Air France KLM warns of capacity cuts as losses deepen

Air France KLM’s cargo division has seen losses deepen in the second quarter of the year and services at the airline will be cut as it attempts to address overcapacity.
The airline group’s cargo division saw its operating loss for the second quarter of the year increase by 33% against last year to €78m.
This came on the back of a 9.6% year-on-year decrease in cargo revenues to €604m as capacity and therefore volumes shrank.
Revenue tonne kms declined by 11.1% year on year during the second quarter to 2.2bn RTK.
During the period, its cargo division saw freighter capacity axed by 26%, while belly capacity was up by 1.3%. Overall cargo capacity was down by 5.7%.
Freighter capacity would be reduced further as part of the Perform 2020 cost saving initiative.
“The group continued to restructure its cargo activity to address the weak global trade and structural air cargo industry overcapacity,” it said.
“Within the framework of Perform 2020, three Boeing 747s were retired in the winter 2014-15 season, while all MD11s will be retired by June 2016.
“The group plans to operate only five full-freighters by the end of 2016. This reduction should enable the full-freighter business to return to operating breakeven in 2017 (versus a strike-adjusted loss of €95m in 2014).
“The group recorded in its June 30 2015 accounts provisions to cover the corresponding voluntary departure plans.”
The overall airline also saw losses deepen during the quarter as it recorded a €79m deficit against €11m last year.
Board of directors chairman warned that there would be an acceleration of the Perform 2020 initiative and passenger/bellyhold capacity on weaker routes would be reduced.
During the second half the group plans to reduce capacity to Japan by 14%, to Brazil by 5% and to east Africa by 6%.
Chairman of the board of directors Alexandre de Juniac said: “The lack of results improvement leads us to implement immediate additional adaptation measures including, in particular, the closure of heavily loss-making routes, the downward revision in capacity for the forthcoming Winter season, together with an acceleration and an increase in the magnitude of our cost-saving initiatives.
“Following the [productivity] agreement signed by KLM with its unions, the rapid conclusion of the negotiations with the Air France unions is key to re-launching the results turnaround.
“At this pivotal moment in Air France-KLM’s history, the Board and I know that we can count on the spirit of responsibility and commitment shared by all the Group’s staff to enable us to return to a growth path.”
It also managed to reduce its debts during the first half, to €4.5bn from €5.4bn a year ago

 Notes: all figures apply to cargo division