Air France-KLM recently reported a decline in profits for its latest quarter, attributing the downturn to a reduction in passenger traffic as the Paris Summer Olympics approach. This unexpected drop has led the airline group to revise its annual financial forecasts downward and intensify its efforts to reduce costs. The decline in traveler numbers, despite the impending global event, has put additional pressure on the airline to find ways to mitigate the financial impact.
The Franco-Dutch airline had already warned in early July that the Games would hammer revenues as many tourists avoided one of the world's most visited cities during the crowded competitions.
But the negative impact for the quarter is now set at €200 million euros, above the €160-180 million forecast a few weeks ago, the carrier said in a statement.
For June alone, the impact of lost ticket sales was estimated at €40 million.
As a result, second-quarter profit stood at €165 million, well below the €308 million estimated by an average of analyst forecasts by FactSet.
“The second quarter of 2024 confirmed an increasingly challenging environment for aviation,
with rising fuel prices and a continued pressure on costs. In this context, KLM and Transavia
delivered a stable yet sluggish performance, while Air France was in addition impacted by
exceptional events, including the negative effect of the Olympic Games in June," according to Benjamin Smith, CEO of the Group, quoted by a press release.
The quarterly profit was also just over one-fourth of the €612 million booked in the same quarter last year, even as revenues rose 4.3 percent over the period to €7.95 billion.
The airline cited higher fuel and salary costs as also weighing on profits, even as traffic increased by 4.4 percent over the year to 25.7 million passengers.
In response, it lowered its forecast of capacity in available seat kilometres (ASK,) a key profitability metric for money generated per flight, to growth of four percent, down from five percent previously.
And after a hiring freeze imposed after a net loss of €522 million euros in the first quarter, it will now also cut advertising budgets and trim non-essential spending by 20 percent.
(With newswires)
