Etihad Airways will not fly to Air France’s rescue

Air France-KLM is still struggling to put its finances in order.

The Franco-Dutch group recorded, for the first semester of the year, a business turnover of 6.64 billion euros, a 3% increase but a drop of 4.5% if we take the exchange rate into account.

As a reminder, 40% of the company’s expenses are billed in dollars. Its operating loss has dropped to 232 million euros, versus 207 million euros in the first semester of 2014.

Some markets suffer more than others, such as Japan, where the demand is at a decrease of 15-20% due to the terrorist attacks.

The lethargy of the Brazilian economy, the drop in activity on the oil routes, and the political consequences of troubles in Africa don’t make things any easier.

The events in Tunisia and Morocco particularly affected Transavia, because these two destinations account for 35% of its sales volume.

Consequently, while the low-cost branch of the group maintains its growth, with a capacity rising at 22% and a business turnover progressing at 3.5% for 450 million euros, it is still not profitable and is digging further its operating losses at 75 million euros, versus 64 millions in the first semester of 2014.

The group will also not benefit from the decrease of the fuel bill of 1.9 billion dollars, since it was completely absorbed by the effects of the exchange rate.

In front of the degradation of the economic climate, Air France-KLM must react. “We need to amplify and accelerate our cost reduction plan,” declared Alexandre de Juniac.

The transporter has to find 1.8 billion euros in savings by 2017, of which 55% comes from expenses on personnel.

Social negotiations are running their course.

The management body congratulated itself on the conclusion of an agreement on the province bases, on the exit of the Boeing 747 from the fleet, but it is still waiting on the end of negotiations with unions next September.

On the procedure launched at the Bobigny tribunal against the SNPL union, Frédéric Gagey, Air France’s CEO, expressed feeling delighted that both parties are getting back to the negotiations table.

All while inciting his pilots to follow the example of their Dutch counterparts, who were able to find an agreement with the management.

Should there be no agreement, Alexandre de Juniac is still considering a very strong cut of the long-haul network, without giving specifics on the lines that will be affected.

The company already announced the closing of Stavanger (Norway), Verona, Vigo and Kuala Lumpur as well as a cut in flights towards Japan, Brazil, and Russia.

Despite all of its structural efforts, Air France-KLM will not make it out alone and is requesting the help of the government and European Union to create conditions for more sustainable competition.

“We ask governments to limit the fees and tax provisions or disadvantageous regulations.

We also hope that the European Union will relieve the cost of the European sky, which is one of the most expensive in the world, through the establishment of the Sésar program, for example,” declared Alexamdre de Juniac.

As for Gulf companies, the CEO hopes for the establishment of an international arbitration mechanism to monitor unfair competition practices and eventual subsidies.

He also specified that he was discussing with Etihad Aiways on cooperating in the passage activity, but that the Emirate company will not participate in Air France’s capital.

“There are no discussions on this topic,” he emphasized. Something to momentously hush recurring rumors of an eventual buyout.