Air France-KLM said it would limit investments and accelerate cost controls next year to mop up the remaining impact of a recent pilots’ strike that helped slash its operating profit by more than half in the third quarter.
Europe’s second-largest network carrier by revenues said the interim measures were needed to secure a smooth transition between two successive turnaround plans, after the cash-draining strike slowed down its progress towards debt reduction.
Like rival Lufthansa, Air France is trying to expand low-cost operations and reduce costs to compete with low-cost carriers and Gulf carriers.
However, a bitter two-week confrontation last month with pilots over plans to expand low-cost subsidiary Transavia put a dent of 416 million euros ($530 million) in quarterly revenues and 330 million euros in its operating result.
The Franco-Dutch group reiterated that the combined effects of the strike and a dip in fourth-quarter demand would remove 500 million euros from its targeted earnings before interest, tax, depreciation and amortisation (EBITDA) for 2014 of 2.2-2.3 billion euros.
“Over and above the effects of the strike, we also predict that the market will remain sluggish in the fourth quarter,” Finance Director Pierre-Francois Riolacci told reporters.
“It is difficult to separate the effect of the market from the direct effect of the strike, but the 500 million euros (cost estimate) includes these elements,” Riolacci said.
Air France-KLM shares, which have fallen 40 percent over the last six months, dropped almost 4 percent in opening trades and were down 1.5 percent at 0806 GMT.
Cantor Fitzgerald analyst Robin Byde said although the strike impact remained as expected, Air France had wider problems.
“Our wider concern is that three out of four group divisions still remain ‘structurally’ troubled,” he wrote in a note to clients, referring to the airline’s passenger short-haul and long-haul operations, plus its cargo division.
Overall, the group’s revenue fell 6.7 percent in the third quarter to 6.7 billion euros, while operating profit fell by 394 million euros to 247 million, the group said.
On a like-for-like basis, revenues rose 0.2 percent and operating income fell by 18 million euros, it said.
Unit revenues fell 1.8 percent in real terms in the third quarter while unit costs fell 1.2 percent.
Unit revenues look set to fall again in the fourth quarter, with the passenger business stable and cargo falling, Riolacci said.
While it is too late to claw back the effects of the strike and the dip in demand in 2014, Air France-KLM said it planned to adjust investments, accelerate cost cuts and apply “dynamic management” to its asset portfolio from 2015.
However it repeated denials given on Tuesday of Dutch news reports that it was looking at major job cuts in its Dutch arm.