Air France-KLM Group has officially released financial information on its performance during the first six months of 2018 and the things are not looking great. The company’s second profit performance was negatively influenced by its French unit strikes, which resulted in the partial disturbance of the airline’s network. KLM profits, on the other hand, have maintained stable, making it clear that the problem predominantly lies in the French side of the business. Although 2018’s first-half results are not ideal, the company remains positive on its ability to recover and improve its performance by the end of the year.
Air France-KLM Profits
Air France-KLM announced a loss of €89m during the year’s first half. The result was largely affected by the second quarter’s drop in pre-tax profits of nearly 80 percent to €167m. The drastic fall was a result of French strikes, but not solely. The rising cost of fuel across the world is increasingly felt by airlines as operational expenses continue to surge. In addition, Air France-KLM is not immune to currency fluctuations and has felt costs rise as a result.
The company’s revenue reached expectations, totalling to €6.6bn in contrast to net income, which was recorded at €109m, showing a drop of 82 percent. The strikes that took place during the first six months of the year harmed the company by costing it €260m in the quarter, and €335m as a total during the first six months of 2018.
On the Bright Side
Although the picture may look quite grey so far, not everything from the first half results of Air France-KLM is negative. The company managed to reach 2.7 percent growth during the time period as a result of a stable business environment and a strong unit revenue performance. This was seen not only in passenger but in the company’s cargo business. Revenue per Available Seat Kilometer was also on the rise, growing by 1.6 percent.
During the period it was mainly Air France who was struggling to stay afloat because of the arising strikes. On the other hand, KLM performed much better. While Air France’s profit before interest, taxes, depreciation, and amortization dropped by 95 percent, KLM’s decreased only by 7 percent, leaving the company in a stable position.
Air France-KLM has been lacking a permanent Chief Executive since May. Internal issues have left the company without a new, permanent Chief Executive, which may also be damaging the company’s performance to some extent.
Earlier in the year, a joint venture agreement was signed between Air France-KLM, Delta Air Lines and Virgin Atlantic and the future of the new North Atlantic company is in the hands of U.S. authorities. There has been information released that Air France-KLM and Virgin Atlantic are in talks about extending their partnership to other regions of the world. Overall, the outlook for the remained for the year is strong and Air France-KLM is confident in its ability to recover from its negative first-half results for 2018.