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AF-KL Huge Net Loss Of USD 1.1 Billion In 2ndQ  
User currently offlineGonzalo From Chile, joined exactly 9 years ago today! , 1985 posts, RR: 2
Posted (2 years 3 weeks 2 days 12 hours ago) and read 14193 times:

Apparently not only the small regional carriers are suffering the adverse economic situation in Europe...

AF/KL Group blames the restructuring process and internal accounting changes, but still, looks very disappointing...


http://atwonline.com/airline-finance...posts-895-million-2q-net-loss-0730


Rgds.

G.


80 Knots...V1...Rotate...Gear Up...DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20 / B732 / B763
55 replies: All unread, showing first 25:
 
User currently offlinePlymSpotter From Spain, joined Jun 2004, 11639 posts, RR: 60
Reply 1, posted (2 years 3 weeks 2 days 12 hours ago) and read 14195 times:

Quoting Gonzalo (Thread starter):
AF/KL Group blames the restructuring process and internal accounting changes, but still, looks very disappointing...

Well yes it looks disappointing, until you read this, which is much more important:

Quote:
The airline group’s second-quarter operating loss was €66 million, more than halving a €145 million operating deficit in the 2011 June quarter.

Dan  



...love is just a camouflage for what resembles rage again...
User currently offlineGonzalo From Chile, joined exactly 9 years ago today! , 1985 posts, RR: 2
Reply 2, posted (2 years 3 weeks 2 days 11 hours ago) and read 13866 times:

Quoting PlymSpotter (Reply 1):
Well yes it looks disappointing, until you read this, which is much more important:

Quote:The airline group’s second-quarter operating loss was €66 million, more than halving a €145 million operating deficit in the 2011 June quarter.
Dan

Yes, but come on, the AF/KL Group was created in 2004, and 8 years later they are still talking about changes in the accounting process and restructuring and bla bla bla. After reading this kind of things someone could think that this "consolidation" ( or the name you like more for this ), was not a very good idea, at least for one of the airlines involved... Just my humble opinion...

Rgds.

G.



80 Knots...V1...Rotate...Gear Up...DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20 / B732 / B763
User currently offlineAsturias From Spain, joined Apr 2006, 2148 posts, RR: 16
Reply 3, posted (2 years 3 weeks 2 days 10 hours ago) and read 13632 times:

Quoting Gonzalo (Reply 2):
After reading this kind of things someone could think that this "consolidation" ( or the name you like more for this ), was not a very good idea, at least for one of the airlines involved... Just my humble opinion...

Keep your voice down, there are some true believers in airline mergers/consolidation here that will have their feelings hurt if you point out the obvious: mergers aren't a magic bullet and are largely irrelevant in the grand scheme of things (except they deliver a hefty bonus to the executives involved)

Another example is the creation of the aptly named International Consolidated Airlines Group which has done nothing in particular for the airlines involves, but it has made some executives very very rich.

In my experience there's only one thing that *really* works: a well run company. Now I'm not saying AF or KL aren't well run, but a lot of effort an energy is wasted in consolidation, effort that would be better spent in day to day managing of the companies.



Tonight we fly
User currently offlineU2380 From United Kingdom, joined Dec 2010, 325 posts, RR: 0
Reply 4, posted (2 years 3 weeks 2 days 10 hours ago) and read 13568 times:

Quoting Asturias (Reply 3):
Another example is the creation of the aptly named International Consolidated Airlines Group which has done nothing in particular for the airlines involves, but it has made some executives very very rich.

Surely it's a tad too early to judge whether the formation of IAG was a success? They don't seem to be doing too badly, although I will confess, I haven't kept up to date with recent events/announcements.


User currently offlineGonzalo From Chile, joined exactly 9 years ago today! , 1985 posts, RR: 2
Reply 5, posted (2 years 3 weeks 2 days 10 hours ago) and read 13487 times:

Quoting U2380 (Reply 4):
Surely it's a tad too early to judge whether the formation of IAG was a success? They don't seem to be doing too badly, although I will confess, I haven't kept up to date with recent events/announcements.

I don't have updated information either. Maybe a little off topic, but I can tell you, at least among a number of the South American passengers, there were hope of a better service in IB when they became part of IAG, supposedly due to some sort of customer service learning form BA. Those hopes already vanished, and certainly killing the hopes of a better service today could have an adverse effect in the net results tomorrow...

Rgds.

G.
Edited for typo

[Edited 2012-07-30 10:44:04]


80 Knots...V1...Rotate...Gear Up...DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20 / B732 / B763
User currently offlineAesma From France, joined Nov 2009, 6594 posts, RR: 9
Reply 6, posted (2 years 3 weeks 2 days 8 hours ago) and read 13081 times:

I don't see what the loss has to do with the merger. AF has been looking for a restructuring for a long time, but things weren't bad enough (and political pressure during the presidential campaign) until now to actually go ahead with it.

There are airlines left and right going bankrupt currently, mergers or no mergers.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineTeamInTheSky From United States of America, joined Apr 2011, 534 posts, RR: 0
Reply 7, posted (2 years 3 weeks 2 days 8 hours ago) and read 13016 times:

Quoting Gonzalo (Reply 2):
Yes, but come on, the AF/KL Group was created in 2004, and 8 years later they are still talking about changes in the accounting process and restructuring and bla bla bla. After reading this kind of things someone could think that this "consolidation" ( or the name you like more for this ), was not a very good idea, at least for one of the airlines involved... Just my humble opinion...

Remember Gonzalo, it always gets darkest before the dawn. Maybe I fly AF too much or maybe I am just too young, but I do believe that AF is finally making the corrective action needed to get their balance sheet in order. They are paying down their crushing debt, trying to strike deals with unions to prevent labor action, starting to cut down the bureaucracy, their load factors are up on long-haul, and they are actually see reduction in operating losses.

Like DL, some of these heavy losses can be contributed to accounting rules, not actual money out of pocket.

AF have a long way to go, I think AF is finally positioning themselves as they should have been for years. Especially with the new S4 pier open, I really hope the best for AF!



Since 2010: DL, KL, AF, WX, IG, FR , FL, U2, AK, BA, OK, UX, VS, VN, K6
User currently offlineTIA From Albania, joined Mar 2006, 524 posts, RR: 2
Reply 8, posted (2 years 3 weeks 2 days 7 hours ago) and read 12959 times:

Quoting Gonzalo (Thread starter):
Apparently not only the small regional carriers are suffering the adverse economic situation in Europe...

AF/KL Group blames the restructuring process and internal accounting changes, but still, looks very disappointing...

Disappointing??? You do realize that their results IMPROVED, right? I have no dog in this fight, but the results were positive, despite the overall loss. Thus the reason for their stock being up 17% today.


User currently offlineFI642 From Monaco, joined Mar 2005, 1079 posts, RR: 2
Reply 9, posted (2 years 3 weeks 2 days 1 hour ago) and read 11255 times:

Quoting Asturias (Reply 3):
Keep your voice down, there are some true believers in airline mergers/consolidation here that will have their feelings hurt if you point out the obvious: mergers aren't a magic bullet and are largely irrelevant in the grand scheme of things (except they deliver a hefty bonus to the executives involved)

That is too true. Rank and file never are rewarded for their extreme efforts.



737MAX, Cool Planes for the Worlds Coolest Airline.
User currently offlinelightsaber From United States of America, joined Jan 2005, 12981 posts, RR: 100
Reply 10, posted (2 years 3 weeks 2 days ago) and read 11080 times:
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Quoting TIA (Reply 8):
Disappointing??? You do realize that their results IMPROVED,

   That's improved?  

Seriously, while a few hundred million might be ignore-able by AF-KL, the forward looking indicators are not positive for the French economy as well as the whole European economy.

I suspect they took a charge to make future earnings look better.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineFlying-Tiger From Germany, joined exactly 15 years ago today! , 4161 posts, RR: 36
Reply 11, posted (2 years 3 weeks 1 day 18 hours ago) and read 9412 times:

Quoting lightsaber (Reply 10):

Seriously, while a few hundred million might be ignore-able by AF-KL, the forward looking indicators are not positive for the French economy as well as the whole European economy.

Actually same goes for the US economy, which isn´t really running "full steam" at the moment as well. For all carriers operating on the North Atlantic it will mean depressed earnings ´cause the volume will not be there on either side of the pond.

And - for the record - I remember a pretty interesting game in Washington DC a couple of months ago with the target to raise the overall debt cieling by a couple of trillion USD... whilest Europe is currently cetainly in focus concerning debts, one has to raise the question what ever-expanding debt in the US will mean to global aviation traffic once the necessity to cut down on budgets will start in the US. Not the rosiest picutre...



Flown: A319/320/321,A332/3,A380,AT4,AT7,B732/3/4/5/7/8,B742/4,B762/763,B772,CR2,CR7,ER4,E70,E75,F50/70,M11,L15,S20
User currently offlinemikey72 From United Kingdom, joined Oct 2009, 1780 posts, RR: 2
Reply 12, posted (2 years 3 weeks 1 day 17 hours ago) and read 9139 times:

Could KL split from AF and join IAG ?

I guess the band wagon is too far down the road (alliances, DL, etc) for that.

If only the KL/BA merger had progressed to fruition.

I can't help but think a IB, AF and AZ combo would have been optimal.



Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
User currently offliner2rho From Germany, joined Feb 2007, 2602 posts, RR: 1
Reply 13, posted (2 years 3 weeks 1 day 16 hours ago) and read 8926 times:

Quoting PlymSpotter (Reply 1):
Well yes it looks disappointing, until you read this, which is much more important:

Quote:
The airline group’s second-quarter operating loss was €66 million, more than halving a €145 million operating deficit in the 2011 June quarter.

Or also:

boosted second-quarter revenue 4.5%. Second-quarter group passenger capacity was up just 0.3% year-over-year to 67.46 billion ASMs, while traffic heightened 2.4% to 55.82 billion RPKs. Load factor was 82.8%, up 1.7 points.

In any case, these are just quarterly results. They provide an instantaneous photo as required by stock markets, but that's it. I never make interpretations of quarterly results. Yearly results, yes. Evolution from year-to-year, even better. But this is just an instantaneous picture of an airline that is optimizing its operations. Let's see how it evolves, and if they succeed to return to profitability. I like the idea of the regional bases, or merging its three regional carriers, improving crew productivity, etc. The opening of CDG S4 should (hopefully!) much improve operations there.


User currently offlineklmcedric From Belgium, joined Dec 2003, 812 posts, RR: 22
Reply 14, posted (2 years 3 weeks 1 day 16 hours ago) and read 8819 times:

If fuel prices remain where they are right now for some time, the year result will be much better then last year.

That huge loss in the first quarter is a direct result of the massive cost cutting measures that are being put into
place. Seems contradictory, but that's how it is.

Operating result is what really counts.


User currently offlinerbgso From United States of America, joined Jun 2006, 588 posts, RR: 0
Reply 15, posted (2 years 3 weeks 1 day 13 hours ago) and read 8087 times:

Quoting Asturias (Reply 3):
In my experience there's only one thing that *really* works: a well run company. Now I'm not saying AF or KL aren't well run, but a lot of effort an energy is wasted in consolidation, effort that would be better spent in day to day managing of the companies.

Very well said, and so true.


User currently offlineN62NA From United States of America, joined Aug 2003, 4447 posts, RR: 6
Reply 16, posted (2 years 3 weeks 1 day 12 hours ago) and read 7847 times:

Quoting mikey72 (Reply 13):
I can't help but think a IB, AF and AZ combo would have been optimal.

Spain, France and Italy? With the economic and political situations of those 3 countries, I would think that would have been a recipe for disaster.


User currently offlinemikey72 From United Kingdom, joined Oct 2009, 1780 posts, RR: 2
Reply 17, posted (2 years 3 weeks 1 day 12 hours ago) and read 7848 times:

Quoting rbgso (Reply 16):
Very well said, and so true.

Yes it is.

Surprisingly considering what I post on here I am not a fan of consolidation I just merely see it as a run away train that once started is impossible to stop. Kind of like a wild horse running towards a burning stable.

It is band wagon that once moving no airline can resist jumping on and we must now try amd make the most of it.

KL must be wondering how AF will achieve its aim with a socialist French government to appease.



Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
User currently offlinekl911 From Czech Republic, joined Jul 2003, 5128 posts, RR: 12
Reply 18, posted (2 years 3 weeks 1 day 10 hours ago) and read 7611 times:

Quoting mikey72 (Reply 18):
KL must be wondering how AF will achieve its aim with a socialist French government to appease.

And KLM is doing much better then AF. Actually, it might make a profit, and AF losses. AF has serious issues with Unions, something Holland hardly has.


User currently offlineAesma From France, joined Nov 2009, 6594 posts, RR: 9
Reply 19, posted (2 years 3 weeks 1 day 10 hours ago) and read 7606 times:

Quoting mikey72 (Reply 18):
KL must be wondering how AF will achieve its aim with a socialist French government to appease.

The government (and most of the staff, but not the PNC) seems satisfied with the plan that includes no firings.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlinelightsaber From United States of America, joined Jan 2005, 12981 posts, RR: 100
Reply 20, posted (2 years 3 weeks 1 day 10 hours ago) and read 7530 times:
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Quoting Flying-Tiger (Reply 12):
Actually same goes for the US economy, which isn´t really running "full steam" at the moment as well. For all carriers operating on the North Atlantic it will mean depressed earnings ´cause the volume will not be there on either side of the pond.

No disagreement there. Not something that will help AL-KL what so ever.

If you want to add to the fun, India is stalling too; It simply isn't sporting of them to have national blackouts...
Short on coal to fire tens of thousands of MW of electrical generation?!? (WSJ doesn't link, but its on Google news right now.)

So we are looking for a "fun" fall for aviation.  

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineseabosdca From United States of America, joined Sep 2007, 5393 posts, RR: 4
Reply 21, posted (2 years 3 weeks 1 day 9 hours ago) and read 7489 times:

Quoting lightsaber (Reply 10):
I suspect they took a charge to make future earnings look better.

You can't do that; if you do, and get caught, it's considered earnings manipulation, a form of securities fraud.

Take charges for legitimate reasons as early as possible? Sure.

Take charges just to increase future earnings?   


User currently offlinelightsaber From United States of America, joined Jan 2005, 12981 posts, RR: 100
Reply 22, posted (2 years 3 weeks 1 day 8 hours ago) and read 7305 times:
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Quoting seabosdca (Reply 21):
You can't do that; if you do, and get caught, it's considered earnings manipulation, a form of securities fraud.

  

I'm sure the reasons were 'legitimate.' However, taking such a charge so far into the AF-KL merger? This is to 'clean up' the books for future hard times. Pick your wording, the effect is the same. In effect AF-KL has cut their depreciation expenses for the next few years due to this charge. The charge will boost future earnings during a difficult time.

GE was able to manage their earnings for a decade. They made the money, they were just selective on when to take charges.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineTYCOON From United States of America, joined Feb 2007, 393 posts, RR: 3
Reply 23, posted (2 years 3 weeks 1 day 6 hours ago) and read 7163 times:

Sorry to burst everyone's bubble, but this was actually GOOD news... AF/KL have been improving their operating performance and the losses were due to exceptional, one time right offs. The investor/financial community recognizes this as following this announcement share prices went up!
And, just to correct everyone's preconceived notions, the French economy, while not bubbly, is in relative comparison OK... Germany and France still are the motors of Europe and neither economy is officially in recession... The UK is in much worse shape economically than France, and there is just no comparison between Italy and Spain, and France.


User currently offlineTeamInTheSky From United States of America, joined Apr 2011, 534 posts, RR: 0
Reply 24, posted (2 years 3 weeks 1 day 6 hours ago) and read 7154 times:

Quoting lightsaber (Reply 22):
I'm sure the reasons were 'legitimate.' However, taking such a charge so far into the AF-KL merger? This is to 'clean up' the books for future hard times. Pick your wording, the effect is the same. In effect AF-KL has cut their depreciation expenses for the next few years due to this charge. The charge will boost future earnings during a difficult time.

GE was able to manage their earnings for a decade. They made the money, they were just selective on when to take charges.

Lightsaber

As an accountant, I can confirm that in French GAAP as well as US GAAP rules due allow some wiggle room when to take charges and write down values (or sometimes up values). Which while earnings manipulation is wrong, there are ways to smooth earnings for reporting purposes.

All major airlines do this, which is why all earnings reports have to be taken with some grain of salt.



Since 2010: DL, KL, AF, WX, IG, FR , FL, U2, AK, BA, OK, UX, VS, VN, K6
25 col : It would be a huge negative. IAG/OW offers very little to KL. KL is very strong in Asia/China and feeds AMS. They have a superb link with DL, which w
26 icna05e : I might be wrong, but I don't see how those charges are blamed on the merger. Restructuration happens anytime when a company tries to improve their f
27 Post contains images Icarus75 : I'm french and I'm wondering the same thing about....our new government! I think we're going in he wall!! This plan is mean to allow economies and I
28 TIA : Exactly. But their results improved despite a worsening/uncertain economic environment.
29 Aesma : Well, I don't know exactly what's the problem, but if we take your example, I could see why they wouldn't want to work 33% more, would you want to ?
30 F9animal : I just hope we see a turn around to profits. I hope all the best, because AF-KL are awesome!
31 lear35pilot : While this announcement way show progress in AF/KLM financial performance, their customer service, both on the ground and in the air still falls far b
32 Burkhard : I think one has to compare the operating loss of 66Mio with the same quarter numbers of LH, which are +361Mio, to see that they still have a lot to do
33 rwsea : While KLM is much better than Air France, you're still correct for the most part. This company has some of the worst customer service I've ever seen
34 Gonzalo : I'm baffled by the lack of improvements in both AF from KL and IB from BA. I'm fully aware that consolidation has nothing to do with service on board
35 par13del : Those doing the jumping are investors and or senior management, in essense the folks who are the "paper airline", the others who are the thousands of
36 Icarus75 : I do not see why LH PNC can work like that and not AF PNC! That was my point! They also do not want arguing that's for security reasons! It doesn't s
37 Aesma : Well until an LH plane crashes we can't really know, so I hope we'll never know. Also I'm not familiar with the conditions LH provides to its crew. It
38 Amsterdam : KLM operates full fokkers and embraers with 100 pax including 'business class' on short streches with only 2 cabin crew. The French have to work harde
39 Amsterdam : Going from 4 to 3 cabin crew means that 3 have to do the 25% work of that 4th one. Divided by them 3, which makes each of the 3 having to do just 8%
40 TYCOON : lear35pilot, while I sympathize with your unfortunate experience with AF, I couldn't disagree with you more strongly. Of all the airlines you mention,
41 Aesma : You can't play with percentages like that (but granted, a 10-year-old would make the same mistake). Convert in works hours and you'll see I'm right.
42 Aquila3 : Well. I sure hope you do NOT really hope that. Certain affirmations should be just avoided, in my humble opinion. It can be good to be nationalist (a
43 Aesma : Why did you cut the end of my sentence where I said I hope we never know ? As for a crash where cabin crew mattered, AF had one recently (the A340 at
44 Amsterdam : All those words to say that 8% is about 1/3 of 25%. Which was already clear for anyone reading my post obviously. Anyway, if 4 cabin crew is signific
45 SQ22 : Interesting. Did they develop it together? Is it from a third party provider?
46 DeltaMD90 : There's a lot of things in life I don't wanna do, but if my company is losing money hand over foot, you better believe I'd want to work more to keep
47 Amsterdam : I'm not sure. But I think it's developed by Lufthansa Systems. The flight planning system is called LIDO.
48 lear35pilot : Tycoon....while I appreciate your comments, there is no way your going to change my mind about Air France. Like you, i have flown on many airlines, I
49 Aesma : No what is clear is that you're very bad at maths. If I'm doing 1/3 of your work on top of mine, I'm not working 8% more but 33% more.
50 Gonzalo : Absolutely agree with you. I know is not comparable, but the case of Pluna comes to mind, the unions did strikes and put sticks on the wheels every t
51 YULWinterSkies : But these tend to happen at CDG more frequently than other airports. Yes, baggage generally gets delivered to your door in the next 24 hours, but tha
52 goldorak : I completely agree with you. I have flown more than 800 sectors on AF (and around 200 on various other airlines) and I had a great majority of very g
53 mikey72 : All the major carriers of the world i'm sure are above what I would consider to be an acceptable level. It just depends on how high you want to set t
54 r2rho : Definitely agree, CDG's terminal layout is a handicap to AF operations. If the airport was to be the AF hub, why was it laid out as an O&D airpor
55 Burkhard : I'm sure a 130 seater can well be handled by a cabin crew of 3. And they do not have to work 33% more . it is the task of the management to organize
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