COVID-19 weighed heavily on the Group's results Air France-KLM in the first half of 2020. The number of passengers carried collapsed (-62% in the first half of 2020), while capacity fell by 53% for the Group (including -89% in the second quarter alone).
The losses are therefore abysmal. The Group posts a net loss of 4.4 billion euros for the first six months of the yearThe loss for the second quarter alone reached 2.6 billion euros. In the second quarter, sales fell to 1.18 billion, down by 5.84 billion over the year...
Business class struggling
The uncertainties surrounding COVID-19 and the outbreaks of the epidemic across the globe are a nasty surprise for the Group. They are contributing to an anaemic recovery in traffic. Air France-KLM notes very late bookings in general, weak demand in business class and anaemic long-haul traffic due to border closures in many countries. The traffic index calculated by Air France is only 20 (base 100 for 2019) for long-haul traffic. It is around 40 for short- and medium-haul traffic.
The Group's management estimates that a return to normal levels will not be achieved until around 2024. In June, forecasts were still predicting a return to pre-crisis levels in 2022.
But the group still has a number of strengths. Firstly, because its long-term viability is now assured. It has 14.2 billion euros in liquid assets or credit lines. This figure includes €10.4 billion in direct or guaranteed loans granted by both France and the Netherlands.
The restructuring that has been put in place involves the withdrawal of Airbus A340s and A380s as well as Boeing B747s; the renegotiation for later delivery of new Airbus A350 and Boeing 787 aircraft; and the adjustment of capacity with the restructuring of the network. Air France-KLM have announced a reduction in seat capacity of 20% in 2021, but this will be greater on French routes.
At its results presentation, Air France finally revealed what its future domestic network in France will look like. Capacity is falling sharply, by 40% by 2022. The carrier is thus applying the government's directive to abolish all domestic routes - except those serving the Roissy hub - where the train offers an alternative taking less than two and a half hours.
Orly badly affected by network downsizing
At Orly, Air France will maintain its Shuttle service only to the busiest destinations in the south, i.e. Marseille, Nice and Toulouse. as well as Corsica, which is under a public service obligation. However, routes to Biarritz, Brest, Montpellier, Pau, Perpignan and Toulon will be taken over by Transavia, once the agreement on operating conditions has been confirmed between management and unions. In total, Orly will see the number of destinations reduced from 22 to 13.. Departures from Paris airport include Bordeaux, Lourdes/Tarbes, Lyon, Mulhouse/Basle and Nantes.
On the other hand, the airline will retain all domestic feeder flights to its Roissy CDG hub. A total of 14 destinations.
Another hub in distress: that of HOP! Air France hub at Lyon, which will see the number of its domestic destinations reduced from 15 to 12.. Lorient, Metz/Nancy and Toulon will be permanently withdrawn from the Air France timetable, while the HOP! fleet will be halved. Other adjustments will follow in the future. Air France indicates that Transavia will be able to position itself on cross-border routes where there is a low-cost offer.
All in all, Air France is expected to stem losses on its domestic network, which reached €200 million in 2019. But the pill is a bitter one for many regional airports, especially those that depended on a single route to a hub such as Metz/Nancy to Lyon or Tarbes to Orly. It does, however, open the door to new entrants. The regional carrier Twin Jet has just announced that it will be taking over the Metz/Nancy route from September with three daily frequencies by Beechcraft 1900. The small airline is a de facto partner of Flying Blue.
