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Air France-KLM plans staff reduction after $648 million Q3 loss news
13 February 2009

Air France-KLM, Europe's biggest airline, reported a net loss of euro505 million ($648 million) in its fiscal third quarter, and announced plans for a job freeze that would eliminate 1,000-1,200 jobs this year through a moratorium on hiring and by not replacing retirees.

The company, which posted a euro 139 million profit in the the third quarter of the last financial year, registered an operating loss of euro 194 million in the third quarter this year as the economic crisis reduced demand for flights and cargo traffic.

It reported a net income of 103 million euros restated for non-recurrent and non-cash items for the first nine months of the current fiscal.

The passenger business saw a 3.4 per cent rise in traffic and a 2.9 per cent rise in capacity while the load factor gained 0.3 points at 79.5 per cent.

Long-haul traffic proved relatively resilient, but saw a decline in premium class revenues which the more robust performance of economy class was insufficient to offset, the airlines said.

Medium-haul suffered from a poor performance on the French domestic market in terms of both traffic and unit revenues.

The cargo activity suffered a sharp decline. The drop in traffic (12.5 per cent in Q3) was accompanied by a significant decline in unit revenues linked to the removal of a considerable proportion of the fuel surcharges
as well as general overcapacity in the sector which continued to put pressure on pricing, the airlines said.

Air France-KLM also saw a negative impact from its fuel hedging policies amidst falling oil prices.

Revenues were virtually stable at 5.97 billion euros for production measured in equivalent available seat km up 2.3 per cent. Unit revenue was down 2.0 per cent, and by 1.8 per cent on a constant currency basis. Operating costs were up 8.9 per cent to 6.17 billion euros mainly due to the impact of the higher fuel bill. Excluding the fuel charge they rose just 0.1 per cent.

The main change in operating costs related to the fuel bill, commercial and distribution and other costs. The fuel bill rose 498 million euros to 1.60 billion euros (+45.3 per cent) under the combined effect of a 1 per cent decline in volumes, a negative currency effect of 7 per cent and a 39 per cent increase in fuel prices after an unfavourable hedging effect.

For the first nine months of the financial year 2008-09, operating income stood at 445 million euros. After a negative currency impact of 2.7 per cent, revenues rose 3.0 per cent in the first half to 18.96 billion euros, up 4.2 per cent.

For the first nine months revenues from other activities rose 21.5 per cent to 1.03 billion euros of which 702 million euros for leisure (+25.1 per cent) and 282 million euros for catering (+13.7 per cent). Operating income amounted to 58 million euros at 31 December 2008 against 54 million euros at 31 December 2007.

The airlines said the outlook for financial year 2008-09 is still of a positive operating result, but its level will depend on economic developments between now and the end of the year, their impact on the passenger activity, and especially on cargo which is facing extremely difficult conditions, as reflected in recent monthly traffic statistics.

''In the meantime, we will continue to assess all our costs in order to achieve additional savings wherever possible,'' it added.

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Air France-KLM plans staff reduction after $648 million Q3 loss