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Air France-KLM (AFLYY) 1H14 Loss Narrows, Revenues Drop Y/Y

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Airline giant Air France-KLM SA (AFLYY - Free Report) reported first-half 2014 adjusted loss of €1.16 per share ($1.59), narrower than the loss of €2.32 ($3.05) incurred in the first half of 2013. Total operating revenue in the first half of 2014 came in at €12.01 billion ($16.50 billion), which declined 1.78% from the comparable period last year. Foreign exchange affected results to the tune of €287 million ($394.7 million).

Passenger revenues and Cargo revenues dropped 1% and 4.3% respectively at the end of the first half of 2014. Revenues from Maintenance business and catering business dropped a respective 7.2% and 20.2% while Transavia business revenues improved 4.5% during the first six months of the year.

Operating Statistics

Airline traffic increased 2.5% year over year in the reported period along with 1.2% growth in capacity leading to a load factor (percentage of seats filled with passengers) growth of 100 basis points (bps) year over year to 83.8%.

Passenger revenue reduced 1.0%, and unit revenue per available seat mile fell 1.8%. Unit cost per available seat mile also declined 4.2% during the first half.

Operating Income and Expenses

Operating cost reduced by 3.6% during the first half of 2014. EBITDA increased 50% to €591 million ($810.67 million), while operating loss narrowed to €207 million ($283.94 million) from first-half 2013 loss of € 448 million ($588.31 million).

Balance Sheet

Air France-KLM ended the first half with unrestricted cash and short-term investments of €3,298.0 million ($4,501.11 million). Net debt at the end of the period stood at €5,414 million ($7,389.03 million) leading to a net debt/EBITDA ratio of 2.6 times (up by 0.3 points). Operating free cash flow at the end of first half stood at €95 million ($129.66 million).


Despite a tough operating environment, Air France-KLM expects 2014 EBITDA in the range of €2.2–€2.3 billion. The carrier also targets net debt of €4.5 billion by 2015.

Peer Releases

Delta Air Lines Inc. (DAL - Free Report) reported second-quarter 2014 adjusted earnings of $1.04 per share, beating the Zacks Consensus Estimate of $1.03, while Southwest Airline Co.’s (LUV - Free Report) earnings of 70 cents also steered ahead of our estimate of 61 cents. Likewise, United Continental Holdings Inc. (UAL - Free Report) posted a profit of $2.34 per share, much higher than the Zacks Consensus Estimate of $2.22.

Air France-KLM currently carries a Zacks Rank #4 (Sell).

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