Air France-KLM warnings about lower average earnings dropped the price of shares of the European air company. Furthermore, the Franco-Dutch company could cut more employees. The second largest European airline lowered their expectations for financial results by the end of 2014. Air France-KLM now expects 12% lower profit mainly due to the glut in the sector and lower prices for freight and passengers.
In the early hours of stock trading in Europe, the shares of Air France-KLM dropped by 4.68% to 8.96 EUR per share. They reached the lowest level since late February and dragged down European aviation sector, which represents the least so far. The shares of low-cost airlines easyJet and Ryanair dropped, respectively – with 3.09% and 1.63%. The parent company of British Airways and Iberia – International Consolidated Airlines Group, loses 5% of its market capitalization.
The communication from the Air France-KLM is happening just weeks after a similar statement made German airline Lufthansa. The management of the German carrier predicted less financial performance in 2015 and 2016 due to lower expected revenue from the carriage of passengers and cargo. At 12:40 local time the shares of Deutsche Lufthansa AG lost 2.43% of its value.
However, Air France-KLM is not the only one company, which revised its forecasts. After the warning of Lufthansa, same news came from Icelandair and Jet2.com. SAS said it would cut costs and US-based Delta disappointed with the sales revenue. According to Air France-KLM the lower expected value of 2.2 to 2.3 billion EUR, which is lower than previously projected 2.5 billion EUR will still be 20% higher than the profit before interest, taxes, depreciation and impairment losses for 2013.
The reduced forecast comes amid weak demand for freight and challenging situation in Venezuela in the first quarter, reads the opinion of the Air France-KLM. The company is one of many whose incomes remain stranded in Caracas because of a dispute related to meat currency. The Venezuelan government requires airlines to sell tickets in the local currency Bolivar, but the government did not manage to return quickly earned funds companies for strict currency restrictions. As a result of the dispute Venezuela owes about 290 million USD of the company relative to the total recovery of 4.2 billion USD calculated by the Venezuelan Airlines Association at the end of May. The official says that almost half of the value of the revised financial forecast due to weaker demand for freight and what is happening in the South American country. The other half falls on lower revenues from the carriage of passengers.
In June, the number of passengers carried by Air France-KLM passengers jumped 2.9% on an annual basis. The low traffic its subsidiary Transavia France was 4.3% more intense, while the transported goods – 4.3% less. In June, the capacity of the Air France-KLM for passenger transport increased by 1.8%, while that of Transavia France – 4.6%. At the same time the capacity of the company’s cargo decreased by 1.7%.