Air France-KLM posts losses in third quarter

Air France-KLM, the biggest airline in Europe, has suffered losses in the three months to December 2008, which it blamed on the global economic recession.

The company announced a net loss of €505 million ($648 million) in its fiscal third quarter, compared a profit of €139 million in the same period a year before.

The operating losses for the fiscal third quarter was to the tune of €194 million. In a statement, Air France-KLM, headquartered in Paris, France, said the economic recession had badly affected the airline’s business-class travel as well as cargo traffic.

In fact, the losses were not unexpected after Air France-KLM had warned, in January 2009, of a quarterly loss of 200 million euros.

In order to cope with the slump, Air France-KLM said it was freezing all new hiring, reducing costs as well as cutting capacity.

In the statement, Air France-KLM said it was planning to cut its workforce by up to 1,200 in the full year ending March 2009 “through attrition as people retiring will not be replaced.”

The Air France-KLM group, which employs 104,600 employees worldwide, has already cut 2,000 jobs through attrition.

It is also intending to slash capacity by 2% in the summer of 2009 as well as cut spending as “the economic environment continues to deteriorate.” Despite the losses in the third quarter, the Air France-KLM statement said that the carrier was still aiming to achieve a profit in the full year that ends in March 2009. The carrier said that while its long-haul passenger traffic was “relatively resilient” in the third quarter, medium-haul passenger traffic was adversely affected by a weak domestic market.

Air France-KLM said its cargo traffic was especially hit by the economic downturn, with the cargo traffic going down by 12.5% in the third quarter. However, the Franco-Dutch airline group stressed that its finances were “healthy” with cash of €4.3 billion at the end of 2008 and available credit lines of €1.4 billion.
A recent report by the International Air Transport Association (IATA) had said that the airline industry worldwide had lost $5 billion in 2008 as passenger growth slowed down and cargo traffic fell.

British Airways, the flag-carrier airline of the United Kingdom, had, a few days ago announced losses for a nine-month period and said that it did not expect the financial position of most airlines to improve for another 24 months.