Air France KLM SA revealed in an official statement that its annual profit may be reduced by €500 million ($632 million) due to lost revenues after pilots strikes led to cancellations of hundreds of flights.
According to Air Frances statement, the total losses from the strike are about €500 million ($632 million), with direct losses in the range from €320 million to €350 million, which represent lost revenue and additional expenses minus costs avoided, such as fuel.
The Chief Financial Officer of the company – Mr. Pierre-Francois Riolacci explained in a conference call, which was cited by Bloomberg: “It’s hard to know exactly what portion of that is linked to the strike, and what is linked to a lower market trend.”
The estimated losses scrape about one fifth off the full-year core profit of Air France, sending the carriers stock falling to a 13-month low.
As reported by Reuters, the chief market analyst at Ava Trade – Naeem Aslam commented: “The strikes have taken a big toll and may have a devastating impact on future earnings and this concept is not sitting well with investors, who are offloading this from their books. Given that we already have fragile growth in Europe, which is impacting overall demand, the airline has some serious headwinds to face.”
The pilot strike, one of the longest and toughest in the history of the France-based airline, came at a moment when the carrier was facing intense competition in the face of low-cost rivals, such as easyJet Plc and Ryanair Holding Plc. The strike was initiated by the largest pilot union after Air Frances Chief Executive Officer Alexandre de Juniac announced intentions to battle low-cost airlines by creating a pan-European discount unit.
Air France KLM SA fell by 2.89% to trade at €6.49 per share by 10:52 GMT in Paris, marking a one year change of -11.49%. The company is valued at €2.00 billion. According to the Financial Times, the 25 analysts offering 12 month price targets for Air France KLM SA have a median target of €9.50, with a high estimate of €12.00 and a low estimate of €2.75. The median estimate represents a 42.26% increase from the last price of €6.68.
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