Ben Smith, CEO of aviation combination Air France-KLM, starts his telephone press conference on Thursday in a good mood. He describes what he sees when he looks out the window at Paris Charles de Gaulle Airport. “Flights are leaving, all gates are occupied. It’s a beautiful image.”
Air France-KLM had a lot of good news to report when it presented the figures for the first quarter of 2022. Increasing passenger numbers, more turnover, a better result. Daughter KLM is making some profit again and repaying part of the corona loan from the Dutch state. And it is “wonderful” that more and more customers are using the luxury seats for holiday travel – premium leisure – discover, says Smith.
There is one thing that spoils the atmosphere for the French-Dutch company: the chaos at Schiphol, KLM’s home base. Due to a shortage of airport staff, travelers often had to wait hours before they could go through security in recent weeks. “We are very concerned,” Smith said. “This is a big issue for us.”
Airlines may be forced to cancel or move flights from Schiphol this summer, Schiphol director Dick Benschop announced this week. KLM already canceled several dozen flights last week to relieve Schiphol. Air France-KLM is now using its “maximum lobbying power” to prevent flights from Amsterdam from being forced to cancel this summer, Smith said – without criticizing Benschop or Schiphol, incidentally. “We are very dependent on Schiphol,” he said.
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Air France-KLM uses its “maximum lobbying power” to prevent flights from Amsterdam from being canceled this summer
Shortage everywhere
Elsewhere, aviation is also encountering limits due to staff shortages now that corona restrictions are being lifted, Smith said. Airlines in the US are struggling with a shortage of pilots and in Smith’s home country, Canada, are too few security staff, just like at Schiphol. “This will be a very challenging summer, not just for Air France-KLM, but for all airlines in Europe.”
The tight labor market, combined with rising inflation, is also expected to lead to higher personnel costs at Air France-KLM itself. Higher wage demands are in line with expectations. But fortunately, Smith said, relations with unions are “much better than they have been in decades” — including at Air France, where unions have a wealth of more active members. “We believe we can negotiate this in such a way that it will not affect our position vis-à-vis competitors.”
Air France-KLM as a whole suffered an operating loss of 350 million euros last quarter, compared to a loss of 1.2 billion a year earlier. The KLM branch made a modest profit, 3 million euros. Passenger numbers at the group tripled in a year to 14.5 million, of which 4.8 million at KLM. Turnover at group level more than doubled to 4.4 billion euros. Investors appreciated the figures: the Air France-KLM share was more than 2 percent higher on Thursday afternoon.
Lufthansa, an important competitor of Air France-KLM, also announced quarterly figures on Thursday. Below the line, the German company lost 584 million euros, where that was more than a billion a year earlier. Lufthansa also doubled its turnover.
State aid repaid
A bright spot at KLM is that the airline can repay 311 million euros in the second quarter of the state aid it received to absorb the blow caused by the corona pandemic. The Dutch government, together with banks, reserved 3.4 billion euros for KLM, of which the company used 942 million euros.
After the repayment, 631 million euros still remains due. “If the recovery continues, KLM may make further repayments later this year,” the company said in a press release.
KLM has an interest in repaying the aid, because there are conditions attached to the credit. For example, as long as KLM receives financial support, it is not allowed to pay out bonuses and dividends.