News from the airline world today. Starting with finance, it appears that Air France-KLM is expecting a “deep operating loss” for 2011. Operations-wise, US airlines have had to divert polar routes due to storms. On the labor front, AA CEO Tom Horton seeks to trim some fat from its workforce in midst of Chapter 11 restructuring
Wall Street Journal: Financial situation at Air-France KLM is ‘extremely tight’
The journal reported today that the company continues to suffer losses due to rising fuel costs, fierce competition from low-cost carriers and the continued economic downturn. Although CEO Alexandre de Juniac did not go into specific details on how large the losses would be, he did project that the number will reach, “several hundred million euros.”
Cash flows for the ailing company, which governs both airline divisions operating under two separate brands, have been unable to generate enough funds to finance investments as debt continues to surmount. Consequently, AF-KL has launched a recovery plan targeted towards bolstering productivity, postponing investments and reducing overheads through wage and hiring freezes. Also included will be postponing the deliveries of two Airbus A380 jumbos back two years, to save on fuel costs.
Still, recovery will be a slow and painful process. From my understanding, it appears that the largest pain points hail from the Air France side of the equation. French labor laws seem to over-favor the employees in this case, as pilots appear to be generously paid (when compared to the competition) for fewer working hours, yet negotiations can only be seen as an uphill battle as Air France employees are heavily unionized. Network-wise, it appears that AF has yet to determine how to redefine their strategy for shorter-haul flights. Overemphasis on long-haul markets has caused AF to dilute its brand image on its short haul segments, which is up against fierce competition from the low-cost market. Finally, one cannot ignore the effects of media, which has plagued Air France’s safety reputation, particularly as the factors which brought down AF 447 over the Atlantic in 2009 seem to point more and more towards pilot error.
Let’s hope for the sake of a long-time flag carrier, and its sister brand, the carrier has a successful turnaround. Click here to access the article.
Polar-Solar diversions: US airlines take action
Yesterday, a huge solar eruption, the largest in seven years, caused several flight diversions for US airlines currently flying polar routes between North America and Asia. Due to the threat of Earth-bound charged particles, which could interfere with aircraft communications systems, Delta Air Lines had to re-route several of its Detroit to Asia flights (Tokyo, Osaka, Seoul, Nagoya, Shanghai, Beijing and Hong Kong) to use more southernly routings in order to avoid potential disruptions.
American Airlines seeks to shAApe up its workforce
Fort Worth newspaper Star Telegram reported today that American Airlines CEO Tom Horton sent out a letter to employees that it will remove a layer from its management structure. While difficult to remove people and positions, industry experts seem to agree that this represents a change in executive vision, as well as a necessary, albeit tough, step for American moving forward, in order to focus more on high productivity and less on bureaucracy.
Perhaps most notable in the article was the mentioning of mea culpa, meaning that some employees perceived the letter as a sign that AA execs are finally beginning to acknowledge that management was responsible for the company’s failure. Ever since the company filed in November 2011, several executives have stepped down or retired, including then-CEO Gerard Arpey, Bob Reding, executive vice president of operations, and Mark Burdette, vice president of employee relations.
Read more here.
Enjoy, and Happy Wednesday!