Business | Aviation

Air France-KLM halves operating loss in the second quarter

Aims to improve operating profit, cap net debt in the second six months of the year

  • Reuters
  • Published: 13:44 July 30, 2012
  • Gulf News

  • Image Credit: AFP
  • From left: Air France-KLM CFO Philippe Calavia, Air France CEO Alexandre de Juniac, Chairman of the Board of Directors and Air France-KLM CEO, Jean-Cyril Spinetta, and KLM President and CEO Peter Hartman, at a press conference to present the group’s 2012 first half results on Monday in Paris.

Paris: Air France-KLM halved its operating loss on improved passenger activity but a drop in the value of hedging contracts, a restructuring charge and ongoing wrangles with unions continued to hover over its worsening bottom line.

The Franco-Dutch group, which last week failed to win cabin crew support for a key restructuring plan, said operating losses in the second quarter narrowed to €66 million (Dh299 million) from €145 million (Dh656 million) last year as revenues grew 4.5 per cent to €6.5 billion (Dh29.40 billion).

“These results demonstrate how crucial the success of the Transform 2015 plan is to the turnaround of the group,” Chairman and Chief Executive Jean-Cyril Spinetta said in a statement.

Net losses widened to €895 million (Dh4.05 billion) from €197 million (Dh0.89 billion).

Analysts were on average expecting operating losses of €216 million (Dh977 million) and a net loss of €211 million (Dh954 million) on revenues of €6.45 billion (Dh29.17 billion), according to Thomson Reuters I/B/E/S consensus data.

The latest results come as staff at the Air France network, which merged with Dutch KLM in 2004, weigh up a restructuring plan that the airline insists will determine its future as competition from low-cost carriers and Gulf majors intensifies.

Two out of three unions representing cabin crew last week rejected proposals to cut 5,122 posts through voluntary measures, dealing a blow to the loss-making airline’s efforts to push through politically sensitive restructuring plans.

“What is clear is that we don’t have a choice: the measures we proposed are meant to ensure the survival of the company and its recovery in coming years,” Finance Director Philippe Calavia told reporters after unveiling the quarterly earnings.

“The majority of our colleague have understood this.”

Pilots are due to vote on the plan in August. Some unions have called the 20 per cent productivity savings excessive.

Unit costs declined 1.3 per cent after stripping out currency and fuel prices as the airline’s restructuring exercise took hold in the second quarter.

Passenger busines improved in the second quarter but cargo suffered from the weak global economy, the airline said.

Air France-KLM took a restructuring charge of €365 million and said the value of its fuel hedging contracts fell by €372 million, driving up net losses for the quarter.

For the rest of the year it predicted an improvement on the €195 million operating profit seen in the second half of 2011, helping to keep net debt below the €6.51 billion posted at the end of 2011. At end-June it stood at €6.24 billion.

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