Air France-KLM announced its third-quarter results on Friday, revealing losses of more than €440 million. Having seen an increase in demand from July to mid-August, new government restrictions impacted the expected recovery in demand. The group has agreed with labor representatives on substantial restructuring plans to meet changing customers’ expectations after the COVID-19 crisis ends.
Air France-KLM group posts €1 billion operating loss
According to a press release seen by Simple Flying on Friday, Air France-KLM has posted huge losses for the third quarter of 2020. The group said that €2.5 billion third-quarter revenues were down 67% over the same period last year. Operating losses were €1.04 billion, a decrease of almost €2 billion.
The group recorded an EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of €442 million, which was limited thanks to cost control and state aid. It received a €7 billion bailout from the French government in May and a further €3.4 billion from the Dutch in June. The financing provided much-needed liquidity. Group CEO Benjamin Smith said,
“After a promising recovery during the summer, the gradual closure of international borders in the second half of August and the resurgence of the pandemic strongly impacted our results in the Third Quarter, with the Group reporting an operating loss of 1.0 billion euros. We have accelerated the implementation of cost reduction and cash preservation measures.”
According to the company, passenger traffic was down 80.7% in the third quarter compared to 2019. July and August were relatively strong in terms of traffic, but September was disappointing after being affected by restrictive travel measures. The tightening of travel restrictions, border closures, and the absence of corporate travel delayed the expected recovery in traffic.
Bleak outlook for short-term recovery
The report says that the group expects a challenging fourth quarter of 2020, with current forward bookings sharply down compared to last year.
After the lockdown, the Air France-KLM Group saw a positive recovery in demand until mid-August. Then, with the reintroduction of restrictions, the reversal of passenger demand led the group’s airlines to downwardly adjust the capacity planned for the fall and winter period.
The group doesn’t foresee a recovery demand any time soon as customer booking behavior is much more short-term oriented and also highly dependent on the government-imposed travel restrictions, especially on the long-haul network. The national lockdown in France that started on Friday and will last until at least the end of November will further weigh on the group’s activities.
Air France–KLM attempts to boost customer confidence
The group’s airlines have been trying various measures to encourage passenger confidence during these uncertain times. In September, they began offering fully refundable vouchers for customers who needed to change their travel plans for whatever reason. Air France extended its travel insurance to cover COVID-19 related risks.
The group CEO said,
“We are also working closely with our partners on various means, such as rapid detection tests, that would allow traffic within the best sanitary conditions for our customers and employees.”
Despite these measures, the Netherlands’ Finance Minister said on Dutch television that the future of Air France-KLM is not guaranteed. He said that, if the COVID-19 situation were to last until the end of next year, even deeper cuts in costs would be needed.
How do you see the long-term future of Air France-KLM?