Air France-KLM narrows losses in Q2 as travel picks up

In May, it had said it expected to operate 50% of its pre-pandemic flight capacity in Q2, picking up to 55-65% in Q3

An easing of coronavirus travel restrictions is generating the first signs of recovery at Air France-KLM, said the airline group, as its unveiled narrower losses for the second quarter coupled with positive cash from operations.

The Franco-Dutch group posted losses before interest, tax, depreciation, and amortisation (Ebitda) of €248 million ($294.57m)for the quarter - marking a €532m improvement from heavy losses a year earlier when the pandemic had triggered global lockdowns.

Third-quarter Ebitda is expected to be positive, it said, adding its medium-term operating margin goal remained unchanged.

With long-haul capacity rising again following the reopening of the North Atlantic to Americans visiting Europe, Air France-KLM said it expected capacity at 60-70 per cent of 2019 levels in the third quarter.

In May, it had said it expected to operate 50 per cent of its pre-pandemic flight capacity in the second quarter, picking up to 55-65 per cent in the third quarter.

But with US-bound travel still closed to the majority of Europeans, it held back from giving capacity forecasts for the fourth quarter and called for reciprocity in the opening of borders as well as faster vaccination rollouts worldwide.

"We are closing the gap but we are still not there. We are still hampered by the Covid situation and the changing conditions," said chief financial officer Steven Zaat.

For the first time since the start of the crisis, operating free cash flow after lease repayments was positive at €210m. Both of its main carriers - Air France and KLM - were cash-positive on the back of rising ticket sales.

"The appetite is there for people who can and will travel," Mr Zaat told reporters.

The group sees "good" summer bookings in Europe, though they are coming in later than usual, he said.

Air France-KLM reported quarterly revenues of €2.75 billion, up €1.57bn from the same period last year.

Operating losses roughly halved to €752m. Quarterly unit costs fell 71 per cent due mainly to higher capacity, which grew by 389 per cent compared to the tough year-ago quarter.

"We were able to reduce more costs than what we expected," Mr Zaat said, with restructuring showing improved results.

Fuel costs rose by about €300m, mainly due to the extra capacity as well as a slight impact from rises in oil prices, cushioned by more favourable hedge contracts.

"The cargo market is still resilient" despite a 66 per cent increase in capacity compared to last-year's crisis-hit second-quarter, Mr Zaat said.

Net debt fell by €2.7bn to €8.3bn from end-2020 after measures to boost the group's balance sheet.

Mr Zaat said KLM was in close touch with the Dutch state as it discusses further measures with the European Commission, but declined to give details of any concessions.

Updated: August 1st 2021, 7:57 AM