Air France-KLM plunges into €1.8bn loss as virus bites

Group says return to pre-pandemic demand is several years off

This picture taken on May 7, 2020 shows an Air France plane at the finger of the Nice International airport in the French Riviera city of Nice, southern France, on the 52th day of a lockdown in France aimed at curbing the spread of the COVID-19 pandemic, the novel coronavirus.   / AFP / VALERY HACHE

Air France-KLM on Thursday announced a first-quarter net loss of €1.8 billion and warned of more woe to come as the coronavirus pandemic blocks international travel.

Chief executive Benjamin Smith said the company was working on "a renewal plan" that would probably include staff cuts.

The Franco-Dutch airline said it had suffered the net loss of €1.8bn (Dh7.17bn/US$1.95bn) in the first three months of the year, more than five times its €324 million loss in the first quarter of 2019.

The group reported €455m in "over-hedged" fuel purchases as the pandemic crushed demand for oil and prices tumbled to more than 20-year lows before recovering slightly.

epa08408295 French soldiers wearing protective face masks walk past an Air France building in Paris,  France, 07 May 2020. France is under lockdown in an attempt to stop the widespread of the SARS-CoV-2 coronavirus causing the Covid-19 disease.  EPA/IAN LANGSDON

The virus crisis hit France fully in March, with a nationwide lockdown implemented on March 17.

Second-quarter figures could even more disastrous with most planes stuck on the tarmac as international travel grinds to a near-standstill.

Chief financial officer Frederic Gagey told a conference call that the airline had even started "very well in January and February".

French deputy transport minister Jean-Baptiste Djebbari told France 2 TV that Mr Smith hinted at "more voluntary departures than direct job cuts" at the airline.

Rival British Airways has announced plans to shed 12,000 jobs and United Airlines is looking to make 3,450 redundant.

At the start of the year the group recorded "passenger unit revenue up 0.8 per cent".

The group said 10.5 per cent of its capacity had been suspended in the quarter.

Capacity was forecast to be 95 per cent lower in the second quarter than in the same period a year earlier, before easing back slightly to an 80 per cent drop in the third.

The group predicted "a progressive lifting of border restrictions in 2020, enabling a slow capacity resumption" in the summer.

But that was balanced with "a prolonged negative impact on passenger demand, not expected to recover to pre-crisis levels before several years".

Air France is to benefit from €7bn in French loans either from or backed by the state, along with an expected €2bn to €4bn in aid from the Dutch government.

The European Commission has given its backing to the package.

The French government has insisted that the help is "not a blank cheque" and will depend on the airline becoming greener by reducing carbon emissions, using more modern aircraft and cutting domestic routes.