Air France-KLM's third quarter unit revenues are expected to be negatively impacted by around €150-170 million as a result of the Paris Olympic Games 2024 this summer. The company said in its second quarter results its operating result in the period had already been impacted by the games to the tune of around €40 million, with its operating results totalling €513 million, down from €733 million a year prior. Its operating margin during the quarter was at 6.5%.
"The second quarter of 2024 confirmed an increasingly challenging environment for aviation, with rising fuel prices and a continued pressure on costs,"" said the group's CEO Benjamin Smith. ""In this context, KLM and Transavia delivered a stable yet sluggish performance, while Air France was in addition impacted by exceptional events, including the negative effect of the Olympic Games in June."
The company had previously warned that the games would impact its unit revenues significantly between June and August this year. It reported that French residents were postponing their summer travel plans until after the games while it was reported that tourists were also avoiding the city for the duration of the event. It does expect air travel to normalise as it concludes. In addition, higher fuel costs and unit costs have ""hampered"" its operating results.
The group said it has introduced a hiring freeze and additional cost cuts as it adapts to the Olympics situation. The group's revenues for the quarter totalled €7.9bn, up a marginal 4.3% from the same period last year. Its net income was down just over €400 million, totalling €165 million. The second quarter earnings report coincides with other airlines' results, showing a growing demand for premium products. The group read in its financial presentation its increase in revenues was “predominantly driven by premium traffic” and also includes a “significant” amount of premium traffic being leisure customers.
In the first half of 2024, its premium revenues were up 7.4% compared to the first half of last year. It added that corporate revenue was up 5% in the first half of the year. The company held €9.6bn in cash at the end of the quarter. Its net debt to EBITDA ratio was 1.6x.
The group's capacity was up 4% in the quarter compared to second quarter 2023. Transavia - one of its airline subsidiaries - reported strong revenues of €843 million, up 18.4% from last year's second quarter. Its operating result swung to a positive €26 million. The group said this was "supported by the implementation of paid hand luggage with high capacity development" for Transavia. It revised its capacity outlook for the full year to an increase of 4% having previously estimated a 5% increase. It expects unit costs to increase 2% in the year compared to 2023, previously estimating between a 1-2% increase. Furthermore, its full year net capital expenditures are set to be below €3bn, previously estimating it to be at €3bn.