Air France (AF, Paris CDG) and partner KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) have outlined their proposed "Perform 2020" strategic growth plan, successor to their "Transform 2015" cost-cutting and restructuring plan which will come to a close this year. In terms of its financial aims, the programme is looking to increase the Group's core earnings by 8-10% per year through 2017.
“Transform 2015 will be completed by the year end having fully delivered on its objective of significantly improving the Group’s competitiveness and delivering a EUR1billion-plus reduction in costs," Air France-KLM’s Chairman and Chief Executive Officer, Alexandre de Juniac, said. "Perform 2020, the strategic plan we are launching today, will be supported by two main levers: growth, which we are looking to capture in a number of areas, and competitiveness combined with financial discipline which should continue to ensure firm foundations for the development of Air France-KLM."
As reported extensively by ch-aviation, Air France-KLM intends to restructure its loss making medium-haul and point-to-point business with the aim of returning to profitability by 2017. Together with the creation of a single business unit combining HOP! (France) (A5, Paris CDG) and the Air France point-to-point operations, Transavia Airlines (HV, Amsterdam Schiphol) and Transavia France (TO, Paris Orly) will be reoriented as regional European budget carriers.
"By 2017, Transavia will rank amongst the leading low cost carriers in Europe, operating a fleet of 100 aircraft and carrying more than 20 million passengers. This business should contribute an additional EUR100million (USD127million) of EBITDAR in 2017. With profitability being impacted by ongoing ramp-up costs, the Group is targeting operating profits by 2018," a statement said.
Cargo operations are set to be scaled back with a significant reduction in the Group's dedicated-freighter fleet from 14 aircraft in operation in 2013 to 5 aircraft at the end of 2016. With greater focus to be placed on belly-hold freight services, Air France-KLM Cargo should return to breakeven in 2017 (versus a loss of EUR110million in 2013 and a EUR200million loss including bellies). The Group will, however, not abandon the dedicated-freight market maintaining a fleet of two B777-Fs in Paris CDG under Air France Cargo, and three B747-400(F)s in Amsterdam Schiphol under KLM Cargo. Martinair (Netherlands)'s fleet of five MD-11(F)s will be phased out.
Concerning the group's other areas, Air France-KLM will continue to foster its growing Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) division particularly in the areas of engines and components, including via targeted acquisitions. This business should generate an additional EUR50million to EUR80million of EBITDAR in 2017, depending on acquisitions.
"By 2020, we will have built an air transport group focused on a leading long-haul network at the heart of global alliances, with a portfolio of unique brands, restructured short and medium-haul operations with a reinforced presence in the low cost segment in Europe, leadership positions in cargo, maintenance and catering, and a significantly improved risk profile both operationally and financially,” de Juniac ended.
Air France-KLM has agreed to selling over 3% of shares in airline technology provider Amadeus in two separate transactions worth EUR339million (USD438 million) leaving it with a 4.4% stake in Amadeus going forward.
