Everything is going very fast. The flight schedule assumptions presented internally to Air France last week no longer hold. While almost the entire Air France and KLM fleet is grounded, there was still talk of ensuring a very ambitious offer in July and August: putting 70 to 80% of the offer back online. long-haul seats initially planned for this summer before the Covid crisis, 80 to 90% on medium-haul and 65 to 75% on short-haul. Unsurprisingly, these assumptions no longer hold. Air France-KLM chief executive Ben Smith told pilots this Friday during a videoconference. After a minimal activity in June where only 20% of the total capacity could be insured, Ben Smith intends to return to service in July 40% of the offer (in seat kilometers offered) initially planned before the crisis, then 60% in August, before reaching 75% in the fourth quarter at best. Which still seems terribly ambitious, at least for this summer. Like many, the CEO of Air France-KLM plans a slow and gradual recovery. For Ben Smith, it will take two years to return to the same level as 2019.
Loss of 25 million euros per day
The situation is critical. Air France-KLM is losing 25 million euros a day and Air France today only has cash to last until early June. It seems a bit exaggerated. According to our information, Air France loses between 500 and 600 million euros per month (excluding coverage by the State of partial unemployment). This was what was recently presented to staff representatives. All for 1.5 billion euros in cash (KLM has the same level and Air France-KLM has around 2.5 billion).
Two requests to the state
The group needs outside help to bail out. “In the absence of additional funding, a need for liquidity is expected in the third quarter of 2020, “Air France-KLM warned Thursday in its press release, saying that these were its” best estimates “. “As a result, the Air France-KLM group, Air France and KLM are conducting in-depth discussions with their respective governments and financial institutions in order to have the resources that will enable them to secure and support adequate liquidity levels, by all means “, said the group.
Negotiations are underway with the French and Dutch states to obtain secured loans. There are two requests to the French State. One aims to obtain cash to pass the crisis in the short term (4 to 5 months), the other is intended to cover the next 12 to 18 months.
Banks are reluctant
Problem. Banks are reluctant to lend with a state guarantee on 75% of the loans. According to the pilots, Ben Smith would seek to obtain an uncapped level of cash guaranteed to 90% by the state. The Canadian leader would be hostile to a nationalization of Air France which would not be a response to the group’s cash needs in the short term, he told the pilots.
The low level of capacity expected by the end of the year will cause overstaffing and too many aircraft. But if the state guarantees the loans to Air France, it could require the group not to lay off. Management currently does not anticipate layoffs. A quarter of the fleet could nevertheless be eliminated by the end of the year. While the next two A350s will be delivered in May and June, no decision has been made on the last B787 and the two A350s scheduled for delivery in the fourth quarter. For the time being, the deliveries of the first A220s this fall remain unchanged. Ben Smith intends to anticipate the exit of the A380 fleet.
