Adecade after its merger to form the Air France-KLM group, Europe’s second largest carrier grouping marked its 10-year anniversary with more red ink, more questions than answers around its cargo division restructuring and a cargo staff moral that surely must be at rock bottom.
The group’s full year results for 2014, reveal flat revenues of €24.9 billion and EBITDA of €1.5 billion, down €266 million. Excluding last year’s damaging strike, EBITDA rose €159 million to €2 billion. The adjusted net result was a loss of €535 million.
Aside from various earlier announcements on restructuring of the cargo division, little more was revealed at the annual results briefing. “I won’t dwell on cargo,” said chief financial officer Pierre-Francois Riolacci in a results webcast. “Despite restructuring, unit revenues were continually in decline and it was not sufficient to reverse the trend.”
More detailed figures show that with a 2.3 per cent reduction in cargo capacity last year, tonnage fell by a greater 2.9 per cent. Load factors fell modestly while total cargo revenues declined by 4.8 per cent with unit revenue per ATK down two per cent, while unit cost per ATK fell 1.3 per cent, for a cargo division operating loss of €202 million. With full freighter capacity falling by seven per cent last year, the carrier earlier said it is speeding up the phasing out of nine freighters, to operate just five by the end of next year which, if things go according to plans, will lead to breaking even by 2017.
The financial pressures are clearly creating a rift in the Franco-Dutch relationship with fears KLM would loose its control over finances, in order to triage the haemorrhaging Air France part of the business. In the end KLM retained control over its finances.
On the cargo front, the resignation of Erik Varwijk, managing director of Air France- KLM Cargo after 25 years at the carrier was yet another bout of bad news and one that sends dismal signals to the market as to the future of the cargo division. But then again who can blame Varwijk – nobody wants to mark the latter stages of their career presiding over the inglorious dismantling of a once proud and successful cargo division.
For now its all down to speculation with the Dutch press reporting that two of Martinair’s MD-11Fs will be phased out in April while other, more dramatic reports claim a full six of Martinair’s MD-11Fs will be axed by the end of this year. This would leave three B747-400Fs plus one MD-11F – a tiny fraction of its once ample freighter fleet.
KLM’s union has backed down from its October proposal, which suggested the carrier should change eight B747Fs into a fleet of eight B777Fs – clearly an outrageous option.
An internal union email published in the Dutch press in February said: “We have come to the conclusion that the AF/KLM Group is currently not financially able to invest in B777Fs. Therefore, we have adjusted our plan to this new reality in the form of six B747 aircraft. This is the minimum number of aircraft required, according to experts and the Works Council… “Also this scale is the required minimum to ensure a defensive position at Schiphol on freight. The economy is picking up and the export increases which we see will further restore the [freight] market.”
While a substantially better idea than the eight B777Fs, it still is likely unworkable because of the need to further cut costs. With the story unfolding like a some bizarre soap opera, one can only watch and wait for the next installment, perhaps hoping beyond hope that some semblance of a cargo division remains.
