Air France-KLM has reported a worse than expected operating loss of €597m for the first quarter of 2012 and as a result has warned of a higher than expected operating loss for the first half. Reported revenue was up 6% on the same period last year at €5.7bn but its operating loss grew for the quarter by €194m from €403m last year to €597m. Fuel costs are to blame on the main with an 18% increase recorded but employee costs also went up by some 6% and this on the main was due to pension charges from the KLM side which highlights a worrying trend.
However Air France-KLM’s net loss remained flat, at €368m for the quarter from €367m a year ago, as it recorded a one-off gain relating to the sale of a stake in Amadeus. On the back of this deal the loss per share was limited to €1.25, compared with €1.24 last year.
Air France-KLM remains the most indebted of Europe’s large airlines and is still having problems making a dent in those high operating costs that are mainly due to staff. Laying off more staff will not help in the short term due to payments for the same and in the medium term both oil and pension costs are creeping, which could yet erase much of the savings from its cost savings plan.
Last month the airline entered talks with unions to reduce expenses through new collective bargaining agreements on wages and benefits and hopes to conclude the negotiations by June, but the airline should and could have acted sooner to do the job before the election and the rise of a socialist president who could yet derail the process or at least put pressure on the same.
The airline’s net debt position improved slightly, from €6.5bn at the end of last year to €6.4bn at the end of March 2012. Air France-KLM has a target of cutting its net debt to €4.5bn by the end of 2014. This could be done if Air France-KLM were to defer aircraft deliveries like Qantas did today (see below in APAC). But the Air France-KLM fleet is not in a position to wait for new aircraft like Qantas so that option should not cross the mind of management at the Franco-Dutch giant – if it does then you know the going is very bad indeed.
It is worth wondering if the new French government, whoever may be at the head of the same, will start to give Air France-KLM a helping hand….that will go down well (I don’t think) with the likes of Ryanair, Easyjet and IAG all of which know full well that the French market is the key growth area in Europe……The hawks are circling and the EU open market should ensure that they have an opportunity to pile the pressure onto Air France-KLM routes.
Worse than expected loss at Air France-KLM for 1Q due to pension charges and fuel
