Air France-KLM SA or Air France, a Franco-Dutch airline holding company, declared on Thursday, May 7, 2020, that the airline has suffered an 815 million-euro ($880 million) first-quarter (Q1) operating loss, which was ascertained after two weeks of coronavirus shutdown in the country. The ailing airline group also projected that it would take “several years” for the company to recover the loss of revenue affected by the coronavirus pandemic.
Revenue Decline is Likely to Continue Till Q3
The global aviation industry had been hampered badly due to the pandemic restrictions of air travels in a bid to curb the spreading of the virus. Since several major airline companies declared the state of insolvencies, governments across countries have stepped in to grant rescue packages for their airlines to save from further declining of costs and conserve cash in response to the unprecedented global crisis.
Air France’s Chief Financial Officer (CFO), Frederic Gagey stated that the airline’s revenue started dipping in the month of March and expected, such an “abrupt plunge in revenue that will obviously extend through the second quarter.”
Following the virus impact, the airline, which has received 7 billion euros in French-backed rescue aid and Dutch pledges for a further 2 billion to 4 billion, expected to reduce monthly cash burn to 400 million euros in the Q2. A source reported that the airline, because of its proper management in cost-cutting and state-funded furloughs, saved 350 million euros a month.
The airline group expected that the operating losses of the carrier would be increased “significantly” in April-June with a condition of putting 95% of flights to remain grounded by a combination of travel restrictions designed to contain the pandemic and collapsed demand. Capacity would be slashed down 80% in the Q3, the group predicted, with customers returning only gradually.
Full-Year Loss in Operating Earnings
Considering the widespread pandemic and potential impact on the aviation industry, the CFO Gagey said that the airline company now expected a full-year loss in operating earnings before interest, tax, depreciation, and amortization (EBITDA), which is happening for the first time in its history. Overall, Air France’s revenue fell 15.5% to 5.02 billion euros in the Q1 with its net loss widened to 1.8 billion euros from 324 million, and also swollen by a 455 million-euro impact from over-hedged fuel.
However, the impact of the virus pandemic had initially hit widely in Asian airline companies early in the Q1 by the time the effects of lockdowns and travel bans were not present in European nations; they felt the hit later until the second half of March.
Air France described that it considered plans to reduce its fleet capacity by 20% in 2021 comparing against its pre-crisis 2020 guidance. It also warned that demand was “not expected to recover to pre-crisis levels before several years” while it was expected that the airline’s Chief Executive, Ben Smith would present an updated “transformation plan” to investors within months.
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