Air France-KLM recorded deep-red results for Q1 2020, reporting a EUR -1.803 billion net loss including exceptional items. It felt the impact of the Covid 19-restrictions especially in March, which doesn’t bode well for Q2 when the situation has been even more dramatic.
The net loss compares to a EUR -324 million loss in the same quarter last year. Just for March, the net loss was EUR -560 million. The net result includes exceptional items like a EUR -455 million negative fuel hedge result because of ‘over-hedging’, EUR -173 million in deferred income taxes, EUR -21 million in impairment costs on eight of KLM’s Boeing 747-400s and EUR -25 million on accelerated depreciation on Air France’s A380s.
The operating loss was EUR-861 million versus -268 million. Revenues were EUR 5.020 billion compared to 5.942 billion last year.
Air France versus KLM
Within the Group, the two network airlines show different performances as has become de rigeur within Air France-KLM. Air France posted a net loss of EUR -536 million compared to 249 million last year, with revenues down -17.8 percent to EUR 3.016 billion. The operating margin ended up at -17.8 percent or -11 percent lower.
At KLM, the net loss was EUR -275 million compared to -47 million last year. Revenues were down -9.7 percent to EUR 2.140 billion and the operating margin -12.9 percent or -10.9 percent lower.
On average, the network airlines flew 20.2 percent fewer passengers at 15.7 million. Cargo was down -10.1 percent to 242 tons with revenues down -14.8 percent to EUR 466 million.
Transavia and Transavia France booked a EUR -82 million loss versus -70 million the previous year. Its revenues were -1.6 percent lower at EUR 242 million. The leisure airlines flew -19.8 percent fewer passengers at 2.3 million.
The network airlines have been operating at only 5 percent capacity in April and expect to do so in Q2 as well, although KLM has restarted some short-haul services since May 4. The Group expects to operate at -80 percent capacity in Q3.
Transavia has been grounded from late March and has extended this a couple of times until May 27.
Capex down by 1.2 billion
Air France-KLM has identified EUR 500 million in cost savings for the rest of 2020 with more revisions ongoing. It expects to reduce crew costs EUR 350 million a month in Q2 from partial activity and variable pay reductions, while all temporary contracts have been ended. Air France aims to reduce unit costs by -1.8 percent in Q4, KLM by -0.8 percent. Deferral of taxes and other social charges will save EUR 70 million.
Capex has been reduced by EUR 1.2 billion to EUR 2.4 billion which includes another 0.3 million in addition to what was announced in February. Air France has deferred deliveries of three Airbus A350-900s until 2021, while all deliveries expected this year will be under financial arrangements.
Air France has decided to early-retire its four A340-300s and is considering the same for its nine remaining A380’s of which four have already been placed in deep storage.
Liquidity position Q3 remains an issue
By the end of Q1, the Group had EUR 6.4 billion available in liquidity, bolstered by drawing down a EUR 1.765 billion credit facility, and selling shares in the Amadeus booking system for EUR 356 million. Net debt stood at EUR 6.584 billion, up 437 million. Its free cash position was EUR -825 million.
Since then, Air France has secured a package of aid and loans worth EUR 7 billion from the French government and has been approved by the European Commission. The Dutch government is still in negotiations with banks and KLM about a EUR 2 to 4 billion package that needs approval from parliament. In a hearing on May 6, the Dutch parliament was divided on what conditions must apply before KLM will get this aid. Secretary of Finance Wopke Hoekstra stressed that KLM needs to come up with a significant restructuring plan to improve its costs base.
Today, the Group repeated that it could run out of cash by Q3 as it still burns some EUR 400 million in cash each month in Q2.
Without providing guidance for the remaining quarters, Air France-KLM said it expects significantly negative EBITDA for the rest of 2020 and significantly higher loss for Q2.