Air France-KLM Struggles as Strikes Hit Profit

Air France-KLM Group saw profit tumble in the second quarter after strikes in its French unit caused disruption to its network.

The company, which is still hunting for a permanent CEO, reported a net profit of $127 million (€109 million), down 81.6 percent on the prior year. Walkouts at Air France cost the company $304 million (€260 million). Revenues were flat at $7.7 billion (€6.6 billion).

Despite the labor unrest, Air France-KLM is upbeat about the rest of its financial year with long-haul, forward-booking load factors ahead of last year for the next four months.

“Strike action at Air France weighed on the results, with management estimating a slight increase excluding these costs,” Gerald Khoo, an analyst at Liberum, said in a note to investors.

“Unit revenue trends remain positive, led by premium traffic, and accelerating slightly from Q1, despite the industrial action.”

Air France’s struggles are in contrast to its airline partner KLM. Air France’s profit before interest, taxes, depreciation and amortization (EBITDA) fell 95 percent to $15.2 million (€13 million), while KLM’s dropped just 7 percent to $383 million (€328 million). The tension between the Dutch and the French sides of the business is likely to continue until Air France sorts out its employee relations.

Joint Venture Update

Air France-KLM, Delta Air Lines and Virgin Atlantic signed a final agreement for a North Atlantic joint venture in May and the deal is now with U.S. authorities.

Interestingly, Air France-KLM said it was in discussions with Virgin Atlantic about “strategic cooperation” in other parts of the world.