Air France-KLM has pushed back the delivery of three widebody Airbus 350s to 2021 as part of the major reduction in capital expenditures to cope with the effects of the coronavirus pandemic. The Franco-Dutch group trimmed planned Capex this year by a third compared with its pre-Covid-19 guidance, to €2.4 billion ($2.6 billion), and it will revise medium-term Capex “for future development of demand and flexibility needs,” the group said Thursday during the presentation of its first-quarter results.
Earnings for the first three months of the year were dismal and marked Air France-KLM’s worst quarterly loss since the creation of the group in May 2004. Operating loss deepened to €815 million, from a €286 million loss a year earlier, and the group’s net loss spiraled from €324 million to €1.8 billion, driven partly by extraordinary financial items including €455 million to cover losses resulting from “over-hedging” of fuel, €21 million in impairment costs on eight Boeing 747s and €25 million for the accelerated depreciation on its A380 aircraft fleet. The group last year announced it would phase out its 11 A380s early as they proved a bad fit for Air France’s network and estimated the impact of the decision at around €400 million, spread over the phase-out period until 2022, or €25 million per quarter. One unit has already left the fleet. The airline has parked the other 10.
The grounding of the A380 fleet initially was supposed to be temporary, but on Thursday executives said an “earlier phase-out” of the A380 and its Boeing 747 fleets was “under study.” The company did not reply to a question from AIN about whether that could mean the A380s will not return to active service at Air France when traffic recovers after Covid-19. The group on Wednesday decided to remove Air France’s remaining four A340s.
In the first quarter, revenue fell 15.5 percent over the same period last year, to €5.01 billion, while the number of passengers carried on its network airlines and its low-cost subsidiary Transavia fell 20.1 percent, to 18.1 million.
Air France-KLM CEO Ben Smith noted the group “had a promising start” to the first quarter—in line with the objectives of the strategic plan presented in November 2019—but the acceleration of the COVID-19 crisis and the growing travel restrictions in March caused havoc. Operating loss for the month of March amounted to €560 million. Second-quarter operating losses will run “significantly higher” than in the first quarter, Air France-KLM said and further warned of “a prolonged negative impact on passenger demand, not expected to recover to pre-crisis levels before several years end.” The group anticipates operating just 5 percent and 15 percent of last year’s capacity measured in ASKs in the second and third quarter, respectively.