French-Dutch airline group Air France-KLM said Friday it saw the “first signs of recovery” in bookings amid easing pandemic travel restrictions as it reported a second-quarter net loss of nearly 1.5 billion euros ($1.8 billion).
The group's fleet of planes carried just over 7 million passengers in the year's second quarter, a rise of 477% compared to the same quarter last year, when strict lockdowns and travel restrictions slammed the brakes on the global aviation industry.
With many countries now easing those restrictions amid vaccination campaigns, travelers are taking to the skies once more.
"Reciprocity of borders reopening and the acceleration of the vaccination rollout worldwide, especially in the context of the rise of the delta variant, will play a key role in maintaining this momentum.” said group CEO Benjamin Smith.
The carriers said that the easing of restrictions on Americans flying to Europe “also resulted in an improved booking trend.”
With long-haul capacity rising again following the reopening of the North Atlantic to Americans visiting Europe, the group said it expected capacity at 60-70% of 2019 levels in the third quarter.
In May, it had said it expected to operate 50% of its pre-pandemic flight capacity in the second quarter, picking up to 55-65% in the third quarter.
But with U.S.-bound travel still closed to the majority of Europeans, it held back from giving capacity forecasts for the fourth quarter and called for reciprocity in the opening of borders as well as faster vaccination rollouts worldwide.
"We are closing the gap but we are still not there. We are still hampered by the COVID situation and the changing conditions," said Chief Financial Officer Steven Zaat.
For the first time since the start of the crisis, operating free cashflow after lease repayments was positive at 210 million euros. Both of its main carriers – Air France and KLM – were cash-positive on the back of rising ticket sales.
"The appetite is there for people who can and will travel," Zaat told reporters.
The group sees "good" summer bookings in Europe, though they are coming in later than usual, he said.
Revenue for the quarter was 2.75 billion euros, up by 132.5% compared to 2020's second quarter.
The Franco-Dutch group's losses before interest, tax, depreciation and amortization (EBITDA) came in at 248 million euros for the quarter – marking a 532-million-euro improvement from a year ago.
Third-quarter EBITDA is expected to be positive, it said, adding its medium-term operating margin goal remained unchanged.
Operating losses roughly halved to 752 million euros. Quarterly unit costs fell 71% due mainly to higher capacity, which grew by 389% compared to the tough year-ago quarter.
"We were able to reduce more costs than what we expected," Zaat said, with restructuring showing improved results.
Fuel costs rose by about 300 million euros, mainly due to the extra capacity as well as a slight impact from rises in oil prices, cushioned by more favorable hedge contracts.
"The cargo market is still resilient" despite a 66% increase in capacity compared to last year's crisis-hit second-quarter, Zaat said.
Net debt fell by 2.7 billion euros to 8.3 billion euros from end-2020 after measures to boost the group's balance sheet.
Zaat said KLM was in close touch with the Dutch state as it discusses further measures with the European Commission, but declined to give details of any concessions.
Air France-KLM plunged to a 7.1 billion-euro loss in 2020 as the global pandemic triggered a 67% slump in passenger numbers at the group. The French and Dutch governments threw the carriers a lifeline of at least 9 billion euros to ensure they survived the unprecedented downturn.
As part of cost-cutting efforts, the carriers laid off thousands of workers amid the pandemic.
