Air France-KLM warns on profits
By Kevin Done, Aerospace Correspondent
Published: October 24 2008 12:16 | Last updated: October 24 2008 12:16
Air France-KLM, Europe’s biggest airline, issued a profit warning on Friday against a background of sharply deteriorating international air traffic and forecast losses for the global industry.
Iata, the airline industry trade association, announced an “alarming drop” in passenger and cargo traffic in September and said there was still worse to come.
Air France-KLM said “taking into account current economic conditions, it will be very difficult for the group to achieve its objective of operating income for this financial year of €1bn.”
The share price fell by 97 cents or more than 8 per cent to €10.90 in afternoon trading in Paris.
The group, which already warned in May its operating profit could fall by a third this year from last year’s record €1.41bn, said the result would “remain comfortably in profit as long as market conditions don’t deteriorate any further.”
Air France-KLM, which has already taken steps to cut costs and reduce capital investment, said it was further slowing planned capacity growth for the next winter and summer seasons with an expansion of 1-2 per cent compared with growth of four per cent forecast in May.
Giovanni Bisignani, director general of Iata, warned on Friday the sharp decline in passenger and cargo traffic was outpacing industry actions to cut capacity. International load factors tumbled and only 74.8 per cent of available seats were filled in September, down from 79.2 per cent in August.
Despite the rapid fall in fuel prices since July Iata maintained its forecast for the global industry to fall to a net loss of $5.2bn this year.
In the six years between 2001 and 2006 the industry suffered net losses of $42bn and only returned to a $5.6bn profit in 2007.
“The industry crisis is deepening along with the crisis in the global economy,” said Mr Bisignani. More than 30 airlines had collapsed and been removed from the industry’s international payment settlement system this year, he said, and a further 20 were on the watch list for suspension.
Iata said passenger traffic had declined by 2.9 per cent year-on-year in September, while cargo traffic, a key early indicator of the state of the world economy, had fallen by 7.7 per cent.
“The deterioration in traffic is alarmingly fast-paced and widespread,” said Mr Bisignani. The decline in passenger volumes was the worst since 2003, when the industry was hit by the Sars (severe acute respiratory syndrome) epidemic.
He said the drop in the oil price to half its July peak was not enough to offset the impact of the drop in demand. “At this rate, losses may be even deeper than our forecast $5.2bn for this year,” he said.
Air cargo accounts for 35 per cent of the value of internationally traded goods and Iata said the 7.7 per cent fall in September was the biggest monthly year-on-year decline since the bursting of the technology bubble in 2001. It was the fourth successive monthly year-on-year decline.
Carriers from Asia-Pacific, the largest players in the air cargo market, suffered a fall in volumes of 10.6 per cent last month.
Iata said the sharp downturn in world trade had disproportionately hit Asia-Pacific carriers with a 6.8 per cent drop also in passenger traffic in September.
Middle East carriers were being affected after several years of double digit growth with passenger traffic falling last month by 2.8 per cent.
Iata said while the region’s oil based economy remained strong, the large share of transit traffic passing through the hub airports in the Gulf exposed local carriers to the global economic weakness.
European carriers’ traffic declined by 0.5 per cent, as the region’s economies headed into recession. North American carriers’ international traffic fell by 0.9 per cent ending growth of around five per cent during the first eight months of the year.
Officials from 15 countries and regions including the US , the European Commission, Australia, Canada, India and Brazil are meeting in Istanbul this weekend to consider proposals from Iata for accelerating the liberalisation of the aviation industry.
Iata is urging governments to waive certain clauses in their bilateral air service agreements, which restrict market access and limit foreign ownership of carriers.
“Today’s crisis highlights the need for airlines to be able to run their businesses like normal global businesses,” said Mr Bisignani. Airlines needed “the basic freedoms to do business that other industries take for granted,” he said.
Copyright The Financial Times Limited 2008
By Kevin Done, Aerospace Correspondent
Published: October 24 2008 12:16 | Last updated: October 24 2008 12:16
Air France-KLM, Europe’s biggest airline, issued a profit warning on Friday against a background of sharply deteriorating international air traffic and forecast losses for the global industry.
Iata, the airline industry trade association, announced an “alarming drop” in passenger and cargo traffic in September and said there was still worse to come.
Air France-KLM said “taking into account current economic conditions, it will be very difficult for the group to achieve its objective of operating income for this financial year of €1bn.”
The share price fell by 97 cents or more than 8 per cent to €10.90 in afternoon trading in Paris.
The group, which already warned in May its operating profit could fall by a third this year from last year’s record €1.41bn, said the result would “remain comfortably in profit as long as market conditions don’t deteriorate any further.”
Air France-KLM, which has already taken steps to cut costs and reduce capital investment, said it was further slowing planned capacity growth for the next winter and summer seasons with an expansion of 1-2 per cent compared with growth of four per cent forecast in May.
Giovanni Bisignani, director general of Iata, warned on Friday the sharp decline in passenger and cargo traffic was outpacing industry actions to cut capacity. International load factors tumbled and only 74.8 per cent of available seats were filled in September, down from 79.2 per cent in August.
Despite the rapid fall in fuel prices since July Iata maintained its forecast for the global industry to fall to a net loss of $5.2bn this year.
In the six years between 2001 and 2006 the industry suffered net losses of $42bn and only returned to a $5.6bn profit in 2007.
“The industry crisis is deepening along with the crisis in the global economy,” said Mr Bisignani. More than 30 airlines had collapsed and been removed from the industry’s international payment settlement system this year, he said, and a further 20 were on the watch list for suspension.
Iata said passenger traffic had declined by 2.9 per cent year-on-year in September, while cargo traffic, a key early indicator of the state of the world economy, had fallen by 7.7 per cent.
“The deterioration in traffic is alarmingly fast-paced and widespread,” said Mr Bisignani. The decline in passenger volumes was the worst since 2003, when the industry was hit by the Sars (severe acute respiratory syndrome) epidemic.
He said the drop in the oil price to half its July peak was not enough to offset the impact of the drop in demand. “At this rate, losses may be even deeper than our forecast $5.2bn for this year,” he said.
Air cargo accounts for 35 per cent of the value of internationally traded goods and Iata said the 7.7 per cent fall in September was the biggest monthly year-on-year decline since the bursting of the technology bubble in 2001. It was the fourth successive monthly year-on-year decline.
Carriers from Asia-Pacific, the largest players in the air cargo market, suffered a fall in volumes of 10.6 per cent last month.
Iata said the sharp downturn in world trade had disproportionately hit Asia-Pacific carriers with a 6.8 per cent drop also in passenger traffic in September.
Middle East carriers were being affected after several years of double digit growth with passenger traffic falling last month by 2.8 per cent.
Iata said while the region’s oil based economy remained strong, the large share of transit traffic passing through the hub airports in the Gulf exposed local carriers to the global economic weakness.
European carriers’ traffic declined by 0.5 per cent, as the region’s economies headed into recession. North American carriers’ international traffic fell by 0.9 per cent ending growth of around five per cent during the first eight months of the year.
Officials from 15 countries and regions including the US , the European Commission, Australia, Canada, India and Brazil are meeting in Istanbul this weekend to consider proposals from Iata for accelerating the liberalisation of the aviation industry.
Iata is urging governments to waive certain clauses in their bilateral air service agreements, which restrict market access and limit foreign ownership of carriers.
“Today’s crisis highlights the need for airlines to be able to run their businesses like normal global businesses,” said Mr Bisignani. Airlines needed “the basic freedoms to do business that other industries take for granted,” he said.
Copyright The Financial Times Limited 2008
