How a pilot strike led to $680mm in cuts for new planes and services


The Air FranceKLM 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.

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An Air France A380 arriving at JFK airport

 

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.

Read More: Air France-KLM to Cut Investments by $680 Million

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

One Comment

  1. Had they given in to the pilots early on, they would not have incurred the revenue loss and probably would have come out with a profit. A company is only as good as its drudge workers.

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