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Air France-KLM Reports Third Quarter Net Loss of €1.7 billion on 67 Percent Revenue Decline to €2.5

The Group reported an EBITDA loss of (€442) million due to cost controls and state aid and an operating result of (€1.05) billion, down €1.96 billion from Q3 2019. The Company’s net loss of (€1.67) billion includes (€635) million in restructuring and other charges.

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

Today (October 30, 2020), the Air France-KLM Group reported a third quarter net loss of (€1.67) billion on a 67 percent year-over-year revenue decline to €2.5 billion. The Group reported a Q3 EBITDA loss of (€442) million thanks to strict cost controls and state aid. The company’s operating result was (€1.05) billion, down €1.96 billion compared to the third quarter of 2019. The Group’s net loss totaled (€1.67) billion including (€565) million in restructuring charges, (€39) million in COVID-19 related over-hedging, and a (€31) million fleet impairment charge. As of September 30, 2020, the Air France-KLM Group reported a net debt of €9.3 billion, up €3.2 billion from December 31, 2019 and €12.4 billion in liquidity. In Friday’s report, Air France-KLM Group’s CEO, Mr. Benjamin Smith, said,

“After a promising recovery during the summer, the gradual closure of international borders in the second half of August and the resurgence of the pandemic strongly impacted our results in the Third Quarter, with the Group reporting an operating loss of 1.0 billion euros. We have accelerated the implementation of cost reduction and cash preservation measures. We are also working closely with our partners on various means, such as rapid detection tests, that would allow traffic within the best sanitary conditions for our customers and employees. Beyond these immediate necessary measures, we are engaged in a more profound transformation of our Group, with the objective of exiting this crisis in a stronger position, ready to address the future challenges of our industry. Air transport will continue to connect people and cultures, but we foresee changes in customers’ expectations that we anticipate too. We expect a challenging Fourth quarter 2020, with current forward booking sharply down compared to last year.”

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

Third quarter Group net employee costs were down 36 percent year-over-year attributable to the release of temporarily hired staff and suspension of profit sharing at Air France and KLM. The Group’s average number of Full Time Equivalent (FTE) employees decreased year-over-year by 5,500, including 2,500 temporary contracts. Operating free cash for the third quarter was (€1.22) billion, down €985 million from Q3 2019. The company anticipates a challenging fourth quarter with substantially lower EBITDA versus the third quarter. For the full year, the Group has reduced CAPEX guidance by (€1.5) billion to €2.1 billion and for Q4 the company expects capital expenditures of approximately €600 million, half of which is fully financed fleet-related CAPEX. Air France-KLM also repaid a €400 million hybrid bond in October 2020.

In order to align their fleet with existing demand, the Group has accelerated the retirement of their Airbus A380s, Airbus A340s, Boeing 747s, Canadair regional jets and Embraer E145s. The company does not expect a return to pre-pandemic demand levels for several years and the short-term recovery has been delayed due to the resurgence of COVID-19. KLM will be reshaped to emerge as a smaller, cheaper, more agile and sustainable airline with a substantial reduction in operating costs in 2021 and beyond. The carrier will enjoy €750 million in benefits in 2021 from decreases in labor, fleet, procurement and fuel costs.

Air France will also accelerate their restructuring plan including a restructure of French domestic, optimization of external spending, transformation of support functions, operational adaptation and fleet modernization. The airline expects to achieve an €800 million benefit in 2021 and a total of €1.2 billion by 2022. The carrier’s restructuring plan calls for a reduction of 4,000 FTEs through 2020 and a total of 8,500 by 2022.

Source(s): KLM, Air France-KLM

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