Further changes to the Air France and KLM refund policy

Faced with legal challenges, Air France and KLM have decided to further adjust their refund policy for flight cancellations. Both Air France and KLM are gradually and carefully restoring their networks as travel restrictions are lifted and rules changed.  Therefore, the airlines are now saying in the event of flight cancellations customers will be able to choose between rebooking, a voucher or a cash refund whatever the cancellation date of their flight. Customers who already received a voucher and wish to opt for a cash refund can do so, most consumer rights campaigners are urging customers to opt for the cash refund.  There are a number of reasons why passengers are advised to do this, not least is the fact that with an overabundance of seats, the fares will be significantly lower and Air France and KLM have adopted a rule that there will be no additional amount added to the cash value of the voucher when it is refunded because it was not fully used.    

The voucher policy will stay in place.

Air France - KLM backtracking over refund v voucher policy

COVID-19: Adaptation of Air France and KLM's commercial policy

Photo Air France

Air France - KLM are backtracking on their controversial policy of only giving customers who have had flights cancelled due to the coronavirus COVID-19 crisis a voucher or credit note to use for a future flight. And, then only allowing a refund after a year has passed providing they have not used the voucher. Thereby forcing customers to give the airlines at least a 12-month interest-free loan. 

Since the beginning of this crisis, Air France and KLM have issued those sorts of vouchers,  despite a backlash from customers, politicians and various organizations. However,  now the airline group is backtracking on that policy.  It claims it is making a change to the policy because of the gradual lifting of travel bans and entry restrictions, although most in the industry believe the bad publicity surrounding the policy, as well a mass of potential legal and governmental challenges that were brewing in the wings has had more influence.   

Air France and KLM have decided to adjust their refund policy for flight cancellations taking place on 15th May and after, these customers are now being offered the choice of a voucher or a cash refund.

Rather horrendously, the airline group is not backdating this policy to allow the vast majority of customers who have had flights cancelled before 15th May a refund for at least a year.  Nope,  they will still have to wait to get their money back.  By some attempt to appease growing frustration and discontent they are adding a bonus of 15% to the total value of the initial ticket that was cancelled - good news you may think. But, alas that extra 15% only applies if the customers use the vouchers for a KLM or Air France flight.  If they wait for the year to get the cash,  then whoosh that 15% vanishes and they only get back what they originally paid. 

Rather unsurprisingly Air France KLM is saying it may take months for refunds to be processed because of the exceptional circumstances being experienced by the airline. 

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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 Air France-KLM Group and Air France secure funding of €7 billion

The Air France-KLM Group stated previously that, given the major impact of the Covid-19 crisis, it would need a massive financial boost to survive. 

The Air France-KLM Group, Air France and KLM therefore engaged in talks with the French and Dutch governments regarding the implementation of specific aid measures that would enable them to maintain their solvency.

Following several weeks of discussions with the French state and banking institutions, the Air France-KLM Group and Air France were able to finalize the various components of a support mechanism dedicated to Air France on which principle agreements are being finalised:

This support mechanism is comprised of:

A French state-backed loan of €4 billion granted by a syndicate of six banks to Air France-KLM and Air France.  The French state is guaranteeing this loan up to 90%, and it has a maturity of 12 months, with two consecutive one-year extension options exercisable by Air France-KLM;
A direct shareholder’s loan of €3 billion from the French state to Air France-KLM with a maturity of four years, with two consecutive one-year extension options exercisable by Air France-KLM.

Job losses to come at Air France warns boss just hours after getting the green light on £6 billion of government aid.

Photo Air France

The boss of the Air France-KLM group, Ben Smith is has been warning of job losses to come at the airline group, just hours after being given the green light on a massive €7 billion, £6.13 billion cash injection of money from the government.

The Canadian has been quoted in the French media that voluntary redundancies are going to be part of a massive cost-cutting exercise in all areas of the French airline.  It is also being reported that costs at ‘HOP’ were not viable as things stand at the moment.

It would take the airline up to two years, maybe even a bit longer to rover from the coronavirus COVID-19 crisis and for the aviation industry as a whole to recover. 

Since 14 March 2020, Air France and Transavia have operated more than 1,800 flights from 132 airports in 82 countries, enabling the repatriation of more than 270,000 passengers, including 150,000 French nationals. In a severely deteriorated economic context and at a time when most aircraft had to leave Paris empty, Air France and Transavia have introduced special capped fares for repatriation passengers.

These repatriation operations are now coming to an end in most regions, with the exception of certain areas such as North Africa where demand remains high, despite more than 200 flights already operated.

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Air France and KLM having in-depth discussions with governments for bail-out funds as minister says "we want to save at all costs this French industrial champion."

 Enough cash to last three months!

It was no surprise earlier this week the Air France-KLM Group confirmed that Air France and KLM were holding 'in-depth' discussions with the French and Dutch governments respectively over bailout funds.  The group also confirmed that discussions were also ongoing with some other financial institutions and potential investors in order to buy their way out of the financial instability caused by the coronavirus COVID-19 pandemic.

Due to the increasingly strict measures taken by many countries regarding air travel and entry restrictions, the Air France-KLM Group has, much like almost all airlines around the world, had to drastically reduce its flight schedule, down to a tenth of what it was this time last year. Such a massive drop in flights, with no end date in sight for the suspension, has left the group with no option but to seek additional methods of finance in order to keep going after it said it had enough month to last just three more months. 

"We are facing an unprecedented crisis affecting without exception the airline industry, which is causing a great deal of uncertainty about the outlook for air transport," said Benjamin Smith, Chief Executive Officer of Air France-KLM. "Since the beginning of this crisis, the Air France-KLM Group has done everything possible to ensure the health safety of its employees and customers and, on the financial side, to preserve its short-term liquidity and prepare for the future."

French and Dutch governments to guarantee €6 billion loans for Air France-KLM

Reuters news agency is reporting that the Air France-KLM group is in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, as the airline group braces for a sustained coronavirus shut down, sources have said. 

The two states, which each own 14% of Air France-KLM, have paused a long-running boardroom feud to address the cash crunch, according to three people close to €€the discussions. But the crisis ultimately risks deepening their conflict, they said.

Details and amounts are not finalised and could change, the people said. Under the most likely scenario, Air France could get about 4 billion euros in French-guaranteed loans while KLM receives close to 2 billion backed by The Hague, two sources said.

Air France-KLM take exceptional measures

The COVID-19 crisis has continued to spread in recent days, leading many countries to take increasingly stringent measures in an attempt to slow the rate of spread of the epidemic. Some countries have imposed constraints on the movement of travellers from France, the Netherlands or more broadly from Europe. In France, the transition to a level 3 public health emergency requires the closure of all non-essential services since last weekend.

Faced with these growing restrictions on the possibility of travelling and a strong downward trend in demand which has resulted in a drop in traffic and sales over the last few weeks, the Air France-KLM Group is obliged to gradually reduce its flight activity very significantly over the next few days, with the number of available seat kilometres (ASK)  potentially decreasing between -70% and -90%.

Air France, KLM, Delta and Virgin Atlantic Launch World’s Leading Partnership

The new partnership provides customers with more convenient flight schedules and a shared goal of ensuring a smooth and consistent travel experience, whichever airline people fly.  The partnership also provides the flexibility to book flights on any of the four carriers through their respective mobile apps, websites, or via travel agents. Customers will enjoy award-winning service, top-tier premium cabin products and complimentary food, drink and seat-back in-flight entertainment in all cabins on all trans-Atlantic flights.

Enhanced customer benefits starting from 13 February mean that loyalty programme members will be able to earn and use miles or enjoy elite benefits for flights on any of the four airlines’ worldwide operations, including a trans-Atlantic trip, intra-Europe hops, or domestic U.S. journey, offering more opportunities to quickly move through loyalty tiers and reach a higher status. Eligible Elite loyalty programme members can also enjoy priority boarding and relax in over 100 airport lounges when travelling internationally.

Qantas and Air France - KLM agree new frequent flyer partnership

Qantas Frequent Flyers can now access reward seats, earn Qantas Points and receive tier benefits across the entire Air France – KLM Royal Dutch Airlines (KLM) network.

As part of the comprehensive new partnership between the airline groups, Qantas Frequent Flyers will be able to fly to over 60 new destinations across Europe and Africa including Biarritz, France; Dresden, Germany; Calvi, Corsica, France; and Bristol, United Kingdom.

In 2018 Qantas established codeshare agreements with Air France and KLM allowing the customers of each airline to connect on flights between Australia and Europe via Singapore and Hong Kong. Customers also benefited from reciprocal lounge access and Qantas Points on Qantas coded flights.

Today’s announcement allows members to access reward seats and earn points on all fares across all Air France and KLM marketed flights globally. Frequent flyers with Gold status or higher will also be able to access tier benefits including priority boarding, priority check-in and extra baggage allowance on any Air France and KLM operated flights.

Transavia France announces its first 14 destinations from Montpellier

Transavia France, which is the French low-cost airline of the Air France - KLM group has recently unveiled its first 14 destinations to operate from Montpellier. 

From April 3, 2020, it will be the only low-cost airline to have a base in Montpellier and the firm aims to develop a low-cost quality offer to a wide range of exclusive popular destinations, including Italy, Spain and Morocco.

Thanks to two aircraft based at Montpellier airport, Transavia will serve from April 3, 2020, 14 new destinations, including 13 exclusive routes:

Air France-KLM launches ambitious plan to recapture a leadership position in Europe

In Paris today, Air France-KLM CEO  Benjamin Smith, Air France-KLM CEO, along with Pieter Elbers, KLM President and CEO, Anne Rigail, Air France CEO, and Frederic Gagey, Air France-KLM CFO, will outline the group’s ambitious strategic plans along with its financial predictions for the next five years as it seeks to regain a leadership position in the European aviation world.

Included in the plans are:

• Restore a dynamic of sustainable profitability based on a new value-focused model for the group’s primary stakeholders: employees, customers, and shareholders.
• A plan built around four main strategic priorities: optimising the operational model, refocusing passenger revenue growth around the most profitable segments, developing initiatives on customer data, the Flying Blue loyalty programme, maintenance and cargo, and pragmatically analyzing consolidation opportunities. Each of these initiatives support the group's goal to remain a leader in the sector's ecological transition.
• 
  

• Profit: Medium-term operating margin of 7-8%
• Cash: Medium-term positive adjusted Free Cash Flows
• Leverage: Net debt/EBITDA ratio circa 1.5x
• Shareholder returns: Prospects for returning to dividend distribution  

The Air France KLM group results are in.....

The Air France KLM group released its latest results for Q3 last week, which showed the European airline group saw its operating result fall by 165 million euros compared to the same period last year. Net income was down by 4290 million euros whilst debt was 5.9 billion euros.  

THIRD QUARTER 2019

• Passenger growth up 2.1% and load factor up 0.2 point.
• Passenger unit revenue slightly down by -0.6%, as a consequence of the macro-economic context.
• Unit costs slightly  increase by 0.4% at constant currency and fuel, on track for full year guidance.
• Operating result at 900 million euros, down by 165 million euros compared to the third quarter 2018, with revenues up 2% and fuel expenses up 135 million euros.
• Net income at 366 million euros, down by 420 million euros compared to last year impacted by a stronger dollar end of September and Airbus A380 phase-out financial impact of 100 million euros.
• Reduction in Group net debt, down by 253 million euros to 5.9 billion euros and Net debt/EBITDA ratio at 1.5x, stable compared to 31 December 2018.

Air France - KLM boss glad other French airlines have gone bankrupt.

The controversial new boss of the Air France-KLM group says he's glad other airlines in France have gone bankrupt, indicating it would eventually benefit the French aviation industry. 

Ben Smith ordered Air France to drop a rescue bid for Aigle Azur, so it could pick the bones of the carcass and snap up costly airport slots at a fraction of the price, French aviation commentators have said. Officially Air France dropped its part in a rescue bid for the troubled carrier because any takeover would 'harm staff relations.'.

“There is going to be consolidation,” Smith said at a ceremony in Toulouse for the delivery of the first Air France A350. “We believe positive results will come out of it, to ensure that airlines that are based here in France will be stronger to compete globally, - The jobs associated with those larger more powerful airlines will be created here in France.” Smith was speaking just hours after he turned down requests from XL Airways for help.  “We have a stable social environment today in Air France, and we’ve made it clear we’re not going to jeopardise that,” he said. 

Whilst Smith is happy to see French workers out of jobs, he is far from alone, Willie Walsh, the boss of IAG - which owns Iberia, British Airways, Aer Lingus, Level and Vueling is equally content at the current situations. He said that bankruptcies among competitors would help support the group’s growth next year. 

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August traffic details for KLM and Air France

KLM Royal Dutch Airlines saw passenger load factor decline slightly in August, by 0.2% to 91.6%. Traffic was up 1.5%, but lagged slightly behind a 1.8% increase in capacity. The decline in load factor was especially evident in Asia. Traffic growth was mainly achieved on European routes, with capacity and traffic declining on routes to Central and South America, Africa and the Middle East. Cargo traffic declined sharply by 5.8%, with capacity down just 0.5%, which saw load factor declining significantly by 3.5%pts to 62.3%.

“In August, load factor was down slightly compared to the same month last year. Cargo traffic suffered a substantial decline across the entire business, continuing the trend we saw in previous months. With costs and revenues under pressure, cost cutting will remain our priority here. We need to do so to keep investing in the quality of our product, our people and our sustainability objectives." Said KLM President & CEO Pieter Elbers.

Air France-KLM knocked by Aigle Azur rescue bid

(Reuters) - Air France-KLM shares fell sharply on Monday as it emerged as a bidder for bankrupt French-based budget carrier Aigle Azur, which left 19,000 passengers stranded when it abruptly halted operations.

The offer from the group’s Air France unit was among 14 bids submitted for privately-held Aigle Azur, which was placed was placed under bankruptcy protection on Sept. 2., ahead of a midday deadline, an official with the CFDT union told Reuters.

Higher fuel costs and stiffer low-cost competition have led to a wave of bankruptcies among smaller European airlines in recent years, including Air Berlin, Germania, British-based Monarch, Latvia’s Primera Air and Swiss SkyWork.

Delta, Air France, KLM & Virgin Atlantic will carbon-offset all flights to and from Chicago for the 2019 GBTA convention

Delta and its joint venture partners Air France, KLM and Virgin Atlantic will carbon-offset more than 1,800 metric tons of emissions from more than 15,000 Delta, Air France, KLM and Virgin Atlantic customer flight segments to and from Chicago surrounding the 2019 GBTA convention, the preeminent annual industry gathering of travel sales and service professionals globally.

Delta and its joint venture partners Air France, KLM and Virgin Atlantic will carbon-offset more than 1,800 metric tons of emissions covering more than 15,000 customer flight segments to and from Chicago from Aug. 3 – 10
Delta, Air France, KLM and Virgin Atlantic are increasing the ease of carbon-offset purchases on their websites as part of their ongoing commitment to sustainability
Delta’s ambition is to be the leader in corporate sustainability and is piloting built-in carbon-offsetting for corporate travel agreements
Delta to join GBTA’s Sustainability and Responsibility Committee

SkyTeam member airlines also strive to set the industry standard for protecting the environment, promoting social responsibility and realizing equitable, economic prosperity

“We know sustainability is important to every member of the Delta, Air France, KLM and Virgin Atlantic family, including those who we do business with daily and our many thousands of corporate and business travellers who fly us every day,” said Bob Somers, Delta’s Senior Vice President – Global Sales. “These offsets are symbolic of our continued commitment to sustainability and our long-term target of reducing our carbon emissions by 50 percent by 2050.”

Greater tie-up between Delta, Air France-KLM and Virgin on the way....

The Reuters news agency is reporting that Elaine Chao, The US Transportation Secretary has already given tentative approval of a vastly expanded transatlantic tie-up between Delta, Virgin Atlantic and Air France-KLM.

The expanded joint venture builds up from the two previous joint ventures and will allow a greater saturation of the market, mileage earning potential and legalised fare fixing. The tentatively approved antitrust immunity for the joint venture and will require the carriers to report annually on commercial cooperation efforts and provide a detailed assessment after five years, the statement said.

Delta currently owns 49% of Virgin Atlantic - more than any other entity and its investment directly in Air France-KLM stands at 9%, however, it owns another two percent via subsidiaries and private investment holdings.  

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Air France-KLM results at 30 June 2019

Key highlights for the European giant Air France-KLM in the second quarter include:

Passenger growth +5.1% and load factor +1.3 point.
Passenger unit revenue up by 0.8%.
Unit costs decrease by -2.3% at constant currency and fuel.
Operating result at 400 million euros, up 54 millions euros compared to the second quarter 2018 hit by Air France strikes1, and reflecting unit cost improvement partly offset by an increased fuel bill.
Further reduction in Group net debt, down 466 million euros to 5.7 billion euros and Net debt/EBITDA ratio at 1.4x, an improvement of -0.1pt compared to 31 December 2018.

Benjamin Smith, CEO of Air France-KLM Group, said: “In a challenging environment, Air France-KLM Group posted a robust second quarter. The slight increase in passenger unit revenue that we had anticipated, together with continued execution in unit cost reduction, enabled us to more than offset rising fuel costs. These elements, combined with satisfactory long-haul forward booking trends lead us to confirm our guidance for 2019. At the same time, we continue to implement our strategic vision focused on reducing costs and making our Group more robust in the very competitive marketplace in Europe. We have also made key decisions on the renewal of our fleet to transition to cleaner aircraft in order to support a more environmentally responsible operation, including the order of sixty Airbus A220s for short- and medium-haul and the accelerated phasing out of ten Airbus A380 to be replaced by more modern fuel-efficient aircraft.”

Evolution of the Air France-KLM fleet - Orders for 60 Airbus A220-300s while A380's to be phase out earlier.

Evolution of the Air France-KLM fleet 

Big moves ahead for the entire fleet of Air France-KLM fleet as its board of directors have given approval for several strategic decisions concerning the development of the Air France fleet, following a meeting on July 30, 2019.

These decisions reflect the Group's focus on simplification. Making the fleet more competitive, by continuing its transformation with more modern, high-performance aircraft with a significantly reduced environmental footprint is key to achieving leading industry margins.

Firm order for 60 A220-300s, with 30 options and 30 acquisition rights, which will gradually replace Air France's A318 and A319 fleet
Retirement of the 10 A380s from the Air France fleet by 2022, and study of the
replacement of A380s by new generation aircraft