Air France-KLM in bad economic situation

[sn26567]

Air France-KLM faces a bumpier ride than its peers through the turbulent economic times ahead, as it wrestles with high staff costs, a large debt pile and tough competition that have battered its shares this year.

Lufthansa and IAG (BA-Iberia) are much better shape.

http://www.reuters.com/article/2011/09/ ... 4J20110902

This time, the EU will no longer allow the French goverment to bail them out, like at the end of the 1990es when AF received an injection of 120 billion FRF (20 billion EUR). Belgium was not allowed to act similarly with Sabena...

[sn26567]

Air France KLM “looking for major cuts”

Air France-KLM is looking for savings of €700-800 million. Pierre-Henri Gourgeon, the airline’s CEO, met union representatives yesterday (September 5) and said growth targets would have to be cut because of the uncertain economic outlook.

A salary freeze and capacity cuts are likely to be introduced next summer while divisional heads have been asked to look for other savings.

A decision on whether to purchase 100 new long haul planes is also expected in “the coming days”.

Source: ABTN

[fretn]

The truth is it's Air France that doesn't know how to run an airline.

[jan_olieslagers]

.. without the solid backing of a state monopoly. Let me think, doesn't that remind me of one other airline, or perhaps even a few of them? Some typical Latin-Mediterranean-European (previous) flag airlines, most likely?

[Flanker]

The truth is it's Air France that doesn't know how to run an airline.

KLM isn't doing much better. Operationally, KLM is a total disaster.

For reference, HB-IWC has written this thread about KL delays and cancellations relating to long-haul alone.
http://www.flyertalk.com/forum/klm-flyi ... ad-52.html

I write about HB-IWC because he's done some good job posting some Sabena stuff from the old days, as I will post on the A330-200 thread.


A little word on LH: LH's balance sheet is also unimpressive. A lot of account payables, intangible assets worth 25% of equity.
They're also sitting on a big pile of debt. It's not too big a problem YET because they have a lot of cash.
But if the economy tanks again, and all signs point to that effect, LH is much more exposed to risk than AF-KL due to its higher reliance on high yield pax. It's probably in that view that the CEO has been quoted recently making some comments that he wants to reduce that exposure by focusing more on the low-yield end of the market.

It's also not healthy for a company to borrow billions in cash at 7% interest rate and to leave it on the savings account to get 1-2%. 5-6% doesn't seem like much but when you do that with 5 billions, it's like all the nice profits of Swiss are going down the toilet.

[Established02]

For reference, HB-IWC has written this thread about KL delays and cancellations relating to long-haul alone.
http://www.flyertalk.com/forum/klm-flyi ... ad-52.html

Flanker, this is a thread of ... 2008.

[Flanker]

I don't think that it makes a difference. KL is still running an embarrassing operation and I hear that things are going from bad to worse.
KL used to be a very good and competitive airline in the 1990's early 2000's. Until they started putting their hands into everything where they don't belong, from Transavia to Martinair. Marrying AF was also a weird thing, I'm not sure it's bringing either of them any positive value.

It's still running, for now, but it's going no-where.

[Flanker]

By the way, in the article the share drops comparison isn't telling the real picture and isn't accurate.

AF-KL dropped 52% from the start of the year and even 60% from its 12 months high in January.
Sure LH dropped only 34% (and not less than half of AFKL) since the start of the year, but if you take the 12 months high of 17,93 achieved in December, it's still a huge 41% drop.

41% drop in 8 months means that investors and shareholders aren't as confident about LH's future as a sustainable group. That tough investor environment and

hint at upcoming labour negociations...

will make of SN a tough sale.

It's not to take away the hope, and don't tell me how or why, but the air definitely smells differently in a company at or beyond its southbound turning point.

[euroflyer]

AF-KL dropped 52% from the start of the year and even 60% from its 12 months high in January.
Sure LH dropped only 34% (and not less than half of AFKL) since the start of the year, but if you take the 12 months high of 17,93 achieved in December, it's still a huge 41% drop.

41% drop in 8 months means that investors and shareholders aren't as confident about LH's future as a sustainable group.

Sorry, but this information about falling share prices is absolutely useless without the background of the stock market performance as a whole. I think everybody is aware nowadays that share prices do not only reflect the investor confidence in a company but even more the overall expectations about the economy AND a good piece of pure speculation and gambling. So ONLY IF the fall in share prices of AF or LH is bigger than that of the overall market this COULD be an indication of lost investor confidence. In general nowadays you can more or less forget stock markets and share prices as indicator for a companoies performance; not without reason many many listed companies have even stopped share-based bonus programmes for their staff; because there is simply no direct connection anymore between company performance and share price.

[Passenger]

It's not all bad news about AF / KLM :

Dow Jones Sustainability Index 2011, supersector Travel & Leisure: 1. Air France-KLM

Source:
http://www.sustainability-index.com/djs ... e-vdef.pdf

"Launched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. Based on the cooperation of Dow Jones Indexes and SAM they provide asset managers with reliable and objective benchmarks to manage sustainability portfolios.

Currently approximately 60 DJSI licenses are held by asset managers in 16 countries to manage a variety of financial products including active and passive funds, certificates and segregated accounts. In total, these licensees presently manage over 8 billion USD based on the DJSI."