Air France / KLM Annual 2018 results – KLM – 9.8% Profit vs 1.7% AF

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This topic contains 15 replies, has 7 voices, and was last updated by  MarcusGB 29 Jul 2019
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  • MarcusGB
    Participant

    A positive reaction to the Annual results from KLM / AF has been made today, with share price up 5.75% at this time.
    As many BT forum members have commented, confirmations that KLM are soaring ahead with the profit, compared to AF.
    9.8% for KLM, 1.7% for Air France.

    Further, the new CEO has agreed pay increases with the Pilots, quelling further industrial action, completed yesterday.
    Growth for Transavia services in 2018, with this set to increase even further this year.
    787-10’s begin to arrive at KLM in June 2019, with even better World Business Class seating. The 747 fleet is declining currently at 11, having retired 2 in 2018. These great KLM Blue icons are becoming rare!

    ?? If The Group will begin to pay dividends on their shares this year, very long overdue.

    The new Intercontinental Lounge is quite stunning, as much a work of Art as well as functioning. Much improved catering, space, staffing, and must really be one of the finest and largest Lounges in Europe at this time.
    Non-Schengen passengers including those travelling on KLM to the UK, benefit from this lounge also as it stands!

    All seems more settled for The Group for the time ahead, KLM Brand stands out strongly, whilst the AF is due some consolidation and much repair, as per the direction of the new Group CEO. Very positive.

    https://globenewswire.com/news-release/2019/02/20/1738038/0/en/AIR-FRANCE-KLM-FULL-YEAR-2018-RESULTS.html


    canucklad
    Participant

    As many BT forum members have commented, confirmations that KLM are soaring ahead with the profit, compared to AF.
    9.8% for KLM, 1.7% for Air France

    It’s a mildly interesting report, including the phrase

    “The global context remains uncertain given the current geopolitical environment and fuel price trends.”

    I’m assuming they’re talking post March 29th and anything Trump does to impact future oil prices?

    What isn’t acceptable for me is how the AF staffing levels leech their KLM counterparts, just look at the comparative fleet size against staffing ratio and its relatively easy to guesstimate the where the 8% gap is.

    9.8% for KLM,
    Fleet size 200
    32.000 employees

    1.7% for Air France.
    Fleet size 212
    84,000 employees

    Having said that I had to use Wiki to get the AF info as opposed to the official KLM site.

    Compared to Delta , they’re both over staffed !!


    AMcWhirter
    Participant

    Hello MarcusGB – What was not mentioned were the recent tensions between Ben Smith the new CEO of Air France/KLM and KLM’s CEO Pieter Elbers.

    Mr Elbers contract ends in April and there were no plans to renew it.

    Mr Elbers is well liked by KLM staff. The latter held demonstrations in support of Mr Elbers in front of KLM’s Amstelveen HQ.

    The Dutch govt also gave its support.

    This news has been little reported by UK media (too busy with Brexit and all the other goings-on).

    CNA carried a report in Engish.

    https://www.channelnewsasia.com/news/business/klm-workers-petition-air-france-to-keep-dutch-executive-11244098

    The upshot was that Pieter Elbers has been reappointed for a further four years. [NL]

    http://www.amstelveenweb.com/nieuws-Pieter-Elbers-blijft-President-en-CEO-van-KLM&newsid=331573743


    MarcusGB
    Participant

    Thanks Alex.

    I was aware of this though it was not vastly reported here. A friend in Amsterdam told me as this was going on, and that 80% of the KLM staff had backed Peter Elbers to continue as CEO, or they would go on Strike!
    Yes, there were meetings with Senior Ministers, PM, and the Amsterdam City, all players in Schiphol, and ownership of KLM.
    They are very much concerned with the influence, and continuation of the Dutch Interests. Also the long term future of KLM with Air France…

    https://www.bloomberg.com/news/articles/2019-02-17/klm-air-france-klm-ceos-agree-on-governance-plan-tribune-says

    Following this, was the end of year Annual report i outlined here previously.
    This enforces that fact of the KLM Brand being so more viable and profitable, which simply cannot be ignored. KLM is clearly in good shape, with many new Aircraft, and retirement plans on line for the 747’s, as well as introduction of the Dreamliners 10’s to start arriving in June. By Comparison, there are few A332/333, with the whole of the main fleet being Boeing now. Its is far from this at Air France…!

    The Dutch are very focused on this matter, Peter CEO is confirmed to continue, and now an equal Board on the joint structure for KLM/AF future.
    With Joon, and HOP, being scrapped, it seems the tidying up is on the AF side.
    For now, it seems that Staff action on both sides has been quelled by Benjamin Smith.
    Share price is higher than any time in the last year, and who knows of the Dividends Policy, but healthy enough to do so…?

    Knowing staff in the KLM side, a far stronger Brand, tensions are tight. KLM staff will not give or give up anymore. It seems very clear, that the AF side have to Up their Game, or there will be plans to divide the two once again, with Dutch Governments backing. This has been discussed more widely in The Netherlands, but common knowledge there…

    4 users thanked author for this post.

    christopheL
    Participant

    May be KLM is a must and AF is a mess but AF is the boss which simply cannot be ignored.

    P. Elbers saved his head by finally accepting Ben Smith to become a member of KLM’s supervisory board. He is a member of the new 4 member CEO committee but he is going to be isolated there as other members of the committee are his « best friend » Ben Smith and two other AF representatives.

    As you can imagine, this has been widely reported in France as is widely reported the fact that 85% of AF pilots agreed Ben Smith’s strategic plan.

    Ben Smith seems to have a very clear idea of what may make the group increase it’s profitability : capitalysing on the quality and finesse of AF onboard product by increasing the number of premium seats to the detriment of economy class in respect with the new rule which will now be used to calculate the 2/3 1/3 balance between AF and KLM.

    IMHO a demerger is as unlikely as UK campaigning for a full merger of all EU countries.


    christopheL
    Participant

    @ Canucklad
    « What isn’t acceptable for me is how the AF staffing levels leech their KLM counterparts, just look at the comparative fleet size agains staffing ratio »

    Your comparison of the fleets and number of employees of AF and KLM is based on figures that are correct for KLM but are really not for AF.

    AF/KLM Group reference document for 2017 gives the Following information.

    AF Group (including Transavia France)
    Fleet : 344 (not 220)
    Employees : 53 800 (you mention no less than 84 000)

    KLM Group (including Transavia Netherlands)
    Fleet : 201 (correct)
    Employees : 33 500 (correct as well)

    https://www.airfranceklm.com/fr/system/files/ddr_air_france-klm_2017_va_0_1_0.pdf

    This means that the AF employees/planes ratio is 156/1 (yours was nothing less than 382/1) when KLM’s ratio is 166/1 !!! Surprising isn’t it?

    This discrepancy may be explained by the fact that KLM employees have a 6.89% sickness absenteeism rate (an increase of 8.5% compared to 2016) when AF’s sickness absenteeism rate is as low as 3.77% (reduced by 10.2% compared to 2016). I can imagine one need to be slightly overstaffed when your employees have a fragile health 🙂


    christopheL
    Participant

    The Dutch government announced today that it has taken a 12.68% stake in AF-KLM and wants to increase it to obtain the same shareholding as the French United States government (around 14%).
    It is very surprising to see that the Netherlands is converting to the French tradition of interference in corporate governance which has always been highly criticized.
    But it is even more astonishing to note that the Netherlands seems very concerned about the idea that AF improves its contribution to the profitability of the group.


    MarcusGB
    Participant

    I was also just reading some information sent to me from Dutch Colleagues and also a friend today. Thanks for both posting this.

    I think it has been known in certain circles that The Dutch Government have had concerns on these issues for some time.
    Plans were laid in wait as far as i knew over 3 years ago, and been heightened amidst the unrest amongst employees.
    Whatever happens within the two Airlines, clearly damages The Whole group, and Millions were wiped off the profits as a result of AF staff actions again in 2018.

    Consolidation and action within AF is clearly happening, Hop, Joon, all being “mopped up”, the mess both have created.
    I am pleased The Dutch advocate, protect their Airline’s Branding for The Country, and preserve the impact that has into their economy.
    Equally, Amsterdam City Council have stakes here, as they do in the ownership of Schiphol as stakeholders, and clearly as a Hub for KLM.
    It is a structural part of the Dutch Economy, and they have every right to Act to preserve and protect it.

    Schiphol is well regarded Voted as the “Best Airport in Europe” for some time, and just seems to get better, plans already underway for the next 15 years capacity growth.
    They shame what is unreachable in Management in the UK and capacity, as well as for thought for the future.
    They have always organised, planned many decades ahead, a very Dutch behaviour!

    No surprise this action. It has been provided for, and on stand by for a long time, at all levels of Governments. No doubts, strategy is formulated well ahead also.
    Politically with the other shareholders, including the staff, there have also been discussions and goals have been well set and agreed.
    Ordinary people and their Governments, have a genuine right to be involved when so much employment and income is derived from such a Business Operation, when it is a relatively small population, and Country. No wonder the City Council of Amsterdam are also involved with the huge incomes derived for the City as a whole from this investment, and tourism.
    No wonder that The KLM Brand is seen so positively Worldwide, and it deserves to be rightly advocated for and protected, as truly Dutch.

    They Act in ways we have lost in the UK, and keep some Value system i greatly respect.
    Today demonstrated that.


    Edski777
    Participant

    It is clear that there is a huge mistrust on all levels in the Netherlands of the French, as widely reported over the past weeks and in news broadcasts tonight. It was reported that there was an agreement on the political level that the French government would sell its stake in AF/KLM. They have not done so and kept an interest. Agreements about a two tier system with AF and KLM/Transavia operating as separate companies under one holding from the past were no longer honored. Ben Smith bought off the unrest within AF, despite the poor financial results. Furthermore, he tried to ditch Elbers despite the phenomenal results, not only financially, but also in restructuring KL over the last 4 years.
    His approach worthy of so much appreciation by the KL personnel to sign a petition with over 27.000 signatures on a staff base of 32.000.

    Today the Dutch government announced they felt they had to step in to protect its economic interests. Although they won’t say this: they clearly distrust the French government and the current AF/KL board. The Dutch finance minister announced that he will be “an active shareholder, not an activist shareholder”, but that can change quickly, depending on the reaction of the French government and/or the AF/KL board.

    The whole process shows clearly how in a merger that started 16 years ago two completely different cultures have been unable to bridge the gap. Clearly the Dutch have made a huge mistake in 2003 when selling KLM to AF without a buy back option. This option could have been the incentive for AF to follow in KL’s footsteps and reorganize. As long as the difference in culture and, probably more important, the huge gap in the results exists I can’t see a future of one company on the horizon. With rising oil prices and stiff competition lurking around the corner AF is likely to report losses for this year. If KL is again the cork that keeps the company afloat tensions will not subside. Too much has happened and the memories are still fresh.

    And for those who look at it from a business and financial point of view: could you continue with the current 2/3 and 1/3 size option? Shareholders and stakeholders alike deserve better, so let the strongest part flourish. So far that has clearly not been AF.

    Interesting and, at least for AF/KL, trying times ahead.


    christopheL
    Participant

    -14% this morning for the AF-KLM share !
    The surprise investment of the Netherlands in AF-KlM seems to inspire investors …

    https://m.investir.lesechos.fr/actualites/air-france-klm-decroche-l-entree-au-capital-de-l-etat-neerlandais-inquiete-1830563.html?#


    capetonianm
    Participant

    The whole process shows clearly how in a merger that started 16 years ago two completely different cultures have been unable to bridge the gap.

    This and the lack of trust of the Dutch towards the French were always going to result in friction, a marriage made in hell. I have mentioned before how pervasive this was when I worked on a project with KLM around the time of the merger (late 2007).

    No doubt I shall again be accused of ‘hating the French’ for stating, again, the obvious.

    On recent flights with KLM, I am always pleased to see how strong the Dutch brand and ethic have remained. May it remain so.

    2 users thanked author for this post.

    Edski777
    Participant

    No, I won’t accuse you of “hating the French”. But you are clearly wrong: compared to this marriage a marriage in hell is nothing more than a cosy get together around an open fire. It doesn’t work and it looks as if it will never work.

    Tonight a totally flabbergasted French finance minister was shown on television. He couldn’t believe what happened. Nobody had informed them of the plan or the intentions of the Dutch government. A minister dumbfounded that they had been outplayed at their own game. A government taking a share in a commercial company: qu’elle horreur!
    A French president demanding to get an explanation on the intentions of the Dutch government.

    But hold on: who had a 14% share in this company and was obviously informed from within beforehand on every planned move? Who didn’t offload these shares, despite a gentleman’s agreement? Who refused to appoint the most successful director in the team after successive failures from their own candidates? Who considered to not extend the contract of the managing director of the part of the business that generated 80% of the overall profit?

    The Dutch government read into the actions of and discussions of late with the French their intentions and took action to protect the interests of KLM, Schiphol Amsterdam Airport and the Dutch economy. They did what the Dutch people expect from a decent government: stand for the interest of all! They have clearly had enough of the French game!

    The action of the Dutch government will not attribute to a better relation, but at least they made clear where they stand. The Dutch may not hate the French, but they sure have a deep dislike of the way they conduct their business. The Dutch have put up with it for quite some time and kept AF/KL afloat, but the French clearly pushed them too far and found out that they have teeth and can bite. Next Friday the Dutch finance minister will travel to Paris and most certainly explain to his counterpart this was definitely not a love bite. The French better take notice! If only in the interest of Air France.

    5 users thanked author for this post.

    capetonianm
    Participant

    No great surprise then that the French connection is lagging behind the Dutch.

    Air France-KLM blames fuel costs for first-quarter losses
    The carrier’s operating loss for quarter one was €303m, far higher than forecasts, with price competition also playing a part.
    Air France-KLM shares were down 4.4% to €9.78 at 8.13am GMT, after the group said its operating loss widened to €303m from €118m a year earlier.

    https://www.businesslive.co.za/bd/companies/2019-05-03-air-france-klm-blames-fuel-costs-for-first-quarter-losses/

    1 user thanked author for this post.

    JohnnyG
    Participant

    Air France is set to approve the purchase of 50 to 70 new Airbus planes, French newspaper Journal du Dimanche reports, in a boon for the European aviation giant.

    Chief Executive Officer Ben Smith, who took the reins of Paris-based Air France-KLM last year, will outline his plans for updating the airline’s fleet Wednesday when the company announces its first-half results, JDD said without saying how it obtained the information.

    Air France-KLM Group CEO Ben Smith Calms Dutch Rift
    Ben SmithPhotographer: Marlene Awaad/Bloomberg
    The order of A220 planes, the first by Air France in years, is set to be approved by the board on July 30.

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