Air France-KLM Set to Cut Costs After Pilots’ Strike
Air France-KLM plans to scale back investments next year to clean up the costs of their recent pilots’ strike. Their profits fell 61 percent during the third-quarter due to the pilots’ strike. The 14-day strike also caused $530 million in lost sales. Of course, that’s not the only problem the airline carrier is facing.To reduce costs, Air France-KLM is implementing several plans to help them continue to compete in the market, particularly with low-cost carriers. For instance, they plan to adjust some long-haul flights because of overcapacity to Asia, Latin America, and East Africa. This is supposed to help put profits back on track. They are also going to trim part of their Perform 2020 plan, particularly for Transavia growth and reform their short-haul and cargo divisions.
Air France-KLM has already curtailed some flights because of the Ebola outbreak in West Africa, but it’s not making much of a difference in terms of profits. All of their operation divisions are seeing cuts. Pierre-Francois Riolacci, Finance Director, predicts the market will remain sluggish. He said, “It is difficult to separate the effect of the market from the direct effect of the strike, but the 500 million includes these elements.”
Shares for this large network carrier have dropped significantly over the past six months, by as much as 40 percent. The pilots’ strike hurt Air France-KLM badly, but they had other problems, too. Most of their group divisions need structural revision to increase profits.
It’s not possible for Air France-KLM to turn back the clock and reverse the damage caused by the pilots’ strike, so they are making financial cuts in several places to try and put them back on track financially. It will take a couple of years until they are back to where they were prestrike. However, the airline is remaining positive.
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