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Air France KLM loses over 400m following strikes

Article By: ,  Financial Analyst
October 31, 2014 4:41 PM

Air France-KLM is counting the costs of last month's pilots' strike with the company noting lost revenues of over €400 million (£247.9 million).

The Franco-Dutch firm reported a €416 million drop in its revenues while third-quarter operating profits dropped by over 50 per cent. Officials announced that operating profit now stood at €247 million, down from the €641 million achieved in the same period a year earlier. The strikes and the seasonal demand dip in the fourth quarter could see Air France-KLM lose €500 million from its €2.3 billion earnings target for 2014.

Air France pilots went on strike in September over the company's plans to expand its low-cost carrier, Transavia. The company wanted to double passenger numbers using the budget airline by 2017 thus extending its services outside of France. It was designed to help Air France compete with established budget airlines such as easyJet and Ryanair.

However, pilots were unhappy with the lower rate of pay being offered thanks to the expansion of Transavia. Air France's response was to state that it would only increase the budget service across France and commit to a "renewed guarantee that will be no relocation" of jobs as part of the agreement.

While the strike came to an end in late September, Air France-KLM is still counting the cost of this two-week action.

Pierre-Francois Riolacci, Air France finance director, said: "Over and above the effects of the strike, we also predict that the market will remain sluggish in the fourth quarter. Of course, there has been a strike and the market environment is difficult, so it is quite right to manage things strictly."

It has been a testing year for Air France-KLM which issued a profit warning in July. At the time shares in the company dropped five per cent to €8.90 with officials warning that due to overcapacity there could be job cuts in the future.

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