AF grounds A380s; KLM shelves B747s

AF grounds A380s; KLM shelves B747s

Faced with growing restrictions on the possibility of travelling and a strong downward trend in demand which has resulted in a drop in traffic and sales over the last few weeks following the spread of COVID-19, the Air France-KLM Group is obliged to gradually reduce its flight activity very significantly over the next few days, with the number of available seat kilometres (ASK) potentially decreasing between -70% and -90%.

This reduction in capacity is currently scheduled to last two months, and the Group will continue to monitor the evolution of the situation on a daily basis and adjust it if necessary.

As a result of this reduction in capacity, Air France will ground its entire Airbus 380 fleet and KLM its entire Boeing 747 fleet.

Cash flow

To deal with this situation, the Group has already taken a number of strong measures to secure its cash flow: Additional savings measures have been identified, which will generate €200 million in 2020; An initial review of the investment plan has reduced the capital expenditure plan by €350 million, to which will be added the impact of the decline in activity on the amount of maintenance investments

Air France and KLM will be consulting with their elected employee representatives on measures to take into account the impact of the expected decline in activity, including a project to implement partial activity

Last week, the Air France-KLM Group drew a revolving credit facility for a total amount of €1.1 billion and KLM drew a revolving credit facility for a total amount of €665 million. As of March 12, the Group and its subsidiaries had more than €6 billion in cash and cash equivalents

In spite of the measures taken, the deterioration of the environment linked to the epidemic and the sharp reduction in its activity that has resulted today lead the group to forecast a sharply deteriorated financial trajectory compared to the outlook presented at the publication of its annual results. Indeed, the Group estimates that the drop in revenues from the Passenger business resulting from the reduction in capacity will only be offset by around 50% by the drop in variable costs before cost savings measures.

In this extremely difficult context, the Air France-KLM Group has welcomed the statements made by the French and Dutch governments, which have each indicated that they were studying all possible means to support the Group.

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James Graham

James Graham is an award-winning transport media journalist with a long background in the commercial freight sector, including commercial aviation and the aviation supply chain. He was the initial Air Cargo Week journalist and retuned later for a stint as editor. He continues his association as editor of the monthly supplements. He has reported for the newspaper from global locations as well as the UK.

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