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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

or

or

Commission file number: 1-32139

Air France-KLM

(Exact name of registrant as specified in its charter)

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

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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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:

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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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:

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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.

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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.

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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:

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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.

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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 Navette shuttle 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:

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:

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:

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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:

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:

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:

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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:

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History of KLM

The main stages in the development of KLM were:

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:

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.

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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 2007 cost-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:

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société Air France’s significant subsidiaries are as follows:

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:

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.

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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:

Notes:

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:

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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:

Notes:

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:

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Notes:

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.

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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:

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.

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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: