The Air France–KLM group had big plans for new planes and upgraded services. Instead of implementing them, however, the next two years will see a reduction of $680mm for improvements. The news came last week as the company addressed its plans for the future in light of less than stellar financial results for 2015. The reduction in expenses will mostly come through a deferment of new aircraft acquisitions.
The company says that the pilot strike in late 2014 erased €500mm in revenue and forced the LCC subsidiary Transavia to be scaled back. Transavia was previously indicated to be one of the key factors in the AF-KLM Group’s efforts to compete with LCCs in the intra-Europe market. On the plus side, labor costs for the company actually decreased in 2014 by about 2%. Unfortunately, they are still some of the highest labor costs in the industry.
Lots of potential for things to still not turn in favor of the company with these cuts and deferments. And choosing to not buy new planes could have a long-term impact on the overall operating budgets, though that is less likely if it is just a short-term delay.
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