The next few months promise to be difficult for the airline industry. The Air France-KLM group announced a net loss of 1.8 billion euros in the first quarter. Even more disastrous fallout is expected by the summer.
The Franco-Dutch air carrier already reports a 10.5% drop in capacity in the first quarter (-35% in March), and it forecasts a collapse of 95% for the second quarter and 80% in the third, according to a press release. Air transport is one of the economic sectors most severely affected by the coronavirus crisis, in particular due to traffic restrictions and border closings decided all over the world to curb the spread of the virus.
91% reduction in theft
On May 3, for example, the number of flights to Europe was 91% lower compared to the same period in 2019, according to the European Organization for the Safety of Air Navigation Eurocontrol.
Most companies in the world, nailed to the ground, see their cash melt and since the end of April announcements of social plans follow one another: 12,000 job cuts at British Airways, 5,000 at SAS, 2,000 at Icelandair, 3,000 at Ryanair, 3,450 at United Airlines or 3,000 at Virgin Atlantic. Air France-KLM, which resorted to short-time working, more than quintupled its loss in the first quarter compared to the same period of 2019 (-324 million euros). It notably includes 455 million euros in advance purchases of fuel which was ultimately not consumed due to the crisis.
Seven billion state loans
And these results currently reflect only the impact of Covid-19 in March, when the year had “started very well in January and February,” commented the group's chief financial officer Frédéric Gagey, during a conference call with journalists.
“We are working on a new plan so that the Air France-KLM group regains its competitiveness in a deeply disrupted world and reaffirms its leadership in the sustainable transition of air transport. These new directions will be presented in the coming months, "said the group's managing director, Benjamin Smith, quoted in the press release.
The European Commission already authorized France on Monday to grant support of 7 billion euros to Air France, including 4 billion bank loans guaranteed to 90% by the state and 3 billion direct loan from the state, with consideration for commitments to improve profitability and the environment. The company must reduce CO2 emissions on its domestic flights by 50% by 2024 and initiate a study in France on the Air France network when there are rail alternatives of less than 2.5 hours, according to the government.
The Dutch government also plans to help the KLM company with two to four billion euros. The group predicts "a slow recovery in activity in the summer of 2020, with the gradual lifting of border restrictions", but believes that demand for commercial traffic "should not return to the level before the crisis for several years "
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