Air France-KLM expects a return to profitability in a full year


Air France-KLM expects a return to profitability for the full year and adds transatlantic seats as a relaxation of travel rules revives the outlook for the struggling carrier.

The airline recorded positive free cash flow in the third quarter and offers 70 to 75% of its 2019 network capacity in the last three months of the year, according to a statement released on Friday. This will exceed the 66 percent reached during the period July to September.

While the carrier declined to provide an outlook for 2022 due to uncertainty over most Asian countries reopening, it said demand during the peak summer season was higher than expected. Europe eased border restrictions during this time and vaccinations have encouraged governments to ease restrictions.

The update is the latest sign that the aviation industry may finally weather the worst of the crisis caused by the coronavirus pandemic, which has blocked much of air travel for most of 18 months. Air France-KLM has only survived thanks to massive state aid from French and Dutch shareholders, although the full opening of crucial routes between Europe and the United States from next month could form the basis of ‘a sustainable recovery.

Positive gains

Third-quarter profit before interest, taxes, depreciation and amortization of 796 million euros was positive for the first time since the start of the pandemic and exceeded estimates compiled by Bloomberg. The airline expects the figure to be positive in the fourth quarter and slightly positive for the year.

Air France-KLM saw a sharp increase in ticket purchases for short and medium-haul flights over the summer as well as for long-haul destinations, which account for around three-quarters of profit margins, according to the CFO Steven Zaat.

“We are building capacity to the United States and plan to be at around 90% of 2019 supply by the end of the winter season,” he said on a call. Demand to the United States is strong and long-haul activity in the third quarter “was a great success”.

Nevertheless, discussions are underway between the Dutch government and the European Commission for a new recapitalization program, Zaat said. The carrier is also preparing other capital strengthening measures that could include a rights issue and quasi-equity instruments, the statement said.

“We are prepared for it, but we are looking for the right conditions,” he said. “We don’t have a liquidity crisis in this business.”

Debates

Air France-KLM is in “extensive discussions” with manufacturers for an order for narrow-body planes, Zaat said, declining to provide details on when a decision will be made. Airbus and its American rival Boeing clash to win the deal.

The carrier’s € 10.4 billion in cash and available credit lines “can be considered sufficient given the continued recovery throughout the summer,” the airline said. – Bloomberg


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