Air France KLM SA announced on Thursday it expects even lower 2014 earnings citing persistent weakness in long-haul markets and the impact of the 14-day pilot strike.
The Paris-based company trimmed its projection for earnings before interest, taxes, depreciation and amortization by an additional €200 million to €1.5 billion to €1.6 billion. This is the third time Europe’s largest airline revises its forecast, it started the year with an estimate of €2.5 billion.
The first profit warning from KLM came in July, when the company cited overcapacity on North American and Asian air routes, then in October the company said profit could fall by as much as €500 million as a result from the two-week strike in the companys history.
The longest pilot strike, which maimed traffic for weeks, caused more damage to the companys Q4 performance than previously estimated, including higher-than-expected re-invoicing charge for customers who flew with rivals during the strike, KLM said.
The positive effects from plunging oil prices were limited, as crude prices has fallen by more compared to jet fuel, the company said.
Additionally the companys CFO Pierre-Francois Riolacci said on a conference call, that decreased fuel prices cripple the effect of having a bigger number of fuel-efficient airplanes.
“We’ll have to look again at cutting our investments, and clearly that may involve our fleet,” Mr. Riolacci added, indicating that KLM may not purchase the ten fuel-efficient Boeing 777s wide-body jets in the near future. The company had planned to acquire the planes in 2015 and 2016, but now it will delay the deliveries.
However, recent events would not have an impact on KLMs strategic plan through 2020, the successor of “transform 2015.” CEO Alexandre de Juniac said that “the Perform 2020 dynamic is under way across all the group’s activities.”
“By significantly stepping up our cost-cutting efforts and adapting the investment plan, Air France-KLM can gain the resources and be well prepared to tackle 2015 despite the difficult competitive environment,” Mr. Juniac added.
Air France KLM SA gained 4.34% on Thursday and closed at €8.30 in Paris. On Friday the stock dropped 8.25% to trade at €7.62 at 12:58 GMT, marking a one-year increase of 5.24%. The company is valued at €2.39 billion. According to the Financial Times, the 25 analysts offering 12-month price targets for Air France KLM have a median target of €7.50, with a high estimate of €9.60 and a low estimate of €2.75. The median estimate represents a 9.67% decrease from the last close price of €8.30.
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