for the years ended March 31, 2005, 2004 and 2003, respectively, and an increase (decrease) in stockholders equity of  10.5 million, 4.6 million and 
(0.9) million as of March 31, 2005, 2004 and 2003, respectively, as compared to the amounts reported under French GAAP.



(ii)  Amortization of excess purchase price



Under French GAAP, the excess of the purchase price of equity method investments over the Companys
share of the historical net book value of the investee is generally considered as goodwill, and is amortized over 20 years. Under U.S. GAAP, such excess purchase price is allocated to the corresponding underlying assets of the investee. As mentioned
in note 35 (a) the Company recorded an increase in net income of 2.3 million, 2.2 million and  2.0 million for the years ended March 31, 2005, 2004 and 2003 respectively, corresponding primarily to the reversal of amortization of
the goodwill related to the Companys investment in Alpha.



(iii)  Companies recorded at cost under French GAAP and accounted for under the equity method under U.S. GAAP



In certain cases, under French GAAP, investments of 20% or more held in certain companies have not been accounted for using the equity
method, when the Company does not exercise significant influence, or does not intend to exercise such influence.



Under U.S. GAAP, the Company has considered the provisions of FASB Interpretation No. 35, Criteria for Applying the Equity Method
of Accounting for Investments in Common Stock and determined that the investment in Opodo should be accounted for under the equity method.



Consequently, the reconciliation of net income and stockholders equity reflects the Companys accounting for its investment in
Opodo using the equity method under U.S. GAAP for the years ended March 31, 2004 and 2003. During the year ended March 31, 2005, the Company ceased to reflect Opodos losses in its US GAAP financial statements as its investment was reduced to
zero with no commitment to provide further financial support to Opodo.



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



In addition, during the year ended March 31, 2005, the Companys share in Opodo
was reduced to 8.3%, resulting in Opodo no longer qualifying for equity method. Therefore Opodo is now recorded at cost under US GAAP with a book value of zero. Under French GAAP, Opodo is recorded at cost with a book value of  15.0 million.



For the years ended March 31 2005, 2004 and
2003, the impact on U.S. GAAP pre-tax income was an increase of 10.9 million, an increase of 11.2 million and a reduction of 20.0 million, respectively. The impact on stockholders equity was a decrease of 15.0
million, 25.9 million and 37.1 million as of March 31, 2005, 2004 and 2003, respectively, as compared to the amounts reported under French GAAP.



A summary with respect to Opodo adjustments to net income and stockholders equity before tax from French to US GAAP is disclosed
below:



|                                                                                           |  |                       |  |       |                      |  |       |   |  |       |   |  |       |   |  |       |  
|------------------------------------------------------------------------------------------ |  | --------------------- |  | ----- | -------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                                           |  | Net Income            |  |       | Stockholders equity | 
|                                                                                           |  | 2005                  |  | 2004  |                      |  | 2003  |   |  | 2005  |   |  | 2004  |   |  | 2003  |  
|                                                                                           |  | (in million of euros) | 
|Air France - KLM share in Opodos equity investment                                        |  |                      |  | (14.8 | )                    |  | (20.0 | ) |  | (51.9 | ) |  | (51.9 | ) |  | (37.1 | )
|Cancellation of impairment charge on Opodos investment recorded at cost under French GAAP |  | 10.9                  |  | 26.0  |                      |  |       |   |  | 36.9  |   |  | 26.0  |   |  |       |  
|                                                                                           |  |                       |  |       |                      |  |       |   |  |       |   |  |       |   |  |       |  
|Total                                                                                      |  | 10.9                  |  | 11.2  |                      |  | (20.0 | ) |  | (15.0 | ) |  | (25.9 | ) |  | (37.1 | )
|                                                                                           |  |                       |  |       |                      |  |       |   |  |       |   |  |       |   |  |       |  



In
addition, under U.S. GAAP, the Company accounted for its 24.75 % investment in Toga, a limited partnership related to Terminal 1 in the JFK airport using the equity method under U.S. GAAP following the provisions of EITF D-46, Accounting For
Limited Partnership Investments, which requires the use of the equity method unless the investors interest is minor. Consequently, under U.S. GAAP, the Company recorded an increase in stockholders equity of 1.6 million,
1.6 million and 1.8 million as of March 31, 2005, 2004 and 2003, respectively, as compared to French GAAP. The impact on net income was nil for all periods presented.



(iv)  Company accounted for under the equity method under French GAAP and consolidated under U.S. GAAP



Under French GAAP, the Company maintains
a 45% interest in Air France Partnairs Leasing (AFPL), a company whose primary business activity is leasing aircraft to Air France, and accounts for this investment under the equity method.



Under U.S. GAAP, the Company has considered the provisions
of SFAS No.13, Accounting for Leases (SFAS 13). The Company has determined that the equity method is not adequate for fair presentation of this investment because the principal business activity of this investee is to lease
aircraft to Air France. Therefore, AFPL is consolidated under U.S. GAAP. The impact on total assets was an increase of 39.1 million, 50.5 million and 70.2 million as of March 31, 2005, 2004 and 2003, respectively. The impact on
financial debt was an increase of 15.8 million, 19.4 and 27.8 million as of March 31, 2005, 2004 and 2003, respectively. The Company recorded an increase (decrease) in net income of 24.6 million, 12 million and
12.7 million for the years ended March 31,2005, 2004 and 2003, respectively, and a decrease in stockholders equity of 12.9 million, 37.4 million and 49.4 million as of March 31, 2005, 2004 and 2003, respectively, as
compared to amounts determined under French GAAP.



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Notes to the Consolidated Financial Statements (Continued)



The impact on stockholders equity is due to sale and leaseback transactions
that occurred in 1988 and that have been partially eliminated under French GAAP due to the accounting for AFPL under the equity method, but that are fully eliminated under U.S. GAAP due to consolidation. Any subsequent disposals of aircraft by AFPL
would lead to differences in the recognition of capital gain or loss between French and U.S. GAAP, as the carrying values of the aircraft differ between both sets of GAAP.



A summary of the adjustments to net income and stockholders equity before tax from French to US GAAP
is disclosed below:



|                              |  |                       |  |      |                      |       |   |  |       |   |  |       |   |  |       |  
|----------------------------- |  | --------------------- |  | ---- | -------------------- | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                              |  | Net Income            |  |      | Stockholders equity |      
|                              |  | 2005                  |  | 2004 |                      | 2003  |   |  | 2005  |   |  | 2004  |   |  | 2003  |  
|                              |  | (in million of euros) | 
|Amadeus GTD adjustments       |  | 3.1                   |  | 5.3  |                      | 7.3   |   |  | 10.5  |   |  | 4.6   |   |  | (0.9  | )
|Opodo                         |  | 10.9                  |  | 11.2 |                      | (20.0 | ) |  | (15.0 | ) |  | (25.9 | ) |  | (37.1 | )
|Toga                          |  |                      |  |     |                      |      |   |  | 1.6   |   |  | 1.6   |   |  | 1.8   |  
|Air France Partnairs Leasing  |  | 24.6                  |  | 12.0 |                      | 12.7  |   |  | (12.9 | ) |  | (37.4 | ) |  | (49.4 | )
|Other                         |  | 1.1                   |  |     |                      |      |   |  |      |   |  |      |   |  |      |  
|                              |  |                       |  |      |                      |       |   |  |       |   |  |       |   |  |       |  
|Equity method investments (e) |  | 39.7                  |  | 28.5 |                      |      |   |  | (15.8 | ) |  | (57.1 | ) |  | (85.6 | )
|                              |  |                       |  |      |                      |       |   |  |       |   |  |       |   |  |       |  



(f)  Provisions



Air
France - KLM has implemented a voluntary program to reduce the working time for employees that are between 55 and 60 years old (legal age for retirement). Under the conditions of this plan, the Company has proposed to certain employees to reduce
their working time to 50% while they continue to retain 80% of their former compensation levels. Under French GAAP, the Company accrued for such costs based on valuation of the commitments undertaken by the Company for employees accepting this
arrangement.



Under U.S. GAAP, such costs are
expensed as incurred as they relate solely to future service periods and do not qualify as post-employment benefits according to SFAS 112, Employers Accounting for Post-employment Benefits, because employees who accepted the offer will
continue to render service to the Company.



For
the years ended March 31, 2005, 2004 and 2003, the impact of this difference was a decrease of net income before tax of 6.1 million,  0.1 million and 10.1 million respectively, as compared to French GAAP, while the impact on
stockholders equity before tax under U.S. GAAP was an increase of 8.0 million, 14.1 million and 14.2 million at March 31 2005, 2004 and 2003, respectively.



(g)  Stock-based compensation



Under French GAAP, the Company does not account for any compensation charge in relation to its stock-based
compensation plan with the exception of its related stock-option component. In accordance with French GAAP, Air France - KLM does not record any compensation charge when stock options are granted. Under French GAAP, if a company issues new shares to
satisfy the exercise of the options, then the difference between the par value and the exercise price is recorded as an addition to additional paid-in capital. If a company repurchases shares on the open market or issues



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



shares held in treasury, then the difference between the repurchase price of the shares and the exercise price of the option is recorded as a compensation
charge in the consolidated income statement.



Under US GAAP, the company accounts for stock-based compensation in accordance with SFAS 123, Accounting for Stock-Based Compensation.



(i)  Share Purchase Plan (Offre Réservée aux Salariés : ORS)



As indicated in Note 32 to the consolidated financial
statements, on February 1st, 2005, eligible employees and retirees of Air France and subsidiaries were offered to
acquire Air France  KLM shares under certain preferential terms. Such preferential terms were comprised of (i) a 20% discount on Air France  KLM share market price, (ii) the attribution of free shares and (iii) an employer matching
contribution under certain conditions.



All the
shares granted under this plan were granted by the French State, the Companys main stockholder. At the closing date of the offer period, on February 21st, 2005, 8,414,273 shares had been acquired by the eligible employees.



Under French GAAP, the Company recorded a compensation expense corresponding to the matching contribution paid by the Company of  16
million.



Under US GAAP, due to the
preferential terms of the plan, such plan qualifies as a compensatory plan falling under the scope of SFAS 123. As a result, shares granted under such plan were fair valued at grant date and the related compensation expense recognized immediately as
there was no vesting condition associated with such plan.



The fair value of the shares granted has been determined based on the market price of Air France  KLM shares at grant date, deemed to be the end of the subscription period and assuming that 100% of the free
shares will ultimately be attributed to the employees. As a result, the Company recorded a compensation expense of  69.2 million during the year ended March 31, 2005 in addition to the matching contribution of  16 million already
accounted for under French GAAP.



(ii)  ESA 1998



In the case of the ESA 1998 stock compensation plan, 3,516,596 options were granted on May 30, 2000 to certain of the Companys employees. Such options are exercisable at an exercise price of 15.75 per share from May 31, 2005
through May 31, 2007. Upon exercise of these options the Company intends to deliver treasury shares previously acquired on the open market and will account for the related compensation charge when options are exercised.



Under U.S. GAAP, the company accounts for the fair value of
the grants under this plan in accordance with the fair value method described in Statement 123, Accounting for Stock-Based Compensation (SFAS 123). The compensation cost that was charged against income for this plan under U.S.
GAAP was 23.3 million, 24.2 million and 24.8 million for the years ended March 31, 2005, 2004 and 2003, respectively. This GAAP difference had no impact on stockholders equity as of March 31, 2005, 2004 and 2003,
respectively.



(iii)  ESA
2003



As indicated in Note 32 to the
consolidated financial statements, on February 1st, 2005, Air France  KLM launched a share purchase plan per
which employees of Air France located in France were offered to purchase Air France  KLM shares at a price of  14 per share in exchange for a reduction in their salary over a six year period.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



At the end of the offer period, on February 21st, 2005, 12.6 million Air France  KLM shares had been purchased by Air France employees. These Air France  KLM shares were actually granted
by Air France  KLMs main stockholder, the French State which in turn will be compensated by Air France  KLM for a total amount of  107 million. The vesting period of this plan will effectively start on May 2005 until May
2011.



Under French GAAP, Air France  KLM
accounted for the compensation to the French State of amount of  107 million as a liability as of March 31, 2005. The related expense will be recognized on a straight line basis over the vesting period in six years and is accounted for as a
prepaid expense as of March 31,2005.



Under US
GAAP, the Company accounts for this share purchase plan in accordance with SFAS 123. The fair value of the shares granted has been estimated at  180.4 million. Such amount will impact the income statement on a straight line basis starting in
May 2005. As a result, no compensation expense has been recognized during the year ended March 31, 2005. The compensation amount to be paid to the French state of an amount of  107 million will be considered as the acquisition of treasury
shares once such shares are delivered.



A
Summary of the adjustments to net income before tax from French to US GAAP is disclosed below :



|                             |  |                       |   |  |       |   |  |       |  
|---------------------------- |  | --------------------- | - |  | ----- | - |  | ----- | -
|                             |  | Net Income            |  
|                             |  | 2005                  |   |  | 2004  |   |  | 2003  |  
|                             |  | (in million of euros) |  
|ESA 1998                     |  | (23.3                 | ) |  | (24.2 | ) |  | (24.8 | )
|ESA 2003                     |  |                      |   |  |      |   |  |      |  
|ORS                          |  | (69.2                 | ) |  |      |   |  |      |  
|                             |  |                       |   |  |       |   |  |       |  
|Stock-based compensation (g) |  | (92.5                 | ) |  | (24.2 | ) |  | (24.8 | )
|                             |  |                       |   |  |       |   |  |       |  



(h)  Treasury shares



The discussion below only relates to treasury shares held by Air France. The US GAAP adjustment related to treasury shares held by KLM is reflected within the business combination line item (Note 35(a)).



Under French GAAP, the cost of treasury share repurchases
that are intended for distribution to the employees is classified in investments in marketable securities, and accounted for as described in Note 2.19. Remaining treasury shares that are purchased with the intent of managing stock price are recorded
as a reduction of stockholders equity at acquisition cost. All of these shares have been excluded in the earnings per share computation in accordance with French GAAP.



For French GAAP purposes, a provision is recorded for unrealized losses on shares which are classified as
investments in marketable securities. Changes in the provision, including any subsequent recovery in value, if any, are recorded as financial income or expense. Increases or decreases in the fair value of shares which are classified as a reduction
of stockholders equity are recorded directly as a component of stockholders equity.



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Notes to the Consolidated Financial Statements (Continued)



As of March 31, 2005, under French GAAP, the Company was carrying 4,824,002 of its
own shares of which 1,924,464 were classified as short term investment at a cost of 29.2 million (ii) 1,299,538 were classified as a reduction of the Company stockholders equity, and (iii) 1,600,000 had been transferred to a third party
with a commitment to repurchase those shares. For French GAAP purposes, this transaction is considered as temporary loan. A charge of  0.8 million was recognized in the Companys French GAAP consolidated financial statements to account
for unrealized losses on the Companys own shares accounted for as short term investment.



As of March 31, 2004 under French GAAP, the Company was carrying 2,435,311 of its own shares of which (i) 49,464 were classified as
short-term investment at a cost of 0.8 million (ii) 1,185,847 were classified as a reduction of the Company stockholders equity, and (iii) 1,200,000 had been transferred to a third party with a commitment to repurchase those shares. For
French GAAP purposes, this transaction is considered as temporary loan.



A release of provision of 7.5 million was recognized in the Companys French GAAP consolidated financial statements to account for the change in fair value of the treasury stocks accounted for as short-term
investment. In addition, the Company realized a gain of  1.1 million on the disposition of 614,042 of its own shares which was recorded through equity under both French and U.S. GAAP.



As of March 31, 2003, the Company was carrying 2,884,498 of
its own shares of which (i) 1,249,464 were classified as short-term investment at a cost of 21.5 million and (ii) 1,635,034 were classified as a reduction of the Company stockholders equity. A charge of 10.3 million was recognized
in the Companys French GAAP consolidated financial statements to account for unrealized losses on the Companys own shares accounted for as short-term investment.



Under U.S. GAAP, treasury shares are accounted for as a reduction of stockholders equity at
acquisition cost, and no further recognition is given for subsequent changes in fair value. When treasury shares are resold, any differences between cost and fair value are generally recorded directly to stockholders equity. Accordingly, the
0.8 million expense, 7.5 million income and 10.3 million expense recognized for the years ended March 31, 2005, 2004 and 2003, respectively under French GAAP were reversed for purposes of determining the U.S. GAAP net income. The
impact on stockholders equity was a decrease of 49.8 million, 18.7 million and 11.2 million As of March 31, 2005, 2004 and 2003, respectively.



In addition, the temporary loan of shares described above is accounted for as a sale of treasury stocks with
a commitment to re-acquire the shares issued, thus resulting in an increase in stockholders equity of  24.2 million and  15.9 million as of March 31, 2005 and 2004 respectively.



Under U.S. GAAP, the commitment to repurchase the shares has
been separately accounted for by the Company in accordance with SFAS 150, Accounting For Certain Financial Instruments withCharacteristics of both Liabilities and Equity. This results in an increase in financial debt and a decrease in
stockholders equity of 24.2 million and  15.9 million as of March 31, 2005 and 2004 respectively.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



A summary of the adjustments to net income and stockholders equity before tax
from French to US GAAP is disclosed below:



|                                                                          |  |                       |  |                       |   |  |      |  |       |   |  |       |   |  |       |  
|------------------------------------------------------------------------- |  | --------------------- |  | --------------------- | - |  | ---- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                          |  | Net Income            |  | Stockholders equity  |  
|                                                                          |  | (in million of euros) |  | (in million of euros) |  
|                                                                          |  | 2005                  |  | 2004                  |   |  | 2003 |  | 2005  |   |  | 2004  |   |  | 2003  |  
|Reclassification of treasury stock as a reduction of stockholders equity |  |                      |  |                      |   |  |     |  | (29.2 | ) |  | (5.6  | ) |  | (21.5 | )
|Commitment to repurchase as a reduction of stockholders equity           |  |                      |  |                      |   |  |     |  | (24.2 | ) |  | (15.9 | ) |  |      |  
|Reversal under US GAAP of the unrealized gain (loss) on treasury shares   |  | 0.8                   |  | (7.5                  | ) |  | 10.3 |  | 3.6   |   |  | 2.8   |   |  | 10.3  |  
|Reversal of the gain on sale of treasury shares                           |  |                      |  |                      |   |  |     |  |      |   |  |      |   |  |      |  
|                                                                          |  |                       |  |                       |   |  |      |  |       |   |  |       |   |  |       |  
|Treasury shares (h)                                                       |  | 0.8                   |  | (7.5                  | ) |  | 10.3 |  | (49.8 | ) |  | (18.7 | ) |  | (11.2 | )
|                                                                          |  |                       |  |                       |   |  |      |  |       |   |  |       |   |  |       |  



(i)  Sale-leaseback transactions



The Company regularly enters into transactions whereby the Company sells a fully owned aircraft to a third party and leases the aircraft back from this party (the lessor). Under French GAAP and to the extent the lease
back agreement qualifies as an operating lease, the Company recognizes the entire gains and losses on the sale transactions upon completion of the sale of the aircraft to the lessor. The Company does not record any profits or losses on the sale when
the leaseback transaction qualifies as a capital lease.



Under U.S. GAAP, all profits or losses on sales realized by the Company are deferred and amortized in proportion to the amortization of the leased asset, if a capital lease, or in proportion to the related gross rental charged to expense
over the lease term, if an operating lease. However, when the fair value of the property at the time of the transaction is less than its undepreciated cost, a loss is recognized immediately up to the amount of the differences between undepreciated
cost and fair value.



The application of U.S.
GAAP resulted in an increase (decrease) in the Companys net income for the years ended March 31, 2005, 2004 and 2003 by 2.7 million, (19.9) million and 29.4 million, respectively and a decrease in the Company
stockholders equity by 73.9 million 76.6 million and 56.7 million as of March 31, 2005, 2004 and 2003, respectively, as compared to French GAAP. The related balance sheet impact was an increase in the other current
liabilities of an amount of 73.9 million 76.6 million and 56.7 million as of March 31, 2005, 2004 and 2003, respectively.



(j)  Lease accounting



Under French GAAP, companies have the choice to account for lease arrangements either based on International Accounting Standard 17,
Leases (IAS 17) or based on the form of the lease arrangement. The latter method has been applied by the Company as described in note 2.15 to the consolidated financial statements. Under this method, a lease arrangement is
qualified as a capital lease if the lease arrangement provides for a bargain purchase option.



Under U.S. GAAP, the Company applied the provisions of SFAS 13, which requires that a lease agreement meeting any of the specified
criteria listed in SFAS 13 be accounted for as a capital lease through recognition of the leased asset and a liability corresponding to the lower of the market value of the leased asset or the present value of the obligation under the lease. In
accordance with this standard, the Company has determined that a number of the lease arrangements accounted for as operating leases under French GAAP should be recorded as capital leases under U.S. GAAP.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The application of U.S. GAAP resulted in an increase in the Companys net income
under U.S. GAAP as compared to French GAAP of 1.6 million, 12.6 million and 29.9 million for the years ended March 31, 2005, 2004 and 2003, respectively and an increase (decrease) in the Company stockholders equity of
16.1 million, 14.4 million and 1.8 million as of and for the periods ended March 31, 2005, 2004 and 2003.



The application of this standard also resulted in an increase in fixed assets of 88.6 million, 118.4 million and 111.9
million at March 31, 2005, 2004 and 2003, a decrease in accrued rent expense of 2.7 million at March 31, 2005, a decrease in prepaid expenses of 3.8 million and 5.0 million at March 31, 2004 and 2003, an increase in interest
payable of 2.5 million, 0.8 million and 1.0 million at March 31, 2005, 2004 and 2003, and an increase in debt of 72.3 million, 98.9 million and 104.1 million at March 31, 2005, 2004 and March 31, 2003,
respectively, as compared to amounts determined in French GAAP.



(k)  Accounting for maintenance costs



The Company changed its method of accounting for estimated costs of major airframe and engine maintenance under French GAAP, effective April 1, 2002. As a result, the Company adopted the component method for these
costs in which the estimated costs of these expenses related to aircraft owned and held under capital leases were capitalized upon adoption, and will be amortized over the period remaining until the next overhaul. As described in note 2.1 of the
Companys consolidated financial statements, the Company recorded the effects of this change in accounting method in stockholders equity, as of April 1, 2002. Prior to April 1, 2002, the Company was accounting for these maintenance costs
using (i) the accrual method for maintenance costs associated with airframes and (ii) the expense as incurred method for maintenance costs associated with engines.



Under U.S. GAAP, the Company accounts for maintenance costs of owned aircraft and aircraft held under
capital leases using the expense as incurred method.



The discussion below only relates to Air France maintenance costs. US GAAP adjustment related to KLM is presented within the business combination line item.



As of and for the year ended March 31, 2005, French GAAP maintenance costs accounting for airframes and
engines was based on the component method resulting in the recognition of net assets of 70.2 million. The effect on the Companys net income before tax of the net change in the capitalized maintenance cost amounted to  5.4 million
(a charge) for the year ended March 31, 2005. Under US GAAP, as the Company is expensing the maintenance costs as incurred, the maintenance net assets and the related effect on the Companys net income before tax were reversed, resulting in a
decrease in the Companys net stockholders equity of (70.2) million and a related increase in the Companys net income before tax of 5.4 million.



As of and for the year ended March 31, 2004, French GAAP maintenance costs accounting for airframes and
engines was based on the component method resulting in the recognition of net assets of 75.6 million. The effect on the Companys net income before tax of the net change in the capitalized maintenance cost amounted to (24.5) million
(a charge) for the year ended March 31, 2004. Under US GAAP, as the Company is expensing the maintenance costs as incurred, the maintenance net assets and the related effect on the Companys net income before tax were reversed, resulting
in a decrease in the Companys net stockholders equity of (75.6) million and a related increase in the Companys net income before tax of 24.5 million.



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Notes to the Consolidated Financial Statements (Continued)



As of and for the year ended March 31, 2003, French GAAP maintenance costs accounting
for airframes and engines was based on the component method resulting in the recognition of net assets of 100.1 million. The effect on the Companys net income before tax of the net change in the capitalized maintenance cost amounted to
40.9 million (an income) for the year ended March 31, 2003. Under US GAAP, as the Company is expensing the maintenance costs as incurred, the maintenance net assets and the related effect on the Companys net income before tax were
reversed, resulting in a decrease in the Companys net stockholders equity of (100.1) million and a related decrease in the Companys net income before tax of (40.9) million.



(l)  Restitution cost accrual



In connection with the change in accounting method for
maintenance costs under French GAAP as described above, the Company changed also its method of accounting for restitution cost related to aircraft under operating lease effective April 1, 2002. Prior to April 1, 2002, the Company was accruing solely
for restitution costs related to airframes. Effective April 1, 2002, the Company accrues for both airframes and engines restitution costs related to aircraft under operating lease as soon as the asset does not meet the return to condition criteria
set as per the lease arrangement between the Company and the lessor. When the condition of the aircraft exceeds the return to condition criteria set as per the lease arrangement, the Company capitalizes the related amount in excess. Such amount is
further amortized on a straight-line basis over a period ending when the restitution criteria is met. The effect of the change in accounting method for restitution costs amounted to 223.5 million and was accounted for directly through the
Companys retained earnings in accordance with French GAAP.



Under U.S. GAAP, restitution costs are accrued when such costs are probable and estimable in accordance with SFAS No. 5, Accounting for Contingencies (SFAS 5).



The discussion below only relates to Air France restitution
costs. US GAAP adjustment related to KLM is presented within the business combination line item.



As of and for the year ended March 31, 2005, French GAAP restitution costs accounting for both airframes and engines resulted in the
recognition of a restitution cost accrual of 263.3 million. The net effect of the net change in the accrual on the Companys net income before tax for the year ended March 31, 2005 amounted to 11.6 million (a gain). Under US GAAP,
as the Company is accruing for restitution costs when such costs are probable and estimable, it was determined that the restitution cost accrual amounted to 4.3 million. Therefore, under US GAAP, the Company reversed the unnecessary
restitution cost accrual and the related effect on the Companys net income before tax, resulting in an increase in the Companys stockholders equity of 259.1 million and a decrease in the Companys net income before tax
of 6.6 million as of and for the year ended March 31, 2005.



As of and for the year ended March 31, 2004, French GAAP restitution costs accounting for both airframes and engines resulted in the recognition of a restitution cost accrual of 274.9 million. The net effect of
the net change in the accrual on the Companys net income before tax for the year ended March 31, 2004 amounted to 32.5 million (a gain). Under US GAAP, as the Company is accruing for restitution costs when such costs are probable and
estimable, it was determined that the restitution cost accrual amounted to 9.3 million. Therefore, under US GAAP, the Company reversed the unnecessary restitution cost accrual and the related effect on the Companys net income before tax,
resulting in an increase in the Companys stockholders equity of 265.6 million and a decrease in the Companys net income before tax of 37.9 million as of and for the year ended March 31, 2004.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



As of and for the year ended March 31, 2003, French GAAP restitution costs accounting
for both airframes and engines resulted in the recognition of a restitution cost accrual of 307.4 million. The net effect of the net change in the accrual on the Companys net income before tax for the year ended March 31, 2003 amounted
to 23.4 million (a charge). Under US GAAP, as the Company is accruing for restitution costs when such costs are probable and estimable, it was determined that the restitution cost accrual amounted to 3.9 million. Therefore, under US
GAAP, the Company reversed the unnecessary restitution cost accrual and the related effect on the Companys net income before tax, resulting in an increase in the Companys stockholders equity of 303.5 million and an increase
in the Companys net income before tax of 26.9 million as of and for the year ended March 31, 2003.



(m)  Pension and post retirement benefits



As disclosed in Note 35(a), the Company has re-measured the KLMs pension projected benefit obligation and fair value of plan assets
at the date of acquisition. Under French GAAP, the amount of net asset that can be recognized is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans
(the asset ceiling rule). Under US GAAP, no such limitation exists and therefore the pension asset was increased under US GAAP by 393 million in the opening balance sheet of KLM. Under French GAAP, a charge of  59.4 million
related to this asset ceiling was recognized during the year ended March 31, 2005. This difference in GAAP, related to KLMs pension schemes, resulted in an increase in the Companys net income before tax of  59.4 million as
compared to amounts recorded under French GAAP. These differences are reflected with the business combination line item.



As described in note 22.1, the Company has elected to provide for the costs and liabilities related to substantially all of the
Companys pension, post-employment and post-retirement plans in accordance with French GAAP. In France, all of the Companys employees benefit from the retirement indemnity scheme, and ground employees hired before 1993 benefit from the
retirement scheme CRAF. In other countries, the employees covered and the type of retirement plans vary considerably depending on local regulations and practices.



Under U.S. GAAP, all pension, post-employment, and post-retirement plans are to be accounted for in
accordance with Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions (SFAS 87), Statement of Financial Accounting Standards No. 106, Employers Accounting for Postretirement Benefits
Other than Pensions (SFAS 106), and Statement of Financial Accounting Standards No. 112, Employers Accounting for Post-employment Benefits (SFAS 112), respectively. Benefit obligations and costs as measured
under these Statements are similar in most respects to benefit obligations and costs as determined by the Company under French GAAP, with the following exceptions in addition to the asset ceiling referred to above:



  French GAAP does not provide for the recognition of an
additional minimum liability. Under U.S. GAAP, an additional minimum liability is required for pension plans in which the excess of accumulated benefit obligation over the fair value of plan assets is larger than the recorded net liability, as
defined in SFAS 87.



  French GAAP requires
recognition of prior service cost for vested rights, amortized over service to vesting date if non-vested. Under U.S. GAAP, prior service cost amounts are generally amortized over future periods.



  Under U.S. GAAP, the Company is required to account for the
costs and obligations of all plans in accordance with SFAS 87, SFAS 106 and SFAS 112. Accordingly, the Companys pension and post-retirement costs and obligations are included in the reconciliation of net income and stockholders equity
for all periods presented.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



SFAS 87 requires that companies located outside the United States adopt the
provisions of SFAS 87 for fiscal years beginning after December 15, 1988. Due to the significant period of time that has elapsed from the date when SFAS 87 was required to be adopted, it was not feasible for the Company to apply U.S. GAAP on a
retroactive basis as of the dates originally required in the standards. As a result, the Company, as permitted, has adopted SFAS 87 on April 1, 2001.



At the date of adoption, the Companys net transition asset was 56.0 million. Such transition amount was analyzed on a plan by
plan basis and amortized through a period of 12 years, (which represents the amortization period between the required adoption date of April 1, 1989 and April 1, 2001), on the basis of the remaining service period of employees expected to receive
benefits as estimated at the adoption date. As a result, the effect of amortizing the transition amount resulted in an increase to stockholders equity under U.S. GAAP of 36.0 million as of April 1, 2001.



For those specific plans for which the remaining service life
of employees is less than 12 years the transition obligation is considered to be fully amortized at April 1, 2001. For those individual plans for which the remaining service life of employees covered under the plan is greater than 12 years the
transition amount has been determined and amortized on a straight-line basis for the service period remaining as of April 1, 2001. As of April 1, 2001, the net unamortized transition amount was 20.0 million. This amount corresponds to
retirement indemnities in France (18.0 million), U.S. pension plans (3.0 million) and Japanese plans ((1.0) million) in which the expected remaining service life of employees was determined to be approximately 19 years. As a
result, this transition amount is expected to be amortized on a straight-line basis for the remaining seven years as a reduction to periodic pension cost.



This difference in GAAP resulted in an increase in the Companys net income before tax under U.S. GAAP as compared to French GAAP by
 12 million, a decrease of  (1.1) million and  (5.9) million for the years ended March 31, 2005, 2004 and 2003 respectively and an increase in the Companys stockholders equity before tax of  1.8 million,
51.3 million and 49.6 million as of and for the years ended March 31, 2005, 2004 and 2003 respectively.



Additional disclosures presented in accordance with SFAS 132 (Revised 2003), Employers Disclosures about Pensions and Other
Postretirement Benefitsand related to the Companys pension and post-retirement plans are provided in note 37.



(n)  Derivative instruments and hedging activities



Under French GAAP, the Company applies the following accounting policies:



  Forward exchange contracts and foreign currency swaps are
used to hedge foreign currency exchange rate exposures. Unrealized gains and losses on these investments are deferred and recorded against the carrying amount of the hedged asset or liability on firm commitments. Contract premiums are amortized
ratably over the term of the hedge arrangement.



  The Company enters into various interest rate swaps to manage its interest rate exposure. The objectives of the swaps are to modify instruments from fixed rate to floating and floating rate to fixed. The difference between
interest payable and receivable is recognized as interest expense or interest income.



  The petroleum options premiums are accounted for in the income statement on an accrual basis. The difference between interest payable and receivable on petroleum swaps is recognized as operating
expense or operating income.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Under U.S. GAAP, the Company adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133) on April 1, 2001. Under U.S. GAAP, all derivative instruments other
than certain derivatives indexed to the Companys own stock are to be recognized on the balance sheet at fair value. Changes in the fair value of derivatives that are not designated as hedges are immediately recorded through income. If the
derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability or firm commitments through earnings or
recognized in accumulated other comprehensive income until the hedged item is recognized in earnings. The ineffective portion in the change in fair value of a derivative instrument is immediately recognized in earnings. In order to qualify for hedge
accounting, formal documentation designating the relationships between the hedging instrument and the hedged underlying transaction must be in place at the inception and hedge effectiveness must be reassessed regularly.



The derivatives held by the Company over the periods are
economic hedges but do not systematically qualify for hedge accounting under SFAS 133 as the documentation supporting hedging transactions was not sufficient to meet SFAS 133 requirements. In particular, derivatives hedging jet fuel prices are
generally recorded under trading principles except jet fuel swaps which are qualified as cash flow hedges.



Under U.S. GAAP, for the year ended March 31, 2005, the Company recognized a net gain of 687.8 million (net of 2005 OCI current
change of  215.1 million on a Group share basis) in the income statement as a result of changes in the fair value of derivatives, comprising unrealized gain of 821.4 million on fuel derivatives, unrealized loss of 140.2 million on
forward exchange contracts and unrealized gain of 6.6 million on interest rate swaps. Impacts on U.S. GAAP current assets, non-currents assets, current liability and non-current liability are 1,758.9 million, 214.6 million,
878.9 million and 33.4 million respectively. This difference in GAAP results in an increase in the Companys stockholders equity before tax of  1,061.2 million.



Under U.S. GAAP, for the year ended March 31, 2004, the
Company recognized a net gain of 158.6 million (net of 2004 OCI current change of 18.1 million) in the income statement as a result of changes in the fair value of derivatives, comprising unrealized gain of 128.3 million on fuel
derivatives, unrealized gains of 15.1 million on forward exchange contracts and unrealized gain of 33.3 million on interest rate swaps. Impacts on U.S. GAAP current assets, non-currents assets, current liability and non-current liability
are 578.0 million, 101.2 million, 390.6 million and 136.1 million respectively. This difference in GAAP results in an increase in the Companys stockholders equity before tax of 152.6 million.



Under U.S. GAAP, for the year ended March 31, 2003, the
Company recognized a net loss of 31.2 million in the income statement as a result of changes in the fair value of derivatives, comprising unrealized losses of 12.4 million on fuel derivatives, unrealized gains of 16.5 million on
forward exchange contracts and unrealized losses of 35.3 million on interest rate swaps. Impacts on U.S. GAAP current assets, non-currents assets, current liability and non-current liability are 289.9 million, 63.1 million,
279.9 million and 97.4 million respectively. This difference in GAAP resulted in a decrease in the Companys stockholders equity before tax of 24.1 million.



(o)  Other derivative instruments



In 1999 the Company entered into an agreement with a financial institution to guarantee a minimum stock
price of 14 in connection with the ESA 1998 plan. As a result, Air France - KLM bears the risk of any decrease below 14 of its own stock price under the terms of this agreement.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



At March 31, 2003 and under French GAAP, the Company recorded a provision of 23
million of which 11.4 million aimed at covering such exposure. At March 31, 2004 and under French GAAP, this provision was reversed as the stock price exceeded  14 per share.



Under U.S. GAAP, the Company considered the provisions of EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock (EITF 00-19) and determined that the contract, in which the Company entered into with the financial institution should be measured at fair value at the
inception date and classified as equity. Subsequent changes in fair value are not recognized. Consequently, the fair value of this equity instrument has been measured at March 31, 2001, resulting in an increase of financial debt and a decrease of
stockholders equity of 31.9 million, as compared to French GAAP.



The provision accrued for under French GAAP for an amount of 11.4 million at March 31, 2003, subsequently reversed at March 31, 2004 would not have been accrued or reversed under U.S. GAAP. As of March 31, 2005,
the agreement was terminated. There is therefore no reconciling item on such topic as of March 31, 2005.



(p)  Revenue recognition



(i)  Revenue generated from power-by-the-hour maintenance



Under French GAAP, the Company accounts for the revenue generated from power-by-the-hour maintenance
provided to third party companies based on the flight time declared by the customer. The Company recognizes revenue for other maintenance contracts using the percentage of completion method.



Under U.S. GAAP, in accordance with Staff Accounting Bulletin
No. 104, Revenue Recognition in Financial Statements (SAB 104) and FASB Technical Bulletin 90-1, Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts, the Company defers revenue
generated by the power-by-the-hour maintenance arrangements until the service is rendered. Consequently, the Company recorded an increase (decrease) in net income before tax of 0.7 million, (5.3) million and (3.1) million for the
year ended March 31, 2005, 2004 and 2003, respectively, and a decrease in stockholders equity before tax of 12.0 million, 12.7 million and 7.4 million As of March 31, 2005, 2004 and 2003, respectively.



(ii)  Exchange of slots



During the years ended March 31, 2005 and 2004, the Company
entered into a series of transactions to exchange with third party airlines certain of its summer and winter slots for others that it does not intend to utilize. This exchange of similar assets also included cash consideration.



As of March 31, 2005, the Company recognized a total gain
under French GAAP of  7.1 million for the 2004 / 2005 exchange of summer and winter slots. The cash consideration received as of this date was  4.1 million corresponding to the payment for the summer slots only. However, the Company
considered that all uncertainties about the timing and resolution of contingencies for the exchange of the winter slots were assured beyond a reasonable doubt.



Under US GAAP, the Company has considered that the culmination of the earnings process was not reached for the exchange of the winter
slots and consequently as of March 31, 2005, has deferred recognition of the gain of  3.0 million relating to the winter slots. Subsequent to March 31, 2005, all outstanding conditions were waived.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



As of March 31, 2004, the Company recognized a total gain under French GAAP of 
49.5 million for the exchange of summer and winter slots. The cash consideration received as of this date was  29.1 million corresponding to the payment for the summer slots only. However, the Company considered that all
uncertainties about the timing and resolution of contingencies for the exchange of the winter slots were assured beyond a reasonable doubt.



Under US GAAP, the Company has considered that the culmination of the earnings process was not reached for the exchange of the winter
slots and consequently as of March 31, 2004, has deferred recognition of the gain of  20.4 million relating to the winter slots. Subsequent to March 31, 2004, all outstanding conditions were waived and the Company received cash consideration
relating to the 2003 / 04 fiscal year winter slots exchange, thus resulting in the reversal of the previously recorded  20.4 million US GAAP adjustment as of March 31, 2005.



A summary of the adjustments to the net income and stockholders equity
before tax from French to US GAAP is disclosed below :



|                                           |  |                       |  |       |                      |  |      |   |  |       |   |  |       |   |  |      |  
|------------------------------------------ |  | --------------------- |  | ----- | -------------------- |  | ---- | - |  | ----- | - |  | ----- | - |  | ---- | -
|                                           |  | Net Income            |  |       | Stockholders equity | 
|                                           |  | 2005                  |  | 2004  |                      |  | 2003 |   |  | 2005  |   |  | 2004  |   |  | 2003 |  
|                                           |  | (in million of euros) | 
|Accounting for Power-by-the-hour contracts |  | 0.7                   |  | (5.3  | )                    |  | (3.1 | ) |  | (12.0 | ) |  | (12.7 | ) |  | (7.4 | )
|Accounting for exchange of slots           |  | 17.4                  |  | (20.4 | )                    |  |     |   |  | (3.0  | ) |  | (20.4 | ) |  |     |  
|                                           |  |                       |  |       |                      |  |      |   |  |       |   |  |       |   |  |      |  
|Revenue recognition (p)                    |  | 18.1                  |  | (25.7 | )                    |  | (3.1 | ) |  | (15.0 | ) |  | (33.1 | ) |  | (7.4 | )
|                                           |  |                       |  |       |                      |  |      |   |  |       |   |  |       |   |  |      |  



(q)  Credit memos and related aircraft depreciation



Under French GAAP, credit memos received from aircraft manufacturers in connection with purchases of aircraft that are in substance incentives earned in connection with aircraft phase-out and other asset retirement
programs, are recognized as other income in the same period as the estimated cost associated with the fleet phase-out.



Under U.S. GAAP, credit memos that are incentives to purchase a particular manufacturers aircraft are applied as a reduction of the
cost of the aircraft at the time of purchase, and result in a reduction of depreciation expense over the life of the related aircraft. Consequently, under U.S. GAAP, the Company recorded an increase (decrease) in net income before tax of 3.0
million, 2.0 million and (21.1) million for the years ended March 31, 2005, 2004 and 2003 respectively, and a decrease in stockholders equity before tax of 83.9 million, 87.0 million and 89.0 million as of March
31, 2005, 2004 and 2003 respectively, as compared to French GAAP.



Under French GAAP, companies must revise the useful economic life of long-lived assets solely when significant modifications in the use of the assets occur.



Under U.S. GAAP, companies must continually evaluate the
appropriateness of useful life assigned to long-lived assets. As a result, when the Company decided to phase out the A310, in September 1999, the Company determined that the useful life and the salvage value of ten A310 aircraft had to be reduced in
response to the Companys decision to accelerate the phase-out of these aircraft.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Seven of the A310 aircraft were disposed of during the year ended March 31, 2002
while three of these aircraft were disposed of during the year ended March 31, 2003. Consequently, gains realized on these disposals differ between French GAAP and U.S. GAAP, as the carrying value of the assets differed between French GAAP and U.S.
GAAP.



Therefore, under U.S. GAAP, the Company
recorded an increase in net income before tax 8.4 million for the year ended March 31, 2003. The impact was nil as of March 31, 2005 and 2004.



During the year ended March 31, 2004, the Company realized a loss of 16.5 on a sale and lease back transaction related to one A330.
Under US GAAP, such loss is decreased by 7.7 million, amount which represents the net book value of the purchase incentive affected to such aircraft as a result of the US GAAP adjustments mentioned above on the credit memos. Therefore, under
US GAAP, the Company records an increase in net income before tax of 7.7 million for the year ended March 31, 2004 and a related increase in stockholders equity of 7.7 million.



A summary of the adjustments to net income and
stockholders equity before tax from French to US GAAP is disclosed below:



|                                                                                             |  |            |  |      |                      |       |   |  |       |   |  |       |   |  |       |  
|-------------------------------------------------------------------------------------------- |  | ---------- |  | ---- | -------------------- | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                                             |  | Net Income |  |      | Stockholders equity |      
|                                                                                             |  | 2005       |  | 2004 |                      | 2003  |   |  | 2005  |   |  | 2004  |   |  | 2003  |  
|Credit memos accounted for as a reduction of purchased aircraft cost under US GAAP           |  | 3.0        |  | 2.0  |                      | (21.1 | ) |  | (83.9 | ) |  | (87.0 | ) |  | (89.0 | )
|Adjustment to the useful life and salvage value of seven A310                                |  |           |  |     |                      | 8.4   |   |  |      |   |  |      |   |  |      |  
|Related adjustment to the loss realized with the sale and lease back transaction of one A330 |  |           |  | 7.7  |                      |      |   |  | 7.7   |   |  | 7.7   |   |  |      |  
|                                                                                             |  |            |  |      |                      |       |   |  |       |   |  |       |   |  |       |  
|Credit memos and related aircraft depreciation (q)                                           |  | 3.0        |  | 9.7  |                      | (12.7 | ) |  | (76.2 | ) |  | (79.3 | ) |  | (89.0 | )
|                                                                                             |  |            |  |      |                      |       |   |  |       |   |  |       |   |  |       |  



(s)  Accounting for income taxes



(i)  Deferred tax liability related to Amadeus GTD



Under French GAAP deferred tax liabilities on undistributed earnings are not required to be accounted for. Under U.S. GAAP, a deferred tax liability on undistributed earnings is required to be accounted for in
accordance with SFAS 109, Accounting For Income Taxes (SFAS 109) if the undistributed earnings are not indefinitely reinvested.



Prior to March 31, 2005, and in accordance with SFAS 109, the Company had not provided for any deferred tax liability on the undistributed
earnings of its investment in Amadeus based upon its determination that such earnings would be permanently reinvested.



As noted in Note 33 to the consolidated financial statements, the Group has decided to enter into a sale transaction. Therefore, as of
March 31, 2005, the Group considers that certain cumulative undistributed earnings will be distributed in the future. Consequently, the Group recorded a  47.2 million deferred tax liability as of and for the year ended March 31,
2005.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(ii)  Deferred taxes on perpetual loans



Under French GAAP, the Company does not account for deferred
taxes for temporary differences between the carrying amount and the tax basis of its two perpetual loans (TSDI) contracted in 1989 and 1992, respectively.



Under US GAAP and in accordance with the provisions of SFAS 109, a deferred tax liability of an amount of  87.2 million,  80.1
million and  64.4 million as of March 31, 2005, 2004 and 2003 respectively was accounted for resulting in a decrease in the Companys net income after tax of  7.1 million,  15.7 million and  13.5 million for
the year ended March 31, 2005, 2004 and 2003. The impact on stockholders equity is a decrease by  87.2 million,  80.1 million and  64.4 million as of March 31, 2005, 2004 and 2003 respectively. (Please refer to the paragraph
on restatement)



A summary of the adjustments
to the net income and stockholders equity after tax from French to US GAAP is disclosed below :



|                                              |  |            |   |  |                      |   |  |       |   |  |        |   |  |       |   |  |       |  
|--------------------------------------------- |  | ---------- | - |  | -------------------- | - |  | ----- | - |  | ------ | - |  | ----- | - |  | ----- | -
|                                              |  | Net Income |   |  | Stockholders equity |  
|                                              |  | 2005       |   |  | 2004                 |   |  | 2003  |   |  | 2005   |   |  | 2004  |   |  | 2003  |  
|Deferred tax liability related to Amadeus GTD |  | (47.2      | ) |  |                     |   |  |      |   |  | (47.2  | ) |  |      |   |  |      |  
|Deferred taxes on perpetual loans             |  | (7.1       | ) |  | (15.7                | ) |  | (13.5 | ) |  | (87.2  | ) |  | (80.1 | ) |  | (64.4 | )
|                                              |  |            |   |  |                      |   |  |       |   |  |        |   |  |       |   |  |       |  
|Accounting for income taxes (s)               |  | (54.3      | ) |  | (15.7                | ) |  | (13.5 | ) |  | (134.4 | ) |  | (80.1 | ) |  | (64.4 | )
|                                              |  |            |   |  |                      |   |  |       |   |  |        |   |  |       |   |  |       |  



(t)  Tax
effect of the above adjustments



The tax
effect of the adjustments included in the reconciliations of net income and stockholders equity under French GAAP to US GAAP was calculated by applying the applicable tax rate to the pretax adjustment where such adjustments have a tax effect.
The applicable tax rate was the tax rate expected to apply at the time the temporary difference reverses based on the specific tax jurisdiction in which the reversal will occur.



The tax effect of the US GAAP adjustments resulted in a decrease in the Companys net income of 
303.7 million, 44.5 and 7.7 million for the years ended March 31, 2005, 2004 and 2003, respectively, and a decrease in stockholders equity of  233.9 million,  88.2 and  34.5 million as of March 31, 2005, 2004 and
2003, respectively.



(u)  Other comprehensive
income



SFAS No. 130, Other
Comprehensive Income (SFAS 130), requires reporting of comprehensive income and its various components. French GAAP does not require separate disclosure of all such changes in equity during the period.



The Companys statement of other comprehensive income
for the years ended March 31, 2005, 2004 and 2003 is included in note 36 -2 (c).



(v)  Classification differences



(i)  Reclassification to operating income under U.S. GAAP



Under U.S. GAAP, certain items such as restructuring expenses ( 21 million 22 million and 13 million for the years
ended March 31, 2005, 2004 and 2003, respectively) are classified as part of operating income.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Additionally, under US GAAP, government grants received as a result of the events of
September 11, 2001 events have been separately disclosed in the income statement for an amount of 17.7 million for the year ended March 31, 2003 (nil in 2004), resulting in an increase of passenger service and other operating expenses of
17.7 million and 0, respectively, for the year ended March 31, 2003.



(ii)  Goodwill and Other intangible assets



Under French GAAP, certain amounts of historical goodwill have been reclassified to other intangible assets caption and are
being amortized over 20 years. For purposes of preparing U.S. GAAP financial statements these amounts (net book value of 100 million, 118 million and 136 million as of March 31, 2005, 2004 and 2003, respectively) are
reclassified to goodwill.



(iii)  Cash and cash
equivalents



Under French GAAP, cash and cash
equivalents as per the cash flow statement are stated net of bank overdrafts ( 263 million, 289 million and 267 million as of March 31, 2005, 2004 and 2003, respectively). For purposes of preparing the U.S. GAAP consolidated
financial statements, bank overdrafts are reclassified as a component of short-term debt.



(iv)  Other balance sheet classification differences



Under French GAAP, the consolidated balance sheets do not make the distinction between current and non-current items. Such distinction is
required for a U.S. GAAP presentation.



Under
French GAAP, deposits on capital leases have been presented as an offset of the related lease obligation. These deposits ( 494.9 million, 282 million and 277 million as of March 31, 2005, 2004 and 2003, respectively) has been
reclassified as financial assets for U.S. GAAP presentation.



Under French GAAP, as described in note 23.1, debt linked to sales with reservation of title are classified as long-term loans. Under US GAAP, these transactions have been treated as sales capital-leaseback
transactions and the corresponding debt of  609.5 million, 596.0 million, and 635.6 million respectively As of March 31, 2005, 2004 and 2003 have been reclassified to Obligations under capital leases.



In connection with the perpetual subordinated loan
securities as described in note 23.2 of the primary consolidated financial statements, the Company did pay deposits for an amount of 194 million. Under French GAAP, such deposits are accounted for as a reduction of the related long-term
debt as of March 31, 2004 and 2003.



Under U.S.
GAAP, and under the provisions of FIN 39, Offsetting of Amounts Related to Certain Contracts the Company does not offset the deposits and the related long-term debt. One of the perpetual subordinated notes came to maturity during the year
ended March 31, 2005. Therefore, the remaining deposits of  98.7 million have been reclassified under the caption Perpetual subordinated loan deposit of the balance sheet and the related long-term debt has been increased by a
similar amount.



Additionally, a provision for
slow moving inventory, which was accounted for as a provision for liabilities and charges under French GAAP as of March 31, 2003 for an amount of 14 million, has been reclassified as a reduction of inventory under U.S. GAAP. Such provision was
appropriately classified under French GAAP as of March 31, 2004 and March 31, 2005.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



36  Reconciliation to U.S. GAAP



The following is a summary of the required adjustments to the consolidated income statements for the years
ended March 31, 2005, 2004 and 2003 and to the stockholders equity at March 31, 2005, 2004 and 2003, which would be required if U.S. GAAP had been applied instead of French GAAP.



(1)  Reconciliation



(a)  Reconciliation of net income (loss)



|                                                             |  |                      |   |  |                |   |  |            |   |  |            |  
|------------------------------------------------------------ |  | -------------------- | - |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                             |  | Year Ended March 31, |  
|                                                             |  | 2005                 |   |  | 2005           |   |  | 2004       |   |  | 2003       |  
|                                                             |  |                      |   |  |                |   |  | (Restated) |   |  | (Restated) |  
|                                                             |  | (in $ million)(1)    |   |  | (in  million) |  
|Net income as reported in the Consolidated Income Statements |  | 455.5                |   |  | 351.2          |   |  | 92.7       |   |  | 120.5      |  
|(a) Business combination                                     |  | 72.5                 |   |  | 55.9           |   |  | (2.5       | ) |  | (13.2      | )
|(a) Goodwill amortization                                    |  | 45.8                 |   |  | 35.3           |   |  | 35.3       |   |  | 35.1       |  
|(b) Impairment of long-lived assets                          |  |                     |   |  |               |   |  | 3.4        |   |  | 53.9       |  
|(c) Marketable securities                                    |  | 6.6                  |   |  | 5.1            |   |  | (2.0       | ) |  |           |  
|(d) Consolidation                                            |  |                     |   |  |               |   |  |           |   |  |           |  
|(e) Equity method                                            |  | 51.5                 |   |  | 39.7           |   |  | 28.5       |   |  |           |  
|(f) Provisions                                               |  | (7.9                 | ) |  | (6.1           | ) |  | (0.1       | ) |  | (10.1      | )
|(g) Stock-based compensation                                 |  | (120.0               | ) |  | (92.5          | ) |  | (24.2      | ) |  | (24.8      | )
|(h) Treasury stock                                           |  | 1.0                  |   |  | 0.8            |   |  | (7.5       | ) |  | 10.3       |  
|(i) Sale-leaseback transactions                              |  | 3.5                  |   |  | 2.7            |   |  | (19.9      | ) |  | 29.4       |  
|(j) Accounting for leases                                    |  | 2.1                  |   |  | 1.6            |   |  | 12.6       |   |  | 29.9       |  
|(k) Accounting for maintenance                               |  | 7.0                  |   |  | 5.4            |   |  | 24.5       |   |  | (40.9      | )
|(l) Restitution cost                                         |  | (8.6                 | ) |  | (6.6           | ) |  | (37.9      | ) |  | 26.9       |  
|(m) Pensions and post-retirement benefits                    |  | 15.6                 |   |  | 12.0           |   |  | (1.1       | ) |  | (5.9       | )
|(n) Derivative instruments and hedging activities            |  | 892.0                |   |  | 687.8          |   |  | 158.6      |   |  | (31.2      | )
|(o) Other derivatives instruments                            |  |                     |   |  |               |   |  | (11.4      | ) |  | 11.4       |  
|(p) Revenue recognition                                      |  | 23.5                 |   |  | 18.1           |   |  | (25.7      | ) |  | (3.1       | )
|(q) Credit memos and related aircraft depreciation           |  | 3.9                  |   |  | 3.0            |   |  | 9.7        |   |  | (12.7      | )
|(r) Others                                                   |  | 1.6                  |   |  | 1.2            |   |  |           |   |  |           |  
|(s) Accounting for income taxes                              |  | (70.4                | ) |  | (54.3          | ) |  | (15.7      | ) |  | (13.5      | )
|(t) Tax effect of the above adjustments                      |  | (393.9               | ) |  | (303.7         | ) |  | (44.5      | ) |  | (7.7       | )
|Minority interests                                           |  | (2.3                 | ) |  | (1.8           | ) |  |           |   |  |           |  
|                                                             |  |                      |   |  |                |   |  |            |   |  |            |  
|Net income according to U.S. GAAP                            |  | 978.9                |   |  | 754.8          |   |  | 172.8      |   |  | 154.3      |  
|                                                             |  |                      |   |  |                |   |  |            |   |  |            |  

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-105



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(b)  Reconciliation of Stockholders equity



|                                                                                         |  |                  |   |  |                |   |  |            |   |  |            |  
|---------------------------------------------------------------------------------------- |  | ---------------- | - |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                         |  | At March 31,     |  
|                                                                                         |  | 2005             |   |  | 2005           |   |  | 2004       |   |  | 2003       |  
|                                                                                         |  |                  |   |  |                |   |  | (Restated) |   |  | (Restated) |  
|                                                                                         |  | (in $million)(1) |   |  | (in  million) |  
|Stockholders equity as reported in the Consolidated Balance Sheets, after appropriation |  | 6,692.8          |   |  | 5,160.6        |   |  | 4,062.4    |   |  | 3,993.7    |  
|(a) Business combinations                                                                |  | (232.9           | ) |  | (179.6         | ) |  | 4.9        |   |  | 7.4        |  
|(a) Goodwill amortization                                                                |  | 184.7            |   |  | 142.4          |   |  | 106.7      |   |  | 71.8       |  
|(b) Impairment of long-lived assets                                                      |  | (3.5             | ) |  | (2.7           | ) |  | (2.8       | ) |  | (6.2       | )
|(c) Marketable securities                                                                |  | (3.2             | ) |  | (2.5           | ) |  | (5.1       | ) |  | (13.5      | )
|(d) Consolidation                                                                        |  |                 |   |  |               |   |  |           |   |  |           |  
|(e) Equity method                                                                        |  | (20.5            | ) |  | (15.8          | ) |  | (57.1      | ) |  | (85.6      | )
|(f) Provisions                                                                           |  | 10.4             |   |  | 8.0            |   |  | 14.1       |   |  | 14.2       |  
|(g) Stock based compensation                                                             |  |                 |   |  |               |   |  |           |   |  |           |  
|(h) Treasury stock                                                                       |  | (64.6            | ) |  | (49.8          | ) |  | (18.7      | ) |  | (11.2      | )
|(i) Sale-leaseback transactions                                                          |  | (95.8            | ) |  | (73.9          | ) |  | (76.6      | ) |  | (56.7      | )
|(j) Accounting for leases                                                                |  | 20.9             |   |  | 16.1           |   |  | 14.4       |   |  | 1.8        |  
|(k) Accounting for maintenance                                                           |  | (91.0            | ) |  | (70.2          | ) |  | (75.6      | ) |  | (100.1     | )
|(l) Restitution cost                                                                     |  | 336.0            |   |  | 259.1          |   |  | 265.6      |   |  | 303.5      |  
|(m) Pensions and post-retirement benefits                                                |  | 2.3              |   |  | 1.8            |   |  | 51.3       |   |  | 49.6       |  
|(n) Derivative instruments and hedging activities                                        |  | 1,376.3          |   |  | 1,061.2        |   |  | 152.6      |   |  | (24.1      | )
|(o) Other derivatives instruments                                                        |  |                 |   |  |               |   |  | (31.9      | ) |  | (20.5      | )
|(p) Revenue recognition                                                                  |  | (19.5            | ) |  | (15.0          | ) |  | (33.1      | ) |  | (7.4       | )
|(q) Credit memos and related aircraft depreciation                                       |  | (98.8            | ) |  | (76.2          | ) |  | (79.3      | ) |  | (89.0      | )
|(r) Others                                                                               |  | 1.6              |   |  | 1.2            |   |  |           |   |  |           |  
|(s) Accounting for income taxes                                                          |  | (174.3           | ) |  | (134.4         | ) |  | (80.1      | ) |  | (64.4      | )
|(t) Tax effect of the above adjustments                                                  |  | (303.3           | ) |  | (233.9         | ) |  | (88.2      | ) |  | (34.5      | )
|Minority interests                                                                       |  | (23.0            | ) |  | (17.7          | ) |  |           |   |  |           |  
|                                                                                         |  |                  |   |  |                |   |  |            |   |  |            |  
|Stockholders equity according to U.S. GAAP                                              |  | 7,494.4          |   |  | 5,778.7        |   |  | 4,123.5    |   |  | 3,928.8    |  
|                                                                                         |  |                  |   |  |                |   |  |            |   |  |            |  

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-106



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(2)  U.S. GAAP financial information



(a)  Consolidated income statements



|                                                                                     |  |                  |   |  |                |   |  |            |   |  |            |  
|------------------------------------------------------------------------------------ |  | ---------------- | - |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                     |  | Years ended      |  
|                                                                                     |  | 2005             |   |  | 2005           |   |  | 2004       |   |  | 2003       |  
|                                                                                     |  |                  |   |  |                |   |  | (Restated) |   |  | (Restated) |  
|                                                                                     |  | (in $million)(1) |   |  | (in  million) |  
|Net sales                                                                            |  | 24,727.6         |   |  | 19,066.7       |   |  | 12,295.6   |   |  | 12,669.2   |  
|Salaries and related costs                                                           |  | (7,729.1         | ) |  | (5,959.7       | ) |  | (4,161.3   | ) |  | (3,962.7   | )
|Depreciation and amortization                                                        |  | (1,960.8         | ) |  | (1,511.9       | ) |  | (1,068.3   | ) |  | (1,079.4   | )
|Aircraft fuel                                                                        |  | (3,440.5         | ) |  | (2,652.9       | ) |  | (1,302.2   | ) |  | (1,381.7   | )
|Landing fees and other rents                                                         |  | (2,617.5         | ) |  | (2,018.3       | ) |  | (1,342.5   | ) |  | (1,361.8   | )
|Aircraft maintenance materials and outside repairs                                   |  | (1,030.1         | ) |  | (794.3         | ) |  | (548.7     | ) |  | (664.3     | )
|Aircraft rent                                                                        |  | (749.2           | ) |  | (577.7         | ) |  | (411.2     | ) |  | (467.2     | )
|Other selling expenses                                                               |  | (1,393.3         | ) |  | (1,074.3       | ) |  | (1,050.6   | ) |  | (1,156.9   | )
|Passenger service                                                                    |  | (1,894.6         | ) |  | (1,460.9       | ) |  | (1,043.1   | ) |  | (1,103.7   | )
|Asset writedowns, restructuring and related items, net                               |  | (26.6            | ) |  | (20.5          | ) |  | (12.7      | ) |  | (14.9      | )
|Other operating expenses                                                             |  | (2,065.3         | ) |  | (1,592.5       | ) |  | (1,164.1   | ) |  | (1,301.7   | )
|French government grant                                                              |  |                 |   |  |               |   |  |           |   |  | 17.7       |  
|                                                                                     |  |                  |   |  |                |   |  |            |   |  |            |  
|Income from operations                                                               |  | 1,820.6          |   |  | 1,403.7        |   |  | 190.9      |   |  | 192.6      |  
|Interest income (expense)                                                            |  | (412.7           | ) |  | (318.2         | ) |  | (149.4     | ) |  | (170.3     | )
|Interest income and other financial income, net                                      |  | (51.4            | ) |  | (39.6          | ) |  | 130.8      |   |  | 106.5      |  
|Gain on sale of stock in subsidiaries                                                |  | 87.0             |   |  | 67.1           |   |  | 4.8        |   |  | 4.3        |  
|                                                                                     |  |                  |   |  |                |   |  |            |   |  |            |  
|Income before taxes, minority interests and share in net income of equity affiliates |  | 1,443.5          |   |  | 1,113.0        |   |  | 177.1      |   |  | 133.1      |  
|Income tax (expense) income                                                          |  | (579.5           | ) |  | (446.8         | ) |  | (65.8      | ) |  | (10.5      | )
|Share in net income of equity affiliates                                             |  | 97.9             |   |  | 75.5           |   |  | 56.2       |   |  | 28.2       |  
|Minority interests                                                                   |  | 17.0             |   |  | 13.1           |   |  | 5.3        |   |  | 3.5        |  
|                                                                                     |  |                  |   |  |                |   |  |            |   |  |            |  
|Net income                                                                           |  | 978.9            |   |  | 754.8          |   |  | 172.8      |   |  | 154.3      |  
|                                                                                     |  |                  |   |  |                |   |  |            |   |  |            |  

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-107



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(b)   Earnings per share under U.S. GAAP



In accordance with SFAS 128, basic earnings per share is
computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. The computation of diluted earnings per share is adjusted to include any potential common shares. The computation and
reconciliation of basic and diluted earnings per share for the years ended March 31, 2005, 2004 and 2003 prepared in accordance with U.S. GAAP is as follows:



|                                                       |  |                                                    |  |                                                 |  |             |   |  |             |  
|------------------------------------------------------ |  | -------------------------------------------------- |  | ----------------------------------------------- |  | ----------- | - |  | ----------- | -
|                                                       |  | Year ended March 31,                               | 
|                                                       |  | 2005                                               |  | 2005                                            |  | 2004        |   |  | 2003        |  
|                                                       |  |                                                    |  |                                                 |  | (Restated   | ) |  | (Restated   | )
|                                                       |  | (in $ million except shares and per share data)(1) |  | (in  million except shares and per share data) | 
|Numerator                                              |  |                                                    |  |                                                 |  |             |   |  |             |  
|Net income according to U.S. GAAP                      |  | 978.9                                              |  | 754.8                                           |  | 172.8       |   |  | 154.3       |  
|Denominator (share amounts)                            |  |                                                    |  |                                                 |  |             |   |  |             |  
|Weighted average number of sharesoutstanding  basic   |  | 258,705,143                                        |  | 258,705,143                                     |  | 216,909,488 |   |  | 217,269,052 |  
|Weighted average number of sharesoutstanding  diluted |  | 258,895,004                                        |  | 258,895,004                                     |  | 216,909,488 |   |  | 217,269,052 |  
|Basic earnings per share                               |  |                                                    |  |                                                 |  |             |   |  |             |  
|Net earnings per share according to U.S. GAAP          |  | 3.78                                               |  | 2.92                                            |  | 0.80        |   |  | 0.71        |  
|Diluted earnings per share                             |  |                                                    |  |                                                 |  |             |   |  |             |  
|Net earnings per share according to U.S. GAAP          |  | 3.78                                               |  | 2.92                                            |  | 0.80        |   |  | 0.71        |  

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-108



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(c)  Statement of other comprehensive income



The following information presents the statement of other
comprehensive income as required by SFAS No. 130. The components of other comprehensive income have been presented after adjustment to U.S. GAAP.



|                                                           |  |                      |   |  |                |   |  |            |   |  |            |  
|---------------------------------------------------------- |  | -------------------- | - |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                           |  | Year ended March 31, |  
|                                                           |  | 2005                 |   |  | 2005           |   |  | 2004       |   |  | 2003       |  
|                                                           |  |                      |   |  |                |   |  | (Restated) |   |  | (Restated) |  
|                                                           |  | (in $ million)(1)    |   |  | (in  million) |  
|Net income under U.S. GAAP                                 |  | 978.9                |   |  | 754.8          |   |  | 172.8      |   |  | 154.3      |  
|Other comprehensive income:                                |  |                      |   |  |                |   |  |            |   |  |            |  
|Foreign currency translation adjustments                   |  |                     |   |  |               |   |  | (12.0      | ) |  | (16.0      | )
|Unrealized gains / losses on available-for-sale securities |  | (3.2                 | ) |  | (2.5           | ) |  | 10.3       |   |  | (8.4       | )
|Minimum pension liabilities adjustments                    |  | (79.1                | ) |  | (61.0          | ) |  | (4.3       | ) |  | (79.6      | )
|Derivative instruments                                     |  | 279.0                |   |  | 215.1          |   |  | 18.1       |   |  | 1.1        |  
|Tax effect on the above adjustments                        |  | (65.7                | ) |  | (50.6          | ) |  | (6.8       | ) |  | 29.4       |  
|                                                           |  |                      |   |  |                |   |  |            |   |  |            |  
|Comprehensive income according to U.S. GAAP                |  | 1,109.9              |   |  | 855.8          |   |  | 178.1      |   |  | 80.8       |  
|                                                           |  |                      |   |  |                |   |  |            |   |  |            |  

---

Note

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $
1.2969 on March 31, 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Tax
effect on other comprehensive income items of each of the individual items was as follows:



|                                                           |  |                      |   |  |            |   |  |           
|---------------------------------------------------------- |  | -------------------- | - |  | ---------- | - |  | ----------
|                                                           |  | Year ended March 31,
|                                                           |  | 2005                 |   |  | 2004       |   |  | 2003      
|                                                           |  |                      |   |  | (Restated) |   |  | (Restated)
|Foreign currency translation adjustments                   |  |                     |   |  |           |   |  |          
|Unrealized gains / losses on available-for-sale securities |  | 0.5                  |   |  | (2.0       | ) |  | 1.6       
|Minimum pension liabilities adjustments                    |  | 19.7                 |   |  | 1.5        |   |  | 28.2      
|Derivative instruments                                     |  | (70.8                | ) |  | (6.4       | ) |  | 0.4       
|                                                           |  |                      |   |  |            |   |  |           
|                                                           |  | (50.6                | ) |  | (6.8       | ) |  | 29.4      
|                                                           |  |                      |   |  |            |   |  |           



F-109



---

##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The following table presents the accumulated balances, net of tax, of each item of
other comprehensive income.



|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|----------------------------- |  | ---------------------------- | - |  | --------------------------------------- | - |  | --------------------------------------------------------- | - |  | ----------------------- | - |  | ---------- | - |  | ----- | -
|                              |  | Minimum liability adjustment |   |  | Foreign currency translation adjustment |   |  | Unrealized gains/ losses on available for sale securities |   |  | Derivatives instruments |   |  | Tax effect |   |  | Total |  
|                              |  | (in  million)               |  
|Year ended March 31, 2003     |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance beginning of the year |  | (38.4                        | ) |  | 19.0                                    |   |  | 0.9                                                       |   |  | (33.0                   | ) |  | 25.1       |   |  | (26.4 | )
|Current period change         |  | (79.6                        | ) |  | (16.0                                   | ) |  | (8.4                                                      | ) |  | 1.1                     |   |  | 29.4       |   |  | (73.5 | )
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance end of the year       |  | (118.0                       | ) |  | 3.0                                     |   |  | (7.5                                                      | ) |  | (31.9                   | ) |  | 54.5       |   |  | (99.9 | )
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Year ended March 31, 2004     |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance beginning of the year |  | (118.0                       | ) |  | 3.0                                     |   |  | (7.5                                                      | ) |  | (31.9                   | ) |  | 54.5       |   |  | (99.9 | )
|Current period change         |  | (4.3                         | ) |  | (12.0                                   | ) |  | 10.3                                                      |   |  | 18.1                    |   |  | (6.8       | ) |  | 5.3   |  
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance end of the year       |  | (122.3                       | ) |  | (9.0                                    | ) |  | 2.8                                                       |   |  | (13.8                   | ) |  | 47.7       |   |  | (94.6 | )
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Year ended March 31, 2005     |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance beginning of the year |  | (122.3                       | ) |  | (9.0                                    | ) |  | 2.8                                                       |   |  | (13.8                   | ) |  | 47.7       |   |  | (94.6 | )
|Current period change         |  | (61.0                        | ) |  |                                        |   |  | (2.5                                                      | ) |  | 215.1                   |   |  | (50.6      | ) |  | 101.0 |  
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  
|Balance end of the year       |  | (183.3                       | ) |  | (9.0                                    | ) |  | (0.3                                                      | ) |  | 201.3                   |   |  | (2.9       | ) |  | 6.4   |  
|                              |  |                              |   |  |                                         |   |  |                                                           |   |  |                         |   |  |            |   |  |       |  



(d)  Statement of changes in stockholders equity in accordance with U.S. GAAP:



|                                     |  |                |   |  |                            |   |  |                         |   |  |                   |   |  |                                                   |   |  |                |   |  |                            |   |  |                    |   |  |                                                   |  
|------------------------------------ |  | -------------- | - |  | -------------------------- | - |  | ----------------------- | - |  | ----------------- | - |  | ------------------------------------------------- | - |  | -------------- | - |  | -------------------------- | - |  | ------------------ | - |  | ------------------------------------------------- | -
|                                     |  | Common stock   |   |  | Additional paid-in capital |   |  | Deferred compen- sation |   |  | Retained earnings |   |  | Accumul- ated other compreh- ensive income (loss) |   |  | Treasury stock |   |  | Total stockholders equity |   |  | Minority interests |   |  | Total stockholders equity and minority interests |  
|                                     |  | (in  million) |  
|Balance at March 31, 2002 (Restated) |  | 1,868.0        |   |  | 586.0                      |   |  | (132.7                  | ) |  | 1,602.5           |   |  | (26.4                                             | ) |  | (24.1          | ) |  | 3,873.3                    |   |  | 143.6              |   |  | 4,016.9                                           |  
|Net change in treasury stock         |  |               |   |  |                           |   |  |                        |   |  |                  |   |  |                                                  |   |  | (22.1          | ) |  | (22.1                      | ) |  |                   |   |  | (22.1                                             | )
|Dividends paid                       |  |               |   |  |                           |   |  |                        |   |  | (28.0             | ) |  |                                                  |   |  |               |   |  | (28.0                      | ) |  | (2.0               | ) |  | (30.0                                             | )
|Other changes                        |  |               |   |  |                           |   |  |                        |   |  | (0.6              | ) |  |                                                  |   |  |               |   |  | (0.6                       | ) |  |                   |   |  | (0.6                                              | )
|Net income (loss)                    |  |               |   |  |                           |   |  |                        |   |  | 154.3             |   |  |                                                  |   |  |               |   |  | 154.3                      |   |  | (3.5               | ) |  | 150.8                                             |  
|Other comprehensive income (loss)    |  |               |   |  |                           |   |  |                        |   |  |                  |   |  | (73.5                                             | ) |  |               |   |  | (73.5                      | ) |  | (12.6              | ) |  | (86.1                                             | )
|Deferred compensation                |  |               |   |  | (0.9                       | ) |  | 26.3                    |   |  |                  |   |  |                                                  |   |  |               |   |  | 25.4                       |   |  |                   |   |  | 25.4                                              |  
|Balance at March 31, 2003 (Restated) |  | 1,868.0        |   |  | 585.1                      |   |  | (106.4                  | ) |  | 1,728.2           |   |  | (99.9                                             | ) |  | (46.2          | ) |  | 3,928.8                    |   |  | 125.5              |   |  | 4,054.3                                           |  
|Net change in treasury stock         |  |               |   |  | (3.8                       | ) |  |                        |   |  |                  |   |  |                                                  |   |  | 28.1           |   |  | 24.3                       |   |  |                   |   |  | 24.3                                              |  
|Dividends paid                       |  |               |   |  |                           |   |  |                        |   |  | (17.0             | ) |  |                                                  |   |  |               |   |  | (17.0                      | ) |  | (3.0               | ) |  | (20.0                                             | )
|Other changes                        |  | (10.2          | ) |  | (5.7                       | ) |  |                        |   |  | 1.0               |   |  |                                                  |   |  |               |   |  | (14.9                      | ) |  | (20.9              | ) |  | (35.8                                             | )
|Net income (loss)                    |  |               |   |  |                           |   |  |                        |   |  | 172.8             |   |  |                                                  |   |  |               |   |  | 172.8                      |   |  | (5.4               | ) |  | 167.4                                             |  
|Other comprehensive income (loss)    |  |               |   |  |                           |   |  |                        |   |  |                  |   |  | 5.3                                               |   |  |               |   |  | 5.3                        |   |  | (7.5               | ) |  | (2.2                                              | )
|Deferred compensation                |  |               |   |  | (0.8                       | ) |  | 25.0                    |   |  |                  |   |  |                                                  |   |  |               |   |  | 24.2                       |   |  |                   |   |  | 24.2                                              |  
|Balance at March 31, 2004 (Restated) |  | 1,857.8        |   |  | 574.8                      |   |  | (81.4                   | ) |  | 1,885.0           |   |  | (94.6                                             | ) |  | (18.1          | ) |  | 4,123.5                    |   |  | 88.7               |   |  | 4,212.2                                           |  
|Issuance of common stock             |  | 422.2          |   |  | 309.4                      |   |  |                        |   |  |                  |   |  |                                                  |   |  |               |   |  | 731.4                      |   |  |                    |   |  | 731.4                                             |  
|Contribution of assets               |  |               |   |  | (206.0                     | ) |  |                        |   |  | 206.0             |   |  |                                                  |   |  |               |   |  |                           |   |  |                   |   |  |                                                  |  
|Exchange offer costs                 |  |               |   |  | (16.8                      | ) |  |                        |   |  |                  |   |  |                                                  |   |  |               |   |  | (16.8                      | ) |  |                   |   |  | (16.8                                             | )
|Net change in treasury stock         |  |               |   |  |                           |   |  |                        |   |  |                  |   |  |                                                  |   |  | (13.9          | ) |  | (13.9                      | ) |  |                   |   |  | (13.9                                             | )
|Dividends paid                       |  |               |   |  |                           |   |  |                        |   |  | (17.0             | ) |  |                                                  |   |  |               |   |  | (17.0                      | ) |  | (1                 | ) |  | (18.0                                             | )
|Other changes                        |  | (3.4           | ) |  | (4.9                       | ) |  |                        |   |  | 29.0              |   |  |                                                  |   |  |               |   |  | 20.7                       |   |  | 11.1               |   |  | 31.8                                              |  
|Net income (loss)                    |  |               |   |  |                           |   |  |                        |   |  | 754.8             |   |  |                                                  |   |  |               |   |  | 754.8                      |   |  | 1.6                |   |  | 756.4                                             |  
|Other comprehensive income (loss)    |  |               |   |  |                           |   |  |                        |   |  |                  |   |  | 101.0                                             |   |  |               |   |  | 101.0                      |   |  | 4.3                |   |  | 105.3                                             |  
|Deferred compensation                |  |               |   |  | 249.6                      |   |  | (154.6                  | ) |  |                  |   |  |                                                  |   |  |               |   |  | 95.0                       |   |  |                   |   |  | 95.0                                              |  
|Change in scope                      |  |               |   |  |                           |   |  |                        |   |  | 33.8              |   |  |                                                  |   |  | (33.8          | ) |  |                           |   |  | 12.5               |   |  | 12.5                                              |  
|Balance at March 31, 2005            |  | 2,276.4        |   |  | 906.1                      |   |  | (236.0                  | ) |  | 2,891.6           |   |  | 6.4                                               |   |  | (65.8          | ) |  | 5,778.7                    |   |  | 117.2              |   |  | 5,895.9                                           |  



F-110



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(e)  Summarized balance sheet in accordance with U.S. GAAP:



|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | - |  | -------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                                                                                                       |  | At March 31,      |  
|                                                                                                                                                                       |  | 2005              |   |  | 2005           |   |  | 2004       |   |  | 2003       |  
|                                                                                                                                                                       |  |                   |   |  |                |   |  | (Restated) |   |  | (Restated) |  
|                                                                                                                                                                       |  | (in $ million)(1) |   |  | (in  million) |  
|Cash and cash equivalents                                                                                                                                              |  | 3,242.3           |   |  | 2,500.0        |   |  | 1,804.5    |   |  | 958.6      |  
|Short-term investments                                                                                                                                                 |  | 118,7             |   |  | 91.5           |   |  | 93.4       |   |  | 282.2      |  
|Accounts receivables, net of an allowance for uncollectible amount of  102.2 million,  93.9 million and 89.0 million at
March 31, 2005, 2004 and 2003, respectively |  | 2,945.4           |   |  | 2,271.1        |   |  | 1,649.5    |   |  | 1,432.4    |  
|Income tax receivable                                                                                                                                                  |  | 8.2               |   |  | 6.3            |   |  | 4.6        |   |  | 5.1        |  
|Inventories, net of an allowance for obsolescence of  103.3 million,  48.5 million and 78.9 million at March 31, 2005, 2004
and 2003 respectively                   |  | 489.7             |   |  | 377.6          |   |  | 149.3      |   |  | 205.1      |  
|Deferred income taxes                                                                                                                                                  |  |                  |   |  |               |   |  |           |   |  |           |  
|Pension prepaid expenses                                                                                                                                               |  | 1,966.0           |   |  | 1,515.9        |   |  | 25.4       |   |  | 47.8       |  
|Prepaid expenses and other                                                                                                                                             |  | 1,330.4           |   |  | 1,025.8        |   |  | 1,060.5    |   |  | 829.8      |  
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Total current assets                                                                                                                                                   |  | 10,100.7          |   |  | 7,788.2        |   |  | 4,787.2    |   |  | 3,761.0    |  
|Flight equipment                                                                                                                                                       |  | 13,483.7          |   |  | 10,396.9       |   |  | 8,660.1    |   |  | 9,055.3    |  
|Accumulated depreciation                                                                                                                                               |  | (5,997.8          | ) |  | (4,624.7       | ) |  | (3,414.7   | ) |  | (3,503.3   | )
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Flight equipment, net                                                                                                                                                  |  | 7,485.9           |   |  | 5,772.2        |   |  | 5,245.4    |   |  | 5,552.0    |  
|Flight and ground equipment under capital lease                                                                                                                        |  | 9,280.9           |   |  | 7,156.2        |   |  | 3,601.3    |   |  | 3,421.9    |  
|Accumulated depreciation                                                                                                                                               |  | (3,792.9          | ) |  | (2,924.6       | ) |  | (1,349.9   | ) |  | (1,118.0   | )
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Flight and ground equipment under capital lease, net                                                                                                                   |  | 5,488.0           |   |  | 4,231.6        |   |  | 2,251.4    |   |  | 2,303.9    |  
|Ground equipment                                                                                                                                                       |  | 5,011.9           |   |  | 3,864.5        |   |  | 2,242.1    |   |  | 2,253.1    |  
|Accumulated depreciation                                                                                                                                               |  | (3,180.0          | ) |  | (2,452.0       | ) |  | (1,462.6   | ) |  | (1,456.0   | )
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Ground property and equipment, net                                                                                                                                     |  | 1,831.9           |   |  | 1,412.5        |   |  | 779.5      |   |  | 797.1      |  
|Investment in equity affiliates                                                                                                                                        |  | 654.3             |   |  | 504.5          |   |  | 336.4      |   |  | 308.9      |  
|Investments in debt and equity securities                                                                                                                              |  | 72.4              |   |  | 55.8           |   |  | 50.3       |   |  | 45.2       |  
|Deferred income taxes                                                                                                                                                  |  | 226.4             |   |  | 174.6          |   |  | 41.5       |   |  | 115.4      |  
|Lease Deposits                                                                                                                                                         |  | 720.2             |   |  | 555.3          |   |  | 352.7      |   |  | 350.3      |  
|Perpetual subordinated loan deposit                                                                                                                                    |  | 128.0             |   |  | 98.7           |   |  | 194.0      |   |  | 194.0      |  
|Long term financial assets related to derivatives                                                                                                                      |  | 2,206.1           |   |  | 1,701.1        |   |  | 101.2      |   |  | 63.2       |  
|Other non-current assets                                                                                                                                               |  | 698.5             |   |  | 538.6          |   |  | 112.4      |   |  | 105.3      |  
|Intangible assets                                                                                                                                                      |  | 363.5             |   |  | 280.3          |   |  | 37.1       |   |  | 40.9       |  
|Goodwill                                                                                                                                                               |  | 375.3             |   |  | 289.4          |   |  | 285.9      |   |  | 287.3      |  
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Total non-current assets                                                                                                                                               |  | 20,250.5          |   |  | 15,614.6       |   |  | 9,787.8    |   |  | 10,163.5   |  
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  
|Total assets                                                                                                                                                           |  | 30,351.2          |   |  | 23,402.8       |   |  | 14,575.0   |   |  | 13,924.5   |  
|                                                                                                                                                                       |  |                   |   |  |                |   |  |            |   |  |            |  



F-111



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                                                    |  |                   |  |                |  |            |  |           
|------------------------------------------------------------------- |  | ----------------- |  | -------------- |  | ---------- |  | ----------
|                                                                    |  | At March 31,     
|                                                                    |  | 2005              |  | 2005           |  | 2004       |  | 2003      
|                                                                    |  |                   |  |                |  | (Restated) |  | (Restated)
|                                                                    |  | (in $ million)(1) |  | (in  million)
|Current maturities of long-term debt                                |  | 498.9             |  | 384.7          |  | 603.2      |  | 501.0     
|Short-term obligations                                              |  | 339.7             |  | 261.9          |  | 288.1      |  | 415.6     
|Current obligations under capital leases                            |  | 936.4             |  | 722.0          |  | 196.0      |  | 316.4     
|Trade payables                                                      |  | 2,466.3           |  | 1,901.7        |  | 1,221.9    |  | 1,371.3   
|Deferred revenue on ticket sales                                    |  | 2,147.7           |  | 1,656.0        |  | 1,007.9    |  | 900.9     
|Taxes payable                                                       |  | 10.1              |  | 7.8            |  | 20.9       |  | 4.9       
|Accrued salaries, related benefits and employee related liabilities |  | 959.1             |  | 739.5          |  | 485.8      |  | 452.4     
|Deferred tax liability  current                                    |  |                  |  |               |  |           |  |          
|Other current liabilities                                           |  | 3,384.4           |  | 2,609.7        |  | 1,482.6    |  | 1,228.9   
|                                                                    |  |                   |  |                |  |            |  |           
|Total current liabilities                                           |  | 10,742.6          |  | 8,283.3        |  | 5,306.4    |  | 5,191.4   
|                                                                    |  |                   |  |                |  |            |  |           
|Long-term debt                                                      |  | 3,653.8           |  | 2,817.3        |  | 1,899.4    |  | 1,674.2   
|Obligations under capital leases less current obligations           |  | 6,207.4           |  | 4,786.3        |  | 2,234.2    |  | 2,113.5   
|Pension liabilities                                                 |  | 1,049.5           |  | 809.2          |  | 591.2      |  | 559.1     
|Provisions                                                          |  | 327.2             |  | 252.3          |  | 54.7       |  | 133.5     
|Other non-current liabilities                                       |  | 44.9              |  | 34.6           |  | 167.8      |  | 98.5      
|Deferred tax liabilities  non-current                              |  | 679.4             |  | 523.9          |  | 109.1      |  | 100.0     
|                                                                    |  |                   |  |                |  |            |  |           
|Total non-current liabilities                                       |  | 11,962.2          |  | 9,223.6        |  | 5,056.4    |  | 4,678.8   
|                                                                    |  |                   |  |                |  |            |  |           
|Total liabilities                                                   |  | 22,704.8          |  | 17,506.9       |  | 10,362.8   |  | 9,870.2   
|                                                                    |  |                   |  |                |  |            |  |           
|Minority interests                                                  |  | 152.0             |  | 117.2          |  | 88.7       |  | 125.5     
|Stockholders equity                                                |  | 7,494.4           |  | 5,778.7        |  | 4,123.5    |  | 3,928.8   
|                                                                    |  |                   |  |                |  |            |  |           
|Total liabilities and stockholders equity                          |  | 30,351.2          |  | 23,402.8       |  | 14,575.0   |  | 13,924.5  
|                                                                    |  |                   |  |                |  |            |  |           

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(f)  Cash
flow statement



The cash flow statement
prepared under French GAAP and presented in the primary financial statements does not conform to the requirements of International Accounting Standard No.7, Cash flow Statements (IAS 7), or Statement of Financial Accounting
Standard No. 95, Cash Flow Statement (SFAS 95).



F-112



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The following cash flow statement is prepared in accordance with SFAS 95:



|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|------------------------------------------------------------------------------------ |  | ---------------- | - |  | -------------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                     |  |                  |   |  | Year ended March 31, |  
|                                                                                     |  | 2005             |   |  | 2005                 |   |  | 2004       |   |  | 2003       |  
|                                                                                     |  |                  |   |  |                      |   |  | (Restated) |   |  | (Restated) |  
|                                                                                     |  | (in $million)(1) |   |  | (in  million)       |  
|Cash flows from operating activities:                                                |  |                  |   |  |                      |   |  |            |   |  |            |  
|Net income (loss)                                                                    |  | 978.9            |   |  | 754.8                |   |  | 172.8      |   |  | 154.3      |  
|Adjustments to reconcile net income (loss) to cash provided by operating activities: |  |                  |   |  |                      |   |  |            |   |  |            |  
|Depreciation and amortization                                                        |  | 1,960.8          |   |  | 1,511.9              |   |  | 1,034.8    |   |  | 1,079.4    |  
|Addition to the restructuring provision, net                                         |  | (36.5            | ) |  | (28.2                | ) |  | (5.2       | ) |  | 3.2        |  
|Other provisions                                                                     |  | (119.6           | ) |  | (92.2                | ) |  | (58.4      | ) |  | (19.0      | )
|Deferred income taxes                                                                |  | 569.0            |   |  | 438.7                |   |  | 75.9       |   |  | 2.2        |  
|Dividends (less than) in excess of equity income                                     |  | (73.0            | ) |  | (56,3                | ) |  | (44.6      | ) |  | (16.3      | )
|Impact of exchange rate                                                              |  | 187.4            |   |  | 144.5                |   |  | (31.5      | ) |  | (97.8      | )
|Loss (gain) from sale of assets, net                                                 |  | (62.6            | ) |  | (48.3                | ) |  | 7.4        |   |  | (66.5      | )
|Loss (gain) from sale or investments, net                                            |  | (87.0            | ) |  | (67,1                | ) |  | (4.8       | ) |  | (4.3       | )
|Change in certain current assets and liabilities                                     |  | (951.9           | ) |  | (734.0               | ) |  | (50.4      | ) |  | (139.8     | )
|Other                                                                                |  | (33.6            | ) |  | (25.9                | ) |  | (19.8      | ) |  | 5.1        |  
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Net cash provided by operating activities                                            |  | (2,331.7         | ) |  | 1,797.9              |   |  | 1,076.2    |   |  | 900.5      |  
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Cash flows from investing activities                                                 |  |                  |   |  |                      |   |  |            |   |  |            |  
|Flight equipment additions                                                           |  | (2,019.2         | ) |  | (1,557.0             | ) |  | (791.7     | ) |  | (1,135.0   | )
|Deposit on capital and operating leases                                              |  | (34.5            | ) |  | (26.6                | ) |  | (2.4       | ) |  | (13.6      | )
|Other tangible and intangible assets additions                                       |  | (483.1           | ) |  | (372.5               | ) |  | (262.1     | ) |  | (262.6     | )
|Proceeds from sales of flight equipment                                              |  | 182.0            |   |  | 140.4                |   |  | 398.4      |   |  | 386.3      |  
|Proceeds from sales of investments                                                   |  | 144.4            |   |  | 111.4                |   |  | 15.6       |   |  | 7.6        |  
|Acquisition of non consolidated investments                                          |  | (89.1            | ) |  | (68.7                | ) |  | (11.5      | ) |  | (45.8      | )
|Cash and cash equivalent of KLM Group at the closing date of the Exchange Offer      |  | 703.4            |   |  | 542.4                |   |  |           |   |  |           |  
|Decrease (increase) in short-term investments                                        |  | 213.5            |   |  | 164.6                |   |  | 184.9      |   |  | (88.4      | )
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Net cash provided by (used in) investing activities                                  |  | (1,382.5         | ) |  | (1,066.0             | ) |  | (468.8     | ) |  | (1,151.5   | )
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Cash flow from financing activities                                                  |  |                  |   |  |                      |   |  |            |   |  |            |  
|Payments on long-term debt                                                           |  | (450.8           | ) |  | (347.6               | ) |  | (387.0     | ) |  | (765.8     | )
|Payments on capital lease obligations                                                |  | (532.2           | ) |  | (410.3               | ) |  | (189.9     | ) |  | (502.7     | )
|Cash dividends                                                                       |  | (31.3            | ) |  | (24.1                | ) |  | (24.6      | ) |  | (34.3      | )
|Issuance of long-term debt                                                           |  | 987.5            |   |  | 761.4                |   |  | 994.8      |   |  | 1,094.5    |  
|Increase (decrease) in short-term debt                                               |  | (34.0            | ) |  | (26.2                | ) |  | (127.6     | ) |  | 44.0       |  
|Reduction of minority interests                                                      |  | (13.7            | ) |  | (10.6                | ) |  | (10.3      | ) |  |            |  
|Treasury stock                                                                       |  | (18.0            | ) |  | (13.9                | ) |  | 24.3       |   |  | (22.1      | )
|Proceeds in loans                                                                    |  | (96.3            | ) |  | (74.3                | ) |  | (39.2      | ) |  | (49.2      | )
|Repayment in loans                                                                   |  | 148.5            |   |  | 114.5                |   |  | 4.9        |   |  | 9.7        |  
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Net cash provided by (used in) financing activities                                  |  | (40.3            | ) |  | (31.1                | ) |  | 245.4      |   |  | (225.9     | )
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Impact of exchange rate                                                              |  | (6.8             | ) |  | (5.3                 | ) |  | (6.9       | ) |  | (2.0       | )
|Net (decrease) increase in cash and cash equivalents                                 |  | 902.0            |   |  | 695.5                |   |  | 845.9      |   |  | (478.9     | )
|Cash and cash equivalents beginning of the year                                      |  | 2,340.3          |   |  | 1,804.5              |   |  | 958.6      |   |  | 1,437.5    |  
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Cash and cash equivalents at year end                                                |  | 3,242.3          |   |  | 2,500.0              |   |  | 1804.5     |   |  | 958.6      |  
|                                                                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|Supplemental disclosures of cash paid                                                |  |                  |   |  |                      |   |  |            |   |  |            |  
|Cash paid for income taxes                                                           |  | (31.3            | ) |  | (24.1                | ) |  | (6.4       | ) |  | (2.9       | )
|Cash paid for net interest                                                           |  | (333.2           | ) |  | (256.9               | ) |  | 126.4      |   |  | (131.5     | )
|Change in certain current assets and liabilities                                     |  |                  |   |  |                      |   |  |            |   |  |            |  
|(Increase) decrease in inventories                                                   |  | (22.2            | ) |  | (17.2                | ) |  | 50.6       |   |  | 47.5       |  
|(Increase) decrease in receivables                                                   |  | 54.5             |   |  | 42.0                 |   |  | (208.4     | ) |  | 95.3       |  
|(Increase) decrease in other current assets and other current liabilities, net       |  | (1,389.5         | ) |  | (1,071.4             | ) |  | 273.9      |   |  | (109.5     | )
|Increase (decrease) in trade payables                                                |  | 405.4            |   |  | 312.6                |   |  | (166.5     | ) |  | (173.1     | )

---

Note:

|(1) | Translation of amounts from  into $ has been made merely for the convenience of the reader at the Noon Buying Rate of the Federal Reserve Bank of New York of 1 = $1.2969
on March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-113



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



The Company does not have significant non-cash transactions related to capital
leases. Aircraft financed through capital leases are first purchased by the Company and subsequently sold and leased back.



37  Specific U.S. GAAP disclosures



All the notes hereafter include U.S. GAAP figures with the exception of notes (4), (11), (18) and (21), which are based on French GAAP
figures.



(1)  Acquisition of KLM



(a)  Condensed balance sheet disclosing the amount
assigned to each major asset and liability caption of KLM under US GAAP at the acquisition date



|                               |  |                             |  
|------------------------------ |  | --------------------------- | -
|                               |  | Fair value at May 1st, 2004 |  
|                               |  | In  million                |  
|Intangible Assets              |  | 270.2                       |  
|Tangible assets                |  | 2,722.0                     |  
|Investment in equity investees |  | 121.7                       |  
|Other long-term investments    |  | 568.7                       |  
|Pension asset                  |  | 1,353.0                     |  
|Inventories                    |  | 200.3                       |  
|Receivables                    |  | 719.6                       |  
|Cash and Cash equivalents      |  | 685.1                       |  
|Deferred tax assets            |  | 161.4                       |  
|Provisions for risks           |  | (259.8                      | )
|Long-term debt                 |  | (4,152.7                    | )
|Deferred tax liability         |  |                            |  
|Other assets and liabilities   |  | (1,617.2                    | )
|                               | 
|Net assets acquired            |  | 772.3                       |  



F-114



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(b)  Pro forma information



The following unaudited pro forma information is presented, for comparative purposes, as
though the public offer and the transactions described in the note 3 to the consolidated financial statements had taken place on April 1, 2004 (in the case of the pro forma statement of income for the year ended March 31, 2005) and April 1, 2003 (in
the case of pro forma statement of income for the year ended March 31, 2004).



Pro forma financial information is not necessarily indicative of the future results of Air France-KLM or of the financial condition of the combined entities that would have been achieved had the transactions described in the Notes been
consummated on the dates used as the basis for the preparation of Air France-KLMs pro forma income statement.



|                                              |  |                                                  |  |                                                  
|--------------------------------------------- |  | ------------------------------------------------ |  | -------------------------------------------------
|                                              |  | Air France-KLM Proforma March 31, 2005 Unaudited |  | Air France-KLM Pro forma March 31, 2004 Unaudited
|Net sales                                     |  | 19,555.7                                         |  | 18,172.6                                         
|Income from operations                        |  | 1,426.7                                          |  | 558.6                                            
|Net income                                    |  | 766.8                                            |  | 357.7                                            
|                                              |  |                                                  |  |                                                  
|Pro forma weighted average share outstanding: |  |                                                  |  |                                                  
|Basic                                         |  | 2.96                                             |  | 1.35                                             
|Diluted                                       |  | 2.96                                             |  | 1.35                                             
|Pro forma earnings per share                  |  |                                                  |  |                                                  
|Basic                                         |  | 2.92                                             |  | 1.35                                             
|Diluted                                       |  | 2.92                                             |  | 1.35                                             



(2)  Pension and post-retirement benefits other than pension plans



(a)  Defined contribution plans



The Company records expenses related to defined contribution benefit plans as they are incurred.



(b)  Defined benefit plans



The Company sponsors various defined benefit pension plans. The employees covered and the type of retirement plan depends on local regulations and practices.



Estimates of the Companys pension and end of service benefit obligations are
calculated annually with the assistance of independent actuaries. Estimates consider best estimate actuarial assumptions, including the probable future length of the employees service, the employees final pay, and the expected average
life span of the employees.



The Companys obligations are discounted by
country based upon discount rates appropriate in the circumstances. The obligations are recognized based upon the proportion of benefits earned by employees as services rendered.



Fair values are used to determine the market value of fund assets.



Modifications of pension plans are amortized over the expected average future service lives of the related employees.



F-115



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Obligations and Funded Status



Disclosures in accordance with SFAS 132 (Revised 2003) of Obligations and Funded Status and based on SFAS 87 calculations are as follows:



|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|---------------------------------------------- |  | -------------------- | - |  | -------------- | - |  | ------- | - |  | ------ | - |  | ----- | - |  | ----- | -
|                                               |  | Pension benefits     |   |  | Other benefits |  
|                                               |  | Year Ended March 31, |  
|                                               |  | 2005                 |   |  | 2004           |   |  | 2003    |   |  | 2005   |   |  | 2004  |   |  | 2003  |  
|                                               |  | In euros million     |  
|Change in benefit obligation                   |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Benefit obligation at beginning of year        |  | 1,659.1              |   |  | 1,540.6        |   |  | 1,476.7 |   |  | 24.1   |   |  | 26.5  |   |  | 28.7  |  
|Service cost                                   |  | 281.5                |   |  | 34.3           |   |  | 42.1    |   |  | 4.2    |   |  | 2.2   |   |  | 1.4   |  
|Interest cost                                  |  | 445.2                |   |  | 80.8           |   |  | 78.5    |   |  | 6.4    |   |  | 1.3   |   |  | 1.4   |  
|Employees contributions                       |  | 32.0                 |   |  | 1.6            |   |  | 2.1     |   |  |       |   |  |      |   |  |      |  
|Plan amendments                                |  | 16.0                 |   |  | 25.5           |   |  | 5.9     |   |  |       |   |  |      |   |  |      |  
|Business combinations                          |  | 7.533.4              |   |  | 1.9            |   |  | 9.1     |   |  | 99.0   |   |  | (0.5  | ) |  |      |  
|Settlements                                    |  | (1.3                 | ) |  | (2.4           | ) |  | (4.8    | ) |  |       |   |  |      |   |  |      |  
|Benefits paid                                  |  | (348.1               | ) |  | (94.6          | ) |  | (91.3   | ) |  | (8.3   | ) |  | (5.1  | ) |  | (0.6  | )
|Actuarial loss (gain)                          |  | 706.1                |   |  | 80.8           |   |  | 57.4    |   |  | 16.7   |   |  | 0.1   |   |  | 1.5   |  
|Other                                          |  | (18.8                | ) |  | (9.4           | ) |  | (35.1   | ) |  | (0.5   | ) |  | (0.4  | ) |  | (5.9  | )
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Benefit obligation at end of year              |  | 10,305.1             |   |  | 1,659.1        |   |  | 1,540.6 |   |  | 141.6  |   |  | 24.1  |   |  | 26.5  |  
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|                                               |  |                     
|                                               |  | Pension benefits     |   |  | Other benefits |  
|                                               |  | Year Ended March 31, |  
|                                               |  | 2005                 |   |  | 2004           |   |  | 2003    |   |  | 2005   |   |  | 2004  |   |  | 2003  |  
|                                               |  | In euros million     |  
|Change in plan assets                          |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Fair value of plan assets at beginning of year |  | 1,022.7              |   |  | 987.6          |   |  | 1,082.0 |   |  | 0.5    |   |  | 1.2   |   |  | 1.5   |  
|Actual return on plan assets                   |  | 912.6                |   |  | 127.3          |   |  | (12.0   | ) |  |       |   |  | 0.1   |   |  |      |  
|Employers contributions                       |  | 260.6                |   |  | 8.4            |   |  | 30.8    |   |  | 0.1    |   |  | (0.6  | ) |  | 0.8   |  
|Employees contributions                       |  | 32.0                 |   |  | 1.7            |   |  | 2.1     |   |  |       |   |  |      |   |  |      |  
|Business combinations                          |  | 8,912.2              |   |  | 1.6            |   |  | 7.5     |   |  |       |   |  | (0.2  | ) |  |      |  
|Settlements                                    |  |                     |   |  | (1.7           | ) |  | (5.4    | ) |  |       |   |  |      |   |  |      |  
|Benefits paid                                  |  | (345.1               | ) |  | (91.4          | ) |  | (91.3   | ) |  |       |   |  | 0.1   |   |  | (0.6  | )
|Other (foreign currency translation)           |  | (14.4                | ) |  | (10.8          | ) |  | (26.1   | ) |  | (0.1   | ) |  | (0.1  | ) |  | (0.5  | )
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Fair value of plan assets at end of year       |  | 10,780.6             |   |  | 1,022.7        |   |  | 987.6   |   |  | 0.5    |   |  | 0.5   |   |  | 1.2   |  
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Funded status                                  |  | 475.5                |   |  | (636.4         | ) |  | (553.0  | ) |  | (141.1 | ) |  | (23.6 | ) |  | (25.3 | )
|Unrecognized actuarial losses                  |  | 516.6                |   |  | 198.0          |   |  | 191.7   |   |  | 17.9   |   |  | 2.3   |   |  | 2.2   |  
|Unrecognized transition obligation (asset)     |  | (8.1                 | ) |  | (11.1          | ) |  | (14.0   | ) |  |        |   |  |      |   |  |      |  
|Unrecognized prior service cost                |  | 40.0                 |   |  | 27.3           |   |  | 5.1     |   |  |       |   |  |      |   |  |      |  
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  
|Prepaid (accrued) pension cost                 |  | 1,024.0              |   |  | (422.2         | ) |  | (370.2  | ) |  | (123.2 | ) |  | (21.3 | ) |  | (23.1 | )
|                                               |  |                      |   |  |                |   |  |         |   |  |        |   |  |       |   |  |       |  



F-116



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Amounts recognized in the consolidated balance sheet consist of:



|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  
|------------------------------------------------------------------------- |  | ---------------- | - |  | -------------- | - |  | ------ | - |  | ------ | - |  | ----- | - |  | ----- | -
|                                                                          |  | Pension benefits |   |  | Other benefits |  
|                                                                          |  | At March 31,     |  
|                                                                          |  | 2005             |   |  | 2004           |   |  | 2003   |   |  | 2005   |   |  | 2004  |   |  | 2003  |  
|                                                                          |  | In euros million |  
|Accrued benefit liability (excluding Minimum Liability Adjustments MLA) |  | (491.9           | ) |  | (447.6         | ) |  | (418.0 | ) |  | (123.2 | ) |  | (21.3 | ) |  | (23.1 | )
|MLA                                                                       |  | (183.8           | ) |  | (122.3         | ) |  | (118.0 | ) |  |        |   |  |      |   |  |      |  
|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  
|Prepaid benefit cost                                                      |  | 1,515.9          |   |  | 25.4           |   |  | 47.8   |   |  |        |   |  |      |   |  |      |  
|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  
|Net amount prepaid (accrued) for under U.S. GAAP                          |  | 840.2            |   |  | (544.5         | ) |  | (488.2 | ) |  | (123.2 | ) |  | (21.3 | ) |  | (23.1 | )
|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  
|Intangible assets                                                         |  |                 |   |  |               |   |  |       |   |  |       |   |  |      |   |  |      |  
|Accumulated other comprehensive income                                    |  | 183.8            |   |  | 122.3          |   |  | 118.0  |   |  |        |   |  |      |   |  |      |  
|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  
|Net amount recognized                                                     |  | 1,024.0          |   |  | (422.2         | ) |  | (370.2 | ) |  | (123.2 | ) |  | (21.3 | ) |  | (23.1 | )
|                                                                          |  |                  |   |  |                |   |  |        |   |  |        |   |  |       |   |  |       |  



The net accruals accounted for as of
March 31, 2005, 2004 and 2003 in the consolidated balance sheets prepared under French GAAP can be compared with balances determined under U.S. GAAP as follows:



|                                                                                                                                          |  |                  |   |  |                |   |  |        |   |  |        |    |  |       |   |  |       |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | - |  | -------------- | - |  | ------ | - |  | ------ | -- |  | ----- | - |  | ----- | -
|                                                                                                                                          |  | Pension benefits |   |  | Other benefits |  
|                                                                                                                                          |  | At March 31,     |  
|                                                                                                                                          |  | 2005             |   |  | 2004           |   |  | 2003   |   |  | 2005   |    |  | 2004  |   |  | 2003  |  
|                                                                                                                                          |  | In euros million |  
|Net amount prepaid (accrued) for under U.S. GAAP                                                                                          |  | 840.2            |   |  | (544.5         | ) |  | (488.2 | ) |  | (123.2 | )  |  | (21.3 | ) |  | (23.1 | )
|Excess funding of plans recognized in income only when paid back to the companies                                                         |  | (452.0           | ) |  |               |   |  |       |   |  |       |    |  |       |   |  |      |  
|Impacts of transition obligation, of prior service cost and of actuarial gains recognized with a different timing under local
regulations |  | (185.6           | ) |  | (173.5         | ) |  | (174.4 | ) |  |       |    |  |       |   |  | 6.8   |  
|MLA                                                                                                                                       |  | 183.8            |   |  | 122.3          |   |  | 118.0  |   |  |       |    |  |      |   |  |      |  
|                                                                                                                                          |  |                  |   |  |                |   |  |        |   |  |        |    |  |       |   |  |       |  
|Net amount prepaid (accrued) for in consolidated financial statements under French GAAP                                                   |  | 386.4            |   |  | (595.7         | ) |  | (544.6 | ) |  | (123.2 | )  |  | (21.3 | ) |  | (16.3 | )
|Accrued                                                                                                                                   |  | (670.9           | ) |  | (614.1         | ) |  | (564.1 | ) |  | (123.2 | )* |  | (21.3 | ) |  | (16.3 | )
|Prepaid                                                                                                                                   |  | 1057.3           |   |  | 18.4           |   |  | 19.5   |   |  |       |    |  |      |   |  |      |  

---

|* | In which  99 million were classified in other provisions for KLM post-retirement medical benefits under French GAAP
|- | --------------------------------------------------------------------------------------------------------------------



Information for pension plans with an accumulated benefit obligation in excess of plan
assets



|                               |  |                      |  |                                                                   |  |         |  |         |  |         |  |        
|------------------------------ |  | -------------------- |  | ----------------------------------------------------------------- |  | ------- |  | ------- |  | ------- |  | -------
|                               |  | Year Ended March 31,
|                               |  | All plans            |  | Plans with anAccumulated BenefitObligation in excess ofplan asset
|                               |  | 2005                 |  | 2004                                                              |  | 2003    |  | 2005    |  | 2004    |  | 2003   
|Projected benefit obligation   |  | 10,305.1             |  | 1,659.1                                                           |  | 1,540.6 |  | 2,026.3 |  | 1,579.9 |  | 1,439.2
|Accumulated benefit obligation |  | 9,004.0              |  | 1,485.9                                                           |  | 1,393.3 |  | 1,792.6 |  | 1,409.9 |  | 1,296.7
|Fair value of plan assets      |  | 10,780.6             |  | 1,022.7                                                           |  | 987.6   |  | 1,131.8 |  | 922.5   |  | 862.9  



F-117



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Components of Net Periodic Benefit Cost



|                                                   |  |                              |   |  |                |   |  |       |   |  |      |  |      |   |  |      |  
|-------------------------------------------------- |  | ---------------------------- | - |  | -------------- | - |  | ----- | - |  | ---- |  | ---- | - |  | ---- | -
|                                                   |  | Pension benefits             |   |  | Other benefits |  
|                                                   |  | For the year ended March 31, |  
|                                                   |  | 2005                         |   |  | 2004           |   |  | 2003  |   |  | 2005 |  | 2004 |   |  | 2003 |  
|Components of net periodic benefit cost            |  |                              |   |  |                |   |  |       |   |  |      |  |      |   |  |      |  
|Service cost                                       |  | 281.5                        |   |  | 34.3           |   |  | 42.1  |   |  | 4.2  |  | 2.2  |   |  | 1.5  |  
|Interest cost                                      |  | 445.2                        |   |  | 80.8           |   |  | 78.5  |   |  | 6.4  |  | 1.4  |   |  | 1.4  |  
|Expected return on plan assets                     |  | (531.3                       | ) |  | (56.5          | ) |  | (67.2 | ) |  |     |  | (0.1 | ) |  | (0.1 | )
|Amortization of transition obligation/(asset)      |  | (3.0                         | ) |  | (2.7           | ) |  | (2.8  | ) |  |     |  |     |   |  |     |  
|Amortization of prior service cost                 |  | 3.7                          |   |  | 2.1            |   |  | 0.3   |   |  |     |  |     |   |  |     |  
|Amortization of unrecognized actuarial (gain) loss |  | 5.6                          |   |  | 4.4            |   |  | 0.2   |   |  | 1.1  |  |     |   |  |     |  
|Other                                              |  | (4.0                         | ) |  | (0.7           | ) |  |      |   |  | 1.6  |  |     |   |  |     |  
|                                                   |  |                              |   |  |                |   |  |       |   |  |      |  |      |   |  |      |  
|Net periodic benefit cost                          |  | 197.7                        |   |  | 61.7           |   |  | 51.1  |   |  | 13.3 |  | 3.5  |   |  | 2.8  |  
|                                                   |  |                              |   |  |                |   |  |       |   |  |      |  |      |   |  |      |  



Annual cost under French GAAP for all
defined benefits plans is  282 million,  64 million and  48 million for the years ended March 31, 2005, 2004 and 2003, respectively.



Assumptions



Actuarial assumptions have been determined by the Company with the assistance of actuaries on a country by country basis and company by company.



|                                            |  |                  |   |  |                |   |  |      |   |  |      |   |  |      |   |  |      |  
|------------------------------------------- |  | ---------------- | - |  | -------------- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                            |  | Euro zone        |  
|                                            |  | Pension benefits |   |  | Other benefits |  
|                                            |  | 2005             |   |  | 2004           |   |  | 2003 |   |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Weighted-average assumptions as of March 31 |  |                  |   |  |                |   |  |      |   |  |      |   |  |      |   |  |      |  
|Discount rate                               |  | 4.50             | % |  | 5.00           | % |  | 5.25 | % |  | 4.50 | % |  | 5.25 | % |  | 5.5  | %
|Rate of compensation increase               |  | 5.20             | % |  | 3.4            | % |  | 3.4  | % |  | 2.00 | % |  |     |   |  |     |  
|Expected return on plan assets              |  | 5.30             | % |  | 5.7            | % |  | 5.9  | % |  |     |   |  |     |   |  |     |  
|                                            | 
|                                            |  | USA  CANADA     |  
|                                            |  | Pension benefits |   |  | Other benefits |  
|                                            |  | 2005             |   |  | 2004           |   |  | 2003 |   |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Discount rate                               |  | 6.5              | % |  | 6.3            | % |  | 6.6  | % |  | 6.3  | % |  |     |   |  |     |  
|Rate of compensation increase               |  | 4.0              | % |  | 2.9            | % |  | 3.3  | % |  | 5.0  | % |  |     |   |  |     |  
|Expected return on plan assets              |  | 7.0              | % |  | 7.4            | % |  | 7.5  | % |  |     |   |  |     |   |  |     |  
|Medical trend                               |  |                  |   |  |                |   |  |      |   |  | 8.5  | % |  |     |   |  |     |  
|Sensitivity to medical trend 1% on APBO     |  |                  |   |  |                |   |  |      |   |  | 5.0  |   |  |     |   |  |     |  



F-118



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##### Table of Contents

AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



|                                            |  |                                |   |  |                       |   |  |      |   |  |      |   |  |      |   |  |      |  
|------------------------------------------- |  | ------------------------------ | - |  | --------------------- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                            |  | Rest of EuropePension benefits |   |  | Asia Pension benefits |  
|                                            |  | 2005                           |   |  | 2004                  |   |  | 2003 |   |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Weighted-average assumptions as of March 31 |  |                                |   |  |                       |   |  |      |   |  |      |   |  |      |   |  |      |  
|Discount rate                               |  | 5.3                            | % |  | 5.4                   | % |  | 5.5  | % |  | 1.9  | % |  | 2.0  | % |  | 2.0  | %
|Rate of compensation increase               |  | 4.6                            | % |  | 4.7                   | % |  | 4.5  | % |  | 2.0  | % |  | 2.6  | % |  | 2.8  | %
|Expected return on plan assets              |  | 7.3                            | % |  | 7.0                   | % |  | 6.5  | % |  | 4.8  | % |  | 6.0  | % |  | 5.3  | %



The expected long term rate of return
on Plans assets is based primarily on Plan-specific asset/liability investment studies performed by outside consultants and recent and historical returns on the Company Plans assets



Plan Assets



|                               |  |                      |   |  |      |  
|------------------------------ |  | -------------------- | - |  | ---- | -
|                               |  | Year Ended March 31, |  
|                               |  | 2005                 |   |  | 2004 |  
|Asset category                 |  |                      |   |  |      |  
|Government and Corporate bonds |  | 50                   | % |  | 59   | %
|Equity securities              |  | 37                   | % |  | 28   | %
|Real estate                    |  | 10                   | % |  | 8    | %
|Short-term investments         |  | 2                    | % |  | 5    | %
|Other                          |  | 1                    | % |  |     |  
|                               |  |                      |   |  |      |  
|Total                          |  | 100                  | % |  | 100  | %
|                               |  |                      |   |  |      |  



Equity securities do not include the
Companys common stock.



Cash Flows



Contributions



The Company expects to contribute  308 million to its pension plans for the fiscal year ending March 31, 2006.



Estimated Future Benefit Payments



The following benefit payments which reflect expected future service, as appropriate, are
expected to be paid (in  million):



|          |  |                 
|--------- |  | ----------------
|          |  | Pension benefits
|2006      |  | 349             
|2007      |  | 370             
|2008      |  | 392             
|2009      |  | 412             
|2010      |  | 432             
|2011-2015 |  | 2,418           



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(3)  Income taxes



(a)  Deferred tax balances:



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and deferred tax liabilities as of March 31, 2005, 2004, and 2003, are presented below:



|                                                                                 |  |              |   |  |                |   |  |        |  
|-------------------------------------------------------------------------------- |  | ------------ | - |  | -------------- | - |  | ------ | -
|                                                                                 |  | At March 31, |  
|                                                                                 |  | 2005         |   |  | 2004           |   |  | 2003   |  
|                                                                                 |  |              |   |  | (restated)     |  
|                                                                                 |  |              |   |  | (in  million) |  
|Tax losses carried forward                                                       |  | 606.2        |   |  | 504.8          |   |  | 368.2  |  
|Accrued pension and retirement obligation                                        |  | 226.0        |   |  | 190.6          |   |  | 174.4  |  
|Flight equipment, other property and equipment                                   |  | 655.1        |   |  | 20.6           |   |  | 31.9   |  
|Internal capital gain                                                            |  | 29.6         |   |  | 65.9           |   |  | 77.9   |  
|Deferred gains on sale and lease back transactions                               |  | 25.4         |   |  | 27.1           |   |  | 18.1   |  
|Derivatives                                                                      |  |             |   |  |               |   |  | 8.4    |  
|Other                                                                            |  | 88.0         |   |  | 38.3           |   |  | 34.0   |  
|Deferred tax assets                                                              |  | 1,630.3      |   |  | 847.3          |   |  | 712.9  |  
|Less: valuation allowance                                                        |  | (277.2       | ) |  | (107.8         | ) |  | (117.4 | )
|Deferred tax assets, net of valuation allowance                                  |  | 1,353.1      |   |  | 739.5          |   |  | 595.5  |  
|Netting by tax grouping or by legal entity                                       |  | (1,178.5     | ) |  | (698.1         | ) |  | (480.1 | )
|Deferred tax assets                                                              |  | 174.6        |   |  | 41.5           |   |  | 115.4  |  
|Intangible assets (note 35 (a) on business combination)                          |  | 67.2         |   |  |               |   |  |       |  
|Flight equipment, other property and equipment (due to depreciation differences) |  | 353.6        |   |  | 366.9          |   |  | 387.9  |  
|Prepaid pension and retirement                                                   |  | 445.7        |   |  |               |   |  |       |  
|Derivatives                                                                      |  | 361.6        |   |  | 53.4           |   |  |       |  
|TSDI                                                                             |  | 87.2         |   |  | 80.1           |   |  | 64.4   |  
|Equity investments                                                               |  | 53.5         |   |  |               |   |  |       |  
|Other provisions                                                                 |  | 328.0        |   |  | 299.0          |   |  | 122.0  |  
|Other                                                                            |  | 5.6          |   |  | 7.8            |   |  | 5.8    |  
|Gross deferred tax liabilities                                                   |  | 1,702.4      |   |  | 807.2          |   |  | 580.1  |  
|Netting by tax grouping or by legal entity                                       |  | (1,178.5     | ) |  | (698.1         | ) |  | (480.1 | )
|Deferred tax liability                                                           |  | 523.9        |   |  | 109.1          |   |  | 100.0  |  
|                                                                                 |  |              |   |  |                |   |  |        |  
|Net deferred tax asset (liability)                                               |  | (349.3       | ) |  | (67.7          | ) |  | 15.4   |  
|                                                                                 |  |              |   |  |                |   |  |        |  



The
valuation allowance was 187.9 million as of April 1, 2002. During the years ending March 31, 2003, 2004 and 2005, the valuation allowances increased/(decreased) by (70.5) million, (9.6) million and 169.4 million,
respectively.



In assessing the realizability
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize
the



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



benefits of these deductible differences, net of the existing valuation allowances at March 31, 2005. At March 31, 2005, the existing valuation allowance
corresponds to the deferred tax asset of an entity which is in a three year cumulative tax loss position and which has recently joined the Air France - KLM French tax group and to the limitation of the deferred tax asset recognized in relation to
KLMs negative goodwill allocation (see note 35 (a)).



At March 31, 2005, based upon past earnings and continuing profitability forecasted by management, the future taxable income of the tax group, taken as a whole, was more likely than not to absorb the group deferred
tax assets at March 31, 2005 with the exception of the remaining valuation allowance mentioned in the preceding paragraph.



(b)  Income before tax, minority interests and share in net income of equity affiliates



|                                                                                   |  |                      |  |                |   |  |       |  
|---------------------------------------------------------------------------------- |  | -------------------- |  | -------------- | - |  | ----- | -
|                                                                                   |  | Year ended March 31, | 
|                                                                                   |  | 2005                 |  | 2004           |   |  | 2003  |  
|                                                                                   |  |                      |  | (in  million) |  
|France                                                                             |  | 793.8                |  | 195.1          |   |  | 149.7 |  
|Foreign                                                                            |  | 319.2                |  | (18.0          | ) |  | (16.6 | )
|                                                                                   |  |                      |  |                |   |  |       |  
|Income before tax, minority interests and share in net income of equity affiliates |  | 1,113.0              |  | 177.1          |   |  | 133.1 |  
|                                                                                   |  |                      |  |                |   |  |       |  



(c)  Tax benefit (expense)



|                                    |  |                      |   |  |                |   |  |       |  
|----------------------------------- |  | -------------------- | - |  | -------------- | - |  | ----- | -
|                                    |  | Year ended March 31, |  
|Corporate income taxes              |  | 2005                 |   |  | 2004           |   |  | 2003  |  
|                                    |  |                      |   |  | (restated)     |  
|                                    |  |                      |   |  | (in  million) |  
|Current                             |  |                      |   |  |                |   |  |       |  
|Domestic                            |  | (7.3                 | ) |  | (22.5          | ) |  | (6.5  | )
|Foreign                             |  | (0.7                 | ) |  | 32.6           |   |  | (1.8  | )
|Total current tax benefit/(expense) |  | (8.0                 | ) |  | 10.1           |   |  | (8.3  | )
|Deferred                            |  |                      |   |  |                |   |  |       |  
|Domestic                            |  | (328.2               | ) |  | (81.4          | ) |  | (12   | )
|Foreign                             |  | (110.6               | ) |  | 5.5            |   |  | 9.8   |  
|Total deferred tax expense          |  | (438.8               | ) |  | (75.9          | ) |  | (2.2  | )
|                                    |  |                      |   |  |                |   |  |       |  
|Total income tax expense            |  | (446.8               | ) |  | (65.8          | ) |  | (10.5 | )
|                                    |  |                      |   |  |                |   |  |       |  



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(d)  Effective income tax rate reconciliation



|                                                                                            |  |                    |   |  |            |   |  |       |  
|------------------------------------------------------------------------------------------- |  | ------------------ | - |  | ---------- | - |  | ----- | -
|                                                                                            |  | Year end March 31, |  
|                                                                                            |  | 2005               |   |  | 2004       |   |  | 2003  |  
|                                                                                            |  |                    |   |  | (Restated) |  
|                                                                                            |  | (in  million)     |  
|Income (loss) before taxes, minority interests and share in net income of equity affiliates |  | 1,113.0            |   |  | 177.1      |   |  | 133.1 |  
|Income tax rate                                                                             |  | 34.9               | % |  | 35.4       | % |  | 35.4  | %
|                                                                                            |  |                    |   |  |            |   |  |       |  
|Expected tax charge                                                                         |  | (388.8             | ) |  | (62.7      | ) |  | (47.1 | )
|                                                                                            |  |                    |   |  |            |   |  |       |  
|Impact of:                                                                                  |  |                    |   |  |            |   |  |       |  
|Permanent differences                                                                       |  | (32.9              | ) |  | (41.9      | ) |  | (19.5 | )
|Of which movement in valuation allowance on investments in subsidiaries                     |  | (1.3               | ) |  | (21.2      | ) |  | 13.5  |  
|Of which stock based compensation                                                           |  | (32.3              | ) |  | (8.6       | ) |  | (8.8  | )
|Net change in valuation allowance                                                           |  | 7.2                |   |  | 4.5        |   |  | 57.0  |  
|Difference in taxation rates                                                                |  | 27.3               |   |  | 8.9        |   |  | 5.0   |  
|Change in enacted tax rate                                                                  |  | (19.4              | ) |  |           |   |  |      |  
|Settlement of tax dispute                                                                   |  |                   |   |  | 33.0       |   |  |      |  
|Equity investments                                                                          |  | (47.2              | ) |  |           |   |  |      |  
|Other                                                                                       |  | 7.0                |   |  | (7.6       | ) |  | (5.9  | )
|                                                                                            |  |                    |   |  |            |   |  |       |  
|Actual provision for income tax                                                             |  | (446.8             | ) |  | (65.8      | ) |  | (10.5 | )
|                                                                                            |  |                    |   |  |            |   |  |       |  
|Effective tax rate                                                                          |  | 40.1               | % |  | 37.2       | % |  | 7.9   | %
|                                                                                            |  |                    |   |  |            |   |  |       |  



(e)  Tax losses carry forward maturities



The total of recognized and unrecognized basis of tax loss carry forwards amounts to  1,626.4 million as of March 31, 2005. In accordance with Article 89 of the French Finance Law (loi de finances) for 2005,
approved on December 18, 2003, tax losses may now be carried forward for an unlimited period of time.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(4)  Combined information concerning subsidiaries consolidated using the proportionate
consolidation method



In accordance with
regulations of the U.S. Securities and Exchange Commission with respect to the use of the proportionate consolidation method, summarized financial information about the Companys share of assets, liabilities, revenues, expenses and cash flows
included in French GAAP financial statements and related to the Logair, FPSEA and Teamtrackers investments accounted for using the proportionate consolidation method are presented below:



|                                    |  |                          |  
|----------------------------------- |  | ------------------------ | -
|                                    |  | Year endedMarch 31, 2005 |  
|                                    |  | (in  million)           |  
|Balance Sheet data                  |  |                          |  
|Non-current assets                  |  | 0.4                      |  
|Current assets                      |  | 6.0                      |  
|Equity                              |  | (0.6                     | )
|Current liabilities                 |  | 7.0                      |  
|Income statement data               |  |                          |  
|Net sales                           |  | 18.8                     |  
|Income from operations              |  | 0.4                      |  
|Net result                          |  | (0.1                     | )
|Cash flow data                      |  |                          |  
|Cash flow from operating activities |  | 0.9                      |  
|Cash flow from investing activities |  | 0.3                      |  
|Cash flow from financing activities |  | (1.1                     | )



(5)  Other information about affiliates



The carrying value of the Companys stake in listed equity affiliates was as follows at March 31, 2005:



|              |  |            |   |  |                |  |             
|------------- |  | ---------- | - |  | -------------- |  | ------------
|              |  | % interest |   |  | Net value      |  | Market value
|              |  |            |   |  | (in  million)
|Amadeus       |  | 23.36      | % |  | 310.0          |  | 1,003.5     
|Alpha Airport |  | 26.21      | % |  | 37.0           |  | 64.0        
|Kenya Airways |  | 26.00      | % |  | 30.8           |  | 29.9        



In
addition dividends received for the year ended March 31, 2005 from equity affiliates amounted to  12 million ( 18 million and 12 million for the years ended March 31, 2004 and 2003).



(6)  Use of estimates in the preparation of financial statements



The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.



(7)  Advertising costs



We expense advertising costs as other selling expenses in the year incurred. Advertising expense was  129 million, 91 million
and 113 million for the years ended March 31, 2005, 2004 and 2003, respectively.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(8)  Available-for-sale securities



At March 31, 2005, the Companys cost, gross unrealized
gains, gross unrealized losses and fair value of the available-for-sale investment securities are as follows:



|     |  |                |  |                      |  |                       |   |  |          
|---- |  | -------------- |  | -------------------- |  | --------------------- | - |  | ---------
|     |  | Cost           |  | GrossunrealizedGains |  | GrossunrealizedLosses |   |  | FairValue
|     |  | (in  million)
|2005 |  | 22.8           |  | 1.4                  |  | (0.9                  | ) |  | 23.3     
|2004 |  | 23.9           |  | 2.8                  |  |                      |   |  | 26.7     
|2003 |  | 27.9           |  | 1.0                  |  | (8.5                  | ) |  | 20.4     



The
change in the net unrealized gains or losses on available for sale securities that have been included in a separate component of stockholders equity for 2005, 2004 and 2003 is an increase (decrease) of  (2.5) million, 10.3 million,
and (8.4) million, respectively. At March 31, 2005 available for sale securities at cost are comprised of Alitalia ( 17.6 million), Austrian Airlines ( 4.0 million) and Air Mauritius ( 1.6 million).



Realized gains for securities held by the Company are
determined using the average cost method. There were no realized gains for the years ended March 31, 2005, 2004 and 2003.



(9)  Stock options



Air France



On October 28, 1998, the Company signed a labor agreement with its pilots. Such agreement became effective May 1, 1999 for a two year
period.



This plan included certain
compensation provisions in which pilots had the choice of either accepting a reduction in their gross salary in exchange for common stock granted by the French State, a significant stockholder of the Company, or maintain their salary.



As a result of the plan provisions mentioned above,
15,023,251 shares of common stock were issued to pilots on May 31, 1999 of which 4,760,250 vest over the service life of the pilots and 10,263,001 over a seven year period.



The compensation cost recognized by the Company under U.S. GAAP amounted to  23.3 million, 24.2
million and 24.8 million for the years ended March 31, 2005, 2004 and March 31, 2003, respectively (see note 35(g)).



In addition, and as part of the above plan, the Company granted on May 30, 2000, 3,516,596 stock options exercisable from May 31, 2005
through May 31, 2007 at an exercise price of 15.75 a share. There was no vesting period for the options granted. Therefore, the compensation cost associated with the stock options was fully recognized when these options were granted on May 30,
2000.



The fair value at grant date of the
above mentioned options has been estimated based on the Black Scholes model using the following assumptions: a volatility of 31%, an expected life of six years, an interest rate of 5.64% and average dividends of 0.1098.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



KLM



Before the business combination with Air France-KLM, each member of the KLMs management board and
other key executives had been granted options subject to the law of the Netherlands to purchase KLM common shares. KLM had purchased the number of shares necessary for the employees to exercise their stock options.



In accordance with the framework agreement for the business
combination of Air France and KLM, the stock options and stock appreciation rights of KLM outstanding prior to the execution of the business combination were changed on May 4, 2004 such that the option holder is entitled to purchase Air France-KLM
shares and stock appreciation rights related to Air France-KLM shares.



The shares held by KLM for the exercise of the KLM options were therefore converted into Air France-KLM shares and transferred to a Foundation whose sole purpose is to hold these shares. As of March 31, 2005, the
Foundation held 1,659,268 shares of Air France-KLM shares to be made available upon exercise of the stock options.



The fair value of 4.6 million as of March 31, 2005 of the stock options has been estimated based on the Black Scholes model using
the following assumptions: expected stock price volatility of 30.3%, an expected option life of five years, a risk free interest rate ranging from 2.1% to 2.9% and expected dividend yield of 2.06%.



(10)  Disclosures of SFAS 142 adoption



The following table displays the changes in the carrying
amount of goodwill under U.S. GAAP by reportable segment:



|                        |  |                |   |  |       |  |             |  |       |   |  |       |  
|----------------------- |  | -------------- | - |  | ----- |  | ----------- |  | ----- | - |  | ----- | -
|                        |  | Passenger      |   |  | Cargo |  | Maintenance |  | Other |   |  | Total |  
|                        |  | (in  million) |  
|At April 1, 2002        |  | 279.9          |   |  |      |  |            |  | 5.4   |   |  | 285.3 |  
|Additions               |  | 3.1            |   |  |      |  | 1.2         |  | 0.1   |   |  | 4.4   |  
|Disposals               |  |               |   |  |      |  |            |  | (0.1  | ) |  | (0.1  | )
|Translation adjustments |  | (2.3           | ) |  |      |  |            |  |      |   |  | (2.3  | )
|At April 1, 2003        |  | 280.7          |   |  |      |  | 1.2         |  | 5.4   |   |  | 287.3 |  
|Additions               |  |               |   |  |      |  |            |  |      |   |  |      |  
|Disposals               |  |               |   |  |      |  |            |  |      |   |  |      |  
|Translation adjustments |  | (1.4           | ) |  |      |  |            |  |      |   |  | (1.4  | )
|At March 31, 2004       |  | 279.3          |   |  |      |  | 1.2         |  | 5.4   |   |  | 285.9 |  
|Additions               |  |               |   |  |      |  |            |  | 3.7   |   |  | 3.7   |  
|Disposals               |  |               |   |  |      |  |            |  |      |   |  |      |  
|Translation adjustments |  | (0.2           | ) |  |      |  |            |  |      |   |  | (0.2  | )
|At March 31, 2005       |  | 279.1          |   |  |      |  | 1.2         |  | 9.1   |   |  | 289.4 |  



Other
intangible assets mainly consist of :



  intangible assets recognized as a result of KLMs business combination for a net amount of  230.3 million at March 31, 2005



  software and licenses for a total amount of  50.0 million, 37.1 million and
40.9 million at March 31, 2005, 2004 and March 31, 2003, respectively. For the fiscal years ended March 31, 2005, 2004 and 2003, amortization expense related to those assets was approximately  35.4 million 19.2 million and
19.0 million, respectively.



As of March
31, 2005, the amortization period for amortizable intangible assets acquired as part of KLMs business combination ranges from 5 to 12 years. The related amortization expense for the next five coming years is estimated, on a yearly basis, at
9.9 million.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(11)  Related party transactions



Aggregate amounts due from / to and transactions with related
parties as derived from the French GAAP accounts are as follows as of and for the years ended March 31, 2005, 2004 and 2003:



|                                          |  |                       |   |  |                |   |  |        |  
|----------------------------------------- |  | --------------------- | - |  | -------------- | - |  | ------ | -
|                                          |  | At March 31,          |  
|                                          |  | 2005                  |   |  | 2004           |   |  | 2003   |  
|                                          |  |                       |   |  | (in  million) |  
|Assets                                    |  |                       |   |  |                |   |  |        |  
|Accounts receivable-trade, net            |  | 79.9                  |   |  | 222.9          |   |  | 27.2   |  
|Prepaid expenses and other current assets |  |                      |   |  | 1.3            |   |  | 63.1   |  
|Other non-current assets                  |  | 13.6                  |   |  | 14.3           |   |  | 8.4    |  
|                                          |  |                       |   |  |                |   |  |        |  
|Total assets                              |  | 93.5                  |   |  | 238.5          |   |  | 98.7   |  
|                                          |  |                       |   |  |                |   |  |        |  
|Liabilities                               |  |                       |   |  |                |   |  |        |  
|Accounts payable, trade                   |  | 84.4                  |   |  | 79.7           |   |  | 65.9   |  
|Other current liabilities                 |  | 31.8                  |   |  | 43.3           |   |  | 89.5   |  
|Long-term liabilities                     |  |                      |   |  |               |   |  | 1.0    |  
|                                          |  |                       |   |  |                |   |  |        |  
|Total liabilities                         |  | 116.2                 |   |  | 123.0          |   |  | 156.4  |  
|                                          |  |                       |   |  |                |   |  |        |  
|                                          | 
|                                          |  | Years ended March 31, |  
|                                          |  | 2005                  |   |  | 2004           |   |  | 2003   |  
|                                          |  |                       |   |  | (in  million) |  
|Net sales                                 |  | 256.9                 |   |  | 291.7          |   |  | 196.0  |  
|Landing fees and other rents              |  | (517.6                | ) |  | (477.9         | ) |  | (444.8 | )
|Other selling expenses                    |  | (42.0                 | ) |  | (42.8          | ) |  | (38.4  | )
|Passenger service                         |  | (37.4                 | ) |  | (36.3          | ) |  | (33.8  | )
|Other, net                                |  | (18.1                 | ) |  | (16.2          | ) |  | 11.2   |  
|                                          |  |                       |   |  |                |   |  |        |  



As
part of its normal business, the Company enters into transactions with related parties among which transactions with state owned and governmental entities such as the defense ministry, the Paris Airports Authority (Aéroports de Paris
(ADP)) and the French civil aviation regulator (DGAC) represent the most significant related party transactions. The Company believes that such transactions are concluded on terms similarly equivalent to those of transactions
with third parties. The most significant transactions are described below:



ADP



ADP
is the French service organization which manages the civil airports and aerodromes within a 50 kilometer radius from Paris including the Roissy Charles de Gaulle, Orly and Le Bourget airports. As a result, the Company has various arrangements with
ADP including but not limited to:



(i) land and
property rental arrangements and



(ii) airport
and passenger regulated fee arrangements.



In
addition, ADP collects landing airport taxes on behalf of the French state.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Total expenses incurred by the Company in connection with the above mentioned
arrangements amounted to 446.2 million, 414.9 million and 443.7 million for the years ended March 31, 2005, 2004 and 2003, respectively.



Defense Ministry



The Company entered in some arrangements with the French Defense Ministry to maintain certain of the French army aircraft. The net
revenues derived from such arrangements amounted to 165.6 million, 204 million and 116.6 million for the years ended March 31, 2005, 2004 and 2003, respectively.



DGAC



The civil aviation regulator is the French State service organization which manages the French air space. As a result, DGAC is charging
fees to the Company for the use of installations and services operated by the French State over the home territory and its vicinity for en-route air traffic safety and for the speed of its movements, including radio communications and meteorological
services.



The expense incurred in connection
with the above mentioned arrangement amounted to 112.0 million, 88.3 million, and 82.6 million for the years ended March 31, 2005, 2004 and March 31, 2003, respectively.



In addition, the company has entered into transactions with
investments reported under the equity method under U.S. GAAP notably with Air Austral, Heathrow Cargo Handling, Air Chef and Opodo Limited. Transactions with these equity investments were not significant for the years ended March 31, 2005, 2004 and
2003, respectively.



(12)  Summarized combined
balance sheet and income statement information of equity affiliates



Summarized financial information for equity affiliates are presented in Note 16. The table below presents balance sheet and income statement information for the Opodo investment which was accounted for under the cost
method under French GAAP and under the equity method under U.S. GAAP as explained in note 35(e) until June 30, 2004. Opodo is now recorded at cost under both French and US GAAP.



The combined information for the entity that is proportionately consolidated under French GAAP is separately
presented in note 37 (4).



(a)  Combined
balance sheet information



|                                           |  |                    |   |  |     
|------------------------------------------ |  | ------------------ | - |  | ----
|                                           |  | As of December 31,
|                                           |  | 2003               |   |  | 2002
|                                           |  | (in  million)    
|Current assets                             |  | 52.9               |   |  | 57.9
|Long-term assets                           |  | 17.6               |   |  | 1.9 
|                                           |  |                    |   |  |     
|Total assets                               |  | 70.5               |   |  | 59.8
|                                           |  |                    |   |  |     
|Current liabilities                        |  | 37.6               |   |  | 28.7
|Long-term liabilities                      |  | 49.4               |   |  |    
|Total equity                               |  | (16.5              | ) |  | 31.1
|                                           |  |                    |   |  |     
|Total liabilities and stockholders equity |  | 70.5               |   |  | 59.8
|                                           |  |                    |   |  |     



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(b)  Combined income statement information



|                                |  |                          |   |  |       |  
|------------------------------- |  | ------------------------ | - |  | ----- | -
|                                |  | Years ended December 31, |  
|                                |  | 2003                     |   |  | 2002  |  
|                                |  | (in  million)           |  
|Sales                           |  | 18.9                     |   |  | 6.0   |  
|Loss from continuing operations |  | (65.5                    | ) |  | (88.8 | )
|Net loss                        |  | (64.8                    | ) |  | (87.6 | )



(13)  Derivative instruments



Economic hedging strategies that are in place at the Company but that do not qualify for hedge accounting under U.S. GAAP are the following:



Fuel hedging program



The impact of fuel price changes on the company and its competitors is dependent upon various factors, including hedging strategies. The
company has a fuel hedging program in which it enters into jet fuel, heating oil and crude swap and option contracts to protect against increases in jet fuel prices. These instruments generally have maturity of up to 36 months.



Air France - KLM hedging policy consists in hedging the
purchase price in U.S. Dollar of a portion of the Companys fuel requirements. During the year ended March 31, 2005, Air France - KLM hedged 69 % of its dollar priced fuel requirements.



Interest rate hedging program



Air France - KLM is exposed to interest rate risk through its
debt and cash. The Companys interest rate exposure can be sub-divided into the following risks:



Fair value risk for fixed-rate financial assets and liabilities. By contracting a fixed-rate liability, for example, the company is
exposed to an opportunity cost in the event of a fall in interest rates. Changes in interest rates impact the market value of fixed-rate assets and liabilities, leaving the associated financial income or expense unchanged.



Cash-flow risk for floating rate assets and liabilities.
Changes in interest rates have little impact on the market value of floating-rate assets and liabilities, but directly influence the future income or expense flows of the company.



In accordance with the general policy established by Air France - KLM senior management, the company seeks
to manage these two types of risks by entering into interest rate swaps. The Company corporate treasury department manages the financing by applying procedures established by management, and hedges interest rate risk exposure in accordance with
target ratios of fixed to floating debt.



Air
France - KLM is exposed to credit risk in the event of a counterpartys default. The Company attempts to limit the exposure to counterparty risk by rigorously selecting the counterparties with which it trades, through regularly monitoring the
ratings assigned by credit rating agencies as well as the nature and maturity of operations with them.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Foreign currency hedging program



Current Operations



Although Air France - KLMs reporting currency is the
euro, part of its cash flow is denominated in other currencies, such as the U.S. dollar, the Japanese yen, the British pound sterling and the Swiss franc. Air France - KLMs commercial activities also generate and incur income and expenses in
foreign currency. Air France - KLMs policy is to hedge against exchange risks relating to forecast cash surpluses or shortfalls in various currencies (e.g. the U.S. dollar, the Japanese yen, and non-euro European currencies). Hedging takes the
form of forward sales or purchases and/or option-based strategies.



Acquisitions of Flight Equipment



Capital expenditure for flight equipment is denominated in U.S. dollars. Air France - KLM hedges on the basis of projected fluctuations in the U.S. dollar via forward sales and purchases and/or option-based strategies.



Long-Term Debt and Capital Leases



A number of loans are denominated in foreign currency so as
to diversify sources of funding and take into account cash surpluses generated in various currencies. In order to safeguard against the risk of exchange rate fluctuations on debt and capital leases currency swaps are used. This is a micro-hedging
mechanism matched specifically to the borrowing to which it relates.



(14)  Financial debt



Short and
long-term debt and capital lease obligations



|                                                             |  |                      |  |                |  |        
|------------------------------------------------------------ |  | -------------------- |  | -------------- |  | -------
|                                                             |  | Year ended March 31,
|                                                             |  | 2005                 |  | 2004           |  | 2003   
|                                                             |  |                      |  | (in  million)
|Perpetual subordinated loan                                  |  | 666.8                |  | 309.7          |  | 362.6  
|Bonds payable                                                |  | __                   |  | 18.3           |  | 187.2  
|Capital-lease obligations                                    |  | 5,508.3              |  | 2,430.2        |  | 2,429.9
|Other long-term loans                                        |  | 2,453.8              |  | 2,130.2        |  | 1,576.6
|Accrued interest                                             |  | 81.3                 |  | 44.4           |  | 48.8   
|Long-term debt and capital lease obligations(1)              |  | 8,710.2              |  | 4,932.8        |  | 4,605.1
|Borrowings with short-term original maturities               |  | __                   |  |               |  | 150    
|Short-term bank finance facilities and similar facilities    |  | 261.9                |  | 288.1          |  | 265.6  
|Short-term debts                                             |  | 261.9                |  | 288.1          |  | 415.6  
|                                                             |  |                      |  |                |  |        
|Total short and long-term debt and capital lease obligations |  | 8,972.1              |  | 5,220.9        |  | 5,020.7
|                                                             |  |                      |  |                |  |        

---

Note:

|(1) | Including amounts maturing within one year.
|--- | -------------------------------------------



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Analysis by maturity date



|           |  |                       |  |         |  |        
|---------- |  | --------------------- |  | ------- |  | -------
|           |  | Years ended March 31,
|           |  | 2005                  |  | 2004    |  | 2003   
|           |  | (in  million)       
|Matures in |  |                       |  |         |  |        
|Y + 1      |  | 1,106.6               |  | 799.2   |  | 817.4  
|Y + 2      |  | 1,131.8               |  | 580.0   |  | 437.2  
|Y + 3      |  | 1,094.8               |  | 646.3   |  | 505.5  
|Y + 4      |  | 869.8                 |  | 334.6   |  | 555.6  
|Y + 5      |  | 633.6                 |  | 447.0   |  | 283.6  
|> 5 years  |  | 3,873.6               |  | 2,125.7 |  | 2,005.8
|           |  |                       |  |         |  |        
|Total      |  | 8,710.2               |  | 4,932.8 |  | 4,605.1
|           |  |                       |  |         |  |        



(15)  Leases



The
Company leases various types of property and equipments mainly aircraft and ground facilities.



The Company had 207, 139 and 150 aircraft under operating leases and 152, 99 and 100 aircraft under capital leases as of March 31, 2005,
2004 and 2003 respectively. The aircraft leases can generally be renewed at the end of the lease terms at rates based on fair market value. Certain of the Companys operating leases have contingent rental payments.



Ground facilities include executive offices, ticket and
administrative offices, and maintenance facilities. Airport facilities are utilized for flight operations under leases with the municipalities or agencies owning such airports. Substantially all leases provide that the Company pays taxes,
maintenance, insurance and other operating expenses applicable to the leased property.



The Company also subleases certain aircraft and ground facilities under non-cancelable operating leases.



F-130



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Capital leases



The following amounts related to capital leases are included in property and equipment:



|                                                        |  |                       |   |  |                |   |  |          |  
|------------------------------------------------------- |  | --------------------- | - |  | -------------- | - |  | -------- | -
|                                                        |  | Years ended March 31, |  
|                                                        |  | 2005                  |   |  | 2004           |   |  | 2003     |  
|                                                        |  |                       |   |  | (in  million) |  
|Flight equipment                                        |  | 6,904.2               |   |  | 3,330.0        |   |  | 3301.9   |  
|Other property and equipment                            |  | 252.0                 |   |  | 271.3          |   |  | 120.0    |  
|Total Cost                                              |  | 7,156.2               |   |  | 3,601.3        |   |  | 3,421.9  |  
|Less accumulated depreciation                           |  | (2,924.6              | ) |  | (1,349.9       | ) |  | (1,118.0 | )
|                                                        |  |                       |   |  |                |   |  |          |  
|Total net book value of assets held under capital lease |  | 4,231.6               |   |  | 2,251.4,       |   |  | 2,303.9  |  
|                                                        |  |                       |   |  |                |   |  |          |  
|Aircraft                                                |  |                       |   |  |                |   |  |          |  
|Minimum lease payments by maturity                      |  |                       |   |  |                |   |  |          |  
|Y + 1                                                   |  | 928.4                 |   |  | 248.8          |   |  | 305.4    |  
|Y + 2                                                   |  | 1,084.9               |   |  | 471.4          |   |  | 218.9    |  
|Y + 3                                                   |  | 908.1                 |   |  | 490.4          |   |  | 461.1    |  
|Y + 4                                                   |  | 649.4                 |   |  | 216.3          |   |  | 459.6    |  
|Y + 5                                                   |  | 492.7                 |   |  | 200.9          |   |  | 213.9    |  
|> 5 years                                               |  | 2,297.9               |   |  | 882.4          |   |  | 983.0    |  
|                                                        |  |                       |   |  |                |   |  |          |  
|Total                                                   |  | 6,361.4               |   |  | 2,510.2        |   |  | 2,641.9  |  
|                                                        |  |                       |   |  |                |   |  |          |  
|Of which interest                                       |  | 1,025.4               |   |  | 279.1          |   |  | 281.0    |  
|Aircraft capital leases                                 |  | 5,336.0               |   |  | 2,231.2        |   |  | 2,360.9  |  
|Other property and equipment                            |  |                       |   |  |                |   |  |          |  
|Minimum lease payments by maturity                      |  |                       |   |  |                |   |  |          |  
|Y + 1                                                   |  | 20.7                  |   |  | 20.0           |   |  | 11.0     |  
|Y + 2                                                   |  | 20.7                  |   |  | 21.1           |   |  | 11.0     |  
|Y + 3                                                   |  | 19.2                  |   |  | 22.0           |   |  | 11.0     |  
|Y + 4                                                   |  | 18.5                  |   |  | 21.0           |   |  | 11.0     |  
|Y + 5                                                   |  | 18.0                  |   |  | 19.0           |   |  | 10.0     |  
|> 5 years                                               |  | 101.6                 |   |  | 127.0          |   |  | 21.0     |  
|                                                        |  |                       |   |  |                |   |  |          |  
|Total                                                   |  | 198.7                 |   |  | 230.0          |   |  | 75.0     |  
|                                                        |  |                       |   |  |                |   |  |          |  
|Of which interest                                       |  | 28.7                  |   |  | 34.0           |   |  | 11.0     |  
|Building capital leases                                 |  | 170.0                 |   |  | 196.0          |   |  | 64.0     |  
|Equipment capital lease                                 |  | 2.3                   |   |  | 3.0            |   |  | 4.0      |  
|Total capital leases                                    |  | 5,508.3               |   |  | 2430.2         |   |  | 2,428.9  |  
|                                                        |  |                       |   |  |                |   |  |          |  



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Operating leases



Obligation for minimum lease payments under non-cancelable operating leases are as follows:



|                                   |  |                       |  |         |  |        
|---------------------------------- |  | --------------------- |  | ------- |  | -------
|                                   |  | Years ended March 31,
|                                   |  | 2005                  |  | 2004    |  | 2003   
|                                   |  | (in  million)       
|Aircraft                           |  |                       |  |         |  |        
|Minimum lease payments by maturity |  |                       |  |         |  |        
|Y + 1                              |  | 618.2                 |  | 447.7   |  | 446.0  
|Y + 2                              |  | 523.1                 |  | 444.1   |  | 455.0  
|Y + 3                              |  | 438.9                 |  | 365.3   |  | 396.0  
|Y + 4                              |  | 347.0                 |  | 307.2   |  | 320.0  
|Y + 5                              |  | 253.0                 |  | 231.7   |  | 251.0  
|> 5 years                          |  | 570.0                 |  | 340.3   |  | 411.0  
|                                   |  |                       |  |         |  |        
|Total                              |  | 2,750.2               |  | 2,136.3 |  | 2,279.0
|                                   |  |                       |  |         |  |        
|Other property and equipment       |  |                       |  |         |  |        
|Minimum lease payments by maturity |  |                       |  |         |  |        
|Y + 1                              |  | 158.0                 |  | 128.0   |  | 110.0  
|Y + 2                              |  | 133.0                 |  | 102.0   |  | 93.0   
|Y + 3                              |  | 122.0                 |  | 86.0    |  | 74.0   
|Y + 4                              |  | 102.0                 |  | 77.0    |  | 64.0   
|Y + 5                              |  | 87.0                  |  | 72.0    |  | 57.0   
|> 5 years                          |  | 745.0                 |  | 429.0   |  | 396.0  
|                                   |  |                       |  |         |  |        
|Total                              |  | 1,347.0               |  | 894.0   |  | 794.0  
|                                   |  |                       |  |         |  |        



During
2005, 2004 and 2003 rental expense under operating leases was 1,606.0 million, 1,160.6 million and 1,205.9 million, respectively.



(16)  Guarantees



The Company has entered into various guarantee and indemnification arrangements.



The Company adopted the provisions of FASB Interpretation
No.45, Guarantors Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The Interpretation requires that the Company recognize the fair value of guarantee and indemnification
arrangements issued or modified by the Company after December 31, 2002, if these arrangements are within the scope of that Interpretation. In addition, under previously existing generally accepted accounting principles, the Company continues to
monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and recognizes any such losses under the guarantees and indemnifications when those losses are estimable.



Air Littoral



At March 31, 2003, Air France had provided a 20.9
million guarantee given in connection with the rental of aircraft by Air Littoral. This guarantee was provided in 1994 as part of an arrangement whereby Air Inter, a subsidiary of Air France, leased aircraft and crews from Air Littoral. Air Littoral
filed for bankruptcy with the Tribunal de Commerce in August 2003.



F-132



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Following the bankruptcy of Air Littoral, Air France - KLM took over the lease
agreements for which Air France gave the above guarantees. These lease agreements qualify as capital leases under US GAAP and have been adjusted accordingly in the reconciliation footnote.



(17)  Concentration of risks



The Company is exposed to credit risk in the event of a
counterpartys default. The Company attempts to limit its exposure to counterparty risk by rigorously selecting the counterparties with which it trades, through regularly monitoring the ratings assigned by credit rating agencies as well as the
nature and maturity of operations with them. The Company believes it has no material concentration of risk with any counterparty and does not anticipate any third party default that might have a significant impact on the financial position and
results of operations.



(18)  Segment information



Under French GAAP, the Company reports
three business segments based on the segmentation adopted for the internal organization of the enterprise. Under U.S. GAAP, the Company has identified four reportable segments which reflect how management makes decisions about resources to be
allocated to the segment and assess its performance.



These segments are as follows:



  Passengers: Passengers derives its revenues mainly from air transportation services to scheduled passengers. Passengers revenues are also derived from commissions from sales of Skyteam alliance members flights and revenues
from code sharing revenues, receipts from baggage handling and information system services,



  Cargo: Cargo derives its revenues from the freight transportation operations,



  Maintenance: Maintenance derives its revenues from (i) the maintenance of Air France - KLM aircraft and (ii) maintenance services
provided to a number of airline companies and other clients throughout the world,



  Amadeus: Air France - KLM has determined that its equity investment in Amadeus meets the criteria of a reportable segment.



All other (as presented in the table below) reflects the activity of subsidiaries other than those included
in the Companys four reportable segments.



The accounting policies of the segments are the same as those described in the summary of significant accounting policies (note 2 of the Companys French GAAP consolidated financial statements), except that segment financial
information has been prepared using a management approach consistent with how the Companys management internally allocates financial information for the purpose of making internal operating decisions.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Intersegment revenues between the maintenance and the passenger segment are priced on
a basis substantially consistent with the sales to third parties.



|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|----------------------------------------- |  | ------------------------- | - |  | ----- | - |  | ----------- | - |  | ------- |  | --------- | - |  | -------------------------- | - |  | ------------ | -
|                                          |  | Year ended March 31, 2005 |  
|                                          |  | Passenger                 |   |  | Cargo |   |  | Maintenance |   |  | Amadeus |  | All other |   |  | Inter-segment elimination  |   |  | Consolidated |  
|                                          |  | (in  million)            |  
|Revenues from external customers          |  | 15,004                    |   |  | 2,492 |   |  | 777         |   |  |        |  | 805       |   |  |                           |   |  | 19,078       |  
|Intersegments revenues                    |  | 438                       |   |  | 22    |   |  | 1,801       |   |  |        |  | 533       |   |  | (2,794                     | ) |  |             |  
|Depreciation and amortization             |  | 1,270                     |   |  | 71    |   |  | 293         |   |  |        |  | 86        |   |  |                           |   |  | 1,720        |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Operating income (loss)                   |  | 312                       |   |  | 95    |   |  | 48          |   |  |        |  | 42        |   |  |                           |   |  | 497          |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Financial incomes (loss)                  |  | (54                       | ) |  | (3    | ) |  | (15         | ) |  |        |  | (147      | ) |  |                           |   |  | (219         | )
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Pre-tax income (loss)                     |  | 202                       |   |  | 126   |   |  | 63          |   |  |        |  | (67       | ) |  |                           |   |  | 324          |  
|Equity in earnings (losses) of affiliates |  |                          |   |  |      |   |  |            |   |  | 50      |  | 23        |   |  |                           |   |  | 73           |  
|Tangible fixed assets                     |  | 9,262                     |   |  | 972   |   |  | 1,300       |   |  |        |  | 1,220     |   |  |                           |   |  | 12,754       |  
|                                          | 
|                                          |  | Year ended March 31, 2004 |  
|                                          |  | Passenger                 |   |  | Cargo |   |  | Maintenance |   |  | Amadeus |  | All other |   |  | Inter- segment elimination |   |  | Consolidated |  
|                                          |  | (in  million)            |  
|Revenues from external customers          |  | 10,260                    |   |  | 1,412 |   |  | 508         |   |  |        |  | 157       |   |  |                           |   |  | 12,337       |  
|Intersegments revenues                    |  | 377                       |   |  | 2     |   |  | 1,277       |   |  |        |  | 363       |   |  | (2,019                     | ) |  |             |  
|Depreciation and amortization             |  | 873                       |   |  | 76    |   |  | 258         |   |  |         |  | 23        |   |  |                            |   |  | 1,230        |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Operating income (loss)                   |  | 67                        |   |  | 15    |   |  | 50          |   |  |        |  | 7         |   |  |                           |   |  | 139          |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Financial incomes (loss)                  |  | (100                      | ) |  | (4    | ) |  | (16         | ) |  |        |  | 60        |   |  |                           |   |  | (60          | )
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Pre-tax income (loss)                     |  | (34                       | ) |  | 10    |   |  | 33          |   |  |        |  | 53        |   |  |                           |   |  | 62           |  
|Equity in earnings (losses) of affiliates |  |                          |   |  |      |   |  |            |   |  | 45      |  | 8         |   |  |                           |   |  | 53           |  
|Tangible fixed assets                     |  | 6,688                     |   |  | 371   |   |  | 759         |   |  |        |  | 88        |   |  |                           |   |  | 7,906        |  
|                                          | 
|                                          |  | Year ended March 31, 2003 |  
|                                          |  | Passenger                 |   |  | Cargo |   |  | Maintenance |   |  | Amadeus |  | All other |   |  | Inter-segmentelimination   |   |  | Consolidated |  
|                                          |  | (in  million)            |  
|Revenues from external customers          |  | 10,527                    |   |  | 1,479 |   |  | 540         |   |  |        |  | 141       |   |  |                           |   |  | 12,687       |  
|Intersegments revenues                    |  | 398                       |   |  | 23    |   |  | 1,310       |   |  |         |  | 349       |   |  | (2,080                     | ) |  |             |  
|Depreciation and amortization             |  | 930                       |   |  | 46    |   |  | 257         |   |  |        |  | 77        |   |  |                            |   |  | 1,310        |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Operating income (loss)                   |  | 101                       |   |  | 48    |   |  | 67          |   |  |        |  | (24       | ) |  |                           |   |  | 192          |  
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Financial incomes (loss)                  |  | (85                       | ) |  | (7    | ) |  | (22         | ) |  |        |  | 29        |   |  |                            |   |  | (85          | )
|                                          |  |                           |   |  |       |   |  |             |   |  |         |  |           |   |  |                            |   |  |              |  
|Pre-tax income (loss)                     |  | 12                        |   |  | 41    |   |  | 49          |   |  |        |  | (4        | ) |  |                           |   |  | 98           |  
|Equity in earnings (losses) of affiliates |  |                          |   |  |      |   |  |            |   |  | 36      |  | (7        | ) |  |                           |   |  | 29           |  
|Tangible fixed assets                     |  | 6,978                     |   |  | 508   |   |  | 580         |   |  |        |  | 96        |   |  |                            |   |  | 8,162        |  



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



Consolidated segment information by geographical area



The revenue information from external customers on a French
GAAP basis detailed by geographical area is disclosed in note 4 of the Companys Consolidated Financial Statements. The Companys assets are substantially located in France.



(20)  Subsequent events



During the financial year ended March 31, 2005, Air France, Iberia Líneas Aéreas de
España S.A., Deutsche Lufthansa AG (through its subsidiary Lufthansa Commercial Holdings GmbH) and Amadelux Investment S.A. initiated negotiations with private equity funds in order to launch a public offer for class A shares of Amadeus
Global Travel Distribution, S.A. through a newly incorporated company, Wam Acquisition S.A. The offer commenced on May 25, 2005 and closed on June 27, 2005. The offer was accepted by 94.73% of the shares to which the bid was addressed, resulting in
Wam Acquisition, S.A. holding a total of 95.08% of the class A shares and 98.74% of the total share capital of Amadeus GTD. Following the offer, Air France indirectly holds 22.96% and Air France, Iberia Líneas Aéreas de España
S.A., Deutsche Lufthansa AG (through its subsidiary Lufthansa Commercial Holdings GmbH), through Wam Acquisition S.A., indirectly hold 45.92% of Amadeus GTD.



The consideration offered by Wam Acquisition S.A. amounts to 7.35 per class A share of Amadeus. This price represents a 49.4 %
premium with regard to the closing price of Amadeus shares on the last trading day prior to August 17, 2004, the date on which the first relevant fact informing the market on the interest of several investors in Amadeus was published. The offer is
conditioned on the acquisition of at least 428,796,291 class A shares in Amadeus, representing 77.68 % of the shares eligible for the offer.



This transaction will allow Air France to remain a shareholder of Amadeus and to earn gross cash income of approximately 800
million.



During the calendar years 2000
and early 2001, a number of Servair employees initiated a lawsuit before the French Labor Court seeking payment of back wages. The plaintiffs argued that time spent eating meals in the company cafeteria constituted time during which the employee is
under the control of the employer and should thus be compensated as normal working hours. Servair has taken the position that time spent eating meals is an interruption in working hours that is not entitled to remuneration. In its definitive ruling
dated November 8, 2001, the Court of Appeal of Paris sided with the position argued by Servair. Other suits representing a total of 471 individual claims initiated by Servair employees over this same issue are still pending before the courts. In a
ruling handed down on October 29, 2004, the court dismissed a case filed by approximately 30 employees. In a ruling handed down on June 7, 2005, the court dismissed actions brought by 122 employees. A decision is expected to be handed down on the
actions of a further 150 employees on September 26, 2005.



(21)  Recently issued U.S accounting standards



Share-based paymentFASB Statement No. 123 (Revised 2004)



In December 2004, the FASB issued FASB Statement No. 123(Revised 2004) ), share-based payment, which addresses the accounting for
transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This statement is a revision to Statement
123 and supersedes APB Opinion 25, Accounting for Stock Issued to Employees, and its related guidance.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



This statement will be effective for the Company as of April 1, 2006. . The company does not expect that the adoption of the provisions of SFAS No. 123(R)
will have a material impact on its financial position or results of operations.



Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003



In January 2004, the FASB issued FASB Staff Position (FSP) SFAS No. 106-1, Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-1). Beginning in 2006, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare
Act) introduces a federal subsidy to sponsors of healthcare benefit plans in certain circumstances and a prescription drug benefit to eligible participants under Medicare. The Company has determined that the federal subsidy to be provided
under the Medicare Act will not have an impact on its postretirement benefit plans. The Company believes, however, that the new prescription drug benefit that will be provided under Medicare will reduce its future claims costs under its
postretirement benefit plans.



Exchanges on nonmonetary
assetsFASB Statement No. 153, an amendment of APB Opinion No. 29



In December 2004, the FASB issued SFAS No. 153, which exempts from fair value measurement the exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a result of the exchange.



This statement shall be applied prospectively and will be the Company for nonmonetary asset exchanges occurring after April 1, 2006. The
Company does not expect that the adoption of this statement will have a material impact on its financial position or results of operations.



Effect of Contingently Convertible Debt on Diluted Earnings per Share



In September 2004, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue
04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share (EITF 04-08). This EITF requires shares of common stock issuable upon conversion of contingently convertible debt instruments to be included in
the calculation of diluted earnings per share whether or not the contingent conditions for conversion have been met, unless the inclusion of these shares is anti-dilutive. Previously, shares of common stock issuable upon conversion of contingently
convertible debt securities were excluded from the calculation of diluted earnings per share.



Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments



In September 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF)
Issue 03-1-1, Effective Date of Paragraphs 10 20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which delays the effective date for the recognition and measurement
guidance in EITF Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further application guidance is necessary for securities analyzed for impairment under EITF Issue No. 03-1. The Company continues to assess the
potential impact that the adoption of the proposed FSP could have on its financial statements.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations



In March 2005, the FASB issued Interpretation
47. This Interpretation clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity
in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is conditional even though uncertainty exists about
the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists to make a
reasonable estimate of the fair value of the obligation.



Interpretation 47 is effective for fiscal years ending after December 15, 2005. The Company does not anticipate that the implementation of the provisions of FIN 47 will have a material effect on its financial position
or on the results of operations.



SFAS No. 154, Accounting
Changes and Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3



In May 2005 the FASB published SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements, and applies to all voluntary changes in accounting principle and also to changes required by an accounting pronouncement only when it does not include specific transition provisions.



Opinion 20 previously required that most voluntary changes in
accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods financial
statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.



This Statement carries forward without change the guidance contained in Opinion 20: (i) for reporting the
correction of an error in previously issued financial statements, (ii) for a change in accounting estimate, and (iii) requiring justification of a change in accounting principle on the basis of preferability.



The Company believes that the initial application of the
provisions of this Interpretation will not have a material impact on its financial position, cash flows or results of operations.



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AIR FRANCE - KLM AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (Continued)



(21)  Other information



These information are based on French GAAP figures.



|                                                                     |  |                              |  |                             |   |  |                |   |  |                        
|-------------------------------------------------------------------- |  | ---------------------------- |  | --------------------------- | - |  | -------------- | - |  | -----------------------
|                                                                     |  | Balance atbeginning ofperiod |  | Charged tocosts andexpenses |   |  | Othermovements |   |  | Balance atend of period
|                                                                     |  | (in  million)              
|Valuation and qualifying accounts deducted from the related accounts |  |                              |  |                             |   |  |                |   |  |                        
|2005                                                                 |  |                              |  |                             |   |  |                |   |  |                        
|Financial investments and miscellaneous                              |  | 91                           |  | 16                          |   |  | 6              |   |  | 113                    
|Inventories                                                          |  | 49                           |  | (13                         | ) |  | 67             |   |  | 103                    
|Trade receivables and related accounts                               |  | 99                           |  | 30                          |   |  | (27            | ) |  | 102                    
|Other accounts receivable                                            |  | 3                            |  | 2                           |   |  |                |   |  | 5                      
|2004                                                                 |  |                              |  |                             |   |  |                |   |  |                        
|Financial investments and miscellaneous                              |  | 70                           |  | 24                          |   |  | (3             | ) |  | 91                     
|Inventories                                                          |  | 65                           |  | (16                         | ) |  |               |   |  | 49                     
|Trade receivables and related accounts                               |  | 93                           |  | 6                           |   |  |               |   |  | 99                     
|Other accounts receivable                                            |  | 10                           |  | (10                         | ) |  | 3              |   |  | 3                      
|2003                                                                 |  |                              |  |                             |   |  |                |   |  |                        
|Financial investments and miscellaneous                              |  | 65                           |  | 5                           |   |  |               |   |  | 70                     
|Inventories                                                          |  | 61                           |  | 4                           |   |  |               |   |  | 65                     
|Trade receivables and related accounts                               |  | 96                           |  | (4                          | ) |  | 1              |   |  | 93                     
|Other accounts receivable                                            |  |                             |  | 10                          |   |  |               |   |  | 10                     



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Consolidated Interim Financial Statements as of and for the years ended December 31, 2003 and 2002, prepared in accordance with International Financial Reporting Standards together with the

reconciliation of shareholders equity and net income to Generally Accepted Accounting Principles in the United States of America



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INDEPENDENT AUDITORS REPORT



To the Board of
Directors and Shareholders of Amadeus Global Travel Distribution, S.A.



We have
audited the accompanying consolidated balance sheets of Amadeus Global Travel Distribution, S.A. and its subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, of cash flows, and of changes in
shareholders equity for each of the three years in the period ended December 31, 2003 prepared in accordance with International Financial Reporting Standards. These consolidated financial statements are the responsibility of the
controlling Companys Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Amadeus Global Travel Distribution, S.A. and its subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2003 in conformity with International Financial Reporting Standards.



International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended December 31, 2003 and the determination of consolidated shareholders equity and financial position as of
December 31, 2003 and 2002, to the extent summarized in Note 25.





/s/ for DELOITTE & TOUCHE ESPANA, S.L.



Madrid, Spain

March 31, 2004



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Consolidated Balance Sheets as of December 31, 2003 and 2002



|                                                     |  |           |  |          
|---------------------------------------------------- |  | --------- |  | ---------
|                                                     |  | 2003      |  | 2002     
|ASSETS                                               |  |           |  |          
|                                                     |  |          
|Current assets                                       |  |           |  |          
|Cash and cash equivalents (Note 22)                  |  | 42,101    |  | 18,302   
|Accounts receivable, net (Note 4)                    |  | 182,429   |  | 167,176  
|Accounts receivableaffiliates, net (Notes 4 and 15) |  | 63,021    |  | 60,106   
|Loans receivable and advancesaffiliates (Note 15)   |  | 88        |  | 143      
|Taxes receivable (Note 20)                           |  | 42,023    |  | 55,362   
|Prepayments and other current assets (Note 5)        |  | 82,810    |  | 66,486   
|                                                     |  |           |  |          
|Total current assets                                 |  | 412,472   |  | 367,575  
|                                                     |  |           |  |          
|Tangible assets (Note 6)                             |  |           |  |          
|Land and buildings                                   |  | 129,213   |  | 129,355  
|Data processing hardware and software                |  | 425,707   |  | 410,471  
|Other                                                |  | 128,503   |  | 116,019  
|                                                     |  |           |  |          
|                                                     |  | 683,423   |  | 655,845  
|Less accumulated depreciation                        |  | 410,944   |  | 378,987  
|                                                     |  |           |  |          
|Net tangible assets                                  |  | 272,479   |  | 276,858  
|                                                     |  |           |  |          
|Intangible assets (Note 7)                           |  |           |  |          
|Patents, trademarks and licenses                     |  | 88,673    |  | 82,797   
|Purchased technology                                 |  | 41,688    |  |         
|Software development projects                        |  | 324,957   |  | 269,809  
|Purchased contracts                                  |  | 272,093   |  | 260,480  
|Goodwill                                             |  | 310,961   |  | 225,680  
|Other                                                |  | 5,486     |  | 15,989   
|                                                     |  |           |  |          
|                                                     |  | 1,043,858 |  | 854,755  
|Less accumulated amortization                        |  | 487,806   |  | 384,148  
|                                                     |  |           |  |          
|Net intangible assets                                |  | 556,052   |  | 470,607  
|                                                     |  |           |  |          
|Deferred income taxes (Note 20)                      |  | 126,115   |  | 135,883  
|Loans receivableaffiliates (Note 15)                |  | 1,725     |  | 2,813    
|Investments in associates (Note 8)                   |  | 63,273    |  | 124,153  
|Other long-term investments, net (Note 8)            |  | 104,757   |  | 38,278   
|                                                     |  |           |  |          
|Total other non-current assets                       |  | 295,870   |  | 301,127  
|                                                     |  |           |  |          
|Total non-current assets                             |  | 1,124,401 |  | 1,048,592
|                                                     |  |           |  |          
|Total assets                                         |  | 1,536,873 |  | 1,416,167
|                                                     |  |           |  |          



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Consolidated Balance Sheets as of December 31

(Expressed in thousands of EUROSKEURs)



|                                                     |  |           |   |  |           |  
|---------------------------------------------------- |  | --------- | - |  | --------- | -
|                                                     |  | 2003      |   |  | 2002      |  
|LIABILITIES AND SHAREHOLDERS EQUITY                 |  |           |   |  |           |  
|Current liabilities                                  |  |           |   |  |           |  
|Accounts payable, net (Note 4)                       |  | 247,400   |   |  | 229,585   |  
|Accounts payableaffiliates, net (Note 4 and 15)     |  | 24,731    |   |  | 31,128    |  
|Debt payable within one year (Note 11)               |  | 80,310    |   |  | 67,615    |  
|Current obligations under finance leases (Note 12)   |  | 9,643     |   |  | 8,085     |  
|Income taxes payable (Note 20)                       |  | 35,181    |   |  | 11,147    |  
|Other current liabilities (Note 5)                   |  | 100,739   |   |  | 77,598    |  
|                                                     |  |           |   |  |           |  
|Total current liabilities                            |  | 498,004   |   |  | 425,158   |  
|                                                     |  |           |   |  |           |  
|Long-term liabilities                                |  |           |   |  |           |  
|Long-term debt (Note 11)                             |  | 701       |   |  | 140,801   |  
|Obligations under finance leases (Note 12)           |  | 104,420   |   |  | 109,960   |  
|Deferred income taxes payable (Note 20)              |  | 102,228   |   |  | 45,340    |  
|Other long-term liabilities (Note 13)                |  | 72,778    |   |  | 71,541    |  
|                                                     |  |           |   |  |           |  
|Total long-term liabilities                          |  | 280,127   |   |  | 367,642   |  
|                                                     |  |           |   |  |           |  
|Minority interests                                   |  | 1,029     |   |  | 1,027     |  
|                                                     |  |           |   |  |           |  
|Shareholders equity (Note 14)                       |  |           |   |  |           |  
|Share capital                                        |  | 27,898    |   |  | 27,898    |  
|Additional paid-in capital                           |  | 379,358   |   |  | 373,195   |  
|Treasury shares and other similar equity instruments |  | (126,899  | ) |  | (128,050  | )
|Retained earnings                                    |  | 502,879   |   |  | 367,026   |  
|Cumulative translation adjustments                   |  | (25,523   | ) |  | (17,729   | )
|                                                     |  |           |   |  |           |  
|Total shareholders equity                           |  | 757,713   |   |  | 622,340   |  
|                                                     |  |           |   |  |           |  
|Total liabilities and shareholders equity           |  | 1,536,873 |   |  | 1,416,167 |  
|                                                     |  |           |   |  |           |  



See the accompanying
notes to the consolidated financial statements



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Consolidated Statements of Income for the Years Ended December 31,

(Expressed in thousands of EUROSKEURs)



|                                                                               |  |           |   |  |           |   |  |           |  
|------------------------------------------------------------------------------ |  | --------- | - |  | --------- | - |  | --------- | -
|                                                                               |  | 2003      |   |  | 2002      |   |  | 2001      |  
|Revenue (Note 16)                                                              |  | 1,929,009 |   |  | 1,856,320 |   |  | 1,785,124 |  
|Cost of sales                                                                  |  | 1,528,358 |   |  | 1,470,854 |   |  | 1,417,628 |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Gross profit                                                                   |  | 400,651   |   |  | 385,466   |   |  | 367,496   |  
|Selling, general and administrative expenses                                   |  | 80,021    |   |  | 78,020    |   |  | 102,553   |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Operating income                                                               |  | 320,630   |   |  | 307,446   |   |  | 264,943   |  
|Other income (expense)                                                         |  |           |   |  |           |   |  |           |  
|Interest expense, net (Note 18)                                                |  | (15,713   | ) |  | (19,370   | ) |  | (24,333   | )
|Exchange gains (losses)                                                        |  | (1,931    | ) |  | (174      | ) |  | (193      | )
|Other income (expense), net                                                    |  | 2,980     |   |  | 13,137    |   |  | 16,507    |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Income before income taxes                                                     |  | 305,966   |   |  | 301,039   |   |  | 256,924   |  
|Income tax (Note 20)                                                           |  | 122,182   |   |  | 115,820   |   |  | 100,086   |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Income after taxes                                                             |  | 183,784   |   |  | 185,219   |   |  | 156,838   |  
|Equity in income (losses) from associates                                      |  | (23,645   | ) |  | (22,671   | ) |  | (19,703   | )
|Equity in income (losses) from discontinuing operations of associates(Note 10) |  |          |   |  | (15,468   | ) |  | (4,412    | )
|Minority interests                                                             |  | (25       | ) |  | 7         |   |  |          |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Net income                                                                     |  | 160,114   |   |  | 147,087   |   |  | 132,723   |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Basic earnings per class A share, in EURs (Note 21)                          |  | 0.28      |   |  | 0.26      |   |  | 0,23      |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Basic earnings per class B share, in EURs (Note 21)                          |  |          |   |  |          |   |  |          |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Diluted earnings per class A share, in EURs (Note 21)                        |  | 0.28      |   |  | 0.25      |   |  | 0,23      |  
|                                                                               |  |           |   |  |           |   |  |           |  
|Diluted earnings per class B share, in EURs (Note 21)                        |  |          |   |  |          |   |  |          |  
|                                                                               |  |           |   |  |           |   |  |           |  



See the accompanying
notes to the consolidated financial statements



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Consolidated Statements of Cash Flows for the Years Ended December
31,

(Expressed in Thousands of Euros-Keurs)



|                                                                |  |          |   |  |          |   |  |          |  
|--------------------------------------------------------------- |  | -------- | - |  | -------- | - |  | -------- | -
|                                                                |  | 2003     |   |  | 2002     |   |  | 2001     |  
|Cash flows from operating activities                            |  |          |   |  |          |   |  |          |  
|Operating income                                                |  | 320,630  |   |  | 307,446  |   |  | 264,943  |  
|Adjustments for:                                                |  |          |   |  |          |   |  |          |  
|Depreciation and amortization                                   |  | 211,905  |   |  | 183,915  |   |  | 157,777  |  
|                                                                |  |          |   |  |          |   |  |          |  
|Operating income before changes in working capital:             |  | 532,535  |   |  | 491,361  |   |  | 422,720  |  
|Accounts receivable                                             |  | (4,067   | ) |  | (23,886  | ) |  | 8,475    |  
|Taxes receivable                                                |  | 2,525    |   |  | (3,441   | ) |  | (5,355   | )
|Other current assets                                            |  | 15,837   |   |  | 8,190    |   |  | (4,272   | )
|Accounts payable                                                |  | (17,286  | ) |  | 32,029   |   |  | (14,201  | )
|Other current liabilities                                       |  | 1,815    |   |  | (7,207   | ) |  | 5,746    |  
|Other long-term liabilities                                     |  | 2,099    |   |  | 4,321    |   |  | 19,920   |  
|                                                                |  |          |   |  |          |   |  |          |  
|Cash provided from operating activities                         |  | 533,458  |   |  | 501,367  |   |  | 433,033  |  
|Taxes paid                                                      |  | (61,825  | ) |  | (77,374  | ) |  | (74,361  | )
|                                                                |  |          |   |  |          |   |  |          |  
|Net cash provided from operating activities                     |  | 471,633  |   |  | 423,993  |   |  | 358,672  |  
|                                                                |  |          |   |  |          |   |  |          |  
|Cash flows from investing activities                            |  |          |   |  |          |   |  |          |  
|Additions to tangible assets                                    |  | (52,803  | ) |  | (75,407  | ) |  | (83,568  | )
|Additions to intangible assets                                  |  | (89,033  | ) |  | (89,797  | ) |  | (131,520 | )
|Investment in subsidiaries and associates, net of cash acquired |  | (83,957  | ) |  | (91,847  | ) |  | (40,163  | )
|Interest received                                               |  | 1,813    |   |  | 3,388    |   |  | 2,835    |  
|Sundry investments and deposits                                 |  | (8,529   | ) |  | (3,700   | ) |  | (9,076   | )
|Acquisition of Treasury shares                                  |  | (96      | ) |  | (73,098  | ) |  |         |  
|Disposals of Treasury shares                                    |  | 224      |   |  | 3,917    |   |  | 329      |  
|Loans to third parties                                          |  | (55,652  | ) |  | (1,661   | ) |  | (3,820   | )
|Loans to affiliates                                             |  | (4,941   | ) |  | (17,430  | ) |  | (10,619  | )
|Cash proceeds collected/(paid)derivative agreements            |  | 12,225   |   |  | 20,004   |   |  | (37,714  | )
|Disposals of sundry investments                                 |  | 2,689    |   |  | 834      |   |  | 19,895   |  
|Dividends received                                              |  | 9,076    |   |  | 10,819   |   |  | 6,678    |  
|Proceeds obtained from disposal of fixed assets                 |  | 5,112    |   |  | 7,487    |   |  | 7,233    |  
|                                                                |  |          |   |  |          |   |  |          |  
|Net cash used in investing activities                           |  | (263,872 | ) |  | (306,491 | ) |  | (279,510 | )
|                                                                |  |          |   |  |          |   |  |          |  
|Cash flows from financing activities                            |  |          |   |  |          |   |  |          |  
|Proceeds from borrowings                                        |  | 300,598  |   |  | 308,211  |   |  | 300,447  |  
|Repayments of borrowings                                        |  | (427,819 | ) |  | (356,257 | ) |  | (305,537 | )
|Interest paid                                                   |  | (17,928  | ) |  | (21,440  | ) |  | (28,963  | )
|Redemption of class B shares                                  |  |         |   |  |         |   |  | (554     | )
|Dividends paid                                                  |  | (29,998  | ) |  | (37,999  | ) |  | (52,177  | )
|Payments of finance lease liabilities                           |  | (9,756   | ) |  | (11,430  | ) |  | (12,410  | )
|                                                                |  |          |   |  |          |   |  |          |  
|Net cash used in financing activities                           |  | (184,903 | ) |  | (118,915 | ) |  | (99,194  | )
|                                                                |  |          |   |  |          |   |  |          |  
|Effect of exchange rate changes on cash and cash equivalents    |  | 941      |   |  | 1,104    |   |  | (278     | )
|                                                                |  |          |   |  |          |   |  |          |  
|Net increase / (decrease) in cash and cash equivalents          |  | 23,799   |   |  | (309     | ) |  | (20,310  | )
|Cash and cash equivalents at beginning of period                |  | 18,302   |   |  | 18,611   |   |  | 38,921   |  
|                                                                |  |          |   |  |          |   |  |          |  
|Cash and cash equivalents at end of period                      |  | 42,101   |   |  | 18,302   |   |  | 18,611   |  
|                                                                |  |          |   |  |          |   |  |          |  



See the accompanying
notes to the consolidated financial statements



F-144



---

##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Consolidated Statements of Changes in Shareholders Equity

(Expressed in Thousands of Euros-Keurs)



|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|-------------------------------------------------------- |  | ------------ | - |  | ------------------------- | - |  | ------------------------------------------------ | - |  | ---------------- | - |  | --------------------------------- | - |  | ------- | -
|                                                         |  | Sharecapital |   |  | Additional paid-incapital |   |  | Treasuryshares andother similarequityinstruments |   |  | Retainedearnings |   |  | Cumulative translationadjustments |   |  | Total   |  
|Balance as of December 31, 2000                          |  | 33,437       |   |  | 435,111                   |   |  | (35,725                                          | ) |  | 43,414           |   |  | 350                               |   |  | 476,487 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Accounting for financial instruments                     |  |             |   |  |                          |   |  |                                                 |   |  | (203             | ) |  | (5,948                            | ) |  | (6,151  | )
|Other gains (losses)                                     |  |             |   |  |                          |   |  |                                                 |   |  |                 |   |  | 5,086                             |   |  | 5,086   |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Gains (losses) not recognized in the statement of income |  |             |   |  |                          |   |  |                                                 |   |  | (203             | ) |  | (862                              | ) |  | (1,065  | )
|(Acquisitions)/disposals of Treasury shares, net         |  |             |   |  | 3,026                     |   |  | 2,913                                            |   |  | (2,913           | ) |  |                                  |   |  | 3,026   |  
|Redemption of class B shares                           |  | (5,539       | ) |  |                          |   |  |                                                 |   |  | 4,984            |   |  |                                  |   |  | (555    | )
|Equity swap transactions                                 |  |             |   |  |                          |   |  | (18,780                                          | ) |  |                 |   |  |                                  |   |  | (18,780 | )
|Net income for the period                                |  |             |   |  |                          |   |  |                                                 |   |  | 132,723          |   |  |                                  |   |  | 132,723 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Balance as of December 31, 2001                          |  | 27,898       |   |  | 438,137                   |   |  | (51,592                                          | ) |  | 177,905          |   |  | (512                              | ) |  | 591,836 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Equity instruments                                       |  |             |   |  | 1,505                     |   |  |                                                 |   |  |                 |   |  |                                  |   |  | 1,505   |  
|Available for sale financial assets                      |  |             |   |  |                          |   |  |                                                 |   |  | (3,318           | ) |  |                                  |   |  | (3,318  | )
|Tax impact                                               |  |             |   |  |                          |   |  |                                                 |   |  | 1,189            |   |  |                                  |   |  | 1,189   |  
|Hedging instruments                                      |  |             |   |  |                          |   |  |                                                 |   |  | 19,641           |   |  | 20,967                            |   |  | 40,608  |  
|Tax impact                                               |  |             |   |  |                          |   |  |                                                 |   |  | (6,868           | ) |  | (7,338                            | ) |  | (14,206 | )
|Other gains (losses)                                     |  |             |   |  |                          |   |  |                                                 |   |  | 2,531            |   |  | (30,846                           | ) |  | (28,315 | )
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Gains (losses) not recognized in the statement of income |  |             |   |  | 1,505                     |   |  |                                                 |   |  | 13,175           |   |  | (17,217                           | ) |  | (2,537  | )
|(Acquisitions) / disposals of Treasury shares, net       |  |             |   |  | (66,447                   | ) |  | (66,858                                          | ) |  | 66,858           |   |  |                                  |   |  | (66,447 | )
|Equity swap transactions                                 |  |             |   |  |                          |   |  | (9,600                                           | ) |  |                 |   |  |                                  |   |  | (9,600  | )
|Dividends                                                |  |             |   |  |                          |   |  |                                                 |   |  | (37,999          | ) |  |                                  |   |  | (37,999 | )
|Net income for the period                                |  |             |   |  |                          |   |  |                                                 |   |  | 147,087          |   |  |                                  |   |  | 147,087 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Balance as of December 31, 2002                          |  | 27,898       |   |  | 373,195                   |   |  | (128,050                                         | ) |  | 367,026          |   |  | (17,729                           | ) |  | 622,340 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Equity instruments                                       |  |             |   |  | (3,543                    | ) |  |                                                 |   |  |                 |   |  |                                  |   |  | (3,543  | )
|Available for sale financial assets                      |  |             |   |  |                          |   |  |                                                 |   |  | 4,092            |   |  |                                  |   |  | 4,092   |  
|Tax impact                                               |  |             |   |  |                          |   |  |                                                 |   |  | (1,441           | ) |  |                                  |   |  | (1,441  | )
|Hedging instruments                                      |  |             |   |  |                          |   |  |                                                 |   |  | 22,076           |   |  | 11,875                            |   |  | 33,951  |  
|Tax impact                                               |  |             |   |  |                          |   |  |                                                 |   |  | (7,735           | ) |  | (4,156                            | ) |  | (11,891 | )
|Other gains (losses)                                     |  |             |   |  | 8,555                     |   |  |                                                 |   |  | (10,104          | ) |  | (15,513                           | ) |  | (17,062 | )
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Gains (losses) not recognized in the statement of income |  |             |   |  | 5,012                     |   |  |                                                 |   |  | 6,888            |   |  | (7,794                            | ) |  | 4,106   |  
|(Acquisitions) / disposals of Treasury shares, net       |  |             |   |  | 1,151                     |   |  | 1,151                                            |   |  | (1,151           | ) |  |                                  |   |  | 1,151   |  
|Dividends                                                |  |             |   |  |                          |   |  |                                                 |   |  | (29,998          | ) |  |                                  |   |  | (29,998 | )
|Net income for the period                                |  |             |   |  |                          |   |  |                                                 |   |  | 160,114          |   |  |                                  |   |  | 160,114 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  
|Balance as of December 31, 2003                          |  | 27,898       |   |  | 379,358                   |   |  | (126,899                                         | ) |  | 502,879          |   |  | (25,523                           | ) |  | 757,713 |  
|                                                         |  |              |   |  |                           |   |  |                                                  |   |  |                  |   |  |                                   |   |  |         |  



See the accompanying
notes to the consolidated financial statements



F-145



---

##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002

(Expressed in Thousands of Euros-Keurs)



|1. | ACTIVITY
|-- | --------



The consolidated financial statements include Amadeus Global Travel Distribution, S.A., domiciled in Spain (the Company) and its consolidated
subsidiaries (the Group). The Group is a leader in information technology, serving the marketing, sales and distribution needs of the global travel and tourism industry. Its worldwide data network and database of travel information are
used by travel agencies and airline sales offices. Today, travel agencies and airline offices can make bookings with airlines, hotel chains, car rental companies, and newer groups of providers such as ferry, rail, cruise, insurance and tour
operators. The Group provides the above-mentioned services through a computerised reservation system (CRS) and through its new e-commerce channel of distribution. Additionally, the Group provides information technology (IT)
services and solutions to the airline industry which includes inventory management and passenger departure control. The Companys share and ownership structure are described in Note 14.



F-146



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Below is a summary of the consolidated Group companies as of December 31, 2003, 2002 and 2001:



|                                             |  |                         |      |                                                      |   |      |       |   |      |       |  
|-------------------------------------------- |  | ----------------------- | ---- | ---------------------------------------------------- | - | ---- | ----- | - | ---- | ----- | -
|                                             |  | Country ofincorporation |      | Percentage of participation as ofDecember 31 (2) (9) |  
|Company                                      |  |                         | 2003 |                                                      |   | 2002 |       |   | 2001 |      
|Fully consolidated companies                 |  |                         |      |                                                      |   |      |       |   |      |       |  
|                                             |  |                         |      |                                                     
|Airline Automation, Inc.(1)                  |  | U.S.A.                  |      | 100.0                                                | % |      |      |   |      |      |  
|Amadeus America, S.A.                        |  | Argentina               |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Argentina, S.A.                      |  | Argentina               |      | 80.0                                                 | % |      | 80.0  | % |      | 80.0  | %
|Amadeus Asia, Ltd.                           |  | Thailand                |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Austria Marketing GmbH               |  | Austria                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Benelux, N.V.                        |  | Belgium                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Bolivia SRL                          |  | Bolivia                 |      | 100.0                                                | % |      | 100.0 | % |      |      |  
|Amadeus Central and West Africa S.A.         |  | Ivory Coast             |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Data Processing GmbH                 |  | Germany                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Denmark A/S. (5)                     |  | Denmark                 |      | 100.0                                                | % |      | 100.0 | % |      | 5.0   | %
|Amadeus GDS LLP                              |  | Kazakhstan              |      | 100.0                                                | % |      | 100.0 | % |      |      |  
|Amadeus GDS (Malaysia) Sdn. Bhd.             |  | Malaysia                |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus GDS Singapore Pte. Ltd.              |  | Singapore               |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Germany GmbH                         |  | Germany                 |      | 100.0                                                | % |      | 34.0  | % |      | 34.0  | %
|AMADEUSGLOBAL Ecuador, S.A.                  |  | Ecuador                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Global Travel Distribution, S.A.     |  | Spain                   |      | N/A                                                  |   |      | N/A   |   |      | N/A   |  
|Amadeus Global Travel Israel Ltd.            |  | Israel                  |      | 90.0                                                 | % |      | 90.0  | % |      | 90.0  | %
|Amadeus GTD Australia Pty. Ltd.              |  | Australia               |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus GTD Ltd.                             |  | Kenya                   |      | 100.0                                                | % |      |      |   |      |      |  
|Amadeus GTD Southern Africa Pty. Ltd.        |  | South Africa            |      | 100.0                                                | % |      |      |   |      |      |  
|Amadeus Hellas, S.A.                         |  | Greece                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Hong Kong, Ltd.                      |  | Hong Kong               |      | 100.0                                                | % |      |      |   |      |      |  
|Amadeus Magyarország Kft (Ltd.)              |  | Hungary                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing (Ghana), Ltd.              |  | Ghana                   |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing Ireland, Ltd.              |  | Ireland                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing Italia, S.P.A.             |  | Italy                   |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing Nigeria, Ltd.              |  | Nigeria                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing Philippines, Inc.          |  | Philippines             |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing Romania, S.R.L.            |  | Romania                 |      | 100.0                                                | % |      |      |   |      |      |  
|Amadeus Marketing Schweiz, A.G.              |  | Switzerland             |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Marketing (U.K.), Ltd.               |  | U.K.                    |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus NMC Holding, Inc.                    |  | U.S.A.                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus North America LLC. (1)               |  | U.S.A.                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Norway, AS. (5)                      |  | Norway                  |      | 100.0                                                | % |      | 100.0 | % |      | 5.0   | %
|Amadeus Paraguay, S.R.L.                     |  | Paraguay                |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Perú, S.A.                           |  | Peru                    |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Polska, Sp.zo.o.                     |  | Poland                  |      | 100.0                                                | % |      | 75.5  | % |      | 75.5  | %
|Amadeus Receptionsservice AB (5)             |  | Sweden                  |      | 100.0                                                | % |      | 100.0 | % |      | 5.0   | %
|Amadeus Rezervasyon Dagitim Sistemleri, A.S. |  | Turkey                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus s.a.s                                |  | France                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Scandinavia AB                       |  | Sweden                  |      | 100.0                                                | % |      | 100.0 | % |      | 5.0   | %
|Amadeus Services Ltd.                        |  | U.K.                    |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Services Asia-Pacific Pty. Ltd.      |  | Australia               |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Amadeus Sweden AB (5)                        |  | Sweden                  |      | 78.3                                                 | % |      | 78.3  | % |      | 3.9   | %
|Americs AB (5)                               |  | Sweden                  |      | 100.0                                                | % |      | 100.0 | % |      | 5.0   | %
|CRS Amadeus América, S.A.                    |  | Uruguay                 |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|e-Travel, Inc. (1)                           |  | U.S.A.                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Eviaggi.com, S.P.A.                          |  | Italy                   |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|ICSA-T Australia Pty. Ltd. (4)               |  | Australia               |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|ICSA-T France S.A.R.L. (4)                   |  | France                  |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|ICSA-T India Pvt Ltd (4)                     |  | India                   |      |                                                     |   |      | 75.0  | % |      | 33.0  | %
|ICSA-T Holding Inc.(4) (8) (10)              |  | U.S.A.                  |      |                                                     |   |      | 100.0 | % |      | 44.0  | %



F-147



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|                                                                            |  |                         |      |                                                      |   |      |       |   |      |       |  
|--------------------------------------------------------------------------- |  | ----------------------- | ---- | ---------------------------------------------------- | - | ---- | ----- | - | ---- | ----- | -
|                                                                            |  | Country ofincorporation |      | Percentage of participation as ofDecember 31 (2) (9) |  
|Company                                                                     |  |                         | 2003 |                                                      |   | 2002 |       |   | 2001 |      
|ICSA-T US LLC (1) (3) (4)                                                   |  | U.S.A.                  |      | 100.0                                                | % |      | 100.0 | % |      | 71.5  | %
|ICSA-T N.V.                                                                 |  | Belgium                 |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|ICSA-T Scandinavia AB (4)                                                   |  | Sweden                  |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|ICSA-T Travel Software GmbH (4)                                             |  | Switzerland             |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|ICSA-T UK, Ltd. (4)                                                         |  | U.K.                    |      | 100.0                                                | % |      | 100.0 | % |      | 44.0  | %
|NMC Eastern European CRS, B.V.                                              |  | The Netherlands         |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|SIA Amadeus Latvija.                                                        |  | Latvia                  |      | 100.0                                                | % |      | 100.0 | % |      | 9.75  | %
|Sistemas de Reservaciones CRS de Venezuela, C.A.                            |  | Venezuela               |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|UAB Amadeus Lietuva.                                                        |  | Lithuania               |      | 100.0                                                | % |      | 100.0 | % |      | 9.75  | %
|Vacation.com, Inc. (1)                                                      |  | U.S.A.                  |      | 100.0                                                | % |      | 100.0 | % |      | 100.0 | %
|Vivacances S.A.                                                             |  | France                  |      | 67.5                                                 | % |      | 50.0  | % |      |      |  
|                                                                            |  |                         |      |                                                     
|Companies consolidated under the equity method                              |  |                         |      |                                                      |   |      |       |   |      |       |  
|                                                                            |  |                         |      |                                                     
|1Travel.com, Inc. (1)                                                       |  | U.S.A.                  |      | 38.9                                                 | % |      | 38.9  | % |      | 27.5  | %
|AlphaNet BVBA. (4)                                                          |  | Belgium                 |      | 28.0                                                 | % |      | 28.0  | % |      | 3.6   | %
|Amadeus Algerie, S.A.R.L.                                                   |  | Algeria                 |      | 40.0                                                 | % |      | 40.0  | % |      |      |  
|Amadeus Bulgaria, Ltd.                                                      |  | Bulgaria                |      | 49.0                                                 | % |      | 49.0  | % |      | 49.0  | %
|Amadeus Brasil, Ltda.                                                       |  | Brazil                  |      | 34.0                                                 | % |      | 34.0  | % |      | 34.0  | %
|Amadeus France, S.N.C.                                                      |  | France                  |      | 34.0                                                 | % |      | 34.0  | % |      | 34.0  | %
|Amadeus Gulf LLC                                                            |  | United ArabianEmirates  |      | 49.0                                                 | % |      |      |   |      |      |  
|Amadeus Kuwait Company W.L.L.                                               |  | Kuwait                  |      | 35.0                                                 | % |      |      |   |      |      |  
|Amadeus Marketing CSA, s.r.o.                                               |  | Czech Rep.              |      | 35.0                                                 | % |      | 35.0  | % |      | 35.0  | %
|Amadeus Maroc, S.A.S.                                                       |  | Morocco                 |      | 30.0                                                 | % |      | 30.0  | % |      | 30.0  | %
|Amadeus Qatar W.L.L.                                                        |  | Qatar                   |      | 40.0                                                 | % |      | 40.0  | % |      | 40.0  | %
|Amadeus Sudani, Co.Ltd.                                                     |  | Sudan                   |      | 40.0                                                 | % |      | 40.0  | % |      |      |  
|Amadeus Tunisie S.A.                                                        |  | Tunisia                 |      | 30.0                                                 | % |      | 30.0  | % |      | 5.0   | %
|Atinera LLC (1) (7)                                                         |  | U.S.A.                  |      | 50.0                                                 | % |      | 50.0  | % |      | 50.0  | %
|ITA (Internet Travel Agent Inc.) (1)                                        |  | U.S.A.                  |      | 22.3                                                 | % |      | 22.3  | % |      | 22.3  | %
|Optims                                                                      |  | France                  |      | 30.0                                                 | % |      |      |   |      |      |  
|PT Amadeus Indonesia                                                        |  | Indonesia               |      | 50.0                                                 | % |      |      |   |      |      |  
|Qivive GmbH (6)                                                             |  | Germany                 |      | 33.3                                                 | % |      | 11.3  | % |      |       |  
|Red Universal de Marketing y Booking On Line, S.A. (RUMBO)                |  | Spain                   |      | 50.0                                                 | % |      | 50.0  | % |      | 50.0  | %
|Sistemas Automatizados de Agencias de Viajes, S.A. (SAVIA)                |  | Spain                   |      | 34.0                                                 | % |      | 34.0  | % |      | 34.0  | %
|Sociedad Anato-Avianca de Reservaciones de Servicios Turisticos Savia Ltda. |  | Colombia                |      | 50.0                                                 | % |      | 50.0  | % |      |      |  
|Stellar Access, Inc. (1) (7)                                                |  | U.S.A                   |      | 20.0                                                 | % |      | 20.0  | % |      | 20.0  | %
|Topas Co. Ltd.                                                              |  | South Korea             |      | 32.0                                                 | % |      | 32.0  | % |      | 32.0  | %
|Travel.com.au Ltd.                                                          |  | Australia               |      | 16.7                                                 | % |      | 19.2  | % |      | 19.9  | %
|Travellink AB                                                               |  | Sweden                  |      | 35.1                                                 | % |      | 25.0  | % |      | 25.0  | %
|Traventec Limited (6)                                                       |  | Ireland                 |      | 45.0                                                 | % |      | 16.6  | % |      |      |  

---

|(1) | The participation in these companies is held through Amadeus NMC Holding, Inc.
|--- | ------------------------------------------------------------------------------

|(2) | In certain cases companies are considered to be wholly-owned subsidiaries, even though due to local statutory obligations they are required to have more than one shareholder or a
specific percentage of the capital stock owned by citizens and/or legal entities of the country concerned. These shareholders act as trustees on behalf of the Group.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In year 2002, the Companys investment in ICSA-T US LLC was an indirect economic interest of 49% through Amadeus NMC Holding Inc. and the remaining 51% via ICSA-T N.V.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The participation in these companies is held through ICSA-T N.V.
|--- | ----------------------------------------------------------------

|(5) | The participation in these companies is held through Amadeus Scandinavia AB.
|--- | ----------------------------------------------------------------------------

|(6) | The participation in these companies is held through Amadeus Germany GmbH
|--- | -------------------------------------------------------------------------

|(7) | This company ceased operations in 2002
|--- | --------------------------------------

|(8) | This company has ceased operations in 2003
|--- | ------------------------------------------

|(9) | The percentage of participation as of December 31, 2002 has been presented for comparative purposes. The applicable accounting method applies based on the voting rights in each
period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | The participation in these companies in 2002 is held through ICSA-T N.V.
|---- | ------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



2.    BASIS OF PRESENTATION AND COMPARABILITY OF THE
INFORMATION INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS



| | a) | Basis of presentation
| | -- | ---------------------



| | i) | General Information
| | -- | -------------------



The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). These
financial statements have been authorized for issue by the Board of Directors of the Company on March 31, 2004. Certain amounts for the prior period have been reclassified to conform with 2003 presentation. A reclassification has been performed in
the 2002 balances for the net presentation of certain deferred tax assets and deferred tax liabilities in accordance with the accounting principle followed by the Group.



| | ii) | Spanish GAAP financial statements
| | --- | ---------------------------------



In compliance with legal regulatory requirements, the Companys management also prepares consolidated annual accounts as of December 31, 2003 and
2002 under Spanish GAAP. As a consequence of the difference in accounting principles, the consolidated net equity reflected under Spanish GAAP exceeds the net equity as of December 31, 2003 reflected under IFRS by approximately EURs 145.4 million
and the net income reflected under Spanish GAAP is lower than the net income under IFRS for the year ended December 31, 2003 by approximately EURs 10.0 million. As of and for the year ended December 31, 2002 these differences were approximately EURs
169.5 million and EURs 62.3 million, respectively. The main differences as of and for the years ended December 31, 2003 and 2002 are due to the difference in accounting methods used in the acquisition in 1997 of Amadeus Data Processing and Co. KG
(Amadeus Operations KG), as well as the accounting for Treasury shares and other similar equity instruments.



| | iii) | Use of estimates
| | ---- | ----------------



Use of estimates and assumptions, as determined by management, is required in the preparation of consolidated financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those estimates and assumptions.



| | b) | Comparison of information
| | -- | -------------------------



For comparative purposes, the Group presents, together with the amounts included in the balance sheet, the statements of income, cash flow and changes in
shareholders equity, and the explanatory notes as of and for the year ended December 31, 2003, those as of and for the years ended December 31, 2002 and December 31, 2001.



| | c) | Changes in the consolidation scope
| | -- | ----------------------------------



Note 1 presents the main changes in the companies which were consolidated by the Group during 2003, 2002 and 2001, as well as the consolidation method
used in each case.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



3.    ACCOUNTING PRINCIPLES



The main accounting principles used in the consolidated financial statements are as follows:



| | a) | Principles of consolidation
| | -- | ---------------------------



The consolidated financial statements include all companies over which the Group exercises control. Control refers to the power to govern the financial
and operating policies so as to obtain the benefits from its activities. Intercompany balances and transactions between Group companies have been eliminated. Associates (investees in which the Group has significant influence but does not exercise
management control) and joint-ventures have been accounted for using the equity method. Subsidiaries are not consolidated when control is temporary, this is the case when a subsidiary is acquired with the intention of disposing of it in the
following twelve months, instead they are accounted for as an available for sale financial asset.



| | b) | Foreign currency transactions
| | -- | -----------------------------



Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the
settlement of such transactions and from the translation at year-end of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income.



| | c) | Currency translation
| | -- | --------------------



The financial statements of the individual Group companies are denominated in each companys local currency. For consolidation purposes: the assets
and liabilities are translated into EURs at year-end rates; components of the statement of income are translated at average exchange rates for the year; and share capital, additional paid-in capital, and reserves are translated at historical rates.
Any exchange differences arising as a result of this translation, for majority interests in subsidiaries and interests in associates, are shown together as a separate component of shareholders equity in the cumulative translation
adjustments caption. In the case of translation differences related to minority interests, these are included in the minority interests caption of the balance sheet.



| | d) | Related parties
| | -- | ---------------



The Group considers its significant shareholders or affiliates, associates and members of the Board of Directors to be related parties.



| | e) | Cash equivalents
| | -- | ----------------



Cash equivalents generally consist of certificates of deposit, time deposits, commercial paper, short-term government obligations and other money market
instruments. Such investments are stated at cost, which approximates fair value.



| | f) | Tangible assets
| | -- | ---------------



Tangible assets are recorded at the lower of cost or recoverable value and are depreciated applying the straight-line method over the estimated useful
lives of the assets:



|                                      |  |      
|------------------------------------- |  | -----
|                                      |  | Years
|Buildings                             |  | 50   
|Data processing hardware and software |  | 25  
|Other                                 |  | 320 



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Repairs and renewals are charged to income when the expenditure is incurred.



Leased tangible assets where the Group substantially assumes all the risks
and benefits of ownership, are capitalized and the present value of the related lease payments is recorded as a liability. Each lease payment is allocated between the liability and interest expense based on a constant rate of interest on the
principal outstanding. The capitalized leased assets are depreciated applying the straight-line method over the above-mentioned useful lives.



Operating lease payments are charged to income as incurred over the term of the lease.



| | g) | Intangible assets
| | -- | -----------------



Intangible assets are recorded at cost and reviewed periodically and adjusted for any diminution in value as noted in paragraph h). These assets include
the following:



| |  |  | Patents, trademarks and licenses: the cost of acquiring licences for CRS and IT services software developed outside the Group as well as acquired trademarks. These assets are being
amortized applying the straight-line method over 3-10 years.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchased technology: the capability obtained by the practical application of knowledge, processes, methods, tools and systems to serve the market need more efficiently.
Specifically, it relates to the combination of the traditional Amadeus Global Distribution System (GDS) technology with Start Amadeus local platform, granting Amadeus a unique platform unchallenged to date in the German market. This asset is
being amortized applying the straight-line method, based on the expected service life of 10 years.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Software development projects, including e-commerce related development activities: software applications developed by the Group which are capitalized once technical feasibility is
established and where it is reasonably anticipated that the costs will be recovered through future activities or benefit future periods and the cost of the assets can be measured reliably. These projects are being amortized applying the
straight-line method over 3-5 years. Software maintenance costs are charged to expense as incurred.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchased contracts represent the acquisition costs of contracts that give the Group the right to bill for future services as well as capitalizable costs related to travel agency
incentives. These costs are being amortized applying the straight-line method, based on the expected service life of the contract, over 3-10 years.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Goodwill and negative goodwill represent the excess or deficit when comparing the purchase price with the fair value of the net assets acquired and are amortized applying the
straight-line method over 4-10 years. Amortization is carried out over 10 years in the case of acquisitions with high strategic value and long-term impact on the Groups business. The excess/default of purchase price corresponding to
investments in associates is included in long-term investments and the corresponding amortization expenses are included in the Equity in income (losses) from associates caption of the statement of income. When settlement of purchase
consideration is deferred, the cost of the acquisition includes the net present value of this deferred consideration. In cases where the exact amount of deferred consideration is contingent on future events, the amount of the deferred consideration
is estimated at the acquisition date and recorded as liability. Any subsequent adjustment to the estimated amount of deferred consideration is applied as a cumulative adjustment to goodwill in the period of the change in estimate and recorded as
liability.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | Other intangible assets are amortized on a straight-line basis over 3-5 years.
| | - |  | ------------------------------------------------------------------------------



Amortization expenses related to intangible assets are included in the cost of sales and selling, general and administrative expense captions of the
statement of income.



h) Impairment of non-current assets



The Group periodically evaluates the carrying value of
non-current assets for potential impairment. As a result of this evaluation, an impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount by reducing the carrying amount of the asset to its recoverable
amount with the corresponding charge to the statement of income in the Cost of sales caption. The recoverable amount is the greater of the net selling price and the value in use. In assessing the value in use, the estimated future cash
flows are discounted to their present value using an appropriate risk adjusted discount rate.



i) Pension and other post-retirement obligations



The Group operates a number of defined benefit and defined contribution pension plans. Liabilities of the Group arising from defined benefit obligations are determined using the projected unit credit method.
Independent actuarial valuations are carried out annually, for the largest plans and on a regular basis for other plans. The actuarial assumptions used to calculate the benefit obligations vary according to the economic conditions of the country in
which the plan is located.



Such plans are either externally
funded, with the assets of the schemes held separately from those of the Group, or unfunded with the related liabilities carried in the balance sheet.



For the funded defined benefit plans, the deficit or excess of the fair value of plan assets over the present value of the defined benefit obligation is
recognised as a liability or an asset in the balance sheet, taking into account any unrecognised actuarial gains or losses and past service cost. However, an excess of assets is recognised only to the extent that it represents a future economic
benefit which is available to the Group, for example in the form of refunds from the plan or reductions in future contributions.



Actuarial gains and losses arise mainly from changes in actuarial assumptions and differences between actuarial assumptions and what has actually
occurred. They are recognised in the income statement, over the remaining working lives of employees, only to the extent that their net cumulative amount exceeds 10% of the greater of present value of the obligation or of the fair value of plan
assets.



For defined benefit plans the actuarial cost charged
to the income statement consists of current service cost, interest cost, expected return on plan assets and past service cost as well as actuarial gains or losses to the extent that they are recognised.



Benefits provided by defined contribution plans are charged to the income
statement as incurred.



j) Capital issuance costs



Expenses incurred in connection with the increases in capital are applied
as a reduction to the proceeds received in the additional paid-in capital caption of the balance sheet net of any related income tax benefit.



k) Treasury shares



Treasury shares held by the Group are reported as a reduction in shareholders equity. The gain or loss on disposal of these shares is registered in
additional paid-in capital.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



l) Revenue recognition



The Group receives fees from travel providers for providing electronic travel and reservation services through its CRS. The
fee amount is dependent upon the usage and the level of functionality at which the provider participates. Revenue from airline reservations is recognized based on the number of bookings, net of cancellations made and an allowance for future
cancellations, or the number of CRS transactions depending on the option contractually selected on an annual basis by the applicable airlines.



Revenue from airline IT services and bookings of car rentals and hotel rooms is recognized at the time the reservation is used by the end consumer.
Revenue for other services to travel agencies, airlines and others is recognized in the month of service.



m) Stock incentive plans



The Group accounts for its obligations under stock incentive plans as follows:



| |  |  | Compensation expense is recognised for stock options, if the fair market value of the underlying stock at the date of the grant is above the exercise price. In this case, the
expense is accrued over the vesting period of these rights (currently four years).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Compensation expense relating to stock grants (i.e. their fair market value at the grant date) is recognized over the vesting period of these rights.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



n) Research and development



Research and development costs are charged to expense as incurred, except
for significant software projects that have reached development stage (see g, above). The research and development costs expensed for the years ended December 31, 2003,2002 and 2001 were KEURs 90,320, KEURs 68,010 and KEURs 55,006 respectively.



o) Financial instruments



i) Currency and interest rate related derivatives



The Group uses derivative financial instruments to hedge certain currency
and interest rate exposures. All of these derivatives, whether designated as hedges or not, are recorded at fair value, being the market value for listed instruments or valuation based on option pricing models and discounted cash flow calculations
for unlisted instruments. For accounting recognition purposes, the following policy has been applied.



| |  |  | Cash flow hedges: Effective gains or losses resulting from remeasurement to fair value are included directly in retained earnings until the committed or forecasted transaction
occurs, at which point they will be reclassified to the statement of income. Ineffective gains or losses are recorded directly in the statement of income.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hedges of the net investment in a foreign entity: Effective gains or losses obtained from remeasurement to fair value are included in cumulative translation adjustments. Ineffective
gains or losses are recorded directly in the statement of income.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | No hedge accounting: Gains or losses from derivatives not designated or qualifying for hedging treatment are accounted for directly in the statement of income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



ii) Equity related instruments



The Group has issued warrants (call options sold) of its class A shares as part of the consideration for
acquiring certain IT contracts and certain corporate acquisitions. The fair value of these warrants is measured by using an option pricing model and is recorded as additional consideration for the underlying assets acquired. Warrants issued by the
Group where the holder has the right to request settlement in cash are considered as a financial liability and recorded in the Other liabilities caption and are consequently remeasured to fair value with unrealized gains or losses
recorded in the statement of income. Warrants issued by the Group, where the holder does not have the right to request settlement in cash, are considered to be equity instruments and are stated at fair value being recorded as additional paid-in
capital, with no subsequent recognition of movements in fair value.



Equity swap agreements (contracts to buy shares in the Company in future periods), entered into in order to manage the exposure to a rise in the Groups share price with respect to warrants issued as described above, are treated as:



| |  |  | Derivative financial instruments: When they include interim cash settlement features that are in substance similar to a form of collateral, and therefore do not qualify as an equity
instrument. In such cases, unrealized gains or losses arising from remeasurement to fair value are recorded in the statement of income. Fair value is measured by using an option pricing model.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity instruments: When there is no interim cash settlement feature, the equity swap agreements qualify as equity instruments and the underlying shares are treated similar to
Treasury shares and are presented as a reduction in shareholders equity.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a component of certain commercial agreements, the Group receives warrants or options on shares of other companies. Warrants or options received on shares of other companies are recorded as derivative financial
assets and measured initially at cost, which is the fair value of the consideration given. Subsequent remeasurement of these financial assets is performed at their fair values with unrealized gains or losses recorded in the statement of income. Fair
value is measured by using an option pricing model. When fair value cannot be reliably determined, these derivative financial assets are reflected in the balance sheet at amortized cost.



Additionally, investments in companies over which the Group does not have significant influence or control are recorded as
available for sale financial assets and measured at their fair values by reference to the market value for the listed instrument or by using techniques such as market value for similar instruments, discounted cash flow analysis and option pricing
models for unlisted instruments. Unrealized gains or losses are included in the statement of changes in shareholders equity, with realized gains or losses being recognized in the statement of income. When fair value cannot be reliably
determined, these investments are reflected in the balance sheet at amortized cost.



p) Income taxes



The current
income tax is recognised in the statement of income, except to the extent that it relates to items directly taken to equity, in which case it is recognised in equity.



Deferred taxes are determined under the liability method. Under this method, deferred tax assets and liabilities are
recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using tax rates that are expected to apply when the assets or liabilities are realized based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date. Deferred



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



taxes arising from movements in equity are charged or credited directly to equity. Deferred tax assets are recognized when the probability of realization is
reasonably assured and are adjusted only to the extent that it is no longer probable that a benefit will be realized in the future. Deferred tax assets and deferred tax liabilities related to the same tax jurisdiction are presented net in the
balance sheet.



Tax credits for investments in subsidiaries and
associates are applied to reduce the amount of the investment when there is an increase in the percentage of ownership. In the case of capital increases that do not represent an increase in the percentage of ownership or for newly created companies,
tax credits are recognized at the moment of the capital contribution.



q) Earnings per share



The Group calculates basic
earnings per share using the weighted average number of shares outstanding during the period. The calculation of diluted earnings per share also includes the dilutive effect of the weighted average warrants, stock grants and stock options
outstanding during the period.



4.    ALLOWANCES 
ACCOUNTS RECEIVABLE/PAYABLE



The Group provided an
allowance against accounts receivable for estimated cancellations of airline bookings as of December 31, 2003 of KEURs 72,758; and the Group provision for the related reduction in accounts payable for distribution fees as of December 31, 2003 was
KEURs 30,786. As of December 31, 2002 the related allowances amounted to KEURs 75,178 against accounts receivable and KEURs 38,664 as a reduction in accounts payable.



The Group provision for potentially uncollectible accounts receivable as of December 31, 2003 was KEURs 48,637; and as of
December 31, 2002 was KEURs 43,065.



5.     PREPAYMENTS
AND OTHER CURRENT ASSETS AND LIABILITIES



The breakdown of
the Prepayments and other current assets caption as of December 31 is as follows:



|                            |  |        |  |       
|--------------------------- |  | ------ |  | ------
|                            |  | 2003   |  | 2002  
|Prepaid expenses            |  | 23,388 |  | 27,804
|Short-term deposits         |  | 9,156  |  | 10,556
|Derivative assets (Note 19) |  | 35,680 |  | 20,582
|Other                       |  | 14,586 |  | 7,544 
|                            |  |        |  |       
|Total                       |  | 82,810 |  | 66,486
|                            |  |        |  |       



The breakdown of the
Other current liabilities caption as of December 31 is as follows:



|                                 |  |         |  |       
|-------------------------------- |  | ------- |  | ------
|                                 |  | 2003    |  | 2002  
|Taxes payable  non income tax   |  | 11,496  |  | 8,520 
|Employee related accrual         |  | 60,060  |  | 51,038
|Derivative liabilities (Note 19) |  | 11,032  |  | 4,063 
|Deferred purchase consideration  |  | 7,709   |  | 4,210 
|Other                            |  | 10,442  |  | 9,767 
|                                 |  |         |  |       
|Total                            |  | 100,739 |  | 77,598
|                                 |  |         |  |       



The Deferred
purchase consideration caption includes the part of the deferred payment derived from certain corporate acquisitions that will vest next year.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|6. | TANGIBLE ASSETS
|-- | ---------------



Balances and movements for the years ended December 31, 2003 and 2002 of the items included under tangible assets are as follows:



|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|--------------------------------------------- |  | --------------- | - |  | ----------------------------------- | - |  | ------- | - |  | ------- | -
|Cost                                          |  | Land &buildings |   |  | Data processing hardware & software |   |  | Other   |   |  | Total   |  
|Balance as of December 31, 2001               |  | 129,329         |   |  | 381,567                             |   |  | 109,645 |   |  | 620,541 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Additions                                     |  | 26              |   |  | 65,483                              |   |  | 13,044  |   |  | 78,553  |  
|Additions due to acquisitions of subsidiaries |  |                |   |  | 846                                 |   |  | 1,309   |   |  | 2,155   |  
|Retirements and disposals                     |  |                |   |  | (19,241                             | ) |  | (3,527  | ) |  | (22,768 | )
|Transfers                                     |  |                |   |  | 106                                 |   |  | (347    | ) |  | (241    | )
|Exchange rate adjustments                     |  |                |   |  | (18,290                             | ) |  | (4,105  | ) |  | (22,395 | )
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Balance as of December 31, 2002               |  | 129,355         |   |  | 410,471                             |   |  | 116,019 |   |  | 655,845 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Additions                                     |  | 27              |   |  | 47,993                              |   |  | 5,560   |   |  | 53,580  |  
|Additions due to acquisitions of subsidiaries |  |                |   |  | 13,216                              |   |  | 11,969  |   |  | 25,185  |  
|Retirements and disposals                     |  | (165            | ) |  | (35,996                             | ) |  | (2,288  | ) |  | (38,449 | )
|Transfers                                     |  | (3              | ) |  | 2,577                               |   |  | (121    | ) |  | 2,453   |  
|Exchange rate adjustments                     |  | (1              | ) |  | (12,554                             | ) |  | (2,636  | ) |  | (15,191 | )
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Balance as of December 31, 2003               |  | 129,213         |   |  | 425,707                             |   |  | 128,503 |   |  | 683,423 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Accumulated depreciation                      |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Balance as of December 31, 2001               |  | 24,476          |   |  | 250,155                             |   |  | 59,523  |   |  | 334,154 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Additions                                     |  | 2,451           |   |  | 64,444                              |   |  | 9,714   |   |  | 76,609  |  
|Additions due to impairment                   |  |                |   |  | 1,092                               |   |  |        |   |  | 1,092   |  
|Retirements and disposals                     |  |                |   |  | (16,370                             | ) |  | (2,734  | ) |  | (19,104 | )
|Transfers                                     |  |                |   |  | 1,600                               |   |  | (1,690  | ) |  | (90     | )
|Exchange rate adjustments                     |  | 1               |   |  | (11,479                             | ) |  | (2,196  | ) |  | (13,674 | )
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Balance as of December 31, 2002               |  | 26,928          |   |  | 289,442                             |   |  | 62,617  |   |  | 378,987 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Additions                                     |  | 2,452           |   |  | 62,921                              |   |  | 11,187  |   |  | 76,560  |  
|Additions due to impairment                   |  |                |   |  |                                    |   |  |        |   |  |        |  
|Retirements and disposals                     |  | (157            | ) |  | (32,400                             | ) |  | (1,556  | ) |  | (34,113 | )
|Transfers                                     |  |                |   |  | 371                                 |   |  | (7      | ) |  | 364     |  
|Exchange rate adjustments                     |  |                |   |  | (9,036                              | ) |  | (1,818  | ) |  | (10,854 | )
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Balance as of December 31, 2003               |  | 29,223          |   |  | 311,298                             |   |  | 70,423  |   |  | 410,944 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Net book value as of December 31, 2001        |  | 104,853         |   |  | 131,412                             |   |  | 50,122  |   |  | 286,387 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Net book value as of December 31, 2002        |  | 102,427         |   |  | 121,029                             |   |  | 53,402  |   |  | 276,858 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  
|Net book value as of December 31, 2003        |  | 99,990          |   |  | 114,409                             |   |  | 58,080  |   |  | 272,479 |  
|                                              |  |                 |   |  |                                     |   |  |         |   |  |         |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The Other caption includes building installations, furniture and
fittings, and miscellaneous.



As of December
31, 2003 fully depreciated items amount to KEURs 180,575 (KEURs 90,644 at December 31, 2002).



As of December 31, 2002 additions due to impairment of Data processing hardware & software amount to KEURs 1,092 and
correspond to hardware related to certain software development projects of the leisure travel industry.



Leased assets included in the aforementioned numbers are as follows:



|                                    |  |              |  |        
|----------------------------------- |  | ------------ |  | -------
|                                    |  | December 31,
|                                    |  | 2003         |  | 2002   
|Land & buildings                    |  |              |  |        
|Cost                                |  | 126,396      |  | 126,396
|Less accumulated depreciation       |  | 28,961       |  | 26,570 
|                                    |  |              |  |        
|Net book value                      |  | 97,435       |  | 99,826 
|                                    |  |              |  |        
|Data processing hardware & software |  |              |  |        
|Cost                                |  | 11,549       |  | 10,992 
|Less accumulated depreciation       |  | 8,479        |  | 8,834  
|                                    |  |              |  |        
|Net book value                      |  | 3,070        |  | 2,158  
|                                    |  |              |  |        
|Other                               |  |              |  |        
|Cost                                |  | 22,385       |  | 40,402 
|Less accumulated depreciation       |  | 13,565       |  | 25,672 
|                                    |  |              |  |        
|Net book value                      |  | 8,820        |  | 14,730 
|                                    |  |              |  |        
|Total                               |  |              |  |        
|Cost                                |  | 160,330      |  | 177,790
|Less accumulated depreciation       |  | 51,005       |  | 61,076 
|                                    |  |              |  |        
|Net book value                      |  | 109,325      |  | 116,714
|                                    |  |              |  |        



The
depreciation related to assets acquired under finance leases, for the years ended December 31, 2003 and December 31, 2002, was KEURs 7,130 and KEURs 7,208, respectively. The acquisitions of tangible assets under finance leases were KEURs 776 and
KEURs 3,932 for the years ended December 31, 2003 and 2002, respectively.



As of December 31, 2003 assets under construction of KEURs 590 were included in Data processing hardware & software and in Other. As of December 31, 2002 assets under construction of KEURs
152 were included in Land & buildings.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|7. | INTANGIBLE ASSETS
|-- | -----------------



Balances and movements for the years ended December 31, 2003 and 2002 of the items included under intangible assets are as follows:



|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|--------------------------------------------- |  | ------------------------------ | - |  | -------------------- |  | ----------------------------- | - |  | ------------------- | - |  | -------- | - |  | ------- | - |  | --------- | -
|                                              |  | Patents, trademarks & licenses |   |  | Purchased technology |  | Software development projects |   |  | Purchased contracts |   |  | Goodwill |   |  | Other   |   |  | Total     |  
|Cost                                          |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2001               |  | 81,493                         |   |  |                     |  | 213,609                       |   |  | 255,717             |   |  | 157,467  |   |  | 14,429  |   |  | 722,715   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Additions                                     |  | 2,287                          |   |  |                     |  | 57,594                        |   |  | 26,029              |   |  | 88,968   |   |  | 1,749   |   |  | 176,627   |  
|Additions due to acquisitions of subsidiaries |  | 16                             |   |  |                     |  | 3,791                         |   |  |                    |   |  |         |   |  |        |   |  | 3,807     |  
|Retirements and disposals                     |  | (1                             | ) |  |                     |  | (226                          | ) |  | (13,710             | ) |  | (22      | ) |  | (70     | ) |  | (14,029   | )
|Transfers                                     |  |                               |   |  |                     |  | 227                           |   |  | 2,777               |   |  | 1,833    |   |  | 13      |   |  | 4,850     |  
|Exchange rate adjustments                     |  | (998                           | ) |  |                     |  | (5,186                        | ) |  | (10,333             | ) |  | (22,566  | ) |  | (132    | ) |  | (39,215   | )
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2002               |  | 82,797                         |   |  |                     |  | 269,809                       |   |  | 260,480             |   |  | 225,680  |   |  | 15,989  |   |  | 854,755   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Additions                                     |  | 5,887                          |   |  |                     |  | 54,694                        |   |  | 28,209              |   |  | 100,636  |   |  | 79      |   |  | 189,505   |  
|Additions due to acquisitions of subsidiaries |  | 891                            |   |  |                     |  | 3,734                         |   |  |                    |   |  |         |   |  |        |   |  | 4,625     |  
|Retirements and disposals                     |  |                               |   |  |                     |  |                              |   |  | (18,043             | ) |  |         |   |  | (10,191 | ) |  | (28,234   | )
|Transfers                                     |  |                               |   |  | 41,688               |  | 1,205                         |   |  | 9,880               |   |  | 5,202    |   |  | (284    | ) |  | 57,691    |  
|Exchange rate adjustments                     |  | (902                           | ) |  |                     |  | (4,485                        | ) |  | (8,433              | ) |  | (20,557  | ) |  | (107    | ) |  | (34,484   | )
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2003               |  | 88,673                         |   |  | 41,688               |  | 324,957                       |   |  | 272,093             |   |  | 310,961  |   |  | 5,486   |   |  | 1,043,858 |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Accumulated amortization                      |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2001               |  | 35,337                         |   |  |                     |  | 75,924                        |   |  | 111,785             |   |  | 63,895   |   |  | 12,517  |   |  | 299,458   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Additions                                     |  | 11,666                         |   |  |                     |  | 31,504                        |   |  | 42,850              |   |  | 14,919   |   |  | 1,042   |   |  | 101,981   |  
|Additions due to impairment                   |  |                               |   |  |                     |  | 6,819                         |   |  |                    |   |  |         |   |  |        |   |  | 6,819     |  
|Retirements and disposals                     |  | (1                             | ) |  |                     |  |                              |   |  | (10,338             | ) |  | (22      | ) |  | (36     | ) |  | (10,397   | )
|Transfers                                     |  |                               |   |  |                     |  | 78                            |   |  |                    |   |  | 3,266    |   |  | 11      |   |  | 3,355     |  
|Exchange rate adjustments                     |  | (281                           | ) |  |                     |  | (2,080                        | ) |  | (5,330              | ) |  | (9,307   | ) |  | (70     | ) |  | (17,068   | )
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2002               |  | 46,721                         |   |  |                     |  | 112,245                       |   |  | 138,967             |   |  | 72,751   |   |  | 13,464  |   |  | 384,148   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Additions                                     |  | 11,120                         |   |  | 4,011                |  | 35,510                        |   |  | 42,746              |   |  | 25,767   |   |  | 1,008   |   |  | 120,162   |  
|Additions due to impairment                   |  | 2,054                          |   |  |                     |  | 1,213                         |   |  |                    |   |  | 14,028   |   |  |        |   |  | 17,295    |  
|Retirements and disposals                     |  | (16                            | ) |  |                     |  |                              |   |  | (16,489             | ) |  |         |   |  | (10,188 | ) |  | (26,693   | )
|Transfers                                     |  |                               |   |  |                     |  | (297                          | ) |  | 10                  |   |  | 12,566   |   |  | (77     | ) |  | 12,202    |  
|Exchange rate adjustments                     |  | (510                           | ) |  |                     |  | (2,782                        | ) |  | (4,902              | ) |  | (11,045  | ) |  | (69     | ) |  | (19,308   | )
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Balance as of December 31, 2003               |  | 59,369                         |   |  | 4,011                |  | 145,889                       |   |  | 160,332             |   |  | 114,067  |   |  | 4,138   |   |  | 487,806   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Net book value as of December 31, 2001        |  | 46,156                         |   |  |                     |  | 137,685                       |   |  | 143,932             |   |  | 93,572   |   |  | 1,912   |   |  | 423,257   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Net book value as of December 31, 2002        |  | 36,076                         |   |  |                     |  | 157,564                       |   |  | 121,513             |   |  | 152,929  |   |  | 2,525   |   |  | 470,607   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  
|Net book value as of December 31, 2003        |  | 29,304                         |   |  | 37,677               |  | 179,068                       |   |  | 111,761             |   |  | 196,894  |   |  | 1,348   |   |  | 556,052   |  
|                                              |  |                                |   |  |                      |  |                               |   |  |                     |   |  |          |   |  |         |   |  |           |  



The increase in
software development projects during the years 2002 and 2003 is mainly due to capitalization of software for IT services as well as ongoing investments in the traditional and e-commerce areas. The increase in purchased contracts during the year 2003
is primarily due to signing bonuses paid to travel agencies. The increase in purchased contracts during the year 2002 it is also due to the capitalization of costs related to IT services contracts. The increase in goodwill during the years 2003 and
2002 is mainly due to the acquisition of the subsidiaries Amadeus Germany GmbH and Amadeus Scandinavia AB respectively. The increase in purchased technology is due to the acquisition of the remaining 66% share interest in Amadeus Germany GmbH and
Balance Sheet reclassification of the original 34% acquisition.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



As of December 31, 2003 fully amortized items amount to KEURs 126,468 (KEURs 102,612 at
December 31, 2002).



As of December 31, 2003 an impairment
loss amounting to KEURs 9,961 was recognised in the statement of income related to the goodwill of the Consortia Business unit. An additional impairment loss amounting to KEURs 4,067 has been considered for the goodwill related to a company in the
e-commerce arena and to ICSA-T N.V. These write downs were necessary on account of the low recoverable value on the basis of discounted future cash-flow compared to the book value.



The additions due to impairment of Software development projects for 2002 include KEURs 6,819 due to the write
down of certain projects related to the leisure travel industry.



As of December 31, 2003 and 2002 assets under construction of KEURs 2,758 and KEURs 878 respectively, were included in Licenses.



8.    INVESTMENTS IN ASSOCIATES AND OTHER LONG-TERM INVESTMENTS



Balances and movements for the years ended December 31, 2003 and 2002 of the items included under investments in associates
and long-term investments are as follows:



|                                           |  |                           |   |  |                             |   |  |         |  
|------------------------------------------ |  | ------------------------- | - |  | --------------------------- | - |  | ------- | -
|                                           |  | Investments In associates |   |  | Other long-term investments |   |  | Total   |  
|Balance at December 31, 2001               |  | 148,081                   |   |  | 38,592                      |   |  | 186,673 |  
|Additions                                  |  | 15,040                    |   |  | 17,312                      |   |  | 32,352  |  
|Additions due to acquisitions              |  |                          |   |  | 3,374                       |   |  | 3,374   |  
|Decreases                                  |  |                          |   |  | (10,515                     | ) |  | (10,515 | )
|Share of associates results               |  | (45,590                   | ) |  |                            |   |  | (45,590 | )
|Dividends received                         |  | (10,820                   | ) |  |                            |   |  | (10,820 | )
|Transfers                                  |  | 26,376                    |   |  | (5,128                      | ) |  | 21,248  |  
|Remeasurement to fair value of investments |  |                          |   |  | (3,400                      | ) |  | (3,400  | )
|Exchange rate adjustments                  |  | (8,934                    | ) |  | (1,957                      | ) |  | (10,891 | )
|                                           |  |                           |   |  |                             |   |  |         |  
|Balance at December 31, 2002               |  | 124,153                   |   |  | 38,278                      |   |  | 162,431 |  
|                                           |  |                           |   |  |                             |   |  |         |  
|Additions                                  |  | 6,471                     |   |  | 80,088                      |   |  | 86,559  |  
|Additions due to acquisitions              |  | 857                       |   |  | 67                          |   |  | 924     |  
|Decreases                                  |  |                          |   |  | (2,870                      | ) |  | (2,870  | )
|Share of associates results               |  | (21,706                   | ) |  |                            |   |  | (21,706 | )
|Dividends received                         |  | (9,076                    | ) |  |                            |   |  | (9,076  | )
|Transfers                                  |  | (35,087                   | ) |  | (11,200                     | ) |  | (46,287 | )
|Remeasurement to fair value of investments |  |                          |   |  | 2,274                       |   |  | 2,274   |  
|Exchange rate adjustments                  |  | (2,339                    | ) |  | (1,880                      | ) |  | (4,219  | )
|                                           |  |                           |   |  |                             |   |  |         |  
|Balance at December 31, 2003               |  | 63,273                    |   |  | 104,757                     |   |  | 168,030 |  
|                                           |  |                           |   |  |                             |   |  |         |  



The Share of
associates results caption excludes the impact of taxes payable at the respective shareholder level; in 2002 it also includes the impact of discontinued operations (see Note 10). The Transfers caption for investments in
associates includes the impact of acquiring controlling interests in associates; in 2002 it also includes a reclassification for provision of loans related to discontinued operations.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The increase in the Other long-term investments caption is mainly due to a convertible
loan given to OPODO. Such conversion into 16.6% of equity is subject to legal and contractual conditions. The vesting period of this loan is three years since inception date. The interest rate applicable, if the option is not exercised, is EURIBOR +
5%.



9.    NEW INVESTMENTS IN SUBSIDIARIES AND
ASSOCIATES



| | a) | During the year ended December 31, 2003 the Group made the following investments in subsidiaries and associates:
| | -- | ----------------------------------------------------------------------------------------------------------------



| | i) | Acquisitions:
| | -- | -------------



| |  | 66% interest in Amadeus Germany GmbH (former Start Amadeus GmbH; total interest 100%)
| | - | -------------------------------------------------------------------------------------



| |  | 24.5% interest in Amadeus Polska Sp.zo.o (total interest 100%)
| | - | --------------------------------------------------------------



| |  | 100% interest in Airline Automation, Inc.
| | - | -----------------------------------------



| |  | 17.54% interest in Vivacances S.A. (total interest 67.54%)
| | - | ----------------------------------------------------------



| |  | 35% interest in Amadeus Kuwait Company W.L.L.
| | - | ---------------------------------------------



| |  | 30% interest in OPTIMS S.A.
| | - | ---------------------------



| |  | 10% interest in Travellink AB (total interest 35%)
| | - | --------------------------------------------------



| |  | 100% interest in German Travel Services GmbH. The Group has temporary control over the company, as defined in the accounting principles and therefore has not consolidated this
participation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | Newly created companies:
| | --- | ------------------------



| |  | 100% interest in the NMCs Amadeus Global Travel Distribution Southern Africa Limited, Amadeus Marketing Romania S.R.L., Amadeus East Africa and Amadeus Hong Kong Ltd.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 50% interest in PT Amadeus Indonesia
| | - | ------------------------------------



| |  | 49% interest in Amadeus Gulf LLC
| | - | --------------------------------



| | iii) | Capital increases:
| | ---- | ------------------



| |  | Amadeus Polska Sp.zo.o
| | - | ----------------------



| |  | Amadeus Hellas S.A.
| | - | -------------------



| |  | Amadeus Global Travel Israel Limited
| | - | ------------------------------------



| |  | Amadeus GTD Australia Pty Ltd.
| | - | ------------------------------



| |  | Eviaggi.com S.P.A.
| | - | ------------------



| |  | Travellink AB
| | - | -------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The main balance sheet impacts of these transactions are summarized below:



|                                                 |  |         |  
|------------------------------------------------ |  | ------- | -
|Net cash paid for current transactions           |  | 102,433 |  
|Conversion of debt to equity                     |  | 2,000   |  
|Deferred consideration (see note 13)             |  | 13,863  |  
|Cash acquired as a result of current acquisition |  | 35,233  |  
|Tax benefit on investments                       |  | (16,837 | )
|Equity in net assets acquired                    |  | (33,882 | )
|                                                 |  |         |  
|Excess purchase price                            |  | 102,810 |  
|Allocation of fair value to net assets acquired  |  | (21,633 | )
|                                                 |  |         |  
|Goodwill                                         |  | 81,177  |  
|                                                 |  |         |  



Following the 66%
acquisition of Amadeus Germany GmbH (former Start Amadeus), the following fair values were identified with respect to net assets acquired:



|                                                |  |         |  
|----------------------------------------------- |  | ------- | -
|Purchased technology                            |  | 30,056  |  
|Purchased contracts                             |  | 5,234   |  
|Deferred income taxes payable                   |  | (13,657 | )
|                                                |  |         |  
|Allocation of fair value to net assets acquired |  | 21,633  |  
|                                                |  |         |  



Purchased technology
is the capability obtained by the practical application of knowledge, processes, methods, tools and systems to serve the market need more efficiently. In the case mentioned above, it relates to the combination of the traditional Amadeus Global
Distribution System (GDS) technology integrated with Amadeus Germanys local platform, granting Amadeus a unique platform unchallenged to date in the German market. This asset is being amortized applying the straight-line method, based on the
expected service life, which in this case is 10 years.



Purchased technology related to the original 34% acquisition, amounting to KEURs 11,632 has been transferred to the Purchased technology caption in the Balance Sheet.



The reconciliation between the net cash paid for current transactions and the net cash invested in subsidiaries and
associates is as follows:



|                                                                                      |  |         |  
|------------------------------------------------------------------------------------- |  | ------- | -
|Net cash paid for current transactions                                                |  | 102,433 |  
|Cash acquired related to the pre-existing ownership in Amadeus Germany and Vivacances |  | (18,476 | )
|                                                                                      |  |         |  
|Net cash invested in subsidiaries and associates                                      |  | 83,957  |  
|                                                                                      |  |         |  



| | b) | During the year ended December 31, 2002 the Group made the following investments in subsidiaries and associates:
| | -- | ----------------------------------------------------------------------------------------------------------------



| | i) | Acquisitions:
| | -- | -------------



| |  |  | 11.4% interest in 1Travel.com Inc. (total interest 38.9%)
| | - |  | ---------------------------------------------------------



| |  |  | 50% interest in Sociedad Anato-Avianca de Reservaciones de Servicios Turísticos Savia Ltda, the Colombian National Marketing Company (NMC)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | 25% interest in the NMC Amadeus Tunisie S.A. (total interest 30%)
| | - |  | -----------------------------------------------------------------



| |  |  | 95% interest in the group Smart AB (renamed Amadeus Scandinavia AB, total interest 100%), the NMC Holding Company for the Scandinavian market. One of the six NMCs within this group,
SMART Sverige AB (the Swedish NMC, now renamed Amadeus Sweden AB), has a minority participation by the Swedish Government Railway Company of 21.75%
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 56% interest in ICSA-T N.V. group (10% via the SMART AB acquisition, total interest 100%)
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | 50% interest in Vivacances S.A.
| | - |  | -------------------------------



| | ii) | Newly created companies:
| | --- | ------------------------



| |  |  | 100% interest in the NMCs Amadeus GDS LLP (Kazakhstan) and Amadeus Bolivia SRL
| | - |  | ------------------------------------------------------------------------------



| |  |  | 40% interest in the NMC Amadeus Argelie S.A.R.L.
| | - |  | ------------------------------------------------



| |  |  | 40% interest in Amadeus Sudani, Co.Ltd.
| | - |  | ---------------------------------------



| | iii) | Capital increases
| | ---- | -----------------



| |  |  | Sociedad Anato-Avianca de Reservaciones de Servicios Turísticos Savia Ltda.
| | - |  | ---------------------------------------------------------------------------



| |  |  | Amadeus GTD Australia Pty. Ltd.
| | - |  | -------------------------------



| |  |  | Amadeus Rezervasyon Dagitim Sistemleri A.S.
| | - |  | -------------------------------------------



| |  |  | Eviaggi.com S.P.A.
| | - |  | ------------------



| |  |  | Amadeus Data Processing GmbH
| | - |  | ----------------------------



The main balance sheet impacts of these transactions are summarized below:



|                                                 |  |         |  
|------------------------------------------------ |  | ------- | -
|Net cash paid for current acquisition            |  | 89,149  |  
|Conversion of debt to equity                     |  | 15,639  |  
|Deferred consideration (see note 13)             |  | 27,473  |  
|Cash acquired as a result of current acquisition |  | 27,371  |  
|Tax benefit on investments                       |  | (34,270 | )
|Equity in net assets acquired                    |  | (34,714 | )
|                                                 |  |         |  
|Goodwill                                         |  | 90,648  |  
|                                                 |  |         |  



|10. | DISCONTINUED OPERATIONS
|--- | -----------------------



On December 9, 2002, the discontinuance of operations of Atinera Llc, an associate company for software development based in the U.S.A,
was announced under a formal plan previously approved by its Board of Directors on December 6, 2002.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The detail of the financial statement impact of this discontinued operation as of and
for the year ended December 31, 2002 is as follows:



|                                                                                        |  |         |  
|--------------------------------------------------------------------------------------- |  | ------- | -
|                                                                                        |  | 2002    |  
|Statement of Income                                                                     |  |         |  
|Equity in income (losses) from discontinuing operations of associates Before income tax |  | (22,812 | )
|Income tax                                                                              |  | 7,344   |  
|                                                                                        |  |         |  
|Net income (loss)                                                                       |  | (15,468 | )
|                                                                                        |  |         |  
|Statement of Cash-Flows                                                                 |  |         |  
|Cash-flows from investing activities Loans to affiliates                                |  | (10,097 | )
|                                                                                        |  |         |  



The
plan for discontinuance has been completed during 2003 with no additional impacts.



|11. | CURRENT AND LONG-TERM DEBT
|--- | --------------------------



The breakdown of amounts owed to financial institutions, by maturity, is as follows as of December, 31:



|                            |  |        |  |        
|--------------------------- |  | ------ |  | -------
|                            |  | 2003   |  | 2002   
|Syndicated loansshort-term |  | 62,729 |  | 40,000 
|Other credit facilities     |  | 17,581 |  | 27,615 
|                            |  |        |  |        
|Total short-term debt       |  | 80,310 |  | 67,615 
|                            |  |        |  |        
|Syndicated loanslong-term  |  |       |  | 140,000
|Other                       |  | 701    |  | 801    
|                            |  |        |  |        
|Total long-term debt        |  | 701    |  | 140,801
|                            |  |        |  |        
|Total debt                  |  | 81,011 |  | 208,416
|                            |  |        |  |        



The
Group has two syndicated loans as of December 31, 2003 which are under KEURs 327,729 and KEURs 300,000 dual currency revolving credit facility agreements, denominated in EUR and USD. As of December 31, 2003 and 2002, the total unused amounts
available under these facilities are KEURs 565,000 and KEURs 461,829, respectively. The interest rates for the drawdowns on these loans ranged from 2.39% to 3.75% for the year ended December 31, 2003 and from 3.35% to 4.11% in 2002. These loans have
commitment fees that range from 0.10% to 0.25% of the unused portion. Under the terms of these loan agreements, the Group is obliged to meet certain covenants, the most important of which are that the ratio of debt to total EBITDA (Earnings before
interest, tax, depreciation and amortization) shall not exceed 3:1 and that the ratio of EBITDA to total financial charges shall be or shall exceed 4:1.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The repayment and maturity schedule for these two facilities as of December 31, is as
follows:



|                  |  |                              |  |                                         |  |                              |  |                                        
|----------------- |  | ---------------------------- |  | --------------------------------------- |  | ---------------------------- |  | ---------------------------------------
|                  |  | 2003                         |  | 2002                                   
|Date of maturity  |  | Amount offacilities maturing |  | Repayment schedule foroutstandingamount |  | Amount of facilitiesmaturing |  | Repayment schedule foroutstandingamount
|April 24, 2003    |  |                             |  |                                        |  | 41,829                       |  | 40,000                                 
|April 21, 2004    |  | 27,729                       |  | 27,729                                  |  |                             |  |                                       
|April 24, 2004    |  | 100,000                      |  | 35,000                                  |  | 100,000                      |  | 100,000                                
|April 24, 2005    |  | 100,000                      |  |                                        |  | 100,000                      |  | 40,000                                 
|April 24, 2006    |  | 100,000                      |  |                                        |  | 100,000                      |  |                                       
|December 20, 2006 |  | 150,000                      |  |                                        |  | 150,000                      |  |                                       
|December 20, 2007 |  | 150,000                      |  |                                        |  | 150,000                      |  |                                       
|                  |  |                              |  |                                         |  |                              |  |                                        
|                  |  | 627,729                      |  | 62,729                                  |  | 641,829                      |  | 180,000                                
|                  |  |                              |  |                                         |  |                              |  |                                        



Short
term credit facilities have accrued interest at between 2.37% and 5.60% during 2003 and between 3.36% and 5.60% in 2002.



In addition to the syndicated loans mentioned above, various financial institutions have made available short-term lines of credit and
credit facilities, which require no commitment fees. As of December 31, 2003 and 2002, the unused portion of these short-term credit facilities is KEURs 93,645 and KEURs 113,938, respectively.



|12. | COMMITMENTS
|--- | -----------



| | a) | Leases
| | -- | ------



The Group leases certain facilities and equipment under operating and finance leases.



The most significant asset acquired under finance lease is
the CRS data processing center in Erding. The original cost (in 1988) of this facility was KEURs 106,558, which was increased due to new construction by KEURs 10,942 during the year 2000. These expenditures have been financed via lease agreements
with similar terms and recorded as tangible assets under a finance lease (see Note 6). These leases expire on December 31, 2019, although the Group has an option to terminate the main lease on June 30, 2011. At the end of years 2009 and 2019 the
Group has the option to purchase the land and the buildings for the residual value of KEURs 70,235 and KEURs 21,097, respectively. Quarterly payments consisted of principal plus interest at an average of 4.98% during 2003 and 2002.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The future minimum lease payments for finance leases as of December 31, is as
follows:



|                                  |  |         |  |                  |  |         |  |                 
|--------------------------------- |  | ------- |  | ---------------- |  | ------- |  | ----------------
|Year(s) due                       |  | 2003    |  | 2002            
|                                  |  | Gross   |  | Net presentvalue |  | Gross   |  | Net presentvalue
|01                               |  | 14,912  |  | 13,824           |  | 13,516  |  | 12,361          
|12                               |  | 14,029  |  | 12,861           |  | 13,767  |  | 12,339          
|23                               |  | 12,263  |  | 10,982           |  | 12,683  |  | 11,213          
|34                               |  | 10,468  |  | 9,028            |  | 11,740  |  | 10,181          
|45                               |  | 10,402  |  | 8,790            |  | 10,045  |  | 8,337           
|510                              |  | 37,716  |  | 26,484           |  | 40,173  |  | 28,829          
|1015                             |  | 35,865  |  | 19,267           |  | 35,865  |  | 19,266          
|1520                             |  | 28,271  |  | 12,827           |  | 35,442  |  | 15,519          
|                                  |  |         |  |                  |  |         |  |                 
|Total minimum lease payments      |  | 163,926 |  | 114,063          |  | 173,231 |  | 118,045         
|Less amount representing interest |  | 49,863  |  |                 |  | 55,186  |  |                
|                                  |  |         |  |                  |  |         |  |                 
|Obligations under finance leases  |  | 114,063 |  | 114,063          |  | 118,045 |  | 118,045         
|                                  |  |         |  |                  |  |         |  |                 
|Current portion                   |  | 9,643   |  |                  |  | 8,085   |  |                 
|Long-term portion                 |  | 104,420 |  |                  |  | 109,960 |  |                 
|                                  |  |         |  |                  |  |         |  |                 
|                                  |  | 114,063 |  |                  |  | 118,045 |  |                 
|                                  |  |         |  |                  |  |         |  |                 



For
the year ended December 31, 2003 and 2002 the rental expense for operating leases were KEURs 41,839 and KEURs 27,641, respectively.



The future minimum lease payments for operating leases as of December 31, is as follows:



|               |  |         |  |        
|-------------- |  | ------- |  | -------
|Year(s) due    |  | 2003    |  | 2002   
|0  1          |  | 44,097  |  | 26,398 
|1  2          |  | 36,880  |  | 21,374 
|2  3          |  | 29,580  |  | 17,869 
|3  4          |  | 23,571  |  | 11,911 
|4  5          |  | 21,094  |  | 8,661  
|5  10         |  | 56,756  |  | 26,344 
|10  15        |  | 15,500  |  | 11,985 
|               |  |         |  |        
|Total payments |  | 227,478 |  | 124,542
|               |  |         |  |        



| | b) | Other commitments
| | -- | -----------------



As of December 31, 2003 and 2002, the Group had short-term commitments to acquire tangible assets for KEURs 9,252 and KEURs 2,190, respectively.
Additionally, the Group has entered into various software license agreements which could entail future payments. The likelihood that the Group will make these payments is subject to the compliance by the counterparty with certain contractual
obligations and certain other events. The maximum amount committed under these agreements, at December 31, 2003, is 1,227 and KEURs 268 for the short and the long-term, respectively (at December 31, 2002, KEURs 4,550 and KEURs 37,389 for the short
and the long-term, respectively).



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



13.    OTHER LONG-TERM LIABILITIES



The breakdown of this caption as of December 31, 2003 and 2002 is as follows:



|                                                                            |  |        |  |       
|--------------------------------------------------------------------------- |  | ------ |  | ------
|                                                                            |  | 2003   |  | 2002  
|Debt related to equity instruments similar to treasury shares (see Note 14) |  | 28,380 |  | 28,380
|Deferred purchase consideration                                             |  | 27,070 |  | 24,153
|Defined benefit plans                                                       |  | 3,711  |  | 8,396 
|Derivative liabilities (Note 19)                                            |  | 4,980  |  | 3,514 
|Others                                                                      |  | 8,637  |  | 7,098 
|                                                                            |  |        |  |       
|                                                                            |  | 72,778 |  | 71,541
|                                                                            |  |        |  |       



| | a) | Deferred purchase consideration
| | -- | -------------------------------



The liability increase corresponds to deferred purchase consideration (payable over a period of 3 to 4 years) related to certain corporate acquisitions
during 2003 (see Note 9). The amount of this liability is contingent on the evolution of the respective businesses acquired.



| | b) | Pension and Post-retirement benefits
| | -- | ------------------------------------



The Group operates funded and unfunded defined benefit plans.



The amounts related to defined benefit plans recognized in the balance sheet as of December 31, are as follows:



|                                                     |  |         |   |  |        |  
|---------------------------------------------------- |  | ------- | - |  | ------ | -
|                                                     |  | 2003    |   |  | 2002   |  
|Present value of wholly unfunded obligations         |  | 6,596   |   |  | 6,277  |  
|Present value partially or wholly funded obligations |  | 34,852  |   |  | 17,326 |  
|                                                     |  |         |   |  |        |  
|Present value of defined benefit obligations         |  | 41,448  |   |  | 23,603 |  
|Fair value of plan assets                            |  | (31,270 | ) |  | (9,822 | )
|                                                     |  |         |   |  |        |  
|Funded Status of the Plan                            |  | 10,178  |   |  | 13,781 |  
|Unrecognized actuarial gains/(losses)                |  | (6,467  | ) |  | (5,385 | )
|                                                     |  |         |   |  |        |  
|Net (asset)/liability in balance sheet               |  | 3,711   |   |  | 8,396  |  
|                                                     |  |         |   |  |        |  



The defined benefit
plan amounts recognized in the statement of income for the years ended December 31, are as follows:



|                                                      |  |        |   |  |        |   |  |        |  
|----------------------------------------------------- |  | ------ | - |  | ------ | - |  | ------ | -
|                                                      |  | 2003   |   |  | 2002   |   |  | 2001   |  
|Net Current service cost                              |  | 2,243  |   |  | 1,214  |   |  | 1,161  |  
|Interest cost                                         |  | 2,289  |   |  | 1,354  |   |  | 1,316  |  
|Expected return on plan assets                        |  | (1,943 | ) |  | (1,006 | ) |  | (1,038 | )
|Amortization of unrecognized actuarial (gains)/losses |  | 238    |   |  | 104    |   |  | 23     |  
|Effect of curtailments or settlements                 |  | 684    |   |  |       |   |  |       |  
|Past service cost                                     |  |       |   |  | 41     |   |  | 42     |  
|                                                      |  |        |   |  |        |   |  |        |  
|Total net periodic pension cost                       |  | 3,511  |   |  | 1,707  |   |  | 1,504  |  
|                                                      |  |        |   |  |        |   |  |        |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Balances and movements for the years ended December 31, 2003, 2002 and 2001 of the items included
under defined benefit plan liability are as follows:



|                                                                       |  |        |   |  |       |   |  |        |  
|---------------------------------------------------------------------- |  | ------ | - |  | ----- | - |  | ------ | -
|                                                                       |  | 2003   |   |  | 2002  |   |  | 2001   |  
|Balance at the beginning of the period                                 |  | 8,396  |   |  | 5,317 |   |  | 7,622  |  
|Company contributions                                                  |  | (4,076 | ) |  | (495  | ) |  | (5,663 | )
|Net periodic pension cost for the year                                 |  | 2,828  |   |  | 1,707 |   |  | 1,504  |  
|Benefits paid directly by the company in the year                      |  | (329   | ) |  |      |   |  |       |  
|Adjustments relating to acquisitions/diverstures/business combinations |  | 1,459  |   |  |      |   |  |       |  
|Adjustments relating to settlements/curtailments/terminations          |  | 684    |   |  |      |   |  |       |  
|Exchange rates differences                                             |  | (488   | ) |  | (735  | ) |  | 383    |  
|Additional minimum liability charged to equity                         |  |       |   |  | 2,602 |   |  |       |  
|Additional minimum liability adjustment                                |  | (2,602 | ) |  |      |   |  |       |  
|Reclassification from other net liabilities                            |  | (2,161 | ) |  |      |   |  | 1,471  |  
|                                                                       |  |        |   |  |       |   |  |        |  
|Balance at the end of the period                                       |  | 3,711  |   |  | 8,396 |   |  | 5,317  |  
|                                                                       |  |        |   |  |       |   |  |        |  



A summary of the major
actuarial assumptions used to calculate the most significant portion of the defined benefit obligation as of December 31, is as follows:



|                                        |  |               |  |              
|--------------------------------------- |  | ------------- |  | -------------
|                                        |  | 2003          |  | 2002         
|Discount rate for Obligations           |  | 5.61%6.25%   |  | 5.79%6.75%  
|Discount rate for Expense               |  | 5.88%6.75%   |  | 5.70%7.25%  
|Long-Term Rate of Return on Plan Assets |  | 6.32%8.50%   |  | 6.19%8.50%  
|Rate of Future Compensation Increases   |  | 3.27%3.75%   |  | 3.09%4.50%  
|Rate of Pension Increases               |  | 1.84%         |  | 1.70%        
|Medical rate and ultimate rate          |  | 11.0% / 5.25% |  | 11.0% / 5.25%



For the years ended
December 31, 2003 and 2002 the expense for defined contribution plans is KEURs 13,419 and KEURs 13,135, respectively.



|14. | SHAREHOLDERS EQUITY
|--- | --------------------



Balances and movements of class A and class B shares for the years 2003 and 2002 are as follows:



|                        |  |                                         |  |                |   |  |                   |   |  |                                       
|----------------------- |  | --------------------------------------- |  | -------------- | - |  | ----------------- | - |  | --------------------------------------
|                        |  | Class A shares (Par value 0.01 Euros) |  |                |  
|                        |  | Issued shares                           |  | Treasuryshares |   |  | Outstandingshares |   |  | Class B shares(Par value 0.10 Euros)
|As of December 31, 2001 |  | 590,000,000                             |  | 5,706,413      |   |  | 584,293,587       |   |  | 219,983,100                           
|                        |  |                                         |  |                |   |  |                   |   |  |                                       
|Additions               |  |                                        |  | 11,366,203     |   |  | (11,366,203       | ) |  |                                      
|Disposals               |  |                                        |  | (1,360,886     | ) |  | 1,360,886         |   |  |                                      
|                        |  |                                         |  |                |   |  |                   |   |  |                                       
|As of December 31, 2002 |  | 590,000,000                             |  | 15,711,730     |   |  | 574,288,270       |   |  | 219,983,100                           
|                        |  |                                         |  |                |   |  |                   |   |  |                                       
|Additions               |  |                                        |  | 22,025         |   |  | (22,025           | ) |  |                                      
|Disposals               |  |                                        |  | (230,912       | ) |  | 230,912           |   |  |                                      
|                        |  |                                         |  |                |   |  |                   |   |  |                                       
|As of December 31, 2003 |  | 590,000,000                             |  | 15,502,843     |   |  | 574,497,157       |   |  | 219,983,100                           
|                        |  |                                         |  |                |   |  |                   |   |  |                                       



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The shares included above represent the authorized share capital of the Company. All
shares are fully subscribed and paid.



The
Treasury shares have been acquired primarily in order to cover obligations under the Stock Incentive Plan described in Note 17 and warrants issued as described in Note 19. Disposals are mainly due to shares and options granted to employees in
connection with the different Stock Incentive Plans and portfolio adjustments made in order to match the current obligations of the Group.



Each class A share carries the right to one vote, whilst each class B share carries the right to 10 votes.
Economic rights are greater for class A shares in respect of any future distribution of dividends. The right to receive a dividend for class B shares is calculated as the lesser of 1% of total dividends or 1% of the par value
of class B shares. In the event of liquidation of the assets of the Group, class A shares have greater economic rights than class B shares, as the Group would pay out the par value of class A shares
and in the case of any outstanding amounts they would be distributed among class B shares for their par value; further remaining amounts would be distributed among class A shares.



As of December 31, 2003 and 2002 the Companys shares
were held as follows:



|                                     |  |                 |  |                 |  |                    |   |  |                       |  
|------------------------------------ |  | --------------- |  | --------------- |  | ------------------ | - |  | --------------------- | -
|Shareholder                          |  | Class Ashares |  | Class Bshares |  | % ofClassAshares |   |  | % oftotalvotingrights |  
|Société Air France                   |  | 137,847,654     |  | 85,782,614      |  | 23.36              | % |  | 35.69                 | %
|Iberia Líneas Aéreas de España, S.A. |  | 107,826,173     |  | 67,100,243      |  | 18.28              | % |  | 27.92                 | %
|Lufthansa Commercial Holding, GmbH   |  | 107,826,173     |  | 67,100,243      |  | 18.28              | % |  | 27.92                 | %
|Other (1)                            |  | 236,500,000     |  |                |  | 40.08              | % |  | 8.47                  | %
|                                     |  |                 |  |                 |  |                    |   |  |                       |  
|Total                                |  | 590,000,000     |  | 219,983,100     |  | 100                | % |  | 100                   | %
|                                     |  |                 |  |                 |  |                    |   |  |                       |  

| | 
| | 

| | (1) | Includes the Treasury shares and the public shares.
| | --- | ---------------------------------------------------



The General Shareholders Assembly of June 20, 2003 declared a dividend per class A and per class B share, in
accordance with the Groups by-laws and once the economic rights of the Treasury shares were proportionally distributed to the remaining shares. The final dividend of KEURs 29,998 was paid in July 2003 with regards to the distribution of 2002
results.



Included in retained earnings are
reserves of KEURs 106,696 and KEURs 109,704 as of December 31, 2003 and 2002, respectively, which cannot be distributed as dividends according to statutory regulations applicable to various Group companies.



The components of the Treasury shares and other similar
equity instruments caption as of December 31, were as follows:



|                |  |                  |  |            |  |         |  |        
|--------------- |  | ---------------- |  | ---------- |  | ------- |  | -------
|                |  | Number of shares |  | KEURs     
|                |  | 2003             |  | 2002       |  | 2003    |  | 2002   
|Treasury shares |  | 15,502,843       |  | 15,711,730 |  | 98,519  |  | 99,670 
|Equity swaps    |  | 4,500,000        |  | 4,500,000  |  | 28,380  |  | 28,380 
|                |  |                  |  |            |  |         |  |        
|                |  | 20,002,843       |  | 20,211,730 |  | 126,899 |  | 128,050
|                |  |                  |  |            |  |         |  |        



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|15. | RELATED PARTY BALANCES AND TRANSACTIONS
|--- | ---------------------------------------



Below is a summary of significant balances and transactions with affiliates. All transactions with affiliates are carried out on an
arms length basis.



| | a) | Accounts receivablesaffiliates
| | -- | -------------------------------



The receivables are primarily for revenues earned from worldwide bookings made through the Amadeus CRS for flights on the shareholder
airlines. Total revenues earned by the Group from affiliates for the year ended December 31, 2003 and 2002 are KEURs 505,291 and KEURs 509,694, respectively.



| | b) | Loans receivable and advancesaffiliates
| | -- | ----------------------------------------



Total interest earned by the Group from affiliates is KEURs 44 and KEURs 814 for the year ended December 31, 2003 and 2002, respectively.
Interest rates for these loans denominated in United States Dollars (USD), EURs and Swedish Krona (SEK) ranged from 3.16% to 4.15% for the the year ended December 31, 2003. Interest rates for these loans denominated in United States Dollars (USD),
EURs and Swedish Krona (SEK) ranged from 2.51% to 5.16% for the year ended December 31, 2002.



| | c) | Accounts payableaffiliates
| | -- | ---------------------------



The payables arise primarily from distribution fees due for bookings made through the shareholder airlines. Total operating expenses
incurred by the Amadeus Group with its affiliates are KEURs 281,589 and KEURs 333,093 for the year ended December 31, 2003 and 2002, respectively.



| | d) | Board of Directors remuneration
| | -- | -------------------------------



Total remuneration of all kinds to the members of the Board of Directors of the Company amounts to KEURs 460 in 2003 (KEURs 443 in 2002).
No loans, advances or stock options have been granted to the members of the Board of Directors.



|16. | SEGMENT INFORMATION
|--- | -------------------



The Group operates in the travel industry and, accordingly, events that significantly affect the industry could also affect the
Groups operations and financial position. The following geographical distribution of revenues is based primarily on the country where bookings were made and, with respect to bookings made through the Groups CRS directly with airlines,
based upon the home country of the airline:



|                  |  |                         |  |           |  |          
|----------------- |  | ----------------------- |  | --------- |  | ---------
|                  |  | Year ended December 31,
|                  |  | 2003                    |  | 2002      |  | 2001     
|Europe            |  | 1,293,464               |  | 1,160,111 |  | 1,071,039
|United States     |  | 182,544                 |  | 203,258   |  | 248,486  
|Rest of the world |  | 453,001                 |  | 492,951   |  | 465,599  
|                  |  |                         |  |           |  |          
|Total             |  | 1,929,009               |  | 1,856,320 |  | 1,785,124
|                  |  |                         |  |           |  |          



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The following geographical distribution of assets is based on the country where the
assets were located or relate to. The split of assets as of December 31, 2003 is as follows:



|                          |  |         |  |         |  |                  |  |                                          |  |        
|------------------------- |  | ------- |  | ------- |  | ---------------- |  | ---------------------------------------- |  | -------
|                          |  | Europe  |  | US      |  | Rest of theworld |  | Assets usedfor generalenterprisepurposes |  | Total  
|Tangible assets           |  | 249,330 |  | 12,177  |  | 10,972           |  |                                         |  | 272,479
|Intangible assets         |  | 255,727 |  | 85,722  |  | 14,558           |  | 200,045                                  |  | 556,052
|Investments in associates |  | 45,040  |  | 6,579   |  | 11,654           |  |                                         |  | 63,273 
|                          |  |         |  |         |  |                  |  |                                          |  |        
|Total                     |  | 550,097 |  | 104,478 |  | 37,184           |  | 200,045                                  |  | 891,804
|                          |  |         |  |         |  |                  |  |                                          |  |        



The
split of assets as of December 31, 2002 is as follows:



|                          |  |         |  |         |  |                  |  |                                          |  |        
|------------------------- |  | ------- |  | ------- |  | ---------------- |  | ---------------------------------------- |  | -------
|                          |  | Europe  |  | US      |  | Rest of theworld |  | Assets usedfor generalenterprisepurposes |  | Total  
|Tangible assets           |  | 243,576 |  | 22,316  |  | 10,966           |  |                                         |  | 276,858
|Intangible assets         |  | 151,317 |  | 132,181 |  | 15,863           |  | 171,246                                  |  | 470,607
|Investments in associates |  | 94,473  |  | 11,953  |  | 17,727           |  |                                         |  | 124,153
|                          |  |         |  |         |  |                  |  |                                          |  |        
|Total                     |  | 489,366 |  | 166,450 |  | 44,556           |  | 171,246                                  |  | 871,618
|                          |  |         |  |         |  |                  |  |                                          |  |        



Because of the interrelationships between the Groups geographical activities, it is not meaningful to segment global results for the purposes of IAS 14.



|17. | STOCK INCENTIVE PLANS
|--- | ---------------------



Beginning with the International Global Offering of 1999, the Group adopted a stock based Employee Incentive Plan (the Plan) to retain and motivate senior
management and employees starting October 19, 1999. The plan provides for the award of common stock in the form of stock options and stock grants as follows:



| | i) | The Group granted to its employees a one-time grant of shares, depending on salary level and seniority, which would vest over a three-year period in three equal annual instalments.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | The Group granted to senior management a one-time grant of shares which would vest at the end of a three to four year period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------



| | iii) | The Group also granted to executive employees (including non-senior members from the management team), in each of the years 1999 to 2003, options to purchase shares of the
Group ́s Common Stock at the market price on the date of the grant. The aforementioned options vest in equal instalments over a four-year period measured from the date of the grant and have a ten-year term from the grant date.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



As of December 31, the detail of these plans is as follows:



|                             |  |                  |   |  |                |   |  |                  |   |  |                |  
|---------------------------- |  | ---------------- | - |  | -------------- | - |  | ---------------- | - |  | -------------- | -
|                             |  | 2003             |   |  | 2002           |  
|                             |  | Numberof options |   |  | Valueof shares |   |  | Numberof options |   |  | Valueof shares |  
|Outstanding at 1st January   |  | 8,945,901        |   |  | 48,378         |   |  | 6,102,706        |   |  | 38,156         |  
|                             |  |                  |   |  |                |   |  |                  |   |  |                |  
|                             |  |                  |   | 
|Of which vested              |  | 2,747,244        |   |  | 17,454         |   |  | 1,306,923        |   |  | 8,449          |  
|                             |  |                  |   | 
|New rights                   |  | 3,446,115        |   |  | 19,919         |   |  | 3,184,617        |   |  | 12,369         |  
|Rights exercised (*)         |  | (49,707          | ) |  | (224           | ) |  | (128,797         | ) |  | (741           | )
|Rights expired               |  | (286,019         | ) |  | (1,514         | ) |  | (212,625         | ) |  | (1,406         | )
|                             |  |                  |   |  |                |   |  |                  |   |  |                |  
|Outstanding at 31st December |  | 12,056,290       |   |  | 66,559         |   |  | 8,945,901        |   |  | 48,378         |  
|                             |  |                  |   |  |                |   |  |                  |   |  |                |  
|                             |  |                  |   | 
|Of which vested              |  | 4,983,719        |   |  | 29,549         |   |  | 2,747,244        |   |  | 17,454         |  

---

|(*) | The average price for the rights exercised has been 4.5 EURs during 2003 and 5.75 EURs during 2002.
|--- | ---------------------------------------------------------------------------------------------------



The increase in new rights during 2003 corresponds to the 2003 Stock Option Program.



The maturity dates of options as of December 31, are as follows:



|            |  |            |  |               |  |           |  |              
|----------- |  | ---------- |  | ------------- |  | --------- |  | -------------
|            |  | 2003       |  | 2002         
|            |  | Number     |  | Exerciseprice |  | Number    |  | Exerciseprice
|One year    |  |           |  |              |  |          |  |             
|Two years   |  |           |  |              |  |          |  |             
|Three years |  |           |  |              |  |          |  |             
|Four years  |  |           |  |              |  |          |  |             
|Five years  |  |           |  |              |  |          |  |             
|Six years   |  | 1,941,603  |  | 5.75          |  |          |  |             
|Seven years |  | 1,160,967  |  | 8.89          |  | 2,018,875 |  | 5.75         
|Eight years |  | 2,458,081  |  | 5.42          |  | 1,189,940 |  | 8.89         
|Nine years  |  | 3,049,524  |  | 3.88          |  | 2,552,469 |  | 5.42         
|Ten years   |  | 3,446,115  |  | 5.78          |  | 3,184,617 |  | 3.88         
|            |  |            |  |               |  |           |  |              
|Total       |  | 12,056,290 |  |               |  | 8,945,901 |  |              
|            |  |            |  |               |  |           |  |              



| | iv) | During 2002, the Group implemented an Employee Stock Purchase Program. The general conditions of the program allow employees to purchase Company shares every three months up to an
established percentage amount of the employees annual salary. If the purchased shares are maintained over a period of 30 days, the Company will grant shares for 15% of the amount the employee contributes to the program. The cost for the year
ended December 31, 2003 and 2002 was KEURs 97 and KEURs 139 respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The IFRS on share-based payment transactions, which provides a fair value approach to accounting for share based payments, has been issued in the first quarter 2004. The effective application date will be January 1,
2005. The transitional provisions will require prospective application for equity settled stock incentive plans. As



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



a result, the Group does not provide a pro forma impact on the income statement and earnings per share that would have applied had the transition provision
required retrospective application.



|18 | ADDITIONAL INCOME STATEMENT DATA AND RELATED DISCLOSURES
|-- | --------------------------------------------------------



The Groups personnel expense and number of employees were as follows:



|                            |  |                        |  |         |  |        
|--------------------------- |  | ---------------------- |  | ------- |  | -------
|                            |  | Year ended December 31
|                            |  | 2003                   |  | 2002    |  | 2001   
|Gross personnel costs       |  | 387,863                |  | 317,415 |  | 298,146
|Less amount capitalized     |  | 26,429                 |  | 29,638  |  | 38,014 
|                            |  |                        |  |         |  |        
|Net charge to income        |  | 361,434                |  | 287,777 |  | 260,132
|                            |  |                        |  |         |  |        
|Average number of employees |  | 5,130                  |  | 4,088   |  | 3,922  
|                            |  |                        |  |         |  |        



The
Groups net interest expense was as follows:



|                     |  |                         |  |        |  |       
|-------------------- |  | ----------------------- |  | ------ |  | ------
|                     |  | Year ended December 31,
|                     |  | 2003                    |  | 2002   |  | 2001  
|Interest expense     |  | 17,750                  |  | 22,486 |  | 27,460
|Less interest income |  | 2,037                   |  | 3,116  |  | 3,127 
|                     |  |                         |  |        |  |       
|Net interest expense |  | 15,713                  |  | 19,370 |  | 24,333
|                     |  |                         |  |        |  |       



|19 | FINANCIAL INSTRUMENTS
|-- | ---------------------



| | a) | Objectives and significant terms and conditions
| | -- | -----------------------------------------------



The Group uses the following financial instruments as part of its commercial operations and to manage the risks arising from fluctuations in currency
exchange rates, interest rates and share market prices:



| | i) | Currency derivatives
| | -- | --------------------



The Group has risks associated with fluctuations in currency exchange rates and uses currency derivatives to hedge future cash flows, net investments in
foreign entities and certain monetary assets and liabilities. The Group is party to a variety of foreign currency forward and option contracts for the management of these exchange rate exposures.



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



As of December 31, 2003, the details of open foreign currency options and open
forward contracts is as follows:



Derivative Assets:



|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|------------------------- |  | ------------------- |  | -------- | --- | -------- | --- | --------------------- | --- |  | ----------------- |  | ----- |  | ----- |  | ------
|Type                      |  | FinancialInstrument |  | Currency |     | Maturity |     | Notionalamount(KEURs) |     |  | Fair value(KEURs)
|                          |  |                     |  |          | OCI |          | CTA |                       | P&L |  | Total            
|Cash flow hedge           |  | Forward             |  | USD      |     | 2004     |     | 125,741               |     |  | 19,451            |  |      |  | 2,797 |  | 22,248
|                          |  |                     |  |          |     | 2005     |     | 52,716                |     |  | 6,365             |  |      |  |      |  | 6,365 
|                          |  |                     |  | Others   |     | 2004     |     | (33,999               | )   |  | 1,425             |  |      |  | 407   |  | 1,832 
|                          |  |                     |  |          |     | 2005     |     | (26,039               | )   |  | 1,994             |  |      |  |      |  | 1,994 
|                          |  | Options             |  | USD      |     | 2004     |     | 24,545                |     |  | 1,934             |  |      |  | 15    |  | 1,949 
|                          |  |                     |  |          |     | 2005     |     | 30,278                |     |  | 2,885             |  |      |  | 377   |  | 3,262 
|                          |  |                     |  |          |     | 2006     |     | 16,129                |     |  | 125               |  |      |  | 93    |  | 218   
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Net equity investments    |  | Forward             |  | USD      |     | 2004     |     | 36,283                |     |  |                  |  | 4,346 |  |      |  | 4,346 
|                          |  |                     |  | Others   |     | 2004     |     | 9,531                 |     |  |                  |  | 235   |  |       |  | 235   
|                          |  | Options             |  | USD      |     | 2004     |     | 11,876                |     |  |                  |  | 1,032 |  |      |  | 1,032 
|                          |  |                     |  |          |     | 2005     |     | 38,005                |     |  |                  |  | 2,684 |  |      |  | 2,684 
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Others                    |  | Forward             |  | USD      |     | 2004     |     | 46,709                |     |  |                  |  |      |  | 2,615 |  | 2,615 
|                          |  |                     |  | Others   |     | 2004     |     | (12,059               | )   |  |                  |  |      |  | 832   |  | 832   
|                          |  |                     |  |          |     | 2005     |     | (3,120                | )   |  |                  |  |      |  | 40    |  | 40    
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|                          |  | IRS                 |  | EUR      |     | 2009     |     | 10,048                |     |  |                  |  |      |  | 178   |  | 178   
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Premium paid              |  |                     |  |          |     |          |     |                       |     |  |                  |  |      |  |      |  | 2,738 
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Total                     |  |                     |  |          |     |          |     |                       |     |  | 34,179            |  | 8,297 |  | 7,354 |  | 52,568
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Total short term (Note 5) |  |                     |  |          |     |          |     |                       |     |  | 22,810            |  | 5,613 |  | 6,666 |  | 35,680
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       
|Total long term           |  |                     |  |          |     |          |     |                       |     |  | 11,369            |  | 2,684 |  | 688   |  | 16,888
|                          |  |                     |  |          |     |          |     |                       |     |  |                   |  |       |  |       |  |       

---

|(*) | Others includes derivative instruments which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Derivative Liabilities



|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|------------------------- |  | ------------------- |  | -------- | --- | -------- | --- | --------------------- | --- | ----------------- | ----- | ----- |  | ----- |  | ------
|Type                      |  | FinancialInstrument |  | Currency |     | Maturity |     | Notionalamount(KEURs) |     | Fair value(KEURs)
|                          |  |                     |  |          | OCI |          | CTA |                       | P&L |                   | Total
|Cash flow hedge           |  | Forward             |  | USD      |     | 2004     |     | 27,979                |     | 3,098             |       |      |  | 129   |  | 3,227 
|                          |  |                     |  |          |     | 2005     |     | 4,453                 |     | 444               |       |      |  |      |  | 444   
|                          |  |                     |  | Others   |     | 2004     |     | 25,870                |     | 1,463             |       |      |  | 429   |  | 1,892 
|                          |  |                     |  |          |     | 2005     |     | 20,661                |     | 1,285             |       |      |  |      |  | 1,285 
|                          |  | Options             |  | USD      |     | 2004     |     | 24,545                |     |                  |       |      |  | 441   |  | 441   
|                          |  |                     |  |          |     | 2005     |     | 19,873                |     |                  |       |      |  | 1,065 |  | 1,065 
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|Net equity investments    |  | Forward             |  | USD      |     | 2004     |     | 15,568                |     |                  |       | 4,355 |  |      |  | 4,355 
|                          |  |                     |  | Others   |     | 2004     |     | 743                   |     |                  |       | 23    |  |      |  | 23    
|                          |  | Options             |  | USD      |     | 2004     |     | 11,876                |     |                  |       |      |  | 279   |  | 279   
|                          |  |                     |  |          |     | 2005     |     | 38,005                |     |                  |       |      |  | 1,150 |  | 1,150 
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|                          |  |                     |  | Others   |     | 2004     |     | 30,300                |     |                  |       |      |  | 815   |  | 815   
|                          |  | IRS                 |  | EUR      |     | 2005     |     | 50,000                |     |                  |       |      |  | 1,036 |  | 1,036 
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|Total                     |  |                     |  |          |     |          |     |                       |     | 6,290             |       | 4,378 |  | 5,344 |  | 16,012
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|Total short term (Note 5) |  |                     |  |          |     |          |     |                       |     | 4,561             |       | 4,378 |  | 2,093 |  | 11,032
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       
|Total long term (Note 13) |  |                     |  |          |     |          |     |                       |     | 1,729             |       |      |  | 3,251 |  | 4,980 
|                          |  |                     |  |          |     |          |     |                       |     |                   |       |       |  |       |  |       

---

|(*) | Others includes derivative instruments which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the year 2003, the Group entered into certain derivative instruments designated as cash flow hedge for which the underlying transaction is expected to occur in 2004. These derivative instruments have been
cancelled in 2003. The cumulative gain on these hedging instruments at the time of cancellation was KEURs 2,142 and is included in equity as of December 31, 2003 until the forecasted transaction occurs. The balance amount related to derivative
instruments cancelled in 2002 that remained in equity as of December 31, 2002 amounting to KEURs 549 has been reclassified to the statement of income in 2003 at the time the underlying transaction occurred.



Additionally, of the total outstanding derivative instruments
in equity as of December 31, 2002, a net gain of 6,309 has been reclassified to the statement of income in 2003. Of the outstanding derivative instruments in equity as of December 31, 2001, a net loss of KEURs 1,505 was reclassified to the statement
of income during the year 2002.



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



As of December 31, 2002 the details of open foreign currency options and open forward
contracts is as follows:



Derivative Assets:



|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|------------------------- |  | ------------------- |  | -------- | --- | -------- | --- | --------------------- | --- | ------------------ |  | ----- |  | ----- | - |  | ------ | -
|Type                      |  | FinancialInstrument |  | Currency |     | Maturity |     | Notionalamount(KEURs) |     | Fair value (KEURs) | 
|                          |  |                     |  |          | OCI |          | CTA |                       | P&L |                    |  | Total | 
|Cash flow hedge           |  | Forward             |  | USD      |     | 2003     |     | 74,664                |     | 7,722              |  |      |  | 1,976 |   |  | 9,698  |  
|                          |  |                     |  |          |     | 2004     |     | 59,884                |     | 6,269              |  |      |  |      |   |  | 6,269  |  
|                          |  |                     |  |          |     | 2005     |     | 6,866                 |     | 1,058              |  |      |  |      |   |  | 1,058  |  
|                          |  |                     |  | Others   |     | 2003     |     | 49,732                |     | 95                 |  |      |  | 129   |   |  | 224    |  
|                          |  |                     |  |          |     | 2004     |     | 1,092                 |     | 4                  |  |      |  |      |   |  | 4      |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Net equity investments    |  | Forward             |  | USD      |     | 2003     |     | 118,673               |     |                   |  | 7,595 |  |      |   |  | 7,595  |  
|                          |  |                     |  |          |     | 2003     |     | 12,609                |     |                   |  | 300   |  |      |   |  | 300    |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Others                    |  | Forward             |  | USD      |     | 2003     |     | 91,270                |     |                   |  |      |  | 2,091 |   |  | 2,091  |  
|                          |  |                     |  |          |     | 2003     |     | 15,956                |     |                   |  |      |  | 673   |   |  | 673    |  
|                          |  | Options             |  | USD      |     | 2003     |     | 28,607                |     |                   |  |      |  | (243  | ) |  | (243   | )
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Premium paid              |  |                     |  |          |     |          |     |                       |     |                   |  |      |  |      |   |  | 244    |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Total                     |  |                     |  |          |     |          |     |                       |     | 15,148             |  | 7,895 |  | 4,626 |   |  | 27,913 |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Total short term (Note 5) |  |                     |  |          |     |          |     |                       |     | 7,817              |  | 7,895 |  | 4,626 |   |  | 20,582 |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  
|Total long term           |  |                     |  |          |     |          |     |                       |     | 7,331              |  |      |  |      |   |  | 7,331  |  
|                          |  |                     |  |          |     |          |     |                       |     |                    |  |       |  |       |   |  |        |  

---

|(*) | Others includes derivative instruments which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | The notional amounts for year 2002 have been calculated using the 2002 year end exchange rate.
|---- | ----------------------------------------------------------------------------------------------



Derivative Liabilities:



|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|------------------------- |  | ------------------- |  | -------- | --- | -------- | --- | --------------------- | --- | ------------------ | ----- | ----- |  | --- |  | -----
|Type                      |  | FinancialInstrument |  | Currency |     | Maturity |     | Notionalamount(KEURs) |     | Fair value (KEURs)
|                          |  |                     |  |          | OCI |          | CTA |                       | P&L |                    | Total
|Cash flow hedge           |  | Forward             |  | USD      |     | 2004     |     | 6,866                 |     | 935                |       |      |  |    |  | 935  
|                          |  |                     |  | Others   |     | 2003     |     | 32,184                |     | 1,166              |       |      |  | 428 |  | 1,594
|                          |  |                     |  |          |     | 2004     |     | 42,677                |     | 848                |       |      |  |    |  | 848  
|                          |  |                     |  |          |     | 2005     |     | 20,391                |     | 43                 |       |      |  |    |  | 43   
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|Net equity investments    |  | Forward             |  | USD      |     | 2003     |     | 15,019                |     |                   |       | 1,985 |  |    |  | 1,985
|                          |  |                     |  |          |     | 2004     |     | 13,588                |     |                   |       | 1,688 |  |    |  | 1,688
|                          |  |                     |  | Others   |     | 2003     |     | 312                   |     |                   |       | 35    |  |    |  | 35   
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|Others                    |  | Forward             |  | USD      |     | 2003     |     | 10,980                |     |                   |       |      |  | 67  |  | 67   
|                          |  |                     |  | Others   |     | 2003     |     | 16,822                |     |                   |       |      |  | 382 |  | 382  
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|Total                     |  |                     |  |          |     |          |     |                       |     | 2,992              |       | 3,708 |  | 877 |  | 7,577
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|Total short term (Note 5) |  |                     |  |          |     |          |     |                       |     | 1,166              |       | 2,020 |  | 877 |  | 4,063
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      
|Total long term (Note 13) |  |                     |  |          |     |          |     |                       |     | 1,826              |       | 1,688 |  |    |  | 3,514
|                          |  |                     |  |          |     |          |     |                       |     |                    |       |       |  |     |  |      

---

|(*) | Others includes derivative instruments which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | The notional amounts for year 2002 have been calculated using the 2002 year end exchange rate.
|---- | ----------------------------------------------------------------------------------------------



F-175



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



| | ii) | Interest rate derivatives
| | --- | -------------------------



To limit the Group ́s exposure to increases in interest rates related to a finance lease agreement, the Group has an interest rate
swap agreement. This agreement entitles the Group to receive interest at floating rates and obliges it to pay interest at a fixed rate of 5.785%, both relating to a declining schedule of principal amounts, beginning on December 31, 1999 at KEURs
20,016 and ending on December 31, 2004 at KEURs 10,427. The remaining notional amounts of this interest rate swap were KEURs 12,501 and KEURs 14,494 as of December 31, 2003 and 2002, respectively. The estimated fair value of this contract, based on
the net present value of the future cash flows, was an unrealized loss of KEURs 372 and KEURs 696 as of December 31, 2003 and 2002 respectively. Of the total fair value of interest rate derivatives included in equity as of December 31, 2002, a net
loss of KEURs 203 has been reclassified to the statement of income during the year 2003.



In 2002, the Group entered into two interest rate swap agreements starting October 18, 2002 ending October 20, 2003 and starting November 29, 2002 ending November 29, 2005 with bullet principals of KEURs 50,000 and
KEURs 100,000 respectively. These agreements entitled the Group to receive interest at floating rates and pay at a fixed rate of 3.23% and 3.423% respectively. The agreements entered into are to limit the Groups exposure to increases in
interest rates of its credits and loans. During 2003, the bullet principal of the outstanding agreement was reduced to KEURs 50,000. Additionally, in June the Group entered into a new agreement ending June 5, 2009. The principal amounted to KEURs
10,799 and would be reduced during the life of the agreement. As of December 31, 2003 the bullet principal amounts to KEURs 10,048. This agreement entitles the Group to receive interest at floating rates and pay at a fixed rate of 2.6775%. The fair
value of these agreements as of December 31, 2003 and 2002 is an unrealized loss of KEURs 858 and KEURs 1,816 respectively, being the former treated for accounting purposes as an ineffective hedge. As a result of the year end change in the interest
payment structure of the Groups credits and loans, these structures do not qualify for hedge accounting as of December 31, 2003.



| | iii) | Equity related instruments
| | ---- | --------------------------



| |  |  | Warrants issued
| | - |  | ---------------



As a result of certain commercial agreements in the IT services area and other areas during the year 2000 the Group issued warrants to purchase 10,668,000
of its class A shares at exercise prices ranging from EURs 9.09 to EURs 13.40 per share. Under the terms of the respective contractual agreements, the number of warrants is based on the number of class A shares issued on the
date of the contract. Therefore, any increase in the number of issued class A shares could require a corresponding increase in the number of warrants. As of December 31, 2003, these warrants are fully vested. Expiration dates for these
warrants are during the years 2004 and 2005.



The warrants
mentioned above are classified as follows at December 31:



|                       |  |                          |  |                 
|---------------------- |  | ------------------------ |  | ----------------
|Cash settlement option |  | Number of warrants as of
|                       |  | December 31,2003         |  | December 31,2002
|Yes                    |  | 5,900,000                |  | 5,900,000       
|No                     |  | 4,768,000                |  | 4,768,000       
|                       |  |                          |  |                 
|                       |  | 10,668,000               |  | 10,668,000      
|                       |  |                          |  |                 



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



As a result of the removal of the cash settlement option on 2,950,000 warrants of Amadeus class
A shares on June 5, 2002, these warrants were re-denominated as equity instruments. Due to this re-denomination, KEURs 1,505 were credited to equity under the Additional paid-in capital caption with a corresponding reduction
in the Other long-term liability caption. This amount relates to the fair value of the warrants as of the date of removal of the cash settlement option and no subsequent remeasurement to market value is performed.



The initial fair value of the 1,818,000 warrants, vested in 2001, which are
considered to be equity instruments, amounting to KEURs 8,617, was credited directly to equity during the year ended December 31, 2000, in the Additional paid-in capital caption.



The fair value of the warrants with cash settlement, that are considered to
be financial liabilities, as of December 31, 2003 and 2002, is KEURs 59 and KEURs 295 respectively. The unrealized gains recognized as other income, in respect of these warrants, during the years ended December 31, 2003 and 2002 are KEURs 236 and
KEURs 4,514, respectively.



The fair values of the outstanding
warrants are estimated based on quoted market prices of the underlying Amadeus class A shares at the balance sheet date and applying an appropriate valuation methodology. This methodology uses certain estimates, including the volatility
of the Companys share price.



| |  |  | Equity swap
| | - |  | -----------



In order to manage the exposure to a rise in its share price with respect to the warrants described above, during the year 2000 the Group entered into equity swap agreements which allowed Amadeus to buy 12,812,858 of
its class A shares at an average price of EURs 10.32 or settle the difference with the market price in cash, at any time until mid-2004. The financing costs relating to these agreements were at interest rates of 2.50% to 3.56% and 3.53%
to 4.14% during 2003 and 2002, respectively. These costs are recognized in the Financial expenses caption and amount to 478 KEURs and 4,510 KEURs during 2003 and 2002, respectively.



During 2001 and 2002, part of these agreements were treated as equity
instruments as a result of removal of their cash settlement option and another part was converted into Treasury shares.



The current situation of these agreements is as follows:



|                               |  |                   |  |               |   |  |                  
|------------------------------ |  | ----------------- |  | ------------- | - |  | -----------------
|                               |  | Number of shares 
|                               |  | December 31, 2002 |  | Cancellations |   |  | December 31, 2003
|Interim cash settlement        |  | 1,812,462         |  | (1,812,462    | ) |  |                 
|No interim cash settlement     |  | 4,500,000         |  |              |   |  | 4,500,000        
|Converted into Treasury shares |  | 6,500,396         |  |              |   |  | 6,500,396        
|                               |  |                   |  |               |   |  |                  
|                               |  | 12,812,858        |  | (1,812,462    | ) |  | 11,000,396       
|                               |  |                   |  |               |   |  |                  



The fair value of the
equity swap agreements which are not treated as equity instruments (based on quoted market prices and using the intrinsic valuation method), for the years ended December 31, 2003 and 2002, resulted in a gain of KEURs 2,658 and an unrealized gain of
KEURs 3,898, respectively, included in the statement of income under the Other income (expense) caption.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | Warrants and options received
| | - |  | -----------------------------



During 2002, as a component of certain commercial agreements, the Group received options on shares of other companies. The conversion into shares depended
on certain contractual conditions. An after tax loss of KEURs 34 was recognized as of December 31, 2002. These options have matured in 2002.



| |  |  | Investments in securities
| | - |  | -------------------------



Additionally, as of December 31, 2003, the Group had investments in companies over which it does not have significant influence or control. As of December
31, 2003, the Group recorded in the statement of changes in shareholders equity an unrealized gain of KEURs 2,651, resulting from changes in fair values of these assets for which fair value is reliably determinable. The fair values of these
securities as of December 31, 2003 was KEURs 9,781 and are recorded in the Other long-term investments caption.



|b) | Credit risk
|-- | -----------



The Group has no significant concentrations of credit risk. Derivative financial instruments are entered into with financial institutions with high credit ratings. The credit exposure of derivative financial
instruments is represented by the net fair values of the contracts, as disclosed above.



|c) | Fair values
|-- | -----------



The fair values of loans receivable, accounts receivable, cash and cash equivalents and accounts payable approximate to their carrying amounts due to the short-term maturities of these assets and liabilities. The fair
value of short and long-term debt is estimated to approximate the carrying amount, as the interest rates applicable are primarily variable. The fair value of obligations under finance leases is estimated using the expected future payments discounted
at market interest rates and as of December 31, 2003 and December 31, 2002 was approximately KEURs 114,911 and KEURs 120,575, respectively.



|d) | SITA INC NV depository certificates
|-- | -----------------------------------



As of December 31, 2003 and 2002 the Group holds 3,214,200 depository certificates of SITA INC NV issued by Stiching the SITA Information Networking
Computing Foundation (the Foundation), representing 3,214,200 shares of SITA INC NV, at a cost of KEURs 3,557, which is included in the Long-term investments caption.



The convertibility and saleability of these depository certificates are
subject to restrictions imposed by the Foundation under shareholders agreements and under the Terms of Administration of the Foundation. Accordingly, the Group believes that it is not practicable to determine with sufficient reliability a fair
value of the depository certificates.



|20. | TAXATION
|--- | --------



The companies that make up the Group are all individually responsible for their own tax assessments and hence do not file a consolidated tax return. The
majority of these companies are open to tax inspection according to local tax laws in each case. Income tax returns cannot be considered definitive until its expiration or acceptance by the Tax Authorities and, independently that fiscal legislation
is susceptible to different interpretations, it is estimated that whatever additional fiscal liability may arise as a consequence of an eventual tax inspection will not have significant effect on the consolidated financial statements considered as a
whole. In



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



this regards in December 2003, the French Tax Authorities issued a tax assessment on Amadeus s.a.s. for the fiscal years 2000 and 2001. Irrespective of the
final outcome of the administrative / legal process initiated by the company, in case that the final tax assessment materialises, it will not have significant effect on the consolidated financial statements due to the bilateral tax adjustment to be
applied at group level.



Income tax expense was as follows:



|         |  |                        |  |         |  |        
|-------- |  | ---------------------- |  | ------- |  | -------
|         |  | Year ended December 31
|         |  | 2003                   |  | 2002    |  | 2001   
|Current  |  | 117,455                |  | 100,102 |  | 65,689 
|Deferred |  | 4,727                  |  | 15,718  |  | 34,397 
|         |  |                        |  |         |  |        
|Total    |  | 122,182                |  | 115,820 |  | 100,086
|         |  |                        |  |         |  |        



The
reconciliation between the statutory income tax rate in Spain and the effective income tax rate applicable to the Group as of December 31, is as follows:



|                                                   |  |      |   |  |      |  
|-------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                   |  | 2003 |   |  | 2002 |  
|                                                   |  | %    |   |  | %    |  
|Statutory income tax rate in Spain                 |  | 35.0 |   |  | 35.0 |  
|Effect of higher tax rates in other countries      |  | 0.8  |   |  | 0.4  |  
|Permanent differences due to goodwill amortization |  | 3.9  |   |  | 1.9  |  
|Other permanent differences                        |  | 0.3  |   |  | 1.1  |  
|Losses with no tax benefit recognition             |  | 1.3  |   |  | 0.4  |  
|Other                                              |  | (1.4 | ) |  | (0.3 | )
|                                                   |  |      |   |  |      |  
|Effective income tax rate                          |  | 39.9 |   |  | 38.5 |  
|                                                   |  |      |   |  |      |  



The
acquisition cost, in December 1997, of Amadeus Operations KG, in excess of the net assets acquired, is deductible for German tax purposes over a 15-year period. This acquisition was accounted for as a uniting of interests and, therefore, this
benefit was recognized as a deferred tax asset by a credit to shareholders equity in connection with the uniting of interests. As a result of the change in tax rates in Germany approved during the year 2003 and 2002 and effective beginning
January 1, 2004 and January 1, 2003 respectively, this deferred tax asset was decreased during the year 2003 which has resulted in a corresponding debit to retained earnings of KEURs 3,119 and increased during the year 2002 which has resulted in a
credit to retained earnings of KEURs 3,466.



A
detail of tax receivables and payables as of December 31 is as follows:



|                   |  |        |  |       
|------------------ |  | ------ |  | ------
|                   |  | 2003   |  | 2002  
|Tax receivable     |  |        |  |       
|Income tax         |  | 20,929 |  | 32,737
|VAT                |  | 17,751 |  | 21,019
|Others             |  | 3,343  |  | 1,606 
|                   |  |        |  |       
|Total              |  | 42,023 |  | 55,362
|                   |  |        |  |       
|Tax payable        |  |        |  |       
|Income tax payable |  | 35,181 |  | 11,147
|                   |  |        |  |       
|Total              |  | 35,181 |  | 11,147
|                   |  |        |  |       



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The Groups deferred tax balances as of December 31, are as follows:



|                                                            |  |         |   |  |         |  
|----------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                            |  | 2003    |   |  | 2002    |  
|Assets                                                      |  |         |   |  |         |  
|Amadeus Operations KGacquisition                           |  | 84,043  |   |  | 96,848  |  
|Unused tax losses                                           |  | 27,822  |   |  | 37,375  |  
|Unused investment tax credits                               |  | 25,131  |   |  | 19,727  |  
|Finance leases                                              |  | 2,389   |   |  | 2,549   |  
|Net cancellation reserve                                    |  | 14,690  |   |  | 12,548  |  
|Depreciation and amortization                               |  | 20,586  |   |  | 19,831  |  
|Bad debt provision                                          |  | 8,867   |   |  | 9,074   |  
|Hedge accounting                                            |  | 1,258   |   |  | 729     |  
|Employees benefits                                          |  | 7,305   |   |  | 8,233   |  
|IPO cost                                                    |  | 1,352   |   |  | 3,072   |  
|Other                                                       |  | 8,953   |   |  | 11,858  |  
|                                                            |  |         |   |  |         |  
|                                                            |  | 202,396 |   |  | 221,844 |  
|Netting (see Note 2)                                        |  | (76,281 | ) |  | (85,961 | )
|                                                            |  |         |   |  |         |  
|                                                            |  | 126,115 |   |  | 135,883 |  
|                                                            |  |         |   |  |         |  
|Liabilities                                                 |  |         |   |  |         |  
|Unrealized gainsforeign currency and financial instruments |  | 33,512  |   |  | 22,581  |  
|Provision for decline in value of investments               |  | 68,618  |   |  | 49,425  |  
|Depreciation and amortization                               |  | 33,717  |   |  | 27,626  |  
|Capitalization of IT related costs                          |  | 5,679   |   |  | 7,474   |  
|Purchased Intangible Assets                                 |  | 16,806  |   |  |        |  
|Other                                                       |  | 20,177  |   |  | 24,195  |  
|                                                            |  |         |   |  |         |  
|                                                            |  | 178,509 |   |  | 131,301 |  
|Netting (see Note 2)                                        |  | (76,281 | ) |  | (85,961 | )
|                                                            |  |         |   |  |         |  
|                                                            |  | 102,228 |   |  | 45,340  |  
|                                                            |  |         |   |  |         |  



Acquisitions of new subsidiaries generated KEURs 2,429 of acquired deferred tax liabilities and KEURs 1,419 of acquired deferred tax assets in 2003 and 2002, respectively as well as KEURs 16,837 and KEURs 34,270 of investment tax credits
during 2003 and 2002. Deferred taxes charged to equity during 2003 and 2002 were of KEURs 12,568 and KEURs 13,405, respectively, mainly relating to cash flow and net equity investment hedges.



The following table shows the expiration date of unused tax
losses for which no deferred tax asset was recognized in the financial statements due to the uncertainty of their recoverability as of December 31:



|                      |  |        |  |       
|--------------------- |  | ------ |  | ------
|                      |  | 2003   |  | 2002  
|Year(s) of expiration |  |        |  |       
|0-1                   |  | 101    |  | 49    
|1-2                   |  | 611    |  | 1,786 
|2-3                   |  | 77     |  | 2,354 
|3-4                   |  | 1,385  |  | 4,524 
|4-5                   |  | 1,650  |  | 1,802 
|Unlimited             |  | 15,166 |  | 8,869 
|                      |  |        |  |       
|Total                 |  | 18,990 |  | 19,384
|                      |  |        |  |       



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



21    EARNINGS PER SHARE



The reconciliation of the weighted average number of shares and diluted weighted average number of shares outstanding as of
December 31, 2003, December 31, 2002 and December 31,2001 is as follows:



|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|----------------------------------------------------------- |  | ------------------------------------- | - |  | ------------------------------------- | - |  | ------------------------------------- | - |  | ------------------------------------------------------------- | - |  | ------------------------------------------------------------- | - |  | ------------------------------------------------------------- | -
|                                                            |  | Class Ashares as ofDecember 31,2003 |   |  | Class Ashares as ofDecember 31,2002 |   |  | Class Ashares as ofDecember 31,2001 |   |  | Weightedaveragenumber ofclass Ashares as ofDecember 31,2003 |   |  | Weightedaveragenumber ofclass Ashares as ofDecember 31,2002 |   |  | Weightedaveragenumber ofclass Ashares as ofDecember 31,2001 |  
|Total shares issued                                         |  | 590,000,000                           |   |  | 590,000,000                           |   |  | 590,000,000                           |   |  | 590,000,000                                                   |   |  | 590,000,000                                                   |   |  | 590,000,000                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Treasury shares and other similar equity instruments        |  | (20,002,843                           | ) |  | (20,211,730                           | ) |  | (8,706,413                            | ) |  | (20,156,222                                                   | ) |  | (14,327,962                                                   | ) |  | (6,759,802                                                    | )
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Total shares outstanding                                    |  | 569,997,157                           |   |  | 569,788,270                           |   |  | 581,293,587                           |   |  | 569,843,778                                                   |   |  | 575,672,038                                                   |   |  | 583,240,198                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Dilutive effect of warrants, stock options and stock grants |  | 722,393                               |   |  | 1,780,707                             |   |  | 1,623,214                             |   |  | 853,736                                                       |   |  | 1,133,020                                                     |   |  | 1,355,069                                                     |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Total number of diluted shares                              |  | 570,719,550                           |   |  | 571,568,977                           |   |  | 582,916,801                           |   |  | 570,697,514                                                   |   |  | 576,805,058                                                   |   |  | 584,595,267                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|                                                            |  |                                       |   |  |                                       |  
|                                                            |  | Class Bshares as ofDecember 31,2003 |   |  | Class Bshares as ofDecember 31,2002 |   |  | Class Bshares as ofDecember 31,2001 |   |  | Weightedaveragenumber ofclass Bshares as ofDecember 31,2003 |   |  | Weightedaveragenumber ofclass Bshares as ofDecember 31,2002 |   |  | Weightedaveragenumber ofclass Bshares as ofDecember 31,2001 |  
|Total shares issued                                         |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Total shares outstanding                                    |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  
|Total number of diluted shares                              |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                           |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                       |   |  |                                       |   |  |                                                               |   |  |                                                               |   |  |                                                               |  



For the purposes of
allocating earnings between the class A and class B shares, the assumption is made that the maximum economic rights attributable to the class B shares would be according to the dividend calculation described in
Note 14. Additionally, the assumption is made that 100% of the profits are paid out as dividends and the respective portion is allocated to the class B shares first and the remainder to the class A shares.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



The calculation of basic earnings per share (rounded to two significant digits) for the years ended
December 31, is as follows:



|                                                        |  |             |  |             |  |            
|------------------------------------------------------- |  | ----------- |  | ----------- |  | -----------
|                                                        |  | 2003        |  | 2002        |  | 2001       
|Net income in KEURs                                     |  | 160,114     |  | 147,087     |  | 132,723    
|Weighted average number of class A shares outstanding |  | 569,843,778 |  | 575,672,038 |  | 583,240,198
|Weighted average number of class B shares outstanding |  | 219,983,100 |  | 219,983,100 |  | 219,983,100
|                                                        |  |             |  |             |  |            
|Basic earnings per class A share, in EURs             |  | 0.28        |  | 0.26        |  | 0.23       
|                                                        |  |             |  |             |  |            
|Basic earnings per class B share, in EURs             |  |            |  |            |  |           
|                                                        |  |             |  |             |  |            



The calculation of
diluted earnings per share (rounded to two significant digits) for the years ended December 31, is as follows:



|                                                                |  |             |  |             |  |            
|--------------------------------------------------------------- |  | ----------- |  | ----------- |  | -----------
|                                                                |  | 2003        |  | 2002        |  | 2001       
|Net income in KEURs                                             |  | 160,114     |  | 147,087     |  | 132,723    
|Weighted average number of diluted class A shares outstanding |  | 570,697,514 |  | 576,805,058 |  | 584,595,267
|Weighted average number of diluted class B shares outstanding |  | 219,983,100 |  | 219,983,100 |  | 219,983,100
|                                                                |  |             |  |             |  |            
|Diluted earnings per class A share, in EURs                   |  | 0.28        |  | 0.25        |  | 0.23       
|                                                                |  |             |  |             |  |            
|Diluted earnings per class B share, in EURs                   |  |            |  |            |  |           
|                                                                |  |             |  |             |  |            



|22. | ADDITIONAL STATEMENT OF CASH FLOWS RELATED DISCLOSURE
|--- | -----------------------------------------------------



The components of cash and cash equivalents as of December 31, are as follows:



|                                     |  |        |  |        |  |       
|------------------------------------ |  | ------ |  | ------ |  | ------
|                                     |  | 2003   |  | 2002   |  | 2001  
|Cash on hand and balances with banks |  | 22,507 |  | 17,239 |  | 17,689
|Short-term investments               |  | 19,594 |  | 1,063  |  | 922   
|                                     |  |        |  |        |  |       
|                                     |  | 42,101 |  | 18,302 |  | 18,611
|                                     |  |        |  |        |  |       



|23. | AUDITING SERVICES
|--- | -----------------



Professional fees for auditing services performed in the Company and its subsidiaries by its auditor Deloitte & Touche and related companies amount to
KEURs 1,248 and KEURs 1,218 for the years ended December 31, 2003 and 2002, respectively.



Additionally, fees for services similar to audits (such as due diligence, purchase audits, etc.) and other professional services delivered to the Company and its subsidiaries by its auditor Deloitte & Touche and
related companies amount to KEURs 725 and KEURs 906 for the year ended December 31, 2003 and KEURs 793 and KEURs 1,039 for the year ended December 31, 2002, respectively.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|24. | SUBSEQUENT EVENTS
|--- | -----------------



On December 19, 2003 Amadeus exercised its right of first refusal for the acquisition of Amadeus Brazil, increasing its participation to 69%. According to
Brazilian legislation, the legal effect of such action is retroactive to the exercise date once documents have been accepted, during thirty days following the date of execution, by the Registra. The acceptance of the documents was on January 16,
2004 and, therefore, the legal effect of the increase in participation is retroactive to December 19, 2003. Notwithstanding the above, Amadeus has not fully consolidated this subsidiary as it had not taken effective control as of December 31, 2003.
On January 8, 2004, Amadeus exercised again its right of first refusal to acquire an additional participation of 7%, controlling now 76% of the share capital. The total cash consideration paid amounted to approximately USDs 3.8 million.



As part of the restructuring process of certain activities within the
Amadeus Group, on February 10, 2004, the Board of Directors of ICSA-T NV has proposed the dissolution of the company and has called an extraordinary Shareholders meeting for March 10, 2004, for its discussion and / or approval if so decided.
The business of ICSA-T NV will continue being carried out by other entities of the Group.



On February 13, 2004 Lufthansa sold 13.2% of its class A shares in Amadeus Global Travel Distribution representing approximately 2.8% of the total share capital. Accordingly, Lufthansa stake in Amadeus has
been reduced to approximately 5.05% of class A shares.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|25. | DIFFERENCES BETWEEN INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
|--- | -------------------------------------------------------------------------------------------------------------------------------------



The consolidated financial statements of the Amadeus Group
are prepared in accordance with International Financial Reporting Standards (IFRS), which differ in certain respects from Generally Accepted Accounting Principles in the United States of America (U.S. GAAP). The most significant differences are as
follows:



Reconciliation of Net Income and
Shareholders Equity from IFRS to U.S. GAAP



The following table (Reconciliation Table) sets forth the adjustments to consolidated net income and shareholders equity that would have been required had U.S. GA AP been applied instead of IFRS:



|                                                                                     |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|------------------------------------------------------------------------------------ |  | ------ | -------------------------------- | ---------- | - | ------------------ | -------------------- | - | ---- | ------- | - | ---- | ------- | - | ---- | ------- | -
|                                                                                     |  | Item # |                                  | Net Income |   |                    | Shareholders Equity |  
|                                                                                     |  |        | For the Years Ended December 31, |            |   | As of December 31, |                     
|                                                                                     |  |        | 2003                             |            |   | 2002               |                      |   | 2001 |         |   | 2003 |         |   | 2002 |        
|Amounts per accompanying consolidated financial statements                           |  |        |                                  | 160,114    |   |                    | 147,087              |   |      | 132,723 |   |      | 757,713 |   |      | 622,340 |  
|Increase (decrease) due to:                                                          |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|Goodwill                                                                             |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|Amortization of goodwill                                                            |  | 1.1    |                                  | 26,685     |   |                    | 15,705               |   |      | 696     |   |      | 40,990  |   |      | 15,303  |  
|Negative Goodwill                                                                   |  | 1.2    |                                  | (917       | ) |                    | (786                 | ) |      |        |   |      | 367     |   |      | (786    | )
|Impairment of Goodwill                                                              |  | 1.3    |                                  | (15,989    | ) |                    |                     |   |      |        |   |      | (16,880 | ) |      |        |  
|Reversal of goodwill and deferred tax asset from contingent consideration            |  | 2      |                                  |           |   |                    |                     |   |      |        |   |      | (27,269 | ) |      | (26,519 | )
|Reversal of liability from contingent consideration                                  |  | 2      |                                  |           |   |                    |                     |   |      |        |   |      | 27,269  |   |      | 26,519  |  
|Reversal of interest expense from contingent consideration                           |  | 2      |                                  | 1,294      |   |                    | 512                  |   |      |        |   |      | 1,806   |   |      | 512     |  
|Capitalization of software developed for internal use                                |  | 3      |                                  | 2,219      |   |                    | (2,638               | ) |      | (6,449  | ) |      | (10,468 | ) |      | (12,687 | )
|US GAAP adjustments of equity investees                                              |  | 4      |                                  | 11,699     |   |                    | 14,240               |   |      |        |   |      | 27,228  |   |      | 14,179  |  
|Tax effect of the above adjustments                                                  |  | 5      |                                  | (1,215     | ) |                    | 806                  |   |      | 2,278   |   |      | 2,962   |   |      | 4,404   |  
|                                                                                     |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|Amounts under U.S. GAAP before cumulative effect of a change in accounting principle |  |        |                                  | 183,890    |   |                    | 174,926              |   |      | 129,248 |   |      | 803,718 |   |      | 643,265 |  
|Cumulative effect of a change in accounting principle:                               |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|Negative goodwill, as of January 1, 2002                                             |  | 1.2    |                                  |           |   |                    | 3,862                |   |      |        |   |      |        |   |      | 3,862   |  
|                                                                                     |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  
|Amounts under U.S. GAAP                                                              |  |        |                                  | 183,890    |   |                    | 178,788              |   |      | 129,248 |   |      | 803,718 |   |      | 647,127 |  
|                                                                                     |  |        |                                  |            |   |                    |                      |   |      |         |   |      |         |   |      |         |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



|                                                                                                        |  |         |  |         |  |        
|------------------------------------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|BASIC EARNINGS PER SHARE                                                                                |  | 2003    |  | 2002    |  | 2001   
|Basic income per share, under U.S. GAAP, before cumulative effect of a change in accounting principle   |  | 0.323   |  | 0.304   |  | 0.222  
|                                                                                                        |  |         |  |         |  |        
|Cumulative effect of a change in accounting principle, per share                                        |  |        |  | 0.006   |  |       
|Basic net income per share in accordance with U.S. GAAP                                                 |  | 0.323   |  | 0.310   |  | 0.222  
|                                                                                                        |  |         |  |         |  |        
|                                                                                                        |  |         | 
|DILUTED EARNINGS PER SHARE                                                                              |  | 2003    |  | 2002    |  | 2001   
|Diluted income per share, under U.S. GAAP, before cumulative effect of a change in accounting principle |  | 0.322   |  | 0.303   |  | 0.221  
|                                                                                                        |  |         |  |         |  |        
|Cumulative effect of a change in accounting principle per share                                         |  |        |  | 0.007   |  |       
|Diluted net income per share in accordance with U.S. GAAP                                               |  | 0.322   |  | 0.310   |  | 0.221  
|                                                                                                        |  |         |  |         |  |        
|                                                                                                        |  |         | 
|SHARES (in thousands)                                                                                   |  | 2003    |  | 2002    |  | 2001   
|Weighted average number of basic shares                                                                 |  | 569,844 |  | 575,672 |  | 583,240
|Weighted average number of diluted shares                                                               |  | 570,698 |  | 576,805 |  | 584,595



|                                                                            |  |         |   |  |         |  
|--------------------------------------------------------------------------- |  | ------- | - |  | ------- | -
|Statement of changes in shareholders equity                                |  | 2003    |   |  | 2002    |  
|U.S. GAAP shareholders equity at January 1                                 |  | 647,127 |   |  | 586,094 |  
|Net income for the year, under U.S. GAAP                                    |  | 183,890 |   |  | 178,788 |  
|(Acquisitions)/disposals of treasury shares, net                            |  | 1,151   |   |  | (66,447 | )
|Redemption of class B shares                                              |  |        |   |  |        |  
|Equity swap transactions                                                    |  |        |   |  | (9,600  | )
|Warrants issued                                                             |  | (3,543  | ) |  | 1,505   |  
|Dividend                                                                    |  | (29,998 | ) |  | (37,999 | )
|Tax benefit from acquisition of Amadeus Operations KG                       |  | (3,120  | ) |  | 3,466   |  
|Other                                                                       |  | (43     | ) |  | 679     |  
|Accumulated other comprehensive income (loss):                              |  |         |   |  |         |  
|Translation adjustments under IFRS (including net investment hedge)         |  | (7,794  | ) |  | (17,217 | )
|Additional translation adjustment under U.S. GAAP                           |  | (2,558  | ) |  | (1,172  | )
|Unrealized holding gain (loss) on available for sale securities, net of tax |  | 2,651   |   |  | (2,129  | )
|Minimum pension liability, net of tax of KEURs 988                          |  | 1,614   |   |  | (1,614  | )
|Other derivatives and hedging activities, net of tax                        |  | 14,341  |   |  | 12,773  |  
|                                                                            |  |         |   |  |         |  
|U.S. GAAP shareholders equity at December 31                               |  | 803,718 |   |  | 647,127 |  
|                                                                            |  |         |   |  |         |  



The differences
included in the Reconciliation Table above are explained in the following items:



|1. | Goodwill
|-- | --------



| | 1.1 | Amortization of Subsidiary Goodwill
| | --- | -----------------------------------



Under IFRS, goodwill should be amortized on a systematic basis over its useful life. The amortization period should reflect the best estimate of the
period during which future economic benefits are expected to flow to the enterprise. The company is amortizing goodwill applying the straight-line method over 4-10 years.



Under U.S. GAAP, goodwill acquired in a business combination for which the acquisition date is after June 30, 2001 shall not
be amortized, and any existing goodwill at January 1, 2002 is no longer amortizable for U.S. GAAP purposes beginning on such date according to SFAS No. 142, Goodwill and other Intangible Assets (SFAS 142).



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Accordingly, net income for the years ended December 31, 2003, 2002 and 2001 should be increased by
KEURs 26,685, KEURs 15,705, and KEURs 696, respectively.



| | 1.2 | Negative Goodwill
| | --- | -----------------



Under IFRS, if negative goodwill arising in a business combination is related to expectations of identifiable future losses and expenses that can be
measured reliably at the date of acquisition, that portion of negative goodwill should be recognized as income in the income statement when the future losses and expenses are recognized. Otherwise, the amount of negative goodwill not exceeding the
fair values of acquired identifiable non-monetary assets should be recognised as income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable/amortizable assets; and the amount of negative
goodwill in excess of the fair values of acquired identifiable non-monetary assets should be recognized as income immediately.



Under US GAAP and for acquisitions initiated after June 30, 2001, negative goodwill is initially allocated on a pro-rata basis against the carrying
amounts of certain acquired non-financial assets, with any excess recognized as an extraordinary gain. Additionally, in accordance with SFAS No. 141, Business Combinations(SFAS 141), any unamortized deferred credit at January 1, 2002 related
to an excess over cost shall be written off and recognized as the effect of a change in accounting principle.



Therefore, negative goodwill outstanding on January 1, 2002 has been written off to income as the cumulative effect of a change in accounting principle,
and negative goodwill amortization recorded under IFRS is reversed for the years ended December 31, 2003 and 2002.



Accordingly, net income for the years ended December 31, 2003 and 2002 has been increased (decreased) by KEURs (917) and KEURs 3,076, respectively, of
which, in 2002, KEURs 3,862 represented the effect of the change in accounting principle (of this amount, 1,792 relates to equity investees), and KEURs (786) the reversal of subsidiary negative goodwill amortization recorded under IFRS.



1.3    Impairment of Goodwill



Effective January 1, 2002, the Company adopted SFAS 142. Under SFAS 142,
goodwill is no longer amortized over its estimated useful life, but is instead tested for impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is based on fair value, is performed on a
reporting unit (RU) level. Additionally, goodwill on equity method investments is no longer amortized; however, it will continue to be tested for impairment in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of
Accounting for Investments in Common Stock(APB 18). (See items 1.1 and 4 for reversal of goodwill amortization adjustment).



The Company has performed the transitional goodwill impairment test required by SFAS 142 as of January 1, 2002 and the annual goodwill impairment
test as of December 31, 2002 and December 31, 2003. Goodwill in each reporting unit is tested for impairment during the third and fourth quarter of every year. As a result of these analyses, the Company has determined that no impairment of goodwill
was required upon the adoption of SFAS 142 or for the year ended December 31, 2002.



During 2003, the Company performed an impairment test under IFRS, as a result of impairment indicators arising in the third quarter of 2003, on the goodwill arising from the purchase of the Consortia Business unit
(see Note 7). The test was performed by comparing the carrying value of the reporting unit (including goodwill) to its fair value. From this analysis, an impairment loss of KEURs 9,961 was determined and recorded under IFRS for



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



the year ended December 31, 2003. Under U.S. GAAP, the Company has performed Step 2 of the SFAS 142 goodwill impairment test in the fourth quarter of 2003 to
determine the implied fair value of goodwill. Based on this analysis, the Company has identified an unrecognised intangible asset, arising from contracts established with the travel agencies that form the consortium, which has been valued using an
income approach, specifically the multi-period excess earnings method (MEEM). The identification and valuation of this intangible asset reduces the implied fair value of goodwill by approx. KEURs 2,425.



Additionally, the Company has recorded, under IFRS, an impairment loss
amounting to KEURs 4,067 for the entire goodwill balance arising in a subsidiary engaged in e-commerce activities and another subsidiary which has been dissolved in 2004 (Notes 7 and 24).



As a result of the goodwill impairment analyses performed under U.S. GAAP, the impairments recorded under IFRS have been
maintained, and an additional impairment charge of KEURs 15,989 has been recorded for the year ended December 31, 2003 as a result of the higher carrying amount of goodwill caused by its non-amortization under U.S. GAAP and the identification of
unrecorded intangibles in the Step 2 process.



The fair value
of the reporting units is determined based on income, market approaches, and cost approaches. The income approach used considered the present value of earnings attributable to the reporting unit or costs avoided as a result of owning the reporting
unit. The market approach considered examination of transactions involving the sale of comparable assets. The cost approach considered the reproduction/replacement cost adjusted for depreciation and obsolescence.



2.    Contingent Consideration



In the third quarter of 2002, Amadeus acquired a 95% stake of AMADEUS
SCANDINAVIA AB, while in the first quarter of 2003 it acquired the remaining 66% of Amadeus Germany GmbH (Start Amadeus). A part of the purchase price in both acquisitions consisted of a contingency based on future bookings of the acquired
companies.



Under IFRS, in accordance with IAS 22, Business
Combinations, this type of contingency should be included in the cost of the acquisition as of the date of acquisition if the contingency is probable and the amount can be measured reliably. Therefore the Company has included in the cost of the
acquisitions the net present value of the deferred consideration.



Under US GAAP, in accordance with SFAS 141, the outcome of the contingency shall be disclosed but not recorded as a liability at its nominal amount at the acquisition date unless the outcome of the contingency is determinable beyond a
reasonable doubt, this is when the contingency is resolved and consideration is issued or becomes issuable.



Accordingly, goodwill and the deferred tax asset recognized for the related investment tax credits, as well as the respective long-term and short term
liability and the interest expense recognized under IFRS, have been eliminated for U.S. GAAP purposes; the acquisition cost is adjusted instead as the booking objectives are achieved in each period.



3.    Capitalization of Software Developed for Internal Use



Under IFRS, the Company has capitalized certain
administrative costs as a part of the software developed for internal use, according to the fact that the mentioned costs are direct costs of the capitalized projects.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Under US GAAP, according to SOP 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, these administrative costs should not be capitalized. Therefore, net income for the years ended December 31, 2003, 2002 and 2001 should be increased (decreased) by KEURs 2,219, KEURs (2,638), and KEURs (6,449),
respectively.



4.    U.S. GAAP Adjustments of Equity
Investees



This reconciling item includes the U.S. GAAP
adjustments to the net income and shareholders equity of investments that would be accounted for under the equity method of accounting pursuant to Accounting Principles Board Opinion No. 18 (APB 18), The Equity Method of Accounting for
Investments in Common Stock, and the related equity method goodwill. These adjustments relate to the reversal of equity goodwill amortization, negative goodwill, and goodwill impairment, and represented an increase in net income for the years
ended December 31, 2003 and 2002 of KEURs 11,699 and KEURs 14,240, respectively.



5.    Tax Effect of the Above Adjustments



Tax effects are computed on the differences arising from taxable adjustments to U.S. GAAP, since they are considered to be temporary differences to be accounted for under SFAS No. 109, Accounting for Income
Taxes.



Other Significant Accounting Policies



Revenue Recognition



Amadeus provides various travel marketing and distribution services through the Global Distribution system. As compensation
for services provided, fees are collected from airline, car rental and hotel vendors and other providers of travel-related products and services for reservations booked through the Amadeus system. Revenue for airline travel reservations is
recognized at the time of the booking of the reservation, net of estimated future cancellations. This booking fee cancellations reserve is calculated based on historical cancellation rates. In estimating the amount of future cancellations that will
require Amadeus to refund a booking fee, the Company assumes that an immediate re-booking, without loss of revenue, follows a significant percentage of cancellations. This assumption is based on historical rates of cancellations/re-bookings and has
a significant impact on the amount reserved. If circumstances change (i.e., higher than expected cancellation rates or changes in booking behaviour), estimation of future cancellations could be increased by material amounts and Amadeus ́
revenue decreased by a corresponding amount.



Revenue for car,
rental, hotel bookings and other travel providers is recognized at the time the reservation is used by the customer.



The Company also enters into service contracts with subscribers to provide access to the system, hardware, software, hardware maintenance and other
support services. Fees billed on service contracts are recognized as revenue in the month earned.



Impairment of Long-Lived Assets



On January 1, 2002, Amadeus adopted, under U.S. GAAP, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS 121) and establishes a single accounting model for long-lived assets to be disposed of by sale consistent with the fundamental



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



provisions of SFAS 121. Under SFAS 144, there is no longer a requirement to allocate goodwill to long-lived assets to be tested for impairment. It also
establishes a probability weighted cash flow estimation approach to deal with situations in which there are ranges of cash flows that may be generated by the asset being tested for impairment.



Under IFRS, and consistent with the impairment model established in SFAS 144,
the Company wrote down, in 2002 and 2003, certain software development projects related to the leisure travel industry that have been stopped, and in 2003, certain licences that have been replaced by new ones and have thus become obsolete (see Note
7).



Derivative Instruments and Hedging Activities



Under U.S. GAAP, the Company adopted, effective January 1, 2001, SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other
contracts (embedded derivatives) and for hedging activities. SFAS 133 requires that all derivatives, whether designated in hedging relationships or not, be recorded on the balance sheet at fair value. The difference between a derivatives
previous carrying amount and its fair value as of January 1, 2001 shall be reported as a transition adjustment in net income or other comprehensive income (OCI), as appropriate, as the cumulative effect of a change in accounting
principle. The accounting for changes in fair value of a derivative instrument depends on its intended use and the resulting designation.



Under SFAS 133, if the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable
to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in OCI and are recognized in the income statement when the hedged
item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. The gain or loss on a hedging derivative instrument that is designated as, and is effective as, an economic hedge of the net
investment in a foreign operation shall be reported in the same manner as a translation adjustment to the extent it is effective as a hedge. The ineffective portion of net investment hedges shall be reported in earnings.



Under IFRS, the Company adopted, on January 1, 2001, IAS 39, Financial
Instruments: Recognition and Measurement, which is not significantly different to SFAS 133 as applied to the Group (see Note 3o)). Therefore, an adjustment has not been recorded in the reconciliation above.



Guarantees Accounting



On January 1, 2003 under U.S. GAAP, Amadeus adopted the FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45), which requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and
measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The application of this interpretation has not had any effect on the consolidated financial position,
results of operations, or cash flow of the Group.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Consolidated Financial Statements as of

December 31, 2003 and 2002 (Continued)

(Expressed in Thousands of Euros-Keurs)



Recently Issued Accounting Pronouncements



SFAS No. 132 (Revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits



In December 2003, the FASB issued SFAS No. 132, Revised 2003, (SFAS
132R), which requires an entity to make additional disclosures about pensions and other postretirement benefits. These disclosures include information describing the types of plan assets, investment strategy, measurement date(s), plan
obligations, cash flows and components of net periodic benefit cost. SFAS 132R is effective for domestic (Spanish) plans beginning with fiscal years ending after December 15, 2003 and for foreign plans beginning with fiscal years ending after June
15, 2004. SFAS 132R is effective for interim reporting period disclosures beginning after December 15, 2003 and after the provisions of this statement are adopted. The Company currently prepares financial statements in accordance with Item 17 of
Form 20-F, and is therefore not required to provide financial statement disclosures required by U.S. generally accepted accounting principles and Regulation S-X. Accordingly, the Company does not expect to have any effect from the adoption of this
revised standard.



FIN No. 46Consolidation of Variable Interest
Entitiesan interpretation of ARB No. 51



In December
2003, the FASB issued a revision to Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46R or the Interpretation). FIN 46R clarifies the application of
ARB No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance
its activities without additional subordinated financial support. FIN 46R requires the consolidation of these entities, known as variable interest entities (VIEs), by the primary beneficiary of the entity. The primary beneficiary is the
entity, if any, that will absorb a majority of the entitys expected losses, receive a majority of the entitys expected residual returns, or both.



Among other changes, the revisions of FIN 46R (a) clarified some requirements of the original FIN 46, which had been issued in January 2003, (b) eased
some implementation problems, and (c) added new scope exceptions. FIN 46R deferred the effective date of the Interpretation for public companies, to the end of the first reporting period ending after March 15, 2004, except that all public companies
must at a minimum apply the provisions of the Interpretation to entities that were previously considered special-purpose entities under the FASB literature prior to the issuance of FIN 46R by the end of the first reporting period ending
after December 15, 2003. The Company does not anticipate that the adoption of FIN 46R will have a material impact on its financial position, cash flows or results of operations.



SAB No. 104Revenue Recognition



In December 2003, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. SAB 104 updates
portions of the interpretive guidance included in Topic 13 of the codification of Staff Accounting Bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and
regulations. The company believes it is currently following the guidance of SAB 104.



SAB No. 105Application of Accounting Principles to Loan Commitments.



During 2004, the SEC has issued SAB No. 105, Application of Accounting Principles to Loan Commitments. The SAB is effective for loan commitments entered into after March 31, 2004. The Company does not
anticipate any effect from the application of this Bulletin.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Unaudited Consolidated Financial Statements as of December 31, 2004 and 2003, prepared in accordance with International Financial Reporting Standard



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Unaudited Consolidated Balance Sheets as of December 31

(Expressed in thousands of EUROSKEURs)



|                                                     |  |           |  |          
|---------------------------------------------------- |  | --------- |  | ---------
|ASSETS                                               |  | 2004      |  | 2003     
|Current assets                                       |  |           |  |          
|Cash and cash equivalents (Note 21)                  |  | 104,669   |  | 42,101   
|Accounts receivable, net (Note 4)                    |  | 245,228   |  | 182,429  
|Accounts receivableaffiliates, net (Notes 4 and 14) |  | 58,921    |  | 63,021   
|Loans receivable and advancesaffiliates (Note 14)   |  | 1,190     |  | 88       
|Taxes receivable (Note 19)                           |  | 41,611    |  | 42,023   
|Prepayments and other current assets (Note 5)        |  | 77,456    |  | 82,810   
|                                                     |  |           |  |          
|Total current assets                                 |  | 529,075   |  | 412,472  
|                                                     |  |           |  |          
|Tangible assets (Note 6)                             |  |           |  |          
|Land and buildings                                   |  | 130,142   |  | 129,213  
|Data processing hardware and software                |  | 465,097   |  | 425,707  
|Other tangible assets                                |  | 138,616   |  | 128,503  
|                                                     |  |           |  |          
|                                                     |  | 733,855   |  | 683,423  
|Less accumulated depreciation                        |  | 446,321   |  | 410,944  
|                                                     |  |           |  |          
|Net tangible assets                                  |  | 287,534   |  | 272,479  
|                                                     |  |           |  |          
|Intangible assets (Note 7)                           |  |           |  |          
|Patents, trademarks and licenses                     |  | 79,903    |  | 88,673   
|Purchased technology                                 |  | 72,282    |  | 41,688   
|Software development projects                        |  | 371,859   |  | 324,957  
|Purchased contracts                                  |  | 274,748   |  | 272,093  
|Goodwill                                             |  | 453,383   |  | 310,961  
|Other intangible assets                              |  | 9,137     |  | 5,486    
|                                                     |  |           |  |          
|                                                     |  | 1,261,312 |  | 1,043,858
|Less accumulated amortization                        |  | 604,103   |  | 487,806  
|                                                     |  |           |  |          
|Net intangible assets                                |  | 657,209   |  | 556,052  
|                                                     |  |           |  |          
|Deferred income taxes (Note 19)                      |  | 108,779   |  | 126,115  
|Loans receivableaffiliates (Note 14)                |  | 1,015     |  | 1,725    
|Investments in associates (Note 8)                   |  | 27,588    |  | 63,273   
|Other long-term investments, net (Note 8)            |  | 63,839    |  | 104,757  
|                                                     |  |           |  |          
|Total other non-current assets                       |  | 201,221   |  | 295,870  
|                                                     |  |           |  |          
|Total non-current assets                             |  | 1,145,964 |  | 1,124,401
|                                                     |  |           |  |          
|Total assets                                         |  | 1,675,039 |  | 1,536,873
|                                                     |  |           |  |          



See the accompanying
notes to the consolidated financial statements



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Unaudited Consolidated Balance Sheets as of December 31

(Expressed in thousands of EUROSKEURs)



|                                                     |  |           |   |  |           |  
|---------------------------------------------------- |  | --------- | - |  | --------- | -
|LIABILITIES AND SHAREHOLDERS EQUITY                 |  | 2004      |   |  | 2003      |  
|Current liabilities                                  |  |           |   |  |           |  
|Accounts payable, net (Note 4)                       |  | 316,768   |   |  | 247,400   |  
|Accounts payableaffiliates, net (Note 4 and 14)     |  | 27,032    |   |  | 24,731    |  
|Dividends payable                                    |  | 34        |   |  |          |  
|Debt payable within one year (Note 10)               |  | 8,562     |   |  | 80,310    |  
|Current obligations under finance leases (Note 11)   |  | 9,996     |   |  | 9,643     |  
|Income taxes payable (Note 19)                       |  | 32,651    |   |  | 35,181    |  
|Other current liabilities (Note 5)                   |  | 127,863   |   |  | 100,739   |  
|                                                     |  |           |   |  |           |  
|Total current liabilities                            |  | 522,906   |   |  | 498,004   |  
|                                                     |  |           |   |  |           |  
|Long-term liabilities                                |  |           |   |  |           |  
|Long-term debt (Note 10)                             |  | 2,538     |   |  | 701       |  
|Obligations under finance leases (Note 11)           |  | 96,003    |   |  | 104,420   |  
|Deferred income taxes payable (Note 19)              |  | 74,528    |   |  | 102,228   |  
|Other long-term liabilities (Note 12)                |  | 37,303    |   |  | 72,778    |  
|                                                     |  |           |   |  |           |  
|Total long-term liabilities                          |  | 210,372   |   |  | 280,127   |  
|                                                     |  |           |   |  |           |  
|Minority interests                                   |  | 10,037    |   |  | 1,029     |  
|                                                     |  |           |   |  |           |  
|Shareholders equity (Note 13)                       |  |           |   |  |           |  
|Share capital                                        |  | 23,044    |   |  | 27,898    |  
|Additional paid-in capital                           |  | 360,341   |   |  | 379,358   |  
|Treasury shares and other similar equity instruments |  | (109,499  | ) |  | (126,899  | )
|Retained earnings and other reserves                 |  | 686,395   |   |  | 502,879   |  
|Cumulative translation adjustments                   |  | (28,557   | ) |  | (25,523   | )
|                                                     |  |           |   |  |           |  
|Total shareholders equity                           |  | 931,724   |   |  | 757,713   |  
|                                                     |  |           |   |  |           |  
|Total liabilities and shareholders equity           |  | 1,675,039 |   |  | 1,536,873 |  
|                                                     |  |           |   |  |           |  



See the accompanying
notes to the consolidated financial statements



F-193



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.



Unaudited Consolidated Statements of Income for the Years Ended December 31,

(Expressed in thousands of EUROSKEURs)



|                                                                                |  |           |   |  |           |  
|------------------------------------------------------------------------------- |  | --------- | - |  | --------- | -
|                                                                                |  | 2004      |   |  | 2003      |  
|Revenue (Note 15)                                                               |  | 2,056,680 |   |  | 1,929,009 |  
|Cost of sales                                                                   |  | 1,620,379 |   |  | 1,528,358 |  
|                                                                                |  |           |   |  |           |  
|Gross profit                                                                    |  | 436,301   |   |  | 400,651   |  
|Selling, general and administrative expenses                                    |  | 92,887    |   |  | 80,021    |  
|                                                                                |  |           |   |  |           |  
|Operating income                                                                |  | 343,414   |   |  | 320,630   |  
|Other income (expense)                                                          |  |           |   |  |           |  
|Interest expense, net (Note 17)                                                 |  | (6,045    | ) |  | (15,713   | )
|Exchange gains (losses)                                                         |  | (4,109    | ) |  | (1,931    | )
|Other income (expense), net                                                     |  | 397       |   |  | 2,980     |  
|                                                                                |  |           |   |  |           |  
|Income before income taxes                                                      |  | 333,657   |   |  | 305,966   |  
|Income tax (Note 19)                                                            |  | 129,018   |   |  | 122,182   |  
|                                                                                |  |           |   |  |           |  
|Income after taxes                                                              |  | 204,639   |   |  | 183,784   |  
|Equity in income (losses) from associates                                       |  | (8,279    | ) |  | (23,645   | )
|Equity in income (losses) from discontinuing operations of associates (Note 10) |  |           |   |  |           |  
|Minority interests                                                              |  | 11,672    |   |  | (25       | )
|                                                                                |  |           |   |  |           |  
|Net income                                                                      |  | 208,032   |   |  | 160,114   |  
|                                                                                |  |           |   |  |           |  
|Basic earnings per class A share, in EURs (Note 20)                           |  | 0.36      |   |  | 0.28      |  
|                                                                                |  |           |   |  |           |  
|Basic earnings per class B share, in EURs (Note 20)                           |  |          |   |  |          |  
|                                                                                |  |           |   |  |           |  
|Diluted earnings per class A share, in EURs (Note 20)                         |  | 0.36      |   |  | 0.28      |  
|                                                                                |  |           |   |  |           |  
|Diluted earnings per class B share, in EURs (Note 20)                         |  |          |   |  |          |  
|                                                                                |  |           |   |  |           |  



See the accompanying
notes to the consolidated financial statements



F-194



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Unaudited Statements of Cash Flows

(Expressed in Thousands of Euros-Keurs)



|                                                                           |  |          |   |  |          |  
|-------------------------------------------------------------------------- |  | -------- | - |  | -------- | -
|                                                                           |  | 2004     |   |  | 2003     |  
|Cash flows from operating activities                                       |  |          |   |  |          |  
|Operating income                                                           |  | 343,414  |   |  | 320,630  |  
|Adjustments for:                                                           |  |          |   |  |          |  
|Depreciation and amortization                                              |  | 205,991  |   |  | 211,905  |  
|                                                                           |  |          |   |  |          |  
|Operating income before changes in working capital net of amounts acquired |  | 549,405  |   |  | 532,535  |  
|Accounts receivable                                                        |  | 4,334    |   |  | (4,067   | )
|Taxes receivable                                                           |  | (5,810   | ) |  | 2,525    |  
|Other current assets                                                       |  | 8,053    |   |  | 15,837   |  
|Accounts payable                                                           |  | (24,855  | ) |  | (17,286  | )
|Other current liabilities                                                  |  | (10,397  | ) |  | 1,815    |  
|Other long-term liabilities                                                |  | (5,127   | ) |  | 2,099    |  
|                                                                           |  |          |   |  |          |  
|Cash provided from operating activities                                    |  | 515,603  |   |  | 533,458  |  
|Taxes paid                                                                 |  | (105,621 | ) |  | (61,825  | )
|                                                                           |  |          |   |  |          |  
|Net cash provided from operating activities                                |  | 409,982  |   |  | 471,633  |  
|                                                                           |  |          |   |  |          |  
|Cash flows from investing activities                                       |  |          |   |  |          |  
|Additions to tangible assets                                               |  | (77,011  | ) |  | (52,803  | )
|Additions to intangible assets                                             |  | (73,830  | ) |  | (89,033  | )
|Investment in subsidiaries and associates, net of cash acquired            |  | (55,884  | ) |  | (83,957  | )
|Interest received                                                          |  | 4,631    |   |  | 1,813    |  
|Sundry investments and deposits                                            |  | (4,257   | ) |  | (8,529   | )
|Loans to third parties                                                     |  | (4,367   | ) |  | (55,652  | )
|Loans to affiliates                                                        |  | (585     | ) |  | (4,941   | )
|Cash proceeds collected/(paid)derivative agreements                       |  | 3,889    |   |  | 12,225   |  
|Disposals of sundry investments                                            |  | 3,663    |   |  | 2,689    |  
|Dividends received                                                         |  | 7,828    |   |  | 9,076    |  
|Proceeds obtained from disposal of fixed assets                            |  | 3,598    |   |  | 5,112    |  
|                                                                           |  |          |   |  |          |  
|Net cash used in investing activities                                      |  | (192,325 | ) |  | (264,000 | )
|                                                                           |  |          |   |  |          |  
|Cash flows from financing activities                                       |  |          |   |  |          |  
|Proceeds from borrowings                                                   |  | 32,864   |   |  | 300,598  |  
|Repayments of borrowings                                                   |  | (106,076 | ) |  | (427,819 | )
|Interest paid                                                              |  | (12,533  | ) |  | (17,928  | )
|Redemption of Class B shares                                             |  | (485     | ) |  |         |  
|Acquisition of Treasury shares                                             |  | (63,086  | ) |  | (96      | )
|Disposals of Treasury shares                                               |  | 39,215   |   |  | 224      |  
|Dividends paid                                                             |  | (35,000  | ) |  | (29,998  | )
|Payments of finance lease liabilities                                      |  | (10,419  | ) |  | (9,756   | )
|                                                                           |  |          |   |  |          |  
|Net cash used in financing activities                                      |  | (155,520 | ) |  | (184,775 | )
|                                                                           |  |          |   |  |          |  
|Effect of exchange rate changes on cash and cash equivalents               |  | 431      |   |  | 941      |  
|                                                                           |  |          |   |  |          |  
|Net increase / (decrease) in cash and cash equivalents                     |  | 62,568   |   |  | 23,799   |  
|Cash and cash equivalents at beginning of period                           |  | 42,101   |   |  | 18,302   |  
|                                                                           |  |          |   |  |          |  
|Cash and cash equivalents at end of period (Note 21)                       |  | 104,669  |   |  | 42,101   |  
|                                                                           |  |          |   |  |          |  



See the accompanying
notes to the consolidated financial statements



F-195



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Unaudited Statements of Changes in Shareholders Equity

(Expressed in Thousands of Euros-Keurs)



|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|-------------------------------------------------------- |  | ------------ | - |  | ------------------------- | - |  | ----------------------------------------------- | - |  | --------------------------------- | - |  | -------------------------------- | - |  | ------- | -
|                                                         |  | Sharecapital |   |  | Additional paid-incapital |   |  | Treasuryshares andothersimilarequityinstruments |   |  | Retainedearningsand otherreserves |   |  | Cumulativetranslationadjustments |   |  | Total   |  
|Balance as of December 31, 2002                          |  | 27,898       |   |  | 373,195                   |   |  | (128,050                                        | ) |  | 367,026                           |   |  | (17,729                          | ) |  | 622,340 |  
|Equity instruments                                       |  | (3,543       | ) |  |                          |   |  |                                                |   |  |                                  |   |  |                                 |   |  | (3,543  | )
|Available for sale financial assets                      |  |             |   |  |                          |   |  |                                                |   |  | 4,092                             |   |  |                                 |   |  | 4,092   |  
|Tax impact                                               |  |             |   |  |                          |   |  |                                                |   |  | (1,441                            | ) |  |                                 |   |  | (1,441  | )
|Hedging instruments                                      |  |             |   |  |                          |   |  |                                                |   |  | 22,076                            |   |  | 11,875                           |   |  | 33,951  |  
|Tax impact                                               |  |             |   |  |                          |   |  |                                                |   |  | (7,735                            | ) |  | (4,156                           | ) |  | (11,891 | )
|Other gains (losses)                                     |  |             |   |  |                          |   |  |                                                |   |  | (10,104                           | ) |  | (15,513                          | ) |  | (25,617 | )
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|Gains (losses) not recognized in the statement of income |  |             |   |  | (3,543                    | ) |  |                                                |   |  | 6,888                             |   |  | (7,794                           | ) |  | (4,449  | )
|(Acquisitions) / disposals of Treasury shares, net       |  |             |   |  | 9,706                     |   |  | 1,151                                           |   |  | (1,151                            | ) |  |                                 |   |  | 9,706   |  
|Dividends                                                |  |             |   |  |                          |   |  |                                                |   |  | (29,998                           | ) |  |                                 |   |  | (29,998 | )
|Net income for the period                                |  |             |   |  |                          |   |  |                                                |   |  | 160,114                           |   |  |                                 |   |  | 160,114 |  
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|Balance as of December 31, 2003                          |  | 27,898       |   |  | 379,358                   |   |  | (126,899                                        | ) |  | 502,879                           |   |  | (25,523                          | ) |  | 757,713 |  
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|Available for sale financial assets                      |  |             |   |  |                          |   |  |                                                |   |  | (2,373                            | ) |  |                                 |   |  | (2,373  | )
|Tax impact                                               |  |             |   |  |                          |   |  |                                                |   |  | 828                               |   |  |                                 |   |  | 828     |  
|Hedging instruments                                      |  |             |   |  |                          |   |  |                                                |   |  | (4,131                            | ) |  | 2,155                            |   |  | (1,976  | )
|Tax impact                                               |  |             |   |  |                          |   |  |                                                |   |  | 1,444                             |   |  | (755                             | ) |  | 689     |  
|Other gains (losses)                                     |  |             |   |  |                          |   |  |                                                |   |  | (632                              | ) |  | (4,434                           | ) |  | (5,066  | )
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|Gains (losses) not recognized in the statement of income |  |             |   |  |                          |   |  |                                                |   |  | (4,864                            | ) |  | (3,034                           | ) |  | (7,898  | )
|(Acquisitions) / disposals of Treasury shares, net       |  |             |   |  | (19,017                   | ) |  | 17,400                                          |   |  | 10,979                            |   |  |                                 |   |  | 9,362   |  
|Dividends                                                |  |             |   |  |                          |   |  |                                                |   |  | (35,000                           | ) |  |                                 |   |  | (35,000 | )
|Redemption of Class B shares                           |  | (4,854       | ) |  |                          |   |  |                                                |   |  | 4,369                             |   |  |                                 |   |  | (485    | )
|Net income for the period                                |  |             |   |  |                          |   |  |                                                |   |  | 208,032                           |   |  |                                 |   |  | 208,032 |  
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  
|Balance as of December 31, 2004                          |  | 23,044       |   |  | 360,341                   |   |  | (109,499                                        | ) |  | 686,395                           |   |  | (28,557                          | ) |  | 931,724 |  
|                                                         |  |              |   |  |                           |   |  |                                                 |   |  |                                   |   |  |                                  |   |  |         |  



See the accompanying
notes to the consolidated financial statements



F-196



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements

(Expressed in Thousands of Euros-Keurs)



|1. | ACTIVITY
|-- | --------



The consolidated financial statements include Amadeus Global Travel Distribution, S.A., domiciled in Spain (the Company) and its consolidated
subsidiaries (the Group). The Group is a leader in information technology, serving the marketing, sales and distribution needs of the global travel and tourism industry. Its worldwide data network and database of travel information are
used by travel agencies and airline sales offices. Today, travel agencies and airline offices can make bookings with airlines, hotel chains, car rental companies, and groups of providers such as ferry, rail, cruise, insurance and tour operators. The
Group provides the above-mentioned services through a computerised reservation system (CRS) and through its e-commerce channel of distribution. Additionally, the Group provides information technology (IT) services and
solutions to the airline industry, which includes inventory management and passenger departure control. The Companys share and ownership structure are described in Note 13.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Below is a summary of the consolidated Group companies as of December 31, 2004, 2003:



|                                                    |  |                          |  |       |   |  |       |  
|--------------------------------------------------- |  | ------------------------ |  | ----- | - |  | ----- | -
|Company                                             |  | Country of incorporation |  | 2004  |   |  | 2003  |  
|Fully consolidated companies                        |  |                          |  |       |   |  |       |  
|                                                    |  |                          | 
|Airline Automation, Inc. (1)                        |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|Amadeus América, S.A.                               |  | Argentina                |  | 100.0 | % |  | 100.0 | %
|Amadeus Americas, Inc.                              |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Argentina, S.A.                             |  | Argentina                |  | 80.0  | % |  | 80.0  | %
|Amadeus Asia, Ltd.                                  |  | Thailand                 |  | 100.0 | % |  | 100.0 | %
|Amadeus Austria Marketing GmbH                      |  | Austria                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Benelux, N.V.                               |  | Belgium                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Bolivia SRL                                 |  | Bolivia                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Brasil, Ltda. (9)                           |  | Brazil                   |  | 76.0  | % |  | 34.0  | %
|Amadeus Bulgaria EOOD (9)                           |  | Bulgaria                 |  | 100.0 | % |  | 49.0  | %
|Amadeus Central and West Africa, S.A.               |  | Ivory Coast              |  | 100.0 | % |  | 100.0 | %
|Amadeus Data Processing GmbH                        |  | Germany                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Denmark A/S (5)                             |  | Denmark                  |  | 100.0 | % |  | 100.0 | %
|Amadeus France, S.N.C. (9)                          |  | France                   |  | 100.0 | % |  | 34.0  | %
|Amadeus France Services S.A. (9) (12)               |  | France                   |  | 70.6  | % |  | 19.5  | %
|Amadeus GDS LLP                                     |  | Kazakhstan               |  | 100.0 | % |  | 100.0 | %
|Amadeus GDS (Malaysia) Sdn. Bhd.                    |  | Malaysia                 |  | 100.0 | % |  | 100.0 | %
|Amadeus GDS Singapore Pte. Ltd.                     |  | Singapore                |  | 100.0 | % |  | 100.0 | %
|Amadeus Germany GmbH                                |  | Germany                  |  | 100.0 | % |  | 100.0 | %
|AMADEUSGLOBAL Ecuador, S.A.                         |  | Ecuador                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Global Travel Distribution, (Malta) Limited |  | Malta                    |  | 100.0 | % |  |      |  
|Amadeus Global Travel Distribution, S.A.            |  | Spain                    |  | N/A   |   |  | N/A   |  
|Amadeus Global Travel Israel Ltd.                   |  | Israel                   |  | 90.0  | % |  | 90.0  | %
|Amadeus GTD Australia Pty. Ltd.                     |  | Australia                |  | 100.0 | % |  | 100.0 | %
|Amadeus GTD Inc. (1)                                |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|Amadeus GTD Ltd.                                    |  | Kenya                    |  | 100.0 | % |  | 100.0 | %
|Amadeus GTD Southern Africa Pty. Ltd.               |  | South Africa             |  | 100.0 | % |  | 100.0 | %
|Amadeus Hellas, S.A.                                |  | Greece                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Honduras, S.A.(1)                           |  | Honduras                 |  | 100.0 | % |  | 100.0 | %
|Amadeus Hong Kong, Ltd.                             |  | Hong Kong                |  | 100.0 | % |  | 100.0 | %
|Amadeus Magyaroszag Kft (Ltd.)                      |  | Hungary                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing (Ghana), Ltd.                     |  | Ghana                    |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Ireland, Ltd.                     |  | Ireland                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Italia, S.P.A.                    |  | Italy                    |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Nigeria, Ltd.                     |  | Nigeria                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Philippines, Inc.                 |  | Philippines              |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Romania, S.R.L.                   |  | Romania                  |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing Schweiz, A.G.                     |  | Switzerland              |  | 100.0 | % |  | 100.0 | %
|Amadeus Marketing (U.K.), Ltd.                      |  | U.K.                     |  | 100.0 | % |  | 100.0 | %
|Amadeus México S.A. de C.V. (1)                     |  | Mexico                   |  | 100.0 | % |  | 100.0 | %
|Amadeus North America LLC. (1)                      |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Norway, AS (5)                              |  | Norway                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Paraguay, S.R.L.                            |  | Paraguay                 |  | 100.0 | % |  | 100.0 | %
|Amadeus Perú, S.A.                                  |  | Peru                     |  | 100.0 | % |  | 100.0 | %
|Amadeus Polska, Sp.zo.o.                            |  | Poland                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Receptionsservice AB (5) (14)               |  | Sweden                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Rezervasyon Dagitim Sistemleri, A.S.        |  | Turkey                   |  | 100.0 | % |  | 100.0 | %
|Amadeus sas                                         |  | France                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Saudi Arabia Limited (13)                   |  | Saudi Arabia             |  | 100.0 | % |  |      |  
|Amadeus Scandinavia AB                              |  | Sweden                   |  | 100.0 | % |  | 100.0 | %
|Amadeus Services, Ltd.                              |  | U.K.                     |  | 100.0 | % |  | 100.0 | %



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



|                                                                    |  |                          |  |       |   |  |       |  
|------------------------------------------------------------------- |  | ------------------------ |  | ----- | - |  | ----- | -
|Company                                                             |  | Country of incorporation |  | 2004  |   |  | 2003  |  
|Amadeus Services Asia-Pacific, Pty. Ltd.                            |  | Australia                |  | 100.0 | % |  | 100.0 | %
|Amadeus Sweden AB (5)                                               |  | Sweden                   |  | 78.3  | % |  | 78.3  | %
|Amadeus Technology Center Nordic AB (15)                            |  | Sweden                   |  | 100.0 | % |  | 100.0 | %
|Americs AB (5)                                                      |  | Sweden                   |  | 100.0 | % |  | 100.0 | %
|CRS Amadeus América, S.A.                                           |  | Uruguay                  |  | 100.0 | % |  | 100.0 | %
|e-Travel, Inc. (8)                                                  |  | U.S.A.                   |  |      |   |  | 100.0 | %
|Eviaggi.com, S.P.A.                                                 |  | Italy                    |  | 100.0 | % |  | 100.0 | %
|HDS (9) (11)                                                        |  | U.S.A.                   |  | 96.1  | % |  | 30.0  | %
|Hogatex Allemagne (9) (11)                                          |  | Germany                  |  | 96.1  | % |  | 30.0  | %
|Hogatex Austria (9) (11)                                            |  | Austria                  |  | 96.1  | % |  | 30.0  | %
|Hogatex Finland (9) (11)                                            |  | Finland                  |  | 96.1  | % |  | 30.0  | %
|ICSA-T Australia, Pty. Ltd. (4) (14)                                |  | Australia                |  | 100.0 | % |  | 100.0 | %
|ICSA-T France, S.A.R.L. (4) (14)                                    |  | France                   |  | 100.0 | % |  | 100.0 | %
|ICSA-T US LLC (1) (8)                                               |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|ICSA-T N.V. (14)                                                    |  | Belgium                  |  | 100.0 | % |  | 100.0 | %
|ICSA-T Travel Software GmbH (4) (14)                                |  | Switzerland              |  | 100.0 | % |  | 100.0 | %
|ICSA-T UK, Ltd. (4) (14)                                            |  | U.K.                     |  | 100.0 | % |  | 100.0 | %
|Moneydirect Limited NZ (10)                                         |  | New Zealand              |  | 100.0 | % |  | 100.0 | %
|Moneydirect Pty. Ltd. (10)                                          |  | Australia                |  | 100.0 | % |  | 100.0 | %
|NMC Eastern European CRS, B.V.                                      |  | The Netherlands          |  | 100.0 | % |  | 100.0 | %
|Opodo GmbH (3)                                                      |  | Germany                  |  | 55.4  | % |  |      |  
|Opodo Limited                                                       |  | U.K.                     |  | 55.4  | % |  |      |  
|Opodo S.A.R.L. (3)                                                  |  | France                   |  | 55.4  | % |  |      |  
|Optims Asia (9) (11)                                                |  | Singapore                |  | 96.1  | % |  | 30.0  | %
|Optims S.A. (9)                                                     |  | France                   |  | 96.1  | % |  | 30.0  | %
|Optims Italia (9) (11)                                              |  | Italy                    |  | 96.1  | % |  | 30.0  | %
|Optims U.K. (9) (11)                                                |  | U.K.                     |  | 96.1  | % |  | 30.0  | %
|Otedis (9) (11)                                                     |  | France                   |  | 96.1  | % |  | 30.0  | %
|Prologest (9) (11)                                                  |  | Spain                    |  | 96.1  | % |  | 30.0  | %
|SIA Amadeus Latvija                                                 |  | Latvia                   |  | 100.0 | % |  | 100.0 | %
|Sistemas de Reservaciones CRS de Venezuela, C.A.                    |  | Venezuela                |  | 100.0 | % |  | 100.0 | %
|Travellink AB (9)                                                   |  | Sweden                   |  | 85.1  | % |  | 35.1  | %
|UAB Amadeus Lietuva                                                 |  | Lithuania                |  | 100.0 | % |  | 100.0 | %
|Vacation.com, Inc. (1)                                              |  | U.S.A.                   |  | 100.0 | % |  | 100.0 | %
|Vacation.com Canada, Inc. (1)                                       |  | Canada                   |  | 100.0 | % |  | 100.0 | %
|Vivacances S.A.                                                     |  | France                   |  | 67.5  | % |  | 67.5  | %
|                                                                    |  |                          | 
|Investments carried under the equity method                         |  |                          |  |       |   |  |       |  
|                                                                    |  |                          | 
|1Travel.com, Inc. (1)                                               |  | U.S.A                    |  | 38.9  | % |  | 38.9  | %
|AlphaNet BVBA (4) (14)                                              |  | Belgium                  |  | 28.0  | % |  | 28.0  | %
|Amadeus Algerie, S.A.R.L.                                           |  | Algeria                  |  | 40.0  | % |  | 40.0  | %
|Amadeus Gulf LLC                                                    |  | United ArabianEmirates   |  | 49.0  | % |  | 49.0  | %
|Amadeus Kuwait Company W.L.L.                                       |  | Kuwait                   |  | 35.0  | % |  | 35.0  | %
|Amadeus Marketing CSA, s.r.o.                                       |  | Czech Rep.               |  | 35.0  | % |  | 35.0  | %
|Amadeus Maroc, S.A.S.                                               |  | Morocco                  |  | 30.0  | % |  | 30.0  | %
|Amadeus Qatar W.L.L.                                                |  | Qatar                    |  | 40.0  | % |  | 40.0  | %
|Amadeus Sudani, Co. Ltd.                                            |  | Sudan                    |  | 40.0  | % |  | 40.0  | %
|Amadeus Tunisie, S.A.                                               |  | Tunisia                  |  | 30.0  | % |  | 30.0  | %
|Atinera LLC (1) (7) (14)                                            |  | U.S.A.                   |  | 50.0  | % |  | 50.0  | %
|Comtec (Europe) Limited                                             |  | U.K.                     |  | 20.0  | % |  |      |  
|ITA (Internet Travel Agent) Inc. (1)                                |  | U.S.A.                   |  | 22.3  | % |  | 22.3  | %
|Jordanian National Touristic Marketing Private Shareholding Company |  | Jordan                   |  | 50.0  | % |  |      |  
|PT Amadeus Indonesia                                                |  | Indonesia                |  | 50.0  | % |  | 50.0  | %
|Qivive GmbH (6) (14)                                                |  | Germany                  |  | 33.3  | % |  | 33.3  | %
|Red Universal de Marketing y Booking On Line, S.A. (RUMBO)        |  | Spain                    |  | 50.0  | % |  | 50.0  | %



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



|                                                                            |  |                          |  |      |   |  |      |  
|--------------------------------------------------------------------------- |  | ------------------------ |  | ---- | - |  | ---- | -
|Company                                                                     |  | Country of incorporation |  | 2004 |   |  | 2003 |  
|Sistemas Automatizados de Agencias de Viajes, S.A. (SAVIA)                |  | Spain                    |  | 34.0 | % |  | 34.0 | %
|Sociedad Anato-Avianca de Reservaciones de Servicios Turísticos Savia Ltda. |  | Colombia                 |  | 50.0 | % |  | 50.0 | %
|Stellar Access, Inc. (1) (7) (14)                                           |  | U.S.A.                   |  | 20.0 | % |  | 20.0 | %
|Topas Co. Ltd.                                                              |  | SouthKorea               |  | 32.0 | % |  | 32.0 | %
|Travel.com.au Ltd.                                                          |  | Australia                |  | 14.9 | % |  | 16.7 | %
|Traventec Limited (6)                                                       |  | Ireland                  |  | 45.0 | % |  | 45.0 | %

---

|(1) | The participation in these Group companies is held through Amadeus Americas, Inc., formerly known as Amadeus NMC Holding Inc. until August 2, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In certain cases companies are considered to be wholly-owned subsidiaries, even though due to local statutory obligations they are required to have more than one shareholder or a
specific percentage of the capital stock owned by citizens and/or legal entities of the country concerned. These shareholders are not entitled to any economic rights.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The participation in these companies is held through Opodo Limited.
|--- | -------------------------------------------------------------------

|(4) | The participation in these companies is held through ICSA-T N.V. Business activity performed by ICSA-T N.V. and its subsidiaries is carried out by other Group Companies. No relevant
impact has been recorded in 2004, related to the liquidation process of ICSA-T N.V. and its subsidiaries.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The participation in these companies is held through Amadeus Scandinavia AB.
|--- | ----------------------------------------------------------------------------

|(6) | The participation in these companies is held through Amadeus Germany GmbH.
|--- | --------------------------------------------------------------------------

|(7) | This company ceased operations in 2002.
|--- | ---------------------------------------

|(8) | This company has merged during 2004 with Amadeus Americas, Inc.
|--- | ---------------------------------------------------------------

|(9) | The percentage of participation as of December 31, 2003 has been presented for comparative purposes. The applicable accounting method applies based on the voting rights in each
period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | The participation in this company is held through Amadeus GTD Australia Pty. Ltd.
|---- | ---------------------------------------------------------------------------------

|(11) | The participation in these companies is held through Optims S.A.
|---- | ----------------------------------------------------------------

|(12) | The participation in this company is held through Amadeus France, S.N.C.
|---- | ------------------------------------------------------------------------

|(13) | The indirect participation in this company is held through NMC Eastern European CRS, B.V.
|---- | -----------------------------------------------------------------------------------------

|(14) | These companies are under liquidation process.
|---- | ----------------------------------------------

|(15) | Previously known as ICSA-T Scandinavia AB.
|---- | ------------------------------------------



2.    BASIS OF PRESENTATION AND COMPARABILITY OF THE INFORMATION INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS



| | a) | Basis of presentation
| | -- | ---------------------



| | i) | General Information
| | -- | -------------------



The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). These
financial statements have been authorized for issue by the Board of Directors of the Company on March 29, 2005.



| | ii) | Consolidated annual accounts prepared under generally accepted accounting principles in Spain (Spanish GAAP).
| | --- | -------------------------------------------------------------------------------------------------------------



In compliance with legal regulatory requirements, the Companys
management also prepares consolidated annual accounts as of December 31, 2004 and 2003 under Spanish GAAP. As a consequence of the difference in accounting principles, the consolidated net equity reflected under Spanish GAAP exceeds the net equity
reflected under IFRS by approximately EURs 132.2 million as of December 31, 2004 and the net income reflected under Spanish GAAP is higher than the net income under IFRS for the year ended December 31, 2004 by approximately EURs 8.3 million. As of
and for the year ended December 31, 2003 net equity reflected under Spanish GAAP exceeded the net equity reflected under IFRS by approximately EURs 145.4 million and the net income reflected under Spanish GAAP was lower then the IFRS net income by
approximately



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



EURs 10.0 million. The main differences as of and for the years ended December 31, 2004 and 2003 are due to the difference in accounting methods used in the
acquisition in 1997 of Amadeus Data Processing and Co. KG (Amadeus Operations KG), the accounting for Treasury shares and equity related instruments.



| | iii) | Use of estimates
| | ---- | ----------------



Use of estimates and assumptions, as determined by management, is required in the preparation of consolidated financial statements in conformity with
IFRS. Actual results could differ from those estimates and assumptions.



| | b) | Comparison of information
| | -- | -------------------------



For comparative information purposes, the Group presents, together with the amounts included in the consolidated balance sheet, the consolidated
statements of income, of cash flows and of changes in shareholders equity, and the explanatory notes as of and for the year ended December 31, 2004, those as of and for the year ended December 31, 2003.



Certain amounts for the prior period have been reclassified to conform with
2004 presentation.



| | c) | Changes in the consolidation scope
| | -- | ----------------------------------



Note 1 presents the main changes in the companies which were consolidated or carried under the equity method by the Group during 2004 and 2003, as well as
the accounting method used in each case.



3.    ACCOUNTING PRINCIPLES



The main accounting principles used in the preparation of the consolidated financial statements are as follows:



| | a) | Principles of consolidation
| | -- | ---------------------------



The consolidated financial statements include all companies over which the Group has control. Control refers to the power to govern the financial and
operating policies so as to obtain the benefits from its activities. Intercompany balances and transactions between Group companies have been eliminated. Associates (investees in which the Group has significant influence but does not exercise
management control) and joint-ventures have been accounted for using the equity method. Subsidiaries are not consolidated when control is temporary, this is the case when a subsidiary is acquired with the intention of disposing of it in the
following twelve months, instead they are accounted for as an available for sale financial asset.



| | b) | Foreign currency transactions
| | -- | -----------------------------



Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the
settlement of such transactions and from the translation at year-end of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income.



| | c) | Currency translation
| | -- | --------------------



The financial statements of the individual Group companies are denominated in each companys local currency. For consolidation purposes, the assets
and liabilities are translated into EURs at year-end



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



rates; components of the statement of income are translated at average exchange rates for the year; and share capital, additional paid-in capital, and
reserves are translated at historical rates. Any exchange differences arising as a result of this translation, for majority interests in subsidiaries and interests in associates, are shown together as a separate component of shareholders
equity in the Cumulative translation adjustments caption. In the case of translation differences related to minority interests, these are included in the minority interests caption of the balance sheet.



| | d) | Related parties
| | -- | ---------------



The Group considers its significant shareholders or affiliates, associates and members of the Board of Directors to be related parties.



| | e) | Cash equivalents
| | -- | ----------------



Cash equivalents generally consist of certificates of deposit, time deposits, commercial paper, short-term government obligations and other money market
instruments with maturity of three months or less. Such investments are stated at cost, which approximates fair value.



| | f) | Tangible assets
| | -- | ---------------



Tangible assets are recorded at the lower of cost or recoverable value and are depreciated applying the straight-line method over the estimated useful
lives of the assets:



|                                      |  |      
|------------------------------------- |  | -----
|                                      |  | Years
|Buildings                             |  | 50   
|Data processing hardware and software |  | 25  
|Other tangible assets                 |  | 320 



Repairs and renewals
are charged to income when the expenditure is incurred.



Leased
tangible assets where the Group assumes substantially all the risks and benefits of ownership, are capitalized and the present value of the related lease payments is recorded as a liability. Each lease payment is allocated between the liability and
interest expense based on a constant rate of interest on the principal outstanding. The capitalized leased assets are depreciated applying the straight-line method over the above-mentioned useful lives.



Operating lease payments are charged to the statement of income as incurred
over the term of the lease.



| | g) | Intangible assets
| | -- | -----------------



Intangible assets are recorded at cost and reviewed periodically and adjusted for any diminution in value as noted in paragraph h). These assets include
the following:



| |  |  | Patents, trademarks and licensesThese include the cost of acquiring licences for CRS and IT services software developed outside the Group as well as acquired trademarks. These
assets are being amortized applying the straight-line method over 3-10 years.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchased technologyThis represents the acquisition cost of capability obtained by the practical application of knowledge, processes, methods, tools and systems to serve the
market need more efficiently. These assets are being amortized applying the straight-line method over 3-15 years, based on the expected service life.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | Software development projectsThese include software applications developed by the Group which are capitalized once technical feasibility is established, it is reasonably
anticipated that the costs will be recovered through future activities or benefit future periods and the cost of the assets can be measured reliably. These projects are being amortized applying the straight-line method over 3-10 years. Software
maintenance costs are charged to expense as incurred.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchased contractsThese represent the acquisition costs of contracts that give the Group the right to bill for future services as well as capitalizable costs related to
travel agency incentives. These costs are being amortized applying the straight-line method, based on the expected service life of the contract, over 3-10 years.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Goodwill and negative goodwill represent the excess or deficit when comparing the purchase price with the fair value of the net assets acquired and are amortized applying the
straight-line method over 4-10 years, except as described below. Amortization is carried out over 10 years in the case of acquisitions with high strategic value and long-term impact on the Groups business. The excess/default of purchase price
corresponding to investments in associates is included in long-term investments and the corresponding amortization expenses are included in the Equity in income (losses) from associates caption of the statement of income. When settlement
of purchase consideration is deferred, the cost of the acquisition includes the net present value of this deferred consideration. In cases where the exact amount of deferred consideration is contingent on future events, the amount of the deferred
consideration is estimated at the acquisition date and recorded as liability. Any subsequent adjustment to the estimated amount of deferred consideration is applied as a cumulative adjustment to goodwill in the period of the change in estimate and
recorded as liability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other intangible assets are amortized on a straight-line basis over 3-5 years.
| | - |  | ------------------------------------------------------------------------------



Amortization expenses related to intangible assets are included in the cost of sales and selling, general and administrative expense captions of the
statement of income.



Goodwill and intangibles assets with
indefinite useful lives that result from business combinations for which the agreement date is on or after March 31, 2004 are not amortized and are tested annually for impairment. Negative goodwill on these business combinations is not recognised
but charged to the statement of income once the fair value of net assets acquired is reassessed.



h) Impairment of non-current assets



The Group periodically evaluates the carrying value of non-current assets for potential impairment. As a result of this evaluation, an impairment loss is
recognized whenever the carrying amount of an asset exceeds its recoverable amount by reducing the carrying amount of the asset to its recoverable amount with the corresponding charge to the statement of income in the Cost of sales
caption. The recoverable amount is the greater of the net selling price and the value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using an appropriate risk adjusted discount rate.
Additionally to the impairment analysis required by IFRS, the Group performs periodical impairment tests over the majority of its intangible assets.



i) Pension and other post-retirement obligations



The Group operates a number of defined benefit and defined contribution pension plans. Liabilities of the Group arising from defined benefit obligations
are determined using the projected unit credit method. Independent actuarial valuations are carried out annually for the largest plans and on a regular basis for



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



other plans. The actuarial assumptions used to calculate the benefit obligations vary according to the economic conditions of the country in which the plan
is located. Such plans are either externally funded, with the assets of the schemes held separately from those of the Group, or unfunded with the related liabilities carried in the balance sheet.



For the funded defined benefit plans, the deficit or excess of the fair value
of plan assets over the present value of the defined benefit obligation is recognised as a liability or an asset in the balance sheet, taking into account any unrecognised actuarial gains or losses and past service cost. However, an excess of assets
is recognised only to the extent that it represents a future economic benefit which is available to the Group, for example in the form of refunds from the plan or reductions in future contributions.



Actuarial gains and losses arise mainly from changes in actuarial assumptions
and differences between actuarial assumptions and what has actually occurred. They are recognised in the income statement, over the remaining working lives of employees, only to the extent that their net cumulative amount exceeds 10% of the greater
of present value of the obligation or of the fair value of plan assets.



For defined benefit plans the actuarial cost charged to the statement of income consists of current service cost, interest cost, expected return on plan assets and past service cost as well as actuarial gains or losses to the extent that
they are recognised.



Contributions made to defined
contribution plans are charged to the statement of income as incurred.



j) Capital issuance costs



Expenses incurred in
connection with the increases in capital are applied as a reduction to the proceeds received in the additional paid-in capital caption of the balance sheet, net of any related income tax benefit.



k) Treasury shares



Treasury shares held by the Group are reported as a reduction in
shareholders equity. The gain or loss on disposal of these shares is recorded in the Additional paid-in capital caption.



l) Revenue recognition



The Group receives fees from travel providers for providing electronic travel and reservation services through its CRS. The fee amount is dependent upon
the usage and the level of functionality at which the provider participates. Revenue from airline reservations is recognized based on the number of bookings, net of cancellations made and an allowance for future cancellations, or the number of CRS
transactions depending on the option contractually selected on an annual basis by the applicable airlines.



Revenue from airline IT services and bookings of car rentals and hotel rooms is recognized at the time the reservation is used by the end costumer.
Revenue for other services to travel agencies, airlines and others is recognized in the month of service.



m) Stock incentive plans



The Group accounts for its obligations under stock incentive plans as follows:



| |  |  | Compensation expense is recognised for stock options, if the fair market value of the underlying stock at the date of the grant is above the exercise price. In this case, the
expense is accrued over the vesting period of these rights (currently four years).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | Compensation expense relating to stock grants (i.e. their fair market value at the grant date) is recognized over the vesting period of these rights.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



n) Research and development



Research and development costs are charged to expense as incurred, except
for significant software projects that have reached development stage (see g, above). The research and development costs expensed for the years ended December 31, 2004 and 2003 were KEURs 97,646 and KEURs 90,320, respectively.



o) Financial instruments



i) Currency and interest rate related derivatives



The Group uses derivative financial instruments to hedge certain currency
and interest rate exposures. All of these derivatives, whether designated as hedges or not, are recorded at fair value, being the market value for listed instruments or valuation based on option pricing models and discounted cash flow calculations
for unlisted instruments. For accounting recognition purposes, the following policy has been applied.



| |  |  | Cash flow hedges: Effective gains or losses resulting from remeasurement to fair value are included, net of tax, directly in retained earnings until the committed or forecasted
transaction occurs, at which point they will be reclassified to the statement of income. Ineffective gains or losses are recorded directly in the statement of income.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hedges of net investment in a foreign entity: Effective gains or losses obtained from remeasurement to fair value are included, net of tax, in cumulative translation adjustments.
Ineffective gains or losses are recorded directly in the statement of income.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | No hedge accounting: Gains or losses from derivatives not designated nor qualified for hedging treatment are accounted for directly in the statement of income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



ii) Equity related instruments



The Group has issued warrants (call options sold) of its class A
shares as part of the consideration for acquiring certain IT contracts and certain corporate acquisitions. The fair value of these warrants is measured by using an option pricing model and is recorded as additional consideration for the underlying
assets acquired. Warrants issued by the Group where the holder has the right to request settlement in cash are considered as a financial liability and recorded in the Other liabilities caption and are consequently remeasured to fair
value with unrealized gains or losses recorded in the statement of income. Warrants issued by the Group, where the holder does not have the right to request settlement in cash, are considered to be equity instruments and are stated at fair value
being recorded as additional paid-in capital, with no subsequent recognition of movements in fair value.



Equity swap agreements (contracts to buy shares of the Company in future periods), entered into in order to manage the exposure to a rise in the
Groups share price with respect to warrants issued as described above, are treated as:



| |  |  | Derivative financial instruments, when they include interim cash settlement features that are in substance similar to a form of collateral, and therefore do not qualify as an equity
instrument: In such cases, unrealized gains or losses arising from remeasurement to fair value are recorded in the statement of income. Fair value is measured by using an option pricing model.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



| |  |  | Equity instruments, when there is no interim cash settlement feature, the equity swap agreements qualify as equity instruments and the underlying shares are treated similar to
Treasury shares and are presented as a reduction in shareholders equity.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a component of certain commercial agreements, the Group receives warrants or options on shares of other companies. Warrants or options received on shares of other companies are recorded as derivative financial
assets and measured initially at cost, which is the fair value as of the day of the transaction of the consideration given. Subsequent remeasurement of these financial assets is performed at their fair values with unrealized gains or losses recorded
in the statement of income. Fair value is measured by using an option pricing model. When fair value cannot be reliably determined, these derivative financial assets are reflected in the balance sheet at amortized cost.



Additionally, investments in companies over which the Group does not have
significant influence or control are recorded as available for sale financial assets and measured at their fair values by reference to the market value for the listed instrument or by using techniques such as market value for similar instruments,
discounted cash flow analysis and option pricing models for unlisted instruments. Unrealized gains or losses are included in the statement of changes in shareholders equity, net of tax, with realized gains or losses being recognized in the
statement of income. When fair value cannot be reliably determined, these investments are reflected in the balance sheet at amortized cost.



p) Income taxes



The current income tax is recognised in the statement of income, except to the extent that it relates to items directly taken to equity, in which case it
is recognised in equity.



Deferred taxes are determined under
the liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using tax rates that are expected to apply when the
assets or liabilities are realized based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred taxes arising from movements in equity are charged or credited directly to equity. Deferred tax assets
are recognized when the probability of realization is reasonably assured and are adjusted only to the extent that it is no longer probable that a benefit will be realized in the future. Deferred tax assets and liabilities related to the same tax
jurisdiction are presented net in the balance sheet.



Tax
credits for investments in subsidiaries and associates are applied to reduce the amount of the investment when there is an increase in the percentage of ownership. In the case of capital increases that do not represent an increase in the percentage
of ownership or for newly created companies, tax credits are recognized at the moment of the capital contribution.



q) Earnings per share



The Group calculates basic earnings per share using the weighted average number of shares outstanding during the period. The calculation of diluted
earnings per share also includes the dilutive effect of the weighted average warrants, stock grants and stock options outstanding during the period.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



4.    ALLOWANCES  ACCOUNTS RECEIVABLE/PAYABLE



The Group provided an allowance against accounts receivable for estimated
cancellations of airline bookings as of December 31, 2004 of KEURs 72,290; and the Group provision for the related reduction in accounts payable for distribution fees as of December 31, 2004 was KEURs 25,986. As of December 31, 2003 the related
allowances amounted to KEURs 72,758 against accounts receivable and KEURs 30,786 as a reduction in accounts payable.



The Groups provision for potentially uncollectible accounts receivable as of December 31, 2004 was KEURs 64,414; and as of December 31, 2003 was
KEURs 48,637.



5.    PREPAYMENTS AND OTHER CURRENT
ASSETS AND LIABILITIES



The breakdown of the
Prepayments and other current assets caption as of December 31 is as follows:



|                            |  |        |  |       
|--------------------------- |  | ------ |  | ------
|                            |  | 2004   |  | 2003  
|Prepaid expenses            |  | 28,751 |  | 23,388
|Short-term deposits         |  | 9,232  |  | 9,156 
|Derivative assets (Note 18) |  | 22,354 |  | 35,680
|Other                       |  | 17,119 |  | 14,586
|                            |  |        |  |       
|Total                       |  | 77,456 |  | 82,810
|                            |  |        |  |       



The breakdown of the
Other current liabilities caption as of December 31 is as follows:



|                                 |  |         |  |        
|-------------------------------- |  | ------- |  | -------
|                                 |  | 2004    |  | 2003   
|Taxes payable  non income tax   |  | 19,435  |  | 9,002  
|Employee related accrual         |  | 73,585  |  | 60,060 
|Derivative liabilities (Note 18) |  | 4,323   |  | 11,032 
|Deferred purchase consideration  |  | 8,767   |  | 7,709  
|Other                            |  | 21,753  |  | 12,936 
|                                 |  |         |  |        
|Total                            |  | 127,863 |  | 100,739
|                                 |  |         |  |        



The Deferred
purchase consideration caption includes the part of the deferred payment derived from certain corporate acquisitions in 2003 and 2002 that will vest in the following year.



The Taxes payable-non income tax caption includes VAT Payable and Other taxes payable (see Note 19).



The Employee related accrual caption mainly includes the
variable compensation vested during the years 2004 and 2003 but paid in the following year and holidays accrued but not taken.



The Other caption includes other public institutions payable, short-term deferred income and other sundry creditors.



F-207



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



|6. | TANGIBLE ASSETS
|-- | ---------------



Balances and movements for the years ended December 31, 2004 and 2003 of the items included under tangible assets are as follows:



|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|--------------------------------------------- |  | --------------- | - |  | ----------------------------------- | - |  | ------------------- | - |  | ------- | -
|Cost                                          |  | Land &buildings |   |  | Data processing hardware & software |   |  | Othertangibleassets |   |  | Total   |  
|Balance as of December 31, 2002               |  | 129,355         |   |  | 410,471                             |   |  | 116,019             |   |  | 655,845 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Additions                                     |  | 27              |   |  | 47,993                              |   |  | 5,560               |   |  | 53,580  |  
|Additions due to acquisitions of subsidiaries |  |                |   |  | 13,216                              |   |  | 11,969              |   |  | 25,185  |  
|Retirements and disposals                     |  | (165            | ) |  | (35,996                             | ) |  | (2,288              | ) |  | (38,449 | )
|Transfers                                     |  | (3              | ) |  | 2,577                               |   |  | (121                | ) |  | 2,453   |  
|Exchange rate adjustments                     |  | (1              | ) |  | (12,554                             | ) |  | (2,636              | ) |  | (15,191 | )
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Balance as of December 31, 2003               |  | 129,213         |   |  | 425,707                             |   |  | 128,503             |   |  | 683,423 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Additions                                     |  |                |   |  | 67,096                              |   |  | 11,631              |   |  | 78,727  |  
|Additions due to acquisitions of subsidiaries |  | 929             |   |  | 11,020                              |   |  | 4,835               |   |  | 16,784  |  
|Retirements and disposals                     |  |                |   |  | (35,896                             | ) |  | (3,925              | ) |  | (39,821 | )
|Transfers                                     |  |                |   |  | 989                                 |   |  | (1,234              | ) |  | (245    | )
|Exchange rate adjustments                     |  |                |   |  | (3,819                              | ) |  | (1,194              | ) |  | (5,013  | )
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Balance as of December 31, 2004               |  | 130,142         |   |  | 465,097                             |   |  | 138,616             |   |  | 733,855 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Accumulated depreciation                      |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Balance as of December 31, 2002               |  | 26,928          |   |  | 289,442                             |   |  | 62,617              |   |  | 378,987 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Additions                                     |  | 2,452           |   |  | 62,921                              |   |  | 11,187              |   |  | 76,560  |  
|Retirements and disposals                     |  | (157            | ) |  | (32,400                             | ) |  | (1,556              | ) |  | (34,113 | )
|Transfers                                     |  |                |   |  | 371                                 |   |  | (7                  | ) |  | 364     |  
|Exchange rate adjustments                     |  |                |   |  | (9,036                              | ) |  | (1,818              | ) |  | (10,854 | )
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Balance as of December 31, 2003               |  | 29,223          |   |  | 311,298                             |   |  | 70,423              |   |  | 410,944 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Additions                                     |  | 2,452           |   |  | 60,237                              |   |  | 11,680              |   |  | 74,369  |  
|Additions due to impairment                   |  |                |   |  | 346                                 |   |  |                    |   |  | 346     |  
|Retirements and disposals                     |  |                |   |  | (31,908                             | ) |  | (3,214              | ) |  | (35,122 | )
|Transfers                                     |  |                |   |  | (35                                 | ) |  | 48                  |   |  | 13      |  
|Exchange rate adjustments                     |  |                |   |  | (3,321                              | ) |  | (908                | ) |  | (4,229  | )
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Balance as of December 31, 2004               |  | 31,675          |   |  | 336,617                             |   |  | 78,029              |   |  | 446,321 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Net book value as of December 31, 2002        |  | 102,427         |   |  | 121,029                             |   |  | 53,402              |   |  | 276,858 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Net book value as of December 31, 2003        |  | 99,990          |   |  | 114,409                             |   |  | 58,080              |   |  | 272,479 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  
|Net book value as of December 31, 2004        |  | 98,467          |   |  | 128,480                             |   |  | 60,587              |   |  | 287,534 |  
|                                              |  |                 |   |  |                                     |   |  |                     |   |  |         |  



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The Other tangible assets caption includes building installations,
furniture and fittings, and miscellaneous.



As
of December 31, 2004 fully depreciated items amount to KEURs 260,361 (KEURs 180,575 at December 31, 2003).



Leased assets included in the aforementioned numbers are as follows:



|                                    |  |              |  |        
|----------------------------------- |  | ------------ |  | -------
|                                    |  | December 31,
|                                    |  | 2004         |  | 2003   
|Land & buildings                    |  |              |  |        
|Cost                                |  | 126,396      |  | 126,396
|Less accumulated depreciation       |  | 31,351       |  | 28,961 
|                                    |  |              |  |        
|Net book value                      |  | 95,045       |  | 97,435 
|                                    |  |              |  |        
|Data processing hardware & software |  |              |  |        
|Cost                                |  | 9,860        |  | 11,549 
|Less accumulated depreciation       |  | 8,655        |  | 8,479  
|                                    |  |              |  |        
|Net book value                      |  | 1,205        |  | 3,070  
|                                    |  |              |  |        
|Other                               |  |              |  |        
|Cost                                |  | 23,540       |  | 22,385 
|Less accumulated depreciation       |  | 14,880       |  | 13,565 
|                                    |  |              |  |        
|Net book value                      |  | 8,660        |  | 8,820  
|                                    |  |              |  |        
|Total                               |  |              |  |        
|Cost                                |  | 159,796      |  | 160,330
|Less accumulated depreciation       |  | 54,886       |  | 51,005 
|                                    |  |              |  |        
|Net book value                      |  | 104,910      |  | 109,325
|                                    |  |              |  |        



The
depreciation related to assets acquired under finance leases, for the years ended December 31, 2004 and December 31, 2003, was KEURs 5,651 and KEURs 7,130, respectively. The acquisitions of tangible assets under finance leases were KEURs 1,716 and
KEURs 776 for the years ended December 31, 2004 and 2003, respectively.



As of December 31, 2004 assets under construction of KEURs 1,170 were included in Data processing hardware & software and in Other tangible assets. As of December 31, 2003 assets under
construction of KEURs 590 were included in Data processing hardware & software and in Other tangible assets.



F-209



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



7.    INTANGIBLE ASSETS



Balances and movements for the years ended December 31, 2004 and 2003 of the items included under intangible assets are as
follows:



|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|--------------------------------------------- |  | ---------------------------- | - |  | -------------------- |  | --------------------------- | - |  | ------------------- | - |  | -------- | - |  | --------------------- | - |  | --------- | -
|                                              |  | Patents,trademarks& licenses |   |  | Purchased technology |  | Softwaredevelopmentprojects |   |  | Purchased contracts |   |  | Goodwill |   |  | Otherintangibleassets |   |  | Total     |  
|Cost                                          |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2002               |  | 82,797                       |   |  |                     |  | 269,809                     |   |  | 260,480             |   |  | 225,680  |   |  | 15,989                |   |  | 854,755   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Additions                                     |  | 5,887                        |   |  |                     |  | 54,694                      |   |  | 28,209              |   |  | 100,636  |   |  | 79                    |   |  | 189,505   |  
|Additions due to acquisitions of subsidiaries |  | 891                          |   |  |                     |  | 3,734                       |   |  |                    |   |  |         |   |  |                      |   |  | 4,625     |  
|Retirements and disposals                     |  |                             |   |  |                     |  |                            |   |  | (18,043             | ) |  |         |   |  | (10,191               | ) |  | (28,234   | )
|Transfers                                     |  |                             |   |  | 41,688               |  | 1,205                       |   |  | 9,880               |   |  | 5,202    |   |  | (284                  | ) |  | 57,691    |  
|Exchange rate adjustments                     |  | (902                         | ) |  |                     |  | (4,485                      | ) |  | (8,433              | ) |  | (20,557  | ) |  | (107                  | ) |  | (34,484   | )
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2003               |  | 88,673                       |   |  | 41,688               |  | 324,957                     |   |  | 272,093             |   |  | 310,961  |   |  | 5,486                 |   |  | 1,043,858 |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Additions                                     |  | 1,461                        |   |  |                     |  | 55,562                      |   |  | 16,207              |   |  | 109,027  |   |  | 601                   |   |  | 182,858   |  
|Additions due to acquisitions of subsidiaries |  | 724                          |   |  | 24,572               |  | 4,617                       |   |  | 3,620               |   |  | 2,639    |   |  | 2,945                 |   |  | 39,117    |  
|Retirements and disposals                     |  | (8,253                       | ) |  |                     |  | (14,839                     | ) |  | (15,037             | ) |  | 43       |   |  | (8                    | ) |  | (38,094   | )
|Transfers                                     |  | (2,406                       | ) |  | 6,022                |  | 3,118                       |   |  | 168                 |   |  | 38,023   |   |  | 136                   |   |  | 45,061    |  
|Exchange rate adjustments                     |  | (296                         | ) |  |                     |  | (1,556                      | ) |  | (2,303              | ) |  | (7,310   | ) |  | (23                   | ) |  | (11,488   | )
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2004               |  | 79,903                       |   |  | 72,282               |  | 371,859                     |   |  | 274,748             |   |  | 453,383  |   |  | 9,137                 |   |  | 1,261,312 |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Accumulated amortization                      |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2002               |  | 46,721                       |   |  |                     |  | 112,245                     |   |  | 138,967             |   |  | 72,751   |   |  | 13,464                |   |  | 384,148   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Additions                                     |  | 11,120                       |   |  | 4,011                |  | 35,510                      |   |  | 42,746              |   |  | 25,767   |   |  | 1,008                 |   |  | 120,162   |  
|Additions due to impairment                   |  | 2,054                        |   |  |                     |  | 1,213                       |   |  |                    |   |  | 14,028   |   |  |                      |   |  | 17,295    |  
|Retirements and disposals                     |  | (16                          | ) |  |                     |  |                            |   |  | (16,489             | ) |  |         |   |  | (10,188               | ) |  | (26,693   | )
|Transfers                                     |  |                             |   |  |                     |  | (297                        | ) |  | 10                  |   |  | 12,566   |   |  | (77                   | ) |  | 12,202    |  
|Exchange rate adjustments                     |  | (510                         | ) |  |                     |  | (2,782                      | ) |  | (4,902              | ) |  | (11,045  | ) |  | (69                   | ) |  | (19,308   | )
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2003               |  | 59,369                       |   |  | 4,011                |  | 145,889                     |   |  | 160,332             |   |  | 114,067  |   |  | 4,138                 |   |  | 487,806   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Additions                                     |  | 9,911                        |   |  | 8,463                |  | 38,052                      |   |  | 38,863              |   |  | 25,881   |   |  | 1,000                 |   |  | 122,170   |  
|Additions due to impairment                   |  | 397                          |   |  |                     |  | 7,252                       |   |  |                    |   |  | 3,002    |   |  |                      |   |  | 10,651    |  
|Retirements and disposals                     |  | (8,253                       | ) |  |                     |  | (14,603                     | ) |  | (14,521             | ) |  |         |   |  |                      |   |  | (37,377   | )
|Transfers                                     |  | 8                            |   |  | 464                  |  | (485                        | ) |  |                    |   |  | 29,079   |   |  |                      |   |  | 29,066    |  
|Exchange rate adjustments                     |  | (294                         | ) |  |                     |  | (1,393                      | ) |  | (1,680              | ) |  | (4,866   | ) |  | 20                    |   |  | (8,213    | )
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Balance as of December 31, 2004               |  | 61,138                       |   |  | 12,938               |  | 174,712                     |   |  | 182,994             |   |  | 167,163  |   |  | 5,158                 |   |  | 604,103   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Net book value as of December 31, 2002        |  | 36,076                       |   |  |                     |  | 157,564                     |   |  | 121,513             |   |  | 152,929  |   |  | 2,525                 |   |  | 470,607   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Net book value as of December 31, 2003        |  | 29,304                       |   |  | 37,677               |  | 179,068                     |   |  | 111,761             |   |  | 196,894  |   |  | 1,348                 |   |  | 556,052   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  
|Net book value as of December 31, 2004        |  | 18,765                       |   |  | 59,344               |  | 197,147                     |   |  | 91,754              |   |  | 286,220  |   |  | 3,979                 |   |  | 657,209   |  
|                                              |  |                              |   |  |                      |  |                             |   |  |                     |   |  |          |   |  |                       |   |  |           |  



The increase in
software development projects during the years 2003 and 2004 is mainly due to capitalization of software for IT services, as well as ongoing investments in the traditional and e-commerce areas.



The increase in purchased technology during the years 2004 and 2003 are
mainly due to the acquisition of the 55.36% share interest in Opodo Limited (UK) and the acquisition of the remaining 66% share interest in Amadeus Germany GmbH and Balance Sheet reclassification of the original 34% acquisition, respectively.



The increase in purchased contracts during the years 2004 and
2003 are primarily due to signing bonuses paid to travel agencies.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The increase in goodwill during the year 2004 is mainly due to the acquisition of the subsidiaries
Amadeus France SNC, Optims SA, and Opodo Limited (UK) and during the year 2003 is mainly due to the acquisition of the subsidiary Amadeus Germany GmbH.



As of December 31, 2004 fully amortized items amount to KEURs 119,862 (KEURs 126,468 at December 31, 2003).



As of December 31, 2004 an impairment loss amounting KEURs 7,252 has been
recognised in the statement of income mainly related to software developments in the leisure area. These write downs were necessary on account of the change in Managements expectations on the recoverable value, on the basis of discounted
future cash-flow compared to the book value.



As of December
31, 2003 an impairment loss amounting to KEURs 9,961 was recognised in the statement of income related to the goodwill of the Consortia Business unit. An additional impairment loss amounting to KEURs 4,067 has been considered for the goodwill
related to a company in the e-commerce arena and to ICSA-T N.V. These write downs were necessary on account of the low recoverable value on the basis of discounted future cash-flow compared to the book value.



As of December 31, 2004 and 2003 assets under construction of KEURs 1,910
and KEURs 2,758 respectively, were included in Licenses.



8.    INVESTMENTS IN ASSOCIATES AND OTHER LONG-TERM INVESTMENTS



Balances and movements for the years ended December 31, 2004 and 2003 of the items included under investments in associates and long-term investments are
as follows:



|                                           |  |                           |   |  |                           |   |  |         |  
|------------------------------------------ |  | ------------------------- | - |  | ------------------------- | - |  | ------- | -
|                                           |  | Investments In associates |   |  | Otherlong-terminvestments |   |  | Total   |  
|Balance at December 31, 2002               |  | 124,153                   |   |  | 38,278                    |   |  | 162,431 |  
|Additions                                  |  | 6,471                     |   |  | 80,088                    |   |  | 86,559  |  
|Additions due to acquisitions              |  | 857                       |   |  | 67                        |   |  | 924     |  
|Decreases                                  |  |                          |   |  | (2,870                    | ) |  | (2,870  | )
|Share of associates results               |  | (21,706                   | ) |  |                          |   |  | (21,706 | )
|Dividends received                         |  | (9,076                    | ) |  |                          |   |  | (9,076  | )
|Transfers                                  |  | (35,087                   | ) |  | (11,200                   | ) |  | (46,287 | )
|Remeasurement to fair value of investments |  |                          |   |  | 2,274                     |   |  | 2,274   |  
|Exchange rate adjustments                  |  | (2,339                    | ) |  | (1,880                    | ) |  | (4,219  | )
|                                           |  |                           |   |  |                           |   |  |         |  
|Balance at December 31, 2003               |  | 63,273                    |   |  | 104,757                   |   |  | 168,030 |  
|                                           |  |                           |   |  |                           |   |  |         |  
|Additions                                  |  | 3,441                     |   |  | 19,685                    |   |  | 23,126  |  
|Additions due to acquisitions              |  |                          |   |  | 19,048                    |   |  | 19,048  |  
|Decreases                                  |  |                          |   |  | (7,758                    | ) |  | (7,758  | )
|Share of associates results               |  | (7,566                    | ) |  |                          |   |  | (7,566  | )
|Dividends received                         |  | (8,126                    | ) |  |                          |   |  | (8,126  | )
|Transfers                                  |  | (23,521                   | ) |  | (68,332                   | ) |  | (91,853 | )
|Remeasurement to fair value of investments |  |                          |   |  | (2,876                    | ) |  | (2,876  | )
|Exchange rate adjustments                  |  | 87                        |   |  | (685                      | ) |  | (598    | )
|                                           |  |                           |   |  |                           |   |  |         |  
|Balance at December 31, 2004               |  | 27,588                    |   |  | 63,839                    |   |  | 91,427  |  
|                                           |  |                           |   |  |                           |   |  |         |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The Share of associates results caption excludes the impact of taxes payable at the
respective shareholder level. The Transfers caption for investments in associates includes the impact of acquiring controlling interests in associates.



The increase in the Other long-term investments caption during year 2004 is mainly due to deposits of Opodo
Limited (UK). The increase in this caption during 2003 is mainly due to the convertible loan given to Opodo Limited (UK) (Note 9).



As of December 31, 2004, the transfers out of the Other long term investment caption includes the impact of considering the convertible
loan, given to Opodo Limited (UK) in 2003, as an intercompany loan upon the acquisition by the Group of 55.36% interest in this company. The terms of the convertible loan contract have been revised and the option to convert has been cancelled.



9.    NEW INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES



| | a) | During the year ended December 31, 2004 the Group made the following investments in subsidiaries and associates:
| | -- | ----------------------------------------------------------------------------------------------------------------



| | i) | Acquisitions:
| | -- | -------------



| |  | 42% interest in Amadeus Brasil Ltda (total interest 76%).
| | - | ---------------------------------------------------------



| |  | 50% interest in Travellink AB (total interest 85.1%).
| | - | -----------------------------------------------------



| |  | 20% interest in Comtec (Europe) Limited.
| | - | ----------------------------------------



| |  | 51% interest in Amadeus Bulgaria EOOD (total interest 100%).
| | - | ------------------------------------------------------------



| |  | 55.36% interest in Opodo Limited (UK).
| | - | --------------------------------------



| |  | 66.12% interest in Optims S.A. (total interest 96.12%).
| | - | -------------------------------------------------------



| |  | 66% interest in Amadeus France SNC (total interest 100%).
| | - | ---------------------------------------------------------



| | ii) | Newly created companies:
| | --- | ------------------------



| |  | 100% interest in the NMC Amadeus Global Travel Distribution (Malta) Limited.
| | - | ----------------------------------------------------------------------------



| |  | 100% interest in the NMC Amadeus Saudi Arabia Limited.
| | - | ------------------------------------------------------



| |  | 50% Interest in Jordanian National Touristic Marketing Private Shareholding Company.
| | - | ------------------------------------------------------------------------------------



| | iii) | Capital increases:
| | ---- | ------------------



| |  | Amadeus Hong Kong Ltd.
| | - | ----------------------



| |  | Amadeus Marketing (Ghana) Ltd.
| | - | ------------------------------



| |  | Amadeus Austria Marketing, GmbH.
| | - | --------------------------------



| |  | Eviaggi.com S.P.A.
| | - | ------------------



| |  | Amadeus Marketing Philippines Inc.
| | - | ----------------------------------



| |  | Amadeus Central and West Africa S.A.
| | - | ------------------------------------



| |  | Sistema de Reservaciones CRS de Venezuela C.A.
| | - | ----------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The main balance sheet impacts of these transactions are summarized below:



|                                                |  |         |  
|----------------------------------------------- |  | ------- | -
|Cash paid for current transactions              |  | 131,063 |  
|Conversion of debt to equity                    |  | 2,772   |  
|Deferred consideration                          |  | 42,652  |  
|Tax benefit on investments                      |  | (28,728 | )
|Equity in net assets acquired                   |  | (29,146 | )
|                                                |  |         |  
|Excess purchase price                           |  | 118,613 |  
|Allocation of fair value to net assets acquired |  | (8,487  | )
|                                                |  |         |  
|Goodwill                                        |  | 110,126 |  
|                                                |  |         |  



The reconciliation
between the net cash paid for current acquisitions and the net cash invested in subsidiaries and associates is as follows:



|                                                                                                                       |  |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------- | -
|Cash paid for current transactions                                                                                     |  | 131,063 |  
|Cash acquired as a result of current acquisition                                                                       |  | (42,409 | )
|Cash acquired related to the pre-existing ownership in Amadeus Brazil, Travellink, Bulgaria, Optims and Amadeus France |  | (5,579  | )
|Cash acquired related to minority interests                                                                            |  | (27,191 | )
|                                                                                                                       |  |         |  
|Net cash invested in subsidiaries and associates                                                                       |  | 55,884  |  
|                                                                                                                       |  |         |  



Of the business
combinations performed during the year 2004, the acquisition of Opodo Limited, Optims S.A. and Amadeus France SNC have been effected from March 31 onwards being, therefore, subject to the application of the new IFRS 3 Business
Combinations. The accounting for these acquisitions has been determined provisionally and is within the provisional accounting period.



The purchase price and goodwill amounts recognised for Optims S.A. and Amadeus France SNC are included in the purchase price and goodwill aggregates for
the year 2004 presented above.



On July 1, 2004 we acquired a
55.36% controlling stake, via capital increase, in Opodo Ltd, a leading pan-European online travel portal for EURs 62 million in cash, being EURs 20 million paid upon acquisition, and the remaining EURs 42 million deferred in two installments before
year end. The revenues and net profit for the Group from acquisition date is KEURs 24,110 and KEURs (14,015) respectively.



Opodo is managed under Amadeus umbrella and operates as a separate entity with its own board. Opodos nine pre-existing airline owners remain
as shareholders in the portal.



Amadeus was already the
technology provider of Opodo and had presence on its board since April 2003, by means of a Convertible Loan amounting to approximately EURs 52 million. Upon completion of the 55.36% acquisition, the conversion rights attached to the loan have
terminated, and remain as a financial loan.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The purchase consideration paid for the above acquisition and the goodwill acquired is as follows:



|                                  |  |         |  
|--------------------------------- |  | ------- | -
|Purchase consideration            |  |         |  
|Cash invested                     |  | 62,000  |  
|Tax benefit on investment         |  | (10,059 | )
|                                  |  |         |  
|Total purchase consideration      |  | 51,941  |  
|Fair value of net assets acquired |  | 18,952  |  
|                                  |  |         |  
|Goodwill                          |  | 32,989  |  
|                                  |  |         |  



The goodwill amount
recognised is attributed to the economic benefits to be obtained at central level and to the tax losses carry-forward not recognised at acquisition date.



The fair value of assets, liabilities and contingent liability amounts recognised at the acquisition date is as follows:



|                         |  |                                     |  
|------------------------ |  | ----------------------------------- | -
|                         |  | Fair valuesrecognised atacquisition |  
|Assets                   |  |                                     |  
|Curent assets            |  | 115,228                             |  
|Tangible assets          |  | 4,358                               |  
|Intangible assets        |  |                                     |  
|Purchased technology     |  | 21,900                              |  
|Other non current assets |  | 16,483                              |  
|                         | 
|Liabilites               |  |                                     |  
|Deferred Tax Liablities  |  | 6,570                               |  
|Other liabilities        |  | 117,165                             |  
|Contingent liabilites    |  |                                    |  
|                         |  |                                     |  
|Net assets               |  | 34,234                              |  
|Minority interest        |  | (15,282                             | )
|                         |  |                                     |  
|Net assets acquired      |  | 18,952                              |  
|                         |  |                                     |  



Information on
carrying amounts of the above items immediately before the acquisition was effected are not disclosed since the information is currently not available.



Following the 55.36% acquisition of Opodo Limited (UK), the following fair values were identified with respect to the net assets acquired:



|                                                         |  |        |  
|-------------------------------------------------------- |  | ------ | -
|Purchased technology                                     |  | 21,900 |  
|Deferred income taxes payable                            |  | (6,570 | )
|                                                         |  |        |  
|100% allocation of fair value to the net assets acquired |  | 15,330 |  
|55.36% allocation of fair value to net assets acquired   |  | 8,487  |  



Purchased technology
is the capability obtained by the practical application of knowledge, processes, methods, tools and systems to serve the market need more efficiently. In the case of Opodo, it relates to its capability to operate the online travel web-site providing
a wide range of travel agency services.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The recoverable amount of Opodo has been determined as of December 31, 2004 on the basis of a value
in use calculation, which has resulted in no impairment. Cash flow projections have been based on a five year period financial budget approved by management. Estimated cash flows beyond this period are extrapolated using the estimated growth rate
for the business in which Opodo operates.



| | b) | During the year ended December 31, 2003 the Group made the following investments in subsidiaries and associates:
| | -- | ----------------------------------------------------------------------------------------------------------------



| | i) | Acquisitions:
| | -- | -------------



| |  |  | 66% interest in Amadeus Germany GmbH (former Start Amadeus GmbH; total interest 100%).
| | - |  | --------------------------------------------------------------------------------------



| |  |  | 24.5% interest in Amadeus Polska Sp.zo.o (total interest 100%).
| | - |  | ---------------------------------------------------------------



| |  |  | 100% interest in Airline Automation, Inc.
| | - |  | -----------------------------------------



| |  |  | 17.54% interest in Vivacances S.A. (total interest 67.54%).
| | - |  | -----------------------------------------------------------



| |  |  | 35% interest in Amadeus Kuwait Company W.L.L.
| | - |  | ---------------------------------------------



| |  |  | 30% interest in Optims S.A.
| | - |  | ---------------------------



| |  |  | 10% interest in Travellink AB (total interest 35%).
| | - |  | ---------------------------------------------------



| |  |  | 100% interest in German Travel Services GmbH. The Group had temporary control over the company and, therefore, has not consolidated this participation, which has been sold in 2004.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | Newly created companies:
| | --- | ------------------------



| |  |  | 100% interest in the NMCs Amadeus Global Travel Distribution Southern Africa Limited, Amadeus Marketing Romania S.R.L., Amadeus East Africa and Amadeus Hong Kong Ltd.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 50% interest in PT Amadeus Indonesia
| | - |  | ------------------------------------



| |  |  | 49% interest in Amadeus Gulf LLC
| | - |  | --------------------------------



| | iii) | Capital increases
| | ---- | -----------------



| |  |  | Amadeus Polska Sp.zo.o
| | - |  | ----------------------



| |  |  | Amadeus Hellas S.A.
| | - |  | -------------------



| |  |  | Amadeus Global Travel Israel Limited
| | - |  | ------------------------------------



| |  |  | Amadeus GTD Australia Pty Ltd.
| | - |  | ------------------------------



| |  |  | Eviaggi.com S.P.A.
| | - |  | ------------------



| |  |  | Travellink AB
| | - |  | -------------



The main balance sheet impacts of these transactions are summarized below:



|                                                |  |         |  
|----------------------------------------------- |  | ------- | -
|Cash paid for current transactions              |  | 137,666 |  
|Conversion of debt to equity                    |  | 2,000   |  
|Deferred consideration                          |  | 13,863  |  
|Tax benefit on investments                      |  | (16,837 | )
|Equity in net assets acquired                   |  | (33,882 | )
|                                                |  |         |  
|Excess purchase price                           |  | 102,810 |  
|Allocation of fair value to net assets acquired |  | (21,633 | )
|                                                |  |         |  
|Goodwill                                        |  | 81,177  |  
|                                                |  |         |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Following the 66% acquisition of Amadeus Germany GmbH (former Start Amadeus), the
following fair values were identified with respect to net assets acquired:



|                                                |  |         |  
|----------------------------------------------- |  | ------- | -
|Purchased technology                            |  | 30,056  |  
|Purchased contracts                             |  | 5,234   |  
|Deferred income taxes payable                   |  | (13,657 | )
|                                                |  |         |  
|Allocation of fair value to net assets acquired |  | 21,633  |  
|                                                |  |         |  



Purchased technology related to the original 34% acquisition, amounting to KEURs 11,632 has been transferred to the Purchased technology caption in the Balance Sheet.



The reconciliation between the net cash paid for current transactions and the net cash invested in
subsidiaries and associates is as follows:



|                                                                                      |  |         |  
|------------------------------------------------------------------------------------- |  | ------- | -
|Cash paid for current transactions                                                    |  | 137,666 |  
|Cash acquired as a result of current acquisition                                      |  | (35,233 | )
|Cash acquired related to the pre-existing ownership in Amadeus Germany and Vivacances |  | (18,476 | )
|                                                                                      |  |         |  
|Net cash invested in subsidiaries and associates                                      |  | 83,957  |  
|                                                                                      |  |         |  



|10. | CURRENT AND LONG TERM DEBT
|--- | --------------------------



The breakdown of amounts owed to financial institutions, by maturity, is as follows as of December, 31:



|                            |  |        |  |       
|--------------------------- |  | ------ |  | ------
|                            |  | 2004   |  | 2003  
|Syndicated loansshort-term |  |       |  | 62,729
|Other credit facilities     |  | 8,562  |  | 17,581
|                            |  |        |  |       
|Total short-term debt       |  | 8,562  |  | 80,310
|                            |  |        |  |       
|Other                       |  | 2,538  |  | 701   
|                            |  |        |  |       
|Total long-term debt        |  | 2,538  |  | 701   
|                            |  |        |  |       
|Total debt                  |  | 11,100 |  | 81,011
|                            |  |        |  |       



The
Group has two syndicated variable rate loans as of December 31, 2004 which are under KEURs 200,000 and KEURs 300,000 dual currency revolving credit facility agreements, denominated in EUR and USD. As of December 31, 2004 and 2003, the total unused
amounts available under these facilities are KEURs 500,000 and KEURs 565,000, respectively. The interest rates for the drawdowns on these loans ranged from 2.37% to 2.58% for the year ended December 31, 2004 and from 2.39% to 3.75% in 2003. These
loans have commitment fees that range from 0.25% to 0.26% of the unused portion. Under the terms of these loan agreements, the Group is obliged to meet certain covenants, the most important of which are that the ratio of debt to total EBITDA
(Earnings before interest, tax, depreciation and amortization) shall not exceed 3:1 and that the ratio of EBITDA to total financial charges shall be or shall exceed 4:1.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The repayment and maturity schedule for these two facilities as of December 31, is as
follows:



|                  |  |                             |  |                                         |  |                             |  |                                        
|----------------- |  | --------------------------- |  | --------------------------------------- |  | --------------------------- |  | ---------------------------------------
|                  |  | 2004                        |  | 2003                                   
|Date of maturity  |  | Amount offacilitiesmaturing |  | Repaymentschedule foroutstanding amount |  | Amount offacilitiesmaturing |  | Repaymentschedule foroutstanding amount
|April 21, 2004    |  |                            |  |                                        |  | 27,729                      |  | 27,729                                 
|April 24, 2004    |  |                            |  |                                        |  | 100,000                     |  | 35,000                                 
|April 24, 2005    |  | 100,000                     |  |                                        |  | 100,000                     |  |                                       
|April 24, 2006    |  | 100,000                     |  |                                        |  | 100,000                     |  |                                       
|December 20, 2006 |  | 150,000                     |  |                                        |  | 150,000                     |  |                                       
|December 20, 2007 |  | 150,000                     |  |                                        |  | 150,000                     |  |                                       
|                  |  |                             |  |                                         |  |                             |  |                                        
|                  |  | 500,000                     |  |                                        |  | 627,729                     |  | 62,729                                 
|                  |  |                             |  |                                         |  |                             |  |                                        



Short
term credit facilities have accrued interest at rates between 2.31% and 6.21% during 2004 and between 2.37% and 5.60% in 2003.



In addition to the syndicated loans mentioned above, various financial institutions have made available lines of credit and credit
facilities, which require no commitment fees. As of December 31, 2004 and 2003, the unused portion of these credit facilities is KEURs 96,089 and KEURs 94,360, respectively.



|11. | COMMITMENTS
|--- | -----------



| | a) | Leases
| | -- | ------



The Group leases certain facilities and equipment under operating and finance leases.



The most significant asset acquired under finance lease is
the CRS data processing center in Erding. The original cost (in 1988) of this facility was KEURs 106,558, which was increased due to new construction by KEURs 10,942 during the year 2000. These expenditures have been financed via lease agreements
with similar terms and recorded as tangible assets under a finance lease (see Note 6). These leases expire on December 31, 2019, although the Group has an option to terminate the main lease on June 30, 2011. At the end of years 2009 and 2019 the
Group has the option to purchase the land and the buildings for the residual value of KEURs 70,235 and KEURs 21,097, respectively. Quarterly payments consisted of principal plus interest at an average of 4.98% during 2004 and 2003.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The future minimum lease payments for finance leases as of December 31, is as
follows:



|                                  |  |         |  |                  |  |         |  |                 
|--------------------------------- |  | ------- |  | ---------------- |  | ------- |  | ----------------
|Year(s) due                       |  | 2004    |  | 2003            
|                                  |  | Gross   |  | Net presentvalue |  | Gross   |  | Net presentvalue
|01                               |  | 15,089  |  | 13,979           |  | 14,912  |  | 13,824          
|12                               |  | 12,727  |  | 11,650           |  | 14,029  |  | 12,861          
|23                               |  | 10,965  |  | 9,741            |  | 12,263  |  | 10,982          
|34                               |  | 10,542  |  | 9,170            |  | 10,468  |  | 9,028           
|45                               |  | 8,976   |  | 7,469            |  | 10,402  |  | 8,790           
|510                              |  | 35,924  |  | 24,725           |  | 37,716  |  | 26,484          
|1015                             |  | 35,865  |  | 19,266           |  | 35,865  |  | 19,267          
|1520                             |  | 21,097  |  | 9,999            |  | 28,271  |  | 12,827          
|                                  |  |         |  |                  |  |         |  |                 
|Total minimum lease payments      |  | 151,185 |  | 105,999          |  | 163,926 |  | 114,063         
|Less amount representing interest |  | 45,186  |  |                 |  | 49,863  |  |                
|                                  |  |         |  |                  |  |         |  |                 
|Obligations under finance leases  |  | 105,999 |  | 105,999          |  | 114,063 |  | 114,063         
|                                  |  |         |  |                  |  |         |  |                 
|Current portion                   |  | 9,996   |  |                  |  | 9,643   |  |                 
|Long-term portion                 |  | 96,003  |  |                  |  | 104,420 |  |                 
|                                  |  |         |  |                  |  |         |  |                 
|                                  |  | 105,999 |  |                  |  | 114,063 |  |                 
|                                  |  |         |  |                  |  |         |  |                 



For
the year ended December 31, 2004 and 2003 the rental expense for operating leases were KEURs 51,089 and KEURs 41,839, respectively.



The future minimum lease payments for operating leases as of December 31, is as follows:



|               |  |         |  |        
|-------------- |  | ------- |  | -------
|Year(s) due    |  | 2004    |  | 2003   
|0  1          |  | 38,972  |  | 44,097 
|1  2          |  | 33,524  |  | 36,880 
|2  3          |  | 26,687  |  | 29,580 
|3  4          |  | 21,875  |  | 23,571 
|4  5          |  | 21,117  |  | 21,094 
|5  10         |  | 49,428  |  | 56,756 
|10  15        |  | 6,482   |  | 15,500 
|               |  |         |  |        
|Total payments |  | 198,085 |  | 227,478
|               |  |         |  |        



| | b) | Other commitments
| | -- | -----------------



As of December 31, 2004 and 2003, the Group had short-term commitments to acquire tangible assets for KEURs 8,142 and KEURs 9,252, respectively.
Additionally, the Group has entered into various software license agreements, which could entail future payments. The likelihood that the Group will make these payments is subject to the compliance by the counterparty with certain contractual
obligations. The maximum amount committed under these agreements, at December 31, 2004, is KEURs 7,761 and KEURs 660 for the short and the long-term, respectively (at December 31, 2003, KEURs 1,227 and KEURs 268 for the short and the long-term,
respectively).



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



12.    OTHER LONG-TERM LIABILITIES



The breakdown of this caption as of December 31, 2004 and 2003 is as follows:



|                                                                            |  |        |  |       
|--------------------------------------------------------------------------- |  | ------ |  | ------
|                                                                            |  | 2004   |  | 2003  
|Debt related to equity instruments similar to treasury shares (see Note 13) |  |       |  | 28,380
|Deferred purchase consideration                                             |  | 24,173 |  | 27,070
|Defined benefit plans                                                       |  | 3,355  |  | 3,711 
|Derivative liabilities (Note 18)                                            |  | 2,448  |  | 4,980 
|Others                                                                      |  | 7,327  |  | 8,637 
|                                                                            |  |        |  |       
|                                                                            |  | 37,303 |  | 72,778
|                                                                            |  |        |  |       



| | a) | Deferred purchase consideration
| | -- | -------------------------------



The amount of this liability is contingent on the evolution of the respective businesses acquired.



| | b) | Pension and Post-retirement benefits
| | -- | ------------------------------------



The Group operates funded and unfunded defined benefit plans.



The amounts related to defined benefit plans recognized in the balance sheet as of December 31, are as follows:



|                                                        |  |         |   |  |         |  
|------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                        |  | 2004    |   |  | 2003    |  
|Present value of wholly unfunded obligations            |  | 9,045   |   |  | 6,596   |  
|Present value of partially or wholly funded obligations |  | 38,819  |   |  | 34,852  |  
|                                                        |  |         |   |  |         |  
|Present value of defined benefit obligations            |  | 47,864  |   |  | 41,448  |  
|Fair value of plan assets                               |  | (33,728 | ) |  | (31,270 | )
|                                                        |  |         |   |  |         |  
|Funded Status of the Plan                               |  | 14,136  |   |  | 10,178  |  
|Past service cost                                       |  | (1,596  | ) |  |        |  
|Unrecognized actuarial gains/(losses)                   |  | (9,185  | ) |  | (6,467  | )
|                                                        |  |         |   |  |         |  
|Net (asset)/liability in balance sheet                  |  | 3,355   |   |  | 3,711   |  
|                                                        |  |         |   |  |         |  



The defined benefit
plan amounts recognized in the statement of income for the years ended December 31, are as follows:



|                                                      |  |        |   |  |        |   |  |        |  
|----------------------------------------------------- |  | ------ | - |  | ------ | - |  | ------ | -
|                                                      |  | 2004   |   |  | 2003   |   |  | 2002   |  
|Net Current service cost                              |  | 2,408  |   |  | 2,243  |   |  | 1,214  |  
|Interest cost                                         |  | 2,405  |   |  | 2,289  |   |  | 1,354  |  
|Expected return on plan assets                        |  | (2,281 | ) |  | (1,943 | ) |  | (1,006 | )
|Amortization of unrecognized actuarial (gains)/losses |  | 236    |   |  | 238    |   |  | 104    |  
|Effect of curtailments or settlements                 |  | 242    |   |  | 684    |   |  |       |  
|Past service cost                                     |  | 219    |   |  |       |   |  | 41     |  
|                                                      |  |        |   |  |        |   |  |        |  
|Total net periodic pension cost                       |  | 3,229  |   |  | 3,511  |   |  | 1,707  |  
|                                                      |  |        |   |  |        |   |  |        |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Balances and movements for the years ended December 31, 2004 and 2003 of the items included under
defined benefit plan liability are as follows:



|                                                                      |  |        |   |  |        |   |  |       |  
|--------------------------------------------------------------------- |  | ------ | - |  | ------ | - |  | ----- | -
|                                                                      |  | 2004   |   |  | 2003   |   |  | 2002  |  
|Balance at the beginning of the period                                |  | 3,711  |   |  | 8,396  |   |  | 5,317 |  
|Company contributions                                                 |  | (3,087 | ) |  | (4,076 | ) |  | (495  | )
|Net periodic pension cost for the year                                |  | 2,987  |   |  | 2,828  |   |  | 1,707 |  
|Benefits paid directly by the company in the year                     |  | (298   | ) |  | (329   | ) |  |      |  
|Adjustments relating to acquisitions/divestures/business combinations |  |       |   |  | 1,459  |   |  |      |  
|Adjustments relating to settlements/curtailments/terminations         |  | 242    |   |  | 684    |   |  |      |  
|Exchange rates differences                                            |  | (161   | ) |  | (488   | ) |  | (735  | )
|Additional minimum liability charged to equity                        |  |        |   |  |        |   |  | 2,602 |  
|Additional minimum liability adjustment                               |  |       |   |  | (2,602 | ) |  |       |  
|Reclassification from other net liabilities                           |  | (39    | ) |  | (2,161 | ) |  |      |  
|                                                                      |  |        |   |  |        |   |  |       |  
|Balance at the end of the period                                      |  | 3,355  |   |  | 3,711  |   |  | 8,396 |  
|                                                                      |  |        |   |  |        |   |  |       |  



A summary of the major
actuarial assumptions used to calculate the most significant portion of the defined benefit obligation as of December 31, is as follows:



|                                        |  |               |  |              
|--------------------------------------- |  | ------------- |  | -------------
|                                        |  | 2004          |  | 2003         
|Discount rate for Obligations           |  | 5.18%6.00%   |  | 5.61%6.25%  
|Discount rate for Expense               |  | 5.55%6.25%   |  | 5.88%6.75%  
|Long-Term Rate of Return on Plan Assets |  | 5.68%8.30%   |  | 6.32%8.50%  
|Rate of Future Compensation Increases   |  | 3.30%3.75%   |  | 3.27%3.75%  
|Rate of Pension Increases               |  | 1.82%         |  | 1.84%        
|Medical rate and ultimate rate          |  | 10.5% / 5.25% |  | 11.0% / 5.25%



For the years ended
December 31, 2004 and 2003 the expense for defined contribution plans is KEURs 15,660 and KEURs 13,419, respectively.



|13. | SHAREHOLDERS EQUITY
|--- | --------------------



Balances and movements of class A and class B shares for the years 2004 and 2003 are as follows:



|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  
|----------------------- |  | --------------------------------------- |  | -------------- | - |  | ----------------- | - |  | -------------------------------------- | -
|                        |  | Class A shares (Par value 0.01 Euros) |  |                |   | 
|                        |  | Issued shares                           |  | Treasuryshares |   |  | Outstandingshares |   |  | Class B shares(Par value 0.10 Euros) |  
|As of December 31, 2002 |  | 590,000,000                             |  | 15,711,730     |   |  | 574,288,270       |   |  | 219,983,100                            |  
|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  
|Additions               |  |                                        |  | 22,025         |   |  | (22,025           | ) |  |                                       |  
|Disposals               |  |                                        |  | (230,912       | ) |  | 230,912           |   |  |                                       |  
|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  
|As of December 31, 2003 |  | 590,000,000                             |  | 15,502,843     |   |  | 574,497,157       |   |  | 219,983,100                            |  
|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  
|Additions               |  |                                        |  | 10,311,563     |   |  | (10,311,563       | ) |  |                                       |  
|Disposals               |  |                                        |  | (6,708,736     | ) |  | 6,708,736         |   |  | (48,539,400                            | )
|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  
|As of December 31, 2004 |  | 590,000,000                             |  | 19,105,670     |   |  | 570,894,330       |   |  | 171,443,700                            |  
|                        |  |                                         |  |                |   |  |                   |   |  |                                        |  



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The shares included above represent the authorized share capital of the Company. All
shares are fully subscribed and paid.



The
Treasury shares have been acquired primarily in order to cover obligations under the Stock Incentive Plan described in Note 16 and warrants issued as described in Note 18. Disposals include shares and options granted to employees in connection with
the different Stock Incentive Plans and portfolio adjustments made in order to match with the current obligations of the Group.



In the Annual General Shareholders meeting that has taken place in June 2004, the redemption of 48,539,400 class B
shares was approved, following the sale of 78,000,000 Amadeus Class A shares by Lufthansa Commercial Holding GmbH on February 12, 2004.



Each class A share carries the right to one vote, whilst each class B share carries the right to 10 votes.
Economic rights are greater for class A shares in respect of any future distribution of dividends. The right to receive a dividend for class B shares is calculated as the lesser of 1% of total dividends or 1% of the par value
of class B shares. In the event of liquidation of the assets of the Group, class A shares have greater economic rights than class B shares, as the Group would pay out the par value of class A shares
and in the case of any outstanding amounts they would be distributed among class B shares for their par value; further remaining amounts would be distributed among class A shares.



As of December 31, 2004 the Companys shares are held
as follows:



|                                     |  |                 |  |                 |  |                    |   |  |                        |  
|------------------------------------ |  | --------------- |  | --------------- |  | ------------------ | - |  | ---------------------- | -
|Shareholder                          |  | Class Ashares |  | Class Bshares |  | % ofClassAShares |   |  | % oftotal votingrights |  
|Société Air France                   |  | 137,847,654     |  | 85,782,614      |  | 23.36              | % |  | 43.21                  | %
|Iberia Líneas Aéreas de España, S.A. |  | 107,826,173     |  | 67,100,243      |  | 18.28              | % |  | 33.80                  | %
|Lufthansa Commercial Holding, GmbH   |  | 29,826,173      |  | 18,560,843      |  | 5.05               | % |  | 9.34                   | %
|Other (1)                            |  | 314,500,000     |  |                |  | 53.31              | % |  | 13.65                  | %
|                                     |  |                 |  |                 |  |                    |   |  |                        |  
|Total                                |  | 590,000,000     |  | 171,443,700     |  | 100                | % |  | 100                    | %
|                                     |  |                 |  |                 |  |                    |   |  |                        |  

| | 
| | 

| | (1) | Includes the Treasury shares and the public shares.
| | --- | ---------------------------------------------------



As of December 31, 2003 the Companys shares are held as follows:



|                                     |  |                 |  |                 |  |                    |   |  |                        |  
|------------------------------------ |  | --------------- |  | --------------- |  | ------------------ | - |  | ---------------------- | -
|Shareholder                          |  | Class Ashares |  | Class Bshares |  | % ofClassAShares |   |  | % oftotal votingrights |  
|Société Air France                   |  | 137,847,654     |  | 85,782,614      |  | 23.36              | % |  | 35.69                  | %
|Iberia Líneas Aéreas de España, S.A. |  | 107,826,173     |  | 67,100,243      |  | 18.28              | % |  | 27.92                  | %
|Lufthansa Commercial Holding, GmbH   |  | 107,826,173     |  | 67,100,243      |  | 18.28              | % |  | 27.92                  | %
|Other (1)                            |  | 236,500,000     |  |                |  | 40.08              | % |  | 8.47                   | %
|                                     |  |                 |  |                 |  |                    |   |  |                        |  
|Total                                |  | 590,000,000     |  | 219,983,100     |  | 100                | % |  | 100                    | %
|                                     |  |                 |  |                 |  |                    |   |  |                        |  

| | 
| | 

| | (1) | Includes the Treasury shares and the public shares.
| | --- | ---------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The General Shareholders Assembly of June 14, 2004 declared a dividend per
class A and per class B share, in accordance with the Companys by-laws and once the economic rights of the Treasury shares were proportionally distributed to the remaining shares. The final dividend of KEURs 35,000
was paid in July 2004 with regards to the distribution of 2003 results.



Included in retained earnings are reserves of KEURs 117,683 and KEURs 106,696 as of December 31, 2004 and 2003, respectively, which cannot be distributed as dividends according to statutory regulations applicable to
various Group companies. Within these restricted reserves there is an allocation for the total amount of Treasury shares acquired which is charged to additional paid-in capital.



The components of the Treasury shares and other similar equity instruments caption as of December 31, were
as follows:



|                |  |                  |  |            |  |         |  |        
|--------------- |  | ---------------- |  | ---------- |  | ------- |  | -------
|                |  | Number of shares |  | KEURs     
|                |  | 2004             |  | 2003       |  | 2004    |  | 2003   
|Treasury shares |  | 19,105,670       |  | 15,502,843 |  | 109,499 |  | 98,519 
|Equity swaps    |  |                 |  | 4,500,000  |  |        |  | 28,380 
|                |  |                  |  |            |  |         |  |        
|                |  | 19,105,670       |  | 20,002,843 |  | 109,499 |  | 126,899
|                |  |                  |  |            |  |         |  |        



|14. | RELATED PARTY BALANCES AND TRANSACTIONS
|--- | ---------------------------------------



Below is a summary of significant balances and transactions with affiliates. All transactions with affiliates are carried out on an
arms length basis.



| | a) | Accounts receivablesaffiliates
| | -- | -------------------------------



The receivables are primarily for revenues earned from worldwide bookings made through the Amadeus CRS for flights on the shareholder
airlines. Total revenues earned by the Group from affiliates for the year ended December 31, 2004 and 2003 are KEURs 498,452 and KEURs 505,291, respectively.



| | b) | Loans receivable and advancesaffiliates
| | -- | ----------------------------------------



Total interest earned by the Group from affiliates is KEURs 146 and KEURs 44 for the year ended December 31, 2004 and 2003, respectively.
Interest rates for these loans denominated in United States Dollars (USD) and EURs ranged from 3.29% to 6.15% for the year ended December 31, 2004. Interest rates for these loans denominated in United States Dollars (USD), EURs and Swedish Krona
(SEK) ranged from 3.16% to 4.15% for the year ended December 31, 2003.



| | c) | Accounts payableaffiliates
| | -- | ---------------------------



The payables arise primarily from distribution fees due for bookings made through the shareholder airlines. Total operating expenses
incurred by the Amadeus Group with its affiliates are KEURs 266,701 and KEURs 281,589 for the year ended December 31, 2004 and 2003, respectively.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



| | d) | Board of Directors remuneration
| | -- | -------------------------------



Total remuneration of all kinds to the members of the Board of Directors of the Company amounts to KEURs 426 in 2004 (KEURs 460 in 2003).
No loans, advances or stock options have been granted to the members of the Board of Directors.



|15. | SEGMENT INFORMATION
|--- | -------------------



The Group operates in the travel industry and, accordingly, events that significantly affect the industry could also affect the
Groups operations and financial position. The following geographical distribution of revenues is based primarily on the country where bookings were made and, with respect to bookings made through the Groups CRS directly with airlines,
based upon the home country of the airline:



|                  |  |                         |  |           |  |          
|----------------- |  | ----------------------- |  | --------- |  | ---------
|                  |  | Year ended December 31,
|                  |  | 2004                    |  | 2003      |  | 2002     
|Europe            |  | 1,371,988               |  | 1,293,464 |  | 1,160,111
|United States     |  | 169,717                 |  | 182,544   |  | 203,258  
|Rest of the world |  | 514,975                 |  | 453,001   |  | 492,951  
|                  |  |                         |  |           |  |          
|Total             |  | 2,056,680               |  | 1,929,009 |  | 1,856,320
|                  |  |                         |  |           |  |          



The
following geographical distribution of assets is based on the country where the assets were located or relate to. The split of assets as of December 31, 2004 is as follows:



|                          |  |         |  |        |  |                  |  |                                          |  |        
|------------------------- |  | ------- |  | ------ |  | ---------------- |  | ---------------------------------------- |  | -------
|                          |  | Europe  |  | US     |  | Rest of theworld |  | Assets usedfor generalenterprisepurposes |  | Total  
|Tangible assets           |  | 266,220 |  | 6,929  |  | 14,385           |  |                                         |  | 287,534
|Intangible assets         |  | 367,637 |  | 60,279 |  | 14,034           |  | 215,259                                  |  | 657,209
|Investments in associates |  | 16,382  |  | 2,664  |  | 8,542            |  |                                         |  | 27,588 
|                          |  |         |  |        |  |                  |  |                                          |  |        
|Total                     |  | 650,239 |  | 69,872 |  | 36,961           |  | 215,259                                  |  | 972,331
|                          |  |         |  |        |  |                  |  |                                          |  |        



The
split of assets as of December 31, 2003 is as follows:



|                          |  |         |  |         |  |                  |  |                                          |  |        
|------------------------- |  | ------- |  | ------- |  | ---------------- |  | ---------------------------------------- |  | -------
|                          |  | Europe  |  | US      |  | Rest of theworld |  | Assets usedfor generalenterprisepurposes |  | Total  
|Tangible assets           |  | 249,330 |  | 12,177  |  | 10,972           |  |                                         |  | 272,479
|Intangible assets         |  | 255,727 |  | 85,722  |  | 14,558           |  | 200,045                                  |  | 556,052
|Investments in associates |  | 45,040  |  | 6,579   |  | 11,654           |  |                                         |  | 63,273 
|                          |  |         |  |         |  |                  |  |                                          |  |        
|Total                     |  | 550,097 |  | 104,478 |  | 37,184           |  | 200,045                                  |  | 891,804
|                          |  |         |  |         |  |                  |  |                                          |  |        



Because of the interrelationships between the Groups geographical activities, it is not meaningful to segment global results for purposes of IAS 14, Segment Reporting.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



|16. | STOCK INCENTIVE PLANS
|--- | ---------------------



Beginning with the International Global Offering of 1999, the Group adopted a stock based Employee Incentive Plan (the Plan) to retain and motivate senior
management and employees starting October 19, 1999. The plan provides for the award of common stock in the form of stock options and stock grants as follows:



| | i) | The Group granted to its employees a one-time grant of shares, depending on salary level and seniority, which would vest over a three-year period in three equal annual installments.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | The Group granted to senior management a one-time grant of shares, which would vest at the end of a three to four year period.
| | --- | ------------------------------------------------------------------------------------------------------------------------------



| | iii) | The Group also granted to executive employees (including non-senior members from the management team), in each of the years 1999 to 2004, options to purchase shares of the
Group ́s Common Stock at the market price on the date of the grant until the year 2003, and at the average market price for the year 2004. Thus no compensation expense has been recorded for plans prior to 2004 and KEURs 415 compensation expense
have been recognised related to the 2004 Plan. The aforementioned options vest in equal installments over a four-year period measured from the date of the grant and have a ten-year term from the grant date.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, the detail of these plans is as follows:



|                             |  |                  |   |  |                        |   |  |                  |   |  |                        |  
|---------------------------- |  | ---------------- | - |  | ---------------------- | - |  | ---------------- | - |  | ---------------------- | -
|                             |  | 2004             |   |  | 2003                   |  
|                             |  | Numberof options |   |  | Value atexercise price |   |  | Numberof options |   |  | Value atexercise price |  
|Outstanding at 1st January   |  | 12,056,290       |   |  | 66,559                 |   |  | 8,945,901        |   |  | 48,378                 |  
|                             |  |                  |   |  |                        |   |  |                  |   |  |                        |  
|Of which vested              |  | 4,983,719        |   |  | 29,549                 |   |  | 2,747,244        |   |  | 17,454                 |  
|New rights                   |  | 3,630,120        |   |  | 19,203                 |   |  | 3,446,115        |   |  | 19,919                 |  
|Rights exercised (*)         |  | (889,071         | ) |  | (4,576                 | ) |  | (49,707          | ) |  | (224                   | )
|Rights expired               |  | (217,042         | ) |  | (1,238                 | ) |  | (286,019         | ) |  | (1,514                 | )
|Plan 2003 adjustment         |  | (168,049         | ) |  | (971                   | ) |  |                 |   |  |                       |  
|                             |  |                  |   |  |                        |   |  |                  |   |  |                        |  
|Outstanding at 31st December |  | 14,412,248       |   |  | 78,977                 |   |  | 12,056,290       |   |  | 66,559                 |  
|                             |  |                  |   |  |                        |   |  |                  |   |  |                        |  
|                             |  |                  |   | 
|Of which vested              |  | 6,476,974        |   |  | 37,696                 |   |  | 4,983,719        |   |  | 29,549                 |  

---

|(*) | The average price for the rights exercised has been 5.15 EURs during 2004 and 4.5 EURs during 2003.
|--- | ---------------------------------------------------------------------------------------------------



The increase in new rights during 2004 corresponds to the 2004 Stock Option Program.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The maturity dates of options as of December 31, are as follows:



|            |  |            |  |                |  |            |  |               
|----------- |  | ---------- |  | -------------- |  | ---------- |  | --------------
|            |  | 2004       |  | 2003          
|            |  | Number     |  | Exercise price |  | Number     |  | Exercise price
|Five years  |  | 1,596,212  |  | 5.75           |  |           |  |              
|Six years   |  | 1,122,956  |  | 8.89           |  | 1,941,603  |  | 5.75          
|Seven years |  | 2,106,936  |  | 5.42           |  | 1,160,967  |  | 8.89          
|Eight years |  | 2,754,393  |  | 3.88           |  | 2,458,081  |  | 5.42          
|Nine years  |  | 3,201,631  |  | 5.78           |  | 3,049,524  |  | 3.88          
|Ten years   |  | 3,630,120  |  | 5.29           |  | 3,446,115  |  | 5.78          
|            |  |            |  |                |  |            |  |               
|Total       |  | 14,412,248 |  |                |  | 12,056,290 |  |               
|            |  |            |  |                |  |            |  |               



| | iv) | During 2002, the Group implemented an Employee Stock Purchase Program. The general conditions of the program allow employees to purchase Company shares every three months up to an
established percentage of the employees annual salary. If the purchased shares are maintained over a period of 30 days, the Company will grant shares for 15% of the amount the employee contributes to the program. The cost for the year ended
December 31, 2004 and 2003 was KEURs 86 and KEURs 97, respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The IFRS 2 on sharebased payment transactions, which provides a fair value approach to accounting for share based payments, has been issued in the first quarter 2004. The effective application date will be
January 1, 2005. The transitional provisions will require prospective application for equity settled stock incentive plans. As a result, the Group does not provide a pro forma impact on the income statement and earnings per share that would have
applied had the transition provision required retrospective application.



|17. | ADDITIONAL INCOME STATEMENT DATA AND RELATED DISCLOSURES
|--- | --------------------------------------------------------



The Groups personnel expense and number of employees were as follows:



|                            |  |                        |  |        
|--------------------------- |  | ---------------------- |  | -------
|                            |  | Year ended December 31
|                            |  | 2004                   |  | 2003   
|Gross personnel costs       |  | 402,111                |  | 387,863
|Less amount capitalized     |  | 25,144                 |  | 26,429 
|                            |  |                        |  |        
|Net charge to income        |  | 376,967                |  | 361,434
|                            |  |                        |  |        
|Average number of employees |  | 5,760                  |  | 5,257  
|                            |  |                        |  |        



In the year 2003, the
average headcount has been recalculated using the period from the acquisition to year-end instead of averaging across the full year.



The Groups net interest expense was as follows:



|                     |  |                         |  |       
|-------------------- |  | ----------------------- |  | ------
|                     |  | Year ended December 31,
|                     |  | 2004                    |  | 2003  
|Interest expense     |  | 12,266                  |  | 17,750
|Less interest income |  | 6,221                   |  | 2,037 
|                     |  |                         |  |       
|Net interest expense |  | 6,045                   |  | 15,713
|                     |  |                         |  |       



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



|                     |  |                         |  |       
|-------------------- |  | ----------------------- |  | ------
|                     |  | Year ended December 31,
|                     |  | 2004                    |  | 2003  
|Interest expense     |  | 12,266                  |  | 17,750
|Less interest income |  | 6,221                   |  | 2,037 
|                     |  |                         |  |       
|Net interest expense |  | 6,045                   |  | 15,713
|                     |  |                         |  |       



|18. | FINANCIAL INSTRUMENTS
|--- | ---------------------



| | a) | Objectives and significant terms and conditions
| | -- | -----------------------------------------------



The Group uses the following financial instruments as part of its commercial operations and to manage the risks arising from fluctuations in currency
exchange rates, interest rates and share market prices:



| | i) | Currency derivatives
| | -- | --------------------



The Group has risks associated with fluctuations in currency exchange rates and uses currency derivatives to hedge future cash flows, net investments in
foreign entities and certain monetary assets and liabilities. The Group is party to a variety of foreign currency forward and option contracts for the management of these exchange rate exposures.



As of December 31, 2004, the details of open foreign currency
options and open forward contracts is as follows:



Derivative Assets:



|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|------------------------- |  | ------------------- |  | -------- | -------- | -------- | --- | --------------------------- | --- |  | ------------------ | ----- | --- |  | ------ | - |  | ------
|Type                      |  | FinancialInstrument |  | Currency |          | Maturity |     | Notionalamount (KEURs)(***) |     |  | Fair value (KEURs)
|                          |  |                     |  |          | OCI (**) |          | CTA |                             | P&L |  |                    | Total
|Cash flow hedge           |  | Forward             |  | USD      |          | 2005     |     | 68,748                      |     |  | 7,264              |       |    |  | 4,143  |   |  | 11,407
|                          |  |                     |  |          |          | 2006     |     | 12,587                      |     |  | 1,644              |       |    |  |       |   |  | 1,644 
|                          |  |                     |  | Others   |          | 2005     |     | (39,668                     | )   |  | 1,949              |       |    |  | 468    |   |  | 2,417 
|                          |  |                     |  |          |          | 2006     |     | (28,292                     | )   |  | 723                |       |    |  |       |   |  | 723   
|                          |  | Options             |  | USD      |          | 2005     |     | 55,062                      |     |  | 7,158              |       |    |  | (1,696 | ) |  | 5,462 
|                          |  |                     |  |          |          | 2006     |     | 66,808                      |     |  | 5,481              |       |    |  | (1,468 | ) |  | 4,013 
|                          |  |                     |  |          |          | 2007     |     | 40,378                      |     |  | 2,693              |       |    |  | (947   | ) |  | 1,746 
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Net equity investments    |  | Forward             |  | USD      |          | 2005     |     | 5,284                       |     |  |                   |       | 154 |  |       |   |  | 154   
|                          |  |                     |  | Others   |          | 2005     |     | 19,049                      |     |  |                   |       | 112 |  |       |   |  | 112   
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Others (*)                |  | Forward             |  | USD      |          | 2005     |     | 23,758                      |     |  |                   |       |    |  | 888    |   |  | 888   
|                          |  |                     |  | Others   |          | 2005     |     | 11,606                      |     |  |                   |       |    |  | 144    |   |  | 144   
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|                          |  | IRS                 |  | EUR      |          | 2009     |     | 8,474                       |     |  |                   |       |    |  | 28     |   |  | 28    
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Premium paid              |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  | 4,473 
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Total                     |  |                     |  |          |          |          |     |                             |     |  | 26,912             |       | 266 |  | 1,560  |   |  | 33,211
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Total short term (Note 5) |  |                     |  |          |          |          |     |                             |     |  | 16,371             |       | 266 |  | 3,947  |   |  | 22,354
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       
|Total long term           |  |                     |  |          |          |          |     |                             |     |  | 10,541             |       |    |  | (2,387 | ) |  | 10,857
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |       |     |  |        |   |  |       



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



---

|(*) | Others includes derivative instruments, which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | Other Comprehensive Income (OCI) included within retained earnings and other reserves caption.
|---- | ------------------------------------------------------------------------------------------------

|(***) | Notional amounts for Options are presented based on year-end exchange rates.
|----- | ----------------------------------------------------------------------------



Derivative Liabilities



|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|------------------------- |  | ------------------- |  | -------- | -------- | -------- | --- | --------------------------- | --- |  | ------------------ |  | --- |  | ----- |  | -----
|Type                      |  | FinancialInstrument |  | Currency |          | Maturity |     | Notionalamount (KEURs)(***) |     |  | Fair value (KEURs)
|                          |  |                     |  |          | OCI (**) |          | CTA |                             | P&L |  | Total             
|Cash flow hedge           |  | Forward             |  | USD      |          | 2005     |     | (13,571                     | )   |  | 781                |  |    |  | 412   |  | 1,193
|                          |  |                     |  | Others   |          | 2005     |     | (49,145                     | )   |  | 1,383              |  |    |  | 372   |  | 1,755
|                          |  |                     |  |          |          | 2006     |     | (41,303                     | )   |  | 1,192              |  |    |  |      |  | 1,192
|                          |  |                     |  |          |          | 2007     |     | (19,349                     | )   |  | 263                |  |    |  |      |  | 263  
|                          |  | Options             |  | USD      |          | 2005     |     | 40,378                      |     |  |                   |  |    |  | 373   |  | 373  
|                          |  |                     |  |          |          | 2006     |     | 28,632                      |     |  |                   |  |    |  | 506   |  | 506  
|                          |  |                     |  |          |          | 2007     |     | 38,176                      |     |  |                   |  |    |  | 487   |  | 487  
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|Net equity investments    |  | Forward             |  | USD      |          | 2005     |     | (5,222                      | )   |  |                   |  | 93  |  |      |  | 93   
|                          |  |                     |  | Others   |          | 2005     |     | (19,014                     | )   |  |                   |  | 79  |  |      |  | 79   
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|Others (*)                |  | Forward             |  | Others   |          | 2005     |     | (13,357                     | )   |  |                   |  |    |  | 830   |  | 830  
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|Total                     |  |                     |  |          |          |          |     |                             |     |  | 3,619              |  | 172 |  | 2,980 |  | 6,771
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|Total short term (Note 5) |  |                     |  |          |          |          |     |                             |     |  | 2,164              |  | 172 |  | 1,987 |  | 4,323
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      
|Total long term (Note 12) |  |                     |  |          |          |          |     |                             |     |  | 1,455              |  |    |  | 993   |  | 2,448
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |     |  |       |  |      

---

|(*) | Others includes derivative instruments, which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | Other Comprehensive Income (OCI) included within retained earnings and other reserves caption.
|---- | ------------------------------------------------------------------------------------------------

|(***) | Notional amounts for Options are presented based on year-end exchange rates.
|----- | ----------------------------------------------------------------------------



During the year 2004, the Group entered into certain derivative instruments designated as cash flow hedge for which the underlying
transaction is expected to occur in 2005. These hedge designations have been cancelled in 2004. The cumulative gain on these hedging instruments at the time of cancellation was KEURs 2,201, and is included in equity as of December 31, 2004 until the
forecasted transaction occurs. Part of the balance amount of KEURs 2,142 related to derivative instruments cancelled in 2003 that remained in equity as of December 31, 2003 has been reclassified to the statement of income in 2004 at the time the
underlying transaction occurred.



Additionally,
of the total outstanding derivative instruments in equity as of December 31, 2003, a net gain of KEURs 13,704 has been reclassified to the statement of income in 2004. Of the outstanding derivative instruments in equity as of December 31, 2002, a
net gain of KEURs 6,309 was reclassified to the statement of income during the year 2003.



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



As of December 31, 2003 the details of open foreign currency options and open forward
contracts is as follows:



Derivative Assets:



|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|------------------------- |  | ------------------- |  | -------- | -------- | -------- | --- | --------------------------- | --- |  | ------------------ |  | ----- |  | ----- |  | ------
|Type                      |  | FinancialInstrument |  | Currency |          | Maturity |     | Notionalamount (KEURs)(***) |     |  | Fair value (KEURs)
|                          |  |                     |  |          | OCI (**) |          | CTA |                             | P&L |  | Total             
|Cash flow hedge           |  | Forward             |  | USD      |          | 2004     |     | 125,741                     |     |  | 19,451             |  |      |  | 2,797 |  | 22,248
|                          |  |                     |  |          |          | 2005     |     | 52,716                      |     |  | 6,365              |  |      |  |      |  | 6,365 
|                          |  |                     |  | Others   |          | 2004     |     | (33,999                     | )   |  | 1,425              |  |      |  | 407   |  | 1,832 
|                          |  |                     |  |          |          | 2005     |     | (26,039                     | )   |  | 1,994              |  |      |  |      |  | 1,994 
|                          |  | Options             |  | USD      |          | 2004     |     | 24,545                      |     |  | 1,934              |  |      |  | 15    |  | 1,949 
|                          |  |                     |  |          |          | 2005     |     | 30,278                      |     |  | 2,885              |  |      |  | 377   |  | 3,262 
|                          |  |                     |  |          |          | 2006     |     | 16,129                      |     |  | 125                |  |      |  | 93    |  | 218   
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Net equity investments    |  | Forward             |  | USD      |          | 2004     |     | 36,283                      |     |  |                   |  | 4,346 |  |      |  | 4,346 
|                          |  |                     |  | Others   |          | 2004     |     | 9,531                       |     |  |                   |  | 235   |  |      |  | 235   
|                          |  | Options             |  | USD      |          | 2004     |     | 11,876                      |     |  |                   |  | 1,032 |  |      |  | 1,032 
|                          |  |                     |  |          |          | 2005     |     | 38,005                      |     |  |                   |  | 2,684 |  |      |  | 2,684 
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Others (*)                |  | Forward             |  | USD      |          | 2004     |     | 46,709                      |     |  |                   |  |      |  | 2,615 |  | 2,615 
|                          |  |                     |  | Others   |          | 2004     |     | (12,059                     | )   |  |                   |  |      |  | 832   |  | 832   
|                          |  |                     |  |          |          | 2005     |     | (3,120                      | )   |  |                   |  |      |  | 40    |  | 40    
|                          |  | IRS                 |  | EUR      |          | 2009     |     | 10,048                      |     |  |                   |  |      |  | 178   |  | 178   
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Premium paid              |  |                     |  |          |          |          |     |                             |     |  |                   |  |      |  |      |  | 2,738 
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Total                     |  |                     |  |          |          |          |     |                             |     |  | 34,179             |  | 8,297 |  | 7,354 |  | 52,568
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Total short term (Note 5) |  |                     |  |          |          |          |     |                             |     |  | 22,810             |  | 5,613 |  | 6,666 |  | 35,680
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       
|Total long term           |  |                     |  |          |          |          |     |                             |     |  | 11,369             |  | 2,684 |  | 688   |  | 16,888
|                          |  |                     |  |          |          |          |     |                             |     |  |                    |  |       |  |       |  |       

---

|(*) | Others includes derivative instruments, which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | Other Comprehensive Income (OCI) included within retained earnings and other reserves caption.
|---- | ------------------------------------------------------------------------------------------------

|(***) | Notional amounts for Options are presented based on year-end exchange rates.
|----- | ----------------------------------------------------------------------------



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Derivative Liabilities:



|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|------------------------- |  | ------------------- |  | -------- | -------- | -------- | --- | --------------------------- | --- | ------------------ | ----- | ----- |  | ----- |  | ------
|Type                      |  | FinancialInstrument |  | Currency |          | Maturity |     | Notionalamount (KEURs)(***) |     | Fair value (KEURs)
|                          |  |                     |  |          | OCI (**) |          | CTA |                             | P&L |                    | Total
|Cash flow hedge           |  | Forward             |  | USD      |          | 2004     |     | 27,979                      |     | 3,098              |       |      |  | 129   |  | 3,227 
|                          |  |                     |  |          |          | 2005     |     | 4,453                       |     | 444                |       |      |  |      |  | 444   
|                          |  |                     |  | Others   |          | 2004     |     | 25,870                      |     | 1,463              |       |      |  | 429   |  | 1,892 
|                          |  |                     |  |          |          | 2005     |     | 20,661                      |     | 1,285              |       |      |  |      |  | 1,285 
|                          |  | Options             |  | USD      |          | 2004     |     | 24,545                      |     |                   |       |      |  | 441   |  | 441   
|                          |  |                     |  |          |          | 2005     |     | 19,873                      |     |                   |       |      |  | 1,065 |  | 1,065 
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|Net equity investments    |  | Forward             |  | USD      |          | 2004     |     | 15,568                      |     |                   |       | 4,355 |  |      |  | 4,355 
|                          |  |                     |  | Others   |          | 2004     |     | 743                         |     |                   |       | 23    |  |      |  | 23    
|                          |  | Options             |  | USD      |          | 2004     |     | 11,876                      |     |                   |       |      |  | 279   |  | 279   
|                          |  |                     |  |          |          | 2005     |     | 38,005                      |     |                   |       |      |  | 1,150 |  | 1,150 
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|Others (*)                |  | Forward             |  | Others   |          | 2004     |     | 30,300                      |     |                   |       |      |  | 815   |  | 815   
|                          |  | IRS                 |  | EUR      |          | 2005     |     | 50,000                      |     |                   |       |      |  | 1,036 |  | 1,036 
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|Total                     |  |                     |  |          |          |          |     |                             |     | 6,290              |       | 4,378 |  | 5,344 |  | 16,012
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|Total short term (Note 5) |  |                     |  |          |          |          |     |                             |     | 4,561              |       | 4,378 |  | 2,093 |  | 11,032
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       
|Total long term (Note 12) |  |                     |  |          |          |          |     |                             |     | 1,729              |       |      |  | 3,251 |  | 4,980 
|                          |  |                     |  |          |          |          |     |                             |     |                    |       |       |  |       |  |       

---

|(*) | Others includes derivative instruments, which do not qualify for hedge accounting and are used by the Company to protect itself from changes in value of foreign-currency
denominated monetary assets and liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | Other Comprehensive Income (OCI) included within retained earnings and other reserves caption.
|---- | ------------------------------------------------------------------------------------------------

|(***) | Notional amounts for Options are presented based on year-end exchange rates.
|----- | ----------------------------------------------------------------------------



| | ii) | Interest rate derivatives
| | --- | -------------------------



The Group entered into an interest rate swap agreement to hedge against exposure to increases in interest rates related to a finance lease
agreement, which has expired in December 2004. During the year, this agreement entitled the Group to receive interest at floating rates and obliged it to pay interest at a fixed rate of 5.785%, both relating to a declining schedule of principal
amounts, beginning on December 31, 1999 at KEURs 20,016 and ending on December 31, 2004 at KEURs 10,427. The remaining notional amounts of this interest rate swap were KEURs 12,501 as of December 31, 2003. Of the total fair value of interest rate
derivatives included in equity as of December 31, 2003, a net loss of KEURs 240 has been reclassified to the statement of income during the year 2004.



In 2002, the Group entered into an interest rate swap agreement starting November 29, 2002 ending November 29, 2005 with a fixed notional
principal of KEURs 100,000. This agreement entitled the Group to receive interest at floating rates and pay at a fixed rate of 3.423%. The agreement entered into is to limit the Groups exposure to increases in interest rates of its credits and
loans. As of August 2003, the bullet principal of the outstanding agreement was reduced up to KEURs 50,000. In January 2004, the remaining notional of this IRS was fully cancelled.



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Additionally, in June 2003 the Group entered into a new agreement ending June 5,
2009. The principal amounted to KEURs 10,799 and would be reduced during the life of the agreement (amortising principal). As of December 31, 2004 the principal amounts to KEURs 8,474. This agreement entitles the Group to receive interest at
floating rates and pay at a fixed rate of 2.6775%.



As a result of the 2003 year end change of the interest payment structure of the Groups credits and loans, this structure does not qualify for hedge accounting as of December 31, 2004 and 2003.



The fair value of the outstanding agreements as of December
31, 2004 and 2003 is an unrealized gain of KEURs 28 and an unrealized loss of KEURs 858 respectively.



| | iii) | Equity related instruments
| | ---- | --------------------------



| |  |  | Warrants issued
| | - |  | ---------------



As a result of certain commercial agreements in the IT services arena and other areas the Group issued during the year 2000 warrants to purchase
10,668,000 of its class A shares at exercise prices ranging from EURs 9.09 to EURs 13.40 per share. Under the terms of the respective contractual agreements, the number of warrants is based on the number of class A shares
issued on the date of the contract. Therefore, any increase in the number of issued class A shares could require a corresponding increase in the number of warrants. As of December 31, 2003, these warrants were fully vested.



The warrants mentioned above are classified as follows at December 31:



|                       |  |                          |  |                  
|---------------------- |  | ------------------------ |  | -----------------
|Cash settlement option |  | Number of warrants as of
|                       |  | December 31, 2004        |  | December 31, 2003
|Yes                    |  |                         |  | 5,900,000        
|No                     |  | 1,818,000                |  | 4,768,000        
|                       |  |                          |  |                  
|                       |  | 1,818,000                |  | 10,668,000       
|                       |  |                          |  |                  



During 2004, 8,850,000
of these warrants have expired without being executed. The fair value as of December 31, 2003 amounting to KEURs 59, has been charged to the statement of income during 2004. Expiration date for the remaining warrants is November 2005.



The initial fair value of the 1,818,000 warrants, vested in 2001, which were
considered to be equity instruments, amounting to KEURs 8,617, was credited directly to equity during the year ended December 31, 2000, in the Additional paid-in capital caption.



| |  |  | Equity swap
| | - |  | -----------



In order to manage the exposure to a rise in its share price with respect to the warrants described above, the Group entered during the year 2000 into equity swap agreements which allowed Amadeus to buy 12,812,858 of
its class A shares at any time until mid-2004 at an average price of EURs 10.32 or settle the difference with the market price in cash. The financing costs relating to these agreements were at interest rates of 2.55% to 2.74% and 2.50%
to 3.56% during 2004 and 2003, respectively. These costs are recognized in the Financial expenses caption and amount to KEURs 465 and KEURs 478 during 2004 and 2003, respectively.



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



In November 2003, an equity swap agreement representing 1,812,462 class A shares was
cancelled.



As of December 31, 2004 all agreements have matured
and converted into Treasury shares. The current situation of these agreements is as follows:



|                               |  |                   |  |               |   |  |                  
|------------------------------ |  | ----------------- |  | ------------- | - |  | -----------------
|                               |  | Number of shares 
|                               |  | December 31, 2003 |  | Cancellations |   |  | December 31, 2004
|No interim cash settlement     |  | 4,500,000         |  | (4,500,000    | ) |  |                 
|Converted into Treasury shares |  | 6,500,396         |  | 4,500,000     |   |  | 11,000,396       
|                               |  |                   |  |               |   |  |                  
|                               |  | 11,000,396        |  |              |   |  | 11,000,396       
|                               |  |                   |  |               |   |  |                  



| |  |  | Investments in securities
| | - |  | -------------------------



Additionally, as of December 31, 2004, the Group had investments in companies over which it does not have significant influence or control. As of December
31, 2004 and 2003, the Group recorded in the statement of changes in shareholders equity an unrealized loss of KEURs 1,545 and an unrealized gain of KEURs 2,651, net of tax, respectively, resulting from changes in fair values of these assets.
The fair values of these securities as of December 31, 2004 and 2003 was KEURs 6,818 and KEURs 9,781, respectively, and are recorded in the Other long-term investments caption.



|b) | Credit risk
|-- | -----------



The Group has no significant concentrations of credit risk. Derivative financial instruments are entered into with financial institutions with high credit ratings. The credit exposure of derivative financial
instruments is represented by the net fair values of the contracts, as disclosed above.



|c) | Fair values
|-- | -----------



The fair values of loans receivable, accounts receivable, cash and cash equivalents and accounts payable approximate to their carrying amounts due to the short-term maturities of these assets and liabilities. The fair
value of short and long-term debt is estimated to approximate the carrying amount, as the interest rates applicable are primarily variable. The fair value of obligations under finance leases is estimated using the expected future payments discounted
at market interest rates and as of December 31, 2004 and December 31, 2003 was approximately KEURs 109,314 and KEURs 114,911, respectively.



|d) | SITA INC NV depository certificates
|-- | -----------------------------------



As of December 31, 2004 and 2003 the Group holds 3,214,200 depository certificates of SITA INC NV issued by Stiching the SITA Information Networking
Computing Foundation (the Foundation), representing 3,214,200 shares of SITA INC NV, at a cost of KEURs 3,557, which is included in the Long-term investments caption.



The convertibility and saleability of these depository certificates are
subject to restrictions imposed by the Foundation under shareholders agreements and under the Terms of Administration of the Foundation. Accordingly, the Group believes that it is not practicable to determine with sufficient reliability a fair
value of the depository certificates.



F-231



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



19.    TAXATION



The companies that make up the Group are all individually responsible for their own tax assessments and hence do not file a
consolidated tax return. The majority of these companies are open to tax inspection according to local tax laws in each case. Income tax returns cannot be considered definitive until its expiration or acceptance by the Tax Authorities and,
independently that fiscal legislation is susceptible to different interpretations, it is estimated that whatever additional fiscal liability may arise as a consequence of an eventual tax inspection will not have a significant effect on the
consolidated financial statements considered as a whole. In this regard, in December 2003, the French Tax Authorities issued a tax assessment on Amadeus s.a.s. for the fiscal years 2000 and 2001. Irrespective of the final outcome of the
administrative / legal process initiated then by the company, in case that the final tax assessment materialises, it will not have a significant effect on the consolidated financial statements as of December 2004 due to the bilateral tax adjustment
to be applied at group level. Additionally, the general tax audit initiated by the Spanish tax authorities over the Company in July 2004 is still in progress. The taxes and fiscal years under review are the Corporate Income Tax for the years 1999
and 2002 and remaining taxes (VAT, Withholding taxes, etc.) for the years 2000 to 2002.



Income tax expense was as follows:



|         |  |                        |  |        
|-------- |  | ---------------------- |  | -------
|         |  | Year ended December 31
|         |  | 2004                   |  | 2003   
|Current  |  | 122,866                |  | 117,455
|Deferred |  | 6,152                  |  | 4,727  
|         |  |                        |  |        
|Total    |  | 129,018                |  | 122,182
|         |  |                        |  |        



The
reconciliation between the statutory income tax rate in Spain and the effective income tax rate applicable to the Group as of December 31, is as follows:



|                                                   |  |      |   |  |      |  
|-------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                   |  | 2004 |   |  | 2003 |  
|                                                   |  | %    |   |  | %    |  
|Statutory income tax rate in Spain                 |  | 35.0 |   |  | 35.0 |  
|Effect of different tax rates in other countries   |  | 0.9  |   |  | 0.8  |  
|Permanent differences due to goodwill amortization |  | 2.5  |   |  | 3.9  |  
|Other permanent differences                        |  | (2.2 | ) |  | 0.3  |  
|Losses with no tax benefit recognition             |  | 2.4  |   |  | 1.3  |  
|Other                                              |  | 0.1  |   |  | (1.4 | )
|                                                   |  |      |   |  |      |  
|Effective income tax rate                          |  | 38.7 |   |  | 39.9 |  
|                                                   |  |      |   |  |      |  



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



A detail of tax receivables and payables as of December 31 is as follows:



|                      |  |        |  |       
|--------------------- |  | ------ |  | ------
|                      |  | 2004   |  | 2003  
|Tax receivable        |  |        |  |       
|Income tax receivable |  | 15,103 |  | 20,929
|VAT                   |  | 22,134 |  | 17,751
|Others receivable     |  | 4,374  |  | 3,343 
|                      |  |        |  |       
|Total                 |  | 41,611 |  | 42,023
|                      |  |        |  |       
|Tax payable           |  |        |  |       
|Income tax payable    |  | 32,651 |  | 35,181
|VAT                   |  | 8,089  |  | 1,223 
|Other tax payable     |  | 11,346 |  | 7,779 
|                      |  |        |  |       
|Total                 |  | 52,086 |  | 44,183
|                      |  |        |  |       



The
Groups deferred tax balances as of December 31, are as follows:



|                                                            |  |         |   |  |         |  
|----------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                            |  | 2004    |   |  | 2003    |  
|Assets                                                      |  |         |   |  |         |  
|Amadeus Operations KGacquisition                           |  | 74,706  |   |  | 84,043  |  
|Unused tax losses                                           |  | 12,591  |   |  | 27,822  |  
|Unused investment tax credits                               |  | 32,261  |   |  | 25,131  |  
|Finance leases                                              |  | 2,571   |   |  | 2,389   |  
|Net cancellation reserve                                    |  | 16,207  |   |  | 14,690  |  
|Depreciation and amortization                               |  | 24,214  |   |  | 20,586  |  
|Bad debt provision                                          |  | 9,623   |   |  | 8,867   |  
|Hedge accounting                                            |  | 978     |   |  | 1,258   |  
|Employees benefits                                          |  | 7,202   |   |  | 7,305   |  
|IPO cost                                                    |  |        |   |  | 1,352   |  
|ICSAT Liquidation                                          |  | 3,907   |   |  |        |  
|Dividends tax credits                                       |  | 4,165   |   |  | 2,965   |  
|Other                                                       |  | 10,716  |   |  | 5,988   |  
|                                                            |  |         |   |  |         |  
|                                                            |  | 199,141 |   |  | 202,396 |  
|Netting                                                     |  | (90,362 | ) |  | (76,281 | )
|                                                            |  |         |   |  |         |  
|                                                            |  | 108,779 |   |  | 126,115 |  
|                                                            |  |         |   |  |         |  
|Liabilities                                                 |  |         |   |  |         |  
|Unrealized gainsforeign currency and financial instruments |  | 16,668  |   |  | 33,512  |  
|Provision for decline in value of investments               |  | 73,204  |   |  | 68,618  |  
|Depreciation and amortization                               |  | 40,201  |   |  | 33,717  |  
|Capitalization of IT related costs                          |  | 9,388   |   |  | 5,679   |  
|Purchased Intangible Assets                                 |  | 18,922  |   |  | 16,806  |  
|Other                                                       |  | 6,507   |   |  | 20,177  |  
|                                                            |  |         |   |  |         |  
|                                                            |  | 164,890 |   |  | 178,509 |  
|Netting                                                     |  | (90,362 | ) |  | (76,281 | )
|                                                            |  |         |   |  |         |  
|                                                            |  | 74,528  |   |  | 102,228 |  
|                                                            |  |         |   |  |         |  



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Acquisitions of new subsidiaries generated KEURs 1,222 of acquired deferred tax
assets in 2004 and KEURs 6,570 and KEURs 2,429 of acquired deferred tax liabilities in 2004 and 2003, respectively as well as KEURs 28,728 and KEURs 16,837 of investment tax credits during 2004 and 2003. The European Commission has asked the Spanish
Government for the necessary information to analyse the export activity deduction (Investment tax credit) in order to determine whether it constitutes a state grant. The European Commission has not concluded its analysis yet, so the scope of the
claim is still not known. With the situation as it stands, it is not possible to objectively determine the impact it may have on the Amadeus Group once the claim is resolved. In these consolidated financial statements, the Group has not recorded any
provision for this concept as the Group estimates that the probable outcome will be the cancellation of the rebate in the short-term without the need to pay back rebates already received.



Deferred tax assets charged to equity during 2004 were KEURs 1,563 while deferred tax income payable charged
to equity during 2003 was KEURs 12,568, mainly relating to cash flow and net equity investment hedges.



The following table shows the expiration date of unused tax losses for which no deferred tax asset was recognized in the financial
statements mainly due to the uncertainty of their recoverability as of December 31:



|                      |  |         |  |       
|--------------------- |  | ------- |  | ------
|                      |  | 2004    |  | 2003  
|Year(s) of expiration |  |         |  |       
|0-1                   |  |        |  | 101   
|1-2                   |  | 796     |  | 611   
|2-3                   |  | 1,261   |  | 77    
|3-4                   |  | 1,710   |  | 1,385 
|4-5                   |  | 12,728  |  | 1,650 
|Unlimited             |  | 211,198 |  | 15,166
|                      |  |         |  |       
|Total                 |  | 227,693 |  | 18,990
|                      |  |         |  |       



The
main increase in 2004 relates to the acquisition of Opodo Limited (UK).



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AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



20.    EARNINGS PER SHARE



The reconciliation of the weighted average number of shares and diluted weighted average number of shares outstanding as of
December 31, 2004 and December 31, 2003 is as follows:



|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|----------------------------------------------------------- |  | ------------------------------------- | - |  | -------------------------------------- | - |  | ------------------------------------------------------------- | - |  | ------------------------------------------------------------- | -
|                                                            |  | Class Ashares as ofDecember 31,2004 |   |  | Class Ashares as of December 31,2003 |   |  | Weightedaveragenumber ofclass Ashares as ofDecember 31,2004 |   |  | Weightedaveragenumber ofclass Ashares as ofDecember 31,2003 |  
|Total shares issued                                         |  | 590,000,000                           |   |  | 590,000,000                            |   |  | 590,000,000                                                   |   |  | 590,000,000                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Treasury shares and other similar equity instruments        |  | (19,105,670                           | ) |  | (20,002,843                            | ) |  | (19,791,050                                                   | ) |  | (20,156,222                                                   | )
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Total shares outstanding                                    |  | 570,894,330                           |   |  | 569,997,157                            |   |  | 570,208,950                                                   |   |  | 569,843,778                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Dilutive effect of warrants, stock options and stock grants |  | 2,902,973                             |   |  | 722,393                                |   |  | 2,470,576                                                     |   |  | 853,736                                                       |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Total number of diluted shares                              |  | 573,797,303                           |   |  | 570,719,550                            |   |  | 572,679,526                                                   |   |  | 570,697,514                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|                                                            |  |                                       |   | 
|                                                            |  | Class Bshares as ofDecember 31,2004 |   |  | Class Bshares as of December 31,2003 |   |  | Weightedaveragenumber ofclass Bshares as ofDecember 31,2004 |   |  | Weightedaveragenumber ofclass Bshares as ofDecember 31,2003 |  
|Total shares issued                                         |  | 219,983,100                           |   |  | 219,983,100                            |   |  | 219,983,100                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Total shares outstanding                                    |  | 171,443,700                           |   |  | 219,983,100                            |   |  | 210,275,220                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  
|Total number of diluted shares                              |  | 171,443,700                           |   |  | 219,983,100                            |   |  | 210,275,220                                                   |   |  | 219,983,100                                                   |  
|                                                            |  |                                       |   |  |                                        |   |  |                                                               |   |  |                                                               |  



For the purposes of
allocating earnings between the class A and class B shares, the assumption is made that the maximum economic rights attributable to the class B shares would be according to the dividend calculation described in
Note 13. Additionally, the assumption is made that 100% of the profits are paid out as dividends and the respective portion is allocated to the class B shares first and the remainder to the class A shares.



The calculation of basic earnings per share (rounded to two digits) for the
years ended December 31, is as follows:



|                                                        |  |             |  |            
|------------------------------------------------------- |  | ----------- |  | -----------
|                                                        |  | 2004        |  | 2003       
|Net income in KEURs                                     |  | 208,032     |  | 160,114    
|Weighted average number of class A shares outstanding |  | 570,208,950 |  | 569,843,778
|Weighted average number of class B shares outstanding |  | 210,275,220 |  | 219,983,100
|                                                        |  |             |  |            
|Basic earnings per class A share, in EURs             |  | 0.36        |  | 0.28       
|                                                        |  |             |  |            
|Basic earnings per class B share, in EURs             |  |            |  |           
|                                                        |  |             |  |            



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



The calculation of diluted earnings per share (rounded to two significant digits) for the years ended
December 31, is as follows:



|                                                                |  |             |  |            
|--------------------------------------------------------------- |  | ----------- |  | -----------
|                                                                |  | 2004        |  | 2003       
|Net income in KEURs                                             |  | 208,032     |  | 160,114    
|Weighted average number of diluted class A shares outstanding |  | 572,679,526 |  | 570,697,514
|Weighted average number of diluted class B shares outstanding |  | 210,275,220 |  | 219,983,100
|                                                                |  |             |  |            
|Diluted earnings per class A share, in EURs                   |  | 0.36        |  | 0.28       
|                                                                |  |             |  |            
|Diluted earnings per class B share, in EURs                   |  |            |  |           
|                                                                |  |             |  |            



21.    ADDITIONAL STATEMENT OF CASH FLOWS RELATED DISCLOSURE



The components of cash and cash equivalents as of December 31, are as follows:



|                                     |  |         |  |       
|------------------------------------ |  | ------- |  | ------
|                                     |  | 2004    |  | 2003  
|Cash on hand and balances with banks |  | 39,342  |  | 22,507
|Short-term investments               |  | 65,327  |  | 19,594
|                                     |  |         |  |       
|                                     |  | 104,669 |  | 42,101
|                                     |  |         |  |       



22.    AUDITING
SERVICES



Professional fees for auditing services performed
in the Company and its subsidiaries by its auditor Deloitte and related member firms amount to KEURs 1,404 and KEURs 1,248 for the years ended December 31, 2004 and 2003, respectively.



Additionally, fees for audit related services, such as due diligence and purchase audits, and other professional services
delivered to the Company and its subsidiaries by its auditor Deloitte and related member firms amount to KEURs 393 and KEURs 505 for the year ended December 31, 2004 and KEURs 725 and KEURs 906 for the year ended December 31, 2003, respectively.



23.    SUBSEQUENT EVENTS



Amadeus has increased from 55.36% to 74.02% its stake, for EUR 80.4 million,
in the pan-European on-line portal Opodo, with the corresponding proportional dilution of the other shareholders. The transaction was carried out within the context of the acquisition by Opodo of Karavel S.A., Quest and the integration of the wholly
owned e-commerce subsidiaries for the Italian and Scandinavian market, of eviaggi.com and Travellink AB, respectively.



The acquisition of 100% equity stake in Karavel, S.A. amounts approximately EUR 60 million in cash, plus the resulting amount of additional adjustments to
the initial purchase price in relation to the working capital.



Karavel is a leading online travel company in France, whose core expertise is in the pre-packaged holiday market. Its wholly owned subsidiary Promovacances, S.A is a well-known and respected brand, established in the French market since
1997, offering great value to travellers to a wide range of destinations and product types.



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##### Table of Contents

AMADEUS GLOBAL TRAVEL DISTRIBUTION, S.A.

Notes to the Unaudited Consolidated Financial Statements (Continued)

(Expressed in Thousands of Euros-Keurs)



Continuing the strategy of consolidating its global distribution network, Amadeus has increased its
shareholding in SAVIA Amadeus, its Spanish national marketing and distribution company (NMC) for Spain and Portugal, from 34 to 100 per cent. SAVIA Amadeus, headquartered in Madrid (Spain), is one of Amadeus largest markets worldwide in terms
of bookings.



The cost of the acquisition has been EUR 82.3
million in cash plus the resulting amount of additional adjustments to the initial purchase price in relation to the working capital.



As it is of public domain, the major shareholders of the Company (Air France, Iberia and Lufthansa) initiated in the year 2004 a selection process among a
group of financial investors for the acquisition of the Company. As already informed to the Spanish Stock Exchange Commission, the major shareholders together with BC Partners and Cinven have launched a public tender offer over 100 per cent of
Amadeus shares at a price of EUR 7.35 per share, with the final objective of de-listing the Company from the Stock Market. At this agreed price, the value of the Group amounts to EUR 4,340 million. As there is no more available information from
these private negotiations, we cannot foresee the potential accounting impacts derived from this transaction.



The stock option plans, according to their rules, would become immediately vested in the case of a change of control. The holders would have up to six
months to exercise their options (Note 16).



F-237