Air France-KLM sees bigger losses before recovery

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Renewed COVID-19 lockdowns are pushing Air France-KLM deeper into the red, the airline group warned on Thursday, as it chalked up a 7.1 billion euro ($8.5 billion) net loss for 2020 and postponed a key mid-term profitability goal.

The airline group expects to fly 40% of its pre-crisis capacity in January-March, as tougher travel curbs in France and beyond widen losses from the 407 million euros in negative earnings before interest, taxes, depreciation and amortization (EBITDA) recorded in the fourth quarter.

The past year has “tested the Air France-KLM Group with the most severe crisis ever experienced by the air transport industry,” Chief Executive Ben Smith said.

The worsening travel outlook threatens to ruin Europe’s critical summer season and leave major carriers in need of another round of funding support, analysts warn.

Air France-KLM last year received 10.4 billion euros in loans and guarantees from France and the Netherlands and is negotiating the terms of a state-backed recapitalisation, with EU regulators pushing for airport slot concessions.

The Air France business recorded a 989 million-euro operating loss last quarter, more than six times wider than KLM’s 152 million-euro deficit. Performance disparities have in the past sharpened Franco-Dutch tensions between the airlines and their government shareholders.

The cargo business, a bright spot for many airlines as grounded flights push up freight prices, saw unit revenues more than double in the fourth quarter.

The quarterly net loss of 1 billion euros was less than the 1.31 billion deficit analysts expected, according to the company’s own consensus polling. Revenue fell 64.3% to 2.36 billion euros on a 78% traffic decline.

Operating cash flow was a negative 2.12 billion euros last quarter, and net debt increased by 4.9 billion over the year to 11.05 billion as of Dec. 31, against 9.8 billion in liquidity.

Air France-KLM cut its workforce by 10% or 8,700 full time-equivalent positions in 2020 and expects to eliminate a further 6,000 “in coming years,” it said.

The group also flagged a likely further postponement of the 7-8% operating-margin objective it had pushed back last July by a year to 2025. The goal is “unchanged but delayed,” it said on Thursday, giving no new target date.

Main Photo: EPA-EFE/ETIENNE LAURENT

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