Air France-KLM 3Q operating profit tumbles due to pilot strike, but underlying trend is also down

The fall in Air France-KLM's 3Q2014 operating profit more than offset improvements recorded in 1H2014. This deterioration in 3Q2014 was largely as a result of the 14 day pilot strike in Sep-2014, which hit the operating result by EUR330 million. Nevertheless, even without the strike effect, unit revenue weakness weighed on the underlying performance of the group and lowered the like for like operating result.

Air France-KLM expects passenger capacity growth in long-haul markets from Europe to slow a little from 6.3% in 3Q2014 to 5.5% in 4Q2014. It plans to keep its own passenger capacity flat, with significant cuts in point to point capacity, but these price pressures look unlikely to dissipate quickly.

The company says that its Transform 2015 programme, which mainly focused on cost and debt reduction, is on track and it is already implementing key initiatives under its new Perform 2020 plan. The ratification by pilot union membership of the recent draft agreement over the growth of Transavia would provide an important psychological boost.