Air France-KLM cautions on revenue drop amid lockdowns

The Franco-Dutch airline group reported a 67 percent drop in revenue. (Reuters)
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Updated 31 October 2020

Air France-KLM cautions on revenue drop amid lockdowns

  • Air France and KLM aim to reduce combined headcount by the equivalent of 9,000 full-time positions this year, with a further 4,500 to follow at the French carrier by 2022

PARIS: Air France-KLM unveiled a €1.05 billion ($1.24 billion) quarterly operating loss and warned of worse to come as a resurgent coronavirus brings new travel curbs.
The Franco-Dutch airline group reported a 67 percent drop in third-quarter revenue to €2.52 billion on Friday, as France returned to full lockdown for at least a month.
New COVID-19 outbreaks pose a threat to network airlines already weakened by the crisis and long-haul travel collapse.
“The gradual closure of international borders in the second half of August and the resurgence of the pandemic strongly impacted our results,” Chief Executive Ben Smith said.
Air France-KLM has €12.4 billion in liquidity, thanks largely to a French and Dutch government-backed bailout, a cash cushion comparable to those of European peers Lufthansa and IAG. Net debt increased by €1.34 billion in the quarter to €9.31 billion as of Sept. 30.
But the depletion will accelerate with a further collapse in traffic, Chief Financial Officer Frederic Gagey cautioned.
Air France is expected to operate less than 35 percent of its year-earlier capacity in the fourth quarter, with KLM’s schedule only “slightly” better, he added.
And the group’s €1.22 billion quarterly operating cash burn would have been €582 million worse without payment delays from suppliers and tax authorities — whose benefit will now begin to wear off.
The operating loss was better than the €1.24 billion expected by analysts on €2.79 billion in revenue, according to the median of 16 estimates in a company consensus poll.
Earnings before interest, tax and depreciation came in at a negative €442 million and will be “substantially lower” in the fourth quarter, Air France-KLM said.
Some €565 million in restructuring charges swelled its bottom-line net loss to €1.67 billion.
Air France and KLM aim to reduce combined headcount by the equivalent of 9,000 full-time positions this year, with a further 4,500 to follow at the French carrier by 2022.
A doubling of cargo unit-revenue was a rare bright spot, thanks to freight pricing supported by the widespread grounding of planes, but did little to offset the broader gloom.
Air France-KLM said that it still aims to raise new capital to bolster its debt-laden balance sheet; a second step demanded by creditor banks and announced with the April bailout. “We’re working intensively on it,” Gagey said.


US sanctions Chinese and Russian firms over Iran trade

Updated 29 November 2020

US sanctions Chinese and Russian firms over Iran trade

  • Four companies accused of ‘transferring sensitive technology and items’ to missile program

LONDON: The US has slapped economic sanctions on four Chinese and Russian companies that Washington claims helped to support Iran’s missile program.

The four were accused of “transferring sensitive technology and items to Iran’s missile program” and will be subject to restrictions on US government aid and their exports for two years, Secretary of State Mike Pompeo said in a statement.

The sanctions, imposed on Wednesday, were against two Chinese-based companies, Chengdu Best New Materials and Zibo Elim Trade, as well as Russia’s Nilco Group and joint stock company Elecon.

“These measures are part of our response to Iran’s malign activities,” said Pompeo. “These determinations underscore the continuing need for all countries to remain vigilant to efforts by Iran to advance its missile program. We will continue to work to impede Iran’s missile development efforts and use our sanctions authorities to spotlight the foreign suppliers, such as these entities in the PRC and Russia, that provide missile-related materials and technology to Iran.”

The Trump administration has ramped up sanctions on Tehran after withdrawing from the Iran nuclear deal in 2018.

Earlier this week, Pompeo met Kuwaiti Foreign Minister Sheikh Ahmad Nasser Al-Mohammad Al-Sabah, when the campaign of pressure on the Iranian regime was also discussed.

“I want to thank Kuwait for its support of the maximum pressure campaign. Together, we are denying Tehran money, resources, wealth, weapons with which they would be able to commit terror acts all across the region,” he said.

It is not yet clear how the incoming administration of Joe Biden will deal with Tehran and whether it wants to revive the nuclear deal which would be key reviving the country’s battered economy. The Iranian rial has lost about half of its value this year against the dollar, fueling inflation and deepening the damage to the economy.

Iran’s economy would grow as much as 4.4 percent next year if sanctions were lifted, the Institute of International Finance (IIF) said last week. 

The economy is expected to contract by about 6.1 percent in 2020 according to IIF estimates.