Air France-KLM reports Q2 performance as strongly impacted by Covid-19

Air France-KLM

The Covid-19 crisis severely impacted the Q2 2020 results, the company reports revenue at €1,182m, down €5,839m Y-o-Y. Operating result at €1,553m, down €1,976m Y-o-Y. EBITDA loss minimalised to an average of €260m per month compared to an initial estimate of €400m thanks to cash preservation and cost control measures. Net income was reported at a negative €2,612m, including an impairment on Airbus 380 and 340 aircraft at respectively -€520 and -€72m, Covid-19 related over-hedging at -€105m, and restructuring provision at -€227m.

The French and the Dutch governments have provided financial packages with conditions attached to increase competitiveness and achieve sustainability objectives. Thus at June 30, 2020, the Air FranceKLM Group has €14.2bn of liquidity or credit lines at its disposal to weather the crisis and restructure its business.

The Group has introduced stringent sanitary measures on board and, supported by the on-going “Travel with Confidence” campaign, has seen a slow recovery of leisure demand in June and July 2020. The airlines of the Group are carefully increasing capacity for the summer months, wherein overall capacity levels are managed based on continuously scrutinizing developments in market demand and government policies, including the opening of borders and slot moratoriums. The Group aims to rebuild its worldwide network step by step with a wide variety of destinations in the portfolio. Nevertheless, there is limited visibility on the demand recovery curve as customer booking behaviour is much more short-term oriented than before the Covid-19 crisis, especially on the Long Haul network.

On this basis the Group expects capacity in Available Seat kilometers at index 45 for the third quarter 2020 and at index 65 for the fourth quarter 2020 compared to last year; as well as negative load factor developments for the third quarter 2020, particularly on long-haul network, and anticipates negative yield mix effects due to a delayed recovery in business compared to leisure motive traffic.

The Group has further reduced its capital expenditure plan for 2020 to €2.1bn. This is a reduction of -€1.5bn compared to the initial 2020 guidance of €3.6bn. The Group foresees a significantly negative EBITDA in the second half year 2020.

The Group has reported strong Cargo yields due to a gap between industry capacity and demand in Q2.

Global air cargo capacity is at the end of Q2 2020 approximately 27% lower than 2019, whereby industry air cargo load factors are the highest levels in past two years. The Cargo capacity of the Group has been down 56.3%, primarily driven by the reduction in belly capacity of passenger aircraft, with load factors strongly up 16.0 points for the quarter. Unit revenue was strongly positive for Q2 2020 up 145.7% Y-o-Y at constant currency. On the demand side, worldwide airfreight volumes are down due to Covid-19 crisis but are expected to rebound to 90-95% of pre Covid-19 levels in 2021. The supply-demand gap of the past months is foreseen to narrow as industry capacity supply will increase.

Source: Air France-KLM

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