The numbers are looking mighty fine for Air France-KLM. The carrier just reported a healthy second quarter profit. But dig deeper and you’ll find a disparity…and a ticking time bomb.
With a net profit of 345MN Euros (405MN USD), Air France-KLM have something to be proud of. Well, at least KLM does. Dig deeper into the numbers and you’ll see that the smaller KLM division contributed 90% of the profits over this period. That’s staggering considering KLM is only 2/3 the size of Air France in terms of passenger traffic. KLM carried 41.6 million passengers last year while Air France carried 57.1 million.
The strong results were attributed to overall growth in premium and North Atlantic pricing. All this despite a string of strikes by Air France workers which cost the company 335MN Euros during the last two quarters. French workers have agreed not to strike during the busy summer months, but have already warned of a new round of strikes in September. Rising fuel costs also remain a concern, with total fuel expenditure expected to rise 450MN Euros over last year.
The carrier is still without a CEO and the latest results again make the case for a Dutch CEO. KLM CEO Pieter Elbers is still considered a top contender for the position, though he continues to deny interest in it.
CONCLUSION
The way I see it, KLM will not continue to prop up Air France and its perpetual labor woes quarter after quarter, year after year. This is a ticking time bomb that can only be diffused by a long-term labor concession from Air France workers. But that’s like asking a cat not to eat the mouse in front of her. That’s why I still predict an eventual Air France-KLM divorce. On amicable terms of course…
> Read More: KLM Increasingly Frustrated With Air France Marriage
I hope so, I feel KLM is definitely run a lot better than AF. We experienced the AF strike back in April, a total disaster for many passengers. Oh well..
Speaking of euro-airlines Q2 earnings, IAG says they haven’t spoken with NAS since their April bid. IAG will sell out of their stake if takeover talks go nowhere. Much less ‘amicable terms’ on that one.
Who would book an Air France with the constant uncertainty that the trip will be disrupted. Not I, for one.
Without taking anything away from KLM because they are very well run, to be fair to Air France management they employ a much more aggressive workforce who sees any profits as a legitimate reason to ask for a raise. In fact I’m not sure they usually even correlate the airline’s ability to pay to their expected annual increases. The pilot union is especially militant. Work stoppages are routine. IMHO the superb Dutch management team would not have similar results at AF as long as their workforce maintains their antics. KLM is more profitable because the Dutch workforce are more realistic. France is my favorite place in the world to visit. But running a business there would prove difficult.
Unless Delta is willing to bankroll the venture and be willing to let KLM overpay, I don’t see the French government letting KLM divorce Air France. They see what everyone does and know AF’s days would be numbered. The Macron government is doing a nice job in their attempts to change the culture of entitlement in the workplace but we all need to remember that the way the partnership is structured AF basically runs the show. Until you convince the French unions to be realistic nothing will really improve.