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Cargo a weakness for Air France-KLM in Q1

By control on May 4, 2012

Despite a 5.5-percent rise in passenger traffic during the first quarter, Air France-KLM saw a ballooning fuel bill and a depressed cargo market, which lead to mostly negative financial results for the first three months of 2012.  According to the carrier, the results — which include a 6-percent, year-over-year, revenue jump, but an 82-percent decline in EBITDAR — are in line with expectations.

Officials blame the slow cargo environment — which started its depression in May 2011 — for their lackluster freight numbers. During the first quarter, traffic fell by 6.1 percent, capacity lost 2 percent and load factor declined by 2.9 points. Cargo revenue finished the quarter down 3.3 percent when compared to the same period in 2011, with an operating result of € -68 million.

Operating costs, of course, had a large hand in the total numbers. Costs rose 6-percent, year-over-year, without fuel expenditures, which increased by 3 percent. Salary increases and rising pension costs pushed employee expenditures up by 6 percent, year-over-year, to 1.91 billion. This all lead to an operating result of € -597 million, adjusted to € -521 million.

Looking toward the future, Air France-KLM officials expect the fuel tab to increase by €1.1 billion. The first half of 2012 is expected to be slightly worse than the first half of 2011, but revenues should pick up during the last half of the year, when they hope to see some results from the company's Transformation 2015 initiatives.

Last month, Air France Chairman and CEO Alexandre de Junaic updated the company on its Transform 2015 progress, a program that will help push the company toward a path of sustainable growth. Objectives include reducing controllable costs by 20 percent to reach an industry average; refocusing customer service; and simplifying the overall organization of the carrier. Specific to cargo activity, officials want to improve business development and purchasing.

"The work performed by the Transform 2015 project teams will enable us to fundamentally transform the company to restore competitiveness, win back customers and return to a growth trajectory,"  de Juniac said in a statement at the time.

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