Air France-KLM posted on Thursday huge first-quarter losses and warned that the situation would not improve much in the next few months as global travel restrictions persist due to the pandemic.
With passenger numbers in the quarter down 73 per cent compared with a year earlier, the French-Dutch group is pinning its hopes on mass vaccinations allowing global travel to kickstart again later in the year.
The Franco-Dutch group saw €1.5 billion evaporate after tax in the first quarter while revenues were down 57 per cent on a year earlier.
The French and Dutch governments have propped up the airline since the pandemic wrecked travel and tourism last year, with Paris coming to the rescue again last month.
“A year into the COVID crisis, lockdown measures and travel restrictions in our home markets and around the world continue to strongly impact the group’s activity,” chief executive Benjamin Smith said in a statement, describing the environment as “ever-challenging”.
Chief financial officer Frederic Gagey warned that the start of the second quarter was also “not showing any notable improvement” so far, with international flights still heavily restricted across much of the planet.
Smith, however, insisted the company was looking 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”.
The company was looking 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”- Air France-KLM chief executive Benjamin Smith
In the meantime, the airline is continuing with cost-cutting measures, including voluntary redundancies.
The French and Dutch governments provided €10 billion in loans to Air France-KLM last year. In April, the French state doubled its stake in the company to nearly 30 per cent. The airline also raised just over €1 billion in a share issue.
But like long-haul rivals including Lufthansa and IAG, which operates British Airways and Iberia, it remains highly vulnerable.
CEO pay dispute
This quarter, Air France-KLM – which operates low-cost airline Transavia as well as the French and Dutch flag carriers – used just 48 per cent of the capacity used in the same period in 2019, measured in available seat kilometres. This is expected to edge up to 50 per cent in the second quarter.
With many governments eyeing a return to international tourism in the crucial summer season, the group expects to raise capacity to between 55 and 65 per cent of pre-pandemic 2019 levels in the third quarter, it said in a statement.
Air France-KLM booked a bottom-line net loss of €7.1 billion in 2020.
A controversy erupted in the Netherlands last month over a €2 million payout to Smith in 2020 despite the losses. Dutch lawmakers backed a motion demanding the withdrawal of the payment to the Franco-Dutch company’s boss and threatening to block any future aid to the group.