Air France-KLM speeds up cost cuts, curbs investments
PARIS (Reuters) - Air France-KLM is accelerating cost cuts and deferring debt reduction goals as pressure on revenues and a weak euro threaten to dampen the benefits of lower oil prices this year.
Europe's second largest traditional network carrier, which issued three profit warnings last year, also announced plans to cut investments and delay some aircraft deliveries as it posted lower 2014 revenues and core profits on Thursday.
Although lower oil prices have boosted airline balance sheets worldwide, Air France-KLM expressed concerns about currency swings and overcapacity in some long-haul markets, which come on the heels of a costly Air France pilots strike.
The Franco-Dutch group said it would bolster its recently launched Perform 2020 strategic plan, by reducing investments by 300 million euros (£195 million) a year in both 2015 and 2016, and confirmed the equivalent of 800 further jobs through voluntary measures.
It revised up its unit cost reduction target for 2015-17 to an average of 1.5 percent a year, instead of a previous goal of between 1 and 1.5 percent a year.
For 2015, the group intends to cut unit costs by 1 to 1.3 percent, saving 250-300 million euros.
It now targets net debt of 5 billion euros at the end of 2015, rather than 4.5 billion euros targeted previously, and down from an actual level of 5.41 billion at the end of 2014.
It eased its medium-target target for the ratio of net debt to gross operating profit before lease rentals (EBITDAR) to around 2.5 from 2017, compared with a previous target of below 2.5.
"With the way we see the market developing, except for the North Atlantic, we are being very, very cautious," Chief Executive Alexandre de Juniac told journalists.
Group revenues fell 2.4 percent in 2014 to 24.912 billion euros despite a 1.3 percent increase in passenger numbers.
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 266 million euros to 1.589 billion euros, weighed down by the impact of the recent pilot strike.
Analysts were on average expecting EBITDA of 1.671 billion euros and revenues of 24.84 billion, according to a Thomson Reuters I/B/E/S consensus estimate.
Net losses narrowed sharply to 198 million euros due to changes in Dutch pension rules and a gain on the sale of shares in the Amadeus booking system.
Hit by weakening revenues since last summer and the lingering effects of the recent pilots strike, the Franco-Dutch group gave no profit forecast for 2015.
"The global context in early 2015 remains uncertain," the group said in a statement.
Air France-KLM, 15.9-percent owned by the French state and 6.8 percent by staff, has not paid a dividend since 2007-08.
Its shares closed up 0.1 percent at 7.589 euros on Wednesday, valuing the group at 2.28 billion euros.
(Reporting by Cyril Altmeyer, Tim Hepher; Editing by Leila Abboud)
