Air France-KLM Is at the Mercy of Middle East and Low-Cost Carriers

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Air France-KLM Group, after a year that saw three profit warnings and its worst strike in 40 years, said there’s little cause for optimism in 2015 as revenue comes under “very strong pressure” from low-cost and Gulf carriers.

Shares of Air France-KLM fell as much as 4.5 percent as Europe’s biggest airline said in a briefing that it faces “fierce competition” on both short-haul and inter-continental routes, creating a “difficult context” for the year ahead.

Air France-KLM cut its 2014 profit outlook for the third time on Dec. 19 and said it was seeking new ways to save money, including postponing aircraft purchases. The Paris-based company has said it will communicate further plans when it reveals full- year financial financial figures on Feb. 19.

Meetings with workers are scheduled for Jan. 22 and Feb. 5 after reports that the Air France arm plans 5,000 job losses, though it has said no cuts will be proposed before union talks.

Air France will already have reduced headcount by 10 percent as of March compared with the end of 2011, paring the total to 63,000. Dutch unit KLM’s workforce was cut 9 percent between 2008 and the end of 2014 to 32,700.

Air France-KLM shares fell as much as 34.6 cents to 7.33 euros and were trading 4.1 percent lower at 7.36 euros as of 1:57 p.m. in Paris. The stock has lost 20 percent in 12 months, valuing the business at 2.21 billion euros ($2.6 billion).

The Franco-Dutch company’s downbeat assessment comes after the International Air Transport Association said Dec. 10 that a lower oil price would help airlines announce higher earnings for 2014, followed by a 25 percent boost in 2015.

Read MoreAir France-KLM Third-Quarter Profit Drops Following Pilot Strike
Air France-KLM Chief Financial Officer Pierre-Francois Riolacci said last month that fuel-price hedging means there’ll be a lag before the company benefits from cheaper crude, without saying how much the windfall might be.

Today’s briefing was given in Amsterdam.

(Source: Bloomberg | Andrea Rothman)

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27 Apr 2018 - 02:38

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