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Air France-KLM Sees No Relief From Low-Cost, Gulf Rivalry

Published on Jan 18 2015 4:40 PM in General Industry

Air France-KLM Sees No Relief From Low-Cost, Gulf Rivalry

Air France-KLM Group, after a year that saw three profit warnings and its worst strike in 40 years, said there’s little cause for optimism in 2015 as revenue comes under “very strong pressure” from low-cost and Gulf carriers.

Shares of Air France-KLM fell as much as 4.5 per cent as Europe’s biggest airline said in a briefing that it faces “fierce competition” on both short-haul and inter-continental routes, creating a “difficult context” for the year ahead.

Air France-KLM cut its 2014 profit outlook for the third time on Dec. 19 and said it was seeking new ways to save money, including postponing aircraft purchases. The Paris-based company has said it will communicate further plans when it reveals full-year financial financial figures on 19 Feb.

Meetings with workers are scheduled for 22 Jan. and 5 Feb. after reports that the Air France arm plans 5,000 job losses, though it has said no cuts will be proposed before union talks.

Air France will already have reduced headcount by 10 per cent as of March compared with the end of 2011, paring the total to 63,000. Dutch unit KLM’s workforce was cut 9 per cent between 2008 and the end of 2014 to 32,700.

The Franco-Dutch company’s downbeat assessment comes after the International Air Transport Association said 10 Dec. that a lower oil price would help airlines announce higher earnings for 2014, followed by a 25 per cent boost in 2015.

Air France-KLM Chief Financial Officer Pierre-Francois Riolacci said last month that fuel-price hedging means there’ll be a lag before the company benefits from cheaper crude, without saying how much the windfall might be.

Bloomberg News, edited by Hospitality Ireland

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