Tougher Covid-19 travel curbs push Air France-KLM deeper into the red

Europe's second-largest airline posts a €7.1bn net loss for 2020 after experiencing 'most severe crisis ever'

An Air France Airbus A380 aircraft at Charles-de-Gaulle airport in Paris. Renewed Covid-19 lockdowns pushed Air France-KLM deeper into the red after it chalked up a €7.1 billion ($8.5bn) net loss for Show more

Renewed Covid-19 lockdowns pushed Air France-KLM deeper into the red as it chalked up a €7.1 billion ($8.5bn) net loss for 2020 and postponed a key mid-term profitability goal, the airline group said on Thursday.

The airline group expects to fly 40 per cent of its pre-crisis capacity in January-March, as tougher travel curbs in France and beyond widen losses from the €407 million in negative earnings before interest, taxes, depreciation and amortisation recorded in the fourth quarter.

The past year has "tested the Air France-KLM Group with the most severe crisis ever experienced by the air transport industry," chief executive Ben Smith said.

The worsening travel outlook threatens to ruin Europe's critical summer season and leave major carriers in need of another round of funding support, analysts warn.

Air France-KLM last year received €10.4bn in loans and guarantees from France and the Netherlands and is negotiating the terms of a state-backed recapitalisation, with EU regulators pushing for airport slot concessions.

The Air France business recorded a €989m operating loss last quarter, more than six times wider than KLM's €152m deficit. Performance disparities have in the past sharpened Franco-Dutch tensions between the airlines and their government shareholders.

The cargo business, a bright spot for many airlines as grounded flights push up freight prices, saw unit revenues more than double in the fourth quarter.

The quarterly net loss of €1bn was less than the €1.31bn deficit analysts expected, according to the company's own consensus polling. Revenue fell 64.3 per cent to €2.36bn on a 78 per cent traffic decline.

Operating cash flow was a negative €2.12bn last quarter, and net debt increased by €4.9bn over the year to €11.05bn as of December 31, against €9.8bn in liquidity.

Air France-KLM cut its workforce by 10 per cent, or 8,700 full time-equivalent positions, in 2020 and expects to eliminate a further 6,000 "in coming years", it said.

The group also flagged a likely further postponement of the 7 per cent to 8 per cent operating margin objective it had pushed back last July by a year to 2025. The goal is "unchanged but delayed", it said without giving a new target date.