Air France-KLM Posts Solid Q3 Financial Results

DALLAS — European airline group Air France-KLM (AF-KLM) released its third-quarter (Q3) financial results, with a solid performance for the summer. Moreover, Air France (AF) revealed its route network for the winter season.

For Q3 2023, the group's revenue reached €8.7 billion (US$9.2 billion), a seven percent increase compared to last year. The operating result of €1.3 billion (US$1.4 billion) is €318 million higher than last year. These higher figures are due to an increase in the number of passengers the group carried during the quarter, eight percent higher this year with almost 27 million travelers.

The operating margin of the group is 15.5% overall, with Transavia (TO) being first with 18.5%, KLM (KL) at 15.7%, and Air France (AF) at 15.0%. This figure is again higher than last year and shows an increase in the group's profitability. The group's predictions for the full-year result remained unchanged.

Low-cost subsidiary Transavia posted strong Q3 results. Photo: Alberto Cucini/Airways

Financial Operations

When we look at the strong results, AF-KLM reduced its debt, which is now at €5 billion. According to French media, the group fully reimbursed its loan to the French government. This €4 billion loan was granted during the pandemic, to help the airline when the passenger demand was so low. Moreover, according to French news outlet Les Echos, the group also paid France €650m in interest, making the loan profitable.

During the summer, AF-KLM invested in its future with a new order for 50 Airbus A350s. Just before this order, the group announced the creation of a 50-50 joint venture with Airbus to provide services linked to A350 components.

Another major move for the group was its investment in SAS Scandinavian Airlines (SK), taking a share in the bankrupt airline and helping it recover financially. This investment allows the group to take a controlling share in the airline in a few years, and a new partner in Europe.

AF is also restructuring its Paris hubs, with the announcement that all of its flights will operate from Paris-Charles de Gaulle (CDG) and that Paris-Orly (ORY) will only be a base for its low-cost subsidiary TO.

AF is renewing its long-haul fleet with modern Airbus A350 aircraft. Photo: Francesco Cecchetti/Airways

CEO Comments

"Air France-KLM delivered a solid quarter, marked by remarkable results," said Ben Smith, the CEO of the airline group. "This performance was driven by strong summer demand. I would like to thank all our teams for their unfailing commitment during the season."

He mentioned the A350 order, "This new order represents a multi-billion investment to our sustainability roadmap, coming on top of previous orders for new generation widebody and narrowbody aircraft", and added, "It confirms our ambition to reach 64% of next-generation aircraft by 2028 and is another major step towards our target of reducing our CO2 emissions per passenger kilometer by 30% by 2030"

Finally, he spoke about the investment in SK, "We initiated a process to acquire up to 19.9% in SAS, with an option to increase our share after two years. By investing in SAS, we intend to enhance our offer and connectivity in the Nordics"

AF uses its new A220 fleet for medium-haul European destinations. Photo: Alberto Cucini/Airways

Winter Network

Just before the group published its financial results, AF also revealed its program for winter 2023-2024. Seeing a strong passenger demand during the summer, especially on long-haul flights, the airline expands its network.

The French flag carrier will serve 167 destinations in 79 countries, with two new flights to Raleigh-Durham (RDU) and Abu Dhabi (AUH). The second flight will be operated as part of the new, stronger codeshare agreement with Etihad (EY). Moreover, the airline decided to open seasonal routes to Christmas destinations in Scandinavia, and Innsbruck in Austria (INN). Summer flights to Krakow (KRK) and Dar-es-Salaam (DAR) will be extended for the winter.

Apart from these destinations, numerous long-haul flights will see an increase in capacity, with more frequent flights or larger aircraft. This will be the case, especially on routes to North America, with a seat offer 20% higher than in 2019. Services to Dallas (DFW), Vancouver (YVR), Boston (BOS), and Montreal (YUL) will be increased.

In Central and South America, there will be an increased frequency of flights to San José (SJO) and larger aircraft will operate the route to Bogota (BOG). Moreover, the airline will develop its regional Caribbean network with new flights to Saint-Martin (SXM) from Pointe-à-Pitre in Guadeloupe (PTP). This 50-minute flight will be operated by an Airbus A320.

Capacities to Asia will see an impressive 60% increase compared to last year, even if they remain below pre-pandemic levels. While Japan and China will be the main destinations for the airline, Bangkok (BKK) in Thailand will see daily flights resume, with up to 10 flights per week during the peak season.

Overall, the group posted strong financial results, allowing it to launch new financial operations and investments, and expand its network. However, investors were not all satisfied with these results, as we can see with the group's shares hitting a record low after the announcement.

Featured image: KL Boeing 777-300ER PH-BVF. Photo: Fabrizio Spicuglia/Airways