Air France-KLM hopes to get out of the red

Image Air France-KLMTimes in the airline business are hard, and many airlines are feeling the pinch. Air FranceKLM has also failed to get out of the red as planned. The management of the airline, however, is looking to 2014 with confidence.

Back on track after cutbacks

After posting losses again last year, the French-Dutch airline is expecting that things will turn to the better again in 2014. The company had assumed that they would already slip back into profit in 2013, but in fact fell even further into the red, with a loss of 1.83 billion euros. The reasons given by the management for the continued losses included severance payments for dismissed staff, a huge tax burden, the fall in value of the shareholding in the airline Alitalia, and the intended sale of the subsidiary, CityJet. In response to continuing losses, the company embarked on a rigorous austerity programme in 2011. It has reportedly cut a total of 7,500 jobs since then, with a projected 10,000 job cuts by 2015.

Air France-KLM intends to forge ahead with new strength

This year, Air France-KLM now intends to reap the rewards of its austerity programme and to soon turn a profit due to lower costs.   The new seats on Air France are also an indication of it once again achieving lift-off.  Alexandre de Juniac, Chair of the company’s Board, is optimistic that the airline will achieve profitable growth in 2014. Nevertheless, as de Juniac points out, currency fluctuations and fuel prices still make the outlook uncertain. The austerity programme has at least already had an effect, with a profit before tax, interest payments, and depreciation. This rose by over 30 percent to 1.86 billion euros, exceeding even analysts’ predictions. The Ebitda is expected to grow to approx. 2.5 billion euros this year. Air France-KLM has also managed to consolidate its debt, which adds to the positive trend in the company’s fortunes.

Fierce competition between airlines

The airline – like a number of other airlines – still has to contend with enormous competition in Europe. Cheap airlines cost many traditional airlines passengers and business. The freight business is also unprofitable. With a turnover of 25.5 billion euros in 2013, Air France-KLM is at much the same level as in the year before. A not inconsiderable factor was the strong euro, which hampered the company’s development. It is to be hoped that 2014 will be a good year. In January at least, Air France-KLM attracted 5.7 million passengers. That is an increase of 3.8% over the previous year.

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