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Air France-KLM launches new cost cuts after Q2 unit revenue falls

Friday, July 24, 2015 - 14:01
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Closely watched unit revenue at Air France-KLM fell in the second quarter, prompting Europe's second-largest network carrier to launch 300 million euros (S$451.8 million) in new cost cuts and scale back its capacity growth for the winter season.

[PARIS] Closely watched unit revenue at Air France-KLM fell in the second quarter, prompting Europe's second-largest network carrier to launch 300 million euros (S$451.8 million) in new cost cuts and scale back its capacity growth for the winter season.

The Franco-Dutch airline group reported lower operating profit and slipped further into the red with a net loss of 79 million euros in the quarter, but maintained its objectives for the year on Friday, including a reduction in debt.

Chief executive Alexandre de Juniac said the 300 million euros in new savings would slash about a quarter from the group's general administrative expenses of over 1.1 billion.

He urged Air France pilots to reach a new productivity agreement by the end of September but warned that without a deal, the airline would have to take "severe measures" to cut back routes in its long-haul network as early as October.

It has already reached deals with KLM pilots and staff involved in provincial bases in France, he told reporters.

Air France-KLM said it would increase capacity by just 0.6 per cent over the year as a whole, compared with a rise of 1.1 per cent it had predicted in February.

The company posted second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of 569 million euros. Revenue grew three per cent to 6.642 billion, but fell 4.5 per cent on a comparable basis.

Analysts were on average expecting second-quarter EBITDA of 575.5 million euros and net profit of 2.97 million on sales of 6.513 billion, according to consensus data from Thomson Reuters I/B/E/S.

In the second quarter, unit revenue per passenger-kilometre fell 4.8 percent on a like-for-like basis.

For the first half, Air France-KLM said all the gains from lower fuel prices were offset by pressure on unit revenue and currency swings, forcing it to accelerate cost savings.

The first-half operating loss widened to 232 million euros as the stronger dollar pushed up fuel and maintenance costs. Air France-KLM pays 42 per cent of its costs in dollars, but receives only 25 per cent of its revenue in the US currency.

The group reiterated plans to improve unit costs by 1-1.3 per cent or 250-300 million euros over the year as a whole, based on measures already announced. Unit costs per available seat-kilometre fell 0.5 per cent in the second quarter.

It still plans to reduce its net debt to 4.4 billion euros by end-2015. At mid-year, Air France-KLM's debt stood at 4.55 billion euros, down from 5.41 billion a year earlier.

REUTERS

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