On Thursday, 6 May 2021, Air France – KLM group posted a huge loss for the first quarter. Further, they warned that the situation would not improve much in the next few months. The number of passengers in the first quarter is 75% down as compared to the year earlier. The French-Dutch group is hopping for mass vaccination, which will allow global travel to kickstart again later in the year.
Air France -KLM Group, is a Franco-Dutch airline holding company incorporated under French law. Its headquarters is at Charles de Gaulle Airport in Tremblay-en-France, near Paris. The group also has its offices in Montreuil, Seine-Saint-Denis, Paris, and Amstelveen, Netherlands. Both air France and KLM are members of the SkyTeam airline alliance.
Impact of travel restrictions
In the first three months of the year, the Air France-KLM group continued to be negatively impacted by travel restrictions. as the whole industry:
- Revenue at 2.2 billion euros, 57% down compared to last year
- EBITDA loss at -0.6billion euros, reduced due to strict cost control and national partial activity schemes
- Operating result at -1.2 billion euros, down 0.4 billion euros compared to last year
- Net income at -1.5 billion euros, after taking interest charges into account
- Net debt at 12.5 billion euros, up 1.5 billion compared to the end of 2020
- On 31 March 2021, the Group has 8.5 billion euros of liquidity and credit lines at the disposal
- Early April; 2021, the first set of balance sheet strengthening measure successfully executed, increasing €4 billion equity and improved cash position by €1 billion
Due to the lockdown in France and Netherlands until the beginning of May and travel restrictions worldwide, the group still anticipates the second quarter to be similar to the first quarter. Therefore, customer booking behavior is still short-term oriented.
The key to reduce travel restrictions and reopen borders is recovering rapidly due to the speed of the vaccination process. The Air France-KLM Group expects capacity in available seat kilometers circa index 50% in the second quarter of 2021 compared to 2019 for the passenger activity.
For the third quarter, the Group foresees a capacity in Available seat kilometers index in the range of 55% to 65% compared to 2019 for the network passenger activity thanks to estimated higher demand. The Air France-KLM group continues to work to strengthen its balance sheet.
Board of Directors
The Board of Directors of Air France-KLM chaired by Ms. Anie-MarieCoudrec, met on May 5, 2021, to approve the financial statements for the first quarter of 2021, Group CEO Mr. Benjamin Smith said:
“A year into the Covid crisis, lockdown measures and travel restriction in our home markets and around the world continue to impact the group’s activity strongly. In this ever-challenging environment, the Group has nevertheless shown its resistance maintaining strict control of its capacity and costs.”
“ The success of the first set of capital-strengthening measures completed in April allows us to look forward to the summer season with greater confidence, hoping that the progress of the vaccination roll-out worldwide and the implementation of travel passes will allow borders to reopen and traffic to recover. In the meantime, we have accelerated our transformation plan to build a solid post-crisis model. This includes the execution of our voluntary departure plans, which are progressing as expected. In the coming months, we will continue our strict cost control approach while reinforcing our sustainability commitments in line with our ambitious environmental road map.”
Transavia operating results
Transavia’s operating results are -120 million euros as impacted by the Covid-19 crisis. The first-quarter operating result ended -38 million euros lower than last year at an operational loss of -120 million euros due to strict border restrictions in Europe and North Africa.
The first-quarter activity level was only around 20% of last year’s production, with a unit revenue down -21.6%compared to 2020. Load factor at 57.6% was impacted by travel restrictions imposed. The production level of Transavia France was slightly higher at an index of 26 compared to 2020 because of the start of domestic routes.
Transavia plans to capture the leisure traffic in the coming months of summer to recover from the crisis. It will be a great opportunity for the group to compete again. The addition of eight Boeing 737-800 aircraft to the Transavia fleet in the first quarter is also part of the plan.
On 31 March 2021, the group has 8.5 billion euros of liquidity and credit lines at its disposal. This level can be considered comfortable, given the expected recovery in the summer, despite the cash requirements for 2021 which include:
- Q2 2021 EBITDA expected to be in the same range as EBITDA Q1 2021
- Capex spending inferior at 2.0 billion euros in 2021, but largely funded for fleet investments
- Restructuring cash out of 0.5 billion euros in 2021, part of which is financed by the associated reduction in the wage bill.
The Air France-KLM group aims to strengthen its balance sheets in the future. They planned to show extraordinary resolutions to the Board of Directors to restore equity. It will help initiate the gradual refinancing of state aid and restore the leverage ratio.