Air France-KLM posted Wednesday first-half losses, hit by fuel price hedging and a slump in demand for travel, but said it looks to return to operating break-even by the start of the next financial year.
The airline -- hit like its peers by an economic crisis-sparked slowdown in demand for travel as well as by high oil prices -- said it expects to return to break-even on an operating basis around the beginning of the 2010-11 financial year, but noted that this target does not take into account the impact of fuel hedging contracts signed before 2009.
"The situation remains uncertain, and competition is fierce, but we want to play our trump cards," CEO Pierre-Henri Gourgeon told a news conference.
In the second quarter of this financial year, pre-2009 fuel hedges caused a EUR179 million euro negative impact, and in the first half overall it saw a EUR430 million negative impact from fuel hedging. The airline has now changed its fuel hedging policy, reducing the length of hedging contracts from four years to two, it said in a statement.
Nevertheless, Gourgeon said in a statement that the group's performance improved in the second quarter compared with the "deep losses" it experienced in the first quarter.
The crisis is prompting many airlines to think about teaming up to share costs. Asked about a possible investment in Japan Airlines, Gourgeon said Air France-KLM, as well as the Skyteam alliance to which it belongs, were ready to invest. He said it would be up to the Japanese government to determine the conditions under which an investment could take place.
COST-CUTS HELPING
The company posted a current operating loss of EUR543 million for the six months ended September, compared with a current operating profit of EUR592 million for the same period a year earlier. First-half revenues declined 19.9 percent to EUR10.775 billion.
The group recorded a EUR147 million net loss for the second quarter, compared with a EUR27 million net profit in the same period a year earlier.
Cost-cutting measures are starting to have a positive impact on results, Gourgeon said.
The airline said it is targeting cargo-activity break-even in 2011-12. In the second quarter, cargo activity revenues slumped 41 percent to 540 million.
A reorganization of its medium-haul network announced earlier this month and linked to its wider "Challenge 12" cost-cut plan should translate into a positive impact on operating results in 2011-12, Air France-KLM said.
British Airways earlier this month posted a bigger than expected first-half loss and predicted revenue would slump by GBP1 billion pounds this year.
Lufthansa last month provided a gloomy outlook for the airline industry and reported that its third quarter operating profit fell 21 percent.
Airline association IATA has said it expects the industry as a whole to lose USD$11 billion this year, and USD$3.8 billion in 2010.
