Air France-KLM is expected to post its first positive annual operating result since 2019, company news

In 2022, Air France-KLM can claim victory: the first positive operating result since 2019. The airline rebounded in the second quarter, posting an operating profit of 386 million euros against a deficit of 753 million a year ago. From a loss of 1.49 billion in June 2021, the net result turned into a profit of 324 million, the first time since 2019. In general, it is based on a turnover of 6.7 billion, which is a growth of 143.9%. The icing on the cake: ticket sales for the summer exploded to over €1 billion. CEO Ben Smith, who commented on the results on Friday morning, could only be pleased: ” Air France-KLM posted better-than-expected results. We transported three times more passengers than last year. » « We had an exceptional period– added CFO Steven Zaat. Operating margin, at 5.8% in the second quarter, is close to the pre-pandemic level of 6%. This exceeds our expectations and the expectations of the market. At Air France-KLM, like KLM, operating profitability returned to pre-crisis levels and the maintenance division became profitable for the first time since Covid. On the stock market, these indicators are welcomed: the title rose by 6.1% to 1.365 euros.

Failures in work

This rebound is not a surprise. This was announced by Ryanair or Lufthansa, which have already published their results. This was facilitated by an extraordinary recovery in passenger traffic, the desire to escape from it all never disappeared, despite the health crisis. This recovery was even faster than the industry expected, causing disruptions at some airports. In Amsterdam, Schiphol, which is a platform for KLM, has repeatedly asked to limit ticket sales and cancel flights due to a lack of staff, including security. ” KLM mitigates disruption by prioritizing delayed customers over punctuality, facilitating rebooking and limiting load factors already constrained by Schiphol Airport said Ben Smith. For its part, Air France maintained stable operations with 99.4% of flights operated in June and July. This situation cost the group 70 million euros per quarter. It takes time to settle. So the Franco-Dutch carrier should limit its passenger capacity to 80-85% in the third quarter, after 82% in the second quarter, before increasing to 85-90% at the end of the year. ” In the fourth quarter, disruptions in the operation of airports will be eliminated hopes the CFO. Near low cost Transavia will exceed capacity, on the other hand, at 2019 levels.

Americans in Paris

Another closely watched subject is the evolution of oil prices. They flew away with the post-Covid recovery and the war in Ukraine. In the second quarter, Air France-KLM spent 1.86 billion euros on fuel, which is 1.34 billion more than a year ago and 459 million more than in 2019. However, in total for the year the group should save 1 billion thanks to fuel. a hedging policy that ensured the price of 72% of kerosene needs during the spring. ” We have already implemented a hedging policy for 2023– noted the financial director. Given the high price of oil, it is necessary to increase the yield by 13-15%. [rendement, ndlr]. In the second quarter, it grew by 12.5% ​​in the premium class and by 16.9% in the economy class. Since the situation there is favorable, a further increase in prices is planned for the third quarter.

In the United States, fill rates are at unprecedented levels and yields are significantly higher than in 2019 “, – rejoiced Ben Smith. The strengthening of the dollar gives a sense of wealth to Americans who are returning to Paris en masse… Taking advantage of this trend, Air France-KLM announced on Thursday the opening of a daily direct connection from this winter between its Paris-Charles-de Gaulle hub and Newark Liberty Airport, a stone’s throw from the Big Apple. In Asia, China and Japan are still closed.” Productivity is good, but at too low capacities, that’s how it is– lamented Steven Zaat. But we are ready to reopen and have the ability to move our transport capacity from west to east. »

On the balance sheet, an increase in gross operating profit to €931 million, coupled with very good ticket sales, enabled Air France-KLM to generate free operating cash flow of €1.5 billion in the second quarter and reduce its net debt by €2.2 billion . The latter is still too high at €6.03 billion, but the group is working to reduce it. To date, KLM has repaid all of the Dutch state aid received during the crisis. Air France has recovered 60%, which puts the company on track to escape the restrictions imposed by Brussels and reach the 75% threshold, which, if crossed, will allow it to participate in the consolidation of the sector.