The Air France-KLM Group has reported a widening loss in its first quarter, with an operating result of EUR -303 million (compared to compared EUR -269 million a year earlier), due to competitive head winds in the form of industry capacity overhang, rising fuel prices and a weak cargo market. Unit revenue decreased by -0.4 per cent at constant currency.
The Group also further reduced its net debt, down EUR 403 million to EUR 5.8 billion with a net debt/EBITDA ratio of 1.4x stable compared to 31 December 2018.
The quarter’s combined Passenger and Cargo revenues increased by 1.0 per cent at constant currency to EUR 5.2 billion.
Total cargo revenues were up marginally by +0.7 per cent (-1.3 per cent in constant currency terms) to EUR 547 million as cargo volumes remained flat year-on-year at 270,000 tonnes.
Traffic was up 0.5 per cent to 2,046 million revenue tonne kilomtres (RTKs) with capacity exapnding 1.4 per cent to 3,462 million available tonne kilometres (ATKs) for a load factor of 59.1 per cent, down 0.5 percentage points.
“A slowdown of volumes in the first quarter is visible in the whole air freight market, due to economic slowdown, political uncertainties and trade disputes,” the carrier says adding this has put pressure on freight rates, resulting in a unit revenue development of -4.0 per cent at constant currency.
Several network rationalisation measures have been implemented during the quarter to counterbalance the negative trend. A slight capacity increase has been offset by this unit revenue decrease, resulting in a decline of revenues by 1.3 per cent at constant currency, it adds.
Looking ahead the carrier says, “the global context remains uncertain given the current geopolitical environment and fuel price trends.” The airline confirmed its 2019 guidance, which includes a EUR 650 million increase in its fuel bill, and capital expenditure of EUR 3.2 billion.
Benjamin Smith, Air France-KLM Group CEO adds: “As anticipated, the first quarter has been challenging for the European airline industry including the Air France-KLM Group, as substantial industry capacity growth in the off-peak business period led to unit revenue pressure.
“In this context, the Group achieved further improvement in unit cost while reaping the benefits of its efforts to strengthen its positioning, as evidenced by the first signs of progress in operational performance at Air France, notably in term of ‘Net Promoter Score’ and punctuality.
“These elements, together with a more benign industry supply outlook for the summer, lead us to expect improving trends in the rest of the year and to confirm our full-year guidance.”