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Air France loss as KLM profits

AMSTELVEEN: The Air France-KLM Group continues its slide towards a dénouement after reporting a net loss of -€535 million for 2014 following the previous year's -€463 million deficit.

Air France reported annual gross revenues of €15.58 billion, down 3.4 percent from 2013, and an increase in its net loss from -€174 million to -€314 million, much of which it attributes to a 14-day pilot strike.

KLM, on the other hand, produced revenue of €9.64 billion in 2014, half a percent point less than the previous year, and a net profit of €175 million – down from a €301 million profit in 2013.klm SPL

At group level, adjusted net debt fell from €11.7 billion to €11.5 billion following a reduction of €200 million in long-term aircraft lease liability. The cost of financing group debt fell 7.3 percent during the year to -€446 million – nearly wiping out KLM's profit for the past two years in interest payments.

Air France-KLM says because 2015 looks "uncertain", almost all of the expected savings on its fuel bill "could be offset by unit revenue pressure and negative currency impacts". Therefore it is reducing the investment budget by €600 million in 2015/2016; making 800 Air France staff redundant this year; and reducing unit costs by €250-€350 million by the end of 2015.

"Transform 2015" - the group's catchy term used for cost reduction – is now being replaced by "Perform 2020" under which it will develop a passenger hub business based on an upgraded product offer; increase its customer focus; ensure a stronger positioning of brands; and reinforce its strategic partnerships – one of which is Etihad.

The group says it also plans "a return to operating breakeven by 2017 by further optimizing its point-to-point operations with the creation of a single business unit". In addition to expanding its Transavia low-cost subsidiary to compete with Ryan Air, easyjet, Pegasus, Vueling et al, Air France-KLM says it will also complete the "finalization of the cargo repositioning" adding that negotiations with KLM unions are "ongoing" – presumably in relation to Martinair pilots as a result of the previously-announced phasing out of nine freighters by 2016.

Group cargo tonnage fell 2.9 percent in 2014 to 1.3 million tonnes; RTKs fell 2.4 percent compared to 2013; load factor remained the same at 63 percent; and revenues fell 4.8 percent year-on-year to €2.68 billion. The operating result increased to -€212 million from -€202 million in 2013.

The group blames the continuing losses in its cargo unit to "weak global trade and structural air cargo industry overcapacity". It says it plans to return to an operating breakeven in 2017 with five full freighters. Presumably before then it will have a new cargo head to replace Erik Varwijk who leaves next month.

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