Like a year ago, Air France-KLM must have asked itself the question: what if? What if Air France hadn’t lost €335mln on social unrest and strikes that never seemed to end? The effect has been clearly visible in the 2018 results, presented on February 20.
Air France-KLM booked an operating result of €1.332bln, down 30.7% from the €1.923 in 2017, a year also affected by strikes. Total revenues were €26.51bln, up 2.5% from last year. Net income was €409mln, 151% higher than the previous year.
By airline, the differences are striking. KLM performed strongly, with revenues up 5% to €10.955bln. Net income was slightly down by 0.5% to €1.073bln, or almost 80% of the total Group result. By comparison, net income of Air France was €266mln, down a whopping 69.2%, on revenues up 1.2% to €16.073bln.
Except for the strikes, the group – like all airlines – was hit by higher fuel costs, especially in Q4. Despite this AF-KLM Group improved its net debt position by €195mln to €6.184bln. The biggest reduction was at KLM, €-454mln.
The low-cost subsidiaries Transavia and Transavia France saw strong growth, with revenues up 12.2% to €1.611bln and a net income 18% higher to €139mln. The airline carried 7.1% more passengers or 15.8mln on 10.1% higher Revenues per Passenger Kilometer to 28.392mln. Especially Transavia France increased capacity by over 21%.
CEO Ben Smith outlined his masterplan for the Group, briefly announced on February 14. By getting rid of over-lapping brands and by simplifying the brand structure, improving the cabin products, optimizing the network, Air France-KLM expects to steer towards a course of stability and growth. Its guidance is a 2.1-3% increase in capacity at the network carriers and 9-11% for Transavia.
By securing a number of social contracts with pilots, cabin crew and ground staff, at last AF-KLM should have a year without new social conflicts. This year the Group targets a cost reduction of 0-1%, despite an expected fuel bill increase by €650mln.
Smith confirmed that the Group will offer a tender to OEM’s for replacing the medium-haul Airbus A320-family at Air France and Boeing 737-fleet at KLM, which at an average age of over a decade are up for replacement. He didn’t give details, although Airinsight reported on January 8 that an order might be announced as soon as the Paris Air Show next June.
The AF 777-300ERs will get a cabin update this year and the A380s next year. The A380 fleet will be reduced from the current 10 to 7 when these aircraft come out of lease in the next two years. The A340-fleet at AF will be phased out in 2020 and the Boeing 747 fleet with KLM in 2021.