MIAMI – Dutch Finance minister Wopke Hoekstra spoke out against the Air France-KLM group on Sunday, claiming the airline group may be in financial jeopardy if it fails to lower costs. The group’s portfolio is highlighted by the Dutch and French flag carriers, KLM (KL) and Air France (AF), respectively.
“That is not automatic,” said Hoekstra when speaking about the survival of the Air France-KLM group in an interview on Buitenhof early Sunday.
An Uncertain Survival
The airline industry continues its financial struggle into Q3 2020 as COVID-19 cases continue to trend high. Despite receiving £10.4bn ($12.3bn) worth of bailouts and guarantees in July, the Air France-KLM group has been focused on cost-cutting efforts. KL and AF have agreed to a combined reduction of 8,000 jobs, with some KL employees taking an additional pay cut.
Experts believe the airline industry could return to pre-COVID levels by Q4 2021, but Hoekstra is still very cautious. He warned of a large-scale restructure, saying it may be what is necessary to keep the airline group afloat.
Air France-KLM Fleet Retirements
The Air France-KLM group has turned to more efficient aircraft as it races to cut costs. AF was originally planning to slowly phase out its fleet of 10 Airbus A380, but reversed course and retired the aircraft with immediate effect. While luxurious in their prime, these aircraft are too inefficient for current levels of demand.
KLM is following suit, planning to cease operations of its Boeing 747 aircraft by October. Although a painful decision, these jumbo jets of the past are simply too unsuitable for the current financial climate.
Despite these efforts, the airline group is still losing £10m ($12m) per day. As the financial effects of the coronavirus drag on, Air the France-KLM group must continue reducing costs to guarantee its survival.
Featured Image: Air France Airbus A380 PHOTO: Liam Funnell/Airways