Air France-KLM hit by euro as it speeds up cuts
Air France-KLM yesterday announced it would embark on an accelerated cost-cutting exercise and defer its debt reduction goals as a weak euro has dampened the benefits of lower oil prices for airlines globally.
Europe’s second largest traditional network carrier, which issued three profit warnings last year, also announced plans to cut investments and delay some aircraft deliveries as it posted lower 2014 revenues and core profits.
Although lower oil prices have boosted airline balance sheets worldwide, Air France-KLM expressed concerns about currency swings and overcapacity in some long-haul markets.
The Franco-Dutch group said it would bolster its recently launched Perform 2020 strategic plan, by reducing investments by €300m (£195m) a year in both 2015 and 2016, and confirmed it would cut the equivalent of 800 further jobs through voluntary measures.
It revised up its unit cost reduction target for 2015-17 to an average of 1.5 per cent a year, instead of a previous goal of between one and 1.5 per cent a year.
For 2015, the group intends to cut unit costs by one to 1.3 per cent, saving between €250m and €300m.
It now targets net debt of €5bn at the end of 2015, rather than €4.5bn targeted previously, and down from an actual level of €5.41bn at the end of 2014.
“With the way we see the market developing, except for the North Atlantic, we are being very, very cautious,” chief executive Alexandre de Juniac said yesterday.
Group revenues fell 2.4 per cent in 2014 to €24.91bn despite a 1.3 per cent increase in passenger numbers.