Sunday, 13 June, 2021

Net profits rising: what if the sky cleared for Air France-KLM?

Two weeks after the salary agreement signed at Air France, the Air France-KLM group announced an increase in its net profits of more than 22% in the third quarter. But beware: the group must still conduct other negotiations with its staff next week, and also anticipate the increase in its oil bill.

Air France-KLM's profits are on the rise.

Air France-KLM announced Wednesday, October 31 a net profit up 22.6% in the third quarter, marked in October by a salary agreement at Air France which opens “new perspectives”, according to the new boss of the airline group.

New negotiations next week

Ben Smith, who took office in mid-September, in a statement welcomed a “solid operating income” of 1.065 billion euros (-6.7%) over the summer period, adding that the salary agreement concluded at Air France on October 19 brought “stability and new perspectives for our activities and our employees”. This result reflects, according to him, “the commitment of all (the) teams” of the group, “its commercial power and the attractiveness of its brands”.

“I am convinced that, in the coming months, we will be able to rely on the strengths and assets of the group to build an ambitious and innovative strategy, in order to ensure the success of our airlines and to reposition Air France-KLM as a leader. industry, ”he added. The agreement signed on October 19 provides, for all categories of personnel, 2% retroactive increase to January 1, 2018 and 2% increase to January 1, 2019, as well as mandatory annual negotiation (NAO) in October 2019. It will cost in 2018, “51 million euros” to the group, specified the financial director of Air France-KLM Frédéric Gagey during a telephone press point with journalists.

The agreement was signed after several months of a conflict marked by 15 days of strike at the call of the inter-union between February and May, at an estimated cost of 335 million euros. The conflict had led to the sudden departure of CEO Jean-Marc Janaillac. Categorical negotiations are to be held from next week. It will begin on November 5 with the representative unions of pilots and on November 7 for those of cabin crew (cabin crew, hostesses and stewards).

Asked about Mr. Smith’s strategic plan, Mr. Gagey stressed that the group’s new strongman had “spent a lot of time in relation to resolving the crisis at Air France” and that “if there is no strategy presented to the outside world, there is a lot of work being done internally ”.

Rise in the oil bill

On the financial front, Mr. Gagey praised the “robust” results thanks to the “good commercial performance” of the group, with a turnover up 4% in the third quarter. Net profit (786 million) rose sharply compared to the same quarter of 2017, which was marked by the effects of the evolution of pension funds within the Dutch branch of the group, he said.

The decline in operating profit is explained, according to Mr. Gagey, by the effect of a heavier oil bill and currency declines. These two elements are offset by the increase in unit revenue, per offered seat kilometer, and a decrease in unit costs of 20%, he added. For the full year 2018, the capacity growth outlook has been lowered to a range of 2% to 2.5% – compared to 2.5% to 3.5% previously – due to capacity in the third quarter “A little lower than expected,” according to Mr. Gagey.

The oil bill, which will amount to 5 billion in 2018, will be up 500 million euros compared to 2017. And it should reach 5.9 billion euros in 2019, based on the price of October 26 , said the CFO. In terms of passenger traffic, the group notes a “strong performance from routes to North America and Asia” while “demand from Brazil and Argentina is impacted by the depreciation of local currencies”. For the whole of 2018, “the group will continue to work on improving revenue in a context of rising oil bills,” he explains.

(With AFP)

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