Air France KLM completes freighter restructuring but operating losses deepen

04 / 11 / 2016

Air France KLM saw its cargo division's operating performance worsen during the third quarter of the year, while its freighter fleet restructuring was completed.

The Franco-Dutch airline group recorded an operating loss of €100m during the third quarter of the year, compared with a loss on €81m during the same period in 2015.

Third quarter revenues were also down, slipping to €487m compared with €584m last year.

Financial performance was effected by “structural industry overcapacity” and traffic decreased by 6.4% to 2.1bn cargo revenue tonne km (RTK).

The traffic decline comes despite some of its European rivals seeing demand improve during the quarter, with traffic up at IAG and Lufthansa. However, it has been reducing freighter activity and there were also cabin crew strikes in August and July.

During the quarter, the company also took action to further reduce its freighter fleet by retiring up a further two of its MD-11 freighters in July to leave it with a total of six all-cargo aircraft. It also took an MD-11 out of action earlier in the year.

The removal of the two aircraft resulted in a reduction of full-freighter capacity in the third of 22%, while overall cargo capacity was down 3.1%.

It said its freighter operations were now on-track to break even next year and added that its freighter fleet reduction had been finalised.

The industry has also been blighted by lower rates in 2016, which is reflected in the airline group’s decline revenues per RTK of 12.4% year on year to 21.18 cents.

However, Air France KLM said it had improved earnings before interest, tax, depreciation and amortisation by €27m mainly as a result of restructuring efforts, although it did not provide any further details.

Unit costs for the period, not including fuel, were down by 2.3% on a constant currency basis.

The overall company saw third quarter revenues decrease by 5.1% year on year, while its net result was up 13.1% to €544m.

Revenues were affected by lower pricing and exchange rates, while a reduction in the fuel bill helped profitability.