Air France-KLM Group said profit in 2014 may be €500 million lower than earlier forecast amid lost revenues from the worst strike in its history, which crippled flights for two full weeks last month.
The fallout from the actual strike stands at €320m to €350m. That figure represents lost revenue and additional costs minus expenses avoided such as a fuel, it said. The total shortfall is higher because the strike has led some passengers to delay bookings, though the airline, Europe’s largest, said it was difficult to know to what extent poorer- than-expected bookings are related to the strike, and to what extent, a general weakness in demand.
Air France pilots initiated a strike after chief executive Alexandre de Juniac announced plans compete more effectively with lower-cost airlines by creating a pan-European discount unit based outside France. September traffic slumped 15.9 per cent, and fourth-quarter bookings show seat occupancy rates at one to two percentage points lower, the company said.
“Perhaps more concerning than the one-off strike impact are comments that fourth quarter booking trends are one to two points behind expectations,” Mark Irvine-Fortescue, an analyst at Jefferies International in London, wrote in a note, calling the €500m figure worse than expected.
The airline cut its full-year earnings forecast in July amid overcapacity on North American and Asian routes and poor demand for freight. Air France predicted earnings before interest, tax, depreciation and amortization at €2.2 billion to €2.3bn this year, compared with a previous target of as much as €2.5bn.
In 2013, the airline group reported Ebitda of €1.86bn. The carrier said at the time it aimed for the Air France unit to at least break even.
Pilots only ended their walkout when the company dropped the plans for the low-cost unit outside France. Management was set to meet with pilot unions to discuss how to proceed with an existing discount unit, called Transavia France. Talks were suspended after members of smaller unions not invited showed up anyway and refused to leave. Negotiations will instead proceed with smaller groups starting again today.
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