Air France-KLM issues third profits warning of the year

Air France-KLM issues third profits warning of the yearA third profit warning of the year has been issued by Air France-KLM, with the airline blaming continued price weakness and a worse than expected impact of a two-week pilots’ strike.

The group said earnings before interest, taxes, depreciation and amortisation would be €200 million lower than recently forecast.

The Franco Dutch carrier began the year predicting EBITDA of €2.5 billion, but is now set to gain as little as €1.5 billion to €1.6 billion.

The group suffered a two-week strike in September which cost it nearly half a billion euros, prompting a downgrading of its earnings forecast. The carrier issued its first warning in July.

The company said last night that “persistent weakness” in several long-haul markets since the summer have hurt profits while new financial regulations in Holland are affecting pension costs.

The cost of the two-week strike by Air France pilots was higher than expected due to the cost of flying passengers on other airlines during the period.

The group had previously said that the strike could cost around €320 million to €350 million directly in lost revenue with an estimated €150 million more as passengers delayed bookings.

The company added it had also seen little benefit from the fall in oil price because it has fallen by more than the price of jet fuel.

It plans to accelerate its cost-cutting measures and scale back its investment plans.

CEO Alexandre de Juniac said: “By significantly stepping up our cost-cutting efforts and adapting the investment plan, Air France-KLM can gain the resources and be well prepared to tackle 2015 despite the difficult competitive environment.”

The company said it was sticking with its long-term Perform 2020 growth plan, which includes investing €1 billion in low cost arm Transavia to expand from 47 to 100 aircraft by 2017.

“The Perform 2020 dynamic is under way across all the Group’s activities, based on the imperatives of an ongoing improvement in competitiveness and strict financial discipline,” said de Juniac.

Sourced from Travel Weekly

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