Pilot Strikes Affect Profitability of Air France-KLM

Published By : 23 Feb 2015 | Published By : QYRESEARCH

Air France-KLM has plans of resorting to aggressive cost cutting measures and also reducing the level of investments. This came after it was reported that there was a substantial fall in the entire year’s profits followed by a major pilot’s strike in the previous year. Soon after the strike there was a serious conflict with the pilots which pertained to the plans of expansion of airline’s budget and economical subsidiary called Transavia.

Air France KLM’s pilot strike was one of the longest strikes in twenty years. In fact, this strike ended up offsetting the benefits that could be derived from the falling prices of fuel. The airline reported that the weakening Euro has a major impact on its overall business performance and also the problem of overcapacity on flight routes to Africa, Asia, and Latin America weighed heavily on the prices of tickets. The revenues declined by almost 2.4% in spite of a rise of 1.3% in the number of passengers. 

The airline stated that in the current year (2015) and the next year (2016) it plans to cut costs to the effect of €300 million. Alexandre de Juniac, the chief executive, Air France-KLM expressed that with the current status of the market apart from the North Atlantic, the airline company is treading rather cautiously.  As per the early morning trade estimates, the value of the shares of the airline fell by almost 6%. 

Aviation analysts have also stated there was a major difference of opinion between the top managements of KLM and Air France with respect to moving ahead in the business with a typical low cost and economical service.
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