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Air France-KLM cuts freighter costs

AMSTELVEEN, Netherlands: Air France-KLM has confirmed it will retire five Martinair MD11 freighters by 2016 in a bid to cut costs in its loss-making cargo business.

The aircraft are the oldest in the group's fleet and were due to be phased out between 2018 and 2022.

With the first MD11 leaving after the upcoming winter schedule, the group's main deck freighter capacity will eventually comprise three B747ER freighters, two B777Fs and 15 B747 Combis.

martinair freighterThe announcement is part of a new "Perform 2020" cost-cutting plan announced to union representatives on September 04 that includes expanding the AF-KL low-cost Transavia subsidiary from new hubs in Germany and Portugal.

The new program is the latest attempt to reduce the group's long-term debt, currently over €5 billion, and return to profitability.

Erik Varwijk, head of the Air France KLM Martinair Cargo unit, said a Goldman Sachs review had determined four options for the future of Martinair: investing in new freighters; writing down the existing units; potential partnerships; and a sale of the airline "with or without" a commercial agreement with AF-KL.

With no subsequent interest in a partnership or buying Martinair, and no interest in adding to its long-term debt with new aircraft, the AF-KL board was left with the obvious choice of getting rid of the MD-11s, four of which are owned and one is leased.

Together with expected labor issues associated with the expansion of its low-cost passenger subsidiary, the airline group says it will be discussing how to find new jobs for the 350-400 Martinair employees affected by the planned fleet reduction.

Varwijk stressed that AF-KL has every intention of retaining its position in the airfreight industry and forecasts its cargo unit will breakeven by 2017 as a result of reduced freighter overheads and an increasing reliance on the belly capacity of B777 and A350 aircraft.

Noting "cash is a fact, profit is a matter of opinion", he said cargo makes a €1billion net contribution after deducting all direct costs and AF-KL is going to change its accounting reporting to avoid an "unnecessary negative perception" of the value made by cargo to group revenue.

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