Friday, 11 July 2014

Air France - KLM Profits Dive

The future is not looking rosy for the  Air France-KLM dire conglomerate as profits are set to dive by as much as 12% in the face of increasing competition in the long-haul airline sector.  The Franco-Dutch airline profit warning sent its shares crashing down by 5%. 
This weeks unexpected profit warning sent shares at British Airways and Iberia parent International Airlines Group down almost 7% to 336¼p. IAG shares were changing hands at 420p prior to Lufthansa’s warning.  

EasyJet’s shares were also hit even though its longest flights are from Europe to the Middle East and North Africa.  The shares fell 77p to £12.48 and have now come off 30% in the past three months, wiping more than £2 billion off the value of the airline.
Air France-KLM said: “Bookings for July and August reflect the over–capacity on certain long-haul routes, notably North America and Asia, with the attendant impact on yields.”
The impact on the long-haul market of expansion by the three state-backed carriers of the Middle East - Emirates of Dubai, Qatar Airways, and Etihad of Abu Dhabi - is seen to be a key issue, although Air France-KLM declined to specify it.
Noting weak cargo demand and a fall-off in traffic to Venezuela amid the political uncertainty there, Air France KLM said: “These factors lead us to revise our EBITDA for 2014 from around €2.5 billion to between €2.2 billion and €2.3 billion.” 
It isn't all doom and gloom in the airline world, Etihad announced this week strong first-half figures with revenues rising by 28% to $3.2 billion.