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Air France-KLM Announces Second Quarter Net Loss of €2.6 Billion on 83.2 Percent Revenue Decline

Air France-KLM announced on Thursday a second quarter 2020 net loss of €2.6 billion on a year-over-year revenue decline of 83.2 percent to €1.2 billion. The Group’s monthly EBITDA loss was reduced to around €260 million on cash preservation and cost control measures.

Air France-KLM Reports Second Quarter 2020 Financial Results - Courtesy Air France-KLM

On Thursday (July 30, 2020), the Air France-KLM Group reported a second quarter net loss of €2.162 billion on a year-over-year revenue decline of 83.2% to €1.182 billion. The Group’s net loss includes an impairment on Airbus A380 and A340 aircraft at €520 million and €72 million respectively, along with an over-hedging charge of €105 million and a €227 million restructuring charge. The company’s quarterly operating loss was €1.5 billion with an operating loss at Air France of €1.06 billion and a KLM operating loss of €493 million. At the close of the second quarter the Group’s net debt to EBITDA ratio was 4.8x, compared to 1.5x at the close of 2019.

After receiving substantial financial packages from both the French and Dutch governments, the Group closed the quarter with €14.2 in liquidity and available credit facilities. The company has further reduced 2020 CAPEX spending by €300 million to €2.1 billion and the company foresees a negative EBITDA for H2 2020. During Q2, passenger traffic declined 95.6% compared to the same period last year to 1.2 million, while passenger unit revenue per ASK (available seat kilometer) eroded 42.8% to 3.88 euro cents. In Thursday’s announcement, Air France-KLM Group’s CEO, Mr. Benjamin Smith said,

“The second quarter results demonstrate the unprecedented impact of the COVID-19 crisis on the activity of the Air France-KLM Group and all airlines worldwide. The Group reported an operating loss of 1.5 billion euros for the quarter, with activity virtually at a standstill in April. The cost reduction and liquidity preservation measures rapidly implemented have nevertheless enabled our operational losses to be reduced. The exceptional support of the French and Dutch governments has provided Air France-KLM with the liquidity needed to weather the crisis and ensure a gradual recovery in business. However, the uncertainties linked to the health situation, the opening of borders and the general economic situation are very strong. We must also adapt to important changes in customers’ behavior. The context pushes us to accelerate our transformation and improve our economic and environmental performance according to the main pillars of our strategic plan. I am confident in our ability to implement these projects with our teams in order to emerge from this exceptional crisis.”

The Group’s second quarter cargo capacity was down 56.3%, largely attributable to the reduction of passenger aircraft belly capacity, while load factors increased 16% to 74.7%. Employee expenses at the Group declined 50.4% during the quarter due to short-time work, the release of temporary and hired staff as well as the suspension of profit sharing at both airlines. The average number of FTEs (Full Time Equivalents) at the Group declined by 4,000 during the second quarter.

Air France-KLM does not expect the recovery of pre-pandemic levels of demand to return for several years and plans on operating with a capacity reduction of at least 20% for 2021. The Group’s restructuring plan moving forward includes an employee reduction of 6,520 or around 16% of the workforce at Air France, a reduction of 1,020 employees or 42% of the workforce at Hop! by the end of 2022. Additionally, KLM has announced that they will implement between 4,500-5000 redundancies through 2021. To reduce future structural costs, the Group has canceled or delayed all non-essential CAPEX investments, including IT projects as well as ground and real estate projects.

Source: Air France-KLM


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