Air France-KLM Loses $219 Million on Cargo

Air France-KLM said its cargo unit booked a $219 million second quarter loss against a year earlier profit of nearly $15 million and won't break even for at least another eighteen months.

The worsening cargo performance contributed to Europe's biggest airline swinging to a $70 million operating loss in the three months to September 30 from a $583 million profit in the same period in 2008.

The Franco-Dutch carrier posted a larger-than-expected net loss, equal to the loss in the cargo segment, of $219 million against year-earlier income of $40.2 million as revenue plunged 19 percent to $8.3 billion.

Pierre-Henri Gourgeon, Air France-KLM chief executive, said the carrier is still burdened by a "very big crisis" in its cargo operation which is facing "extremely aggressive, sometimes desperate" competition.

Cargo revenue tumbled 41 percent in the second quarter to $851 million from $1.43 billion a year ago as traffic fell 16.8 percent on a 17.9 percent cut in capacity. As a result, the load factor, or portion of cargo space sold, rose almost one percentage point to 64.5 percent. Cargo yields collapsed 27.8 percent from the corresponding quarter in 2008.

First half cargo losses grew to $513 million from a year earlier profit of $38.7 million on revenue down 41.5 percent at $1.66 billion. The second quarter deficit included a $29.8 million loss on hedging fuel prices.

Air France-KLM said it is restructuring its cargo business, Europe's biggest, by optimizing the use of "belly" space on its passenger and combi passenger/cargo aircraft and "the rationalization" of the full freighter program. Cargo capacity for the winter season which began on Oct. 25 has been reduced by 15 percent.

These measures should lead to break even on cargo operations during the 2011/2012 fiscal year, the airline said.

Air France-KLM has grounded 11 of its 29 freighters -- including eight Boeing 747-400Fs -- amid speculation it plans eventually to hive off its freighter fleet to Martinair, its Dutch cargo and charter subsidiary.

The airline said it plans to trim its 105,000 payroll by 4,500 in the year to end March 2010 and seek further voluntary jobs cuts of between three percent and five percent by March 2011.

Contact Bruce Barnard at brucebarnard47@hotmail.com.