UNITED STATES (OBSERVATORY NEWS) — Franco-Dutch air group Air France-KLM has warned that by April it will lose from 150 to 200 million euros in profit due to the severe impact of the outbreak of Chinese coronavirus on the aviation industry, reports Reuters.
Franco-Dutch group shares plummeted after the publication of the final results for 2019 and the publication of the forecast for 2020, which was the focus of markets that monitor the economic effect far beyond China, where the outbreak of coronavirus occurred.
Like many global airlines, Air France-KLM canceled flights to mainland China by the end of March, based on its impact assessment and on the assumption that flights will resume gradually.
“This is the hypothesis that we are using at the moment, but we don’t know how reliable it is,” said Frederic Gage, CFO of Air France-KLM.
“It is obvious that if (the outbreak of coronavirus) lasts longer, the impact will be more severe,” said the representative of the air group.
Shares of Air France-KLM fell 3.8% to 9.36 euros on February 20, as shares of travel companies suffered due to growing concern about the spread of the virus in Asia.
For Air France and its KLM partner, as well as for global peers, the January outbreak occurred just at a time when easing tensions in world trade seemed to promise higher demand in 2020.
Flights to mainland China accounted for 5.5% of Air France-KLM shipments in 2019.
Under the new CEO, Bene Smith, Air France-KLM must finance an ambitious fleet renewal plan, which foresees capital expenditures this year at € 3.6 billion, which will require delivery of five new Airbus A350 aircraft and four Boeing 787s.
These plans are still in place, but Air France-KLM is ready to revise its budget and capacity goals if the forecast for coronavirus worsens.
“We have many scenarios that we can consider if this virus continues,” Smith said. Currently, the group plans to expand its network by 2-3% in 2020, and the low-cost operator Transavia – by 4-6%.
Operating profit in the fourth quarter was € 96 million, with revenue growing 1.9% to $ 6.618 billion, which is not in line with expectations of € 104 million, with $ 6.648 billion in the company’s survey of analysts.
An 18.8% decrease in operating income for the whole year was reflected in a decrease in revenue from passenger and freight transportation, as well as higher fuel costs, which are expected to be reduced by 300 million euros this year.
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