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BIZ: Air France Operating Profit Falls 69%

Wed Nov 28, 2001 7:46 am

Air France warns of deep losses in second half
By Kevin Done, Aerospace Correspondent
Published: November 27 2001 18:31 | Last Updated: November 27 2001 18:46

Air France said on Tuesday that operating profits had fallen by 69 per cent in the second quarter and warned that it would fall deep into loss during the second half of the year to the end of March.

The majority state-owned French flag carrier said it was aiming "to approach break even" at the operating level for the 12 months, a steep fall from an operating profit of E443m ($390m) last year.

Jean-Cyril Spinetta, Air France chairman, said the airline industry was "facing what is likely to be a prolonged crisis."

The events of September 11 "marked a sharp, unprecedented break with the past for the entire airline industry."

The group had applied for E80m in compensation from the French government for the immediate damage suffered in the four days after the terrorist attacks on the US, when US airspace was completely closed, said Philippe Calavia, Air France chief financial officer.

The compensation claim included E55m for the disruption suffered during the four days, the limit for state compensation payments set by the European Commission, and E25m for implementing extra security measures including the screening of all checked-in baggage.

Mr Calavia said the group could still achieve a net break even for the year including the compensation payment, down from a net profit of E421m last year.

Air France estimated that the events of September 11 had cost it about E150m in lost turnover and E127m in reduced operating profits.

For the six months to the end of September the group reported a 34 per cent drop in net profit from E429m to E283m on a 7.3 per cent increase in turnover from E6.1m to E6.58m. Operating profit fell by 21.9 per cent to E325m, while net earnings per share fell from E1.97 to E1.30.

Mr Calavia said that Air France had experienced "a very slight, very gradual" recovery in traffic in recent weeks. Traffic had fallen by 12 per cent year-on-year in the last ten days of September, by ten per cent during October and by 7.5 per cent so far during November.

Yields, or average fare levels, during November had returned to last year's levels. The "positive trend has been confirmed by the higher rate of advance bokings for the months ahead," he said.

Air France was planning to retire 16 aircraft between October and the end of March, said Mr Calavia. Capacity during the winter season would remain unchanged year-on-year. The group had been forced to abandon its plan to raise capacity by eight per cent, and capacity next summer was planned to be two per cent lower than during the past summer.

The group was negotiating with Boeing, the US aerospace group, to defer delivery of eight B777 long haul aircraft by 12 to 24 months instead of taking delivery between spring next year and summer 2003.

Mr Calavia said the group expected the crisis to last until the second half of next year with some recovery starting by the end of 2002
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