Biggest-ever quarterly profit for Air France-KLM

Airline Air France-KLM posted its best quarter ever this summer. From the period from July to September, the French-Dutch airline group retains an operating profit of 1,3 billion euros, which is an improvement on the record set six years ago. Profits rose by almost a third in the third quarter compared to last year and the aircraft were on average about 90% full.

Strong demand for air tickets meant that planes were fuller last summer, and Air France-KLM was able to charge more for a ticket – they became 1,8% more expensive. As a result, the merged airline more than made up for higher fuel and salary costs.

€ 1,3 billion injection

Between July and September, the group carried 26,9 million passengers, up 7,6% compared to the same period last year, while revenue rose 6,8% to 8,6 billion euros. Net profit, which also subtracts costs such as taxes and debt, more than doubled to 900 million euros. It is a huge boost for the company because, during the COVID-19 pandemic, it still suffered losses of more than 11 billion euros.

But despite heavy debts (end September still 5 billion euros), equity – the balance of assets and liabilities – should be restored by the end of the financial year, partly due to the completion of the transaction confirmed last week with Apollo Global Management. Indeed, the US fund has agreed to inject 1,3 billion euros into a new subsidiary backed by Airline group Flying Blue’s loyalty program.

Strong growth for Transavia

Budget airline Transavia, soon to become Group Air France’s reference carrier at Orly Airport, in particular, grew strongly, despite problems due to a shortage of available aircraft. As a result, hundreds of flights during the summer holidays were canceled, but capacity was still 14% higher than a year earlier and well above the pre-COVID level. Next year, all the impact of the pandemic is expected to be eliminated.

Dutch KLM, which, with 110 aircraft, has a smaller fleet compared to Air France’s 213, is having more trouble recovering from the pandemic than its French sister airline. KLM boosted capacity by 5% last year, Air France by 7%. The Dutch brand posted a profit of 539 million euros, compared to 806 million euros for Air France.

South America is a popular

The capacity of flights to China and Japan is still only half of 2019 levels, despite the number of flights to those countries having already sharply increased this year following the relaxation of local health rules in China in particular.

Still, Air France-KLM is going to increase offerings to China and Japan again by 60% compared to the winter of 2022-2023, even if they remain lower than 2019 levels. It will also resume daily flights to Bangkok in January and February.

South America, on the other hand, is very popular (+10%). The planes heading in that direction are the best-filled of all the regions the group travels to. North America also showed growth. In this context, it also extended its commercial partnership with Brazilian company Gol for ten years.

Still brooding on the TAP takeover

That the company is brimming with confidence is also evidenced by the fact that in late September it announced its desire to buy at least 50 Airbus A350s to renew Aire France’s fleet of long-haul aircraft.

In early October, the group also acquired 19,9% of troubled Scandinavian airline SAS.

Air France-KLM also still has its sights set on Portuguese company TAP, which is currently being privatized. Although Portuguese president Marcelo Rebelo de Sousa could still throw a spanner in the works. For instance, he has still not promulgated the law for the privatization of TAP Air Portugal. He is first seeking “clarifications” from the government.

The Portuguese government launched the privatization of at least 51% of the national airline’s capital at the end of September. Apart from Air France-KLM, Lufthansa and IAG (British Airways and Iberia) are also interested.

After major difficulties during the coronavirus pandemic that saw the airline nationalized, TAP could return to profit in 2022. In fact, the airline announced last week a record profit of 180,5 million euros in the third quarter.