Operating profits slide at Air France KLM’s cargo division

Air France KLM saw its cargo division’s financial performance worsen last year as it faced weak demand conditions and continued with restructuring.
The Franco-Dutch airline group saw revenues at its cargo division decline by 9.5% year-on-year in 2015 to €2.7bn, while operating profits declined by 15.6% on 2014 levels to a loss of €245m.
Traffic declined by 8.5% to 9bn revenue tonne km, while capacity was down by 4.5% to 14.9 available tonne km. As a result, its load factor slipped to 60.4% compared with 63.1% in 2014.
It blamed the performance on market conditions and its restructuring programme, named perform 2020, which included the removal of five of its freighters from operation.
However, it was confident these measures would see its freighter business return to breakeven at an operating level in 2017. This year the freighter business recorded a €42m loss, compared with €97m in 2014.
Overall unit costs at the airline’s cargo division were down by 10.8% on a like-for-like basis thanks to lower fuel costs and “good cost performance”.
“The Group continued to restructure its cargo activity to address weak global trade from/to Europe and structural air cargo industry overcapacity,” it said.
“During full-year 2015, full-freighter capacity was reduced by more than 23%, leading to a strike-adjusted decrease in total capacity of 5.8%.
“Within the framework of Perform 2020, the Group phased out five freighters during 2015 and plans to operate only five full-freighters by summer 2016.
“This reduction should enable the full-freighter business to return to operating breakeven in 2017.”
There was also an improvement in operating performance as the year progressed, although it still recorded a loss.
During the fourth quarter it recorded an operating loss €23m, up 25.9% year on year, as it reduced unit costs by 14.9% on a like-for-like basis.
Meanwhile, the overall airline returned an annual operating profit, €819m, for the first time in four years as it benefitted from lower fuel costs and increased passenger numbers.
The company is in the process of trying to reduce its costs, partly be entering negotiations with staff.
Last year, there were angry protests at the airline’s headquarters as the company announced plans to make 2,900 people redundant.
This was later reduced to 1,600 voluntary redundancies.