Air France KLM continues to cut costs as loss narrows

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Air France KLM continues to cut costs as loss narrows

Unread post by bimjim » Thu Nov 19, 2009

Air France KLM continues to cut costs as loss narrows
Thursday November 19, 2009

Claiming that the downturn "has led to behavioral changes among our customers which are likely to persist beyond the recovery," Air France KLM yesterday proposed an enlarged voluntary redundancy program affecting 1,700 jobs next year as it announced a €147 million ($219.3 million) loss in its fiscal second quarter ended Sept. 30, reversed from a €27 million surplus last year.

CEO Pierre-Henri Gourgeon said the company "responded quickly" to the recession and is "adapting more rapidly than expected." It is targeting €700 million in cost cuts this fiscal year and he cited the improvement from the first quarter (a €431 million loss) as evidence that "all these measures are starting to have a positive impact."

Nevertheless, "lack of visibility over the timing and strength of the economic recovery means we must pursue our efforts in terms of cost reduction," he said, necessitating the additional job cuts as AF KLM pursues full-year operating breakeven. In September, it announced a voluntary redundancy program comprising 1,500 positions (ATWOnline, Sept. 24).

Second-quarter revenue plunged 19.2% to €5.61 billion and the operating result swung to a €47 million loss from a €391 million profit in the three months ended Sept. 30, 2008. AF KLM said it also took a €179 million charge related to pre-2009 fuel hedges and noted it would have been in the black on an operating level excluding that charge. Costs fell 13.6% to €5.65 billion. Its passenger segment reported a €140 million operating profit despite a 17.2% fall in revenue, but cargo lost €127 million.

Group airlines flew 56.14 billion RPKs during the quarter, down 3.3%, against a 4.4% cut in capacity to 66.86 billion ASKs. Load factor rose 0.9 point to 84%. Yield was down 14.6% to €7.37 cents and unit revenue declined 13.6% to €6.19 cents. CASK dropped 7.8% to €6.14 cents. AF KLM finished the quarter with 646 aircraft, 611 of which were in operation. Winter season capacity is scheduled to fall 2% year-over-year.

Fiscal first-half loss of €573 million compared to a €176 million profit in the year-ago period. Operating result reversed to a €543 million deficit from a €592 million profit.

by Brian Straus

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