Air France-KLM expecting return to profit 

Over a million fewer travellers arrived and departed from Ireland last month compared to September 2019

Air France-KLM is eyeing a remarkable recovery to full-year profitability after having to be bailed out.

Air France-KLM expects a return to profitability for the full year and is adding transatlantic seats as an easing of travel rules revives prospects for the struggling carrier.

The airline group reported positive free cash flow in the third quarter and said it is offering 70% to 75% of 2019 network capacity during the final three months of the year. That will exceed the 66% achieved in the July-to-September period.

“The bookings are coming in much better than we expected,” chief financial officer Steven Zaat said. “We are prepared to ramp up more if needed.” While the carrier declined to provide an outlook for 2022 because of uncertainty about the reopening of most Asian countries, it said demand during the summer high season was above expectations.

Europe eased border curbs during that time and vaccinations emboldened governments to relax restrictions. The US is set to reciprocate starting November 8.

The update is the latest sign the aviation industry may be finally through the worst of the crisis brought on by the coronavirus pandemic, which grounded much of air travel for the best part of 18 months.

Air France-KLM only survived thanks to massive state aid from shareholders France and the Netherlands, though the full opening of crucial routes between Europe and the US starting next month could provide the basis for a sustainable recovery.

Third-quarter earnings before interest, taxes, depreciation and amortisation of €796m were positive for the first time since the pandemic began and beat estimates. The airline expects the figure to be positive in the fourth quarter and slightly positive for the year.

Air France-KLM saw a surge in ticket purchases for short and medium-haul flights over the summer as well as for long-haul destinations, which account for about three quarters of profit margins, Mr Zaat said.

“We’re building up capacity to the US and plan to be at around 90% of the 2019 offer at the end of winter season,” he said.

Demand to the US is strong and the long-haul business in the third-quarter “was quite a success story.”

Nevertheless, talks are ongoing between the Dutch government and the European Commission for a further recapitalisation package, Mr Zaat said. The carrier is also readying more capital-strengthening measures that could include a rights issue and quasi equity instruments.

“We are prepared for it, but we are looking for the right conditions,” he said. “We have no liquidity crisis at this company.”

-Bloomberg