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Air France-KLM lowers capacity forecast citing ‘operational challenges’
Global Banking & Finance Review®
Company
By Dina Kartit and Juliette Portala
(Reuters) -Air France-KLM on Friday lowered its third-quarter capacity forecast citing operational difficulties at airports that could weigh on its performance.
The company expects capacity to reach 80% to 85% of levels achieved in the third quarter of pre-pandemic 2019, cutting a forecast it made in May of 85% to 90%.
“The strong recovery we see this summer is putting the entire aviation industry to the test,” CEO Ben Smith said in an earnings statement.
“While Air France-KLM had prepared for close to pre-pandemic demand levels, our airlines are not immune to the major operational challenges taking place around the world.”
Airlines across Europe face labour strife this summer as the rapid recovery in tourism has led to staff shortages and soaring inflation has prompted cabin crews and pilots to demand higher wages and better working conditions.
The group’s Dutch arm KLM, alongside Lufthansa, British Airways and easyJet have all cut flights this summer and been forced to impose a limit on ticket sales to cope with the disruptions.
KLM, which announced earlier in July it had come to a collective labour agreement to increase wages for ground crew, in a separate statement on Friday said the sharp rise in passenger numbers, long queues at Amsterdam’s Schiphol Airport and staff shortages had put heavy pressure on operations, especially in May and June.
Air France-KLM however beat quarterly expectations with a return to profit in both core and net income.
Second-quarter income from current operations totalled 386 million euros ($395 million) while net profit reached 324 million, both well above analysts’ forecasts.
The company, whose activities also include cargo and maintenance, said the yield environment should remain high for the remainder of 2022, above 2019 levels thanks to strong summer demand.
($1 = 0.9778 euros)
(Reporting by Dina Kartit and Juliette Portala; editing by David Gregorio and Jason Neely)
Operational challenges refer to difficulties that affect a company's ability to deliver services effectively, such as staffing shortages or logistical issues.
Net profit is the amount of money a company earns after all expenses, taxes, and costs have been deducted from total revenue.
Yield environment refers to the pricing and demand conditions in which a company operates, influencing its revenue potential.
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