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Air France puts cost of pilots strike at €500m

Air France planes parked on the tarmac at Charles de Gaulle International Airport in Roissy, near Paris. Photo: Jacky Naegelen/Reuters

Air France planes parked on the tarmac at Charles de Gaulle International Airport in Roissy, near Paris. Photo: Jacky Naegelen/Reuters

Air France-KLM has put the total cost of last month’s two-week pilots strike at €500 million, enough to wipe more than a fifth off the group’s estimated full-year core profit and sending its shares to a 13-month low.

Europe’s second-biggest network carrier by revenue had already in July revised down its target for 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) from €2.5 billion to between €2.2 and €2.3 billion. At the time, it mainly cited overcapacity on long-haul routes and weak cargo demand. The strike, combined with a warning note on forward demand, have added to its woes.

The Franco-Dutch group said yesterday total passenger traffic fell 15.9 per cent in September compared with the year before, adding that bookings for the fourth quarter were down by between 1 and 2 percentage points.

Total passenger traffic fell 15.9 per cent in September compared with the year before

The €500 million strike cost estimate included a direct impact of between €320 million and €350 million, reflecting lower receipts and the purchase of tickets for customers on rival airlines, with costs partly offset by savings on fuel and other costs. The remainder was down to the delay in bookings.

Chief financial officer Pierre-Francois Riolacci told reporters the airline had sold some 28 per cent of capacity for the fourth quarter, compared with 30 per cent normally at this stage of the year.

“The group estimates that part of this delay could be progressively reduced over the coming weeks,” the carrier said in a statement, adding it was difficult to exactly quantify the adjustment given the exceptional nature of the event.

Shares in the Franco-Dutch airline group, which had lost 22 per cent since the strike began in mid-September, fell more than 5 per cent to touch a low of €6.26, their lowest since September last year.

France, the eurozone’s second-biggest economy, posted zero growth in the first two quarters of the year, while statistics office INSEE last week predicted growth of just 0.1 per cent for both the third and fourth quarters.

Pilots ended the airline’s longest strike since 1998 in late September after managers agreed to drop plans to set up a new European arm for low-cost unit Transavia. Air France plans to press ahead with the expansion of Transavia France.

Air France-KLM said that for the winter season, its capacity would grow by 0.7 per cent.

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