07 May, 2020

Air France-KLM reports €815 million first-quarter operating loss

Air France-KLM reports €815 million Q1 operating loss

Photo Air France KLM

The Air France-KLM group has already received confirmation of a €7 billion rescue package from the French Government, in addition to the Dutch Government's pledge of aid between 2 and 4 billion euros, yet still, the travel giant posted a massive operating loss of  €815 million during the first quarter of 2020.  

The Paris based airline group says it expects to burn through €400 million during the second quarter, having made substantial efforts in cutting costs and thanks in no small part to government-supported staff furlough schemes. 

The group's net debt increased to €12,955 million which will be greatly increased over the course of this year for a number of reasons, including losses on fuel hedging contracts, reduction in capacity and aircraft leases. 

There is little good news on the horizon for the firm, it doesn't expect demand for air travel to reach pre-COVID levels until sometime after 2022 and could take a number of years after that. Optimism for a rapid bounce-back was dimmed by French President Emmanuel Macron who warned on Tuesday that overseas travel was going to be limited. It would be unlikely that French people will be able to go on long-haul trips this year. Even commenting that even travel within Europe may be limited to help cut the risks of another wave of the coronavirus COVID-19.

"It is too soon to say whether we can take holidays. What I can say is that we will limit major international travel, even during the summer holidays. We will stay Europeans and, depending on how the epidemic evolves, we might have to reduce that a little more. We will know early June," Macron told the media on a visit to a school. 

Benjamin Smith, Chief Executive Officer of the Air France-KLM Group, said: "The Air France-KLM Group had a promising start to the first quarter in line with the objectives of the strategic plan presented in November 2019. However, the acceleration of the Covid-19 crisis in March had a strong impact on the Group's first quarter results. I would like to thank our teams for their exceptional mobilization in this unprecedented crisis. The Air France-KLM Group has adapted rapidly, by implementing health safety measures essential to our staff and customers, reducing our costs to preserve our liquidity, continuously adjusting our flight schedule, and the many repatriation flights and flights to transport medical equipment.

Uncertainties remain regarding the evolution of Covid-19 and we must be cautious in the assumptions of recovery in the coming months. Nevertheless, the commitment to financial support of the French and Dutch governments to our Group, as well as that our banking partners participating in these schemes, is a strong testimony of their confidence in our ability to weather this crisis and rebuild. 

We are working on a renewal plan to ensure that the Air France-KLM Group regains its competitiveness in a deeply shaken world and reaffirms its leadership in the sustainable transition of air transport. These new orientations will be presented in the coming months.”

There will be at least a 20% reducting in the groups fleet size, yet where the cuts will be made has yet to be announced, although it is understood the Airbus A380 will be retired as earlier as possible along with a number of small regional aircraft.

The full Q1 report can be located here. 

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