Air France-KLM promises more efficiency

Air France-KLM will boost revenue and improve efficiency, including better management of its fleet of aircraft, to increase its margin to 7-8% in the medium term, said Tuesday the group's general manager, Ben Smith, when investors are presented with a five-year strategic plan.

“The Air France-KLM group has all the assets to regain its leading position,” said Ben Smith, quoted in a statement, for his first major strategic presentation since his arrival at the head of the Franco-Dutch group last year .

After a series of strikes at Air France in 2018 that cost him 335 million euros, the social climate has subsided under the direction of Ben Smith within the French company. The Canadian leader has wage agreements with the pilots, which have certainly increased the cost of labor but must also eventually bring more operational flexibility.

For now, the group still faces a problem of performance gap between Air France and KLM.

The Group's operating margin thus stood at 4.8% over the first nine months of 2019, a decrease of 1.7 points compared to the same period last year, but that of Air France was only 2.1% against 8.5% for his Dutch partner.

As part of its five-year plan, Ben Smith promises to improve the group's profitability and restore the payment of a dividend, suspended since 2008. For this, he intends to “simplify our fleet, clarify our positioning both on our market segments than in our brand portfolio, gaining significant commercial and operational flexibility through new social agreements “.

Accelerate fleet renewal

Air France-KLM wants to reduce its costs by accelerating the renewal of its fleet and by injecting more flexibility into the management of the more than 500 aircraft operated, cumulatively, by the group.

Ben Smith has already managed this year to overcome the objections issued by the Dutch side against an integration plan to combine the management of Air France and KLM aircraft fleets, which continue to be operated separately 15 years after the creation of the group.

Air France-KLM recorded a charge of 100 million euros in its accounts last quarter due to the early retirement of the A380 to replace the very large aircraft of Airbus by less fuel-hungry aircraft.

Ben Smith said Tuesday that Air France would choose in the coming weeks between the Boeing 787 and the Airbus A350 to replace its A380s.

To boost its sales, Air France-KLM wants to better organize around its three main brands: Air France will focus on a high-end offer and try to take advantage of the tourist attractiveness of France; KLM will seek to strengthen its status as a leading airline for connecting flights in Europe via Amsterdam Schiphol Airport; and Transavia will insist on the low-cost segment.

While Air France gave up in September to take over the French company in trouble Aigle Azur, Air France-KLM “consider consolidation opportunities in a pragmatic way,” said the group Tuesday.

The stock lost 2.74% to 10.28 euros late morning on the Paris Stock Exchange, among the largest declines in the European Stoxx 600, itself up 0.12% at the same time.

(with Reuters)


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