Air France - KLM Cargo Loss Rises Despite Better Overall Re-sults

The passenger sector managed to show a net profit of €118 million for the fiscal year 2015, which in comparison to their 2014 €225 million loss, is a step in the right direction.
The 2014 figures were however heavily influenced by the many strikes within Air France which caused drop in revenues at that time.
A milestone for the airline as it shows its first annual profit since 2011 and many had wondered whether it would ever be able to come anywhere near black figures in the fu-ture.

It’s the cargo department which continues to lag behind
Despite having further cut back on cargo capacity during the past year, AF-KL Cargo re-ported an annual loss of €245 million. This is €33 million more than the previous year.
Cargo revenues for the twelve months fell a further 9.5 percent.
The fact that the all-cargo fleet, mainly Martinair aircraft, was cut back by over 20 percent, or five aircraft, resulted in being able to reduce the all-freighter fleet loss down to €42 mil-lion compared to a loss of €55 million during the previous year.

Cargo tonnages carried in the combined fleet dropped by 7.5 percent compared to 2014.
The fourth quarter tonnage fell to 309.000 tonnes which represents a decrease of 7.7 percent compared to the previous fourth quarter.
Losses during the final three months of 2015 were reported as being €23 million, a figure which is better than the 2014 fourth quarter loss of €31 million.

How will the cargo arm bring itself through 2016?
Cutting down further on freighter capacity is one of the hopes within the company of try-ing to stem the cargo loss bleed.
This is nothing new as the management had despite strong protests from various depart-ments, made the firm commitment to cut the freighter fleet back even further.
By the middle of this year, the carrier plans to have only five full freighters in service com-pared to the thirteen units which were still in the air in 2013.
The combined Air France-KLM freighter fleets have dropped drastically from their 2004-2005 levels.
KLM is also pushing ahead with the phase out plans for the Boeing 747Combi fleet, which are being replaced by the much smaller Boeing 787 Dreamliners.
The report shows that due to the continued freighter “phase-out” that the aim is to bring the full freighter operation back to a breakeven by 2017.
But what about the rest of the cargo capacity they have on offer?
Will 2016 show these belly holds producing acceptable revenue yields?
Air freight rates are falling again worldwide, yields are in some areas almost non-existent and the world economic and political scene won’t be of any help in increasing cargo rev-enues, let alone, profits.

Much will depend on what cargo figures Air France - KLM can produce during the first and second quarters.

John Mc Donagh