The Air France-KLM Group will gradually reduce its flight activity during the next two months due to the restrictions in travel imposed in France and other countries, in an attempt to slow the rate of spread of the Covid-19 pandemic.
According to the Group, the growing restrictions on travel and the strong downward trend in demand has resulted in a drop in traffic and sales over the last few weeks.
“Air France-KLM is obliged to gradually reduce its flight activity very significantly over the next few days, with the number of available seat kilometers (ASK) potentially decreasing between 70-90 percent,” the Group said.
As a result of the reduction in capacity, Air France will ground its entire Airbus 380 fleet and KLM its entire Boeing 747 fleet.
The reduction in capacity is expected to last two months.
To deal with this situation, the group has already taken a number of strong measures to secure its cash flow:
- Additional savings measures have been identified, which will generate 200 million euros in 2020,
- An initial review of the investment plan has reduced the capital expenditure plan by 350 million euros, to which will be added the impact of the decline in activity on the amount of maintenance investments,
- Air France and KLM will be consulting with their elected employee representatives on measures to take into account the impact of the expected decline in activity, including a project to implement partial activity,
- Last week, the Air France-KLM group drew a revolving credit facility for a total amount of €1.1 billion and KLM for a total amount of 665 million euros. As of March 12, the group and its subsidiaries had more than 6 billion euros in cash and cash equivalents.
In spite of the measures taken, the Group estimates that the drop in revenues from the passenger business resulting from the reduction in capacity will only be offset by around 50 percent by the drop in variable costs before cost savings measures.
In this extremely difficult context, the Air France-KLM group has welcomed the statements made by the French and Dutch governments, which have each indicated that they were studying all possible means to support the group.