Air France-KLM back to operating loss; warns lower fuel may be offset by low unit revenue & currency

Air France-KLM marked its first decade with a return to loss at the operating level in 2014. A pilot strike over the development of LCC Transavia took EUR425 million off the operating result, which would otherwise have been positive and higher than in 2013. The dispute was settled and Air France-KLM's generally good history of labour relations suggests that it is unlikely to be repeated in 2015.

Nevertheless, the settlement required management to compromise its plans for Transavia and this may make it harder to push through further important restructuring across the group. Moreover, even without the impact of the strike, the year was characterised by ongoing unit revenue weakness, particularly in long-haul markets such as Latin America.

Air France-KLM does not see this market environment improving. Indeed, it has suggested that the benefits of lower fuel prices in 2015 may all be eaten up by falling unit revenue and currency movements. The group has abandoned its previous EBITDAR growth targets, but is cutting its investment plans and is accelerating its unit cost reduction. There is more turbulence ahead.