Air France puts cost of pilots strike at €500 million

Air France put the total cost of last month’s two-week pilots strike at €500 million on Wednesday, wiping more than a fifth off its parent group’s estimated full-year core profit.

Air France-KLM, Europe's second-biggest network carrier by revenue, had already revised down its target for 2014 earnings before interest, tax, depreciation and amortisation (ebitda) in July from €2.5 billion to between €2.2 billionand €2.3 billion.

At the time, it mainly cited overcapacity on long-haul routes and weak cargo demand. The strike has added to its woes.

Air France-KLM said total passenger traffic fell 15.9 per cent in September, adding that bookings for the fourth quarter were down by between 1 and 2 percentage points.

The company said the €500 million cost estimate included a €320-€350 million direct impact that took account of lower receipts and the purchase of tickets for customers on rival airlines, with costs partly offset by savings on fuel and other costs. The remainder was down to the delay in bookings.

Chief financial officer Pierre-Francois Riolacci told reporters the airline had sold some 28 per cent of capacity for the fourth quarter, compared with 30 per cent normally at this stage of the year.

“The group estimates that part of this delay could be progressively reduced over the coming weeks,” the carrier said in a statement, adding that it was difficult to “quantify this adjustment exactly given the exceptional nature of the event”.

Pilots ended the airline's longest strike since 1998 in late September after managers agreed to drop plans to set up a new European arm for low-cost unit Transavia. Air France plans to press ahead with the expansion of Transavia France.

Air France-KLM said that for the winter season, its capacity would grow by 0.7 per cent, including 0.1 per cent for the passenger business at its two main brands, Air France and KLM, as well as regional carrier Hop, and 13.3 per cent for Transavia.

In a sign of ongoing tensions in the aftermath of the dispute, Air France said it had been forced to cancel a meeting with unions on Tuesday on its plans for Transavia due to the absence of unions representing a minority of staff.

“This meeting will be replaced by informal consultations with each representative union in order to deliver information on the development of Transavia,” it said in a statement.

Air France pilots are seeking the right for future pilots to be recruited on the same conditions as those currently working for the main airline, a point on which management says it will not give way.

Shares in Air France-KLM closed down 4.6 per cent on Tuesday at €6.678 for a 22 per cent drop since the strike began - shrugging off a decision by JPMorgan to upgrade the stock from ‘underweight’ to ‘overweight’.

Reuters