Air France-KLM pulls out of danger, offers tow to Alitalia
Paris (AFP) - Air France-KLM has climbed sharply away from crisis, its quarterly statement showed Thursday, but the airline group delayed the timetable for getting over its debt mountain while offering help to shaky partner Alitalia.
The French-Dutch airline group, considered at risk of failing two years ago, reported that third-quarter operating profit leapt by nearly a third thanks to restructuring efforts.
But the net figure fell by half because of a writedown of the group's 25.0 percent interest in Italian airline Alitalia which has just averted insolvency and needs new capital urgently.
Air France-KLM is restructuring to pull out of deep financial problems and cope with low-cost competition, and chief executive Alexandre de Juniac said that the operating figure was "very encouraging" as a sign that the measures were working.
Operating profit jumped by 29.1 percent to 634 million euros ($868.6 million), in line with analysts' expectations and up from 491 million euros in the same quarter last year.
Net profit fell to 144 million euros from 296 million euros.
Air France-KLM along with other shareholders in Alitalia have until the middle of November to decide whether or not to participate in a share of a capital increase of up to 300 million euros.
De Juniac told analysts that "we are a loyal partner, we are a serious partner. We want to help them (Alitalia) and there are three conditions."
He said that since talks on recapitalisation began, the French group had been clear about requiring "strict financial, industrial and social conditions" and a "profound restructuring" for Alitalia.
If these conditions were met, the French group could "envisage" strengthening the partnership. If not "we will not do so," De Juniac said.
The fall in Air France-KLM's net profit for the quarter reflected a tax charge of 140 million euros and a factor of 137 million euros for its interests in Alitalia.
But the restructuring programme at Air France-KLM, called Transform 2015, continued to bear fruit.
On the basis of these results, the group held to its targets for the whole of 2013.
In the first half, an operating loss had been reduced by 239 million euros to 451 million euros, and a net loss fell by 33.8 percent to 649 million euros.
With the third-quarter boost, for the first nine months of the year the group switched into an operating profit of 183 million euros from a loss of 199 million euros in the same period of last year.
Debt-reduction target delayed to 2015
On the basis that its bill for fuel would be $2.3 billion, and in a highly volatile climate, the group said second-half operating profit would improve in line with performance in the first half.
In January 2012, Air France-KLM launched a restructuring programme to save 2.0 billion euros over three years and to reduce debt to 4.5 billion euros by the end of 2014 from 6.5 billion euros at the beginning of 2012.
However, on Thursday the group delayed this timetable.
The group said now that given an environment marked by weak growth, volatile fuel prices and exchange rates, and despite a big improvement in long-range operations and maintenance, underlying profit next year would be about 2.5 billion euros.
This was at the lower end of the range mentioned previously and the 2.0-billion euro reduction of net debt debt would now be achieved in 2015.
"The group continued to improve its operating result during this quarter," De Juniac said in a statement:
"This is very encouraging since it shows that the roll-out of the measures in the Transform 2015 plan is proceeding in line with our expectation.
However, the medium-haul and cargo sectors were facing major difficulties.
The airline said that conditions had remained difficult in the third quarter, and in addition the euro had risen strongly, crimping sales figure when converted from other currencies.
In the quarter sales edged up by 0.4 percent to 7.21 billion euros.
