The European aviation sector is once again in the eye of the storm this morning as the governments of the Old Continent are stepping up measures to restrict the movements of their fellow citizens.
An offer reduced by up to 90% at Air France KLM
At Air France KLM, in order to cope with the increasing restrictions on the possibility of traveling and a strongly declining demand which has resulted in the last few weeks in a decrease in traffic and sales, the Group will reduce over the activity will progress significantly over the next few days, with an offer of available seat kilometers (SKO) which could drop between 70% and 90%. This reduction in capacity is currently scheduled for a period of 2 months, and the Group will continue to monitor the evolution of the context on a daily basis to make it evolve if necessary. As a result of this reduction in capacity, Air France will immobilize its entire Airbus 380 fleet and KLM its entire Boeing 747 fleet.
80% of staff on partial unemployment?
To cope with this situation, the Group stresses that it has already taken strong measures to secure its cash flow: an additional savings plan which will generate 200 million euros during 2020; an initial revision of the investment plan reduced the latter by 350 ME, to which will be added the impact of the drop in activity on the amount of maintenance investments; Air France and KLM will consult the representative bodies of their staff on measures that take into account the impacts of the drop in activity, including the implementation of partial activity. According to several press articles, almost 80% of the carrier’s workforce could be placed on short-time working.
A strongly degraded financial trajectory
Despite these measures, the deterioration of the environment linked to the epidemic and the sharp reduction in its activity which results from it today lead the group to forecast a financial trajectory that is greatly degraded compared to the perspectives presented on the occasion of the publication. of its annual results. The Group estimates that the drop in revenues from passenger activity resulting from the reduction in capacity will only be compensated for up to around 50% by the drop in variable costs before saving measures. In this extremely difficult context, the Air France-KLM group welcomed the statements made by the French State and the Dutch State, which indicated that they each study all possible conditions for support for the Group.
The state to the rescue?
Several rumors have been circulating in trading rooms for several days. The daily ‘Les Echos’ reported on a government reflection on a possible AF bailout. A rise of the French State in the capital of the group “is not topical today”, however declared to Reuters a source with the French ministry for Finances. The Netherlands has said it will “do whatever it takes” to keep the company running, Dutch Finance Minister Wopke Hoekstra said on Sunday after KLM announced a plans to cut 1,500 to 2,000 jobs.
Capacity reduction of at least 75% at IAG in April and May
While IAG has suspended all flights to China, reduced capacity on Asian routes, canceled all flights to, from and within Italy and made various changes to its home network. British Airways’ mother says it plans to cut capacity in April and May by at least 75% compared to the same period last year. The carrier, who points out that it is taking various measures to reduce its operating costs and preserve its cash flow, notes that given the persistent uncertainty as to the potential impact and the duration of COVID-19, it is still not possible to provide precise results guidance for the whole of 2020.
easyjet could immobilize the majority of the fleet
easyJet explains that it continues to make major flight cancellations. “These actions will continue on an ongoing basis for the foreseeable future and could result in the immobilization of the majority of the easyJet fleet.” The low-cost company, which says it continues to organize “rescue flights for short periods where it can in order to repatriate its customers”, states that it is taking “all necessary measures to eliminate the costs and non critical expenses of the ‘enterprise at all levels. The immobilization of planes on the ground will eliminate significant levels of variable costs. ” easyJet, which highlights its strong balance sheet with a cash balance of £ 1.6 billion and an unused revolving credit facility of $ 500 million, also explains that given the current situation, it is not not possible to provide financial guidance for the remainder of fiscal year 2020.